TaxTMI Updates e-Newsletter
May 13,2021

Claim to carry forward unutilised CENVAT credit via Form GST TRAN-1 - power to permit filing/revision of TRAN-1 outside prescribed time - extension of time for filing TRAN-1 by invoking removal of difficulties - verification of genuineness of credit claims by the revenue

Claim to carry forward unutilised CENVAT credit via Form GST TRAN-1 - power to permit filing/revision of TRAN-1 outside prescribed time - verification of genuineness of credit claims by the revenue - Whether assessees whose requests for availing TRAN-1 credit were rejected could be permitted another opportunity to file or revise Form GST TRAN-1 despite expiry of earlier time-limits - HELD THAT: - The Division Bench's reasoning in connected matters, which placed reliance on earlier High Court decisions and on the historical amendments and extensions to Rule 117 (including use of the removal of difficulties power), led to the conclusion that assessees should be given a further opportunity to file or revise Form GST TRAN-1 so as to carry forward unutilised CENVAT/credit under the erstwhile regime. Applying that precedent, the learned Single Judge's order granting such relief was sustained. The court emphasised that the revenue remains entitled to verify the genuineness and merits of the claims in accordance with law, and any allowance to file/revise TRAN-1 is subject to such verification. In the present appeal the High Court dismissed the Union's challenge to that approach and, in consequence, granted the assessees a finite further period to submit TRAN-1. [Paras 4, 5]

Writ appeal dismissed; assessees granted 30 days from the date of the order to submit/revise Form GST TRAN-1, subject to verification of the genuineness of the claims by the revenue.

Final Conclusion: The High Court dismissed the writ appeal and directed that the assessees be allowed a final opportunity-30 days from the date of the order-to submit or revise Form GST TRAN-1; the revenue is at liberty to verify the genuineness of the credit claims in accordance with law.

Full and true disclosure - jurisdiction of the Settlement Commission - entitlement to proceed with application after additional disclosure during adjudication - judicial review under Article 226

Full and true disclosure - jurisdiction of the Settlement Commission - Section 245(C) - Whether the Settlement Commission had jurisdiction to entertain and decide the application filed by the assessee where the application was not made with true and full disclosure of income. - HELD THAT: - The Court held that an application under Section 245(C) must contain true and full disclosure at the first instance and that subsequent disclosures or additional statements furnished during adjudication demonstrate that the original application was not with true and full disclosure. The Settlement Commission's own findings and the material placed by the Department - including omitted assets and revised statement of facts - establish that the assessee had not initially disclosed all material particulars. Accordingly, the Settlement Commission, having proceeded despite such non-disclosure and accepted additional offerings during adjudication, acted without jurisdiction and in contravention of the statutory prerequisite for entertainability of a settlement application. [Paras 21, 22]

The application before the Settlement Commission was not filed with true and full disclosure and therefore the Commission lacked jurisdiction to entertain and decide the application.

Entitlement to proceed with application after additional disclosure during adjudication - judicial review under Article 226 - Whether the High Court could entertain the writ petition under Article 226 to challenge the Settlement Commission's order in the facts of this case. - HELD THAT: - The Court considered authorities on the scope of judicial review of Settlement Commission orders and observed that where the statutory precondition of true and full disclosure is absent and the Commission proceeds despite material non-disclosure or accepts revised disclosures during adjudication, such an order is susceptible to challenge. Given that the Department established non-disclosure and the Commission's order itself recorded additional disclosures, interference under Article 226 was warranted to set aside an order passed without jurisdictional compliance. The Court therefore exercised judicial review and quashed the impugned order. [Paras 23]

The writ petition was maintainable and, on the established lack of true and full disclosure and consequent lack of jurisdiction, the Settlement Commission's order was quashed.

Final Conclusion: The order of the Settlement Commission dated 13.03.2008 in Application No.TN/CN3/06-07/1/WT is quashed for want of jurisdiction because the application was not made with true and full disclosure; the writ petition is allowed.

Miscellaneous Application pending for an appeal dismissed in limine - Appeal dismissed in limine - Vivad Se Vishwas 2020 eligibility where MA is pending on specified date - Rectification of Tribunal's order under Section 254(2) as correction of mistake apparent on record - Doctrine of relation back

Miscellaneous Application pending for an appeal dismissed in limine - Vivad Se Vishwas 2020 eligibility where MA is pending on specified date - Whether Forms 1 and 2 filed under the Direct Tax Vivad Se Vishwas Act, 2020 qualify for consideration where a Miscellaneous Application (MA) filed before 31.01.2020 was pending in respect of an appeal that had been dismissed in limine. - HELD THAT: - The Court found as an undisputed fact that the revenue filed an MA on 13.11.2018 which was pending on the specified date 31.01.2020 and related to the revenue's appeal that had been dismissed by the Tribunal on 22.06.2018. The Tribunal's dismissal was held to be in limine because it was based on a mistaken impression about earlier years and contained no merits discussion. Applying the Revenue's Circular No.21 of 2020 (FAQ 61), which makes an MA pending on 31.01.2020 in respect of an appeal dismissed in limine eligible under the scheme, the Court concluded that the petitioner-assessee met both prerequisites: (i) the MA was pending on the specified date; and (ii) the MA related to an appeal dismissed in limine. Accordingly, the petitioner was entitled to succeed on this ground and the rejection of Forms 1 and 2 could not stand. [Paras 8, 9]

Forms 1 and 2 could not be rejected on the ground that the appeal was not pending on 31.01.2020; the petitioner satisfies the conditions of FAQ 61 and is entitled to have the Forms considered under the 2020 Act.

Rectification of Tribunal's order under Section 254(2) as correction of mistake apparent on record - Doctrine of relation back - Whether the Tribunal's order of 11.05.2020 restoring the revenue's appeal (by rectifying its earlier order of 22.06.2018 under Section 254(2)) must be construed as relating back so as to treat the appeal as pending on 31.01.2020. - HELD THAT: - The Court accepted that the Tribunal, on realising a mistake apparent on the face of the record, exercised its power under Section 254(2) to recall the order of 22.06.2018 and restore the appeal by order dated 11.05.2020. The Court held that the 22.06.2018 order was vitiated by an apparent mistake and that its rectification effectively 'breathed life' into the previously dismissed appeal. Invoking the doctrine of relation back, the Court held that the corrective order must be read so as to render the appeal pending for the purposes of the 2020 Act and the Circular's FAQ 61 analysis. This construction supports treating the restored appeal as within the scheme's coverage. [Paras 8, 9]

The Tribunal's rectification under Section 254(2) and the doctrine of relation back justify treating the restored appeal as pending for purposes of the 2020 Act.

Final Conclusion: The writ petition is allowed; the impugned orders rejecting Forms 1 and 2 are set aside and the revenue is directed to accord due consideration to those Forms under the Direct Tax Vivad Se Vishwas Act, 2020, keeping in mind the timelines in the Act.

Deduction under Section 80-IB(10) - Percentage Completion Method - Quashing and remand for fresh adjudication

Deduction under Section 80-IB(10) - Percentage Completion Method - Adjudication on merits - Quashing and remand for fresh adjudication - Claim for deduction under Section 80-IB(10) was not finally adjudicated and is remitted to the Assessing Officer for fresh consideration - HELD THAT: - The Assessing Officer disallowed the entire claim of the assessee under Section 80-IB(10) without considering the merits of the proportionate deduction claimed by applying the Percentage Completion Method. This Court, relying on its earlier decision in CIT vs. M/s. S.N. Builders and Developers rendered on 07.01.2021, found that the matter requires adjudication on merits. The orders of the Tribunal, the Commissioner (Appeals) and the Assessing Officer insofar as they relate to the Section 80-IB(10) claim were quashed and the matter was remitted to the Assessing Officer to decide the claim afresh in accordance with law. The Court recorded that, in view of the cited decision, it was unnecessary to answer the substantial question of law framed in the appeal. [Paras 4, 7, 8]

Orders quashed and the claim under Section 80-IB(10) remitted to the Assessing Officer for fresh adjudication in accordance with law

Final Conclusion: Appeal disposed by quashing the impugned orders and remitting the Section 80-IB(10) claim for fresh adjudication by the Assessing Officer in accordance with law; substantial question of law not answered in view of earlier decision relied upon.

Deduction under Section 10A - export turnover - communication expenses and expenses incurred in foreign currency - failure to adjudicate grounds - quashing of tribunal order - remand for fresh consideration

Deduction under Section 10A - export turnover - communication expenses and expenses incurred in foreign currency - failure to adjudicate grounds - remand for fresh consideration - Tribunal's failure to adjudicate independently the contention that communication expenses and expenses in foreign currency ought not to be reduced from export turnover while computing deduction under Section 10A; quashing of that portion of the Tribunal order and remand for fresh decision. - HELD THAT: - The Bench examined the Tribunal's order and found that ground No.9-challenging the reduction of communication expenses and foreign currency expenses from export turnover for computing the Section 10A deduction-was not dealt with independently by the Tribunal. Instead, the Tribunal treated ground Nos.9 and 10 as covered by this Court's decision in CIT v. Tata Elxsi and did not undertake a separate adjudication of ground No.9. In view of the absence of an independent finding on that ground, the Court concluded that the Tribunal's order insofar as it pertains to ground No.9 must be set aside and the matter remitted to the Tribunal for fresh consideration and decision on that specific ground. [Paras 7, 8]

Portion of the Tribunal order relating to ground No.9 quashed and matter remitted to the Tribunal for fresh adjudication of that ground.

Final Conclusion: The appeal is disposed of by quashing the Tribunal's order insofar as it failed to adjudicate ground No.9 and by remitting the matter to the Tribunal for fresh decision on that ground; the substantial question of law was not answered.

Pre emption of statutory time for filing reply - bias / pre set mind in administrative decision making - requirement to consider party's reply before passing order - quashing of order and remand for speaking order

Pre emption of statutory time for filing reply - bias / pre set mind in administrative decision making - requirement to consider party's reply before passing order - Validity of the impugned order passed before the expiry of the time prescribed for filing reply and without considering the reply filed on the last day. - HELD THAT: - The Court found that the impugned order was digitally signed at about 16:22:33 hours on 15.03.2021, whereas the Show Cause Notice allowed the petitioner to file a digital reply up to 23:59 hours on the same date. By passing the order prior to the deadline and without considering the reply filed by the petitioner on 15.03.2021, the respondent acted with a pre set mind and thereby violated the principles of fair adjudication. The order was therefore held to be invalid for lack of consideration of the petitioner's response and for manifest procedural unfairness. [Paras 1, 2, 5]

Impugned order is quashed as having been passed before the prescribed deadline and without considering the petitioner's reply.

Quashing of order and remand for speaking order - requirement to consider party's reply before passing order - Relief to be granted and subsequent procedure to be followed after quashing the impugned order. - HELD THAT: - Having quashed the defective order, the Court directed that the matter be remitted to the second respondent for fresh adjudication. The second respondent is required to pass a speaking order on merits in accordance with law after considering the reply filed by the petitioner on 15.03.2021. The Court disposed of the writ petition on this basis and declined to insist on costs. [Paras 6]

Case remitted to the second respondent to pass a speaking order after considering the petitioner's reply; writ petition disposed of.

Final Conclusion: The impugned order dated 15.03.2021 is quashed for having been passed before the expiry of the time allowed for filing the reply and without considering that reply; the matter is remitted to the second respondent to decide afresh by a speaking order after due consideration of the reply filed on 15.03.2021.

Service of notice under Section 226(3) of the Income Tax Act - Coercive recovery proceedings - Assessment under Section 144 for AY 2017-18 - Non-cooperation in assessment proceedings - Interim protection pending disposal of appeal - Duty to seek stay from appellate/administrative authority

Service of notice under Section 226(3) of the Income Tax Act - Coercive recovery proceedings - Non-cooperation in assessment proceedings - Validity of the Section 226(3) notice issued to the bank without simultaneous service on the petitioner - HELD THAT: - The Court recorded that the Section 226(3) notice was not served on the petitioner simultaneously with service on the bank manager, which ought to have been done. However, this defect was held not to be fatal to the recovery proceedings because the petitioner was aware of the coercive recovery action initiated as early as March 2020 and had not sought interim relief or otherwise acted to protect its rights. The assessment itself arose from a non-cooperation scenario where the petitioner did not respond to notices under Section 142(1) or pre-assessment show cause notices, and an order under Section 144 was passed. In these factual circumstances the writ relief in the nature of certiorari/mandamus to quash the Section 226(3) notice was refused. [Paras 5, 6]

The challenge to the Section 226(3) notice is rejected; non-service on the petitioner is not fatal where the petitioner was aware of recovery proceedings and did not seek timely interim relief.

Interim protection pending disposal of appeal - Duty to seek stay from appellate/administrative authority - Coercive recovery proceedings - Grant of interim relief and directions regarding disposal of the pending appeal - HELD THAT: - Although the writ petition for quashing the notice was dismissed, the Court exercised its supervisory jurisdiction to afford limited interim protection. The petitioner was directed to seek appropriate interim protection from appellate or administrative authorities; concurrently, the Court directed the National Faceless Appeals Centre to dispose of the petitioner's pending first appeal within twelve weeks after hearing the petitioner and in accordance with law. Pending disposal of that appeal, no further coercive recovery proceedings shall be initiated or continued insofar as a specified portion of the total demand has already been recovered. [Paras 7]

Directs disposal of the appeal within twelve weeks and grants limited interim protection by restraining further coercive recovery until the appeal is disposed.

Final Conclusion: Writ petition dismissed insofar as the challenge to the Section 226(3) notice is concerned; petitioner granted limited interim protection and the appellate authority directed to dispose the pending appeal within twelve weeks; no costs.

Allowability of depreciation to charitable institutions - set-off and carry forward of losses by charitable institutions - application of income under section 11 - double benefit/double deduction

Allowability of depreciation to charitable institutions - application of income under section 11 - double benefit/double deduction - Depreciation claimed by the assessee-society was allowable despite having treated capital expenditure as application of income under section 11. - HELD THAT: - The Tribunal upheld the CIT(A)'s allowance of depreciation, following the decision of the jurisdictional High Court in DIT (Exemption) v. Indraprastha Cancer Society and the ratio of the Supreme Court in Rajasthan and Gujarati Charitable Foundation Poona, which recognise that depreciation may be allowed when computing income of charitable institutions and that treating the cost as application of income in the year of acquisition does not preclude accounting for depreciation in subsequent years. The Tribunal also noted the statutory amendment by Finance Act No. 2/2014 regarding deduction by way of depreciation being restricted for purposes of section 11, but observed that the amendment is prospective with effect from AY 2015-16 and therefore does not affect the assessment year under consideration. On this basis the Tribunal found no error in the CIT(A)'s decision to allow depreciation. [Paras 4]

The allowance of depreciation was upheld and the Revenue's ground challenging it was dismissed.

Set-off and carry forward of losses by charitable institutions - application of income under section 11 - Carry forward and set-off of deficit/carry forward loss claimed by the assessee-society was admissible. - HELD THAT: - The Tribunal endorsed the CIT(A)'s conclusion that adjustment of brought forward loss and carry forward of deficit is permissible for charitable institutions because income is to be computed on commercial principles; the CIT(A) had followed binding decisions of the jurisdictional High Court (including DIT v. Raghuvanshi Charitable Trust) and other authorities holding that brought forward/ carry forward losses are to be allowed while computing income under section 11. No error was found in the CIT(A)'s allowance of the carry forward of deficit. [Paras 5]

The disallowance of carry forward of deficit by the Assessing Officer was set aside and the CIT(A)'s allowance was upheld; Revenue's ground was dismissed.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s allowance of depreciation and the carry forward of deficit for the assessment year under consideration.

Registration under Section 12A of the Income-tax Act - approval under Section 80G of the Income-tax Act - requirement of 12A registration as a prerequisite for 80G approval - verification of genuineness of aims and objects - non-compliance due to COVID-19 as reasonable and bona fide cause - remand for fresh decision with opportunity to be heard

Registration under Section 12A of the Income-tax Act - verification of genuineness of aims and objects - non-compliance due to COVID-19 as reasonable and bona fide cause - remand for fresh decision with opportunity to be heard - Whether the rejection of the appellant's application for registration under Section 12A was justified where the appellant did not respond to notices and did not produce documents - HELD THAT: - The Tribunal found that the ld. Commissioner rejected the Section 12A application in the absence of proper pleadings, information and documents and on the ground that charitable activities could not be verified. The Tribunal accepted that the appellant had a reasonable and bona fide cause for non-participation in the proceedings because the applications and notices fell during the Covid 19 pandemic period, which impeded the appellant's ability to appear and submit documents. In view of these peculiar facts and the absence of an adjudication on merits, the Tribunal set aside the impugned rejection and remanded the matter to the ld. Commissioner for fresh decision on merits, directing that the appellant be afforded reasonable opportunities of being heard. [Paras 3, 4]

Impugned order rejecting registration under Section 12A set aside and matter remanded to the ld. Commissioner for fresh decision with reasonable opportunity to the appellant.

Approval under Section 80G of the Income-tax Act - requirement of 12A registration as a prerequisite for 80G approval - remand for fresh decision with opportunity to be heard - Whether the appellant's application for approval under Section 80G could be granted when 12A registration was not in place - HELD THAT: - The Tribunal noted that the ld. Commissioner correctly observed that before granting approval under Section 80G, it is mandatory for the applicant to have registration under Section 12A. Given the rejection of the Section 12A application (which the Tribunal has remanded for fresh decision), the Section 80G application cannot be granted until the registrational requirement is fulfilled. The Tribunal therefore directed that the 80G application be considered in the light of any fresh decision on the 12A application and afforded the appellant an opportunity to be heard. [Paras 3]

The ld. Commissioner's view that 12A registration is a prerequisite for grant of approval under Section 80G was upheld; consideration of the 80G application to follow after fresh decision on 12A.

Final Conclusion: The appeals are allowed for statistical purposes: the orders rejecting registration under Section 12A and refusing 80G approval are set aside and the matters remanded to the ld. Commissioner for fresh adjudication on merits, with reasonable opportunities of being heard to the appellant; the requirement that 12A registration precede 80G approval is affirmed.

Arm's length price adjustment - notional interest on inter-group receivables/payables - choice of interest benchmark for cross-border transactions (LIBOR v. domestic PLR) - netting of reciprocal notional interest - grace period for computation of notional interest - business expenditure: club membership subscriptions - ad hoc disallowance for unverifiable bills and vouchers

Arm's length price adjustment - notional interest on inter-group receivables/payables - choice of interest benchmark for cross-border transactions (LIBOR v. domestic PLR) - netting of reciprocal notional interest - grace period for computation of notional interest - Computation of notional interest on receivables/payables from/to Associated Enterprises for ALP adjustment. - HELD THAT: - The Tribunal accepted the assessee's submission that, because the transactions are cross-border, LIBOR is the appropriate benchmark rather than the domestic PLR. Prior decisions of the Bench on the same question were noted. The Tribunal further held that notional interest charged on receivables should be netted with notional interest on payables to the same AEs, since reciprocal exposures exist. Considering the nature of the assessee's trade, the Tribunal fixed a grace period of 30 days for computing notional interest on debit and credit transactions with AEs and directed computation accordingly. [Paras 6]

Adopt LIBOR for computing notional interest; permit netting of reciprocal notional interest; apply a 30 day grace period.

Business expenditure: club membership subscriptions - Allowability of club expenditure claimed by the assessee as business expenditure. - HELD THAT: - The AO disallowed the club expenditure on the basis that it was not justified as business expenditure in Form 3CD. The assessee failed to substantiate before the Tribunal that the expenditure was incurred for business purposes. In the absence of supporting material, the Tribunal found no reason to overturn the AO's disallowance. [Paras 8]

Addition of club expenditure of Rs. 2,41,139/- confirmed.

Ad hoc disallowance for unverifiable bills and vouchers - Validity of ad hoc disallowance made by the AO towards freight and repairs where several vouchers were not verifiable. - HELD THAT: - On verification of claimed freight and repairs expenses, the AO found several self-made vouchers not accessible for verification and made an estimated disallowance. Having regard to the facts and the admitted non-availability/unverifiability of several bills and vouchers, the Tribunal declined to interfere with the AO's estimate. [Paras 10]

Ad hoc disallowances made by the AO towards freight and repairs upheld.

Final Conclusion: The appeal is partly allowed: the Tribunal directed recomputation of notional interest using LIBOR with permitted netting and a 30 day grace period, and confirmed the additions/disallowances in respect of club expenditure and the ad hoc estimates for unverifiable freight and repair claims.

Allowability of provisions for after-sales costs as business expenditure under section 37 - ascertainability of liability arising from warranty and after-sales obligations - binding effect of consistent Tribunal findings in assessee's own case and Revenue's acquiescence - non-applicability of disallowance under section 14A where no exempt income is earned - computation of expenditure attributable to exempt income under Rule 8D(2) of the Income Tax Rules

Allowability of provisions for after-sales costs as business expenditure under section 37 - ascertainability of liability arising from warranty and after-sales obligations - binding effect of consistent Tribunal findings in assessee's own case and Revenue's acquiescence - Deletion of addition made by the Assessing Officer in respect of provision for after-sales costs was justified and the CIT(A)'s order deleting the addition was upheld. - HELD THAT: - The Tribunal examined the assessee's claim of provision for after-sales costs and the Assessing Officer's disallowance on the ground that no obligation was cast and no liability had accrued. The assessee demonstrated that the provision was made on a consistent, scientific and systematic basis and relied on the principle that where warranty/after-sales obligations attach to a sale the liability becomes ascertainable and deductible. The Tribunal placed weight on the long-standing favourable treatment in the assessee's own case across assessment years from 1998-99 onwards, including a recent ITAT decision for A.Y. 2011-12 and instances where the Assessing Officer and Revenue had given effect to earlier Tribunal findings (including no appeal being filed by Revenue for certain years and allowance by the AO after verification). In view of these consistent prior findings in the assessee's own case, the Tribunal found no reason to interfere with the CIT(A)'s deletion of the addition and upheld the allowance of the provision. [Paras 7, 8, 9, 10, 11]

Grounds raised by the Revenue in ITA No.246/PUN/2018 are dismissed and the addition for after-sales costs is deleted.

Non-applicability of disallowance under section 14A where no exempt income is earned - computation of expenditure attributable to exempt income under Rule 8D(2) of the Income Tax Rules - Disallowance confirmed by the CIT(A) under section 14A read with Rule 8D(2) in respect of expenditure attributable to exempt income was not warranted because the assessee did not earn any exempt income; the cross-objection by the assessee was allowed. - HELD THAT: - The Assessing Officer invoked Rule 8D(2) to compute and disallow expenditure allegedly attributable to investments, after noting investments made by the assessee in a subsidiary. The assessee contended no exempt income arose from those investments during the year. The Tribunal applied the settled principle that section 14A (and attendant Rule 8D computation) does not operate where no exempt income is received or receivable in the relevant year. The Tribunal referred to the consistent judicial view (including decisions of the Bombay High Court and other authorities) that disallowance under section 14A cannot be sustained in the absence of exempt income. On the facts that no exempt income was earned in the year under appeal, the Tribunal concluded that no disallowance under section 14A was permissible and therefore set aside the disallowance confirmed by the CIT(A). [Paras 14, 15, 16, 17, 18]

Cross-objection CO No.04/PUN/2021 is allowed and the disallowance under section 14A r.w. Rule 8D(2) is set aside.

Final Conclusion: In aggregate the Revenue's appeal is dismissed and the assessee's cross-objection is allowed: the disallowance for after-sales provision is deleted and the disallowance under section 14A r.w. Rule 8D(2) is set aside for A.Y. 2013-14.

Remand for fresh adjudication - penalty proceedings under section 271B - penalty proceedings under section 271(1)(b) - penalty proceedings under section 271(1)(c) - assessment completed under section 144 v. assessment under section 143(3) - admission of evidence on remand

Penalty proceedings under section 271B - assessment completed under section 144 v. assessment under section 143(3) - remand for fresh adjudication - admission of evidence on remand - Validity of penalty levied under section 271B in the facts of the case and the appropriate remedy - HELD THAT: - Penalty proceedings under section 271B were initiated for failure to have the accounts audited and to furnish the audit report within the due date. The penalty was originally imposed on the basis of an assessment completed under section 144, which has subsequently been set aside by the Tribunal and the matter remanded resulting in an assessment under section 143(3). Since the assessment on which the penalty was founded no longer subsists, the Tribunal found it appropriate to remit the penalty issue to the Assessing Officer for fresh adjudication. The assessee is permitted to file evidence in support of contentions before the Assessing Officer on remand. [Paras 9, 10]

Penalty under section 271B remanded to the file of the Assessing Officer for fresh adjudication; assessee permitted to file evidence; appeal allowed for statistical purposes.

Penalty proceedings under section 271(1)(b) - remand for fresh adjudication - admission of evidence on remand - Confirmation of penalty under section 271(1)(b) for non-compliance with notices under sections 143(2)/142(1) and the appropriate remedy - HELD THAT: - The facts and circumstances in this appeal were held to be identical to those in the appeal concerning section 271B. By parity of reasoning, the Tribunal concluded that the question of levy and confirmation of penalty under section 271(1)(b) should also be remitted to the Assessing Officer for fresh consideration. The remand carries the same directions as in the other appeal, allowing the assessee to place evidence before the Assessing Officer. [Paras 13, 14]

Penalty under section 271(1)(b) remanded to the Assessing Officer for fresh adjudication with similar directions; appeal allowed for statistical purposes.

Penalty proceedings under section 271(1)(c) - remand for fresh adjudication - admission of evidence on remand - Confirmation of penalty under section 271(1)(c) for furnishing inaccurate particulars of income and the appropriate remedy - HELD THAT: - Given that the material facts were identical to the other two appeals and the penalty under section 271(1)(c) had been confirmed in ex parte proceedings, the Tribunal applied the same reasoning and directed that the matter be remitted to the Assessing Officer for fresh adjudication. The assessee is at liberty to file supporting evidence before the Assessing Officer on remand. [Paras 17, 18]

Penalty under section 271(1)(c) remanded to the Assessing Officer for fresh adjudication with similar directions; appeal allowed for statistical purposes.

Final Conclusion: All three appeals relating to A.Y. 2008-09 are allowed for statistical purposes and the penalty matters under sections 271B, 271(1)(b) and 271(1)(c) are remanded to the Assessing Officer for fresh adjudication, with liberty to the assessee to file evidence.

Validity of reassessment proceedings - Notice under section 148 - Reopening of assessment and assessment under section 147 - Assessment framed under section 144 - Transfer of proceedings under section 127 - Continuity of proceedings under section 127(4) - Jurisdictional competence of assessing officer

Validity of reassessment proceedings - Notice under section 148 - Transfer of proceedings under section 127 - Continuity of proceedings under section 127(4) - Jurisdictional competence of assessing officer - Whether the reassessment framed by DCIT (International Taxation) was valid where notice under section 148 was issued by ITO Phagwara and no order under section 127(2) transferring the case to DCIT was recorded, and whether continuity under section 127(4) cured any defect. - HELD THAT: - The Tribunal examined the sequence of events and the coordinate-bench decision in Sh. Manjit Singh v. DCIT International Taxation where identical facts were held to render reassessment invalid. In the present case the notice under section 148 was issued by ITO Phagwara but the consequential assessment was framed by DCIT (International Taxation) without any recorded order under section 127(2) transferring jurisdiction. The Tribunal held that where the initiating proceedings were without jurisdiction or where no competent-authority transfer under section 127(2) is recorded, the Assessing Officer of the transferee jurisdiction cannot lawfully continue and complete reassessment merely by invoking continuity under section 127(4). The transfer provisions require competent-authority action; a suo motu transfer by an officer who lacked jurisdiction does not validate void proceedings. Following the coordinate Bench, the Tribunal concluded that reopening and assessment in such circumstances are not sustainable and must be quashed. [Paras 7, 8]

Reassessment framed by DCIT (International Taxation) quashed as initiation and transfer were not validly effected; reassessment under sections 147/144 set aside.

Final Conclusion: Following the coordinate Bench decision, the Tribunal allowed the appeal, quashed the assessment framed under section 144 read with section 147 for AY 2011-12 on the ground that the reassessment proceedings were not validly initiated/transferred and therefore could not be sustained.

Disallowance under section 14A of the Income-tax Act, 1961 - computation under Rule 8D(2) of the Income-tax Rules - application of Rule 8D(2)(iii) - consideration of only investments actually yielding exempt income - capital expenditure versus revenue expenditure (replacement of meters) - allocation of head office expenses for deduction under section 80IA - deduction under section 80IA - applicability against gross total income - computation of book profit under section 115JB - disallowance under Explanation 1 clause (f)

Disallowance under section 14A of the Income-tax Act, 1961 - computation under Rule 8D(2) of the Income-tax Rules - application of Rule 8D(2)(iii) - consideration of only investments actually yielding exempt income - Deletion of disallowance under section 14A as computed by applying Rule 8D(2) and the scope of Rule 8D(2)(iii). - HELD THAT: - The Tribunal found that the assessee had made a voluntary disallowance and possessed sufficient interest free funds (share capital and reserves) in excess of investments yielding exempt income. Following the jurisdictional High Court decision in HDFC Bank and the Special Bench of the Delhi Tribunal in Vireet Investments, the second limb interest disallowance under Rule 8D(2) was correctly deleted. As to Rule 8D(2)(iii), the CIT(A)'s direction that the AO should consider only those investments which actually yielded exempt income consonant with Vireet Investments was upheld. The matter was thus remitted to the AO for recomputation strictly by considering only investments that actually produced exempt dividend income and thereafter adjusting the voluntary disallowance made by the assessee.

Deletion of Rule 8D(2) disallowance upheld; AO directed to recompute under Rule 8D(2)(iii) considering only investments actually yielding exempt income and then reduce the voluntary disallowance.

Capital expenditure versus revenue expenditure (replacement of meters) - Whether expenditure on replacement of electricity meters is capital or allowable as revenue deduction. - HELD THAT: - The Tribunal noted that on identical facts the issue has repeatedly been decided in the assessee's favour by earlier Tribunal and Bombay High Court orders in the assessee's own case. The CIT(A)'s acceptance of the assessee's contention and deletion of the addition treating the replacement cost as capital was sustained by following those precedents and prior appellate decisions in the assessee's case.

Addition disallowing the replacement meter expenditure dismissed; CIT(A)'s order in favour of the assessee sustained.

Allocation of head office expenses for deduction under section 80IA - Validity of apportioning head office expenses to compute deduction under section 80IA. - HELD THAT: - The Tribunal held that the issue is covered by earlier decisions in the assessee's own case and by the Bombay High Court which supported the assessee's position. The CIT(A)'s deletion of the AO's allocation of head office expenses for reducing the section 80IA claim was therefore correct and required no interference.

AO's apportionment of head office expenses for computing section 80IA deduction set aside; relief to the assessee upheld.

Deduction under section 80IA - applicability against gross total income - Whether deduction under section 80IA can be set off against gross total income or only against business income. - HELD THAT: - The Tribunal recorded that the question has been previously decided in the assessee's favour by the Bombay High Court in earlier appeals and that the CIT(A) correctly followed that binding position. Consequently, there was no infirmity in allowing the section 80IA deduction as applied in the assessment as per the earlier High Court rulings.

Deduction under section 80IA held allowable in the manner adopted by the assessee (as per the Bombay High Court decisions); CIT(A)'s order sustained.

Computation of book profit under section 115JB - disallowance under Explanation 1 clause (f) - disallowance under section 14A of the Income-tax Act, 1961 - Whether the AO could apply Rule 8D(2) to make disallowance for computing book profit under section 115JB, or whether only actual expenses debited to profit and loss account need to be disallowed under Explanation 1 clause (f) to section 115JB(2). - HELD THAT: - Relying on the Special Bench decision in Vireet Investments, the Tribunal concluded that the mechanistic application of Rule 8D(2) is not permissible for computing disallowance under clause (f) of Explanation 1 to section 115JB(2); only actual expenses debited to the profit and loss account which relate to earning exempt income are to be disallowed. The assessee had already made a voluntary disallowance of expenses in the return, and no further disallowance was warranted for book profit computation. The CIT(A)'s deletion of the AO's disallowance in computing book profits was therefore correct.

Deletion of the disallowance for section 115JB computation sustained; only actual expenses (including the assessee's voluntary disallowance) to be considered.

Final Conclusion: The Revenue's appeal is partly allowed. The Tribunal upheld the CIT(A)'s deletions in respect of the Rule 8D(2) second limb interest disallowance and disallowance for computation of book profit under section 115JB, sustained the finding that replacement meter costs need not be disallowed as capital expenditure in this appeal, and affirmed the CIT(A)'s relief on allocation of head office expenses and the treatment of section 80IA deduction; the AO is directed to recompute the Rule 8D(2)(iii) disallowance considering only investments that actually yielded exempt income and to adjust the assessee's voluntary disallowance accordingly.

Apportionment of sale consideration - capital gains arising on sale of flats with incidental membership/leasehold rights - clubbing provisions under Section 64(1) of the Act - acceptance of returns by the department and prevention of double taxation - deduction under Section 54EC - consequential interest liability computed on returned income

Apportionment of sale consideration - capital gains arising on sale of flats with incidental membership/leasehold rights - Whether the portion of sale consideration of Rs.44,63,434/- (attributed to two family members) could be included in the assessee's income or required to be apportioned among all four original co owners - HELD THAT: - The Tribunal found on the facts that the plot and attendant society/membership rights were originally purchased by four persons and, although the plot was contributed to the firm with capital accounts credited to the two contributors, the membership and other personal rights remained with all four individuals. The flats were sold together with those rights which were never transferred to the firm. Consequently, a portion of the sale consideration properly relates to the individual rights retained by all four and not solely to the two who had been credited with purchase cost. Inclusion of the amount in the assessee's hands would result in attribution of consideration that belonged to the other co owners. [Paras 8, 9]

Sale consideration was to be distributed among the four original owners; the addition of Rs.44,63,434/- in the hands of the assessee on account of the shares of the two ladies is not sustainable and is deleted.

Clubbing provisions under Section 64(1) of the Act - Whether the addition sustained by the CIT(A) under clubbing provisions of Section 64(1) was justified - HELD THAT: - The CIT(A) applied clubbing provisions to sustain the addition. The Tribunal held that there was no transfer from husband to wife or other relationships warranting clubbing; the rights and consideration related to independently held membership/leasehold rights of the four individuals. Further, the Tribunal noted the limited ambit of Section 64(1) (as to whom it applies) and observed that the CIT(A) erred in applying clubbing even in relation to the mother. Accordingly, clubbing under Section 64(1) could not be invoked to bring the said amount to tax in the assessee's hands. [Paras 8]

Application of clubbing provisions by the CIT(A) was incorrect; the addition under Section 64(1) is deleted.

Acceptance of returns by the department and prevention of double taxation - deduction under Section 54EC - Whether the fact that the two co owners had disclosed and been assessed on their respective capital gains (and claimed reinvestment deductions) precluded inclusion of the same consideration in the assessee's income - HELD THAT: - The Tribunal took note of the returns and computations of the two women which disclosed the capital gains attributable to their shares (without claiming cost) and their claiming of deduction under Section 54EC by reinvestment. Those returns were accepted by the department. The Tribunal held that taxing the same sale consideration again in the hands of the assessee would lead to double taxation and therefore there was no justification to include that consideration in the assessee's income. [Paras 9]

Since the co owners had disclosed and been assessed on their shares, and claimed reinvestment deduction, the disputed amount cannot be brought to tax again in the assessee's hands; the addition is deleted.

Consequential interest liability computed on returned income - Whether interest under Section 234C is chargeable consequentially on the deleted addition - HELD THAT: - Grounds relating to interest under Section 234C were treated as consequential. The Tribunal observed that such interest, where chargeable, is to be computed on the returned income and not on the assessed income after deletions. [Paras 10]

Interest chargeability (grounds 3 & 4) is consequential; interest, if any, is to be computed on the returned income and not on the assessed income following deletion.

Final Conclusion: The Tribunal allowed the appeal, deleted the addition of Rs.44,63,434/-, held that clubbing under Section 64(1) was wrongly applied by the CIT(A), recognised that the co owners had been assessed on their shares (preventing double taxation), and observed that any interest consequences are to be determined on the returned income.

Taxability under section 56(1) of the Income-tax Act - receipt of share premium as capital receipt - distinction between capital and revenue receipts - application of section 56(2)(viib) to share premium - treatment under section 68 - genuineness of share subscription - transfer pricing adjustment - arithmetic mean including customs duty

Taxability under section 56(1) of the Income-tax Act - receipt of share premium as capital receipt - distinction between capital and revenue receipts - Receipt of share premium cannot be treated as income taxable under section 56(1) of the Act - HELD THAT: - The Tribunal found that the assessee had received share premium which formed part of share capital and shareholders' funds; such receipts are capital in nature and, unless specifically brought to tax, are not includible as income. To attract chargeability under section 56(1), the receipt must have the character of "income" as defined in section 2(24). The Tribunal held that infringement of other statutes (for example, alleged non-compliance with Companies Act provisions) does not, by itself, convert a capital receipt into revenue for income-tax purposes. The Tribunal relied on earlier coordinate-bench decisions (Credit Suisse Business Analysis (India) (P) Ltd. and Green Infra Ltd.) which addressed identical contentions and concluded that share premium is not taxable under section 56(1); factual allegations that premium moneys were used for day-to-day business or that intangible assets were impaired did not establish revenue character where the assessee did not claim such amounts as deductions or where opening and closing balances of the share premium account remained unchanged. The Tribunal rejected the Revenue's reliance on a contrary decision that involved findings under section 68 where genuineness of parties and layering of funds had been shown, noting those facts are distinguishable and that in the present case no such enquiries challenging genuineness were made by the AO. [Paras 4]

The addition made under section 56(1) on account of receipt of share premium is deleted; the CIT(A) was correct in holding the share premium to be a capital receipt not taxable under section 56(1).

Transfer pricing adjustment - arithmetic mean including customs duty - Direction to include customs duty while computing arithmetic mean for transfer pricing adjustment - HELD THAT: - At the hearing the Department conceded the ground challenging the CIT(A)'s direction to the AO to include customs duty in computing the arithmetic mean in respect of transfer pricing adjustment. The concession was recorded as a statement made from the Bar and the ground was allowed. [Paras 2]

Ground challenging the CIT(A)'s direction is allowed pursuant to the Revenue's concession.

Final Conclusion: The Revenue's appeal is partly allowed. The Tribunal upheld the deletion by the CIT(A) of the addition under section 56(1) in respect of share premium for A.Y.2011-12, holding the receipt to be a capital receipt not chargeable as income; separately, the Revenue conceded and the Tribunal allowed the ground relating to inclusion of customs duty in the arithmetic mean for transfer pricing adjustment.

Re-assessment under Section 17(4) read with Section 17(5) of the Customs Act - speaking order requirement under Section 17(5) - contemporaneous import data / NIDB reliance - transaction value loading and enhancement - acceptance of re-assessment in writing - estoppel in taxation matters

Speaking order requirement under Section 17(5) - re-assessment under Section 17(4) read with Section 17(5) of the Customs Act - contemporaneous import data / NIDB reliance - transaction value loading and enhancement - Validity of reassessment and enhancement of declared transaction value based solely on contemporaneous import data (NIDB) without passing a speaking order as required by Section 17(5). - HELD THAT: - The Tribunal held that Section 17(5) mandates that where reassessment under Section 17(4) is contrary to the self-assessment, the proper officer must pass a speaking order within fifteen days unless the importer has confirmed acceptance of the reassessment in writing. Section 17(5) does not make issuance of a speaking order contingent on the importer requesting it. The adjudicating authority's uniform enhancement on the sole basis of NIDB/contemporaneous import data, without specifying the particulars of the contemporaneous data in the order and without issuing a speaking order, failed to meet the statutory obligation. The Tribunal noted authority on this point and distinguished earlier decisions relied upon by Revenue as not involving the Section 17(5) obligation. Further, on the facts the customs officers did not follow the prescribed assessment procedure and orally denied provisional assessment, allegedly exerting pressure causing the importer's apparent acceptance. For these reasons the Tribunal concluded the assessing authority's reliance on NIDB alone and failure to pass a speaking order rendered the enhanced assessments unsustainable. [Paras 10, 11]

Enhanced assessment based solely on NIDB/contemporaneous data without a speaking order under Section 17(5) is unsustainable; the assessing authority failed to follow mandatory procedure and the enhancement is set aside.

Acceptance of re-assessment in writing - estoppel in taxation matters - Whether the importer's written acceptance of enhanced value and payment to avoid demurrage precluded challenge to the reassessment. - HELD THAT: - The Tribunal accepted that acceptance in writing can, in appropriate circumstances, obviate the need for a speaking order; however, the factual matrix here showed that the importer's purported acceptance was obtained after coercive conduct to avoid detention and demurrage and that the acceptance was not a free and uncoerced relinquishment of rights. The Tribunal relied on the appellate record and its finding that the customs officer did not follow laid down procedure and effectively compelled the importer to accede to enhancement. Consequently, the importer was not estopped from challenging the reassessment and the Commissioner (Appeals) was justified in restoring the declared values. [Paras 11]

The importer's apparent acceptance, given under the circumstances recorded, did not bar challenge to reassessment; acceptance obtained under the described conduct did not preclude setting aside the enhancement.

Final Conclusion: Revenue's appeals are dismissed. The Commissioner (Appeals) order setting aside enhancement of value and restoring declared transaction value is upheld; respondent is entitled to consequential benefits in accordance with law.

Restoration of company struck off from ROC register - extension of limitation due to COVID-19 - filing of overdue statutory returns for restoration - publication of restoration notice in newspaper and Official Gazette - payment to Central Government towards cost of striking off - clearance of Income-tax dues as condition for restoration

Extension of limitation due to COVID-19 - Applicability of the Supreme Court's COVID-19 extension of limitation to the belated appeal from striking off of the company's name. - HELD THAT: - The Tribunal found that the appeal, filed beyond the three-year period prescribed in Section 252(1) of the Companies Act, 2013, nevertheless attracts the benefit of the Supreme Court's order dated 23.03.2020 in Suo Motu Writ Petition (Civil) No. 3/2020 extending limitation from 15th March, 2020, and subsequent clarifying orders. The Tribunal accepted that the Supreme Court's order is binding on all Courts and Tribunals and noted the NCLT Principal Bench circular applying the extension to matters within NCLT jurisdiction. On that basis the appellant was held entitled to the extended period, and the delay in filing the appeal was condoned for the purpose of adjudicating restoration on merits. [Paras 10, 11, 12, 13]

The appeal is treated as within time by application of the COVID-19 extension of limitation; the appellant is entitled to proceed with restoration despite filing after three years.

Restoration of company struck off from ROC register - filing of overdue statutory returns for restoration - publication of restoration notice in newspaper and Official Gazette - payment to Central Government towards cost of striking off - clearance of Income-tax dues as condition for restoration - Whether the company's name should be restored to the Register of Companies and the conditions for such restoration. - HELD THAT: - Having held the appeal maintainable under the extended limitation, the Tribunal allowed the appeal in part and directed the Registrar of Companies to restore the company's name subject to specified conditions. The conditions require the appellant to file all overdue statutory returns with applicable fees and additional fees within the stipulated period or within 90 days from receipt of an authentic copy of the order; to publish a restoration notice in leading newspapers circulating in the district and in the Official Gazette as per a draft approved by the ROC; to pay to the Central Government, through the ROC, a sum towards the cost incurred in striking off the company; to clear all Income-tax dues, including any penalties for non-filing, and to produce requisite acknowledgements; and for the Registry to forward a copy of the order to the concerned Income Tax Department. Restoration was ordered to be effected only upon compliance with these conditions. [Paras 14]

The appeal is partially allowed; the ROC is directed to restore the company's name upon the appellant's compliance with the enumerated conditions.

Final Conclusion: The appeal for restoration of the company's name is allowed in part: the Tribunal applied the Supreme Court's COVID-19 extension of limitation to render the belated appeal maintainable and directed restoration of the company's name upon compliance with conditions including filing of overdue returns, publication of notice, payment to the Central Government towards strike-off costs, and clearance of Income-tax dues.

Admission of Section 10 corporate insolvency application - existence of debt and default - operation of moratorium under Section 14 - duration of moratorium until completion of the Corporate Insolvency Resolution Process - supersession of board and appointment of Interim Resolution Professional

Admission of Section 10 corporate insolvency application - existence of debt and default - The application filed under Section 10 of the IBC, 2016 is to be admitted as debt and default are established. - HELD THAT: - The Tribunal proceeded on the basis of the Hon'ble NCLAT's findings that the existence of debt and default was established and that the Corporate Applicant was not hit by ineligibilities under Section 11. The NCLAT observed that the adjudicating authority had rejected the application on extraneous grounds and remitted the matter for admission after notice and rectification of any defects. Applying those observations, the Tribunal held that the Section 10 application must be admitted under Section 10(4) of the Code and proceeded to admit the petition. [Paras 2, 7]

Application under Section 10 admitted and petition stands admitted in terms of the Code.

Supersession of board and appointment of Interim Resolution Professional - Appointment of the proposed Interim Resolution Professional and supersession of the Board of Directors upon initiation of CIRP. - HELD THAT: - The Corporate Debtor proposed Mr. J. Manivannan as Interim Resolution Professional and produced his written consent in the prescribed form. The Tribunal appointed the proposed IRP to take forward the Corporate Insolvency Resolution Process and directed that the powers of the board of directors stand superseded upon initiation of CIRP. The IRP was directed to take all steps required under the Code, specifically in terms of Sections 15, 17 and 18, and to file his report before the Bench within twenty days. [Paras 3]

Proposed IRP appointed; powers of the Board superseded and IRP to act and file report within 20 days.

Operation of moratorium under Section 14 - duration of moratorium until completion of the Corporate Insolvency Resolution Process - Moratorium under Section 14 of the Code comes into effect from the date of this order and continues until completion of the CIRP subject to statutory exceptions. - HELD THAT: - On admission of the Section 10 petition, the Tribunal declared that the moratorium envisaged by Section 14(1) would follow in relation to the Corporate Debtor, restraining institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security, and recovery of property occupied by the Corporate Debtor. The Tribunal noted the exceptions and protections in Sections 14(2), 14(2A) and 14(3), and recorded that the moratorium shall have effect from the date of the order until completion of the Corporate Insolvency Resolution Process as provided by Section 14(4), subject to cessation upon approval of a resolution plan or an order for liquidation. [Paras 4, 5, 6]

Moratorium declared effective from the date of this order and to continue until completion of the CIRP, with statutory exceptions.

Final Conclusion: The Tribunal, applying the NCLAT's findings that debt and default are established and no bar under Section 11 exists, admitted the Section 10 petition, appointed the proposed Interim Resolution Professional whose consent was on record, declared the moratorium under Section 14 effective from the date of the order until completion of the CIRP, and directed communication of the order to the Corporate Debtor, IBBI and the IRP.

Maintainability of application under section 60(5) of the IBC - Doctrine of merger - estoppel of successful resolution applicant from avoiding liabilities under an approved resolution plan - jurisdiction to grant interim restraint against recovery of statutory dues under the Employees Provident Fund and Miscellaneous Provisions Act - priority and protection of provident fund dues in the insolvency regime

Maintainability of application under section 60(5) of the IBC - estoppel of successful resolution applicant from avoiding liabilities under an approved resolution plan - Application under section 60(5) IBC seeking recall of approval of the resolution plan, impleadment of the Regional Provident Fund Commissioner and interim restraint on recovery was not maintainable and is rejected. - HELD THAT: - The Tribunal recorded that the order approving the resolution plan was challenged before the NCLAT and the common order was upheld with modifications; the successful resolution applicant's Civil Appeal was dismissed by the Supreme Court. By virtue of the Doctrine of merger the adjudicating authority's order stands merged with the final order of the Supreme Court and has attained finality. Reliance on the reasoning of the appellate authority that a successful resolution applicant cannot withdraw after approval, is estopped from avoiding liabilities under the approved plan, and the passage of time may deplete the corporate debtor's assets, supports the view that the present application seeking recall and interim relief is not maintainable. The Tribunal further observed that the applicant had failed to implement the plan within the stipulated time and that obligations to pay employees' provident fund are statutory and ought not to be stayed by this forum. In these circumstances the Adjudicating Authority concluded that it would be improper to exercise jurisdiction to grant the interim restraint sought and the application must be dismissed. [Paras 7, 8, 11]

Prayer for impleadment and interim restraint against the Regional Provident Fund Commissioner and for recall of the resolution plan is rejected as not maintainable; IA disposed of.

Final Conclusion: The application under section 60(5) IBC seeking recall of the resolution-plan approval, impleadment of the Regional Provident Fund Commissioner and restraint on recovery of provident-fund dues is dismissed as not maintainable; the approval order stands merged with the final order of the Supreme Court and the interim relief is refused.

Mandatory pre-deposit under Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944 - condonation of delay in filing appeal - finality of an order not challenged by the Revenue - remand for fresh decision on merits

Mandatory pre-deposit under Section 83 of the Finance Act, 1994 read with Section 35F of the Central Excise Act, 1944 - The impugned order dismissing the appeal for non-compliance with the mandatory pre-deposit was set aside. - HELD THAT: - The Tribunal found that the appellant had complied with the condition of making the mandatory pre-deposit as prescribed under the cited provisions. Consequently, the dismissal of the appeal by the Commissioner (Appeals) on the ground of non-deposit could not be sustained and was set aside. The Tribunal exercised its supervisory jurisdiction to correct the order insofar as it recorded dismissal for non-compliance with the statutory pre-deposit requirement.

Dismissal of the appeal for non-deposit set aside.

Condonation of delay in filing appeal - finality of an order not challenged by the Revenue - remand for fresh decision on merits - Delay in filing the appeal before the Tribunal was condoned and the matter was remanded to the Commissioner (Appeals) to decide the appeal on merits. - HELD THAT: - The Revenue contended before the Tribunal that the appeal was barred by limitation. However, no appeal was filed by the Revenue against the impugned order insofar as the Commissioner (Appeals) did not examine the limitation issue; accordingly, the Commissioner (Appeals)'s order on limitation has attained finality. The Revenue also failed to establish receipt of the impugned order by the appellant within time. In view of these circumstances, any delay in presenting the appeal to this Tribunal was condoned. Since the Commissioner (Appeals) did not decide the appeal on merits, the Tribunal remanded the matter to the Commissioner (Appeals) to decide the appeal on merits within 90 days of receipt of the Tribunal's order. The Tribunal rejected the Revenue's request to file cross examination as irrelevant to the limited question remitted, noting that cross examination would not assist in raising the limitation issue which the Revenue had not challenged before the Commissioner (Appeals).

Delay condoned; matter remanded to Commissioner (Appeals) to decide on merits within 90 days; request to file cross examination rejected.

Final Conclusion: The Tribunal set aside the dismissal of the appeal for alleged non-compliance with the mandatory pre-deposit, condoned any delay in filing before the Tribunal, refused the Revenue's request to file cross-examination, and remanded the appeal to the Commissioner (Appeals) for a decision on merits within 90 days.

Availment of Cenvat credit passed on by an Input Service Distributor - Requirement under Cenvat Credit Rules for distribution of input tax credit by an Input Service Distributor - Status of a divisional unit (integral division) vis-a -vis separate legal entity for credit distribution - Estoppel by prior acceptance of revenue orders/decisions

Availment of Cenvat credit passed on by an Input Service Distributor - Status of a divisional unit (integral division) vis-a -vis separate legal entity for credit distribution - Credit distributed by ILTD could be validly availed by the assessee. - HELD THAT: - The court found that ILTD is an integral division of the assessee and not a separate legal entity; it controls the supply chain of unmanufactured tobacco to the factories and was registered as an Input Service Distributor for the Indian Leaf Tobacco Division. Accordingly, distribution of service-tax paid input credits by ILTD to manufacturing units was permissible. The tribunal's acceptance of this position was supported by a binding division bench decision of this Court concerning the limitations on distribution by an Input Service Distributor, and no argument was shown to render that decision inapplicable. The court therefore upheld the tribunal's conclusion that the credits in question were properly availed by the assessee. [Paras 7]

Credits distributed by ILTD were not void ab initio and could be validly availed by the assessee.

Requirement under Cenvat Credit Rules for distribution of input tax credit by an Input Service Distributor - Interpretation of limitations on distribution by an Input Service Distributor - The tribunal was right in not treating ILTD as ineligible to be an Input Service Distributor on the ground that it was not an office or establishment of the manufacturer. - HELD THAT: - The court examined the legal test for an Input Service Distributor and noted that Rule 7 (as construed by the division bench decision relied upon by the tribunal) imposes only two limitations: distribution cannot exceed service tax paid and credits attributable to services used exclusively for exempted activities cannot be distributed. Given ILTD's status as an internal division controlling supply to factories and its registration as an Input Service Distributor, the tribunal correctly declined to treat ILTD as not being an office or establishment for the purposes of credit distribution. The factual contention that ILTD did not provide output services did not render the distribution impermissible in the light of the statutory scheme and precedent relied upon. [Paras 7]

CESTAT did not err in refusing to treat ILTD as ineligible to distribute credit on the basis that it was not an office or establishment.

Estoppel by prior acceptance of revenue orders/decisions - Finality of earlier adjudications and its effect on challenge to identical claims - Revenue was estopped from challenging the entitlement to credit for the impugned period after having accepted identical claims for other periods. - HELD THAT: - The court observed that the revenue had earlier accepted identical claims of the assessee for the periods November 2010 to July 2011 and August 2011 to December 2011, orders which were not further challenged. Having accepted the tribunal's view in those earlier periods, the revenue could not be permitted to adopt a contrary stance for a different period. The court relied on settled authority that acceptance of a legal position in earlier adjudications precludes re-agitation of the same question in subsequent proceedings, and therefore declined to permit the revenue to challenge the tribunal's order in the present appeal. [Paras 8]

Revenue cannot challenge correctness of tribunal's view in respect of the entitlement to avail input credit after having accepted similar tribunal orders for other periods.

Final Conclusion: The substantial questions of law are answered against the revenue and in favour of the assessee; the tribunal's order allowing the appeal is upheld and the revenue's appeal is dismissed.

Settlement of arrears - requirement of valid order of assessment - 90% payment requirement for settlement application - computation under Section 7(b) - one third payment with waiver of balance - designated authority's duty to verify and summarily reject if 90% not paid - issuance of settlement certificate and discharge from liability - lifting of attachment upon satisfaction of settlement conditions

Requirement of valid order of assessment - Existence of valid assessment orders is a pre-condition for raising and enforcing revenue demands; assessments were available only for 1994-95 and 1995-96 and not for the other periods. - HELD THAT: - The Court found that, despite opportunities granted to the revenue to produce assessment orders, records of assessment were not produced for the periods other than 1994-95 and 1995-96. Since a demand under the revenue statute can be raised and enforced only if preceded by a valid order of assessment, the absence of such orders for the other years meant those demands could not be sustained. The court therefore proceeded to decide the challenge only with reference to the two years for which assessment orders exist. [Paras 8]

Demands for periods other than 1994-95 and 1995-96 cannot be sustained for want of assessment orders; adjudication confined to 1994-95 and 1995-96.

90% payment requirement for settlement application - computation under Section 7(b) - one third payment with waiver of balance - designated authority's duty to verify and summarily reject if 90% not paid - lifting of attachment upon satisfaction of settlement conditions - issuance of settlement certificate and discharge from liability - Whether the petitioner had paid the required amount under the Settlement Act for the periods 1994-95 and 1995-96 and was entitled to settlement, refund of excess and lifting of attachment. - HELD THAT: - The designated authority quantified the demands for 1994-95 and 1995-96 in accordance with the Settlement Act provisions (Sections 6(3), 7(b) and 8(1)). The total demand so computed for those two years was determined to be the stated amount. The petitioner, however, had already remitted an amount in excess of the computed demand (the remitted sum exceeded the demand by more than double). Applying the statutory scheme - including the requirement that an application be rejected if ninety per cent of the amount payable is not paid and the rule in Section 7(b) concerning payment of one third of arrears with waiver of balance - the Court held that the petitioner had satisfied the payment condition. Consequently the excess amount paid was directed to be refunded within six weeks and the attachment on the property was ordered to be lifted forthwith. [Paras 9, 11, 12]

Petitioner satisfied the payment condition for settlement for 1994-95 and 1995-96; excess remittance to be refunded and attachment on the property lifted.

Final Conclusion: Writ petitions allowed: adjudication limited to assessment years 1994-95 and 1995-96; petitioner held to have paid the requisite amount under the Settlement Act for those years, directed to be refunded the excess and the attachment on the property ordered to be lifted.

Right to be heard - audi alteram partem - assessment under the Tamil Nadu Value Added Tax Act, 2006 - de novo assessment on remand

Right to be heard - audi alteram partem - de novo assessment on remand - Impugned assessment order passed without hearing the petitioner was vitiated and required to be set aside for fresh adjudication. - HELD THAT: - The Court found that the assessing officer proceeded to pass the impugned order without hearing the petitioner, while noting that the petitioner had not appeared on the listed date but had filed a representation seeking time to prepare. In the interests of substantial justice, the assessment order was set aside and the matter remitted for fresh hearing. The petitioner was directed to appear before the Assessing Officer on the specified date with supporting materials, and the Assessing Officer was directed to afford a hearing (either by video conference or physically) and to pass an order of assessment de novo within four weeks thereafter, in accordance with law. [Paras 1, 2, 3]

Impugned order set aside; matter remitted for fresh hearing and de novo assessment with specified directions to the petitioner and Assessing Officer.

Final Conclusion: Writ petition allowed by setting aside the impugned assessment for 2016-17; petitioner to be heard and Assessing Officer to pass a fresh de novo assessment within four weeks of hearing.

Principles of natural justice - opportunity of personal hearing - insufficient notice and inadequate time to file objections - setting aside assessment orders and remand for de novo assessment

Principles of natural justice - opportunity of personal hearing - insufficient notice and inadequate time to file objections - Impugned assessment orders dated 22.02.2021 were passed in violation of the principles of natural justice because the petitioner was not heard and was given insufficient time to file objections. - HELD THAT: - The Court found that pre-assessment notices were issued earlier (by R2) and objections were filed by the petitioner on 21.11.2016, yet the incumbent officer (R1) issued a fresh notice on 05.02.2021 erroneously recording non-response to earlier notices. Although R1 called for a personal hearing on 11.02.2021 and the petitioner filed a reply on 10.02.2021 referring to earlier annexures, the assessments were framed on 22.02.2021 without hearing the petitioner or considering the objections already on record. The short interval between notice and framing of assessment, and the requirement to both file objections and appear within a week, rendered the opportunity to be ineffective. On these facts the Court concluded that the statutory/administrative process did not afford a meaningful hearing and therefore violated the principles of natural justice. [Paras 2, 3, 4]

Findings of violation of natural justice; impugned assessment orders set aside.

Setting aside assessment orders and remand for de novo assessment - Direction for fresh proceedings: the matter was remitted for de novo assessment after affording an effective hearing to the petitioner. - HELD THAT: - In view of the procedural infirmity, the Court directed that the impugned orders be set aside and ordered that the petitioner shall appear before the Assessing Officer on 10.05.2021 at 10:30 a.m. without expecting any further notice. The Court required the Assessing Officer to hear the petitioner and pass assessments de novo within four weeks from 10.05.2021, taking into account submissions and annexures already placed on record and observing applicable Standard Operating Procedures. [Paras 5]

Assessments remitted for fresh hearing and de novo assessment with specified date for appearance and timeline for disposal.

Final Conclusion: The High Court held that the assessment orders dated 22.02.2021 for 2013-14, 2014-15 and 2015-16 were passed in breach of natural justice, set those orders aside and remitted the matters for de novo assessment after affording the petitioner an effective hearing on 10.05.2021, with assessments to be completed within four weeks thereafter.

Furnishing of security - bank guarantee vs personal bond - stay of demand subject to security - modification of appellate conditional order - deposit as condition for stay

Bank guarantee vs personal bond - modification of appellate conditional order - Impugned direction to furnish bank guarantee modified to permit furnishing of a personal bond for the balance of disputed tax and penalty. - HELD THAT: - The second respondent's order admitted payment of a portion of the disputed tax and directed the petitioner to furnish a bank guarantee for the remaining tax and penalty. The petitioner sought modification to permit a personal bond in place of a bank guarantee. This Court noted earlier similar orders granting identical relief and the respondent did not contest the request. Taking into account that the petitioner has remitted fifty percent of the disputed tax, the Court exercised its discretion to modify the impugned order to permit the petitioner to furnish a personal bond for the balance within four weeks. The modification is limited to this substitution of security and is conditional on the furnishing of the personal bond. [Paras 3, 5, 7]

Petitioner permitted to furnish a personal bond in lieu of bank guarantee for the balance of tax and penalty within four weeks; impugned order modified to that limited extent.

Stay of demand subject to security - deposit as condition for stay - Stay of the balance of disputed tax and penalty ordered subject to furnishing of the personal bond. - HELD THAT: - The Court directed that, upon furnishing of the personal bond by the petitioner for the balance of tax and penalty, there shall be an order of stay of the balance of the disputed tax and penalty until disposal of the appeal by the first appellate authority. The stay is expressly made conditional upon the petitioner furnishing the personal bond within the stipulated period and is confined to the duration of the appellate proceedings. [Paras 7]

Stay of the balance of disputed tax and penalty until disposal of the first appeal, subject to the furnishing of the personal bond.

Final Conclusion: Writ petition allowed by consent to the limited extent of modifying the impugned order dated 22.03.2021: petitioner permitted to furnish a personal bond in lieu of a bank guarantee for the balance of tax and penalty within four weeks, and upon furnishing the bond the balance is stayed until disposal of the appeal; otherwise the impugned order remains unaltered.

Reversal of Input Tax Credit under Section 27(2) of the Tamil Nadu Value Added Tax Act, 2006 - principles of natural justice in departmental reliance on third party returns and annexures - duty of the Revenue to furnish materials relied upon - maintainability of writ petition in view of delay and laches - extension of limitation for filing appeals pursuant to pandemic era orders

Maintainability of writ petition in view of delay and laches - Writ petitions filed after the impugned assessment orders without explanation for delay were not allowed to succeed. - HELD THAT: - The Court noted that the assessment orders were passed and served in June 2020 while the writ petitions were filed on 19.04.2021 and that no affidavit explanation was furnished for delay or laches in approaching the Court. Although the petitions were taken up for final disposal by consent, the absence of any explanation for the delay was recorded and the Court did not find justification to interfere with the impugned assessment orders on that ground.

Petitions dismissed on merits; no interference on account of unexplained delay.

Reversal of Input Tax Credit under Section 27(2) of the Tamil Nadu Value Added Tax Act, 2006 - principles of natural justice in departmental reliance on third party returns and annexures - duty of the Revenue to furnish materials relied upon - Reversal of claimed Input Tax Credit based on details culled from departmental records/annexures did not breach principles of natural justice where the Department furnished the relied upon materials and afforded opportunity of hearing. - HELD THAT: - The petitioner challenged the disallowance of Input Tax Credit under Section 27(2) as being based on annexures to dealers' returns and raised a natural justice complaint that materials relied upon were not furnished. The Court observed that pursuant to an earlier order requiring furnishing of details and a fresh assessment, the Assessing Authority had supplied the details extracted from the Departmental website corresponding to annexures I and II and stated that personal hearings were granted on specified dates, where the petitioner did not appear. On that factual basis the Court concluded that the Department discharged its burden to furnish the materials relied upon and that there was no justifiable ground to set aside the impugned assessments.

No interference with the reversal of Input Tax Credit; assessments upheld.

Extension of limitation for filing appeals pursuant to pandemic era orders - Petitioner granted limited liberty to file appeals before the first appellate authority within a curtailed time, having regard to the series of pandemic era extension orders. - HELD THAT: - Although the Court dismissed the writ petitions, it afforded the petitioner a two week period from the date of the order to file appeals before the first Appellate Authority in view of the Supreme Court's decisions extending the time for filing appeals during the pandemic. This constituted a discretionary, time limited opportunity to pursue statutory remedies.

Liberty granted to file appeals within two weeks; otherwise dismissal stands.

Final Conclusion: Writ petitions challenging the assessments for 2010-11 to 2014-15 are dismissed. The Court found no breach of natural justice or failure by the Department to furnish materials relied upon and recorded absence of justification to interfere; petitioner granted two weeks' liberty to file appeals before the first Appellate Authority. No costs.

Trading account method - stock variation by formula/money-value method - physical stock verification - maintenance of accounts under Rule 6 of TNVAT Rules - deemed assessment under Section 22(2) of TNVAT Act, 2006 - remand for fresh consideration

Trading account method - stock variation by formula/money-value method - Validity of arriving at stock difference by adopting a formula or money value (trading account) method where stock register was not maintained. - HELD THAT: - The impugned assessment computed stock difference on the basis of the trading account (formula/money value) method although the assessee had not maintained a stock register. The Court held that the question is covered by the Division Bench decision in Tax Case(Revision)(MD) No.100 of 2012 (State of Tamil Nadu represented by the Deputy Commissioner(CT), Madurai Division Vs. Tvl.Jalaram Timber Depot), which declined the use of formula/money value methods for arriving at stock variation, observing that such formulae in terms of money value are not a scientific method. Respectfully following that precedent, the Court concluded that the assessing authority ought not to have relied upon the formula/money value trading account method to determine stock difference and quashed the impugned order on that ground. [Paras 6, 7]

Order levying tax and penalty based on stock difference computed by formula/money value method quashed.

Physical stock verification - maintenance of accounts under Rule 6 of TNVAT Rules - remand for fresh consideration - Remand to the assessing authority for fresh computation of stock difference by physical terms and the procedure to be followed on remand. - HELD THAT: - The matter was remitted to the second respondent for fresh adjudication in accordance with law. The Court noted that under Rule 6 of the TNVAT Rules the assessee is bound to maintain accounts and that the petitioner appears to possess relevant account books; accordingly, the assessing officer may call upon the assessee to undertake an exercise to arrive at physical stock and to furnish a statement on oath, which the officer can then verify. The assessing officer was directed expressly not to follow any formulae/money value method but to determine stock difference in physical terms, premised on the fact that an inspection had been made and inventory of physical stock was taken at that time. [Paras 7]

Matter remitted to the assessing authority to compute stock difference in physical terms, permitting the assessee to furnish a statement on oath and directing verification by the officer; no use of formula/money value method.

Final Conclusion: Writ petition allowed; impugned order quashed and the matter remitted to the assessing authority for fresh consideration to determine stock difference in physical terms in accordance with law and Rule 6 of the TNVAT Rules; no order as to costs.

Power of the Reserve Bank to issue directions under Section 35A of the Banking Regulation Act - Regulatory capital (Tier 1 / Additional Tier 1 instruments) - Perpetual subordinated debt with loss absorption / Point of Non Viability (PONV) trigger and write down - Distinction between share capital and regulatory capital - Interaction and inconsistency between RBI master circular and Companies Act, 2013 - Judicial deference in economic regulation by expert statutory regulator - Sui generis character of AT1 bonds

Power of the Reserve Bank to issue directions under Section 35A of the Banking Regulation Act - Judicial deference in economic regulation by expert statutory regulator - Validity of the Master Circular as a measure issued under the Banking Regulation Act - HELD THAT: - The Master Circular is a regulatory measure issued by the RBI to implement BCBS standards domestically and is to be tested under Indian law rather than as an international treaty. Clause 3 of the Basel Committee Charter shows BCBS decisions lack binding international legal force; therefore Article 253 is not engaged. Section 35A confers wide power on the RBI to issue directions in the interest of banking policy and proper management of banking companies. Precedents (including reasoning in the Cryptocurrency decision) establish that RBI directions framed under statutory mandate are supplemental to the BR Act and attract deference in the field of economic regulation. Applying these principles, the Court finds the Master Circular falls within RBI's statutory powers and is not without jurisdiction. [Paras 18, 19, 20]

The Master Circular is within the statutory jurisdiction of the RBI under Section 35A and is not void for want of authority.

Regulatory capital (Tier 1 / Additional Tier 1 instruments) - Distinction between share capital and regulatory capital - Whether AT1 bonds issued under the Master Circular constitute share capital under the Companies Act, 2013 - HELD THAT: - AT1 instruments permitted by the Master Circular include perpetual non cumulative preference shares and perpetual debt instruments (PDI). For an instrument to be share capital under the Companies Act it must be issued, subscribed and paid up and reflected as share capital in the balance sheet. Yes Bank's AT1 instruments were reflected as borrowings (not share capital) in its accounts and the instruments carry features (perpetuality, absence of put, subordinated rank, loss absorption) that distinguish them from equity. Consequently, AT1 PDIs do not fall within the statutory concept of share capital under the Companies Act, 2013 and Section 12 of the BR Act is not applicable to treat them as share capital. [Paras 24, 25]

AT1 perpetual debt instruments do not constitute share capital for the purposes of the Companies Act, 2013.

Perpetual subordinated debt with loss absorption / Point of Non Viability (PONV) trigger and write down - Sui generis character of AT1 bonds - Interaction and inconsistency between RBI master circular and Companies Act, 2013 - Whether AT1 bonds are debentures / debt under the Companies Act, 2013 and the legal character of AT1 bonds generally - HELD THAT: - Although AT1 instruments are accounted as borrowings, their features make them a special form of borrowing: coupon payments are enforceable until write down; there is no lender put right to principal; principal repayment is contingent on issuer call (after prescribed period and with RBI approval) or conversion/write down upon PONV. The inclusive definition of 'debenture' in Section 2(30) and Section 71 regarding redemption does not govern banking companies to the extent inconsistent with BR Act and RBI rules. Given the Master Circular's statutory character and the instruments' distinctive features (perpetuality, subordination, loss absorption), they do not qualify as debentures within the Companies Act for the inconsistent aspects; AT1 bonds are therefore sui generis regulatory capital and a peculiar form of borrowing which may be extinguished upon pre specified triggers. [Paras 25, 26, 27, 28]

AT1 bonds are borrowings for accounting purposes but constitute a sui generis regulatory capital instrument and do not qualify as debentures under the Companies Act to the extent of inconsistency.

Perpetual subordinated debt with loss absorption / Point of Non Viability (PONV) trigger and write down - Judicial deference in economic regulation by expert statutory regulator - Whether the Master Circular and the AT1 write down regime violate the Constitution (Articles 14, 19, 21, 300A) or other laws including the Contract Act and the Companies Act - HELD THAT: - The Court recognises that subordinate legislation may be struck down for manifest arbitrariness or lack of competence, but applies principles of judicial restraint and deference in economic regulation. The AT1 instruments' distinctive features and the disclosed contractual terms (including PONV and write down clauses) constitute an intelligible classification having a rational nexus to the regulatory objective of maintaining CRAR and financial stability. The Master Circular does not effect compulsory expropriation; investors accepted the terms and received consideration in the form of coupons. The instruments serve the public interest of bank stability and the Master Circular does not contravene the Companies Act, the Banking Regulation Act or the Contract Act in the respects challenged. Accordingly, fundamental rights and property guarantees under the Constitution are not infringed by the Master Circular's regime for AT1 instruments. [Paras 30, 31, 32, 33, 34]

The Master Circular and the AT1 regulatory regime do not violate Articles 14, 19, 21 or Article 300A, nor do they infringe the Companies Act, the Banking Regulation Act or the Contract Act as contended.

Sui generis character of AT1 bonds - Characterisation of AT1 bonds as a distinct class of investment and attendant investor disclosure and risk implications - HELD THAT: - AT1 bonds possess features (perpetual tenor, subordinated rank, coupon discretion, loss absorption on PONV) that make them a distinct class of instrument. The Court notes investors were furnished with disclosures in the information memorandum and that retail participation in such high risk instruments raises policy considerations. While these observations do not affect the legal conclusions, the Court recommends RBI revisit retail participation norms and coordinate with securities regulator to prevent inappropriate retail exposure where terms do not permit it. [Paras 22, 35]

AT1 bonds form a distinct, high risk class; regulatory authorities should consider calibrating retail participation and disclosure norms, but this does not invalidate the Master Circular.

Final Conclusion: The writ petition is dismissed. The Master Circular (Basel III Capital Regulations consolidated July 1, 2015) is within the RBI's statutory power under the Banking Regulation Act; AT1 instruments issued thereunder are regulatory capital and a sui generis form of perpetual subordinated borrowing with loss absorption features and do not amount to share capital or debentures under the Companies Act to the extent of inconsistency. The Master Circular and the regulatory regime for AT1 bonds do not infringe the challenged statutory or constitutional provisions; petitioners' challenge fails.