TaxTMI Updates e-Newsletter
Apr 25,2020

Exemption under Notification No.12/2017 - Central Tax (Rate) - declared tariff below one thousand rupees per day - Services Accounting Group 9963 / SAC 996311 / SAC 996322 - composite supply - independent supply - taxability under Notification No.11/2017 - Central Tax (Rate)

Exemption under Notification No.12/2017 - Central Tax (Rate) - declared tariff below one thousand rupees per day - Services Accounting Group 9963 / SAC 996311 / SAC 996322 - Daily accommodation services charged at Rs.300 to Rs.500 per bed are exempt under Notification No.12/2017 - Central Tax (Rate). - HELD THAT: - The Authority found that the applicant's supply is accommodation services covered by the Service Accounting Codes for room/unit accommodation (SAC 996311/996322). Entry No.14 of Notification No.12/2017-Central Tax (Rate) exempts services by hotels, inns, guest houses, clubs or campsites for residential or lodging purposes where the declared tariff of a unit of accommodation is below Rs.1,000 per day. The applicant's consolidated daily tariff per unit (maximum Rs.500) is below Rs.1,000 and the services are provided as a package with accommodation as the principal element. Applying the concept of composite supply under section 8 of the CGST Act, the Authority concluded the proposed daily services fall within the exemption in entry No.14 and are not liable to tax under the said notification. [Paras 7]

Daily accommodation services at the stated rates are exempt under entry No.14 of Notification No.12/2017-Central Tax (Rate).

Exemption under Notification No.12/2017 - Central Tax (Rate) - declared tariff below one thousand rupees per day - composite supply - Monthly accommodation services charged at Rs.6,900 to Rs.12,500 per bed are exempt under Notification No.12/2017 - Central Tax (Rate) as equivalent daily tariff is below Rs.1,000 per day per unit. - HELD THAT: - The Authority examined the applicant's monthly tariff and converted it to an equivalent daily amount for assessing applicability of the exemption. It noted that even at the maximum stated monthly charge, the per unit per day equivalent (computed from the furnished tariff structure) is less than Rs.1,000. Given that the accommodation (with ancillary facilities) is supplied as a package with accommodation as the principal supply, the entire composite supply qualifies for exemption under entry No.14 of Notification No.12/2017-Central Tax (Rate). [Paras 7]

Monthly accommodation services at the stated rates are exempt under entry No.14 of Notification No.12/2017-Central Tax (Rate).

Independent supply - Services Accounting Group 9963 / SAC 996311 / SAC 996322 - taxability under Notification No.11/2017 - Central Tax (Rate) - Additional charges for extra facilities are taxable if they are supplied independently and do not belong to Group 9963; if they belong to Group 9963 they are covered by the exemption in entry No.14 provided the declared tariff condition is met. - HELD THAT: - The Authority distinguished between ancillary elements forming part of the composite accommodation supply and services supplied independently under separate contracts. It held that additional services which are independent of the accommodation and do not fall within Group 9963 will be taxable at the applicable rates and may also attract registration requirements. Conversely, where such additional services fall within Group 9963 (the service group specified in the notifications), their turnover would be covered by entry No.14 and thus exempt, subject to the declared tariff remaining below Rs.1,000 per day per unit. [Paras 7, 8]

Extra facilities charged separately are taxable if not within Group 9963; if they belong to Group 9963 they are exempt under entry No.14 provided the declared tariff condition is satisfied.

Final Conclusion: The Authority ruled that the applicant's stated daily and monthly accommodation tariffs qualify for exemption under entry No.14 of Notification No.12/2017-Central Tax (Rate) because the declared tariff per unit is below Rs.1,000 per day; additional services charged separately are taxable unless they fall within Group 9963, in which case they too are exempt subject to the declared tariff condition.

Classification of parts of spacecraft - principal or sole use test for parts - classification under HSN 8803 as parts of satellites - application of Notification No. 08/2017 - residual entry for leasing services (Entry No.17(viii)) - rate of tax on leasing to follow rate on like goods involving transfer of title - debit-credit correction mechanism under Section 34 of the CGST Act

Classification under HSN 8803 as parts of satellites - application of Notification No. 08/2017 - residual entry for leasing services (Entry No.17(viii)) - rate of tax on leasing to follow rate on like goods involving transfer of title - principal or sole use test for parts - Leasing of satellite transponders is taxable at the rate applicable to parts of satellites (HSN 8803), i.e., 5% IGST. - HELD THAT: - The Authority examined the nature and role of a transponder and found it to be the key payload of a communication satellite performing amplification and frequency conversion; without it the satellite is defunct. Applying the Section and Chapter Notes and Explanatory Notes, the transponder is suitable for use solely or principally with communication satellites and is not more specifically provided for elsewhere in the Nomenclature. Goods located in the space segment (transponders) are therefore not classifiable under Chapter 85 (transmission apparatus located on the ground) and instead fall within Heading 8803 as parts of goods of Heading 8802 (spacecraft including satellites). Entry No.17(viii) of Notification No.08/2017 (residual entry for leasing or rental services) prescribes that the rate for such leasing services shall be the same as the rate applicable on supply of like goods involving transfer of title; transponders fall under 8803 90 00 and Entry No.245 of Schedule I prescribes 5% IGST. Accordingly, leasing of satellite transponders covered by SAC 997319 attracts 5% IGST (2.5% CGST + 2.5% KGST). [Paras 6]

Leasing of satellite transponders (SAC 997319) is classifiable as parts of satellites under HSN 8803 and taxable at 5% IGST in terms of Entry No.17(viii) of Notification No.08/2017 read with Entry No.245 (HSN 8803) of Schedule I.

Debit-credit correction mechanism under Section 34 of the CGST Act - restriction on retrospective levy where tax already charged and collected - The applicant cannot retrospectively levy GST at 5% for past supplies already invoiced and collected; any excess collection must be paid to Government and corrected only through authorised adjustment mechanisms. - HELD THAT: - The Authority ruled that where tax has already been charged and collected under earlier invoices, the applicant cannot simply levy the 5% rate retrospectively by issuing fresh invoices. Any excess tax collected must be remitted to the Government within the prescribed time. Correction of mistakes in tax invoices is permissible only through the debit-note/credit-note mechanism and subject to the conditions and time limits prescribed (as set out in Section 34 of the CGST Act). The ruling therefore limits retrospective application of the 5% levy in respect of services already supplied and invoiced with tax collected under a different rate.

The applicant cannot levy GST @5% retrospectively on services already provided if tax under earlier invoices has been charged and collected; excess collection must be paid to the Government and corrected, if applicable, only through debit/credit note adjustments in accordance with statutory provisions.

Final Conclusion: The Authority ruled that leasing of satellite transponders is classifiable as parts of satellites (HSN 8803) and, under the residual leasing entry, attracts 5% IGST; however, this rate cannot be applied retrospectively to supplies already invoiced and taxed without observing the statutory correction mechanism and payment obligations.

Requirement for registration and threshold for registration - location of supplier / principal place of business - place of supply for works contract - bill-to-ship-to rule under IGST - intra-state and inter-state supply characterization - scope of advance ruling under Section 97(2)

Requirement for registration and threshold for registration - location of supplier / principal place of business - Whether the applicant is required to obtain a separate GST registration in Karnataka to execute the contract at the Karnataka project site. - HELD THAT: - The Authority found that the applicant's principal place of business is in Rajasthan and the applicant has no other fixed establishment. The location of the supplier is therefore the principal place of business in Rajasthan. Registration is required in the state from where the supplier makes taxable supplies subject to the turnover threshold; as the applicant does not have a fixed establishment at the Karnataka site, a separate registration in Karnataka is not required for execution of the contract. The Authority observed, however, that the applicant is at liberty to obtain registration if it establishes a fixed establishment at the project site. [Paras 7]

No separate GST registration in Karnataka is required to execute the project unless the applicant establishes a fixed (permanent) establishment at the project site.

Bill-to-ship-to rule under IGST - intra-state and inter-state supply characterization - Tax treatment when goods are purchased from a dealer in Rajasthan and shipped directly to the Karnataka project site (applicant not separately registered in Karnataka). - HELD THAT: - Where both supplier (dealer in Rajasthan) and recipient (the applicant) are located in Rajasthan, the supply is intra-state notwithstanding direct shipment to Karnataka and falls within a bill-to-ship-to transaction under the IGST provisions. Consequently, the dealer in Rajasthan must charge CGST and SGST in its invoice. Separately, when the applicant invoices the project entity in Karnataka, the applicant must charge IGST in its invoice to the Karnataka recipient. [Paras 7]

Dealer in Rajasthan to charge CGST and SGST; applicant to charge IGST in its invoice to the Karnataka project entity.

Bill-to-ship-to rule under IGST - intra-state and inter-state supply characterization - Tax treatment when goods are purchased from a dealer in Karnataka and shipped to the Karnataka project site (applicant not separately registered in Karnataka). - HELD THAT: - Where the supplier (dealer in Karnataka) is situated in Karnataka and the applicant (recipient) is situated in Rajasthan, the supply constitutes an inter-state supply under the IGST provisions and is covered by a bill-to-ship-to transaction. Therefore the dealer in Karnataka must charge IGST in its invoice. The applicant, when invoicing the Karnataka project entity, must also charge IGST. [Paras 7]

Dealer in Karnataka to charge IGST; applicant to charge IGST in its invoice to the Karnataka project entity.

Scope of advance ruling under Section 97(2) - Whether the Authority will rule on the documents required to be carried by the transporter for shipments to the Karnataka project site. - HELD THAT: - The Authority held that the question on documents to be carried by the transporter does not fall within the matters on which an advance ruling can be sought under the cited provision. As such, the Authority declined to give any ruling on that question. [Paras 7]

No ruling is given on the documents required to be carried by the transporter as the question is outside the scope of advance ruling under Section 97(2).

Final Conclusion: The Authority ruled that no separate Karnataka registration is required unless a fixed establishment is created; it clarified the tax treatment for bill-to-ship-to supplies from Rajasthan dealers (CGST & SGST) and from Karnataka dealers (IGST), and declined to rule on transporter documentary requirements as outside the scope of advance ruling.

Supply of services by way of leasing/letting out of immovable property - exemption for "Services by way of renting of residential dwelling for use as residence" under entry 13 of Notification No. 9/2017 - Integrated Tax (Rate) - pooled lessors as a single contracting entity for invoice and taxability purposes - distinction between residential dwelling and rooms provided as lodging/hostel/PG accommodation

Pooled lessors as a single contracting entity for invoice and taxability purposes - supply of services by way of leasing/letting out of immovable property - Characterisation of the transaction and the person(s) liable to issue invoice and charge GST where multiple lessors have pooled parts of a property and executed a single lease to the lessee. - HELD THAT: - The lease deed shows five lessors pooled their individual parts into a single property and executed one agreement in favour of the lessee for the entire premises, with a common consideration and a mechanism for apportionment of receipts. The lessee has the right to sub lease the total property and all terms apply to the whole. The authority accordingly held that the supply is made by the group of lessors as a single contracting entity to the lessee; the applicant is not independently supplying to the lessee. Consequently, invoicing and taxability must be examined in the context of the group to lessee supply rather than as separate supplies by individual lessors. The exact legal nature or constitution of the group (partnership, association etc.) was not ascertained and was not decided. The transaction, being grant of right to use immovable property for consideration in the course or furtherance of business, constitutes a supply of services under the Act. [Paras 7, 8]

The lessors, acting as a pooled group under a single lease, constitute the supplier of the leasing service to the Company and invoicing/taxability must be determined at the group to lessee level; the applicant does not individually effect supply to the Company.

Exemption for "Services by way of renting of residential dwelling for use as residence" under entry 13 of Notification No. 9/2017 - Integrated Tax (Rate) - distinction between residential dwelling and rooms provided as lodging/hostel/PG accommodation - Applicability of entry 13 exemption to the lease of the premises in question described as 42 rooms (with attached toilets) let out to an operator providing student accommodation with ancillary services. - HELD THAT: - Entry 13 exempts services by way of renting of a "residential dwelling for use as residence." The leased premises in the agreement consist of 42 rooms with attached toilets and are used by the lessee to provide student accommodation along with ancillary services (maintenance, food, Wi Fi etc.), akin to paying guest/hostel accommodation. The authority found such accommodation does not fit the meaning of a single "residential dwelling" (a house) and that rooms provided for lodging/residential purposes by commercial establishments (hotels, inns, guest houses, paying guest accommodations) are categorised separately in the notification scheme. Therefore the exemption in entry 13 is not attracted to the group's lease to the Company. [Paras 9, 10, 11]

The exemption under entry 13 does not apply; the lease services to M/s. DTwelve Spaces Pvt. Ltd. are not "renting of residential dwelling for use as residence" and therefore are not covered by that exemption.

Final Conclusion: The Authority ruled that the collective lease by the pooled lessors to the Company constitutes a taxable supply of services by the group (with invoicing/taxability to be treated at the group to lessee level) and that the exemption in entry 13 of Notification No. 9/2017 (renting of residential dwelling for use as residence) does not apply to the leased premises described and used as student lodging/PG accommodation; accordingly GST is chargeable by the lessors (provided they are registered).

Value of taxable supply - transaction value - subsidies directly linked to the price under Section 15(2)(e) of the CGST Act, 2017 - subsidies provided by the Central Government and State Governments - privity of contract

Value of taxable supply - subsidies directly linked to the price under Section 15(2)(e) of the CGST Act, 2017 - privity of contract - Whether government subsidy disbursed to the supplier on behalf of the farmer is to be treated as a subsidy in the hands of the supplier and excluded from the transaction value under Section 15(2)(e) of the CGST Act, 2017. - HELD THAT: - The Authority examined the contractual relationship and the mechanism of payment and held that the contract for supply is solely between the supplier and the farmer and the price is the sole consideration payable by the farmer. Payments made by the Bank or Government Department are received only on account of the farmer and there is no privity of contract between the supplier and the Bank or Government. Section 15(1) defines transaction value as the price actually paid or payable where the price is the sole consideration. Section 15(2)(e) excludes from value subsidies that are directly linked to the price, while subsidies provided by the Central or State Governments are excluded from inclusion. In the present facts the assistance to the farmer does not affect or determine the price charged by the supplier; receipt of government assistance is merely a mode of payment on behalf of the farmer. Consequently the assistance is not a subsidy linked to the price within the meaning of Section 15(2)(e) and is not to be included as part of the supplier's taxable value. [Paras 6]

The government assistance paid to or on account of the farmer is not a subsidy in the hands of the supplier and is not covered by Section 15(2)(e); it does not form part of the value of taxable supply.

Transaction value - subsidies directly linked to the price under Section 15(2)(e) of the CGST Act, 2017 - Whether the question of inclusion or exclusion of the subsidy arises under Section 15(2) when the subsidy does not influence the transaction value (price actually paid or payable). - HELD THAT: - The Authority applied Section 15(1) and (2) and found that transaction value is the price actually paid or payable by the recipient and that exclusion under Section 15(2)(e) applies only to subsidies directly linked to the price. Where the price is fixed and payable by the farmer irrespective of government assistance, and the method of receipt (direct, via bank, or by supplier on farmer's authorization) does not affect the price, the subsidy does not influence the transaction value. Therefore the question of excluding the subsidy from transaction value does not arise. [Paras 6]

If the subsidy does not affect the price paid or payable by the farmer, Section 15(2) does not require inclusion or exclusion of that subsidy in the transaction value.

Value of taxable supply - transaction value - Whether the supplier is entitled to refund of accumulated unutilised input tax credit if the subsidy is not treated as part of the taxable value. - HELD THAT: - Having determined that the government assistance is not part of the supplier's taxable value because it does not alter the transaction price, the Authority addressed the corollary relief. Since the assistance is not excluded from the transaction value (i.e., it does not reduce the supplier's taxable turnover), there is no basis for an entitlement to refund of input tax credit on that ground. The factual and legal conclusion that the full invoice value remains the taxable value means no accumulation arising from exclusion of subsidy is established. [Paras 6]

No entitlement to refund arises on the ground that subsidy is not part of taxable value.

Final Conclusion: The Authority ruled that government assistance paid to or on account of the farmer does not affect the price payable to the supplier and is not a subsidy in the supplier's hands under Section 15(2)(e); the full invoice value is the transaction value and there is no basis for excluding the assistance or for any refund of input tax credit on that account.

Determination of value under Rule 32(5) of the CGST Rules - Marginal scheme for second-hand goods valuation - Second-hand goods sold as such or after minor processing without change in nature - Eligibility for input tax credit vis-a -vis margin scheme

Determination of value under Rule 32(5) of the CGST Rules - Second-hand goods sold as such or after minor processing without change in nature - Marginal scheme for second-hand goods valuation - Valuation of supply of second-hand gold jewellery purchased from unregistered individuals and sold without change in form/nature under Rule 32(5). - HELD THAT: - Rule 32(5) prescribes that where a taxable supply is made by a person dealing in buying and selling of second-hand goods (used goods sold as such or after minor processing that does not change the nature of the goods) and no input tax credit has been availed on the purchase, the value of supply shall be the difference between the selling price and the purchase price, and negative value shall be ignored. The applicant admitted purchasing used gold jewellery from unregistered persons, performing only cleaning and polishing (not changing form or nature), selling the goods as second-hand jewellery and not availing ITC on such purchases. The supply is taxable under the Tariff entry covering articles of jewellery. Having satisfied the conditions of (i) taxable supply, (ii) dealing in second-hand goods sold as such or after minor processing without change in nature, and (iii) non-availment of input tax credit on purchase, the applicant is eligible to value the outward supply under sub rule (5) of Rule 32 as the margin (selling price minus purchase price). [Paras 6]

Applicant may value supplies of second-hand gold jewellery purchased from unregistered individuals and sold without change in form/nature by applying sub rule (5) of Rule 32 of the Central Goods and Services Tax Rules.

Eligibility for input tax credit vis-a -vis margin scheme - Marginal scheme for second-hand goods valuation - Effect of claiming input tax credit on purchases of second-hand jewellery from registered persons on entitlement to use the margin scheme under Rule 32(5). - HELD THAT: - If the applicant purchases second-hand goods from registered persons, the applicant may claim input tax credit on such inward supplies subject to eligibility under section 16. However, availing input tax credit on purchases of the second-hand goods disqualifies the supplier from applying the margin (sub rule (5)) method of valuation for outward supplies of those goods. Thus, there is a mutually exclusive choice: either claim ITC on purchases from registered suppliers or, if ITC is not availed on such purchases, apply the margin scheme for valuation under Rule 32(5). [Paras 7]

Purchases of second-hand jewellery from registered persons permit claiming ITC if eligible, but claiming such ITC renders the supplier ineligible to adopt the margin scheme under Rule 32(5) for valuation of outward supplies.

Final Conclusion: Advance ruling: (i) applicant dealing in second hand gold jewellery purchased from unregistered individuals and sold without change in form/nature may value the supplies by the margin method under Rule 32(5); (ii) purchases from registered persons permit claiming input tax credit if eligible, but availing ITC on such purchases precludes use of the margin scheme for valuation.

Summary order. The application for advance ruling filed by the applicant is disposed of as withdrawn and no ruling is recorded.

Bail under Section 439 Cr.P.C. - Factors for grant of bail: nature of offence, period of custody, delay in trial, Covid-19 pandemic - Fabricated invoices and absence of E Way Bill as probative evidence - Custody risk due to Covid 19 infection in prison - Role of security, deposit and sureties as condition for bail

Bail under Section 439 Cr.P.C. - Factors for grant of bail: nature of offence, period of custody, delay in trial, Covid-19 pandemic - Role of security, deposit and sureties as condition for bail - Grant of bail to the applicant during trial subject to specified conditions - HELD THAT: - The High Court considered the application under Section 439 Cr.P.C. for bail during trial and, after perusal of the case diary and hearing rival contentions about alleged fabrication of invoices and non supply of goods, directed release on bail. The Court noted that the applicant had been in custody since 28.11.2019, the dispute involved aspects of civil character and contested documentary evidence, and that the prevailing Covid 19 situation and presence of infected persons in jail militated in favour of bail. The Court also recorded submissions on deposit and security, and exercised its discretion to impose stringent monetary conditions to secure the complainant's interest and ensure attendance at trial. Having balanced the prosecution's objections about alleged forged invoices and absence of E Way Bills against the custody period, the likelihood of protracted trial and public health concerns, the Court ordered conditional release rather than custodial continuation.

Applicant Lalit Kumar Gandhi released on bail subject to (a) personal bond and two local sureties of specified amounts to the satisfaction of the trial Court, (b) deposit of Rs. 50 Lakhs to be kept as fixed deposit by the trial Court and furnishing solvent security for the remaining claimed amount, and (c) mandatory attendance at every hearing of the trial; non attendance would invite cancellation of bail.

Final Conclusion: Bail granted to the applicant during trial on stringent security and deposit conditions in view of prolonged custody, disputed documentary evidence, and the Covid 19 risk; attendance at trial mandated and bail liable to be cancelled on default.

Deduction under Section 80P(2) of the Income-tax Act - Rectification under Section 154 of the Income-tax Act for mistake apparent on the record - Requirement of inquiry into activities of the assessee to determine eligibility for deduction - Registration/certificate is not conclusive for entitlement to deduction - Each assessment year is a separate unit for determination of deduction

Rectification under Section 154 of the Income-tax Act for mistake apparent on the record - Mistake apparent where earlier appellate order rests on a decision subsequently reversed by a higher forum - Validity of the CIT(A)'s rectification under Section 154 to recall its earlier appellate order denying the deduction. - HELD THAT: - The Tribunal upheld the principle that an appellate order founded on a precedent subsequently reversed by a higher bench may give rise to a rectifiable mistake under Section 154. The Tribunal relied on the Larger Bench decision of the Kerala High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT , which reversed the earlier Division Bench view in Chirakkal Service Co-operative Bank Ltd. v. CIT , and followed the precept that where a controlling judicial precedent is overruled the earlier order based on that precedent can be rectified. Applying that principle, the Tribunal dismissed the assessee's contention that the CIT(A) could not issue the rectification notice merely because the point was debatable or pending in higher fora. The Tribunal therefore found that recalling the earlier CIT(A) order in the light of the Full Bench reversal was permissible as a rectification for mistake apparent on the record. [Paras 7]

The grounds challenging the CIT(A)'s exercise of power under Section 154 were dismissed insofar as the rectification was founded on the subsequent Full Bench reversal of earlier precedent.

Requirement of inquiry into activities of the assessee to determine eligibility for deduction - Registration/certificate is not conclusive for entitlement to deduction - Each assessment year is a separate unit for determination of deduction - Whether the CIT(A) was justified in denying the deduction outright without directing the Assessing Officer to examine the assessee's activities and determine eligibility for deduction under Section 80P(2). - HELD THAT: - The Tribunal held that the Larger Bench of the Kerala High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT mandates that on a claim under Section 80P (post introduction of sub-section (4)) the Assessing Officer must enquire into the factual activities of the society rather than be bound by the registration certificate. The Tribunal observed that the CIT(A) ought not to have rejected the claim of deduction without such factual examination by the Assessing Officer. In light of that legal position and the principle that each assessment year is distinct, the Tribunal restored the matter to the file of the Assessing Officer for enquiry into the activities of the assessee and determination of entitlement to deduction for the assessment year concerned. The Tribunal therefore remanded the substantive issue for fresh verification and decision by the Assessing Officer. [Paras 7]

The denial of deduction without factual inquiry was set aside and the question of eligibility for deduction under Section 80P(2) was remitted to the Assessing Officer for examination and decision for the assessment year.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal upheld the validity of rectification where based on a subsequent Full Bench reversal of earlier precedent but remitted the question of entitlement to deduction under Section 80P(2) for AY 2014-2015 to the Assessing Officer to examine the assessee's activities and determine eligibility, since registration alone is not conclusive and each assessment year must be separately considered.

Taxability of receipts under the head "Income from House Property" versus "Income from Other Sources" - deemed to be let out (Annual Lettable Value / ALV) - option agreement and compensation for restraint on letting - application of section 22 and section 23 for computation of annual value

Option agreement and compensation for restraint on letting - taxability of receipts under the head "Income from House Property" versus "Income from Other Sources" - Whether the amount received under the option agreement is taxable as income from house property by treating the property as deemed to be let out, or is taxable as income from other sources as compensation for not letting out the property. - HELD THAT: - The Tribunal examined the nature of the receipt under the option agreement which granted the existing tenant the option to take on rent the vacant units within a specified period of nine months in return for a compensation. Section 22 applies where property is let out or deemed to be let out; section 23 provides the mechanism to compute annual value where property is let or where it is vacant the sum for which it might reasonably be expected to be let (market rent or municipal value). In the present case the property was neither let out nor vacant in the sense required for deeming under section 22/23; instead the assessee had renounced the right to market the units for a limited period under an option agreement and received compensation for that restraint. The Tribunal held that such compensation is not rental income arising from letting or deemed letting of the property and therefore is not assessable under the head "Income from House Property." Having excluded the applicability of sections 22 and 23 to the receipt, the Tribunal concluded that the amount is a compensation receipt assessable under the head "Income from Other Sources," as the assessee had offered. The Tribunal directed deletion of the addition treating the property as deemed let and held that the AO and the CIT(A) were incorrect in applying section 22 to the option consideration. [Paras 7, 8, 9]

The receipt under the option agreement is not assessable as income from house property by deeming the property to be let; it is compensation assessable under the head "Income from Other Sources," and the addition under house property is deleted.

Final Conclusion: Appeal allowed; the Tribunal held that compensation received under the option agreement is not rental income or deemed rent under sections 22/23 and is taxable as income from other sources, directing deletion of the addition treated as income from house property.

Admission of additional evidence under Rule 46A(1)(b) of Income Tax Rules, 1962 - remand report and verification by assessing officer - proof of delivery and establishment of branch for validating purchases - deletion of addition on account of unexplained purchase/unexplained investment

Admission of additional evidence under Rule 46A(1)(b) of Income Tax Rules, 1962 - remand report and verification by assessing officer - Admissibility of additional evidence filed before the Commissioner (Appeals) and the correctness of admitting such evidence after calling for remand report from the AO. - HELD THAT: - The Tribunal accepted that the assessee was unable to produce the documents before the AO at the fag end of assessment proceedings because of custody in Tihar Jail and that the documents were filed before the CIT(A). The CIT(A) forwarded the additional evidence to the AO and called for remand reports. The AO examined the evidence, obtained confirmations from the seller and furnished remand reports which acknowledged the transactions and submitted supporting documents. Having regard to the necessity of the documents for adjudication and the fact that the AO had an opportunity to and did comment on them through remand reports, the admission of the additional evidence by CIT(A) under Rule 46A(1)(b) was held to be proper and there was no infirmity in admitting the evidence. [Paras 4, 7]

Admission of the additional evidence by the CIT(A) under Rule 46A(1)(b) was upheld.

Proof of delivery and establishment of branch for validating purchases - deletion of addition on account of unexplained purchase/unexplained investment - Whether the assessee established receipt of gold and existence of Delhi branch such that the addition made by the AO on account of alleged purchase outside books should be deleted. - HELD THAT: - On examination of the documents and remand report, the AO obtained confirmation from the seller that delivery challans DC3 and DC4 dated 01.04.2011 were issued for 7 kg and 6 kg of gold respectively to M/s Raja & Co. at the Delhi address C 128, Phase 4, Ashok Vihar. The assessee produced VAT returns for the Delhi branch for FY 2011 12 which were verified by the CIT(A). The AO accepted the identity of the seller and the transaction, and the remaining doubt as to mode of delivery was removed by establishing that the assessee had a branch at the Delhi address where the goods were delivered. The established receipt of 13 kg of gold at the branch explained the subsequent sales of 7,596.58 grams made between 01.04.2011 and 04.04.2011. In these circumstances the addition treating the purchases as unexplained investment was not sustained. [Paras 4, 7]

The addition made by the AO on account of alleged purchase outside books was deleted; the Tribunal upheld the CIT(A)'s deletion.

Final Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s admission of additional evidence and the deletion of the addition by the AO in respect of purchases of gold for Assessment Year 2012-13.

Definition of education under section 2(15) - genuineness of activities - nascent stage of trust and evidentiary expectations - remand for fresh consideration - restrictive dissolution and amalgamation clauses in memorandum of association

Definition of education under section 2(15) - Whether the objects and activities of the assessee fall within the meaning of "education" as envisaged in section 2(15) of the Act. - HELD THAT: - The Tribunal examined the memorandum and the stated aims and objects which aim at professional development, education (including primary, adult, continuing, vocational, technical), physical and spiritual development and specifically include yoga. Applying the statutory scope of education, the Tribunal held that these objects, taken as a whole, fall within the definition of education under section 2(15). The Tribunal therefore found that the first ground on which the Ld. CIT(E) rejected registration - namely that the activities do not qualify as education - is not tenable. [Paras 5]

The Tribunal allowed the challenge to the finding that the objects do not constitute "education" under section 2(15) and held that the objects fall within that definition.

Genuineness of activities - nascent stage of trust and evidentiary expectations - remand for fresh consideration - Whether rejection of the application on the ground of absence of financial accounts and bank statements (and consequent inability to corroborate genuineness) was justified at the nascent stage of the assessee's operations. - HELD THAT: - The Tribunal noted that the company was recently incorporated and claimed operations commenced only in April 2019. Relying on the principle that where an assessee is at an initial or nascent stage, absence of extensive activity may limit the relevance of documentary corroboration, the Tribunal observed that documents placed before it indicated activities which were not before the Ld. CIT(E). The Tribunal concluded that the question of genuineness required fresh consideration by the Ld. CIT(E) who is empowered to call for documents or make enquiries before adjudicating. Consequently, the Tribunal set aside the rejection on this ground and remitted the matter to the Ld. CIT(E) for fresh adjudication after allowing the assessee to produce the relevant financial accounts, bank statements and other documents. [Paras 5]

The Tribunal remitted the issue of genuineness to the Ld. CIT(E) for fresh consideration permitting submission and verification of financial and other relevant documents.

Restrictive dissolution and amalgamation clauses in memorandum of association - remand for fresh consideration - Whether clauses in the memorandum of association relating to distribution of assets on winding up and restriction on amalgamation were acceptable as drafted. - HELD THAT: - On perusal of clauses 10 and 11 of the Memorandum of Association, the Tribunal found them to be restrictive because they limited transfer of assets on dissolution and prescribed amalgamation only with another section 8 company having similar objects, which could unduly constrain benefit to charitable purposes. The Tribunal observed that these clauses should be appropriately amended. It directed the assessee to make suitable amendments to clause nos. 10 and 11 and to submit the revised documents to the Ld. CIT(E) during the adjudication of the registration application. [Paras 5]

The Tribunal directed amendment of the restrictive clauses in the memorandum and remitted the matter to the Ld. CIT(E) for fresh decision after the assessee files amended clauses and other relevant documents.

Final Conclusion: The Tribunal set aside the CIT(E) order insofar as it rejected registration on the ground that the objects do not constitute "education" and remitted the application to the CIT(E) for fresh adjudication on the question of genuineness and after the assessee files financials and amended memorandum clauses; appeal allowed for statistical purposes.

Penalty for concealment or furnishing inaccurate particulars - application of Explanation 5A to penalty provision - penalty on income disclosed in return filed under search-assessment provisions (section 153A) - requirement of incriminating material/documents found in search to constitute undisclosed income - distinction between voluntary disclosure and undisclosed income found in search

Penalty on income disclosed in return filed under search-assessment provisions (section 153A) - requirement of incriminating material/documents found in search to constitute undisclosed income - Whether penalty under section 271(1)(c) (read with Explanation 5A) is leviable where additional income is disclosed in return filed under section 153A but no incriminating documents or undisclosed assets pertaining to the assessee were found in the course of search. - HELD THAT: - The Tribunal held that Explanation 5A (as applied by the authorities below) makes the levy of penalty contingent on the existence of 'undisclosed income' as defined therein, which requires incriminating material (such as entries, assets or documents found in the course of search) establishing undisclosed income. On the facts the search/survey in the group did not uncover any documentary or asset evidence linking undisclosed income to the assessee; the additional income was disclosed by the assessee and accepted in assessment under the search-assessment provisions. The authorities below did not point to seized incriminating material specifically evidencing undisclosed income of the assessee and did not verify or link any projection or seized document to books/transactions to establish suppression. Following precedents of the Tribunal and the Supreme Court as applied by the Bench, mere admission or disclosure under section 132(4) / return under section 153A, without incriminating material found in search linking undisclosed income, is insufficient to sustain a penalty under the provision relied upon.

Penalty set aside and directed to be deleted for lack of incriminating material establishing undisclosed income; appeal allowed on this ground.

Penalty for concealment or furnishing inaccurate particulars - distinction between voluntary disclosure and undisclosed income found in search - Whether initiation of penalty proceedings is vitiated by failure to specify whether the charge is concealment of income or furnishing of inaccurate particulars, and whether that defect justified deletion of penalty. - HELD THAT: - The assessee contended that the penalty initiation notice was defective for not specifying whether it alleged concealment or furnishing of inaccurate particulars. The Tribunal, while noting this contention and earlier authorities relied upon by the assessee, grounded its conclusion primarily on the absence of incriminating material found in the search and the acceptance of the returned income under the search-assessment provisions. The Bench respectfully followed the Supreme Court and coordinate-bench decisions which, in parity with the facts, supported relief to the assessee. The Tribunal did not sustain the penalty in the circumstances and allowed the appeal.

Ground alleging invalid initiation was considered in context and appeal allowed; penalty directed to be deleted.

Final Conclusion: The Tribunal allowed the appeals and set aside the penalty orders, directing the Assessing Officer to delete the penalty imposed under the impugned provisions, on the ground that no incriminating material was found in the search to establish undisclosed income and the additional income disclosed in returns under the search-assessment provisions was accepted.

Defective show cause notice under section 271(1)(c) - Requirement to specify whether penalty is for concealment of particulars of income or for furnishing inaccurate particulars of income - Penalty under section 271(1)(c) - Application of mind by the Assessing Officer - Binding effect of coordinate-bench precedent - Conditional restoration where higher court decision may affect finality

Defective show cause notice under section 271(1)(c) - Requirement to specify whether penalty is for concealment of particulars of income or for furnishing inaccurate particulars of income - Penalty under section 271(1)(c) - Application of mind by the Assessing Officer - Binding effect of coordinate-bench precedent - Validity of the penalty imposed under section 271(1)(c) where the show cause notice did not specify which limb of section 271(1)(c) (concealment or furnishing inaccurate particulars) was alleged and whether the assessing officer applied independent mind in levying penalty. - HELD THAT: - The Tribunal examined the defective notice issued under section 271(1)(c) which failed to specify whether the penalty related to concealment of particulars of income or to furnishing inaccurate particulars. Relying on the coordinate-bench reasoning in Sachin Arora and the principles extracted from the Karnataka High Court decision in Manjunath Cotton Mill, the Tribunal observed that the assessing officer had merely adopted findings from the assessment order without applying independent mind while framing penalty proceedings. The Tribunal held itself bound by the authoritative pronouncement of the coordinate bench in the same set of facts and followed that reasoning to find the notice and consequent penalty unsustainable. In view of these deficiencies, the assessee's grievance regarding illegality of the penalty was accepted and the appeal was allowed. [Paras 3, 4, 5, 6]

Penalty sustained by CIT(A) set aside and appeal allowed on the ground of defective notice and lack of independent application of mind by the Assessing Officer.

Conditional restoration where higher court decision may affect finality - Whether the revenue may seek restoration of the appeal if the Supreme Court decides the contested question in favour of the revenue. - HELD THAT: - The Tribunal recorded that a Special Leave Petition raising the same controversy is pending before the Hon'ble Supreme Court. Recognising that the final determination on whether a notice must specify the particular limb of section 271(1)(c) may be altered by the Supreme Court, the Tribunal permitted the revenue to move an appropriate application for restoration of the appeal if the Supreme Court decides the issue in the revenue's favour. This direction preserves the revenue's right to revive proceedings should the higher court overrule the coordinate-bench approach followed by the Tribunal. [Paras 4, 5]

Revenue permitted to apply for restoration of the appeal in the event the Supreme Court decides the issue in its favour.

Final Conclusion: The Tribunal allowed the assessee's appeal and set aside the penalty sustained under section 271(1)(c) on account of a defective show cause notice and lack of independent application of mind by the Assessing Officer, while permitting the revenue to seek restoration of the appeal if the Supreme Court later rules in the revenue's favour.

Reopening of assessment under section 147/148 - reasons recorded under section 148 - reliance on District Valuation Officer valuation report - binding jurisdictional ITAT precedent in co-owner's case

Reopening of assessment under section 147/148 - reasons recorded under section 148 - reliance on District Valuation Officer valuation report - binding jurisdictional ITAT precedent in co-owner's case - Validity of the reopening of assessment and the consequential reassessment order under section 147/148. - HELD THAT: - The CIT(A) quashed the reassessment by holding that the reasons recorded under section 148 were not sustainable in the facts of this case and by respectfully following the ITAT, Chandigarh decisions in the appeals of co owners of the same property. The reassessment was initiated on the basis of a DVO valuation report and related factual contentions but there was no change in material facts compared to the co owners' cases in which the jurisdictional ITAT had held that reopening could not be sustained when founded merely on the valuation material before the AO. The Tribunal, after examining the order of the CIT(A) and noting that the Revenue did not demonstrate any distinguishing feature or fresh material that would validate the reasons recorded, agreed with the conclusion that the jurisdictional basis for invoking section 147/148 was lacking and that the reassessment therefore stood quashed. As the reassessment was quashed, the additions arising therefrom became infructuous.

Reopening under section 147/148 quashed; reassessment and resultant additions set aside.

Final Conclusion: The Revenue's appeal is dismissed; the reassessment made under section 147/148 is quashed following the binding jurisdictional ITAT precedent in respect of the same property and the additions arising from that reassessment are deleted.

Debt and default - financial creditor - buy-back agreement - existence of dispute - specific performance vs insolvency proceedings - abuse of insolvency process - arbitration clause - application under section 7 of the IBC, 2016

Debt and default - financial creditor - buy-back agreement - Claim that the Petitioners are financial creditors entitled to initiate CIRP on the basis of the alleged buy-back obligation and outstanding amount - HELD THAT: - The Tribunal examined the terms of the three buy-back agreements and the materials placed on record. It noted that the Petitioners received the principal payments advanced to them and that the agreements do not provide for interest at the rate unilaterally claimed. The buy-back claim for one unit was incorrectly pleaded by the Petitioners contrary to the price stated in the agreement. The Petitioners failed to produce contemporaneous documentation showing exercise of the first option (buy-back) in the manner required by the agreements and did not surrender the sale/construction agreements. Given these defects and the disputed nature of the asserted entitlement, the Tribunal held that the Petitioners did not establish an undisputed debt and default sufficient to qualify them as financial creditors for the purpose of initiating CIRP under the Code. [Paras 9, 15]

The Petitioners are not entitled, on the present record, to be treated as financial creditors on a proved debt and default; the claim of debt is disputed and not established.

Existence of dispute - arbitration clause - specific performance vs insolvency proceedings - Whether a real dispute exists which precludes invocation of the Code and whether the contract provides alternate remedies - HELD THAT: - The Tribunal found multiple factual and legal disputes concerning the quantum and basis of the claim, including (i) the correct buy-back price as per the agreement, (ii) absence of contractual provision for the claimed interest, and (iii) lack of proof of effective exercise of the contractual option. The agreements contain an arbitration clause and a clause permitting specific performance; the Tribunal held that these contractual remedies and the disputed questions ought to be adjudicated in the appropriate forum rather than by summary insolvency proceedings. Reliance on precedents that the Code is not a substitute for recovery forums was applied to conclude that ongoing disputes bar initiation of CIRP. [Paras 11, 12, 14]

There is a genuine dispute and available alternate remedies (including arbitration and suit for specific performance/recovery); therefore the application under the Code is not maintainable.

Abuse of insolvency process - application under section 7 of the IBC, 2016 - Whether the petition is an abuse of the insolvency process and liable to be rejected - HELD THAT: - Taking into account the solvency and ongoing operations of the Corporate Debtor, the nature of the claim, and the Petitioners' conduct (receipt of principal and subsequent pursuit of disputed amounts), the Tribunal concluded that the Petitioners have not approached the Tribunal with clean hands and that the Code was invoked as a means of recovery rather than to address a clear insolvency event. The Tribunal emphasised that initiation of CIRP on untenable grounds would have wider adverse consequences for other stakeholders and public interest. [Paras 12, 13, 15]

The petition is an improper invocation of the Code and amounts to an abuse of process; it is liable to be rejected.

Final Conclusion: The Company Petition under section 7 of the IBC, 2016 is rejected for failure to establish an undisputed debt and default, presence of a real dispute and available alternate remedies (including arbitration and specific performance), and because the petition constitutes an improper invocation of the insolvency process; liberty is reserved to the Petitioners to pursue appropriate civil remedies.

Application under section 9 of the Insolvency & Bankruptcy Code, 2016 - Operational debt and default - Pre-existing dispute and its effect on insolvency application - Service of demand notice under section 8 of the Code - Moratorium under section 14 of the Code - Appointment of Interim Resolution Professional

Operational debt and default - Application under section 9 of the Insolvency & Bankruptcy Code, 2016 - Whether the operational creditor established existence of operational debt and default so as to maintain the Section 9 petition. - HELD THAT: - The Tribunal examined the documents filed by the applicant including purchase orders, delivery challans, invoices and legal notices and found that these documents establish the existence of the operational debt and that the corporate debtor committed default in payment. The petition was supported by the affidavit required under section 9(3) and the application was held to be complete. The Tribunal concluded that the applicant is an operational creditor within the meaning of the Code and that the amount claimed is payable and not barred by limitation or other law, thereby satisfying the conditions for admission of a Section 9 application. [Paras 14, 15, 19, 21, 26]

The operational creditor proved existence of operational debt and occurrence of default; the Section 9 petition is maintainable on merits.

Pre-existing dispute and its effect on insolvency application - Operational debt and default - Whether a pre-existing dispute regarding quality of materials barred the admission of the Section 9 petition. - HELD THAT: - The corporate debtor alleged that the supplied materials were of inferior quality and relied on communications with a third party. The Tribunal noted that the respondent failed to place on record any communication with the petitioner disputing quality prior to the demand notice. The emails produced related to correspondence with Indian Oil Corporation and not with the petitioner. In the absence of evidence of a bona fide dispute existing prior to receipt of the demand notice, the contention of a pre-existing dispute was rejected. [Paras 13, 16, 17, 19]

No pre-existing dispute was proved; the alleged dispute relating to quality did not bar admission of the petition.

Service of demand notice under section 8 of the Code - Whether the demand notice was properly served so as to trigger the insolvency process. - HELD THAT: - The record shows that the applicant issued demand notices, one of which returned undelivered with a remark 'left' and a subsequent notice was also returned undelivered. The Tribunal proceeded on the material on record and observed that service was complete for the purpose of proceeding under the Code. Having found no dispute and that the statutory preconditions were met, the Tribunal treated the service as effective to commence the Section 9 process. [Paras 7, 14, 19]

Service of the demand notice was treated as complete for the purposes of admitting the Section 9 application.

Moratorium under section 14 of the Code - Appointment of Interim Resolution Professional - Whether the petition should be admitted, moratorium declared and an Interim Resolution Professional appointed. - HELD THAT: - Having found that operational debt existed, default had occurred and no pre-existing dispute barred the claim, the Tribunal exercised its discretion under the Code to admit the petition. It directed commencement of CIRP, declared the moratorium with the statutory prohibitions as set out in section 14(1), directed the Interim Resolution Professional to make the public announcement and call for claims, and appointed a named Interim Resolution Professional in accordance with section 13(1)(c). The moratorium's temporal effect and protections were specified as commencing from receipt of the authenticated order and lasting until completion of the CIRP or further orders under sections 31 or 33. [Paras 21, 22, 24, 25, 26]

The petition is admitted; moratorium is declared and an Interim Resolution Professional is appointed.

Final Conclusion: The Tribunal admitted the Section 9 petition, holding that the operational creditor established debt and default, rejected the alleged pre-existing dispute for want of evidence, treated service of the demand notice as effective, declared the moratorium and appointed an Interim Resolution Professional to conduct the corporate insolvency resolution process.

Moratorium under the Insolvency and Bankruptcy Code - prohibition on transferring, encumbering, alienating or disposing of assets during CIRP - status quo in relation to disputed property during CIRP - stock-in-trade versus corporate asset during CIRP - enforcement of an arbitral award vis-a -vis moratorium - third party assets held under trust or contractual arrangements

Moratorium under the Insolvency and Bankruptcy Code - prohibition on transferring, encumbering, alienating or disposing of assets during CIRP - enforcement of an arbitral award vis-a -vis moratorium - Scope of the moratorium vis-a -vis the Applicant's attempt to set aside sale deeds and to enforce the Arbitration Award during the ongoing CIRP. - HELD THAT: - The Tribunal held that Section 14(1)(b) of the I&B Code imposes a moratorium prohibiting transfer, encumbrance, alienation or disposal of the corporate debtor's assets or any legal or beneficial interest therein from the insolvency commencement date until completion of CIRP. Although an arbitral award exists, the Award itself conditions the respondent's acquisition of rights on fulfillment of a payment schedule; rights in favour of the corporate debtor arise only upon effecting the conditional payments. There is no material before the Tribunal to show that the Award has been stayed under Section 34 of the Arbitration and Conciliation Act or otherwise rendered unenforceable. In these circumstances, enforcement steps or dealings with the disputed property during CIRP cannot be permitted except in accordance with the I&B Code and subject to the moratorium. The Tribunal therefore found it appropriate to preserve the status quo in respect of the property. [Paras 4, 7, 8, 9, 11]

Status quo ordered and the IRP directed not to deal with the disputed property pending CIRP; enforcement or alienation of the property pursuant to the Award is restrained by the moratorium.

Stock-in-trade versus corporate asset during CIRP - third party assets held under trust or contractual arrangements - Whether sales effected by the corporate debtor/IRP constitute permissible disposal of 'stock in trade' outside the moratorium. - HELD THAT: - The IRP contended that the corporate debtor is a real estate developer and that disposals are of stock in trade in the ordinary course of business, which the IRP may effect to preserve the corporate debtor as a going concern. The Tribunal observed that no evidence was placed by the IRP to establish that the assets sought to be alienated are stock in trade and not corporate assets subject to the moratorium. Further, the explanation to Section 18 prevents treating third party assets held by the corporate debtor under trust or contractual arrangements as the corporate debtor's assets for CIRP purposes. In accounting parlance, stock in trade forms part of current assets and cannot be divorced from corporate assets absent clear evidence. In absence of such material, the IRP cannot be permitted to treat the disputed property as freely disposable stock in trade. [Paras 5, 9, 10, 11]

No finding that the disputed property is stock in trade was recorded; the IRP was directed not to deal with the property until further order.

Enforcement of an arbitral award vis-a -vis moratorium - conditional rights under an arbitral award - Effect of the Arbitration Award's conditional payment schedule on the respondent's rights and on the Applicant's reliefs. - HELD THAT: - The Award declares that the respondent would derive absolute rights in respect of the property only upon effecting payment of the sum quantified in the Award as per the schedule. Thus, the respondent's rights vest only upon compliance with the Award's conditions. The Tribunal emphasised this conditionality as relevant to the question whether the respondent presently possesses enforceable rights capable of being exercised despite the moratorium. Given the conditional nature of the Award and absence of evidence of its enforcement or any stay under Section 34, the Tribunal exercised its power to preserve the status quo rather than permit alienation. [Paras 6, 7, 8]

The rights under the Award accrue only upon fulfillment of the payment schedule; in view of that conditionality and the moratorium, the Tribunal restrained dealing with the property.

Final Conclusion: The Tribunal granted a status quo in respect of the disputed property and directed the Interim Resolution Professional not to deal with the property during the CIRP; parties remain at liberty to seek modification of the order by appropriate application.

Section 9 of the Insolvency & Bankruptcy Code, 2016 - corporate insolvency resolution process - operational creditor - demand notice under section 8 - compliance with section 9(3) affidavits - moratorium under Section 14 - appointment of Interim Resolution Professional - ex-parte proceedings - deposit to meet immediate expenses of IRP

Section 9 of the Insolvency & Bankruptcy Code, 2016 - operational creditor - corporate insolvency resolution process - Admission of the petition filed under Section 9 seeking initiation of the corporate insolvency resolution process against the corporate debtor. - HELD THAT: - The Tribunal found that the petitioner, an operational creditor, had furnished invoices for services rendered and, after partial payment by the corporate debtor, had unpaid invoices. The petitioner issued the demand notice contended to be in terms of the Code and filed affidavits required under the provisions governing a Section 9 petition. The corporate debtor was duly served but did not appear and the matter was proceeded ex-parte. Having considered the material on record and the non-appearance of the corporate debtor, the Tribunal held that the petitioner's case merited admission and consequently admitted the petition under Section 9 to initiate the corporate insolvency resolution process. [Paras 6, 7]

The petition under Section 9 is admitted and CIRP is initiated against the corporate debtor.

Demand notice under section 8 - compliance with section 9(3) affidavits - Sufficiency and service of the demand notice and compliance with statutory affidavit requirements for a Section 9 petition. - HELD THAT: - The Tribunal recorded that the operational creditor issued the demand notice dated 18-04-2019 which was served on 22-04-2019. Affidavits in compliance with the statutory requirements under Section 9(3)(b) and 9(3)(c) were placed on record to corroborate the petition. On the basis of the served demand notice and the affidavits filed in compliance with the Code, the Tribunal found that the procedural prerequisites for proceeding under Section 9 were satisfied. [Paras 5, 6]

Demand notice was held to have been served and the statutory affidavit requirements for Section 9 were found to be complied with.

Moratorium under Section 14 - Imposition of moratorium consequent to admission of the Section 9 petition. - HELD THAT: - Upon admission of the petition, the Tribunal declared that the moratorium under Section 14 of the Code shall come into effect forthwith. The order specifies the customary prohibitions on institution or continuation of suits or proceedings against the corporate debtor, transfer or disposal of assets, enforcement of security interests and recovery of property in possession of the corporate debtor, while also noting statutory exceptions concerning supply of essential goods or services and transactions notified by the Central Government. The moratorium was directed to remain in effect until completion of the CIRP, subject to the statutory proviso regarding approval of a resolution plan or liquidation. [Paras 7]

A moratorium in terms of Section 14 is imposed with immediate effect upon admission.

Appointment of Interim Resolution Professional - deposit to meet immediate expenses of IRP - Appointment of an Interim Resolution Professional and direction for deposit to meet his immediate expenses. - HELD THAT: - The Tribunal noted that the operational creditor had not proposed a name of an IRP and therefore appointed a named insolvency professional empanelled with the IBBI to act as IRP. The IRP was directed to take steps mandated under the Code and file his report before the Adjudicating Authority. Further, the operational creditor was directed to deposit a sum to meet immediate expenses of the IRP, with the order recording that the amount shall be accountable and reimbursable by the committee of creditors as CIR costs. [Paras 8, 9]

A specific IRP is appointed and the operational creditor directed to deposit funds for immediate IRP expenses, recoverable as CIR costs.

Final Conclusion: The Section 9 petition by the operational creditor is admitted, a moratorium under Section 14 is imposed with immediate effect, an Interim Resolution Professional is appointed, and the operational creditor is directed to deposit funds to meet immediate IRP expenses; the matter is listed for further consideration.

Locus standi of suspended director - commercial wisdom of Committee of Creditors - NCLT's limited scope to interfere with CoC decisions - substitution of resolution applicant - liquidation under the Insolvency and Bankruptcy Code - appointment of liquidator under section 34(1) and duties under section 35

Locus standi of suspended director - NCLT's limited scope to interfere with CoC decisions - commercial wisdom of Committee of Creditors - Maintainability of IA No. 344 of 2018 filed by a suspended director challenging CoC decisions. - HELD THAT: - The Adjudicating Authority held that the suspended board member (the applicant) lacked locus standi to challenge the commercial decisions of the Committee of Creditors. The Tribunal observed that the resolution applicant, if aggrieved, was the proper party to challenge the CoC's decision and that the authority cannot question the commercial wisdom of the CoC. Reliance was placed on precedents recognizing that the CoC's commercial decisions are to be respected and judicial bodies have limited jurisdiction to interfere unless such decisions are perverse or contrary to the Code or law. Therefore the application filed by the suspended director was held not maintainable and disallowed. [Paras 7]

IA No. 344 of 2018 filed by the suspended director is not maintainable and is disallowed.

Substitution of resolution applicant - liquidation under the Insolvency and Bankruptcy Code - Permissibility of substituting the proposed resolution applicant after CoC rejection and after expiry of the CIRP timeline. - HELD THAT: - The Tribunal held that the prayer to permit substitution of the resolution applicant is contingent and impermissible in the circumstances, particularly since the CIRP timeline had expired. The Adjudicating Authority noted the time-bound nature of the Code and that substitution could not be ordered when the corporate insolvency resolution process had already lapsed, rendering the relief unsustainable. [Paras 7, 8]

Prayer for substitution of the resolution applicant is not allowable and is refused as the CIRP period had expired.

Liquidation under the Insolvency and Bankruptcy Code - appointment of liquidator under section 34(1) and duties under section 35 - Whether the Corporate Debtor should be ordered into liquidation and appointment of the Liquidator. - HELD THAT: - Having regard to the CoC's recommendation for liquidation, the expiry of the prescribed CIRP period (including the extended period), and the failure to arrive at an acceptable resolution plan, the Adjudicating Authority directed liquidation of the Corporate Debtor. The Tribunal appointed the then Resolution Professional as Liquidator under section 34(1) of the Code, directed him to issue the public announcement and to intimate the Registrar of Companies, and required the Liquidator to act in accordance with the duties and powers prescribed under section 35 and the Code subject to the Authority's directions. [Paras 9, 10, 11, 12]

IA No. 228 of 2018 is allowed; the Corporate Debtor is ordered into liquidation and Mr. Chandra Prakash Jain is appointed as Liquidator with the specified duties.

Final Conclusion: The application by the suspended director challenging CoC decisions is dismissed for want of locus standi; substitution of the resolution applicant is refused as impermissible after expiry of the CIRP; the Corporate Debtor is ordered into liquidation and the Resolution Professional, Mr. Chandra Prakash Jain, is appointed as Liquidator with directions to make the public announcement, intimate the Registrar of Companies and perform duties under the Code.

Priority of secured creditors - non-obstante clause - overriding effect of special enactments - priority of statutory first charge for provident fund contributions - recovery under Sec.87 of the Finance Act, 1994

Priority of secured creditors - non-obstante clause - recovery under Sec.87 of the Finance Act, 1994 - overriding effect of special enactments - Whether the petitioner Bank's claim to appropriate the Income Tax refund prevails over the recovery notice issued under Sec.87 of the Finance Act, 1994 by respondents 1-3 - HELD THAT: - The Court examined Sec.87 and Sec.88 of the Finance Act, 1994 and the subsequently inserted provisions Sec.31-B in the Recovery of Debts and Bankruptcy Act, 1993 and Sec.26-E in the SARFAESI Act, 2002 (both introduced w.e.f. 1.9.2016). Those provisions, containing non-obstante language, accord priority to secured creditors to realise secured debts over all other debts and Government dues. The Court held that these later special enactments operate to override inconsistent provisions of the Finance Act, 1994 and thereby entitle a secured creditor to appropriate funds subject to the statutory scheme in those Acts. The Court rejected reliance on the earlier Supreme Court decision in Central Bank of India v. State of Kerala to the extent it was decided prior to insertion of Sec.31-B and Sec.26-E, and followed the view that the law has changed after 1.9.2016 so as to give priority to secured creditors. [Paras 47, 52, 53, 58, 59]

The impugned notice under Sec.87 of the Finance Act, 1994 cannot be sustained and the petitioner Bank is entitled to appropriate the Income Tax refund credited to the borrower towards its dues.

Priority of statutory first charge for provident fund contributions - non-obstante clause - overriding effect of special enactments - Whether the 5th respondent's claim under Sec.11 of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 prevails over the petitioner Bank's claim to appropriate the Income Tax refund - HELD THAT: - Section 11(2) of the EPF Act creates a first charge in favour of Provident Fund dues by a non-obstante clause. The Court applied the principle that where two special Acts with non-obstante clauses conflict, the later enactment prevails. Sec.31-B (Recovery of Debts and Bankruptcy Act, 1993) and Sec.26-E (SARFAESI Act, 2002), as amended w.e.f. 1.9.2016, are later special enactments conferring priority on secured creditors. Applying Solidaire India Ltd. v. Fairgrowth Financial Services Ltd., the Court held that the later non-obstante provisions govern and therefore the EPF claim cannot override the secured creditor's right to appropriate the refund. [Paras 61, 62, 64, 65, 66]

The 5th respondent's claim under the EPF Act does not prevail over the petitioner Bank's right to appropriate the Income Tax refund.

Final Conclusion: Writ petition allowed. The notice dated 11.6.2019 issued under Sec.87 of the Finance Act, 1994 is set aside; the petitioner Bank is entitled to appropriate the Income Tax refund credited to the borrower towards its dues; interlocutory applications filed by respondents 1-3 and the borrower are dismissed and pending miscellaneous petitions stand closed.

Cenvat Credit - Input Services - Admissibility of credit on service tax paid - Remand for factual verification of place of removal in relation to GTA service - Followed precedent in appellant's own case

Cenvat Credit - Input Services - Admissibility of credit on service tax paid - Cenvat credit is allowable in respect of the claimed input services (Clearing Service, Life Insurance Services for employees, Mandap Keeper Service and other listed services) as these services fall within the definition of 'input service'. - HELD THAT: - The Tribunal noted that the identical question had already been decided in the appellant's own case by the Tribunal's earlier order dated 01.09.2017, where service tax paid on various services (including Clearing Service, Life Insurance of employees, Cleaning Service and Mandap Keeper Service) was held to be admissible as 'input service' under the definition in Rule 2(l) of the CCR, 2004. Having regard to those findings and the absence of any effective contrary contention, the Tribunal held that the issue was no longer res integra and, on that basis, allowed the appeal insofar as credit on the specified input services is concerned. [Paras 5, 6]

Impugned denial of Cenvat credit in respect of the listed input services is set aside and credit is allowed.

Remand for factual verification of place of removal in relation to GTA service - Admissibility of credit on service tax paid - The question of admissibility of credit on service tax paid on GTA service was remanded for factual ascertainment whether place of removal was factory or customer's premises. - HELD THAT: - While most challenged services were held to be input services by earlier decisions, the Tribunal observed that credit qua GTA service depends on the factual position recorded in the terms of sale-specifically whether the place of removal was the factory or the customer's premises. The earlier order reproduced by the Tribunal had remanded the GTA-related aspect to the adjudicating authority for this factual determination. The Tribunal in the present appeal endorsed that approach and remitted the GTA issue for ascertainment of the relevant fact before allowing credit. [Paras 5]

Credit relating to GTA service is remanded to the adjudicating authority for determination of the place of removal; final decision on admissibility to follow on that factual verification.

Final Conclusion: The impugned order is set aside and the appeal is allowed: Cenvat credit is permitted for the specified input services in accordance with the Tribunal's earlier order, while the claim for credit on GTA service is remanded to the adjudicating authority for factual verification of place of removal before final adjudication.

Cenvat credit admissibility - definition of input service and exclusion of construction services - service receiver's entitlement despite service provider's registration/classification - credit for repair and renovation of factory premises as input service - eligible capital asset - storage tank - onus of proof regarding the exact nature of services received

Cenvat credit admissibility - service receiver's entitlement despite service provider's registration/classification - onus of proof regarding the exact nature of services received - Cenvat credit claimed on service invoices for labour charges relating to handling of stores, unloading, shifting and allied activities was allowable to the appellant. - HELD THAT: - The Tribunal examined the invoices and records and found that the amounts in question were for labour services for handling of stores and allied activities, for which service tax had been charged and paid. The consistent view of courts and CBEC Circulars is that an error in classification or registration on the part of the service provider cannot be visited upon the service receiver who otherwise satisfies the conditions for taking credit. On the material before it the Tribunal concluded that the appellant had received taxable input services and had paid the tax; consequently the cenvat credit of the disputed amount was admissible.

Cenvat credit of Rs. 7,64,318/- relating to labour/handling of stores is allowable.

Cenvat credit admissibility - credit for repair and renovation of factory premises as input service - eligible capital asset - storage tank - Cenvat credit claimed against amounts characterised as renovation/repair and for construction of a new storage tank/pond was allowable, including treatment of the storage tank as an eligible capital asset. - HELD THAT: - The Tribunal found that the amounts paid to the service providers related in part to repair and maintenance and in part to construction of a new storage tank/pond. Repair and renovation services used in the factory premises fall within the inclusive part of the definition of input service and are eligible for credit. Further, the storage tank was identifiable as a specific capital asset eligible under the relevant rule. Taking these findings together, the Tribunal held that the appellant was entitled to cenvat credit on the amounts in question and that the adjudicating authorities had erred in disallowing the credit.

Cenvat credit of Rs. 19,26,435/- relating to renovation/repair and construction of storage tank/pond is allowable as eligible cenvat credit.

Final Conclusion: The appeal is allowed; the disallowance of cenvat credit aggregating the disputed amounts was set aside and the appellant held entitled to cenvat credit for both the labour/handling services and the amounts relating to repair/renovation and construction of the storage tank, with consequential relief.

Rejection of books of accounts - Survey report - Best judgment assessment - Verification and tallying of stock - Adverse inference for non-production at survey - Remand for fresh adjudication

Rejection of books of accounts - Survey report - Adverse inference for non-production at survey - Verification and tallying of stock - Best judgment assessment - Remand for fresh adjudication - Validity of rejection of the assessee's books of accounts and consequent best judgment assessment based solely on the fact that books were not produced at the time of survey - HELD THAT: - The Tribunal and first appellate authority upheld rejection of the books because no books were found at the premises during survey and some stock could not be verified. The High Court examined the material and found that after service of the show cause notice the assessee produced the books which were examined and tallied by the assessing agency (SIB/SIT) and no discrepancy or evasion was found on that perusal. The Court observed that books may be rejected for specific demonstrable reasons such as inconsistency with physical stock, discrepancies between registers and accounts, or inability to determine transactions from the records; however, non-production of books at the exact time of survey, without any other independent or corroborative finding of tampering, inaccuracy or mismatch, cannot be the sole ground for rejection. The Tribunal failed to consider the grounds advanced by the assessee and did not record any independent finding justifying rejection apart from the absence of books at survey; its conclusion was therefore founded on apprehension rather than on a due consideration of the available material. In consequence, the Court concluded that the matter requires fresh adjudication by the Tribunal with directions to consider the accounts, the results of the post-survey verification/tallying, and the assessee's explanations before deciding on the validity of rejection and any best judgment assessment. [Paras 12, 13, 14, 15, 16]

Rejection of books of accounts could not be sustained solely on their non-production at the time of survey; Tribunal's order is set aside and the matter is remanded to the Tribunal for fresh adjudication.

Final Conclusion: The revision is allowed; the impugned Tribunal order dated 23.11.2013 is set aside and the matter is remanded to the Tribunal for fresh adjudication on the issue of rejection of books of accounts and related assessment, to be decided expeditiously within six months from production of a certified copy of this order.

Mixture or preparation - small quantity and commercial quantity (quantity thresholds) - offending drug content versus gross/mixture weight - Section 21 read with statutory scheme and notifications - validity of executive clarification (Note 4 to 2001 notification)

Offending drug content versus gross/mixture weight - mixture or preparation - Whether, for determining small or commercial quantity, only the pure drug content is to be taken into account or the weight of the entire seized mixture/ preparation (including neutral material) is to be considered - HELD THAT: - The Court examined E. Micheal Raj which held that, where a narcotic drug or psychotropic substance is mixed with neutral substances, only the actual content by weight of the narcotic/psychotropic substance is relevant for determining small or commercial quantity. Having considered the statutory definitions, the Statement of Objects and Reasons of the 2001 amendment, Note 2 to the 2001 notification and the scheme of the NDPS Act, the Court concluded that the Act contemplates seizures of preparations/mixtures and that the total weight of a manufactured drug or preparation, including neutral material, is relevant for determining the quantity threshold. The Court reasoned that the definition of "preparation" and related provisions, together with the notification structure, indicate that thresholds in the table apply to preparations as a whole; entry 239 and Note 2 show how mixtures of multiple drugs are to be treated; and a construction excluding neutral material would frustrate the deterrent object and practical operation of the Act. Applying these considerations, the Court found the principle in E. Micheal Raj (that only pure drug content is to be weighed) to be incorrect.

The quantity for determining small or commercial quantity in mixtures/preparations includes the weight of the entire seized mixture (including neutral material) and not only the pure drug content; E. Micheal Raj to that extent is not good law.

Section 21 read with statutory scheme and notifications - Whether Section 21 is a stand-alone provision or must be construed in conjunction with other provisions of the NDPS Act and the relevant notifications - HELD THAT: - The Court held that Section 21 cannot be read in isolation. The statutory scheme, definitions of manufactured drug, preparation, and the notification mechanism for specifying small and commercial quantities must be read together. The amended sentencing structure (introduction of small and commercial quantity) and the table and notes in the notification are integral to determining the applicable punishment; hence Section 21 must be interpreted in light of other provisions and the notifications referred to in the Act.

Section 21 is not standalone and must be construed along with other statutory provisions and the notifications specifying quantity thresholds.

Validity of executive clarification (Note 4 to 2001 notification) - Whether the notification dated 18.11.2009 (adding Note 4 to the 19.10.2001 notification) is intra vires and redefines parameters for constituting an offence or awarding punishment - HELD THAT: - The Court considered the impugned Note 4, which states that the quantities in the table apply to the entire mixture/solution and not just pure drug content. Having found that the statutory scheme and earlier Note 2 already supported treating preparations/mixtures as subject to the thresholds, the Court treated Note 4 as clarificatory and enacted 'ex abundanti cautela'. The Court held that the 2009 notification does not exceed the powers conferred by clauses (viia) and (xxiiia) of Section 2 and does not re define or expand the statutory scheme beyond what the Act and earlier notifications contemplate.

The 18.11.2009 notification (adding Note 4) is valid, clarificatory in nature and not ultra vires the NDPS Act.

Final Conclusion: Reference answered: E. Micheal Raj (classification that only pure drug content is to be weighed) is not good law; where a seizure is a mixture/preparation the neutral material is to be included in determining small or commercial quantity; Section 21 must be read with the Act and notifications; and the 18.11.2009 clarification (Note 4) is valid. Appeals are to be decided in accordance with this answer and on merits.

Economic offences constitute a class apart - criminal breach of trust - criminal conspiracy - grant of bail in economic offences-stringent parameters - duty of trustees to invest trust monies in accordance with trust instrument, statutory rules and government notifications - Section 418 of the Companies Act-safeguarding provident fund deposits - forged minutes and fabrication of records - prima facie evidence of illicit brokerage and money trail

Criminal breach of trust - criminal conspiracy - grant of bail in economic offences-stringent parameters - duty of trustees to invest trust monies in accordance with trust instrument, statutory rules and government notifications - Section 418 of the Companies Act-safeguarding provident fund deposits - forged minutes and fabrication of records - prima facie evidence of illicit brokerage and money trail - Bail application of Sudhanshu Dwivedi rejected. - HELD THAT: - The accused-applicant was Director (Finance) of UPPCL and a trustee entrusted with jointly operating the trust accounts and recommending investments. The prosecution alleges that provident fund monies of two trusts were invested in DHFL contrary to statutory and trust-prescribed investment directions, causing massive loss, and that forged minutes were prepared to justify investments. The court found prima facie material: absence of Board authorisation for investments on the dates alleged; forged signatures on minutes of 24.03.2017; and a statement indicating division of brokerage proceeds among the accused. Applying established precedents that economic offences involving deep-rooted conspiracies and large public funds require stringent consideration at bail stage, the court held that the nature and gravity of accusations, magnitude of alleged loss, documentary and custodial material, and incomplete money-trail furnish sufficient basis to deny bail. Given the risk to the integrity of the investigation and the seriousness of the alleged offences, the trial court's refusal of bail was not disturbed.

Bail rejected.

Prima facie evidence of illicit brokerage and money trail - criminal conspiracy - grant of bail in economic offences-stringent parameters - Bail application of Vikas Chawla rejected. - HELD THAT: - The prosecution's case, as reflected on record, shows that the accused-applicant received large brokerage payments from DHFL into his account which he failed to satisfactorily explain or account for. Documentary entries in the investigation materials indicate multiple transmissions of brokerage amounts to entities connected to the accused, and the accused's company is recorded in the ledger of recipients. Whether the accused had actual knowledge or was kept in the dark is a matter for trial and further investigation. Applying the controlling principles for bail in serious economic offences-considering the nature of allegations, documentary evidence of receipt of funds and a deep-rooted conspiracy-the court found it inappropriate to grant bail at this stage.

Bail rejected.

Final Conclusion: Both bail applications are dismissed: the application of Sudhanshu Dwivedi is rejected on merits in view of prima facie material of breach of trust, forged records and alleged brokerage; the application of Vikas Chawla is rejected in view of documentary evidence of receipt of large brokerage amounts and the ongoing investigation into a deep-rooted economic conspiracy.