TaxTMI Updates e-Newsletter
May 08,2021

Long-Term Capital Gains exemption under section 10(38) - exemption for share of profit of a firm under section 10(2A) - addition based on suspicion, surmise or conjecture impermissible without evidence - remand for verification of contract notes/ledger with stock exchange records - onus on Revenue to prove transactions are bogus

Long-Term Capital Gains exemption under section 10(38) - addition based on suspicion, surmise or conjecture impermissible without evidence - remand for verification of contract notes/ledger with stock exchange records - onus on Revenue to prove transactions are bogus - Validity of disallowance of exemption claimed under section 10(38) in respect of alleged long term capital gains. - HELD THAT: - The Tribunal examined the Assessing Officer's findings and the remand report. The Assessing Officer, after verification with the Stock Exchange, accepted that the contract notes and ledger accounts produced by the assessee matched the Stock Exchange data. The ld. CIT(A) nevertheless sustained the addition on a hypothesis of a pre planned scheme to convert unaccounted income into exempt income, relying on probability and SEBI orders against certain directors which were not shown to have any direct link to the assessee's transactions. The Tribunal held that once the AO's remand report accepted the genuineness of contract notes and broker records, and in absence of any independent corroborative evidence that the assessee's transactions were pre arranged or bogus, the addition could not be sustained. The Court reiterated the settled principle that suspicion, surmise or conjecture cannot substitute for evidence and that the burden to prove a transaction to be bogus rests on Revenue. SEBI orders post dating the assessee's purchases and lacking a live link to the impugned transactions could not be read against the assessee. Accordingly the addition based on mere probability was held unsustainable and the exemption under section 10(38) was allowed. [Paras 22, 23, 24, 25, 26]

Addition of exempted long term capital gains was deleted; ground allowing exemption under section 10(38).

Exemption for share of profit of a firm under section 10(2A) - onus on Revenue to verify documentary evidence - Whether share of profit of the firm claimed as exempt under section 10(2A) is exigible to tax or allowable as exempt income. - HELD THAT: - The assessee produced firm returns, computation, partners' particulars and supporting books to demonstrate that the amount claimed as share of profit arose from the firm 'Desai Gas Agency' and was taxable (exempt) under section 10(2A). The Assessing Officer and the ld. CIT(A) had lumped this component with the disallowed LTCG without examining the documentary evidence. On review of the records the Tribunal found the evidences in order and concluded that the amount constituted separate exempt income under section 10(2A). The Tribunal directed the Assessing Officer to allow the claim and declined to remit the issue for further verification. [Paras 28, 31, 32]

Share of profit from the firm amounting to the claimed sum is allowable as exempt under section 10(2A); ground allowed.

Final Conclusion: The appeal is allowed: the disallowance of claimed long term capital gains under section 10(38) is deleted for lack of evidence showing bogus transactions, and the claim of exemption for share of profit of the firm under section 10(2A) is held allowable; the Assessing Officer to give effect accordingly.

Amortization of preliminary expenses under section 35D - Capital expenditure versus revenue expenditure on enhancement of authorised share capital - Revenue expenditure versus capital expenditure on acquisition of subsidiary companies - Assessing officer's verification of vouchers and bills - Restoration/remand for factual verification of carry forward losses

Amortization of preliminary expenses under section 35D - Capital expenditure versus revenue expenditure on enhancement of authorised share capital - Whether ROC fees paid for increase of authorised share capital, disallowed as capital expenditure by the assessing authorities relying on Apex Court decisions, are allowable to be amortised under section 35D. - HELD THAT: - Revenue authorities treated the fee paid to the Registrar of Companies for enhancement of authorised capital as capital in nature and disallowed it under section 37, relying on Supreme Court precedents. The Tribunal examined section 35D, relevant judicial authority relied upon by the assessee, and the financial statements showing increase of share capital. The Tribunal concluded that section 35D provides for amortisation of certain preliminary/capital-type expenses incurred in the preliminary stage or in the normal course of business and that the ROC expenditure for increase of share capital falls within that ambit. Consequently the assessing officer was directed to allow the ROC expenditure to be amortised as per section 35D. [Paras 5]

ROC fees towards increase of share capital are to be allowed by way of amortisation under section 35D; directions issued to the AO to give effect accordingly.

Revenue expenditure versus capital expenditure on acquisition of subsidiary companies - Assessing officer's verification of vouchers and bills - Whether expenses incurred for acquisition of subsidiary companies, disallowed by the AO as capital in nature, are allowable as revenue expenditure. - HELD THAT: - The AO disallowed the claimed expenditure for lack of explanation. On appeal the CIT(A) directed verification of bills and evidences. Before the Tribunal the assessee produced bills and vouchers which were placed on record. Having considered the totality of facts, the Tribunal remitted the matter to the file of the AO for verification of the bills and vouchers, and directed that if the documents are found in order the AO should allow the expenditure as revenue in the impugned assessment year. The Tribunal thus did not finally adjudicate the factual veracity but directed verification and allowance subject to AO's findings. [Paras 6]

Matter remitted to the AO for verification of bills and vouchers and allowance of the expenditure as revenue if found in order; ground allowed for statistical purposes.

Restoration/remand for factual verification of carry forward losses - Whether carry forward loss claimed by the assessee should be adjudicated when it was not pressed before the CIT(A) but pressed before the Tribunal. - HELD THAT: - The assessee did not press this ground before the CIT(A) but raised it before the Tribunal. The Tribunal restored the matter to the assessing officer for factual verification rather than deciding it on merits at the Tribunal stage. Accordingly the issue was not finally adjudicated on merits but sent back for determination by the AO. [Paras 7]

Ground relating to carry forward loss restored to the AO for factual verification; treated as allowed for statistical purposes.

Final Conclusion: The ROC fees for enhancement of authorised share capital are allowable by amortisation under section 35D and the AO is directed to give effect; expenses for acquisition of subsidiaries are remitted to the AO for verification of supporting bills and allowance if found in order; claim of carry forward loss is restored to the AO for factual verification. Appeal disposed of accordingly (allowed for statistical purposes).

Validity of reassessment proceedings - reassessment proceedings initiated by a non jurisdictional assessing officer - requirement to record reasons for reopening and issuance of notice under section 148 to confer jurisdiction - service of notice by affixture and address of assessee

Validity of reassessment proceedings - reassessment proceedings initiated by a non jurisdictional assessing officer - requirement to record reasons for reopening and issuance of notice under section 148 to confer jurisdiction - Reassessment proceedings are invalid where the officer who recorded reasons and issued the notice lacked territorial jurisdiction and the officer having jurisdiction did not himself record reasons or issue a fresh notice. - HELD THAT: - The Tribunal found that the notice under section 148 was originally issued by ITO Ward 5(3), who did not have territorial jurisdiction over the assessee, while the assessment was ultimately completed by ITO Ward 11(4), the officer having jurisdiction. After the assessee informed the issuing officer of her correct address and the record was transferred to ITO Ward 11(4), that officer did not record reasons for reopening nor issue a fresh notice under section 148 on the correct address but proceeded on the basis of the reasons recorded by the non jurisdictional officer. The Tribunal held that jurisdiction to reopen vests only after the assessing officer himself records reasons for reopening and issues the notice within the prescribed time and on fulfilment of the statutory conditions. As these conditions were not satisfied by the officer who completed the assessment, the reassessment proceedings were initiated without jurisdiction and are therefore void. [Paras 7]

Reassessment order dated 30.12.2016 is set aside as the reassessment was invalidly initiated by a non jurisdictional officer and the jurisdictional officer failed to record reasons or issue a fresh notice.

Final Conclusion: The appeal is partly allowed: the reassessment order is quashed on the ground of invalid initiation for lack of jurisdiction; the remaining grounds were rendered academic and therefore not adjudicated.

Transfer pricing adjustment on AMP expenses - international transaction - Bright Line Test - Other Method under Rule 10AB - Profit Split Method - FAR analysis - full fledged licensed manufacturer - DEMP E/marketing intangibles - precedential effect of Tribunal orders

Transfer pricing adjustment on AMP expenses - international transaction - Bright Line Test - Other Method under Rule 10AB - Profit Split Method - FAR analysis - full fledged licensed manufacturer - DEMP E/marketing intangibles - precedential effect of Tribunal orders - Sustenance of transfer pricing adjustment on account of AMP expenses for the year under appeal - HELD THAT: - The Tribunal considered that the solitary adjudicatory question is whether the AMP expenditure incurred by the assessee qualifies as an international transaction such as to warrant a transfer pricing adjustment. The Tribunal noted that the issue was squarely covered by its own earlier orders in the assessee's case for prior assessment years. The DRP had directed deletion of the adjustment if those Tribunal orders were not contested further. Applying functional, asset and risk (FAR) analysis and relevant precedents, the Tribunal held that mere excess AMP spending does not of itself establish an international transaction, and that the Bright Line Test and the global AMP/sales comparison effectively amount to an impermissible application of BLT. The Tribunal observed that the Other Method under Rule 10AB and the Profit Split Method were misapplied: PSM was not properly used (no combined profit determined or reliable contribution analysis), and the adopted comparisons (global AMP/sales) did not meet the Rule 10AB requirement of comparable uncontrolled transactions. The Tribunal also relied on the OECD/BEPS analysis and domestic authorities to the effect that for a full fledged licensed manufacturer which undertakes manufacturing risks and functions domestically, AMP expenses are ordinarily revenue in nature and do not automatically create transferable marketing intangibles (DEMP E) benefiting the foreign AE absent evidence of relevant functions, assets or risks assumed by the AE in India. On these determinative grounds, and in view of consistent prior Tribunal decisions in the assessee's favour, the Tribunal directed deletion of the transfer pricing addition. [Paras 3, 4, 5, 6, 7]

The transfer pricing adjustment on account of AMP expenses is deleted; the appeal is allowed and the stay application is dismissed as infructuous.

Final Conclusion: The Tribunal deleted the AMP-related transfer pricing addition for AY 2016-17, holding that no international transaction was established and that the methods applied by the revenue were misconceived; the appeal is allowed and the stay application dismissed as infructuous.

Admission of additional evidence - remand for fresh consideration - assessment addition on unexplained cash deposits

Admission of additional evidence - remand for fresh consideration - Admissibility of additional evidence (sale deed) and remand to the Commissioner (Appeals) for fresh decision on merits in relation to additions made for unexplained bank deposits. - HELD THAT: - The assessee filed a petition to admit additional evidence consisting of a sale deed, averring that the appeal before the Commissioner (Appeals) had been heard at a distant forum and that an adjournment/transfer request prevented the sale deed from being placed before the Commissioner (Appeals). The Tribunal, after hearing the revenue and examining the materials, found it appropriate to allow the petition for admission of the additional evidence. The matter is remitted to the file of the Commissioner (Appeals) with a direction to decide the appeal on merits after considering the admitted additional evidence. The assessee is directed to submit the necessary information and to cooperate with the Commissioner (Appeals) in the disposal of the appeal. The Tribunal further recorded that if the assessee again fails or defaults before the Commissioner (Appeals), no leniency will be extended and the Commissioner (Appeals) may decide the appeal in accordance with law, having regard to the facts and circumstances. [Paras 5, 6, 7]

Additional evidence admitted; appeal remitted to the Commissioner (Appeals) for fresh decision on merits after considering the sale deed and other information; directions issued to the assessee to cooperate; admonition recorded against future default; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal admitted the additional evidence (sale deed) and remitted the appeal to the Commissioner (Appeals) for fresh adjudication on merits in respect of the addition made for unexplained cash deposits for A.Y. 2014-15, directing the assessee to cooperate and warning that further default will forfeit leniency; appeal allowed for statistical purposes.

Arm's Length Price - receivables treated as an international transaction - use of assessee's weighted average rate of interest for benchmarking - remand for factual verification of tax-credit mismatch - exclusion of Section 14A disallowance from Minimum Alternate Tax computation

Arm's Length Price - receivables treated as an international transaction - use of assessee's weighted average rate of interest for benchmarking - Validity of ALP adjustment of Rs. 1,69,22,957/- (interest @12%) on receivables from associated enterprises. - HELD THAT: - The Tribunal upheld the ALP adjustment limited to the interest computed at 12% as adopted by the Assessing Officer in conformity with the Dispute Resolution Panel's direction. The adjustment was founded on the assessee's own submission dated 23-11-2016 which computed a weighted average finance cost and requested adoption of 12% instead of 14.75% proposed by the Transfer Pricing Officer. Having accepted the assessee's computation during assessment proceedings, the assessee could not be treated as aggrieved against an adjustment based on its own figures. The Tribunal also endorsed the view that delayed realisation interest on receivables constitutes an international transaction, relying on the tribunal precedent cited, and found no reason to interfere with the adjustment on the facts and submissions before it. [Paras 5]

ALP adjustment of Rs. 1,69,22,957/- (interest @12%) on receivables from AEs affirmed and the assessee's substantive grounds challenging it declined.

Remand for factual verification of tax-credit mismatch - Addition of Rs. 68,81,044/- on account of mismatch between Form 26AS tax credit and assessee's books. - HELD THAT: - The Tribunal observed that the disputed sum had been assessed in earlier assessment years according to the assessee's contention and that the matter required factual verification by the Assessing Officer to ensure the amount is not doubly assessed. Consequently, the Tribunal treated this ground as accepted for statistical purposes and directed that the issue be examined by the Assessing Officer to ascertain whether the income was already assessed earlier, avoiding double addition. [Paras 6]

Issue remitted to the Assessing Officer for factual verification to determine whether the addition would amount to double assessment; ground accepted for statistical purposes.

Exclusion of Section 14A disallowance from Minimum Alternate Tax computation - Inclusion of Section 14A disallowance (computed under Rule 8D) in computation of tax under the Minimum Alternate Tax (MAT) provision. - HELD THAT: - Relying on the Tribunal's settled view in the cited precedent, the Tribunal held that the disallowance under Section 14A does not qualify for inclusion in the computation of book profits for MAT purposes. Accordingly, the Assessing Officer was directed to delete the impugned MAT addition and make consequential computations as per law. [Paras 7]

Section 14A/Rule 8D disallowance excluded from MAT computation; Assessing Officer directed to delete the MAT addition and recompute.

Final Conclusion: Appeal partly allowed: ALP adjustment of Rs. 1,69,22,957/- on receivables from associated enterprises upheld; addition of Rs. 68,81,044/- remitted to the Assessing Officer for factual verification to avoid double assessment; Section 14A disallowance removed from MAT computation and Assessing Officer directed to recompute accordingly.

Violation of principle of natural justice - opportunity of being heard - remand for fresh consideration - production of documentary evidence during pandemic - reconsideration on merits

Violation of principle of natural justice - opportunity of being heard - production of documentary evidence during pandemic - remand for fresh consideration - Ld. CIT(A) passed the impugned order without giving proper and sufficient opportunity to the assessee to produce supporting documentary evidence, necessitating remand. - HELD THAT: - The Tribunal found that the authorised representative before the Ld. CIT(A) could not produce relevant documentary evidence because the assessee was residing away and production was impeded by the Covid-19 pandemic and lockdown. The assessee filed written submissions but did not file supporting documents before the Ld. CIT(A). Having considered the circumstances and noting that the Revenue did not oppose remand, the Tribunal concluded that there was merit in the contention of failure to afford adequate opportunity. In consequence, the impugned order was set aside and the matter was remitted to the Ld. CIT(A) for fresh disposal on merits after giving the assessee proper and sufficient opportunity to produce relevant documentary evidence; the assessee was directed to cooperate and make due compliance to enable expeditious disposal.

Impugned order set aside; matter remitted to Ld. CIT(A) for fresh consideration on merits after affording proper opportunity to produce documentary evidence; assessee to comply and cooperate.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the order of the Ld. CIT(A) and remitting the matter for fresh adjudication after affording the assessee adequate opportunity to produce documentary evidence, having regard to pandemic-related difficulties.

Treatment of benami partnership firms - attribution of income of benami firms to the beneficial owner - estimation of income by applying a percentage to aggregate turnover - disallowance under section 40(a)(ia) of the Income-tax Act for failure to deduct tax at source

Treatment of benami partnership firms - attribution of income of benami firms to the beneficial owner - estimation of income by applying a percentage to aggregate turnover - The ten partnership firms in which the assessee held 95% share were benami and the income of those firms could be attributed to the assessee and estimated at 5% of their aggregate turnover. - HELD THAT: - The Tribunal found on the material on record that the assessee held 95% capital in each of the ten firms, the ostensible partners admitted they were employees and not genuine partners, the licence fees were paid by the assessee and no evidence was produced to show profit distribution according to the stated profit-sharing ratios. The firms had not maintained proper books nor produced cogent evidence of expenses. On these facts the Revenue Authorities rightly treated the firms as the assessee's benami concerns and, in the absence of proper accounts or evidence, reasonably estimated the firms' income at 5% of aggregate turnover and added that amount to the assessee's income. The Tribunal declined to interfere with that estimation as fair and reasonable, but clarified that once the income of those firms had been assessed in the hands of the assessee it could not be again assessed separately in the hands of those firms. [Paras 7]

Benami character of the ten firms and the addition of income assessed at 5% of aggregate turnover in the hands of the assessee upheld; income so assessed shall not be re-assessed in the hands of those firms.

Disallowance under section 40(a)(ia) of the Income-tax Act for failure to deduct tax at source - Disallowance of interest payments for failure to deduct tax at source under section 40(a)(ia) was confirmed. - HELD THAT: - The Assessing Officer disallowed specified amounts of interest paid by the assessee on the ground that tax was not deducted at source. The assessee failed to controvert the findings or produce material to rebut the invocation of section 40(a)(ia). The Tribunal found the Revenue Authorities' invocation of section 40(a)(ia) to be in accordance with law and declined to interfere with the disallowance. [Paras 9]

Disallowance under section 40(a)(ia) confirmed.

Final Conclusion: The assessee's appeal is dismissed.

Reopening of assessment under section 147 - Validity of notice under section 148 - Proviso to section 147 - absence of default - Treatment of foreign exchange fluctuation loss as provision/unascertained liability - Capitalization versus revenue treatment of R&D expenditure

Reopening of assessment under section 147 - Validity of notice under section 148 - Proviso to section 147 - absence of default - Validity of reassessment proceedings under section 147/notice under section 148 quashed - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the reassessment initiated by the AO was not valid. The CIT(A) found that the AO had earlier formed a view during the original assessment proceedings after considering the explanations and documents furnished by the assessee, and therefore the condition in the proviso to section 147 (regarding default) was not satisfied. The Tribunal agreed with the CIT(A)'s reasoning, noting that the AO had not discovered any fresh material warranting reopening and that the assessee's objections to the notice under section 148 were not disposed of in a manner to justify reassessment. In these circumstances the reassessment order under section 147 was quashed. [Paras 1, 2, 3, 7]

Reassessment initiation under section 147/notice under section 148 held invalid and quashed.

Treatment of foreign exchange fluctuation loss as provision/unascertained liability - Capitalization versus revenue treatment of R&D expenditure - Disallowance proposals in reassessment (foreign exchange reinstatement loss and R&D expenditure) set aside by quashing reassessment - HELD THAT: - The AO in the reopened proceedings sought to disallow (a) a portion of claimed foreign exchange fluctuation loss attributable to debtors/creditors reinstatement as a notional provision for diminution (an unascertained liability), and (b) claimed R&D expenses as capital in nature. The Tribunal did not adjudicate these substantive contentions on merits because it found the entire reassessment to be invalid. As the reassessment was quashed for lack of valid reasons to reopen, the proposed disallowances added in the reassessment order could not stand. [Paras 7, 8]

Proposed disallowances in reassessment (foreign exchange reinstatement loss and R&D expenditure) reversed by reason of quashing the reassessment; substantive merits not adjudicated.

Final Conclusion: The Tribunal dismissed the revenue appeal, upholding the CIT(A)'s order quashing the reassessment under section 147/notice under section 148 for AY 2009-10; consequently, the additions sought in the reopened assessment relating to foreign exchange reinstatement loss and R&D expenditure could not be sustained.

Apportionment of shared office expenses - allowability of rent and office maintenance expenses - deductibility of business expenditure - burden of proof to establish sharing by related parties - treatment of paper companies for expense allocation

Apportionment of shared office expenses - allowability of rent and office maintenance expenses - treatment of paper companies for expense allocation - Whether the assessing officer and CIT(A) were justified in disallowing a portion of rent and office maintenance expenses on the ground that the office premises was shared with sister concerns. - HELD THAT: - The Tribunal found no material on record to show that the 13 sister concerns conducted any significant activities from the rented premises during the relevant year; the Revenue authorities did not controvert the assessee's contention with books of account, particulars of sister concerns, or other evidence. In the absence of evidence establishing that the expenses were actually shared or absorbed by other entities, the inference that expenditure should be apportioned was unsupported. Where related companies are only 'on paper' and do not conduct substantive operations, the entire expenditure for rent and office maintenance is attributable to the operating assessee and not apportionable in any material degree. The Tribunal therefore held that the partial disallowance sustained by the CIT(A) lacked evidentiary foundation and directed allowance of the claimed expenditure. [Paras 6, 7]

The addition disallowing a portion of the rent and office maintenance expenses is deleted and the Assessing Officer is directed to allow the entire amount of Rs. 78,39,022/- as deduction in the hands of the assessee.

Final Conclusion: Appeal allowed: the Tribunal deleted the disallowance made and sustained by the revenue authorities and directed the Assessing Officer to allow the full rent and office maintenance expenditure claimed by the assessee for AY 2013-14.

Additional depreciation - claim not made in original or revised return - scope of assessing officer's powers - Appellate Tribunal's powers under section 254 - explanation 5 to section 32(1) - binding nature of Board Circular

Additional depreciation - claim not made in original or revised return - scope of assessing officer's powers - Appellate Tribunal's powers under section 254 - Adjudication of claim for additional depreciation which was not made in the original or any revised return but was raised during assessment proceedings. - HELD THAT: - The Tribunal held that the question whether additional depreciation, not claimed in the original return or by way of a revised return but sought to be allowed during assessment proceedings, must be adjudicated on facts and law by the Assessing Officer after giving the assessee an opportunity of being heard. Reliance was placed on the distinction in Goetze (India) Ltd. v. CIT, where the Supreme Court's limitation on entertaining belated claims applied to the powers of the Assessing Officer but did not curtail the powers of the Income-tax Appellate Tribunal under section 254. On that basis the Tribunal did not decide the claim on merits but directed remand to the AO for fresh adjudication in accordance with law and record. The Tribunal accordingly allowed the grounds raised for statistical purposes and directed the AO to decide the claim after hearing the assessee. [Paras 5, 6]

Appeal allowed for statistical purposes and the matter remanded to the Assessing Officer to adjudicate the claim for additional depreciation (not claimed in the original or revised return) on facts and law after affording the assessee an opportunity of being heard.

Final Conclusion: The Tribunal remitted the issue of additional depreciation (claimed for AY 2014-15 but not in the original or any revised return) to the Assessing Officer for fresh adjudication after hearing the assessee; the appeal is allowed for statistical purposes.

Employees' contribution to provident fund and ESI - deduction under section 36(1)(va) conditioned on credit to employees' account by the due date - non-applicability of amendment to section 43B to employees' contribution under section 36(1)(va) - definition of income under section 2(24)(x) - binding precedent

Employees' contribution to provident fund and ESI - deduction under section 36(1)(va) conditioned on credit to employees' account by the due date - definition of income under section 2(24)(x) - Whether employees' contributions received by the assessee are allowable as deduction where they were not credited to employees' accounts in the relevant funds by the due date prescribed for crediting under section 36(1)(va). - HELD THAT: - The Tribunal followed the Jurisdictional High Court's detailed exposition that sums received by an employer from employees as contributions to provident fund/ESI are treated as 'income' under section 2(24)(x) but are allowable as a deduction only if, as per section 36(1)(va) and its Explanation, the assessee has credited those sums to the employees' accounts in the relevant fund on or before the 'due date' prescribed by the relevant labour statutes or instruments. The Tribunal accepted the High Court's reasoning that the post-2003 amendments to section 43B (which concern employer's contributions) do not amend or curtail the separate, continuing statutory requirement in section 36(1)(va) regarding employees' contributions. Reliance on authorities dealing with employer's contribution or on the retrospective effect of amendment to section 43B was held inapposite to alter the specific condition in section 36(1)(va) that governs employees' contributions. Following the binding jurisdictional precedent, the Tribunal concluded that where employees' contributions were not credited to the employees' accounts in the relevant fund on or before the due date, deduction under section 36(1)(va) cannot be allowed. [Paras 6, 7]

Disallowance of employees' contribution to PF/ESI is sustained where such contributions were not credited to employees' accounts by the due date; the CIT(A)'s order is confirmed and the appeal is dismissed.

Final Conclusion: The Tribunal, following the binding decision of the Jurisdictional High Court, held that employees' contributions are deductible under section 36(1)(va) only if credited to employees' accounts in the relevant fund by the statutory 'due date'; as that condition was not satisfied, the disallowance made by the assessing officer is sustained and the assessee's appeal is dismissed.

Computation of book profit under Explanation 3 to Section 40(b)(v) for deduction of partners' remuneration - inclusion of receipts shown in the profit and loss account irrespective of their head of income - treatment of interest on fixed deposits and interest on income-tax refund as part of book profit - limits on Assessing Officer's power to reclassify items of profit under Explanation 3

Computation of book profit under Explanation 3 to Section 40(b)(v) for deduction of partners' remuneration - inclusion of receipts shown in the profit and loss account irrespective of their head of income - treatment of interest on fixed deposits and interest on income-tax refund as part of book profit - Whether interest income and other receipts reflected in the profit and loss account but classified under other heads of income must be excluded from book profit for computing the ceiling on partners' remuneration under Explanation 3 to Section 40(b)(v). - HELD THAT: - The Tribunal held that Explanation 3 requires book profit to be the net profit as shown in the profit and loss account computed in the manner laid down in Chapter IV-D and does not mandate selection of any particular head of income. Consequently, amounts credited to profit and loss account - including interest on fixed deposits, interest on income-tax refund, dividend and recurring deposit interest - cannot be excluded merely because they are classified under a different head for tax purposes. The Bench applied and followed the binding precedents of the jurisdictional Gujarat High Court in CIT v. J.J. Industries and the Calcutta High Court in Md. Serajuddin & Bros., which held that income shown in the profit & loss account is to be taken into account for computing book profit under Explanation 3 and that the Assessing Officer is not entitled to go behind the net profit shown except for adjustments specified in Explanation 3. Having found no material to distinguish those precedents, the Tribunal concluded that the Assessing Officer and the CIT(A) erred in excluding the said interest incomes from book profit and in making the consequential disallowance of partners' remuneration. [Paras 10, 11, 12]

Addition of Rs. 2,24,247/- for excess partners' remuneration deleted and the appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that amounts reflected in the profit and loss account (including interest on FDs and interest on income-tax refund) must be included in book profit under Explanation 3 to Section 40(b)(v), and accordingly deleted the disallowance of partners' remuneration.

Article 21 - exemption from IGST on imported oxygen concentrators - state-authorised relief agencies - judicial direction to executive for extension of tax exemption

Exemption from IGST on imported oxygen concentrators - state-authorised relief agencies - judicial direction to executive for extension of tax exemption - Request to respondent to consider extending IGST exemption on imported oxygen concentrators to individuals receiving them as gifts and to communicate instructions on the same. - HELD THAT: - The Court recorded that a subsequent notification (No. 4/2021 - Customs dated 03.05.2021) exempts imposition of IGST on oxygen concentrators imported by the State Government or through entities authorised by the State Government, relief agencies or statutory bodies, available till 30.06.2021. Observing that the respondent had already granted exemption to the named categories, the Court held that the respondent could, in the exercise of its executive power, consider further extending the exemption to individuals so as to enable import of oxygen concentrators by way of gift without levy of IGST. The Court directed the learned Additional Solicitor General to obtain instructions and revert, and to place the order before the Hon'ble Finance Minister for consideration. [Paras 5, 8]

The respondent was directed to consider extending the IGST exemption to individuals importing oxygen concentrators as gifts; the ASG to obtain instructions, revert and place the order before the Finance Minister; matter listed for further hearing.

Final Conclusion: The writ petition remains pending. The Court noted the respondent's existing limited exemption and directed the executive to consider extending IGST exemption to individuals importing oxygen concentrators as gifts, with the ASG to obtain instructions and place the order before the Finance Minister; the matter is listed for further hearing.

Requirement to endorse EPCG authorisation number and supporting manufacturer on shipping bills - constructive satisfaction of export obligation through contemporaneous records - opportunity to be heard and produce evidence under Section 149 of the Customs Act - non-speaking order set aside and remand for fresh speaking decision

Requirement to endorse EPCG authorisation number and supporting manufacturer on shipping bills - constructive satisfaction of export obligation through contemporaneous records - opportunity to be heard and produce evidence under Section 149 of the Customs Act - Whether non-mention of the EPCG authorisation number and supporting manufacturer on the shipping bills is fatal to claim of concessional duty or whether the export obligation can be satisfied constructively by contemporaneous supporting records and explanations - HELD THAT: - The Court acknowledged that para 5.7.1 of the EPCG Scheme requires endorsement of the EPCG authorisation number and the name of the supporting manufacturer on shipping bills, and that in the present case both were absent. However, the Court held that although these requirements are mandatory, they are capable of being satisfied constructively. The petitioner must be afforded an opportunity to establish the factum of export through third party exports by producing contemporaneous evidence (such as confirmations from the exporter, correspondence and other supporting documents). The Court relied on the availability of a forum under Section 149 of the Customs Act to permit the petitioner to adduce such materials and discharge the burden of proof. The absence of the endorsement on the face of the shipping bills is not ipso facto fatal where bona fide cases can be proved by other records, and therefore the authorities must consider such explanations and evidence before denying concessional duty. [Paras 5, 7]

Non mention on shipping bills is not automatically fatal; petitioner must be given an opportunity to prove export through contemporaneous supporting records and explanations, and the authorities must consider such material before refusing concessional duty.

Non-speaking order set aside and remand for fresh speaking decision - opportunity to be heard and produce evidence under Section 149 of the Customs Act - Whether the impugned order rejecting the petitioner's amendment applications should be sustained despite being non speaking and without having considered the petitioner's explanations and supporting material - HELD THAT: - The Court found that the impugned order was non speaking and did not advert to the petitioner's justification for non mention of EPCG details on the shipping bills. Given the requirement to allow the petitioner to prove exports by contemporaneous records and the heavy but dischargeable burden on the petitioner, the Court set aside the order and directed that the petitioner be heard. The matter was remitted to the Commissioner of Customs to hear the petitioner, consider any material produced in support of its claim, and pass a speaking order on the applications on merits within a prescribed time frame. [Paras 8]

Impugned non speaking order set aside; matter remitted to the Commissioner of Customs for hearing, consideration of supporting materials and passing of a speaking order within four weeks from the specified date.

Final Conclusion: Writ petition allowed: the non speaking order rejecting the petitioner's applications is set aside and the matter is remitted to the Commissioner of Customs to hear the petitioner, consider contemporaneous supporting records under Section 149 of the Customs Act and pass a speaking order on merits within the time directed by the Court; ancillary relief granted restraining invocation of bank guarantee pending the fresh decision.

Mandamus - speaking order under Section 17(5) of the Customs Act, 1962 - disposal of writ petition by consent

Mandamus - speaking order under Section 17(5) of the Customs Act, 1962 - Grant of a mandamus directing respondents to pass a speaking order in respect of Bill of Entry No.5477945 dated 29.10.2019 within the time fixed by the Court and disposal of the writ petition. - HELD THAT: - The respondents' counsel accepted notice and, by consent, gave an undertaking to pass the requested speaking order under Section 17(5) of the Customs Act, 1962 within six weeks. The court recorded the assurance and, as the relief sought (a speaking order) stands achieved by that undertaking, disposed of the writ petition finally at the stage of admission. No further adjudication of the merits was necessary because the remedy sought was accorded by the respondents' commitment and recorded order. [Paras 3, 4]

Mandamus granted by consent; respondents to pass a speaking order under Section 17(5) of the Customs Act, 1962 within six weeks and the writ petition is disposed of; no costs.

Final Conclusion: By consent and on the respondents' undertaking, the petition is disposed of with a direction to pass a speaking order under Section 17(5) of the Customs Act, 1962 in relation to the specified Bill of Entry within six weeks; no costs.

Pre-deposit under Section 129E - protection from coercive recovery during pendency of appeal - maintenance of appeal on condonation of delay - redemption of seized goods under Section 125(2) - absolute confiscation of seized goods

Pre-deposit under Section 129E - protection from coercive recovery during pendency of appeal - maintenance of appeal on condonation of delay - Whether the authorities could proceed to dispose of or auction seized goods while an appeal was pending before CESTAT where the appellant had made the statutory pre-deposit under Section 129E and the appeal had been admitted. - HELD THAT: - The Court noted that following amendment and substitution effected by Finance (No.2) Act, 2014, the statutory scheme embodied in Section 129E requires specified pre-deposit for admission of an appeal and that, once the pre-deposit is made, no separate stay is required to protect the appellant's interest. The Court relied on the Circular issued by the Board (Circular No.1053/2/2017-CX dated 10.03.2017), which expressly states that once the prescribed pre-deposit is paid no coercive action shall be taken for recovery of the balance amount during the pendency of appeal proceedings before the appellate authorities. Applying these legal positions to the factual matrix - admitted appeal before CESTAT, condonation of delay and requirement for pre-deposit satisfied - the Court held that the communication by the Assessing Authority threatening disposal of the goods lacked foundation. The respondents accepted the legal position and undertook not to pursue the communication. The Court accordingly treated the prayer for mandamus as having been satisfied and disposed the petition. [Paras 6, 7, 8, 9, 10]

The authorities were restrained from prosecuting the threatened disposal/auction of the seized watches pending determination of the admitted appeal, in view of the protection afforded by the statutory pre-deposit and the Board's circular; the communication threatening disposal will not be pursued.

Final Conclusion: Writ petition disposed as the respondents undertook not to pursue the communication threatening disposal of the seized goods; the statutory pre-deposit under Section 129E and the Board's circular protect the appellant from coercive recovery or auction during the pendency of the admitted appeal.

Service and Communication of Orders - Computation of Period of Limitation from Date of Knowledge - Effect of Change of Address Notice on Service - Remand for Decision on Merits after Setting Aside Time Bar Dismissal

Service and Communication of Orders - Computation of Period of Limitation from Date of Knowledge - Effect of Change of Address Notice on Service - Whether the appeal was barred by limitation where the Order in Original was sent to the assessee's old address despite prior intimation of change of address, and if limitation must be computed from the date the appellant came to know of the order. - HELD THAT: - The appellant produced contemporaneous evidence that the Department was informed of a change of address (letter dated 03.07.2012, received 12.07.2012) and an internal note showing that verification of the new address was ordered. Despite this, the Order in Original dated 18.02.2013 was issued to the earlier address and there was no actual communication or service of the order upon the appellant. Relying on the statutory scheme requiring communication/service of decisions, the Tribunal held that where there is no actual service, the relevant date for computing limitation is the date on which the appellant actually came to know of the order. Applying that principle to the facts, the appellant discovered the order in 2019 and filed the appeal within sixty days from that date. Consequently, the Commissioner (Appeals)'s dismissal of the appeal as time barred could not be sustained.

The rejection of the appeal on the ground of limitation is set aside and the appeal is remitted to the Commissioner (Appeals) for adjudication on merits.

Final Conclusion: The Tribunal held that absence of actual service of the Order in Original (sent to the appellant's old address despite prior intimation) meant limitation runs from the date of actual knowledge; the time bar dismissal was set aside and the matter remanded to the Commissioner (Appeals) for fresh decision on merits.

Recall of judgment on changed circumstances - Review under the Code of Criminal Procedure - Maintainability of Section 340 Cr.P.C. proceedings in presence of parallel company proceedings - NCLT as the appropriate forum for adjudication of company-related disputes

Recall of judgment on changed circumstances - NCLT as the appropriate forum for adjudication of company-related disputes - Whether the judgment dated 13.08.2020 should be recalled in view of the withdrawal of Company Petition No.114/2007 before the NCLT on 07.02.2020. - HELD THAT: - The Court held that its earlier disposal of the petition dated 13.08.2020 was founded on the premise that Company Petition No.114/2007 was pending before the NCLT and that, following the Supreme Court's directions, the issues raised in the criminal miscellaneous petition were intrinsically linked to the company proceedings and ought to be raised before the NCLT. It was not placed before the Court at the time of disposal that the NCLT had allowed an application permitting withdrawal of the company petition on 07.02.2020. Once that NCLT order was brought to the Court's notice, the foundational premise for declining to entertain the petition no longer subsisted. The Court therefore found it appropriate to recall the earlier judgment on this ground alone, while expressly refraining from adjudicating the merits of the allegations of perjury. [Paras 10, 11, 14, 15, 16]

Judgment dated 13.08.2020 is recalled because the NCLT petition which formed the basis for non-entertainment had been withdrawn; no opinion expressed on merits.

Review under the Code of Criminal Procedure - Maintainability of Section 340 Cr.P.C. proceedings in presence of parallel company proceedings - Whether the petition seeking prosecution for alleged perjury should be adjudicated by this Court now that the NCLT petition stands withdrawn. - HELD THAT: - The Court observed the general proposition that review under the Code of Criminal Procedure is limited (noting that review does not lie under Cr.P.C. except for clerical/arithmetical errors) but, given the change in circumstances caused by the withdrawal of the company petition, the Court recalled its earlier order which had declined to entertain the petition for procedural reasons. The Court explicitly did not enter upon the merits of the perjury allegations and directed that the criminal miscellaneous petition be listed before the Roster Bench for fresh consideration, subject to administrative orders, thereby leaving substantive adjudication to follow. [Paras 9, 15, 16, 17]

Matter to be listed before the Roster Bench for fresh consideration; merits not decided by this Court in the recall order.

Final Conclusion: The judgment dated 13.08.2020 is recalled because the Company Petition No.114/2007-which justified non-entertainment of the criminal petition-was withdrawn by the NCLT on 07.02.2020; the Court has not expressed any view on the merits of the allegations and has directed listing of the criminal miscellaneous petition before the Roster Bench for further consideration.

Principles of natural justice (audi alteram partem) - reading-in of procedural fairness into administrative directions - fraud classification and reporting framework by RBI - Red Flagged Account (RFA) and Joint Lenders Forum (JLF) decision-making - penal measures for fraudulent borrowers and impact on promoters/directors - reporting to law enforcement agencies and triggering of criminal investigation - statutory directions under Section 35-A of the Banking Regulation Act - arbitrariness and reasonableness under Articles 14, 19(1)(g) and 21 of the Constitution

Principles of natural justice (audi alteram partem) - reading-in of procedural fairness into administrative directions - fraud classification and reporting framework by RBI - Principles of natural justice, in particular audi alteram partem, are to be read into Clauses 8.9.4 and 8.9.5 of the Master Circular. - HELD THAT: - The Master Circular, issued under statutory power, effects grave civil and penal consequences for borrowers and their promoters/directors by triggering reporting to RBI and law enforcement and by imposing debarments and denial of restructuring. Absent an express ouster of natural justice, courts must read in a requirement of a reasonable opportunity to be heard where administrative decisions produce such consequences. The circular contains an elaborate warning, detection and reporting scheme but is silent on giving the affected borrower an opportunity before JLF classifies an account as 'fraud'. Urgency and administrative convenience do not automatically displace the duty of fairness; where necessary the hearing may be abridged but must be substantive. To avoid vagueness and arbitrariness and to preserve consistency with existing precedents requiring a hearing before stigmatic classifications, the Court reads the principle of audi alteram partem into Clauses 8.9.4 and 8.9.5 so that JLF decision-making includes furnishing evidence and a fair opportunity to explain before final classification. [Paras 54, 55, 56, 58, 60]

Audi alteram partem must be incorporated into Clauses 8.9.4 and 8.9.5 of the Master Circular.

Red Flagged Account (RFA) and Joint Lenders Forum (JLF) decision-making - reporting to law enforcement agencies and triggering of criminal investigation - principles of natural justice (audi alteram partem) - The JLF meeting dated 15.02.2019 which classified the Company's account as 'fraud' is legally unsustainable and set aside for failure to afford a hearing and for reaching a conclusion while awaiting further forensic clarification. - HELD THAT: - The JLF relied on forensic and transaction audit material but did not furnish the forensic auditor's report relied upon to the Company or its directors; in several items the JLF itself recorded that clarifications were to be sought, yet proceeded to unanimously 'treat the account as fraud'. The formation of the JLF's opinion, which has immediate civil and penal consequences and triggers reporting to RBI/CBI, required that the evidence to be relied upon be furnished and that the borrower be given an opportunity to explain. The JLF's conclusion was reached in the absence of relevant evidence and contrary to the procedural fairness now read into the Master Circular, rendering the decision invalid. [Paras 63, 66, 67, 68]

The JLF decision dated 15.02.2019 is set aside and declared legally unsustainable.

Fraud Identification Committee (FIC) resolution - reliance on uncommunicated reports as evidence - principles of natural justice (audi alteram partem) - The FIC resolution dated 31.07.2019 identifying the account as 'fraud' is legally unsustainable and set aside for relying on reports that were not furnished to the Company and for failure to afford a hearing. - HELD THAT: - The FIC's resolution was premised on a report of the IRP which was not placed in evidence before the borrower or its directors and has not been shown to have been furnished to them. Fundamental fairness requires that a party be informed of evidence to be used against it and given an opportunity to meet it. The absence of such basic steps, especially where the classification triggers criminal reporting and penal measures, vitiates the FIC's resolution. [Paras 64, 65, 69]

The FIC resolution dated 31.07.2019 is set aside and declared legally unsustainable.

Remedial directions and procedural safeguards - opportunity of personal hearing to affected parties - duty to furnish evidence relied upon - Remedial directions: JLF must furnish the forensic and IRP reports to the petitioner and the Official Liquidator and afford personal hearing before re-deciding classification; FIC to thereafter consider confirmation; timelines prescribed for completion. - HELD THAT: - To cure the procedural infirmity and to give effect to the read-in natural justice requirement, the Court directs that copies of the Forensic Auditor's Report dated 06.04.2018 and the report of Dr. K.V. Srinivas, IRP, be furnished to the petitioner and to the Official Liquidator. The JLF must afford a personal hearing to both the petitioner and the OL before deciding whether to classify the account as 'fraud'. After JLF's decision, the FIC shall decide on confirmation. The court prescribes a three-month timeframe for the JLF exercise from receipt of the certified copy of the judgment and two months for the FIC thereafter. [Paras 70]

Directions issued: JLF to furnish reports and give personal hearings; JLF decision within three months and FIC to act within two months; impugned JLF and FIC orders set aside.

Final Conclusion: The writ petition is allowed: the Court reads the audi alteram partem rule into Clauses 8.9.4 and 8.9.5 of the RBI Master Circular; the JLF decision of 15.02.2019 and the FIC resolution of 31.07.2019 are set aside; the JLF is directed to furnish the forensic and IRP reports to the petitioner and the Official Liquidator, to afford personal hearings and to re-decide within three months, after which the FIC shall consider confirmation within two months.

Inordinate delay and laches in initiation of regulatory proceedings - Exercise of regulatory powers within a reasonable time - Remedial nature of SEBI's powers under Sections 11 and 11B - Non-disclosure of charge/pledge arrangements vis-a -vis listing obligations - Misleading statement as an element of prohibition of fraudulent and unfair trade practices - Requirement of positive evidence to establish diversion of funds

Inordinate delay and laches in initiation of regulatory proceedings - Exercise of regulatory powers within a reasonable time - Whether the show cause notice and consequent directions could be sustained despite initiation after a long delay - HELD THAT: - The Tribunal held that although no statutory limitation period is prescribed, SEBI must exercise adjudicatory powers within a reasonable period. The initiation of proceedings by issuing a show cause notice after more than 14 years was found to be an inordinate and unexplained delay. The respondent's general contention that overseas enquiries and concurrent investigations justified the delay was not accepted in the absence of particulars or plausible explanation showing why the process necessarily required such a long time. Reliance on prior authorities was considered, but the Tribunal held that the facts here demonstrate a failure to act within a reasonable period and that such laches prejudices the appellant; accordingly the proceedings initiated after such delay are liable to be quashed. [Paras 21, 22, 23, 27]

Initiation of proceedings after the inordinate delay was quashed; the impugned directions could not be sustained on account of laches.

Requirement of positive evidence to establish diversion of funds - Whether the charge of diversion of GDR proceeds (US$ 7.13 million) from the appellant to unknown entities was established - HELD THAT: - The WTM did not find merit in the appellant's explanation that the balance amount was used for repayment of loans and reflected in annual reports, and the WTM had recommended internal review by the audit committee. The Tribunal observed that the WTM ultimately did not uphold the diversion charge; there was no finding of diversion and no material to establish that funds were redirected to unknown entities. Accordingly, the allegation of diversion was not sustained. [Paras 15, 16, 28]

The charge of diversion of funds was not established and was rejected.

Misleading statement as an element of prohibition of fraudulent and unfair trade practices - Remedial nature of SEBI's powers under Sections 11 and 11B - Whether the appellant made a misleading statement to the stock exchanges about subscription of the GDR issue, attracting liability under PFUTP Regulations - HELD THAT: - The Tribunal found the WTM's conclusion that a misleading statement was made to be based on conjecture. The listing and subscription of the GDRs was an admitted fact and there was no legal requirement demonstrated that subscription must involve a specific minimum number of subscribers. There was no material showing investor inducement or that investors were misled by the statement of subscription. Given that fraud under PFUTP Regulations was not established, the element of inducement necessary for Regulation 5 violation was also absent. Consequently the finding of a misleading statement was held to be unsustainable. [Paras 17, 19, 28]

No misleading statement was proved; the finding of violation of PFUTP Regulation 5 could not be sustained.

Non-disclosure of charge/pledge arrangements vis-a -vis listing obligations - Remedial nature of SEBI's powers under Sections 11 and 11B - Whether nondisclosure of an Account Charge Agreement to the stock exchange justified directions under Sections 11 and 11B - HELD THAT: - The Tribunal noted that the WTM presumed non-disclosure amounted to a contravention but did not analyse or demonstrate how the Listing Agreement required disclosure of the Account Charge Agreement, nor did it articulate the legal link between nondisclosure and the impugned remedial directions under Sections 11/11B. The Court observed that if nondisclosure under the Listing Agreement had been established, the appropriate course would have been to consider penalties or specific measures under the Listing Agreement rather than to invoke broad remedial directions under Sections 11 and 11B without rationale. In the absence of material showing a listing-obligation breach and without reasoning tying nondisclosure to the impugned directions, the finding could not be sustained. [Paras 17, 18, 28]

The nondisclosure finding was unsupported by analysis of the Listing Agreement and could not sustain directions issued under Sections 11 and 11B.

Final Conclusion: The Tribunal allowed the appeal, quashed the WTM's order debarring the appellant from accessing the securities market for one year, held that diversion and fraud were not established, found the purported nondisclosure and misleading-statement findings unsustainable, and set aside the SEBI directions principally on account of inordinate delay and on merits in the peculiar facts of the case.

Regulation 40C - exclusion of lockdown period from CIRP timelines - commercial wisdom of the Committee of Creditors - judicial non-interference with CoC commercial decisions - extension of CIRP under Section 12(2)

Regulation 40C - exclusion of lockdown period from CIRP timelines - Validity of the Adjudicating Authority's exclusion of the period 5 May 2020 to 31 October 2020 from the CIRP under Regulation 40C. - HELD THAT: - Regulation 40C provides that the period of lockdown shall not be counted for timelines for any activity that could not be completed due to such lockdown. The Tribunal held that Regulation 40C excludes time only for activities that could not be performed because of the lockdown; activities undertaken and completed during the lockdown are not invalidated by the regulation. On the facts, the Adjudicating Authority was satisfied by material placed before it that exclusion of 179 days was warranted and therefore correctly invoked Regulation 40C to exclude that period from the CIRP computation. The Resolution Professional was not required to invoke Regulation 40C as a matter of routine, but could do so when justified by the inability to complete specific activities during lockdown. [Paras 5, 21, 29]

The exclusion of 5 May 2020 to 31 October 2020 from the CIRP under Regulation 40C was validly granted and does not invalidate activities completed during the lockdown.

Regulation 40C - duties of the Resolution Professional - Whether the Resolution Professional violated Regulation 40C by seeking exclusion of time-period rather than exclusion of activities or by acting unilaterally without regard to stakeholders' interests. - HELD THAT: - The Tribunal examined the contention that the RP acted unilaterally and sought only a time exclusion to complete formalities, thereby neglecting stakeholders' interests. It found that the CIRP was conducted in accordance with the Code and Regulations and that invocation of Regulation 40C was in response to activities that could not be completed due to lockdown. Allegations that the RP acted against the interests of the corporate debtor and stakeholders were not established on the record. The RP's actions had the approval of the CoC where required. [Paras 11, 12, 13, 29]

No breach of Regulation 40C by the Resolution Professional is made out; the RP's invocation of the regulation to exclude the lockdown period was permissible.

Commercial wisdom of the Committee of Creditors - judicial non-interference with CoC commercial decisions - Whether the CoC's commercial decision (not to re-issue Form G and to seek exclusion of time) is amenable to judicial review. - HELD THAT: - The Tribunal reiterated settled law that the commercial wisdom of the CoC is paramount and not ordinarily subject to judicial interference. The minutes show that the CoC considered options and, as a commercial decision, directed the RP to proceed without fresh publication of Form G and unanimously resolved to seek exclusion of 179 days. Reliance was placed on Supreme Court authority that CoC decisions on commercial wisdom are non-justiciable except within the limited scope provided by the Code. Given the CoC's unanimous decision and the approvals recorded, the Tribunal held that the CoC's choice was not open to challenge before the Adjudicating Authority or this Appellate Tribunal. [Paras 23, 24, 25, 33]

The CoC's commercial decision to seek exclusion and not to re-issue Form G is not justiciable and cannot be interfered with.

Extension of CIRP under Section 12(2) - party status and right to be heard - Whether the appellant (a minority equity shareholder) was entitled to be heard before the Adjudicating Authority granted the exclusion. - HELD THAT: - The Tribunal observed that the exclusion application was between the RP and the Adjudicating Authority and founded on CoC approval; the appellant, being an equity shareholder and not a necessary party to that application, was not entitled to an opportunity to be heard in that proceedings. The Adjudicating Authority had been satisfied by the material before it and exercised its power to exclude the lockdown period; the appellant's locus to challenge that order was limited and the claim that no hearing was afforded was without basis on the record. [Paras 26, 28]

The appellant was not a necessary party to the exclusion application and no failure of hearing is established.

Final Conclusion: The Tribunal dismissed the appeals, upholding the Adjudicating Authority's order excluding the lockdown period from the CIRP under Regulation 40C, finding no violation by the Resolution Professional, and holding that the CoC's commercial decision not to re-issue Form G and to seek time exclusion was not amenable to judicial interference.

Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - pre-existing dispute - rejection of Section 9 application on account of pre-existing dispute - plausible contention requiring further investigation - patently feeble defence

Pre-existing dispute - rejection of Section 9 application on account of pre-existing dispute - plausible contention requiring further investigation - Whether the Section 9 application filed by the Operational Creditor is liable to be rejected on account of a pre-existing dispute between the parties. - HELD THAT: - The Tribunal examined the pleadings and documentary record and found email exchanges and other communications evidencing disputes as to short supplies, mismatches and quality of radiographic test samples, replacement of goods and discussions on quantification of loss and settlement. The material on record showed ongoing correspondence from August 2018 onwards and specific emails in February-March 2019 recording dissatisfaction, loss and delayed or wrong supplies. Applying the principle that an adjudicating authority must reject a Section 9 application where a notice or record discloses the existence of a bona fide pre-existing dispute, the Tribunal held that the dispute on facts and quality of supplies was a plausible contention requiring further investigation and was not a patently feeble or spurious defence. The Tribunal therefore did not examine merits beyond satisfying itself that the dispute existed in fact and was supported by evidence sufficient to bar admission of the Section 9 petition. [Paras 9, 10, 11, 12]

Section 9 application dismissed as there is a pre-existing dispute which disentitles the Operational Creditor from initiation of CIRP.

Final Conclusion: The petition under Section 9 seeking initiation of CIRP against the Corporate Debtor was dismissed on the ground of a bona fide pre-existing dispute evidenced in the record; the Registry was directed to communicate the order to the parties.

Operational debt and default under Insolvency and Bankruptcy Code, 2016 - Admissibility of Section 9 application and initiation of Corporate Insolvency Resolution Process - Liability to pay hiring/rental charges irrespective of equipment utilisation - Appointment of Interim Resolution Professional and moratorium under Section 14 - Supply of essential goods or services during moratorium

Operational debt and default under Insolvency and Bankruptcy Code, 2016 - Admissibility of Section 9 application and initiation of Corporate Insolvency Resolution Process - The Section 9 application by the Operational Creditor was admitted on the basis that 'debt' and 'default' were established. - HELD THAT: - The Tribunal examined the work orders, invoices, email communications, bank account statement and demand notice. It found that invoices were raised and acknowledged by the Corporate Debtor, payment towards part of the claim had been made, and a balance remained due as per the operational creditor's records. The Tribunal held that, on the material before it, the presence of an outstanding operational debt and the Corporate Debtor's default were established and therefore the Section 9 application was maintainable and required admission to initiate CIRP. [Paras 10, 11, 12]

Section 9 application IBA/417/2020 admitted and Corporate Insolvency Resolution Process initiated.

Liability to pay hiring/rental charges irrespective of equipment utilisation - The Tribunal held that payment of hiring/rental charges arises from the work order and is not conditional upon actual utilisation of the equipment during the hire period. - HELD THAT: - The Tribunal considered the terms and conditions of the work orders and the parties' correspondence. It observed that the work orders did not stipulate that hiring charges would be payable only if the cranes were put to use. The Tribunal reasoned that once equipment is availed on rental basis and accepted by the respondent, the contractual obligation to pay the agreed hiring charges arises irrespective of whether the equipment was used, and therefore the Corporate Debtor's contention that charges should be limited to days of actual use did not negate the creditor's claim on the record before the Tribunal. [Paras 10]

The claim for hiring/rental charges is payable as per the work order terms and is not negated by alleged non-utilisation of the cranes.

Appointment of Interim Resolution Professional and moratorium under Section 14 - Supply of essential goods or services during moratorium - Consequential directions on admission were issued: appointment of an Interim Resolution Professional from IBBI list, imposition of moratorium, and directions regarding interim expenses. - HELD THAT: - On admitting the Section 9 application, the Tribunal appointed an Interim Resolution Professional from the IBBI list subject to standard disclosures and absence of disciplinary proceedings. The order declared the moratorium as prescribed under the Code, including stay on suits, transfer or disposal of assets, and enforcement of security, while noting the exception that supply of specified essential goods or services shall not be terminated during the moratorium. The Tribunal directed the Operational Creditor to pay a specified sum to the Interim Resolution Professional to meet initial expenses and directed communication of the order to the parties and IBBI. [Paras 13, 14, 15, 16, 17]

An Interim Resolution Professional appointed; moratorium imposed with attendant statutory consequences; initial expense directed to be paid to the Interim Resolution Professional and order to be communicated to parties and IBBI.

Final Conclusion: The Tribunal admitted the Section 9 application, concluding that the operational debt and default were proved; it held that hiring charges were payable under the work order irrespective of actual utilisation, initiated CIRP, appointed an Interim Resolution Professional from the IBBI list, imposed the moratorium under the Code and directed payment of interim expenses and communication of the order.

Ex post facto law and Article 20(1) of the Constitution - Offence of money laundering as an independent/stand alone offence - Proceeds of crime - Continuing offence - Confiscation not being punitive punishment - Declaratory/clarificatory amendments

Ex post facto law and Article 20(1) of the Constitution - Proceeds of crime - Declaratory/clarificatory amendments - Whether prosecution under sections 3, 5 and 8(5) of the PML Act for assets/events antecedent to inclusion of predicate offences in the Schedule (with effect from 01.06.2009) offends Article 20(1) as ex post facto penal law. - HELD THAT: - The Court found that the prosecutions and attachment proceedings under the PML Act were initiated after 01.06.2009 when the amended provisions and the Schedule were in force, and therefore the cases are not founded on a penal provision retrospectively creating an offence. Section 3 punishes activities connected with "proceeds of crime" and, read with section 2(1)(u), requires existence of proceeds of crime but does not make prosecution contingent on conviction for a scheduled offence. The amendments were held to be clarificatory of the scope of "proceeds of crime" and the statutory scheme treats money laundering as an independent offence; accordingly initiating proceedings under the PML Act in the factual setting did not amount to penalising conduct by ex post facto law and did not attract Article 20(1). [Paras 44, 48, 50, 53, 55]

Prosecution under the PML Act in the cases before the Court does not violate Article 20(1) and is not barred as ex post facto legislation.

Offence of money laundering as an independent/stand alone offence - Proceeds of crime - Continuing offence - Whether section 3 of the PML Act is dependent on the prior existence or conviction for a scheduled (predicate) offence, or whether money laundering is a standalone offence permitting independent prosecution and attachment. - HELD THAT: - The Court analysed section 3 and section 2(1)(u) and concluded that money laundering penalises involvement in processes or activities connected with proceeds of crime (including concealment, possession, acquisition, use, projection as untainted property) and is not coterminous with or dependent upon prosecution or conviction for the predicate offence. The statutory scheme and precedents support that the offence under section 3 is independent; hence proceedings under Chapter III (adjudicatory/attachment) and Chapter VII (criminal trial) may run parallel and one does not await the result of the other. [Paras 48, 49, 50]

Section 3 is an independent, stand alone offence; prosecution and attachment under the PML Act can proceed without conviction for the scheduled offence.

Confiscation not being punitive punishment - Continuing offence - Whether confiscation under section 8(5) of the PML Act (and the attachment/forfeiture machinery in Chapter III) is punitive in nature so as to be prohibited by Article 20(1) when applied to properties acquired prior to the amendment of the Schedule. - HELD THAT: - The Court held that confiscation/forfeiture under the PML Act is remedial/confiscatory and part of a separate civil like adjudicatory mechanism (Chapter III) distinct from criminal punishment; forfeiture/confiscation has been judicially characterised as not amounting to "punishment" within Article 20(1). Given the Act's scheme, safeguards (adjudicating authority, adjudication procedures) and the public interest in depriving persons of illegitimately acquired assets, attachment and confiscation do not constitute retroactive penalisation merely because the relevant predicate offences were included in the Schedule by amendment. [Paras 57, 58, 60, 61]

Confiscation under the PML Act is not punishment for purposes of Article 20(1); attachment and adjudication under sections 5 and 8(5) are constitutionally permissible in the cases before the Court.

Final Conclusion: All writ petitions/criminal petitions are devoid of merit; the statutory scheme of the PML Act permits independent prosecution for money laundering and attachment/confiscation under its adjudicatory provisions, and the petitions are dismissed.

Quashing of recovery notice - recovery of admitted service tax dues - finality of assessment orders - Sabka Viswas Legacy (Dispute Resolution) Scheme, 2019 - installment scheme for payment of dues - absence of legal infirmity in recovery notice

Quashing of recovery notice - recovery of admitted service tax dues - finality of assessment orders - absence of legal infirmity in recovery notice - Legality of the notice under Section 87 of the Finance Act, 1994 issued for recovery of admitted service tax dues which have attained finality. - HELD THAT: - The Court recorded that the arrears sought to be recovered were admitted by the petitioner and that the assessment orders giving rise to the demands had attained finality. The petitioner had sought relief under the Sabka Viswas Legacy (Dispute Resolution) Scheme, 2019 and later requested an instalment arrangement, but failed to comply with the conditions of the scheme and the instalment arrangement. No substantive legal flaw or infirmity was shown in the impugned recovery notice, which was confined to collection of admitted and final dues. In these circumstances the petition challenging the recovery notice was without merit. [Paras 2, 3]

Writ petition dismissed; challenge to the recovery notice under Section 87 rejected.

Final Conclusion: The petition to quash the recovery notice was dismissed because the dues were admitted and the assessment orders were final; the petitioner failed to comply with available scheme and instalment arrangements and no legal infirmity in the recovery notice was shown.