TaxTMI Updates e-Newsletter
May 21,2020

Refund of tax - maintainability of writ petition despite availability of statutory appeal - statutory remedy by filing appeal - permission to serve documents electronically - expedited/early hearing of writ petition

Permission to serve documents electronically - tagging of electronic filings to court file - Permission granted to respondent to email counter-affidavit and for the same to be tagged to the writ petition file; copy to be emailed to petitioner's counsel. - HELD THAT: - The Court permitted the counsel for the respondent GST to email the counter-affidavit along with annexures to the Court and directed that on receipt the emailed documents be tagged to the file of the writ petition. The Court also directed that a copy of the emailed counter-affidavit be sent to the petitioner's counsel. The order implements electronic service and filing to enable continuation of proceedings despite logistical difficulties occasioned by the lockdown. [Paras 7, 8, 9]

Respondent permitted to email counter-affidavit with annexures; emailed documents to be tagged to the file and emailed to petitioner's counsel.

Expedited/early hearing of writ petition - refund of tax - Application for early hearing of the writ petition (which seeks refund) was allowed and the writ petition was listed for hearing on a specified date. - HELD THAT: - The petitioner sought early hearing on the ground that a substantial refund has not been granted despite repeated orders. Having permitted electronic filing and service of the counter-affidavit and noting that the writ petition itself seeks the refund, the Court allowed the petitioner's application for early hearing and fixed a date for hearing. The order facilitates adjudication on the writ petition on merits without awaiting prolonged procedural delay. [Paras 3, 9, 12]

Application for early hearing allowed; writ petition listed for hearing on 10th June, 2020.

Maintainability of writ petition despite availability of statutory appeal - statutory remedy by filing appeal - refund of tax - The Court held that the order dated 19th September, 2019 rejecting the refund claim would not be an impediment to hearing the writ petition and the writ petition need not await the outcome of any statutory appeal against that order. - HELD THAT: - Respondent GST informed the Court that an order dated 19th September, 2019 rejected the petitioner's refund application and that a statutory appeal remedy was available. The petitioner denied receipt of that order and contended that no appeal need be filed and that the writ petition could proceed. The Court recorded that the order of 19th September, 2019 would not impede the relief sought in the writ petition and that the hearing of the writ petition need not await the outcome of any appeal filed against that order. [Paras 4, 5, 6]

Order dated 19th September, 2019 rejecting refund is not an impediment to the writ petition being heard; writ petition to proceed without awaiting the appeal.

Procedural filing of rejoinder - electronic service - Petitioner granted time to file rejoinder to the counter-affidavit by email within two weeks; rejoinder to be tagged to the writ petition file. - HELD THAT: - Following permission for electronic service of the respondent's counter-affidavit, the Court allowed the petitioner two weeks to file a rejoinder, also by email, and directed that the rejoinder be tagged to the writ petition file, thereby ensuring complete exchange of pleadings through electronic means prior to the listed hearing. [Paras 11]

Petitioner to file rejoinder by email within two weeks; rejoinder to be tagged to the file.

Grant of exemption subject to rules - Application for exemption (CM No.10821/2020) allowed subject to just exceptions and in terms of prevalent rules. - HELD THAT: - The Court allowed the petitioner's application for exemption in terms of the prevailing rules, recording the allowance and disposing of the application accordingly. No further reasoning concerning the exemption was recorded. [Paras 1, 2]

Application for exemption allowed subject to just exceptions and in terms of prevalent rules; application disposed of.

Final Conclusion: The Court permitted electronic filing and service of the respondent's counter-affidavit and directed tagging and service to the petitioner, allowed the petitioner's application for early hearing of the writ petition seeking a tax refund (holding that the earlier rejection order would not bar the writ hearing), granted two weeks for filing a rejoinder by email, listed the petition for hearing on 10th June, 2020, and allowed the exemption application subject to prevalent rules.

Profiteering as denial of commensurate reduction in prices under Section 171 - DGAP investigation under Rule 129 - pass-on benefit at SKU level - comparison of pre-rate average base price with post-rate invoice-wise base price - exclusion/netting off ('zeroing') not permissible in anti-profiteering - discounts and Section 15(3) invoice-recording requirement - inclusion of excess GST collected in the profiteered amount - deposit in Consumer Welfare Fund and interest under Rule 133 - power to investigate beyond the product/party named in complaint

DGAP investigation under Rule 129 - power to investigate beyond the product/party named in complaint - Validity of DGAP's expansion of investigation to include Respondent No.1 and Respondent No.2 despite original complaint naming another entity - HELD THAT: - The Authority held that Section 171(2) and Rule 129 empower the DGAP to investigate and collect evidence in all cases where a reduction in rate of tax or benefit of ITC ought to be passed on; this mandate is not restricted to products or suppliers expressly named in an initial complaint. Where, during investigation, DGAP came to know that other registered persons (here Respondent No.1 and Respondent No.2) were the actual manufacturers/suppliers and had not passed on benefit, he was obliged to include them in the investigation and to report the infringement to the Authority. Consequently, the DGAP's decision to withdraw the notice to the initially named entity and issue notices to the actual suppliers/distributors was in consonance with Section 171 and Rule 129 and therefore valid. [Paras 66, 67, 68, 69]

DGAP lawfully expanded investigation and included Respondent No.1 and Respondent No.2; objection on this ground is rejected.

Pass-on benefit at SKU level - comparison of pre-rate average base price with post-rate invoice-wise base price - exclusion/netting off ('zeroing') not permissible in anti-profiteering - Appropriate methodology for computation of profiteering (average pre-rate vs invoice-wise post-rate; SKU-level treatment; netting off) - HELD THAT: - The Authority accepted DGAP's methodology of computing channel/customer-wise average base price for a short pre-rate period (01.11.2017-14.11.2017 or latest month) and comparing that pre-rate average with each actual invoice-wise base price in the post-rate period, on an SKU-by-SKU and recipient-by-recipient basis. The reasons given: (a) suppliers charged different base prices to different customers and many customers did not buy the same SKU in both periods, making direct invoice-to-invoice comparison impracticable; (b) Section 171 requires that benefit must be passed on each supply/each SKU so averaging pre-rate prices for a short representative period is reasonable for comparison while post-rate calculation must be invoice-specific; and (c) netting off positive and negative variances across SKUs (the 'zeroing' or netting methodology) is impermissible because it would deny relief to individual purchasers who were not given the benefit. On these bases the Authority found DGAP's method just, reasonable and in consonance with Section 171 and Article 14. [Paras 62, 63, 65, 77, 85]

DGAP's computation methodology (pre-rate short-period average v. post-rate invoice-wise prices at SKU level; no netting off) is upheld as lawful and appropriate.

Discounts and Section 15(3) invoice-recording requirement - profiteering as denial of commensurate reduction in prices under Section 171 - Whether discounts (including the additional 7.81% claimed) amounted to lawful passing of benefit under Section 171 and could be excluded from profiteering computation - HELD THAT: - The Authority examined the invoices and evidence relied upon by Respondent No.1 and found that: (a) the Respondent had increased base prices post 15.11.2017 and then shown discounts (claimed to be 7.81%), (b) the discounts were not recorded on invoices in a manner satisfying Section 15(3) of the CGST Act (i.e., discounts given before/at time of supply must be duly recorded), and (c) even where a 7.81% discount appeared, it did not equate to the full commensurate reduction legally required (a 10% rate reduction) and Respondent's own tables showed a shortfall. The Authority therefore held that the purported discounts did not discharge the statutory obligation to pass on the full commensurate benefit by reduction in prices and could not be excluded from computation of profiteering. [Paras 24, 25, 71, 78, 88]

The claimed discounts (including 7.81%) do not qualify as lawful passing of the commensurate benefit and cannot be excluded from profiteering; Respondent's contention is rejected.

Inclusion of excess GST collected in the profiteered amount - profiteering as denial of commensurate reduction in prices under Section 171 - Whether the excess GST collected on increased base prices should be included in the quantified profiteered amount - HELD THAT: - The Authority held that the excess GST collected on account of higher base prices constituted part of the benefit wrongfully denied to consumers. Price for the purposes of Section 171 includes GST; where a supplier charged a higher base price after rate reduction and thereby collected excess GST, that excess tax constituted an element of the denial of benefit and properly forms part of the profiteered amount. The DGAP's inclusion of the GST component in the computed profiteered sums was therefore sustained. [Paras 16, 87]

Excess GST collected is to be included in the profiteered amount; DGAP's inclusion of GST is upheld.

DGAP investigation under Rule 129 - period from 15.11.2017 to 31.03.2019 - Validity of the period of investigation (15.11.2017 to 31.03.2019) and whether the lengthy investigation period was arbitrary - HELD THAT: - The Authority noted there is no prescribed fixed investigation period in the Act or Rules; obligation to pass on benefit arose from 15.11.2017. DGAP chose 15.11.2017 up to the date of last month of receipt of reference (31.03.2019) as the investigation cut off. Because Respondents failed to produce evidence that they had passed on benefit prior to 31.03.2019, DGAP was entitled to investigate until that date. Cases cited by Respondents where shorter periods were used were distinguished on facts (those complaints were received immediately after reduction). The Authority found the period adopted was not arbitrary given the lack of evidence of earlier compliance. [Paras 3, 73, 76]

Investigation period 15.11.2017 to 31.03.2019 is valid; objection to length of period is rejected.

Deposit in Consumer Welfare Fund and interest under Rule 133 - profiteering as denial of commensurate reduction in prices under Section 171 - Determination of profiteered amounts, directions for deposit with Consumer Welfare Funds, interest, and initiation of penalty proceedings - HELD THAT: - On the basis of DGAP's computations and the upheld methodology, the Authority determined the profiteered amounts for Respondent No.1 as Rs. 18,48,34,084/- (inclusive of GST) and for Respondent No.2 as Rs. 38,64,891/- (inclusive of GST) for the period 15.11.2017 to 31.03.2019. An amount of Rs. 8,97,253/- found to have been profiteered by Respondent No.1 from Respondent No.2 shall not be passed to the distributor but deposited in the Consumer Welfare Funds of the Centre and States in terms of Rule 133(3)(c). Both Respondents were directed to reduce prices, deposit the profiteered amounts with interest at 18% from the date of collection until deposit, within three months, failing which recovery mechanisms under CGST/SGST were to be used. Further, Show Cause Notices were ordered to be issued under Section 171(3A) for imposition of penalty. [Paras 114, 115, 116, 117, 118]

Profiteered amounts quantified and confirmed; Respondents directed to deposit amounts with interest into CWFs within three months and Show Cause Notices for penalty to be issued.

Final Conclusion: The Authority upheld DGAP's jurisdiction and methodology, rejected the Respondents' objections (including claimed discounts, period, and netting-off), determined profiteering for 15.11.2017 to 31.03.2019 as Rs. 18,48,34,084/- (Respondent No.1) and Rs. 38,64,891/- (Respondent No.2) inclusive of GST, directed reduction of prices, deposit of these amounts with 18% interest into the Consumer Welfare Funds within three months, and ordered issuance of Show Cause Notices for penalty under Section 171(3A).

Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 - respondent may support order on grounds decided against him - scope of the subject-matter of an appeal - right to raise jurisdictional objections without filing cross objections under Section 253(4) - assumption of jurisdiction and validity of reassessment under Section 153C - requirement (or absence) of a written application to invoke Rule 27 - limitation that respondent cannot be allowed to put appellant in a worse position

Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 - requirement (or absence) of a written application to invoke Rule 27 - respondent may support order on grounds decided against him - Whether Rule 27 requires a written application and the procedural scope in which a respondent may invoke it before the Tribunal. - HELD THAT: - The Court held that Rule 27 is an enabling provision that permits a respondent, though he may not have appealed, to support the order under challenge on any grounds that were decided against him. The Tribunal erred in adopting a hyper technical requirement that invocation of Rule 27 must be by a written application in a prescribed form: the provision contains no such mandate and no notified form for this purpose was shown. Rule 27 is intended to let a respondent effectively defend an order appealed against and to prevent the respondent from becoming a victim of 'wrong reasons'. While the provision operates in a limited sphere and cannot be used to obtain relief that would put the appellant in a worse position than before the appeal, it cannot be so narrowly construed as to render it redundant or to displace the respondent's right to urge grounds bearing on the subject matter of the appeal. The Tribunal therefore had no discretion to refuse to consider the additional grounds on the basis that no written application had been filed. [Paras 11, 20, 21, 22]

Rule 27 does not mandate a written application in a specified form; the Tribunal should not have refused to admit the respondent's additional grounds solely for want of a written application and must allow the respondent to invoke Rule 27 within its proper scope.

Scope of the subject-matter of an appeal - right to raise jurisdictional objections without filing cross objections under Section 253(4) - assumption of jurisdiction and validity of reassessment under Section 153C - limitation that respondent cannot be allowed to put appellant in a worse position - Whether the assessee (as respondent before the ITAT) could invoke Rule 27 to raise jurisdictional objections to reassessment under Section 153C and whether the ITAT was justified in remitting the matter without adjudicating those legal grounds. - HELD THAT: - The Court analysed authorities (including Sundaram & Co. and subsequent decisions) and concluded that Rule 27 entitles a respondent who has not filed a cross appeal to defend the Commissioner (Appeals) order by urging grounds decided against him if those grounds bear on the subject matter of the appeal. Jurisdictional objections that go to the root of the assessment (such as failure to record satisfaction or absence of nexus with seized material under Section 153C) are issues that can directly affect the final outcome and therefore fall within the ambit of Rule 27. The Court distinguished authorities relied on by Revenue where the impugned issue had attained finality or where the issue raised by the respondent would have expanded the appeal to the respondent's detriment. Rule 27, however, cannot be used to obtain relief that would place the appellant in a worse position than before the appeal; but that limitation did not preclude consideration here because the jurisdictional objections were interlinked with grounds pressed by Revenue and could affect the appeal's result. The ITAT's refusal to admit and consider those legal grounds was thus erroneous. [Paras 14, 16, 22, 26]

The assessee, as respondent before the Tribunal, was entitled under Rule 27 to raise jurisdictional objections to the reassessment under Section 153C; the ITAT erred in refusing to permit those grounds and the matter is to be reconsidered afresh by the ITAT allowing the additional grounds.

Final Conclusion: The impugned ITAT order is set aside in part. Rule 27 may be invoked by a respondent without a prescribed written application and, where the grounds sought to be urged bear on the subject matter of the appeal (including jurisdictional objections to reassessment under Section 153C), the Tribunal must consider them subject to the limitation that no order may be made placing the appellant in a worse position than before. The matter is remanded to the ITAT to hear the respondent's additional grounds afresh and decide in accordance with law.

Transactional Net Margin Method - comparability under Rule 10B(2) - functional similarity in FAR analysis - deemed international transaction under Section 92B(2) - Related Party Transaction filter - role of segmental information in comparability - challenge to comparables despite passing filters

Transactional Net Margin Method - comparability under Rule 10B(2) - functional similarity in FAR analysis - TNMM does not permit dilution of Rule 10B(2) comparability standards; functional similarity (FAR) remains a mandatory requirement for selecting comparables even under TNMM. - HELD THAT: - The Court held that Rule 10B(2) governs comparability and requires assessment of functions performed, assets employed and risks assumed. Reliance on authorities (including Rampgreen, Chryscapital, Avaya and related decisions) establishes that although TNMM is less sensitive to certain transactional differences, it does not relax the requirement of functional similarity. The proper approach is to apply FAR analysis and, where material differences exist, either make reasonably accurate adjustments as permitted by the Rules or exclude the comparable if differences cannot be eliminated. Broad or superficial classification of services under ITeS is insufficient; comparables must be similar in materially relevant respects that affect profitability. [Paras 23, 24, 25, 26, 27]

Comparables must satisfy Rule 10B(2) FAR criteria; TNMM does not justify ignoring functional dissimilarity and the Tribunal rightly applied FAR to exclude functionally dissimilar comparables.

Deemed international transaction under Section 92B(2) - Related Party Transaction filter - Wipro Technology Services Ltd. was properly excluded because its transactions with Citi Group fell within the deeming provision of Section 92B(2), making them related/tainted transactions and causing it to fail the RPT filter. - HELD THAT: - The Court examined the Master Agreement and observed that Wipro Technology Services (formerly Citi Technology Services) continued to provide services to Citi pursuant to a pre-existing arrangement. Section 92B(2) deems such transactions to be international transactions between associated enterprises where there existed a prior agreement, thereby disqualifying the company as an uncontrolled comparable. Precedential orders involving sister concerns and Tribunal findings confirming the application of Section 92B(2) supported the conclusion that the RPT filter failure warranted exclusion. [Paras 29, 30, 31]

Wipro Technology Services Ltd. was rightly excluded as it ceased to be an uncontrolled transaction under Section 92B(2) and failed the Related Party Transaction filter.

Role of segmental information in comparability - functional similarity in FAR analysis - Persistent Systems Ltd. and Thirdware Solutions and Sales Ltd. were properly excluded because absence of segmental information and evidence of product sales rendered them functionally dissimilar to the purely captive software development assessee. - HELD THAT: - The Tribunal found from annual reports that both companies derived income from sale of software products and subscriptions and lacked separate segmental disclosure distinguishing product and services revenues. Those factual findings were not seriously disputed by Revenue. Given that product sales and related commission structures materially affect profit levels and business model, lack of segmental data prevented reliable FAR comparability or adjustments, justifying exclusion. [Paras 32, 33]

Exclusion of Persistent Systems Ltd. and Thirdware Solutions and Sales Ltd. was justified on factual grounds of functional dissimilarity and non-availability of segmental data.

Challenge to comparables despite passing filters - comparability under Rule 10B(2) - A comparable does not acquire immunity from challenge merely by passing initial selection filters; the TPO/Tribunal may validate annual report data and exclude comparables on substantive FAR grounds. - HELD THAT: - The Court rejected Revenue's contention that acceptance of filters precludes subsequent challenge. Filters narrow the search but inclusion must be validated against actual data and FAR analysis. If the annual reports or other material disclose disqualifying functional or contractual characteristics (or other material differences), those comparables may be excluded despite initial filter clearance. The Tribunal's exercise in re-examining comparability was thus within the statutory scheme. [Paras 34]

Passing of filters does not preclude reassessment of comparability; the Tribunal rightly excluded comparables after examining substantive FAR and documentary evidence.

Final Conclusion: On application of Rule 10B(2) FAR principles and statutory provisions including Section 92B(2), the Tribunal correctly deleted the four comparables for reasons of functional dissimilarity, failure of the RPT filter and absence of segmental data; the Revenue's appeal is dismissed.

Waiver of interest for delay in filing return and payment of advance tax - CBDT Circular dated 26.06.2006 - clause 2(a) and clause 2(d) - survey under Section 133A of the Income Tax Act, 1961 - seizure under Section 132 of the Income Tax Act, 1961 - interest under Sections 234A, 234B and 234C of the Income Tax Act, 1961

CBDT Circular dated 26.06.2006 - clause 2(a) - CBDT Circular dated 26.06.2006 - clause 2(d) - waiver of interest under Section 234A - waiver of interest under Sections 234B and 234C - survey under Section 133A - seizure under Section 132 - Whether the petitioner is entitled to waiver of interest under the CBDT Circular dated 26.06.2006 in respect of the assessment year 2010-11 and, if so, which components of interest are to be waived. - HELD THAT: - Clause 2(a) of the CBDT Circular must be read as a whole and applies where books of account and incriminating documents have been seized; the phrase "or otherwise" in that clause is to be construed with reference to seizure proceedings and not to survey proceedings in which impoundment/seizure is not shown to have occurred. Clause 2(d) requires two ingredients: inability to file returns due to unavoidable circumstances and filing voluntarily without detection by the assessing officer. Here, survey under Section 133A was conducted and the petitioner admitted tax liabilities during the survey; the return filed on 5.4.2011 followed detection at the survey and therefore cannot be regarded as a voluntary return filed without detection. Although impounding of documents during survey may constitute an unavoidable circumstance insofar as delay in filing the return is concerned, it does not relieve the assessee of defaults in payment of advance tax for the relevant quarters. Consequently, the circumstances justify waiver of interest attributable solely to delay in filing the return (Section 234A) to the extent caused by impoundment, but do not justify waiver of interest for defaults in payment or deferment of advance tax (Sections 234B and 234C). [Paras 8, 9, 12]

Interest under Section 234A for the assessment year 2010-11 is to be waived; interest under Sections 234B and 234C is sustained.

Final Conclusion: Writ petition disposed directing the respondent to waive interest under Section 234A for AY 2010-11 on account of delay attributable to impoundment during survey; the levy of interest under Sections 234B and 234C is confirmed.

Addition under section 69A as unexplained cash deposits - ex parte order - natural justice - relevance of earlier cash withdrawals and redeposits - remand for verification of fund flow, cash book and opening cash balance - presumption of redeposit in absence of contrary evidence

Addition under section 69A as unexplained cash deposits - relevance of earlier cash withdrawals and redeposits - presumption of redeposit in absence of contrary evidence - remand for verification of fund flow, cash book and opening cash balance - Whether the addition of the unexplained cash deposits ought to be sustained or whether the issue should be remitted for verification of opening balance and earlier withdrawals to assess redeposits. - HELD THAT: - The Assessing Officer treated part of the total cash deposits as explained and disallowed/added back the remaining amount as unexplained. The Tribunal found that the A.O. did not examine the assessee's cash book or verify the fund flow position and there was no material on record disproving that earlier withdrawals were kept as cash and subsequently redeposited. Relying on precedents where similar factual matrices led to acceptance of redeposit explanations in absence of contrary evidence, the Tribunal held that the matter requires fresh scrutiny. Accordingly, the Tribunal directed remand to the A.O. to examine the books, verify the opening cash balance, examine earlier withdrawals and the cash in hand position and give due credit where appropriate instead of sustaining the addition without such verification. [Paras 6, 7]

Issue remitted to the Assessing Officer for fresh consideration to verify fund flow, cash book and opening balance and to give due credit towards earlier withdrawals and redeposits; the addition is not sustained at this stage.

Ex parte order - natural justice - Whether the ex parte order of the Commissioner of Income Tax (Appeals) in confirming the addition should be set aside for lack of service or breach of natural justice. - HELD THAT: - The CIT(A) recorded that multiple hearing notices had been served and that adjournments had been sought on earlier dates; on the final posted date neither the assessee nor authorised representative appeared and no adjournment or submissions were filed. The assessee's contention that the final hearing notice was not served was noted, but the Tribunal proceeded to address the substantive defect in the assessment (lack of verification of cash book and fund flow) by remitting the matter to the A.O. for fresh consideration. The Tribunal did not simply sustain the ex parte confirmation without ordering a fresh enquiry; instead, in the interest of justice it directed reassessment of the relevant issue by the A.O. [Paras 4, 6, 7]

Although the CIT(A) passed an ex parte order after non appearance, the Tribunal, addressing the substantive controversy, remitted the matter for fresh consideration rather than upholding the ex parte confirmation without enquiry.

Final Conclusion: The appeal is allowed for statistical purposes; the matter is remitted to the Assessing Officer to verify the assessee's fund flow, cash book, opening cash balance and earlier withdrawals and to grant appropriate credit for redeposits before finalising the assessment. Order pronounced on 27th April, 2020.

Deemed dividend under section 2(22)(e) - exemption under section 2(22)(e)(ii) - advances given in the ordinary course of business - payment of interest by shareholder defeats benefit - not a deemed dividend - accumulated profits as ceiling for deemed dividend in closely held companies

Deemed dividend under section 2(22)(e) - payment of interest by shareholder defeats benefit - not a deemed dividend - exemption under section 2(22)(e)(ii) - advances given in the ordinary course of business - Whether the advances of Rs. 2,62,31,369/- from Shreem Design & Infrastructure Pvt. Ltd. to the assessee constitute deemed dividend chargeable under section 2(22)(e) to the extent of accumulated profits of Rs. 1,71,13,533/-. - HELD THAT: - The Tribunal found on the record that the assessee had paid interest on the amounts borrowed from the company, evidenced by TDS certificates and the company's ledger entries (paras 8, 8.1). Payment of interest at market rates and corresponding TDS established that the assessee did not derive a gratuitous benefit from the company (para 8.2). The statutory purpose of section 2(22)(e) is to prevent diversion of company funds for shareholders' benefit; where the shareholder has compensated the company by payment of interest, the transaction falls outside the mischief of deemed dividend (para 8.3). The Tribunal also relied on its earlier decision in the assessee's own case (ITA No. 29/AHD/2019, order dated 12/04/2019) and coordinate decisions applying the principle that advances compensated by consideration (such as interest) are not deemed dividends (para 8.3). No contrary material was brought on record by Revenue; accordingly the Tribunal set aside the findings of the CIT(A) and directed deletion of the addition (para 8.4). [Paras 8]

Addition under section 2(22)(e) of Rs. 1,71,13,533/- deleted; appeal allowed.

Final Conclusion: The Tribunal held that loans taken by the assessee from the company were accompanied by payment of interest and TDS, hence did not confer a benefit within section 2(22)(e); the addition based on deemed dividend was deleted and the appeal was allowed.

Speculative transaction - characterisation under Section 43(5)(e) as non-speculative - eligible transaction in respect of trading in commodity derivatives - recognized association - commodity derivative - bad debt deduction written off as irrecoverable in books - allowability of business loss under income from profits and gains of business - CBDT Circular on allowability of bad debts

Speculative transaction - characterisation under Section 43(5)(e) as non-speculative - eligible transaction in respect of trading in commodity derivatives - recognized association - commodity derivative - Whether the assessee's transactions on NSEL are to be treated as speculative transactions or as eligible commodity-derivative trading not subject to the definition of speculation - HELD THAT: - The AO characterised the assessee's paired contracts on NSEL as speculative under Section 43(5). The Tribunal found that the AO himself accepted that the assessee was trading in commodity derivatives and that transactions were effected electronically on NSEL with client identity and PAN reflected in time-stamped contract notes. Section 43(5)(e), introduced by Finance Act, 2013, excludes eligible transactions in commodity derivatives carried out in a recognised association from being deemed speculative; Explanation 2 and Chapter VII of the Finance Act, 2013 define "commodity derivative" and the conditions for eligible transactions. Applying these provisions to the facts-that transactions were carried out on the electronic platform of NSEL through members, with requisite documentary identifiers and fall within the Chapter VII definition-the Tribunal held that the transactions cannot be treated as speculative. The Tribunal therefore reversed the AO's characterisation and treated the trading as business (commodity-derivative) transactions rather than speculation. [Paras 19, 21, 22, 24, 31]

Transactions on NSEL were not speculative; they fall within the exclusion in Section 43(5)(e) as eligible commodity-derivative trading carried out in a recognised association and must be treated as business transactions.

Bad debt deduction written off as irrecoverable in books - bad debt deduction under Section 36(1)(vii) read with Section 36(2) - allowability of business loss under income from profits and gains of business - TRF Ltd. - CBDT Circular No. 12/2016 - Whether the loss arising from non-recovery of advances to brokers (written off) is allowable as a business loss / bad debt deduction - HELD THAT: - The assessee wrote off unrecoverable balances due from brokers after NSEL's operations were suspended and claimed the resulting loss as business loss. The Tribunal examined precedents and administrative guidance, notably the Supreme Court decision in TRF Ltd. (as cited in the judgment) and CBDT Circular No.12/2016, which state that where a debt is written off in the books as irrecoverable and conditions of Section 36(2) are met, the deduction under Section 36(1)(vii) is allowable without requiring separate proof of irrecoverability. The Tribunal rejected the Revenue's reliance on communications from NSEL advising against allowance of bad debts as premature, observing that recoveries, if any, can be taxed when received. Given the assessee's trading history, treatment of such receipts as business income in earlier years, and that the advances formed part of the business transactions which became irrecoverable, the Tribunal held that the claimed loss is an allowable business loss under Section 28 (and correspondingly as bad debt under Section 36(1)(vii) where applicable). [Paras 25, 27, 28, 29, 32]

The write off of unrecoverable trade advances to brokers is an allowable business loss / bad debt deduction, consistent with TRF Ltd. and CBDT Circular No.12/2016; any subsequent recovery would be taxable when received.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2015-16, holding that the NSEL transactions are not speculative but eligible commodity-derivative trading carried out in a recognised association and that the loss on unrecoverable advances written off in the books is an allowable business loss / bad debt; the appeal is allowed.

Addition under section 69A of the Income-tax Act - unexplained bank credits and burden of proof - genuine business receipts versus unexplained credits - theory of real income - peak credit (highest balance) method for computing unexplained deposits - application of declared gross profit rate to unexplained deposits

Addition under section 69A of the Income-tax Act - unexplained bank credits and burden of proof - application of declared gross profit rate to unexplained deposits - peak credit (highest balance) method for computing unexplained deposits - Whether the addition made by the Assessing Officer under section 69A by treating excess bank deposits as unexplained income should be sustained in full, reduced by applying the declared gross profit rate, or restricted to the peak credit in the account. - HELD THAT: - The Assessing Officer made an addition by treating the difference between total bank deposits and declared turnover as unexplained cash deposits. The CIT(A) sustained that addition on the ground that supporting vouchers evidencing purchases and sales were not produced and the deposits exceeded admitted sales. The Tribunal examined the deposit-withdrawal statements filed by the assessee and noted patterns of systematic deposits and withdrawals consistent with small trading operations. The Tribunal observed that taxing only gross deposits without giving due cognizance to corresponding withdrawals would be unjustified in the facts of this case. The assessee's contention to apply the declared gross profit rate to the total deposits was not accepted as there was no documentary evidence of sales or purchases to substantiate such an approach. However, as an alternate and pragmatic measure the Tribunal held that the addition could be restricted to the peak credit in the bank account (highest net credit position) rather than the aggregate of all deposits, and accordingly modified the addition to that peak credit figure. The Tribunal thus partially allowed the appeal by reducing the quantum of addition while upholding the principle that unexplained bank credits can be added under section 69A where the source is not satisfactorily proved. [Paras 8]

Addition under section 69A sustained in principle but restricted in quantum to the peak bank credit; appeal partly allowed.

Final Conclusion: The Tribunal upheld the Assessing Officer's exercise of power to add unexplained bank deposits under section 69A but, on the facts of this small-trader case and having regard to withdrawals, reduced the addition to the peak credit in the account; the assessee's request to apply the declared gross profit rate to all deposits was not accepted.

Classification of capital gains as long term capital gains - date of acquisition for computation of period of holding - letter of allotment as vesting of proprietary right - definition of capital asset under S.2(14) of the Act - entitlement to exemption under section 54F consequent to long term status - change in the definition of transfer under S.2(47) (sub-clause (v)) and its effect on precedent

Date of acquisition for computation of period of holding - letter of allotment as vesting of proprietary right - classification of capital gains as long term capital gains - entitlement to exemption under section 54F consequent to long term status - Whether the period of holding of the parcel of land (site no.37) must be reckoned from the date of allotment/payment (thereby qualifying as long term) or from the later date of execution/registration of sale deed (resulting in short term status), and whether consequent benefit under section 54F is allowable. - HELD THAT: - The Tribunal accepted the assessee's case that the allotment letter issued by the development authority, followed by payment in accordance with its terms, gives rise to a definite right in the assessee which falls within the expression 'property' for the purposes of the definition of 'capital asset' under S.2(14). Reliance was placed upon the principle affirmed by the Hon'ble Bombay High Court in PCIT v. Vembu Vaidyanathan and the supporting CBDT circulars, which treat rights conferred by allotment letter (where terms are complied with) as acquisition for the purpose of computing period of holding. On the facts the assessee had been issued the allotment letter and had made the stipulated payment; consequently the date of allotment/payment must be taken as the date of acquisition for reckoning the period of holding. The Tribunal held that when acquisition is so established prior to registration, the later formal execution of sale deed does not preclude classification as a long term capital asset. The decision relied upon by revenue (CIT v. V.V. Modi) was held distinguishable because the statutory scheme has since been amended (change in S.2(47) by insertion of sub-clause (v)) and therefore its ratio is not applicable to the present facts. Applying these principles, the gain arising on sale of the combined plot including site no.37 was correctly treated as long term capital gain and the consequential reliefs (including exemption under section 54F) flow to the assessee. [Paras 8, 9]

Assessee's period of holding is to be reckoned from the date of allotment/payment (not the later registration), the gain on sale of site no.37 is long term capital gain, and the consequential benefit under section 54F is allowable; appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for AY 2012-13, holding that allotment together with payment vested proprietary rights prior to registration, thereby making the gain long term and entitling the assessee to the benefits claimed under section 54F.

Exemption under Section 54F - land appurtenant to residential house - necessary for convenient enjoyment - intent of parties as evidenced by agreement and registered deeds

Exemption under Section 54F - land appurtenant to residential house - intent of parties as evidenced by agreement and registered deeds - necessary for convenient enjoyment - Whether the vacant site acquired by the assessee adjacent to the purchased residential house is to be treated as land appurtenant to the house and the claim for exemption under Section 54F of the Income Tax Act is allowable. - HELD THAT: - The Tribunal examined the agreement for sale dated 06.01.2015 and two registered sale deeds executed within 13 days in February 2015 and found that the agreement and the deeds, read harmoniously, demonstrate the assessee's intention to purchase the entire property including the vacant land. The mere execution of two registered sale deeds-on the vendor's insistence or for reasons such as avoidance of TDS-does not change the substance of the transaction. The Tribunal applied the test of necessity for convenient enjoyment of the building and concluded that the vacant site adjacent to the existing residential house is necessary for its convenient enjoyment and therefore constitutes land appurtenant to the residential house. On that basis the Tribunal held that the land acquired by the second deed must be treated as appurtenant and the claim for the exemption was to be allowed, directing the Assessing Officer to grant the exemption.

Vacant site adjacent to the purchased residential house is land appurtenant and the exemption claim under Section 54F is allowed; orders of the authorities below set aside and Assessing Officer directed to allow the claim.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2015-16, holding that the vacant site purchased adjacent to the residential house is appurtenant and directing the Assessing Officer to allow the assessee's claim for exemption under Section 54F of the Income Tax Act.

Allowance of depreciation on assets registered in the name of a director - ownership for depreciation purposes where funds for purchase are provided by the company - use of vehicle for business as sufficient basis for depreciation claim - registration of movable asset not a condition precedent for legal ownership - precedential effect of coordinate-bench decision applied mutatis mutandis

Allowance of depreciation on assets registered in the name of a director - use of vehicle for business as sufficient basis for depreciation claim - ownership for depreciation purposes where funds for purchase are provided by the company - registration of movable asset not a condition precedent for legal ownership - Whether depreciation and related expenses on a car registered in the name of the director are allowable to the assessee-company - HELD THAT: - The Tribunal accepted the assessee's claim that the car, though registered in the director's name, was purchased with company funds, shown as the company's asset and used for the business; there was no material on record to show use for non-business purposes. The Assessing Officer's disallowance rested solely on registration in the director's name and earlier years' treatment. The Tribunal followed the coordinate-bench decision in Edwise Consultants Pvt. Ltd. (relying on the Gujarat High Court decision in Aravali Finlease Ltd. and the Delhi High Court in Basti Sugar Mills Co. Ltd.) which held that registration is not a condition precedent for legal ownership of a movable asset and that depreciation is allowable to the company where the vehicle is used for business and the company furnished the funds. The Revenue did not press a contrary factual finding. Applying that precedent mutatis mutandis, the Tribunal set aside the disallowance and directed allowance of depreciation and related expenses. [Paras 8, 9, 10, 11]

Disallowance of depreciation and expenses on the car deleted; claim allowed.

Final Conclusion: Both appeals for AY 2014-15 and AY 2015-16 are allowed: depreciation and related expenses disallowed by the Assessing Officer are deleted and the claims are accepted in accordance with the coordinate-bench precedent.

Disallowance under section 40A(3) - capital work-in-progress treatment - addition on account of additional payments for purchase of land - applicability of section 153C versus section 143(3) - reliance on material seized in third-party search - precedent of coordinate benches

Disallowance under section 40A(3) - capital work-in-progress treatment - precedent of coordinate benches - Deletion of the disallowance made u/s 40A(3) in respect of amounts paid for acquisition of land which were debited to capital work-in-progress and not claimed as expenditure. - HELD THAT: - The Tribunal accepted the assessee's position, following a series of coordinate-bench decisions (including Westland Developers Pvt. Ltd.), that where payments for acquisition of land were paid in cash to farmers, debited to capital work-in-progress and not charged to the profit and loss account (being reimbursed by a sister concern through account-payee cheque and the land acquired on behalf of that concern), the provisions of section 40A(3) were not attracted. On these facts the sum was not an expenditure for which deduction was claimed, and the transactions were shown in the balance sheet; accordingly invoking section 40A(3) was held improper and the disallowance was directed to be deleted. [Paras 9]

Disallowance of Rs. 859495/- made u/s 40A(3) set aside; ground No. 4 allowed.

Addition on account of additional payments for purchase of land - precedent of coordinate benches - Deletion of the addition on account of alleged additional/enhanced payments made for purchase of land, after limited quantification by the Assessing Officer. - HELD THAT: - The Tribunal noted that identical additions in group cases had been deleted by coordinate benches (including the Westland Developers line of decisions and other group appeals). Although the Assessing Officer had quantified and reduced the original addition, the Tribunal found no reason to sustain the residual disallowance and, following the series of coordinate-bench decisions dealing with similar facts, directed deletion of the quantified addition. [Paras 12]

Addition of Rs. 22760/- (post-quantification) deleted; ground No. 3 allowed.

Final Conclusion: The appeal is partly allowed: the disallowances/additions sustained by the Assessing Officer and confirmed by the CIT(A) are deleted as directed; all other grounds become infructuous and are dismissed.

Allocation of import quota on ad-hoc basis - clearance of imported consignments for immediate industrial use - adjustment of allocated quantities in ensuing financial year - treatment of writ petition as application for administrative consideration - electronic communication of administrative orders to avoid delay

Allocation of import quota on ad-hoc basis - clearance of imported consignments for immediate industrial use - adjustment of allocated quantities in ensuing financial year - treatment of writ petition as application for administrative consideration - electronic communication of administrative orders to avoid delay - Direction to DGFT to promptly consider petitioners' request for allocation or, alternatively, to permit clearance of consignments and adjust quantities in the ensuing financial year; and to treat the petition as an application and communicate orders electronically. - HELD THAT: - Having regard to the petitioners' urgent requirement of Calcined Pet Coke to keep smelters operational and the limitation on annual CPC imports pursuant to existing guidelines and the Supreme Court's order dated 09.10.2018, the Court directed the DGFT to consider the petitioners' request for allocation by 5:00 P.M. on 16.05.2020. If DGFT could not complete consideration by that time, the Court authorized DGFT to issue necessary orders enabling clearance of the petitioners' consignments at the specified ports for use as raw material in their plants. The Court further directed that any quantities cleared under the interim measure be adjusted against the quantities that may be allocated to the petitioners in the ensuing financial year (2020-2021). To facilitiate prompt administrative action, the Court directed that the writ petition be treated as an application for allocation and that DGFT communicate its orders electronically to avoid transmission delay. These directions balance the immediate operational exigency of the petitioners with the consequence that any interim clearance will be reconciled against future quota allocations. [Paras 5, 6]

Writ petition disposed of as the DGFT was directed to consider allocation by 16.05.2020, alternatively permit clearance of consignments with adjustment in 2020-2021, treat the petition as an application and communicate orders electronically; compliance to be reported on 04.06.2020.

Final Conclusion: The petition and interlocutory application were disposed of pursuant to directions that DGFT expeditiously consider allocation or permit clearance of consignments for immediate use and adjust allocations in the ensuing financial year; the petition is to be treated as an application and DGFT's orders communicated electronically, with compliance listed on 04.06.2020.

Interim bail on medical/COVID-19 grounds - High Powered Committee criteria for interim parole/bail during COVID-19 - bar under section 212(6)(ii) of the Companies Act, 2013 - economic offences constitute a class apart - nature and gravity of offence and risk of tampering of evidence in bail consideration - custodial medical care and jail precautions

Interim bail on medical/COVID-19 grounds - High Powered Committee criteria for interim parole/bail during COVID-19 - bar under section 212(6)(ii) of the Companies Act, 2013 - nature and gravity of offence and risk of tampering of evidence in bail consideration - custodial medical care and jail precautions - Prayer for immediate interim release on bail till curtailment of the COVID-19 pandemic was refused. - HELD THAT: - The applicant sought limited interim bail under section 439 Cr.P.C. on account of alleged medical vulnerability and the COVID-19 pandemic, relying on the Supreme Court's suo motu directions and the High Powered Committee resolutions. The Supreme Court had permitted the applicant to approach the High Court, but the Committee's resolution contemplated interim release for undertrial prisoners facing offences carrying maximum sentence up to seven years; the applicant is accused under the Companies Act of offences punishable up to ten years. The Court observed that the present application is a limited plea for release until the pandemic is curtailed and that the applicant reserved the right to seek further relief later, a fact relevant to his conduct. The Court examined the medical claim and noted jail hospital facilities, and that requests for ancillary comforts (food, bedding, medicines) were being met. The earlier bail granted in a separate CBI-registered case was held not determinative for the SFIO prosecution instituted under the Companies Act, 2013, which was ordered by the Central Government in public interest. In view of the nature and gravity of the alleged economic offences, the ongoing investigation, and apprehension of tampering with evidence, the Court found the balance of convenience did not favour interim release on the pandemic ground and therefore refused the limited bail prayer. The Court directed custodial safeguards in the jail in accordance with COVID-19 precautions and ordered expeditious completion of investigation, while clarifying that its observations do not prejudice any regular bail application under section 439 Cr.P.C. [Paras 16, 17, 18, 19, 20]

The application for immediate interim release on bail until the COVID-19 pandemic is curtailed is rejected; directions issued for jail precautions and expedited investigation; liberty reserved for any regular bail application.

Final Conclusion: Limited bail application for immediate release during the COVID-19 pandemic was refused on account of the seriousness and gravity of the alleged economic offences, ongoing SFIO investigation and apprehension of tampering with evidence; custodial COVID-19 precautions and expedition of investigation were directed and liberty to seek regular bail remains preserved.

Offer to the public - private placement / domestic concern - first proviso to section 67(3) - offers to fifty persons or more treated as public issue - clerical error in RoC allottees list and evidential effect - quashing of WTM order for lack of violation

Offer to the public - private placement / domestic concern - first proviso to section 67(3) - offers to fifty persons or more treated as public issue - clerical error in RoC allottees list and evidential effect - Allotment of RPS by the company whether amounted to a public issue under section 67(3) of the Companies Act, 1956. - HELD THAT: - The Tribunal found on the evidence that the list filed with the Registrar of Companies contained clerical mistakes which, after removing repetitions and adding missing complainants, showed allotment to 47 persons. Applying the ordinary meaning of "offer to the public" and the exception in section 67(3), and having regard to the first proviso which treats offers to fifty or more persons as public issues, the corrected factual position established that the allotment was confined to less than fifty persons and was a private placement or "domestic concern". The WTM's contrary conclusion was based on conjecture drawn from the fact of three complaints and was held to be perverse and unsupported by evidence. The Tribunal also relied on the Court's exposition that the proviso makes offers to fifty or more persons public issues, so that an issue to fewer persons remains private. [Paras 4, 8, 9]

Allotment was to less than fifty persons and therefore did not constitute a public issue under section 67(3); no violation of the Companies Act was made out.

Quashing of WTM order for lack of violation - clerical error in RoC allottees list and evidential effect - Validity of the WTM's directions (refund, interest and restraint on directors) in view of the finding on violation. - HELD THAT: - Because the Tribunal concluded that there was no violation of section 67(3) on the corrected facts, the exercise of SEBI's powers by the WTM to direct refund with interest and to restrain the directors was founded on an erroneous factual and legal premise. The order of the WTM was therefore unsustainable and liable to be set aside. [Paras 4, 9]

WTM's order directing refund, interest and restraint quashed; appeals allowed.

Final Conclusion: On the corrected factual matrix (47 allottees) the allotment was a private placement not a public issue under section 67(3); the WTM's order predicated on a finding of public issue is quashed and the appeals are allowed.

Rebuttable presumption of persons acting in concert - persons acting in concert - substantial acquisition and creeping acquisition - obligation to make an open offer under SAST Regulations - permissible remedial alternative under Regulation 32(1)(b)

Rebuttable presumption of persons acting in concert - persons acting in concert - Liability of SBEC Systems (India) Ltd. (appellant in Appeal No.443 of 2018) as a person acting in concert with other promoters for the additional share acquisitions - HELD THAT: - The Tribunal held that the deeming provision that promoters are persons acting in concert gives rise to a rebuttable presumption which may be displaced by positive or discernible negative evidence of independent conduct. A public limited company cannot be deemed to have acted through its promoters without evidence such as board resolutions or communications showing a common objective. The WTM erred in concluding that the appellant failed to rebut the presumption without considering the absence of any board resolution, correspondence or participation by the company in the acquisitions. Applying the principle in Diachii Sankyo and this Tribunal's precedents, mere promoter status or common replies does not suffice to make the company a person acting in concert where there is no material showing joint action or understanding. [Paras 10, 11]

Appeal No.443 of 2018 allowed; the WTM's direction against SBEC Systems (India) Ltd. is quashed and set aside.

Persons acting in concert - rebuttable presumption of persons acting in concert - Liability of Appellant Nos.1 to 4 in Appeal No.444 of 2018 as persons acting in concert with Appellant Nos.5 and 6 for the additional acquisitions - HELD THAT: - The Tribunal found that Appellant Nos.5 and 6 made individual acquisitions forced by circumstances (acceptance of shares in lieu of loan repayment) and there was no material to demonstrate a meeting of minds or joint action by Appellant Nos.1 to 4. The WTM's invocation of the presumption against all promoters without examining conduct or communications to establish concerted action was not sustainable. Consequently, the direction against Appellant Nos.1 to 4 could not be upheld. [Paras 12, 13]

The WTM's direction insofar as Appellant Nos.1 to 4 in Appeal No.444 of 2018 is set aside; those appellants are not held to be persons acting in concert for the acquisitions.

Substantial acquisition and creeping acquisition - obligation to make an open offer under SAST Regulations - permissible remedial alternative under Regulation 32(1)(b) - Relief and liability of Appellant Nos.5 and 6 for having acquired additional shares without compliance with Regulation 3(2) and the appropriate remedial direction - HELD THAT: - The Tribunal accepted that Appellant Nos.5 and 6 acquired additional shares without complying with the open offer obligations, but noted the acquisitions arose from acceptance of shares due to default by borrowers and against a backdrop of the company being declared sick and a draft rehabilitation scheme under consideration. The Tribunal held that these acquisitions were not deliberate attempts to subvert takeover norms and that the usual direction to make a public announcement may not be the only appropriate remedy. Exercising the power under Regulation 32(1)(b), the Tribunal modified the WTM's direction and directed Appellant Nos.5 and 6 to sell the shares acquired in violation and transfer the proceeds to the Investor Protection Fund within six months. [Paras 14, 15, 16]

Appeal No.444 of 2018 partly allowed; the WTM's direction against Appellant Nos.5 and 6 is modified - they are directed to sell the shares acquired in violation and remit proceeds to the Investor Protection Fund within six months.

Final Conclusion: The Tribunal allowed Appeal No.443 (SBEC Systems (India) Ltd.) and quashed the WTM's direction against that appellant; in Appeal No.444, the direction against Appellant Nos.1-4 was set aside, while the direction against Appellant Nos.5 and 6 was modified to require sale of the improperly acquired shares and transfer of proceeds to the Investor Protection Fund within six months under Regulation 32(1)(b).

Pre-existing dispute - existence of a dispute before receipt of the demand notice - application under section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 - admission of Corporate Insolvency Resolution Process - set aside of admission under section 9

Pre-existing dispute - existence of a dispute before receipt of the demand notice - Mobilox ratio - There existed a pre-existing dispute between the parties which negatived admission of the section 9 application. - HELD THAT: - The Tribunal examined the documentary record, notably multiple emails exchanged between the parties raising complaints about defective service and disputed bills during the subsistence of the contract, and applied the test in Mobilox Innovations (paras 33-34) requiring that a dispute must exist prior to receipt of the demand notice. The correspondence dated 31-10-2017, 25-12-2017, 26-12-2017 and other emails were held to establish that the corporate debtor had raised objections to the quality of services and to particular invoices before the demand notice. The NCLT's admission of the section 9 petition was found to have proceeded without proper appreciation of these pre-existing disputes and the governing legal principle, and therefore was incorrect.

Impugned order admitting the section 9 petition is set aside and the Corporate Insolvency Resolution Process is terminated; the corporate debtor is released from the rigour of CIRP.

Admission of Corporate Insolvency Resolution Process - set aside of admission under section 9 - The question of fees and costs of the Corporate Insolvency Resolution Process is remitted to the Adjudicating Authority for determination, to be borne by the Operational Creditor. - HELD THAT: - Having set aside the admission and directed cessation of the CIRP and return of records to the corporate debtor, the Tribunal remitted the limited issue of determination of IRP/RP fees and costs to the Adjudicating Authority for assessment and quantification. The Tribunal directed that such fees and costs shall be borne by the Operational Creditor.

Matter remitted to the Adjudicating Authority to decide the fee and costs of the CIRP, which shall be borne by the Operational Creditor.

Final Conclusion: The appeal is allowed: the NCLT order admitting the section 9 application is set aside on the ground of a pre-existing dispute; the CIRP is terminated and management returned to the corporate debtor; the Adjudicating Authority will determine CIRP fees and costs to be borne by the Operational Creditor.

Maintainability of appeal under section 61 of the Insolvency and Bankruptcy Code, 2016 - appeal against admission order - remedy of appeal versus application for stay before the Adjudicating Authority - laches and estoppel as bar to relitigation - inherent powers of the Adjudicating Authority

Maintainability of appeal under section 61 of the Insolvency and Bankruptcy Code, 2016 - appeal against admission order - remedy of appeal versus application for stay before the Adjudicating Authority - laches and estoppel as bar to relitigation - Whether the instant appeal (C.A. No. 190 (PB) of 2020) seeking stay of proceedings and dismissal of the company petition is maintainable before the Appellate Tribunal - HELD THAT: - The Tribunal held that once a petition under the Code has been admitted, the proper remedy for an aggrieved person is to prefer an appeal against the admission order in accordance with section 61, and not to seek stay of proceedings by way of a separate application under the guise of inherent powers. The appeal before the Tribunal was an attempt to seek relief (stay and dismissal of the petition) which is not the available recourse after admission. Further, the appellant had earlier challenged the admission order by filing Company Appeal (AT) (Ins.) No. 410 of 2018 which was dismissed; in those circumstances the appellant was estopped by its conduct and barred by laches from embarking on another round of litigation seeking the same relief. For these reasons the present appeal was held to be per se not maintainable and was dismissed without costs. [Paras 12, 13]

The appeal is not maintainable and is dismissed as not maintainable, without costs.

Final Conclusion: The Appellate Tribunal dismissed the appeal as not maintainable, holding that the correct remedy against an admission order is an appeal under section 61 and that the appellant, having earlier challenged the admission and suffered dismissal, was estopped by laches from seeking the relief by the present route.

Application under Section 7 of the I&B Code - date of default / NPA as trigger for limitation - Article 137 of the Limitation Act, 1963 - Effect of acknowledgment under Section 18 of the Limitation Act, 1963 - Balance sheet / annual return not an acknowledgment

Application under Section 7 of the I&B Code - date of default / NPA as trigger for limitation - Article 137 of the Limitation Act, 1963 - The Section 7 application was barred by limitation as the period of limitation is governed by Article 137 and begins to run from the date of default/NPA. - HELD THAT: - The Tribunal applied binding Supreme Court precedents which held that applications under Section 7 are governed by the Limitation Act and, being 'applications', ordinarily fall under the residuary Article 137. The right to sue for insolvency proceedings accrues when default occurs and the limitation period of three years under Article 137 runs from that trigger. In the present case the Corporate Debtor had defaulted prior to 2004 and the account was declared NPA in 2004; hence the three-year limitation would have expired in 2007. The Adjudicating Authority's view that limitation began from the date of the DRT decree was contrary to this principle and therefore the Section 7 application is time-barred. [Paras 11, 18, 21, 22, 28]

Application under Section 7 dismissed as barred by limitation.

Effect of acknowledgment under Section 18 of the Limitation Act, 1963 - DRT decree not shifting date of default - Balance sheet / annual return not an acknowledgment - The decree of the Debts Recovery Tribunal and the Corporate Debtor's balance sheets/annual returns do not operate as an acknowledgment under Section 18 to shift the date of default for limitation purposes. - HELD THAT: - Section 18 permits a written acknowledgment signed by the debtor to compute a fresh period of limitation. A decree awarding recovery does not itself amount to an acknowledgment by the debtor that shifts the date of default; it only records that the debt became due and quantifies it, and execution is a separate step. The Financial Creditor relied on the Corporate Debtor's balance sheets and auditor's reports, but filing of balance sheets and annual returns is a statutory requirement under the Companies Act and non-filing attracts penal consequences. Therefore statutory filing obligations cannot be treated as voluntary acknowledgments under Section 18. In absence of any contemporaneous written and signed acknowledgment by the Corporate Debtor prior to expiry of the original limitation period, Section 18 cannot be invoked to extend limitation. [Paras 12, 13, 15, 23, 24]

DRT decree and balance sheets/annual returns do not extend or revive the limitation period under Section 18.

Remand for quantification of fees and costs - The Adjudicating Authority is remitted to determine the fee and costs payable to the Interim Resolution Professional/Resolution Professional, to be borne by the Financial Creditor. - HELD THAT: - Although the Section 7 application is dismissed as time-barred, the Tribunal directed that the Interim Resolution Professional shall hand over assets and records to the promoters/board and that the Adjudicating Authority will decide the fee and costs incurred and payable to the Interim Resolution Professional/Resolution Professional, which shall be borne by the Financial Creditor. This matter is remitted for determination by the Adjudicating Authority.

Remitted to the Adjudicating Authority to determine fees and costs of the Interim Resolution Professional; assets and records to be handed over immediately.

Final Conclusion: Appeal allowed. The Section 7 application filed by the Financial Creditor is set aside as barred by limitation; the Corporate Debtor is released from the CIRP and the Interim Resolution Professional shall hand over assets and records to the promoters/board; the Adjudicating Authority is remitted to determine fees and costs payable to the Interim Resolution Professional, to be borne by the Financial Creditor.

Financial creditor - financial debt - commercial effect of a borrowing - offer and acceptance - earnest money - proof of acceptance and communication - manufactured document / bona fides of document

Financial creditor - financial debt - commercial effect of a borrowing - Whether the Applicant is a Financial Creditor by virtue of amounts allegedly paid to the Corporate Debtor and thus entitled to be treated under clause (f) of sub section (8) of Section 5. - HELD THAT: - The Tribunal examined the material relied upon by the Applicant and found no concluded contract or supporting documentation to establish that the sums paid had the commercial effect of a borrowing. The Applicant produced e receipts and counterfoils evidencing transfers but failed to produce any agreement for sale, acceptance by the Corporate Debtor, or other documents from which a financial debt could be inferred. The alleged offer (Annexure B) was conditional, there was no proof of dispatch or receipt, and acceptance could not be presumed from silence. In absence of certainty, communication and commitment required for formation of contract, and without documents to show the transaction had the commercial character of a borrowing, the claim could not be held to constitute a financial debt under clause (f). Consequently, the Applicant could not be classified as a Financial Creditor on the record before the Tribunal. [Paras 8, 9, 10, 11, 12]

Applicant is not established to be a Financial Creditor; the claim does not qualify as a financial debt under Section 5(8)(f).

Offer and acceptance - earnest money - proof of acceptance and communication - manufactured document / bona fides of document - Whether the amounts paid can be treated as earnest money or part of a contractual sale in the absence of acceptance and corroborative documents, and whether the Applicant's claim as an other stakeholder requires further verification. - HELD THAT: - The Tribunal noted that earnest money presupposes a contract and that it becomes part of the purchase price only upon fulfilment of the contract. The Applicant failed to produce a contract of sale, any acceptance by the Corporate Debtor, or evidence corroborating that the alleged offer was received and acted upon. Given the unilateral nature of the payments and the lack of supporting documentary proof, the payments could not be conclusively characterized as earnest money or as creating stakeholder rights without further inquiry. The Annexure relied upon was of doubtful provenance in absence of proof of dispatch/receipt, and therefore the claim as an other stakeholder was clouded and required verification by the Resolution Professional; the allegation that the RP changed positions was held to be unfounded as the order sheets are not final orders. [Paras 5, 6, 9, 12, 13]

Payments cannot be accepted as earnest money or as creating contractual rights in absence of acceptance and corroborative documents; the claim as a stakeholder is clouded and requires verification by the RP, but on the material before the Tribunal the application has no merit.

Summary of remedy under section 60(5) - Whether the application under Section 60(5) should be admitted and reliefs granted seeking declaration as a member of the Committee of Creditors or direction to the Respondent. - HELD THAT: - The Applicant sought reliefs under Section 60(5) to be admitted and to be declared a member of the Committee of Creditors. The Respondent stated that the Applicant's earlier Form F had been accepted and did not file a reply; however, the Tribunal found the Applicant's underlying entitlement unestablished on merits. The allegations about respondents changing statements were found baseless. Having considered the lack of documentary foundation for the claimed financial debt or enforceable contractual right, the Tribunal found no merit in admitting the application for the reliefs sought. [Paras 2, 3, 14]

Application under Section 60(5) is dismissed for lack of merit.

Final Conclusion: The application seeking admission under Section 60(5), declaration of the Applicant as a Financial Creditor or member of the Committee of Creditors, and related directions is dismissed for want of merit; the Applicant has not established a financial debt or contractual entitlement on the materials before the Tribunal.

Initiation of corporate insolvency resolution process under section 9 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 - limitation under the Limitation Act, 1963 and computation of date of default - acknowledgment of liability and fresh period of limitation - validity of board resolution and power of attorney as procedural authorisation - running account / reconciliation and proof of carry-forward balances

Limitation under the Limitation Act, 1963 and computation of date of default - The application under section 9 IBC was barred by limitation as the date of default was August 28, 2015 and the application filed on January 7, 2019 fell beyond the three year period. - HELD THAT: - The Tribunal noted that the invoices relied upon related to transactions on or before August 21, 2015 and, given the contractual payment term of seven days, the date of default for the outstanding invoice-bunch was August 28, 2015. The applicant filed the insolvency application on January 7, 2019, which is beyond three years from the date of default as governed by Article 137 of the Limitation Act, 1963. The Tribunal observed delays and gaps between the initial legal notice (July 2016), the section 8 demand notice (March 13, 2018) and the filing of the section 9 application, and concluded that the claim was time-barred. Accordingly the application could not be maintained and was ordered dismissed on limitation grounds. [Paras 11, 14, 16]

Application dismissed as barred by limitation.

Acknowledgment of liability and fresh period of limitation - running account / reconciliation and proof of carry-forward balances - The credit note dated April 1, 2017 did not operate as an acknowledgment of liability sufficient to start a fresh period of limitation. - HELD THAT: - The Tribunal examined the credit note produced subsequently by the applicant and found it did not contain any admission of liability or an unequivocal intention to pay prior dues. Relying on the established principle that an acknowledgment must consciously admit liability or intention to pay, the Tribunal held the credit note was merely a document counter-signed by the corporate debtor and not a statement restarting limitation. The applicant had not placed contemporaneous running-account reconciliations, year-end carry-forwards or documentation showing mutual consensus on opening/closing balances to show a continuing liability, and the credit note was not filed in the original petition but in additional documents. Consequently the credit note could not cure the limitation bar. [Paras 14, 15, 16]

Credit note does not amount to acknowledgment restarting limitation; limitation bar remains.

Validity of board resolution and power of attorney as procedural authorisation - processual law as aid to justice - The board resolution and power of attorney submitted by the applicant were sufficient for authorisation and the procedural objections thereto were rejected. - HELD THAT: - The Tribunal considered the challenge to the applicant's board resolution and the form of authorisation under the NCLT Rules. Observing that the power of attorney contained the substantive contents of Form NCLT-12 and invoking the proposition that procedural requirements should not frustrate substantive justice, the Tribunal held that rejecting the application solely for non-filing of the precise form would be unjust. Consequently the objection under section 158/Rule 45 was rejected and the board resolution/authorisation was treated as proper. [Paras 12]

Procedural objection to authorisation rejected; board resolution and power of attorney treated as valid.

Final Conclusion: The application under section 9 of the IBC was dismissed on the ground that it is time-barred; the Tribunal also held that the credit note did not amount to an acknowledgment restarting limitation, while procedural objections to the applicant's board resolution and authorisation were overruled.

Limitation - time-barred debt - date of debt becoming due and payable - effect of recovery order of Debts Recovery Tribunal - default - admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional - moratorium under the IBC - Article 137 of the Limitation Act

Limitation - time-barred debt - date of debt becoming due and payable - effect of recovery order of Debts Recovery Tribunal - Article 137 of the Limitation Act - The petition under section 7 is not barred by limitation. - HELD THAT: - The loans were declared NPA on 30.09.2002 and IDBI instituted recovery proceedings before the DRT on 27.07.2004. The DRT, by its order dated 17.08.2018, allowed the recovery application and ordered payment of the debt with interest. The Tribunal held that by virtue of the DRT order the debt became "due and payable" with effect from 17.08.2018. An application under section 7 filed within three years from that date is therefore within the period prescribed by Article 137 of the Limitation Act. The respondent's contention that the debt was time barred was rejected in view of the DRT order rendering the debt payable as on 17.08.2018 and the petition filed on 25.03.2019 being within three years. [Paras 6, 7]

Limitation defence repelled; petition under section 7 is maintainable as filed within three years from the DRT order of 17.08.2018.

Default - admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional - moratorium under the IBC - Default is established and the section 7 petition is admitted; interim measures and appointment of IRP ordered. - HELD THAT: - The Tribunal noted that the corporate debtor had admittedly defaulted in repayment of the debt and that default was satisfactorily proved. The adjudicatory test in a section 7 application is limited to existence of default. Having found default and that the petition was not time-barred, the Tribunal admitted the company petition. The petitioner's proposed interim resolution professional had furnished consent and no disciplinary proceedings were shown to be pending; accordingly the Tribunal appointed the IRP, directed him to take charge and proceed with CIRP steps, and declared moratorium under section 14 of the IBC. [Paras 8]

Company petition admitted; IRP appointed and moratorium declared to commence CIRP.

Final Conclusion: The Tribunal held that the section 7 petition was not barred by limitation in view of the DRT order of 17.08.2018 which made the debt due and payable; finding established default, the company petition was admitted, an IRP was appointed and moratorium under the IBC was declared to commence the CIRP.

Preventive detention - Article 22(5) - requirement to consider representation expeditiously - representation to the specially empowered officer - inordinate delay in disposal of representation vitiating detention - Advisory Board consideration and Central Government confirmation

Article 22(5) - requirement to consider representation expeditiously - representation to the specially empowered officer - inordinate delay in disposal of representation vitiating detention - Whether the representations made by the petitioner were considered expeditiously by the specially empowered officer and the Central Government in compliance with Article 22(5), and whether any delay vitiates the preventive detention order. - HELD THAT: - The Court reviewed the constitutional requirement that representations against preventive detention orders must be considered "as expeditiously as possible" and that unexplained or avoidable delay would render continued detention impermissible. It was admitted that the petitioner filed representations dated 15th April 2020 (addressed to the Specially Empowered Officer) and 17th April 2020 (to the Central Government). The record shows the 15th April representation was forwarded to the Zonal NCB on 16th April but was not forwarded to the Specially Empowered Officer by the Sponsoring Authority; it was obtained by the detaining authority only on 29th April 2020 and disposed of hurriedly the same day. Although the Advisory Board considered a representation on 18th April and submitted its opinion to the Central Government, there is no adequate explanation for the Sponsoring Authority's failure to forward the petitioner's 15th April representation to the Specially Empowered Officer in New Delhi, nor for the delay in forwarding and deciding the 17th April representation (forwarded on 20th April but decided only on 30th April). The Court applied settled principles that the detaining authority must not exhibit supine indifference, slackness or callous attitude in dealing with representations and that such safeguards under Article 22 are to be zealously enforced. In the facts of this case the Court concluded there was an inordinate and unexplained delay in considering the petitioner's representations by the Specially Empowered Officer and the Central Government; that delay amounted to a breach of the constitutional mandate in Article 22(5) and vitiated the continuation of the preventive detention order. [Paras 12, 18, 19, 20, 21]

The Court quashed the detention order dated 23rd January 2020 and the subsequent confirmation dated 27th April 2020, and directed the petitioner's immediate release if not required in connection with any other case.

Final Conclusion: The writ petition is allowed: the preventive detention order dated 23rd January 2020 and its confirmation dated 27th April 2020 are quashed for inordinate and unexplained delay in disposal of the petitioner's representations under Article 22(5); the petitioner is to be released forthwith unless required in another matter.

Right to Information Act - vigilance inquiry disclosure - duty to furnish reply to representation - administrative fairness

Vigilance inquiry disclosure - Right to Information Act - duty to furnish reply to representation - Respondents to disclose the outcome of the vigilance inquiry to the petitioner and to furnish a reply within a specified time upon receipt of an application or representation. - HELD THAT: - The petitioner participated in the recruitment process but his name did not appear in the list of successful candidates and he was informed that his case was under vigilance scrutiny. The Court observed that numerous representations and RTI requests by the petitioner had not been replied to. Without adjudicating the merits of the recruitment dispute, the Court permitted the petitioner to seek disclosure of the vigilance inquiry outcome either by filing an RTI application or a fresh representation. Upon receipt of such application or representation, the respondents are directed to furnish the necessary reply in respect of the vigilance inquiry within four weeks. The petitioner remains free to pursue appropriate legal remedies against any reply so received. This direction is procedural and does not decide the substantive entitlement of the petitioner to appointment. [Paras 8]

The petitioner may apply under RTI or submit a fresh representation; respondents must reply regarding the vigilance inquiry within four weeks; petitioner may take further legal recourse; matter not decided on merits.

Final Conclusion: Writ petition disposed by directing respondents to furnish the outcome of the vigilance inquiry to the petitioner within four weeks upon receipt of an RTI application or fresh representation; no determination on the merits of the candidate's claim to appointment.

Extension of limitation - Application to all proceedings under general and special laws - Limitation extended irrespective of condonability - Exercise of constitutional powers under Article 142 read with Article 141 - Suo motu cognizance - Binding effect on Courts, Tribunals and authorities

Extension of limitation - Application to all proceedings under general and special laws - Limitation extended irrespective of condonability - Exercise of constitutional powers under Article 142 read with Article 141 - Binding effect on Courts, Tribunals and authorities - Period of limitation for filing all petitions, applications, suits, appeals and other proceedings is extended w.e.f. 15th March 2020 until further orders and the extension is binding on all Courts, Tribunals and authorities. - HELD THAT: - The Court, taking suo motu cognizance of the difficulties arising from the COVID-19 pandemic, directed that the period of limitation in all proceedings - whether governed by the general law of limitation or by any Special Law, and whether the limitation is condonable or not - stands extended with effect from 15th March 2020 until further orders. The order is issued under the Court's constitutional power under Article 142 read with Article 141 and is declared to be binding on all Courts, Tribunals and authorities. The measure is directed to obviate practical difficulties faced by litigants and to avoid requiring physical presence for filing across jurisdictions; High Courts are to communicate the order to subordinate courts and registrars general have been issued notice for return.

Period of limitation extended from 15th March 2020 until further order; extension applies to all proceedings under general and special laws irrespective of condonability and is binding on all Courts, Tribunals and authorities under Article 142 read with Article 141.

Final Conclusion: Suo motu order extending limitation from 15th March 2020 until further orders; binding on all courts, tribunals and authorities, issued under Article 142 read with Article 141; High Courts to communicate to subordinate fora and Registrars General served with notice.

Extension of interim orders - suo motu cognizance - extraordinary circumstances - COVID-19 pandemic - automatic extension of interim orders - liberty to seek relief for extreme hardship - supersession by contrary Supreme Court orders - continuation of restricted court functioning

Extension of interim orders - automatic extension of interim orders - continuation of restricted court functioning - supersession by contrary Supreme Court orders - Interim orders which were subsisting as on 15.05.2020 and which expired or would expire thereafter are to be automatically extended till 15.06.2020 or until further orders, subject to any contrary orders of the Hon'ble Supreme Court of India. - HELD THAT: - Having taken suo motu cognizance of the extraordinary circumstances arising from the COVID-19 pandemic and the continuing restrictions on court functioning, the Court directed that interim orders which were subsisting as on 15.05.2020 and which expired or would expire thereafter shall be automatically extended. The extension is temporal and provisional - operative till 15.06.2020 or until further orders - and expressly does not override any specific contrary order passed by the Supreme Court in a particular matter. The direction is founded on the need to mitigate hardships caused by limited access to courts during the period of restricted functioning and continuing governmental restrictions. [Paras 3]

Automatic extension of interim orders subsisting as on 15.05.2020 granted until 15.06.2020 or until further orders, except where the Supreme Court has passed contrary orders.

Liberty to seek relief for extreme hardship - suo motu cognizance - Parties affected by the automatic extension who suffer extreme hardship are entitled to seek appropriate relief as provided by law. - HELD THAT: - The Court recognised that the blanket extension could, in some cases, cause hardship of an extreme nature. To accommodate such situations, it preserved the right of any party adversely affected by the extension to approach the appropriate forum and seek such relief as may be permitted under law. This is an exception carved out to ensure that the equitable impacts of the automatic extension can be addressed on a case-by-case basis. [Paras 4]

Parties suffering extreme hardship due to the extension may avail appropriate legal remedy.

Final Conclusion: Taking suo motu cognizance of the COVID-19 related restrictions and limited court functioning, the High Court ordered that interim orders subsisting as on 15.05.2020 be automatically extended till 15.06.2020 (subject to any contrary Supreme Court orders), preserved a remedy for parties facing extreme hardship, and directed publication and further listing of the matter for 15.06.2020.