TaxTMI Updates e-Newsletter
Apr 23,2021

Voucher as an instrument of advance consideration for future supply - voucher neither a good nor a service - time of supply of vouchers under sections 12(4) and 13(4) - supply to be classified by nature of underlying goods or services - deeming of supply at time of issue to avoid double taxation - pre-paid instruments and RBI recognition as contextual factor

Voucher neither a good nor a service - voucher as an instrument of advance consideration for future supply - Nature of vouchers issued by the appellant - HELD THAT: - The Appellate Authority held that a voucher is an instrument of advance payment of consideration for a future supply and, as such, is not itself a good or a service. The authority reasoned that treating a voucher as neither good nor service is sufficient without adjudicating whether it constitutes an actionable claim; the statutory definitions and the treatment of vouchers in the time of supply provisions indicate that vouchers operate only as a means of payment for an underlying supply. Consequently vouchers are not classifiable as distinct goods or services but relate to the supply they entitle the holder to receive. [Paras 7]

Vouchers are neither goods nor services; they are instruments of consideration and are not classifiable separately apart from the underlying supply.

Time of supply of vouchers under sections 12(4) and 13(4) - deeming of supply at time of issue to avoid double taxation - When the supply arising from vouchers is to be treated as having been made - HELD THAT: - Interpreting subsections (4) of the time of supply provisions, the Appellate Authority held that where a voucher identifies the goods or services that can be obtained on redemption (i.e., the supply is identifiable at the point of issue), the supply of the underlying goods or services is deemed to occur on the date of issue of the voucher. In other cases the time of supply is the date of redemption. The authority explained that this deeming avoids double taxation because the subsequent transfer/redemption will not attract tax if the supply has already been treated as made at issue. [Paras 7]

If the voucher specifies the underlying supply, the time of supply is the date of issue; otherwise it is the date of redemption, and taxation at issue prevents double taxation on later redemption.

Supply to be classified by nature of underlying goods or services - Classification and applicable rate for supplies relating to vouchers - HELD THAT: - Because vouchers are instruments of consideration and not supplies in themselves, the Appellate Authority concluded that the supply connected with a voucher must be classified according to the nature of the underlying goods or services. Consequently the tax rate applicable at the time the voucher is treated as effecting the supply (generally the date of issue where the supply is identifiable) is the rate applicable to the underlying goods or services to be supplied on redemption. [Paras 7, 8]

The applicable rate of tax is the rate applicable to the underlying goods or services represented by the voucher; voucher itself is not separately classifiable.

Deeming of supply at time of issue to avoid double taxation - Whether taxation at issue results in double taxation - HELD THAT: - The Appellate Authority specifically addressed the concern of double taxation raised by the appellant and held that taxing the underlying supply at the point of issue (where the supply is identifiable) does not amount to double taxation because the law deems the supply to have occurred at issue and, accordingly, the subsequent redemption/transfer will not attract tax on the same supply. [Paras 7]

Taxation at the time of issue (where supply is identifiable) does not cause double taxation because the supply is deemed to have occurred at issue.

Pre-paid instruments and RBI recognition as contextual factor - Questions left unanswered by the Advance Ruling Authority regarding third party PPIs, receipts from third party issuers and treatment of discount - HELD THAT: - The Appellate Authority noted that certain questions originally raised (relating to treatment of third party PPIs, taxability of amounts received from third party PPI issuers, and treatment of discount between face value and discounted value) were not answered by the AAR because it lacked jurisdiction to admit them. The Appellate Authority's decision modifies the AAR only on the classification and timing aspects; the jurisdictional non admission of those other questions remains and they were not adjudicated on merits in the present order. [Paras 3, 4, 8]

Questions on third party PPIs, taxability of receipts from third party issuers and treatment of discount were not decided by the AAR for want of jurisdiction and remain unadjudicated in this order.

Final Conclusion: The Appellate Authority modified the Advance Ruling to hold that vouchers are instruments of advance consideration (neither goods nor services), that where a voucher identifies the underlying supply the supply is deemed to occur on the date of issue (otherwise on redemption), and that the applicable tax rate is the rate applicable to the underlying goods or services; issues relating to third party PPIs and treatment of discounts were not decided for lack of jurisdiction.

Exemption of transmission or distribution of electricity by an electricity transmission or distribution utility - scope of supply - supply of goods and supply of services - consideration - inter company transactions between transmission and distribution utilities - deployment of employees - supply of manpower versus fund transfer - value of supply including incidental charges - advance ruling bindingness

Exemption of transmission or distribution of electricity by an electricity transmission or distribution utility - supply of goods and supply of services - inter company transactions between transmission and distribution utilities - Taxability of transfer of operation and maintenance materials and transfer of capital assets between TANGEDCO and TANTRANSCO and applicability of the exemption entry under Notification No.12/2017 (Sl. No.25). - HELD THAT: - Notification No.12/2017 exempts services of transmission or distribution of electricity when supplied by an electricity transmission or distribution utility to a recipient of such services. The exemption deals with services and must be read with the meaning of transmission and distribution as envisaged in the Electricity Act. A distribution service is one whose output is electricity supplied to consumers in the licensee's area; a transmission service requires conveyance of electricity by transmission lines. TANGEDCO is a generation and distribution utility and TANTRANSCO is a transmission utility; the supplies of operation and maintenance materials and transfers of capital assets by TANGEDCO to TANTRANSCO do not amount to TANGEDCO supplying transmission or distribution services to TANTRANSCO (i.e., TANGEDCO is not conveying electricity for TANTRANSCO as recipient). The appellant's contention that the entire value chain is beyond GST by reference to GST Council minutes and historical exemptions was rejected: the minutes of the GST Council do not alter the scope of the statutory exemption and do not support a blanket value chain immunity from GST. Consequently, supplies of materials and capital assets between the two entities are supplies of goods and not covered by the service exemption entry relied upon by the appellant. [Paras 6]

AAR's ruling that supply of operation and maintenance materials and transfer of capital assets are taxable as 'supply of goods' and not covered by the exemption entry is affirmed.

Deployment of employees - supply of manpower versus fund transfer - consideration - scope of supply - Whether deployment of employees of TANGEDCO to TANTRANSCO attracts GST as supply of services or is not a taxable supply (mere fund transfer/accounting) depending on factual matrix. - HELD THAT: - Two factual modes were identified: (i) where TANTRANSCO itself pays the employees and debits the expense in its books, those employees are under TANTRANSCO's control and no service by TANGEDCO is involved; (ii) where TANGEDCO continues to pay salaries while booking the amounts as receivable from TANTRANSCO (i.e. TANGEDCO pays and then recovers actual amounts), such arrangement amounts to a supply of service for consideration and is liable to GST. The Appellate Authority modifies the AAR ruling to reflect this distinction and directs that the assessing officer determine the factual matrix for each employee to decide taxability. [Paras 6]

AAR's finding is upheld to the extent that where TANGEDCO pays employees and recovers amounts from TANTRANSCO (booked as receivables) it constitutes a taxable supply; where TANTRANSCO pays directly no service is involved. Factual determination is remitted to the assessing officer.

Value of supply including incidental charges - exemption of transmission or distribution of electricity by an electricity transmission or distribution utility - Taxability of Deposit Contributory Works (DCW) - whether charges for shifting of service/line and related installation works are exempt as part of the exempted supply of electricity or taxable as separate works classifiable under SAC 99873. - HELD THAT: - The AAR had held DCW (shifting service/line, installation of transformers/lines and accessories) to be classifiable under SAC 99873 and taxable; the appellant relied on section 15 to argue that incidental charges form part of the exempt supply of electricity. The Appellate Authority did not find compelling reasons to disagree with the AAR: DCW were treated as separate works (installation/services) and not absorbed into an exempt supply of transmission or distribution under the facts presented. The Authority noted the AAR's reliance on existing CBIC guidance and observed that contrary High Court decisions cited by the appellant had not attained finality and were distinguishable. [Paras 6]

AAR's ruling that DCW are taxable and classifiable under SAC 99873 is affirmed.

Final Conclusion: The appeal is disposed of by affirming the Advance Ruling except as modified on the question of employee deployment: supplies of operation and maintenance materials and transfers of capital assets between TANGEDCO and TANTRANSCO are taxable as supplies of goods and not covered by the service exemption; Deposit Contributory Works are taxable; deployment of employees is taxable only where TANGEDCO pays salaries and recovers actual amounts from TANTRANSCO (those instances are taxable supplies), whereas where TANTRANSCO pays directly there is no service - factual determination is remitted to the assessing officer.

Pure services - Exemption under Notification No.12/2017-C.T.(Rate) SI.No.3 - Activity in relation to any function entrusted to a Panchayat under Article 243G - Activity in relation to any function entrusted to a Municipality under Article 243W - Provided to Central/State Government or Union Territory or Local Authority or Governmental Authority

Pure services - Exemption under Notification No.12/2017-C.T.(Rate) SI.No.3 - Provided to Central/State Government or Union Territory or Local Authority or Governmental Authority - Applicability of entry No.3 of Notification No.12/2017-C.T.(Rate) to material quality testing services rendered by TWAD Board - HELD THAT: - The Authority found that the material quality testing services are provided by TWAD directly to contractors for consideration pursuant to contractual obligations, and therefore are services ''provided'' to the contractors and not to the class of recipients specified in the exemption entry. The exemption entry requires (i) the supply to be a pure service, (ii) supplied to Central/State/UT/Local Authority or Governmental Authority, and (iii) be ''by way of any activity in relation to any function entrusted to'' Panchayat/Municipality under Articles 243G/243W. The laboratories' testing activity was characterised as an independent service of assuring material quality for turnkey contracts and not an activity in relation to the specific functions listed in the Eleventh/Twelfth Schedules. Reliance placed on earlier rulings was distinguished on facts or found inapplicable. Accordingly the conditions of the notification are not satisfied for the material testing services and the exemption does not apply. [Paras 9, 10]

Quality material testing services rendered by TWAD Board are not exempt under entry No.3 of Notification No.12/2017-C.T.(Rate).

Pure services - Exemption under Notification No.12/2017-C.T.(Rate) SI.No.3 - Activity in relation to any function entrusted to a Panchayat under Article 243G - Activity in relation to any function entrusted to a Municipality under Article 243W - Applicability of entry No.3 of Notification No.12/2017-C.T.(Rate) to geophysical survey investigation services rendered by TWAD Board - HELD THAT: - The Authority examined the nature and recipients of geophysical survey services and the functions listed in the Eleventh and Twelfth Schedules. Geophysical investigations conducted to identify water sources for borewells/open wells and provided to local bodies/panchayats are activities closely connected to the constitutionally entrusted function of ''Water supply'' (Eleventh/Twelfth Schedules). The service, as rendered to local authorities and governmental entities for that purpose, qualifies as a pure service in relation to a function entrusted to Panchayat/Municipality and thus falls within the scope of entry No.3. The exemption is therefore accepted for such geophysical survey services, subject to the conditions specified in the notification (including effective date and that the supply is a pure service to the specified class of recipients). [Paras 9, 10]

Geophysical survey investigation services rendered by TWAD Board for identification of water sources for local authorities/panchayats are exempt under entry No.3 of Notification No.12/2017-C.T.(Rate), subject to the conditions specified in the ruling.

Final Conclusion: The Authority ruled that TWAD's material quality testing services are not exempt under entry No.3 of Notification No.12/2017-C.T.(Rate), whereas geophysical survey investigation services provided to local authorities/panchayats for identification of water sources qualify for exemption under the same entry, subject to the notification's conditions.

Input tax credit - Plant and machinery - Pipelines laid outside the factory premises - Works contract services for construction of immovable property - Goods or services received for construction of an immovable property on own account - Foundation and structural support - Capitalisation in books as plant and machinery

Input tax credit - Pipelines laid outside the factory premises - Works contract services for construction of immovable property - Plant and machinery - Eligibility of input tax credit on goods and services for laying of transfer pipeline and its foundation/structural support for transporting Propane/Butane from jetty to the terminal - HELD THAT: - The Explanation to Section 17(5) excludes from 'plant and machinery' the category of "pipelines laid outside the factory premises", and Section 17(5) restricts credit for goods/services for construction of immovable property unless that immovable property qualifies as plant and machinery. The Authority rejected the applicant's contention that the exclusion applies only to pipelines used for outward supply or that the 'precincts' concept under the Factories Act brings the pipeline within factory premises. The GST definition controls and the legislative history (GST Council minutes) shows an intention to exclude pipelines laid outside factory premises from eligible plant and machinery. As the proposed transfer pipelines (approximately 4.1-4.3 km from jetty to terminal) are pipelines laid outside the factory premises and were to be executed as works contracts, the credit is not available under the statutory exclusion. [Paras 9]

Not eligible for input tax credit on the transfer pipelines and their foundation/structural support; credit restricted by the exclusion of pipelines laid outside the factory premises.

Input tax credit - Plant and machinery - Works contract services for construction of immovable property - Foundation and structural support - Capitalisation in books as plant and machinery - Eligibility of input tax credit on goods and services for construction/installation of refrigerated storage tanks and related structural support (and eligibility of credit for pile foundations forming site groundwork) - HELD THAT: - Refrigerated storage tanks used for receipt, storage, processing and onward supply of Propane/Butane were held to be apparatus/equipment qualifying as 'plant and machinery' provided the tanks are capitalised in the applicant's books of account as 'plant and machinery' and not treated as immovable property. The Purchase Order for the refrigerated tanks covered construction/erection including structural support and therefore goods/services under that PO are eligible for input tax credit subject to capitalization. However, separate 'pile foundations' executed for strengthening site load-bearing capacity were found to be 'other civil structures' (excluded under the Explanation) and not the foundation/structural support for the tanks; such pile foundations therefore do not qualify as plant and machinery and credit on them is not available. [Paras 10]

Eligible for input tax credit on the refrigerated storage tanks and their structural support as per PO No. 4500405026 dated 11.03.2020, provided the tanks are capitalised as 'plant and machinery'; not eligible for credit on pile foundations covered by PO No. 4500401679 dated 10.02.2020.

Input tax credit - Plant and machinery - Works contract services for construction of immovable property - Foundation and structural support - Capitalisation in books as plant and machinery - Eligibility of input tax credit on goods and services for construction of fire water reservoir (water storage tank) and related structural support, and eligibility of credit for pile foundations used at site - HELD THAT: - The water storage tanks, forming part of the firefighting system required for the terminal, were treated as equipment/apparatus that may qualify as 'plant and machinery' for GST purposes if capitalised in the applicant's books as such and not shown as immovable property. The Purchase Order for the fire water tanks included construction and structural support and therefore taxes paid under that PO are eligible for input tax credit subject to capitalization as 'plant and machinery'. As with the storage tanks, separately contracted pile foundations were found to be other civil structures and not the foundation/structural support for the tanks; credit on pile foundations is therefore not available. [Paras 11]

Eligible for input tax credit on the fire water reservoir and its structural support as per PO No. 4500405071 dated 11.03.2020, provided the tanks are capitalised as 'plant and machinery'; not eligible for input credit on pile foundations.

Final Conclusion: The Authority ruled that input tax credit is not available for the transfer pipelines and their pile foundations (being pipelines laid outside the factory premises excluded from 'plant and machinery'). Credit is available for the refrigerated storage tanks and for the fire water reservoir (including the structural support covered under the respective purchase orders) provided those tanks are capitalised in the applicant's books as 'plant and machinery' and not treated as immovable property; credit is not available for separate pile foundations executed as other civil structures.

Pure services - Composite supply - Exemption under Notification No. 12/2017-Central Tax (Rate) (Serial No. 3) - Functions entrusted to a Municipality under Article 243W - Local authority

Pure services - Composite supply - Exemption under Notification No. 12/2017-Central Tax (Rate) (Serial No. 3) - Whether the supply by the applicant to Greater Chennai Corporation is a 'pure service' eligible for exemption under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. - HELD THAT: - The Authority examined the contract, tender documents, measurement book extracts and scope of work and found that the arrangement comprised supply, installation and commissioning of an RO plant together with a five-year operation and maintenance contract. The O&M obligations included treating raw water to produce purified water for dispensing through vending machines, issuance and maintenance of smart cards, provision of security, testing and maintenance of the plant, software integration and related services. The contract was a rate contract bundling the plant supply and O&M services; the RO plant supply and O&M were naturally bundled and the tender envisaged both together. Even if treated as separable, the O&M activities involve supply of purified water and smart cards (goods) in addition to services, and therefore the overall supply is a composite supply comprising goods and services rather than a supply of only services. As the entry at Serial No.3 requires the supply to be a 'pure service' (excluding works contract or other composite supplies involving supply of any goods), the primary condition for exemption is not met. Consequently the Authority did not consider the further limbs of the exemption entry. [Paras 8, 9]

The supply is not a 'pure service' but a composite supply of goods and services; the exemption at Serial No. 3 of Notification No. 12/2017-C.T.(Rate) is not available to the applicant.

Final Conclusion: The Authority ruled that the agreement to provide the RO plant and undertake its operation and maintenance constitutes a composite supply (goods and services) and therefore the applicant is not eligible for exemption under Serial No. 3 of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017.

Composite supply of works contract - Works contract as defined in clause (119) of Section 2 of the CGST Act - Government Entity - Predominantly for use other than for commerce, industry or any other business or profession - Supply procured by Government Entity in relation to a work entrusted to it by the Government - Residual construction services taxable at 18% under entry 3(xii) of Notification No.11/2017-C.T.(Rate)

Composite supply of works contract - Works contract as defined in clause (119) of Section 2 of the CGST Act - Whether the applicant's retrofitting and modification works constitute a composite works contract service - HELD THAT: - The work contract as per the contract documents involves design, engineering, foundation and structural works, supply of goods and related services for retrofitting and modification of the immovable property. There is transfer of property in goods in the execution of the contract and the scope includes construction, fitting out and improvement of the building. On these facts the work falls within the definition of a 'works contract' under Section 2(119) and is a composite supply of works contract.

The works undertaken by the applicant are 'works contract' services and amount to a composite supply of works contract.

Government Entity - Predominantly for use other than for commerce, industry or any other business or profession - Supply procured by Government Entity in relation to a work entrusted to it by the Government - Residual construction services taxable at 18% under entry 3(xii) of Notification No.11/2017-C.T.(Rate) - Whether entry Sl.No.3 item (vi) of Notification No.11/2017-C.T.(Rate) (concessional rate) applies to the applicant's supply to TANGEDCO and what rate is applicable - HELD THAT: - Entry 3(vi) applies only if (i) the supply is a composite works contract, (ii) supplied to a Government/ Government Entity, (iii) the works are predominantly for use other than commerce/industry/any business or profession, and (iv) where supplied to a Government Entity, the supply is procured in relation to a work entrusted to that entity by the Government/local authority. Although TANGEDCO qualifies as a 'Government Entity' (majority government ownership and control), the Authority found that TANGEDCO's principal activity-generation and distribution of electricity-is commercial in nature for tariff and revenue recovery purposes under the Electricity Act and thus the works are not 'predominantly for use other than for commerce, industry or any other business or profession.' Further, the retrofitting and elevation modification works are not in relation to the core work entrusted to TANGEDCO (generation/distribution), and therefore the proviso condition for supplies to a Government Entity is not satisfied. Since conditions (iii) and (iv) for applicability of entry 3(vi) are not met, the concessional entry does not apply.

Entry Sl.No.3 item (vi) of Notification No.11/2017-C.T.(Rate) is not applicable to the applicant; the supply does not qualify for the concessional rate.

Final Conclusion: The Authority rules that the applicant's retrofitting and modification works are a composite works contract and, since the conditions for concessional entry 3(vi) are not met, the services are taxable under the residual construction entry and attract 18% GST (9% CGST + 9% SGST) as per Sl.No.3(xii) of Notification No.11/2017-C.T.(Rate) as amended.

Definition of "agricultural produce" (explanation 2(d)) - exemption for loading, unloading, packing, storage or warehousing of agricultural produce - support services to agriculture - processed products excluded where processing not usually done by a cultivator at farm level - Circular clarification on farm level processing and marketability for primary market

Definition of "agricultural produce" (explanation 2(d)) - exemption for loading, unloading, packing, storage or warehousing of agricultural produce - processed products excluded where processing not usually done by a cultivator at farm level - Circular clarification on farm level processing and marketability for primary market - Whether tamarind inner pulp without shell and seeds is an "agricultural produce" and whether cold storage of such product is exempt under the Notification No. 11/2017 and 12/2017 CT(Rate) dated 28.06.2017. - HELD THAT: - The Notifications grant nil rate for services of loading, unloading, packing, storage or warehousing of "agricultural produce" as defined in explanation 2(d), which confines the term to produce on which either no further processing is done or only such processing as is usually done by a cultivator at farm level that does not alter essential characteristics but makes it marketable for the primary market. The clarificatory Circular excludes processed products where processing is not a farm level activity (examples given include tea, processed coffee, dehusked/split pulses, jaggery, processed nuts). The material on record (affidavits, photographs, video) shows that the tamarind pulp stored by the applicant is produced by sun drying and beating/hammering to remove shell, seeds and fibre - processes carried out as a cottage industry and not as simple farm level operations. The HSN guidance and Notifications distinguish fresh/unprocessed tamarind (exempt) from dried/processed tamarind. Because the stored product has undergone drying and de shelling/deseeding processes that are not the farm level processes contemplated by explanation 2(d), it does not retain the status of "agricultural produce" for the purpose of the exemption. Consequently, the storage service relating to such tamarind is not covered by the nil rate entries. [Paras 7, 8]

Tamarind inner pulp without shell and seeds is not an "agricultural produce" under explanation 2(d) and cold storage of such tamarind is not exempt under Sl. No. 54(e) of Notification No. 12/2017 CT(Rate) dated 28.06.2017.

Final Conclusion: The Authority rules that deshelled, deseeded tamarind pulp stored by the applicant is not "agricultural produce" as defined in the Notifications and, therefore, the cold storage services in respect of that product do not attract the exemption under the specified entries of Notification No. 11/2017 and 12/2017 CT(Rate).

Transition of input tax credit - carry forward of input tax credit - filing of FORM GST TRAN-1 - technical glitches on GST portal - IT grievance redressal mechanism - requirement to demonstrate portal glitch - extension of time under Rule 117(1A) - distinction between transition and utilisation of credit

Filing of FORM GST TRAN-1 - technical glitches on GST portal - extension of time under Rule 117(1A) - carry forward of input tax credit - Petition seeking direction to enable reopening of the GST portal and permit filing of FORM GST TRAN-1 for carrying forward input tax credit - HELD THAT: - The Court noted that the petitioner had been unable to upload FORM GST TRAN-1 within the original due date because of widespread technical glitches on the common GST portal and that the Central Board had acknowledged such difficulties by instituting an IT grievance mechanism. Rule 117 was subsequently amended by insertion of sub-rule (1A) permitting extension of time for submitting FORM GST TRAN-1 to 31.03.2019, and that date was later extended. The petitioner demonstrated repeated attempts to access the portal between 12.02.2019 and 26.03.2019. Having regard to the admitted systemic portal failures, the subsequent administrative recognition of those failures, and precedents permitting relief, the Court directed the respondents to enable the petitioner to upload the requisite TRAN forms forthwith so that the petitioner may seek carry forward/utilisation of the input tax credit subject to verification by the assessing authority. [Paras 3, 6, 7, 10, 11]

Writ petition allowed and respondents directed to enable uploading of FORM GST TRAN-1 to permit carry forward of input tax credit, subject to verification and assessment.

Requirement to demonstrate portal glitch - IT grievance redressal mechanism - distinction between transition and utilisation of credit - Validity of placing onus on assessee to establish demonstrable technical glitch in the portal as precondition for relief - HELD THAT: - The Court observed that the Circular of 03.04.2018 and the later provision in Rule 117(1A) place an onus on an assessee to establish a demonstrable technical glitch. The Court found that such a requirement did not exist in the statute prior to the Circular, and it is unreasonable to expect assessees to have anticipated the need to collect documentary proof (such as screenshots) of portal failures contemporaneously. The Court also emphasised the legal distinction between mere transition of credit and its utilisation which remains subject to verification by an assessing officer. On these foundations, the Court was critical of a rigid insistence on pre-collected proof as an absolute bar to relief where systemic portal failures occurred and administrative mechanisms acknowledged such failures. [Paras 6, 8]

Requirement that the assessee must demonstrably establish portal glitches cannot be rigidly applied to deny relief where systemic technical failures occurred and were recognised administratively; transition and utilisation of credit are distinct, and utilisation remains subject to assessment.

Final Conclusion: The writ petition was allowed: respondents were directed to enable the petitioner to upload FORM GST TRAN-1 to carry forward input tax credit (subject to verification), and the Court disapproved of a rigid requirement that assessees must have pre-collected demonstrable evidence of portal glitches where systemic failures were acknowledged.

Opportunity of personal hearing - right to be heard (audi alteram partem) - failure to consider reply vitiating assessment - remand for fresh consideration - opportunity for cross-examination

Opportunity of personal hearing - failure to consider reply vitiating assessment - right to be heard (audi alteram partem) - Impugned assessment orders passed without affording effective personal hearing and without considering the petitioner's reply were liable to be set aside. - HELD THAT: - The Court found that although show-cause notices were issued and a reply was filed, the petitioner was prevented by the Covid-19 lockdown from attending the personal hearing. In these circumstances the absence of effective opportunity to explain the case and the apparent non-consideration of the petitioner's reply rendered the assessment orders unsustainable. The Court held that procedural fairness required affording the petitioner a personal hearing before finalising assessment, and accordingly set aside the impugned orders. [Paras 6]

Impugned orders dated 30.09.2020 set aside for want of adequate opportunity of personal hearing and consideration of the petitioner's reply.

Remand for fresh consideration - opportunity for cross-examination - Matter remanded to the assessing authority for fresh consideration after affording cross-examination and personal hearing, and for passing appropriate orders on merits within a stipulated time. - HELD THAT: - Rather than adjudicating the merits afresh, the Court directed that the respondent shall give the petitioner an opportunity for personal hearing and for cross-examination as may be necessary, and thereafter decide the assessment on merits in accordance with law. The Court imposed an eight-week timeline from receipt of the order for completion of this exercise, thereby remitting the matter for fresh consideration rather than pronouncing on substantive tax liabilities. [Paras 7]

Matter remanded to respondent for fresh consideration after affording cross-examination and personal hearing; exercise to be completed within eight weeks.

Final Conclusion: Writ petitions allowed; impugned assessment orders dated 30.09.2020 set aside and matter remanded to the respondent for fresh consideration after affording opportunity of cross-examination and personal hearing, to be completed within eight weeks; no costs.

Transitional input tax credit - tax deducted at source (TDS) carried forward under TRAN-1 - Section 140 of the TNGST 2017 - transition of input tax credit - principles of natural justice - opportunity of personal hearing - availability of alternative statutory remedy and maintainability of writ petition

Tax deducted at source (TDS) carried forward under TRAN-1 - transitional input tax credit - Section 140 of the TNGST 2017 - transition of input tax credit - entitlement to carry forward transitional input tax credit claimed through TRAN-1 in respect of amounts deducted as TDS prior to the GST regime - HELD THAT: - The Court held that amounts deducted as anticipated tax liability under the earlier regime retain the character of tax and are eligible to be treated as transitional input tax credit under the statutory scheme. Relying on the reasoning in the cited batch of writ petitions (W.P.Nos.9991 of 2019 etc.), the Court accepted that TDS/amounts deducted prior to 01.07.2017 may be carried forward through TRAN-1 in terms of Section 140 of the TNGST 2017. On that basis the impugned order disallowing and reversing the transitional credit was quashed.

The petitioner is entitled to carry forward the claimed transitional credit relating to TDS through TRAN-1; the impugned order on this ground is quashed.

Principles of natural justice - opportunity of personal hearing - availability of alternative statutory remedy and maintainability of writ petition - validity of the impugned order insofar as it was passed without affording personal hearing and the contention that the writ petition was not maintainable due to availability of an alternative remedy - HELD THAT: - The Court found the respondents' plea that an appeal remedy rendered the writ petition non maintainable unacceptable in the circumstances, having regard to the earlier decision in the batch of writ petitions. The petitioner also alleged that no opportunity of personal hearing was granted before confirming the proposal to disallow transitional credit; having set aside the impugned order on entitlement grounds and on the authorities relied upon, the Court allowed the writ petition. The decision records that the writ challenge was maintainable and results in quashing of the impugned order.

The impugned order passed without granting the claimed opportunity and challenged despite alleged alternative remedy is set aside; the writ petition is allowed.

Final Conclusion: The impugned order dated 07.06.2020 denying and reversing the transitional input tax credit claimed through TRAN-1 (including credit attributable to TDS) is quashed; the writ petition is allowed and connected miscellaneous petition is closed with no costs.

Setting up of business - commencement of business - readiness to commence business - pre-operative expenses - capitalisation of business expenditure - proviso to Section 3 (previous year) - perverse finding

Setting up of business - readiness to commence business - commencement of business - Whether the assessee had "set up" its insurance broking business prior to 02.02.2012 or only when IRDA granted the licence on 02.02.2012. - HELD THAT: - The Court analysed the distinction between "setting up" and "commencement" of business, noting that the proviso to Section 3 ties the previous year to the date of setting up a new business. The assessee was incorporated on 24.11.2010, held its first board meeting on 29.11.2010 approving the licence application and operational steps, deputed trained employees, opened a bank account, executed operating leases on 01.06.2011 and established offices at 29 locations, and filed the licence application on 01.12.2010. These facts demonstrated that the assessee had acquired the necessary wherewithal and physical infrastructure and was in a state of readiness to commence the business well before IRDA issued the licence. The Court held that being "ready to commence business" constitutes setting up the business, distinct from the later point of actual commencement permitted by regulatory approval. The Tribunal's finding that the business was set up only on 02.02.2012 was therefore held to be perverse and erroneous in law. [Paras 5, 6, 7]

The finding that the assessee set up its business only on 02.02.2012 is perverse; the assessee had set up its business prior to that date.

Pre-operative expenses - capitalisation of business expenditure - proviso to Section 3 (previous year) - Whether the expenses incurred by the assessee prior to 02.02.2012 were to be disallowed and capitalised as pre-operative expenditure or allowable as business expenditure. - HELD THAT: - Applying the conclusion that the assessee was "set up" prior to 02.02.2012, the Court held that expenses incurred during the period when the assessee had prepared and kept the business primed cannot be treated as pre-operative and capitalised merely because regulatory permission was granted later. The Court observed that treating such interregnum expenses as non-allowable would penalise taxpayers when regulatory authorities delay approvals, and would defeat the statutory concept of previous year under the proviso to Section 3. The authorities below misdirected themselves by equating readiness to do business with inability to claim business deductions. [Paras 5, 7, 8]

The expenses incurred while the assessee was ready to commence business are not to be disallowed and capitalised as pre-operative expenditure; they are allowable as business expenditure.

Final Conclusion: The Tribunal's order is set aside: the assessee had set up its business prior to 02.02.2012 and the impugned disallowance and capitalization of expenses is quashed; the appeal is allowed in favour of the assessee.

Taxability of interest income where recipient has offered it to tax - taxation of interest accrued to third-party cooperative society in assessee's hands - treatment of provision for post-retirement medical expenses as definite liability - application of Accounting Standard (AS) 15 to post-retirement benefits - mischief of double taxation and factual finding preventing taxation - misdirection in law and on facts

Treatment of provision for post-retirement medical expenses as definite liability - application of Accounting Standard (AS) 15 to post-retirement benefits - Deletion of disallowance in respect of provision made for post-retirement medical expenses upheld. - HELD THAT: - The Tribunal had, relying on its own decision in assessment year 2009-2010, held that the provision for post-retirement medical expenses created a definite liability. The Court records that this aspect was dealt with by the Tribunal on the basis of Accounting Standard (AS) 15 and that in an earlier round this Court had held that no substantial question of law arose in relation to that aspect. Consequently the deletion made by the Tribunal in favour of the assessee stands affirmed for assessment year 2008-2009. [Paras 3, 4, 6]

Tribunal's deletion of the disallowance relating to post-retirement medical provision upheld; no substantial question of law arises.

Taxability of interest income where recipient has offered it to tax - mischief of double taxation and factual finding preventing taxation - Deletion of disallowance in respect of interest income which had been offered to tax by the cooperative societies upheld. - HELD THAT: - The Tribunal recorded factual findings that the concerned cooperative societies had offered the said interest income to tax. The Court held that, in view of this factual finding, the same income could not be taxed in the hands of the assessee. That conclusion disposes of the revenue's challenge on this aspect and the Court records that no substantial question of law arises. [Paras 7]

Deletion of the addition relating to interest already offered to tax by cooperative societies affirmed; no substantial question of law arises.

Taxation of interest accrued to third-party cooperative society in assessee's hands - misdirection in law and on facts - Whether the Tribunal misdirected itself in deleting interest which accrued to Cooperative Electrical Supply Society Ltd., Siricilla is admitted for hearing before this Court. - HELD THAT: - The Court has admitted the revenue's appeal only insofar as the question whether the Tribunal erred in law and on facts in deleting from the assessee's taxable income interest which accrued to Cooperative Electrical Supply Society Ltd., Siricilla. The Court framed the specific question of law and directed that the matter be listed in the regular category; meanwhile the parties are to file the record of the case. The issue is therefore reserved for determination on merits by this Court. [Paras 8, 9, 10, 11]

Appeal admitted and remanded for regular listing on the question whether the Tribunal misdirected itself in deleting interest accrued to Cooperative Electrical Supply Society Ltd., Siricilla; parties to file the record.

Final Conclusion: The appeal is dismissed insofar as it challenges the Tribunal's deletions relating to the post-retirement medical provision and interest already offered to tax by cooperative societies (no substantial question of law). The appeal is admitted and directed to be listed for regular hearing only on the narrow question whether the Tribunal misdirected itself in deleting interest which accrued to Cooperative Electrical Supply Society Ltd., Siricilla; the parties to file the record meanwhile.

Deemed dividend under section 2(22)(e) of the Income Tax Act - liability of recipient-company for deemed dividend - recall of court order for error apparent on face of record - restoration of appeal for adjudication on merits

Deemed dividend under section 2(22)(e) of the Income Tax Act - liability of recipient-company for deemed dividend - Whether the Court's earlier dismissal of the question on section 2(22)(e) was erroneous and required recall so that the question of deeming of loans/advances as dividend in the hands of the assessee may be examined on merits. - HELD THAT: - The Court found that the earlier order (paragraph 6 of the order dated 16.01.2018) proceeded on an erroneous premise that section 2(22)(e) could not be invoked because the assessee was the recipient of loans/advances rather than the payer. Having noted undisputed facts indicating substantial shareholding and interest (including Akik Tiles Limited's and Marbolite Granito India Limited's shareholdings and relevant management/shareholding connections), the Court concluded that the observation disallowing invocation of section 2(22)(e) in the hands of the recipient was incorrect on the face of the record. The Court also noted that a coordinate Bench had admitted a related question for consideration and that a larger Bench reference was pending before the Supreme Court. In light of these circumstances and the error apparent on the face of the record, the Court recalled its earlier order to permit adjudication of the question on merits before the original forum. [Paras 6, 7, 9]

The order dated 16.01.2018 is recalled insofar as Question B dealing with addition under section 2(22)(e) is concerned; Tax Appeal No.1032 of 2017 is restored for consideration on merits, the Court having not examined the matter on merits and without expressing any view adverse to the assessee.

Final Conclusion: Application allowed: the earlier order is recalled to the extent it dismissed the question relating to deemed dividend under section 2(22)(e); the Tax Appeal is restored for fresh adjudication on merits, and no substantive decision on the correctness of the addition was expressed.

Stay of recovery by adjustment to refund - Deposit as condition for stay of demand - Notice of demand under Section-156

Stay of recovery by adjustment to refund - Deposit as condition for stay of demand - Notice of demand under Section-156 - Whether further recovery by adjustment from the assessee's eligible refund for Assessment Year 2016-17 should be restrained pending adjudication. - HELD THAT: - The writ-application challenged proceedings pursuant to a notice of demand issued under Section-156 arising from the assessment for Assessment Year 2016-17 and sought, inter alia, a stay on recovery. The petitioner contended that the department has already made adjustments to an eligible refund and that any further adjustment or recovery would be impermissible, and also disputed the department's direction to deposit 20% of the total demand as a condition for stay. The High Court issued notice and, by way of ad-interim relief, restrained the respondents from making any further recovery towards the demand by way of adjustment from the eligible refund for Assessment Year 2016-17. The order is interlocutory; the court did not adjudicate the merits of the contentions regarding the quantum to be deposited for a stay or the lawfulness of past adjustments, but granted an interim prohibition on further adjustments of the refund pending further orders.

By ad-interim order the respondents are restrained from effecting any further recovery by adjusting the assessee's eligible refund for Assessment Year 2016-17; notice issued and matter listed on 30/03/2021.

Final Conclusion: Notice issued to respondents; ad-interim restraint granted preventing any further adjustment or recovery from the assessee's eligible refund for Assessment Year 2016-17; interlocutory order returnable on 30/03/2021.

Special valuation under section 50C for computation of capital gains - Binding effect of Departmental Valuation Officer's report - Reference to DVO under section 55A - Powers of Commissioner (Appeals) co-terminus with Assessing Officer - Requirement of opportunity to the Assessing Officer to comment on valuation report

Special valuation under section 50C for computation of capital gains - Binding effect of Departmental Valuation Officer's report - Reference to DVO under section 55A - Powers of Commissioner (Appeals) co-terminus with Assessing Officer - Requirement of opportunity to the Assessing Officer to comment on valuation report - Validity of CIT(A)'s direction to the Assessing Officer to adopt the value determined by the DVO instead of the value determined by the registering (stamp duty) authority and whether the CIT(A) erred in giving relief without affording the AO an opportunity to comment. - HELD THAT: - At assessment the assessee challenged the registering authority's value and the matter was referred to the Departmental Valuation Officer under the statutory reference procedure; the DVO's report was received only after completion of assessment and was placed before the Commissioner (Appeals) in appellate proceedings. The CIT(A) has powers co terminus with the Assessing Officer and, after considering the DVO report and binding judicial precedents, directed the AO to adopt the DVO's lower value for computing long term capital gains and to allow any eligible exemption and recompute consequential interest. The Tribunal found that the CIT(A) recorded reasoned findings, correctly applied the principle that a DVO valuation made on reference under the statutory procedure is binding unless shown to be manifestly erroneous, and that the appellate authority was entitled to consider the DVO report and direct adoption of its valuation; no new cogent material was produced by Revenue to rebut those findings. The Tribunal therefore upheld the CIT(A)'s order and dismissed the revenue's grounds of appeal. [Paras 6, 7, 8]

CIT(A)'s direction that the AO adopt the DVO's valuation and recompute long term capital gains (and consequential relief) is upheld; revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeal and upheld the Commissioner (Appeals)'s order directing the Assessing Officer to adopt the DVO valuation for computing long term capital gains, allow permissible exemptions and recompute consequent interest for A.Y. 2014 15.

Natural justice - opportunity of hearing - ex parte order - obligation under Sub section (6) of Section 250 of the Income tax Act - remand for fresh adjudication

Obligation under Sub section (6) of Section 250 of the Income tax Act - ex parte order - natural justice - opportunity of hearing - remand for fresh adjudication - Validity of the Commissioner of Income Tax (Appeals) order which was passed ex parte without deciding the issues on merits and without affording sufficient opportunity of hearing. - HELD THAT: - The Tribunal found that the CIT(A) had passed an ex parte order without addressing the merits of the issues raised in the appeal. Sub section (6) of Section 250 requires the appellate authority to state the points in dispute and give reasons for its conclusions. The CIT(A)'s dismissal without considering the merits therefore failed to comply with that statutory mandate. Further, the principle of natural justice requires that parties be given a sufficient opportunity to be heard; the assessee had not been afforded such opportunity. In view of these defects, the Tribunal set aside the impugned CIT(A) order and directed that the matters be restored to the file of the CIT(A) for fresh adjudication after granting appropriate opportunity to the assessee and after the assessee furnishes the details called for by the lower authorities. The Tribunal expressly declined to adjudicate the substantive grounds of appeal on merits pending the fresh consideration by CIT(A). [Paras 7, 8]

Impugned CIT(A) order set aside for non compliance with Sub section (6) of Section 250 and principles of natural justice; matter remitted to CIT(A) for fresh adjudication after affording opportunity to the assessee and for the assessee to furnish the requisite details.

Final Conclusion: The appeal is allowed for statistical purposes: the CIT(A) order dated 16.03.2018 is set aside and the matter is restored to the file of the CIT(A) for fresh adjudication after affording the assessee a sufficient opportunity of hearing; no adjudication on the merits of the substantive grounds is made by the Tribunal.

Interest on enhanced compensation - capital receipt - exemption under Section 10(37) - taxability of compensation for agricultural land - interest awarded under Land Acquisition Act as accretion to compensation - re-opening of assessment under section 147

Interest on enhanced compensation - capital receipt - exemption under Section 10(37) - taxability of compensation for agricultural land - interest awarded under Land Acquisition Act as accretion to compensation - Whether the interest received on enhanced compensation for acquisition of agricultural land is taxable as income or is a capital receipt exempt under Section 10(37). - HELD THAT: - The Tribunal examined the character of the interest component received by the assessee on enhanced compensation paid for acquisition of agricultural land. It applied the settled principle that a capital receipt is outside the scope of income-tax unless specifically made chargeable (for example under the capital gains provisions) or is in the nature of revenue receipt. The interest paid on enhanced compensation constitutes an accretion to the compensation and is part of the capital receipt arising from the acquisition. The Assessing Officer's addition treating 50% of such interest as income was unsupported by a finding distinguishing the amount as revenue in nature. The Tribunal further noted the binding application of the Supreme Court's decision in Union of India v. Hari Singh, which holds that compensation/enhanced compensation received for agricultural land is not taxable, and that interest forming part of such compensation is capital in nature. The CIT(A) did not apply or distinguish that precedent. On these grounds, the addition was held to be contrary to law and was set aside.

Addition of interest on enhanced compensation treated as income is reversed; interest is a capital receipt forming part of exempt compensation for agricultural land and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the interest on enhanced compensation received for acquisition of agricultural land is a capital receipt and not taxable as income (applicable to AY 2011-12), and set aside the impugned addition.

Deduction under section 80P(2)(a)(i) - principle of mutuality - loans to members versus loans to non-members - reading of benevolent tax provisions liberally - definition of "member" under State Co operative Societies Act - remand to Assessing Officer for fresh examination

Deduction under section 80P(2)(a)(i) - loans to members versus loans to non-members - principle of mutuality - definition of "member" under State Co operative Societies Act - reading of benevolent tax provisions liberally - Whether the assessee society is entitled to deduction under section 80P(2)(a)(i) for AY 2016-17 and the manner in which the Assessing Officer should examine claims of deduction vis a vis loans to members and non members - HELD THAT: - The Tribunal noted the submissions that the society is registered under the Karnataka Co operative Societies Act, 1959 and that its object is to accept deposits from members and provide credit facilities to members. The Tribunal observed the ratio of the Supreme Court decision discussed in the order, including the approach that section 80P is a benevolent provision to be read liberally and that profits attributable to loans to non members cannot be deducted. Having considered competing contentions about membership (including nominal and associate members), lending to non members and the applicability of precedents, the Tribunal declined to decide the entitlement on merits and instead directed that the Assessing Officer examine the claim of deduction under section 80P(2)(a)(i) in the light of the Supreme Court's decision and factual contentions about loans to members versus non members and the definition of "member" under the State Act. The Tribunal therefore remitted the issue for fresh consideration by the Assessing Officer rather than adjudicating the deduction itself. [Paras 5, 6]

Issue remitted to the file of the Assessing Officer for examination of the deduction under section 80P(2)(a)(i) in the light of the Supreme Court decision; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal has remitted the assessee's claim for deduction under section 80P(2)(a)(i) for AY 2016-17 to the Assessing Officer for fresh examination in light of the Supreme Court's pronouncements; the appeal is allowed for statistical purposes.

Levy of penalty under section 271(1)(c) for concealment where additions are made on estimation - estimated addition - rejection of books of account - no penalty on estimation-based additions - consistency in adjudication

Levy of penalty under section 271(1)(c) for concealment where additions are made on estimation - estimated addition - rejection of books of account - no penalty on estimation-based additions - Whether penalty under section 271(1)(c) is leviable where the addition sustained in assessment is based on estimation of gross profit after rejection of books of account. - HELD THAT: - The Tribunal found that the addition which formed the basis for levy of penalty was an estimated addition. The Assessing Officer had estimated gross profit at 10% of turnover after rejecting the books, whereas on second appeal the Tribunal in the quantum proceedings restricted the addition to gross profit @ 5%. The Bench applied the settled position of law that penalty under section 271(1)(c) cannot be sustained where the addition is founded on estimation. Having considered the quantum order and the authorities placed on record, and observing no contrary factual or legal basis, the Tribunal held that the penalty could not be maintained against the assessee where the assessed addition arose from estimation rather than proved concealment of income. The Tribunal therefore allowed the appeals on this ground for the assessment year 1988-89 and, by applying the same reasoning and principle of consistency, also allowed the appeal for assessment year 1989-90. [Paras 12, 13]

Penalty under section 271(1)(c) deleted because the impugned addition was an estimation; appeals for AY 1988-89 and, consistently, AY 1989-90 allowed.

Consistency in adjudication - Disposition of subsequent appeals which challenged orders that became academic after deletion of penalty in the earlier appeals. - HELD THAT: - Since the Tribunal in ITA Nos. 293 & 294/AHD/2005 deleted the penalty and granted full relief to the assessee, the later appeals (ITA Nos. 2141 & 2142/AHD/2013) which challenged the order giving effect to earlier decisions became infructuous. The Tribunal accordingly dismissed those later appeals as having been rendered academic by the adjudication in the lead appeals. [Paras 15]

ITA Nos. 2141 & 2142/AHD/2013 dismissed as infructuous.

Final Conclusion: The Tribunal deleted the penalty under section 271(1)(c) for AY 1988-89 and, following the same reasoning, for AY 1989-90 on the ground that the additions were estimation-based; consequential appeals rendered infructuous were dismissed.

Disallowance under section 40A(3) - disallowance under section 40(a)(ia) - Rule 6DD(e) exclusion - genuineness of expenditure and supporting vouchers - remand and opportunity to produce evidence - cash payment restriction

Remand and opportunity to produce evidence - genuineness of expenditure and supporting vouchers - Whether the appeal should be restored to the file of the AO or the assessee given further opportunity to produce evidences in view of its plea of being pre-occupied with IBC proceedings - HELD THAT: - The Tribunal found that from assessment to appellate stage the assessee was repeatedly given opportunities to produce bills, vouchers and other proof in support of the pond and farm maintenance expenditure but failed to do so. The assessee's explanation that staff were pre-occupied with IBC proceedings did not justify non-production, since the AO and the CIT(A) had forwarded remand reports, sought explanations and issued specific opportunities (including an office letter dated 01.11.2018) which the assessee did not utilise. The Tribunal observed that the assessee also did not place any evidence before the Tribunal. On these facts the request for restoration for fresh verification was held to be an attempt to prolong proceedings without purpose and therefore rejected. [Paras 9]

Request to restore the appeal to the file of the AO for fresh consideration or for further opportunity to produce evidences is rejected.

Disallowance under section 40A(3) - disallowance under section 40(a)(ia) - Rule 6DD(e) exclusion - cash payment restriction - Whether the disallowance of the pond and farm maintenance expenses on account of payments in cash and non-deduction of TDS is sustainable and whether the payments fall within the exclusion under Rule 6DD(e) - HELD THAT: - It was an admitted fact that the assessee debited pond and farm maintenance expenses of Rs. 20.21 crores and that majority of payments were made in cash exceeding the permissible limits, attracting the prohibition under section 40A(3). The ledger particulars showed payments to labour for pond cleaning, JCB charges and purchases (sand, bricks, salt etc.), not payments to cultivators/growers/producers. Rule 6DD(e) excludes cash payments only where they are made for purchase of agricultural/forest produce or certain specified produce; the Tribunal held that the ledger particulars do not demonstrate such character. In absence of bills, vouchers or other proof that payments were to eligible producers, the AO's disallowance under section 40A(3) and application of section 40(a)(ia) for non-deduction of tax were held to be correctly sustained by the CIT(A). [Paras 10]

The disallowance of the expenditure under section 40A(3) and the consequential disallowance under section 40(a)(ia) is upheld.

Final Conclusion: The Tribunal dismissed the appeal; the CIT(A)'s order sustaining the disallowance of the pond and farm maintenance expenses under section 40A(3) and section 40(a)(ia), and the refusal to remit the matter to the AO for further verification, are affirmed.

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - deduction under Section 54G of the Income Tax Act, 1961 - deletion of assessment addition confirmed by appellate authorities including the High Court

Penalty under section 271(1)(c) of the Income Tax Act, 1961 - deletion of assessment addition confirmed by appellate authorities including the High Court - Sustainability of penalty levied under section 271(1)(c) where the quantum of assessment addition has been deleted by the Tribunal and that deletion has been confirmed by the High Court. - HELD THAT: - The Tribunal recorded that the quantum addition disallowing the assessee's claim under Section 54G was set aside by this Tribunal in I.T.A. No. 1619/Chny/2017 and that the Revenue's further appeal against that order was dismissed by the Hon'ble Madras High Court in T.C.A. No. 426 of 2019, which confirmed the Tribunal's view that the assessee was entitled to the deduction under Section 54G. The Departmental Representative did not controvert the High Court's decision. Given that the foundational addition against which penalty proceedings under section 271(1)(c) were initiated has been deleted and that deletion has been upheld by the High Court, the Tribunal held that the penalty could not survive. The Tribunal therefore sustained the order of the Commissioner (Appeals) deleting the penalty. [Paras 8, 9]

Penalty under section 271(1)(c) deleted; revenue's appeal dismissed.

Final Conclusion: The appeal filed by the Revenue is dismissed; the appellate order deleting the penalty under section 271(1)(c) is sustained following confirmation of the deletion of the underlying addition by the Tribunal and the Hon'ble Madras High Court.

Deduction of interest expenses on payment basis under section 43B - Capitalisation of interest to capital work in progress - Apportionment of interest between profit & loss and capital work in progress - Remand for verification and opportunity of hearing

Deduction of interest expenses on payment basis under section 43B - Capitalisation of interest to capital work in progress - Apportionment of interest between profit & loss and capital work in progress - Remand for verification and opportunity of hearing - Whether unpaid interest forming part of interest charged in the accounts is allowable as deduction for A.Y. 2014-15 or is to be disallowed under section 43B, and whether the claim of apportionment between P&L and CWIP is substantiated - HELD THAT: - The Assessing Officer disallowed the entire unpaid interest on the view that deduction of interest payable to public financial institutions is allowable only if actually paid by the due date of filing the return, and because the assessee did not furnish satisfactory material to justify its apportionment between Profit & Loss account and Capital Work in Progress. The Tribunal noted that the assessee had contended that only a small portion of the unpaid interest was charged to P&L and the balance was capitalised to CWIP, and that documentary evidence in support of the apportionment had been asserted before the lower authorities. Given the absence of supporting material before the AO on the apportionment and the factual nature of the controversy, the Tribunal concluded that the matter required fresh examination and verification of the documentary evidence. Accordingly the Tribunal directed that the assessee be given an opportunity of being heard and the AO decide the issue afresh in accordance with law after examining the documents to be filed by the assessee. [Paras 7]

Issue remitted to the Assessing Officer for fresh adjudication after the assessee files documentary evidence and is afforded an opportunity of hearing; the ground is treated as allowed for statistical purposes.

Final Conclusion: The Tribunal directed remand of the dispute concerning disallowance of unpaid interest (A.Y. 2014-15) to the Assessing Officer for fresh consideration on the basis of documentary evidence to be furnished by the assessee, after providing an opportunity of hearing; the appeal is treated as allowed for statistical purposes.

Deemed dividend under section 2(22)(e) - scope of "loan or advance" in closely held companies - requirement of actual payment/receipt for deeming dividend - strict construction of deeming provisions - loans/advances given for mutual/business benefit not taxable as deemed dividend

Deemed dividend under section 2(22)(e) - requirement of actual payment/receipt for deeming dividend - loans/advances given for mutual/business benefit not taxable as deemed dividend - strict construction of deeming provisions - Whether the advances/loans made by M/s. Kurnool Cylinders Pvt. Ltd. to Dharmaja Cylinders Pvt. Ltd., resulting in alleged escape of income in the hands of the shareholder-assessee, are exigible to tax as deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. - HELD THAT: - The CIT(A) concluded, after considering the assessee's explanations and relevant precedents, that the transactions were not "gracious payments" and that advances made for mutual business benefit do not fall within the ambit of deemed dividend under section 2(22)(e). The CIT(A) relied on authorities holding that the deeming provision must be strictly construed and that mere common shareholdings do not automatically attract the provision. It was also noted that only amounts actually received by a shareholder as loan/advance in the relevant year can be taxed under the clause and, on the facts, no such amount was received by the appellant for the purposes of bringing it within the deeming fiction. The Tribunal examined the reasoning of the CIT(A), found it well-reasoned and consistent with the purpose of the provision and the cited case law, and held that there was no infirmity in directing deletion of the addition. Consequently the Tribunal upheld the CIT(A)'s conclusion that section 2(22)(e) did not apply to the assessee on the facts before it. [Paras 7, 8]

Addition of Rs. 1,99,96,148/- made by the AO under section 2(22)(e) deleted; revenue's ground dismissed.

Final Conclusion: The Tribunal affirms the CIT(A)'s finding that the advances/loans in issue are not taxable as deemed dividend under section 2(22)(e) on the facts, upholds deletion of the addition, and dismisses the revenue's appeal.

Deductibility of interest as business expenditure - revenue cannot substitute business judgment of assessee - requirement of cogent material for disallowance made on estimated/piecemeal basis

Deductibility of interest as business expenditure - revenue cannot substitute business judgment of assessee - Whether interest on term loan amounting to Rs. 20,28,015/- was rightly disallowed as not being for business purpose. - HELD THAT: - The Tribunal found that the revenue authorities did not dispute that the assessee obtained the term loan and paid interest thereon. The Assessing Officer's conclusion that the loan was unnecessary because the assessee had outstanding debtors involved impermissible substitution of the Assessing Officer's commercial judgment for that of the businessman. There was no finding that the loan was not actually taken, that interest was not paid, or that interest-bearing funds were diverted; absent such findings the addition lacked cogency. Consequently the disallowance of the claimed interest was held unsustainable and was deleted. [Paras 8]

Addition of Rs. 20,28,015/- as disallowance of interest is deleted and claim allowed.

Disallowance on estimated basis - requirement of cogent material for disallowance made on estimated/piecemeal basis - Whether the ad-hoc disallowance (reduced by CIT(A) to 20%) of travelling and telephone expenditure was sustainable in absence of vouchers and cogent material. - HELD THAT: - The Tribunal observed that the Assessing Officer made an estimated disallowance merely on the premise that personal element 'cannot be ruled out' without producing cogent material or evidence to substantiate the disallowance. A bare assertion that personal expenses might exist does not justify ipso facto reduction of business expenditure. In absence of material justifying the percentage disallowance, the addition was held unsustainable and ordered to be deleted. [Paras 9]

Estimated disallowance of travelling and telephone expenses is deleted.

Final Conclusion: The assessee's appeal is allowed; the disallowance of interest and the ad-hoc disallowance of travelling and telephone expenses are deleted.

Notional annual lettable value - stock-in-trade - income from house property - business income - precedential weight of coordinate Tribunal decisions in presence of conflicting non jurisdictional High Court decisions - prospective statutory amendment to Sec. 23(5)

Notional annual lettable value - stock-in-trade - income from house property - business income - precedential weight of coordinate Tribunal decisions in presence of conflicting non jurisdictional High Court decisions - prospective statutory amendment to Sec. 23(5) - Whether the annual lettable value of unsold flats held as stock-in-trade of a real estate developer is assessable as income from house property or notional/assessable income under the Act for the year under consideration. - HELD THAT: - The Tribunal found as a fact that the flats were held as stock-in-trade by the assessee and were not let out; no actual rental income was derived. Faced with conflicting High Court decisions (Hon'ble Delhi High Court in Ansal holding ALV assessable as income from house property and Hon'ble Gujarat High Court in Neha Builders taking the contrary view), the Tribunal applied the principle that where non jurisdictional High Courts are in conflict the view favourable to the assessee is to be followed, and gave precedence to coordinate Bench/ITAT decisions of the Mumbai Tribunal which hold that notional ALV cannot be brought to tax as income from house property for unsold flats treated as stock-in-trade. The Tribunal distinguished decisions concerned with actual rental receipts (e.g., Sane & Doshi / Gundecha) as factually different. The Tribunal also noted that the statutory provision later inserted as Sec. 23(5) (Finance Act, 2017) is prospective (effective A.Y. 2018-19) and thus not applicable to the year under consideration. Applying these legal principles and precedents (including C.R. Developments, Runwal Constructions, Shri Rajendra Godshalwar and the later ITAT C-bench decision in Osho Developers), the Tribunal concluded the Assessing Officer erred in bringing to tax the notional ALV of unsold flats held as stock-in-trade and directed deletion of the addition. [Paras 7, 11]

The addition of notional annual lettable value in respect of flats held as stock-in-trade is not sustainable and is deleted; the revenue appeal is dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeal for A.Y. 2013-14, upholding the deletion of the addition made by the Assessing Officer in respect of notional annual lettable value of flats held as stock-in-trade of the real estate developer.

IGST refund - refund claim adjudication - application of precedent - direction for reconsideration

IGST refund - application of precedent - direction for reconsideration - Petition disposed with direction to respondent to reconsider and decide the claim for IGST refund in accordance with law and the ratios of the cited decisions. - HELD THAT: - The Court found the present petition squarely covered by the earlier decision of a cognate bench and therefore disposed of the petition in identical terms. The respondent No.1 was directed to immediately look into the matters and pass an appropriate order on the claim for IGST refund in accordance with law, bearing in mind the ratios of the decisions in M/s. Amit Cotton Industries v. Principal Commissioner of Customs and Awadkrupa Plastomech Pvt. Ltd. v. Union of India. The Court imposed a time limit, requiring completion of this exercise within six weeks from receipt of the writ of this order. The direction operates as a remand for fresh consideration limited to adjudication of the refund claim in light of the stated precedents and applicable law. [Paras 2, 3, 5]

Petition disposed; respondent directed to reconsider and decide the IGST refund claim in accordance with law and the cited precedents within six weeks.

Final Conclusion: Writ petition disposed by way of remand: respondent directed to reconsider and decide the IGST refund claim in accordance with the Court's cited precedents and applicable law within six weeks.

Summary order. Notice issued for final disposal on 02.03.2021 in the petition under Articles 226 and 227 seeking quash of assessment and refund; direct service permitted.

Refund under Section 129E - interest on delayed refund under Section 129EE - voluntary deposit during investigation not constituting duty - limits of appellate authority in setting aside orders beyond scope of appeal

Refund under Section 129E - voluntary deposit during investigation not constituting duty - limits of appellate authority in setting aside orders beyond scope of appeal - Validity of the refund sanctioned by the original authority and whether the Commissioner (Appeals) could set aside that refund in the appeal filed by the appellant. - HELD THAT: - The show cause notice and record establish that the appellant voluntarily deposited the amount during a DRI investigation and the deposit was not made towards any confirmed duty liability. The adjudicating authority dropped the show cause proceedings, leaving no confirmed demand that could convert the deposit into a duty. The original authority therefore correctly sanctioned the refund under Section 129E. The department did not challenge the refund order of the original authority; its cross-objection in the appeal only concerned entitlement to interest and the date from which interest should run. The Commissioner (Appeals) exceeded the scope of the appeal by setting aside the sanctioned refund when the appeal before him was confined to the question of interest, and when there was no departmental challenge to the sanction of refund. For these reasons the Commissioner (Appeals) was not justified in overturning the refund already granted by the original authority. [Paras 5, 6]

Order of the Commissioner (Appeals) setting aside the sanctioned refund is set aside and the refund granted by the original authority under Section 129E is restored.

Interest on delayed refund under Section 129EE - voluntary deposit during investigation not constituting duty - Entitlement of the appellant to interest on the refunded deposit and the period for which interest is payable. - HELD THAT: - Where an amount deposited under the investigation is required to be refunded because no demand was confirmed, the deposit remains refundable and attracts interest. Section 129EE provides for payment of interest on delayed refund of amounts deposited under Section 129E from the date of payment of the amount until the date of refund, at the rate fixed by the Central Government (not below five percent and not exceeding thirty-six percent per annum). Given that the deposited amount was held to be a deposit (not duty) and the adjudicating authority dropped the proceedings, the appellant is entitled to interest on the amount from the date of deposit until the date of payment of the refund. [Paras 7, 8]

Appellant is entitled to interest on the deposited amount from the date of deposit until the date of refund in accordance with Section 129EE; appeal allowed with consequential relief.

Final Conclusion: The Tribunal allows the appeal: it restores the refund sanctioned by the original authority (under Section 129E), holds that the Commissioner (Appeals) exceeded his jurisdiction in setting aside that refund, and directs payment of interest on the deposited amount from the date of deposit until refund in accordance with Section 129EE.

Interest payable from provisional assessment till date of payment - provisional assessment - charging interest up to date of order - remand for verification of interest computation - principles of audi alteram partem

Interest payable from provisional assessment till date of payment - charging interest up to date of order - Whether interest under the statutory provision is payable only up to the date of payment and not up to the date of the adjudication order. - HELD THAT: - The Tribunal analysed sub section (3), which prescribes the period for levy of interest commencing from the first day of the month in which the duty is provisionally assessed and ending on the date of payment thereof. The statutory text therefore fixes both the commencement and the terminal point of liability for interest. Reading the statutory end point as the date of the adjudication order is inconsistent with the legislative prescription. Consequently, an order which charges interest beyond the date of payment and up to the date of the order is not in conformity with the statutory mandate. [Paras 2]

The impugned charging of interest up to the date of the Order in Original is set aside; interest is chargeable only up to the date of payment as prescribed in the statute.

Remand for verification of interest computation - principles of audi alteram partem - Whether the matter should be remitted for recomputation of interest and for giving the appellant an opportunity before finalizing interest liability. - HELD THAT: - Having held that interest can be charged only up to the date of payment, the Tribunal directed remand to the adjudicating authority to verify records and compute the interest liability in accordance with the statutory timeline. The authority is to give the appellant an opportunity in accordance with the principles of audi alteram partem before passing a fresh order calculating interest up to the date of payment.

Matter remanded to the adjudicating authority to verify records, compute interest only up to the date of payment, and pass a fresh order after affording the appellant an opportunity to be heard.

Final Conclusion: The appeal succeeds insofar as the charging of interest up to the date of the adjudication order is concerned; that portion is set aside and the matter is remanded for recomputation of interest only up to the date of payment, after affording the appellant an opportunity to be heard.

Jurisdiction of the Adjudicating Authority under Section 60(5) of the IBC - interaction between moratorium under Section 14 of the IBC and recovery proceedings under the EPF & MP Act - statutory first charge in favour of EPF authorities under Section 11 of the EPF & MP Act - exclusion of provident fund, pension and gratuity sums from the liquidation estate under Section 36(4)(a)(iii) of the IBC - duty to lodge claim and exercise of option to stand outside liquidation under the IBC and Liquidation Regulations

Jurisdiction of the Adjudicating Authority under Section 60(5) of the IBC - Whether the Tribunal has jurisdiction to adjudicate the dispute between the Liquidator and the EPFO in relation to attachment, sale and priorities during the liquidation of the corporate debtor. - HELD THAT: - The Tribunal held that, in view of Section 60(5) of the IBC and the Supreme Court decisions cited (including Gujarat Urja Vikas Nigam Ltd.), the NCLT has jurisdiction to entertain and decide questions of law or fact that arise out of or in relation to insolvency resolution or liquidation proceedings, provided there is a textual nexus with the insolvency. The dispute regarding attachment, sale and priority of assets of the corporate debtor during liquidation arises from and relates to the liquidation process and therefore falls within the Tribunal's jurisdiction. The Tribunal emphasised that this residuary jurisdiction is circumscribed by the text of the IBC and must not be used to usurp the legitimate jurisdiction of other fora where the dispute does not arise from insolvency proceedings.

Tribunal has jurisdiction to entertain and decide the application concerning attachment, sale and priority in the liquidation of the corporate debtor.

Duty to lodge claim and exercise of option to stand outside liquidation under the IBC and Liquidation Regulations - Whether the EPFO is required to lodge a claim and, if it wishes to invoke a security interest or stand outside the liquidation process, to exercise the option prescribed under the IBC and Liquidation Regulations. - HELD THAT: - The Tribunal rejected EPFO's contention that it is exempt from lodging a claim with the IRP/RP/Liquidator. The Tribunal observed that the statutory right to payment under the EPF Act does not dispense with the procedural requirement of filing a claim during CIRP or liquidation because filing a claim notifies the IRP/RP/Liquidator and enables proper collating and consideration of claims under the Code and Regulations. While the EPFO may have its own statutory remedies and quantifications under the EPF Act, the RP/Liquidator must be put on notice of the claim so that the liquidation process can account for such claims and options to stand outside the liquidation can be exercised and considered in accordance with the IBC and the attendant regulations.

EPFO must lodge its claim and, if it intends to invoke a security interest or stand outside the liquidation, must follow the option and procedure under the IBC and Liquidation Regulations; it is not immune from filing a claim.

Interaction between moratorium under Section 14 of the IBC and recovery proceedings under the EPF & MP Act - statutory first charge in favour of EPF authorities under Section 11 of the EPF & MP Act - exclusion of provident fund, pension and gratuity sums from the liquidation estate under Section 36(4)(a)(iii) of the IBC - Whether an attachment by EPFO effected prior to initiation of CIRP is hit by the moratorium under Section 14 of the IBC and whether EPFO's claim enjoys statutory priority such that attached assets cannot be sold in liquidation until EPF dues are discharged. - HELD THAT: - The Tribunal applied the reasoning of precedents (including NCLAT decisions and NCLT benches) and concluded that an order of attachment by EPFO effected prior to the initiation of CIRP is not displaced by the moratorium declared under Section 14 of the IBC. Further, sums due to workmen from provident fund, pension fund and gratuity are excluded from the liquidation estate under Section 36(4)(a)(iii) of the IBC and Section 11 of the EPF Act creates a statutory first charge on establishment assets in favour of EPFO; accordingly EPFO's claim for PF dues (including interest) is entitled to priority and the statutory charge remains operative until discharged. The Tribunal therefore held that the attachment predating CIRP is not vitiated by moratorium and EPFO is entitled to satisfaction of its claim in priority.

Attachment effected by EPFO prior to CIRP is not hit by the moratorium; EPFO's claim for provident fund dues (including interest) enjoys statutory priority and the charge continues until discharged.

Interaction between Liquidator's actions and statutory first charge - Whether the Liquidator's auction of attached movables could be sustained and what directions should be given to resolve the impasse so as to keep the liquidation process on track. - HELD THAT: - Having held that EPFO's prior attachment and statutory first charge subsist and EPFO is entitled to its dues in priority, the Tribunal found that the Liquidator's auction of machinery conducted while the property remained under attachment could not be sustained. To balance interests and avoid perpetual deadlock, the Tribunal directed that the Liquidator may discharge the EPFO claim (including amounts found due up to August 2019) within two weeks by following the procedure under the EPF Act and Second Schedule to the Income Tax Act, failing which EPFO may proceed under its statute to realise dues in priority. The Tribunal further imposed a timeline that any recovery action by EPFO thereafter shall be completed within eight weeks, failing which EPFO shall re locate the movables to the Liquidator to continue the liquidation; any surplus after appropriation of PF dues is to be handed to the Liquidator for the liquidation estate.

Liquidator's auction set aside; Liquidator given two weeks to discharge EPFO dues in priority or EPFO may proceed with recovery, which must be completed within eight weeks, and any surplus shall be deposited with the Liquidator as part of the liquidation estate.

Final Conclusion: The Tribunal exercised its jurisdiction under Section 60(5) of the IBC to determine the dispute: EPFO's prior attachment is not defeated by the moratorium and its claim for provident fund dues (including interest) enjoys statutory priority and exclusion from the liquidation estate; EPFO must nevertheless lodge its claim so the Liquidator can take it into account, and the Liquidator's auction of attached movables was set aside with directions permitting the Liquidator to pay off PF dues within two weeks or, failing that, permitting EPFO to recover in priority subject to an eight week completion period and accounting for any surplus to the liquidation estate.

Look-Out Circular and requirement of disclosure of reasons - right to travel abroad as a fundamental right - prohibition on post-facto validation of grounds not disclosed in the original LOC - economic interests of India as a threshold for issuance of LOC - protection of livelihood against administrative restrictions on travel - effect of DRT award and PMLA attachment on security of bank's claim

Look-Out Circular and requirement of disclosure of reasons - prohibition on post-facto validation of grounds not disclosed in the original LOC - Validity of the LOC issued on the basis that the petitioner 'is' a Director of the borrower-Company when the petitioner had resigned earlier and no such ground was disclosed contemporaneously. - HELD THAT: - The only reason disclosed in the Bank's request and in the LOC itself was that the petitioner was a Director of the borrower-Company, stated in the present tense. The Court found that such an allegation, without contemporaneous documentary support and where the petitioner had resigned long before the alleged fraud, is insufficient to fall within the grounds contemplated by the relevant Office Memoranda for issuing an LOC. A fresh ground (that the petitioner was a guarantor) raised subsequently in affidavits cannot supplant or retrospectively validate the reasons that should have been furnished in the original request or LOC. The DRT award against the borrower and the PMLA attachment order were held to demonstrate that the bank's interests were otherwise secured, further weakening any justification based solely on the Director allegation. [Paras 25, 26, 28, 35, 36]

The LOC issued on the stated ground that the petitioner 'is' a Director was unjustified and cannot be sustained; the LOC and its renewal are quashed.

Prohibition on post-facto validation of grounds not disclosed in the original LOC - Look-Out Circular and requirement of disclosure of reasons - Whether an allegation made for the first time in the respondents' affidavits (that the petitioner was a guarantor) can retrospectively validate the LOC and its renewal. - HELD THAT: - The Court held that introduction of a new ground in affidavit-in-opposition cannot justify issuance or renewal of an LOC when that ground was not disclosed in the original request or LOC. A vague, cursory reference to guarantor liability in the Bank's affidavit without any specific allegation or supporting documents does not cure the absence of reasons in the LOC or the request and therefore cannot retrospectively validate the LOC. [Paras 16, 26, 27, 32]

Post-facto allegations in affidavits do not validate the issuance or renewal of the LOC; such retrospective justification is impermissible.

Economic interests of India as a threshold for issuance of LOC - Look-Out Circular and requirement of disclosure of reasons - Whether the Bank's request and the LOC disclosed any material demonstrating that the petitioner's travel would adversely affect the economic interests of India as required by the Office Memoranda. - HELD THAT: - The Court examined the relevant Office Memoranda and earlier authorities and observed that mere commercial defaults or the quantum of loan do not automatically satisfy the high threshold of prejudice to the economic interests of India. No material was placed on record to demonstrate that permitting the petitioner to travel would jeopardize the country's economic interests. Consequently, the grounds set out in the Office Memoranda were not shown to apply to the petitioner, and the LOC could not be justified on that basis. [Paras 19, 30, 31, 34, 37]

The Bank and Immigration Authorities failed to demonstrate that the economic interests of India would be adversely affected by the petitioner's travel; the LOC was not supported by the requisite grounds.

Right to travel abroad as a fundamental right - protection of livelihood against administrative restrictions on travel - Whether the impugned LOC impermissibly curtailed the petitioner's fundamental right to travel and his livelihood as a seafarer. - HELD THAT: - The petitioner, a Captain in the Merchant Navy, earns his livelihood through overseas travel and spends much of the year on the high seas. The Court held that an LOC, issued without the requisite disclosed grounds and reasons, would curtail the petitioner's constitutional right to travel and would imperil his livelihood and life. Given that the bank's interests were shown to be secured by the DRT award and PMLA attachment orders, withholding the petitioner from leaving the country was unnecessary and disproportionate. [Paras 9, 28, 29, 35]

The LOC unlawfully infringed the petitioner's fundamental right to travel and his livelihood; it could not be sustained.

Final Conclusion: The petition is allowed; the Look-Out Circular and its subsequent extension issued against the petitioner are quashed. Respondent authorities are directed to circulate this order to the concerned agencies to prevent further action based on the LOC. No costs.

Prohibition under Section 195(1)(b)(i) CrPC - Scope of Section 195 - taking cognizance versus police investigation - Non-cognisable offence of giving false evidence (Section 193 IPC) - Interrelation of offences and extension of Section 195 bar to connected offences - Section 340 CrPC - procedure where Section 195 is attracted - Police power to register FIR and investigate cognizable offences - Protection of the administration of justice and purity of court proceedings - Cooperative federalism and investigation by Central Agencies (contextual)

Prohibition under Section 195(1)(b)(i) CrPC - Non-cognisable offence of giving false evidence (Section 193 IPC) - Applicability of the bar under Section 195(1)(b)(i) CrPC to the offences alleged in the FIRs - HELD THAT: - The Court held that the allegations in the FIRs concern attempts to fabricate false evidence and to coerce accused persons to give false statements, matters which fall within the mischief of Section 195(1)(b)(i) CrPC. Section 193 IPC is an offence which directly impacts the administration of justice and therefore attracts the prohibition in Section 195. The words 'in relation to any proceeding in any court' include recording of statements made while proceedings under the PMLA were pending before the Special Court; accordingly Section 195(1)(b)(i) applies to the material facts of these cases. The Court relied on the purpose and precedents interpreting Section 195 to conclude that the embargo is attracted in the present circumstances. [Paras 11, 12, 19]

The prohibition in Section 195(1)(b)(i) CrPC is attracted to the offences alleged in the FIRs (including the offence under Section 193 IPC) and applies to these matters.

Scope of Section 195 - taking cognizance versus police investigation - Interrelation of offences and extension of Section 195 bar to connected offences - Police power to register FIR and investigate cognizable offences - Whether the Crime Branch could register and continue investigation into the FIRs despite the bar under Section 195(1)(b)(i) - HELD THAT: - The Court examined authorities distinguishing Section 195(1)(b)(i) and Section 195(1)(b)(ii) and held that where offences covered by Section 195(1)(b)(i) (such as Section 193 IPC) are interwoven and inseparable from other offences alleged, the procedural bar of Section 195 extends to the whole transaction. Consequently, because Section 193 is a non-cognisable offence in the present facts, the Crime Branch could not lawfully register and investigate the crimes without following the procedure prescribed (including recourse under Section 155(1) CrPC and the special procedure in Section 340 CrPC). The Court therefore found that continued investigation by the Police into these FIRs was impermissible in the present factual matrix. [Paras 13, 20, 21]

The Crime Branch should not have registered or continued investigation of the FIRs as framed; the prohibition under Section 195(1)(b)(i) extends to the interwoven offences and precludes police investigation in the present circumstances.

Section 340 CrPC - procedure where Section 195 is attracted - Protection of the administration of justice and purity of court proceedings - Appropriate forum and procedure to be followed given the bar under Section 195(1)(b)(i) - HELD THAT: - The Court held that where information is received concerning offences under Section 195(1)(b), the jurisdictional court (here the Special Court before which PMLA proceedings lie) may, under Section 340 CrPC, conduct a preliminary inquiry and decide whether it is expedient in the interests of justice to proceed with an enquiry and make a complaint. In the circumstances of these cases the Special Court, having already received a complaint and taken cognizance of the PMLA matters, should be permitted to examine the materials collected by the Crime Branch as information under Section 340(1) and determine whether to order an inquiry and follow the statutory process. [Paras 22, 23]

Records and materials collected by the Crime Branch shall be placed before the Special Court in a sealed cover; the Special Court shall consider them under Section 340 CrPC and decide whether an inquiry is expedient.

Final Conclusion: The two FIRs registered at the Crime Branch (Crime Nos. 94 and 98 of 2021) are quashed and further proceedings in those crimes are stayed. The investigating officers are directed to submit all records pertaining to those crimes to the Special Court in a sealed cover; the Special Court may examine those materials under Section 340 CrPC and decide whether to order an enquiry.

Proceeds of crime - provisional attachment under Section 5 PMLA - definition of proceeds of crime under Section 2(1)(u) PMLA - jurisdiction to attach properties acquired prior to commission of scheduled offence - adjudication by Adjudicating Authority under Section 8 PMLA - maintainability of writ in presence of alternative statutory remedy

Maintainability of writ in presence of alternative statutory remedy - adjudication by Adjudicating Authority under Section 8 PMLA - Challenge to the provisional attachment order by writ petition is maintainable because the impugned attachment is attacked on the ground that the authority lacked jurisdiction to attach certain properties. - HELD THAT: - The Court considered the respondents' contention that petitioners must resort to the remedy before the Adjudicating Authority and reviewed the authorities cited on the exercise of Article 226 where alternative remedies exist. Applying the established exceptions (including where lack of jurisdiction is alleged), the Court held that a writ is maintainable to challenge an order which, on the face of it, suffers from want of jurisdiction. The Court therefore declined to reject the petitions on the ground of alternative remedy where the core contention was that the authority could not lawfully treat certain properties as "proceeds of crime" and so had no jurisdiction to attach them. [Paras 13]

Writ petitions entertained as maintainable insofar as they challenge the jurisdictional validity of the provisional attachment.

Proceeds of crime - definition of proceeds of crime under Section 2(1)(u) PMLA - provisional attachment under Section 5 PMLA - jurisdiction to attach properties acquired prior to commission of scheduled offence - Properties acquired prior to the commission of the scheduled offences (the assets listed in Table I) are not "proceeds of crime" within the meaning of Section 2(1)(u) and therefore could not be validly provisionally attached under Section 5 of the PMLA. - HELD THAT: - The Court analysed the statutory definition in Section 2(1)(u), its legislative amendments and the established judicial interpretations. It observed that the original and amended language contemplates property "derived or obtained" from criminal activity or property equivalent where proceeds have been taken or held outside the country. The Court held that amendments addressing property moved abroad do not extend the definition to permit attachment of unrelated pre existing assets merely because proceeds were dissipated in an enterprise (such as the pisciculture business) and lost. Applying the Heydon's case principle and construing the definition in light of its mischief, the Court concluded that assets acquired before the commission of the scheduled offences do not fall within the first limb of "proceeds of crime" and the explanation added by later amendments does not convert pre offence property into tainted property where the proceeds have been exhausted. [Paras 30, 31]

Attachment and consequential proceedings in respect of the properties listed in Table I set aside as without jurisdiction; those properties are not "proceeds of crime."

Provisional attachment under Section 5 PMLA - adjudication by Adjudicating Authority under Section 8 PMLA - Properties acquired after the commission of the scheduled offences (the assets listed in Table II) fall within the jurisdiction of the enforcement authority and require adjudication under Section 8 of the Act. - HELD THAT: - The Court distinguished the two categories of attached assets and held that the impugned authority retains jurisdiction to proceed against properties acquired after September 2010 which are alleged to have been purchased from the proceeds of the scheduled offences. The correctness of attachment of Table II properties must be determined through the statutory adjudication process provided under Section 8, including service of notice, consideration of replies and hearing before the Adjudicating Authority. [Paras 31, 32]

Proceedings against the properties in Table II may continue before the Adjudicating Authority; attachment of those properties is not set aside by this order.

Final Conclusion: The provisional attachment order dated 31.12.2019 and consequential proceedings are quashed insofar as they relate to properties listed in Table I; proceedings may continue in relation to properties listed in Table II and the petitions are disposed accordingly with no order as to costs.

Definition of input service under Rule 2(l) of CCR 2004 - nexus between input service and exported output service - refund of unutilized CENVAT credit under Notification No.27/2012-CE dated 18.06.2012 read with Rule 5 of CCR 2004 - requirement to bifurcate insurance services for credit/refund purposes

Definition of input service under Rule 2(l) of CCR 2004 - nexus between input service and exported output service - refund of unutilized CENVAT credit under Notification No.27/2012-CE dated 18.06.2012 read with Rule 5 of CCR 2004 - Whether the CENVAT credit/refund claimed in respect of Architectural Services, Event Management Services, Works Contract Services, Supply of Tangible Goods, Membership of Club, Photography Services and Credit/Debit Card & Payment Card Services qualifies as input service under Rule 2(l) CCR 2004 and is refundable for the specified export periods - HELD THAT: - The Tribunal examined the definition of "input service" in Rule 2(l) CCR 2004 and the requirement of nexus with the output (exported) services. Applying the definition and the facts on record, the Tribunal found that the services in question were availed and used in relation to the provision of the appellants' exported output services - e.g., architectural services for designing office premises used to render the output service; event management, photography and supply/hiring of equipment for business events and conferences necessary for conduct of the business; works contract services for repairs/maintenance of premises and assets; membership of club used to promote trade/association activities; and credit/debit card and payment card services used for official travel, meal cards and accommodation in connection with projects. The Tribunal observed that various earlier decisions of Tribunals and High Courts treated such services as input services and that the appellants produced invoices to substantiate use. On that basis the Tribunal held these services fall within the definition of input service and that the appellants are entitled to refund of the unutilized CENVAT credit under the Notification and Rule relied upon. [Paras 6, 7]

Allowed CENVAT credit/refund in respect of Architectural Services, Event Management Services, Works Contract Services, Supply of Tangible Goods, Membership of Club, Photography Services and Credit/Debit Card & Payment Card Services for the stated periods.

Definition of input service under Rule 2(l) of CCR 2004 - requirement to bifurcate insurance services for credit/refund purposes - nexus between input service and exported output service - Whether the CENVAT credit/refund claimed in respect of General Insurance Service in Appeal No. ST/20027/2020 qualifies as input service and is refundable for the period Jan 2017 to Mar 2017 - HELD THAT: - The Tribunal noted that the appellant failed to demonstrate a clear bifurcation between insurance taken on company assets and insurance relating to the lives of employees. In the absence of documentary evidence establishing this segregation and thereby establishing the requisite nexus with the exported output services, the Tribunal was unable to hold the General Insurance Service to be an input service for refund purposes. The decision thus rests on insufficiency of evidence to identify and segregate the component relatable to business assets or operations from employee welfare/ personal coverage. [Paras 6, 7]

Refund in respect of General Insurance Service in Appeal No. ST/20027/2020 denied for lack of bifurcation/evidence; other claims allowed.

Final Conclusion: Except for the General Insurance Service in Appeal No. ST/20027/2020 (denied for lack of bifurcation and documentary evidence), the Tribunal held that the contested services qualify as input services under Rule 2(l) CCR 2004 and allowed the appellants' claims for refund of unutilized CENVAT credit under the stated Notification and Rule for the specified periods; appeals disposed accordingly.

Availability of Cenvat credit on insurance premiums - input service exclusion for services used primarily for personal use or consumption of employees - Workmen Compensation Insurance as indemnification of employer's statutory liability - effect of amendment to definition of "input service" w.e.f. 01.04.2011 - precedential effect of High Court decision overruling tribunal view

Availability of Cenvat credit on insurance premiums - input service exclusion for services used primarily for personal use or consumption of employees - Workmen Compensation Insurance as indemnification of employer's statutory liability - effect of amendment to definition of "input service" w.e.f. 01.04.2011 - Cenvat credit of service tax paid on premium for a workmen compensation insurance policy is admissible where the policy insures the employer (assessee) against its statutory liability and the service is not used primarily for personal use or consumption of employees. - HELD THAT: - The Larger Bench examined the exclusion introduced in Rule 2(l) of the Cenvat Credit Rules, 2004 w.e.f. 01.04.2011 and the factual character of the policy in question. Relying upon the Madras High Court's decision concerning workmen compensation insurance, the Court identified three determinative factors: the nature of the policy, the beneficiary of the policy, and the statute under which the policy is required. Where the insured is the assessee and the policy indemnifies the assessee's potential liability under the Workmen Compensation Act, 1923 (i.e., the benefit flows to the assessee and not primarily for personal use or consumption of employees), such insurance does not fall within the exclusion in clause (C) and Cenvat credit is permissible. The Court distinguished cases where the benefit of the service flowed primarily to employees (e.g., group medical/health insurance, catering), which remain excluded. Applying these principles to the policies before it, the Larger Bench held that the Hydus Technologies view permitting credit in respect of employer-liability insurance is correct. [Paras 23, 24, 25, 26, 30]

The appeal on the legal question is answered in favour of the view in Hydus Technologies: Cenvat credit is available for workmen compensation insurance premiums where the policy insures the assessee's liability and the service is not primarily for employees' personal consumption.

Precedential effect of High Court decision overruling tribunal view - remand for disposal by appropriate bench - The conflict between the tribunal decisions is resolved in favour of Hydus Technologies, and the decision in Ganesan Builders (Tribunal) is treated as having been overruled by the Madras High Court on the workmen compensation insurance point; the specific appeal is to be placed before an appropriate bench for final disposal. - HELD THAT: - The Larger Bench noted that CESTAT-Chennai's contrary view in Ganesan Builders had been overruled by the Hon'ble High Court of Madras on facts concerning workmen compensation policies where the insured is the assessee. Having resolved the legal question in favour of the Hydus approach, the Larger Bench directed that the present appeal be placed before the appropriate bench for decision of the appeal in accordance with the legal conclusions reached. This direction contemplates factual and adjudicatory disposal of the appeal by the designated bench rather than final adjudication on quantum or consequential relief in the Larger Bench order itself. [Paras 20, 21, 30, 31]

The Larger Bench resolves the conflict in favour of Hydus Technologies and, since the panel does not itself proceed to decide the appeal on facts, directs placement of the matter before an appropriate bench for final disposal.

Final Conclusion: The Larger Bench holds that Cenvat credit on service tax paid for a workmen compensation insurance policy is admissible where the policy insures the employer's statutory liability and the service is not used primarily for employees' personal consumption; the view in Hydus Technologies is affirmed and the contrary Tribunal view in Ganesan Builders is noted as effectively overruled by the Madras High Court on the point; the case is directed to be placed before the appropriate bench for final adjudication of the appeal in accordance with this legal position.

Cenvat credit - input services - works contract - composite contract - remand for fresh consideration - opportunity of hearing

Cenvat credit - input services - works contract - composite contract - Admissibility of cenvat credit claimed on service-tax components of invoices issued by M/s. Manana Construction and M/s. ISGEC Heavy Engineering Ltd. - HELD THAT: - The Tribunal found that the appellant claimed cenvat credit on service-tax shown in invoices relating to civil works and installation activity but the original authority did not have before it the relevant agreements, work orders and supporting documents necessary to verify the appellant's contention that separate contracts existed for supply of materials, supply of labour for civil construction and supply of labour for installation/erection. The Assistant Commissioner had recorded that no supporting documents were filed before the original authority and the appellant's bald statements could not be relied upon. Given the absence of documentary proof to determine whether the transactions were taxable works contracts/composite contracts or distinct input services eligible as cenvat credit, the Tribunal did not adjudicate the merits of admissibility but held that the question requires fresh examination on the basis of all relevant documents. [Paras 5]

Issue remanded to the original authority for fresh adjudication of the claim of cenvat credit after examination of all agreements, invoices and work orders.

Remand for fresh consideration - opportunity of hearing - Procedure and timeline for fresh disposal by the original authority upon remand. - HELD THAT: - The Tribunal directed that the appellant shall produce all relevant agreements, work contracts and invoices before the original authority. The original authority is to give the appellant an opportunity of hearing, examine the documents afresh, decide the claim and determine any demand in accordance with law. The Tribunal mandated that the fresh order be passed within three months from receipt of the certified copy of the Tribunal's order. [Paras 5]

Matter remanded with directions to the original authority to adjudicate afresh after hearing the appellant and to decide the claim within three months.

Final Conclusion: The appeal is disposed of by way of remand: the question of entitlement to cenvat credit on the disputed invoices is not finally decided and the matter is sent back to the original authority for fresh consideration upon production of all relevant documents and after affording an opportunity of hearing, to be completed within three months.

CENVAT credit admissibility on components and parts used for repair, maintenance and fabrication of capital goods - definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 - user test for determining capital goods - treatment of structural/metal items as parts of capital goods - precedential effect of tribunal/appellate decisions

CENVAT credit admissibility on components and parts used for repair, maintenance and fabrication of capital goods - definition of capital goods under Rule 2(a) of the Cenvat Credit Rules, 2004 - user test for determining capital goods - chartered engineer certificate as evidence of user - Whether CENVAT credit on disputed items (MS plates, MS angles, MS channels, chains, nickel screen, pugmill and similar items) is admissible as inputs/parts/components of capital goods for the period September 2015 to March, 2016 - HELD THAT: - The Tribunal examined earlier adjudications and followed its Final Order No.20401/2019 dt. 08/05/2019 in which similar goods were held eligible for credit. Applying the user test as applied by the Supreme Court and adopted by the Tribunal, structural metal items and other disputed goods used in fabrication, support or as parts/components of machines and material-handling equipment fall within the scope of capital goods as defined in Rule 2(a) of the Cenvat Credit Rules, 2004. The Tribunal noted that several impugned goods are themselves classifiable under chapters specifically covered by the definition of capital goods and that many items were used for repair, maintenance or fabrication of capital goods; the Chartered Engineer's certificate corroborating usage was not appropriately discredited by the lower authorities. In view of the binding precedents and application of the user test to the facts, the denial of credit was unsustainable. [Paras 6, 7]

Impugned orders denying and recovering CENVAT credit on the disputed items are set aside; the appellant's appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal and set aside the orders of the original authority and Commissioner(Appeals) insofar as they denied CENVAT credit on the specified items for the period September 2015 to March, 2016, holding such items to be eligible as parts/components or inputs used for capital goods in light of the definition in Rule 2(a), the user test and relevant precedents, and granted consequential relief.

Payment of duty under protest and applicability of time limit under proviso (2) to section 11B - entitlement to refund where duty paid under protest - limitation bar under section 11B of the Central Excise Act, 1944

Payment of duty under protest and applicability of time limit under proviso (2) to section 11B - entitlement to refund where duty paid under protest - Whether the time limit prescribed under section 11B of the Central Excise Act, 1944 is applicable to the appellant's refund claim where the duty was paid under protest. - HELD THAT: - The Tribunal found on the material that the appellant had reversed/paid the amount immediately and had done so under protest (to "buy peace"), facts which were recorded in the show cause notice and subsequent proceedings. Applying proviso (2) to section 11B of the Central Excise Act, 1944, the Tribunal held that the statutory time limit for filing refund claims does not apply where duty has been paid under protest. On that basis the Tribunal concluded that the refund claim could not be rejected on the ground of limitation and that the appellant was entitled to the refund. The reasoning rests on the factual finding that payment was made under protest and the legal consequence under proviso (2) that the limitation bar is inapplicable in such cases. [Paras 6]

Impugned order rejecting the refund as barred by limitation is set aside; appeal allowed and the appellant held entitled to refund with consequential relief.

Final Conclusion: The Tribunal allowed the appeal, holding that because the duty was paid under protest, proviso (2) to section 11B applies and the statutory time limit does not bar the refund; the impugned order is set aside and consequential relief granted.

Denial of personal hearing - principles of natural justice - pre-assessment notice and objections - remand for fresh consideration - requirement of reasoned order after hearing

Denial of personal hearing - principles of natural justice - Impugned assessment orders are vitiated for having been passed without affording an opportunity of personal hearing to the assessee. - HELD THAT: - The Court found that the second respondent passed the impugned orders without specifying or affording any date for personal hearing, despite the assessees' contention and the statutory scheme. The Court held that failure to afford personal hearing is a breach of the principles of natural justice and, on that sole ground, the impugned orders cannot stand. Accordingly, the orders under challenge were set aside and remanded to the assessing authority for fresh consideration after giving the assessee an opportunity of personal hearing. [Paras 8, 10]

Impugned orders set aside and remanded for fresh consideration after affording personal hearing.

Pre-assessment notice and objections - denial of personal hearing - Failure to submit objections to a pre-assessment notice does not entitle the assessing officer to deny an opportunity of personal hearing. - HELD THAT: - Relying on a Division Bench exposition cited in the order ([G.V.Cotton Mills (P) Ltd ]), the Court clarified that non-filing of objections to a pre-assessment notice does not absolve the assessing authority from the duty to post the matter for hearing by issuing notice to the assessee; if the assessee then fails to appear, the authority may proceed on merits, but denial of hearing solely because objections were not filed is not permissible. [Paras 9, 10]

Assessing officer cannot refuse to grant personal hearing merely because objections to pre-assessment notice were not filed.

Remand for fresh consideration - requirement of reasoned order after hearing - Assessment files remanded to the respondent to receive reply/objections, fix and communicate a hearing date, hear the assessee with records and pass a reasoned order within stipulated timelines. - HELD THAT: - The Court directed that the petitioner file reply/objections within two weeks from receipt of the order. Thereafter the respondent must fix a specific date for personal hearing, communicate it in advance, hear the petitioner who shall produce relevant records, and thereafter pass an appropriate reasoned order within four weeks. The Court further recorded that if the petitioner does not cooperate or avail the hearing, the respondent must record that fact and proceed in accordance with law. [Paras 10]

Matters remanded with directions to receive objections, afford hearing and pass a reasoned order within the specified timeframes.

Turnover threshold under Section 3(1)(b) of the TNVAT Act - The Court did not decide on whether the turnover crossed the threshold under Section 3(1)(b); the matter was left open for consideration by the assessing authority on remand. - HELD THAT: - Although the petitioner contended that the turnover determined by the respondent did not cross the threshold limit under Section 3(1)(b) of the TNVAT Act, the counter-affidavit was silent on this point and the Court refrained from adjudicating the substantive turnover issue. The Court remanded the assessment for fresh consideration where such questions, including applicability of the threshold, are to be examined and decided by the respondent after hearing the assessee. [Paras 8, 10]

Turnover threshold issue left open and to be examined by the assessing authority on remand.

Final Conclusion: Writ petitions allowed; impugned assessment orders for 2013-14, 2014-15 and 2015-16 set aside and remanded to the assessing authority with directions to receive objections, fix and communicate a hearing date, hear the assessee with relevant records and thereafter pass a reasoned order within the stipulated period; no costs.

Abuse of process of court - successive complaints and improvement of facts - prohibition on filing subsequent complaint by same complainant after registration/charge-sheet - judicial application of mind in summoning and Section 202 CrPC inquiry - right to speedy trial under Article 21 - exercise of Article 142 to quash proceedings and do complete justice

Successive complaints and improvement of facts - abuse of process of court - Validity of the private complaint instituted by Respondent No.2 in 2018 after NCR No.158/2012 and whether it amounted to material improvement and abuse of process. - HELD THAT: - The Court held that a subsequent private complaint by the same complainant, after an earlier information/complaint in respect of the same incident and the commencement of investigation, which materially improves upon the earlier version, is impermissible and constitutes abuse of process. Relying on the principle in T.T. Antony as clarified in Upkar Singh and subsequent authorities, the Court found that Respondent No.2's 2018 complaint introduced material improvements (additional witnesses, new allegations and offences) and deliberately suppressed the existence of an intervening charge-sheet, thereby seeking to subject the appellants to fresh proceedings. Such conduct was held to be mala fide, calculated to harass, and violative of the protections against repetitive and vexatious criminal prosecutions embodied in the CrPC and Article 21 jurisprudence. [Paras 5, 6, 8, 10]

The private complaint filed in 2018 was a material improvement on the earlier information and amounted to abuse of the court's process; it was liable to be quashed.

Judicial application of mind in summoning and Section 202 CrPC inquiry - abuse of process of court - Whether the Magistrate and the Sessions Judge erred in issuing and confirming process against the appellants without proper judicial scrutiny. - HELD THAT: - The Court emphasised that summoning an accused and proceeding on a private complaint require careful judicial application of mind by the Magistrate, including scrutiny under Section 202 CrPC to filter frivolous complaints. Here the Magistrate issued summons despite significant delay, material improvements in the complaint and suppression of relevant facts. The Sessions Judge confirmed the order, including misreading of an offence provision to extend limitation, thereby failing to curb the manifest abuse. The failure of the lower courts to make enquires and to apply the statutory and constitutional safeguards rendered the issuance and confirmation of process erroneous. [Paras 13, 14, 19, 20]

The Magistrate and Sessions Judge erred in issuing and confirming process; those orders were unsustainable and required quashing.

Exercise of Article 142 to quash proceedings and do complete justice - right to speedy trial under Article 21 - Appropriateness of invoking Article 142 to quash all criminal proceedings between the parties arising out of the 5.08.2012 incident. - HELD THAT: - Having found the 2018 private complaint to be mala fide and the lower courts' orders defective, the Court considered the broader equities, the prolonged litigation between the parties since 2006, the appellants' age and infirmities, and the need to prevent continued harassment and further drain on judicial resources. Exercising its inherent powers under Article 142 to do complete justice, and guided by precedents permitting quashing where proceedings are instituted with oblique motive or mala fide intent, the Court concluded that quashing all criminal proceedings between the parties arising from the 5.08.2012 incident was necessary to give quietus to the matter and protect Article 21 rights. [Paras 23, 24, 25, 26, 27]

In exercise of Article 142, all criminal proceedings between the parties arising out of the 5.08.2012 incident are quashed to prevent further abuse and to secure complete justice.

Final Conclusion: The appeal is allowed. The High Court's judgment is set aside; the summons and all proceedings in Complaint Case No.2943/2018 and all criminal proceedings between the parties arising out of the 5.08.2012 incident (including proceedings pursuant to NCR No.158/2012 and NCR No.160/2012 (Crime No.283/2017)) are quashed in the exercise of this Court's powers to prevent abuse of process and to secure complete justice.