TaxTMI Updates e-Newsletter
May 18,2020

Contempt of court - interim order - wilful disobedience - direction to refund with applicable interest - income tax refund under the Income Tax Act, 1961

Contempt of court - interim order - wilful disobedience - direction to refund with applicable interest - Whether the respondents wilfully disobeyed the interim order dated 17th January, 2020 by failing to refund the amount due to the petitioner and whether contempt proceedings should be initiated. - HELD THAT: - The interim order of 17th January, 2020 required the respondents to refund the amount due within four weeks along with applicable interest only if there was no impediment to granting the refund; otherwise a reply was to be filed within the same period. The Court found that the directions were conditional and did not contain specific, unqualified commands concerning an income tax refund under the Income Tax Act, 1961. On the facts and submissions before the Court, there was no demonstrable wilful disobedience of the interim order by the respondents. Further, the respondents' counsel stated that the refund claim had been processed and would be credited to the beneficiary account within a week. In these circumstances the petition for contempt could not be sustained and required dismissal. [Paras 2, 3, 4]

Contempt petition dismissed; no finding of wilful disobedience and respondents' statement about processing the refund noted.

Final Conclusion: The contempt petition was dismissed as the interim order was conditional, no wilful disobedience was found, and the respondents represented that the refund had been processed and would be credited shortly.

Pure question of fact - substantial question of law - appellate interference on findings of fact - invocation of Section 145(3) of the Income Tax Act - remand report - estimation of income in absence of books or vouchers - deletion of addition by Commissioner of Income Tax (Appeals)

Pure question of fact - appellate interference on findings of fact - remand report - deletion of addition by Commissioner of Income Tax (Appeals) - invocation of Section 145(3) of the Income Tax Act - estimation of income in absence of books or vouchers - Validity of the Tribunal's and CIT(A)'s deletion of the addition made by the AO on account of alleged change in net profit ratio, and whether that decision raised a substantial question of law warranting interference by the High Court. - HELD THAT: - The Court examined the Tribunal's upholding of the Commissioner (Appeals) whose order deleted the addition made by the Assessing Officer after a remand. The remand proceedings involved verification of the books of account, and the remand report recorded that no discrepancy was found on examination of the books. Applying the principle that appellate courts will not normally disturb findings of fact, the High Court held that the questions raised by the Revenue were factual in character and did not disclose any substantial question of law. Consequently, the Court treated the Revenue's challenges - including the contention that Section 145(3) could be invoked and that income could be estimated in absence of vouchers - as factual/contention matters that did not justify judicial interference with the concurrent factual findings of the authorities below. [Paras 4, 5]

The Revenue's appeal is dismissed on the ground that the questions raised are pure questions of fact and not substantial questions of law, and no interference with the Tribunal's order deleting the addition is warranted.

Final Conclusion: Revenue's appeal against the Tribunal's order deleting the addition is dismissed as the challenged contentions are factual in nature and do not constitute substantial questions of law; the Tribunal's confirmation of the CIT(A)'s order is left undisturbed.

Classification of golf course as plant and machinery - Depreciation on land improvements versus land - Depreciation on plant and machinery - Accrual/mercantile system of accounting - Taxability of membership fees in the year to which they pertain - Refundable security deposit treated as capital receipt

Classification of golf course as plant and machinery - Depreciation on plant and machinery - Depreciation on land improvements versus land - Depreciation on cost of developing the golf course on land is allowable treating the golf course as plant and machinery. - HELD THAT: - The Tribunal, following the coordinate-bench precedent in the assessee's earlier years and on identical facts, held that a developed golf course functions as a tool of the business and is analogous to a plant for the purpose of the business. The tribunal rejected the AO's view that improvements merely enhance land value and thus are non-depreciable, and accepted the view that the golf course creates a service facility that produces revenue and therefore qualifies for depreciation as plant and machinery. Having found no change in facts or circumstances, the tribunal directed the AO to grant depreciation on the cost of developing the golf course accordingly for the assessment years under appeal. [Paras 7, 12, 15]

Grounds allowing depreciation on the golf course as plant and machinery are allowed and the AO is directed to grant depreciation for the relevant assessment years.

Accrual/mercantile system of accounting - Taxability of membership fees in the year to which they pertain - Refundable security deposit treated as capital receipt - Addition on account of security deposit and membership fees is to be deleted: refundable security deposits are capital receipts and not taxable in the year of receipt; membership fees are taxable in the year to which they pertain under accrual accounting and, if offered to tax in the relevant subsequent years, the addition is liable to be deleted. - HELD THAT: - Relying on the coordinate-bench analysis, the tribunal held that the assessee follows the mercantile/accrual system; membership fees received in advance are chargeable in the year to which they pertain and, where such fees have been offered in the relevant subsequent years on accrual basis, they should not be taxed in the year of receipt. Further, where the security deposit is refundable under the terms of membership it constitutes a deposit (capital receipt) and not income; the tribunal respectfully followed the Gujarat High Court precedent referenced by the coordinate bench and directed deletion of the addition relating to refundable security deposits, while directing the AO to verify the years in which any membership fee income has actually been offered. [Paras 10, 16]

Addition made on account of security deposit and membership fees is deleted to the extent indicated; AO to verify and tax membership fees in the year(s) to which they pertain if not already offered.

Final Conclusion: All three appeals for Assessment Years 2013-14, 2014-15 and 2016-17 are allowed: the AO is directed to allow depreciation on the cost of the golf course treating it as plant and machinery, and to delete the addition made in respect of refundable security deposits and membership fees in accordance with the tribunal's directions regarding accrual treatment and verification by the AO.

Revisionary jurisdiction under section 263 of the Income Tax Act - limitation under section 263(2) of the Income Tax Act - reopening of assessment under section 147 of the Income Tax Act - limitation to run from original assessment where revision concerns issues of original assessment

Revisionary jurisdiction under section 263 of the Income Tax Act - limitation under section 263(2) of the Income Tax Act - limitation to run from original assessment where revision concerns issues of original assessment - Validity of order under section 263 where the Principal Commissioner sought to revise aspects of the original assessment after the period prescribed by section 263(2). - HELD THAT: - The Tribunal held that where the Commissioner in exercise of revisional jurisdiction under section 263 proposes to revisit issues that pertain to the original assessment order (passed under section 143(3)), the period of limitation prescribed by section 263(2) begins to run from the date of the original assessment and not from a subsequent reassessment order passed under section 147. Applying this principle to the facts, the original assessment under section 143(3) was passed on 16.01.2014; accordingly the two year limitation under section 263(2) expired on 31.03.2016. The impugned revisionary order dated 26.02.2019 thus fell beyond the prescribed limitation. The Tribunal relied on the reasoning of the Supreme Court in CIT v. Alagendran Finance Ltd. and subsequent High Court decisions holding that where the subject matter of revision relates to the original assessment (and not to matters exclusively reopened under section 147), limitation for section 263 proceedings runs from the original assessment order. Having found that the PCIT's action sought to touch issues of the original assessment (production/quantum issues emanating from the Justice M.B. Shah report were treated as issues of the original assessment), the Tribunal concluded the revision was time barred and therefore without jurisdiction. The Tribunal expressly left all other contentions open. [Paras 19, 20]

Impugned order under section 263 quashed as barred by limitation; appeal allowed on that ground and other issues left open.

Final Conclusion: The order of the Principal Commissioner under section 263 dated 30.03.2019 is quashed as time barred because the revision related to issues of the original assessment passed on 16.01.2014; appeal allowed on this ground and remaining issues are left open for adjudication if necessary.

Section 14A disallowance - Applicability of Section 14A where no exempt income is earned - Principle of apportionment where mixed funds are used (Maxopp) - Pronouncement of orders under rule 34(5) of the ITAT Rules - 90 day norm and exceptions - Lockdown/force majeure as ground for excluding period for computation of time-limits

Section 14A disallowance - Applicability of Section 14A where no exempt income is earned - Disallowance under section 14A where the assessee did not earn any tax-exempt income in the relevant previous year. - HELD THAT: - On the undisputed factual finding that the assessee had not received any tax-exempt income in the relevant previous year, the Tribunal followed the decisions of the jurisdictional High Court and other High Courts which hold that Section 14A applies only where there is actual receipt (or receivable) of income which does not form part of total income in that year. The Tribunal rejected the revenue's contention that expenditure could be disallowed despite absence of exempt income, observing that decisions such as Maxopp, which address apportionment where exempt income exists, are not apposite where no exempt income was earned. Having regard to precedent including Ballarpur Industries Ltd and Cheminvest/Holcim analyses, the Tribunal held that Section 14A will not apply if no exempt income is received or receivable during the relevant previous year and accordingly deleted the disallowance sustained by the CIT(A). [Paras 3, 4, 5, 6]

Disallowance under section 14A deleted as Section 14A is not attracted where no exempt income was earned or receivable in AY 2013-14.

Principle of apportionment where mixed funds are used (Maxopp) - Whether the Maxopp principle of apportionment of interest (where mixed funds are used) required remand or application in the absence of exempt income. - HELD THAT: - The Tribunal observed that the Maxopp decision concerns situations where exempt income (e.g., dividend) was in fact earned in the relevant year and apportionment of mixed funds becomes relevant. Since no exempt income was earned in the year before the Tribunal, that principle was inapplicable to the facts and the Assessing Officer's grievance based on Maxopp became infructuous once Section 14A was held not to apply on the facts of the case. Consequently no separate apportionment exercise was required. [Paras 5, 6]

Revenue's contention based on apportionment under Maxopp rendered infructuous by the primary finding that no exempt income was earned; no remand for apportionment was necessary.

Pronouncement of orders under rule 34(5) of the ITAT Rules - 90 day norm and exceptions - Lockdown/force majeure as ground for excluding period for computation of time-limits - Whether the delay in pronouncement of the Tribunal's order beyond 90 days from conclusion of hearing was permissible in view of the COVID-19 lockdown and related extraordinary circumstances. - HELD THAT: - The Tribunal acknowledged rule 34(5)'s expectation that orders be pronounced ordinarily within 90 days of conclusion of hearing but noted the statutory use of the word "ordinarily." Having regard to the nationwide lockdown, government notifications treating the pandemic as a disaster/force majeure, and extensions of limitation by higher courts, the Tribunal held that the lockdown period should be excluded when computing the 90-day period. The bench therefore treated the delay as falling within the exception contemplated by rule 34(5)(c) and by contemporaneous judicial and executive measures addressing the pandemic's disruption. [Paras 7, 8, 9, 10, 11]

Delay in pronouncement beyond 90 days was justified by the COVID-19 lockdown and the period of lockdown is to be excluded in computing the 90-day time-limit under rule 34(5).

Final Conclusion: The assessee's appeal is allowed by deleting the section 14A disallowance for AY 2013-14 on the ground that no exempt income was earned in the relevant year; the revenue's cross-appeal is dismissed as infructuous. The Tribunal further holds that the delay in pronouncing the order beyond 90 days is excused by the COVID-19 lockdown and related force majeure considerations, and the lockdown period is to be excluded for computation of the 90-day norm under rule 34(5).

Monetary threshold for filing appeals - application of departmental litigation policy - CBDT circular No.17/2019 read with Circular No.3/2018 - withdrawal or non-pressing of appeals below specified tax limits - retrospective application to pending appeals - liberty to seek recall/ restoration on verification or exceptions

Monetary threshold for filing appeals - CBDT circular No.17/2019 read with Circular No.3/2018 - withdrawal or non-pressing of appeals below specified tax limits - retrospective application to pending appeals - Whether appeals filed by the Revenue for the assessment years indicated are maintainable in view of CBDT circular No.17/2019 raising the monetary limit for filing appeals before the Tribunal to Rs.50,00,000 and its application to pending appeals. - HELD THAT: - The Tribunal held that CBDT Circular No.17/2019, which amends paragraph nos. 3 and 5 of Circular No.3/2018 and raises the monetary limit for filing appeals before the Appellate Tribunal to Rs.50,00,000, applies to pending appeals and permits withdrawal or non-pressing of appeals below the specified tax limit. Paragraph 13 of the earlier circular, preserving retrospective application to pending appeals, remains intact and supports summary dismissal of appeals where tax effect does not exceed the prescribed threshold. The Tribunal also relied on the Supreme Court's application of the same departmental policy in Keshav Power Ltd. to dismiss a petition where the tax effect was below the higher threshold, treating policy compliance as a valid ground for non-pressing appeals. Applying these principles, and noting that the consolidated tax effect in the present appeals does not exceed Rs.50,00,000, the Tribunal treated the Revenue's appeals as non-maintainable and dismissed them. The Tribunal further granted liberty to the Revenue to seek recall and restoration of any appeal wrongly dismissed if, upon verification, it can be shown that an appeal falls within permitted exceptions or the tax effect was miscomputed. [Paras 6, 7, 8, 9, 10]

All four appeals for the assessment years 2011-12, 2012-13, 2013-14 and 2014-15 are dismissed as withdrawn/non-maintainable under the departmental litigation policy embodied in CBDT Circular No.17/2019, with liberty to the Revenue to seek recall where exceptions or miscomputations can be demonstrated.

Final Conclusion: Following CBDT Circular No.17/2019 read with Circular No.3/2018 and the Supreme Court's approach in Keshav Power Ltd., the Tribunal dismissed the Revenue's four appeals for AYs 2011-12 to 2014-15 as non-maintainable since the tax effect does not exceed Rs.50,00,000, while allowing the Revenue liberty to seek recall and restoration upon satisfactory verification of exceptions or miscomputation.

Computation of profits of life insurance business under Section 44 and the First Schedule - Taxation of shareholder's account surplus as part of life insurance business income - Actuarial valuation and treatment of Funds for Future Appropriation and declared bonuses in computing actuarial surplus - Deductibility of donations under section 37(1) and alternative claim under Chapter VI-A - Exemption of dividend income under section 10(34) and applicability of section 14A - Remand for verification of eligibility under section 80G - Directions for recomputation of earlier years' losses and set-off under section 72 - Prematurity of challenge to initiation of penalty proceedings under section 271(1)(c)

Taxation of shareholder's account surplus as part of life insurance business income - Computation of profits of life insurance business under Section 44 and the First Schedule - Profit shown in the shareholder's profit and loss account is part of the profits of the life insurance business and taxable under the regime of Section 44 read with the First Schedule and Section 115B. - HELD THAT: - The Tribunal followed coordinate-bench precedent in the assessee's own case (ICICI Prudential and subsequent approvals) and the reasoning that a life insurer is not permitted to carry on other business, investments from shareholder funds are integral to the life insurance business, and Section 44's non-obstante clause mandates computation under the First Schedule. In absence of any change in facts and given binding coordinate-bench and High Court approval (subject to SLP not stayed), the Tribunal held that the shareholder's account surplus must be aggregated with policyholders' results and taxed as life insurance business income under Section 115B. The principle of consistency and prior acceptance by Revenue in earlier years reinforced this conclusion. [Paras 11]

Ground No.2 allowed; shareholder's P&L profit to be treated as income from life insurance business.

Actuarial valuation and treatment of Funds for Future Appropriation and declared bonuses in computing actuarial surplus - Computation of profits of life insurance business under Section 44 and the First Schedule - Actuarial surplus must be determined in accordance with the actuarial valuation format contemplated by Rule 2 and the erstwhile Form G/H/I/Form I approach; amounts appropriated to Funds for Future Appropriation and declared bonuses are to be treated as liabilities/reductions while computing actuarial surplus. - HELD THAT: - Relying on the coordinate-bench decision in the assessee's own case, the Tribunal held that Rule 2 requires actuarial valuation in accordance with the Insurance Act (pre-IRDA formats) and that FFA and bonus allocations represent ascertained liabilities or earmarked amounts for policyholders. Such amounts cannot be treated as part of the actuarial surplus available to shareholders. The Tribunal applied authorities interpreting Rule 2 and decisions on recognition of present obligations (including reliance on precedents regarding provisions that are presently incurred though payable in future) to conclude that FFA and declared bonuses must be excluded from actuarial surplus for taxation under Section 44/First Schedule. [Paras 16, 21]

Grounds No.3, 4 and 5 allowed; FFA and bonus allocations are not taxable as part of actuarial surplus.

Deductibility of donations under section 37(1) and alternative claim under Chapter VI-A - Remand for verification of eligibility under section 80G - The disallowance of the donation under Section 37(1) is sustained; the alternative claim for deduction under Section 80G is remitted to the Assessing Officer for verification of conditions. - HELD THAT: - Following the coordinate-bench precedent, the Tribunal confirmed the disallowance under Section 37(1) because Section 44 prescribes the special computation for life insurance business and excludes application of sections 28 to 43B; the assessee had not earlier demonstrated entitlement under Section 80G before the lower authorities. However, the Tribunal admitted the additional alternative ground and, consistent with coordinate-bench practice, set aside the alternative claim to the file of the AO to verify satisfaction of statutory conditions for Section 80G and decide afresh. [Paras 23, 29]

Ground No.6 confirmed (disallowance upheld); additional ground remanded to AO for verification under Section 80G.

Exemption of dividend income under section 10(34) and applicability of section 14A - Computation of profits of life insurance business under Section 44 and the First Schedule - Dividend income is exempt under Section 10(34) for an assessee carrying on life insurance business computed under Section 44; Section 14A is not applicable at the stage of computing income under Section 44. - HELD THAT: - Relying on coordinate-bench authority (ICICI Prudential and related approvals), the Tribunal held that Section 44 creates a specific regime for computing life insurance business income, and the exemption under Section 10(34) applies to dividend income arising in that computation. The Tribunal rejected the Revenue's contention that Section 14A applies at this stage, observing that applicability of Section 14A must be considered at the computation stage under Section 44 and that coordinate-bench precedents have held Section 14A inapplicable to profits and gains of insurance business in this context. [Paras 34]

Ground No.7 allowed; dividend income exempt under Section 10(34).

Directions for recomputation of earlier years' losses and set-off under section 72 - Computation of profits of life insurance business under Section 44 and the First Schedule - The Tribunal amended the CIT(A)'s directions regarding recomputation of earlier years' losses and grant of set-off under Section 72 in line with the coordinate-bench decision for earlier assessment years. - HELD THAT: - Having considered the coordinate-bench rulings in the assessee's own case, the Tribunal found no factual distinction and therefore amended the CIT(A)'s directions as per the coordinate-bench precedent. The Tribunal directed that recomputation and set-off be carried out in accordance with law as clarified by the earlier coordinate-bench decision. [Paras 38]

Ground No.8 allowed as amended in accordance with coordinate-bench directions.

Prematurity of challenge to initiation of penalty proceedings under section 271(1)(c) - The ground challenging initiation of penalty proceedings under Section 271(1)(c) is dismissed as premature. - HELD THAT: - No penalty had been levied and therefore a challenge to initiation was held to be premature and not maintainable at this stage. [Paras 39]

Ground No.9 dismissed as premature.

Final Conclusion: The appeal is partly allowed: the Tribunal, following binding coordinate-bench precedents in the assessee's own case, held that shareholder's account profits, actuarial surplus computation (including treatment of FFA and declared bonuses), dividend exemption under Section 10(34), and directions on recomputation/set-off are to be decided in favour of the assessee as specified; the disallowance of the donation under Section 37(1) is confirmed while the alternative Section 80G claim is remitted to the Assessing Officer for verification; the challenge to initiation of penalty proceedings is dismissed as premature.

Diversion of income by overriding title - application of income - sham agreement - revenue sharing agreement - related-party transaction - allowability of expenditure - precedent of coordinate bench

Sham agreement - related-party transaction - precedent of coordinate bench - Validity of the revenue sharing agreement and whether the disallowance made by the AO on the ground that the agreement is a sham should be sustained. - HELD THAT: - The Tribunal examined the assessing officer's reasons for disallowance (including the AO's finding that the agreement was an afterthought, contradictory documentation, lack of fund movement, absence of TDS, and that the arrangement was a device to divert profits to the holding company). The Bench followed the coordinate bench decision in the assessee's own cases for earlier assessment years, which had considered the identical agreement and factual matrix at length and rejected the Revenue's contention that the agreement was a sham. In light of that binding coordinate bench treatment of the same agreement and identical grounds, the Tribunal found no merit in sustaining the AO's disallowance and dismissed the Revenue's appeal against deletion of the addition. [Paras 10]

Revenue's appeal dismissed; the agreement is not held to be a sham for AY 2012 13 and the disallowance is not sustained.

Diversion of income by overriding title - application of income - revenue sharing agreement - precedent of coordinate bench - Characterisation of the payment under the revenue sharing agreement - whether it amounted to diversion of income by overriding title or merely application of income. - HELD THAT: - Relying on and following the coordinate bench reasoning (which applied authorities such as Sitaldas Tirathdas and Dalmia Cement), the Tribunal accepted the view that where a superior title is created before income accrues (or an obligation exists at source), the income is diverted by an overriding title. The coordinate bench had found that the holding company had a lien/charge over 25% of the sales proceeds by virtue of contributions and the agreement, so that the assessee acted as a collector for the holding company and the relevant share did not form part of the assessee's income. The present Bench adopted that analysis and held the payment to be diversion by overriding title rather than mere post receipt application. [Paras 11]

Payment under the revenue sharing agreement is held to be diversion of income by overriding title; the Tribunal allows the assessee's appeal on this point following the coordinate bench.

Allowability of expenditure - revenue sharing agreement - precedent of coordinate bench - Whether the assessee could claim deduction for expenditure payable under the arrangement (including the contention regarding a 25% deduction or alternative computation) and related computation methodology. - HELD THAT: - The Tribunal, applying the coordinate bench determination for the earlier assessment years and noting no change in the material facts, held that the expenditure/disbursement as dealt with by the coordinate bench is allowable in the hands of the assessee. The Bench therefore allowed the assessee's grounds seeking grant of relief and directions similar to those issued in the earlier decisions, rejecting the AO's and Revenue's contention that the Tribunal or CIT(A) impermissibly adopted a method of computing reasonable expenditure or that the assessee was not entitled to the deduction. [Paras 12]

Assessee's grounds 2-4 allowed; deduction is permitted in accordance with the coordinate bench directions.

Final Conclusion: For Assessment Year 2012 13 the Tribunal dismissed the Revenue's appeal and allowed the assessee's appeal: the revenue sharing agreement with the holding company is not a sham, the payments under it are diversion of income by overriding title (and are therefore dealt with as held by the coordinate bench), and the related deductions are allowable in accordance with the coordinate bench directions.

Arm's length price - transfer pricing - comparability analysis - turnover filter - working capital adjustment - risk adjustment - deduction under section 10A - captivity / captive service provider

Turnover filter - comparability analysis - Validity of excluding high turnover companies from the comparables list when assessing comparability with a captive service provider - HELD THAT: - The Tribunal examined whether companies with substantially higher turnover than the assessee could be excluded as non comparables. Having reviewed precedent from coordinate benches and higher courts, and noting the absence of a jurisdictional High Court decision contrary to the view followed, the Tribunal held that turnover is a relevant criterion for comparability and that companies with turnover materially higher than the assessee may be excluded. Applying that principle, the Tribunal found no infirmity in excluding the listed high turnover companies from the comparables selected by the TPO/ AO. [Paras 12]

Revenue's objection to exclusion of certain high turnover comparables is rejected; exclusion of those comparables is upheld.

Risk adjustment - transfer pricing - Direction to grant ad hoc 1% risk adjustment and the appropriate approach to determination of risk adjustment - HELD THAT: - The DRP had directed a 1% ad hoc risk adjustment. The Tribunal found that risk adjustment must be supported by analysis of risks assumed by comparables and that the assessee should provide necessary details; if comparables' information is lacking, the revenue can use statutory powers to obtain it. The Tribunal therefore allowed the ground for statistical purposes and directed the AO/TPO to compute risk adjustment in accordance with law, on the basis of proper information or by exercising powers to obtain it. [Paras 13]

Ground allowing computation of risk adjustment stands allowed for statistical purposes; AO/TPO to compute risk adjustment in accordance with law.

Deduction under section 10A - export turnover - Whether bandwidth and travel expenses in foreign currency should be excluded from export turnover for computing deduction under section 10A - HELD THAT: - DRP had directed the AO to follow the ratio of the Karnataka High Court in CIT v. Tata Elxsi and to exclude bandwidth and travel expenses from export turnover when computing the section 10A deduction. The Tribunal found no infirmity in directing the AO to recompute export turnover in accordance with that ratio and accepted DRP's direction. [Paras 14]

Revenue's ground on this issue is dismissed; AO to recompute export turnover and section 10A deduction in line with Tata Elxsi ratio as directed by DRP.

Comparability analysis - captivity / captive service provider - Comparability of specific companies proposed as comparables for the assessee's SWD and ITES segments and direction on how each comparable should be treated - HELD THAT: - The Tribunal undertook FAR based assessment of comparability in respect of the challenged comparables. For the SWD segment, Persistent Systems & Solutions Ltd. was excluded because segmental details were absent and the company carried activities not shown as comparable; ICRA Techno Analytics Ltd. was found functionally dissimilar and excluded. KALS Information Systems Ltd. raised factual issues (inventories/ product sales) which the DRP had not verified; accordingly the Tribunal set aside consideration of this comparable to the DRP for verification and a detailed order. For the ITES segment, Accentia Technologies Ltd. had undergone an acquisition and its results were affected by extraordinary events, so it was deleted from the final list; ICRA Online Ltd. was remitted to the AO/TPO for fresh consideration consistent with earlier remands in similar cases. The Tribunal thus allowed the assessee's ground on comparables and directed exclusions or remands as indicated. [Paras 16]

Assessee's challenge to specific comparables is allowed: certain comparables excluded, one sent back to DRP for verification, and another remanded to AO/TPO for fresh consideration.

Working capital adjustment - transfer pricing - Validity of the working capital adjustment percentages adopted by the AO/TPO and the need for recomputation - HELD THAT: - The Tribunal noted that the AO/TPO denied working capital adjustment on the ground that the assessee did not furnish requisite details, but found that the TPO must compute working capital adjustment in actual terms where possible. The assessee was directed to provide necessary details for all comparables finally selected; if information is insufficient, the revenue must use statutory powers to obtain it. The Tribunal directed recomputation of the working capital adjustment in accordance with law and relevant precedents. [Paras 17]

Assessee's ground on working capital adjustment is allowed for statistical purposes; AO/TPO directed to recompute working capital adjustment in accordance with law.

Set off of brought forward loss - Allowability of carry forward/set off of loss pertaining to AY 2009 10 claimed by the assessee - HELD THAT: - The Tribunal observed that the assessee's contention regarding the brought forward loss requires verification of assessment records for AY 2009 10. Both parties sought verification by the AO/TPO. The Tribunal directed the AO/TPO to verify the claim and, if substantiated, to allow it in accordance with law. [Paras 18]

Assessee's ground on carry forward/set off of loss is allowed for statistical purposes and remitted to AO/TPO for verification and decision in accordance with law.

Final Conclusion: Revenue's appeal is dismissed in part and the DRP directions are upheld as indicated. Assessee's appeal is allowed in part: specified comparables were excluded or remitted for verification/fresh consideration, working capital and risk adjustments were directed to be recomputed in accordance with law, and the carry forward loss claim remitted to AO/TPO for verification; consequential recalculations to be carried out as directed.

Transfer pricing adjustment on interest for delayed receivables - international transaction - interest on trade receivables - working capital adjustment and potential double counting - remand to Assessing Officer/Transfer Pricing Officer for fresh verification - deduction under section 80-IB(8A) consequential upon disallowances - relevance of accounting provisions and mercantile system for provision for expenses - verification of Tax Deducted at Source credit

Transfer pricing adjustment on interest for delayed receivables - international transaction - interest on trade receivables - working capital adjustment and potential double counting - remand to Assessing Officer/Transfer Pricing Officer for fresh verification - Whether interest on outstanding receivables from Associated Enterprises constitutes an international transaction and whether the transfer pricing adjustment made by TPO/AO should be sustained. - HELD THAT: - The Tribunal followed the Special Bench decision in Instrumentation Corpn. Ltd. v. Asstt. DIT and relevant coordinate decisions holding that outstanding trade receivables can be akin to a loan and thus fall within the Explanation to section 92B, so that interest on delayed receivables may constitute an international transaction. The Tribunal recognised the competing line of authorities and the contention that working capital adjustment might subsume such receivables, avoiding double taxation. In view of these contrary authorities and the need for factual enquiry into whether the receivables were subsumed in working capital adjustment (including examination of patterns, commercial agreements and impact on working capital), the Tribunal set aside the impugned findings and remitted the matter to the file of the AO/TPO for fresh decision in conformity with the cited decisions, granting the assessee reasonable opportunity to be heard. [Paras 11]

Impugned transfer pricing adjustment on interest on receivables set aside and remitted to AO/TPO for fresh adjudication in conformity with the referred decisions; grounds allowed for statistical purposes.

Deduction under section 80-IB(8A) consequential upon disallowances - effect of disallowance on deduction computations - Whether disallowance of certain expenses should be ignored while computing deduction under section 80-IB(8A) or whether the deduction must be recomputed in law after making the disallowances. - HELD THAT: - The Tribunal noted that disallowances made under section 37 increased the income of the assessee and therefore affected the quantum of deduction under section 80-IB(8A). Relying on this Tribunal's earlier decision in the assessee's own case and the ratio of the Bombay High Court in CIT vs. Gem Plus Jewellery, the Tribunal held that the disallowances cannot be ignored and directed the AO to compute the deduction under section 80-IB(8A) in accordance with law having regard to the cited ratio. [Paras 12]

Directed AO to recompute deduction under section 80-IB(8A) after giving effect to the disallowances; ground allowed.

Relevance of accounting provisions and mercantile system for provision for expenses - verification of provision for expenses for tax and MAT purposes - remand to Assessing Officer for factual verification - Whether the provision for expenses recorded in the books (claimed as expenditure and added back under section 115JB) was properly disallowed as contingent/unascertained without verification and whether it should be verified by the AO. - HELD THAT: - The Tribunal observed that the AO had not verified the assessee's claim that the provision was created in the relevant year, maintained under the mercantile system, and accepted by the statutory auditor. The Departmental Representative conceded that verification was appropriate. Consequently, the Tribunal directed the AO to verify the claim and, if found in order, to allow it in accordance with law. The direction applies both to normal computation and for book profits under section 115JB. [Paras 14]

Directed AO to verify the provision for expenses and grant relief if established; ground allowed for statistical purposes.

Verification of Tax Deducted at Source credit - jurisdictional scope of DRP under section 144C - remand to Assessing Officer for verification of TDS credit - Whether the assessee is entitled to TDS credit claimed in the return which was not verified by the AO and which DRP declined to adjudicate. - HELD THAT: - The DRP declined to adjudicate the ground on the basis that under section 144C it may adjudicate only variations proposed in the draft assessment order. The Tribunal noted that the AO also did not verify the TDS credit in the final order. Both parties agreed the matter should be referred back. The Tribunal therefore directed the AO to verify and consider the TDS credit claim on the basis of documents on record and in accordance with law. [Paras 15]

Directed AO to verify and consider the TDS credit claim; ground allowed for statistical purposes.

Final Conclusion: Appeal partly allowed: Transfer pricing adjustment on interest on receivables remitted to AO/TPO for fresh adjudication; AO directed to recompute deduction under section 80-IB(8A) after giving effect to disallowances; AO directed to verify provision for expenses (including consequences for section 115JB) and to verify claimed TDS credit; other grounds disposed accordingly.

Assumption of jurisdiction under section 147 of the Income-tax Act - reason to believe - approval under section 151 of the Income-tax Act - ex-parte disposal - principles of natural justice / opportunity of hearing - remand for fresh adjudication - addition on account of unexplained bank deposits

Ex-parte disposal - principles of natural justice / opportunity of hearing - remand for fresh adjudication - Whether the ex-parte disposal by the CIT(A) was valid and whether the matter ought to be remanded for fresh hearing. - HELD THAT: - The Tribunal found that the CIT(A) dismissed the appeal ex-parte for non-prosecution without considering the merits of the appellant's contentions and without affording a fair opportunity of hearing. As the CIT(A) has not recorded any adjudicatory reasoning on the substantive grounds raised before it, the proper course is to remit the matter to the file of the CIT(A) for fresh adjudication on merits. The assessee must be granted an opportunity of hearing in accordance with the principles of natural justice before the appellate authority decides the appeal afresh. [Paras 7]

Matter remanded to the CIT(A) for fresh adjudication and opportunity of hearing; appeal partly allowed for statistical purposes.

Assumption of jurisdiction under section 147 of the Income-tax Act - reason to believe - approval under section 151 of the Income-tax Act - addition on account of unexplained bank deposits - remand for fresh adjudication - Whether initiation of proceedings under section 147, the assessment completed under section 147/143(3), and the addition of alleged unexplained deposits are sustainable on the material on record. - HELD THAT: - The Tribunal did not decide these substantive contentions on merits. The assessee had challenged the validity of reopening (absence of specific, reliable and tangible material to form a reason to believe, and alleged lack of requisite approval) and contested the addition made in respect of alleged unexplained deposits. Because the CIT(A) disposed of the appeal without examining these matters, the Tribunal remanded the entire controversy-including the validity of the reopening, the sufficiency of reasons, any requirement of approval, and the addition for unexplained deposits-to the CIT(A) for fresh consideration on merits. [Paras 7]

Substantive issues regarding reopening, jurisdictional validity and the addition are remanded to the CIT(A) for fresh adjudication on merits.

Final Conclusion: The appeal is partly allowed for statistical purposes by remanding the matter to the CIT(A) for fresh adjudication on merits; the assessee shall be afforded a hearing consistent with principles of natural justice.

Recall of ex parte order - non-appearance and adjournment - power to review or amend ex parte decision under Section 254(2) of the Income-tax Act, 1961 - remand to Assessing Officer for verification of title and genuineness of transaction - opportunity of hearing before fresh decision

Recall of ex parte order - non-appearance and adjournment - opportunity of hearing before fresh decision - Miscellaneous application seeking recall of the Tribunal's ex parte order dated 12/12/2019 was dismissed. - HELD THAT: - The Tribunal found that notice for hearing was duly served on the assessee through the Assessing Officer and that nobody appeared on behalf of the assessee nor was any adjournment sought on the date fixed. The assessee's explanation that the Chartered Accountant would appear was unsupported by any prior authorisation on record; the power of attorney relied upon was executed only after the impugned order. The Tribunal further observed that the ex parte disposal recorded reasons for proceeding in the absence of the assessee and that there was no allegation that any relevant material had been left unconsidered by the Tribunal which could have affected the outcome. Although the law permits recalling an ex parte order where satisfactory reasons for non-appearance are shown, the assessee failed to establish such a plausible reason; recall would therefore be futile because the Tribunal had not finally decided the merits but had directed remand for further enquiry. On these bases the Miscellaneous application was dismissed. [Paras 4]

Application to recall the ex parte order dismissed.

Remand to Assessing Officer for verification of title and genuineness of transaction - opportunity of hearing before fresh decision - The matter as to the genuineness of the alleged transfer and the assessee's title was remanded to the Assessing Officer for fresh enquiry and verification, with direction to afford the assessee opportunity of hearing. - HELD THAT: - The Tribunal noted that the assessment and appellate records revealed absence of verifiable title documents, non-registration of sale, doubts about the alleged purchaser's status and the assessee's share in ancestral land. Having considered the assessment history and the findings of the authorities below, the Tribunal concluded that these crucial facts required verification at the assessment stage. Consequently, the Tribunal set aside the matter to the record of the Assessing Officer for conducting proper enquiry-specifically to verify the assessee's share, availability of exclusive right for transfer, possession and real ownership, and the alleged transfer to a purchaser who is a native of Sikkim-and directed that the assessee be given a proper opportunity of hearing before passing any fresh order. [Paras 4]

Matter remanded to the Assessing Officer for enquiry and verification; assessee to be afforded opportunity of hearing before fresh order.

Final Conclusion: The Miscellaneous application to recall the Tribunal's ex parte order is dismissed; the Tribunal's earlier direction remanding the issue of genuineness of the alleged land transfer and the assessee's title to the Assessing Officer for verification, with an opportunity of hearing to the assessee, remains in force.

Application of Section 50C and admissibility of stamp duty/DVO valuation vis a vis declared sale consideration - treatment of distressed sale, tenancy and encumbrances in determination of fair market value - role and sufficiency of DVO report and requirement of comparable evidence for rebate/discount - allowability and computation of indexed cost of construction for long term capital gains

Application of Section 50C and admissibility of stamp duty/DVO valuation vis a vis declared sale consideration - treatment of distressed sale, tenancy and encumbrances in determination of fair market value - role and sufficiency of DVO report and requirement of comparable evidence for rebate/discount - Whether the full value of consideration for computing long term capital gains should be the amount adopted by the stamp duty authority / DVO or the sale consideration recorded in the sale deed, given that the property was occupied by tenants and the sale was a distressed transaction. - HELD THAT: - The Tribunal examined the DVO's adoption of DLC rates and a 15% rebate for distressed sale and found the DVO did not cite comparable sales or reasons adequate to justify the limited rebate despite recorded adverse factors (tenancy, low rents, pending litigation). The sale deed itself disclosed that the entire property was let at nominal rents and that disputes were pending, facts which would depress marketability and price unless vacant possession is delivered. In these circumstances the DVO's valuation, arrived at by applying standard DLC rates with a token 15% discount and without comparable evidence, was held not to represent the fair market value. The Tribunal concluded that the consideration agreed between the parties and reflected in the registered sale deed correctly represented the fair market price of the property and deleted the addition made by the AO and sustained by the CIT(A). [Paras 2]

Addition under Section 50C sustained by lower authorities deleted; declared sale consideration in the deed accepted as fair market value and addition deleted.

Allowability and computation of indexed cost of construction for long term capital gains - assessment of evidentiary sufficiency for year and cost of construction - What amount of indexed cost of construction is allowable where the assessee's claimed historical construction costs and the AO's estimates differ and the years of construction are otherwise accepted. - HELD THAT: - The Tribunal noted that both the AO and the DVO accepted the years of construction as claimed by the assessee (ground floor in 1984 85 and first floor in 2002 03), removing any basis to dispute the years. Given the wide disparity between the assessee's claimed indexed costs and the AO's lower estimation, the Tribunal adopted a pragmatic approach by averaging the two computations to arrive at a just and reasonable indexed cost of construction. The average was assessed to be appropriate in the facts of the case and the AO was directed to recompute the long term capital gain using the averaged indexed cost. [Paras 3, 4]

Average of assessee's and AO's indexed cost of construction allowed as deduction; AO directed to recompute long term capital gain accordingly.

Final Conclusion: Appeal partly allowed: addition based on DVO/stamp valuation under Section 50C deleted in favour of the recorded sale consideration; indexed cost of construction allowed at the average of the assessee's and AO's computations and the AO directed to recompute long term capital gain.

Classification of receipts as professional or business - Applicability of provisions of section 44AA/44AB to medical practitioners - Levy of penalty under section 271B for failure to get accounts audited

Classification of receipts as professional or business - Applicability of provisions of section 44AA/44AB to medical practitioners - Levy of penalty under section 271B for failure to get accounts audited - Whether the assessee, a qualified medical practitioner running a proprietary nursing home, is to be treated as a professional (thereby attracting the audit provisions) and whether the penalty under section 271B is justified. - HELD THAT: - The Tribunal examined the material facts and found it was not disputed that the assessee is a qualified Gynecologist and Anesthetist who attends and treats patients in OPD and runs a proprietary nursing home. The fact of running a nursing home does not convert a medical practitioner into a trader; operating the nursing home was held to be a mode of practising the medical profession and part of her professional activity. There was no evidence of salary receipts or a service agreement that would suggest an employment or business arrangement distinct from the profession. On these findings the Tribunal held that the assessee falls within the ambit of the provisions governing professionals and therefore the requirements of maintenance of accounts and audit under the provisions applicable to professionals (section 44AA read with section 44AB) were attracted. Consequentially, the penalty levied by the Assessing Officer under section 271B for failure to get accounts audited was held to have been rightly confirmed by the CIT(A); the Tribunal found no error in the appellate authority's reasoning and declined to interfere. [Paras 7, 9]

The assessee is a medical professional covered by the provisions relating to maintenance of accounts and audit; the penalty under section 271B as confirmed by the CIT(A) is sustained and the appeal is dismissed.

Final Conclusion: The appeal is dismissed; the Tribunal upholds the finding that the assessee is a medical professional subject to the audit provisions and sustains the penalty under section 271B as confirmed by the CIT(A).

Deduction under Section 54F - reinvestment in name other than assessee - Reinvestment in spouse's name - purposive construction of exemption provision - Reinvestment in sons' names - eligibility for deduction under Section 54F - Part-payment/advance treated as reinvestment - requirement of ownership/complete transaction - Expenditure not wholly and exclusively incurred for transfer - non-deductibility in computation of capital gains

Reinvestment in spouse's name - purposive construction of exemption provision - Deduction under Section 54F - reinvestment in name other than assessee - Allowability of deduction for reinvestment made in the name of the assessee's wife - HELD THAT: - The Tribunal applied the purposive construction endorsed by higher courts and accepted that where the entire purchase consideration proceeds from the assessee, acquisition of the new residential property in the name of the spouse does not preclude deduction under Section 54F. The Tribunal found the Bombay High Court and Delhi High Court decisions relied upon by the assessee supportive and held that the reinvestment of Rs. 6,90,000 in the name of the wife is eligible for deduction under Section 54F. [Paras 8, 9]

Reinvestment in the name of the wife allowed for deduction under Section 54F

Reinvestment in sons' names - eligibility for deduction under Section 54F - Deduction under Section 54F - reinvestment in name other than assessee - Claim for deduction in respect of amounts reinvested in the names of the assessee's sons - HELD THAT: - The Tribunal noted the distinction between investments in the spouse's name and investments in sons' names and accepted the Assessing Officer's and CIT(A)'s approach that reinvestments made in the names of the sons were not eligible for deduction under Section 54F on the material placed before them. The Tribunal found the discussion and conclusions of the lower authorities reasonable and declined to interfere with the disallowance of reinvestments in the sons' names. [Paras 10, 11]

Reinvestment in the names of the sons held ineligible for deduction under Section 54F; disallowance affirmed

Part-payment/advance treated as reinvestment - requirement of ownership/complete transaction - Remand for verification of ownership and quantum attributable to assessee - Treatment of Rs. 18,00,000 paid as advance against purchase and entitlement to deduction - HELD THAT: - The Tribunal found paucity of facts regarding ownership of the Rs. 18,00,000 paid to the vendee and observed that, notwithstanding incompleteness of the transaction, the assessee is entitled to deduction to the extent the contribution can be established as belonging to him. The matter was remanded to the Assessing Officer for examination and verification of the assessee's share in that sum. [Paras 12, 13]

Remitted to Assessing Officer to verify and allow deduction pro tanto for the portion of Rs. 18,00,000 that belongs to the assessee

Expenditure not wholly and exclusively incurred for transfer - non-deductibility in computation of capital gains - Deduction under Section 48 - expenses to perfect title or prevent litigation - Allowability of payments of Rs. 11,50,000 made to father's sisters and daughters as deduction from sale consideration for capital gains computation - HELD THAT: - The Tribunal examined documentary records, noting registered release deeds and mutation entries extinguishing the claimed rights of the father's sisters prior to the sale. It found that the recipients were not owners at the time of transfer and that the payments were not incurred as expenses wholly and exclusively for the purpose of the transfer of the capital asset. The Tribunal agreed with the CIT(A) that the payments appeared gratuitous and were not deductible under Section 48. [Paras 14, 15]

Payments to father's sisters and daughters disallowed as deduction in computation of capital gains

Final Conclusion: The appeal is partly allowed: deduction for reinvestment in the wife's name is allowed; reinvestments in sons' names are disallowed; the claim in respect of Rs. 18,00,000 is remitted to the Assessing Officer for verification of the assessee's entitlement; payments totalling Rs. 11,50,000 to non-owners are disallowed for capital gains computation.

Reconsideration/rectification of tribunal order (ROM) - restoration of application - modification of stay order - pre-deposit condition for stay - dilatory tactics and non-prosecution - recall of order

Reconsideration/rectification of tribunal order (ROM) - restoration of application - modification of stay order - pre-deposit condition for stay - dilatory tactics and non-prosecution - Whether the Tribunal should recall its order dated 05.06.2018 and restore the fourth modification application seeking further modification of the stay order dated 04.12.2013. - HELD THAT: - The Tribunal examined the history of repeated modification applications by the appellant arising from the stay order which required a pre-deposit of 10% of the penalty. Each modification application advancing the same pleas of financial difficulty was considered on merit and rejected, although time-limited extensions to deposit were granted on several occasions. The fourth modification application had been dismissed for non-prosecution, later restored, and ultimately heard on merits and dismissed on 05.06.2018. The present ROM application sought rectification/recall of that dismissal and restoration for fresh hearing on grounds of the appellant's ill-health and inability to pay. The Tribunal found these contentions to be repetitious and dilatory, observing that medical condition and financial difficulty had been repeatedly considered and rejected in earlier modification proceedings. Given the appellant's persistent failure to comply with the pre-deposit directions and the history of successive applications aimed at delaying compliance, no error or sufficient cause for recalling the 05.06.2018 order was found. Consequently the ROM application was dismissed.

The ROM application seeking recall of the order dated 05.06.2018 and restoration/re-hearing of the fourth modification application is dismissed.

Final Conclusion: The Tribunal dismissed the ROM application; having found repeated, meritless modification attempts and non-compliance with the pre-deposit direction, there was no justification to recall the 05.06.2018 order or to restore the modification application for re-hearing.

Existence of dispute under section 9(5)(i)(d) of the Code - Mobilox Innovations test for rebuttal of operational creditor's claim - effect of acknowledgment in writing on limitation under Section 18 of the Limitation Act, 1963 - admission criteria under section 9(5)(i) of the Insolvency and Bankruptcy Code, 2016 - declaration of moratorium under Section 14 of the Code - appointment and vesting of powers in Interim Resolution Professional under Sections 16 and 17 of the Code

Existence of dispute under section 9(5)(i)(d) of the Code - Mobilox Innovations test for rebuttal of operational creditor's claim - Whether a pre-existing dispute exists such that the application under section 9 is liable to be rejected. - HELD THAT: - The Tribunal applied the Mobilox standard and examined the communications relied upon by the corporate debtor. An early email alleging problems with the sorter (10-10-2015) did not specify particular defects and was outweighed by later emails of Quickdel dated 19-5-2016, 11-8-2016 and 12-8-2016 which acknowledged successful automation and approved payment. Objections to the authenticity of those acknowledgements were not substantiated. Other contentions (debit note for a different item, ERP-integration obligations not shown to be contractually covered, FIR references not implicating Grey Orange) were found irrelevant or unsupported. The Tribunal held that the dispute raised by Quickdel was patently feeble and unsupported by evidence. [Paras 14]

The alleged dispute is spurious, hypothetical and illusory and is rejected.

Effect of acknowledgment in writing on limitation under Section 18 of the Limitation Act, 1963 - Whether the application under section 9 was barred by limitation or saved by the written acknowledgement dated 2-8-2016. - HELD THAT: - The Tribunal noted that, in absence of specific dates of default in Part IV, limitation would prima facie run from the contractual commissioning date. However, Section 18 of the Limitation Act provides that a written acknowledgment of liability signed by the debtor restarts limitation from the date of the acknowledgment. The acknowledgement dated 2-8-2016 was signed by an accounts executive of Quickdel and no evidence was produced to show lack of authority. Authorities were referenced to establish that the fresh period runs from the date of signing, not the period referred to within the balance. Applying Section 18, the Tribunal held the acknowledgement restarted limitation and rendered the section 9 application timely. [Paras 17, 19]

The acknowledgement dated 2-8-2016 restarts limitation under Section 18 and the section 9 application is within time.

Admission criteria under section 9(5)(i) of the Insolvency and Bankruptcy Code, 2016 - Whether the application satisfies the statutory conditions for admission under section 9(5)(i). - HELD THAT: - The Tribunal found no objection to the completeness of the application. It concluded there was unpaid operational debt, that the demand notice under section 8 had been delivered, that no bona fide dispute existed as discussed above, and that no interim resolution professional was proposed (so disciplinary pendency was not an issue). These findings correspond to the cumulative conditions in section 9(5)(i). [Paras 20, 21]

The requirements of section 9(5)(i) are satisfied and the application is admitted for initiation of CIRP.

Declaration of moratorium under Section 14 of the Code - Whether moratorium should be declared upon admission of the section 9 application. - HELD THAT: - Upon admission, the Tribunal invoked Section 14(1) and declared moratorium, specifying its statutory effects (stay of suits and proceedings, prohibition on transfer or disposal of assets, bar on enforcement of security, and recovery of property occupied by the corporate debtor). The Tribunal also clarified supply-of-essential-goods carve-outs and the temporal scope of the moratorium until completion of CIRP or approval of a resolution plan or liquidation order. [Paras 22, 24]

Moratorium is declared with effect from the date of the order until completion of the CIRP or earlier order of the Tribunal.

Appointment and vesting of powers in Interim Resolution Professional under Sections 16 and 17 of the Code - Appointment of an Interim Resolution Professional and vesting of management powers upon appointment. - HELD THAT: - As no IRP was proposed by the operational creditor, the Tribunal made a reference to the Board and appointed a professional from the approved panel. It recorded verification of credentials and issued directions consistent with the Code: vesting of management in the IRP, duties to take control of assets and books, public announcement, constitution of the Committee of Creditors after collation of claims, filing of constitution report within statutory time, and fortnightly progress reporting to the Tribunal. [Paras 26, 28]

Mr. Somnath Gupta is appointed as Interim Resolution Professional with directions to perform statutory duties and assume management control.

Final Conclusion: The Tribunal admitted the section 9 petition, holding that no bona fide dispute exists, that the written acknowledgement of 2-8-2016 restarts limitation making the petition timely, declared the statutory moratorium, and appointed an Interim Resolution Professional with directions to manage the corporate debtor and proceed with the CIRP.

Letter of Intent not constituting a concluded contract - operational debt under the Insolvency and Bankruptcy Code, 2016 - volumetric measurement and joint certification by engineer-in-charge and sub-contractor - verification of wages and statutory compliance as pre-condition for processing bills - proof of debt by invoices and confirmation of accounts - compliance with NHAI procedures and royalty payment for excavation and transportation

Letter of Intent not constituting a concluded contract - The document dated 20-7-2015 was a Letter of Intent and not a concluded agreement between the parties. - HELD THAT: - The LoI expressly provided that on acceptance by the petitioner a detailed agreement would be entered into. There was no acceptance and no subsequent detailed agreement produced. The Bench therefore rejected the petitioner's contention that the work was carried out pursuant to an 'Agreement', finding that the LoI, in the absence of acceptance and a concluded contract, could not be treated as an operative agreement obligating the respondent. [Paras 10]

The LoI does not amount to a binding agreement between the parties.

Volumetric measurement and joint certification by engineer-in-charge and sub-contractor - verification of wages and statutory compliance as pre-condition for processing bills - proof of debt by invoices and confirmation of accounts - The invoices and account confirmations produced by the petitioner do not establish a debt payable by the corporate debtor because the contractual procedure for measurement, verification and processing of bills was not complied with and the invoices lack requisite supporting documentation. - HELD THAT: - The LoI required volumetric measurement to be jointly carried out and recorded by the engineer-in-charge and the sub-contractor's authorised agent, and required verification of wage payments and other statutory compliances before processing bills. No joint measurements or the mandated verification documents (including evidence of wages paid and transportation details) were placed on record. The invoices bore identical wording, lacked any acknowledgement or receipt by the respondent and did not show the required statutory compliances. The respondent also disputed the authenticity of the account confirmations and filed a criminal complaint alleging forgery. The Bench found these deficiencies fatal to the petitioner's claim and accepted that the invoices and confirmations were insufficient to prove a debt due. [Paras 10]

The invoices and account confirmations do not constitute adequate proof of a recoverable operational debt.

Compliance with NHAI procedures and royalty payment for excavation and transportation - operational debt under the Insolvency and Bankruptcy Code, 2016 - Absence of compliance with mandated NHAI procedures and lack of royalty payments indicate that the alleged work was not performed, and the claim does not constitute an operational debt under Section 9 of the IBC. - HELD THAT: - The record contained no evidence of compliance with NHAI's mandatory procedures: no Request for Inspection, no approval of borrow area, no confirmatory site certification by NHAI, and no royalty challans evidencing payment to land authorities. These omissions, together with the other documentary deficiencies, led the Bench to conclude that there was no occasion for payment and that the claim did not amount to an operational debt admissible under Section 9. [Paras 10]

Non-compliance with NHAI procedures and absence of royalty payment support the conclusion that no operational debt is established.

Operational debt under the Insolvency and Bankruptcy Code, 2016 - The petition under Section 9 of the IBC is not maintainable as there is no debt due and payable to the petitioner. - HELD THAT: - Weighing the absence of a concluded agreement, the lack of required joint measurements and statutory verifications, the insufficiency and suspected forgery of invoices and confirmations, and non-compliance with NHAI procedural requirements, the Bench concluded that the essential elements of an operational debt recoverable under Section 9 were not made out on the material before it. [Paras 11]

The petition under Section 9 is dismissed for want of any debt due and payable.

Final Conclusion: The petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 was dismissed: the document relied upon was a Letter of Intent and not a concluded agreement; the invoicing and account confirmations failed to comply with contractual and statutory prerequisites and were insufficient to establish an operational debt; non-compliance with NHAI procedures and absence of royalty payments further supported the conclusion that no debt was due.

Pre-existing dispute - crystallization of debt - date of default - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of a real dispute - demand notice and reply

Pre-existing dispute - crystallization of debt - date of default - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - existence of a real dispute - demand notice and reply - Whether the Section 9 petition by the operational creditor is maintainable in view of alleged pre-existing disputes and absence of a crystallized debt and date of default - HELD THAT: - The Tribunal examined the offer/appointment letter, communications, the demand notice dated 1-9-2018 and the corporate debtor's reply dated 15-9-2018. The corporate debtor raised substantive objections regarding the petitioner's performance, alleged unauthorised absence, tampering of attendance records, delay in project progress and disputed entitlement to variable and post-December 2016 fixed salary. The record shows ONGC issued a termination notice to the corporate debtor and the corporate debtor specifically replied to the demand notice raising those disputes. The Tribunal concluded that the claim was not crystallized and the date of default and amount payable were not established at this stage. Applying the principle that the Code is not a substitute for ordinary recovery proceedings and that existence of a real dispute precludes invocation of IBC provisions, the Tribunal held there was a plausible contentious question requiring further investigation and therefore the Section 9 application was not maintainable. [Paras 14, 15, 16, 18]

The Section 9 petition is dismissed as not maintainable on account of pre-existing disputes and absence of a crystallized debt and date of default.

Final Conclusion: The application under Section 9 of the IBC is dismissed for want of maintainability due to pre-existing disputes and non-crystallization of the claimed debt; the petitioner remains free to pursue its claim in the appropriate forum.

Extended period of limitation - suppression of facts with intent to evade payment of service tax - liability of a sub-contractor to pay service tax - proviso to Section 73 extending limitation for fraud/collusion/wilful mis-statement/suppression - remand for determination within the normal period of limitation

Extended period of limitation - suppression of facts with intent to evade payment of service tax - proviso to Section 73 extending limitation for fraud/collusion/wilful mis-statement/suppression - Whether the Department was justified in invoking the extended period of limitation under the proviso to Section 73 on the ground of suppression of facts with intent to evade payment of service tax. - HELD THAT: - The Tribunal examined the invocation of the proviso to Section 73 which extends the one year limitation to five years where levy is not made by reason of fraud, collusion, wilful mis statement or suppression of facts with intent to evade tax. The Show Cause Notice alleged non registration, non filing of returns and deliberate suppression. However, the record showed that an internal audit was conducted and an Internal Audit Report dated 14 December, 2010 had flagged non payment; the SCN was issued only on 18 April, 2013 (after two years and four months). Prior conflicting judicial authority on the liability of sub contractors to pay service tax meant there was scope for doubt on taxability. Relying on authority recognizing that bona fide doubt and delay by the Department in issuing notice may negative an intention to evade, and on decisions treating long departmental inaction after audit as fatal to invoking extended limitation, the Tribunal concluded that the facts did not establish deliberate suppression with intent to evade. Consequently the proviso to Section 73 could not be invoked to extend limitation in this case. The Tribunal therefore set aside liability, penalty and interest only insofar as they related to any period beyond the normal one year period and remitted the matter to the Commissioner to determine service tax liability, penalty and interest, if any, within the normal limitation period after affording opportunity of hearing. [Paras 15, 16, 17, 19, 20]

Invocation of the extended period of limitation was not justified; demand, penalty and interest cannot be sustained beyond the normal one year period and the matter is remitted to the Commissioner to determine liability and any penalty/interest within the normal period after giving opportunity of hearing.

Final Conclusion: The impugned order is set aside to the extent that service tax, penalty and interest were demanded for any period beyond the normal one year limitation; the question of liability, penalty and interest within the normal period is remitted to the Commissioner for fresh determination after hearing the appellant.

Failure of natural justice - right to personal hearing - adjournment owing to COVID-19 pandemic - maintainability of writ petition despite existence of alternative remedy - binding nature of Supreme Court orders extending limitation - remand for fresh hearing

Failure of natural justice - right to personal hearing - The impugned orders were passed in circumstances amounting to a failure of the rules of natural justice by denying the petitioner a fair hearing. - HELD THAT: - The Court found that requests for exemption from personal hearing and for adjournment were made by the petitioner on account of the COVID-19 pandemic and difficulty in accessing records located in other States to prepare a detailed reply. The impugned orders were passed without affording the petitioner an opportunity to file a detailed reply or to be heard in person. Having regard to these facts, the Court held that there was a failure of the rules of natural justice which entitled the petitioner to relief.

Impugned orders set aside on the ground of denial of a fair hearing.

Maintainability of writ petition despite existence of alternative remedy - Existence of an alternative remedy did not render the writ petition non-maintainable in the circumstances of this case. - HELD THAT: - Although the respondents contended that effective alternative remedies were available, the Court observed that the existence of such remedies was not a bar where there has been a failure of natural justice. Given the alleged denial of a fair hearing and the circumstances arising from the pandemic, the Court entertained the writ petition.

Writ petition held maintainable despite availability of alternative remedies.

Binding nature of Supreme Court orders extending limitation - Orders of the Hon'ble Supreme Court extending limitation are binding on tribunals and quasi-judicial authorities and the 1st respondent's refusal to apply them was misconceived. - HELD THAT: - The Court noted that the 1st respondent had taken a contrary view to orders of the Supreme Court which extended limitation for all matters during the taken up matters. The High Court remarked that such Supreme Court orders are binding on all courts, tribunals and quasi-judicial authorities and that the 1st respondent's understanding of the law was clearly misconceived. The Court did not go further into resolving that controversy but recorded the binding character of the Supreme Court direction.

The Court held that the Supreme Court's extension of limitation is binding and observed that the 1st respondent's disagreement was legally unsustainable.

Remand for fresh hearing - The impugned order dated 17.04.2020 and consequential order dated 23.04.2020 were set aside and the matter was remanded for fresh disposal with specified directions. - HELD THAT: - Having found denial of a fair hearing and having noted the pandemic-related difficulties in accessing records and preparing a reply, the Court directed that once pandemic restrictions are eased the 1st respondent shall issue a notice to the petitioner giving two weeks time to appear with reply and documents, allow the petitioner to use the interim period to prepare objections, fix a suitable date after the Central Government relaxes lockdown restrictions, and proceed thereafter; the Court also made clear that if the petitioner seeks time or attempts to delay, the 1st respondent may proceed strictly in accordance with law.

Both impugned orders set aside and matters remanded for fresh hearing in accordance with the directions given.

Final Conclusion: The writ petitions are allowed; the impugned orders dated 17.04.2020 and 23.04.2020 are set aside and the matters are remanded for fresh hearing after pandemic restrictions ease, with directions to issue two weeks' notice for filing reply and personal appearance; no costs.

Entitlement to input tax credit under Section 10 read with Section 20 - burden of proof to establish input tax credit - genuineness of transaction as prerequisite for input tax credit - effect of non-deposit of tax by selling dealer on purchaser's ITC claim - suo moto revision under Section 64 of the Act

Suo moto revision under Section 64 of the Act - effect of non-deposit of tax by selling dealer on purchaser's ITC claim - Validity of the revisional order dated 12.12.2018 and whether the matter requires fresh consideration by the Revisional Authority in light of disputed factual findings concerning input tax credit. - HELD THAT: - The Court examined the authorities and statutory scheme and held that the question whether input tax credit claimed by the assessee can be denied on the ground that the sub contractors did not deposit the tax requires fresh consideration by the Revisional Authority. The Bench noted settled principles that the purchasing dealer bears the burden to prove entitlement to input tax credit and that genuineness of the transaction must be established; but it also observed that where there is no allegation of fraud and earlier verification proceedings (LVO 380) had allowed/refunded ITC after documentary scrutiny, the Revisional Authority ought to examine those factual findings and decide the matter with reference to Sections 10 and 20 of the Act. The Court found that the Revisional Authority had not sufficiently addressed the earlier verification findings and therefore set aside the revisional order and remitted the matter for reconsideration after affording opportunity of hearing and permitting the assessee to place additional documents. [Paras 11, 12, 13, 14, 16]

Order of the Additional Commissioner dated 12.12.2018 is set aside and the matter is remitted to the Revisional Authority for fresh consideration in accordance with law after hearing the assessee and allowing production of documents.

Burden of proof to establish input tax credit - genuineness of transaction as prerequisite for input tax credit - Legal principle governing the purchaser's entitlement to input tax credit where the selling dealer has not deposited the tax collected. - HELD THAT: - The Court reiterated that the burden to prove the correctness of an input tax claim lies on the dealer claiming ITC and that the purchasing dealer must satisfy the authority that the transaction is valid and genuine. However, the Court also recorded the established proposition that where the purchasing dealer demonstrates payment of VAT to the selling dealer and there is no allegation of fraud, the purchaser's entitlement to ITC should not be deprived merely because the selling dealer has not deposited the tax; in such circumstances, proceedings against the selling dealer are open to the Revenue. Applying these principles, the Court held that the factual matrix (including earlier LVO findings that allowed/refunded ITC after verification) must be examined afresh by the Revisional Authority rather than having summary denial without scrutiny. [Paras 8, 10, 11, 12, 14]

Principles clarified that purchaser must discharge burden of proof and prove genuineness, but absent fraud and where earlier verification endorsed ITC, denial on ground of non-deposit by selling dealer cannot be sustained without fresh consideration.

Final Conclusion: Appeal partly allowed; revisional order dated 12.12.2018 set aside and proceedings restored to the Additional Commissioner for fresh consideration in accordance with law after hearing the assessee and permitting additional documents, to be completed within twelve weeks; all rights and contentions kept open.

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - Limitation and cognizance under Section 142 of the Negotiable Instruments Act - proviso permitting condonation of delay - Requirement (or non-requirement) of a separate application under the Limitation Act/Section 473 Cr.P.C. for condoning delay in Section 138 complaints - Scope of summoning order and threshold for trial on offence under Section 138 - Exercise of inherent jurisdiction under Section 482 Cr.P.C. to quash criminal proceedings

Maintainability of complaint under Section 138 of the Negotiable Instruments Act - Limitation and cognizance under Section 142 of the Negotiable Instruments Act - proviso permitting condonation of delay - Requirement (or non-requirement) of a separate application under the Limitation Act/Section 473 Cr.P.C. for condoning delay in Section 138 complaints - The complaint under Section 138 NI Act filed on 1.5.2006 was maintainable despite being filed after the statutory period because the proviso to Section 142 (inserted by the 2002 amendment) permits the court to take cognizance after the prescribed period where the complainant satisfies the court that she had sufficient cause for delay, and such explanation was contained in the complaint. - HELD THAT: - The court analysed the five components of Section 138 and the cognizance limitation in Section 142. It distinguished Subodh S. Salaskar v. Jayprakash M. Shah on the ground that that decision concerned complaints filed before the 2002 amendment and therefore required separate application under limitation principles; by contrast the present complaint was filed after the amendment which added the proviso to Clause (b) of Section 142. The proviso allows the court to condone delay upon being satisfied that sufficient cause has been shown, and it is not incumbent on the complainant to file a separate application under the Limitation Act or Section 473 Cr.P.C. where the explanation for delay is set out in the complaint itself. The learned Magistrate considered the explanation (illness of the complainant supported by medical certificate) and rejected the limitation objection; that conclusion does not call for interference under Section 482 Cr.P.C.

Objection that the complaint was barred by limitation and required a separate condonation application is rejected; the magistrate rightly took cognizance in view of the proviso to Section 142 and the petition to quash proceedings on this ground is dismissed.

Scope of summoning order and threshold for trial on offence under Section 138 - Exercise of inherent jurisdiction under Section 482 Cr.P.C. to quash criminal proceedings - Disputed factual questions relevant to the sale deed, payment and alleged fraud are unsuitable for determination at the threshold and must be decided at trial; thus Section 482 Cr.P.C. relief to quash the summons was not warranted. - HELD THAT: - The court observed that the factual controversies (execution and consideration of sale deed, receipt/encashment of cheques, and circumstances of dishonour) were matters for trial. Having found that the magistrate lawfully exercised his limited inquiry in framing the summoning order and properly rejected the preliminary maintainability objection, the court held there was no ground to invoke inherent jurisdiction to quash the proceedings merely because factual disputes exist which the accused may contest at trial. The court directed the trial court to proceed expeditiously and decide disputed questions of fact in accordance with law after hearing both parties.

Summons and continuation of the criminal proceedings are not liable to be quashed on the asserted factual disputes; the matter is to be adjudicated in the trial court.

Non-bailable warrant and interim directions - The non-bailable warrant issued by the magistrate is not quashed; the High Court vacated its interim stay and directed the accused to appear and apply for bail within three weeks. - HELD THAT: - Given the dismissal of the petition and the decision that cognizance was properly taken, the court vacated its interim order which had stayed proceedings, noted that a non-bailable warrant had been issued, and directed the applicant to surrender before the court concerned within three weeks and apply for bail. The trial court is to consider any bail application in accordance with law.

Direction to the applicant to appear before the trial court within three weeks and seek bail; interim stay vacated and warrant not quashed by this order.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed. The High Court upheld the magistrate's rejection of the limitation objection in light of the 2002 proviso to Section 142 NI Act, declined to quash the summoning order or proceedings which involve disputed facts for trial, vacated its interim stay, and directed the accused to appear within three weeks to apply for bail while the trial court proceeds expeditiously in accordance with law.

Summoning under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act and rebuttal by probable defence - Reckoning of delay and conduct in raising defence of stolen/forged cheque - Scope and limits of inherent powers under Section 482 Cr.P.C. (prohibition of second revision) - Pre trial scrutiny of evidentiary issues versus trial stage appreciation

Summoning under Section 138 of the Negotiable Instruments Act - Scope and limits of inherent powers under Section 482 Cr.P.C. (prohibition of second revision) - Validity of the summoning order under Section 138 N.I. Act and propriety of exercising inherent jurisdiction under Section 482 Cr.P.C. to quash the same after dismissal of revision - HELD THAT: - The High Court examined the material placed before the trial court (original cheque, return memo, bank receipt, notice and service documents) and the revisional court's reasoning and found no illegality or perversity in the impugned orders. The revisional court had considered the applicant's contentions and held that genuineness of signature and related factual disputes could be examined at trial; such pre trial scrutiny was not warranted. The Court observed that the applicant had already availed revision and that invoking Section 482 Cr.P.C. to re appreciate the same material would amount to permitting a de facto second revision, which Section 397(3) Cr.P.C. prohibits. Further, no allegation was made that the courts below acted for extraneous or irrelevant reasons or adopted a process alien to law that would attract the extraordinary jurisdiction under Section 482 Cr.P.C. [Paras 27, 28, 31, 32]

Summoning order dated 7th May, 2019 and revision order dated 24th October, 2019 suffer no illegality; Section 482 Cr.P.C. will not be invoked to reappreciate those orders.

Presumption under Section 139 of the Negotiable Instruments Act and rebuttal by probable defence - Pre trial scrutiny of evidentiary issues versus trial stage appreciation - Reckoning of delay and conduct in raising defence of stolen/forged cheque - Whether the defence that the cheque was stolen and signature forged rebuts the statutory presumption under Section 139 at the pre trial stage - HELD THAT: - The Court explained the statutory scheme: Section 138 creates offence on dishonour, Section 139 raises a rebuttable presumption favouring the holder, and Sections 118/139/related authorities require the accused to raise a probable defence on preponderance of probabilities. Applying these principles to the facts, the Court noted that the bank's return memo recorded dishonour for insufficiency of funds (not mismatched signature), the complainant served notice within statutory time, and the applicant delayed informing the bank and lodging FIR (applicant notified bank only on 28th February, 2019 and sought police action months later). On this record, the Court held that the stolen/forgery defence could not be accepted at the pre trial stage and was a matter to be examined during trial; mere denial without timely cogent material did not discharge the initial onus to rebut the presumption. [Paras 11, 12, 27, 29, 30]

The plea that the cheque was stolen and signature forged does not, on the present record, rebut the presumption under Section 139 at the pre trial stage; the contention is to be examined at trial.

Final Conclusion: The criminal petition under Section 482 Cr.P.C. is dismissed; the impugned summoning order and the revisional court's order are upheld and the contested factual defences (stolen/forged cheque, delay in lodging FIR) are left open for trial. There shall be no order as to costs.