TaxTMI Updates e-Newsletter
May 15,2020

Writ of mandamus - confiscation of goods and conveyance - interference by writ jurisdiction where statutory remedy exists - statutory appeal under Section 107 of the GST Act - provisional release under Section 67(6) of the Act - principles of natural justice - time bound consideration of provisional release application

Writ of mandamus - confiscation of goods and conveyance - interference by writ jurisdiction where statutory remedy exists - principles of natural justice - statutory appeal under Section 107 of the GST Act - Whether the High Court should interfere by way of writ when a final order of confiscation in form GST MOV-11 has been passed and a statutory appeal is available. - HELD THAT: - The Court noted that a final order of confiscation in form GST MOV-11 has already been passed by the concerned authority. In view of the existence of the statutory appellate remedy, the Court declined to entertain interference under Article 226. The writ applicant was relegated to pursue the remedy of appeal under the statutory provision identified by the Court. The Court thereby refused to quash or set aside the confiscation order by writ, notwithstanding the applicant's contentions alleging illegality and breach of principles of natural justice. [Paras 5]

Writ relief declined and the applicant relegated to prefer the statutory appeal under Section 107 of the GST Act.

Provisional release under Section 67(6) of the Act - time bound consideration of provisional release application - Whether the writ applicant may seek provisional release of the goods and conveyance pending the statutory appeal and the timeframe for decision. - HELD THAT: - The Court clarified that, pending the statutory appeal, the applicant is permitted to invoke the provisional relief mechanism under the statutory provision identified by the Court by making an application under Section 67(6) of the Act for provisional release on terms such as execution of bond, furnishing security, or payment of applicable tax, penalty and interest. The Court directed that any such application received by the concerned authority shall be considered and disposed of in accordance with law within one week from receipt. [Paras 5]

Applicant permitted to apply for provisional release under Section 67(6); concerned authority to decide such application within one week.

Final Conclusion: All three writ applications are disposed of: writ interference was declined in view of the statutory appeal remedy, the petitioner is relegated to prefer the statutory appeal, and the petitioner may seek provisional relief under the statutory provision with the authority directed to decide any such application within one week.

Depreciation on computer software vs intangible assets - classification of digital content as computer program or copyrighted intangible asset - interpretation of Note 7 to Appendix I to the Income tax Rules, 1962 - application of Section 14A and Rule 8D(2)(iii) - exclusion of investments yielding taxable dividends - condonation of delay in filing appeal

Depreciation on computer software vs intangible assets - classification of digital content as computer program or copyrighted intangible asset - interpretation of Note 7 to Appendix I to the Income tax Rules, 1962 - Whether 'Digital Content' developed and held by the assessee is computer software eligible for depreciation @60% or an intangible asset eligible for depreciation @25% (AY 2007-08). - HELD THAT: - The Tribunal upheld the conclusion reached by the Assessing Officer and the CIT(A) that the 'Digital Content' developed in house by the assessee is not a 'computer program' within the restricted meaning of Note 7 to Appendix I to the Income tax Rules, 1962, but is instead a copyrighted intangible asset. The ruling distinguishes the wider definition of 'Information Technology Software' used in the customs context (relied upon by the assessee and considered by the Supreme Court in the assessee's customs case) from the narrower statutory treatment under the Income tax Act and Appendix I, where Note 7 confines 'computer software' to a computer programme recorded on a disc, tape or other information storage device. The Tribunal accepted the view that material which, though stored on a medium, constitutes copyrighted digital content used and exploited as intellectual property with enduring benefits is to be treated as an intangible asset (as reflected in AS 26 and relevant precedents) and is therefore entitled to depreciation at the rate prescribed for intangible assets. [Paras 6, 7]

Digital Content developed and held by the assessee for AY 2007 08 is a copyrighted intangible asset and is eligible for depreciation at 25%; appeal dismissed on this issue.

Depreciation on computer software vs intangible assets - classification of digital content as computer program or copyrighted intangible asset - Applicability of the Tribunal's decision on classification and depreciation of 'Digital Content' to AY 2009-10. - HELD THAT: - The Tribunal applied the reasoning and conclusion reached in the adjudication for AY 2007 08 mutatis mutandis to AY 2009 10, observing that the identical question of classification of the digital content arises in the later assessment year and that the prior analysis governs the later appeal. [Paras 8]

The AY 2009 10 appeal is decided in the same manner as AY 2007 08 on the depreciation issue; claim for 60% denied and ground dismissed.

Application of Section 14A and Rule 8D(2)(iii) - exclusion of investments yielding taxable dividends - Validity of the disallowance under Section 14A read with Rule 8D(2)(iii) and whether certain investments must be excluded while computing disallowance (AY 2009-10). - HELD THAT: - The Tribunal held that Rule 8D and Section 14A apply but that the AO must verify whether particular investments gave rise to exempt income during the year. Investments in respect of which dividends were chargeable to tax in India must be excluded from the computation of disallowance. Similarly, investments in Indian companies which did not yield exempt dividend income during the year cannot be included for computing the Section 14A disallowance. The matter was therefore restored to the file of the AO for verification and fresh adjudication in accordance with law, excluding those investments which either produced taxable dividend income or produced no exempt income in the year under consideration. The Tribunal noted applicable precedents and permitted re calculation on verification. [Paras 9]

Disallowance under Section 14A/Rule 8D(2)(iii) partly set aside and remanded to the AO for verification; investments yielding taxable dividends and investments yielding no exempt dividend income during the year shall be excluded in recomputation; appeal partly allowed for statistical purposes.

Condonation of delay in filing appeal - Whether the Tribunal should condone the delay of four days in filing the appeals. - HELD THAT: - The assessee filed a petition explaining the delay of four days supported by an affidavit; the Revenue did not press strong opposition. Having considered the explanation and submissions, the Tribunal exercised its discretion to condone the short delay and admit the appeals for adjudication on merits. [Paras 1]

Delay of four days in filing the appeals is condoned and both appeals admitted for hearing.

Final Conclusion: ITA No.1406/Chny/2015 (AY 2007 08) dismissed: 'Digital Content' developed by the assessee is a copyrighted intangible asset and eligible for depreciation at 25%. ITA No.1407/Chny/2015 (AY 2009 10) partly allowed for statistical purposes: depreciation issue decided against the assessee in the same manner; disallowance under Section 14A/Rule 8D partly set aside and remanded to the AO for verification and recomputation excluding investments yielding taxable dividends or yielding no exempt income during the year.

Provisional attachment of assets - search and seizure under Section 132 of the Income Tax Act, 1961 - protection of revenue - operation of bank accounts pending attachment - power to initiate fresh attachment in accordance with law

Provisional attachment of assets - protection of revenue - The impugned order of provisional attachment over the Fixed Deposit Receipts shall continue to operate in accordance with law. - HELD THAT: - The Court noted that a search under Section 132 had been conducted and that the department had provisionally attached the FDRs to protect the revenue on the Department's case that tax was liable. The parties reached a consensus on an arrangement disposing of the writ petition without adjudicating merits; accordingly the Court directed that the order of provisional attachment dated 10.12.2019 shall continue to operate in accordance with law, preserving the department's interest while not deciding the underlying tax demand on merits. [Paras 6]

The provisional attachment order dated 10.12.2019 shall continue to operate in accordance with law.

Operation of bank accounts pending attachment - The writ applicant is permitted to operate its bank accounts/limits, as those accounts were not frozen or attached by the department. - HELD THAT: - On the consensus reached between the parties and on the department's clarification that the bank accounts had not been frozen or attached, the Court allowed the writ applicant to operate its bank accounts and limits in accordance with law while the provisional attachment of the FDRs remains in force. The Court's direction balances the commercial functionality of the assessee with the continuing protective attachment. [Paras 6]

The writ applicant may operate its bank accounts/limits in accordance with law.

Power to initiate fresh attachment in accordance with law - The department remains free to initiate fresh action, including further provisional attachment, in accordance with law. - HELD THAT: - The Court expressly recorded that the department's liberty to take further action was not curtailed by the consent arrangement and that any future action would be governed by law. The order preserves the statutory rights of the revenue to proceed if considered necessary. [Paras 6]

The department may initiate fresh action, including further provisional attachment, in accordance with law.

Final Conclusion: Writ petition disposed by consent: provisional attachment of specified FDRs to continue; the assessee may operate its bank accounts not frozen or attached; the department retains the statutory right to initiate further action in accordance with law.

Acquisition of jurisdiction - transfer of assessment file and procedure under section 127 - ex parte assessment under section 144 - null and void ab initio - service of notice and affixture

Acquisition of jurisdiction - transfer of assessment file and procedure under section 127 - service of notice and affixture - null and void ab initio - Whether the Assessing Officer Ward 23(4) had valid jurisdiction to issue notices and make assessment for Assessment Year 2008-09 - HELD THAT: - The Tribunal found that the return for AY 2008-09 was filed showing the assessee's business address falling within the territorial jurisdiction of ITO Ward 39(4). The ITO Ward 23(4) purported to assume jurisdiction on the basis that PAN remained with that ward and sought transfer of the file from Ward 39(4) by an internal request. The prescribed statutory procedure for transfer under section 127 was not complied with: there was no regular order by the Principal CIT (Pr.CIT-13) authorising transfer of jurisdiction from Ward 39(4) to Ward 23(4). The Assessing Officer proceeded to issue notices (including by affixture) and passed an ex parte assessment under section 144 without deciding or properly addressing the assessee's objection to jurisdiction and without effecting or recording the lawful transfer of jurisdiction. In these circumstances the Tribunal held that the Assessing Officer did not have jurisdiction and that the assessment order was vitiated by this fundamental defect. The Tribunal therefore allowed the grounds going to jurisdiction and concluded that there was no need to enter upon the merits of the additions. [Paras 10, 11]

The assessment proceedings conducted by ITO Ward 23(4) are without jurisdiction and the assessment order is null and void ab initio; Grounds Nos. 1, 2 and 3 are allowed and the appeal is allowed.

Additions by estimation - ex parte assessment under section 144 - Whether the additions and other substantive findings made in the assessment could be adjudicated in view of the jurisdictional infirmity - HELD THAT: - The Tribunal observed that the jurisdictional defect went to the root of the assessment; consequently it did not decide the substantive merits of the additions (including unexplained purchases, estimated undisclosed sales and estimated interest, short term capital gains treatment, and disallowance of Chapter VI-A claims). Those issues were not adjudicated and were not decided on merits by the Tribunal because the assessment was set aside on jurisdictional grounds. [Paras 10]

Substantive additions and related issues were not decided on merits by the Tribunal and remain unadjudicated due to the assessment being set aside for want of jurisdiction.

Final Conclusion: The appeal is allowed: the assessment order dated 31-12-2010 (passed under section 144 for Assessment Year 2008-09) is vitiated for lack of jurisdiction and is declared null and void ab initio; since jurisdictional grounds dispose of the case, the Tribunal did not decide the merits of the additions, which remain unadjudicated.

Penalty under Section 271(1)(c) of the Income Tax Act - show cause notice specificity - concealment of income - furnishing inaccurate particulars of income - invalidity of penalty proceedings for failure to specify the limb of Section 271(1)(c)

Penalty under Section 271(1)(c) of the Income Tax Act - show cause notice specificity - concealment of income - furnishing inaccurate particulars of income - Validity of the penalty levied under Section 271(1)(c) where the penalty notice did not specify whether it was for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the penalty notice dated 10.02.2014 failed to indicate which limb of Section 271(1)(c) was being invoked because neither the words relating to 'concealment of particulars of income' nor those relating to 'furnishing inaccurate particulars of income' were struck out or otherwise identified. The Assessing Officer proceeded to levy penalty on the basis that income was surrendered only after detection, but the notice itself did not specify the precise charge. The Tribunal relied on the settled principle in the decisions of the High Court and the Supreme Court where similar defects rendered penalty proceedings unsustainable, and observed that decisions cited by the Revenue on the point were distinguishable where the notice had in fact specified the particular limb charged. Applying that reasoning to the present facts, the Tribunal concluded that the notice under Section 271(1)(c) read with Section 274 was bad in law for want of specificity and, accordingly, the penalty could not be sustained. [Paras 7, 8]

Penalty levied under Section 271(1)(c) is not sustainable and is deleted; appeal allowed.

Final Conclusion: The appeal is allowed: the penalty imposed under Section 271(1)(c) for Assessment Year 2011-12 is set aside as the show cause notice failed to specify which limb of Section 271(1)(c) was invoked, and the Assessing Officer is directed to cancel the penalty.

Transfer Pricing - Most Appropriate Method (TNMM vs CUP) - Arm's Length Price - Benchmarking of Royalty and Product Development Fees - Comparability and Selection of Comparable Entities under TNMM - Protective Adjustment versus Substantive Adjustment in Transfer Pricing - Capacity Utilization Adjustment - Carry Forward and Set-off of Brought Forward Losses

Transfer Pricing - Most Appropriate Method (TNMM vs CUP) - Arm's Length Price - Benchmarking of Royalty and Product Development Fees - Appropriateness of TNMM for benchmarking royalty payments and direction to revenue to apply TNMM instead of CUP - HELD THAT: - The Tribunal considered the departmental attempt to substitute CUP for the TNMM adopted by the assessee in respect of running royalty (3% of value added) and product development payments. It noted earlier tribunal orders and that the jurisdictional High Court has held there is no need to deviate from TNMM to CUP in the assessee's prior years. In view of that precedent and the interlinked nature of the transactions, the Tribunal directed the revenue to determine adjustments by applying TNMM as the most appropriate method for both royalty and product development fee transactions. The assessee's appeals on these grounds were allowed. [Paras 10, 13]

Revenue directed to determine adjustments using TNMM; appeals on royalty and product development fees allowed.

Protective Adjustment versus Substantive Adjustment in Transfer Pricing - Comparability and Selection of Comparable Entities under TNMM - Validity of making both substantive and protective adjustments and the suitability of specific comparables included or excluded in the TNMM study - HELD THAT: - The Tribunal held that protective and substantive adjustments for the same assessee are not required where they arise from the same taxable income issue and explained the limited purpose of protective adjustments. Turning to comparability, the Tribunal examined each challenged comparable on product line, core/non-core classification, turnover relation and profitability filters. It rejected Admach Auto India Ltd. (non-core products), Gabriel India Ltd. (non-core products), Brakes India Pvt. Ltd. (turnover 16 times that of assessee beyond acceptable range), Munjal Showa Ltd. (different product line), and Foundation Brake Manufacturing Pvt. Ltd. (continuous losses failing filters). It upheld ASK Automotive Pvt. Ltd. as a suitable comparable after examining turnover composition and R&D expenditure. The Tribunal directed that comparability be revisited keeping these determinations in view while applying TNMM. [Paras 14, 16, 18]

Protective adjustment concept disfavoured for the same assessee; of the contested comparables only ASK Automotive Pvt. Ltd. retained, others excluded for stated comparability reasons; comparability to be applied in TNMM computation accordingly.

Capacity Utilization Adjustment - Entitlement to capacity utilization adjustment in the transfer pricing comparability analysis - HELD THAT: - The Tribunal reviewed prior orders in which capacity utilization adjustments were granted for earlier assessment years of the assessee and, having regard to the industrial standing of the comparables, directed that the same capacity utilization benefit be allowed for the instant year. [Paras 19]

Capacity utilization adjustment to be granted in the instant year as given in earlier assessment years.

Carry Forward and Set-off of Brought Forward Losses - Direction to consider relief on account of brought forward losses - HELD THAT: - The Tribunal directed the assessing officer to consider relief on account of brought forward business losses and unabsorbed depreciation in accordance with the Income Tax Act, taking into account the returns earlier filed by the assessee. This was a directive to the AO to give effect to statutory carry forward and set-off provisions. [Paras 20]

AO directed to consider brought forward losses and unabsorbed depreciation as per law.

Final Conclusion: The assessee's appeal is allowed. Revenue is directed to compute transfer pricing adjustments using TNMM for royalty and product development transactions, apply comparability determinations made by the Tribunal (retaining ASK Automotive and excluding specified comparables), allow capacity utilization adjustment as in prior years, and consider brought forward losses and unabsorbed depreciation in accordance with the Act.

Re-opening of assessment under Section 147 read with first proviso - onus on the assessee to prove entitlement to statutory exemption - classification of land as agricultural land or capital asset - use of official records and enquiries (Registration Department / Tahsildar) as material for reassessment - remand for de novo assessment

Re-opening of assessment under Section 147 read with first proviso - use of official records and enquiries (Registration Department / Tahsildar) as material for reassessment - Validity of reopening the concluded assessment beyond four years and the adequacy of material relied upon to form reason to believe that income had escaped assessment - HELD THAT: - The Tribunal noted that the Assessing Officer obtained new information by verification of the Tamil Nadu Registration Department website showing classification of certain survey numbers as residential and received confirmation from the Tahsildar that agricultural activity was not carried out during 2003-2007 (except one survey number). The authorities below had relied upon those enquiries and contemporaneous official data to record a reason to believe. The Tribunal observed that reopening on the basis of such fresh information or material obtained in enquiries with other government offices is recognised in precedent and can justify reopening under the proviso applicable to assessments beyond four years. However, rather than finally adjudicating the legality on all factual facets, the Tribunal found that further detailed verification was necessary and directed a de novo assessment allowing the assessee full opportunity to produce evidence in support of his claim.

Reopening may stand subject to de novo verification by the AO; matter remanded for fresh adjudication on jurisdictional/legal aspects and facts.

Onus on the assessee to prove entitlement to statutory exemption - classification of land as agricultural land or capital asset - remand for de novo assessment - Whether the land sold was agricultural (entitling exemption) or a capital asset, and whether the assessee had discharged the evidentiary burden to claim exemption - HELD THAT: - The Tribunal reiterated the settled principle that the assessee claiming exemption bears the onus to prove that the land falls within the statutory definition of agricultural land. The record before the authorities showed minimal agricultural receipts (Rs.7,000) and no contemporaneous evidence of agricultural operations, while official enquiries indicated non user for agriculture and classification as residential (formalised on 01.08.2007). Given conflicting materials and the relevance of whether the land fell within CMDA limits and the precise timing of classification, the Tribunal considered that detailed verification was required on (a) whether the lands fell within CMDA during the relevant period, (b) whether agricultural activities were actually carried out by the assessee, and (c) whether the lands amounted to capital assets under the statutory definition. The Tribunal therefore declined to decide the merits finally and remanded these factual and legal questions to the Assessing Officer for de novo assessment, permitting the assessee to produce all evidence and arguments.

Issue not finally adjudicated on merits; remitted to the Assessing Officer for fresh adjudication with directions to admit evidence and afford opportunity of hearing.

Final Conclusion: The appeal is allowed for statistical purposes and the matter is remitted to the Assessing Officer for de novo assessment on both the jurisdictional/legal question regarding reopening and on the merits (classification of the land and entitlement to exemption); the assessee shall be permitted to produce evidence and be heard afresh.

Section 40A(2)(b) - Disallowance applies to expenditure and not to receipts - Joint venture versus association of persons (AOP) - Precedent and stare decisis of the Income tax Appellate Tribunal

Section 40A(2)(b) - Disallowance applies to expenditure and not to receipts - Joint venture versus association of persons (AOP) - Whether disallowance under Section 40A(2)(b) can be invoked by treating payments made by a joint venture to its partner as income which ought to have been earned by the joint venture members, and whether the joint venture must be treated as an AOP for that purpose. - HELD THAT: - The Tribunal and the CIT(A) proceeded on the settled legal principle that the disallowance under Section 40A(2) is directed at expenditures which are excessive or unreasonable and not at the income side. The Assessing Officer had denied claim by treating amounts paid to a JV partner as indicative of income that ought to have been earned (i.e., treating payments as diverted income) and invoked Section 40A(2)(b). Following earlier orders of the ITAT (SMC and G Benches) in closely similar facts, the authorities held that Section 40A(2)(b) cannot be applied to effect a disallowance on the basis that the assessee ought to have earned income from subcontracting; the provision operates in respect of disallowing expenditures and not to recharacterise or disallow receipts. The CIT(A)'s order was in consonance with these Tribunal precedents and the High Court decisions relied upon; no contrary material was shown by the Revenue to distinguish those precedents. Respectfully following those decisions, the addition made by invoking Section 40A(2)(b) was directed to be deleted. [Paras 6, 7]

The disallowance under Section 40A(2)(b) was not attracted; the addition is deleted and the appeals are allowed.

Final Conclusion: Following binding Tribunal precedents and on the basis that Section 40A(2)(b) applies to disallowance of expenditures and not to receipts or diverted income, the addition made by invoking Section 40A(2)(b) is deleted and the four appeals for AY 2015-16 are allowed.

Penalty for furnishing inaccurate particulars of income under section 271(1)(c) - treatment of capital gains: short-term versus long-term - reinvestment of long-term capital gains and revival of proceedings - admissibility of repair expenses against capital gains - disallowance of expenditure attributable to exempt income under section 14A and Rule 8D

Penalty for furnishing inaccurate particulars of income under section 271(1)(c) - treatment of capital gains: short-term versus long-term - reinvestment of long-term capital gains and revival of proceedings - Whether the penalty confirmed by the CIT(A) under section 271(1)(c) is maintainable where the assessment addition on which the penalty was based has been deleted by the Tribunal. - HELD THAT: - The Assessing Officer had levied penalty by treating declared Long Term Capital Gain as Short Term Capital Gain and making an addition. A Coordinate Bench of the Tribunal in an earlier order deleted the addition of short-term capital gains and remanded the matter to the AO to examine reinvestment of the long term capital gains in the new asset. Because, as on date, the quantum addition on which the penalty was predicated stands deleted by the Tribunal, the penalty confirmed by the CIT(A) is set aside. The order preserves the revenue's right to revive penalty proceedings depending on the outcome of the reinvestment enquiry directed on remand.

Penalty set aside with liberty to revive proceedings depending on outcome of reinvestment verification.

Admissibility of repair expenses against capital gains - Whether repair expenses claimed against short term capital gains are admissible where the assessee produced account payee cheque payments to specific persons but the AO disallowed the claim for want of details. - HELD THAT: - The assessee claimed repair expenses against the short term capital gain and produced details of payments by account payee cheques to four named persons on specified dates. The CIT(A) confirmed the disallowance, apparently ignoring those payments. There was no contrary material produced by the revenue to rebut the payments. On the record, the Tribunal found the payment details to be sufficient to justify the repair expenditure claim and directed deletion of the disallowance.

Disallowance of repair expenses deleted; appeal allowed on this ground.

Disallowance of expenditure attributable to exempt income under section 14A and Rule 8D - Whether invocation of Rule 8D to compute disallowance under section 14A is maintainable where procedural requirements were not followed and the assessee had itself made a notional disallowance. - HELD THAT: - Assessee earned dividend income and had made a suo moto disallowance. The AO applied Rule 8D and disallowed a larger sum. The Tribunal noted established precedents and that the procedural requirements of section 14A(2) (as applied by the revenue) were not complied with; additionally the assessee had already disallowed a portion of the exempt income. In those circumstances the Tribunal held that invoking Rule 8D was legally not tenable and directed deletion of the disallowance under section 14A.

Disallowance under section 14A computed by applying Rule 8D deleted; appeal allowed on this ground.

Final Conclusion: The appeals are allowed: in AY 2010-11 the penalty under section 271(1)(c) is set aside with liberty to revive proceedings contingent on reinvestment verification; in AY 2011-12 the disallowance of repair expenses is deleted and the disallowance under section 14A (Rule 8D invocation) is deleted, and the assessee's appeal is allowed.

Reopening assessment on information from search and seizure - Reopening assessment under section 147/notice under section 148 - Explanation of unexplained investment from cash balances - Addition to capital from undisclosed sources - Deduction under section 80C-proof of investment - Principles of natural justice-opportunity of hearing - Remand for verification of evidence

Reopening assessment on information from search and seizure - Explanation of unexplained investment from cash balances - Addition to capital from undisclosed sources - Remand for verification of evidence - Remand to the Assessing Officer for fresh adjudication of additions relating to cash investment in the commercial property and alleged additions to capital. - HELD THAT: - The Tribunal found that both the Assessing Officer and the CIT(A) did not adequately examine documentary evidence placed before them by the assessee in support of the cash payment for purchase of commercial unit and the sources for the introduction to capital. The assessee had produced cash flow statements and other material purportedly showing cash balance and receipts from relatives/minor children and family members, which the authorities had not properly verified and CIT(A) gave no cogent reasons for sustaining the additions. In these circumstances the Tribunal directed that the matter be remanded to the file of the Assessing Officer for fresh adjudication and verification of the evidence produced by the assessee, with opportunity of hearing being accorded in accordance with principles of natural justice; the appeals are partly allowed for statistical purposes pending that exercise. [Paras 7]

Matter remanded to the Assessing Officer for fresh adjudication and verification of the evidences produced by the assessee; assessee to be given opportunity of hearing; appeals partly allowed for statistical purpose.

Deduction under section 80C-proof of investment - Rejection of deduction under section 80C for the claimed amount was upheld. - HELD THAT: - The Tribunal noted that the CIT(A) had rejected the claim for deduction under section 80C for lack of requisite evidence. The Tribunal found no infirmity in that conclusion on the record before it and therefore dismissed the ground relating to the 80C deduction. [Paras 7]

Ground disallowing deduction under section 80C is dismissed.

Principles of natural justice-opportunity of hearing - The contention that assessment was framed without a fair and meaningful opportunity of hearing was dismissed as general in nature. - HELD THAT: - The assessee argued that documents could not be filed on a specified date because of illness of the authorised representative and requested further opportunity. The Tribunal treated this grievance as general and did not find it sufficient to vitiate the assessment on the record presented; accordingly the ground was dismissed. [Paras 7]

Ground alleging violation of natural justice is dismissed as general.

Reopening assessment under section 147/notice under section 148 - Ground challenging initiation of proceedings under section 147 was not pressed and is dismissed. - HELD THAT: - The assessee's counsel expressly did not press the ground contesting the initiation of proceedings under section 147, and the Tribunal recorded that Ground No. 2 is dismissed accordingly. [Paras 7]

Ground challenging initiation of proceedings under section 147 is dismissed as not pressed.

Final Conclusion: Both appeals are partly allowed for statistical purposes: additions relating to cash investment and introduction to capital are remanded to the Assessing Officer for fresh adjudication and verification of evidence with opportunity of hearing; the disallowance of deduction under section 80C and the general natural-justice plea are dismissed, and the challenge to initiation under section 147 was not pressed and dismissed.

Acceptance of cash loans in contravention of Section 269SS - Levy of penalty under Section 271D - 2nd proviso to Section 269SS - exemption where both parties have agricultural income and no income chargeable to tax - Reasonable cause and non-levy of penalty under Section 273B - Remand for verification of genuineness and source of funds

Acceptance of cash loans in contravention of Section 269SS - 2nd proviso to Section 269SS - exemption where both parties have agricultural income and no income chargeable to tax - Levy of penalty under Section 271D - Remand for verification of genuineness and source of funds - Reasonable cause and non-levy of penalty under Section 273B - Whether the assessee was liable to penalty under Section 271D for acceptance of cash loans and whether the 2nd proviso to Section 269SS (exemption where both parties have agricultural income and none has income chargeable to tax) applies, and consequential remand for verification. - HELD THAT: - The Tribunal observed that the Assessing Officer and the Commissioner (Appeals) did not verify the evidence produced by the assessee in relation to the source of cash loans and the agricultural status/income of the lenders and borrower for the purpose of invoking the 2nd proviso to Section 269SS. The assessee had produced material (identity documents, bank statements, affidavits and land record extracts) and asserted that the creditors had received compensation for compulsory acquisition of land and that both parties were agriculturists, which, if established, would attract the proviso and exclude the operation of Section 269SS. Because the revenue authorities failed to examine and adjudicate these factual contentions in the context of Section 269SS and the availability of reasonable cause under Section 273B, the Tribunal found it appropriate to remit the matter to the Assessing Officer for fresh verification of the genuineness of the transactions, the source of funds and the agricultural status/income of the parties, and thereafter to decide whether penalty under Section 271D is leviable. The Tribunal directed that the assessee be given an opportunity of hearing in accordance with principles of natural justice. [Paras 7, 8]

Matter remanded to the Assessing Officer to verify the evidences regarding genuineness, source of funds and applicability of the 2nd proviso to Section 269SS and thereafter decide on levy of penalty under Section 271D; appeal partly allowed for statistical purpose.

Final Conclusion: The Tribunal found that factual verification required for determining applicability of the 2nd proviso to Section 269SS and the consequent levy of penalty under Section 271D was not carried out by the revenue authorities; the matter is remitted to the Assessing Officer for fresh adjudication after giving the assessee an opportunity of hearing, and the appeal is partly allowed for statistical purposes.

Business income versus capital gains - characterisation of immovable property as stock-in-trade or investment - treatment of agricultural land under the definition of capital asset - applicability of exemption for agricultural land under section 2(14)(iii) - disallowance under proviso to section 40(a)(ia) for failure to deduct TDS - relevance of memorandum and articles of association and consistent books of account in determining nature of income

Business income versus capital gains - characterisation of immovable property as stock-in-trade or investment - relevance of memorandum and articles of association and consistent books of account in determining nature of income - Whether the surplus on sale of the agricultural plot is taxable as business income or as long term capital gains. - HELD THAT: - The Tribunal examined the factual matrix including continuous treatment of the land as closing stock in the assessee's books, the memorandum and articles of association showing objects of undertaking land acquisition and sale, the manner of valuation ('at cost' in the books) and the conduct of business. It rejected the contention that valuation at cost or the period of holding (13 years) conclusively establishes investment; valuation at cost does not preclude classification as stock-in-trade and period of holding alone is not decisive. The Tribunal found that the assessee consistently treated the land as stock-in-trade/closing stock, acquired and held in the course of its business of buying and disposing of land, and that the cited authorities on share transactions and stock-brokers were not factually comparable. On these materials the Tribunal sustained the revenue's view that the receipts are business income and not long term capital gains, and held that once the income is held to be business income any claim to treat proceeds as capital gains and seek exemption under section 2(14) is not admissible. [Paras 18, 19, 20, 21, 26]

The surplus on sale of the plot is business income and not long term capital gains; the claim for exemption as capital gain is rejected.

Disallowance under proviso to section 40(a)(ia) for failure to deduct TDS - Whether the disallowance of brokerage under the proviso to section 40(a)(ia) is justified. - HELD THAT: - The assessee paid brokerage and did not deduct TDS, pleading this was the first year of such transactions and absence of TAN. The CIT(A) found that the company was not a new entrant and had been engaged in land transactions since 1997, concluding there was a default under the TDS provisions. The Tribunal, on the record and in absence of contrary evidence from the assessee, declined to interfere with the disallowance upheld by the CIT(A). [Paras 27]

The disallowance of Rs. 2,00,000 under the proviso to section 40(a)(ia) is sustained.

Final Conclusion: The Tribunal dismissed the appeal: the profit on sale of the land was held to be business income (not long term capital gains) and the addition disallowing brokerage for failure to deduct TDS under the proviso to section 40(a)(ia) was upheld.

Requirement of specifying limb of 271(1)(c) in show-cause notice - penalty under section 271(1)(c) of the Income-tax Act - concealment of income versus furnishing inaccurate particulars of income - notice under section 274 read with section 271(1)(c) - separability of penalty proceedings from assessment proceedings - vitiation of penalty where the AO fails to state the limb of offence

Requirement of specifying limb of 271(1)(c) in show-cause notice - penalty under section 271(1)(c) of the Income-tax Act - concealment of income versus furnishing inaccurate particulars of income - separability of penalty proceedings from assessment proceedings - Penalty struck down because the notice and penalty order did not clearly specify whether proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income under section 271(1)(c). - HELD THAT: - The Tribunal found that the notice issued under section 274 read with section 271(1)(c) and the penalty order did not make clear which limb of section 271(1)(c) was invoked. The assessment order and penalty proceedings, being distinct, require the Assessing Officer to demonstrate the specific limb under which penalty is proposed. The material quoted from the penalty order showed ambiguity - the AO alternately referred to concealment and to filing inaccurate particulars. Reliance was placed on consistent judicial authority holding that a notice failing to specify the limb under section 271(1)(c) is vitiated. In view of those precedents and on the facts of the case, the Tribunal concluded that the penalty could not be sustained. [Paras 7, 8, 9, 13]

Penalty of Rs. 7,99,90,570/- levied under section 271(1)(c) is deleted.

Final Conclusion: The appeal is allowed; the penalty under section 271(1)(c) for A.Y. 2014-15 is set aside and the Assessing Officer is directed to delete the penalty.

Unexplained cash credit under section 68 - creditworthiness of lender - verification of source of cash deposits - remand for verification to the Assessing Officer - interest disallowance pending verification

Unexplained cash credit under section 68 - creditworthiness of lender - Acceptability of loan credits to the assessee to the extent explained by verifiable sources - HELD THAT: - The Tribunal examined the source documents and chronology for the Rs. 40 lakhs advanced to the assessee. It accepted the explanation for the first installment of Rs. 20 lakhs as explained by the lender's sale proceeds and found that, of the second installment, Rs. 9 lakhs received from Vishal Transport (the lender's wife's proprietary concern) is also acceptable as source. The authorities below had not discharged the onus to disprove these explained amounts and therefore those portions need not be treated as unexplained cash credit under section 68. [Paras 10, 11]

Loan of Rs. 20 lakhs (first instalment) and Rs. 9 lakhs of the second instalment are accepted as explained and are not to be treated as unexplained cash credit.

Verification of source of cash deposits - remand for verification to the Assessing Officer - Requirement for further investigation into cash deposits in the lender's account forming part of the funds advanced - HELD THAT: - The Tribunal found that cash deposits aggregating Rs. 11 lakhs (Rs. 8 lakhs and Rs. 3 lakhs) in the lender's bank account were not satisfactorily examined by the authorities below. The assessee contended these arose from earlier cash withdrawals from the lender's account and intra-bank transfers; however, that contention was not tested. In view of the unexamined material, the Tribunal directed a remand to the Assessing Officer to verify the source of these cash deposits, to afford the assessee reasonable opportunity and to accept any supporting evidence the assessee may produce, and thereafter to re-assess the matter. [Paras 10, 11]

The question of the Rs. 11 lakhs cash deposits is remitted to the Assessing Officer for verification and re-assessment after giving the assessee an opportunity of hearing.

Interest disallowance pending verification - remand for verification to the Assessing Officer - Allowability of interest claimed on the loans - HELD THAT: - The Tribunal held that the allowability of interest is dependent on the outcome of the verification of the genuineness and source of the funds advanced. Since part of the loan transaction has been remitted for further inquiry, the Assessing Officer is directed to re-decide the claim for interest after completing the verification regarding the cash deposits and after affording the assessee an opportunity of being heard. [Paras 13]

Claim for interest is remitted to the Assessing Officer to be re-decided in light of the verification directed by the Tribunal.

Final Conclusion: Appeals are partly allowed for statistical purposes: portions of the loans (first instalment of Rs. 20 lakhs and Rs. 9 lakhs of the second instalment) are accepted as explained; the balance cash deposits aggregating Rs. 11 lakhs and the claim for interest are remitted to the Assessing Officer for verification and re assessment after affording the assessee a reasonable opportunity of being heard.

Rectification under section 254(2) of the Income Tax Act - mistake apparent on the face of the record - distinction between review and rectification (error of judgment vs. apparent mistake) - scope of Tribunal's power to rectify its own order - deduction under section 54F of the Act - cost of acquisition admitted before assessing officer

Rectification under section 254(2) of the Income Tax Act - mistake apparent on the face of the record - distinction between review and rectification (error of judgment vs. apparent mistake) - Whether the Tribunal's order dated 21.01.2019 contained any apparent mistake warranting rectification under section 254(2) of the Act. - HELD THAT: - The Tribunal examined the miscellaneous application seeking review/rectification of its order dated 21.01.2019 and found no apparent or patent mistake in that order. The record showed that on the issue of cost of acquisition the assessee had admitted a specific cost before the Assessing Officer and the Tribunal rightly dismissed the ground challenging that admission. On the claim of deduction under section 54F, the Tribunal had applied the precedent of the Bombay High Court (as followed by the Pune Bench in an earlier order) which denied the claim where the amount was not deposited in the capital gains account by the due date of filing the return. The Court reiterated the settled principle that power under section 254(2) is confined to correcting obvious and patent mistakes apparent from the record and cannot be used to reopen or review an error of judgment or to re-argue points on which two opinions might reasonably exist. Reliance was placed on authoritative decisions to this effect, including the jurisdictional High Court's formulation that rectification cannot be used to reconsider circumstances that support or detract from a conclusion; only mistakes apparent on the record are amenable to rectification. Applying that standard, the miscellaneous application sought effectively a review of the Tribunal's conclusions rather than identification of any patent error on the face of the record, and therefore did not satisfy the narrow scope of section 254(2). [Paras 5, 6, 7]

Miscellaneous application under section 254(2) is dismissed for lack of any apparent mistake in the Tribunal's order dated 21.01.2019.

Final Conclusion: The application for rectification of the Tribunal's order dated 21.01.2019 under section 254(2) was dismissed: no patent or apparent mistake was found on the record and the relief sought amounted to an impermissible review of the Tribunal's judgment.

Deduction under section 36(1)(viia) - Provision for bad and doubtful debts - Provision for standard assets as per RBI guidelines - Binding effect of RBI provisioning on income-tax deduction claim - Reliance on High Court precedent

Deduction under section 36(1)(viia) - Provision for standard assets as per RBI guidelines - Provision for bad and doubtful debts - Whether the provision made for standard assets in accordance with RBI guidelines qualifies as provision for bad and doubtful debts and is allowable as a deduction under section 36(1)(viia). - HELD THAT: - The Assessing Officer and the Commissioner (Appeals) disallowed the portion of the provision relating to standard assets on the view that such provision was made in respect of assets considered good and recoverable and therefore did not constitute provision for bad and doubtful debts. The Tribunal examined the binding RBI Master Circular prescribing general provisioning on standard assets and noted that an identical question was recently considered and decided in favour of the assessee by the Hon'ble High Court of Karnataka in Bellad Bagewadi Urban Souhard Sahakari Bank Niyamit v. CIT, where the Court held that banks bound by RBI guidelines could claim deduction under section 36(1)(viia) in respect of provisions on standard assets. The Revenue did not produce any contrary binding authority, nor showed that the High Court decision had been set aside or stayed. In view of the High Court precedent and the mandatory nature of RBI provisioning, the Tribunal held that the provision for standard assets is within the scope of provision for bad and doubtful debts for the purpose of section 36(1)(viia), and directed the Assessing Officer to allow the claim to that extent. [Paras 7, 8, 9]

Provision for standard assets made as per RBI guidelines is allowable as provision for bad and doubtful debts under section 36(1)(viia); the claim is to be permitted and the Assessing Officer directed accordingly.

Final Conclusion: Following the High Court precedent and considering the mandatory RBI provisioning, the Tribunal allowed the deduction in respect of provision for standard assets under section 36(1)(viia) and partly allowed the appeal, directing the Assessing Officer to grant the relief.

Bank guarantee - invocation/encashment of bank guarantees - interim injunction - jurisdiction of the National Company Law Tribunal - access to interim relief during lockdown - email filing/dispensation for urgent matters before NCLT

Invocation/encashment of bank guarantees - interim injunction - access to interim relief during lockdown - Whether an ad interim restraint should be granted against encashment of certain bank guarantees pending further orders, in view of difficulties in approaching the NCLT during the COVID-19 lockdown. - HELD THAT: - The petitioner, as Resolution Professional, sought writ relief to restrain IOCL from invoking bank guarantees submitted by the corporate debtor. Petitioner explained inability to promptly invoke NCLT remedies because of closure/limited functioning of NCLT during the national lockdown and reliance on the NCLT's notice permitting urgent applications by email. The Court noted that a separate NCLT order of 13 December 2019 had earlier stayed encashment of other guarantees in related proceedings and that some guarantees in the present petition had already been invoked and encashed. Having considered the constraint on the petitioner caused by the lockdown, and in view of ongoing proceedings before NCLT/NCLAT in related matters, the Court issued notice and granted limited ad interim relief. The Court directed filing of a counter-affidavit and rejoinder within specified time limits, listed the matter for further hearing and, until then, restrained encashment of the specified, not-yet-invoked bank guarantees. [Paras 7, 8, 9, 10, 11]

Issued notice; directed filing of counter-affidavit and rejoinder within fixed timeframes; renotified matter to 10 June 2020; granted ad interim restraint against encashment of the specified bank guarantees until the next date of hearing.

Final Conclusion: Notice issued to respondents; interim restraint granted on encashment of the listed, not-yet-invoked bank guarantees; procedural directions given for filing of affidavits and listing on 10 June 2020.

Injunction against encashment of bank guarantees - Interim relief in view of lockdown/COVID-19 - Limited amnesty pending access to alternative forum - No adjudication on merits / without expressing view on entitlement - Preservation of remedies before NCLT/NCLAT

Injunction against encashment of bank guarantees - Interim relief in view of lockdown/COVID-19 - Limited amnesty pending access to alternative forum - No adjudication on merits / without expressing view on entitlement - Whether limited injunctive relief should be granted restraining the respondent from encashing the three bank guarantees until one week after lifting of the national lockdown imposed in consequence of the n-COVID-2019 pandemic. - HELD THAT: - The petitioner, acting as Resolution Professional, sought restraint against invocation/encashment of three bank guarantees which the respondent had sought to invoke. The petitioner asserted inability to approach the NCLT for urgent interim relief because of the national lockdown and the NCLT's limited functioning during the pandemic. The respondent did not dispute the present stalemate caused by the lockdown and invited that any interim relief be confined to that circumstance and not treated as indicative of the merits. Applying a narrowly tailored approach to preserve the parties' positions while the petitioner remains unable to access the alternate forum, the Court granted a time-limited injunction. The relief was expressly confined to the period until one week after lifting of the lockdown and was granted without entering into or expressing any view on the merits of the dispute or the petitioner's entitlement to a continuing injunction. The order leaves intact the parties' remedies before the NCLT/NCLAT and is not a determination on substantive rights.

A limited injunction was granted restraining the respondent from encashing/invoking the three bank guarantees until the expiry of one week from the lifting of the national lockdown, subject to the clarification that the Court has not adjudicated the merits and that the relief is confined to the present inability to approach the alternate forum.

Final Conclusion: Writ petition disposed by granting a narrowly confined interim injunction restraining encashment of the three bank guarantees until one week after the national lockdown is lifted; the order is without prejudice to the merits and preserves the parties' remedies before the NCLT/NCLAT, with no order as to costs.

Validity of allotment of shares by board resolution - allotment of shares in lieu of consideration other than cash - compliance with Section 62 and private placement rules in case of contractual allotment - power of the board under articles of association to issue and allot shares - related party transaction and requirement of shareholder approval - scope of company tribunal in adjudicating disputed questions of title of immovable property - appointment of directors and entitlement by shareholding or requisition - oppression and mismanagement jurisdiction under the Companies Act

Validity of allotment of shares by board resolution - allotment of shares in lieu of consideration other than cash - power of the board under articles of association to issue and allot shares - The impugned allotment of 1,89,000 equity shares to Respondent No.6 was not shown to be legally impermissible and does not suffer from such legal impediment as to warrant setting it aside. - HELD THAT: - The Tribunal examined the correspondence, the sanctioning arrangements with the bank, the letters between the parties (including the demand and undertaking in 2008), the Board resolutions of the Company and the Articles of Association which vest the Board with power to issue and allot shares. It noted that the allotment was made pursuant to an Articles of Agreement between the Company and Respondent No.6 recording that shares were being issued in part settlement of guarantee commission, that the Board exercised powers within the scope of the AoA and that the allotment fell within the limits of authorised capital at the time. The Tribunal found that the petitioners did not establish any mandatory statutory bar or procedural illegality which vitiates the allotment, and that the factual matrix relied upon by petitioners did not demonstrate contravention of the Companies Act such as would attract the remedy under oppression/mismanagement provisions. On this basis the Tribunal held there was no legal impediment to the allotment and refused to set it aside.

The challenge to the allotment of 1,89,000 shares to Respondent No.6 is rejected.

Related party transaction and requirement of shareholder approval - oppression and mismanagement jurisdiction under the Companies Act - The petitioners have not made out a case of oppression or mismanagement in respect of the related-party sale transaction so as to warrant relief from this Tribunal. - HELD THAT: - The Tribunal considered the allegations about the sale of part of the land and the petitioners' contention that the transaction was prejudicial and required cancellation. It noted that the company and its Board had addressed the matter internally (including placing the issue before the EGM) and that there were outstanding civil proceedings pending in the competent civil court challenging the original sale deed and title. The Tribunal observed that contested questions of title to immovable property and the genuineness of deeds are matters for a civil court and that the petitioners had not established conduct amounting to such oppression or mismanagement by the respondents as to attract intervention in these summary proceedings. Accordingly, the Tribunal did not grant substantive relief in respect of the sale deed.

No relief granted against the impugned sale; matters of title and cancellation of the sale deed remain for civil adjudication and do not establish oppression/mismanagement warranting intervention here.

Appointment of directors and entitlement by shareholding or requisition - power of shareholders to requisition extraordinary general meeting - The petitioners were not entitled, as of right in these proceedings, to be appointed as directors merely by virtue of their shareholding or the requisition relied upon in the petition. - HELD THAT: - The Tribunal noted the petitioners' claim to have been appointed at an informal meeting and their requisition under the Act to call an EGM. It examined the Articles of Association which do not prescribe share qualification for directorship and observed that petitioners adduced no binding shareholders' agreement or other legal entitlement that would require the Company to appoint them as directors. The Tribunal also recorded that requisition procedures and the conduct of the EGM had been dealt with by the company, and that petitioners failed to establish a legal right to appointment in the present summary proceedings.

Prayer for appointment of the petitioners as directors is not upheld.

Scope of company tribunal in adjudicating disputed questions of title of immovable property - Disputed questions of title in respect of the immovable property fall within the cognizance of civil courts and are not to be finally decided by the Tribunal in summary company petition proceedings. - HELD THAT: - The Tribunal recorded that proceedings challenging the original sale deed and title are pending before the civil court and reiterated the settled position that serious disputes of title and genuineness of deeds are to be adjudicated by the competent civil forum rather than in summary company petitions. Accordingly, the Tribunal declined to exercise any power to set aside registered sale deeds in these proceedings.

The Tribunal will not adjudicate the disputed question of title to the land in these summary proceedings and left such matters to the civil court.

Final Conclusion: The Company Petition is dismissed as lacking in merit; the petitioners did not establish legal invalidity of the allotment, oppression or mismanagement warranting relief, nor entitlement to appointment as directors in these proceedings. The impleading application is also dismissed and no order as to costs.

Corporate insolvency resolution process - duty of interim resolution professional to collate claims - duty of interim resolution professional to take control and custody of assets - control and custody of offshore assets - arrangement with foreign/overseas administrator - role of committee of creditors in guiding resolution professional

Duty of interim resolution professional to collate claims - duty of interim resolution professional to take control and custody of assets - Scope of the interim resolution professional's duties on initiation of corporate insolvency resolution process to collate claims and to take control and custody of the corporate debtor's assets. - HELD THAT: - The Tribunal held that on initiation of the corporate insolvency resolution process the duty of interim resolution professional to collate claims extends to all categories of creditors, domestic and international. It further held that the duty of interim resolution professional to take control and custody of assets encompasses assets over which the corporate debtor has ownership rights as recorded in its balance-sheet or in registries and information utilities. These duties arise from the statutory framework governing the resolution process and require the interim resolution professional to take steps to identify and assert control over the corporate debtor's assets in accordance with the law.

The interim resolution professional is required to collate claims of all creditors and to take control and custody of the corporate debtor's assets to the extent recognisable under law.

Control and custody of offshore assets - arrangement with foreign/overseas administrator - Permissibility and mode of taking control and custody of corporate debtor's assets situated outside India. - HELD THAT: - The Tribunal recognised that while the control and custody of offshore assets falls within the ambit of the interim resolution professional's duties, practical effectuation of control over assets situated abroad requires cooperation with overseas authorities. In the present circumstances the Tribunal recorded that control of assets located outside India can only be effected by reaching an arrangement with foreign/overseas administrator (the administrator appointed in the foreign proceeding). Accordingly, the resolution professional must negotiate terms with the foreign administrator and obtain consent or a cooperative mechanism before asserting control over such assets.

Control and custody of assets situated outside India may be pursued by the resolution professional but only by entering into an arrangement/agreement with the foreign administrator; unilateral appropriation is not directed.

Role of committee of creditors in guiding resolution professional - arrangement with foreign/overseas administrator - Extent of the committee of creditors' role in relation to negotiating arrangements with the foreign administrator and the course directed by the Tribunal. - HELD THAT: - The Tribunal expressly left open the broader question whether the committee of creditors has any definitive role in such negotiations for decision at an appropriate stage or in an appropriate case. For the present proceedings, however, the Tribunal permitted the committee of creditors to guide the resolution professional in preparing a draft agreement containing proposed terms and conditions to be taken to the foreign administrator. The Tribunal further directed that if the draft agreement is accepted by the foreign administrator, it may be placed before the Appellate Tribunal for its approval and allowed the resolution professional to file the draft within the prescribed time.

The question of the committee of creditors' formal role is left open for future adjudication; meanwhile the committee may guide the resolution professional and a negotiated draft agreement with the foreign administrator may be placed before the Tribunal.

Final Conclusion: The Tribunal directed that the interim resolution professional must collate claims and may seek control of offshore assets only by an arrangement with the foreign administrator; the committee of creditors' formal role is reserved for future decision but it is permitted to assist in drafting the agreement, which may be filed for the Tribunal's consideration.

Refund of service tax collected on development charges - limitation for refund claims under section 104(3) of the Finance Act, 2017 - time excluded where claimant unable to obtain requisite information/documents from third party - interpretative parity with requirement of certificate under section 103 of the Finance Act, 1994

Refund of service tax collected on development charges - limitation for refund claims under section 104(3) of the Finance Act, 2017 - time excluded where claimant unable to obtain requisite information/documents from third party - interpretative parity with requirement of certificate under section 103 of the Finance Act, 1994 - Whether the refund claim filed on 22.02.2018 was barred by the six month limitation in section 104(3) of the Finance Act, 2017, notwithstanding delay in receiving information and documents from the service provider SIPCOT. - HELD THAT: - Section 104(1) grants refund of service tax collected in respect of one time upfront amounts for the period from 1 June 2007 to 21 September 2016, and sub section (3) prescribes that an application for refund shall be made within six months from the date the Finance Bill, 2017 received the President's assent. The Tribunal observed that Section 104 does not specify who must make the refund application and that, in practice, claimants depended on the service provider (SIPCOT) to confirm deposit of tax and to furnish tax paid challans or certificates. The position is analogous to the statutory scheme under Section 103 where courts have excluded the period consumed in obtaining a required certificate from computation of limitation. Applying that reasoning, the time legitimately taken by SIPCOT to inform the appellants and to furnish requisite documents was excluded for computing limitation, since the appellants could not perform tasks beyond their control. On that basis the Tribunal concluded that rejection on time bar grounds was unjustified and set aside the impugned order.

Impugned order rejecting the refund claim on the ground of limitation set aside; appeal allowed with consequential reliefs.

Final Conclusion: The Tribunal held that delay attributable to the service provider in informing the claimant and furnishing necessary documents is to be excluded when computing the six month limitation under section 104(3) of the Finance Act, 2017; accordingly the time bar defence failed and the refund rejection was set aside.

Prima facie offence under Section 138 of Negotiable Instruments Act - service of notice under Section 138 proviso (b) - statutory presumption under Section 139 of the Negotiable Instruments Act - power under Section 482 Cr.P.C. - cause of action - dishonour for "insufficient funds"

Prima facie offence under Section 138 of Negotiable Instruments Act - dishonour for "insufficient funds" - Validity of taking cognizance and summoning the accused on a complaint under Section 138 where the cheque was returned with endorsement "insufficient fund" - HELD THAT: - The High Court held that the material placed before the Magistrate - including the cheque, bank return with the endorsement "insufficient fund" and the complainant's affidavit - prima facie constituted an offence under Section 138. The endorsement of "insufficient fund" falls within the contingencies contemplated by Section 138 and, at the cognizance stage, amounts to a prima facie foundation for summoning the accused. Disputed factual contentions raised by the accused (for example, denial of issuance of the cheque or allegation of loss/forgery) are matters for trial and cannot be finally decided in exercise of the Court's powers under Section 482 Cr.P.C.

Cognizance and summoning order were not quashed; prima facie offence held to be made out and to be tried by the trial court.

Service of notice under Section 138 proviso (b) - statutory presumption under Section 139 of the Negotiable Instruments Act - Whether the complaint was premature for being filed before expiry of 15 days from service of the statutory notice - HELD THAT: - The Court found that the question of the date of service/receipt of the notice and whether the complaint was filed prematurely involves disputed questions of fact which cannot be resolved on a petition under Section 482 Cr.P.C. The court observed that sending the notice by registered post to the accused's address engages presumptions under the General Clauses Act and Section 139; absence of an express averment of evasion in the complaint does not, at the threshold, justify quashing. Proof of service or non-service is a matter of evidence to be examined at trial.

Complaint not quashed on the ground of premature filing; date-of-service dispute to be determined by the trial court.

Power under Section 482 Cr.P.C. - cause of action - Appropriateness of invoking inherent jurisdiction under Section 482 Cr.P.C. to quash proceedings based on disputed factual assertions such as forgery, non-issuance of cheque or manipulation of receipt dates - HELD THAT: - Relying on precedent, the Court reiterated that exercise of power under Section 482 Cr.P.C. is inappropriate where the challenge raises triable issues of fact. Allegations that the cheque was forged, that the accused lodged complaints about stolen cheques, or that dates of receipt/manipulation of postal acknowledgements were falsified are factual controversies which must be investigated and decided in the trial. The Court declined to resolve such factual disputes at the quashing stage.

Proceedings not quashed on these factual grounds; such matters are remitted to the trial court for adjudication.

Final Conclusion: The petition seeking quashing of the complaint under Section 138 of the Negotiable Instruments Act is dismissed. The summoning order is upheld as raising a prima facie case; disputed questions of fact including service of notice, alleged forgery/non-issuance and related contentions are left to be tried by the court below, which is directed to proceed expeditiously.

Contractual interpretation of facilitative obligations - obligation to issue Sales Tax Form C and claim for differential tax - burden of proof on claimant for deliveries and invoices - limitation and time-barring of claims - interpretation of commercial quotations as inclusive of taxes - scope of arbitral judicial review under Section 34 of the Arbitration and Conciliation Act, 1996

Obligation to issue Sales Tax Form C and claim for differential tax - interpretation of commercial quotations as inclusive of taxes - limitation and time-barring of claims - Validity of Claim No.2 for differential tax on account of non issuance of Sales Tax Form 'C'. - HELD THAT: - The Court upheld the Tribunal's rejection of Claim No.2. The Tribunal found lack of original challans and that the claimed challans did not exclusively relate to respondent supplies; it relied on the petitioner's prior correspondence (21.11.2008) and the quoted price of Rs.135/- per card which included an element towards tax. The Tribunal also interpreted the Sales Tax legal position and found the respondent was not a registered dealer eligible to issue Form 'C' for concessional CST; alternatively, even if Form 'C' were applicable, the element of tax included in the quoted price made any loss claim insubstantial. The Court agreed that the evidence and documents supported the Tribunal's conclusion and found no illegality warranting interference under Section 34. The Tribunal's limitations analysis and its evaluation of the documentary evidence were upheld as not perverse. [Paras 12, 27, 28, 29]

Claim No.2 rejected and the Tribunal's conclusion on lack of entitlement to differential tax sustained.

Burden of proof on claimant for deliveries and invoices - burden of proof on claimant for deliveries and invoices - Validity of Claim No.1 for outstanding dues for supplied Smart Cards (regional centre claims). - HELD THAT: - The Court affirmed the Tribunal's approach that the claimant bore the onus to produce originals and link invoices to specific claimed amounts and to produce witnesses/authors. The Tribunal found discrepancies between invoice amounts and claimed figures, unrebutted respondent denials, documentary gaps, and admissions in oral testimony (including that some RC dues were paid). On the evidence, the Tribunal allowed only a small sum (Rs. 2025/-) for one centre and rejected the remaining asserted dues. The Court found no patent illegality in that evaluation and in the Tribunal's reliance on documentary inconsistencies and witness evidence. [Paras 30, 31]

Claim No.1 largely rejected except for a small sum allowed; the Award on this claim is upheld.

Contractual interpretation of facilitative obligations - stop-work and handover obligations prior to expiry - Validity of Claim No.3 for unutilized inventory of pre printed Smart Cards. - HELD THAT: - The Tribunal found, and the Court agreed, that the Agreement required the parties to stop work in the last month and to hand over software/hardware; the petitioner needed 25 days to produce cards and admitted the respondent ceased providing projections after November 2014. The Tribunal also observed absence of any documentary proof of orders or expenditure proving manufacture of 49,500 unutilized cards. The Tribunal's interpretation that no orders/projections after November 2014 relieved respondent of liability was a plausible construction of the contract and supported by the record; the Court found no perversity to interfere. [Paras 21, 32, 33]

Claim No.3 dismissed; Award upholding the Tribunal's rejection maintained.

Contractual interpretation of facilitative obligations - Validity of Claim No.4 for loss on account of non procurement of Referral Authentication Kits by empanelled hospitals/laboratories. - HELD THAT: - The Tribunal construed Clause 3.1.12 as obliging the respondent only to 'facilitate' procurement (i.e., recommend or facilitate), not to mandate or ensure purchase by hospitals. The Tribunal accepted that limited facilitation (including a request to hospitals) had been undertaken and that the respondent could not compel independent hospitals to buy. The Court held this interpretation to be a plausible one within the Tribunal's domain of contract construction and found no reason to set aside the finding. [Paras 34, 35, 36]

Claim No.4 dismissed; Tribunal's interpretation and rejection of the claim upheld.

Burden of proof on claimant for deliveries and invoices - stop-work and handover obligations prior to expiry - Validity of Claim No.5 for reimbursement of costs/expenditure for services allegedly rendered after contract expiry (01.06.2015 to 08.07.2015). - HELD THAT: - The Tribunal found absence of supporting vouchers, bills or salary statements promised by the petitioner and noted respondent's denial of the documents; it relied on an email directing return of hardware and handover obligations under Clause 9.1.3. The Tribunal also observed inconsistency in petitioner's stance (claiming both withholding of applications and work beyond expiry). The Court agreed that the petitioner failed to discharge the evidentiary onus to prove services beyond expiry and that the Tribunal's factual findings were not vitiated by patent illegality. [Paras 16, 37, 38]

Claim No.5 dismissed; Award rejecting the claim upheld.

Scope of arbitral judicial review under Section 34 of the Arbitration and Conciliation Act, 1996 - Validity of the Arbitral Tribunal's disallowance of respondent's counterclaim for costs of arbitration. - HELD THAT: - The Tribunal disallowed the respondent's counterclaim for costs; the High Court reviewed the Award for patent illegality and perversity and found none in the Tribunal's treatment of the counterclaim or other issues. The Court emphasized that the petitioner's grievances largely sought re appreciation of evidence, which is not permissible under Section 34 absent patent illegality. No basis to upset the Tribunal's exercise of discretion on costs was found. [Paras 10, 39]

Tribunal's disallowance of the respondent's counterclaim for costs is maintained; the Award is upheld.

Final Conclusion: The petition under Section 34 is dismissed. The Arbitral Award dated 31.07.2018 rejecting Claims No.2-No.5 and disallowing the respondent's counterclaim, and allowing only a small portion of Claim No.1, is upheld in its entirety; no patent illegality or reason for interference is found.

Quashment of criminal complaints under Section 482 Cr.P.C. applying Bhajan Lal principles - challenge to transfer of criminal complaints and forum competence - inapplicability of limitation by virtue of The Economic Offences (Inapplicability of Limitation) Act, 1974 - offences under the Income tax Act being deemed non cognizable under Section 279A - jurisdiction of Court of Session, committal requirement and effect of transfer - classification of offences under Part II of the First Schedule to the Cr.P.C. - designation and constitution of Special Courts pursuant to Ashwini Kumar Upadhyay directions - Ranbir Yadav principle that committal is not necessary in cases of transfer - revision under Section 397 Cr.P.C. being discretionary and not a legal right

Inapplicability of limitation by virtue of The Economic Offences (Inapplicability of Limitation) Act, 1974 - offences under the Income tax Act being deemed non cognizable under Section 279A - Whether the criminal complaints were barred by limitation - HELD THAT: - The Court held that offences under the Income tax Act are included in the Schedule to The Economic Offences (Inapplicability of Limitation) Act, 1974, and accordingly Chapter XXXVI Cr.P.C. (limitation for taking cognizance) does not apply. Counsel for petitioners did not dispute this statutory position. The Court therefore concluded that the complaints instituted otherwise than on police report for alleged offences under the Income tax Act are not barred by limitation and it was unnecessary to consider timelines under the Income tax Act for purposes of prosecution. [Paras 16, 18]

Criminal complaints are not barred by limitation.

Quashment of criminal complaints under Section 482 Cr.P.C. applying Bhajan Lal principles - prosecution founded on search and seizure material versus assessment orders - Whether the two criminal complaints should be quashed at the threshold - HELD THAT: - Applying the settled principles for quashment (Bhajan Lal and allied authorities), the Court examined the complaints on their face. The prosecution stated that the cases are founded on search and seizure material (including soft copies shared by Enforcement Directorate and notebooks recovered from the purchaser company) and not upon assessment orders; the alleged corroboration and third party statements raise triable issues. The Court found that even if averments in the complaints are accepted, they prima facie disclose offences under the cited provisions of the Income tax Act and the questions of retraction, corroboration and proof are matters for trial. Accordingly, no ground for quashing was made out. [Paras 20, 21, 24]

Quash petitions dismissed; the complaints shall proceed to trial.

Challenge to transfer of criminal complaints and forum competence - designation and constitution of Special Courts pursuant to Ashwini Kumar Upadhyay directions - jurisdiction of Court of Session, committal requirement and effect of transfer - Ranbir Yadav principle that committal is not necessary in cases of transfer - revision under Section 397 Cr.P.C. being discretionary and not a legal right - Whether the transfer of the complaints from the Economic Offences Court (EO Court) to the Special/Transferee Sessions Court was invalid and prejudicial to the petitioners - HELD THAT: - The Court analysed the Ashwini Kumar Upadhyay directions, subsequent state orders and communications designating Special Courts at Sessions and magisterial levels. Although the petitioners argued that the complaints (magisterial offences) should have remained in a designated Metropolitan Magistrate and that transfer to a Sessions Court deprived them of a revisional remedy, the Court found three relevant points: (a) the Supreme Court's directions contemplated creation/designation of as many Sessions and magisterial Special Courts as necessary and the State had designated multiple courts; (b) committal is not a prerequisite in cases of transfer by reason of the Ranbir Yadav line of authority; and (c) revision under Section 397 Cr.P.C. is discretionary and not a legal right, so the putative loss of that remedy did not constitute established prejudice. The Court noted administrative flaws in the State's handling (including non designation and later non designation of the II Metropolitan Magistrate) and recommended that more Metropolitan Magistrates be designated in Chennai as directed by the Supreme Court, but concluded that the petitioners had not demonstrated specific prejudice from the transfer. Consequently the challenge to transfer was negatived. [Paras 51, 60]

Challenge to transfer fails; transfer to the Sessions Court stands and Crl.O.Ps. assailing transfer are dismissed.

Final Conclusion: The High Court dismissed the petitions: complaints are not time barred under the Economic Offences (Inapplicability of Limitation) Act, 1974; the complaints are not liable to be quashed and must proceed to trial; and the challenge to the administrative transfer of the complaints to the designated Sessions Special Court fails for want of demonstrated prejudice, while urging the State to designate sufficient magisterial Special Courts as per Supreme Court directions.