TaxTMI Updates e-Newsletter
Apr 24,2023

Release of detained conveyance on furnishing bank guarantee - penalty under Section 129 of the GST Act - detention of goods and conveyance - confiscation for non-compliance with release conditions - right to prefer statutory appeal against detention/penalty order

Release of detained conveyance on furnishing bank guarantee - detention of goods and conveyance - penalty under Section 129 of the GST Act - Release of the detained vehicle on furnishing a bank guarantee of equal amount or on payment of the penalty as per the demand order. - HELD THAT: - The court recorded the authority's instruction that the conveyance may be released either on payment of the penalty quantified in the demand order or upon furnishing a bank guarantee of an equal amount. The petitioner undertook to furnish the bank guarantee within two days. The undertaking was accepted and the authority was directed to release the vehicle on compliance with the stated condition. The court also observed that the petitioner had not earlier approached the authority for release despite the availability of those options. [Paras 4, 5, 8]

Vehicle ordered to be released on payment of the penalty as per the demand order or upon furnishing a bank guarantee of equal amount, subject to the petitioner's undertaking to furnish the bank guarantee within two days.

Confiscation for non-compliance with release conditions - detention of goods and conveyance - Consequences in the event of failure to furnish the bank guarantee within the stipulated time. - HELD THAT: - The court made clear that if the petitioner failed to furnish the bank guarantee within the period undertaken, the opposite parties would be at liberty to proceed with confiscation of the vehicle. That consequence follows from the non-fulfilment of the condition on which release was permitted and was recorded to preserve the authority's statutory powers in the event of non-compliance. [Paras 5]

If the bank guarantee is not furnished within the prescribed period, the authority may confiscate the vehicle.

Right to prefer statutory appeal - penalty under Section 129 of the GST Act - Availability of appeal against the impugned order. - HELD THAT: - The court noted that the order impugned is an appealable one and expressly permitted the petitioner to prefer an appeal before the appellate authority in accordance with law. This direction preserves the petitioner's statutory remedy to challenge the detention, demand and penalty assessment through the prescribed appellate process. [Paras 6]

Petitioner permitted to file appeal before the appellate authority in accordance with law.

Final Conclusion: Writ petition disposed of: petitioner permitted to secure release of the detained vehicle by furnishing a bank guarantee of equal amount (undertaken to be furnished within two days) or by payment of the penalty; failure to furnish the bank guarantee will permit confiscation of the vehicle; petitioner is also permitted to prefer an appeal against the impugned order in accordance with law.

Release of detained conveyance on furnishing bond and deposit - confiscation under the CGST Act read with the IGST Act - detention under Section 129 of the CGST Act - permitted amendment of pleadings

Release of detained conveyance on furnishing bond and deposit - confiscation under the CGST Act read with the IGST Act - Whether the detained conveyance should be released pending adjudication despite a confiscation order and part recovery by auction - HELD THAT: - The petitioner informed the Court that the goods had been auctioned by the authority and some amount had been recovered; this position was not disputed by the respondent. The authority submitted that the auction proceeds did not satisfy the entire demand of tax, fine and penalty. On these facts and in the interest of justice the Court directed conditional release of the truck subject to immediate deposit of a specified sum and furnishing of a bond for the balance demand in lieu of the conveyance. The Court therefore authorised release upon compliance with the stated conditions, while leaving the underlying proceedings intact. [Paras 11, 12, 13]

Conveyance to be released on deposit of the specified amount and on furnishing the bond as directed; underlying confiscation proceedings remain undisturbed.

Permitted amendment of pleadings - Permission to carry out the draft amendment filed on 1.12.2022 - HELD THAT: - The Court allowed the draft amendment prayed for in the petition and permitted it to be carried out. The order records grant of leave to amend without further detailed reasoning in the order. [Paras 1]

Draft amendment allowed and permitted to be carried out.

Final Conclusion: Draft amendment permitted; the detained truck is ordered released on immediate deposit of the specified sum and on furnishing the directed bond, subject to compliance and without prejudice to the pending confiscation proceedings; matter stood over to 19.4.2023.

Cancellation of GST registration for non-filing of returns - limitation bar to appeal under section 107(4) of the Gujarat Goods and Services Tax Act, 2017 - notification No. 03/2023 - special procedure for revocation of cancellation under section 148 of the Central Goods and Services Tax Act, 2017 - revocation of cancellation upon furnishing returns and payment of tax, interest, penalty and late fee - applicability of notification to retrospectively cancelled registrations

Limitation bar to appeal under section 107(4) of the Gujarat Goods and Services Tax Act, 2017 - cancellation of GST registration for non-filing of returns - Writ petition cannot be used to circumvent the statutory time-bar where the appeal against cancellation was barred by limitation. - HELD THAT: - The court observed that the petitioner's appeal against cancellation of GST registration was not entertained by the appellate authority as it was filed beyond the outer period prescribed under section 107(4). Granting relief in writ jurisdiction to set aside the cancellation would amount to circumventing the bar of limitation and was not permissible. Consequently, the challenge to the cancellation could not be sustained in writ jurisdiction on the ground of delay in filing the statutory appeal. [Paras 3]

The petition cannot succeed as a means to evade the limitation bar that rendered the statutory appeal incompetent.

Notification No. 03/2023 - special procedure for revocation of cancellation under section 148 of the Central Goods and Services Tax Act, 2017 - revocation of cancellation upon furnishing returns and payment of tax, interest, penalty and late fee - applicability of notification to retrospectively cancelled registrations - Notification No. 03/2023-Central Tax applies to the petitioner's case and affords a window to apply for revocation of cancellation by furnishing returns and paying dues by the notified cut-off. - HELD THAT: - The court relied on Notification No. 03/2023 issued under section 148 of the CGST Act which identifies registered persons whose registration was cancelled under clause (b) or (c) of section 29(2) on or before 31.12.2022 and permits them to apply for revocation up to the 30th day of June, 2023. The notification conditions such revocation applications on furnishing returns up to the effective date of cancellation and payment of tax, interest, penalty and late fee in respect of those returns, and it disallows any further extension. The petitioner's registration, cancelled on 6.1.2022 with retrospective effect from 30.4.2021, falls within the class covered by the notification. Thus, while writ relief to bypass limitation is not permissible, the petitioner may pursue revocation under the special procedure created by the notification by complying with its conditions. [Paras 3, 4, 5, 6]

The petitioner is entitled to avail the special procedure under Notification No. 03/2023 by filing returns and paying the due amounts and may apply for revocation of cancellation within the notified period.

Final Conclusion: The writ petition is disposed of: relief cannot be granted to circumvent the statutory limitation, but the petitioner is permitted to avail the window created by Notification No. 03/2023 by furnishing returns and paying dues and to apply for revocation of cancellation up to the notified cut-off; further developments will give rise to a fresh cause of action.

Maintainability of writ petition where alternate statutory remedy is available - jurisdiction under Article 226 of the Constitution of India - extension of limitation by notification under Section 168A of the CGST Act - treatment of appellate filing made pursuant to court direction as filed in time - obligation of appellate authority to decide appeal on merits and pass a speaking order

Maintainability of writ petition where alternate statutory remedy is available - jurisdiction under Article 226 of the Constitution of India - Whether the writ petition challenging the assessment order could be entertained notwithstanding the availability of the statutory appellate remedy. - HELD THAT: - The Court declined to exercise jurisdiction under Article 226 because the appellant had been granted time by the Single Judge to avail the alternate statutory remedy and, in fact, had filed the statutory appeal pursuant to that permission. The Single Judge's consideration was confined to the question of jurisdiction to entertain the writ petition and did not adjudicate the merits of the appellant's contentions. Given the availability and invocation of the statutory remedy, the High Court dismissed the writ petition and directed that the appeal be considered on its merits by the appellate authority.

Writ petition dismissed for want of jurisdiction to entertain it in the presence of an alternate statutory remedy; appellant permitted to pursue the statutory appeal.

Treatment of appellate filing made pursuant to court direction as filed in time - obligation of appellate authority to decide appeal on merits and pass a speaking order - Whether the appellate authority should treat the appeal filed pursuant to the Single Judge's direction as filed in time and how it should deal with the appellant's contentions. - HELD THAT: - The Single Judge had directed that the appeal filed within the two weeks' period granted would be treated as filed in time. The High Court confirmed that position and clarified that the appellate authority must consider all contentions raised by the appellant, pass a speaking order dealing with those contentions, and decide the appeal on merits without delay. The Court rejected the appellant's apprehension that dismissal of the writ would operate as an adjudication on the merits of his contentions, noting the dismissal related solely to jurisdiction under Article 226.

Appellate filing to be treated as filed in time; appellate authority directed to consider all contentions and pass a speaking order on the appeal without delay.

Extension of limitation by notification under Section 168A of the CGST Act - Whether the extension of time by notification under Section 168A affected the jurisdictional validity of proceedings where show cause notice may not have been issued within the original statutory period. - HELD THAT: - The petitioner argued that a notification extending the period for issuance of orders under Section 168A related only to issuance of orders and that, unless the show cause notice had been issued within the time originally prescribed, proceedings were without jurisdiction. The Single Judge did not accept the contention that the writ should be entertained on that basis and the High Court, by dismissing the writ for want of jurisdiction in the presence of the appellate remedy, did not adjudicate this contention on merits. The petitioner remains free to press this and other contentions before the appellate authority.

Contestation regarding the effect of the Section 168A notification left open for decision by the appellate authority; not decided on merits by this Court.

Final Conclusion: The writ petition was dismissed for want of jurisdiction because the statutory appeal remedy was available and had been invoked; the appeal filed pursuant to the Single Judge's direction shall be treated as filed in time, the appellate authority must consider all contentions on merits and pass a speaking order without delay, and issues including the effect of the Section 168A notification are to be decided by the appellate authority.

Supplier - supply of services - renting of immovable property - general power of attorney - supplier includes agent - place of supply of services - location of supplier of service - intra-state supply - liability to be registered

General power of attorney - supplier - supplier includes agent - liability to be registered - Whether the owner-applicant is liable to be registered in Karnataka under KGST/CGST Act 2017 - HELD THAT: - The Authority found that the owner executed a registered General Power of Attorney appointing his mother to manage the property, induce tenants, execute tenancy deeds and receive rents. Under the statutory definition, a 'supplier' includes an agent acting on behalf of the supplier. The acts performed by the GPA holder in leasing out the property and receiving rents bind the principal and amount to supply of services by the agent. Since the GPA holder, a resident of Bengaluru, is the supplier making taxable supplies from Karnataka, she is liable to obtain registration in the State under the registration threshold provisions. [Paras 15, 16]

The GPA holder, Smt. Prabhavathi, is the supplier of the renting service and is liable to be registered in Karnataka under the KGST/CGST Acts.

Renting of immovable property - place of supply of services - location of supplier of service - intra-state supply - Whether tax is payable on renting of the commercial building and who is liable to pay - HELD THAT: - The Authority held that leasing or letting out of a building is a supply of services. For services directly related to immovable property, the place of supply is the location of the immovable property. As both the place of supply (the Bengaluru property) and the supplier (the GPA holder resident in Bengaluru) are in Karnataka, the supply is intra-state. Consequently, the supplier located in Karnataka is liable to discharge GST on the renting of the commercial building as per the applicable notifications and rate entries. [Paras 15, 17]

The GPA holder, Smt. Prabhavathi, is required to pay tax on the renting of the commercial building.

Final Conclusion: The Advance Ruling holds that the General Power of Attorney holder, Smt. Prabhavathi, is the supplier of the renting service, must register in Karnataka under the KGST/CGST Acts, and is liable to pay GST on the renting of the commercial building.

Classification of goods - HSN classification - interpretation of tariff headings - classification as mineral or chemical fertilisers, phosphatic - applicability of GST rate under notification for phosphatic fertilisers - application of Section and Chapter Notes and WCO explanatory notes

Classification of goods - classification as mineral or chemical fertilisers, phosphatic - HSN classification - applicability of GST rate under notification for phosphatic fertilisers - Classification of the product 'Bio-Phosphate' under the Customs Tariff and the applicable GST rate. - HELD THAT: - The product is a formulation in which Rock Phosphate is the major ingredient blended with phosphate solubilising fungal and bacterial cultures and mineral nutrients. As the product is not animal or vegetable based nor produced by mixing/chemical treatment of animal or vegetable products, it does not fall under heading 3101. The product contains no nitrogenous compounds and therefore is not classifiable under heading 3102. Being phosphatic in nature and not a superphosphate, the product falls within heading 3103 90 00 as an 'other' phosphatic mineral or chemical fertiliser. The classification analysis follows the Section and Chapter Notes and the WCO explanatory notes as applicable to tariff interpretation. Once classified under heading 3103 90 00, the product is covered by the entry in Schedule I (Sl. No. 182B) to Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, which prescribes GST at the rate specified for mineral or chemical phosphatic fertilisers that are to be used as fertilisers. [Paras 13, 14, 15, 16, 17]

The product 'Bio-Phosphate' is classifiable under HSN 3103 90 00 and is exigible to GST at 5% in terms of the applicable notification.

Final Conclusion: Advance ruling: 'Bio-Phosphate' is a phosphatic mineral/chemical fertiliser classifiable under HSN 3103 90 00 and liable to GST at the rate applicable to phosphatic fertilisers under the notified schedule (5%).

Deduction under Section 80-HHC - proportionality formula under clause (b) of Section 80-HHC(3) - retrospective effect of statutory amendments - characterisation of income from sale of shares as income from business - characterisation of interest income as income from other sources

Retrospective effect of statutory amendments - Deduction under Section 80-HHC - Whether the substituted provision of Section 80-HHC(3) introduced by Finance (No. 2) Act, 1991 applies to the assessment years before 01.04.1992? - HELD THAT: - This Court followed the decision in P.R. Prabhakar v. Commissioner of Income Tax [2006 (7) TMI 121 - SUPREME COURT] which held that the amendment to Section 80-HHC(3) by Finance (No. 2) Act, 1991, prescribing a different formula, is effective only from 01.04.1992 and is not retrospective. Consequently, the substituted sub-section (3) is not applicable to the assessment years under consideration. The impugned High Court judgment to the extent it applied the substituted/amended provision to earlier years was held unsustainable. The appeals were therefore to be decided by reference to the law as it existed prior to the substitution effected by the 1991 amendment.

The amended sub-section (3) of Section 80-HHC is not applicable retrospectively and does not apply to assessment years 1989-1990, 1990-1991 and 1991-1992; computation must follow the pre-amendment clause (b) to Section 80-HHC(3).

Characterisation of income from sale of shares as income from business - proportionality formula under clause (b) of Section 80-HHC(3) - Whether income from sale of shares should be treated as 'profits and gains of business or profession' for computing deduction under clause (b) of Section 80-HHC(3) and whether the sale proceeds are includible in total turnover for that computation? - HELD THAT: - The assessing officer had recorded a finding that income from sale of shares constituted business income (profits and gains of business or profession), and that finding had attained finality. Although the assessing officer elsewhere excluded that income from the computation under Section 80-HHC(3), the Court accepted the assessee's contention that income from sale of shares must be treated as business income for the purposes of clause (b). Once so classified, the profit from sale of shares is to be included in the profits of the business and the gross receipt from such sale included in the total turnover when applying the proportionality formula under clause (b) to Section 80-HHC(3) as it stood before the 1991 substitution.

Income from sale of shares is to be treated as business income and the receipt/gross amount from such sale is includible in total turnover for computing deduction under clause (b) of Section 80-HHC(3) for AY 1989-1990.

Characterisation of interest income as income from other sources - Deduction under Section 80-HHC - Whether interest earned on surplus funds is to be treated as business income or as income from other sources for the purpose of computing the deduction under Section 80-HHC(3)? - HELD THAT: - The Court rejected the view of the Commissioner of Income Tax (Appeals) that interest arising from deposit of surplus/transitory funds retained in the business acquires the character of business income. The reasoning was that interest earned on surplus funds does not have a direct nexus with the export business activity and is not income earned by carrying on the business; rather it is taxable under the head 'income from other sources'. Consequently such interest income cannot be included in the profits of the business or in total turnover for the proportionality computation under clause (b) to Section 80-HHC(3). The same principle was applied to the interest incomes in AYs 1989-1990, 1990-1991 and 1991-1992.

Interest income earned on surplus funds is taxable as income from other sources and must be excluded for the purpose of computing deduction under Section 80-HHC(3) for the assessment years in question.

Final Conclusion: Appeals partly allowed: the substituted Section 80-HHC(3) (post-1991 amendment) is not applicable to AYs 1989-1990, 1990-1991 and 1991-1992; income from sale of shares to be treated as business income and included in turnover for computing deduction under the pre-amendment clause (b) to Section 80-HHC(3); interest income on surplus funds is to be taxed as income from other sources and excluded from such computation.

Prosecution under Section 276B read with Section 278B of the Income Tax Act - Sanction for prosecution by Commissioner of Income Tax - CBDT instruction on non-prosecution of persons above seventy - Exceptions to non-prosecution where nature and magnitude of offence warrant - Principal officer / persons in charge and responsible for company's business - Scope of judicial scrutiny in quash petitions vis-a -vis trial court determination

Prosecution under Section 276B read with Section 278B of the Income Tax Act - Sanction for prosecution by Commissioner of Income Tax - CBDT instruction on non-prosecution of persons above seventy - Principal officer / persons in charge and responsible for company's business - Scope of judicial scrutiny in quash petitions vis-a -vis trial court determination - Challenge to the complaints on grounds that petitioners 2 and 3 are above seventy and that there are no averments showing they were principal officers or persons in charge must be adjudicated by the trial Court; the High Court will not quash the complaints at this stage. - HELD THAT: - The Court examined the departmental procedure which ordinarily refrains from prosecuting persons aged seventy or above but which itself contains express exceptions permitting prosecution where the Commissioner of Income Tax, in view of the nature and magnitude of the offence, sanctions prosecution. The Commissioner had sanctioned prosecution in the present matters. Further, consistent with the Apex Court's decision in Madhumilan Syntex Ltd., allegations that a person is a "principal officer" or "in charge of" and "responsible for" the company are matters of evidence; where such averments are made in the complaint, initiation of criminal proceedings and issuance of summons cannot be quashed at the threshold and require trial adjudication. Consequently, the contentions that prosecution should be quashed on age grounds or for lack of averments as to responsibility are to be raised and decided before the trial Court and not by this Court in these petitions. [Paras 5, 6, 7]

Petitions dismissed insofar as they seek quashal of the complaints on the cited grounds; the issues of applicability of the non-prosecution instruction and whether the petitioners are principal officers are left open for determination by the trial Court.

CBDT instruction on non-prosecution of persons above seventy - Exceptions to non-prosecution where nature and magnitude of offence warrant - Whether petitioners 2 and 3 (being above seventy years) must personally appear before the trial Court. - HELD THAT: - Although the general policy in the departmental instruction disfavors prosecution of individuals aged seventy or above, the Court found that the question of applying that policy to these petitioners must be decided by the trial Court in the proceedings. Bearing in mind their admitted age, the High Court exercised its discretion to relieve them of the obligation of personal appearance at the trial stage except where the learned Magistrate deems their presence necessary for the progress of the trial. [Paras 8]

Appearance of petitioners 2 and 3 dispensed with unless the trial Magistrate considers their appearance necessary for the progress of the trial.

Final Conclusion: Criminal Original Petitions seeking quashal of complaints under Section 276B read with Section 278B of the Income Tax Act are dismissed; the question whether the non-prosecution instruction applies and whether the petitioners are principal officers is left to the trial Court for adjudication, and the two senior petitioners are exempted from personal appearance unless required by the Magistrate.

Block assessment under Chapter XIV-B - Section 158BD - assessment in respect of person other than person searched based on seized material - requirement to invoke Section 158BD where seized material shows undisclosed income of another person - amalgamation and non-taxability of transfer under Section 47(vi) - distinction between taxable receipt and non-taxable share-exchange in an amalgamation - remand for fresh assessment and observance of principles of natural justice

Section 158BD - assessment in respect of person other than person searched based on seized material - block assessment under Chapter XIV-B - Validity of block assessment made under Chapter XIV-B when seized material establishing undisclosed income of the assessee was found from searches of other persons without invoking Section 158BD - HELD THAT: - The Court examined whether undisclosed income attributable to the respondents could be validly assessed under Chapter XIV-B where the material relied upon was seized from searches in the premises of other persons. While the Tribunal had held that assessment under Chapter XIV-B could not be sustained without invoking Section 158BD, the High Court answered the substantial questions in favour of the Revenue and directed a fresh adjudication. The Court recorded that amounts transferred by the Sun Pharma group to members of the Dadha Group constituted undisclosed income for the block period and that a proper assessment on merits is required instead of notional allocations. To meet the ends of justice and because direct proof of receipt by individual members was not before the Assessing Officer, the Court remitted the matters to the Assessing Officer for fresh assessment after following principles of natural justice and applicable statutory procedure. [Paras 76, 77, 78, 79, 80]

Impugned Tribunal orders set aside and matters remitted to the Assessing Officer for fresh assessment in accordance with law; substantial question answered in favour of the Revenue.

Amalgamation and non-taxability of transfer under Section 47(vi) - distinction between taxable receipt and non-taxable share-exchange in an amalgamation - capital gains on share transfer vs income from other sources/protective addition - Whether amounts paid by the Sun Pharma group to members of the Dadha Group are rendered non taxable by virtue of the sanctioned amalgamation (Section 47(vi)) or are taxable undisclosed receipts requiring assessment - HELD THAT: - The Court acknowledged that the sanctioned schemes of amalgamation resulted in share-exchange treatment under Section 47(vi) and that amalgamation as such was a reality. However, it held that the reality of amalgamation did not render irrelevant the cash payments made by Sun Pharma and its group to Dadha Group members prior to and apart from the share-exchange. The Court found that such cash transfers, notwithstanding the later amalgamation, constituted undisclosed income within the meaning of the relevant provisions and warranted assessment. Given the absence of direct proof of individual receipt and the need for proper quantification and opportunity to be heard, the Court remitted the matters for fresh adjudication rather than deciding quantification on the record before it. [Paras 72, 73, 74, 79, 80]

Although amalgamation was accepted as a reality, the cash payments are treated as undisclosed income liable to assessment; case remitted for fresh determination by the Assessing Officer.

Final Conclusion: Impugned orders of the Tribunal are set aside; substantial questions of law are answered in favour of the Revenue; both matters are remitted to the Assessing Officer for fresh assessment on merits in accordance with law and after giving the respondents an opportunity of hearing, in respect of the block period 01.04.1988 to 15.12.1998.

Delegation of power under Section 119(2)(b) - principles of natural justice - condonation of delay in filing return of income - pre-determination and non-speaking order - approval and sanction of Principal Chief Commissioner - ignorance of law - awareness of filing process as evidence against reasonable cause

Delegation of power under Section 119(2)(b) - approval and sanction of Principal Chief Commissioner - Validity of the impugned order passed by Respondent No.2 under Section 119(2)(b) and whether Respondent No.2 had authority to pass the order. - HELD THAT: - The Court examined the contention that authority to pass the impugned order vested exclusively in Respondent No.1 and could not be delegated. The Court found that the impugned order was passed with the approval and sanction of the Principal Chief Commissioner (Income Tax), and on that basis concluded that Respondent No.2 had acted within the sanctioned authority. Consequently, the challenge to the vires of the order on grounds of improper delegation was rejected.

Challenge to the authority of Respondent No.2 dismissed; order validly passed with Principal Chief Commissioner's approval.

Principles of natural justice - pre-determination and non-speaking order - Whether the impugned order was vitiated by failure to afford opportunity of hearing, by reliance on an earlier report while enquiries were still stated to be in progress, or by being non-speaking/pre-determined. - HELD THAT: - The Court considered the petitioner's submission that the order was non-speaking and based on a prior report although enquiries were continuing. The Court held that the petitioner's contentions had been duly considered and that there was no breach of principles of natural justice. Further, the Court found the impugned order to be clear and cogent, rejecting the submission of predetermination or non-speaking character.

No violation of natural justice; impugned order is speaking and not vitiated by predetermination.

Condonation of delay in filing return of income - ignorance of law - awareness of filing process as evidence against reasonable cause - Whether there was genuine hardship or reasonable cause warranting condonation of delay in filing the return and grant of refund. - HELD THAT: - The Court addressed the petitioner's plea that he was unaware of the due date and filing process, noting that ignorance of law is no excuse. The fact that the petitioner had filed an income-tax return for Assessment Year 2011-12 within time was held to demonstrate awareness of the return-filing process. The Court agreed with the authority below that these circumstances did not constitute genuine hardship or reasonable cause for late filing, and therefore condonation of delay was not justified.

No reasonable cause or genuine hardship established; condonation of delay and refund claim refused.

Final Conclusion: Writ petition challenging the order passed under Section 119(2)(b) is dismissed: the impugned order was validly made with requisite approval, was not vitiated by breach of natural justice or predetermination, and no reasonable cause was shown to condone delay in filing the return.

Allowance for replacement of dead and useless rubber trees under Rule 7A(2) - revenue deduction for upkeep and maintenance of immature rubber trees under Section 37 - application of Full Bench ratio to assessment and remand for fresh consideration

Allowance for replacement of dead and useless rubber trees under Rule 7A(2) - Entitlement of the assessee to an allowance under Rule 7A(2) for cost of replacement of dead and useless rubber trees in a previously planted area. - HELD THAT: - The Full Bench in I.T.A No.201/2013 and batch was held to be determinative. Applying that ratio, the Court accepted that in computation of business income under Rule 7A the assessee is entitled to an allowance in respect of the cost of replacement of dead and useless rubber trees in a rubber plantation in an area not abandoned, subject to the proviso noted by the Full Bench. The High Court followed and applied that conclusion to the present appeal, holding the Tribunal's contrary view unsustainable. [Paras 4]

Allowance under Rule 7A(2) for replacement of dead and useless rubber trees in an area not abandoned is allowable to the assessee.

Revenue deduction for upkeep and maintenance of immature rubber trees under Section 37 - Whether upkeep and maintenance expenses incurred until maturity of rubber trees are revenue expenditures deductible under Section 37 of the Income Tax Act. - HELD THAT: - Relying on the Full Bench decision, the Court held that the upkeep and maintenance expenses incurred by the assessee until the maturity of rubber trees are revenue expenditures and are eligible for deduction under Section 37. The Tribunal's conclusion to the contrary was set aside and the Full Bench ratio was adopted as binding on the present appeals. [Paras 4]

Upkeep and maintenance expenses incurred till maturity of rubber trees are deductible as revenue expenditure under Section 37.

Application of Full Bench ratio to assessment and remand for fresh consideration - Disposition of the appeals and the treatment of the matter by the assessing authority in light of the Full Bench decision. - HELD THAT: - Having answered the substantive questions in favour of the assessee by following the Full Bench, the Court set aside the orders of the Assessing Officer, the Commissioner (Appeals) and the Tribunal. The matter was remitted to the Assessing Officer for reconsideration and fresh assessment in accordance with the ratio of the Full Bench in I.T.A No.201/2013 and batch, thereby leaving implementation and quantification to the assessing authority consistent with that ratio. [Paras 5]

Original orders set aside and matter remitted to the Assessing Officer for fresh assessment in conformity with the Full Bench ratio.

Final Conclusion: Appeals allowed; the Tribunal's contrary findings set aside; the assessee is entitled to the Rule 7A(2) allowance for replacement of dead and useless rubber trees and to deduction of upkeep and maintenance expenses under Section 37; matter remitted to the Assessing Officer for fresh assessment in accordance with the Full Bench decision.

Revisional jurisdiction under Section 263 of the Income Tax Act - Reassessment proceedings initiated under Section 148 leading to order under Section 143(3) r.w. Section 147 - Long Term Capital Gains on transfer of agricultural land - Clubbing of income under Section 64 of the Income Tax Act - Prejudice to the interest of the Revenue and plausibility test for interference

Revisional jurisdiction under Section 263 of the Income Tax Act - Long Term Capital Gains on transfer of agricultural land - Clubbing of income under Section 64 of the Income Tax Act - Prejudice to the interest of the Revenue and plausibility test for interference - Whether the Principal Commissioner's initiation of revision under Section 263 to direct inclusion of Long Term Capital Gains on sale of agricultural land to the husband was justified, when the Assessing Officer after inquiries accepted the assessee's plea and applied Section 64 to club income. - HELD THAT: - The Tribunal examined the reassessment proceedings and records and found that the Assessing Officer had reopened the case, recorded statements of the assessee and her husband, considered an affidavit and made enquiries before concluding that the transfer was intended to restore ownership to the husband who had originally paid the purchase consideration. The Assessing Officer applied his mind, invoked clubbing under Section 64 and held that no actual consideration passed to the assessee, thereby discharging liability for Long Term Capital Gains. The Pr.CIT's jurisdiction under Section 263 can be exercised only where the assessment is shown to be erroneous and prejudicial to revenue. Where the opinion formed by the Assessing Officer is plausible on the basis of material on record, mere difference of opinion by the Pr.CIT does not render the assessment order erroneous per se and does not justify substituting the Assessing Officer's view. On the facts, the Tribunal found the Assessing Officer's conclusion to be plausible and the revisional direction to enhance income on account of LTCG was therefore unsustainable. [Paras 8, 9, 10]

The revisional exercise under Section 263 is without jurisdiction as the reassessment order was not shown to be erroneous or prejudicial to the revenue; the revisional order is quashed.

Final Conclusion: The appeal is allowed; the revisional order dated 27.12.2018 under Section 263 for Assessment Year 2009-10 is quashed as the Assessing Officer's conclusion was plausible and did not amount to an erroneous order prejudicial to the revenue.

Scheme of amalgamation - undertaking under Section 72A of the Income Tax Act, 1961 - carry forward and set off of accumulated loss and unabsorbed depreciation - compliance with conditions for tax benefit post-amalgamation

Undertaking under Section 72A of the Income Tax Act, 1961 - scheme of amalgamation - Validity of NCLT's dismissal of the scheme application for want of an undertaking under Section 72A - HELD THAT: - The Tribunal upheld the NCLT's dismissal because, at the stage before the NCLT, the scheme did not contain any undertaking by the transferee to comply with the conditions of Section 72A (including holding at least three-fourths of the book value of fixed assets for a prescribed period and continuing the transferor's business). In the absence of such an undertaking before the NCLT, the learned NCLT rightly accepted the Income Tax Department's objections and dismissed the application. The appellate court found no error in that conclusion.

NCLT's dismissal of the scheme for lack of the requisite undertaking under Section 72A is justified.

Compliance with conditions for tax benefit post-amalgamation - carry forward and set off of accumulated loss and unabsorbed depreciation - Whether the appellants may furnish an undertaking before the NCLT and seek fresh consideration - HELD THAT: - The appellants placed on record, before this Tribunal, a rejoinder containing an affidavit of undertaking by the transferee company undertaking to comply with the conditions of Section 72A and confirming it will hold at least three-fourths of the book value of fixed assets and continue the transferor's business for the stipulated period, or forgo the tax benefit if it decides otherwise. The Tribunal observed that, since no such undertaking was before the NCLT earlier, the dismissal stands; however, if a fresh undertaking in terms of Section 72A is filed before the NCLT, the NCLT may reconsider the scheme and pass appropriate orders expeditiously and in accordance with law.

If a fresh undertaking conforming to Section 72A is filed before the NCLT, the NCLT is to consider the scheme afresh and pass appropriate orders.

Final Conclusion: The appeal is disposed of by upholding the NCLT's dismissal for want of the Section 72A undertaking, while permitting the appellants to place a fresh undertaking before the NCLT; on filing such undertaking the NCLT may reconsider and pass appropriate orders expeditiously in accordance with law.

Deduction under Section 80P(2) of the Income-tax Act - business nexus of interest income - interest on bank deposits treated as business income

Deduction under Section 80P(2) of the Income-tax Act - business nexus of interest income - interest on bank deposits treated as business income - Allowability of deduction under Section 80P(2) in respect of interest earned on fixed / bank deposits of the cooperative society. - HELD THAT: - The assessee, a registered thrift and credit cooperative society, accepted members' deposits and provided credit facilities; surplus funds were invested in fixed deposits which were pledged to obtain overdraft facilities used to disburse loans and repay members. The Tribunal found that the investment in fixed deposits and the interest thereon were functionally linked to the assessee's core business of providing credit-the interest earned was applied for providing credit facility and for repayment to members. On this factual and functional nexus, the interest income was held to be inextricably linked to the business activities of the cooperative society and therefore eligible for deduction under Section 80P(2). The Tribunal relied on the decisions cited by the assessee as supporting this view and directed the Assessing Officer to allow the claimed deduction in respect of the bank interest. [Paras 7, 8]

Deduction under Section 80P(2) is allowable in respect of the Rs.32,30,040 interest on bank deposits as it is linked to and utilised for the assessee's credit business.

Final Conclusion: The appeal is allowed and the Assessing Officer is directed to allow the assessee's claim of deduction under Section 80P(2) in respect of the interest on bank/fixed deposits for assessment year 2019-20.

Deduction under section 80IC of the Income tax Act, 1961 - Reopening of assessment under section 147/148 - Directions under section 144A and their binding effect on the Assessing Officer - Filing of Form 10CCB before completion of assessment - Precedential application of CIT v. G.M. Knitting Industries (Supreme Court)

Deduction under section 80IC of the Income tax Act, 1961 - Filing of Form 10CCB before completion of assessment - Maintenance of unit wise accounts - Deletion of addition denying deduction under section 80IC sustained - HELD THAT: - The Tribunal upheld the view of the Ld. CIT(A) that the assessee was entitled to the claimed deduction under section 80IC. The original assessment after scrutiny had allowed the deduction and the record establishes that unit wise bifurcation of accounts was filed in the schedules to the balance sheet and that Form 10CCB was submitted before completion of assessment proceedings. The Assessing Officer brought no material to controvert these facts. Application of the ratio in CIT v. G.M. Knitting Industries (SC) and supportive High Court authority led to the conclusion that a belated filing of Form 10CCB before the finalisation of assessment does not disentitle the assessee to the deduction where the requisite unit wise accounts are on record. On these grounds the addition disallowing the deduction was not sustained.

Addition disallowing the section 80IC deduction deleted and the CIT(A) order in favour of the assessee upheld.

Directions under section 144A and their binding effect on the Assessing Officer - Direction issued under section 144A to allow the deduction is binding on the Assessing Officer and was to be followed - HELD THAT: - The Tribunal accepted the finding of the Addl. CIT under section 144A that the assessment record (including schedules) showed bifurcated unit wise heads and that Form 10CCB was on record during reassessment proceedings. Those directions, being binding on the Assessing Officer, required allowance of the deduction unless contrary material was produced. No such material was demonstrated by the Revenue; accordingly the AO could not lawfully sustain the addition contrary to the binding direction.

The Assessing Officer was bound by the section 144A direction to allow the deduction; his contrary disallowance was set aside.

Final Conclusion: The Revenue's appeal is dismissed; the order of the Commissioner (Appeals) deleting the addition and allowing the section 80IC deduction for AY 2011-12 is affirmed.

Penalty under section 271D - prohibition on acceptance of cash under section 269SS - assessment-year linkage for penalty proceedings - void ab initio initiation of penalty proceedings - acceptance of returned income in assessment

Penalty under section 271D - assessment-year linkage for penalty proceedings - prohibition on acceptance of cash under section 269SS - Validity of penalty proceedings initiated under section 271D for A.Y.2017-18 when the alleged contravention of section 269SS occurred in A.Y.2016-17. - HELD THAT: - The Tribunal found on the record that the sale of immovable property and receipt of cash consideration for Rs.10,48,000/- occurred on 20.01.2016 and the cash was deposited into the bank account on 07.12.2016. The Assessing Officer had accepted the assessee's explanation and completed assessment for A.Y.2017-18 with the returned income; the material contravention of section 269SS thus arose in the previous year relevant to A.Y.2016-17. Initiation of penalty proceedings under section 271D for A.Y.2017-18 therefore did not pertain to the year in which the alleged acceptance in cash took place. On this factual and legal basis the initiation of penalty proceedings for A.Y.2017-18 was held to be void ab initio, and the confirmation of that penalty by the CIT(A) NFAC was without foundation. [Paras 9]

Penalty proceedings under section 271D for A.Y.2017-18 were void ab initio because the contravention of section 269SS occurred in A.Y.2016-17; the CIT(A) order confirming the penalty was set aside.

Acceptance of returned income in assessment - void ab initio initiation of penalty proceedings - Relief to the assessee consequent upon finding that penalty proceedings were invalidly initiated for A.Y.2017-18. - HELD THAT: - Given the Tribunal's conclusion that the alleged violation related to A.Y.2016-17 and that initiation of penalty for A.Y.2017-18 was therefore void, the appropriate remedial direction was to set aside the CIT(A) confirmation and order the Assessing Officer to cancel the penalty. The Tribunal accordingly allowed the assessee's appeal and directed cancellation of the penalty by the AO. [Paras 9, 10]

The appeal is allowed; the CIT(A) order confirming the penalty is set aside and the Assessing Officer is directed to cancel the penalty.

Final Conclusion: The Tribunal allowed the appeal, held that the contravention of section 269SS occurred in A.Y.2016-17 so initiation of penalty under section 271D for A.Y.2017-18 was void ab initio, set aside the CIT(A) order confirming the penalty and directed the Assessing Officer to cancel the penalty.

Exemption under section 10(26BBB) - requirement of establishment by Act - statutory interpretation - literal construction of tax provision - registration under section 12AA - remand for re adjudication

Exemption under section 10(26BBB) - requirement of establishment by Act - statutory interpretation - literal construction of tax provision - Whether a corporation constituted by a Government Resolution (and not by a Central, State or Provincial Act) is eligible for exemption under section 10(26BBB). - HELD THAT: - The Tribunal agreed with NFAC's construction of section 10(26BBB) that the provision exempts income of a corporation only if it is established by a Central, State or Provincial Act. The word 'Act' in the statutory text was held to be determinative; when a fiscal provision prescribes a specific mode of establishment, it must be given literal effect and may not be expanded by judicial activism to include entities created by resolution, notification or other administrative measures. Had the legislature intended to include corporations created by resolution or notification it would have done so in the statute. On this basis the NFAC's conclusion that the appellant - established by a Government of Maharashtra resolution - does not satisfy the statutory criterion for exemption under section 10(26BBB) was upheld. [Paras 4]

NFAC's interpretation that formation by an Act is a requisite for claiming exemption under section 10(26BBB) is correct and is accepted.

Registration under section 12AA - remand for re adjudication - Proceedings relating to the appellant's claim for registration under section 12AA and the consequential effect on assessment for AY 2019-20. - HELD THAT: - The Tribunal noted that proceedings on grant of registration under section 12AA in the appellant's earlier matters were remanded by this Tribunal to the CIT (Exemption) for de novo consideration and that further common orders of this Tribunal directed re-adjudication of assessments pending determination of the 12AA issue. In view of this chain of events and the pendency of the 12AA determination, the Tribunal considered it appropriate in the interest of justice to remit the present assessment matter to the file of the Assessing Officer for fresh adjudication in accordance with law and on the basis of the outcome of the CIT (Exemption)'s decision on registration. The Tribunal also observed that sections 12AA and 10(26BBB) are independent and must be examined separately on their respective statutory criteria. [Paras 4]

Matter remanded to the Assessing Officer to re adjudicate the assessment for AY 2019-20 in accordance with law, having regard to the outcome of the section 12AA proceedings.

Final Conclusion: The Tribunal upheld the NFAC's literal construction of section 10(26BBB) that entitlement requires establishment by an Act and, in the interest of justice, remitted the assessment for AY 2019-20 to the Assessing Officer for de novo adjudication in light of the pending section 12AA determination; appeal allowed for statistical purposes.

Revision under section 263 - deduction under section 54B - conversion of agricultural land into stock-in-trade - erroneous and prejudicial to the interests of revenue - obligation of Assessing Officer to verify claims

Revision under section 263 - erroneous and prejudicial to the interests of revenue - obligation of Assessing Officer to verify claims - deduction under section 54B - Validity of the Principal CIT's order under section 263 holding the assessment order erroneous and prejudicial for failure to properly examine the assessee's claim of deduction under section 54B. - HELD THAT: - The Principal CIT examined the assessment record and concluded that the Assessing Officer did not properly verify or examine the claim of deduction under section 54B in relation to the transfer of the agricultural land and, therefore, the assessment order was erroneous and prejudicial to revenue. The Tribunal, on perusal of the records and the Principal CIT's reasoning, agreed that the AO had not carried out the necessary verification of the facts underlying the s.54B claim, including the consequences of the asserted conversion of the land into stock-in-trade and the effect of alternative dates of transfer on the availability of exemption. The Tribunal held that, even accepting the alternate date advanced by the assessee, the AO's examination would still have required scrutiny of whether the new acquisitions satisfied the statutory condition that they be made after the date of transfer; consequently the Principal CIT was justified in exercising revisional power under section 263 to direct fresh consideration by the AO. The Tribunal found no infirmity in the Principal CIT's conclusion that the order under review was erroneous and prejudicial to the interests of revenue for want of proper verification by the AO.

The Principal CIT's exercise of revision under section 263 was valid; the assessment order was held to be erroneous and prejudicial for lack of proper verification of the s.54B claim, and the direction for fresh consideration by the Assessing Officer is upheld.

Final Conclusion: The assessee's appeal is dismissed; the order of the Principal CIT under section 263 is upheld and the matter is remitted for fresh consideration by the Assessing Officer to examine the claim under section 54B after proper verification.

Allowability of non-compete fees as revenue expenditure versus amortisation over period of benefit - deductibility of employee stock option (ESOP) expenses as ascertained liability - computation and allowability of deduction under Chapter VI-A (Section 80HHE) vis-a -vis set off of brought forward business losses - transfer pricing adjustment for secondment of personnel and appropriate benchmark for arm's length compensation - allocation of depreciation between exempt units (Section 10A) and taxable units - treatment of difference between book depreciation and tax depreciation for purposes of Section 10A exemption

Allowability of non-compete fees as revenue expenditure versus amortisation over period of benefit - Deletion of disallowance of non compete fees and treatment of the payment as allowable revenue expenditure in the year of payment. - HELD THAT: - The Tribunal applied the Supreme Court ratio in Taparia Tools Ltd. and held that where the liability for non compete fees has arisen and been quantified and paid in the year, the expenditure is ordinarily allowable in that year. The Tribunal noted that the agreements were for short periods (one and two years) and the assessee had incurred and claimed the liability in the year; consequently the AO could not substitute an amortisation approach merely because a continuing benefit might exist. Following Taparia, the appellate view deleting the AO's amortisation was upheld. [Paras 9]

Revenue's ground disallowed; disallowance deleted and full deduction allowed in the year of payment.

Deductibility of employee stock option (ESOP) expenses as ascertained liability - Allowability of ESOP expenses debited to profit and loss as a deductible business expense. - HELD THAT: - Relying on judicial authorities (including the decision examined in the Delhi High Court and Special Bench reasoning reproduced in the record), the Tribunal accepted that ESOP discount constitutes a consideration for employment and is an expenditure on an ascertained liability under mercantile accounting. The Tribunal held that such liability, though precise quantification might occur later, is not merely contingent and the expense is deductible when the liability arises; thus the CIT(A)'s deletion of the AO's disallowance was affirmed. [Paras 15]

ESOP expenses allowed; AO's disallowance deleted.

Computation and allowability of deduction under Chapter VI-A (Section 80HHE) vis-a -vis set off of brought forward business losses - interpretation of provisions governing deduction computation and interplay with Section 80AB/80A - Whether deduction under Section 80HHE is available where business profits are nil after set off of brought forward business losses, and whether the deduction must be computed after reducing profits by brought forward losses. - HELD THAT: - The Tribunal followed the Supreme Court's reasoning in Reliance Energy and related authorities to conclude that the profits qualifying for deduction under Section 80HHE are to be computed as profits of the business (as determined under the head 'profits and gains of business') and that the resulting deduction is allowable from gross total income subject to statutory ceilings. The Tribunal accepted the coordinated-bench approach that brought forward business losses do not reduce the 'profits of the business' for the purpose of computing the eligible amount under Section 80HHE, and that Section 80AB/80A do not negate the applicability of the Supreme Court's interpretation. Consequently the CIT(A)'s allowance was upheld. [Paras 21]

Deduction under Section 80HHE upheld; Revenue's grounds dismissed.

Allocation of depreciation between exempt units (Section 10A) and taxable units - treatment of difference between book depreciation and tax depreciation for purposes of Section 10A exemption - Whether the AO was justified in making an addition by treating difference between book depreciation and tax depreciation as not eligible for Section 10A exemption; and direction to recompute and allow certain software depreciation against taxable income after segregating STPI allocation. - HELD THAT: - On the claim that adjustment between book and tax depreciation would not alter total income because the adjusted profits pertaining to STPI units are exempt under Section 10A, the Tribunal agreed with the CIT(A) that the AO's addition was not warranted. The Tribunal held that when the adjusted profit (after adding back book depreciation and deducting tax depreciation) remains within the scope of Section 10A exemption, there is no net addition to total income. Consequently the deletion of the AO's addition was affirmed. Separately, in relation to depreciation on software expenses, the Tribunal required segregation of depreciation between STPI (exempt) and non STPI units and remanded to the AO to consider the working submitted, directing allowance of the balance amount pertaining to taxable units; the issue was remitted for recomputation and verification. [Paras 25, 31]

Addition relating to adjustment for Section 10A deleted; software depreciation issue remanded to AO for segregation between STPI and non STPI and recomputation (statistical allowance directed).

Transfer pricing adjustment for secondment of personnel and appropriate benchmark for arm's length compensation - Validity and quantum of the transfer pricing adjustment made by the TPO in respect of personnel seconded to the AE. - HELD THAT: - The Tribunal recognised that an adjustment is warranted for the benefit derived by the AE from deployment of personnel, but rejected the TPO's benchmarking which applied third party placement agency commission rates because recruitment/placement services provide additional services not present in pure secondment for software services. The Tribunal found the CIT(A)'s reduction (which had considered Indian salaries and excluded certain employees) insufficiently reasoned as the correct arm's length adjustment should differ from placement agency rates. Balancing these considerations, the Tribunal revised the TP adjustment to a moderate fixed figure of Rs.4,00,000 as an appropriate arm's length correction for the benefit received. [Paras 36]

TP adjustment sustained in part; revised to Rs.4,00,000 (appeal partly allowed).

Final Conclusion: The Revenue appeal was partly allowed. Disallowances in respect of non compete fees and ESOP expenses were deleted; deduction under Section 80HHE was upheld; the AO's addition concerning Section 10A depreciation adjustment was deleted; the software depreciation allocation between STPI and non STPI units was remanded to the AO for recomputation and allowance of the taxable portion; and the transfer pricing adjustment was reduced and fixed at Rs.4,00,000.

Deduction under section 57(iii) (commercial expediency test) - nexus between borrowed funds and income from other sources - commercial expediency - excessive interest disallowance - prudent businessman test

Deduction under section 57(iii) (commercial expediency test) - nexus between borrowed funds and income from other sources - excessive interest disallowance - Allowability of the disallowance of interest by restricting interest paid at 21% to 15% and adding the differential as income - HELD THAT: - The Tribunal examined whether the assessee had established commercial expediency for borrowing at a higher rate and the requisite nexus between the borrowed funds and the earning of interest income so as to claim deduction under section 57(iii). The AO restricted deduction by treating the 21% interest as excessive and disallowed the 6% differential. The CIT(A) upheld that disallowance on the view that the assessee failed to demonstrate nexus with interest income at prevailing market rates. The Tribunal found this approach erroneous: if nexus between borrowing and earning interest income were absent outright, the entire interest would have been liable to disallowance, not only part thereof. The Tribunal held that the assessee successfully demonstrated commercial expediency - funds were borrowed on urgent business need and advanced to the company where the assessee was a director - and that the nexus required under section 57(iii) was established. Reliance on precedents was noted to support that expenditure incurred out of commercial expediency for the purpose of earning income from other sources is deductible even if the expenditure does not inevitably yield income. Having accepted commercial expediency and nexus, the Tribunal concluded that the partial disallowance was not sustainable and allowed the appeal. [Paras 6]

The disallowance of the differential interest of Rs. 6,00,000/- was set aside and the assessee's appeal was allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the assessee had established commercial expediency and the requisite nexus under section 57(iii) for borrowing at 21%, and accordingly the addition of the differential interest was not sustainable.

Disallowance under Section 40(b) of the Income-tax Act - Clause 21(c) of Form 3CD - admissibility of remuneration to working partners under Section 40(b) - partnership deed provision determining remuneration - mandatory levy of interest under sections 234B and 234C of the Income-tax Act

Disallowance under Section 40(b) of the Income-tax Act - Clause 21(c) of Form 3CD - admissibility of remuneration to working partners under Section 40(b) - partnership deed provision determining remuneration - Whether the assessing officer was justified in disallowing the claim for remuneration paid to partners on account of non-mention of amounts in Clause 21(c) of Form 3CD and whether the remuneration was inadmissible under Section 40(b). - HELD THAT: - Clause 21(c) of Form 3CD requires disclosure of amounts debited which are inadmissible under sections 40(b)/40(ba) along with computation; it is directed to amounts which are inadmissible. The omission to state the amount of remuneration admissible under Section 40(b) in Clause 21(c) does not permit drawing adverse inference to disallow the deduction. On the facts the assessee did not contravene any of the disqualifying situations enumerated in sub section (b) of Section 40 (namely payment to a non working partner, payments not authorised by or not in accordance with the partnership deed, payments relating to periods prior to the deed, or payments exceeding the amount computed as per the statutory mechanism). The remuneration was authorised by the partnership deed and quantified accordingly. Consequently the disallowance of the claimed remuneration of Rs.4,01,002 made by the assessing officer and confirmed by the CIT(A) was not warranted and is set aside. [Paras 6, 7]

Disallowance of remuneration of Rs.4,01,002 under Section 40(b) set aside; grounds 1 to 7 allowed.

Mandatory levy of interest under sections 234B and 234C of the Income-tax Act - Whether interest under sections 234B and 234C is leviable after allowing the claim on appeal and what direction should be given to the assessing officer. - HELD THAT: - The levy of interest under sections 234B and 234C is mandatory in view of binding precedent of the Supreme Court. Accordingly, although the deduction has been restored to the assessee, the assessing officer is required to recompute and rework the interest liability under sections 234B and 234C while giving effect to this appellate order. [Paras 8]

Ground 8 disposed of by directing the AO to recompute interest under sections 234B and 234C while giving appellate effect.

Final Conclusion: The assessee's appeal is allowed: the disallowance of remuneration under Section 40(b) is vacated and the assessing officer is directed to grant the deduction; interest under sections 234B and 234C shall be recomputed by the AO in accordance with law while giving effect to this order.

Jurisdiction to entertain - preliminary issue under Section 9A - mixed question of law and fact - limitation as a bar to suit - benami transactions and exceptions - nullity of order - restoration of suit and remand for fresh consideration

Preliminary issue under Section 9A - jurisdiction to entertain - mixed question of law and fact - Whether questions of limitation and benami can be decided as preliminary issues under Section 9A of the CPC - HELD THAT: - The Court held that Section 9A is confined to the question whether the Court has jurisdiction to entertain a suit (i.e. inherent jurisdiction in the narrow sense of competence to receive the suit) and therefore does not permit trial, at the preliminary stage, of mixed questions of law and fact such as limitation or benami. The Three-Judge Bench decision in Nusli Neville Wadia v. Ivory Properties was held to be binding and dispositive: only pure questions of law concerning inherent jurisdiction may be decided under Section 9A without evidence. As both limitation and benami raise factual controversies and exceptions (including factual proof of trusts or fiduciary relationships), they are mixed questions requiring evidence and cannot be finally adjudicated under Section 9A. [Paras 41, 42, 43, 56]

Questions of limitation and benami are mixed questions of law and fact and are not within the ambit of preliminary adjudication under Section 9A; they cannot be finally decided under Section 9A without evidence.

Nullity of order - restoration of suit and remand for fresh consideration - Whether the Single Judge's order dismissing the suit on preliminary issues under Section 9A is vitiated and what relief follows - HELD THAT: - Applying the legal principle that Section 9A permits only pure questions of law on inherent jurisdiction to be decided at the preliminary stage, the Court found the Single Judge's dismissal (which proceeded on the basis that evidence could and should have been led to decide limitation and benami) to be contrary to the binding authority of the Three-Judge Bench and therefore a nullity. Consequently, the impugned order and judgment dated 8 and 11 September 2015 were set aside. [Paras 43, 68, 69]

The impugned order is set aside as contrary to law and a nullity; the dismissal of the suit on those preliminary issues is quashed.

Restoration of suit and remand for fresh consideration - mixed question of law and fact - Disposition as to further proceedings following setting aside of the impugned order - HELD THAT: - Having set aside the Single Judge's decision, the Court restored Suit No. 777 of 2014 to file and directed that it proceed afresh before the learned Single Judge. The Court expressly refrained from expressing any opinion on the merits and left all substantive contentions open for trial, noting that questions of limitation and benami will require evidence and adjudication in the proper forum and manner. [Paras 68, 69, 71]

Suit restored to file to proceed afresh; all merits and contentions (including issues of limitation and benami) are left open for trial.

Final Conclusion: The High Court set aside the Single Judge's dismissal of Suit No. 777 of 2014 (dated 8 and 11 September 2015) as being contrary to the law laid down by the Three-Judge Bench in Nusli Neville Wadia v. Ivory Properties; the dismissal was declared a nullity, the suit was restored to file and directed to proceed afresh, with all merits (including limitation and benami issues) to be tried with opportunity for evidence.

Condonation of delay - Limitation period for filing appeal - Duty of government departments to provide reasonable and acceptable explanation for delay - Dismissal for non-prosecution

Condonation of delay - Limitation period for filing appeal - Duty of government departments to provide reasonable and acceptable explanation for delay - Application for condonation of delay in filing and re-filing the appeal was rejected. - HELD THAT: - The Court examined the explanations for a cumulative delay of 307 days in initial filing and a further 109 days in re-filing. The stated reasons-internal departmental processing, misplacement of the impugned order during office renovation of counsel, and misplacement of appeal papers including the affidavit-were held to be bald, lacking particulars and not reasonably acceptable. The Court applied the principle that government bodies must furnish reasonable and acceptable explanations and that condonation is an exception which should not be routinely granted to departments. In view of the inadequacy of the explanations and absence of bona fide efforts to avoid delay, the applications for condonation were refused. [Paras 4, 5, 6, 7, 10]

Applications seeking condonation of delay (CM APPL. 54192/2019 & CM APPL. 54194/2019) are rejected.

Dismissal for non-prosecution - Condonation of delay - The appeal was dismissed for want of prosecution and for failure to establish grounds for condonation of delay. - HELD THAT: - The Court recorded that service on the respondent had not been effected, that the appellant did not take timely steps to effect service or to prosecute the appeal, and that there was inordinate delay in prosecuting the appeal including failure to act after notices were returned. These procedural failures, coupled with the rejection of condonation applications, led the Court to conclude that the appeal could not be entertained. The Court therefore dismissed the appeal. [Paras 8, 9, 10]

The appeal is dismissed.

Final Conclusion: The High Court refused to condone the inordinate delays in filing and re-filing the appeal and, on account of the inadequate explanations and failure to prosecute/serve the respondent, dismissed the appeal.

Rejection of transaction value and determination by contemporaneous import data - related persons under the Customs Valuation Rules - correlation of laboratory test report with official sample for admissibility - mis-declaration of quantity and grade and imposition of penalties

Correlation of laboratory test report with official sample for admissibility - The imported guar gum was of food grade and the department's test report was admissible and credible while the appellant's private laboratory report was not established as referring to the official samples. - HELD THAT: - The Tribunal accepted the CRCL chain of custody which forwarded the official samples to AES and found that AES's reports could be correlated with the entries in the Customs sample register; the appellant had paid for those tests and did not dispute the samples being sent. The Balaji report and accompanying declaration failed to specify sample marks or register numbers and could not be correlated to the samples drawn in presence of officers; the declaration was made years later and did not cure the missing linkage. Further, Balaji's report showed testing against pharmacopeial standards (I.P.) and recorded elevated microbial counts but did not state that the material was not of food grade; accordingly the Balaji report did not advance the appellant's case. On these bases the Tribunal found AES/CRCL testing credible and held the imported guar gum to be of food grade.

AES/CRCL test reports are credible and establish the imported guar gum to be of food grade; the Balaji report is not sufficiently connected to the official samples and is not relied upon.

Rejection of transaction value and determination by contemporaneous import data - related persons under the Customs Valuation Rules - The declared transaction value was rightly rejected and the assessable value was to be determined from contemporaneous imports (NIDB) in view of mis-declared quantity, related party purchase and mis-declaration of grade. - HELD THAT: - The Tribunal identified four independent and cumulative grounds for rejecting the transaction value: (a) the actual imported quantity exceeded the declared quantity; (b) the importer and overseas supplier were related persons within Rule 2(2) of the Customs Valuation Rules; (c) the grade of the goods was mis declared as non food/non pharma whereas testing showed food grade; and (d) the declared price was disproportionately low compared to contemporaneous NIDB prices (the declared value was many times lower). Given these factors the Tribunal held that transaction value could not be accepted and that valuation based on contemporaneous import data in NIDB was appropriate.

Transaction value rejected; assessable value correctly determined on the basis of contemporaneous import data (NIDB).

Mis-declaration of quantity and grade and imposition of penalties - Penalties imposed on the company and on the directors were upheld as justified by their involvement in the mis-declarations. - HELD THAT: - The Tribunal noted the appellants did not dispute the mis declaration of quantity or the relatedness of buyer and seller. The record, including statements recorded during investigation, established the directors' participation in the transactions and in the mis declarations. In view of the deliberate mis declaration of grade and quantity and the related party relationship used in the context of valuation, the Tribunal found the imposition of penalties on the company and the two directors to be correct.

Penalties on the appellant company and on Shri Lakhwinder Pal Singh Puri and Shri Manmit Singh Malhotra are sustained.

Final Conclusion: All three appeals are dismissed; the appellate orders upholding reassessment of value on NIDB data, the finding that the imported guar gum was of food grade based on credible testing, and the penalties on the company and its two directors are affirmed.

Rejection of plaint under Order VII Rule 11(d) - ouster of civil court jurisdiction by the Companies Act - exclusive jurisdiction of the National Company Law Tribunal (NCLT) - oppression and mismanagement - scope of sections 241 and 242 - doctrine of reading down - treating averments in the plaint as true for Order VII Rule 11

Rejection of plaint under Order VII Rule 11(d) - ouster of civil court jurisdiction by the Companies Act - exclusive jurisdiction of the National Company Law Tribunal (NCLT) - Whether the plaint in Title Suit No. 254 of 2015 is barred by the Companies Act, 2013 and hence liable to be rejected under Order VII Rule 11(d) CPC. - HELD THAT: - Order VII Rule 11(d) permits rejection of a plaint only where the plaint on its face discloses that the suit is barred by law. For disposal under Order VII Rule 11(d) the court must treat all averments in the plaint as true and decide on the pleadings alone. The Companies Act, 2013 does not, on its face or by necessary implication, exclude the jurisdiction of civil courts in every matter concerning company affairs; exclusion must be clearly established and is not to be readily inferred. The scheme of the Act and the reliefs claimed must be examined in substance. Where the reliefs sought are declaratory and for enforcement of individual civil rights (including declaration of right to enter premises, injunctions, account and remuneration) and where the plaint does not on its face disclose that such claims fall exclusively within the Tribunal's exclusive statutory jurisdiction, the plaint cannot be rejected at the threshold. Applying these principles to the pleadings in the plaint, the court finds that the suit does not appear on the face of the plaint to be barred by the Companies Act, 2013 and therefore could not be rejected under Order VII Rule 11(d). [Paras 14, 19]

The plaint is not barred by the Companies Act, 2013 and the learned trial court correctly declined to reject the plaint under Order VII Rule 11(d).

Oppression and mismanagement - scope of sections 241 and 242 - doctrine of reading down - treating averments in the plaint as true for Order VII Rule 11 - Whether the question of whether defendant no. 2 falls within the scope of a 'member' for the purposes of sections 241/242 (and hence whether the NCLT is the appropriate forum) can be determined on an application to reject the plaint under Order VII Rule 11. - HELD THAT: - The determination whether a person is a 'member' falling within sections 241/242 involves factual and documentary enquiry. Even if the petitioner's construction of sections 241 and 242 and the application of the doctrine of "reading down" are accepted for argument's sake, such a question cannot be resolved on the pleadings alone where the plaint pleads facts (including an averment that the appointment of the person was put on hold by the Company Law Board). Order VII Rule 11 requires the court to accept plaint averments as true; where the membership status is disputed and requires evidence, the plaint cannot be thrown out at the threshold. Consequently, the issue of whether the NCLT has exclusive jurisdiction over the claims raised must be left for adjudication on evidence rather than by summary rejection of the plaint. [Paras 15, 16, 17, 18]

Whether defendant no. 2 is a 'member' for the purposes of sections 241/242 is a matter requiring evidence and cannot be decided by rejecting the plaint under Order VII Rule 11; the plaint must stand for trial.

Final Conclusion: The petition under Article 227 is dismissed. On the pleadings, the suit is not shown to be barred by the Companies Act, 2013 and the trial court was right to refuse rejection of the plaint under Order VII Rule 11(d); factual issues (including membership status and appropriate forum) require adjudication on evidence.

Resolution Framework 2.0 for COVID-19 related stress of MSMEs - Pre packaged Insolvency Resolution Process - eligibility of corporate applicant under IBC - SARFAESI proceedings and alternative efficacious remedy - laches and duty to exhaust statutory remedies

Resolution Framework 2.0 for COVID-19 related stress of MSMEs - restructuring invoked and implemented - bank's duty to communicate and borrower's obligation to comply - entitlement to restructuring relief under the RBI Resolution Framework 2.0 - HELD THAT: - The Court examined Sub clauses (vi) and (vii) of the RBI circular and noted that restructuring is treated as invoked when the lending institution and the borrower agree to proceed towards finalizing a restructuring plan and that decisions must be communicated within prescribed timelines. The record contains an email from the bank (dated 30.12.2021) requesting the petitioner to deposit amounts necessary for upgradation so that restructuring could be implemented. The petitioner did not show that he complied with or responded to that communication or otherwise took steps to invoke or implement the restructuring. Consequently the scheme was not implemented for want of the petitioner's action and the bank's subsequent issuance of notice under the SARFAESI Act followed. The Court further found delay and lack of diligence on the part of the petitioner in pursuing the scheme with the bank. [Paras 9, 10, 11, 13]

The petitioner was not entitled to the relief under the RBI Resolution Framework 2.0 because the restructuring was not invoked/implemented due to the petitioner's failure to comply with the bank's requisitions.

Pre packaged Insolvency Resolution Process - eligibility of corporate applicant under IBC - definition of corporate applicant in IBC - applicability of the pre packaged insolvency scheme under the IBC to the petitioner (a proprietorship) - HELD THAT: - The Court referred to the IBC definition of 'corporate applicant' and the Notification and Rules for the pre packaged insolvency process, which are directed to corporate applicants such as companies or LLPs. The petitioner is a proprietorship firm and therefore does not fall within the definition of a corporate applicant under Section 5(5) of the IBC. Accordingly, the pre packaged insolvency rules are not available to the petitioner. [Paras 11, 12]

The pre packaged insolvency resolution process under the IBC is not available to the petitioner, who is a proprietorship and not a corporate applicant.

SARFAESI proceedings and alternative efficacious remedy - laches and duty to exhaust statutory remedies - judicial restraint in interference with SARFAESI matters - whether the High Court should exercise writ jurisdiction to stay or set aside SARFAESI proceedings - HELD THAT: - The Court observed that the SARFAESI Act provides a complete code with statutory remedies and that ordinarily writ courts will not interfere with SARFAESI proceedings except in narrowly defined exceptions. The petitioner evidenced laches and had not pursued the bank remedies diligently; the Court found no grounds falling within the exceptions requiring interference. The Court also relied on the principle that financial institution loans are public money and frivolous or dilatory litigation should not impede recovery processes. Given the existence of efficacious alternative remedies and the petitioner's failure to establish exceptional circumstances, the Court declined to exercise its writ jurisdiction. [Paras 14, 15, 16, 17]

The High Court will not interfere with the SARFAESI proceedings; the writ petition is dismissed for want of merit and on account of laches and availability of statutory remedies.

Final Conclusion: The writ petition is dismissed. The petitioner was not entitled to restructuring under the RBI Resolution Framework 2.0 for lack of invocation/implementation by the petitioner; the pre pack insolvency route under the IBC is unavailable to a proprietorship; and the Court will not interfere with the SARFAESI proceedings in the absence of exceptional grounds, the petitioner having been dilatory and with statutory remedies available.

Sale on "as is where is" and "as is what is" basis - due diligence obligation of successful bidder in e-auction - statutory timeline under Schedule I of the Liquidation Regulation, 2016 - mandatory consequence of non payment within 90 days (cancellation of sale) - title litigation is not a defence to withhold balance payment

Title litigation is not a defence to withhold balance payment - due diligence obligation of successful bidder in e-auction - sale on "as is where is" and "as is what is" basis - Appellant could not withhold payment of the balance sale consideration on the ground of ongoing litigation over title or non production of original sale deeds. - HELD THAT: - The e auction notice and process documents expressly disclosed details of the property and noted existing litigation; the sale was conducted on an "as is where is" and "as is what is" basis, placing the obligation of due diligence on the bidder. The Tribunal held that litigation by third parties or non production of original sale deeds did not relieve the successful bidder from the contractual and regulatory obligation to deposit the balance amount within the prescribed time. [Paras 5]

Appellant's plea that bonafide litigation regarding title justified non payment was rejected.

Statutory timeline under Schedule I of the Liquidation Regulation, 2016 - mandatory consequence of non payment within 90 days (cancellation of sale) - Whether the Adjudicating Authority erred in rejecting the application and allowing cancellation where the Appellant failed to deposit the balance within the time prescribed by Schedule I. - HELD THAT: - The Tribunal applied the statutory timeline under Schedule I of the Liquidation Regulation, 2016, and relied on its prior exposition that the 90 day period for payment (with interest mechanics after 30 days) is a maximum and mandatory timeline. Non compliance attracts the statutory consequence of cancellation of sale. Given the Appellant did not make the payment within the prescribed period, the Adjudicating Authority had no option but to reject the Appellant's application and proceed in accordance with the statute. [Paras 6, 7]

Rejection of the Appellant's application and dismissal of the appeal was upheld as in accordance with Schedule I and precedent.

Final Conclusion: Appeal dismissed; Adjudicating Authority's rejection of the application upheld for failure to deposit balance within the statutory timeline, and the Appellant remains free to participate in any re auction subject to conditions.

Computation and exclusion of period of limitation - Proviso to Section 61(2) - outer limit for condonation of delay - Effect of Supreme Court orders extending limitation during COVID-19 - Statutory bar on condonation beyond prescribed outer limit

Effect of Supreme Court orders extending limitation during COVID-19 - Computation and exclusion of period of limitation - Whether the orders of the Hon'ble Supreme Court restoring and extending suspension of limitation during the COVID-19 period operated to save an appeal filed after the statutory period had already expired before 15.03.2020. - HELD THAT: - The Tribunal examined the three Supreme Court orders (23.03.2020; 08.03.2021; 10.01.2022) and their declared effect on computation of limitation. The order of 23.03.2020 extended limitation w.e.f. 15.03.2020; therefore it does not revive or apply where the statutory limitation had already expired on 14.03.2020. The order of 08.03.2021 excluded the period from 15.03.2020 to 14.03.2021 for computation and made available the balance period as on 15.03.2020 with effect from 15.03.2021. The order of 10.01.2022 restored the 23.03.2020 order and excluded the period 15.03.2020 to 28.02.2022, making the balance period as on 03.10.2021 available from 01.03.2022. Consequentially, where the statutory 30-day period under Section 61(2) had already lapsed on 14.03.2020, those extension orders could not be invoked to validate an appeal filed after that date unless there remained a balance period as of 15.03.2020 which could be carried forward under the Supreme Court directions (paras 11-16). [Paras 11, 12, 14, 15, 16]

The Supreme Court orders excluding the period from 15.03.2020 operate only for computing and carrying forward any balance period remaining as on 15.03.2020; they do not revive or validate an appeal where the statutory period had already expired before 15.03.2020.

Proviso to Section 61(2) - outer limit for condonation of delay - Statutory bar on condonation beyond prescribed outer limit - Whether this Appellate Tribunal had jurisdiction to condone delay beyond the unextendible outer period of 15 days under the proviso to Section 61(2) in view of the Supreme Court's orders on limitation. - HELD THAT: - Section 61(2) prescribes 30 days for filing an appeal and permits condonation of delay only for a further period not exceeding 15 days. The Tribunal held that while the Supreme Court's orders excluded specified COVID-19 periods for the purpose of computing limitation, those orders did not extend or alter the statutory outer limit of 15 days available for condonation under the proviso to Section 61(2). Reliance was placed on the principle that a statutory outer limit which is uncondonable cannot be extended even by orders passed in exercise of extraordinary powers (referencing the legal position applied in National Spot Exchange Limited v. Anil Kohli (para 17)). Because the appeal was filed well beyond the 30-day period and no application for condonation was made within the statutory outer limit of 15 days, the Tribunal had no jurisdiction to condone the delay and thus dismissed the condonation application (paras 10, 17-19). [Paras 10, 17, 18, 19]

The Tribunal cannot condone delay beyond the statutory outer limit of 15 days under the proviso to Section 61(2); the application for condonation is dismissed and consequently the appeal is not duly constituted and is dismissed.

Final Conclusion: The application for condonation of delay is dismissed for lack of jurisdiction to condone delay beyond the unextendible 15-day outer limit under the proviso to Section 61(2); accordingly the appeal, being time-barred and not duly constituted, is dismissed (without costs).

Competency to institute complaint under Section 61(2)(ii) of the Foreign Exchange Regulation Act, 1973 - locus standi of the Enforcement Directorate's officer to file complaint - value and judicial notice of Official Gazette notification - presumption under Section 81 of the Evidence Act - admissibility of direct evidence of office held as evidence under Section 60 of the Evidence Act

Competency to institute complaint under Section 61(2)(ii) of the Foreign Exchange Regulation Act, 1973 - locus standi of the Enforcement Directorate's officer to file complaint - admissibility of direct evidence of office held as evidence under Section 60 of the Evidence Act - Whether the complainant had the requisite authority to file the complaint in respect of an offence under Section 57 of the FERA. - HELD THAT: - The High Court analysed the Trial Court's conclusion that the complainant had failed to comply with Section 61(2)(ii) by not producing written authorization. The Court observed that the record contained Exhibit A, a written authorization dated 22.12.2005, and ocular evidence of the officer holding office and tendering that authorization. The statutory scheme under Section 61(2)(ii) contemplates complaints by the Director of Enforcement or an officer authorised in writing; Exhibit A qualifies as such written authorization and the evidence of office is admissible as direct evidence under Section 60. The Trial Court's disregard of Exhibit A and the uncontroverted testimony was a non-application of mind and erroneous appreciation of material evidence, rendering its finding on locus standi untenable. [Paras 12, 16, 20, 22, 23]

The finding that the complainant lacked authority to file the complaint was set aside; Exhibit A and the uncontroverted evidence established requisite authority to institute the prosecution.

Value and judicial notice of Official Gazette notification - presumption under Section 81 of the Evidence Act - Whether the Trial Court was bound to take judicial notice of the Ministry of Finance notification published in the Official Gazette and to give it probative effect. - HELD THAT: - The Court noted the notification S.O. 715(E) dated 24th September, 1993 published in the Official Gazette which authorised categories of Enforcement Directorate officers (including 'All Enforcement Officers') to make complaints. As a public document of unimpeachable nature, the Gazette entry attracts the statutory presumption of correctness under Section 81 of the Evidence Act, and the Magistrate was duty bound to take judicial notice of it. The Trial Court's failure to consider the Gazette notification, alongside Exhibit A and the witness evidence, amounted to illegality and non-application of mind in arriving at the conclusion that statutory preconditions under Section 61(2)(ii) were not met. [Paras 12, 17, 18, 21, 22]

The Trial Court erred in ignoring the Official Gazette notification and the presumption under Section 81; its conclusion on non-compliance of statutory formalities is set aside.

Final Conclusion: The impugned judgment dated 18th August, 2011 is set aside for erroneous rejection of documentary and ocular evidence and failure to take judicial notice of the Official Gazette; the trial court is directed to proceed afresh with the complainant represented by the present holder of the authorised office or another person duly authorised, and to conclude the trial expeditiously.

Grant of bail under Section 45 of PMLA - money-laundering and proceeds of crime - delay in filing final report in predicate offence - flight risk and imposition of bail conditions - role of accused in coordinating fraudulent GDR issue

Grant of bail under Section 45 of PMLA - delay in filing final report in predicate offence - role of accused in coordinating fraudulent GDR issue - Whether the appellant should be released on bail in the PMLA proceedings despite the allegations in the prosecution complaint and the pendency of the predicate FIR where no final report has been filed for several years. - HELD THAT: - The Court examined the specific role attributed to the appellant in the prosecution complaint and noted that paragraph 8 of the complaint gives room for a valid argument that the second condition in Clause (ii) of sub-section (1) of Section 45 of PMLA may be satisfied. At the same time, the Court took into account that the predicate FIR was registered in 2013 and that no final report has been filed in that FIR for the past nine years. Balancing the seriousness of the allegations against the prolonged non-completion of the predicate investigation and the factual materials before it, the Court concluded that continued incarceration of the appellant may not be justified. Applying the statutory framework governing bail under Section 45, the Court allowed the appeal and directed that the appellant be enlarged on bail subject to terms to be imposed by the Special Court under PMLA. [Paras 14, 16]

The appeal is allowed and the appellant is directed to be enlarged on bail in the ED proceedings subject to terms to be imposed by the Special Court.

Flight risk and imposition of bail conditions - grant of bail under Section 45 of PMLA - What conditions should be imposed while granting bail in view of the Enforcement Directorate's apprehension that the appellant is a flight risk. - HELD THAT: - The Court accepted that the Enforcement Directorate's apprehension about the appellant being a flight-risk required mitigation by specific conditions. Accordingly, while granting bail, the Court directed that the Special Court's terms shall include surrender of the appellant's passport and his regular appearance before the Special Court whenever the prosecution complaint is posted. These additional conditions were imposed to address the prosecution's concern while permitting release on bail. [Paras 15, 16]

Bail granted subject to conditions to be framed by the Special Court, including surrender of passport and regular appearance before the Special Court.

Final Conclusion: The appeal is allowed: the appellant is directed to be enlarged on bail in the ED proceedings; the Special Court shall impose appropriate terms under PMLA, including surrender of passport and regular appearance before the Special Court; no costs.

Time limit for determination of service tax liability under Section 73(4B) of the Finance Act - delay in adjudication as ground for setting aside proceedings - reasonableness period of five years for concluding assessments/adjudication - precedential effect of GPI Textiles Ltd. on limitation of adjudication

Time limit for determination of service tax liability under Section 73(4B) of the Finance Act - reasonableness period of five years for concluding assessments/adjudication - delay in adjudication as ground for setting aside proceedings - Validity of adjudication order passed after a delay of more than five years from the dates of the show cause notices - HELD THAT: - The Court examined whether the adjudication order dated 15.12.2020, confirming demands raised by show cause notices issued on 23.10.2013, 27.03.2014 and 16.10.2015, was vitiated by inordinate delay. Reliance was placed on the decision in GPI Textiles Ltd., as well as earlier pronouncements treating a five-year period as a reasonable outer limit for concluding assessment/adjudication in the absence of a statutory period. The petitioner had not been granted adjudication within the time envisaged by clause (b) to Section 73(4B) and subsequent instructions issued by the Board emphasised timely disposal of adjudication matters. The Court noted that no interim stay had been granted by the Supreme Court in related appeals which affected the precedential force of the cited decisions. In those circumstances, and applying the principle that undue delay in conclusion of proceedings without adequate explanation renders the adjudication unlawful and arbitrary, the impugned order was unsustainable.

Impugned order dated 15.12.2020 set aside on account of inordinate delay in adjudication beyond the reasonable five-year period.

Final Conclusion: Writ petition allowed; the order confirming service-tax demands dated 15.12.2020 is set aside as vitiated by inordinate delay in adjudication, having regard to the five-year reasonableness principle and the Court's reliance on GPI Textiles Ltd.; no interim stay in related Supreme Court proceedings having been shown.

Inclusion of non-monetary consideration in taxable value - Service tax on reverse charge basis - Assessable value and notional valuation of free accommodation and employer-provided facilities - Binding effect of judicial precedent - Extended period of limitation under proviso to section 73

Inclusion of non-monetary consideration in taxable value - Assessable value and notional valuation of free accommodation and employer-provided facilities - Service tax on reverse charge basis - Binding effect of judicial precedent - Whether the value of non-monetary consideration (free accommodation, medical facilities, vehicle and telephone insurance, stationery and other reimbursed expenses) is includible in the taxable value for service tax for the period April 2009 to March 2012. - HELD THAT: - The Tribunal accepted the departmental concession that the controlling legal question is settled by prior Tribunal decisions in favour of the appellant and by the Supreme Court authority relied upon in those decisions. Following those precedents, costs reimbursed or notional values attributed to free accommodation and other employer-provided facilities for security personnel are not includible in the assessable value for service tax on reverse charge basis. The Tribunal found that the Commissioner merely confirmed the demand while the issue was pending higher adjudication, but since the law is no longer res integra, the Tribunal is bound by the settled legal position as applied in the cited CISF decisions. In view of that binding precedent, the impugned confirmation of demand (with interest) could not be sustained. The Tribunal therefore did not find it necessary to decide the separate question of limitation.

The confirmation of demand of service tax with interest insofar as it includes non-monetary consideration is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal and set aside the portion of the Commissioner (Appeals) order confirming service tax with interest insofar as it sought to include the notional value of free accommodation and other employer provided facilities in the taxable value for April 2009 to March 2012, the Tribunal being bound by the existing precedent; the question of limitation was left undecided.

Remand for fresh consideration - opportunity of hearing - set aside of adjudicatory order - business takeover / successor liability

Remand for fresh consideration - opportunity of hearing - business takeover / successor liability - set aside of adjudicatory order - Whether the impugned order confirming demand against M/s. Patel Enterprises should be set aside and remitted for fresh adjudication to permit filing of reply and personal hearing in view of the takeover by M/s. Dee Vee Projects Ltd. and related proceedings - HELD THAT: - The Tribunal noted that separate show cause notices were issued to M/s. Patel Enterprises and to M/s. Dee Vee Projects Ltd. for identical periods (2013-14 and 2014-15) and on similar allegations, and that the business of M/s. Patel Enterprises was taken over by M/s. Dee Vee Projects Ltd. on April 01, 2013. Although the order under challenge records that M/s. Patel Enterprises did not file a reply or appear despite opportunities, the Tribunal accepted the appellant's explanation that a reply had been filed by the successor company and that a representative for the successor had appeared, resulting from a bona fide belief that that would suffice. In addition, the demand against the successor company was subsequently dropped. In these peculiar factual circumstances the Tribunal considered it appropriate to set aside the impugned order and remit the matter to the Adjudicating Authority to enable M/s. Patel Enterprises to file a reply and appear for hearing. The Tribunal directed that the appellant shall submit a reply within eight weeks and that the Adjudicating Authority shall endeavour to decide the matter expeditiously as it pertains to the specified periods. [Paras 6, 7]

Impugned order set aside; matter remitted to the Adjudicating Authority for fresh consideration permitting filing of reply within eight weeks and grant of hearing, with directions to decide expeditiously for the periods 2013-14 and 2014-15.

Final Conclusion: The appeal is allowed to the extent that the order dated September 22, 2022 is set aside and the matter remitted for fresh adjudication to permit the appellant to file a reply within eight weeks and to be heard, the Adjudicating Authority being directed to decide the matter expeditiously in respect of 2013-14 and 2014-15.

Unjust enrichment - Refund of excess central excise duty - Valuation for stock transfer under Rule 7 of Central Excise (Valuation) Rules, 2000 - Scope of remand and limits on lower authority - Consistency/estoppel in tax proceedings

Unjust enrichment - Refund of excess central excise duty - Valuation for stock transfer under Rule 7 of Central Excise (Valuation) Rules, 2000 - Entitlement to refund of excess duty on the ground that the higher duty paid at factory-to-depot clearance was not recovered from customers and therefore did not result in unjust enrichment. - HELD THAT: - The Tribunal found on the material before it that goods were cleared from factory to depots on payment of duty at a higher factory-gate value, whereas subsequent sales from depots to customers were at a lower price. The original adjudicating authority had verified documents, accepted chartered accountant certificates and a verification report, and sanctioned refunds on the view that the excess duty paid was not recovered from buyers. The Commissioner (Appeals) reversed that finding by holding that the assessee had failed to prove non-recovery. The Tribunal, applying the principle in Nahar Spg. & Wvg. Mills Ltd. and related decisions, held that where Rule 7 applies (valuation for stock transfers) the depot price prevailing at the relevant time is the relevant benchmark and, since the depot price was lower, the excess duty was not passed on and there is no unjust enrichment. In the absence of any contrary evidence to the verification already made, the department could not displace the finding of non-recovery recorded by the original authority. The Tribunal therefore allowed the appeals and held the impugned order unsustainable. [Paras 7, 9, 10, 15]

Appeals allowed: refunds upheld as excess duty paid was not recovered from customers and doctrine of unjust enrichment did not bar refund.

Scope of remand and limits on lower authority - Whether the Commissioner (Appeals) exceeded the scope of the Tribunal's remand by re-opening valuation under Rule 7 instead of limiting inquiry to unjust enrichment. - HELD THAT: - The Tribunal recorded that its earlier remand to the Commissioner (Appeals) was confined to examination of evidence on unjust enrichment. The Commissioner (Appeals) went beyond that remit by holding that Rule 7 of the Valuation Rules had not been followed. The Tribunal held this to be impermissible: lower authorities must act within the confines of the remand and not travel beyond the specific point remitted for reconsideration, following the principle in Kodak India Ltd. [Paras 11, 12]

Findings of the Commissioner (Appeals) that Rule 7 was not followed were beyond the remand and therefore not sustainable.

Consistency/estoppel in tax proceedings - Whether prior final refund orders in earlier periods preclude the department from taking a contrary stand in the present proceedings. - HELD THAT: - The Tribunal noted that the assessee had earlier periods in which refunds of excess duty were granted and those orders had attained finality. On that factual backdrop and in light of authorities cited, the Tribunal held that the department could not in the present proceedings legitimately adopt a contrary position on the same issue for the same assessee. The Tribunal found the Revenue's reliance on other authorities distinguishable on facts. [Paras 13]

Previous final refund orders in favour of the appellant support the conclusion that the Revenue cannot take a contrary stand; the impugned order is unsustainable on this ground.

Final Conclusion: The impugned order of the Commissioner (Appeals) dated 31.08.2009 is set aside; the appeals are allowed and refunds of excess central excise duty are upheld with consequential relief, the Commissioner having gone beyond the remand and improperly dislodged findings of non-recovery and verified evidence.

Remission under Rule 21 of the Central Excise Rules - protective demand arising from a Show Cause Notice - principles of natural justice - requirement of a speaking order - remand for fresh decision by the adjudicating authority

Remission under Rule 21 of the Central Excise Rules - protective demand arising from a Show Cause Notice - requirement of a speaking order - principles of natural justice - Validity of confirmation of protective demand and the Commissioner (Appeals) order in light of an earlier remand of the remission application for fresh decision. - HELD THAT: - The Tribunal had earlier set aside the communication rejecting the remission application as non-speaking and remitted the matter to the adjudicating authority to decide afresh after considering the appellant's submissions. In those circumstances the present confirmation of the protective demand (and its subsequent confirmation on appeal) is vitiated because it is premised on a remission decision which had been remitted for fresh consideration. A decision on the protective demand can only legitimately follow the outcome of the remission application; until the adjudicating authority complies with the remand and pronounces a reasoned order on remission, any confirmation of duty is a nullity. The Tribunal therefore set aside the Commissioner (Appeals) order and directed the original authority to first comply with the Tribunal's remand, decide the remission claim afresh with reasons and only then proceed to adjudicate the protective demand in accordance with law. [Paras 11, 12]

Order-in-Appeal No.25/Hal/CE/2018-19 dated 04.05.2018 set aside; original authority directed to comply with FO No.75231/2018 dated 09.03.2018 and decide the remission application afresh before adjudicating the protective demand.

Remand for fresh decision by the adjudicating authority - disposal of departmental cross objections - Disposition of Cross Objections filed by the Department seeking modification of appellate order. - HELD THAT: - The Cross Objections filed by the Department challenging the impugned Commissioner (Appeals) order were considered in the light of the Tribunal's earlier remand and the conclusion that the appeal order could not be sustained without the adjudicating authority first complying with the remand. Consequently, the Cross Objections are disposed of by directing compliance with the remand and fresh decision as ordered. [Paras 13]

Cross Objections disposed of in terms of the direction that the original authority shall comply with the Tribunal's remand and decide the remission application afresh.

Final Conclusion: The Commissioner (Appeals) order confirming the duty demand is set aside because it is premised on a remission decision which this Tribunal had remitted for fresh consideration; the adjudicating authority is directed to comply with the Tribunal's remand, decide the remission claim under Rule 21 with reasons, and thereafter proceed, if necessary, to adjudicate the protective Show Cause Notice. The Department's Cross Objections are disposed of accordingly.

Penalty under Section 11AC of the Central Excise Act - Applicability of Section 11AC to short levy or non payment of duty - Reversal of Cenvat credit and prior payment/adjustment - Rule 6(3)(ii) of the Cenvat Credit Rules, 2004 - Contradictory findings by the appellate authority

Penalty under Section 11AC of the Central Excise Act - Applicability of Section 11AC to short levy or non payment of duty - Reversal of Cenvat credit and prior payment/adjustment - Contradictory findings by the appellate authority - Whether the penalty imposed under Section 11AC should be sustained where the confirmed demand relates to an amount of Cenvat credit that was reversed prior to issuance of the show cause notice and there is no short payment or non payment of duty. - HELD THAT: - The Tribunal confined the controversy to the imposition of penalty. It recorded that the amount for which demand was confirmed represented Cenvat credit that had been reversed before the show cause notice was issued. The proviso to Section 11AC and the admitted facts showed no occasion for imposing penalty, which by its terms applies to cases of short levy or non levy/non payment of duty arising from fraud, collusion, wilful mis statement or suppression with intent to evade duty. The Commissioner (Appeals) had in earlier paragraphs (para 9 of his order) recorded that separate accounts need not be maintained w.e.f. 01.04.2016, that the appellant had availed options under Rule 6(3) read with Rule 6(3A), and that the competent officer could permit following the procedure and payment with interest; these findings are inconsistent with the later conclusion in para 11 that there was suppression with intent to evade duty. Given (a) the confirmed demand pertains to reversed credit paid prior to the show cause notice, (b) the absence of short payment or non payment of duty on the admitted facts, and (c) the internal contradiction in the Commissioner (Appeals) findings, the Tribunal held that Section 11AC was inapplicable and the penalty was wrongly imposed. [Paras 5, 8, 9]

Imposition of penalty under Section 11AC set aside; appeal partly allowed while the balance of the order remains intact.

Final Conclusion: The Tribunal held that Section 11AC was inapplicable to the confirmed demand which related to Cenvat credit reversed prior to the show cause notice and where there was no short levy/non payment of duty; noting contradictory findings by the Commissioner (Appeals), the penalty imposed was set aside and the appeal was partly allowed.

Concessional rate of tax on inter State sales - default assessment - penalty under Section 86(10) of the DVAT Act read with Section 9(2) of the CST Act - C-Forms and retrospective cancellation of statutory forms - opportunity to be heard - remand for fresh adjudication - jurisdiction to examine relevant documents

Concessional rate of tax on inter State sales - C-Forms and retrospective cancellation of statutory forms - opportunity to be heard - jurisdiction to examine relevant documents - remand for fresh adjudication - Impugned assessment and penalty notices set aside and remitted to the assessing authority for fresh decision after affording the petitioner an opportunity to be heard. - HELD THAT: - The SOHA had rejected the petitioner's claim for concessional tax treatment on the ground that C-Forms relied upon by the petitioner were alleged to have been cancelled retrospectively by the Haryana authorities and that the petitioner had not produced documents or appeared before SOHA in response to a notice. The petitioner, however, contended non-receipt of the Section 59(2) notice and asserted that it possessed documents to establish inter State sales. The controversy is fact-centric and falls within the adjudicating authority's competence to examine the documents and the validity of the C-Forms in the light of precedents of this Court. Having regard to these circumstances and the respondent's concession that the assessing authorities may consider the documents, the Court set aside the impugned notices and remanded the matters for fresh adjudication. The remand is directed to be undertaken in reference to the Court's earlier decisions cited in the judgment and after giving the petitioner a full opportunity of hearing.

Notices of assessment and penalty set aside; matters remitted to assessing authority to decide afresh after affording opportunity to the petitioner.

Final Conclusion: The petition is allowed; the impugned notices dated 22.05.2019 and 02.08.2018 are set aside and the assessing authority is directed to decide the petitioner's claim afresh in the light of the cited judgments, after giving the petitioner an opportunity to be heard, to be completed within three months.

Transfer of the right to use goods - deemed sale / sale by transfer of right to use goods - service contract v. sale - dominant nature test - availability of goods for delivery, legal right to use and exclusion of transferor - composite transaction and Article 366(29A) - splitting test

Transfer of the right to use goods - service contract v. sale - dominant nature test - availability of goods for delivery, legal right to use and exclusion of transferor - Whether crane services supplied under the contract dated 13.10.2008 amounted to a transfer of the right to use goods constituting a 'sale' under Section 2(35)(iv) of the RVAT Act, 2003 read with Article 366(29A) of the Constitution. - HELD THAT: - The Court applied the dominant-nature test and the attributes identified by the Apex Court for a transfer of right to use goods - availability of the goods for delivery, consensus as to identity of goods and a legal right to use the goods to the exclusion of the transferor for the period. The Rajasthan Tax Board's finding that the contract was one for services was upheld after examining the contractual stipulations (notably Condition Nos. 17 and 28) which required the assessee to supply driver and helper, to undertake repair and maintenance, to maintain log books and permitted interchange of cranes. Those terms demonstrate that effective control, possession and responsibility for the cranes remained with the supplier and that the Transport Department's entitlement was to specified services (loading, unloading, lifting and shifting) rather than an exclusive legal right to use the cranes. The fact that service tax was paid and that the contractual obligations kept operational control with the assessee reinforced the conclusion that the transaction was a service contract and not a transfer of the right to use goods. Reliance on Great Eastern Shipping Company Ltd. was considered but the facts and contractual stipulations distinguished that authority. [Paras 16, 18, 19, 20, 21]

Crane services did not constitute a transfer of the right to use goods and therefore did not amount to a 'sale' under Section 2(35)(iv) of the RVAT Act, 2003; the Tax Board's order in favour of the assessee is affirmed.

Final Conclusion: The question of law is answered in favour of the respondent assessee and against the Revenue; the Sales Tax Revisions are dismissed and the Tax Board's finding that the crane services were contracts of service (not sales by transfer of right to use goods) is maintained.

Principles of natural justice and requirement of specific show-cause notice - blacklisting / debarment of contractors and its stigmatic consequences - imposition and quantification of contractual penalty - effect of administrative communications deferring supply on attribution of default - finality and maintainability of earlier withdrawn appeals with liberty to re-agitate

Principles of natural justice and requirement of specific show-cause notice - imposition and quantification of contractual penalty - Whether the order imposing penalty on the appellant could be sustained in view of the absence of a specific show-cause notice and the imposition of the maximum contractual penalty without reasons - HELD THAT: - The Court held that imposition of penalty could not be approved because the show-cause notice dated 26.11.2019 related only to debarment and did not put the appellant on notice of a proposed penalty; cancellation orders which reserved the right to impose penalty could not substitute for a particularised show-cause notice for quantification of penalty. Further, the authority imposed the maximum contractual rate without specifying reasons or demonstrating quantified loss to justify the highest quantum; the High Court had failed to consider these aspects. Because a valid, particularised and unambiguous notice is essential before levying a stigmatic civil disability and before fixing penalty, the order imposing penalty dated 17.08.2020 was set aside. [Paras 23, 26]

The penalty order dated 17.08.2020 is quashed for want of a specific show-cause notice and for arbitrary fixation of the maximum penalty without reasons.

Blacklisting / debarment of contractors and its stigmatic consequences - effect of administrative communications deferring supply on attribution of default - Whether the debarment of the appellant for three years could be sustained given the respondents' communication deferring further deliveries and the appellant's partial performance - HELD THAT: - The Court found that the respondents' communication dated 18.09.2019, deferring balance deliveries until further instructions, was material and that the respondents failed to show that any 'further instructions' to resume supplies were ever issued prior to cancellation and show-cause action. In that factual matrix, it was unreasonable to attribute sole responsibility for non-supply to the appellant, who had made substantial deliveries. The High Court did not address the effect of the deferment communication; having regard to the stigmatic and long-lasting civil consequences of debarment, the order dated 30.07.2020 debarring the appellant was set aside. [Paras 24, 25, 26]

The debarment order dated 30.07.2020 is quashed and shall not operate against the appellant in future tender processes.

Finality and maintainability of earlier withdrawn appeals with liberty to re-agitate - Whether the Court should entertain the present challenge despite an earlier Special Leave Petition having been withdrawn with liberty to pursue other remedies - HELD THAT: - The Court, having regard to the liberty granted when the earlier SLP was withdrawn and to precedents recognizing that an order granting such liberty does not render subsequent High Court orders final in all circumstances, declined to treat the High Court's order dated 23.04.2021 as final for the purposes of precluding merits scrutiny and proceeded to examine the challenge on merits. [Paras 17, 22]

The appeals are maintainable and the Court proceeded to examine the merits notwithstanding the earlier withdrawal of an SLP with liberty.

Principles of natural justice and requirement of specific show-cause notice - Whether the High Court erred in refusing to examine certain grievances (notably the penalty issue and the effect of the deferment letter) and in dismissing the review petition without addressing those factors - HELD THAT: - The Supreme Court observed that the High Court failed to consider the appellant's contention concerning absence of a specific show-cause notice for penalty and the significance of the deferment communication dated 18.09.2019. The review petition was dismissed without addressing these omissions; the High Court therefore did not deal with the matter in the correct perspective and its orders required disapproval. [Paras 14, 15, 25]

The High Court's orders dated 23.04.2021 and 13.12.2021 (review dismissal) are set aside for failure to consider critical grievances raised by the appellant.

Final Conclusion: The appeals are allowed. The High Court orders dated 23.04.2021 and 13.12.2021 are set aside; the debarment order dated 30.07.2020 and the penalty order dated 17.08.2020 are quashed; the debarment shall not operate against the appellant in future tenders and any penalty recovered shall be refunded (with specified interest if not refunded within the prescribed time). Parties to bear their own costs.