TaxTMI Updates e-Newsletter
May 17,2021

Summary order. Notice issued returnable on 20.05.2021; direct service permitted.

Principles of natural justice - pre-assessment show cause notice - service of notice to changed address / notice sent to previous address - remand for fresh consideration - personal hearing - reasoned order - compliance with Rule 64(1)(b) of the Telangana VAT Rules

Principles of natural justice - pre-assessment show cause notice - service of notice to changed address / notice sent to previous address - Assessment orders passed for the stated years were vitiated by failure to serve pre-assessment show cause notices on the petitioners at their changed address, resulting in violation of principles of natural justice. - HELD THAT: - The Court found on the material before it - including the GST registration certificate evidencing change of address and the respondents' concession that notices were issued to the earlier address - that the petitioners never received the pre-assessment show cause notices. In these circumstances the impugned assessment orders were held to be passed without affording the petitioners the opportunity of being heard, thereby infringing the principles of natural justice and rendering the orders unsustainable. [Paras 5, 6, 7]

Impugned assessment orders for 2013-14 to 2017-18 set aside on grounds of non-service of pre-assessment notices and breach of natural justice.

Remand for fresh consideration - compliance with Rule 64(1)(b) of the Telangana VAT Rules - pre-assessment show cause notice - personal hearing - reasoned order - Matters remitted for fresh consideration with directions on manner and procedure of re-adjudication. - HELD THAT: - The Court directed that the matters be sent back to the assessing authority to issue fresh pre-assessment show cause notices to the petitioners at the address shown in the cause title, in accordance with Rule 64(1)(b) of the Telangana VAT Rules. The petitioners were granted six weeks from receipt of that notice to file objections with supporting material. The assessing authority was required to provide personal hearing and to pass a reasoned order in accordance with law and communicate it to the petitioners. These directions were imposed to cure the procedural defect and to ensure adjudication after affording an opportunity of hearing. [Paras 7]

Matters remitted to the first respondent for issuance of fresh show cause notices and re-adjudication in accordance with the directions given, including six weeks' time to file objections, personal hearing, and a reasoned order.

Final Conclusion: Writ petitions allowed; impugned assessment orders for AYs 2013-14 to 2017-18 set aside and remitted for fresh consideration with directions to issue notice to the petitioners' changed address, allow six weeks for objections, provide personal hearing, and pass a reasoned order in accordance with law.

Zero rated supplies - refund of unutilised input tax credit - refund restriction under Rule 92 of CGST Rules, 2017 - technical glitches / auto-population error in GSTN software - remand for verification of eligibility for refund

Zero rated supplies - refund of unutilised input tax credit - technical glitches / auto-population error in GSTN software - refund restriction under Rule 92 of CGST Rules, 2017 - remand for verification of eligibility for refund - Whether the petitioner's refund claims for CGST and IGST can be rejected because the refund application was auto-populated under SGST - HELD THAT: - The Court accepted that the petitioner is an exporter who made zero rated supplies in October 2017, November 2017 and February 2018 and that supporting invoices and export proof were found to be in order (impugned order records verification). The respondents limited refund relief to SGST under Rule 92 on the ground that the consolidated claim appeared only under SGST and the petitioner did not produce documentary proof of a software error. The petitioner, however, had informed the authority in reply to show cause notices that the refund application was auto-populated under a single head (SGST) and had also submitted refund applications manually. The Court held that where entitlement to refund otherwise exists, a technical error in auto-population by the GSTN cannot fairly defeat the claim and the petitioner cannot be required to produce separate proof of the software error. Having found that invoices and export documents were in order, the Court set aside the rejection to the extent of CGST and IGST and remitted the matter to the respondent for verification of eligibility and grant of refund if satisfied. [Paras 7, 8, 9, 10]

The orders rejecting the petitioner's refund claims under CGST and IGST are set aside and the matter remitted to the second respondent to verify eligibility and grant refund within eight weeks if satisfied.

Final Conclusion: Writ petitions allowed; rejection of CGST and IGST refund claims set aside and matter remitted to the revenue for verification of eligibility and consequential grant of refund within eight weeks; no costs.

Adjournment - maintainability of appeal - defects in Form No. 36 - de-listing from part-heard category - obligation of departmental officers to represent matters during pandemic - Taxpayers' Charter - timely decision and accountability

Adjournment - obligation of departmental officers to represent matters during pandemic - part-heard delisting - Whether the Revenue's request for a further adjournment of six months should be allowed and what interim directions should be issued regarding future adjournments and listing status of the appeal. - HELD THAT: - The Tribunal found the Revenue's repeated requests for adjournment, culminating in a demand for six months, to be unreasonable and inadequately explained. The bench noted that the Department had already been granted multiple adjournments and that senior departmental officers and representatives have continued to discharge appellate functions during the pandemic, including in complex matters, and therefore the general pandemic situation does not justify an indefinite or prolonged adjournment. The Tribunal observed that the Assessing Officer, as appellant, is duty bound to reply on preliminary objections and cannot evade answering the maintainability challenge. Balancing the assessee's plea for early disposal (including his advanced age and health concerns) against the Revenue's request, the Tribunal limited further adjournments and directed procedural steps to ensure timely adjudication. It also recorded that the appeal should not remain listed as 'part heard'.

The request for six months' adjournment is refused; a final adjournment is granted for the last time, no further adjournments shall be allowed, and the appeal is de-listed from the 'part-heard' category.

Maintainability of appeal - defects in Form No. 36 - Taxpayers' Charter - timely decision and accountability - Adjudication on the preliminary issue of maintainability of the Revenue's appeal (including alleged defects in Form No. 36 and the grounds of appeal) and the procedural directions to facilitate that adjudication. - HELD THAT: - Having rejected the Revenue's plea for prolonged adjournment, the Tribunal directed that the preliminary issue of maintainability be taken up for final hearing on a specified date. The Assessing Officer (appellant) was ordered to file a written reply to the department's letter and the objections raised by the assessee, thereby demonstrating that the appeal is maintainable. The departmental representative was directed to make submissions on maintainability on the listed date. The Tribunal emphasised the need for timely disposal in accordance with the Taxpayers' Charter and accountability of departmental officers to justify grounds and procedural compliance instead of seeking successive postponements.

The maintainability objection is directed to be finally heard on the specified date; the AO must file his written reply by the given deadline and the departmental representative shall make submissions on that date.

Final Conclusion: The Tribunal refused the Revenue's application for a six month adjournment, granted that adjournment request for the last time, de listed the appeal from 'part heard' and fixed the preliminary issue of maintainability for final hearing with directions for the AO to file a written reply and for the departmental representative to appear and make submissions; no further adjournments shall be granted.

Disallowance under section 14A and Rule 8D(2)(iii) - Substance over form - Treatment of accumulated share of profits as non-physical investment / current account - Dividend Distribution Tax vis-a -vis Article 10 of DTAA - Admission of additional ground based on supervening Supreme Court decision - Remand for factual examination and opportunity of hearing

Disallowance under section 14A and Rule 8D(2)(iii) - Substance over form - Treatment of accumulated share of profits as non-physical investment / current account - Whether disallowance under section 14A read with Rule 8D(2)(iii) was sustainable where amounts shown as 'investments' were accumulated share of profits from joint ventures and not physical investments. - HELD THAT: - The Tribunal examined the investment schedule and the nature of amounts shown under the head 'investment' and found that those figures represented the assessee's accumulated share of profits/losses from joint ventures over the years rather than any physical cash outlay as investment. The substance of the transaction thus prevailed over its form and the entries effectively comprised current account/loans or accumulated profit share, not investments giving rise to exempt income requiring allocation of expenses under the computation mechanism of Rule 8D(2). Consequently, the computation mechanism in Rule 8D(2) could not be applied to justify any disallowance under section 14A in the facts of this case.

Disallowance under section 14A read with Rule 8D(2)(iii) set aside; Grounds Nos.2 & 3 allowed for both assessment years.

Dividend Distribution Tax vis-a -vis Article 10 of DTAA - Admission of additional ground based on supervening Supreme Court decision - Remand for factual examination and opportunity of hearing - Admission of an additional ground contending that Dividend Distribution Tax paid in excess of the rate prescribed by Article 10 of the India-Thailand DTAA and remand for adjudication of that claim. - HELD THAT: - The Tribunal admitted the additional ground raised for A.Y.2014-15 because it arose from a supervening change in law (Supreme Court decisions holding that the tax under section 115-O is a tax on dividend) which post-dated the assessment proceedings. Following the reasoning in the cited coordinate-bench decisions and authorities permitting admission of such grounds, the Tribunal held the question suitable for adjudication on merits and directed that the matter be set aside to the Assessing Officer for examination in the light of the Supreme Court and High Court decisions (including Tata Tea and Godrej & Boyce), with the assessee being given a reasonable opportunity to be heard and to produce fresh evidence in support of its claim regarding applicability of the DTAA (Article 10) and related factual requirements (such as permanent establishment/connectivity) as may be necessary for disposal.

Additional ground admitted and remanded to the Assessing Officer for fresh examination and adjudication; assessee to be given opportunity of hearing and to submit evidence.

Final Conclusion: The appeals are partly allowed. For both A.Y.2014-15 and A.Y.2015-16 the disallowance under section 14A read with Rule 8D(2)(iii) is set aside in favour of the assessee. The additional ground raised for A.Y.2014-15 concerning Dividend Distribution Tax vis-a -vis Article 10 of the India-Thailand DTAA is admitted and remitted to the Assessing Officer for fresh consideration with opportunity to the assessee to be heard.

Maintainability of writ petition under Article 226 against faceless assessment authority - cause of action arising within territorial jurisdiction - doctrine of forum non conveniens - faceless assessment scheme

Exemption from filing fees and court fees - Applications for exemption from court fees and for permission to file via electronic means - HELD THAT: - The applications seeking exemption and related reliefs were considered on the papers and allowed. The Court granted the requested exemptions subject to just exceptions and compliance with extant rules, and disposed of the applications accordingly. [Paras 1, 2]

Exemption applications allowed and disposed of subject to just exceptions and extant rules.

Maintainability of writ petition under Article 226 against faceless assessment authority - cause of action arising within territorial jurisdiction - doctrine of forum non conveniens - faceless assessment scheme - Appropriate forum to adjudicate challenge to assessment order passed by the National Faceless Assessment Centre, Delhi - HELD THAT: - The Court examined whether a writ under Article 226 challenging an assessment order issued by the National Faceless Assessment Centre at Delhi is maintainable in the Delhi High Court even where the assessee is located elsewhere. Relying on precedents, the Court observed that when the authority making the impugned order is situated in Delhi and the cause of action arises wholly or in part within the territorial jurisdiction, the writ is maintainable in Delhi; the doctrine of forum non conveniens remains a discretionary consideration. However, recognising that taxation matters are allocated to the Roster Bench for consistency and because the question is likely to recur, the Court refrained from finally deciding the issue on merits and directed that the matter be placed before the Roster Bench dealing with taxation matters for consideration so as to avoid conflicting benches reaching different conclusions. [Paras 7, 8, 9, 10]

Matter not finally decided on maintainability; petition is to be listed before the Roster Bench dealing with taxation matters on 17th May, 2021 for consideration.

Final Conclusion: Exemption applications allowed. The substantive question concerning the maintainability of a writ under Article 226 against the National Faceless Assessment Centre, Delhi was recognised as potentially maintainable in Delhi but was not finally determined; the petition is directed to be listed before the Roster Bench dealing with taxation matters on 17th May, 2021 for consideration.

Mandamus for release of seized property - protection of revenue by quantification of demand as nil - administrative approval for release of seized property

Mandamus for release of seized property - administrative approval for release of seized property - protection of revenue by quantification of demand as nil - Release of jewellery seized during search and retained by income tax authorities was to be effected. - HELD THAT: - The Court recorded that the assessment arising from the search had been completed and the assessing authority had quantified the demand as nil, with the petitioner having paid the amounts and the revenue's interests thereby protected. The Income Tax Appellate Tribunal's remand and subsequent proceedings were noted, and the Principal Commissioner conveyed approval for release of the seized jewellery weighing 5825.59 gms to the Assessing Officer by communication dated 08.04.2021. In view of the administrative approval and the protection of the revenue, the relief sought by way of mandamus stood achieved. The Court directed that the process of release be completed after observing all formalities and procedures required under the Rules within four weeks from the date of the order.

The seized jewellery shall be released after completion of statutory formalities and procedures within four weeks.

Final Conclusion: Petition disposed as the administrative approval for release had been communicated and the Court directed completion of the release process observing required formalities within four weeks; writ petition closed with no costs.

Writ of Mandamus - Consideration of representation on merits - Right to inspect Income Tax records and take copies - Opportunity of hearing - Re-opening of assessment and validity of assumption of jurisdiction under Section 147/148

Consideration of representation on merits - Right to inspect Income Tax records and take copies - Opportunity of hearing - Direction to respondent to consider the representation dated 06.11.2019 and to afford opportunity to inspect records and to hear the petitioner - HELD THAT: - The writ petition prayed for a mandamus directing the respondent to consider the representation of the petitioner's son dated 06.11.2019 and to allow inspection of Income Tax records and copies, including the investigation report relied upon for re-opening assessments. The Court did not adjudicate the substantive correctness of the re-opening under Section 147/148 or the pending appeals; instead the Court directed the respondent to dispose of that representation on merits and in accordance with law. The respondent was further directed to afford an opportunity of hearing to the petitioner (as legal heir) before disposing the representation. The direction requires fresh consideration of the representation and compliance with principles of natural justice within the stipulated time. [Paras 5]

Respondent to dispose of the representation dated 06.11.2019 on merits and in accordance with law, after affording the petitioner an opportunity of hearing, within six weeks from receipt of a copy of the order.

Final Conclusion: Writ petition disposed by directing the respondent to consider and decide the representation dated 06.11.2019 on merits, affording the petitioner a hearing, within six weeks; no costs.

Attachment of property under tax recovery - proportionality of attachment - security of revenue - release of attachment to enable payment under a settlement scheme - Direct Tax Vivad Se Vishwas Scheme - powers of Tax Recovery Officer

Attachment of property under tax recovery - proportionality of attachment - security of revenue - release of attachment to enable payment under a settlement scheme - Direction to lift attachment of the commercial property (Office No.407, World Trade Centre, Surat) despite existing attachments, to enable payment under the Direct Tax Vivad Se Vishwas Scheme. - HELD THAT: - The Court found on the material before it that the department was already fully secured by attachment over the petitioner's residential property and five bank accounts whereas the combined valuation (as per the Government Approved Valuer) of the residential and commercial properties substantially exceeded the outstanding demand reflected on the department's portal. The petitioner sought release of attachment on the commercial property to realise sale proceeds so as to pay tax liability under the Direct Tax Vivad Se Vishwas Scheme for a company in which he is a director. The respondents' objection - that the attachment could not be lifted to enable payment under a scheme in respect of a different taxpayer (the company) - was rejected because the petitioner demonstrated adequate security for the department and asserted bona fides. The Court held that lifting the attachment on the commercial property would not prejudice revenue as security is preserved by continuing attachments elsewhere, and would facilitate achieving the purpose of the settlement scheme. For these reasons, the Tax Recovery Officer was directed to lift the attachment and release the commercial property forthwith so the petitioner could deposit the scheme payment. [Paras 12, 13, 14, 15]

Attachment on the commercial property is to be lifted and released so as to enable the petitioner to realise sale proceeds and pay the tax payable under the Direct Tax Vivad Se Vishwas Scheme; respondents to pass necessary orders by 30 March 2021.

Final Conclusion: The petition is allowed to the extent that the Tax Recovery Officer is directed to lift and release the attachment on the specified commercial property forthwith to enable payment under the Direct Tax Vivad Se Vishwas Scheme; rule made absolute to that extent, with no order as to costs.

Re-assessment under Section 147 - Limitation proviso to Section 147 - Explanation 2(c) to Section 147 - Deduction under Section 10AA - Full and true disclosure

Re-assessment under Section 147 - Limitation proviso to Section 147 - Deduction under Section 10AA - Full and true disclosure - Validity of re-assessment proceedings initiated beyond four years where the assessee filed return in time and claimed deduction under Section 10AA which was examined in the original assessment. - HELD THAT: - The reassessment notice issued beyond four years must comply with the proviso to Section 147; ordinarily re-assessment is barred after four years unless conditions in the proviso are satisfied. The petitioner had filed the return within time and made full disclosures, and the original assessment under Section 143(3) had examined the claim of exemption under Section 10AA in detail. No error or omission in the return or annexures was pointed out that would amount to failure to make full and true disclosure. In the absence of such a ground, initiation of reassessment proceedings beyond four years is barred by limitation and cannot be sustained. [Paras 6, 7, 8]

Re-assessment proceedings initiated beyond four years are barred by limitation where the return was filed in time and no failure of full and true disclosure is shown; the reassessment notice is quashed.

Explanation 2(c) to Section 147 - Limitation proviso to Section 147 - Re-assessment under Section 147 - Whether Explanation 2(c) to Section 147 can be invoked to override or expand the statutory limitation prescribed by the proviso to Section 147. - HELD THAT: - Explanation 2(c) describes the scope of incomes which may be considered for re-assessment where income has been under-assessed or excess relief allowed, but it is interpretative and does not have the effect of enlarging or overriding the clear limitation imposed by the proviso to Section 147. The Explanation cannot be read so as to nullify the temporal bar where the statutory conditions for extending limitation are not met. Consequently, reliance on Explanation 2(c) cannot validate reassessment initiated beyond the permissible period. [Paras 9, 10]

Explanation 2(c) cannot be applied to override the limitation in the proviso to Section 147; it does not validate the time-barred reassessment.

Final Conclusion: The reassessment proceedings in relation to Assessment Year 2013-14 initiated beyond four years were barred by limitation; reliance on Explanation 2(c) to sustain the reassessment was rejected and the impugned order was quashed.

Limited scrutiny under CASS - jurisdiction under section 263 - revisional jurisdiction cannot be used to broaden scope of assessment - assessment order erroneous and prejudicial to the interest of revenue - AIR-based selection and confines of scrutiny

Limited scrutiny under CASS - jurisdiction under section 263 - revisional jurisdiction cannot be used to broaden scope of assessment - AIR-based selection and confines of scrutiny - Whether the Principal Commissioner of Income Tax could exercise revisional jurisdiction under section 263 to set aside an assessment framed after limited scrutiny under CASS and direct fresh enquiry on issues not forming part of the limited scrutiny - HELD THAT: - The Tribunal examined the scope of scrutiny where a case is selected under CASS for limited scrutiny. It followed earlier coordinate Bench decisions holding that limited scrutiny must remain confined to the points emanating from AIR and that neither the Assessing Officer nor the reviewing authority can expand that scope without the necessary procedural change (for example conversion to full scrutiny with appropriate approval). Applying those principles to the facts, the Tribunal found that the Pr. CIT, by directing the AO to reopen and re-examine issues which were not part of the limited scrutiny, exceeded the revisional jurisdiction under section 263. The Tribunal relied on precedents of various Benches and held that exercising s.263 to traverse beyond matters falling within the limited scrutiny equates to broadening the jurisdiction of the AO indirectly, which is impermissible. Consequently the revisional order was quashed as being without jurisdiction.

Pr. CIT exceeded jurisdiction in invoking section 263 in a case selected for limited scrutiny; the revisionary order was quashed.

Assessment order erroneous and prejudicial to the interest of revenue - AIR-based selection and confines of scrutiny - Whether the assessment order was erroneous and prejudicial to the revenue on the ground that the AO did not make proper enquiries in respect of specified bank deposits, credit card payments, sale of property and related items - HELD THAT: - The Tribunal reviewed the assessment record and the assessment order and found that the AO had in fact examined and taken conscious views on the matters alleged by the Pr. CIT: (i) an addition of Rs. 4 lakh had been made against cash deposits in one account; (ii) the entire deposit in the second account had been added as unexplained cash credit; (iii) adjustments were made in respect of credit card payments; and (iv) there was no indication of sale of immovable property in AIR or the assessment order. On this review the Tribunal concluded that proper and sufficient enquiries had been conducted by the AO and that the AO's conclusions represented a considered view. In the light of this, the Tribunal rejected the Pr. CIT's contention that the order was erroneous and prejudicial for want of enquiry and held that the Pr. CIT could not substitute his view for that of the AO by invoking section 263.

AO had made sufficient enquiries and the assessment order could not be held erroneous and prejudicial on the grounds urged; Pr. CIT's contrary finding was unsupported.

Final Conclusion: The appeal is allowed: the revisional order passed by the Principal Commissioner of Income Tax under section 263 was quashed as beyond jurisdiction in a case selected for limited scrutiny under CASS, and the assessment order was held not to be erroneous or prejudicial to the revenue on the grounds advanced.

Revision under section 263 - Erroneous and prejudicial to the interest of the Revenue - No prejudice where expenditure is capitalised and not claimed as deduction - Scope and limits of CIT's inquiry under section 263 - Requirement of AO's application of mind

Revision under section 263 - Erroneous and prejudicial to the interest of the Revenue - No prejudice where expenditure is capitalised and not claimed as deduction - Requirement of AO's application of mind - Whether the Pr. Commissioner was justified in invoking section 263 to set aside the assessment on the ground that the Assessing Officer erred in allowing land development expenditure without proper enquiry. - HELD THAT: - The Tribunal applied the twin tests for exercise of revisional power under section 263 - the impugned order must be both erroneous and prejudicial to the interests of the Revenue - and reiterated that section 263 cannot be used to correct every error or to substitute the CIT's view where the AO has applied his mind and taken a tenable view. The assessee's accounts showed that the development expenditure formed part of work-in-progress and the cost of land, and no deduction was claimed in the Profit & Loss account in the relevant year; accordingly there was no immediate loss or prejudice to the Revenue. The Tribunal noted that the Pr. Commissioner did not deal with this specific contention and failed to record any finding on prejudice; further, the veracity of the capitalised expenditure could be examined in the year of realisation. In these circumstances, the formation of satisfaction under section 263 lacked the required basis and the revisional order setting aside the assessment was unsustainable. [Paras 7, 8]

Pr. Commissioner's order under section 263 quashed and the assessee's appeal allowed.

Final Conclusion: The Tribunal held that invocation of section 263 was not justified because the impugned assessment was not shown to be prejudicial to revenue where the expenditure was capitalised and not claimed as a deduction; the revisional order was quashed and the appeal allowed.

Unexplained income under section 68 - taxation under section 115BBE - business income declared during survey - precedential value of coordinate Bench decision

Unexplained income under section 68 - taxation under section 115BBE - business income declared during survey - Whether the amount of Rs. 10,00,000 declared by the assessee during survey proceedings was rightly treated as undisclosed income under section 68 and taxed under section 115BBE or should be treated as business income and taxed at normal rates. - HELD THAT: - The notebook entries relating to M/s Sharma Overseas Services were found in the assessee's possession and the assessee admitted that the entries pertained to his business and declared the amount during survey. The AO treated the declared sum as unexplained credit under section 68 and computed tax under section 115BBE. The Tribunal noted that the assessee had offered an explanation and produced a cash flow statement; the AO did not record adverse findings rejecting the explanation. The Coordinate Bench decision in Shri Bhuwan Goyal (discussed at length) was held to be instructive: where surrendered income arises from business entries recorded and explained on the basis of seized documents, it should not be treated as unexplained credit attracting the special charging provisions but taxed as business income at normal rates. Applying that reasoning, and in view of the absence of negative findings by the AO on the source of the amount, the authorities below erred in invoking section 68 and section 115BBE. [Paras 7, 8, 9, 10]

The order upholding treatment of the sum as undisclosed income under section 68 and taxation under section 115BBE is set aside; the amount is to be treated as business income and taxed at normal rates, and the AO is directed to compute tax accordingly.

Final Conclusion: Appeal allowed; impugned order of the Ld. CIT(A) set aside and matter remitted to AO to compute tax on the declared amount as business income for AY 2017-18 at normal rates, following the coordinate Bench decision relied upon by the Tribunal.

Transfer pricing adjustment - comparability of comparable companies - inclusion/exclusion of comparables - Transactional Net Margin Method (TNMM) - profit level indicator (OP/OC) - application of filters in transfer pricing - remand for factual verification - Safe Harbour Rules and turnover criteria

Inclusion/exclusion of comparables - comparability of comparable companies - Inclusion of Thinksoft Global Services Limited in the final set of comparable companies for benchmarking the assessee's international transactions. - HELD THAT: - The Tribunal examined the availability of Thinksoft Global Services Limited's annual report in the public domain and the functional comparability with the assessee. The material showed that the company is listed on the Bombay Stock Exchange and its Director's/annual report was available; the Revenue did not produce contrary materials. On that basis the Tribunal directed the AO/TPO to include Thinksoft Global Services Limited in the final list of comparables for the year under consideration and allowed the ground raised by the assessee. [Paras 14, 15, 16, 17]

Thinksoft Global Services Limited to be included as a comparable company; part of assessee's ground allowed.

Inclusion/exclusion of comparables - comparability of comparable companies - Exclusion of Cybermate Infotek Limited from the final set of comparables. - HELD THAT: - On review of the company's annual report showing that Cybermate Infotek Limited engaged in both software development services and product development (listing specific products), the Tribunal followed earlier Tribunal precedents holding that where an entity is functionally different (product company plus services) and segmental details are not available, its margins cannot be used to benchmark a company engaged in software development services alone. Applying that reasoning, the Tribunal directed exclusion of Cybermate Infotek Limited from the final set of comparables. [Paras 20, 21, 22]

Cybermate Infotek Limited excluded from the final set of comparables; part of assessee's ground allowed.

Inclusion/exclusion of comparables - comparability of comparable companies - application of filters in transfer pricing - Exclusion of Infobeans Systems Private Limited from the final set of comparables. - HELD THAT: - The Tribunal noted that Infobeans' financials reflected multiple activities including export of goods on FOB basis and a demerger taking retrospective effect from the appointed date; segmental details were not available. Relying on analogous Tribunal decisions and reasoning that extraordinary events (such as demerger) and mixed activities without segmental reporting render a company functionally non-comparable, the Tribunal directed the AO/TPO to exclude Infobeans Systems Private Limited from the final comparables. [Paras 23, 24, 25, 26]

Infobeans Systems Private Limited excluded from the final set of comparables; part of assessee's ground allowed.

Remand for factual verification - comparability of comparable companies - Remand for fresh verification of functional comparability of Cybercom Datamatics Information Solutions Limited. - HELD THAT: - The Tribunal observed that the assessee had not placed the annual report for the relevant year (AY 2012-13) before the CIT(A) and that material available related to a later year (AY 2013-14). Because qualitative and quantitative data for the year under consideration were not before the authorities, the Tribunal set aside the CIT(A)'s decision on this comparable and remanded the matter to the AO/TPO to determine comparability after examining the company's annual report for the relevant year and ensuring compliance with principles of natural justice. The remand was directed for factual determination rather than final adjudication on merits by the Tribunal. [Paras 27, 28]

Matter remanded to AO/TPO for determination of Cybercom Datamatics Information Solutions Limited's comparability based on the company's annual report for the year under consideration.

Remand for factual verification - comparability of comparable companies - Remand to AO/TPO for verification of functionality of Thirdware Solutions Limited. - HELD THAT: - The assessee argued Thirdware Solutions Limited was functionally different (involvement in purchase of IT hardware and diversified activities). The Revenue sought factual verification. The Tribunal, noting the competing contentions and precedent authority excluding Thirdware in similar circumstances, directed restoration of the issue to the AO/TPO for determination of the company's functionality after factual verification and compliance with natural justice, treating the matter as remanded for adjudication at the AO/TPO level. [Paras 31, 32, 33]

Ground restored to AO/TPO for verification of Thirdware Solutions Limited's functionality; remanded for factual determination.

Safe Harbour Rules and turnover criteria - application of filters in transfer pricing - Upholding TPO's rejection of M/s. Cigniti Technologies Ltd. on the AMD/sales filter and restoring TPO's order in respect of that company. - HELD THAT: - The Revenue challenged the CIT(A)'s direction to consider Cigniti Technologies Ltd. as comparable despite the TPO's finding that the company failed the AMD/sales filter. The assessee chose not to contest the Revenue appeal. Having heard parties, the Tribunal upheld the TPO's application of the filter and restored the TPO's rejection of Cigniti as a comparable. [Paras 36, 37, 38, 40]

TPO's rejection of M/s. Cigniti Technologies Ltd. upheld; Revenue's ground allowed.

Safe Harbour Rules and turnover criteria - application of filters in transfer pricing - Upholding TPO's rejection of Presidential Systems and Solutions Ltd. for failing turnover criteria under Safe Harbour Rules and restoring the TPO's order. - HELD THAT: - The Revenue challenged the CIT(A)'s direction to treat Presidential Systems and Solutions Ltd. as comparable despite the TPO noting the company's turnover exceeded the turnover threshold (Rs. 500 crore) prescribed in the Safe Harbour Rules. The assessee did not contest the Revenue appeal. The Tribunal, on that basis, upheld the TPO's application of the turnover criterion and reversed the CIT(A)'s inclusion, restoring the TPO's finding. [Paras 41, 42, 43, 45]

TPO's rejection of Presidential Systems and Solutions Ltd. upheld; Revenue's ground allowed.

Final Conclusion: For A.Y. 2012-13 the Tribunal directed inclusion of Thinksoft Global Services Limited as a comparable and excluded Cybermate Infotek Limited and Infobeans Systems Private Limited from the final set of comparables; it remanded the question of comparability of Cybercom Datamatics Information Solutions Limited and Thirdware Solutions Limited to the AO/TPO for factual verification; and, on Revenue's cross-appeal, restored the TPO's rejection of M/s. Cigniti Technologies Ltd. and Presidential Systems and Solutions Ltd. in accordance with the applicable filters and Safe Harbour criteria.

Penalty under section 271(1)(c) for concealment of income or for furnishing inaccurate particulars of income - requirement of specification of charge in penalty notice - initiation of penalty proceedings in accordance with law - applicability of Explanation 1 to section 271(1)(c)

Penalty under section 271(1)(c) for concealment of income or for furnishing inaccurate particulars of income - requirement of specification of charge in penalty notice - initiation of penalty proceedings in accordance with law - Validity of penalty proceedings where the notice did not specify whether proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income - HELD THAT: - The Tribunal examined the notice issued under section 274 read with section 271(1)(c) and noted that it did not specify the particular limb of section 271(1)(c) under which penalty proceedings were initiated - i.e., whether for concealment of income or for furnishing inaccurate particulars of income. The Revenue did not dispute that the notice lacked such specification. The Tribunal followed the decision of the Delhi High Court in Pr. CIT vs. Sahara India Life Insurance Company Ltd., which holds that a notice initiating penalty proceedings under section 271(1)(c) must specify the limb under which proceedings are initiated; failure to do so renders initiation not in accordance with law. Applying that principle, the Tribunal held that the penalty orders could not stand since initiation was defective. As the penalty was quashed on this ground, the Tribunal declined to adjudicate the remaining merits-based contentions which had become academic. [Paras 9, 15]

Penalty orders for Assessment Years 2009-10 and 2008-09 quashed as initiation of penalty proceedings was not in accordance with law; consequential grounds become academic.

Final Conclusion: The appeals are allowed: penalty orders under section 271(1)(c) for AY 2009-10 and AY 2008-09 are quashed because the penalty notices failed to specify whether proceedings were for concealment of income or for furnishing inaccurate particulars, rendering initiation not in accordance with law; other grounds were not adjudicated as academic.

Admission of additional evidence under Rule 46A of the Income-tax Rules, 1962 - appellate power to summon documents and examine witnesses in furtherance of Section 250(4) - duty to deduct tax at source on payments to non-residents and consequences under 40(a)(ia) of the Act - genuineness and taxability of overseas commission as business expense - application of the Supreme Court decision in CIT v. Toshoku Limited to overseas commission

Admission of additional evidence under Rule 46A of the Income-tax Rules, 1962 - appellate power to summon documents and examine witnesses in furtherance of Section 250(4) - Validity of CIT(A)'s admission of additional documentary evidence filed by the assessee before the appellate authority. - HELD THAT: - The Tribunal upheld the power of the appellate authority to admit evidence not produced before the Assessing Officer where Rule 46-A permits admission: (a) if the Assessing Officer refused admissible evidence, (b) if the appellant was prevented by sufficient cause from producing evidence before the A.O., or (c) if prevented by sufficient cause from producing evidence relevant to any ground of appeal. The Tribunal further observed that the appellate authority's power to direct production of documents or examine witnesses in furtherance of Section 250(4) is an inherent, discretionary power exercisable to enable adjudication of the appeal and to secure fair play and natural justice. Applying these principles, the CIT(A) was held justified in admitting the additional documents furnished by the assessee for adjudication of the dispute. [Paras 11, 12]

Admission of the additional evidence by the CIT(A) was valid and proper.

Duty to deduct tax at source on payments to non-residents and consequences under 40(a)(ia) of the Act - genuineness and taxability of overseas commission as business expense - application of the Supreme Court decision in CIT v. Toshoku Limited to overseas commission - Whether the overseas commission payments disallowed under section 40(a)(ia) for non-deduction of tax at source were rightly deleted by the CIT(A) as genuine payments not liable to TDS. - HELD THAT: - The Tribunal examined the material placed before the CIT(A), including breakup of direct expenses, chart of overseas agents with addresses, declarations/confirmations and sample agreements and payment evidence, and reconciliation between overseas and domestic commissions. Applying the principle in CIT v. Toshoku Limited - that commission earned by a non-resident for services rendered outside India is not to be deemed income accrued or arisen in India - the Tribunal found no infirmity in the CIT(A)'s conclusion that the overseas commission payments were genuine and not liable to deduction of tax at source. Consequently, the disallowance under section 40(a)(ia) was rightly deleted by the CIT(A). [Paras 5, 6, 7, 13, 16]

The disallowance of overseas commission under section 40(a)(ia) was deleted; the CIT(A)'s deletion was upheld and the Revenue's appeal dismissed.

Final Conclusion: Both appeals filed by the Revenue were dismissed: the CIT(A)'s admission of additional evidence under Rule 46A was held proper, and the deletion of disallowance under section 40(a)(ia) in respect of overseas commission payments (treated as genuine and not subject to TDS) was upheld.

Sovereign immunity from taxation - tax deduction at source under Section 195 - Section 196 exemption for payments to the Government - reimbursement versus taxable income - fees for included services under Article 12(4)(b) of the Indo US DTAA - "make available" doctrine - territorial nexus / fee for technical services under Section 9(1)(vii)

Sovereign immunity from taxation - Section 196 exemption for payments to the Government - tax deduction at source under Section 195 - Whether payments to FAA (a US Government organization) fall outside TDS obligation under Section 196 as payments to a sovereign and therefore are not subject to deduction under Section 195. - HELD THAT: - The Tribunal held that the FAA could not be treated as a foreign sovereign immune from taxation for the present commercial transactions with AAI. Both AAI and FAA operate in a commercial/operational sphere (acta jure gestionis) and the agreements are commercial in character; the label 'Government' in the agreements does not confer blanket immunity. Where the legislature grants specific exemptions it does so expressly; absent such specific statutory immunity the taxability is governed by domestic law and relevant treaty provisions. Consequently, Section 196 does not operate to absolve the payer from TDS obligations where the sums are otherwise chargeable under the Act or the DTAA; the transactions are to be assessed on legal character and applicable treaty provisions rather than on a presumption of sovereign immunity. [Paras 13, 14]

FAA is not to be treated as enjoying general sovereign immunity for these payments; Section 196 does not preclude examination of taxability and TDS liability under Section 195.

Reimbursement versus taxable income - tax deduction at source under Section 195 - Whether the payments made to FAA are mere reimbursements (devoid of any profit element) and therefore not chargeable to tax in India so as to attract TDS under Section 195. - HELD THAT: - The Tribunal examined the MoA and annexures which expressly provided that AAI shall reimburse FAA for costs incurred in providing technical assistance and that no mark up or service charge was specified. Relying on the principle that Section 195 applies only to sums 'chargeable under the provisions of this Act', and authorities recognising that pure reimbursements do not constitute income, the Tribunal found that payments on a cost to cost basis without profit element are not taxable receipts. Accordingly, where payments are true reimbursements of costs incurred by FAA in rendering assistance, they are not 'sums chargeable under the Act' and do not prima facie attract TDS under Section 195. [Paras 26, 27, 28, 29, 30]

Payments that are bona fide reimbursements of costs, without any element of profit, are not chargeable to tax in India and therefore do not attract TDS under Section 195.

Fees for included services under Article 12(4)(b) of the Indo US DTAA - "make available" doctrine - territorial nexus / fee for technical services under Section 9(1)(vii) - Whether the services provided by FAA to AAI fall within 'fees for included services' under Article 12(4)(b) of the Indo US DTAA (either by 'making available' technical knowledge/know how or by development and transfer of a technical plan/design) and hence are taxable in India. - HELD THAT: - The Tribunal analysed the scope of Article 12(4)(b), including the two limbs - services that 'make available' technology and services that 'consist of the development and transfer of a technical plan or technical design'. Applying the treaty text and illustrative guidance, the Tribunal found that the assistance rendered (review, analysis, documentation, participation in meetings, preparation of QRs, system architecture and a draft implementation roadmap under the MoA) did not result in the FAA making technology available to AAI in a manner enabling AAI to apply proprietary technology for perpetual use. The assistance was characterised as cooperative technical assistance and dynamic collaboration rather than transfer of exclusive technical know how or a licensed deliverable that would leave the fruits of technology with the recipient. On that basis, the 'make available' requirement was not satisfied and the payments could not be treated as 'fees for included services' chargeable under Article 12. Given these findings, the Tribunal concluded the payments were not taxable as FIS in India. [Paras 40, 41, 42, 43, 44]

The 'make available' condition under Article 12(4)(b) is not satisfied on the facts; the services do not constitute 'fees for included services' taxable in India under the Indo US DTAA.

Final Conclusion: The Tribunal allowed the appeals: payments to FAA are not shielded by sovereign immunity; sums that are bona fide reimbursements without profit are not chargeable to tax and do not attract TDS under Section 195; and the services did not satisfy Article 12(4)(b)'s 'make available' or transfer of technical plan tests, so the payments are not taxable as fees for included services under the Indo US DTAA.

Advance Pricing Agreement (APA) - arm's length price - primary and secondary adjustment - transfer pricing adjustments - taxation of actual (real) income - permanent establishment and attribution of profits - interest under section 234B - remand for factual verification

Advance Pricing Agreement (APA) - arm's length price - taxation of actual (real) income - transfer pricing adjustments - Whether amounts refunded by the assessee to its Indian associated enterprise pursuant to the AE's APA reduce the royalty income taxable in the hands of the assessee. - HELD THAT: - The Tribunal held that where an associated enterprise (GIA India) pursuant to a bona fide APA recovers from the assessee the excess of actual royalty over the APA-determined ALP, that recovery/ refund is not a standalone event but must be viewed together with the original royalty receipt. The portion of the royalty that was bonafide refunded did not ultimately belong to the assessee and therefore cannot be taxed as its income. The APA establishes the bonafides of the reduction; the relevance of the APA is to explain the circumstances of the refund rather than to import substantive benefits of the APA to a non party. The Tribunal rejected objections based on transfer pricing provisos and the subsequent insertion of secondary adjustment rules, holding that nothing prevented parties from effecting lawful adjustments and that the reduction in the assessee's real income must be given effect to for tax purposes. [Paras 16, 21]

Claim accepted in principle: refunded amounts reduce the royalty income taxable in the assessee's hands; accepted in principle and to be given effect subject to factual verification.

Remand for factual verification - Verification of factual aspects and quantum of refunds credited/paid by the assessee pursuant to the APA. - HELD THAT: - Although the Tribunal accepted in principle that refunded amounts reduce the assessee's taxable royalty, it observed that factual elements (verification of whether and when invoices/debits were raised, amounts actually refunded, accounting treatment and timing, and any RBI or other approvals) had not been examined. Accordingly, the Tribunal remitted the matter to the Assessing Officer to verify the factual matrix and quantify the refunds before giving final effect in the assessments. [Paras 21]

Matter remitted to the Assessing Officer for verification of factual elements and quantification; claim accepted in principle but final computation to follow AO's verification.

Permanent establishment and attribution of profits - Whether the assessee had a permanent establishment (PE) or business connection in India and whether any royalty income was attributable to a PE. - HELD THAT: - Following the coordinate bench reasoning in the assessee's 2010 11 case and on the facts before it, the Tribunal found that GIA India is an independent entity which bears the commercial risks of client facing activities, and that factual and legal tests for fixed place, service or agency PE were not satisfied. Consequently, there was no PE in India and issues of attribution of receipts or profits to a PE became academic and infructuous. [Paras 27]

Assessee did not have a PE or business connection in India; related attribution issues dismissed as infructuous.

Interest under section 234B - Levy of interest under section 234B in respect of the relevant assessment year. - HELD THAT: - The Tribunal, applying the law prevailing for the periods in question, held that where tax was deductible at source and withholding obligations under section 195 applied, the advance tax liability is reduced accordingly and levy of interest under section 234B was unsustainable on the facts. The jurisdictional High Court authority relied upon was applied to set aside the levy. [Paras 36]

Interest under section 234B deleted.

Admission of additional grounds - Admissibility of additional grounds seeking relief based on the APA. - HELD THAT: - The Tribunal exercised its discretion to admit the assessee's additional grounds raised in several assessment years, noting they arose from subsequent developments (the APA) and involved questions of law arising from facts on record. The Tribunal permitted consideration of those grounds on merits. [Paras 21]

Additional grounds admitted and adjudicated on merits (subject to remand for factual verification where necessary).

Final Conclusion: The Tribunal held that amounts refunded by the assessee to its Indian associated enterprise pursuant to that enterprise's APA reduce the royalty income taxable in the assessee's hands; the assessee had no PE or business connection in India and related attribution issues are infructuous; interest under section 234B was deleted. The Tribunal accepted the assessee's APA based claim in principle but remitted the matter to the Assessing Officer for verification and quantification of the factual elements before giving final effect in the assessments for the specified years.

Demand of interest without adjudication of duty liability - admissibility of interest and its rate - liability of custodian under Section 47 of the Customs Act, 1962 - appropriate treatment of escrow deposit pending finalisation of remand proceedings

Demand of interest without adjudication of duty liability - admissibility of interest and its rate - liability of custodian under Section 47 of the Customs Act, 1962 - Whether the adjudication and recovery of interest from the custodian (respondent) could be lawfully confirmed before the departmental determination of duty liability and after the Customs Department had already received the duty from the importer in 2013. - HELD THAT: - The Tribunal held that the High Court's interim direction required the competent authority to determine admissibility of interest and its rate only after adjudicating the question of recovery of duty from the respondent and after giving the respondent an opportunity of hearing. The record showed that duty on the goods had been paid to and enjoyed by the Customs in 2013 and that no departmental proceeding or show cause notice had been issued to the respondent to determine its liability for recovery of duty prior to demanding interest. The Tribunal observed that the earlier Tribunal's remark about continuation of the escrow deposit pending remand did not dispense with the requirement that the competent authority must first adjudicate liability to recover duty from the respondent before fixing and recovering interest from it. In that factual and legal matrix, confirming and recovering interest from the respondent without first determining and adjudicating the question of duty liability on the respondent was legally untenable. Applying those principles, the Tribunal found no infirmity in the Commissioner (Appeals) setting aside the adjudication order that had demanded interest from the respondent. [Paras 15, 16, 17, 18, 19]

The adjudication order confirming demand of interest from the respondent was unsustainable; the Commissioner (Appeals) order setting aside that adjudication is upheld and the Revenue's appeal is dismissed.

Final Conclusion: The appeal is dismissed; the impugned order of the Commissioner (Appeals) setting aside the adjudication-demand for interest against the custodian is upheld and the cross objections are disposed of accordingly.

Refund of special additional duty (SAD) - interpretation of exemption notifications - limitation for refund claims - power under section 25(1) of the Customs Act - liberal interpretation of beneficial exemptions - conflict between notification conditions and time-bar

Refund of special additional duty (SAD) - limitation for refund claims - interpretation of exemption notifications - conflict between notification conditions and time-bar - Whether the one year time limit prescribed by Notification No.93/2008 Cus for filing refund of SAD is applicable where the importer has not sold the imported goods within one year of payment of SAD - HELD THAT: - The Tribunal examined Notification No.102/2007 Cus (as amended by Notification No.93/2008 Cus) alongside section 25(1) of the Customs Act and authoritative guidance that exemption notifications must be read as a whole and, where beneficial, interpreted liberally. The Tribunal noted an apparent inconsistency in the amended notification: clause (c) prescribes filing a refund claim within one year of payment of the additional duty, whereas clause (e) requires documentary proof of payment of sales tax/VAT on sale of the imported goods - a condition that may not be fulfillable within one year if the goods remain unsold. Applying the principle that exemptions should advance the remedial purpose without doing violence to the language, the Tribunal observed that enforcing the one year bar irrespective of whether the goods have been sold would defeat the object of the exemption and could lead to double taxation. In view of divergent precedents and the consequential legal question on whether the time limit applies where the cause of action for refund (sale with VAT payment) arises after one year, the Tribunal concluded that the question raises a substantial point of law requiring authoritative determination and therefore referred the matter to a Larger Bench for decision. [Paras 10, 15, 16, 17, 18]

The question was not decided on merits; the matter is referred to the Larger Bench of the Tribunal for authoritative determination and the Registry is directed to place records before the President for constitution of the Larger Bench.

Final Conclusion: The appeal was not adjudicated on the substantive question; the Tribunal found a conflict between the one year filing requirement and the condition to produce VAT/Sales tax proof tied to sale of the goods, and accordingly referred the issue to a Larger Bench for final decision, directing the Registry to place the records before the President.

Sanction of the Scheme of Amalgamation - dispensation of meetings of shareholders and creditors - transfer and vesting of assets and liabilities under Section 232(3) of the Companies Act, 2013 - appointed date for amalgamation - continuity of employees' service - filing revised Memorandum and Articles of Association and payment of differential fee for enhancement of authorised capital - entitlement of the Income Tax Department to recover statutory dues post-amalgamation - sanction subject to compliance with stamp duty, taxes and other statutory requirements - Official Liquidator's report and payment for auditor's investigation fees - certificate of compliance with Accounting Standards

Sanction of the Scheme of Amalgamation - dispensation of meetings of shareholders and creditors - certificate of compliance with Accounting Standards - Sanction of the Scheme of Amalgamation and related procedural compliances - HELD THAT: - The Tribunal, after noting service of statutory and regulatory notices, publication in the nominated newspapers, filings before the Registry and the reports of the Regional Director and the Official Liquidator, found that requisite statutory compliances under the Act and Rules had been fulfilled and accepted the certificate of the independent statutory auditor in respect of compliance with Accounting Standards. The Tribunal accordingly sanctioned the Scheme of Amalgamation annexed to the petitions and recorded that, in the absence of any objection recorded on file (including non-representation by the Income Tax Department), the Scheme could be sanctioned. The earlier order dispensing with meetings of shareholders and creditors pursuant to consent affidavits was treated as having been correctly made and the sanction followed subject to the conditions and directions recorded in the order.

Company Petition sanction granted and the Scheme of Amalgamation is sanctioned subject to the terms and directions contained in the order.

Transfer and vesting of assets and liabilities under Section 232(3) of the Companies Act, 2013 - appointed date for amalgamation - continuity of employees' service - Legal effect of the sanction: transfer/vesting of assets and liabilities, continuation of proceedings, appointed date and employee continuity - HELD THAT: - The Tribunal declared that, pursuant to the Scheme and Section 232(3), all properties, rights, interests, liabilities, obligations and duties of the Transferor Company shall, without further act or deed, be transferred to and vested in the Transferee Company. Proceedings pending by or against the Transferor Company shall continue by or against the Transferee Company. The Tribunal fixed the appointed date as specified in the Scheme and confirmed that employees of the Transferor Company in service immediately prior to the effective date shall become employees of the Transferee Company without break or interruption.

Assets, liabilities and proceedings stand transferred to the Transferee Company from the appointed date and employee service continuity is preserved.

Filing revised Memorandum and Articles of Association and payment of differential fee for enhancement of authorised capital - Obligation to file revised constitutional documents and to make payment of any differential fee on account of enhancement of authorised capital - HELD THAT: - Having noted the Regional Director's observation that the Scheme's clause stating that no further fee or stamp duty would be payable was contrary to the statutory position, the Transferee Company furnished an undertaking to file revised Memorandum and Articles of Association and to make payment of the differential authorised capital fee. The Tribunal directed the Transferee Company to file the revised MOA/AOA with the Registrar of Companies and to make requisite payment of the differential fee (after setting off fees paid by the Transferor Company) in accordance with law.

Transferee Company to file revised MOA/AOA and pay any differential fees for enhanced authorised capital as directed.

Official Liquidator's report and payment for auditor's investigation fees - Recording of Official Liquidator's report and payment towards the auditor appointed by the Official Liquidator - HELD THAT: - The Official Liquidator filed his report concluding that the affairs of the Transferor Company were not conducted prejudicially. The Chartered Accountant appointed by the Official Liquidator made observations on statutory books, deposits, filings and tax compliance. The Tribunal took those reports on record and directed that the Transferor Company make payment to the Official Liquidator towards the fees payable to the auditor who investigated the affairs of the Transferor Company.

Reports recorded and payment to the Official Liquidator for the auditor's fees directed to be made by the Transferor Company.

Entitlement of the Income Tax Department to recover statutory dues post-amalgamation - sanction subject to compliance with stamp duty, taxes and other statutory requirements - Protection of statutory recovery rights and non-exemption from taxes or duties despite sanction - HELD THAT: - The Tribunal, relying on prior authority and observations in earlier decisions, clarified that sanctioning the Scheme does not bar the Income Tax Department from taking appropriate proceedings for recovery of statutory dues from the transferor, transferee or any other person liable for such dues. Likewise, the Tribunal expressly stated that its order does not grant exemption from payment of stamp duty, taxes or any other charges and that sanction will not prevent action being taken in accordance with law if deficiencies or violations are found.

Sanction granted subject to the Income Tax Department's right to recover dues and without exemption from stamp duty, taxes or other statutory requirements.

Final Conclusion: The Tribunal, after recording compliance with statutory procedures and taking on record statutory and Official Liquidator reports, sanctioned the Scheme of Amalgamation on the terms recorded, directed ministerial steps including filing of revised constitutional documents and payment of differential fees and investigator's remuneration, and made clear that the sanction is without prejudice to recovery of statutory dues or other enforcement action in accordance with law.

Sanction of scheme of amalgamation under Section 230-232 - transfer and vesting of assets and liabilities pursuant to Section 232(3) - fixation of appointed date under Section 232(6) - continuity of employee service on amalgamation - obligation to file revised Memorandum and Articles and payment of differential authorized capital fee - protection of rights of tax authorities to recover dues despite sanction - statutory compliance with accounting standards and filing requirements - official liquidator's report and payment of auditor's remuneration

Sanction of scheme of amalgamation under Section 230-232 - Sanction of the Scheme of Amalgamation between the Transferor and Transferee companies. - HELD THAT: - After considering the petitions, the reports of the Regional Director and Official Liquidator, the affidavit of the Transferee Company accepting compliance with certain observations, the certificate of the Independent Statutory Auditor as to compliance with Accounting Standards, and in the absence of any other objections, the Tribunal found that requisite statutory compliances had been fulfilled and there was no bar to sanctioning the Scheme. The Tribunal accepted undertakings given by the Transferee Company in relation to compliance with Registrar of Companies' formalities and payment of any differential fees, and recorded that sanction does not curtail action under other enactments where violations are subsequently found. [Paras 17, 19, 20, 21]

The Scheme of Amalgamation is sanctioned on the terms recorded in the order.

Transfer and vesting of assets and liabilities pursuant to Section 232(3) - Effect of the sanction on transfer and vesting of the Transferor Company's assets, rights and liabilities. - HELD THAT: - The Tribunal applied the statutory effect under Section 232(3) and directed that all properties, rights, interests, liabilities, powers, engagements, obligations and duties of the Transferor Company shall without further act or deed be transferred to and vest in the Transferee Company. The Tribunal also directed that pending proceedings by or against the Transferor Company shall be continued by or against the Transferee Company in accordance with the Scheme. [Paras 21]

All assets, rights and liabilities of the Transferor Company stand transferred and vested in the Transferee Company; pending proceedings to be continued by or against the Transferee Company.

Fixation of appointed date under Section 232(6) - Determination of the appointed date for the Scheme. - HELD THAT: - The Scheme specified the appointed date as 1st April 2019. The Regional Director had observed that the Scheme allowed the Board to determine other dates and suggested an undertaking that the appointed date not be changed. The Transferee Company gave an undertaking that the appointed date shall be 01.04.2019 and would not be changed. On that basis, and in exercise of powers under Section 232(6), the Tribunal declared 1st April 2019 as the appointed date as specified in the Scheme. [Paras 6, 7, 21]

Appointed date for the Scheme is fixed as 1st April 2019.

Continuity of employee service on amalgamation - Status of employees of the Transferor Company upon amalgamation. - HELD THAT: - The Scheme contained provisions for protection of employees' interests and the Regional Director noted Clause 9 of Part II addressing employees. The Tribunal directed that all employees in service immediately preceding the effective date of the Scheme shall become employees of the Transferee Company without any break or interruption in their service. [Paras 6, 21]

Employees of the Transferor Company shall continue as employees of the Transferee Company without break.

Obligation to file revised Memorandum and Articles and payment of differential authorized capital fee - Requirement to file revised constitutional documents and pay any differential fee on enhanced authorized capital. - HELD THAT: - The Regional Director observed that the Scheme's clause on merger of authorized capital should not absolve the Transferee Company from payment of fees for enhancement of authorized capital as mandated by law. The Transferee Company undertook to file revised Memorandum/Articles and to make payment of differential authorized capital fee. The Tribunal directed the Transferee Company to file the revised Memorandum and Articles with the Registrar of Companies and to make requisite payments of any differential fee after setting off fees paid by the Transferor Company. [Paras 6, 7, 21]

Transferee Company to file revised MOA/AOA and pay any differential fee for enhancement of authorized capital after set-off.

Protection of rights of tax authorities to recover dues despite sanction - statutory compliance with accounting standards and filing requirements - Effect of sanction on Income Tax Department's rights and compliance with accounting and filing requirements. - HELD THAT: - Noting the Income Tax Department's memo indicating outstanding demands, the Tribunal recorded submissions that the Transferee Company is a going concern and that some demands may have been paid or disputed. The Tribunal reiterated that the sanction of the Scheme does not oust the Income Tax Department's legitimate rights to proceed to recover dues in accordance with law, relying on precedent that tax authorities may pursue recovery and that the Transferee Company undertook to satisfy demands as finally determined. The Tribunal also noted the certificate of the Independent Statutory Auditor confirming compliance with Accounting Standards and that requisite filings had been made. [Paras 11, 12, 13, 14, 17]

Sanction does not impede the Income Tax Department's rights to pursue and recover tax dues; accounting standards compliance and statutory filings have been certified.

Official liquidator's report and payment of auditor's remuneration - Acceptance of Official Liquidator's report and direction for payment towards auditor engaged by Official Liquidator. - HELD THAT: - The Official Liquidator reported that affairs of the Transferor Company were not conducted prejudicially and placed on record the Chartered Accountant's observations on statutory records, tax filings, absence of arrears and reasonableness of the fair exchange ratio. The Official Liquidator sought to take that report on record and to fix remuneration payable to the auditor who investigated the Transferor Company. The Tribunal directed the Transferor Company to pay Rs. 25,000 to the Official Liquidator for the auditor's fees. [Paras 8, 9, 10]

Official Liquidator's report accepted; Transferor Company directed to pay the auditor's remuneration to the Official Liquidator.

Final Conclusion: The Tribunal, having considered statutory filings, reports of the Regional Director and Official Liquidator, undertakings by the Transferee Company and absence of other objections, sanctioned the Scheme of Amalgamation with operative directions for transfer and vesting of assets and liabilities, fixation of the appointed date as 1st April 2019, continuation of employees, filing of revised constitutional documents and payment of any differential authorized capital fee, while preserving the rights of tax and other authorities and directing payment to the Official Liquidator for auditor's fees.

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt and default - demand notice under Section 8 of the IBC - jurisdiction of the Adjudicating Authority - appointment of Interim Resolution Professional - debtor moratorium under Section 14 of the IBC - security for IRP expenses

Admission of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt and default - demand notice under Section 8 of the IBC - jurisdiction of the Adjudicating Authority - The Section 9 application by the operational creditor is complete and admission of the application is warranted as operational debt and default are established. - HELD THAT: - The Tribunal found that the applicant supplied scaffolding material and raised invoices between 30.12.2012 and 31.03.2018 and that the corporate debtor had not disputed the debt after service of a demand notice in Form 3. The Demand Notice dated 30.05.2019 was sent by registered post and email and delivery is reflected in the tracking records. The applicant filed the necessary affidavit under Section 9(3)(b) affirming absence of notice of dispute. The corporate debtor appeared and sought time for settlement but thereafter failed to complete settlement, and no substantive dispute was raised. The registered office of the corporate debtor being in Delhi gave the Tribunal jurisdiction to entertain the application, and the application was filed within limitation having regard to the last invoice and the filing date. On these findings, default of the operational debt was held to be established and the application was admitted under Section 9(5) of the IBC. [Paras 11, 12, 13, 14, 15]

Application under Section 9 admitted as operational debt and default stood established; Tribunal has jurisdiction and the claim was not time-barred.

Appointment of Interim Resolution Professional - disclosures and consent by IRP - An Interim Resolution Professional is appointed to conduct the Corporate Insolvency Resolution Process subject to specified conditions. - HELD THAT: - As the applicant had not proposed a name, the Tribunal appointed Mr. Deepak Kukreja as IRP subject to the condition that no disciplinary proceedings are pending against him and that he furnish specific consent in Form 2 and make the disclosures required under the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 within one week from the date of the order. The appointment is conditioned upon compliance with the statutory disclosure and consent requirements. [Paras 16]

Mr. Deepak Kukreja appointed as Interim Resolution Professional subject to consent and disclosure filings within one week.

Security for IRP expenses - regulation 6 of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Operational Creditor directed to deposit an amount with the IRP to meet initial expenses of the CIRP. - HELD THAT: - The Tribunal directed the Operational Creditor to deposit a sum of Rs. 2 lacs with the appointed IRP within one week to meet expenses to perform functions under regulation 6 of the IBBI Regulations. The deposit is subject to adjustment by the Committee of Creditors as accounted for by the IRP and shall be refunded to the Operational Creditor as appropriate. [Paras 17]

Operational Creditor to deposit the directed sum with the IRP within one week; amount subject to adjustment by the Committee of Creditors.

Debtor moratorium under Section 14 of the IBC - On admission, moratorium under Section 14(1) of the IBC is operative, with the consequential application of Sections 14(2) to 14(4). - HELD THAT: - Consequent to admission of the Section 9 application, the Tribunal held that the moratorium as envisaged under Section 14(1) shall follow in relation to the corporate debtor, prohibiting actions as provided by the Code, and that the provisions of Sections 14(2) to 14(4) shall apply during the moratorium period. [Paras 18]

Moratorium under Section 14 operates in relation to the corporate debtor and related provisions (Sections 14(2)-14(4)) will apply.

Final Conclusion: The Section 9 application of the operational creditor is admitted; an Interim Resolution Professional is appointed subject to consent and disclosure, the Operational Creditor is directed to make an interim deposit for IRP expenses, and the moratorium under Section 14 of the IBC is declared operative; registry and statutory notifications are directed.

Admissibility of Section 9 application under the Insolvency and Bankruptcy Code, 2016 - operational debt and default - date of default and limitation - ex parte proceedings for non-appearance of corporate debtor - appointment of interim resolution professional and commencement of CIRP - moratorium under Section 14 of the Code - provision for interim expenses to be deposited by the applicant

Admissibility of Section 9 application under the Insolvency and Bankruptcy Code, 2016 - operational debt and default - Application under Section 9 filed by the operational creditor is admissible and is to be admitted initiating CIRP against the corporate debtor on account of admitted operational debt. - HELD THAT: - The Tribunal found the application complete and was satisfied on the basis of the material on record that an operational debt of Rs. 63,36,049/- in respect of unpaid invoices stood due and payable by the corporate debtor and remained unpaid. The corporate debtor, though raising disputes in its reply to the demand notice, did not appear before the Adjudicating Authority to substantiate those contentions, and the Authority proceeded ex parte. In light of the applicant's proof of supply, invoices, service of demand notice and the lack of defence before the Tribunal, the application met the requirements for admission under Section 9 and commencement of the corporate insolvency resolution process was ordered. [Paras 10, 13]

Section 9 application admitted; CIRP ordered to commence against the corporate debtor.

Date of default and limitation - The application is not time-barred; the date of default is 27.09.2019 and the Section 9 application filed on 16.02.2020 is within limitation. - HELD THAT: - The Tribunal identified the date of the last unpaid invoice as 27.09.2019 and treated that date as the date of default. Comparing that date with the filing date of the Section 9 application (16.02.2020), the Tribunal concluded that the application was filed within the prescribed period and was not barred by limitation. [Paras 11]

Application held within limitation; date of default fixed as 27.09.2019.

Ex parte proceedings for non-appearance of corporate debtor - The corporate debtor's non-appearance before the Adjudicating Authority led to ex parte proceedings. - HELD THAT: - Although the corporate debtor filed a reply to the demand notice raising disputes, it failed to appear before the Adjudicating Authority to support those contentions. The Tribunal recorded that in the absence of appearance or defence before the Authority, the proceedings were conducted ex parte and that circumstance contributed to the presumption favouring admission of the application. [Paras 10, 13]

Proceedings ordered ex parte against the corporate debtor for non-appearance; presumption in favour of admission noted.

Appointment of interim resolution professional and commencement of CIRP - moratorium under Section 14 of the Code - provision for interim expenses to be deposited by the applicant - Interim reliefs and administrative steps were directed: appointment of the proposed IRP, imposition of moratorium, and deposit of interim expenses by the applicant. - HELD THAT: - The Tribunal appointed the interim resolution professional proposed by the applicant and directed him to perform statutory duties under the Code and to file reports. A moratorium in terms of Section 14 was imposed immediately, restraining institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property as specified. The applicant was directed to deposit a sum to meet immediate IRP expenses, to be accounted for and recoverable as CIRP costs. Directions were also given for communication of the order to the IRP, IBBI and ROC and for provision of the paper book to the IRP. [Paras 14, 15, 16, 17]

Proposed IRP appointed; moratorium imposed; applicant directed to deposit interim expenses; administrative communications ordered.

Final Conclusion: The Tribunal admitted the Section 9 application, held the operational debt of Rs. 63,36,049/- to be due and payable and not time-barred, proceeded ex parte against the corporate debtor for non-appearance, appointed the proposed interim resolution professional, imposed the moratorium under the Code and directed deposit of interim expenses by the applicant.

Admissibility of Section 9 application - existence of debt and default - pre-existence of dispute - moratorium under Section 14 - appointment of interim resolution professional

Admissibility of Section 9 application - existence of debt and default - pre-existence of dispute - Whether the Section 9 petition is maintainable and whether the Operational Creditor has established existence of debt and default, in view of the Corporate Debtor's contentions of void agreement, impossibility of performance and pre-existing dispute. - HELD THAT: - The Tribunal found that the Operational Creditor established the existence of debt and default by the Corporate Debtor on the material placed before it. The Corporate Debtor's contentions that the consultancy agreement was void ab initio, that performance was impossible, and that there were calculation errors or pre-existing disputes were not substantiated by documentary evidence in the reply. Alleged initiation or pendency of civil or criminal proceedings against the Operational Creditor was also not supported by relevant documents. In the absence of proof of a pre-existing dispute or documentary support for the objections raised, the plea resisting the petition was held to be without merit.

Section 9 petition admitted and corporate insolvency resolution process initiated against the Corporate Debtor.

Moratorium under Section 14 - Whether moratorium should be imposed consequent to admission of the Section 9 petition. - HELD THAT: - On admission of the petition and initiation of CIRP, the Tribunal directed the statutory moratorium to operate forthwith. The scope articulated by the Tribunal prohibits institution or continuation of suits or proceedings and execution of any decree or order against the Corporate Debtor; bars transfer, encumbrance or disposition of the Corporate Debtor's assets; restrains actions to enforce security interests including under SARFAESI; and prevents recovery of property from possession of the Corporate Debtor by owners or lessors. The Tribunal also clarified that supply of essential goods or services shall not be terminated during the moratorium and that specified transactions notified by the Central Government are not covered.

Moratorium under Section 14 is imposed with immediate effect until completion of the corporate insolvency resolution process.

Appointment of interim resolution professional - Whether an Interim Resolution Professional should be appointed and confirmed to manage the CIRP. - HELD THAT: - The Tribunal confirmed the proposed Interim Resolution Professional to take steps required under the Code, including duties under provisions dealing with possession, management and powers during the CIRP and to file reports as mandated. The order records confirmation of the proposed IRP and directs him to undertake statutory functions and file his report within the period specified by the Bench.

Interim Resolution Professional is confirmed and directed to perform statutory duties and file the report within the stipulated time.

Final Conclusion: The Tribunal admitted the Section 9 petition, held that debt and default were established and no pre-existing dispute was proved, directed initiation of CIRP with immediate operation of the moratorium under Section 14, and confirmed the Interim Resolution Professional to conduct the resolution process.

Extinguishment of claims on approval of a Resolution Plan - binding effect of an approved Resolution Plan under Section 31 of the IBC - survival of pre-existing disputes during CIRP - maintainability of Section 34 proceedings after approval of a Resolution Plan - obligation to submit claims in CIRP and inclusion in Information Memorandum - effect of amended Section 36 on pending Section 34 applications

Binding effect of an approved Resolution Plan under Section 31 of the IBC - extinguishment of claims on approval of a Resolution Plan - Whether an award-holder's claim which does not form part of an approved Resolution Plan survives after approval of the Resolution Plan. - HELD THAT: - The Court applied the Supreme Court rulings in Committee of Creditors of Essar Steel and Ghanshyam Mishra v. Edelweiss to hold that once a Resolution Plan is approved under Section 31 of the IBC, the plan is binding on the corporate debtor and its stakeholders and claims not forming part of the approved plan stand extinguished. The Court reasoned that the IBC regime contemplates collation and freezing of claims through the Resolution Professional and Committee of Creditors so that a successful resolution applicant takes over the corporate debtor on a 'fresh slate'; allowing undecided claims to survive would frustrate this scheme and create uncertainty for the resolution applicant. Accordingly, pre-existing and undecided claims that were not collated and included in the Resolution Plan cannot later be pursued. [Paras 15, 16, 17, 23]

Claims not included in the approved Resolution Plan stand extinguished and cannot be pursued after approval under Section 31 of the IBC.

Maintainability of Section 34 proceedings after approval of a Resolution Plan - survival of pre-existing disputes during CIRP - Whether the Section 34 application for setting aside the arbitral award remains maintainable or becomes infructuous following approval of the Resolution Plan. - HELD THAT: - The Court held that a determination on maintainability must precede merits where the legal effect would render the proceedings futile. Having found that a Resolution Plan approved under Section 31 extinguishes claims not included in the plan, the Court concluded that further adjudication on the merits of the Section 34 application would be a waste of judicial and party resources and would not lead to any effective relief. The Court therefore considered the Section 34 proceedings rendered infructuous in the facts of this case and disposed of the application on that basis. [Paras 11, 24, 25]

The Section 34 proceeding is rendered infructuous and therefore not to be proceeded with in the present case.

Effect of amended Section 36 on pending Section 34 applications - obligation to submit claims in CIRP and inclusion in Information Memorandum - Whether the award-holder was precluded from lodging its claim in the CIRP by reason of the filing of a Section 34 application and whether the award-holder had an opportunity and obligation to submit its claim during the CIRP. - HELD THAT: - The Court analysed the amendment to Section 36 and the Supreme Court's decision in Board of Control for Cricket in India v. Kochi Cricket to conclude that filing a Section 34 application does not automatically render an award unenforceable; the award is not automatically stayed unless a separate stay is granted under the amended Section 36. In light of the statutory CIRP procedure (public announcement, collation of claims, Information Memorandum, Form B and Regulation 7), the Court found that the award-holder had procedural opportunities during the CIRP (public announcement was on 25 September 2017 and the plan approved on 16 May 2018) to submit its claim to the Resolution Professional and to be included in the claims collation. The court therefore rejected the contention that the pendency of Section 34 precluded the award-holder from participating in the CIRP. [Paras 20, 21, 23]

Filing of a Section 34 application did not automatically prevent the award-holder from lodging its claim in the CIRP; the award-holder had procedural avenues and obligations to submit its claim during the CIRP.

Obligation to submit claims in CIRP and inclusion in Information Memorandum - Whether the fact that the amount claimed by the respondent appeared in the Information Memorandum affects the survival of the respondent's claim. - HELD THAT: - The Court noted that the Information Memorandum's reference to the amount claimed by the respondent as on 31 March 2014 was a fact that warranted further exploration. The Court observed that mere mention in the Information Memorandum does not supplant the specific procedural requirements under the IBC and CIRP Regulations (including submission in prescribed Form B and adherence to Regulation 7 timelines) and, therefore, the significance of the Information Memorandum entry must be examined. [Paras 18, 20]

The relevance of the respondent's claim appearing in the Information Memorandum requires further exploration and cannot be finally determined on the present record.

Final Conclusion: The application under Section 34 is disposed of as rendered infructuous: in the facts of this case, claims not included in an approved Resolution Plan stand extinguished under Section 31 of the IBC, the award-holder had procedural opportunity to submit its claim during CIRP, and the continuation of the Section 34 proceedings would serve no purpose; one factual matter (the significance of the Information Memorandum entry) is directed to be explored further before any different conclusion may be reached.

Binding effect of an approved resolution plan under Section 31 of the IBC, 2016 - allocation of resolution plan amounts to meet contingent litigation costs - modification of an approved resolution plan after adjudicating authority's order - status and treatment of related party financial creditors - inclusion of costs in the resolution plan as a precondition for their recovery from stakeholders - exclusion of related parties from CoC deliberations under Section 21 of the IBC, 2016

Allocation of resolution plan amounts to meet contingent litigation costs - inclusion of costs in the resolution plan as a precondition for their recovery from stakeholders - modification of an approved resolution plan after adjudicating authority's order - Whether the CoC/Resolution Professional could require related-party financial creditors to bear additional litigation costs by deducting such costs from amounts earmarked for them where those costs were not provided for in the resolution plan approved by the Adjudicating Authority. - HELD THAT: - The Tribunal examined the approved resolution plan as sanctioned by the Adjudicating Authority and noted that the plan earmarked a specific amount for related-party financial creditors and required payment within the period specified in the plan. The CoC's subsequent resolution to meet additional litigation costs from amounts allocated to related-party creditors was not reflected in the plan placed before and approved by the Adjudicating Authority. The Tribunal held that such post-approval adjustments or open-ended deductions cannot be asserted against stakeholders after the plan has been approved. Any contingency or litigation cost that is intended to be met from stakeholder allocations ought to have been included in the resolution plan submitted for approval; omission thereof precludes charging those costs to the related-party creditors after approval. The Tribunal also observed that related parties are not members of the CoC under the statutory scheme and therefore could not have participated in or objected during CoC deliberations, reinforcing that obligations affecting stakeholders must be clearly provided in the approved plan.

The CoC/Resolution Professional cannot deduct additional litigation costs from amounts due to related-party financial creditors where such costs were not provided for in the resolution plan approved by the Adjudicating Authority; the post-approval direction to meet such costs from the related-party allocation is not binding.

Binding effect of an approved resolution plan under Section 31 of the IBC, 2016 - status and treatment of related party financial creditors - Whether the applicant, a related-party financial creditor whose claim and entitlement were admitted under the approved resolution plan, is entitled to the payment as provided under the approved plan and whether the Tribunal should direct its payment. - HELD THAT: - The Tribunal relied on the express terms of the order approving the resolution plan, which made the plan binding on the corporate debtor and all stakeholders under the statutory scheme. Having found that the approved plan allocated a specified sum to related-party financial creditors and that additional litigation costs were not provided for in the plan, the Tribunal concluded that the applicant's entitlement under the approved plan could not be reduced by a subsequent internal CoC decision. In exercise of its supervisory jurisdiction under the insolvency framework, the Tribunal directed that the amount payable to the applicant from the total resolution plan amount be paid by the Resolution Professional without demur and within a stipulated time frame.

The applicant is entitled to the payment provided in the approved resolution plan; the Resolution Professional is directed to pay the amount to the applicant from the total resolution plan amount within 90 days of the order.

Final Conclusion: The application is allowed: the Tribunal held that additional litigation costs not included in the resolution plan could not be imposed on related-party financial creditors post-approval, and directed the Resolution Professional to pay the applicant the amount due under the approved resolution plan from the total resolution plan corpus within 90 days.

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Liquidator on Committee of Creditors' resolution - Public announcement and notice of discharge under Section 33(7) of the IBC, 2016 - Ceasing of CIRP moratorium and commencement of moratorium upon liquidation under Section 33(5) of the IBC, 2016 - Investigation of financial affairs and filing of applications for preferential/undervalued or fraudulent transactions under Section 35(1) of the IBC, 2016 - Obligation to notify Registrar of Companies, Insolvency and Bankruptcy Board of India and tax/regulatory authorities - Liquidator's duty to submit preliminary report under the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016

Liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016 - Appointment of Liquidator on Committee of Creditors' resolution - Order for liquidation of the corporate debtor and appointment of the Interim Resolution Professional as Liquidator pursuant to the Committee of Creditors' resolution. - HELD THAT: - The Tribunal recorded that the Committee of Creditors, at its first meeting, concluded that the corporate debtor was inoperative, had no scope for revival and had no movable or immovable assets other than bank balance, and accordingly resolved to liquidate the company subject to the Tribunal's approval. The IRP had caused public notice and convened the CoC, and the IRP gave written consent in Form AA to act as Liquidator. Guided by the CoC's commercial decision and the precedent referred to, the Tribunal was satisfied to order liquidation of the corporate debtor and to appoint the IRP, CA S. Prabhu, as Liquidator to manage the liquidation process.

The corporate debtor is ordered to be liquidated and CA S. Prabhu is appointed as Liquidator.

Public announcement and notice of discharge under Section 33(7) of the IBC, 2016 - Ceasing of CIRP moratorium and commencement of moratorium upon liquidation under Section 33(5) of the IBC, 2016 - Investigation of financial affairs and filing of applications for preferential/undervalued or fraudulent transactions under Section 35(1) of the IBC, 2016 - Obligation to notify Registrar of Companies, Insolvency and Bankruptcy Board of India and tax/regulatory authorities - Liquidator's duty to submit preliminary report under the Insolvency and Bankruptcy (Liquidation Process) Regulations, 2016 - Directions and obligations of the Liquidator consequent to the liquidation order. - HELD THAT: - The Tribunal specified mandatory directions for the Liquidator to carry out the liquidation process in accordance with IBC, the Liquidation Process Regulations and other relevant rules. The Liquidator is required to issue the public announcement that the corporate debtor is in liquidation and the order serves as notice of discharge to officers, employees and workers. The earlier moratorium under CIRP ceases and a fresh moratorium under liquidation commences. The Liquidator must investigate the financial affairs of the corporate debtor, including preferential, undervalued and fraudulent transactions, and file appropriate applications before the Adjudicating Authority. The Registry was directed to communicate the order to the Registrar of Companies and the IBBI, and the Liquidator must notify tax and other regulatory authorities as required. The Liquidator is to submit a preliminary report within 75 days from the liquidation commencement date and comply with other reporting obligations under the Liquidation Regulations.

The Liquidator is directed to carry out the liquidation and investigatory duties, make requisite notifications to statutory authorities, apply the fresh moratorium on liquidation and submit the preliminary report within the stipulated time.

Final Conclusion: The application for liquidation is allowed: the corporate insolvency resolution process is terminated by ordering liquidation of the corporate debtor; the IRP, CA S. Prabhu, is appointed as Liquidator and is directed to undertake the liquidation process, investigations, statutory notifications and regulatory reporting in accordance with the IBC and applicable regulations.

Maintainability of application - Corporate Applicant under section 10(3)(a) of the IBC, 2016 - Financial Creditor under section 7 of the IBC, 2016 - production of books of account with insolvency application

Maintainability of application - Corporate Applicant under section 10(3)(a) of the IBC, 2016 - Financial Creditor under section 7 of the IBC, 2016 - Whether the application seeking production of balance sheets from 2008-09 till 2018-19 filed under section 10(3)(a) of the IBC, 2016 by the corporate debtor in the main matter (where the main petition was filed under section 7) is maintainable. - HELD THAT: - The Tribunal examined the scope of section 10(3)(a), which mandates that a corporate applicant furnish information relating to its books of account and other documents along with an application filed under section 10. Section 10(3)(a) applies to a 'Corporate Applicant' as defined and is ratione personae confined to applicants who are corporate debtors or entities authorized to file under the corporate insolvency route. The main proceeding against the present applicant had been instituted under section 7 by a financial creditor, and therefore the present applicant is not the 'Corporate Applicant' contemplated by section 10(3)(a) in the context of initiating CIRP. Since the impugned application was filed under provisions applicable to corporate applicants while the substantive proceeding is one initiated by a financial creditor under section 7, the application is not maintainable and no direction for production of the requested balance sheets can be granted under section 10(3)(a). [Paras 5, 6, 7]

Application under section 10(3)(a) is not maintainable in the facts of the case where the main petition is under section 7; the application is dismissed.

Final Conclusion: The application by the corporate debtor seeking direction to the financial creditor to produce balance sheets for 2008-09 to 2018-19, filed under section 10(3)(a) of the IBC, 2016 while the main matter proceeds under section 7, is not maintainable and is dismissed.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal on preponderance of probabilities - Revisional jurisdiction under Sections 397/401 Cr.P.C. - Sentencing discretion and modification in NI Act cases

Offence under Section 138 of the Negotiable Instruments Act - Dishonour of cheque for insufficiency of funds - Conviction under Section 138, N.I. Act was validly recorded - HELD THAT: - The courts below found and the High Court records that the complainant proved receipt of loan by producing the money receipt (Exbt.1) and evidence of two independent witnesses who identified their signatures on that receipt. The impugned cheque (Exbt.2) was issued by the accused to discharge that liability and was presented and returned for insufficiency of funds (Exbt.3 and Exbt.4). The accused did not deny issuance of the cheque and, in his 313 statement, asserted repayment but led no evidence to support that assertion. On appreciation of the prosecution evidence, the trial Court convicted the accused which was affirmed on appeal; no glaring error or miscarriage of justice was demonstrated that would warrant interference under revisional jurisdiction. [Paras 14, 16, 18, 20]

Concurrent conviction under Section 138, N.I. Act is upheld

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal on preponderance of probabilities - The presumption under Section 139 stood unrebutted by the accused - HELD THAT: - Section 139 creates a legal presumption in favour of the cheque-holder that the cheque was issued for discharge of debt or liability; the accused bears an evidentiary burden to rebut it on the preponderance of probabilities. The judgment applies the settled law that mere denial is insufficient and that the accused must bring probable facts to shift the burden. The accused did not adduce evidence to demonstrate repayment or otherwise create a probable defence; therefore the presumption remained intact and supported conviction. [Paras 15, 16, 17, 18]

Presumption under Section 139 not rebutted; prosecution case remains established

Revisional jurisdiction under Sections 397/401 Cr.P.C. - Limits on reappreciation of evidence by High Court - High Court will not re-appreciate evidence in revision absent a glaring feature or gross miscarriage of justice - HELD THAT: - The High Court applied the settled principle that its revisional power is supervisory and not appellate; it should not reappreciate evidence already considered by the trial court and the first appellate court unless a glaring error or gross miscarriage of justice is shown. Having examined the record and concurrent findings of fact, the Court found no such feature warranting interference. [Paras 19]

No reappreciation of evidence; revisional interference declined

Sentencing discretion and modification in NI Act cases - Civil character of Section 138 offence to be considered in sentencing - Sentence was modified having regard to the nature of the offence and personal circumstances - HELD THAT: - Although the trial Court imposed rigorous imprisonment for one year and a fine equal to twice the cheque amount, the High Court noted the civil flavour of offences under the N.I. Act and considered the accused's age, occupation and lack of past record. Exercising sentencing discretion, the Court upheld conviction but reduced the monetary penalty and altered the default custodial term to better match the offence's character and mitigating factors. [Paras 21, 22]

Sentence modified: conviction upheld; fine reduced and default imprisonment limited as ordered

Final Conclusion: The criminal revision petition is partly allowed: concurrent convictions under Section 138, N.I. Act are affirmed for lack of rebuttal of the statutory presumption and absence of any glaring miscarriage of justice, but the sentence is modified - the conviction stands while the fine and default imprisonment are reduced as directed; the case is disposed of.

Extraordinary jurisdiction of High Court under inherent powers to quash interlocutory orders - freezing and defreezing of bank accounts during criminal investigation - cooperation with investigation and compliance with notices under Sections 91 and 160 Cr.P.C. - conditional release of attached assets subject to bank guarantee and undertaking

Freezing and defreezing of bank accounts during criminal investigation - conditional release of attached assets subject to bank guarantee and undertaking - Validity of the magistrate's order dismissing the petition to defreeze the petitioner's bank account and the appropriate relief, if any, to be granted. - HELD THAT: - The High Court found that the Investigating Officer initially opposed defreezement on the ground of non-cooperation, but during pendency of the petition the petitioner furnished information and an authorised signatory responded to notices under Sections 91 and 160 Cr.P.C.; the Investigating Officer thereafter completed investigation and filed a charge sheet. The Court observed that neither party produced clear documentary proof in the petition of the exact amount transferred into the petitioner's frozen account, and that continued freezing served no useful purpose where investigation had been completed and the petitioner had cooperated. Balancing the investigative interest of the State against the commercial and operational prejudice to the petitioner, the Court exercised its inherent jurisdiction to quash the impugned order and directed defreezement on specific conditions to preserve the prosecution's ability to proceed: furnishing a bank guarantee for the amount the petitioner sought to withdraw and an undertaking to cooperate with investigation and trial. The Court also noted the police concern about verification of credentials and potential dissipation of funds if unconditional release were ordered, and tailored the relief to address that concern by imposing protective conditions. [Paras 22, 23, 24, 28, 29]

Impugned order dated 04.12.2020 quashed; bank account ordered to be defrozen subject to petitioner furnishing a bank guarantee for the amount sought and giving an undertaking to cooperate with the Investigating Officer and the trial Court.

Final Conclusion: The Criminal Petition is allowed: the magistrate's order dismissing the application to defreeze the petitioner's bank account is quashed and the Investigating Officer is directed to defreeze the account on condition that the petitioner furnishes a bank guarantee for the sum it sought to withdraw and undertakes to cooperate with further investigation and the trial.

Quashment of criminal proceedings under Section 482 Cr.P.C. - Cheating and criminal breach of trust arising from inter-corporate deposit - Dishonest intention at the inception of transaction - Distinction between civil remedy and criminal prosecution - Scope and limits of High Court's power to quash to prevent abuse of process

Quashment of criminal proceedings under Section 482 Cr.P.C. - Dishonest intention at the inception of transaction - Whether the criminal proceedings under Sections 420, 406 and 120B IPC arising out of an alleged inter-corporate deposit should be quashed at the investigation stage for want of fraudulent or dishonest intention at the time of transaction. - HELD THAT: - The High Court declined to quash the prosecution. On the material on record the inter-corporate deposit was indisputably credited to the borrower's account and, on the same day, an amount was diverted to another account maintained by the petitioner, which the State invites the investigation to examine as indicative of dishonest intention. The petitioner's reliance on earlier decisions establishing that mere inability to repay or subsequent breach does not automatically indicate pre-existing dishonest intention was noted, but the Court observed that those principles must be applied after adequate material is collected. Given that the matter is at the initial stage of investigation and the Criminal Investigation Department has assumed charge, the Court held that it would be inappropriate to take a final view on existence or absence of mens rea without a full investigation and collection of evidence. The Court reiterated that power under Section 482 Cr.P.C. is to be exercised sparingly and not to short-circuit a prosecution, particularly where legal evidence may, upon investigation, or may not, support the accusations.

The application for quashment was refused; proceedings under Sections 420, 406 and 120B IPC shall continue and be investigated by CID.

Distinction between civil remedy and criminal prosecution - Scope and limits of resort to Section 138 N.I. Act vis-a -vis IPC prosecution - Whether availability of civil remedies and a pending prosecution under Section 138 N.I. Act precludes continuation of a separate criminal prosecution under IPC for alleged cheating or criminal breach of trust. - HELD THAT: - The Court affirmed the settled principle that existence of civil remedies, or even a separate prosecution under Section 138 of the Negotiable Instruments Act, does not by itself bar criminal prosecution under IPC where ingredients of the alleged offences (such as dishonest intention or entrustment) require independent inquiry. The Court observed that the offences complained of under Sections 420 and 406 IPC are distinct in nature from remedies under civil law or NI Act and may legitimately be investigated concurrently, subject to proof of the necessary ingredients following investigation.

Availability of civil remedy and the pending NI Act proceeding do not preclude the continuance of the IPC prosecution; the criminal investigation may proceed.

Duty to investigate and expedite CID investigation - The appropriate procedural course where investigation into alleged corporate financial fraud has been assumed by CID. - HELD THAT: - Recognising the commercial complexity and the need for material collection, the Court directed that the CID, which has taken over investigation, should expedite the inquiry and submit its outcome within a reasonable period. The Court emphasised that, given the stage of proceedings, thorough investigation is necessary before any judicial determination whether the allegations disclose criminality or are merely civil wrongs.

Investigation by CID shall proceed and be expedited; the Case Diary to be returned forthwith.

Final Conclusion: The revisional application for quashment was dismissed. The criminal proceedings under Sections 420, 406 and 120B IPC will continue and be investigated by CID (which is directed to expedite the investigation); the pendency of civil remedies or a Section 138 NI Act case does not bar the IPC prosecution at this stage.