TaxTMI Updates e-Newsletter
May 06,2021

Regular bail - bail under Section 439 of the Code of Criminal Procedure, 1973 - offence triable by Magistrate - gravity of offence and role of accused - investigation complete and complaint filed - deposit as condition for bail - preliminary observations not to influence trial court

Regular bail - gravity of offence and role of accused - offence triable by Magistrate - investigation complete and complaint filed - deposit as condition for bail - Grant of regular bail to the applicant in the criminal case registered with the Office of Chief Commissioner of State Tax, Gujarat State (File No. CCST/STO/ENF/FSU-9/SUPRIM PATEL/2020-21/B.1) - HELD THAT: - Having perused the investigation papers and the complaint, the Court noted the prosecution case that the applicant was allegedly involved in generation of e-way bills and misuse of registration numbers in relation to 16 firms, but prima facie material before the Court attributes active complicity to the applicant in four firms only, amounting to tax evasion of approximately the aggregate stated for those four firms. The Court considered the nature and gravity of allegations, the role attributed to the accused, the fact that the investigation has culminated in a complaint being filed, the applicant's age and period of custody, and that the offence is triable by a Magistrate with a maximum punishment of five years. Applying these factors and having regard to the law as laid down by the Apex Court in Sanjay Chandra , the Court was inclined to enlarge the applicant on regular bail subject to stringent conditions including execution of personal bond with surety, surrender of passport, restrictions on travel, periodic attendance at the police station, furnishing/residence condition, and payment of a substantial amount to be deposited with the trial court (with part payment upfront and an undertaking for balance within a fixed period). The Court emphasised that its observations are of a preliminary nature and shall not influence the trial court while deciding the merits. [Paras 6, 7, 9, 11]

Application allowed; applicant released on regular bail on execution of bond and subject to enumerated conditions including deposit and other restrictions.

Final Conclusion: Writ allowed: applicant granted regular bail in the stated GST-related criminal proceedings on furnishing bond and compliance with specified conditions (including deposit), with liberty to the trial court to modify conditions and without prejudice to the trial on merits.

Pre-deposit requirement for statutory appeal - mandatory nature of statutory pre-deposit - judicial power under Article 226 to relax statutory pre-deposit - automatic stay on balance demand upon pre-deposit

Pre-deposit requirement for statutory appeal - mandatory nature of statutory pre-deposit - judicial power under Article 226 to relax statutory pre-deposit - The petitioner cannot be permitted to circumvent or have reduced the statutory pre-deposit prescribed under Section 107 of the OGST Act by invocation of writ jurisdiction. - HELD THAT: - The Court held that Section 107 of the Orissa GST Act prescribes a mandatory pre-deposit of 10% for filing an appeal and that the appellate authority has no statutory discretion to waive that requirement. Consequently, the High Court itself cannot direct the appellate forum to waive or reduce the pre-deposit contrary to the clear language of the statute. Reliance on a decision under a different statute (Kelmar (India) Exports) which reduced a pre-deposit in the context of the Punjab Value Added Tax Act was distinguished on facts and statutory context and held not to persuade adoption of a similar course where the OGST Act prescribes a specific mandatory requirement. [Paras 4]

Petition to waive or reduce the statutory pre-deposit under Section 107 dismissed; High Court will not relax the mandatory pre-deposit by writ.

Automatic stay on balance demand upon pre-deposit - The effect of making the prescribed 10% pre-deposit under Section 107-whether it produces an unfair or unreasonable result by operation of law. - HELD THAT: - The Court noted that upon payment of the 10% pre-deposit the balance 90% of the demand is automatically stayed under the statutory scheme, and in the circumstances of the Act this statutory consequence cannot be characterised as unfair or unreasonable. That automatic stay afforded by the statutory provision weighed against any argument of hardship as a ground to invalidate or relax the prescribed pre-deposit. [Paras 5]

The statutory consequence of automatic stay on the remaining demand upon making the 10% pre-deposit is lawful and not a ground to relax the pre-deposit requirement.

Final Conclusion: Writ petition dismissed: statutory pre-deposit of 10% under Section 107 OGST Act is mandatory and not subject to judicial relaxation in writ jurisdiction; payment of the 10% pre-deposit automatically stays the remaining demand, and that result is not unfair or unreasonable.

Revocation of registration - revival of registration - Input Tax Credit ineligibility - precondition of payment of tax dues for revival - assessment under Section 73 - prohibition on conditioning revocation application on assessment

Revocation of registration - precondition of payment of tax dues for revival - Input Tax Credit ineligibility - prohibition on conditioning revocation application on assessment - Revival of a cancelled GST registration cannot be refused on the basis that tax dues must first be paid or that disputed Input Tax Credit claims must be finally adjudicated. - HELD THAT: - The court held that an application under the statutory provision for revocation of cancellation is confined to the question whether registration should be revived and that the authority considering such application may not embark upon a process of assessment in the guise of deciding revocation. Questions of leviability of tax and the correctness of claimed input tax credit are matters for assessment proceedings to be conducted under the appropriate assessment provisions, and not preliminary conditions for revival. Consequently, conditioning revival on payment of disputed tax or on substantiation of ITC amounts to putting the cart before the horse and is impermissible. [Paras 7, 8, 9]

Revival cannot be made conditional on prior assessment or payment of disputed tax/ITC; assessment of tax and ITC must be undertaken separately under the statutory assessment procedure.

Revival of registration - revocation of registration - assessment under Section 73 - The cancelled registration of the petitioner must be revived forthwith, subject only to the statutory requirements for revocation applications which the petitioner has satisfied by filing returns and remitting late fees. - HELD THAT: - The court found that the petitioner had filed the necessary monthly and annual returns for the periods in question and had paid late fees for belated filing. Those are the conditions relevant to the consideration of the revocation application. Having regard to those facts, the cancellation was held to be incorrect and the appropriate course directed was immediate revival of registration. The respondents remain free to initiate and proceed with assessment proceedings thereafter in accordance with law, including under the provision governing assessment. [Paras 9, 10]

The respondent authority is directed to pass an order reviving the petitioner's registration forthwith; assessment matters may be pursued subsequently under the applicable assessment provisions.

Final Conclusion: Writ petition allowed; the cancellation of the petitioner's GST registration is set aside and the assessing authority is directed to revive the registration immediately; questions as to tax liability and Input Tax Credit may be investigated and determined subsequently through proper assessment proceedings.

Illegality of detention under Section 129 for mere operational loading - Requirement of intention or possibility to evade tax under Section 129 - Permissibility of consigning goods for multiple destinations on a single conveyance for operational convenience - Economic duress arising from compelled payment for release of detained goods and entitlement to refund with interest - Violation of Articles 14 and 300A by arbitrary seizure and exaction

Illegality of detention under Section 129 for mere operational loading - Requirement of intention or possibility to evade tax under Section 129 - Detention of the goods conveyance and demand of tax and penalty under Section 129 were unjustified because there was no material to show intention or possibility of tax evasion where documents matched the quantity and consignments were legitimately consigned to different destinations. - HELD THAT: - The Court found that the authority acted mechanically in detaining the vehicle despite the total quantity carried corresponding to the invoices and e-waybills and without any evidence of discrepancy in quantity or of unloading at an unauthorised place. Section 129 applies where there is established intention or possibility of evading tax; mere observation that Hyderabad lies on the route to Adoni and that one consignment was on top does not, by itself, establish such intention. The officer's conclusion that goods meant for Hyderabad were likely to be offloaded elsewhere was not supported by any prima facie inconsistency in the documentation or load. The respondent's approach ignored the operational reality of loading heavier consignments below lighter consignments and treated route sequence as determinative without application of mind. [Paras 23, 24, 25, 27, 28]

The detention in Form GST MOV-06 and the demand of GST and penalty under Section 129 were set aside as arbitrary and unsustainable.

Permissibility of consigning goods for multiple destinations on a single conveyance for operational convenience - There is no prohibition on loading consignments for different recipients and different States on a single conveyance, and operational convenience in loading order does not amount to malpractice or violation in absence of contrary material. - HELD THAT: - The Court accepted the petitioner's explanation that the transporter loaded the heavier consignment first and the lighter consignment on top for operational convenience so that the lighter consignment could be offloaded earlier at its nearer drop. Requiring a transporter to unload and reload solely because one destination appears earlier on the geographic route would be impractical and unnecessary. In the absence of any rule forbidding multiple-destination consignments on the same vehicle, mere sequence of destinations cannot be equated with intent to evade tax. [Paras 19, 20, 21, 23, 24]

Loading consignments for two destinations on the same conveyance for operational convenience is permissible and does not, by itself, justify detention or penal action.

Economic duress arising from compelled payment for release of detained goods and entitlement to refund with interest - Violation of Articles 14 and 300A by arbitrary seizure and exaction - The amount collected from the petitioner towards GST and penalty as a condition for release of the vehicle was paid under economic duress and must be refunded with interest; the detention and exaction violated Articles 14 and 300A. - HELD THAT: - The petitioner paid the demanded sums to secure release of the conveyance while protesting the demand. The Court held that collection in those circumstances amounted to economic duress because the detention lacked a lawful foundation. The impugned action was characterised as arbitrary and violative of fundamental rights, warranting a direction for refund of the sums paid with interest from the date of payment until actual refund. [Paras 11, 25, 26, 29, 30]

Respondents are directed to refund the amounts paid by the petitioner with interest at the rate specified by the Court.

Final Conclusion: Writ petition allowed; detention order in Form GST MOV-06 dated 29.12.2020 set aside as arbitrary and violative of Articles 14 and 300A; collection of tax and penalty enforced for release was by way of economic duress and refunded with interest; respondents directed to refund the sums with interest within the time fixed.

Provisional attachment to protect revenue under Section 83 - Limits on attachment of third party bank accounts - Safeguards for third parties against drastic revenue measures - Recovery by notice to third parties under Section 79 - Continuation of Section 79 proceedings without deciding merits

Provisional attachment to protect revenue under Section 83 - Limits on attachment of third party bank accounts - Safeguards for third parties against drastic revenue measures - Validity of provisional attachment of the petitioner's bank account under Section 83 when no proceedings under Sections 62, 63, 64, 67, 73 or 74 are pending against him - HELD THAT: - The Court held that Section 83 permits provisional attachment only "where during the pendency of any proceedings under" the specified sections the Commissioner is of the opinion that attachment is necessary to protect Government revenue. In the absence of any proceedings under Sections 62, 63, 64, 67, 73 or 74 against the writ applicant, the authority could not validly invoke Section 83 to provisionally attach the petitioner's bank account. The bench followed earlier Division Bench reasoning in Piyush Shamjibhai Vasoya v. Union of India and observed that provisional attachment is a drastic power with in built safeguards for third parties and cannot be exercised routinely or arbitrarily; banks and authorities must apply their minds and inform affected third parties rather than mechanically freezing accounts. On that basis the impugned communication ordering provisional attachment was quashed and the attachment ordered to be lifted, permitting the petitioner to operate his account. [Paras 11, 13, 15, 16]

The provisional attachment under Section 83 of the CGST Act was quashed and set aside; the bank shall lift the attachment and permit the petitioner to operate his account.

Recovery by notice to third parties under Section 79 - Continuation of Section 79 proceedings without deciding merits - Effect of ongoing proceedings under Section 79 against the petitioner on the present challenge to the Section 83 attachment - HELD THAT: - The Court noted that proceedings under Section 79 had been initiated against the petitioner and expressly did not adjudicate the merits of those proceedings. While quashing the provisional attachment under Section 83, the Court allowed the Section 79 proceedings to continue in accordance with law and declined to express any opinion on their merits. The decision to lift the provisional attachment was therefore confined to the invalid invocation of Section 83 and did not preclude recovery action under Section 79. [Paras 11, 15, 16]

Proceedings initiated under Section 79 shall continue; no opinion expressed on their merits and the quashment of the Section 83 attachment does not affect the Section 79 process.

Final Conclusion: The writ petition is allowed: the communication ordering provisional attachment is quashed and the attachment is lifted permitting the petitioner to operate the bank account; proceedings under Section 79 remain undisturbed and may continue in accordance with law.

Disallowance under section 14A - computation under Rule 8D - attribution of interest to exempt income - book profits under section 115JB - re-computation of disallowance based on actual amounts debited - allowability of depreciation under section 32 - admission of new evidence - remand for fresh adjudication

Disallowance under section 14A - computation under Rule 8D - attribution of interest to exempt income - re-computation of disallowance based on actual amounts debited - book profits under section 115JB - Validity of disallowance under section 14A computed under Rule 8D and adjustment of such disallowance while computing book profits under section 115JB. - HELD THAT: - The Tribunal found that prior co-ordinate bench decisions in the assessee's own case up to AY 2011-12 consistently held that the assessee had surplus interest-free funds to make investments, and no nexus was established by the Assessing Officer to show that fresh investments were financed out of borrowed funds. In the absence of such nexus, the interest disallowance computed u/r 8D(2)(ii) is not sustainable and is deleted. As to indirect expenses disallowance u/r 8D(2)(iii), the AO is directed to re-compute that disallowance after considering only those investments which have yielded exempt income during the year. With regard to adjustment of disallowance while computing book profits u/s 115JB, the matter is restored to the file of the AO for fresh consideration on the lines directed by the Tribunal in earlier orders (noting that the Rule 8D computation mechanism cannot be imported into clause (f) to Explanation 1 to section 115JB(2) and that actual expenses debited to profit & loss account should be considered). [Paras 5, 6, 7]

Interest disallowance u/r 8D(2)(ii) deleted; disallowance u/r 8D(2)(iii) to be re-computed by AO considering only investments yielding exempt income; adjustment of section 14A disallowance in computation of book profits under section 115JB restored to AO for fresh adjudication.

Allowability of depreciation under section 32 - admission of new evidence - remand for fresh adjudication - Allowability of depreciation claimed during assessment proceedings on assets given on finance lease and admissibility of related evidence. - HELD THAT: - The Tribunal noted that the assessee had charged separate fees for certain assets (DG sets, HVAC chillers) leased with premises and had offered and been assessed on that income as business income. Given that, the assessee would be eligible for depreciation under section 32 if the assets form part of business assets. The CIT(A) rejected the claim on account of absence of the tax auditor's certificate at assessment and questioned the characterisation of income as business income versus house property. The Tribunal found that the correct factual matrix requires examination and that the assessee should be permitted to substantiate the claim with documentary evidence. Consequently the matter is set aside and restored to the Assessing Officer for fresh adjudication after appreciating the correct facts and documents, including the tax auditor's certificate, and in accordance with law. [Paras 9, 10]

Impugned rejection of depreciation claim set aside; claim remitted to the Assessing Officer for fresh adjudication after verification of documentary evidence and correct classification of income.

Final Conclusion: The appeal is partly allowed: interest disallowance under Rule 8D(2)(ii) is deleted, indirect expense disallowance under Rule 8D(2)(iii) is directed to be re-computed by the AO limited to investments yielding exempt income, adjustment of section 14A disallowance in computation of book profits under section 115JB is remitted to the AO for reconsideration, and the depreciation claim is remitted to the AO for fresh adjudication after verification of supporting evidence.

Reopening of assessment - reassessment under section 147/148 - unexplained cash credit under section 68 - burden of proof regarding identity, creditworthiness and genuineness - evidentiary value of survey/retracted statements - availability of set off of losses consequent to deletion

Reopening of assessment - reassessment under section 147/148 - Validity of reopening the assessment and issuance of notice under section 148 was contested by the assessee. - HELD THAT: - The Tribunal considered the material relied upon by the Assessing Officer and the Commissioner (Appeals) and noted that the AO was in possession of tangible information from the investigation wing and appraisal report arising out of search/survey operations which pointed to possible escapement of income. The Tribunal observed that formation of a belief that income had escaped assessment requires "reasons to believe" and that the AO had such reasons on the basis of the material before him. The earlier retraction of statements recorded during survey was considered but the Tribunal held that the existence of information from investigation and other material was sufficient to justify reopening; nothing further was required at the prima facie stage to trigger reassessment proceedings. [Paras 8, 9]

Legal grounds challenging reassessment proceedings dismissed; reopening under section 148 held valid.

Unexplained cash credit under section 68 - burden of proof regarding identity, creditworthiness and genuineness - evidentiary value of survey/retracted statements - Sustainability of addition treating share capital and share premium as unexplained cash credit under section 68. - HELD THAT: - On merits the Tribunal examined documentary evidence furnished by the assessee - including share application forms, cheques, bank deposit slips, investor bank statements, share certificates, board resolutions, incorporation documents and audited financials - to test the three ingredients required under section 68: identity of investors, their creditworthiness and genuineness of transactions. The Tribunal, following its coordinate-bench decisions in the assessee's own and sister concern cases on similar facts, held that the assessee had discharged the primary onus by producing documents establishing identity and creditworthiness and demonstrating that investments were routed through banking channels. The Tribunal further found that the sole incriminating material - statements recorded during survey - had been retracted and, unsupported by corroborative evidence, carried limited evidentiary value. The Revenue had not brought on record independent material to rebut the documentary evidence or to show that unaccounted funds were routed as share capital. Reliance on surrounding circumstances by the authorities was found not to have been supported by adequate inquiry in the record. [Paras 6, 7, 8]

Addition under section 68 deleted; set off of losses allowed as per law.

Availability of set off of losses consequent to deletion - Effect of deletion of addition on the assessee's entitlement to set off of business loss. - HELD THAT: - Having deleted the addition treated as unexplained cash credit, the Tribunal directed that losses, to the extent allowable under law, be set off and the Assessing Officer was directed to recompute income accordingly. The Tribunal treated grounds relating to computation of interest and penalty as consequential and noted no separate adjudication was necessary in the circumstances. [Paras 8, 10]

Set off of losses allowed; AO to recompute income in terms of the order.

Final Conclusion: The appeal is partly allowed: reassessment under section 148 upheld, the addition treating share capital/premium as unexplained cash credit under section 68 is deleted on merits and losses consequentially allowed to be set off; Assessing Officer directed to recompute income. Grounds contesting reassessment dismissed; other grounds consequentially disposed.

Reopening of assessment under section 147/148 - escaped income - deemed full value consideration under section 50C - reference to Valuation Officer under section 50C(2) - nature of asset-agricultural land vs. capital asset under section 2(14) - scope of reassessment proceedings

Reopening of assessment under section 147/148 - escaped income - scope of reassessment proceedings - Validity of reassessment proceedings initiated by notice under section 148/147 for AY.2007-08 - HELD THAT: - The Tribunal examined whether the Assessing Officer had tangible material to justify reopening. The material relied upon was the difference between the value adopted for stamp duty and the consideration declared by the assessee, which the Assessing Officer treated as indicative of income having escaped assessment. The Tribunal found that this difference constituted sufficient tangible material to initiate proceedings under section 148/147 and that the Assessing Officer properly recorded reasons therefor. The assessee's plea that the matter was previously considered in the earlier assessment proceedings did not prevent reopening because the specific discrepancy in declared consideration versus SRO (stamp duty) value related to escaped income. Accordingly, the objection to legality of the reopening was rejected and the reopening was held valid. [Paras 6]

Reopening under section 148/147 for AY.2007-08 was valid; the assessee's challenge to the legality of reassessment is rejected.

Deemed full value consideration under section 50C - reference to Valuation Officer under section 50C(2) - nature of asset-agricultural land vs. capital asset under section 2(14) - Validity of addition under section 50C and whether the matter requires reference to the Valuation Officer and determination of whether the land is an agricultural land not falling within the definition of capital asset - HELD THAT: - The Tribunal accepted that applicability of section 2(14) (whether the land is agricultural and hence not a capital asset) goes to the root of whether a section 50C addition can properly be sustained. The Revenue's contention that the assessee could not re-agitate the nature of the land in reassessment proceedings was rejected to the extent that the nature of the asset is determinative of taxability; the Tribunal observed that the DVO reference under section 50C(2) is mandatory in appropriate cases and that a mechanical application of SRO value without determining whether the asset is a capital asset could result in an unsustainable addition. For these reasons the Tribunal accepted the assessee's contention on this aspect and directed that the matter be restored to the Assessing Officer for fresh adjudication, with a mandatory reference to the Valuation Officer under section 50C(2) to determine fair market value and for the Assessing Officer to decide the nature of the land (agricultural or capital asset) before confirming any addition under section 50C. [Paras 7]

Section 50C addition set aside for fresh adjudication; matter remanded to the Assessing Officer with direction to make the mandatory reference to the Valuation Officer under section 50C(2) and determine whether the land is an agricultural land excluded from 'capital asset' under section 2(14).

Final Conclusion: The reassessment under section 148/147 for AY.2007-08 was held valid on the basis of the discrepancy between SRO/stamp duty value and declared consideration, but the section 50C addition was not sustained at this stage; the Tribunal restored the question of section 50C addition to the Assessing Officer for fresh adjudication after making the prescribed reference to the Valuation Officer and determining whether the land sold is an agricultural land excluded from 'capital asset'.

Revisional jurisdiction under section 263 of the Income Tax Act, 1961 - order of the Assessing Officer erroneous and prejudicial to the interests of the Revenue - application of mind by the Assessing Officer - lack of enquiry versus inadequate enquiry - remand for fresh enquiry is not substitute for recording that order is erroneous - acceptance of documentary evidence and verification during scrutiny

Revisional jurisdiction under section 263 of the Income Tax Act, 1961 - order of the Assessing Officer erroneous and prejudicial to the interests of the Revenue - application of mind by the Assessing Officer - acceptance of documentary evidence and verification during scrutiny - remand for fresh enquiry is not substitute for recording that order is erroneous - Whether the Principal Commissioner of Income Tax rightly exercised jurisdiction under section 263 to set aside the assessment for Assessment Year 2015-16. - HELD THAT: - The Tribunal held that both conditions for exercise of revisional jurisdiction under section 263-(i) that the AO's order is erroneous and (ii) that it is prejudicial to the interests of the Revenue-must coexist. The Assessing Officer had issued notices under section 142(1)/133(6), called for and verified demat statements, contract notes, bank passbooks and broker ledgers, and accepted the genuineness of share purchase/sale and resultant LTCG after scrutiny. The AO thus acted as investigator and adjudicator and took a possible view after examination of the documents; such a view is not unsustainable in law. The PCIT's order set aside the assessment on the ground of lack of enquiry without pointing to material on record establishing that the AO's view was erroneous and prejudicial; merely directing a fresh enquiry or remand cannot substitute for the prerequisite finding that the assessment order is erroneous. The Tribunal relied on co-ordinate bench and High Court/Supreme Court principles that (a) difference of opinion or suspicion alone does not justify exercise of section 263, (b) the Commissioner must record clear reasons showing the order is unsustainable in law, and (c) where the AO has applied his mind and verified documents, interference is not warranted. Applying these principles to the facts, the Tribunal concluded that the PCIT's exercise of revisionary power was not sustainable and restored the assessment framed by the AO. [Paras 8, 12]

PCIT's order under section 263 quashed; assessment completed by the AO in respect of Assessment Year 2015-16 restored.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the order passed under section 263 as unsustainable, and restored the AO's assessment for Assessment Year 2015-16.

Issuance of notice under section 143(2) as a sine qua non for assessment under section 143(3) - jurisdiction of the assessing officer conferred by the CBDT under section 120 and vested under section 124 - notice issued by an officer lacking jurisdiction is null and void ab initio - Section 292BB does not cure complete absence of a statutory notice - assessment framed without valid statutory notice is bad in law

Issuance of notice under section 143(2) as a sine qua non for assessment under section 143(3) - notice issued by an officer lacking jurisdiction is null and void ab initio - Section 292BB does not cure complete absence of a statutory notice - jurisdiction of the assessing officer conferred by the CBDT under section 120 and vested under section 124 - Validity of the assessment framed under section 143(3) when the jurisdictional Assessing Officer did not issue the statutory notice under section 143(2). - HELD THAT: - The Tribunal examined whether the assessment dated 14.03.2015 by ITO, Ward-5(3), Kolkata, is valid when no notice under section 143(2) was issued by the Assessing Officer who, as per the Board's jurisdictional notifications, had jurisdiction over the assessee. The assessee had objected to jurisdiction when served with a 143(2) notice dated 12.08.2013 issued by ITO, Ward-4(3), and the departmental records admitted that no 143(2) notice was issued by ITO, Ward-5(3). The Tribunal applied the established principle that service/issuance of notice under section 143(2) is a prerequisite for valid assessment under section 143(3), and that jurisdiction is conferred by the CBDT's directions under section 120 and vested under section 124; an officer who has not been vested with such jurisdiction cannot validly issue the statutory notice. The Tribunal also followed authority that Section 292BB cures infirmities in service but does not validate a complete absence of notice: citation to CIT vs. Laxman Das Khandelwal was applied for this proposition. Reliance was placed on earlier Coordinate Bench decisions and High Court/Supreme Court precedents holding that notice issued by a non jurisdictional officer is null and that subsequent assessment by the jurisdictional officer without having issued a 143(2) notice is void. Applying these principles to the admitted facts, the Tribunal held that the 143(2) notice issued by ITO, Ward-4(3), was without jurisdiction and therefore that the assessment completed by ITO, Ward-5(3), without having issued a statutory 143(2) notice was bad in law. As the defect goes to the root of jurisdiction and validity of the assessment, the Tribunal quashed the assessment and declined to examine merits of the additions as academic. [Paras 8, 9, 10, 11]

The assessment framed under section 143(3) is quashed as the jurisdictional Assessing Officer did not issue the mandatory notice under section 143(2); the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the assessment for Assessment Year 2012-13 was void for want of issuance of the mandatory notice under section 143(2) by the Assessing Officer vested with jurisdiction, and quashed the assessment order dated 14.03.2015.

Manufacture or production - blending of butane and propane as manufacture - additional depreciation under section 32(1)(iiia) - applicability of DTAA rates for withholding tax - rate of tax on dividend governed by DTAA versus section 115-O - grossing up where withholding borne by recipient under section 195A - remand to Assessing Officer for verification of DTAA conditions

Manufacture or production - blending of butane and propane as manufacture - additional depreciation under section 32(1)(iiia) - Whether the assessee's blending of butane and propane to produce LPG constitutes manufacture or production entitling it to additional depreciation under section 32(1)(iiia). - HELD THAT: - The Tribunal analysed the production process and accepted the factual and technical material showing that propane and butane are transformed, by scientific methods using sophisticated plant and machinery, into a distinct commercial product known as LPG. Relying on precedents treating similar processes as manufacture and on the fact that the activity is subjected to Central Excise as manufacture, the Tribunal held that the cumulative processing effects produce an article commercially distinct from the raw gases. Applying the settled tests that manufacture requires a change resulting in a new and distinct article and that processes integrally connected with production are processes of manufacture, the Tribunal concluded the activity is manufacture and thereby attracts additional depreciation under section 32(1)(iiia). The Tribunal therefore declined to interfere with the CIT(A)'s order allowing the claim. [Paras 2, 3]

Assessee's blending activity is manufacture; order of CIT(A) upheld and Revenue's ground dismissed.

Applicability of DTAA rates for withholding tax - rate of tax on dividend governed by DTAA versus section 115-O - grossing up where withholding borne by recipient under section 195A - Admissibility and legal basis of applying DTAA rate (instead of section 115-O) for tax on dividend distributed to non-resident shareholders; and the legal effect of incidence of tax borne by the resident company on applicability of grossing up under section 195A. - HELD THAT: - The Tribunal examined statutory principles that dividend is income of the shareholder (though incidence of tax is shifted to the payer for administrative convenience) and that 'rates in force' include DTAA rates which, if more beneficial, govern withholding under section 195. The Bench reconciled Supreme Court precedents concerning DDT and taxability of dividends, noting that taxability must be considered from the recipient's perspective and that the statutory scheme fixing incidence on the payer does not negate the applicability of DTAA rates to determine the rate. It held that section 195A does not apply where the incidence of tax is fixed by statute on the payer rather than by agreement, and that even if grossing up were required, the more favourable DTAA rate would apply to the grossed-up amount. Because the factual conditions for applying the DTAA (beneficial ownership, absence of permanent establishment, and other treaty conditions) required verification, the Tribunal admitted the additional ground and directed adjudication by the Assessing Officer in accordance with law. [Paras 8, 9]

DTAA rate can govern withholding if treaty conditions are satisfied; claim admitted but remanded to the Assessing Officer for fresh adjudication and verification of treaty conditions.

Admission of additional grounds by condonation of delay - Whether the assessee's delayed filed cross objections (additional legal grounds) should be admitted by condoning the delay. - HELD THAT: - The Tribunal considered the assessee's explanation that the additional grounds were legal in nature and arose consequent to later judicial pronouncements, and held that such legal claims can be raised at any stage to determine the correct taxable income. In the interests of substantive adjudication and given the nature of the grounds, the Tribunal exercised its discretion to condone the delay and admit the additional grounds. [Paras 5, 6]

Delay of 424 days condoned; additional grounds in cross objections admitted.

Final Conclusion: Revenue appeals dismissed on the manufacturing issue - blending of butane and propane to produce LPG held to be manufacture and additional depreciation allowed; delay in filing cross objections condoned and additional legal grounds admitted; DTAA related claim admitted but remanded to the Assessing Officer for verification and fresh adjudication; cross objections allowed for statistical purposes.

Residence for Treaty Purposes - Place of Effective Management - POEM test for companies (incorporation and management & control) - Treaty Benefits for Shipping Profits under Article 8 - Limitation of Benefits / Main Purpose Test (Article 29) - Abuse of Treaty / Treaty Shopping - Tax Residency Certificate as necessary but not sufficient

Residence for Treaty Purposes - Place of Effective Management - POEM test for companies (incorporation and management & control) - Tax Residency Certificate as necessary but not sufficient - Assessee company is a resident of the UAE for purposes of the Indo-UAE tax treaty. - HELD THAT: - The Tribunal found on the record that the assessee is a company incorporated in the UAE and has produced its commercial licence, memorandum and articles, audited accounts and evidence of an office and expatriate employees with UAE work permits. Material on record showed the principal director lived in UAE for a substantial part of the year (300 days) with entry/exit stamps and a UAE residence permit. The Tribunal held that for a company the test is incorporation plus being managed and controlled wholly in the UAE and that, on the facts, there was reasonable material to conclude management and control were exercised from the UAE. Inferences drawn by the revenue based on the nationality of the director, perceived inconsistencies in financial disclosures, or absence of certain documents which are not statutorily required, were held to be conjectural and insufficient to displace the assessee's evidence. The Tribunal relied on the settled principle that an assessee cannot be required to prove a negative and that the Tax Residency Certificate and accompanying evidence established residency for treaty purposes on the facts of the case. [Paras 7, 8]

Assessee company is a UAE resident under Article 4(1)(b) of the Indo-UAE treaty.

Limitation of Benefits / Main Purpose Test (Article 29) - Abuse of Treaty / Treaty Shopping - Treaty Benefits for Shipping Profits under Article 8 - Limitation of benefits provision (Article 29) and abuse/treaty shopping arguments do not apply; assessee is entitled to treaty protection for shipping profits under Article 8. - HELD THAT: - The Tribunal examined Article 29 which denies treaty benefits where the main purpose of creating an entity was to obtain treaty benefits or where the entity lacks bona fide business activities. The Tribunal noted the assessee was formed in 2000 and had genuine business operations long before commencing shipping operations to/from India in 2015, so the main purpose test could not be invoked retrospectively. There was no material to show lack of bona fide business activities. Given the finding of UAE residency and the factual matrix demonstrating genuine business operations from the UAE, the Article 29 limitation was not attracted. Consequently, under Article 8(1) (profits from operation of ships in international traffic), the assessee's shipping income is taxable only in the resident State and therefore not taxable in India; the Assessing Officer must give relief accordingly. [Paras 9, 10]

Article 29 does not operate to deny treaty benefits on these facts; Article 8 protects the assessee's shipping profits from Indian taxation.

Final Conclusion: Appeal allowed; assessee held to be a UAE resident for treaty purposes and entitled to protection of the Indo-UAE treaty in respect of shipping profits under Article 8; assessment to be revised accordingly.

Liability to deduct tax at source under Section 195 - Explanation 2 to Section 195 regarding obligation of non-residents to deduct TDS - retrospective amendment of tax withholding provisions - lex non cogit ad impossibilia - vicarious liability under section 201

Liability to deduct tax at source under Section 195 - Explanation 2 to Section 195 regarding obligation of non-residents to deduct TDS - retrospective amendment of tax withholding provisions - lex non cogit ad impossibilia - vicarious liability under section 201 - Whether interest under section 201(1A) read with section 195 is chargeable on the assessee for payments made on 11 July 2008 by one non-resident to another non-resident, in light of Explanation 2 to Section 195 introduced by Finance Act, 2012 with retrospective effect. - HELD THAT: - The Tribunal held that tax withholding obligations under section 195 regulate the conduct of the payer and cannot reasonably be imposed retroactively so as to require a payer to comply with a rule that did not exist at the time of payment. Applying the principle lex non cogit ad impossibilia and following the reasoning of the Supreme Court in Engineering Analysis Centre of Excellence, the court concluded it is impossible to expect the assessee to withhold tax on 11 July 2008 on the basis of an Explanation inserted only in 2012. Once it is held that no duty to deduct arose at the time of payment, the foundational premise for demands under section 201 r.w.s. 195, including interest under section 201(1A), fails. The Tribunal further observed that the dispute is tax neutral on the facts since the recipient (the seller) has represented that tax on the capital gains was paid and separate proceedings on taxability are pending; in any event, interest under alternate provisions would operate to protect revenue if taxability is ultimately upheld. Bearing these considerations in mind, and approving the CIT(A)'s approach which applied analogous precedents dealing with retrospective withholding obligations, the Tribunal declined to interfere with deletion of the charge of interest under section 201(1A). [Paras 8, 9, 11]

Levy of interest under section 201(1A) read with section 195 was not sustainable for payments made on 11 July 2008; appeal dismissed and cross objection dismissed as infructuous.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletion of the interest demand under section 201(1A) read with section 195 in respect of the 11 July 2008 payment; the appeal and the cross objection were dismissed.

Addition in respect of unexplained cash payments / on money - reassessment proceedings reopened under section 148 - natural justice - obligation to furnish and confront adverse material and permit cross examination - use of investigation material and third party statements as basis for additions - remand for fresh consideration after complying with principles of natural justice

Addition in respect of unexplained cash payments / on money - natural justice - obligation to furnish and confront adverse material and permit cross examination - remand for fresh consideration after complying with principles of natural justice - Whether the addition of Rs. 29,85,000 as unexplained cash/on money could be sustained without confronting the assessee with the adverse investigation material and without affording opportunity to meet or cross examine the sources relied upon, and what relief is appropriate. - HELD THAT: - The Tribunal noted that the Assessing Officer's reopening and addition relied on investigation material and statements obtained during enquiries into the developer's affairs. Following precedent considered in similar cases, the Tribunal held that adverse material which the Assessing Officer proposes to rely upon must be disclosed to the assessee so as to afford an effective opportunity of rebuttal in accordance with principles of natural justice. Where the basis of addition includes third party statements or investigation documents not supplied to the assessee and without affording opportunity to confront or seek cross examination of witnesses, the assessee is deprived of a fair hearing. Given that the factual matrix showed reliance upon investigation material and third party statements and that the material/evidence quantifying the alleged on money was not placed before the assessee, the Tribunal concluded that the issue requires fresh examination by the Assessing Officer after disclosure of the material and after giving the assessee reasonable opportunity to respond. Accordingly, the assessment was set aside and the matter remitted to the Assessing Officer to re decide the question of addition afresh in accordance with law, including complying with the requirements of natural justice; if the Assessing Officer can establish payment of on money by acceptable evidence, addition may be made, otherwise no addition should follow merely because other buyers admitted on money. [Paras 4, 5]

Assessment set aside and issue remitted to the Assessing Officer for fresh decision after disclosing the adverse material and affording the assessee a reasonable opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the assessment for A.Y 2010 11, and remitted the issue of alleged on money/addition to the Assessing Officer for reconsideration after complying with principles of natural justice (disclosure of relied upon material and reasonable opportunity to the assessee).

Exemption under section 10(23C)(vi) - claim of exemption under section 11 - filing of Form 10BB is directory and may be filed at assessment stage - precedent of coordinate Bench/consistency in adjudication - charitable purpose as defined in section 2(15)

Exemption under section 10(23C)(vi) - filing of Form 10BB is directory and may be filed at assessment stage - precedent of coordinate Bench/consistency in adjudication - Allowability of the assessee's claim of exemption for A.Y. 2016-17 despite Form 10BB being filed after the return and after the ITAT order in earlier year. - HELD THAT: - The Tribunal examined whether the assessee, a duly affiliated school, was entitled to exemption for A.Y. 2016-17 when the approval under section 10(23C)(vi) had been directed by the ITAT in an earlier order and Form 10BB was filed during assessment proceedings. The Tribunal noted that the assessee had relied upon earlier orders in its own case - including an ITAT order directing grant of approval effective from A.Y. 2015-16 - and that those orders were available before the CIT(A)'s order but were not followed by the CIT(A). The Tribunal observed that the Revenue did not place any contrary decision distinguishing the facts. The Tribunal further accepted the assessee's submission, supported by judicial precedent cited in submissions, that filing of the audit report in Form 10BB is directory and not a condition the non-filing of which would, by itself, defeat the substantive entitlement to exemption where approval had been granted or directed; consequently filing at the assessment stage was treated as sufficient compliance in the peculiar facts of the case where approval was granted late. Having found no change in facts and no valid distinction from the coordinate Bench's earlier decision, and in view of the assessee's reliance upon and availability of the prior ITAT direction, the Tribunal held that the CIT(A)'s rejection for failure to file Form 10BB on time and the adverse comments about commerciality were not tenable. [Paras 8, 9]

Appeal allowed; exemption for A.Y. 2016-17 is allowed and the assessment disallowance is set aside for statistical purposes.

Final Conclusion: The assessee's appeal for A.Y. 2016-17 is allowed: the Tribunal held that the assessee was entitled to exemption (directed by prior ITAT orders) and that filing Form 10BB at the assessment stage constituted sufficient compliance in the circumstances; the CIT(A)'s order disallowing the exemption is set aside.

Deduction under section 10B - re-computation of book profit under section 115JB - rectification under section 154 - consequential recomputation - remand to Assessing Officer for fresh consideration

Deduction under section 10B - re-computation of book profit under section 115JB - rectification under section 154 - remand to Assessing Officer for fresh consideration - Whether the appeal against the order passed under section 154 and the cross objection challenging recomputation of book profit under section 115JB should be set aside to the file of the Assessing Officer for fresh consideration. - HELD THAT: - The Tribunal had earlier set aside appeals relating to the claim of deduction under section 10B and directed the Assessing Officer to decide that issue and thereafter recompute book profit under section 115JB. The computation of book profit is consequential upon the determination of the deduction under section 10B. Given that the very issue of entitlement to deduction under section 10B has been restored to the file of the Assessing Officer, any order rectifying computation or recomputing book profit cannot be finally adjudicated without fresh consideration after the section 10B issue is decided. In these circumstances the appeals against the section 154 proceedings and the cross objection contesting recomputation of book profit must be returned to the Assessing Officer to be reconsidered in the light of the Tribunal's directions dated 07.11.2019. [Paras 5]

Appeal and cross objection are set aside to the file of the Assessing Officer for reconsideration after deciding the deduction under section 10B and recomputing book profit under section 115JB in accordance with the Tribunal's directions.

Final Conclusion: The appeal and cross objection are disposed of by remitting the matters to the Assessing Officer for fresh consideration and recomputation of book profit in the light of the decision on the claim of deduction under section 10B; they are treated as allowed for statistical purposes.

Rejection of books of account under section 145(3) - best judgment assessment under section 144 - requirement of material basis for estimating income in best judgment assessment - estimation of profit in civil contract business

Rejection of books of account under section 145(3) - best judgment assessment under section 144 - Validity of rejection of books of accounts and power of the AO to make best judgment assessment where books/vouchers are not produced - HELD THAT: - The Tribunal found on the admitted facts that the authorised representative expressly stated inability to produce bills and vouchers and even agreed to an estimation of profit. Under those circumstances the Assessing Officer was entitled to invoke section 145(3) and proceed to make an assessment in the manner provided by section 144. The decision records that where accounts are incomplete or unsupported by necessary evidence the AO is empowered to complete assessment under section 144. The Tribunal therefore accepted the legal correctness of the AO's action to reject the accounts and to proceed to a best judgment assessment, subject to the requirement that any estimation must be supported by material and not be arbitrary. [Paras 7]

Rejection of books under section 145(3) and resort to best judgment assessment under section 144 is lawful on the facts of the case.

Requirement of material basis for estimating income in best judgment assessment - estimation of profit in civil contract business - Appropriate rate of profit to be adopted in the best judgment assessment and whether the AO's adoption of 5% was justified - HELD THAT: - The Tribunal emphasised that although best judgment assessments involve an element of estimation, the AO must bring on record material or reasons for selecting a particular rate of profit; the estimate must not be arbitrary. The AO had adopted 5% net profit without recording comparable cases or other material to justify that rate, whereas the assessee (through his authorised representative) had proposed a 3% rate based on the nature of civil contract business and the fact that net margins in such work vary with contract nature and location. Considering the absence of any material supporting the AO's 5% rate and the admitted facts about the business and the assessee's concurrence to 3%, the Tribunal held that 3% on gross receipts is a reasonable estimate. [Paras 7, 8]

AO's adoption of 5% was not supported by material and is revised to 3% of gross receipts as a reasonable estimate of profit.

Final Conclusion: The appeal is partly allowed: the Tribunal upheld the legality of rejection of books and best judgment assessment under sections 145(3) and 144 but found the AO's adoption of 5% profit arbitrary and directed estimation of profit at 3% on gross receipts for assessment year 2012-13.

Exemption of long-term capital gains under Section 10(38) - carry forward and set-off of capital loss under Section 74 - treatment of loss where the corresponding income is exempt from tax - definition of capital asset and transfer under Section 2(14) and Section 2(47) - harmonious construction of potentially conflicting statutory provisions

Exemption of long-term capital gains under Section 10(38) - carry forward and set-off of capital loss under Section 74 - treatment of loss where the corresponding income is exempt from tax - harmonious construction of potentially conflicting statutory provisions - Whether long-term capital loss on sale of shares subject to STT can be carried forward and set off under the Act notwithstanding exemption of the corresponding long-term capital gain under Section 10(38). - HELD THAT: - The Tribunal examined Sections 10(38) and 74 read with the general scheme of the Act and held that the two provisions must be read harmoniously and not so as to render Section 74 otiose. Section 10(38) exempts income arising from transfer of certain long-term equity assets; it does not, by necessary implication, eliminate the statutory regime for computation and carry forward of capital losses provided in Section 74. A construction that would deny carry forward of capital loss whenever the corresponding income is exempt would nullify the operation of Section 74 and be inconsistent with principles of harmonious interpretation. The Assessing Officer's and the first appellate authority's interpretation to refuse carry forward on the ground of exemption under Section 10(38) was therefore incorrect and unsustainable. [Paras 9]

The order of the CIT(A) disallowing carry forward of the long-term capital loss was set aside; the loss is not excluded from carry forward under Section 74 merely because the corresponding gain is exempt under Section 10(38).

Definition of capital asset and transfer under Section 2(14) and Section 2(47) - period of holding for rights under an agreement for sale - transferability of actionable claims/rights arising from agreement for sale - Whether the right under the agreement to purchase an under-construction flat is a capital asset and, if so, whether the period of holding for determining long-term capital gain is to be reckoned from the date of the first agreement (2004) so that sale in 2012 attracts long-term capital gains treatment. - HELD THAT: - The Tribunal analysed the inclusive definition of 'capital asset' and the meaning of 'transfer' under Section 2(14) and Section 2(47), including the Explanation that transfer includes disposing of or parting with an asset or any interest therein by agreement. Rights or interests in immovable property (including booking rights or rights to obtain title under an agreement for sale) are capable of being capital assets. Precedent accepting that an agreement for sale creates an actionable right corroborates this view. On the facts, the assessee's right arose on entering the agreement with the builder in 2004 and was therefore held for more than the prescribed period prior to the 2012 transfer. The Assessing Officer's finding that the right crystallised only on a later installment was not accepted; the sale was of the right accruing from the 2004 agreement and hence is a transfer of a long-term capital asset. The AO was directed to compute LTCG accordingly and to verify related deductions and other receipts for recomputation. [Paras 16, 17]

The right under the 2004 agreement is a capital asset and the period of holding is to be reckoned from the date of the first agreement; the transfer effected in 2012 gives rise to long-term capital gains and the appeals on this point are allowed with directions for recomputation.

Final Conclusion: Appeals allowed. For A.Y. 2011-12 the Tribunal held that a long-term capital loss on shares subject to STT can be carried forward under Section 74 notwithstanding exemption of the corresponding gain under Section 10(38). For A.Y. 2013-14 the Tribunal held that the right under the 2004 agreement is a capital asset and the holding period runs from the date of that agreement, so the 2012 transfer attracts long-term capital gains treatment; matters remitted to the AO for recomputation and verification.

Capital expenditure versus revenue expenditure - test of enduring benefit - distinction between fixed and circulating capital - Special provision for full value of consideration under Section 50C - disallowance under section 40A(2)(b) for payments to related persons

Capital expenditure versus revenue expenditure - test of enduring benefit - distinction between fixed and circulating capital - Tax treatment of design charges paid for structural drawings and design services - whether capital or revenue expenditure. - HELD THAT: - Payment made to M/s Corus for preparation of detailed layout and specific structural drawings for the T3 terminal were for obtaining technical support, drawings and designs specific to the airport project and did not result in acquisition of any capital asset by the assessee. Applying the commercial and business necessity approach reflected in the tests of enduring benefit and fixed versus circulating capital, the Tribunal held that an enduring or indefinite advantage does not automatically render an outlay capital if the advantage merely facilitates the assessee's trading operations or is an internal part of the profit earning process. The designs were project specific, non transferable to other undertakings, and did not enlarge or create a permanent asset for the assessee; accordingly the expenditure is revenue in nature and deductible. [Paras 6, 7, 8]

The deletion of the addition by the CIT(A) was upheld and the design charges were held to be revenue expenditure.

Special provision for full value of consideration under Section 50C - Determination of full value of consideration for capital gains on sale of flat where stamp valuation authority value differs from declared sale consideration. - HELD THAT: - The Tribunal construed the statutory scheme under Section 50C to mean that, for purposes of computing capital gains, the value determined by the stamp valuation authority or the consideration received or accruing as a result of the transfer, whichever is higher, is to be treated as the full value of consideration. On the facts the assessee had shown a sale consideration higher than the stamp duty value alleged by the AO; the CIT(A) accepted the assessee's position and the Tribunal directed that capital gains be computed taking the sale consideration declared by the assessee, while permitting the AO to re verify the value with registration authorities and act only if verifiable contra evidence of higher stamp valuation is found. [Paras 11, 12]

Appeal allowed on this ground; capital gains to be computed on the declared sale consideration subject to the AO's verification of stamp valuation records.

Disallowance under section 40A(2)(b) for payments to related persons - Validity of disallowances under section 40A(2)(b) in respect of payments to related persons (vehicle purchase, job work, rentals and accommodation). - HELD THAT: - The Assessing Officer made disallowances alleging payments to related parties were excessive, but did not produce tangible evidence to demonstrate rates above market or any tax avoidance motive. The CIT(A) examined the factual explanations - including commercial reasons for transactions, absence of evidence of excessiveness, and that parties were taxed at maximum marginal rates - and found the AO's observations to be vague and presumptuous. In the absence of material establishing that payments were unreasonable or excessive, the disallowances could not be sustained. [Paras 14, 15]

The CIT(A)'s deletions were upheld and the disallowances under section 40A(2)(b) deleted.

Final Conclusion: The Tribunal dismissed the revenue appeals (including summary dismissal of the appeal relating to AY 2010-11 for being below prescribed CBDT limit), upheld the CIT(A)'s deletion of additions in respect of design charges and disallowances under section 40A(2)(b), and allowed the assessee's appeal on capital gains valuation subject to verification of stamp duty records by the Assessing Officer.

Unexplained cash credit - burden of proof under section 68 - identity, genuineness and creditworthiness of depositor - capitalisation versus revenue expenditure (architect fees) - allowability of interest under section 24(b) - determination of annual letting value / fair rent - precedential effect of Tribunal's earlier order in assessee's own case

Unexplained cash credit - burden of proof under section 68 - identity, genuineness and creditworthiness of depositor - Whether the addition of Rs. 50,00,000 treated as unexplained cash credit under section 68 was sustainable. - HELD THAT: - The Tribunal found that the assessee received the amount by account-payee cheque and refunded it by crossed account-payee cheque; the assessee furnished PAN, address and bank evidence and thereby discharged the primary onus to establish identity and genuineness. No material was placed on record by Revenue during assessment to raise suspicion about the source; the only basis for addition was non-compliance by the payor to notices u/s 133(6). The Tribunal distinguished the precedent relied upon by Revenue as involving abundant corroborative adverse facts not present here, and concluded that the addition could not be sustained. [Paras 10, 11, 12]

Addition under section 68 of Rs. 50,00,000 deleted; appeal allowed on this ground.

Capitalisation versus revenue expenditure (architect fees) - Whether the architect fees of Rs. 13,51,175 were correctly disallowed as capital expenditure and required to be capitalised. - HELD THAT: - The Tribunal recorded that the architect fees were for ongoing project management consultancy and were shown as monthly professional charges in the profit and loss account. However, the assessee received rental income and had already claimed standard deductions and interest; the Tribunal accepted Revenue's position that the expenditure related to the construction project and not to routine administrative maintenance of let-out property. On the facts, the expense was not allowable as a separate revenue deduction. [Paras 13, 14, 15, 16]

Appeal dismissed on this ground; disallowance of architect fees sustained.

Allowability of interest under section 24(b) - determination of annual letting value / fair rent - precedential effect of Tribunal's earlier order in assessee's own case - Whether the disallowance of interest on loan raised for construction and the enhancement of Annual Letting Value by applying 8% on total cost of land and building were sustainable. - HELD THAT: - Both parties agreed the matter was covered by the Tribunal's earlier order in the assessee's own case (ITA No. 6177/Del/2014 for AY 2010-11). That earlier decision held that interest on borrowings used for acquisition and construction is allowable under section 24(b) where material showed borrowings were applied to the construction, and that enhancement of annual letting value was unsupportable absent proper determination of fair rent/standard rent and relevant enquiries. In the absence of any material change in facts, the Tribunal applied its prior reasoning to delete the additions made in relation to interest and ALV. [Paras 17, 18, 19, 20]

Additions in respect of interest and enhancement of annual letting value deleted following the assessee's earlier Tribunal order; appeal allowed on these grounds.

Final Conclusion: The appeal is partly allowed: the addition under section 68 of Rs. 50,00,000 and the additions relating to interest/ALV are deleted in favour of the assessee; the disallowance of architect fees is upheld and the appeal is dismissed on that ground.

Summary order. Writ petition closed as withdrawn with liberty to apply to the revisional authority for interim relief; status quo granted by this Court on 09.03.2021 is continued for two weeks from today; connected miscellaneous petition closed; no costs.

Limitation for filing appeal under Section 128 of the Customs Act, 1962 - statutory period of 60 days plus further 30 days - power to condone delay limited to further period of 30 days - appeals filed beyond 90 days are time barred and not maintainable

Limitation for filing appeal under Section 128 of the Customs Act, 1962 - power to condone delay limited to further period of 30 days - appeals filed beyond 90 days are time barred and not maintainable - Whether the Commissioner (Appeals) had power to condone delay in filing the appeals which were presented beyond 90 days from the date of assessment of the bills of entry. - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals) finding that appeals filed after the mandatory period of 60 days and beyond the further condonable period of 30 days (total 90 days) cannot be condoned under Section 128. The impugned order correctly treated the appeals as filed on 21.11.2017 whereas the assessments were on 08.08.2017 and 10.08.2017, showing delay in excess of the statutory 90 days. The Tribunal relied on the settled legal position that the appellate authority's power to extend time is confined to the proviso period of 30 days and that no provision exists to permit condonation beyond that further period; earlier decisions of this Tribunal, the Gujarat High Court and the Supreme Court on the same proposition were noted as supporting authorities. On that basis the Commissioner (Appeals) had no jurisdiction to entertain condonation beyond 90 days and correctly dismissed the appeals as time barred. [Paras 4, 5]

The appeals before the Commissioner (Appeals) were filed beyond the statutory 90 day period and, in the absence of any power to condone delay beyond the further 30 days, are time barred; the impugned order is upheld.

Final Conclusion: The Tribunal dismissed the present appeal and upheld the Commissioner (Appeals) order rejecting the appeals as time barred because they were filed after the statutory period of 60 days plus the further condonable period of 30 days, beyond which no condonation is permissible.

Civil contempt - wilful disobedience - standard of proof beyond reasonable doubt in contempt proceedings - aiding and abetting contempt - interpretation of interlocutory clarification - rights of directors and corporate democracy - votes "on the strength of" shares referable to an estate

Civil contempt - wilful disobedience - standard of proof beyond reasonable doubt in contempt proceedings - votes "on the strength of" shares referable to an estate - interpretation of interlocutory clarification - Whether Harsh Vardhan Lodha (HVL) was guilty of civil contempt for alleged breach of the Bench's order dated October 1, 2020 - HELD THAT: - The court examined whether HVL's participation in board meetings and continuance as director amounted to wilful disobedience of the Bench's clarification that plaintiffs shall "abide by" certain APL Committee decisions and that HVL be restricted from holding office "on the strength of the shares referable to the estate of PDB". The APL decisions recorded only a possibility that the estate included majority shareholding and did not conclusively quantify the controlling interest. The affidavits and voting figures filed by the alleged contemnors showed that at the AGMs HVL could have been re-appointed on the votes of public shareholders excluding votes referable to the estate of PDB; the APL Committee had in fact voted against re-appointment and some such votes were declared invalid. Contempt being quasi criminal requires proof beyond reasonable doubt of deliberate and intentional breach. Given competing, reasonable interpretations of the order and the absence of unrebutted figures demonstrating that HVL held office solely by virtue of shares referable to the estate, wilful disobedience was not established beyond reasonable doubt. The court declined to probe merits of the testamentary disputes in contempt proceedings and dismissed the contempt against HVL. [Paras 53, 55, 56, 60, 66]

Contempt not proved beyond reasonable doubt; contempt application against HVL dismissed.

Aiding and abetting contempt - civil contempt - rights of directors and corporate democracy - Whether the directors of the four listed companies were guilty of contempt for permitting or aiding HVL to act as director/chairman - HELD THAT: - The court proceeded on the footing that if HVL had not been shown guilty of civil contempt, proceedings against third parties for aiding and abetting must fail. The directors' actions were examined against the Companies Act regime and the fact that the listed companies themselves were not parties to the testamentary suit. The directors produced affidavits, voting statistics and legal advice based explanations which raised a plausible, non contumacious basis for permitting HVL to attend and participate. As the court held that HVL's conduct did not amount to wilful disobedience, the derivative allegation of aiding and abetting likewise could not be sustained. Consequently, contempt proceedings against the directors were dismissed. [Paras 67, 68, 69]

Contempt against the directors not established and dismissed.

Final Conclusion: The contempt applications were dismissed: HVL was not shown beyond reasonable doubt to have wilfully disobeyed the Bench's October 1, 2020 order, and, accordingly, the contempt proceedings against the company directors for alleged aiding and abetting also failed. No order as to costs.

Reduction of share capital - special resolution - just and proper to confirm reduction - Demerger Adjustment Reserve - disclosure in annual accounts - Procedure for Reduction of Share Capital Rules, 2016 - alteration of Memorandum of Association and filing of INC-28 - publication and filing with Registrar of Companies - no bar to action for statutory violations

Reduction of share capital - special resolution - just and proper to confirm reduction - Procedure for Reduction of Share Capital Rules, 2016 - Confirmation of the company's reduction of its issued, subscribed and paid up equity share capital as approved by the members by a special resolution. - HELD THAT: - The Tribunal considered the application under Section 66(1) of the Companies Act, 2013 and the supporting records including the board resolution, the special resolution passed at the Extraordinary General Meeting dated 16.10.2019, audited and provisional financial statements, statutory certificates regarding creditors and accounting treatment, and the publication and service of statutory notices. The Company explained that the capital was in excess of its wants and the Board regarded the excess as not profitably utilizable in the business. Having regard to these materials and the procedural compliance under the Rules, the Tribunal found it just and proper to confirm the reduction of the issued, subscribed and paid up equity share capital of the Company as resolved by the members and approved the proposed form of minutes. The sanction is subject to the reservation that any statutory deficiency or violation discovered later may be pursued in accordance with law.

The Tribunal confirmed the reduction of share capital as approved by the special resolution of 16.10.2019.

Demerger Adjustment Reserve - disclosure in annual accounts - Requirement to disclose in the annual accounts the adjustment of the Demerger Adjustment Reserve against the surplus arising on reduction of capital. - HELD THAT: - The Regional Director queried the origin and proposed treatment of the Demerger Adjustment Reserve which arose on an earlier demerger and the Company explained it resulted from differences in values accounted under Ind AS 103. In response the Company furnished an undertaking that the creation of the Demerger Adjustment Reserve and its adjustment against the surplus on capital reduction will be disclosed in the annual accounts for all financial years ending on and after 31.03.2020. The Tribunal recorded this undertaking and directed that the disclosure be made so stakeholders can see how the reserve has been dealt with in the books of account.

The Tribunal required the Company to disclose the Demerger Adjustment Reserve and its adjustment in the annual accounts for financial years ending on and after 31.03.2020, as undertaken.

Publication and filing with Registrar of Companies - alteration of Memorandum of Association and filing of INC-28 - Mandated procedural compliances following confirmation of reduction including publication of the order and filing altered memorandum and Form INC-28 with the ROC. - HELD THAT: - As part of the confirmation, the Tribunal directed the Company to publish the order in specified Tamil and English newspapers and to file a certified copy of the order with the Registrar of Companies within thirty days. It also directed the necessary alteration to the Memorandum of Association to reflect the reduced share capital and the filing of the copy of the altered memorandum and the approved minutes along with the Order by filing E-form INC-28 within thirty days. The Registry was instructed to prepare the Order in FORM No. RSC-6 as per the Rules.

The Tribunal directed publication of the order and filing of the altered Memorandum and Form INC-28 with the ROC within thirty days and ordered registry action to prepare FORM RSC-6.

No bar to action for statutory violations - Clarification that the confirmation does not confer immunity from any liability for non-compliance with enactments, rules or regulations. - HELD THAT: - The Tribunal expressly clarified that the sanction of reduction does not operate as an exemption from payment of stamp duty, taxes or other charges, nor does it preclude action in accordance with law against persons, directors or officials if any deficiency or violation of any enactment, statutory rule or regulation is found. All compliances under other laws such as SEBI, FEMA and Income Tax are to be observed as applicable.

The Tribunal clarified that confirmation of the reduction is without prejudice to action for statutory violations and that statutory compliances remain obligatory.

Final Conclusion: The Company Petition for confirmation of reduction of issued, subscribed and paid up equity share capital filed under Section 66(1) of the Companies Act, 2013 is allowed; the reduction as approved by the special resolution dated 16.10.2019 is confirmed subject to the Company making the specified disclosures and complying with the procedural and statutory requirements, and without prejudice to any action for violations of law.

Civil contempt - wilful disobedience of court orders and wilful breach of undertaking - territorial jurisdiction of the NCLT/NCLAT over foreign companies and their officers - enforceability of contractual undertakings through affiliates - interim relief by staying termination notices and directing continuation of services - remedial powers under Section 425 of the Companies Act, 2013 read with the Contempt of Courts Act, 1971

Territorial jurisdiction of the NCLT/NCLAT over foreign companies and their officers - remedial powers under Section 425 of the Companies Act, 2013 read with the Contempt of Courts Act, 1971 - Whether the respondents could avoid contempt proceedings by pleading lack of territorial jurisdiction. - HELD THAT: - The Tribunal held that the respondents' repeated contention of lack of territorial jurisdiction was misconceived and cannot be used to defeat obligations arising from contracts and undertakings that affect the petitioner's business. Having entered into the Equity Joint Venture Contract and given undertakings before the Tribunals, the foreign respondents and their affiliates are bound by applicable Indian law and by the undertakings given to the NCLT/NCLAT. The Tribunal therefore rejected the jurisdictional plea as an answer to allegations of breach of the undertaking and interim orders, observing that jurisdictional limitations do not shield parties from compliance where their contractual undertakings and the interim orders are directed to protect an Indian party's interests. [Paras 18, 22]

The plea of lack of territorial jurisdiction is untenable for defeating the contempt/alleged breaches and is rejected.

Civil contempt - wilful disobedience of court orders and wilful breach of undertaking - enforceability of contractual undertakings through affiliates - Whether Respondent Nos. 4 and 5 breached the undertaking and orders of the NCLAT and thus committed civil contempt. - HELD THAT: - After considering the undertaking dated 17.08.2019, the NCLAT order dated 27.08.2019 and the final order dated 17.02.2020, the Tribunal found that Respondent Nos. 4 and 5 acted in breach of the undertaking and the appellate orders by effecting share transfers and by issuing termination communications in respect of the ancillary agreements. The Tribunal considered that the undertaking and the orders had the effect of preserving the status quo as to the agreements and obligations existing on 12.06.2019, and that the terminations and divestment which removed beneficial control and terminated services were contrary to that undertaking and the recorded assurances. On this basis the Tribunal held that Respondent Nos. 4 and 5 are guilty of contempt for wilful disobedience of the recorded undertaking and the NCLAT orders. [Paras 23]

Respondent Nos. 4 and 5 have committed contempt of the NCLAT orders and the undertaking.

Interim relief by staying termination notices and directing continuation of services - remedial powers under Section 425 of the Companies Act, 2013 read with the Contempt of Courts Act, 1971 - Whether interim relief should be granted to preserve the petitioner's business pending further proceedings in the contempt petition. - HELD THAT: - Exercising its remedial powers under Section 425 read with the Contempt of Courts Act, the Tribunal directed that all respondents (other than the proforma GETL) and particularly Respondent Nos. 4 and 5, must fulfil their obligations as on 12.06.2019 as directed by the NCLAT, reverse the impugned sale of shares so as not to affect the petitioner's and GETL's business, and that the effect of the termination letters dated 24.04.2020, 18.05.2020 and 01.11.2020 be stayed. The Tribunal further recorded that failure to comply would invite initiation of penal steps under the Contempt of Courts Act and posted the matter for further hearing. [Paras 23]

Interim directions issued: respondents to perform obligations as on 12.06.2019, sale transfers to be reversed so as not to affect business, termination letters stayed; non-compliance will invite contempt proceedings.

Final Conclusion: The Tribunal found that Respondent Nos. 4 and 5 breached their undertaking and the orders of the NCLAT, held that the jurisdictional objection cannot be used to avoid those obligations, stayed the effect of the termination communications and directed all respondents (except the proforma GETL) to comply with obligations as on 12.06.2019, warning that failure to comply will lead to initiation of contempt proceedings; the contempt matter is posted for further hearing.

Scheme of Demerger and Arrangement - sanction under Sections 230 to 232 of the Companies Act, 2013 - appointed date and effectivity of corporate reorganisation - preservation of books and papers under Section 239 of the Companies Act, 2013 - statutory compliances and liabilities not extinguished by sanction - filing of order for confirmation in Form INC-28 - compliance with Companies (Compromises, Arrangements and Amalgamation) Rules, 2016

Scheme of Demerger and Arrangement - sanction under Sections 230 to 232 of the Companies Act, 2013 - appointed date and effectivity of corporate reorganisation - The Tribunal sanctioned the revised Scheme of Demerger and Arrangement and fixed its appointed date and operative effectivity. - HELD THAT: - On consideration of the Scheme, the records, the Regional Director's report and the petitioners' replies and undertakings, the Tribunal held that the proposed Scheme is fair and reasonable, not contrary to public policy and not violative of any provision of law. The Tribunal noted compliance with the statutory requirements under Sections 230-232 and the applicable Rules, accepted the petitioners' modification of the appointed date, and declared that the Scheme shall become effective from the appointed date and operative from filing of the sanction order with the Registrar of Companies. [Paras 12, 13, 14]

The revised Scheme of Demerger and Arrangement is sanctioned; it shall be effective from the appointed date (01.04.2020) and operational on filing of the order with the Registrar of Companies; the Company Petition is disposed of.

Preservation of books and papers under Section 239 of the Companies Act, 2013 - statutory compliances and liabilities not extinguished by sanction - filing of order for confirmation in Form INC-28 - compliance with Companies (Compromises, Arrangements and Amalgamation) Rules, 2016 - The Tribunal issued directions for consequential statutory compliances and preservation of records following sanction of the Scheme. - HELD THAT: - As part of the sanction, the Tribunal required the petitioner companies to preserve books of accounts and records and not to dispose of them without prior permission of the Central Government under Section 239. The Tribunal clarified that sanction does not exempt the parties from stamp duty, taxes, other charges or permissions required by law. It directed filing of the sanctioned order and Scheme with the Registrar of Companies (including submission in the prescribed form), publication of the sanction in specified newspapers, and strict compliance with all undertakings given by the petitioners, including payment of due taxes and statutory dues. The Registrar was directed to furnish certified copies and all concerned authorities to act on authenticated copies. [Paras 13]

Petitioner companies directed to preserve records, complete all filings and publications, comply with undertakings and statutory requirements, and to take consequential steps required under the Act; sanctions do not relieve them of tax or other statutory liabilities.

Final Conclusion: The Tribunal sanctioned the revised Scheme of Demerger and Arrangement as fair and reasonable, fixed the appointed date as 01.04.2020 with effect from filing of the sanction order, and directed specified consequential statutory compliances, preservation of records and adherence to undertakings; the company petition is disposed of.

Amendment of scheme of amalgamation - dispensation of meetings of shareholders and unsecured creditors - consent affidavits of shareholders and unsecured creditors - share valuation and share exchange ratio - filing amended petition within stipulated time - service of amended petition on statutory authorities

Amendment of scheme of amalgamation - dispensation of meetings of shareholders and unsecured creditors - consent affidavits of shareholders and unsecured creditors - share valuation and share exchange ratio - Application for amendment of the scheme of amalgamation was allowed. - HELD THAT: - The Tribunal examined the applicants' application for amendment and the supporting material including board resolutions approving the amended scheme, written consents and affidavits of shareholders and unsecured creditors, and a fresh share valuation report by an IBBI registered valuer. The applicants had earlier obtained dispensation of meetings and had filed the confirmation petition which was pending. The fresh valuation was produced and the Tribunal noted that the share exchange ratio remained unchanged. On that basis and having considered the submissions, the Tribunal permitted the proposed amendment withdrawing one party from the scheme and allowed amendment of the petition and scheme.

Proposed amendment to the scheme of amalgamation allowed; applicants directed to file the amended petition and amended scheme.

Filing amended petition within stipulated time - service of amended petition on statutory authorities - Directions issued as to filing, service and listing for final hearing of the amended petition. - HELD THAT: - The Tribunal directed applicant nos. 1, 2, 3, 4 and 6 to file the amended petition along with the amended scheme within two weeks from the date of the order. The applicants were ordered to serve notice of the amended petition and amended scheme on the Central Government through the Regional Director (Eastern Region), Registrar of Companies (West Bengal), the Income Tax Department, the Official Liquidator, the High Court at Calcutta and the Reserve Bank of India. The amended petition was listed for final hearing on the specified date, subject to being defect free.

Applicants to file amended petition within two weeks, serve prescribed authorities, and amended petition listed for final hearing on the specified returnable date.

Final Conclusion: The Tribunal allowed the application to amend the scheme of amalgamation (permitting withdrawal of one applicant), directed filing of the amended petition and scheme within two weeks, required service on specified statutory authorities, and fixed the amended petition for final hearing on the returnable date, subject to compliance with formalities.

Operational creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice under Section 8 of the Code - proof of debt and invoices - acknowledgement of liability - limitation under the Limitation Act - admissibility of petition

Limitation under the Limitation Act - acknowledgement of liability - admissibility of petition - Whether the Section 9 petition was time-barred and therefore not eligible for admission. - HELD THAT: - The Tribunal noted the last transaction/payment in the ledger was on 17.04.2013 while the balance confirmation relied upon by the operational creditor bears the date 07.09.2019. Applying the principle in acknowledgement of liability under Section 18(1) of the Limitation Act, a fresh period of limitation runs only from the date of a written acknowledgement signed by the party against whom the right is claimed. The balance confirmation dated 07.09.2019 was beyond three years from the last transaction date of 17.04.2013 and therefore did not revive the claim within the requisite limitation period. In consequence, the claim was held to be barred by limitation and the petition under Section 9 of the Code was not admissible. [Paras 14, 15, 16]

The petition was dismissed as time barred and not eligible for admission; the connected I.A. was disposed of.

Final Conclusion: CP(IB) No. 166 of 2020 under Section 9 of the IBC filed by the operational creditor was rejected as barred by limitation; I.A. No. 68 of 2021 disposed of; no order as to costs.

Enforcement of sale certificate during CIRP - possession on as is where is basis - duty of the Resolution Professional under Section 25 of the Insolvency and Bankruptcy Code - requirement of contemporaneous inspection memo/inventory for claiming missing parts - abuse of process of law

Enforcement of sale certificate during CIRP - possession on as is where is basis - requirement of contemporaneous inspection memo/inventory for claiming missing parts - Whether the applicant is entitled to relief for alleged missing parts of machineries sold prior to CIRP when possession was handed over on an "as is where is" basis and no contemporaneous inspection/inventory was produced - HELD THAT: - The Tribunal found that the sale of the machineries to the applicant had been confirmed and a sale certificate issued, and physical possession was handed over by the Resolution Professional on 09.09.2020 on an "as is where is" basis, which was accepted by the applicant. The applicant failed to produce any contemporaneous inspection memo or inventory prepared at the time of inspection or at the time of handing over/taking over possession. The applicant later filed an affidavit conceding that, in view of the possession given based on inspection dated 10.01.2020, none of the specific prayers were required except a residuary prayer. In the absence of any inventory or inspection record prepared by either party or the RP, the Tribunal held it was impossible to identify which parts, if any, were missing at relevant points of time. The Tribunal emphasised that preparing an inspection memo/inventory at the time of handing over/taking over is a mutual duty and that absence of such records precludes meaningful adjudication of the claim for missing parts. [Paras 12, 13, 14, 15, 16]

The application seeking relief for missing parts is not maintainable and is rejected for want of contemporaneous inventory/inspection records and because the applicant accepted possession on an "as is where is" basis.

Duty of the Resolution Professional under Section 25 of the Insolvency and Bankruptcy Code - abuse of process of law - Whether any remedial direction is required against the Resolution Professional for alleged failure to prepare inventories and thereby avoid future disputes - HELD THAT: - While observing that it is the duty of the Resolution Professional under Section 25 of the IBC to act diligently and that preparation of inspection memos and inventories would have avoided the present dispute, the Tribunal found that neither party produced such records despite directions. The Tribunal recorded that the instant application, lacking evidentiary foundation and in light of the applicant's affidavit, amounted to a misconceived proceeding and a sheer abuse of process of law. The Tribunal nevertheless reiterated the RP's general duty to maintain proper records to prevent disputes, but declined to grant any specific relief against the RP in this application. [Paras 16, 17]

No specific remedial direction issued; the Tribunal rejected the application as misconceived and an abuse of process while noting the RP's duty under Section 25 to maintain proper records.

Final Conclusion: The application is dismissed as not maintainable and rejected: the applicant accepted possession on an "as is where is" basis, failed to produce any contemporaneous inspection/inventory to substantiate the claim of missing parts, and the matter is found to be a misconceived proceeding amounting to abuse of process; no costs awarded.

Existence of debt and default under the Insolvency and Bankruptcy Code, 2016 - corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 - force majeure and contractual extension clauses in agreements for delivery of possession - use of consumer forum orders as evidence of debt and default - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Existence of debt and default under the Insolvency and Bankruptcy Code, 2016 - force majeure and contractual extension clauses in agreements for delivery of possession - use of consumer forum orders as evidence of debt and default - Whether the Petitioners have established existence of debt and default so as to admit the Section 7 petition against the Corporate Debtor - HELD THAT: - The Bench found that Petitioners entered into agreement(s) to sell in 2012 and paid sums for flats which were to be delivered within the contractual period subject to a 12 month grace and force majeure. The Corporate Debtor has not handed over possession nor refunded the monies; the total outstanding as claimed is reflected in the documents placed before the Tribunal. The contractual clauses permitting reasonable extension in specified contingencies and preserving the seller's right to suspend or refund without interest were considered but were not accepted as negating liability on the facts: the Court noted the Corporate Debtor's failure to deliver possession and failure to return monies. The Bench also placed weight on the order of the Consumer Disputes Redressal Forum directing delivery of possession, payment of interest and execution of sale deed in favour of a petitioner as corroborative of the existence of debt and default. On the record the Tribunal concluded that the essential ingredients of debt and default required for admission under Section 7 are established and that the defence of contractual extension/force majeure did not rebut the claim of default in this case. [Paras 15, 16, 17, 18]

Section 7 petition admitted on the ground that debt and default are established.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - Direction of moratorium and appointment of Interim Resolution Professional consequent to admission of the Section 7 petition - HELD THAT: - On admission of the petition, the Bench applied the statutory consequences flowing from admission. A moratorium was directed prohibiting institution or continuation of suits or proceedings against the Corporate Debtor, transfer or disposal of its assets, actions to enforce security interests including under SARFAESI, and recovery of property occupied by the Corporate Debtor; supply of essential goods and services was protected as specified. The Bench ordered immediate public announcement of the corporate insolvency resolution process and appointed an Interim Resolution Professional by name and registration number to carry out duties under the Code. The Registry was directed to communicate the order to the parties and the Interim Resolution Professional without delay. [Paras 18, 19]

Moratorium ordered and Mr. Neehal Mahamulal Pathan appointed as Interim Resolution Professional; public announcement and communication directions given.

Final Conclusion: The Section 7 petition was admitted: the Tribunal found existence of debt and default despite contractual extension/force majeure pleas, ordered a moratorium in terms of the Code, directed public announcement of CIRP and appointed an Interim Resolution Professional to manage the insolvency proceedings.

Existence of 'debt' and 'default' - Admission of Section 9 application - Jurisdiction of Adjudicating Authority - Limitation period - Appointment of Interim Resolution Professional - Moratorium under Section 14 - Operational Creditor's obligation to meet IRP's initial expenses

Existence of 'debt' and 'default' - Limitation period - Jurisdiction of Adjudicating Authority - Proof of operational debt and default, and the Adjudicating Authority's jurisdiction and timeliness of the application. - HELD THAT: - The Operational Creditor produced delivery challan-cum-weighment slips, GST certificate and bank statement to establish supply of materials and outstanding dues, thereby proving existence of 'debt' and 'default'. The Adjudicating Authority found that, at the time of filing (30.09.2019), its pecuniary jurisdiction covered debts of one lakh rupees and above and that the registered office of the Corporate Debtor lay within the State of Tamil Nadu. The alleged debt fell within the period from 01.04.2018 to 17.07.2019, and the application was held to be within the period of limitation. [Paras 4]

The Operational Creditor established debt and default; the application was within limitation and the Adjudicating Authority had jurisdiction.

Admission of Section 9 application - Appointment of Interim Resolution Professional - Whether the Section 9 application should be admitted and an Interim Resolution Professional appointed. - HELD THAT: - Having found existence of debt and default and satisfied jurisdictional and limitation requirements, the Adjudicating Authority admitted the application under Section 9(5) of the Code and initiated the Corporate Insolvency Resolution Process. As the Operational Creditor had not nominated a resolution professional, the Tribunal appointed an Interim Resolution Professional from the list furnished by the Insolvency and Bankruptcy Board of India, subject to usual conditions of disclosures and absence of pending disciplinary proceedings. [Paras 6, 11]

The Section 9 application was admitted and the Corporate Insolvency Resolution Process was initiated; an Interim Resolution Professional was appointed.

Moratorium under Section 14 - Operational Creditor's obligation to meet IRP's initial expenses - Consequences of admission: imposition of moratorium and direction regarding payment to the Interim Resolution Professional. - HELD THAT: - Upon admission, the moratorium prescribed by Section 14(1) became operative, restraining institution or continuation of proceedings, transfer or disposal of assets, enforcement of security interests and recovery of property by owners or lessors, subject to the exceptions and duration set out in Sections 14(2)-14(4). The Operational Creditor was directed to pay a specified sum to the Interim Resolution Professional to meet initial expenses, conditional upon the IRP filing the required declaration and disclosures under the Regulations. [Paras 6, 7, 8, 9]

Moratorium under Section 14 was imposed with its statutory scope and duration; the Operational Creditor was directed to pay the initial amount to the Interim Resolution Professional on compliance by the IRP.

Effect of part payment by Corporate Debtor - Effect of part payments made by the Corporate Debtor on the operational debt and the proceedings. - HELD THAT: - The Adjudicating Authority recorded that the Corporate Debtor had made part payments towards the outstanding debt, the last payment of a specified amount remained unpaid and cheques issued by the Corporate Debtor were dishonoured. These facts were noted but did not preclude admission of the Section 9 application once debt and default were established. [Paras 5]

Part payments by the Corporate Debtor were acknowledged; outstanding liability remained and did not prevent admission of the application.

Final Conclusion: The Section 9 petition filed by the Operational Creditor was admitted; the Corporate Insolvency Resolution Process was initiated, an Interim Resolution Professional was appointed on the conditions stated, the moratorium under Section 14 came into effect, and the Operational Creditor was directed to pay the Interim Resolution Professional's initial expenses.

Regular bail under Section 439 CrPC - Section 45 PMLA proviso (women exemption) - requirement under Section 45(1)(ii) PMLA - anticipatory bail compliance - custodial duration and concluded investigation/remand period - conditions of bail - absence of receipt of proceeds/monetary benefit

Regular bail under Section 439 CrPC - Section 45 PMLA proviso (women exemption) - requirement under Section 45(1)(ii) PMLA - Enlargement of the applicant on regular bail in a PMLA prosecution despite Section 45(1)(ii) requirements - HELD THAT: - The Court applied its discretion under Section 439 CrPC to grant regular bail to the applicant in proceedings arising out of the ECIR. It held that the proviso to Section 45 of the PMLA carves out an exception for a woman accused, thereby exempting her from the additional satisfaction requirement contained in Section 45(1)(ii). Having regard to the applicant's gender and the proviso, the Court concluded that the case was not required to meet the higher threshold of Section 45(1)(ii) before bail could be considered. The Court expressly declined to traverse the evidence in detail, confining itself to a prima facie satisfaction that exercise of discretion in favour of bail was appropriate. [Paras 8, 9]

Applicant enlarged on regular bail despite Section 45(1)(ii) because the proviso to Section 45 applies to a woman accused.

Custodial duration and concluded investigation/remand period - absence of receipt of proceeds/monetary benefit - anticipatory bail compliance - Relevance of custody period, concluded investigation, lack of material showing receipt of proceeds, and prior anticipatory bail in favour of bail grant - HELD THAT: - The Court noted that the investigation qua the applicant was complete and that she had been in custody for a prolonged period. It recorded that there was no material on record indicating that the applicant had personally received proceeds of the scheduled offence. The Court further relied on the fact that in the original criminal proceedings the applicant had been granted anticipatory bail and had complied with its conditions. In absence of any special circumstances pointed out by the prosecution and given these facts, the Court found it appropriate to exercise its discretionary power to grant bail subject to conditions. [Paras 8, 9]

Custodial period, concluded investigation, absence of evidence of receipt of proceeds, and prior compliance with anticipatory bail weighed in favour of granting bail.

Conditions of bail - Imposition of conditions while granting regular bail - HELD THAT: - While granting bail, the Court imposed specific conditions to safeguard the investigation and the trial process: execution of a personal bond with a surety, prohibition on misuse of liberty or obstructing investigation, surrender of passport, restriction on leaving the State without permission, periodic appearance at the police station for a limited period, and disclosure of residential address and prior permission for any change. The Court also permitted the trial Court to vary or relax these conditions in accordance with law and clarified that its preliminary observations should not influence the trial court's assessment of evidence. [Paras 10, 12, 13]

Bail granted subject to specified conditions and with liberty for the trial Court to modify them; trial Court not to be influenced by preliminary observations.

Final Conclusion: The petition for regular bail is allowed: the applicant, being a woman and in custody with investigation complete and no material showing receipt of proceeds, is enlarged on regular bail under Section 439 CrPC subject to specified conditions; the trial Court may modify conditions and the preliminary observations shall not prejudice trial.

Interest on delayed payment of service tax - rate of interest under Notification No.13/2016-ST - distinction between tax collected and tax payable - cum-tax benefit

Interest on delayed payment of service tax - rate of interest under Notification No.13/2016-ST - distinction between tax collected and tax payable - Whether interest on the settled service tax liability is payable at 24% or at 15% under the Notification dated 01.03.2016. - HELD THAT: - The notification prescribes two rates of simple interest: 24% where a person has specifically collected any amount as service tax but failed to remit it to the Central Government by the due date; and 15% in any other case. The petitioner maintained that its invoices did not specifically state or collect service tax from recipients during the relevant period and the Settlement Commission nevertheless applied the 24% rate by presuming collection. The Court accepted that the petitioner did not specifically collect service tax as reflected in the invoices and that the earlier grant of cum-tax benefit supports the petitioner's position. Accordingly, charging interest at 24% on the basis of the notification was found to be arbitrary and unsustainable where there was no specific collection; the appropriate rate is therefore 15% for such cases.

Interest on the settled service tax liability shall be charged at 15% per annum instead of 24% under the Notification dated 01.03.2016.

Cum-tax benefit - interest on delayed payment of service tax - Applicability of demand for the first quarter of 2011-12 in view of the petitioner commencing services in July 2011. - HELD THAT: - The Court noted that the petitioner commenced services after registration in July 2011, and therefore no demand could properly be made for the first quarter of 2011-12. This factual finding was used in examining the scope of the demand and supports the adjustment of liability consistent with the timing of commencement of services and the grant of cum-tax benefit earlier ordered by the Court.

Demand cannot stand for the first quarter of 2011-12 since services commenced in July 2011; liability is to be adjusted accordingly.

Final Conclusion: Impugned order modified to the extent that interest shall be charged at 15% per annum (and not 24%) in respect of the settled service tax liability; demand for the first quarter of 2011-12 cannot be sustained as services began in July 2011.

Service as activity carried out for another for consideration - declared services - agreeing to tolerate or do an act - negative list exclusion - trading of goods - principal to principal sale - transfer of title - requirement to read contract as a whole - precedential value of tribunal decisions despite pendency of appeal - writ jurisdiction where perversity, unreasonableness or action without jurisdiction is writ large

Principal to principal sale - transfer of title - negative list exclusion - trading of goods - service as activity carried out for another for consideration - Whether the trade discounts/credit notes received by the petitioner constituted a taxable service or formed part of a sale transaction on principal to principal basis and thus fell within the negative list exclusion for trading of goods. - HELD THAT: - The Court examined the dealership agreements and sample invoices and concluded that the petitioner purchased goods from manufacturers by way of sale and that the relationship, read as a whole, was of seller and buyer on principal to principal basis. The statutory definition of "service" requires an activity carried out for another for consideration and expressly excludes transfer of title in goods by sale. Incidental contractual clauses obliging the dealer to follow business processes or performance targets did not convert the sale into a declared service where no separate consideration was paid for those obligations and the trade discounts were gratuitous or discretionary. The Court adopted reasoning from an earlier Advance Ruling addressing Section 66E(e) and applied the principle that contractual documents must be read as a whole rather than isolating clauses to characterize the transaction as a service.

The trade discounts/credit notes did not constitute a taxable service; the transaction was a sale on principal to principal basis and fell within the negative list exclusion for trading of goods.

Declared services - agreeing to tolerate or do an act - requirement to read contract as a whole - Whether the adjudicating authority correctly characterized the petitioner's activity as a "declared service" under the clause relating to agreeing to tolerate or do an act. - HELD THAT: - The adjudicating authority placed undue emphasis on select clauses of the dealership agreements to treat the activity as a declared service under Section 66E(e). The Court held that there was no agreement or separate contractual obligation by the petitioner to provide such a service for consideration; volume discounts were not contractual rights and the agreements, when read as a whole, established sale transactions. Consequently, the characterization as a declared service was unreasonable.

The finding that the petitioner provided a declared service under Section 66E(e) was unreasonable and unsustainable.

Precedential value of tribunal decisions despite pendency of appeal - binding precedent and duty to follow Tribunal decisions - Whether the adjudicating authority was justified in disregarding binding Tribunal decisions on the ground that appeals against them were pending before higher courts. - HELD THAT: - The Court noted that various CESTAT decisions favorable to the petitioner had been placed before the adjudicating authority. The authority declined to follow those decisions solely because appeals were pending before the Supreme Court and no interim orders had been granted. The Court reiterated that pendency of an appeal does not strip a decision of its precedential value and that the adjudicating authority was bound to follow the Tribunal decisions. By deciding contrary to binding tribunal precedents, the adjudicating authority acted without jurisdiction.

The adjudicating authority erred in disregarding binding Tribunal decisions merely because appeals were pending; those decisions should have been followed.

Writ jurisdiction where perversity, unreasonableness or action without jurisdiction is writ large - proceedings without jurisdiction - effect on alternative remedy - Whether the writ petition was maintainable notwithstanding the existence of an alternative remedy of appeal. - HELD THAT: - Relying on the parameters permitting bypass of alternative remedies where perversity or unreasonableness is manifest, the Court found that the adjudicating authority's order was vitiated by its failure to follow binding precedents and by reaching an unreasonable conclusion contrary to the contractual documents. Such action rendered the proceedings without jurisdiction. In that situation the rule of exhaustion of alternative remedy did not preclude interference under Article 226.

The writ petition was maintainable; the Court rightly exercised writ jurisdiction to quash the impugned order which was rendered without jurisdiction.

Final Conclusion: The impugned adjudication confirming service tax, interest and penalty was quashed. The Court held that the transactions were sales on a principal to principal basis falling within the negative list exclusion for trading of goods; the authority erred in treating the trade discounts as a declared service and in disregarding binding Tribunal decisions. Writ relief was appropriate as the order was unreasonable and without jurisdiction. No costs.

Right to personal hearing - adequacy of service of hearing notice - remand for fresh consideration after hearing - abuse of process of court - administrative discretion to fix hearing dates

Right to personal hearing - adequacy of service of hearing notice - Validity of the personal hearing notices dated 01.03.2021 and whether adequate opportunity was afforded to the petitioner. - HELD THAT: - The Court noted that it had earlier directed that a personal hearing be afforded and orders be passed afresh. The notices issued in compliance reached the petitioner on 11.03.2021 for a hearing date of 22.03.2021, leaving more than ten days to prepare and attend. The Court found no infirmity in issuing the notices on 01.03.2021 and in the manner served, and observed that the petitioner had ample time to produce documents and make objections. The Court contrasted the long history of litigation since 2001, observing that the petitioner had sufficient time over the years to be ready for hearing.

The personal hearing notices were valid and afforded adequate opportunity; no fault was found with service or timing.

Administrative discretion to fix hearing dates - right to personal hearing - Whether fixing the same personal hearing date for all five assessment years was impermissible or rendered the hearing opportunity ineffective. - HELD THAT: - The Court emphasised that it is for the authority to decide how many matters to hear on a given day. Although the petitioner complained that all five assessment years were fixed on the same date leaving insufficient time, the Court held that this administrative decision did not by itself amount to a denial of the right to be heard. The petitioner had been given multiple earlier opportunities and, in any event, received notice with more than ten days' time to prepare.

Fixing the same date for personal hearings of the five assessment years was not in itself infirm; the arrangement did not vitiate the hearing opportunity.

Remand for fresh consideration after hearing - abuse of process of court - Relief to be granted in the writ petitions filed before the scheduled personal hearing and the appropriate course of action. - HELD THAT: - Although the Court found the petitioner's challenge to the notices unsustainable and characterised the belated writ petitions filed two days before the hearing as an abuse of process, the Court, mindful of pandemic conditions and the fact that the petitions were filed before the hearing date, directed a pragmatic course. The Court ordered that the respondent fix a fresh date (12.05.2021) for personal hearing for all the assessment years and thereafter pass orders afresh in accordance with law. The Court made clear that if the petitioner fails to avail the opportunity on the re-fixed date, the respondent is at liberty to decide the matters on merits.

Writ petitions disposed; matters remitted for fresh personal hearing on 12.05.2021 and for passing of fresh orders; failure to appear would permit the authority to decide on merits.

Final Conclusion: The petitions are dismissed on merits of the objections to the notices; however, in the interests of remedy and considering pandemic circumstances the matters are remitted for fresh personal hearing on 12.05.2021 and for fresh orders to be passed thereafter; if the petitioner defaults, the authority may decide on merits.

Principles of natural justice - Opportunity to be heard - Substantial justice - De novo assessment - Rectification under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - Revival of earlier orders on non-appearance

Principles of natural justice - Opportunity to be heard - Whether the Assessing Authority's refusal to grant a further adjournment and proceeding to frame assessment violated principles of natural justice. - HELD THAT: - The Assessing Authority had afforded multiple opportunities to the petitioner but the petitioner repeatedly sought adjournments on the ground that supporting materials were unavailable. On the third occasion a further adjournment was refused and assessment was framed. The court found that the Assessing Authority's refusal to grant an additional extension in these circumstances could not be faulted and did not amount to a breach of principles of natural justice. The reasoning rests on the sequence of repeated adjournment requests and the Assessing Authority's exercise of discretion in refusing a further extension after previous opportunities had been given. [Paras 3]

Refusal of a further adjournment did not violate principles of natural justice; the Assessing Authority's action in framing the assessment was not faulted on that ground.

Rectification under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - Substantial justice - De novo assessment - Revival of earlier orders on non-appearance - Whether the impugned assessment orders and the rejection of rectification applications should be sustained or whether the petitioner should be granted an opportunity to place material before the Assessing Authority. - HELD THAT: - Although the Assessing Authority rejected the reconciliation statements filed with the rectification applications on the ground of delay (filed after one year and five months), the court observed that in the interests of substantial justice the petitioner should be afforded an effective opportunity to substantiate its case. The court did not decide the merits of the assessments or the rectification claims; instead it set aside the impugned orders solely to permit the petitioner to be heard afresh. Directions were issued that the petitioner shall appear before the Assessing Authority on the specified date with all materials, be heard either physically or via video conference, and that after hearing and considering any furnished materials, the Assessing Authority shall pass assessment orders de novo within four weeks. The order further provided that if the petitioner fails to appear, the opportunity extended shall lapse and the impugned orders will stand revived automatically. [Paras 4, 5, 6]

Impugned assessment orders and rejection of rectification applications set aside solely to grant the petitioner one final effective opportunity to be heard; matter remanded for de novo assessment within four weeks after the fresh hearing, with revival of earlier orders if the petitioner fails to appear.

Final Conclusion: Writ petitions disposed by setting aside the impugned assessment orders for the limited purpose of granting the petitioner one final effective hearing; petitioner to appear before the Assessing Authority on the specified date with all materials and assessments to be re determined de novo within four weeks, failing which the original orders revive automatically.