TaxTMI Updates e-Newsletter
May 02,2020

Summary order. Petition dismissed as withdrawn with liberty to pursue an application under Section 97(2)(E) of the Central Goods and Services Tax, 2017 / Madhya Pradesh Goods and Services Tax, 2017.

Release of detained goods on payment of tax and penalty under Section 129 - Invoking Section 130 at the threshold requires a very strong case and recorded reasons - Notice of confiscation must disclose material basis of belief and may be examined for sufficiency of materials - Section 130 is an aggravated, penal remedy and not to be invoked routinely for all contraventions

Release of detained goods on payment of tax and penalty under Section 129 - Proceedings under Section 130 may follow if tax and penalty under Section 129 are not paid - Validity of interim release of the vehicle and goods upon payment of tax and penalty and continuation of proceedings under Section 130 - HELD THAT: - The Court recorded that, pursuant to an earlier interim order of a Coordinate Bench, the writ applicant obtained release of the vehicle and goods on payment of the tax amount in terms of the impugned notice. The Court noted that the present proceedings are at the stage of issuance of a show cause notice under Section 130 and that such proceedings may continue in accordance with law. The applicant was permitted to rely on the observations in the cited decision regarding the circumstances in which confiscation proceedings under Section 130 may be invoked, but the Court did not finally adjudicate the merits of the show cause notice in GST-MOV-10 and left it open for the applicant to make good his case. [Paras 5, 7, 8]

Vehicle and goods had been released on payment of tax; proceedings under Section 130 remain pending and may proceed; the writ is disposed and the Rule is made absolute to the limited extent recorded.

Invoking Section 130 at the threshold requires a very strong case and recorded reasons - Notice of confiscation must disclose material basis of belief and may be examined for sufficiency of materials - Section 130 is an aggravated, penal remedy and not to be invoked routinely for all contraventions - Legal principle governing the invocation of confiscation proceedings under Section 130 at the stage of detention and seizure - HELD THAT: - The Court repeatedly quoted and endorsed the legal exposition in the Coordinate Bench's order (Synergy Fertichem Pvt. Ltd.) that not every contravention detected during transit warrants immediate invocation of Section 130. The authority must examine the nature of contravention and whether there is material to form a reasonable belief of an intention to evade tax; mere suspicion or absence of certain documents does not automatically justify confiscation. Where Section 130 is invoked at the threshold, reasons for such belief should be recorded and, if challenged, the authority must disclose the materials on which the belief was formed so that a court can examine whether an honest and reasonable person could base the belief on those materials. The Court clarified that Section 130 remains available where a strong case is made out, but cautioned against routine issuance of confiscation notices without application of mind. [Paras 3, 6]

Authorities should not routinely invoke Section 130 at the stage of detention; invocation at the threshold requires a strong case with recorded reasons and disclosure of material basis if challenged.

Final Conclusion: The writ petition is disposed; the vehicle and goods had been released on payment of tax in terms of the interim order, the show cause proceedings under Section 130 may continue in accordance with law, and the applicant is permitted to rely on the Court's guidance that invocation of Section 130 at the threshold requires a strong case and disclosed material basis.

Detention and seizure of goods and conveyance - release of detained goods on payment of tax and penalty or security - confiscation under Section 130 of the CGST Act - requirement of application of mind and recording of reasons for invoking confiscation - right to challenge show cause notice and reliance on judicial precedent

Release of detained goods on payment of tax and penalty or security - detention and seizure of goods and conveyance - Direction for release of the vehicle and goods upon payment of the tax amount - HELD THAT: - The Court recorded that, pursuant to an interim order of a Coordinate Bench, the vehicle and goods were to be released upon payment of the tax specified in the impugned notice. The writ applicant availed that interim order and obtained release of the vehicle and goods by paying the tax. The present proceedings remain at the stage of a show cause notice under Section 130 and are to proceed in accordance with law. [Paras 4, 5]

The vehicle and goods were released upon payment of the tax as directed; proceedings on the show cause notice continue in accordance with law.

Confiscation under Section 130 of the CGST Act - requirement of application of mind and recording of reasons for invoking confiscation - Permissibility of invoking confiscation at the threshold and the standard required for issuance of a confiscation notice - HELD THAT: - The Court referred to and permitted reliance on its recent pronouncement in Synergy Fertichem Pvt. Ltd., which explains that Section 130 is an aggravated, penal provision and should not be invoked at the threshold without justifiable grounds. Authorities must examine the nature of contravention and whether there is material to form a bona fide belief of intent to evade tax; mere suspicion is insufficient. When confiscation is invoked at the stage of detention/seizure, reasons or the materials forming the basis of the belief must be disclosed and there must be an application of mind. [Paras 6]

The writ applicant may rely on the observations in paragraphs 99 to 104 of Synergy Fertichem Pvt. Ltd.; Section 130 cannot be routinely invoked without material and recorded reasons.

Right to challenge show cause notice and reliance on judicial precedent - Permitted course for adjudication of the show cause notice and scope of relief in the writ petition - HELD THAT: - The Court held that it is open to the writ applicant to challenge the show cause notice issued in FORM GST MOV-10 and to make good its case before the adjudicating authority, including by relying on the Synergy judgment. The Court did not quash the impugned notice at this stage but disposed of the writ application while making the rule absolute to the limited extent recorded in the order. [Paras 7, 8]

The writ application is disposed of; the rule is made absolute to the limited extent indicated and the applicant may challenge the show cause notice and rely on the cited observations.

Final Conclusion: The Court disposed of the writ petition, recorded that the vehicle and goods were released on payment of the tax under the interim order, permitted the applicant to rely on the High Court's observations in Synergy Fertichem (paras 99-104) when challenging the show cause notice, and made the rule absolute to the limited extent stated while directing that proceedings under Section 130 shall continue in accordance with law.

Processing of return under Section 143(1) vis-a -vis notice under Section 143(2) - non-obstante clause in Section 143(1D) - withholding of refund under Section 241A - summary processing versus scrutiny assessment - centralized processing of returns under Section 143(1A)

Processing of return under Section 143(1) vis-a -vis notice under Section 143(2) - non-obstante clause in Section 143(1D) - summary processing versus scrutiny assessment - Whether issuance of a notice under Section 143(2) renders processing of the return under Section 143(1) unnecessary for assessment years ending on or before 31 March 2017. - HELD THAT: - The Court held that the processing contemplated by sub section (1) is a summary exercise confined to adjustments apparent from the return, whereas sub sections (2) and (3) empower a deeper scrutiny to determine whether income is understated, loss overstated or tax underpaid. Sub section (1D), beginning with a non obstante clause, clearly manifests legislative intent that where a notice under sub section (2) is validly issued (for assessment years ending on or before 31 March 2017), the requirement to process the return under sub section (1) is overridden and processing is not necessary. The Court treated the expression "shall not be necessary" as carving out an exception to the summary processing obligation and gave full effect to the non obstante language. Consequently, once scrutiny proceedings under sub section (2) are initiated in accordance with law, the return need not be processed under sub section (1). [Paras 15, 16, 18]

For assessment years ending on or before 31 March 2017, a notice issued under Section 143(2) makes processing under Section 143(1) unnecessary.

Processing of return under Section 143(1) vis-a -vis notice under Section 143(2) - intimation and deferment of processing - Whether a separate intimation to the assessee is required to defer processing of the return once a notice under Section 143(2) has been issued. - HELD THAT: - The Court held that issuance of a notice under sub section (2) itself is the statutory trigger that renders processing under sub section (1) unnecessary; sub section (1D) does not mandate any further or separate intimation or application of mind to keep processing in abeyance. Reading in a requirement for a separate intimation is neither contemplated by the statute nor serves any purpose. Accordingly, a later dated reasoned order deferring processing that merely records the consequence of an earlier validly issued scrutiny notice is not invalid for being post facto. [Paras 19, 20]

No separate intimation is required; issuance of a notice under Section 143(2) is sufficient to defer processing under Section 143(1).

Withholding of refund under Section 241A - processing of return under Section 143(1) - Whether, for assessment years commencing on or after 1 April 2017 (specifically AY 2017-18), the withholding of refund complied with the statutory requirements of Section 241A and the timing provisions of Section 143. - HELD THAT: - Parliament, by Finance Act, 2017, excluded subsection (1D) for returns furnished for assessment years commencing on or after 1 April 2017 and separately inserted Section 241A, which permits withholding of refund only after recording satisfaction (that grant of refund may adversely affect revenue) and with previous approval of the Principal Commissioner or Commissioner. The Court examined the order dated 14.03.2019 and the antecedent steps and found that the withholding for AY 2017 18 was recorded in conformity with Section 241A and that the action fell within the time permitted by the second proviso to sub section (1) (i.e., before the expiry of one year). The Court confined itself to the question of whether the exercise of power was facially in conformity with statutory requirements and found no violation. [Paras 21, 22]

For AY 2017-18 the withholding effected by the order dated 14.03.2019 satisfied the statutory parameters of Section 241A and was made within the period contemplated by Section 143(1).

Centralized processing of returns under Section 143(1A) - processing of return under Section 143(1) - Relief in respect of the refund claimed for AY 2014-15 and directions in relation to pending scrutiny for AYs 2016-17 and 2017-18. - HELD THAT: - The Court noted that final assessment under Section 143(3) for AY 2014 15 established the appellant's entitlement to a refund. While preserving the Revenue's statutory remedies (including set off under Section 245), the Court directed immediate refund of the amount determined in the final assessment within four weeks. The Court also directed the Revenue to conclude the scrutiny proceedings initiated under Section 143(2) for AYs 2016 17 and 2017 18 expeditiously. The Court limited its intervention to directing refund and expedition of pending proceedings and did not adjudicate merits of the withheld claims or of any subsequent assessments. [Paras 23]

Amount determined as refund for AY 2014-15 to be paid within four weeks; proceedings for AYs 2016-17 and 2017-18 to be concluded expeditiously.

Final Conclusion: The appeal is dismissed except that the assessed refund for AY 2014-15 is to be paid to the appellant within four weeks; for assessment years ending on or before 31 March 2017 the issuance of a valid notice under Section 143(2) renders processing under Section 143(1) unnecessary; no separate intimation is required to defer processing once sub section (2) notice is issued; and for returns from AY 2017-18 onwards withholding of refund must comply with Section 241A and the Court found the order dated 14.03.2019 to be facially in conformity with statutory requirements.

Unaccounted investment - seized documents - appreciation of evidence - presumption under Section 292C of the Act - framing of assessment under Section 153A read with Section 143(3) of the Act - assumption of jurisdiction under Section 153C of the Act

Unaccounted investment - seized documents - appreciation of evidence - Validity of addition of Rs. 22,40,000 as unaccounted investment on the basis of seized loose paper (LPS 1 page 4). - HELD THAT: - The Tribunal found that the seized pages (LPS 1 pp.1-8) contained a ledger entry under the head 'Majumdarji' recording amounts which, after matching with the assessee's partnership capital accounts, left a balance of Rs. 22,40,000. The Tribunal accepted that Rs. 62,60,000 (comprising Rs.60,00,000 of capital and Rs.2,60,000 paid by cheque) was explained by the assessee's capital contributions to two partnership firms, and, because the Revenue produced no contrary material, deleted that portion of the addition. The Tribunal, however, sustained the remaining balance of Rs. 22,40,000 as unexplained/unaccounted investment attributable to the assessee. The High Court held that the Tribunal's view was a plausible appreciation of material, that the authorities below did not rely on Section 292C, and that deletion of the explained amounts while sustaining the unexplained balance did not amount to perversity. On this basis the Court refused to treat questions challenging the Tribunal's appreciation as substantial questions of law. [Paras 11, 12, 13]

Tribunal's decision sustaining addition of Rs. 22,40,000 as unaccounted investment is not perverse and is upheld; related challenges do not raise substantial questions of law.

Framing of assessment under Section 153A read with Section 143(3) of the Act - assumption of jurisdiction under Section 153C of the Act - Whether assessment could be framed under Section 153C because no reasons were recorded for treating LPS 1 page 4 as belonging to the assessee. - HELD THAT: - The Court noted that searches and seizures were conducted at premises of the Regal Homes Group and at the residential/business premises of the assessee, so assessment proceedings were properly framed under Section 153A read with Section 143(3). Because the assessee's own premises had been searched, proceedings under Section 153C (which apply where the premises of a person other than the assessee are searched and incriminating material belonging to the assessee is found) did not arise. Consequently the contention that no reasons were recorded for invoking Section 153C was misconceived and inapplicable to the facts of this case. [Paras 14]

Assessee's challenge based on non recording of reasons under Section 153C is misconceived; Section 153C is not relevant where assessment is framed under Section 153A because the assessee's premises were also searched.

Final Conclusion: The Tribunal's reduction of the addition to Rs. 22,40,000 on the seized ledger entry is a plausible appreciation of the material and is upheld; the contention that Section 153C applied (and required recorded reasons) is misconceived because assessment was correctly framed under Section 153A read with Section 143(3). The appeal is dismissed.

Tax Deduction at Source under Section 195 - Certificate for deduction at lower rate under Section 197 - Consequences of failure to deduct or pay under Section 201 and levy of interest under Section 201(1A) - Refund of TDS and interest under Section 244A - Liability of deductor where deductee assessed at loss

Consequences of failure to deduct or pay under Section 201 and levy of interest under Section 201(1A) - Liability of deductor where deductee assessed at loss - Refund of TDS and interest under Section 244A - Whether interest levied and collected under Section 201(1A) from the deductor can be retained by Revenue where the deductee has been assessed at loss and TDS credit/refund has been allowed to the deductee. - HELD THAT: - The Court examined Sections 195, 197, 201 and 191 and held that if the recipient (deductee) has no tax liability because assessment is completed at a loss, no liability can be fastened on the deductor under Section 201(1). Section 201(1A) is consequential upon liability under Section 201(1) and levies interest for non-deposit only when there is an underlying default attracting assessability. Where the deductee is assessed at loss and the Assessing Officer has allowed TDS credit/refund to the deductee, there is no justification to treat the deductor as an assessee in default or to retain interest collected under Section 201(1A). Accordingly, interest collected from the deductor in respect of payments to a deductee assessed at loss must be refunded, and the deductee is entitled to receive the interest (with statutory interest under Section 244A) once TDS is held refundable to the deductee. The Court applied this principle to the facts, noting that the Assessing Officer at New Delhi allowed TDS credit to the petitioner for the relevant years and that the amounts of interest had been recovered from the deductor and deposited with Revenue (paras 11-13, 16). [Paras 11, 12, 13, 16]

Interest levied under Section 201(1A) in respect of payments to the petitioner (who was assessed at loss for the relevant years) could not be retained by Revenue and is refundable to the petitioner along with interest under Section 244A.

Tax Deduction at Source under Section 195 - Certificate for deduction at lower rate under Section 197 - Liability of deductor where deductee assessed at loss - Whether the impugned order refusing refund of interest (dated 14.09.2017) could be sustained where the order was passed without giving the petitioner an opportunity despite earlier directions to consider refund and where respondent authorities had earlier accepted that TDS was refundable to the petitioner. - HELD THAT: - The Court noted that this Court had earlier directed consideration of refund of interest (order dated 23.01.2017) and that respondent No.2 had communicated to respondent No.1 that TDS had been refunded to the petitioner and requested refund of interest to the deductor so that the deductor could pass it on to the petitioner. The impugned order declined refund on the ground that the default was of the deductor (NHAI) and that interest was imposed on NHAI, but the Court found that such reasoning ignored the consequence that the deductee had been assessed at loss and TDS credit had been allowed. The Court observed a lack of communication between authorities and that the impugned order was untenable in law on the facts, particularly in view of the admitted refundability of TDS to the petitioner and the consequential right to recovery of interest (paras 14-15). [Paras 14, 15]

The impugned order dated 14.09.2017 was quashed; Revenue's refusal to refund the interest was held untenable and contrary to the admitted position that TDS credit/refund was due to the petitioner.

Refund of TDS and interest under Section 244A - Liability of deductor where deductee assessed at loss - The relief and direction to be granted to effectuate refund of interest collected under Section 201(1A). - HELD THAT: - Having found that interest collected under Section 201(1A) was not legally collectible against the petitioner who was assessed at loss and had been allowed TDS credit/refund, the Court directed respondent Nos.1 and 2 to refund the interest amount collected from the deductor under Section 201(1A) together with interest under Section 244A, and directed that the deductor (respondent No.3/NHAI) shall thereafter pay the same to the petitioner in accordance with law. The Court treated respondent No.2's earlier communication to respondent No.1 (requesting compliance) as a basis for ordering compliance and refund and quashed the impugned order (paras 17). [Paras 17]

Respondent Nos.1 and 2 are directed to refund the interest collected under Section 201(1A) (with interest under Section 244A) which was paid by the petitioner via the deductor, and the deductor shall pay the refunded amount to the petitioner in accordance with law.

Final Conclusion: Writ petition allowed. The order dated 14.09.2017 rejecting refund of interest under Section 201(1A) is quashed. Revenue is directed to refund the interest collected from the deductor in respect of the petitioner for assessment years 2008-09 to 2011-12, together with interest under Section 244A, and the deductor shall thereafter pay the refunded interest to the petitioner in accordance with law.

Maintainability of appeal - requirement of Committee on Disputes approval for filing appeals - effect of Electronics Corporation of India Ltd judgment on prior ONGC directions - remand for fresh decision on merits

Maintainability of appeal - requirement of Committee on Disputes approval for filing appeals - The Tribunal was not justified in dismissing the Revenue's appeals as not maintainable solely on the ground that approval of the Committee on Disputes (CoD) had not been obtained. - HELD THAT: - The Tribunal dismissed the appeals for want of CoD clearance but granted liberty to revive them upon obtaining such clearance. This Court held that, in light of the subsequent pronouncement of the Supreme Court in Electronics Corporation of India Ltd, the absence of CoD approval cannot be treated as a bar to maintainability of the appeals. The Tribunal's orders dismissing the appeals only for lack of CoD clearance were therefore unsustainable. Consequentially the impugned orders are set aside and the matters are remitted for adjudication on merits. [Paras 6]

The Tribunal's dismissal of the appeals solely for want of CoD approval is set aside and the matters remanded to the Tribunal to be decided on merits.

Effect of Electronics Corporation of India Ltd judgment on prior ONGC directions - requirement of Committee on Disputes approval for filing appeals - The Supreme Court's decision in Electronics Corporation of India Ltd dispensed with the earlier requirement of obtaining CoD approval as directed in the ONGC line of orders. - HELD THAT: - This Court relied on the reasoning in the cited Division Bench decision which notes that the Constitution Bench in Electronics Corporation of India Ltd reversed earlier orders that had mandated CoD clearance prior to filing litigation. The earlier regime-whereby matters were to be referred to an in house committee before court proceedings-was recalled on grounds including delay and resultant prejudice. Accordingly, it is to be deemed that CoD approval is not a prerequisite for instituting appeals, and the substantial question framed was answered in favour of the appellant. [Paras 5]

The Electronics Corporation of India Ltd judgment operates to remove the requirement of CoD approval for filing the appeals; the substantial question is answered in favour of the Revenue.

Final Conclusion: Both appeals are allowed; the Tribunal's orders dismissing the appeals for want of CoD approval are set aside and the matters are remitted to the Tribunal for fresh decision on merits in accordance with law.

Rectification for mistake apparent on the face of record - deduction under section 10A of the Income tax Act, 1961 - treatment of telecommunications/communication charges for export turnover and total turnover - precedent value of Genpact India v. ACIT (Delhi High Court)

Rectification for mistake apparent on the face of record - deduction under section 10A of the Income tax Act, 1961 - treatment of telecommunications/communication charges for export turnover and total turnover - precedent value of Genpact India v. ACIT (Delhi High Court) - Ground No. 4.1 (failure to exclude telecommunications charges from total turnover when computing deduction under section 10A) is adjudicated and allowed. - HELD THAT: - The Tribunal found that its earlier order inadvertently omitted consideration of ground No. 4.1 and that this omission amounted to a mistake apparent on the face of the record, warranting limited recall and rectification. On merits, the Tribunal accepted the assessee's reliance on the ratio of the Hon'ble Delhi High Court in Genpact India v. ACIT and held that the communication/telecommunication charges excluded from export turnover must be correspondingly excluded from total turnover for recomputing the deduction under section 10A. Consequently, the Assessing Officer is directed to make a corresponding reduction of Rs. 251,278,420/- from the total turnover while computing the section 10A deduction. The Tribunal therefore allowed ground No. 4.1 and allowed the appeal to that extent. [Paras 5, 7]

Ground No. 4.1 is allowed; the Tribunal recalled its order for limited adjudication and directed the Assessing Officer to exclude the specified telecommunications charges from total turnover when recomputing the deduction under section 10A.

Final Conclusion: The miscellaneous application for rectification is allowed; ground No. 4.1 is adjudicated and allowed in favour of the assessee, and the Assessing Officer is directed to make the corresponding reduction from total turnover while recomputing the deduction under section 10A for AY 2009-10.

Rejection of books of accounts and entitlement to opportunity of hearing - admissibility and weight of additional evidence placed before appellate authority - allocation of expenses between SEZ and non SEZ units for computing deduction under section 10AA - deduction under section 10AA and apportionment of direct and common expenses - applicability of section 40A(2)(b) to capital expenditure - treatment of advances and notional interest where advances are for business purposes and financed from interest free reserves - distinction between compensatory charges and penal payments for allowability - disallowance of employer/employee contributions under section 36(1)(va) read with definition in section 2(24)(x)

Rejection of books of accounts and entitlement to opportunity of hearing - admissibility and weight of additional evidence placed before appellate authority - Deletion of addition for excessive material accessories claimed in non SEZ unit (disallowance of expenses of Rs.1,22,62,031/-) following CIT(A)'s decision to decide on merits. - HELD THAT: - The AO rejected books of accounts without confronting the assessee or addressing quantitative records maintained electronically and, after rejection, allowed expenses in non SEZ unit only at SEZ unit ratio. The assessee furnished detailed quantitative charts, per unit cost calculations and additional evidences showing comparable per unit raw material plus accessories cost in both units. Those materials were forwarded to the AO for remand comments, but the AO did not controvert them. The CIT(A) held that rejection was unjustified for lack of opportunity and that, on the merits, the per unit analysis demonstrated no material difference between units; accordingly the addition was deleted. The Tribunal found no infirmity in the CIT(A)'s factual and procedural conclusions and declined to interfere. [Paras 21]

Addition of Rs.1,22,62,031/- deleted; Revenue appeal on this ground dismissed.

Allocation of expenses between SEZ and non SEZ units for computing deduction under section 10AA - deduction under section 10AA and apportionment of direct and common expenses - Disallowance/reduction of deduction under section 10AA (claimed Rs.35,20,119/-) by reallocation of expenses between SEZ and non SEZ units. - HELD THAT: - The AO reallocated export related and other direct expenses to the SEZ unit and apportioned direct expenses on turnover basis, concluding insufficient SEZ profits for section 10AA. The assessee produced separate books, schedules showing export sales from both units and justification for actual allocation of direct expenses; CIT(A) reviewed AO's remand report and found AO had overlooked export sales from the non SEZ unit and had not identified defects in allocations made on an actual basis. CIT(A) held that where expenses are allocated on actual basis and the AO points to no specific defect, such allocation must be respected; therefore the negative adjustment was unwarranted. The Tribunal upheld the detailed factual findings of the CIT(A). [Paras 22]

Disallowance under section 10AA deleted; Revenue appeal on this ground dismissed.

Disallowance of employer/employee contributions under section 36(1)(va) read with definition in section 2(24)(x) - Confirmation of AO's disallowance of employees' contribution towards PF and ESIC as upheld by the CIT(A) and affirmed by the Tribunal in cross objection. - HELD THAT: - The CIT(A) confirmed the AO's disallowance relying on Gujarat High Court precedent in Gujarat State Road Transport Corporation. No substantive additional argument was advanced before the Tribunal; the assessee's cross objection was filed with condoned delay but, on merits, the Tribunal found no infirmity in the CIT(A)'s reliance on the High Court decision and therefore dismissed the cross objection on these grounds. [Paras 29]

Cross objection challenging disallowance of PF/ESIC contributions dismissed; CIT(A)'s confirmation upheld.

Treatment of advances and notional interest where advances are for business purposes and financed from interest free reserves - Deletion of addition for notional interest on interest free advances made to related parties/individuals. - HELD THAT: - The AO treated certain advances as not for business purposes and disallowed notional interest. The assessee explained that one advance constituted a long standing security deposit misclassified as loans and advances and another was an advance against business expenditure subsequently adjusted; it also demonstrated sufficient interest free reserves to fund the advances. CIT(A) accepted the factual explanations and found the advances were for business purposes; the Tribunal found no reason to disturb this factual conclusion and dismissed the Revenue's ground. [Paras 24]

Addition for notional interest deleted; Revenue appeal on this ground dismissed.

Allocation of bad debts between SEZ and non SEZ units - Deletion of addition relating to bad debts (disallowed as pertaining to SEZ unit but shown by assessee as arising from non SEZ unit). - HELD THAT: - AO disallowed bad debts on the basis that they related to sales from the SEZ unit; the assessee produced invoices and records showing the sale was made from the non SEZ unit. CIT(A) accepted the assessee's factual demonstration. The Tribunal found no infirmity in the CIT(A)'s fact finding and affirmed deletion of the addition. [Paras 25]

Bad debt addition deleted; Revenue appeal on this ground dismissed.

Distinction between compensatory charges and penal payments for allowability - Deletion of addition for penalties debited in P&L account (penalties/interest on sales tax and reconnection charges characterized as compensatory). - HELD THAT: - Certain penalty amounts were voluntarily disallowed by the assessee in computation; remaining amounts comprised interest on sales tax and electricity reconnection charges. CIT(A) held these were compensatory rather than penal in nature and thus allowable. The Tribunal agreed with the CIT(A)'s characterization and found the factual approach acceptable, dismissing the Revenue's ground. [Paras 26]

Penalty related additions deleted (as compensatory); Revenue appeal on this ground dismissed.

Applicability of section 40A(2)(b) to capital expenditure - Deletion of addition under section 40A(2)(b) in respect of purchase of plant and machinery from a related party. - HELD THAT: - The AO invoked section 40A(2)(b) to disallow the excess over depreciated value paid to a related party. CIT(A) observed that section 40A(2)(b) operates on expenditure claimed as deduction and is not attracted to capital expenditure where no deduction is claimed; accordingly the addition was deleted. The Tribunal endorsed the legal conclusion and directed deletion of the addition. [Paras 27]

Addition under section 40A(2)(b) deleted; Revenue appeal on this ground dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal in its entirety and also dismissed the assessee's cross objection; the CIT(A)'s factual and legal findings on rejection of books, allocation of expenses between SEZ and non SEZ units, treatment of advances, bad debts, penalties and applicability of section 40A(2)(b) were upheld, while the confirmation of disallowance of employees' PF/ESIC contributions was sustained.

Reopening of assessment under section 147 - requirement of filing return within due date to claim carry forward of business loss - allowability of unabsorbed depreciation - distinguishing precedent on filing obligation of trusts

Reopening of assessment under section 147 - distinguishing precedent on filing obligation of trusts - Validity of reopening assessment where reassessment was initiated because the assessee had not filed its return within the due date. - HELD THAT: - The Tribunal held that reopening of assessment by the AO was proper in the facts of this case. The assessee, a company, is statutorily obliged to file a return whether or not it has taxable income, unlike the position of certain trusts which file only if taxable income arises. The decision relied upon by the assessee (General Electoral Trust) was held to be distinguishable because the trust jurisprudence turned on the different filing obligation of trusts under section 139. In the present case the AO issued notice under section 148 and proceeded under section 143(2) r.w.s. 147 after the assessee filed its return belatedly; initiation of proceedings solely because the return was not filed within the due date was not improper in law on these facts. The Tribunal therefore dismissed the additional grounds based on the trust precedent and recorded that the reopening was valid. [Paras 11, 12]

Proceedings under section 147 were proper and the precedential reliance on trust law was distinguishable; the additional grounds contesting reopening were dismissed.

Requirement of filing return within due date to claim carry forward of business loss - allowability of unabsorbed depreciation - Whether the assessee could claim carry forward of the business loss declared in a return filed belatedly. - HELD THAT: - The Tribunal noted that it is mandatory to file the loss return within the prescribed time to be entitled to carry forward business losses. The facts were undisputed that the assessee filed its return belatedly and therefore could not claim carry forward of the business loss claimed. The CIT(A) had allowed carry forward of unabsorbed depreciation while sustaining denial of the carry forward of the remaining business loss; the Tribunal found no error in that approach and affirmed the CIT(A)'s treatment. Consequently the assessee was not entitled to carry forward the business loss declared in its belated return except as already permitted in respect of unabsorbed depreciation. [Paras 13]

Carry forward of business loss claimed in a belated return is not permissible; allowance of unabsorbed depreciation was correctly sustained and the denial of carry forward of the remaining business loss was affirmed.

Final Conclusion: The appeal is dismissed; reopening under section 147 was proper on the facts and the assessee cannot claim carry forward of business loss from a belated return except to the extent of unabsorbed depreciation already allowed.

Transfer pricing - internal Transactional Net Margin Method (TNMM) - external TNMM - arm's length price - comparability and product similarity under TNMM - foreign exchange fluctuation loss - section 14A read with rule 8D(2)(iii) disallowance - repairs to plant and machinery - capital v. revenue expenditure - section 41(1) - cessation of liability - provision for sales returns

Transfer pricing - internal Transactional Net Margin Method (TNMM) - external TNMM - arm's length price - comparability and product similarity under TNMM - Applicability of internal TNMM (using assessee's AE and non AE segmental results) versus external TNMM for determining arm's length price of exports to AE. - HELD THAT: - The Tribunal accepted the factual position that the assessee had sold identical manufactured products to both the AE and non AEs and had furnished audited segmental Profit & Loss accounts for AE and non AE sales. The TPO had applied an external TNMM and reallocated operating expenses/depreciation on a sales basis but did not record any adverse finding on the audited segmental results or the assessee's submissions on internal TNMM. Rule 10B and the nature of TNMM were held not to require product similarity in the manner required by CUP; TNMM compares net margins, so where reliable segmental profitability data for controlled and uncontrolled sales exist, internal TNMM is permissible. Applying either the assessee's internal figures or even the TPO's reallocation, the margin on AE sales compared favourably with non AE sales; hence no transfer pricing adjustment was warranted. The Tribunal therefore upheld the Commissioner (Appeals) in deleting the TP addition. [Paras 7, 8, 9]

Decision upheld: arm's length price to be determined by internal TNMM on the available segmental data; no TP adjustment required.

Foreign exchange fluctuation loss - Allowability of unrealized foreign exchange loss claimed by the assessee. - HELD THAT: - The Tribunal noted that an identical issue in the assessee's own case for AY 2007-08 was decided in favour of the assessee (finding ECB was for expansion and the loss was allowable having regard to applicable accounting standards), the Revenue had accepted that precedent, and in later years the Revenue had accepted similar claims. On these facts and the Tribunal's prior conclusion, the Commissioner (Appeals) was held justified in allowing the foreign exchange loss for AY 2008-09. [Paras 10, 11, 12, 15]

Allowable: the deletion of the disallowance was upheld and the claim for foreign exchange fluctuation loss sustained.

Section 14A read with rule 8D(2)(iii) disallowance - Validity and quantum of disallowance under rule 8D(2)(iii) in respect of administrative expenditure relating to exempt dividend income. - HELD THAT: - The Tribunal accepted that some administrative expense is reasonably incurred for investments that yield dividend income and noted that in similar circumstances a disallowance had been made and accepted by the assessee in AY 2007-08. However, the Tribunal held that the disallowance must be restricted to the average value of only those investments which actually yielded dividend income during the year. The matter of precise computation was left to the Assessing Officer to verify and determine accordingly. [Paras 18, 20, 23]

Partly allowed and remitted for computation: disallowance to be limited to administrative expense attributable to investments yielding dividend income; AO to verify and compute.

Repairs to plant and machinery - capital v. revenue expenditure - Whether 20% of repairs to plant and machinery should be disallowed as capital expenditure on an ad hoc basis. - HELD THAT: - The Tribunal found that the Assessing Officer made an ad hoc 20% disallowance despite the assessee furnishing supporting evidence and that the Commissioner (Appeals) accepted that expenditures were for replacement of spare parts yet maintained the disallowance on the basis that detailed narration was not available. The Tribunal held that an ad hoc disallowance unsupported by proper reasoning or inconsistency in the appellate findings could not be sustained and deleted the disallowance. [Paras 24, 25, 28]

Disallowance deleted: the AO's ad hoc capitalisation of a part of repairs expenses is set aside.

Section 41(1) - cessation of liability - Addition under section 41(1) by treating an outstanding sundry creditor as ceased liability. - HELD THAT: - The Tribunal recorded that the mere passage of time (liability outstanding for more than three years) does not establish cessation under section 41(1). No material was brought on record by the Revenue to show that the assessee received benefit in the impugned year; part payment in a subsequent year and the balance being written back and offered to tax in a later year indicated the liability had not ceased in the impugned year. The Tribunal directed verification of the assessee's claim (payment and later offer) and ordered deletion of the addition subject to such verification. [Paras 30, 31, 32]

Remitted for verification and directed deletion subject to confirmation that part was paid subsequently and the balance was written back and taxed in a later year.

Provision for sales returns - Allowability of provision for anticipated loss on sales returns claimed in the current year. - HELD THAT: - The assessee admitted during assessment proceedings that the provision had been inadvertently not added back in the return; it requested the AO to treat the return as modified. The Tribunal held that a provision for likely sales returns is an anticipated loss and not crystallized expenditure; therefore it is not allowable in the year unless the loss actually arises in a subsequent year. The AO was directed to verify and grant relief if the loss materializes in a later year. [Paras 33, 34, 36]

Claim disallowed for the year (provision not allowable); relief to be given if and when the loss crystallizes in a subsequent year.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal: transfer pricing adjustment was deleted by applying internal TNMM; foreign exchange loss allowance was sustained; the section 14A administrative disallowance was remitted for limited recomputation; ad hoc disallowance of repairs was deleted; the section 41 addition was directed to be deleted subject to verification; and the provision for sales returns was disallowed for the year with relief if loss crystallizes later.

Diversion of income by overriding title - capital gains - consideration received or accruing - remand for factual verification of mode of sale - indexed cost of acquisition - section 55(2)(b) - admission and abandonment of additional grounds

Admission and abandonment of additional grounds - Additional legal grounds sought to be admitted were admitted but not pressed by the assessee and therefore dismissed. - HELD THAT: - The Bench admitted two additional legal grounds raising defects in reassessment proceedings. On production of records the assessee's representative inspected the assessment file and did not press those legal grounds. The Bench accordingly dismissed those legal issues as not pressed by the assessee. [Paras 3]

Admission granted but the additional legal grounds were dismissed as not pressed.

Diversion of income by overriding title - capital gains - consideration received or accruing - remand for factual verification of mode of sale - Whether long term capital gain arising on sale of Berabari land should be deleted on the ground that sale proceeds were diverted at source by overriding title (sale/appropriation by bank) or taxed as capital gain in assessee's hands because proceeds were routed through/received by the assessee. - HELD THAT: - The Tribunal reviewed authorities establishing the legal distinction between (a) diversion of income by virtue of an overriding title (where the purchaser's payment is appropriated by the creditor and the owner never receives or accrues the consideration) and (b) application of income by the assessee (where the assessee receives the amount and thereafter applies it for discharge of obligation). The factual matrix in this case was unclear: the record shows a bank letter directing the buyer to deposit the sale consideration with the bank, but it is not clear whether the bank itself conducted sale and directly retained proceeds (giving rise to diversion at source) or the assessee procured the sale and the buyer's payment was thereafter appropriated. Because the determination of taxability turns on this factual distinction, the Tribunal directed a limited remand to the Assessing Officer to verify the precise factual sequence, to afford the assessee opportunity of hearing, and to pass a speaking order. The Tribunal specified that if on enquiry the AO finds the facts fall within the overriding-title/diversion-at-source category, the addition shall be deleted. [Paras 22, 23]

Issue remanded to the Assessing Officer for limited factual verification; if proceeds were diverted at source by overriding title the addition shall be deleted.

Indexed cost of acquisition - section 55(2)(b) - capital gains - consideration received or accruing - Whether the cost of acquisition of the VIP Road land should be taken at Rs. 1,122 (as held by AO) or the Fair Market Value as on 01.04.1981 (section 55(2)(b)) as claimed by the assessee. - HELD THAT: - The Tribunal examined the deed of conveyance and associated registration entries which establish that the assessee purchased the VIP Road land on 15.04.1976. Since acquisition was before 01.04.1981, the assessee was entitled, in terms of section 55(2)(b), to adopt the fair market value of the asset as on 01.04.1981 as cost of acquisition. A valuation report determining the FMV as on 01.04.1981 was placed on record. The AO's contrary factual finding that the acquisition date was 25.04.2000 was held to be erroneous. Consequently the AO's computation using the nominal purchase price and an incorrect base index was held to be bad in law. [Paras 25, 27]

AO's computation set aside; cost of acquisition of VIP Road land to be taken as the FMV as on 01.04.1981 (Rs. 8,30,000 as submitted) and computation shall be revised accordingly.

Final Conclusion: The appeal is partly allowed: additional grounds admitted but dismissed as not pressed; the question of LTCG on Berabari land is remanded to the AO for limited factual enquiry into whether sale proceeds were diverted at source by overriding title (in which event the addition shall be deleted); the cost of acquisition of VIP Road land is held to be the FMV as on 01.04.1981 and the AO's computation is set aside for recomputation accordingly.

Exemption under section 10(10C) - Compliance with Rule 2BA of the Income Tax Rules, 1962 - Requirement of employer certification for Rule 2BA conditions - CBDT circulars recognising specific voluntary retirement schemes - Condonation of delay in filing appeal

Condonation of delay - Condonation of delay of 88 days in filing the appeal before the Tribunal was allowed. - HELD THAT: - The assessee furnished a petition with affidavit explaining medical incapacity, difficulty in securing counsel, substitution of counsel, and communication disruption due to natural calamities. The Tribunal found the delay not attributable to wilful laches or negligence on the part of the assessee and, on that basis, exercised its discretion to condone the 88-day delay and proceed to decide the appeal on merits. [Paras 2]

Delay of 88 days condoned and appeal admitted for consideration on merits.

Exemption under section 10(10C) - Compliance with Rule 2BA of the Income Tax Rules, 1962 - Requirement of employer certification for Rule 2BA conditions - CBDT circulars recognising specific voluntary retirement schemes - The assessee is not entitled to exemption under section 10(10C) for the ex-gratia received under the SBI 'Exit Option Scheme'. - HELD THAT: - Section 10(10C) grants exemption for amounts received on voluntary retirement only where the scheme is framed in accordance with prescribed guidelines; Rule 2BA sets out those cumulative requirements. The Tribunal applied the principle that compliance with all conditions of section 10(10C) and Rule 2BA is mandatory. The assessee failed to produce any employer certification confirming that the Exit Option Scheme satisfies the conditions of Rule 2BA; instead the employer's certificate expressly stated that the ex-gratia would be added to the employee's income and tax deducted at source. Reliance on judicial decisions where particular schemes (notably the RBI scheme) had been recognised by the CBDT was held distinguishable because those schemes were specifically recognised; no similar recognition or employer certification existed here. On these facts the claim of exemption was rightly denied. [Paras 7, 8]

Claim of exemption under section 10(10C) denied; appeal dismissed on merits.

Final Conclusion: The Tribunal condoned the 88-day delay in filing the appeal but, on the merits, upheld the denial of exemption under section 10(10C) because the assessee failed to show that the Exit Option Scheme complied with Rule 2BA and produced no employer certification or CBDT recognition; the appeal is dismissed.

Allowability of foreign exchange fluctuation loss under mercantile system of accounting - Reduction of export turnover and total turnover for unrealised export sale proceeds - Deduction of profits derived from export of computer software under Section 10B - Allocation/apportionment of common expenditure between STP and non STP units - Exclusion of depreciation on imported software from eligible export profits

Allowability of foreign exchange fluctuation loss under mercantile system of accounting - Whether the loss on account of foreign exchange fluctuation is allowable as expenditure where accounts are maintained on mercantile system of accounting. - HELD THAT: - The Tribunal applied the ratio of the Hon'ble Supreme Court in Oil & Natural Gas Corpn. Ltd. v. CIT, holding that where accounts are maintained on the mercantile system and there is no adverse finding on the correctness or completeness of accounts, loss arising from foreign exchange fluctuation as at the balance-sheet date is allowable as an expenditure. The AO had disallowed the claim only on the ground that it was a notional loss and had not doubted the computation; accordingly the Tribunal held the loss to be allowable following the Supreme Court's criteria (consistency of accounting treatment, compliance with accounting standards, fair and reasonable method of recording gains and losses), and rejected the Revenue's contention that computation must be in accordance with Rule 115 of the Income-tax Rules when no defect in computation was pointed out by the AO. [Paras 12]

The disallowance of the foreign exchange fluctuation loss was set aside and the claim allowed in favour of the assessee.

Reduction of export turnover and total turnover for unrealised export sale proceeds - Deduction of profits derived from export of computer software under Section 10B - Whether export sale proceeds not received in convertible foreign exchange within the stipulated period must be excluded from both export turnover and total turnover for computing eligible profits under Section 10B. - HELD THAT: - Relying on the legal position in CIT v. HCL Technologies Ltd. and the view of the jurisdictional High Court in Maars Software International Ltd., the Tribunal held that the component constituting the numerator (export turnover) must be identically treated in the denominator (total turnover) so that 'export turnover' does not assume two different characters within the same formula. The Tribunal found no reason to interfere with the CIT(A)'s direction that unrealised export proceeds be reduced from both export turnover and total turnover for computing deduction under Section 10B. [Paras 13, 14]

The CIT(A)'s direction to reduce unrealised export sale proceeds from both export turnover and total turnover was upheld.

Allocation/apportionment of common expenditure between STP and non STP units - Exclusion of depreciation on imported software from eligible export profits - Whether depreciation on imported software, claimed to have been exclusively used for domestic sales, should be excluded from profit eligible for deduction under Section 10A/10B, and whether the AO correctly apportioned such depreciation between STP and non-STP units. - HELD THAT: - The Tribunal reiterated the principle that only indirect/common expenditure is subject to apportionment between STP and non STP units, whereas expenditure directly attributable to a particular unit cannot be apportioned. The assessee's claim that the imported software was exclusively used for domestic sales raises a question of fact which the CIT(A) did not examine on evidence. Given that the AO had originally apportioned depreciation but the factual question of exclusive domestic use remained unresolved on record, the Tribunal directed that the issue be remanded to the AO for fresh adjudication on the factual question (i.e., whether the imported software was used exclusively in domestic sales) and, if found so, to exclude that depreciation from eligible export profits. [Paras 15]

Matter remanded to the AO for enquiry and decision on whether the imported software was exclusively used for domestic sales; if so, exclude the related depreciation from eligible export profits.

Final Conclusion: The Revenue appeal was partly allowed for statistical purposes: the disallowance of foreign exchange fluctuation loss was set aside in favour of the assessee; the CIT(A)'s treatment of unrealised export proceeds (reduced from both export and total turnover) was upheld; and the question of apportioning depreciation on imported software was remanded to the AO for factual determination and consequent adjustment for computation of export profits.

Recognition under section 80G(5)(vi) - registration under section 12AA - genuineness of activities - judicial review of administrative satisfaction - remand for fresh consideration

Recognition under section 80G(5)(vi) - registration under section 12AA - genuineness of activities - remand for fresh consideration - Validity of the Commissioner (Exemption)'s rejection of the assessee's application for recognition under section 80G(5)(vi) and consequent relief. - HELD THAT: - The Tribunal found that the assessee held valid registration under section 12AA as on the date of the impugned order and that no material was placed on record by the Revenue to demonstrate violation of the trust's objects. The reasons recorded by the Commissioner (Exemption)-principally that the trust generated surplus and derived majority receipts from tuition fees-were held not to be the statutory requirements for refusing recognition under section 80G(5)(vi). The Tribunal observed that the Commissioner had not examined the application in terms of section 80G(5) and that the stated grounds were insufficient to sustain rejection. Following precedent of coordinate benches, the Tribunal concluded that the matter should be re-examined by the Commissioner (Exemption), who must afford the assessee a proper opportunity of being heard and consider the application afresh in accordance with law. [Paras 5]

The rejection under section 80G(5)(vi) is set aside and the matter is remanded to the Commissioner (Exemption) for fresh consideration in accordance with law, after affording the assessee an opportunity of being heard.

Final Conclusion: The appeal is allowed for statistical purposes; the order rejecting recognition under section 80G(5)(vi) is set aside and the Commissioner (Exemption) is directed to reconsider the application afresh in accordance with law after giving the assessee a proper hearing.

Deduction under section 80P(2) - Co-operative society - Source of funds - own funds versus funds representing liabilities - Comparative application of precedent - Requirement of a speaking and reasoned order

Deduction under section 80P(2) - Source of funds - own funds versus funds representing liabilities - Comparative application of precedent - Requirement of a speaking and reasoned order - Whether the claim for deduction under section 80P(2) should be allowed in respect of interest earned on bank deposits, having regard to the source of funds and relevant precedents, and whether the matter requires fresh consideration. - HELD THAT: - The Tribunal found that the authorities below did not make any finding on the factual aspect crucial to the claim - namely whether the amounts deposited in the bank (on which interest was earned) were out of the society's own funds or represented liabilities. The Bench noted that precedents lead to different outcomes depending on that factual distinction: in PCIT and Another v. Totagars Co-operative Sale Society the deposits were from liabilities and the claim was negatived, whereas in Tumkur Merchants Souharda Credit Co operative Ltd. v. ITO the deposits were out of own funds and the claim was allowed. The Tribunal therefore directed that the matter be remitted to the Commissioner (Appeals) to examine and compare the facts of the present case with those precedents and with the decision in The Citizen Co operative Society Ltd. v. ACIT, and to pass a speaking and reasoned order after affording both parties an opportunity of being heard. No final adjudication on the merits was undertaken by the Tribunal; rather the Tribunal set aside the CIT(A)'s order and required fresh factual and comparative appellate consideration. [Paras 8, 9, 10, 11]

Order of the CIT(A) set aside and the matter restored to the file of the CIT(A) for fresh decision after factual examination and comparison with the cited precedents, with opportunity to be heard.

Final Conclusion: The appeals are allowed for statistical purposes; the CIT(A)'s orders are set aside and the matter is remanded to the CIT(A) for a speaking, reasoned decision on the claim under section 80P(2) after examining whether the deposits were out of the society's own funds or from liabilities and after comparing the facts with the cited precedents, with opportunity to both parties to be heard.

Deduction under section 80-IC - profits and gains derived from manufacture - nexus between services and manufacture/supply - allowability of bad debts under section 36(1)(vii) - previous inclusion of income as condition for bad debt deduction - writing off of bad debts - TRF Ltd. principle

Deduction under section 80-IC - profits and gains derived from manufacture - nexus between services and manufacture/supply - Whether service receipts connected with supply, installation and commissioning of software and hardware for a turnkey project qualify as "profits and gains derived" from manufacture for the purpose of deduction under section 80-IC. - HELD THAT: - The Tribunal examined the contractual matrix (turnkey tender and sub-contracts) showing supply of software and necessary hardware together with obligations to install, commission and provide support services, and held that the services had a direct nexus with the manufacture/supply of the software/hardware. Section 80-IC permits deduction in respect of profits and gains derived by an undertaking engaged in manufacture or production of an article or thing; where services are integrally linked to and form part of the contractual performance for supply of the product, such receipts are to be regarded as profits derived from the industrial undertaking. The AO's conclusion that service receipts were distinct streams of income was not supported by the agreements or the turnover breakup and was therefore reversed. Applying the cited precedents on nexus between manufacturing activity and ancillary erection/maintenance/service receipts, the Tribunal allowed the claim and held that the service income of Rs. 3,75,22,701 formed part of profits eligible for deduction under section 80-IC. [Paras 11, 13, 16, 17]

Service receipts linked to the turnkey supply, installation and support of software/hardware are profits derived from manufacture and are eligible for deduction under section 80-IC; grounds 2 to 6 allowed.

Allowability of bad debts under section 36(1)(vii) - previous inclusion of income as condition for bad debt deduction - writing off of bad debts - TRF Ltd. principle - Whether the assessee is entitled to deduction for bad debts written off where the amounts had been included as income in earlier years and earlier inclusion was subject to deduction under section 80-IC. - HELD THAT: - The Tribunal found that the AO did not dispute that the debts written off had been offered to tax and included in income in earlier previous years. Section 36(1)(vii) requires that the debt written off be taken into account in computing income of the previous year in which it is written off or an earlier year; there is no statutory requirement that such earlier inclusion must have actually resulted in tax liability (i.e., suffering tax). Reliance on the Supreme Court decision in TRF Ltd. and the CBDT circular was noted to the effect that mere writing off in the books suffices and proof that the debt became irrecoverable is not a precondition. The reasons given by the AO and affirmed by the CIT(A) for denying the deduction - that the earlier inclusion did not suffer tax because of an 80-IC deduction, and that the assessee failed to prove earlier inclusion or that the debt had become bad - were held unsustainable. Consequently, the Tribunal allowed the bad debt deduction. [Paras 19, 21, 23, 24]

Deduction for bad debts written off is allowable where the debts had been included as income in earlier years; denial by AO/CIT(A) on the stated grounds is not sustainable and the claim is allowed.

Final Conclusion: The appeal is allowed: (i) service receipts integrally connected with the turnkey supply, installation and support of software/hardware are part of profits derived from manufacture and are eligible for deduction under section 80-IC; and (ii) deduction for bad debts written off is allowable where those amounts were included in income in earlier years, applying the TRF Ltd. principle.

Long term capital gain on transfer of tenancy right - unexplained cash credit under section 68 - burden of proof on the assessee to explain cash credits - creditworthiness of purchaser - possession and holding period for capital asset - electronic furnishing of documents on ITBA/e filing portal as proof - deduction/exemption under section 54/54F

Long term capital gain on transfer of tenancy right - unexplained cash credit under section 68 - burden of proof on the assessee to explain cash credits - creditworthiness of purchaser - possession and holding period for capital asset - electronic furnishing of documents on ITBA/e filing portal as proof - Taxability of the sale consideration of tenancy rights (Rs. 22.50 crore) as unexplained cash credit and entitlement to LTCG treatment - HELD THAT: - The Tribunal found that tenancy right is a capital asset and that the assessee had placed on record documentary evidence showing acquisition and continued possession (partition deed, letters to owner, rent receipts) and the registered tripartite transfer dated 29.05.2015. The assessee also produced portal screenshots and e filing acknowledgements demonstrating electronic submission of documents to the assessing officer; the AO did not dispute the upload but declined to examine the material. The AO's conclusion that the purchaser lacked creditworthiness was based only on a return showing nil income for AY 2016-17 and no further enquiries were made despite availability of PAN and bank instrument (demand draft) evidencing payment. On this record the Tribunal held that the assessee satisfactorily proved (i) ownership/holding period of the tenancy right for more than three years, (ii) genuineness of the transfer, and (iii) receipt of consideration through banking instrument, and therefore the addition under unexplained cash credit under section 68 could not be sustained. The Tribunal applied the principle that unexplained cash credit cannot be imposed where the assessee has satisfactorily explained the nature and source of receipt and where available documentary material (including electronic filings and registered transfer deed) substantiates the transaction. [Paras 29]

Addition of Rs. 22,50,00,000 treated as unexplained cash credit is deleted; LTCG on sale of tenancy right is allowed.

Deduction/exemption under section 54/54F - Claim for exemption under section 54/54F in respect of reinvestment of capital gains - HELD THAT: - Because the Tribunal upheld that the sale proceeds constituted long term capital gain, the question of claiming exemption under deduction/exemption under section 54/54F arises. The Tribunal did not decide entitlement on the merits of investment/compliance with conditions but directed the assessing officer to verify the factual claim of investment of sale proceeds in the newly acquired residential property and to allow exemption in accordance with law. The direction to the AO is confined to verification and grant of relief if statutory conditions are met. [Paras 30]

Matter remitted to the AO to verify investment and grant exemption under section 54/54F in accordance with law; ground allowed for statistical purpose.

Final Conclusion: Appeal allowed: the addition under section 68 disallowing Rs. 22.50 crore as unexplained cash credit is set aside and long term capital gain on sale of tenancy right is recognised; claim for exemption under section 54/54F is remitted to the assessing officer for verification and grant in accordance with law.

Benami transaction - fiduciary capacity - Section 4(3)(b) of the Benami Transactions (Prohibition) Act, 1988 - SARFAESI Act - enforcement of security and sale procedure - Rule 8(5)(d) of the Security Interest (Enforcement) Rules, 2002 - private treaty sale by secured creditor - affixture under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 - Article 226 writ jurisdiction in cases involving disputed facts - prohibition on suit or claim in respect of benami property

Benami transaction - fiduciary capacity - Section 4(3)(b) of the Benami Transactions (Prohibition) Act, 1988 - Whether the property, though registered in the name of the 5th respondent, was held by him in a fiduciary capacity and thus saved from the prohibition on benami transactions under Section 4(3)(b). - HELD THAT: - The Court applied the established indicia for determining benami transactions, with primary focus on the source of purchase money, the relationship between parties, possession and conduct after sale. Documentary bank records showed substantial payments for the purchase and for EMI/loan servicing originated from the petitioner and his wife and routed to the 5th respondent and the builder. The 5th respondent admitted petitioner's possession and that petitioner acted as his proxy at registration. The factual matrix established confidence and trust between petitioner, his wife and the 5th respondent, and that the ostensible title stood in the 5th respondent for the benefit of petitioner and his wife. On these findings the Court held that the transaction falls within the exception carved out by Section 4(3)(b) as a fiduciary holding and is not hit by the prohibition in Section 3; consequently the petitioner and his wife were the real owners despite the registered sale deed in the 5th respondent's name. [Paras 76, 78, 79, 80, 81]

The 5th respondent was only the ostensible owner; the real owners are the petitioner and his wife, and the purchase is saved by Section 4(3)(b) as a fiduciary holding.

Article 226 writ jurisdiction in cases involving disputed facts - prohibition on suit or claim in respect of benami property - Whether the petitioner could invoke the extraordinary writ jurisdiction of the High Court under Article 226 to challenge the Bank's actions under the SARFAESI Act despite disputed facts and the availability of alternate remedies. - HELD THAT: - The Court examined precedents holding that disputed questions of fact do not ipso facto oust writ jurisdiction where facts are not such as to require elaborate evidence and where State action is arbitrary or unreasonable. Given the documentary material before the Court (bank statements and payments) and the petitioner's pleaded financing of the purchase, the Court found the factual disputes were amenable to summary adjudication in writ proceedings. Further, because the petitioner was found to be a real owner for purposes of the relief sought, he had locus to challenge the Bank's SARFAESI measures. The existence of alternative statutory remedies under the Act was held not to be an absolute bar where the Bank's conduct - including ignoring petitioner's objections and initiating possession proceedings without impleading him - was arbitrary and violative of Articles 14 and 300A. [Paras 82, 83, 84, 85, 88]

The writ petition was maintainable and the petitioner could invoke Article 226 to challenge the Bank's actions in the circumstances.

SARFAESI Act - enforcement of security and sale procedure - affixture under Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 - Rule 8(5)(d) of the Security Interest (Enforcement) Rules, 2002 - private treaty sale by secured creditor - Whether the Bank's acts in classifying the account NPA, issuing possession notices, failing to record affixture as required, not considering petitioner's objections and proceeding to auction were legally valid and what relief should follow. - HELD THAT: - The Court noted that the Bank issued notices under the SARFAESI Act and sought possession and sale; however, it failed to produce evidence of required affixture under Rule 8(1) when challenged, vitiating its action. The Bank also did not adequately consider the petitioner's objections and his offer to service the loan and to effect a private sale under Rule 8(5)(d). In light of the Court's finding that the petitioner (and his wife) were the real owners and that the loan account was being serviced by payments from them, the Bank would not be prejudiced if sale by public auction were not proceeded with. The Court directed that the Bank transfer the property to the petitioner by private treaty under Rule 8(5)(d), subject to the petitioner mortgaging the property and continuing to pay the loan installments as fixed by the Bank. [Paras 29, 98, 99, 100, 101]

Bank's SARFAESI actions were vitiated by failures including lack of affixture and non-consideration of petitioner's objections; the Bank was directed to transfer the property to the petitioner by private treaty under Rule 8(5)(d) subject to mortgage and payment conditions.

Final Conclusion: Writ petition allowed. The Court declared that the 5th respondent was only the ostensible owner and the petitioner (with his wife) the real owners; the Bank's SARFAESI measures were set aside in view of procedural defects and failure to heed petitioner's objections; the Bank was directed to transfer the property to the petitioner by private treaty under Rule 8(5)(d) of the Security Interest (Enforcement) Rules, 2002 on condition that the petitioner mortgages the property to the Bank and continues to pay the installments as fixed. Interlocutory applications disposed as recorded.

Confiscation of exported goods - mis-declaration - penalty under Section 114(iii) of the Customs Act, 1962 - rejection of declared value - Bank Realisation Certificates - market inquiries insufficient to reject value - software malfunction / inadvertent error - drawback claim based on declared FOB value

Confiscation of exported goods - mis-declaration - software malfunction / inadvertent error - penalty under Section 114(iii) of the Customs Act, 1962 - Whether confiscation of exported consignment and penalties on the exporter and partners were justified where initial shipping documents were incorrect but corrected on the same date and the error was attributed to software malfunction. - HELD THAT: - The Tribunal accepted the appellants' uncontested explanation that the first set of shipping documents was inadvertently generated due to a defect in inventory software and that corrected invoices and shipping bills were submitted on the same date when the discrepancy was pointed out by the CHA. The adjudicating authority's finding that the exporters failed to explain the software malfunction did not attract mala fide conduct. Given that the revised documents accurately reflected quantity, description and value, and 100% examination based on the revised shipping bills corroborated those particulars, the acts did not warrant confiscation of the goods or imposition of penalties. The Tribunal concluded that confiscation and penalties were not called for in the facts of the case.

Confiscation of the exported goods set aside and penalties quashed.

Rejection of declared value - Bank Realisation Certificates - market inquiries insufficient to reject value - drawback claim based on declared FOB value - Whether the declared FOB value could be rejected and the drawback claim reduced where Bank Realisation Certificates evidenced full realisation and market inquiries were relied upon by the authority. - HELD THAT: - The Tribunal held that reliance solely on market inquiries was insufficient to reject the declared export value where the exporters placed on record Bank Realisation Certificates evidencing total realisation of the declared value and such BRCs were not disputed by the Adjudicating Authority. In these circumstances the declared value could not be doubted and must be accepted for the purpose of computing drawback. Consequential reduction of the drawback claim by the authority was therefore incorrect.

Declared FOB value accepted; drawback claim to be calculated at the declared value.

Final Conclusion: Impugned order set aside; all three appeals allowed - confiscation and penalties quashed, declared export value accepted in view of BRCs, and drawback to be computed accordingly with consequential relief to the appellants.

Applicability of Board Circular dated 11.06.1990 to silver bullion below 100 kgs - Meaning of "silver bullion" and inclusion of granules within "bullion" - Effect of foreign markings on packaging in shifting burden under section 123 of the Customs Act, 1962 - Burden of proof under section 123 and sufficiency of ledger entries, invoices and seller confirmations - Confiscation and penalty for possession of smuggled goods

Applicability of Board Circular dated 11.06.1990 to silver bullion below 100 kgs - Whether the Board Circular dated 11.06.1990 protecting persons in possession of silver bullion below 100 kgs applies to the seized silver granules - HELD THAT: - The Tribunal recapitulated the Circular which provides that normally section 123 should not be invoked for possession of silver bullion of less than 100 kgs, but that silver in the form of 30 kg bars or bullion bearing foreign markings may be subject to seizure even when quantity is below 100 kgs. Applying the circular to the facts, the Tribunal held that the circular does not provide blanket protection simply because quantity is below 100 kgs where there are foreign markings indicating foreign origin. Since the seized silver granules were contained in cartons bearing manufacturer name, lot numbers, purity and date of manufacture, the Circular's exception for bullion bearing foreign markings applied and the protective non-invocation could not be invoked in favour of the appellant. [Paras 5, 6]

The Board Circular dated 11.06.1990 does not protect the appellant because the seized silver, though 60 kgs, bore foreign markings on the packaging and therefore fell within the circular's exception.

Meaning of "silver bullion" and inclusion of granules within "bullion" - Whether silver granules fall within the ordinary meaning of "silver bullion" for the purpose of applying the Board Circular and section 123 - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s reasoning that the ordinary meaning of 'bullion' - precious metal in bulk - does not exclude forms such as grains or granules. Thus silver in granule form can be regarded as bullion. Given that bullion bearing foreign markings is excepted from the Circular's protection irrespective of being under 100 kgs, the form as granules did not preclude application of the exception. [Paras 6]

Silver in granule form constitutes "bullion" and therefore the presence of foreign markings on its packaging brings it within the Circular's exception.

Effect of foreign markings on packaging in shifting burden under section 123 of the Customs Act, 1962 - Whether the foreign markings on the carton boxes containing the granules were sufficient to treat the seized silver as bearing foreign markings and thereby shift the burden under section 123 - HELD THAT: - The Tribunal observed that practical impossibility of marking loose granules necessitates reliance on markings on the containers. The seized carton boxes bore manufacturer name, lot numbers, date and purity and were factory sealed as per record. The Tribunal found the appellant's explanation that he purchased such pre-printed cartons from roadside to be improbable, especially because the boxes correctly indicated 10 kg quantities that matched the contents. The Tribunal also relied on departmental material pointing to previous interceptions involving identical branded consignments to infer that the manufacturer named on the cartons supplies imported granules. On this basis the Tribunal held that the foreign markings on the packaging related to the granules within and accordingly the burden under section 123 shifted to the appellant to prove lawful import and duty payment. [Paras 6]

The markings on the packaging were sufficient to treat the seized silver as bearing foreign markings and thereby shift the burden under section 123 onto the appellant.

Burden of proof under section 123 and sufficiency of ledger entries, invoices and seller confirmations - Confiscation and penalty for possession of smuggled goods - Whether the appellant discharged the burden under section 123 by producing invoices, ledger extracts and seller confirmations, and whether confiscation and penalty were justified - HELD THAT: - The Tribunal examined the documentary material and statements produced by the appellant. It noted that sellers subsequently stated they sold bars and not granules, and there was no evidence of processing (conversion of bars into granules) such as payment of processing charges or corroborative material. The Tribunal found the accounts and invoices insufficient to show lawful import or payment of customs duty for the seized granules. Given the shifting of burden (on account of foreign markings) and the insufficiency of the appellant's proof, the Tribunal agreed with the authorities below that the appellant failed to establish licit acquisition and that confiscation and penalty were warranted. The Tribunal distinguished the authorities relied upon by the appellant on the ground that those cases did not involve foreign markings on packaging. [Paras 6, 7]

The appellant did not discharge the burden under section 123; confiscation and the penalty imposed were lawful and are upheld.

Final Conclusion: The appeal is dismissed. The Tribunal held that silver granules constitute bullion, the foreign markings on the sealed cartons related to the contents and brought the case within the exception in the Board Circular of 11.06.1990, thereby shifting the burden under section 123 to the appellant, who failed to satisfactorily prove lawful import or duty payment; confiscation and penalty were accordingly upheld.

Application under section 7 of the Insolvency & Bankruptcy Code for initiation of Corporate Insolvency Resolution Process - existence of financial debt and default - limitation for filing a section 7 application - several liability of lenders under an Inter Se Agreement - conditions precedent for disbursement of a sanctioned credit limit - appointment of Interim Resolution Professional and moratorium under section 14

Application under section 7 of the Insolvency & Bankruptcy Code for initiation of Corporate Insolvency Resolution Process - existence of financial debt and default - The section 7 application filed by the Financial Creditor is required to be admitted and CIRP initiated against the Corporate Debtor. - HELD THAT: - The Tribunal examined the documents filed by the parties, including sanction letters, restructuring agreements, revival letter, statement of accounts and other loan documents, and noted para-wise admissions in the Corporate Debtor's counter affidavit regarding availing credit facilities and defaults. Applying the settled principle that where a financial debt and default are established the Adjudicating Authority is bound to admit a section 7 application, the Tribunal found that the requisite debt and default have been proved on the record and that admission is mandated under the Code. Reliance was placed upon the statutory scheme and precedents holding that solvency or going concern status of the company does not preclude admission when financial debt and default exist. [Paras 24, 25, 30, 31, 32]

Section 7 application is admitted and CIRP is initiated.

Limitation for filing a section 7 application - The objection that the section 7 application is barred by limitation is rejected. - HELD THAT: - The Corporate Debtor relied on an earlier classification as NPA (2-1-2013) to contend the application was time-barred. The Financial Creditor demonstrated that following temporary measures (CDR) the account was again classified as NPA on 19-12-2016 after failure of the restructuring, and the application filed on 12-7-2019 was within limitation counted from the latter classification. On these facts, the Tribunal found the limitation objection to be without merit and rejected it. [Paras 26]

Limitation objection rejected.

Conditions precedent for disbursement of a sanctioned credit limit - The plea that the revised Cash Credit limit was not disbursed and thereby caused erosion of capital is rejected; non-disbursement was attributable to the Corporate Debtor's failure to fulfil stipulated conditions. - HELD THAT: - The Corporate Debtor contended that the CC limit revision was not disbursed and that non-disbursement caused its liquidity crunch. The Financial Creditor produced the Supplementary Inter Se Agreement and explained that the revised sanction was subject to conditions such as stipulated equity infusion and addressing cash losses, which the Corporate Debtor failed to comply with. The Tribunal found the Financial Creditor's explanation plausible and ruled against the Corporate Debtor on this contention. [Paras 21, 27, 28]

Claim of wrongful non-disbursement is negatived; issue decided for the Financial Creditor.

Several liability of lenders under an Inter Se Agreement - The Corporate Debtor cannot evade the claim of an individual lender by reliance on inter se arrangements among consortium banks. - HELD THAT: - The Inter Se Agreement among consortium banks provided that rights and obligations of each lender are several and failure of one lender does not absolve others. The Tribunal noted that inter se agreements do not permit the Corporate Debtor to seek shelter against claims made by an individual bank after NPA declaration, consistent with authority cited by the Tribunal. Accordingly, inter se arrangements did not bar the Financial Creditor's claim. [Paras 5, 25]

Inter se agreement does not defeat the Financial Creditor's standalone claim.

Holding on operations and temporary cutback arrangement - appointment of Interim Resolution Professional and moratorium under section 14 - The Corporate Debtor's contention that discontinuance of a temporary 'holding on operations' arrangement unlawfully crippled the business is rejected; IRP is appointed and moratorium declared. - HELD THAT: - The Corporate Debtor alleged that a consortium-granted temporary 'holding on operations' with tagging of sale proceeds was discontinued by the Financial Creditor and that this action crippled operations. The Financial Creditor explained that the arrangement was temporary to facilitate recovery from NPA status and could not be continued indefinitely, especially as receipts were inadequate and the Corporate Debtor's operations deteriorated. The Tribunal accepted the Financial Creditor's explanation. Consequentially, the Tribunal appointed the proposed Interim Resolution Professional pursuant to the Financial Creditor's proposal and issued the moratorium as envisaged under section 14, directing the IRP to perform statutory functions and communicate initiation to the Registrar of Companies and IBBI. [Paras 33, 34, 35, 36, 37]

Objection on discontinuance of temporary arrangement rejected; IRP appointed and moratorium imposed.

Final Conclusion: The Tribunal admitted the section 7 application filed by the Financial Creditor, rejected the Corporate Debtor's objections as to limitation, non-disbursement and discontinuance of a temporary arrangement, appointed the nominated Interim Resolution Professional and directed initiation of the CIRP with moratorium in terms of the Code.

Presentation in financial statements as acknowledgement of debt - acknowledgement of debt under Section 18 of the Limitation Act, 1963 - applicability of the Limitation Act to insolvency proceedings (section 238A of the IBC) - admissibility of a petition under section 7 of the IBC despite attachment of assets under PMLA - continuous acknowledgement / continuing cause of action - declaration of moratorium and appointment of Interim Resolution Professional under the IBC

Admissibility of a petition under section 7 of the IBC despite attachment of assets under PMLA - Attachment of the corporate debtor's assets by the Enforcement Directorate under PMLA at the stage of admission does not preclude admission of a petition under section 7 of the IBC. - HELD THAT: - The Tribunal examined whether prior attachment of assets under PMLA affects the threshold inquiry under section 7, which is whether a financial debt exists and a default has occurred. The Bench held that at the admission stage the relevant conditions are existence of debt and default; ancillary developments such as attachment under PMLA do not defeat admissibility and can be addressed subsequently during CIRP by the Resolution Professional in accordance with law. The contention that PMLA proceedings oust the IBC remedy was therefore rejected as premature at the admission stage. [Paras 4]

The contention based on PMLA attachment is rejected; the section 7 petition is not barred from admission for that reason.

Presentation in financial statements as acknowledgement of debt - acknowledgement of debt under Section 18 of the Limitation Act, 1963 - continuous acknowledgement / continuing cause of action - applicability of the Limitation Act to insolvency proceedings (section 238A of the IBC) - The claim was not time-barred because the corporate debtor's presentation of the outstanding loan and default in its financial statements and auditor's report constituted continuing acknowledgment of debt within the meaning of Section 18 of the Limitation Act, thereby extending the limitation period. - HELD THAT: - The Tribunal found the amount and default were undisputed and appeared in the corporate debtor's financial statements for the year ending 31-3-2018 and in the Auditor's Report. Applying settled authority and the scope of Explanation (a) to Section 18, the Bench concluded that presentation of liability in financial statements and related confirmations or OTS proposals amount to acknowledgement in writing made within the prescribed period, resulting in a continuous cause of action and extension of limitation. The Tribunal relied on prior decisions of the Bench and observed that Section 238A requires the Limitation Act to apply to IBC proceedings 'as far as may be', supporting a pragmatic reading that recognition in balance-sheets keeps the debt alive for the purpose of section 7 admission. Arguments based on CIBIL non-reporting, write-off by the bank, or expiry of the original agreement were rejected as not extinguishing the claim when the debt is reflected in the corporate debtor's accounts. [Paras 5, 6, 11]

Limitation pleaded by the corporate debtor is rejected; presentation in financial statements and auditor's report constitute acknowledgement under Section 18 and the petition is not time-barred.

Declaration of moratorium and appointment of Interim Resolution Professional under the IBC - The petition under section 7 is admitted; moratorium is declared and the proposed Interim Resolution Professional is approved and appointed. - HELD THAT: - Having found existence of debt, default, and that the claim was not barred by limitation, the Tribunal observed that the petition was complete and defect-free. The consent of the proposed IRP was on record and no disciplinary proceedings were pending against her. The Bench therefore admitted the application, declared moratorium as envisaged by the Code, directed public announcement and claims submission, and appointed the IRP to conduct CIRP in a time-bound manner, with directions regarding advance fee and registry communications. [Paras 8]

The section 7 application is admitted; moratorium ordered and the Interim Resolution Professional approved and appointed.

Final Conclusion: The Tribunal admitted the Financial Creditor's petition under section 7 of the IBC against R.P. Info Systems Ltd., holding that attachment under PMLA does not defeat admission, that presentation of the debt in financial statements and auditor's report amounted to acknowledgement under Section 18 (thus averting limitation objection), declared moratorium and appointed the nominated Interim Resolution Professional to conduct the CIRP.

Initiation of corporate insolvency resolution process - financial debt and default - satisfaction of default under the Innoventive test - existence of dispute or counter-claim not a bar to Section 7 admission - limitation - exclusion of time under Section 14 of the Limitation Act - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional

Financial debt and default - satisfaction of default under the Innoventive test - Financial creditor established existence of a financial debt and occurrence of default such as to warrant initiation of CIRP under Section 7. - HELD THAT: - The Tribunal found on the material (loan sanction, loan agreement, classification of account as NPA and subsequent part payments and OTS proposals) that a financial debt was advanced and remained unpaid. Applying the principle in Innoventive Industries Ltd., the Adjudicating Authority need only be satisfied from records that a default has occurred; it is immaterial that the debt is disputed so long as the debt is due and payable. The petition and supporting documents (including One Time Settlement proposals and bank records) demonstrated the debt and non-payment, and therefore established default. [Paras 9, 11, 14]

Default established and financial creditor entitled to proceed under Section 7.

Limitation - exclusion of time under Section 14 of the Limitation Act - The Section 7 application was held to be within limitation by excluding the period spent prosecuting related proceedings before DRT/DRAT/High Court under Section 14 of the Limitation Act. - HELD THAT: - The Tribunal examined the contention that the claim was time-barred and held Article 62 inapplicable to the Section 7 application. It applied Section 14 to exclude the period during which proceedings before DRT/DRAT/High Court were prosecuted with due diligence and in good faith. Reliance was placed on analogous NCLAT authority and the factual chronology (NPA declaration, subsequent litigation and remand) to conclude that the excluded period brings the Section 7 petition within time. [Paras 12, 13]

Application under Section 7 is within limitation after exclusion under Section 14 of the Limitation Act.

Existence of dispute or counter-claim not a bar to Section 7 admission - The Corporate Debtor's plea of a pending counter-claim/dispute did not preclude admission of the Section 7 petition. - HELD THAT: - The Tribunal considered the Corporate Debtor's claim of counter-claims, set-off and alleged bank defaults. It noted that the counter-claim had been litigated before DRT/DRAT and, in substance, there was no impediment to admission. Following Innoventive and subsequent authorities, the existence of a disputed claim does not prevent admission where the financial creditor establishes a due debt and default from records; the counter-claim/set-off does not negate the default for the purposes of triggering CIRP. [Paras 6, 15]

Counter-claim or dispute did not bar admission; petition proceeded.

Initiation of corporate insolvency resolution process - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional - Petition admitted; CIRP initiated, moratorium imposed and IRP appointed with directions for interim costs. - HELD THAT: - Having found existence of financial debt, default and that the application was within limitation, the Tribunal admitted the Section 7 petition and ordered commencement of CIRP. A moratorium under Section 14 of the Code was directed to operate forthwith (staying suits, encumbrance/transfer of assets, enforcement of security and recovery). The proposed IRP, Mr. Pankaj Khetan, whose consent and credentials were on record, was appointed. The financial creditor was directed to deposit an interim sum for IRP expenses to be accountable and recoverable as CIRP costs. [Paras 16, 17, 18]

CIRP admitted; moratorium imposed; IRP appointed and interim deposit directed.

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted: the Tribunal found a due financial debt and default (applying Innoventive), held the application within limitation by exclusion under Section 14 of the Limitation Act, rejected the contention that counter-claims/disputes barred admission, imposed the statutory moratorium and appointed the named IRP with directions for interim expenses.

Liquidation under section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - appointment of resolution professional as liquidator under section 34(1) - committee of creditors' estimate and provision for liquidation costs under Regulation 39B - recommendation to explore sale as a going concern under Regulation 39C - fixing fee of the liquidator under Regulation 39D - compliance with Chapter III of the Code and the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016

Liquidation under section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - Corporate debtor to be liquidated as no resolution plan was received within the insolvency resolution process period. - HELD THAT: - The adjudicating authority found that the CIRP period expired on 26-7-2019 and no resolution plan under section 30(6) was received before expiry despite three invitations for Expression of Interest. The Resolution Professional accordingly filed an application for liquidation. In view of the absence of any resolution plan within the prescribed period and the CoC's resolution to liquidate, the Tribunal ordered liquidation of the corporate debtor in accordance with Chapter III of the Code and directed issuance of the statutory public announcement and transmission of the order to the authority of registration. [Paras 12, 20]

Order for liquidation under Chapter III of the Code was passed and directions given for public announcement and sending the order to the registrar authority.

Appointment of resolution professional as liquidator under section 34(1) - Mr. Hemanshu Jetley, the Resolution Professional, appointed as Liquidator on his written consent. - HELD THAT: - The Tribunal noted the CoC's unanimous resolution proposing Mr. Hemanshu Jetley as Liquidator and the RP's written consent. Section 34(1) provides that the RP shall act as Liquidator subject to such written consent unless replaced. The Tribunal's independent verification recorded no adverse material against him and, accordingly, appointed Mr. Hemanshu Jetley as Liquidator by order. [Paras 13, 14, 15, 17]

Mr. Hemanshu Jetley was appointed as Liquidator pursuant to section 34(1) of the Code.

Committee of creditors' estimate and provision for liquidation costs under Regulation 39B - recommendation to explore sale as a going concern under Regulation 39C - fixing fee of the liquidator under Regulation 39D - CoC's estimates, recommendations and approvals under Regulations 39B, 39C and 39D were recorded and taken into account; directions issued for compliance with liquidation process provisions. - HELD THAT: - The Tribunal recorded that the CoC, with 100% vote share, had made a best estimate of liquidation costs, concluded that no liquid assets were available to meet those costs, fixed the estimated liquidation cost and approved proposed liquidator's fees, and recommended that the Liquidator may first explore sale as a going concern. The Tribunal accepted these compliances and the CoC's recommendations insofar as they were submitted, and directed strict adherence to Chapter III of the Code and the Liquidation Process Regulations (including publication of the announcement, timeline for submission of claims, filing of preliminary and periodic reports, and other statutory requirements). [Paras 18, 19, 21, 22, 24]

CoC's estimates and recommendations under Regulations 39B, 39C and 39D were noted; the Liquidator is to act on those recommendations and comply with the statutory liquidation procedures.

Rights of financial creditors to enforce personal guarantees - Financial creditors are not debarred from enforcing personal guarantees despite liquidation order. - HELD THAT: - The Tribunal clarified that the order of liquidation does not bar financial creditors from pursuing enforcement of personal guarantees and they remain free to take appropriate steps in that regard. [Paras 25]

Financial creditors may enforce personal guarantees notwithstanding the liquidation proceedings.

Final Conclusion: The application under section 33(1)(a) was allowed; the corporate debtor was ordered to be liquidated, Mr. Hemanshu Jetley was appointed as Liquidator, the CoC's estimates and recommendations under Regulations 39B-39D were recorded and the Liquidator directed to comply with Chapter III of the Code and the Liquidation Process Regulations, with statutory announcements, claims process and reporting to follow.

Corporate Insolvency Resolution Process - scope of financial debt under section 5(8) of the Code - standing instructions and flow of disbursed loan proceeds - tripartite agreement as security for loans to allottees - liability of borrower versus liability of developer - maintainability of a petition under section 7 - abuse of process

Scope of financial debt under section 5(8) of the Code - tripartite agreement as security for loans to allottees - liability of borrower versus liability of developer - Whether the transactions alleged by the Financial Creditor constituted a financial debt owed by the Corporate Debtor so as to attract the Code. - HELD THAT: - The Tribunal found that the housing loans were applied for and maintained in the individual names of the borrowers, with separate accounts and statements. Disbursements were made into the borrowers' accounts and, pursuant to standing instructions, remitted to the Corporate Debtor to meet installment demands. The tripartite agreement operated as a means of security permitting the Corporate Debtor to withhold allotment and enabling appropriation of refunds in favour of the Financial Creditor in case of borrower default; it did not, on the facts, make the Corporate Debtor liable to repay the borrowers' loans. The arrangement did not evidence an independent obligation of the Corporate Debtor to the Financial Creditor akin to a financial debt under the statutory definition, and the defaults complained of arose from the borrowers' non payment of EMIs rather than any default by the Corporate Debtor. [Paras 6, 7]

The transactions did not create a financial debt owed by the Corporate Debtor and therefore did not satisfy the requirement for initiating CIRP against the Corporate Debtor.

Maintainability of a petition under section 7 - standing instructions and flow of disbursed loan proceeds - abuse of process - Whether the petition under section 7 of the Code against the Corporate Debtor was maintainable, or whether it amounted to an abuse of process. - HELD THAT: - Applying the factual findings that the liability to pay EMIs rested with the borrowers and that the tripartite agreement furnished security rather than a primary obligation of the builder, the Tribunal concluded that the petition under section 7 was misplaced. Reliance on precedents dealing with subvention schemes where the builder assumed pre-EMI liabilities was held inapposite because the present arrangement did not impose such liability on the Corporate Debtor. Proceeding against the Corporate Debtor in these circumstances was held to be an abuse of process of law. [Paras 7, 8]

The section 7 petition against the Corporate Debtor was not maintainable and was rejected as an abuse of the process.

Final Conclusion: The petition filed by the Financial Creditor under section 7 was rejected because the defaults arose from individual borrowers and the tripartite arrangement constituted security only; the Corporate Debtor was not liable for the said financial debt and proceeding against it was an abuse of process. File to be consigned to the record room.

Admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - establishment of default for initiation of CIRP - jurisdiction of Adjudicating Authority by reference to registered office - moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016 - appointment of Interim Resolution Professional where none is proposed

Jurisdiction of Adjudicating Authority by reference to registered office - This Adjudicating Authority has jurisdiction to entertain the petition. - HELD THAT: - The Tribunal recorded that the Corporate Debtor is incorporated with Registrar of Companies, Maharashtra, Mumbai and its registered office address falls within the territorial jurisdiction of this Bench. On that basis the Bench held it has jurisdiction to deal with the petition. [Paras 2]

Jurisdiction established and retained by the Mumbai Bench.

Establishment of default for initiation of CIRP - admission of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - The operational debt and default stood established and the petition under section 9 of the IBC was liable to be admitted. - HELD THAT: - The Operational Creditor filed invoices, debit notes and a bank certificate and served the statutory demand notice. The Corporate Debtor replied admitting liability by letter dated 12-2-2018 and committed to clear the debt in instalments, thereby acknowledging the debt. The Adjudicating Authority found the application complete, the debt amount exceeded the statutory minimum, and there was no contrary reply or defence. Consequently, the default was held to be established and the petition was admitted. [Paras 5, 6, 7, 11, 12]

Petition admitted; default established and CIRP to be initiated against the Corporate Debtor.

Moratorium under section 14 of the Insolvency & Bankruptcy Code, 2016 - appointment of Interim Resolution Professional where none is proposed - A moratorium was imposed and the IRP is to be appointed by the Adjudicating Authority with directions regarding public announcement, management vesting and initial deposit. - HELD THAT: - Upon admission, the Tribunal directed the moratorium to operate as specified under section 14 of the IBC, listing the prohibited actions during the moratorium and exceptions for essential supplies and notified transactions. The Bench ordered immediate public announcement as per the regulations and directed that, since no IRP was proposed by the Operational Creditor, the IRP would be appointed by the Adjudicating Authority by a separate order. The management of the Corporate Debtor was ordered to vest in the IRP during the CIRP and officers were directed to furnish documents; the Operational Creditor was directed to deposit a specified sum for CIRP-related expenses to be administered by the IRP. [Paras 14]

Moratorium imposed; directions issued for public announcement, vesting of management in IRP, appointment of IRP by Authority, and deposit for CIRP expenses.

Final Conclusion: The petition under section 9 of the IBC filed by the Operational Creditor was admitted: the Tribunal found jurisdiction, held that default was established (supported by the Corporate Debtor's admission), ordered initiation of CIRP, imposed the statutory moratorium, directed immediate public announcement, and directed appointment of an IRP by the Adjudicating Authority together with the deposit for CIRP expenses.

Refund under Cenvat Credit Rules, 2004 - Time barred refund claims - Opportunity to be heard / personal hearing - Remand for fresh consideration - Requirement to substantiate refund claims with invoices and documentary proof

Refund under Cenvat Credit Rules, 2004 - Opportunity to be heard / personal hearing - Requirement to substantiate refund claims with invoices and documentary proof - Remand for fresh consideration - Whether the appeals challenging rejection of refund claims (other than those held time barred) should be remanded for fresh consideration to permit the appellant to substantiate the claims. - HELD THAT: - The appellant explained non appearance at the personal hearing and sought an opportunity to furnish documents and clarify mismatches in invoices and the omission of service tax amounts. The Tribunal accepted that the inability to produce supporting documents at the earlier hearing was the reason for rejection of those contested portions and held that the appellant should be afforded a further chance to establish the refund claims. In view of this, the Tribunal set aside the rejection of the contested refunds and remanded the appeals to the adjudicating authority to reconsider those issues afresh, thereby allowing the appellant to file and substantiate the claims and permitting the authority to examine them on merit. [Paras 4, 5]

Rejection of the contested refund claims is set aside and the appeals are remanded to the adjudicating authority for fresh consideration allowing the appellant opportunity to substantiate the claims.

Time barred refund claims - Whether refund claims rejected on the ground of time bar are to be reconsidered. - HELD THAT: - The record shows certain portions of the refund claim were rejected as time barred. The appellant specifically did not contest those rejections. The Tribunal noted this concession and did not disturb the findings insofar as refunds held to be time barred; those aspects remain unaffected by the remand. [Paras 4]

Refund claims held to be time barred are not reopened and remain rejected, the appellant having not contested those findings.

Final Conclusion: The Tribunal remanded the appeals for fresh adjudication on the contested refund claims to enable the appellant to substantiate the claims, while leaving intact the rejection of refunds held time barred which the appellant did not dispute.

Mutuality principle - Time-bar / limitation - extended period - Bona fide belief - Service tax liability of cooperative societies for services to members

Time-bar / limitation - extended period - Bona fide belief - Mutuality principle - Service tax liability of cooperative societies for services to members - Whether the demand raised by Show Cause Notice dated 23.03.2016 (invoking the extended period) in respect of the period April, 2011 to September 2014 is sustainable or is time-barred. - HELD THAT: - The Tribunal found that the question whether clubs, associations or cooperative societies are liable to service tax for services rendered to their members was the subject of litigation in various courts, with several High Court decisions favouring the assessee on the basis of the mutuality principle. The matter was ultimately considered by a larger Bench of the Supreme Court. In that factual and judicial background the appellant had a bona fide belief that its activity was not chargeable to service tax; it was a registered cooperative society maintaining necessary books. Given this bona fide belief and the contemporaneous state of the law, the Tribunal concluded that there was no mala fide suppression by the appellant and that a demand made only under the extended period of limitation could not be sustained. The Tribunal therefore decided the appeal on the ground of time-bar / limitation without adjudicating the merits of liability.

Impugned order set aside and appeal allowed on the ground of time-bar; miscellaneous application disposed of.

Final Conclusion: The appeal is allowed on limitation grounds: the demand raised for April, 2011 to September 2014 by the extended-period Show Cause Notice dated 23.03.2016 is not sustained in view of the appellant's bona fide belief and the then-contested legal position; merits are left undecided.

License requirement under the Meghalaya Regulation of the Game of Arrow Shooting and the Sale of Teer Tickets Act, 2018 - compliance with distancing requirement under Section 6 of the Act of 2018 - registration and tax liability under the Meghalaya Goods and Service Tax Act for betting services - authority to issue No Objection Certificates and collect tax - enforcement and inspection powers of the Commissioner of Taxes and Superintendents of Taxes

License requirement under the Meghalaya Regulation of the Game of Arrow Shooting and the Sale of Teer Tickets Act, 2018 - Whether teer-counters operating without a fresh licence under the Act of 2018 must be closed until they obtain a valid licence. - HELD THAT: - The Court observed that licences previously granted under the repealed Act of 1982 are not sufficient following enactment of the Act of 2018 and that no teer-counter can lawfully operate without a valid licence under the new statute. Although the petitioner did not specify individual instances, the responsibility to ensure compliance rests on the Commissioner of Taxes and the Superintendents of Taxes in respective districts, who must carry out periodical checks of sites where counters previously operated and of any newly established counters. Accordingly, unlicensed counters are to be closed and may operate only after obtaining licences and fulfilling requirements of the Act of 2018. [Paras 9, 10]

All teer-counters found operating without a licence under the Act of 2018 shall be closed and permitted to operate only after obtaining the requisite licence and complying with statutory requirements.

Compliance with distancing requirement under Section 6 of the Act of 2018 - Whether teer-counters and bookmakers must comply with the minimum-distance requirement from places of worship and educational institutions prescribed by Section 6(1) of the Act of 2018. - HELD THAT: - The Court emphasised that Section 6(1) mandates that counters be located not less than 1000 feet (300 meters) from the nearest place of worship or educational institution, and that this statutory requirement must be scrupulously enforced. The Court directed the State authorities to ensure adherence to this provision during inspections and on grant of licences, noting that monitoring across large areas requires systematic checks by the tax authorities and district administration. [Paras 4, 9, 10]

Teer-counters and bookmakers must be located in compliance with Section 6(1) of the Act of 2018 and authorities are directed to enforce this requirement.

Registration and tax liability under the Meghalaya Goods and Service Tax Act for betting services - Whether operators of teer-counters liable to GST must obtain registration and discharge applicable tax liabilities. - HELD THAT: - The Court recorded that organisers/bookmakers licensed under the Act of 2018 are obliged to obtain GST registration and comply with GST provisions once turnover thresholds are exceeded. The State, through its Taxation Department, has initiated registration processes after notification of the Act and is to ensure compliance. The Court therefore directed that any operator required to register under the Meghalaya GST Act must obtain registration and make payment of due GST. [Paras 6, 10]

Operators obliged to register under the Meghalaya GST Act must obtain registration and make payment of due GST; the State shall ensure compliance.

Authority to issue No Objection Certificates and collect tax - enforcement and inspection powers of the Commissioner of Taxes and Superintendents of Taxes - Whether the respondent No.9-Association has authority to issue NOCs/licenses or collect tax on behalf of the Commissioner of Taxes and the consequence of such unauthorised activity. - HELD THAT: - The Court rejected any proprietary authority of a sports association to grant NOCs or licences or to collect tax on behalf of the State. It clarified that respondent No.9 (a sport association) has no lawful authority to issue NOCs or to collect tax for the Taxation Department; if found to have engaged in such activity in the past or presently, the Commissioner of Taxes is directed to take appropriate action according to law. The Court also ordered a special drive by the Commissioner of Taxes, assisted by Superintendents, local police and district administration, to inspect all centres and enforce the directions. [Paras 2, 7, 10]

Respondent No.9-Association has no authority to issue NOCs/licenses or collect tax on behalf of the Commissioner of Taxes; if involved in such activities, appropriate action shall be taken by the Commissioner of Taxes following inspection.

Final Conclusion: The writ petition is disposed of by directing the State to inspect all teer-counters, close those operating without licences under the Act of 2018, ensure compliance with Section 6(1) distance requirements, secure GST registration and payment where due, and prohibit any association from issuing NOCs or collecting tax on the State's behalf, with the Commissioner of Taxes to lead a special inspection drive and take action where unauthorised activity is found.