TaxTMI Updates e-Newsletter
May 17,2016

Tax collected at source (TCS) - assesse in default for failure to collect tax at source - timber distinguished from sawn timber - manufacture as production of a new and different article - exception for purchasers engaged in manufacturing under section 206C(1A)

Tax collected at source (TCS) - timber distinguished from sawn timber - manufacture as production of a new and different article - assesse in default for failure to collect tax at source - exception for purchasers engaged in manufacturing under section 206C(1A) - Whether sale of sawn timber by the assessee attracted the obligation to collect tax at source under section 206C of the Act - HELD THAT: - The Tribunal examined whether 'timber' as used in section 206C includes 'sawn timber' or whether sawing produces a distinct marketable commodity outside the scope of the provision. The assessee's documentary material (including a tender condition prohibiting sawing in depot premises) and established judicial dicta were held to support the view that sawn timber is a different article from timber in its nascent/log form. Applying the common law understanding of 'manufacture' endorsed by the Supreme Court (production of articles having new forms, qualities or combinations such that a new and different article results), together with precedent recognizing that converting logs into planks/sleepers amounts to manufacture, the Tribunal concluded that sawn timber is not the same as timber for the purposes of section 206C. The CIT(A)'s factual finding that the assessee traded only in sawn timber and that buyers were engaged in manufacturing/processing (bringing the transactions within the exception in section 206C(1A)) was not controverted by the revenue; on that basis the Tribunal found no infirmity in the CIT(A) order and held that the obligation to collect TCS under section 206C did not arise in the facts of this case. [Paras 6, 7]

Sale of sawn timber by the assessee did not attract TCS under section 206C; the CIT(A)'s order holding section 206C inapplicable was upheld.

Final Conclusion: The Tribunal upheld the CIT(A)'s finding that transactions in sawn timber did not attract tax collection at source under section 206C and found no infirmity in that order; the cross objection of the assessee was dismissed as infructuous.

Additional depreciation under proviso to Sec.32(1)(iia) of the Income tax Act - New plant and machinery - 'first put to use' / 'newness' test - Entertainability of belated revised return

Entertainability of belated revised return - Whether a belatedly filed revised return can be considered for allowing a claim of deduction/additional deduction - HELD THAT: - The Tribunal held that a claim that is in accordance with law should be allowed by the Assessing Officer even if made in a revised return filed belatedly. Reliance was placed on the CBDT Circular dated 11.04.1955 and earlier coordinate bench precedents; filing a revised return after the procedural last date does not, by itself, preclude the AO from considering a legally sustainable deduction. Consequently, the Revenue's objection that the revised return filed on 15.08.2013 (after 31.03.2013) rendered the claim incapable of adjudication was rejected to the extent that the claim merits consideration on its legal merits. [Paras 6]

Belated revised return cannot be ipso facto ignored; the AO may consider the claim if it is otherwise in accordance with law.

Additional depreciation under proviso to Sec.32(1)(iia) of the Income tax Act - New plant and machinery - 'first put to use' / 'newness' test - Whether additional depreciation under Sec.32(1)(iia) is allowable in Assessment Year 2011 12 when the plant and machinery were acquired and installed in an earlier year and had been capitalized in the block of assets - HELD THAT: - The Tribunal examined the statutory requirement that additional depreciation under the proviso to Sec.32(1)(iia) applies only to "new" plant and machinery acquired and installed after 31.03.2005, and observed that 'newness' is determined by the year the asset was first put to use. Where plant and machinery were acquired, installed and capitalized in an earlier year and already formed part of the block of assets, they cease to be "new" for a subsequent assessment year. The Tribunal rejected the CIT(A)'s conclusion that additional depreciation could be granted in the later year, emphasising that each assessment year is separate and there is no statutory provision permitting postponement or carry forward of additional depreciation to a succeeding year. The Tribunal followed precedents holding that additional depreciation is allowable only in the year of first use and disallowed the claim for additional depreciation in AY 2011 12 on assets capitalized earlier. [Paras 7]

Additional depreciation under Sec.32(1)(iia) is not allowable in AY 2011 12 for plant and machinery that were acquired, installed and capitalized in an earlier year.

Final Conclusion: The appeal is partly allowed: the Revenue's plea that the belated revised return barred consideration of the claim is rejected, but the claim for additional depreciation in Assessment Year 2011 12 is disallowed because the assets were not "new" in that year; the Tribunal therefore allows the appeal in part.

Estimation of income by adopting a rate of commission for accommodation entries - allowability of expenses as a percentage of gross commission - confirmation of protective additions - search and seizure proceedings - special audit directed under the Income tax Act

Estimation of income by adopting a rate of commission for accommodation entries - allowability of expenses as a percentage of gross commission - Whether the commission income of the assessee from providing accommodation entries should be estimated at the rate applied by the Assessing Officer or the rate and expense allowance adopted by the Commissioner (Appeals). - HELD THAT: - As recorded, investigation during search and survey, seized material and statements indicated that the assessee provided accommodation entries and received commission. The AO estimated income by applying a 5% rate on cheques issued (and bank deposits). The CIT(A), after examining the seized material, statements of beneficiaries and middlemen, and having regard to the involvement of sub brokers who retained a portion of commission, held that a 3% gross commission applied to cheque amounts or bank deposits (whichever higher) was fair and reasonable. The CIT(A) further applied the coordinate bench approach in Sumermal R. Jain to allow expenses at 20% of the gross commission, reducing the net assessable commission to the equivalent of 2.4%. The Tribunal found that CIT(A) had considered the entire material and given detailed reasons for adopting the 3% rate and allowing 20% expenses, and no material was produced before the Tribunal to justify interference with those findings. Accordingly the CIT(A)'s estimation and allowance were upheld.

Estimation of commission income upheld at 3% of cheques issued or bank deposits with admissible expenses allowed at 20% of gross commission, resulting in net commission as determined by CIT(A); assessee's challenge to lower rate and revenue's challenge to higher AO rate dismissed.

Confirmation of protective additions - transactions with G.R. Pandya Shares and Securities Ltd. - Whether the protective additions relating to transactions with G.R. Pandya Shares and Securities Ltd. confirmed by the CIT(A) should be disturbed. - HELD THAT: - For the assessment years in which protective additions on account of transactions with G.R. Pandya Shares and Securities Ltd. were made, the CIT(A) gave detailed reasoning for confirming those additions. The Tribunal considered the record and the lower authorities' findings and found no material or argument before it to warrant interference with the CIT(A)'s conclusions.

Protective additions in respect of transactions with G.R. Pandya Shares and Securities Ltd. confirmed; appeals in respect thereof dismissed.

Confirmation of protective additions - transactions with T.H. Vakil Shares and Securities Pvt. Ltd. - Whether the protective additions relating to transactions with T.H. Vakil Shares and Securities Pvt. Ltd. confirmed by the CIT(A) should be disturbed. - HELD THAT: - The Assessing Officer and the CIT(A) recorded findings and gave reasons for the protective additions concerning transactions with T.H. Vakil Shares and Securities Pvt. Ltd. No material was brought before the Tribunal to persuade it to deviate from the findings of the lower authorities. The Tribunal therefore declined to interfere with the CIT(A)'s confirmation of those additions.

Protective additions in respect of transactions with T.H. Vakil Shares and Securities Pvt. Ltd. confirmed; appeals in respect thereof dismissed.

Final Conclusion: The Tribunal upheld the CIT(A)'s estimation of commission income (gross commission @3% on cheque amounts or bank deposits with 20% expenses allowed, yielding the net rate affirmed by CIT(A)) and confirmed the protective additions relating to G.R. Pandya and T.H. Vakil transactions; all appeals by the assessee and revenue are dismissed.

Cessation/remission of liability - section 41(1) of the Income-tax Act - book-entry gift - constructive receipt and constructive payment - gifts between relatives and exemption under taxation of gifts - taxability of interest previously claimed by payer and offered by recipient

Cessation/remission of liability - section 41(1) of the Income-tax Act - book-entry gift - constructive receipt and constructive payment - taxability of interest previously claimed by payer and offered by recipient - Disallowance of interest of Rs. 11,12,947/- by invoking section 41(1) on account of alleged cessation/remission of liability when an outstanding loan balance was converted into a gift by book entry - HELD THAT: - The Tribunal found that the sum outstanding in the assessee's books in the name of his sister had been genuinely gifted by the sister (a non-resident relative) and accepted by the assessee by a proper gift deed. The interest amounts earlier credited in the sister's account had been claimed as income by her in the relevant years and the assessee had claimed the interest expenditure in his returns; nothing on record disputed these facts. The Tribunal agreed with the assessee's contention that a single book entry effecting the gift had the same economic consequence as a constructive sequence of 'receipt of gift' and 'payment/adjustment of liability', and that treating that book-entry gift as a remission of trading liability would be contrary to substance where the donor genuinely gifted the amount out of natural love and affection. The Tribunal followed the coordinate-bench decision in Rajesh Kumar v. ACIT (24 taxmann.com 133 (Cochin)) where similar facts were held not to attract section 41(1). Applying that reasoning, the Tribunal held there was no cessation or remission of liability taxable under section 41(1) in respect of the interest earlier paid and booked, and therefore the addition was not sustainable. [Paras 5]

Addition of Rs. 11,12,947/- under section 41(1) deleted; ground allowed.

Final Conclusion: The appeal is allowed: the disallowance under section 41(1) in respect of the interest amounting to Rs. 11,12,947/- is deleted as there was no remission of liability where the amount was a genuine gift from a relative and the interest had been offered to tax by the donor.

Penalty under section 271(1)(c) of the Income-tax Act, 1961 - concealment of income / furnishing inaccurate particulars of income - Minimum Alternate Tax as computed under section 115JB - calculation of the amount of tax sought to be evaded - effect of Explanation 4 to section 271(1) and its prospective substitution - CBDT Circular No.25/2015 clarifying pre-1-4-2016 position

Penalty under section 271(1)(c) of the Income-tax Act, 1961 - Minimum Alternate Tax as computed under section 115JB - calculation of the amount of tax sought to be evaded - CBDT Circular No.25/2015 clarifying pre-1-4-2016 position - Validity of penalty of Rs.41,51,041/- imposed under section 271(1)(c) for additions disallowing warranty provisions and for alleged suppression of sales for Asst. Year 2005-06 - HELD THAT: - The Tribunal upheld the deletion of penalty by the Commissioner (Appeals). The decisive legal premise is that for the assessment year in question the tax payable on income computed under the normal provisions was less than the tax paid by the assessee under the deeming provisions of section 115JB (MAT on book profits). Following the Delhi High Court decision in CIT v. Nalwa Sons (as accepted by the Supreme Court on SLP dismissal) and the subsequent CBDT Circular No.25/2015, the established position prior to the prospective substitution of Explanation 4 (w.e.f. 1-4-2016) is that where tax under the normal computation is lower than tax under section 115JB, penalty under section 271(1)(c) is not attracted with reference to additions/disallowances made under the normal provisions. The Tribunal observed that the facts here mirror that position: the assessee paid tax on book profits under section 115JB and, after assessment under normal provisions, no additional tax was payable. In these circumstances concealment, even if found for normal assessment purposes, did not result in tax evasion and therefore did not sustain penalty under section 271(1)(c). Reliance on the CBDT Circular affirmed that appeals on this ground should not be pursued for periods before 1-4-2016. Applying that settled position, the Tribunal found no infirmity in the CIT(A)'s deletion of the penalty. [Paras 4, 9]

Penalty imposed under section 271(1)(c) for the specified additions is deleted and the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal affirms deletion of the penalty under section 271(1)(c) for Asst. Year 2005-06 because tax payable under the normal provisions was less than the tax paid under section 115JB; appeal by Revenue dismissed.

Consideration for use of scientific equipment - royalty - managed web hosting services - rendering of services involving equipment versus grant of right to use equipment - Explanation 2 to Section 9(1)(vi) of the Act

Managed web hosting services - consideration for use of scientific equipment - royalty - rendering of services involving equipment versus grant of right to use equipment - Explanation 2 to Section 9(1)(vi) of the Act - Payments received for providing managed web hosting services are not taxable as consideration for use of, or right to use, scientific equipment under Explanation 2(iva) to Section 9(1)(vi) of the Income-tax Act, 1961. - HELD THAT: - The Tribunal distinguished between (a) consideration paid for the grant of a right to use scientific equipment and (b) consideration paid for rendition of services which employ scientific equipment. Taxability under Explanation 2(iva) requires that the payer have an independent right to use, or physical access to, the equipment such that the receipt is genuinely for the use of the equipment. Where the service-provider merely uses its own equipment to render a managed service (here web hosting with backup, maintenance, security and uninterrupted services) and the customer does not obtain independent rights or physical access to that equipment, the payment is for the service and not for use of the equipment. The Tribunal relied on this principle, approving coordinate-bench authority (Kotak Mahindra Primus Ltd) to hold that the receipts in question are for managed hosting services and not taxable as 'royalty' or as consideration for use of scientific equipment. Although the CIT(A) had also given relief under the India-U.S. treaty, the present contest on the domestic Act was academic since treaty relief would remain operative; on the merits the Tribunal upheld the CIT(A)'s conclusion that the receipts are not chargeable under the domestic provision. [Paras 7, 9, 10, 11]

The CIT(A)'s deletion of the addition is upheld; the receipts are not taxable as consideration for use of scientific equipment under the Act.

Final Conclusion: Appeal dismissed. The Tribunal affirms that payments for managed web hosting services, though involving use of scientific equipment by the provider, are payments for services and not taxable as consideration for use of scientific equipment under Explanation 2(iva) to Section 9(1)(vi); the CIT(A)'s order deleting the addition is approved.

Adventure in the nature of trade - specified agricultural land within the meaning of Section 2(14) - profit on sale of specified agricultural land treated as agricultural income under s.2(1A)/s.10(1) - treatment as business income versus capital gains - application of section 40A(3) to payments for purchase of fixed assets - admission of additional evidence in appellate proceedings

Adventure in the nature of trade - specified agricultural land within the meaning of Section 2(14) - profit on sale of specified agricultural land treated as agricultural income under s.2(1A)/s.10(1) - treatment as business income versus capital gains - admission of additional evidence in appellate proceedings - Whether the profit of Rs. 57,39,980/- on sale of the land is taxable as business income (adventure in the nature of trade) or is exempt as income from transfer of specified agricultural land. - HELD THAT: - The Tribunal and the lower appellate authority examined the facts and found no sustained evidence of systematic trading activity: the assessee had not carried on business activities during the relevant years, the land parcels were shown as fixed assets rather than stock-in-trade, there was no substantial development, subdivision or conversion of the land, and the transaction was an isolated sale. The CIT(A) admitted additional certificates from the Survey Lekhpal showing the village to be outside municipal limits and with population below ten thousand, satisfying the criteria for specified agricultural land. On these findings the authorities concluded that the land qualified as specified agricultural land within the meaning of the Act and that the gain therefore did not constitute taxable business income; accordingly the addition treating the sale as an adventure in the nature of trade was not sustainable. The Tribunal concurred, rejecting the assessing officer's inference drawn from the company's objects and group associations as conjectural, and held that even if a real-estate business existed, specified agricultural land retained its statutory character and the sale qualified as exempt agricultural income under the cited provisions. [Paras 4, 5]

Addition of Rs. 57,39,980/- deleted; profit on sale held to be exempt as arising from transfer of specified agricultural land.

Application of section 40A(3) to payments for purchase of fixed assets - purchase of land as fixed asset not stock-in-trade - rigour of section 40A(3) not attracted to explained cash payments for investments - Whether disallowance under section 40A(3) of Rs. 55,20,000/- for cash payments made on purchase of the land was correctly made by the AO. - HELD THAT: - The appellate authority found and the Tribunal agreed that the lands purchased were part of the assessee's investment/fixed assets and not stock-in-trade. The AO had invoked s.40A(3) premised on treating the purchase as trading activity, but having rejected the characterization of the transaction as adventure in the nature of trade, the statutory rigour of s.40A(3) did not apply. The cash payments were explained, the sale deeds and registration were not doubted by the AO, and binding precedents were held to support that s.40A(3) does not apply to payments made for acquisition of fixed assets when transactions are genuine and explained. [Paras 5, 7]

Addition of Rs. 55,20,000/- under section 40A(3) deleted; disallowance not attracted as the purchases were of fixed assets and the cash payments were satisfactorily explained.

Final Conclusion: The revenue's appeal is dismissed: the additions made by the AO for (i) profit on sale of the specified agricultural land and (ii) disallowance under section 40A(3) are both deleted, the gain being held exempt as arising from transfer of specified agricultural land and the cash-payment disallowance held not attracted.

International transaction - arm's length price - shareholder activity - provision of services - bearing on the profits, income, losses or assets - transfer pricing adjustment - retrospective amendment (Explanation to Section 92B)

International transaction - shareholder activity - provision of services - arm's length price - bearing on the profits, income, losses or assets - transfer pricing adjustment - Deletion of transfer pricing adjustment made in respect of corporate guarantees issued by the assessee for its associated enterprises - HELD THAT: - The Tribunal held that corporate guarantees, while covered by the Explanation inserted in Section 92B as a form of capital financing, fall within the scope of 'international transaction' only if the transaction has a real bearing on the profits, income, losses or assets of the enterprises. Where guarantees are in the nature of quasi capital or genuine shareholder activity (not services) and do not cost the guarantor or have a real impact on its profits/income/assets, they do not constitute an international transaction liable to ALP adjustment. The Tribunal relied on OECD guidance distinguishing shareholder activities from services, on coordinate bench precedents (Micro Ink / Bharti Airtel analysis) and on the absence of benchmarking or material showing an impact; it also held that bank guarantees are not economically comparable to corporate guarantees. On this basis the impugned ALP adjustment was deleted. The Tribunal further observed that the Explanation to Section 92B, being a retrospective legislative clarification, cannot be applied to bring past conduct within transfer pricing norms where that would impose compliance obligations retrospectively for an anti avoidance regime; accordingly the amended scope was treated as effective prospectively (from 1.4.2012) for the present assessment year. Both lines of reasoning (shareholder activity characterization and non application of the retrospective amendment for the year in question) independently supported deleting the adjustment. [Paras 42, 43, 44, 45, 50]

Impugned ALP adjustment in respect of corporate guarantees deleted; assessee's appeal allowed on this issue.

Transfer pricing adjustment - arm's length price - retrospective amendment (Explanation to Section 92B) - Assessing Officer's appeals against CIT(A)'s allowance of deductions and other coordinate bench covered matters - HELD THAT: - The Tribunal noted that the Assessing Officer's grounds (including challenge to the CIT(A)'s allowance of deduction under section 80IB(8A) and related contentions) were covered by decisions of coordinate benches in the assessee's own case for earlier assessment years. Respecting those precedents, the Tribunal declined to interfere with the CIT(A)'s orders and followed the coordinate bench rulings placed on record. [Paras 26, 27, 28, 29]

Assessing Officer's appeal dismissed; CIT(A)'s order upheld on these aspects.

Final Conclusion: The Tribunal allowed the assessee's appeal by deleting the transfer pricing adjustment made in respect of corporate guarantees (holding them to be shareholder/quasi capital activity and, alternatively, not chargeable under the law as applied to the year), and dismissed the Assessing Officer's cross appeal, upholding the CIT(A)'s rulings covered by coordinate bench precedents.

Scope of Section 54 - cost of new asset - construction and purchase may co-exist - habitable - items of comfort excluded from cost of new asset - beneficial construction of tax exemption

Scope of Section 54 - cost of new asset - construction and purchase may co-exist - habitable - Whether expenditure incurred after purchase to render the newly purchased house habitable qualifies as part of the cost of the new asset for claiming exemption under Section 54. - HELD THAT: - The Tribunal found on the facts that the assessee purchased a residential house in dilapidated condition and immediately undertook extensive civil, plumbing, electrical and painting works supported by invoices and photographs. The purchase deed itself (clause 8(ix)) recorded that extensive repairs were required and estimated such repairs at a specified amount. Section 54 does not treat purchase and construction as mutually exclusive; the statute requires consideration of the "cost of the new asset" and contains no prohibition on including post-purchase works that are part of making the house fit for residential use. The term "habitable" is subjective and must be assessed in the factual context of the assessee's socio economic position and the condition of the property; expensive materials or higher quality workmanship per se do not exclude an expenditure from forming part of the cost of the new asset. However, items that are purely items of comfort (such as consumer electronics, furniture, air conditioning, etc.) do not constitute cost of the new asset under Section 54. On the material before it - invoices, photographs and the purchase agreement - the Tribunal concluded the expenditure was directed to making the property habitable and not merely to procuring comforts, and therefore constituted part of the cost of the new asset eligible for Section 54 relief.

Expenditure of Rs. 14,26,705 incurred immediately after purchase to make the house habitable is part of the cost of the new asset and is eligible for exemption under Section 54.

Final Conclusion: The assessee's appeal is allowed and the expenditure incurred to make the newly purchased house habitable is to be treated as cost of the new asset for the purpose of Section 54; exemption is granted accordingly.

Transfer pricing - Profit Level Indicator (PLI) - Arm's length price - Functional comparability - Exclusion of exceptional/non-operational items - Foreign exchange fluctuation treatment - Depreciation adjustment in comparables - Turnover as comparability factor

Profit Level Indicator (PLI) - Foreign exchange fluctuation treatment - Exclusion of exceptional/non-operational items - Arm's length price - Treatment of foreign exchange fluctuation loss while computing PLI - HELD THAT: - The Tribunal examined whether foreign exchange losses appearing in the assessment year should be included in the PLI. It found that a part of the loss arose on realization in the impugned year of export proceeds relating to earlier years (due to late receipt on account of the payer's bankruptcy/restructuring), and that such loss is not relatable to exports of the year under consideration and therefore is an exceptional/non operational item for PLI computation. Losses attributable to exports of the relevant year are to be included. The Tribunal relied on the factual apportionment accepted by the assessee (approximately Rs. 35 lakhs relating to earlier years out of the total loss) and directed recomputation of PLI excluding the earlier year foreign exchange loss while retaining current year exchange losses in business profits for PLI purposes. [Paras 12]

Partly allow - exclude foreign exchange losses attributable to earlier years from PLI computation; include exchange losses relating to the relevant year and direct AO to recompute PLI.

Depreciation adjustment in comparables - Transfer pricing - Allowability of adjustment to PLI on account of higher depreciation charged by the assessee - HELD THAT: - The assessee had sought adjustment to profits for benchmarking on account of having charged depreciation at rates higher than those adopted by comparables. The assessee's representative before the Tribunal conceded that this issue should be decided against the assessee. The Tribunal accordingly reversed the CIT(A)'s direction and held that no adjustment for depreciation is to be made in computing the PLI. [Paras 14]

Allow Revenue - reverse CIT(A); no adjustment on account of depreciation while computing PLI.

Functional comparability - Turnover as comparability factor - Transfer pricing - Exclusion of Rolta India Ltd. and KLG Systel Ltd. from the comparable set - HELD THAT: - The Tribunal considered the FAR profile and size (turnover) of the suggested comparables. On the facts, it accepted that both concerns were functionally dissimilar to the assessee - Rolta on account of diversified large operations and disproportionate turnover vis a vis the tested party, and KLG Systel because of material trading activity, disclosure of closing stock/WIP and significant professional fees/service income inconsistent with the assessee's service provider profile. The Tribunal also noted turnover disparities and relied on established principle that turnover and functional dissimilarity are relevant to comparability. Consequently, the CIT(A)'s exclusion of Rolta and KLG from the final set of comparables was upheld. [Paras 23]

Dismiss Revenue's grounds - uphold CIT(A)'s exclusion of Rolta India Ltd. and KLG Systel Ltd. from the comparable set.

Final Conclusion: The Revenue's appeal is partly allowed. The Tribunal directs recomputation of the PLI for AY 2008 09 excluding foreign exchange losses attributable to earlier years; holds that no depreciation adjustment is to be made in computing PLI; and upholds the exclusion of Rolta India Ltd. and KLG Systel Ltd. from the comparable set.

Additional depreciation - acquired and installed - integrated acquisition and installation - beneficial construction of tax incentives

Additional depreciation - acquired and installed - integrated acquisition and installation - Allowability of additional depreciation under section 32(1)(iia) where plant and machinery were acquired partly before and partly after 31-03-2005 but installation was completed and the plant became operational after 31-03-2005 - HELD THAT: - The Tribunal held that the amended section 32(1)(iia) is a beneficial provision to encourage investment and must be construed liberally. The statutory phrase 'acquired and installed' was interpreted in context: where acquisition and installation form part of a single integrated project, the material date for granting additional depreciation in respect of plant and machinery is the date of installation (completion) when the plant becomes operational. On the facts, the assessee commenced acquisition and installation in FY 2004-05 but completed installation and commenced commercial production in April 2005 (FY 2005-06); the assets acquired both pre- and post-31-03-2005 formed an integrated composite activity directed to setting up the coke production plant and were capitalised only when installation was completed. The Tribunal applied this integrated-activity approach and, relying on earlier Tribunal and High Court pronouncements as discussed in the order (including Bajaj Tempo Limited and Surama Tubes (P.) Ltd. ), concluded that the conditions of section 32(1)(iia) were satisfied and additional depreciation was allowable. [Paras 10, 11]

The claim for additional depreciation of Rs. 83,55,387/- under section 32(1)(iia) was allowable because the plant and machinery, though partly acquired before 31-03-2005, were installed and the integrated project became operational after 31-03-2005.

Final Conclusion: Revenue's appeal dismissed; additional depreciation under section 32(1)(iia) allowed for assessment year 2006-07 as the acquisition and installation were part of an integrated project completed and commissioned after 31-03-2005.

Exemption under section 11 - proviso to section 2(15) - educational activity versus advancement of any other object of general public utility - dominant object test - onus on the Department to prove commercial nature of activities - remand for fresh consideration and verification of documentary evidence

Educational activity versus advancement of any other object of general public utility - proviso to section 2(15) - Whether the proviso to section 2(15) is applicable to the assessee in view of its claim of being engaged in educational activity and whether the assessee was correctly held ineligible for exemption under section 11 for the impugned year. - HELD THAT: - The Tribunal noted that the Assessing Officer and the Commissioner (Appeals) denied the exemption solely on the ground that the assessee derived income from activities characterised as commercial and therefore fell within the proviso to section 2(15) introduced w.e.f. 1 April 2009. However, neither authority made any categorical finding of change in the assessee's objects or activities since registration under section 12A, nor examined the documentary material (including approvals, course syllabi and evidence of training, examinations and infrastructure) placed by the assessee to establish that it imparts education. In these circumstances the Tribunal held that applicability of the proviso - which turns on whether the activity is truly educational or is advancement of some other public utility carried on as business - could not be determined without verifying the documentary evidence and applying mind to whether the activities are ancillary/incidental or constitute the dominant object of earning profit. [Paras 7, 8]

Matter remanded to the Assessing Officer for fresh consideration of whether the assessee is engaged in educational activity or in advancement of other public utility and, if the latter, whether the dominant object is commercial, after verifying documentary evidence and affording the assessee opportunity to be heard; earlier appellate order set aside.

Dominant object test - onus on the Department to prove commercial nature of activities - Extent of proof required from the Department to deny charitable status where a trust registered under section 12A derives income from activities of commercial character. - HELD THAT: - The Tribunal reiterated that mere insertion of the proviso to section 2(15) does not ipso facto deprive a registered trust of charitable status. If a trust created for charitable purposes derives income from commercial activities, the Department must establish that the dominant object of the trust is no longer charitable but to earn profit by engaging in business or commerce. If such commercial activity is incidental or ancillary to the main charitable object, the trust does not lose its character. Accordingly, in the absence of findings by the authorities establishing dominance of a commercial object, the matter requires fresh adjudication. [Paras 7]

Assessing Officer to record reasons and evidence if concluding that the dominant object is commercial, having first given the assessee adequate opportunity to explain and produce evidence.

Final Conclusion: The Tribunal set aside the Commissioner (Appeals) order and restored the matter to the file of the Assessing Officer for fresh, reasoned adjudication on whether the assessee is engaged in educational activity or in advancement of other public utility and, if the latter, whether the dominant object is commercial; appeal allowed for statistical purposes.

Applicability of Section 50C of the Income tax Act to transfers - Deeming fiction under Section 50C applies only to a capital asset being land or building or both - Distinction between transfer of land/building and transfer of limited rights or claim - Adoption of stamp valuation authority value as full value of consideration - Computation of capital gains on actual consideration where Section 50C does not apply

Applicability of Section 50C of the Income tax Act to transfers - Distinction between transfer of land/building and transfer of limited rights or claim - Computation of capital gains on actual consideration where Section 50C does not apply - Whether the deeming provision of Section 50C is attracted to the registered sale dated 26-07-2008 where the assessee purportedly transferred only his claim/right in the property and not complete ownership and possession of the land. - HELD THAT: - The Tribunal accepted the factual finding that the assessee, though having a prior registered document (1984), did not have possession or unencumbered ownership of the land as per revenue records which showed the transferee in continuous possession since 1996 and mutated in his name. The parties settled the dispute by a compromise memo and execution of a registered deed dated 26-07-2008 whereby the assessee received consideration and surrendered his claim. The Tribunal applied the settled principle that Section 50C is a deeming provision confined to transfers of a capital asset being 'land or building or both' and cannot be extended to transfers which amount only to surrender/assignment of limited rights or claims over immovable property. The Tribunal relied on the Coordinate Bench decisions in D. Anitha and Atul G. Puranik Vs. ITO to observe that where the transferor does not hold absolute ownership of the land/building and only transfers limited rights, the value adopted by the stamp valuation authority for stamp duty purposes cannot be substituted as the full value of consideration under Section 50C. Applying these principles to the admitted facts and documentary record, the Tribunal concluded that the transaction constituted transfer of a right/claim (surrender/compromise) and not a transfer of the land/building itself; accordingly Section 50C was not attracted and capital gains were to be computed on the actual consideration received. [Paras 10, 11]

Section 50C does not apply; AO directed to compute capital gains on the actual consideration received.

Final Conclusion: Appeal allowed: on the facts the registered deed of 26-07-2008 effected surrender/transfer of the assessee's claim/right and not transfer of the land/building itself; Section 50C's deeming fiction is therefore inapplicable and capital gains shall be computed on the consideration actually received.

Deduction under section 80P(2)(a)(i) for income earned by providing credit facilities to members - exclusion under section 80P(4) in respect of cooperative banks - primary cooperative bank test under the Banking Regulation Act, 1949 - restriction of deduction to income attributable to dealings with members - condonation of delay and dismissal of cross objections

Deduction under section 80P(2)(a)(i) for income earned by providing credit facilities to members - exclusion under section 80P(4) in respect of cooperative banks - primary cooperative bank test under the Banking Regulation Act, 1949 - restriction of deduction to income attributable to dealings with members - Whether the assessee cooperative society is entitled to deduction under section 80P(2)(a)(i) for the stated assessment years, or is excluded by reason of being a cooperative bank under section 80P(4). - HELD THAT: - The Tribunal confirmed the Commissioner (Appeals) decision allowing the deduction after applying the test for a 'primary cooperative bank' under the Banking Regulation Act, 1949. Relying on the High Court's reasoning reproduced by the CIT(A), the Tribunal accepted that the assessee did not satisfy the cumulative conditions required to be a Primary Cooperative Bank (principal business being banking, prescribed paid up capital threshold and a bye laws prohibition on admitting other cooperative societies), noting that only the paid up capital condition was satisfied. The incidental fact that the society had insignificant transactions with non members did not establish that its principal business was banking. The Tribunal also recorded the legal consequence that any income attributable to dealings with non members would not qualify for deduction, and that the deduction is to be restricted to income earned by providing credit facilities to members, as contemplated by section 80P(1). No contrary precedent was placed before the Tribunal and there was no error shown in the CIT(A)'s application of the High Court decision; accordingly the Tribunal affirmed allowance of the deduction subject to the stated restriction. [Paras 4, 5]

Appeals of the Revenue on this ground dismissed; deduction under section 80P(2)(a)(i) allowed for the assessment years, restricted to income attributable to members.

Condonation of delay and dismissal of cross objections - Whether the cross objections filed by the assessee should be admitted despite a 20 day delay. - HELD THAT: - The assessee's cross objections were filed 20 days late and no reasons were furnished for condonation of delay. The Tribunal declined to condone the delay in the absence of any explanation and consequently dismissed the cross objections as barred by delay. [Paras 6]

Cross objections dismissed for want of condonation of delay.

Final Conclusion: The Tribunal confirmed the CIT(A)'s allowance of deduction under section 80P(2)(a)(i) for AY 2010 11 and AY 2011 12 (limited to income attributable to members) and dismissed the Revenue appeals; the assessee's cross objections were dismissed for delay.

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - distinction between allowability of expenditure and year of allowability for tax purposes - consistency of accounting treatment and bona fide claim - project completion method - mere failure of claim in assessment does not amount to furnishing inaccurate particulars

Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars - distinction between allowability of expenditure and year of allowability for tax purposes - consistency of accounting treatment and bona fide claim - project completion method - Whether penalty under section 271(1)(c) is attracted where the only controversy is the year of allowability of advertisement/sales promotion expenses, the genuineness of which is not in doubt and which had been consistently claimed and earlier accepted by the Revenue. - HELD THAT: - The Tribunal examined whether the assessee had concealed particulars or furnished inaccurate particulars of income within the meaning of section 271(1)(c). The disputed claim related to advertisement/sales promotion expenses claimed as revenue expenditure following the assessee's long-standing project completion method of accounting. The Assessing Officer's objection was limited to the year in which the expenses should be allowed (postponing allowability to the year of sale of specific flats) and did not impugn the genuineness of the expenses. The record showed that the assessee had followed the same accounting treatment since Assessment Year 1990-91 and that the Revenue had accepted this treatment up to Assessment Year 2005-06; the first departure occurred in Assessment Year 2006-07 where penalty was not levied. Further, the Assessing Officer's methodology, though leading to disallowance in the year under appeal, was applied in subsequent assessment years resulting in allowance of the claim there. Given that the dispute concerned only the timing of allowability and not the existence or genuineness of the expenditure, the Tribunal held that the penal provision could not be invoked. Reliance was placed on the principle that making a claim which is not sustained in assessment does not, by itself, constitute furnishing inaccurate particulars, and where no inaccuracy in the return is shown, penalty under section 271(1)(c) is not attracted. [Paras 6, 7, 8, 9]

Penalty under section 271(1)(c) deleted as the disagreement was only on the year of allowability of expenditure and there was no concealment or furnishing of inaccurate particulars.

Final Conclusion: The Tribunal allowed the appeal and set aside the CIT(A)'s order, directing deletion of the penalty levied under section 271(1)(c) for Assessment Year 2007-08 on the ground that the dispute related solely to the timing of allowability of advertisement expenses and the claim was bona fide and consistently made.

Detention by Customs for special examination and testing - demurrage charges on goods detained beyond free days - entitlement to free days where detention attributable to customs examination - release of cargo without conditioning on payment of port charges where detention is by Customs - refund of wrongfully collected demurrage

Detention by Customs for special examination and testing - entitlement to free days where detention attributable to customs examination - Whether the balance 20% of the imported cargo was detained by the Customs for verification and testing and, if so, whether such detention entitled the petitioner to the free days contemplated in the Port Trust Scale of Rates so as to preclude levy of demurrage for that period. - HELD THAT: - The Customs' stand, recorded in its counter, admits that only 80% of the cargo was released on 07.12.2015 and that the balance 20% was retained for verification and for samples to be tested by the Regional Fertilizer Control Laboratory; the RFCL test report dated 04.01.2016 certified the goods as meeting standards and the remaining 20% was released on 13.01.2016. The Port Trust's contrary contention that no detention order was passed is inconsistent with the Customs' contemporaneous directions and subsequent conduct. Clause 9(a) of Chapter IV of the Scale of Rates provides that the first 45 days are free where detention is by the Commissioner of Customs for special examination involving analytical or technical tests. On the admitted facts the detention was attributable to Customs for testing and verification and therefore the period falls within the free days exempting the detained goods from demurrage liability. [Paras 8, 9]

The balance 20% of the cargo was detained by Customs for testing and verification and, being so detained, was entitled to the benefit of the free days under the Scale of Rates; demurrage could not be levied for that period.

Release of cargo without conditioning on payment of port charges where detention is by Customs - refund of wrongfully collected demurrage - Whether the Port Trust was obliged to release the detained cargo without insisting on payment of demurrage and to refund demurrage sums collected in respect of the detained 20%. - HELD THAT: - Having held that the detention of the 20% was by Customs and within the exemption of free days, the Port Trust cannot insist on payment of demurrage as a condition precedent to release. The respondents' insistence on demurrage despite the Customs' admission and release timeline was unsustainable. Consequently, amounts collected as demurrage in respect of the detained 20% were received without entitlement and must be refunded and the cargo released without requiring payment of demurrage. [Paras 9, 10]

The Port Trust is directed to release the cargo stored in E1 Shed under the bill of entry dated 03.12.2015 without insisting on demurrage payment and to refund the demurrage amounts collected in respect of the detained 20% of the cargo.

Final Conclusion: Writ petition allowed: the court directed release of the remaining cargo without payment of demurrage and ordered refund of demurrage collected in respect of the 20% cargo detained by Customs; writ petition disposed of with no costs.

Power of tribunal to entertain stay petition - pre-deposit requirement under Section 129E - inherent powers under Rule 41 of CESTAT Procedure Rules - redemption fine recovery - inapplicability of precedents under erstwhile Section 129E

Power of tribunal to entertain stay petition - pre-deposit requirement under Section 129E - redemption fine recovery - Tribunal has no power to entertain a stay petition against the impugned order insofar as it relates to recovery of the redemption fine. - HELD THAT: - The Tribunal held that the statutory scheme in Section 129E prescribes a pre-deposit regime which governs entertainment of appeals and there is no provision therein permitting filing of an independent application for stay or waiver of the deposit. The reproduced text of Section 129E shows the Tribunal or Commissioner (Appeals) shall not entertain specified appeals unless the prescribed percentage of duty/penalty is deposited. Absent any statutory provision enabling stay or waiver, the miscellaneous application seeking stay of recovery of the redemption fine cannot be entertained by the Tribunal. The Tribunal therefore concluded that it lacks jurisdiction under the statutory framework to grant the relief sought. [Paras 5]

Application dismissed for want of power to entertain stay against recovery of redemption fine.

Inherent powers under Rule 41 of CESTAT Procedure Rules - inapplicability of precedents under erstwhile Section 129E - Tribunal cannot invoke its inherent powers under Rule 41 to stay recovery of the redemption fine where the statutory provision (as currently framed) does not permit stay or waiver; earlier decisions under the erstwhile Section 129E are not applicable. - HELD THAT: - The Tribunal observed that under the erstwhile Section 129E there had been a proviso allowing applications for waiver, and accordingly earlier decisions exercised inherent or discretionary powers to grant waiver or stay (including in respect of redemption fines). However, the present statutory position lacks that proviso and does not provide for waiver or stay; consequently, precedents decided under the erstwhile provision do not govern the current situation. The Tribunal therefore rejected the submission that it could exercise inherent powers under Rule 41 to stay recovery of the redemption fine in the absence of a statutory basis for such relief. [Paras 5, 6]

Reliance on prior decisions under the erstwhile Section 129E is misplaced and inherent powers cannot be invoked to grant the stay; application lacks merit.

Final Conclusion: The miscellaneous application for stay of operation of the impugned order insofar as it relates to recovery of the redemption fine is dismissed as lacking merit because the statutory pre-deposit regime under Section 129E does not permit entertaining such stay or waiver and earlier decisions under the erstwhile provision are inapplicable.

Confiscation and re-export on failure to meet food safety standards - Redemption fine and penalty under Section 112 of the Customs Act, 1962 - Refusal of NOC by FSSAI on account of non-conformity with food product standards - Absence of mala fide; post shipment deterioration during transit - Reliance on foreign laboratory reports to establish condition at time of shipment

Redemption fine and penalty under Section 112 of the Customs Act, 1962 - Absence of mala fide; post shipment deterioration during transit - Reliance on foreign laboratory reports to establish condition at time of shipment - Whether redemption fine and penalty imposed on the importer under Section 112 were sustainable where FSSAI test reports rejected the consignment but exporter's foreign test reports and delay between shipment and sampling indicated post shipment deterioration and absence of mala fide. - HELD THAT: - The Tribunal examined the material showing that two laboratories in the country of export had tested the consignment and found it to be in good condition at the time of shipment, and noted that more than two months elapsed between the date of shipment and the date on which the sample was drawn for FSSAI testing. On the facts, the Tribunal accepted that the defects found by FSSAI could have arisen during transport and that no mala fide on the part of the importer was established. In these circumstances, though the Commissioner refused NOC and permitted re export, the imposition of redemption fine and penalty under Section 112 could not be sustained. The Tribunal therefore allowed the appeal and set aside the redemption fine and penalty, while observing that the appellant would be entitled to consequential benefits in accordance with law. [Paras 8]

The appeal is allowed; the redemption fine and the penalty imposed under Section 112 are set aside and the appellant is entitled to consequential benefits.

Final Conclusion: On the facts found - namely foreign test reports favourable to the exporter, and a substantial interval between shipment and sampling indicating likely post shipment deterioration - the Tribunal held there was no mala fide on the part of the importer and therefore set aside the redemption fine and penalty imposed under Section 112; the appeal was allowed with consequential relief as per law.

Confiscation of prohibited goods - penalty under Section 114(i) and Section 114AA of the Customs Act, 1962 - confessionary statement and corroboration by independent statements - right to cross examine prosecution witnesses - judicial reduction of penalty as proportionate relief

Confiscation of prohibited goods - confessionary statement and corroboration by independent statements - right to cross examine prosecution witnesses - Liability of the appellant for confiscation of the seized wood logs and imposition of penalties on the basis of his confessionary statement and corroborative statements of other persons - HELD THAT: - The Tribunal found that the record contains the appellant's confessionary statement admitting his role in arranging container booking, providing forged seals and facilitating preparation of forged export documents, and that multiple other statements corroborated the appellant's involvement. The appellate authority considered the appellant's contention that cross examination of departmental witnesses was disallowed, but after examining the adjudicating authority's reasoning and cited authorities, concluded that the aggregate evidence established the appellant's participation in the fraudulent export of prohibited goods. In view of these findings, the goods (prohibited wood logs) were liable for confiscation and the appellant was liable to penalties under the relevant penal provisions of the Customs Act. The Tribunal endorsed the conclusions of the lower authorities that the offence was proved on the material on record. [Paras 6, 15, 16]

Findings of involvement by the appellant are upheld; confiscation of the seized wood logs sustained and penalties under Section 114(i) and Section 114AA are upheld.

Judicial reduction of penalty as proportionate relief - Appropriateness of quantum of penalty imposed on the appellant - HELD THAT: - While sustaining liability, the Tribunal observed that the penalty originally imposed by the lower authorities was on the higher side having regard to the value attributed to the seized goods. Exercising its appellate discretion, the Tribunal reduced the monetary penalty imposed on the appellant to a lesser, more reasonable amount as proportionate relief. [Paras 16]

Penalty reduced from the sum imposed by the lower authorities to a lesser amount as a proportionate measure; appeal accordingly partly allowed.

Final Conclusion: The Tribunal upheld the finding of involvement of the appellant in the fraudulent export of prohibited wood logs and sustained confiscation and liability under the penal provisions of the Customs Act, but exercised appellate discretion to reduce the monetary penalty, thereby partly allowing the appeal.

Power of Central Government to remove managerial personnel under Section 388B and remedies under Sections 397/398 - distinct regulatory remedies for corporate mismanagement and compulsory merger proceedings - bar of prior suit under Section 10 CPC (res judicata / subject-matter bar) - stay of proceedings pending determination of related proceedings

Distinct regulatory remedies for corporate mismanagement and compulsory merger proceedings - stay of proceedings pending determination of related proceedings - power of Central Government to remove managerial personnel under Section 388B and remedies under Sections 397/398 - Whether the Company Petition (CP) under Section 388B read with Sections 397/398 and other provisions should be stayed or adjourned sine die on account of prior or pending compulsory merger proceedings and related orders of other High Courts. - HELD THAT: - The Board held that proceedings under Section 388B and Sections 397/398 (for removal of managerial personnel and action for mismanagement) operate in a different field from compulsory merger proceedings, which are concerned with amalgamation of companies. The Court accepted the submission that the Central Government is vested with specific powers to act as a custodian of public interest and to initiate proceedings for removal of directors where mismanagement, fraud, misfeasance or conduct prejudicial to public interest is alleged; such statutory remedies are not invalidated by the existence of merger proceedings. The Board further observed that the term "public interest" is generic and that discrete statutory remedies may co-exist even if invoked to protect public interest. The modification by the Honourable High Court of Madras removing a time limit did not direct a stay of these proceedings; accordingly, the pendency or outcome of the merger proceedings before the Honourable High Court of Bombay did not justify a stay of the CP. The Board therefore found no merit in the application to stay or adjourn the CP sine die and emphasised that CLB's orders would remain subject to the outcome of the Bombay High Court proceedings. [Paras 16, 17, 18, 21, 23]

Application to stay or adjourn the CP on account of pending merger proceedings and related High Court orders dismissed; CP to proceed (subject to outcome of the Bombay High Court proceedings).

Bar of prior suit under Section 10 CPC (res judicata / subject-matter bar) - stay of proceedings pending determination of related proceedings - Whether Section 10 of the Code of Civil Procedure (bar of prior suit) operates to stay or bar the present CP because civil suits and other proceedings raising overlapping facts are pending before other courts. - HELD THAT: - The Board analysed the scope of Section 10 CPC and concluded that its applicability requires that the parties be the same and that the matter in issue be directly and substantially in issue in a previously instituted suit between the same parties. Although the underlying facts (non-payment to investors) may be common across proceedings, the Board found that the parties, remedies, objects and nature of claims in the civil suits differ from the statutory proceedings under Section 388B/397/398 initiated by the State. Civil suits are primarily for contractual monetary relief on preponderance of probabilities, whereas the statutory remedy seeks to investigate and possibly remove managerial personnel on allegations of mismanagement and conduct prejudicial to public interest. Consequently, Section 10 CPC does not apply to bar the CP, and the mere pendency of civil suits does not mandate a stay of these summary statutory proceedings. [Paras 19, 20, 22]

Section 10 CPC not applicable; civil suits pendency does not bar or require stay of the CP.

Final Conclusion: The application by FTIL to stay or adjourn the Company Petition was dismissed as misconceived; the CLB shall proceed with the CP (while the orders passed will remain subject to the outcome of the proceedings pending before the Honourable High Court of Bombay).

Bona fide dispute - winding up petition by creditor - admission of debt - appropriation and use of goods - opportunity to settle accounts - preservation of claim for interest

Bona fide dispute - winding up petition by creditor - Existence of a bona fide dispute on the respondent's claim preventing admission of the winding up petition - HELD THAT: - The Court found that receipt and appropriation of the goods by the appellant, coupled with the grant of specific credits by the respondent in respect of returned or defective lots, did not establish a genuine dispute as to the balance claim. The appellant's varying account, absence of contemporaneous documentation of alleged oral agreements, use of the yarn in manufacture, and failure to show that customers raised complaints or that the appellant suffered loss cumulatively disentitled the appellant to withhold payment. The Company Judge's rejection of the appellant's defence was upheld on the basis that no bona fide dispute of fact or law was made out. [Paras 6, 7, 8, 9, 10]

No bona fide dispute exists in respect of the respondent's claim; the learned Company Judge's order admitting the winding up petition is sustained subject to the appellant settling the claim as ordered.

Admission of debt - winding up petition by creditor - Whether a petition under Sections 433 and 434 of the Companies Act is maintainable only if the company has admitted the debt - HELD THAT: - The Court rejected the appellant's submission that maintainability depends on the company having admitted the debt. The correct test is whether there is a bona fide dispute on the claim. Requiring prior admission would render the statutory remedy nugatory where no bona fide dispute is raised and would enable a company to resist a well-founded claim by mere denial. Therefore, non-admission of a debt does not, by itself, bar a winding up petition where no bona fide dispute exists. [Paras 11, 12]

Maintainability of a creditor's winding up petition does not depend on prior admission of the debt; the decisive criterion is the existence or absence of a bona fide dispute.

Opportunity to settle accounts - winding up petition by creditor - Effect of the learned Judge not specifying the amount in the operative part of the order and the consequence of the appellant having paid the amount directed to be paid - HELD THAT: - Although the operative part did not recite the precise sum, the learned Judge referred to the amount in the body of the order and granted the appellant an opportunity to 'settle the accounts' with the respondent by a specified date. The Division Bench stayed publication subject to payment, the appellant paid the amount and thereby availed of the stay. In view of payment of the sum identified in the impugned order and the finding of no bona fide dispute, the petition no longer survives and is liable to be dismissed. [Paras 13, 14, 15, 17]

The reference to the amount in the body of the order sufficed for the grant of an opportunity to settle; payment made by the appellant satisfies the respondent's claim to that extent and the petition is dismissed as having been satisfied.

Preservation of claim for interest - Whether the appellant is liable to pay interest and whether that question has been decided - HELD THAT: - The invoices and available documents do not provide for interest and the respondent first claimed interest in the statutory notice. The learned Company Judge did not adjudicate the question of interest, and the respondent has not sought clarification or appealed on that point. The Court accordingly declined to decide the issue of interest and left it open for determination by appropriate proceedings-either by an application for clarification before the Company Judge, by appeal, or other remedies. [Paras 16]

The question of interest is left open for determination in appropriate proceedings; it is not decided in this judgment.

Final Conclusion: The appeal is dismissed; there is no bona fide dispute as to the respondent's claim, the respondent may retain the amount paid pursuant to the stay order, and the winding up petition does not survive in view of that payment; the question of interest is left open for determination in separate proceedings. There shall be no order as to costs.

Sanction of Scheme of Amalgamation - dispensation of meetings of shareholders and creditors - approval of Scheme by Unsecured Creditors by chairman's report - adequacy of valuation and share exchange ratio - compliance with Income Tax observations - preservation of books and prohibition on disposal without Central Government permission - statutory compliance and filing with Registrar of Companies - lodging order and Scheme for adjudication of stamp duty - award of costs to Regional Director and Official Liquidator

Sanction of Scheme of Amalgamation - Sanction of the Scheme of Amalgamation of Centurion Remedies Private Limited with Centurion Laboratories Private Limited. - HELD THAT: - The Court considered the Scheme of Amalgamation together with the reports of the Regional Director and the Official Liquidator, the Chairman's Reports of the meetings of Unsecured Creditors and the affidavits regarding publication of notice. Having regard to the unanimous approval of the Unsecured Creditors (as reflected in the Chairman's Reports) and the absence of adverse remarks from the Income Tax Department as noted by the Regional Director, the Court found it appropriate to grant sanction to the Scheme and accordingly sanctioned it. [Paras 11, 12, 13, 15, 16]

Scheme of Amalgamation is sanctioned.

Dispensation of meetings of shareholders and creditors - approval of Scheme by Unsecured Creditors by chairman's report - Validity of dispensation/convening of meetings and approval procedure of creditors and shareholders for the Scheme. - HELD THAT: - Earlier orders dispensed with meetings of Equity Shareholders and, following written consent, dispensed with meetings of Secured Creditors. The Unsecured Creditors' meetings were convened as ordered and the Chairman's Reports show unanimous approval by Unsecured Creditors present in person or by proxy. Notices were published as directed and affidavits filed to that effect. These procedural steps were found to be in order and sufficient for sanction. [Paras 5, 6, 7, 9, 10]

Dispensations and convenings as ordered were valid; required meetings/approvals and publications were satisfied.

Adequacy of valuation and share exchange ratio - compliance with Income Tax observations - Sufficiency of valuation report/support for the share exchange ratio and response to Regional Director's note regarding Income Tax Department. - HELD THAT: - The Transferee Company produced the composite valuation report relied upon for the share exchange ratio and explained that separate working sheets do not exist as suggested by the Regional Director; the exchange ratio had already been approved by Equity Shareholders and Creditors. As regards Income Tax, the Regional Director's own report recorded that no adverse remarks were received from the Income Tax Department; the petitioners, without prejudice, undertook to comply with the Income Tax Act and Rules. On this basis the Court was satisfied with the explanations and documents furnished. [Paras 11, 12, 13]

Valuation and exchange ratio disclosures and the response to Income Tax observations were accepted as adequate.

Preservation of books of accounts and records under prohibition on disposal without Central Government permission - statutory compliance and filing with Registrar of Companies - Directions to the Transferor Company regarding preservation of records and compliance with statutory requirements. - HELD THAT: - The Official Liquidator sought directions that the Transferor Company preserve its books and not dispose of records without prior Central Government permission, and that statutory compliances be ensured. The Court accepted these observations and issued the directions accordingly, and additionally directed filing of authenticated copies of the order and Scheme with the Superintendent of Stamps for adjudication and with the Registrar of Companies electronically and physically as required by law. [Paras 14, 16, 17, 18]

Transferor Company directed to preserve records subject to Central Government permission and to ensure statutory compliance; petitioners directed to lodge authenticated order/Scheme with stamp authorities and Registrar of Companies.

Award of costs to Regional Director and Official Liquidator - dispensation of drawn up order - Determination of costs and dispensation of drawn up order. - HELD THAT: - The Court assessed and fixed the costs of the petitions, ordering payment to the Assistant Solicitor General of India representing the Regional Director and to the Official Liquidator in the case of the Transferor Company. The Court also dispensed with filing and issuance of a drawn up order and authorised acting on authenticated copies issued by the Registrar, High Court of Gujarat. [Paras 16, 19, 20]

Costs fixed and directed to be paid; drawn up order dispensed with and authenticated copies to be acted upon.

Final Conclusion: The High Court sanctioned the Scheme of Amalgamation between the two companies after recording compliance with procedural requirements, accepting the valuation and Income Tax position as represented, directing preservation of Transferor's records and statutory compliance, requiring lodging of the authenticated order and Scheme for stamp adjudication and with the Registrar of Companies, awarding specified costs, and disposing of the petitions.

Refund of service tax under exemption notification - temporal scope of exemption - retrospective operation of notifications

Refund of service tax under exemption notification - temporal scope of exemption - retrospective operation of notifications - Claim for refund of service tax paid on GTA services rendered October, 2007 to December, 2007 under Notification No. 41/2007-S.T. as amended w.e.f. 19-2-2008. - HELD THAT: - Notification No. 41/2007-S.T. operates as an exemption which is implemented by grant of refund; entitlement to refund exists only if the service was exempt under that notification at the time the service was rendered. GTA services relied upon were rendered during October, 2007 to December, 2007, whereas GTA was added to the exemption notification only with effect from 19-2-2008 by Notification No. 3/2008-S.T. There is no contention and no finding of retrospective operation of the amending notification. Consequently the GTA services were not covered by the exemption at the time of rendition and refund under Notification No. 41/2007-S.T. is not permissible. [Paras 3, 4]

Refund claim dismissed as GTA services rendered October-December 2007 were not exempt under Notification No. 41/2007-S.T. at the time of rendition and the amending notification is not retrospective.

Final Conclusion: Appeal dismissed; refund under Notification No. 41/2007-S.T. cannot be granted for GTA services rendered October, 2007 to December, 2007 because the exemption in respect of GTA was made effective only w.e.f. 19-2-2008 and not retrospectively.

CENVAT credit on CHA services used for export clearance - place of removal for export as the Port/ICD/CFS where shipping bill is filed - eligibility to CENVAT Credit determined by place of removal - CENVAT credit on outdoor catering services utilised for factory canteen - cost of subsidised food forming part of cost of production - mandatory canteen obligation under the Factories Act and its relevance to input services - apportionment of input credit to the extent expenditure is borne by the manufacturer

CENVAT credit on CHA services used for export clearance - place of removal for export as the Port/ICD/CFS where shipping bill is filed - eligibility to CENVAT Credit determined by place of removal - Credit of service tax paid on CHA services availed for clearance of goods for export allowed to the manufacturer-exporter. - HELD THAT: - The Tribunal applied Circular No. 999/6/2015-CX (para 6) which clarifies that where a manufacturer-exporter files the shipping bill and hands over goods to the shipping line, transfer of property can be said to take place at the port/ICD/CFS where the shipping bill is filed and that place of removal would be that Port/ICD/CFS. Eligibility to CENVAT Credit must therefore be determined with reference to that place of removal. On that basis, CHA services used for clearance at the port qualify for credit and the Revenue's appeal on this count was dismissed. [Paras 5]

Credit of CHA services allowed to M/s Apar Industries Ltd.; Revenue's appeal dismissed on this point.

CENVAT credit on outdoor catering services utilised for factory canteen - cost of subsidised food forming part of cost of production - mandatory canteen obligation under the Factories Act and its relevance to input services - apportionment of input credit to the extent expenditure is borne by the manufacturer - CENVAT credit for service tax paid on outdoor catering services for the factory canteen is admissible only to the extent the expenditure is borne by the manufacturer; amount borne by employees is not admissible. - HELD THAT: - Relying on the Larger Bench decision in GTC Industries Ltd., the Tribunal noted that the cost of subsidised food is included in the cost of production and that for factories required by law to provide a canteen, employment of an outdoor caterer is an input service related to the business. Consequently, service tax paid for running the canteen is, in principle, creditable. However, where part of the catering cost is borne by employees, that portion does not constitute expenditure of the manufacturer and therefore cannot be allowed as CENVAT credit. The Tribunal accordingly allowed credit proportionately to the extent the appellant bears the cost and disallowed the portion borne by employees. [Paras 6]

Part-credit allowed for outdoor catering services only in proportion to the expenditure borne by the appellant; portion borne by employees disallowed.

Final Conclusion: The Tribunal allowed the appellant's claim for CENVAT credit on CHA services used for export clearance applying Circular No. 999/6/2015-CX, and partly allowed credit for outdoor catering services for the factory canteen only to the extent the employer bears the cost, disallowing the portion borne by employees.

Catering services as eligible input service - restriction based on number of employees for input service eligibility - interpretation of Section 46(1) of the Factories Act regarding provision of catering services - Cenvat credit eligibility

Catering services as eligible input service - restriction based on number of employees for input service eligibility - Cenvat credit eligibility - Whether entitlement to Cenvat credit for catering services is limited to establishments employing more than 250 workers. - HELD THAT: - The Tribunal relied on precedents of the Bombay and Gujarat High Courts and held that there is no legal provision making catering services qualify as input service only where the number of employees exceeds 250. The Revenue's reliance on Section 46(1) of the Factories Act, 1948, which requires catering facilities for factories employing more than 250 workers, was considered but the Tribunal and this Court found no statutory or legal basis to confine the availability of Cenvat credit for catering services to establishments above that employee threshold. The High Court found no reason to interfere with the Tribunal's view and recorded that no substantial question of law arises for determination. [Paras 3, 4, 5]

Entitlement to Cenvat credit for catering services is not restricted to establishments employing more than 250 workers; the Tribunal's conclusion on this point is upheld.

Verification of recovery of cost from workers - remand to original adjudicating authority - Whether the question relating to recovery of cost from the workers should be verified by the original adjudicating authority. - HELD THAT: - The Tribunal allowed the assessee's appeals and confirmed the Commissioner (Appeals)'s order insofar as it remanded the specific question of recovery of cost from workers to be verified by the original adjudicating authority. The High Court recorded and left intact that aspect of the Tribunal's order, thereby directing that the original adjudicating authority undertake verification on that limited issue. [Paras 2]

The remand directing verification by the original adjudicating authority of recovery of cost from the workers is confirmed.

Final Conclusion: Appeals dismissed; Tribunal's allowance of the assessee's appeals on entitlement to Cenvat credit for catering services upheld and the remand for verification of recovery of cost from workers by the original adjudicating authority confirmed.

Penalty under Rule 173Q(1)(bb) of the Central Excise Rules, 1944 - taking CENVAT credit without taking reasonable steps to ensure duty has been paid - requirement to take credit on receipt of intermediate/finished goods from job worker - violation of departmental procedure under Rule 57J treated as contravention - mitigation of penalty where wrongful credit produced only temporary gain and consignments received within prescribed period

Penalty under Rule 173Q(1)(bb) of the Central Excise Rules, 1944 - taking CENVAT credit without taking reasonable steps to ensure duty has been paid - requirement to take credit on receipt of intermediate/finished goods from job worker - Liability to penalty under Rule 173Q(1)(bb) for taking Cenvat credit immediately on receipt of duty documents when inputs were sent directly to job worker - HELD THAT: - The Tribunal accepted that departmental procedure and Rule 57J require credit on inputs sent directly to a job worker to be taken only on receipt of the intermediate/finished goods. Rule 173Q(1)(bb) treats taking credit without taking reasonable steps to ensure appropriate duty has been paid as a contravention attracting penalty, and the Explanation to clause (bb) specifies what constitutes reasonable steps. Taking credit immediately on receipt of duty-paying documents, when the inputs were directly sent to the job worker, amounted to a breach of the prescribed procedure and therefore fell within the ambit of clause (bb). However, on the facts the adjudicating authority found, and the Tribunal noted, that all consignments manufactured by the job worker were returned to the appellant for further processing within the prescribed time; thus the appellant derived only a temporary benefit. Balancing the contravention with the limited and short-lived gain, the Tribunal held that penalty was imposable but required substantial reduction as a matter of mitigation. [Paras 5, 6, 7]

Penalty under Rule 173Q(1)(bb) is imposable for taking inappropriate credit contrary to the procedure, but having regard to the temporary nature of the gain and receipt of consignments within the prescribed time, the penalty is reduced to Rs. 10,000.

Final Conclusion: Appeal allowed in part: penalty of Rs. 2,00,000 imposed by the adjudicating authority and upheld by the first appellate authority is reduced to Rs. 10,000 under Rule 173Q(1)(bb) of the Central Excise Rules, 1944.

Time-bar under Section 11A of the Central Excise Act, 1944 - computation of one year from receipt of intimation under proviso to Section 11A(2B) - applicability of Section 11A to demand of interest - penalty ceiling under Rule 15(3) of the CENVAT Credit Rules, 2004

Time-bar under Section 11A of the Central Excise Act, 1944 - computation of one year from receipt of intimation under proviso to Section 11A(2B) - applicability of Section 11A to demand of interest - Whether the show cause notice demanding interest was barred by limitation or was within the one-year period prescribed by Section 11A, having regard to the intimation of payment by the assessee. - HELD THAT: - The Tribunal observed that Sub-section (2B) to Section 11A permits an assessee to pay duty voluntarily and inform the Central Excise Officer in writing, and that the proviso to Sub-section (2B) expressly directs that the period of one year in Sub-section (1) shall be counted from the date of receipt of such information. The demand for interest was held to fall within the ambit of Section 11A as judicial decisions apply the section to demands of interest as well. The appellant had given written intimation of payment on 26.06.2009; the show cause notice was issued on 23.06.2010. Applying the proviso to Section 11A(2B), the relevant one-year period is computed from receipt of the written intimation, and the notice therefore fell within one year. Prior decisions (including the Gujarat High Court decision relied upon by the appellant) were distinguished on the ground that Section 11A(2B) was not considered there and that those cases addressed the 'date of knowledge' theory rather than a written intimation by the assessee. [Paras 6]

Demand of interest is not time barred; show cause notice dated 23.06.2010 was within one year from the intimation dated 26.06.2009 and was valid.

Penalty ceiling under Rule 15(3) of the CENVAT Credit Rules, 2004 - Whether the penalty imposed under Rule 15(3) could exceed Rs. 2,000 for the relevant period or whether the maximum penalty of Rs. 2,000 (post-amendment) applied. - HELD THAT: - The appellant contended that Rule 15(3) had been amended w.e.f. 11.05.2007 to cap the maximum penalty at Rs. 2,000 and that the First Appellate Authority's imposition of Rs. 10,000 was therefore incorrect. The Revenue did not controvert the legal fact of the amendment. The Tribunal accepted the appellant's contention and found no rebuttal from the respondent to justify a higher penalty, thereby reducing the penalty to the amended maximum. [Paras 5]

Penalty imposed by the First Appellate Authority is reduced from Rs. 10,000 to Rs. 2,000 in accordance with the amendment effective 11.05.2007.

Final Conclusion: The appeal is allowed in part: the penalty under Rule 15(3) is reduced to the amended maximum of Rs. 2,000; the demand of interest is upheld as not time barred since the one-year period under Section 11A is to be counted from the date of receipt of the assessee's written intimation (26.06.2009), and the show cause notice dated 23.06.2010 was within that period.

Admissibility of electronic records - Section 36B compliance for computer-generated evidence - reliance on documents recovered from third party premises - burden of proof in clandestine removal - extension of option to pay reduced penalty - penalty liability of partners vis-a -vis partnership concern

Admissibility of electronic records - Section 36B compliance for computer-generated evidence - Whether computerized printouts recovered from the residence of a third party were admissible evidence without compliance with statutory safeguards under Section 36B of the Central Excise Act. - HELD THAT: - The Tribunal applied the ratio of the Apex Court in Anvar Pv v. V.K. Basheer (construing Section 65B of the Evidence Act) and held that the similarly worded Section 36B requires statutory conditions and procedural safeguards to be satisfied before computer-generated material can be admitted as evidence. None of the requisite conditions or certificate requirements were shown to have been complied with for the two-page computerized statement relied upon by Revenue. Consequently, reliance on those printouts, in absence of Section 36B compliance, was rejected and they could not form the basis for confirming demands. [Paras 7]

Computerized documents recovered from the third party's residence were not admissible evidence for confirming duty demands insofar as Section 36B statutory procedures were not complied with.

Reliance on documents recovered from third party premises - burden of proof in clandestine removal - Whether the departmental case of clandestine manufacture and removal was established by the documents and statements relied upon, and whether demands based on those materials could be sustained. - HELD THAT: - The Tribunal examined the evidentiary matrix and concluded that the case against the appellants rested largely on documents recovered from the residence of the accountant (a third party) and on certain statements. The statements and seized papers were found to be, at best, rough working sheets or projected calculations and did not, either singly or cumulatively, provide independent, corroborative proof of clandestine manufacture, procurement of raw materials, movement of goods or clandestine clearances. The Tribunal reiterated settled law that charges of clandestine removal are serious and must be proved by cogent, independent evidence showing production, removal and clandestine clearance; mere suspicion, matching figures or parts of statements cannot substitute for proof. Absent such corroboration, the impugned demands (other than admitted amounts) were unsustainable and were set aside. [Paras 4, 6, 7, 8, 9]

Demands premised on documents recovered from the third party's premises and uncorroborated statements were not sustainable; appeals were allowed except as to amounts admitted by the appellants.

Extension of option to pay reduced penalty - penalty liability of partners vis-a -vis partnership concern - Which parts of the original demands and penalties were to be sustained, and what relief on penalty was to be granted to the appellants and the named partners/director. - HELD THAT: - The Tribunal identified specific amounts admitted by the appellants which were held payable with interest and equivalent penalty: the duty admitted by Appellant No.2 and specified admitted sums of Appellant No.1. The Tribunal directed that the option to pay 25% reduced penalty (as available under the relevant provision) be extended to the appellants provided payment of the admitted amounts with interest and reduced penalty was made within one month of receipt of the order. In the interest of justice the penalty on the Director (Appellant No.2) was reduced to a specified moderate amount. Penalties imposed on the partners were set aside by reference to the precedent that once penalty is imposed on the partnership concern, separate penalty on partners is not imposable; accordingly those partner penalties were rescinded. [Paras 5, 10]

Admitted duty amounts to be recovered with interest and equivalent penalty; option to pay reduced penalty extended; director's penalty reduced; partner penalties set aside.

Final Conclusion: The appeals were allowed in large part: demands founded on computer printouts and documents recovered from a third party were held inadmissible or insufficiently corroborated and set aside; admitted duty liabilities were sustained and ordered to be paid with interest and equivalent penalty, with the option to pay reduced penalty extended; the director's penalty was reduced and penalties on partners were quashed.

Summary order. Delay condoned; review petitions dismissed.

Applicability of Section 5, Limitation Act, 1963 to proceedings under a special statute - exclusion of Limitation Act provisions by necessary implication - construction of statutory limitation provisions in a complete code - interaction of Section 29(2), Limitation Act, 1963 with special/local enactments - finality of statutory scheme and limited remedial window

Applicability of Section 5, Limitation Act, 1963 to proceedings under a special statute - exclusion of Limitation Act provisions by necessary implication - construction of statutory limitation provisions in a complete code - Whether Section 5 of the Limitation Act, 1963 is available to condone delay in filing a revision under Section 81(1) of the Assam Value Added Tax Act, 2003. - HELD THAT: - The Court examined Section 81(1) (statutory 60 day period for revision) and Section 84 (which makes only Sections 4 and 12 of the Limitation Act applicable) of the Assam Value Added Tax Act, 2003 and held that the legislative scheme manifests an intention to limit the applicability of the Limitation Act to the extent expressly provided. By excluding Section 5 from Section 84, the legislature precluded the High Court from exercising the discretionary power to condone delay under Section 5 in respect of revisions under Section 81(1). The Act is a complete code prescribing forums and fixed time limits to ensure finality; therefore, Section 29(2) of the Limitation Act cannot be invoked to import Section 5 where the special enactment excludes it by necessary implication. The Court relied on authoritative precedents that a special statute which provides an independent code of limitation, or from whose scheme an exclusion can be necessarily implied, displaces the remedy of condonation under Section 5. An earlier division bench order of this Court condoning delay in a particular case was treated as non binding on this question because it did not examine the controlling Supreme Court authorities. [Paras 7, 8, 9, 16, 19]

Section 5 of the Limitation Act, 1963 is not applicable to a revision under Section 81(1) of the Assam Value Added Tax Act, 2003; applications under Section 5 are not maintainable and are dismissed.

Final Conclusion: The applications for condonation under Section 5 of the Limitation Act, 1963 are dismissed as not maintainable; the connected revision petitions under Section 81(1) of the Assam Value Added Tax Act, 2003 are accordingly disposed of. No order as to costs.

Mandatory pre-deposit condition for entertaining revision/appeal - Validity of statutory pre-deposit provision (Section 65(3) of the PVAT Act) as intra vires - Revision under Section 65(2) of the PVAT Act is maintainable - Power of the first appellate/revisional authority to grant interim injunction/protection and to partially or completely waive pre-deposit in deserving cases - Directory character of pre-deposit provision with implied power to grant interim relief

Mandatory pre-deposit condition for entertaining revision/appeal - Validity of statutory pre-deposit provision (Section 65(3) of the PVAT Act) as intra vires - Revision under Section 65(2) of the PVAT Act is maintainable - Validity and effect of the mandatory 25% pre-deposit requirement for entertaining revision under Section 65 of the PVAT Act and maintainability of revision under Section 65(2). - HELD THAT: - The Court applied earlier decisions of this Court and held that revision is maintainable under Section 65(2) of the PVAT Act. The statutory requirement that no application for revision shall be entertained unless accompanied by satisfactory proof of prior minimum payment of twenty-five per cent of the total amount (Section 65(3)) was examined and upheld as intra vires. The Court treated the pre-deposit obligation as a valid condition precedent to entertainment of revision, while noting the legal context and precedents which inform the operation of such provisions in taxation statutes.

Section 65(3)'s pre-deposit condition is valid and revision under Section 65(2) is maintainable subject to compliance with the pre-deposit requirement.

Power of the first appellate/revisional authority to grant interim injunction/protection and to partially or completely waive pre-deposit in deserving cases - Directory character of pre-deposit provision with implied power to grant interim relief - Existence and scope of the power of the first appellate/revisional authority to grant interim protection or to waive the pre-deposit condition either partially or wholly in appropriate cases. - HELD THAT: - Relying on prior pronouncements of this Court, it was held that notwithstanding the statutory pre-deposit requirement, the first appellate or revisional authority possesses, by necessary implication, the power to grant interim injunction/protection and to partially or completely waive the condition of pre-deposit in deserving cases. This power is not to be exercised routinely but only when a strong prima facie case is demonstrated and the authority is satisfied that the purpose of the appeal/revision would be frustrated or rendered nugatory if the pre-deposit condition is insisted upon. Where appeals or revisions were dismissed for non-compliance without adjudication on merits, those orders are to be set aside and remitted so that applications for interim protection may be considered on the stated principles.

The first appellate/revisional authority may, in appropriate and deserving cases, grant interim protection or partially/completely waive the pre-deposit condition; orders dismissing appeals/revisions for want of pre-deposit without adjudicating merits are to be set aside and remitted for consideration of such applications.

Final Conclusion: The petitions are disposed of in the same terms as earlier decisions of this Court: the statutory pre-deposit requirement in Section 65(3) is valid and revision under Section 65(2) is maintainable, subject to the pre-deposit condition; however, the first appellate/revisional authority has the power to grant interim protection or to partially or completely waive the pre-deposit condition in deserving cases, and matters dismissed for non-compliance without adjudication on merits are to be remitted for consideration of interim applications.

Special Act versus general Act doctrine - tax on purchase of sugarcane - preclusive effect of a special enactment on general taxation law - precedential binding effect of Supreme Court decisions - Article 266 and consolidation of tax receipts

Special Act versus general Act doctrine - tax on purchase of sugarcane - precedential binding effect of Supreme Court decisions - Whether the Punjab Sugarcane (Regulation of Purchase and Supply) Act, 1953 being a special Act excludes levy of tax on purchase of sugarcane under the Punjab General Sales Tax Act, 1948. - HELD THAT: - The Court held that this question is concluded against the appellant by earlier decision in VATAP No. 176 of 2013, which followed the Supreme Court's decision in Jagjit Sugar Mills Co. Ltd. v. State of Punjab. The Tribunal's and lower authorities' conclusions upholding assessment were therefore sustained. Reliance on a different Supreme Court decision (Gobind Sugar Mills Ltd.) could not justify departing from Jagjit where the provisions under consideration had been examined by the Supreme Court and the view adverse to the appellant was affirmed. The Court declined to reopen that precedent or hold it not to be good law. [Paras 5, 6]

Question answered against the appellant; earlier conclusion that tax under the Punjab General Sales Tax Act, 1948 is leviable on purchase of sugarcane is affirmed and appeal dismissed.

Article 266 and consolidation of tax receipts - preclusive effect of a special enactment on general taxation law - Whether amounts collected under the Punjab Sugarcane Act being liable to be transferred to the Consolidated Fund affects the conclusion that purchase tax under the Punjab General Sales Tax Act is leviable. - HELD THAT: - The Court noted the appellant's submission that Article 266 would require transfer of amounts to the Consolidated Fund and that the Act could not prescribe utilization. Even assuming the submission, the Court found it immaterial to the established precedent adversely deciding the entitlement to levy; such contentions could not be used to undermine the Supreme Court's holding in Jagjit. The point therefore did not warrant disturbance of the earlier decision dismissing the challenge to the assessment. [Paras 5, 6]

Submission under Article 266 did not alter the outcome; the challenge failed and the appeal was dismissed.

Final Conclusion: Appeals dismissed; the Tribunal's order upholding assessment for non-payment of purchase tax on sugarcane for assessment year 2001-02 is affirmed in view of the binding precedent and earlier decision of this Court.

Definition of 'asset' under section 2(ea)(ii) of the Wealth Tax Act - exclusion of motor cars used in the business of running them on hire or as stock-in-trade - motor cars used in business as plant and machinery are not assets for wealth-tax purpose - productive versus non-productive assets - interpretation beneficial to the assessee

Definition of 'asset' under section 2(ea)(ii) of the Wealth Tax Act - motor cars used in business as plant and machinery are not assets for wealth-tax purpose - productive versus non-productive assets - exclusion of motor cars used in the business of running them on hire or as stock-in-trade - interpretation beneficial to the assessee - Whether motor cars held and used by the assessee in the course of its car-dealership and service business, performing functions analogous to plant and machinery, fall within the definition of 'asset' under section 2(ea)(ii) of the Wealth Tax Act for the years under appeal. - HELD THAT: - The Tribunal examined the plain language and legislative intent of section 2(ea)(ii), read in light of the Finance Act 1992 amendments and the Finance Minister's Budget speech which reflected the Chelliah Committee's recommendation to tax non-productive assets while excluding productive assets. The cars in question were employed integrally in the assessee's business-for demonstrations, test drives, driving training, mobile service vans, towing and related services-and thereby functioned as productive assets akin to plant and machinery. The statutory exclusion of motor cars used in the business of running them on hire or as stock-in-trade showed the legislature's intent to exclude cars applied in the business from wealth-taxable assets; when vehicles are used productively to generate revenue they should be treated similarly. In a situation of ambiguity the Tribunal applied the rule favouring the assessee, following the precedents cited by the assessee, and concluded that the vehicles could not be regarded as 'assets' within section 2(ea)(ii) for wealth-tax purposes. Accordingly, the AO was directed to exclude these cars from the list of wealth-taxable assets. [Paras 7, 8]

Cars used by the assessee in its business, serving as productive assets comparable to plant and machinery, are not 'assets' under section 2(ea)(ii) of the Wealth Tax Act and must be excluded from wealth-tax computation for the years in dispute; appeals allowed.

Final Conclusion: The Tribunal allowed the appeals, holding that the motor cars used integrally in the assessee's dealership and service business are productive assets not falling within the definition of 'asset' under section 2(ea)(ii) of the Wealth Tax Act, and directed the Assessing Officer to exclude them from wealth-taxable assets for the stated assessment years.

Relationship of landlord and tenant arises only on intention to create a demise - onus on claimant to prove existence of tenancy - proclamation of sale must specify every material fact affecting value of the property - duty of decree-holder to disclose in the statement accompanying application for sale matters known or ascertainable to him - estoppel by omission where decree-holder fails to disclose claimed rights in execution proceedings

Relationship of landlord and tenant arises only on intention to create a demise - onus on claimant to prove existence of tenancy - The appellant was not proved to be a tenant of the premises and the presumption of tenancy was rebutted. - HELD THAT: - The Court held that mere payment or description of amounts as 'rent' in correspondence is not conclusive of a tenancy; a tenancy requires an intention to create a demise. The appellant failed to discharge the burden to prove tenancy: it did not produce a resolution of the company in liquidation or any board resolution of the appellant accepting tenancy, produced no lease or agreement, and its witnesses could not establish terms or existence of a lease. The appellant also never asserted tenancy during the execution proceedings or in the proclamation of sale. Taken together - absence of corporate resolutions, lack of documentary or cogent oral evidence, and the conduct of the appellant in the sale process - rebut the presumption of tenancy and lead to the conclusion that the appellant was not a tenant. [Paras 27, 28, 29, 30, 31]

Issue No.1 answered in favour of the first respondent; the appellant is not a tenant.

Proclamation of sale must specify every material fact affecting value of the property - duty of decree-holder to disclose in the statement accompanying application for sale matters known or ascertainable to him - estoppel by omission where decree-holder fails to disclose claimed rights in execution proceedings - The appellant is estopped from setting up a claim of tenancy because it failed to disclose that claim in the execution proceedings and in the proclamation of sale. - HELD THAT: - Order 21 Rule 66(2)(e) requires the proclamation to specify every material thing which a purchaser should know to judge the nature and value of the property; Rule 66(3) mandates that the application for sale be accompanied by a statement specifying, so far as known or ascertainable by the person making the verification, the matters required to be specified. The tenancy, which materially affects value, ought to have been disclosed by the appellant when it caused the property to be put to sale and verified the application. Whether the omission was deliberate or inadvertent, the appellant's failure to disclose led the purchaser to believe there were no tenancy rights, and estoppel can be pleaded against the decree-holder for such omission. Consequently the appellant cannot set up tenancy as a defence to delivery of possession. [Paras 36, 39, 40, 41, 42]

Issue No.2 answered in favour of the first respondent; the appellant is estopped from asserting tenancy.

Final Conclusion: Appeal dismissed and cross objections allowed; both issues decided for the first respondent and possession of the entire property awarded to the purchaser. The judgment was stayed until 31.05.2016 to enable the appellant to challenge the decision.

Security interest created in agricultural land - exclusion under Section 31(i) of the SARFAESI Act - relevant time for classification is time of creation of security interest - enforcement under Section 13 of the SARFAESI Act - subsequent transferees need not be impleaded - res judicata - dismissal for default

Subsequent transferees need not be impleaded - Whether subsequent purchasers of plots from the auction purchaser are necessary parties and must be impleaded - HELD THAT: - The court applied the principle that subsequent transferees step into the shoes of the original transferee and therefore do not require separate impleadment in proceedings where the original auction purchaser is a party. Reliance was placed on the ratio in Escorts Farms Ltd. which holds that subsequent transferees or interveners can claim no different or better rights than their transferors and thus their non-joinder does not vitiate the proceedings when the original transferee is before the court. [Paras 12, 13]

Subsequent purchasers of plots need not be impleaded when the original auction purchaser is a party; non-joinder of such subsequent transferees does not invalidate the proceedings.

Security interest created in agricultural land - exclusion under Section 31(i) of the SARFAESI Act - relevant time for classification is time of creation of security interest - enforcement under Section 13 of the SARFAESI Act - Whether the SARFAESI Act applies where the property was an agricultural land at the time of creation of the security interest but its use changed subsequently - HELD THAT: - A conjoint reading of the Act, its statement of objects and reasons and relevant definitions demonstrates that the exemption for 'any security interest created in agricultural land' is triggered by the nature of the property at the time the security interest is created. Section 13 authorises enforcement of security interest subject to exceptions contained in Section 31; clause 2(m) of the Statement of Objects and Reasons and the statutory language indicate that lands classified as agricultural when the security interest was created fall within the exclusion. Consequently a subsequent change of use or conversion after creation of the security interest does not render the exemption inapplicable. Applying this principle to the facts, the court found that the security interest in the present case was created over agricultural land and therefore the SARFAESI proceedings are not attracted. [Paras 21, 23, 36, 38]

The nature of the property at the time of creation of the security interest is decisive; where a security interest was created in agricultural land the SARFAESI Act does not apply and the SARFAESI proceedings in this case are nullities.

Res judicata - dismissal for default - Whether dismissal of a civil suit for default operates as res judicata in subsequent proceedings under the SARFAESI Act - HELD THAT: - The court held that a dismissal for default without adjudication will not operate as res judicata to bar subsequent proceedings, particularly where jurisdictional bars and separate fora (such as the SARFAESI regime) apply. The decision in Bajranglal Shivchandrai Ruia was relied upon to show that dismissal for default in later proceedings does not preclude earlier or parallel remedies and cannot be treated as final adjudication for the purpose of Section 11 CPC. [Paras 37]

Dismissal of the civil suit for default does not operate as res judicata to bar the challenge under SARFAESI-related proceedings.

Final Conclusion: The writ petitions by the secured creditor and the auction purchaser are dismissed. The court held that the property was an agricultural land at the time the security interest was created, bringing it within the exclusion under Section 31(i) of the SARFAESI Act and rendering the SARFAESI proceedings in respect of that security interest void; this decision does not affect other proceedings pending under the RDDBFI Act.