TaxTMI Updates e-Newsletter
May 22,2021

Bail is the norm, jail is the exception - Grant of bail in economic/GST fraud cases involving large-scale tax evasion - Middleman liability for facilitating use of defunct companies' credentials - Cognizable and non-bailable offence under Section 132(5) of the CGST Act - Ongoing investigation and prejudice to probe as ground to deny bail - Magnitude of economic offence and judicial caution in granting bail

Middleman liability for facilitating use of defunct companies' credentials - Grant of bail in economic/GST fraud cases involving large-scale tax evasion - Ongoing investigation and prejudice to probe as ground to deny bail - Whether the petitioner, who acted as a middleman procuring and selling credentials of defunct companies used for fraudulent GST invoicing, was entitled to be enlarged on bail - HELD THAT: - The court accepted that the petitioner acted as a middleman procuring credentials of defunct companies and passing them to others for monetary consideration (recorded admissions and undisputed material). From those facts the court inferred that the petitioner would have been aware that the credentials were to be used for fake/fraudulent transactions and could not disavow knowledge by pleading a mere middleman role. The court applied the established caution that High Courts must be circumspect in granting bail in large-scale economic/GST frauds, particularly where investigation is ongoing and the alleged fraud is of substantial magnitude; reliance was placed on a recent Supreme Court order cautioning against bail where probe is incomplete in GST matters. The respondent's case that statutory returns implicating the petitioner and communications via the petitioner's mobile and forwarded invoices exist was found to weigh against bail. Granting bail at the preliminary stage, when the investigation is incomplete and the petitioner is alleged to have been instrumental to the perpetration of the fraud, would be prejudicial to the probe and risk undermining enforcement. On these considerations the court concluded that the petitioner's repeated submissions about delay in arrest or absence of assessment did not outweigh the seriousness of the allegations and the need for full investigation. [Paras 10, 11, 13, 14, 15]

Prayer for bail rejected; petition dismissed.

Final Conclusion: Bail application dismissed: the petitioner, shown to have procured and supplied credentials of defunct companies for fraudulent GST invoicing and implicated in large-scale tax evasion while investigation remains at a preliminary stage, is not entitled to bail given the magnitude of the alleged offence and the risk of prejudice to the ongoing probe.

Notice under Section 148 issued to deceased assessee - assessment passed against deceased person is invalid - requirement to issue notices to legal representatives - jurisdictional defect arising from notice addressed to a dead person

Notice under Section 148 issued to deceased assessee - assessment passed against deceased person is invalid - jurisdictional defect arising from notice addressed to a dead person - requirement to issue notices to legal representatives - Validity of notices and assessment proceedings conducted in the name of a deceased assessee where the department had been notified of the death. - HELD THAT: - The petitioner, as legal representative of the deceased assessee, communicated the death and enclosed the death certificate on 13.06.2017. Although an initial notice under Section 148 dated 31.03.2017 was valid, it did not result in an assessment and was allowed to lapse. Subsequent notices and proceedings addressed to the deceased (including the notice dated 25.03.2019 and the assessment order dated 21.12.2019) were issued after the department was informed of the death. The Court proceeded on the uncontradicted basis that the Assessing Officer had knowledge of the death; issuance of notices and the assessment in the name of the deceased therefore suffered a jurisdictional defect. The petitioner also pointed out that notices, if any, ought to have been issued to all legal representatives rather than solely to the petitioner, a point which the Assessing Officer did not address. For these reasons the proceedings and the impugned assessment order issued after the death were held invalid. [Paras 4, 6]

Notices and the assessment order issued after the death of the assessee are invalid; the assessment dated 21.12.2019 is set aside.

Final Conclusion: The writ petition is allowed; the assessment proceedings and order passed in the name of the deceased are declared invalid and set aside. Connected miscellaneous petitions closed; no costs.

Rejection of books of account - Estimation of turnover by reference to packing material - Assessment under Section 143(3) of the Act - Appellate interference on findings of fact - Substantial question of law

Rejection of books of account - Appellate interference on findings of fact - The Tribunal rightly held that the Assessing Officer's rejection of the assessee's accounts was not proper and that the matter was factual not raising a substantial question of law. - HELD THAT: - The High Court examined the record and the Tribunal's reasoning and found that the controversy concerning the veracity of cash entries, alleged unproved purchases and purportedly bogus expenses was resolved by factual findings. The Tribunal and the CIT(A) reviewed the cash book entries, remand report and explanations offered by the assessee, and recorded concluded findings of fact. The High Court observed that the grounds advanced by Revenue were essentially factual and that the Tribunal had elaborately considered the materials relied upon by the Assessing Officer before reaching its conclusions. Accordingly, there was no legal error warranting interference with the Tribunal's factual conclusions. [Paras 7, 14]

The Tribunal's finding that the Assessing Officer's rejection of the books was not proper is upheld; the issue is factual and does not raise a substantial question of law.

Estimation of turnover by reference to packing material - Appellate interference on findings of fact - The Tribunal correctly held that the Assessing Officer's enhancement of turnover by computing probable sales from packing material (including an arithmetical error) was not justified and that the CIT(A) rightly deleted the addition. - HELD THAT: - The Tribunal found, on the material placed before it and the remand report, that the Assessing Officer failed to distinguish between primary and secondary packing material, committed an arithmetical error in quantity (an extra '0'), and ignored closing stock and purchases when equating packing material consumed to probable sales. The Tribunal accepted the CIT(A)'s conclusion that some packing material related to closing stock and that the Assessing Officer's method would inflate sales in absence of corroborative material. The High Court held these conclusions to be based on appraisal of facts and materials and found no legal infirmity in the Tribunal's reasoning to warrant interference. [Paras 14, 17]

The Tribunal's deletion of the addition based on the Assessing Officer's packing-material-based estimation of turnover is confirmed; the assessment enhancement was not sustained.

Final Conclusion: The Revenue's appeal is dismissed; no substantial question of law arises and the Tribunal's factual findings and the CIT(A)'s order upholding the assessee are confirmed. No costs.

Disallowance under Section 14A - use of interest free funds versus interest bearing funds for investment - investments made from overdraft account (intermixing of funds) - remand for factual verification and application of principles of natural justice - deduction under Section 54EC - financial year wise cap on investment for Section 54EC proviso - effect of Finance (No.2) Act, 2014 (proviso effective from 01.04.2015)

Disallowance under Section 14A - use of interest free funds versus interest bearing funds for investment - investments made from overdraft account (intermixing of funds) - remand for factual verification and application of principles of natural justice - Whether the disallowance under Section 14A should be upheld or remanded for verification of source of investments vis a vis interest free funds. - HELD THAT: - The Tribunal found that the assessee failed, before the subordinate authorities, to establish with evidence that the investments were made solely from reserves or other interest free funds. The CIT(A) had observed that the immediate source of investments appeared to be the overdraft account where interest bearing and interest free funds were intermixed. Because the factual matrix as to whether investments were funded exclusively from interest free sources was not established or examined, the Tribunal held that the matter requires factual verification. In the interest of justice and after noting the need for opportunity to the assessee and for the Assessing Officer to apply the law following principles of natural justice, the Tribunal set aside the CIT(A)'s order on this issue and remanded the matter to the Assessing Officer for adjudication and verification of investments vis a vis interest free funds during the year under consideration. [Paras 7]

Order of the CIT(A) on Section 14A disallowance set aside and matter remanded to the Assessing Officer for factual verification and fresh adjudication after complying with principles of natural justice.

Deduction under Section 54EC - financial year wise cap on investment for Section 54EC proviso - effect of Finance (No.2) Act, 2014 (proviso effective from 01.04.2015) - Whether the assessee is entitled to claim deduction under Section 54EC in respect of two separate investments of Rs.50 lakhs each made in two different financial years but within six months of the transfer. - HELD THAT: - The Tribunal examined the statutory proviso and relevant judicial precedents holding that, prior to the amendment effected by Finance (No.2) Act, 2014 (effective from 01.04.2015 for AY 2015 16 onward), the benefit of the proviso to Section 54EC(1) is to be construed financial year wise. Thus, if the assessee made investments of Rs.50,00,000 in two different financial years within six months of transfer, the deduction could be allowed for each financial year up to the Rs.50 lakhs cap. The assessee had invested Rs.50 lakhs on 12.03.2013 (FY 2012 13 relevant to AY 2013 14) and Rs.50 lakhs on 25.07.2013 (FY 2013 14 relevant to AY 2014 15). The amendment by Finance (No.2) Act, 2014, which limits the aggregate to Rs.50 lakhs for the financial year and subsequent year, applies only from AY 2015 16 and is therefore not applicable to the facts before the Tribunal. Applying the pre amendment judicial view, the Tribunal held that the assessee is entitled to the Section 54EC benefit as claimed. [Paras 11, 12, 13]

Order of the CIT(A) set aside; Assessing Officer directed to allow the deduction under Section 54EC as per law.

Final Conclusion: Appeal partly allowed: Section 14A disallowance remanded to the Assessing Officer for factual verification and fresh adjudication after complying with natural justice; Section 54EC disallowance set aside and deduction to be allowed in accordance with the law prevailing for the period in question.

Admissibility of statements under section 132(4) - Requirement of independent corroborative evidence for additions based on search/seizure material - Evidentiary value of 'dumb documents' / loose sheets - Contradictory statements have no evidentiary value - Presumption under section 132(4A) limited to the searched person - Findings in one assessment are not conclusive in the assessment of another person

Admissibility of statements under section 132(4) - Requirement of independent corroborative evidence for additions based on search/seizure material - Evidentiary value of 'dumb documents' / loose sheets - Contradictory statements have no evidentiary value - Addition in the hands of the purchaser based solely on statement(s) of vendors recorded u/s 132(4) and loose sheets seized from vendors - HELD THAT: - The Tribunal held that mere statement(s) recorded u/s 132(4) from the vendors, without any incriminating material or independent corroborative evidence linking the purchasers to payment of on-money, cannot sustain an addition. The seized loose sheets were non-speaking 'dumb documents' and their numeric notings, without corroboration, do not establish payments by the purchasers. Contradictions in the vendors' statements and their denials on cross-examination further erode evidentiary value. Relying on settled decisions, the Tribunal emphasised that additions cannot be founded on suspicion, conjecture or uncorroborated notings; the Department bears the onus to produce cogent corroboration before taxing alleged undisclosed investment in the hands of a third party. [Paras 31, 36, 38]

Addition of Rs. 2,58,20,476/- in the hands of the assessee for AY 2014-15 deleted and the assessee's appeal allowed

Presumption under section 132(4A) limited to the searched person - Requirement of independent corroborative evidence for additions based on search/seizure material - Applicability of statutory presumption arising under section 132(4A) to assessments of third parties (purchasers) - HELD THAT: - The Tribunal observed that the statutory presumption under section 132(4A) pertains to the person in whose possession material was found and seized; it cannot be extended to draw presumptions against third parties. Consequently, the Assessing Officer and CIT(A) erred in applying that presumption to the purchasers without independent evidence linking them to the seized material. The CBDT guidance cautioning against reliance on coerced admissions and emphasising the need for corroborative evidence was also noted. [Paras 35]

Presumption under section 132(4A) not applicable to third-party assessments; cannot justify additions in purchasers' hands

Findings in one assessment are not conclusive in the assessment of another person - Admissibility of statements under section 132(4) - Requirement of independent corroborative evidence for additions based on search/seizure material - Whether admissions or declarations by vendors (including before the Settlement Commission) are binding or conclusive against purchasers for making additions - HELD THAT: - The Tribunal held that an admission or disclosure made by vendors in their proceedings (including before the Settlement Commission) is not conclusive evidence against purchasers. The assessment of each person is separate; material gathered or admissions in one person's assessment do not automatically constitute legal evidence to assess another without independent corroboration. The fact that vendors offered income before the Settlement Commission may raise suspicion but does not substitute for admissible evidence to tax purchasers. [Paras 32, 33, 37]

Admissions by vendors do not, by themselves, justify additions in the hands of purchasers in absence of independent corroborative evidence

Final Conclusion: The Tribunal set aside additions against the purchaser for AY 2014-15 (deleting the addition confirmed by lower authorities) and dismissed the Revenue's appeals for AY 2014-15 and AY 2012-13, holding that uncorroborated statements of vendors and non-speaking loose sheets cannot sustain additions in the hands of third-party purchasers; statutory presumption attaching to searched persons does not extend to third parties and admissions in one assessment are not binding in another.

Deemed transfer under Section 2(47)(v) of the Income-tax Act - part performance under Section 53A of the Transfer of Property Act - taxation of capital gains in the year of transfer - characterisation of receipts as business income (adventure in real estate) v. capital gains - avoidance of double taxation - credit for income previously assessed - validity of belated revised return in proceedings under section 147/148

Deemed transfer under Section 2(47)(v) of the Income-tax Act - part performance under Section 53A of the Transfer of Property Act - taxation of capital gains in the year of transfer - Impugned development agreement resulted in a transfer taxable as short-term capital gains in AY.2005-06 - HELD THAT: - The Tribunal reviewed the development agreement, rectification deed and supplemental agreement and concurred with the lower authorities that possession was handed over to the developer under the development agreement dated 19/10/2004 and related instruments. Applying the jurisdictional precedents considered by the lower authorities and the factual matrix, the Tribunal held that the transaction fell within the scope of a transfer under the deeming provision of Section 2(47)(v) read with Section 53A and that capital gains arose in the year relevant to AY.2005-06. The assessee's contention that absence of commencement of construction or municipal sanction prior to 14/11/2006 defeated transfer was considered and rejected on the basis that handing over of possession and the contractual framework sufficed to fix the year of taxability; non-starting of construction for approvals does not alter the date of transfer for capital gains purposes. Consequently the Assessing Officer's addition of short-term capital gains was affirmed. [Paras 5]

Affirmed the addition of short-term capital gains for AY.2005-06; appeal dismissed.

Characterisation of receipts as business income (adventure in real estate) v. capital gains - Whether the income should be treated as business income from adventure in real estate instead of capital gains - HELD THAT: - The Tribunal examined the assessee's plea that she had engaged in real estate development as an adventure in the nature of business. On perusal of the development agreement and the record, the Tribunal found that the assessee did not herself undertake development activity and that the development risk and activity were borne by the developer. The assessee had, in other proceedings, treated the developed area as a capital asset and claimed deductions consistent with capital gains treatment in AY.2008-09. The Tribunal therefore rejected the contention that the receipts constituted business income. [Paras 5]

Assessee's claim that the receipts were business income was rejected.

Measurement and valuation of developed area - Challenge to measurements and rate adopted by the lower authorities in computing the developed area and its rate - HELD THAT: - The Tribunal noted that the assessee had raised corresponding grounds before the lower appellate authority but did not press them during appellate proceedings before the Tribunal and had not pleaded these grounds in the present appeal. As the grounds were not pursued, and no fresh plea was advanced, the Tribunal declined to entertain the challenge to the measurements and the rate adopted by the Assessing Officer. [Paras 6]

Grounds on measurements and rate rejected for lack of prosecution; no interference.

Avoidance of double taxation - credit for income previously assessed - validity of belated revised return in proceedings under section 147/148 - Whether capital gains assessed in AY.2005-06 should be allowed as credit/adjustment in assessment for AY.2008-09 (and treatment of belated revised return) - HELD THAT: - The Tribunal observed that the assessee's grievance in AY.2008-09 was that income corresponding to the developed area had already been assessed in AY.2005-06 and therefore should not be subjected to tax again. While the Revenue relied on principles limiting allowance of new claims in reopening proceedings under section 147/148, the Tribunal found those authorities inapplicable to the present fact-situation of potential double assessment. Rather than finally adjudicating the computation, the Tribunal directed the Assessing Officer to recompute the assessment for AY.2008-09 after ensuring that income already assessed in preceding year(s) is not treated as escaping assessment for AY.2008-09. The Tribunal thus remitted the matter for fresh computation consistent with the finding that double taxation must be avoided. [Paras 7]

Remitted to the Assessing Officer for recomputation to ensure no double assessment of income already taxed in AY.2005-06; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal affirmed the Assessing Officer and CIT(A) in treating the development agreement as a deemed transfer attracting short-term capital gains in AY.2005-06 and rejected the assessee's contention of business character and valuation objections; the assessment for AY.2008-09 was remitted to the Assessing Officer for recomputation to avoid double taxation of income already assessed in AY.2005-06, and that appeal was allowed for statistical purposes.

Reassessment under section 147/148 - reason to believe - non-application of mind - reliance on investigation wing - reopening of assessment quashed - addition under section 68 - initial onus under section 68 - duty of assessing officer to verify and summon under section 131 - shift of burden to Revenue

Reassessment under section 147/148 - reason to believe - non-application of mind - reliance on investigation wing - Validity of the reopening of assessment under section 147/148 on the basis of reasons recorded by the Assessing Officer - HELD THAT: - The Tribunal examined the reasons recorded for issuance of notice under section 148 and found them to contain incorrect and non-existing facts (wrong beneficiary name and incorrect entry amount) and to be a mere reproduction of information from the Investigation Wing without independent verification. Reliance on authorities establishing that where the assessing officer records vague, erroneous or unverified reasons and fails to apply independent mind, the statutory condition for reopening is not satisfied, the Tribunal concluded that the reopening was illegal. In the circumstances the assessing officer and the sanctioning authority did not apply their minds to the material before them and the notice issued under section 148 and consequent reassessment under section 147 were quashed; all additions made in consequence stood deleted. [Paras 7]

Reopening of the assessment quashed and related additions deleted.

Addition under section 68 - initial onus under section 68 - duty of assessing officer to verify and summon under section 131 - shift of burden to Revenue - Sustainability of additions made under section 68 in respect of share application money and commission - HELD THAT: - The Tribunal found on the record that the assessee furnished share-application forms, affidavits, copies of investors' returns, balance-sheets, bank statements and other documentary evidence establishing identity, genuineness and creditworthiness of the investors. The assessing officer's objection rested on non-production of investor principals before him, but the assessee had requested issuance of summons and later the investors responded to notices under section 133(6) at the appellate remand stage confirming the investments. Applying precedents that once the assessee discharges the initial onus under section 68 by prima facie evidence, the Revenue must undertake further verification to rebut it, the Tribunal held that the assessee had discharged its burden, no independent material was produced by the Department to displace that evidence, and there was no proof of any commission paid. Accordingly the additions under section 68 and the commission addition were deleted. [Paras 10]

Additions under section 68 and the commission addition deleted.

Final Conclusion: Appeal allowed: reassessment proceedings under section 147/148 quashed for non-application of mind and reliance on unverified investigation material; additions under section 68 and the commission addition deleted as the assessee discharged initial onus and no rebuttal material was produced by the Revenue.

Charitable purpose - advancement of any other object of general public utility - genuineness of activities - registration under section 12AA - benefit to a section of the public

Advancement of any other object of general public utility - genuineness of activities - registration under section 12AA - benefit to a section of the public - Whether the assessee-society is entitled to registration under section 12AA of the Income Tax Act as an institution carrying out activities falling within the expression "advancement of any other object of general public utility" under section 2(15). - HELD THAT: - The Tribunal examined the objects and bye-laws of the assessee-society and the statutory scheme under section 2(15) and section 12AA. Section 2(15) distinguishes activities which are per se charitable and a wider category of "advancement of any other object of general public utility", subject to the proviso excluding activities in the nature of trade or business for consideration. Section 12AA empowers the Commissioner to call for documents to satisfy himself about the genuineness of activities and to register a trust if satisfied. The Commissioner (Exemptions) rejected registration essentially on the basis that the society's dominant activity - construction and allotment of chambers for members of the Bar - benefits a specific class of professionals and therefore is not an object of general public utility. The Tribunal held that an object beneficial to a section of the public can constitute an object of general public utility provided the class is identifiable and impersonal in nature; incidental benefits to individual professionals do not convert the activity into a private scheme. The Tribunal further observed that the bye-laws disclose additional activities (environmental greening, de-addiction campaigns, welfare and education of girl child, legal awareness) and that the provision of infrastructure to lawyers is integrally connected to the public function of judicial dispensation and access to justice. Relying on the established principle that the relevancy of application of funds is examinable at assessment stage and on the settled view that bodies serving a profession or a section can be of general public utility, the Tribunal concluded that the dominant purpose of the society falls within section 2(15) and that the Commissioner erred in narrowly construing the objects. The Tribunal therefore directed the Commissioner (Exemptions) to grant registration under section 12AA. [Paras 10, 11]

Assessee entitled to registration under section 12AA; order of the ld.CIT(Exemptions) rejecting registration set aside and registration directed to be granted.

Final Conclusion: The Tribunal allowed the appeal, holding that the society's dominant purpose qualifies as advancement of an object of general public utility under section 2(15) and directing the CIT(Exemptions) to grant registration under section 12AA.

Validity of reopening of assessment under section 147/148 - Non-application of mind to information received - Reasons recorded for reopening must be supported by tangible material and a live nexus to escapement of income - Quashing reassessment where reasons are wrong, incorrect or non existing - Additions made as unexplained credits deleted where reassessment is quashed

Validity of reopening of assessment under section 147/148 - Non-application of mind to information received - Reasons recorded for reopening must be supported by tangible material and a live nexus to escapement of income - Quashing reassessment where reasons are wrong, incorrect or non existing - Additions made as unexplained credits deleted where reassessment is quashed - Reopening of assessment for AY 2007-08 and validity of notice under section 147/148 in light of reasons recorded by the Assessing Officer - HELD THAT: - The Tribunal found that the Assessing Officer reopened the assessment based solely on information received from REIC through ITO Ward-43(4) without independent application of mind. The reasons recorded reproduced vague allegations (inflows from smuggling etc.) which, on examination of the assessment file, were shown to be incorrect, non existing or contradicted by what the AO ultimately assessed. The Tribunal relied on its decision in the assessee's own succeeding year and on authoritative precedents to reiterate that reasons for reopening must be founded on tangible material and a demonstrable link to escapement of income, and that merely reproducing investigation wing information without verification or prima facie satisfaction amounts to non application of mind. Applying these principles to the facts, the Tribunal concluded that the reasons recorded were wrong/incorrect/non existing and that the AO failed to verify the information before forming the belief required for reopening. Consequently the reassessment was held illegal and to be quashed, with all consequential additions deleted; other appellate grounds were left undecided as academic. [Paras 9, 12, 15, 16, 17]

Reopening of the assessment for AY 2007-08 quashed for want of valid reasons and non application of mind; all additions deleted and other issues left academic.

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2007-08, quashed the reassessment proceedings because the Assessing Officer recorded wrong/incorrect/non existing reasons and failed to apply his mind to the information received, and directed deletion of all additions; other grounds were not adjudicated as they became academic.

Depreciation on right to collect toll as an intangible asset - applicability of 25% depreciation rate to licence/rights under section 32(1)(ii) - characterisation of BOT/BOOT concession rights as intangible commercial rights - recognition of provision for major maintenance as a deductible liability under accrual accounting - tests for recognising a provision: present obligation, probable outflow and reliable estimate

Depreciation on right to collect toll as an intangible asset - applicability of 25% depreciation rate to licence/rights under section 32(1)(ii) - Assessee entitled to depreciation at 25% on the capitalised 'right to collect toll' for AY 2012-13 and AY 2013-14. - HELD THAT: - The Tribunal considered conflicting decisions and followed the view of coordinate Benches, the Special Bench and the Bombay High Court that where expenditure has been incurred by the concessionaire to develop, construct and maintain a road under a BOT/BOOT arrangement and, in consideration, the concessionaire obtains the right to collect toll for a specified period, that right is a business/commercial right constituting an intangible asset within the scope of section 32(1)(ii). The Tribunal held that the right arose after incurrence of costs by the assessee, is wholly/partly owned and used in the business, and therefore satisfies the statutory test for allowance of depreciation at the prescribed rate (25%). The Tribunal distinguished and declined to follow the contrary view relied upon below, adopting precedents which treat the licence/right to collect toll as an intangible asset eligible for depreciation.

Grounds challenging allowance of depreciation at 25% are allowed and the assessee is held eligible for depreciation at 25% for both assessment years.

Recognition of provision for major maintenance as a deductible liability under accrual accounting - tests for recognising a provision: present obligation, probable outflow and reliable estimate - Provision made for major maintenance (created on a reasonable estimated basis) is allowable as deduction for AY 2012-13 and AY 2013-14. - HELD THAT: - The Tribunal applied settled principles from Supreme Court authority and relevant Tribunal decisions: a provision qualifies where there is a present obligation from a past event, a probable outflow of resources to settle it, and a reliably measurable estimate. The concession agreement imposed an obligation to carry out major maintenance at specified intervals; estimates for the maintenance liability were documented in the loan agreement/schedules and the assessee computed a proportionate provision for the partial year of operations. On that basis the Tribunal found the provision met the accrual and matching concepts and allowed the claim, rejecting the Assessing Officer's view that the liability was merely contingent.

Grounds disallowing the provision for major maintenance are set aside and the provisions are allowed as deductions subject to veracity of the scientific estimation underpinning the provision.

Procedural abandonment of ground of appeal - Ground challenging treatment of NHAI grant (reduction of depreciable base) for AY 2012-13 was not pressed and dismissed as not pressed; identical ground for AY 2013-14 was considered but the Tribunal applied its findings mutatis mutandis. - HELD THAT: - In assessment year 2012-13 the assessee expressly did not press the ground contesting the deduction of the NHAI grant; the CIT(A)'s order on that ground was therefore dismissed as not pressed. For 2013-14 the grounds were identical and, as there was no change in facts, the Tribunal applied the same approach and disposed the appeals consistently.

Grounds on the NHAI grant were not pressed for AY 2012-13 and dismissed as not pressed; the Tribunal applied the same position to AY 2013-14.

Final Conclusion: Both appeals are partly allowed: the Tribunal upheld the assessee's entitlement to depreciation at 25% on the capitalised right to collect toll (treated as an intangible asset) and allowed the provision for major maintenance as deductible, while the ground relating to the NHAI grant was not pressed for AY 2012-13 and the Tribunal applied its conclusions consistently to AY 2013-14.

Rejection of books of account under section 145(3) of the Income-tax Act - estimation of gross profit by applying average GP ratio - characterisation of software transaction as purchase of goods versus payment for use of intellectual property (royalty) - obligation to deduct tax at source on payments to non-residents and disallowance under section 40(a)(ia) of the Income-tax Act - impact of product-service mix on profit margins

Rejection of books of account under section 145(3) of the Income-tax Act - estimation of gross profit by applying average GP ratio - impact of product-service mix on profit margins - Deletion of addition made by estimating gross profit and rejecting book results on account of alleged fall in gross and net profit ratios. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) finding that the Assessing Officer had not pointed out any specific defect in maintenance of books of account and had relied solely on a comparison of GP and NP ratios to reject the books under section 145(3). The Commissioner (Appeals) recorded that the assessee carried on multiple segments (product and service), the share of the lower margin product segment had increased and the service segment (with higher margins) had decreased, thereby explaining the decline in overall margins. There was no change in method of accounting and no material on record showing purchases or expenses were inflated or sales suppressed. In those circumstances the AO was not justified in substituting the assessee's book results by computing GP on the average of prior years, and the addition was correctly deleted. [Paras 10]

Addition of Rs. 2,86,01,036/- by estimating gross profit was deleted; Revenue's ground is dismissed.

Characterisation of software transaction as purchase of goods versus payment for use of intellectual property (royalty) - obligation to deduct tax at source on payments to non-residents and disallowance under section 40(a)(ia) of the Income-tax Act - Deletion of disallowance under section 40(a)(ia) for failure to deduct TDS on payment to a foreign supplier for purchase of software. - HELD THAT: - The Tribunal affirmed the Commissioner (Appeals) conclusion that the payment was for acquisition of a copyrighted article (software embodied in media) as a product and not for transfer or grant of a right to use the intellectual property giving rise to 'royalty'. The CIT(A) relied on precedent recognising the distinction between acquiring a 'copyright right' and a 'copyrighted article', and on higher judicial decisions treating software supplied on media as goods. In view of those authorities and the finding that the payment was for purchase of product with incidental use of IP, there was no liability to deduct tax under section 195 and consequently no disallowance under section 40(a)(ia). The Tribunal found no infirmity in the CIT(A)'s order and declined to interfere. [Paras 18]

Addition of Rs. 9,12,600/- under section 40(a)(ia) was deleted; Revenue's ground is dismissed.

Final Conclusion: Both grounds of the Revenue appeal are dismissed: the Tribunal upholds the Commissioner (Appeals) in (i) rejecting the AO's substitution of book profits by average GP in place of the assessee's maintained books and deleting the GP addition, and (ii) holding that the disputed software purchase amounted to purchase of goods (copyrighted article) and not royalty, so no TDS disallowance under section 40(a)(ia) is sustainable.

Rejection of books of account and estimation of profits on turnover - estimation of net profit at a deemed percentage of gross receipts - appellate power to enhance income vis-a -vis co-terminous powers of the Commissioner of Income Tax (Appeals) - treatment of receipts as business income versus separate other income for enhancement - deduction under section 80IB(11A) for processing, preservation and packaging of fruits or vegetables or integrated business of handling, storage and transportation of food grains - classification of sweet corn as vegetable (starchy vegetable) or grain for fiscal benefit

Rejection of books of account and estimation of profits on turnover - estimation of net profit at a deemed percentage of gross receipts - Validity of the Assessing Officer's rejection of the assessee's books and estimation of net profit at 10% of gross receipts. - HELD THAT: - The Tribunal examined the AO's finding that the assessee failed to produce supporting bills and vouchers despite opportunities and therefore the books could not be relied upon. Noting the AO's reasoning that the accounts did not reflect true profits and that the turnover exceeded the threshold for presumptive provisions, the Tribunal found no reason to interfere with the AO's pragmatic view. Having considered the gross profit position and the assessee's failure to substantiate expenditure, the Tribunal approved estimation of profit at 10% on total turnover as reasonable and dismissed the corresponding ground of appeal. [Paras 10]

The AO's estimation of income at 10% of gross receipts is upheld.

Appellate power to enhance income vis-a -vis co-terminous powers of the Commissioner of Income Tax (Appeals) - treatment of receipts as business income versus separate other income for enhancement - Whether the Commissioner (Appeals) could enhance the assessee's income by bifurcating receipts as 'other income' and taxing them without allowing attributable expenses after the books were rejected and AO had estimated profits on total receipts. - HELD THAT: - The Tribunal accepted the assessee's submission, supported by precedent, that once books are rejected and a pragmatic estimation of profits has been made by the AO, the appellate authority should not make further additions by extracting items from the same books to treat them as income without regard to the estimation. On review of the particulars of 'other income' and their connection to the primary business activity, the Tribunal held these receipts arose in the course of the principal business and formed part of turnover. Consequently, the CIT(A)'s enhancement treating those receipts as separate taxable 'other income' without permitting corresponding expenditure was set aside and the AO's approach retained. [Paras 13]

The CIT(A)'s enhancement is set aside; the AO's estimation on total turnover stands and the items treated as other income are held to be related to main business.

Deduction under section 80IB(11A) for processing, preservation and packaging of fruits or vegetables or integrated business of handling, storage and transportation of food grains - classification of sweet corn as vegetable (starchy vegetable) or grain for fiscal benefit - Entitlement of the assessee to deduction under section 80IB(11A) for its activities in relation to sweet corn. - HELD THAT: - The Tribunal considered whether sweet corn falls within the ambit of 'fruits or vegetables' or otherwise qualifies under the integrated business limb in the section. Relying on the material placed before it and noting that sweet corn is commonly treated as a starchy vegetable when harvested immature, the Tribunal accepted that the assessee carried out processing, preservation and packaging and possessed requisite plant and machinery. On that basis the Tribunal concluded that the assessee's business activity falls within the scope of section 80IB(11A) and directed allowance of the deduction, while clarifying that the deduction would apply to profit estimated at 10% on revenue from operations but not on profit attributable to the separately shown other income as per Note No. P. [Paras 14]

Assessee is entitled to deduction under section 80IB(11A) on the profit estimated by the AO on revenue from operations; deduction not allowed on estimated profit attributable to other income shown separately.

Final Conclusion: The appeals are partly allowed: the AO's estimation of income at 10% of gross receipts is upheld; the CIT(A)'s enhancement by treating certain receipts as separate other income is set aside and those receipts are held to be part of main business turnover; the assessee is entitled to deduction under section 80IB(11A) on the profit estimated on revenue from operations (but not on profit attributed to other income).

Jurisdiction of Assessing Officer on transfer under section 127(3) - disallowance of alleged bogus purchases - only profit element to be added back - estimation of gross profit on bogus purchases for computing disallowance - disallowance under section 14A read with Rule 8D limited to exempt income - treatment of multiple house properties as deemed let-out and determination of annual letting value

Jurisdiction of Assessing Officer on transfer under section 127(3) - Validity of assessment orders where jurisdiction of Assessing Officer was changed by an order under section 127 without prior communication to the assessee. - HELD THAT: - The Tribunal examined section 127 and held that subsections (1) and (2) require hearing before transfer, but subsection (3) expressly excludes the requirement of giving an opportunity of hearing where the transfer is between Assessing Officers whose offices are situated in the same city, locality or place. The assessee's case was transferred from DCIT-15(2), Mumbai to ACIT, Central Circle-32, Mumbai, i.e., within the same city. The decisions relied upon by the assessee concerned transfers governed by subsections (1) or (2) and are factually distinguishable. The Tribunal also noted prior coordinate-bench orders in the assessee's earlier years on identical facts dismissing the jurisdictional objection. Accordingly, the challenge to jurisdiction was rejected. [Paras 5]

Challenge to jurisdiction of the Assessing Officer is dismissed.

Disallowance of alleged bogus purchases - only profit element to be added back - estimation of gross profit on bogus purchases for computing disallowance - Whether the Assessing Officer can add back the entire amount of alleged bogus purchases, or only the profit element; and the quantification of gross profit to be applied. - HELD THAT: - The Tribunal accepted that the Assessing Officer had accepted the sales declared by the assessee and therefore the entire quantum of alleged bogus purchases could not be added back; only the profit embedded in such transactions is exigible. Noting market practice for trading in ferrous and non-ferrous metals (GP generally 5%-8%) and that the CIT(A) had applied 12.5%, the Tribunal found that the CIT(A)'s estimate was on the higher side. To meet ends of justice and on the material before it, the Tribunal restricted the gross profit to 6% of the alleged bogus purchases and modified the CIT(A)'s order accordingly. This conclusion was applied consistently across AYs 2009-10, 2010-11 and 2011-12. [Paras 6, 11, 18]

Addition on account of alleged bogus purchases is restricted to the profit element, fixed at 6% of the disputed purchases; appeals on this point are partly allowed.

Disallowance under section 14A read with Rule 8D limited to exempt income - Extent of disallowance under section 14A read with Rule 8D in respect of exempt income for AY 2011-12. - HELD THAT: - The Tribunal noted that the Assessing Officer made a disallowance under Rule 8D exceeding the exempt income earned, and that the CIT(A) had reduced but still made a substantial disallowance. Applying settled principle that disallowance under section 14A cannot exceed the exempt income earned, the Tribunal directed the AO to restrict the disallowance to the extent of exempt income actually earned by the assessee in the relevant year. [Paras 16]

Disallowance under section 14A read with Rule 8D is to be restricted to the exempt income earned; ground is partly allowed.

Treatment of multiple house properties as deemed let-out and determination of annual letting value - Validity of additions on account of deemed rent from two properties treated as deemed let-out for AY 2011-12. - HELD THAT: - The Tribunal noted that the assessee possessed three residential properties, one of which was self-occupied; the Assessing Officer treated the other two properties as deemed let-out under the statutory scheme and determined annual letting values. The CIT(A) had followed earlier Tribunal orders for prior years and confirmed the additions. The Tribunal found no error in the factual and legal conclusions recorded by the AO and CIT(A), and observed that the assessee had not placed material before it to rebut those findings. [Paras 17]

Additions on account of deemed rent are upheld; ground is dismissed.

Final Conclusion: The appeals for AYs 2009-10, 2010-11 and 2011-12 are partly allowed: the jurisdictional challenge is dismissed; additions for alleged bogus purchases are restricted to the profit element fixed at 6% of disputed purchases; disallowance under section 14A/Rule 8D is to be limited to the exempt income earned; and additions by way of deemed rent are upheld.

Undervaluation of closing stock - sales without corresponding stock - inventory shrinkage / quantity loss - rejection of book results under section 145(2) - estimation of gross profit - addition for household expenditure as unexplained withdrawals - Rule 46A - production of evidence - tax audit report as supporting evidence

Undervaluation of closing stock - tax audit report as supporting evidence - Addition on account of alleged undervaluation of closing stock of soyabean oil deleted - HELD THAT: - The Tribunal found no discrepancy in quantities between the assessing officer and the assessee; the dispute related only to the rate applied by the AO. The AO applied higher purchase rates for packed and loose soyabean oil without recording any basis for those rates in the assessment order. The assessee consistently valued closing stock at cost or market value, whichever was lower, and the books and tax audit report supported the valuation. In those facts the addition for undervaluation of closing stock was unwarranted and deleted. [Paras 10]

Addition of Rs. 1,40,643 on account of undervaluation of closing stock deleted.

Sales without corresponding stock - Addition for sale of 'sarki khalli' without stock deleted - HELD THAT: - Documents show purchase from Vishnu Oil Industries by invoice dated 27.02.2010 and goods received earlier on 17.02.2010 by carrier; negative stock arose from delayed data entry in the accounting system (posting entered on 28.02.2010). The paper book corroborated timely receipt of goods, showing the apparent negative stock was a posting/timing issue and not evidence of unaccounted sales. [Paras 11]

Addition of Rs. 75,894 for alleged sale without stock deleted.

Inventory shrinkage / quantity loss - tax audit report as supporting evidence - Addition for alleged unexplained quantity loss in soyabean oil deleted - HELD THAT: - The loss of 26.85 quintal was recorded in the tax audit report. The audit report shows opening stock, large purchases and sales such that the loss constituted about 0.05% of total soyabean oil sold-consistent with the nature of the business. The AO made the addition because he said no reply was furnished, but documentary audit evidence on record established the loss and no basis existed to treat it as unexplained sales or to make the addition. [Paras 12]

Addition of Rs. 1,20,825 (noted in grounds as Rs. 1,02,825) for quantity loss deleted.

Rejection of book results under section 145(2) - estimation of gross profit - Rejection of books and addition by estimating gross profit set aside - HELD THAT: - The AO rejected book results and estimated gross profit after noting various alleged discrepancies. The Tribunal, having deleted the specific additions made for undervaluation, sale without stock and quantity loss, held there remained no plausible basis to reject the book results under section 145(2). The assessed discrepancies that purportedly justified rejection were already addressed and deleted, and the assessee maintained regular books with quantitative details; accordingly the AO's action in rejecting the books and estimating gross profit was incorrect. [Paras 13]

Addition of Rs. 6,44,750 by estimating gross profit (on rejection of books) deleted.

Addition for household expenditure as unexplained withdrawals - Household expenditure addition partly sustained - HELD THAT: - The AO had estimated household expenditure at a higher amount and had incorporated it within the gross profit addition. With deletion of the gross profit addition, the household expenditure issue remained live. The assessee showed certain household expenses in return (including withdrawals), but did not place complete household expenditure details on record. Considering the family size, local circumstances and absence of full evidence, the Tribunal, adopting a fair estimate, held household expenditure of Rs. 40,000 per month (Rs. 4,80,000 annually) as reasonable. Given the assessee had shown Rs. 2,21,000, the shortfall of Rs. 2,59,000 was directed to be added to income. [Paras 15]

Household expenditure addition sustained to the extent of Rs. 2,59,000; remainder deleted.

Final Conclusion: The appeal is partly allowed: additions for undervaluation of closing stock, sale without stock, quantity loss and the estimated gross profit (rejection of books) are deleted; the addition for household expenditure is partly sustained to the extent of Rs. 2,59,000; other general grounds need no adjudication.

Addition under section 68 - addition under section 69A - explanation of source and creditworthiness - admission of additional evidence under rule 46A - reassessment proceedings under section 147 read with section 143(3) - treatment of unexplained cash as unaccounted business receipt and application of net profit rate

Addition under section 68 - explanation of source and creditworthiness - Confirmation of addition of Rs. 4,50,000 made under section 68 for AY 2010-11. - HELD THAT: - The Tribunal examined three cheque credits totalling Rs. 4,50,000 and the documentary material produced by the assessee. For two cheques (total Rs. 2,85,000) alleged to be loans from Shri Arun Kumar Tiwari, the assessee furnished a loan confirmation and the lender's bank statement showing deposits a day before issuance of the cheques, but did not produce evidence of the source of those deposits or the lender's financial capacity. For the remaining cheque (Rs. 1,65,000) the assessee failed to furnish specific supporting details. Applying the statutory test under section 68, the Tribunal found the explanations and documents insufficient to establish genuineness and creditworthiness and concluded that the assessee failed to discharge the burden of proof to explain the source of the credits. On this basis the addition under section 68 was sustained. [Paras 11, 12, 13, 15]

Addition of Rs. 4,50,000 under section 68 for AY 2010-11 confirmed; appeal dismissed.

Addition under section 69A - treatment of unexplained cash as unaccounted business receipt and application of net profit rate - Partial deletion and substitution of the addition of Rs. 35,00,000 made under section 69A for AY 2011-12 by treating the deposit as unaccounted business receipt and applying an 8% net profit rate. - HELD THAT: - The assessee relied on an admitted opening cash balance and produced a month-wise cash flow statement, contending that Rs. 30,00,000 of the Rs. 35,00,000 deposit was explained. The Tribunal found merit in the legal proposition that keeping cash idle is not per se impermissible, but observed that surrounding circumstances, lack of books of account, inadequacy and lack of clarity in the cash flow statement, unexplained withdrawals and absence of nexus between alleged withdrawals and bank redeposits left the source of the deposit uncertain. Noting that the revenue could not conclusively demonstrate the origin of the deposits but that the assessee's explanation was not fully persuasive, the Tribunal treated the entire deposit as unaccounted business receipts and, in a discretionary and pragmatic approach, applied a net profit rate of 8% to the disputed amount. Consequentially the addition was restricted to income of Rs. 2,80,000 (8% of Rs. 35,00,000), deleting the balance addition. [Paras 16, 17, 18, 19, 21]

Addition of Rs. 35,00,000 under section 69A partly deleted; substituted addition of Rs. 2,80,000 confirmed.

Admission of additional evidence under rule 46A - Rejection of the ground challenging non admission of additional evidence filed under rule 46A. - HELD THAT: - The Tribunal recorded that no submissions were advanced before it by the assessee in support of the plea for admission of additional evidence under rule 46A. In the absence of argued contentions or supporting material before the Tribunal, the ground alleging erroneous denial of admission of additional evidence was dismissed. [Paras 9]

Ground alleging non admission of additional evidence under rule 46A dismissed.

Reassessment proceedings under section 147 read with section 143(3) - Legal grounds contesting the validity of reassessment proceedings under section 147 read with section 143(3) were not pressed and dismissed. - HELD THAT: - The assessee explicitly chose not to press the challenge to the validity of the reassessment proceedings. The Tribunal recorded that these grounds were not pressed and dismissed them accordingly without further adjudication on the merits. [Paras 8]

Grounds challenging validity of assessment under section 147 r.w.s. 143(3) dismissed as not pressed.

Final Conclusion: For AY 2010-11 the Tribunal confirmed the addition of Rs. 4,50,000 under section 68 and dismissed the appeal; for AY 2011-12 the Tribunal partly allowed the appeal by reducing the addition under section 69A to income of Rs. 2,80,000 (applying an 8% net profit rate) and deleting the remainder; grounds on admission of evidence and reassessment validity were dismissed.

Deemed dividend under Section 2(22)(e) - concern in which such shareholder has a substantial interest - beneficial owner and voting power threshold - limitations by accumulated profits of lender company - application of judicial precedent in tax fiction interpretation

Deemed dividend under Section 2(22)(e) - concern in which such shareholder has a substantial interest - beneficial owner and voting power threshold - Whether loans/advances received by the assessee from three companies are taxable as deemed dividend in the hands of the assessee under Section 2(22)(e) where a common person is a substantial shareholder in both lender companies and the assessee. - HELD THAT: - The Tribunal examined the three limbs of Section 2(22)(e) and found that the first and third limbs were not attracted on the facts. The second limb applies where a company makes a payment by way of loan or advance to a concern in which a shareholder of the payer-company is a member or partner and in which he has a substantial interest. The Tribunal accepted the Revenue's case that Shri Punyapal Surana was a common substantial shareholder in the three lender companies and the assessee, holding more than the statutory threshold of voting power; therefore the prerequisites of the second limb were satisfied. The Tribunal relied on the ratio of the Hon'ble Supreme Court in National Travel Services v. CIT for interpreting the statutory fiction and rejected the contrary precedents relied upon by the assessee as distinguishable on facts. Consequently, the addition as deemed dividend was justified. However, the Tribunal held that the quantum of deemed dividend cannot exceed the accumulated profits of the respective lender companies as reflected in their books at the time of making the loans, and adjusted the aggregate addition accordingly. [Paras 14, 15, 16, 18]

Tribunal confirmed invocation of Section 2(22)(e) and sustained the addition for deemed dividend in favour of the Revenue, subject to reduction so that the addition does not exceed the accumulated profits of the lender companies.

Limitations by accumulated profits of lender company - Whether the amount of deemed dividend is constrained by the accumulated profits of the lender companies. - HELD THAT: - The Tribunal held that while Section 2(22)(e) treats certain loans/advances as deemed dividend, the amount so treated cannot exceed the accumulated profits of the lending company available before making such loans or advances. Applying this principle to the facts, the Tribunal reduced the addition made by the AO to align with the accumulated profits as per the lenders' books, arriving at a lower aggregate addition than that originally made by the AO. [Paras 18]

Quantum of addition reduced and fixed taking into account the accumulated profits of the lender companies; addition confirmed at the adjusted amount.

Final Conclusion: Revenue's appeal partially allowed; Tribunal set aside the CIT(A)'s deletion, confirmed invocation of Section 2(22)(e) for AY 2012-13 but reduced the aggregate addition so that it does not exceed the accumulated profits of the lender companies, fixing the addition accordingly.

Condonation of delay - drawback (brand rate) fixation - exercise of discretion in condonation - right to notice and opportunity to rebut - compartmentalization of authority for grant of extension - remand for reconsideration

Condonation of delay - exercise of discretion in condonation - Validity of the Commissioner of Customs' refusal to condone delays in filing applications for fixation of brand rate for drawback - HELD THAT: - The Tribunal found that the Commissioner approached the applications with undue rigidity inconsistent with the liberalized scheme introduced by the 2010 amendments and the accompanying circular, which relaxed the earlier requirement of demonstrating that the exporter was "prevented by sufficient cause". The refusals did not record case-specific reasons nor identify particular impediments arising from the lapse of time; consequently there was no justification for blanket refusal to condone delay. The Tribunal also noted authority treating drawback as a statutory reimbursement obligation of the State and emphasised that condonation requests are to be dealt with in a manner consonant with that remedial object. On these grounds the impugned refusals were set aside and the matters were returned for fresh consideration. [Paras 6, 7]

Impugned refusals to condone delay set aside for want of adequate, case-specific reasoning and remitted for reconsideration on merits.

Compartmentalization of authority for grant of extension - remand for reconsideration - Proper allocation of jurisdiction between Commissioner and Assistant/Deputy Commissioner for deciding condonation requests and the consequential remedial direction - HELD THAT: - The Tribunal observed that the revised Rules compartmentalise the authority to grant extension: initial condonation within three months lies with the Assistant/Deputy Commissioner and delays beyond that may be decided by the Commissioner, with corresponding fee provisions. To implement this demarcation the Tribunal directed that the Commissioner segregate the condonation requests according to the prescribed jurisdiction; matters within his competence are to be decided by him and the remainder restored to the Assistant/Deputy Commissioner for appropriate action and final disposal. The Tribunal's remand was directed only to the extent of this source of grievance and to ensure compliance with the statutory allocation of functions. [Paras 8]

Directed segregation of requests by jurisdiction; Commissioner to decide those within his competence and to restore remaining matters to Assistant/Deputy Commissioner for disposal.

Right to notice and opportunity to rebut - remand for reconsideration - Whether the exporter was afforded an opportunity to rebut the grounds of refusal - HELD THAT: - The Tribunal found that the competent authority did not place the reasons for refusal on notice nor afford the exporter an opportunity to rebut them. The generality of the reasons indicated a failure to consider each claim and to identify specific impediments caused by delay. That procedural deficiency militated against the validity of the refusals and supported remand for fresh consideration after ensuring the exporter has opportunity to meet any case-specific contentions. [Paras 7]

Found procedural infirmity in denial of opportunity to rebut; directed reconsideration after affording opportunity to the exporter.

Final Conclusion: The impugned communications refusing condonation were set aside. The Tribunal remitted the matters for fresh consideration: the Commissioner must segregate requests according to the prescribed jurisdiction, decide those within his competence and restore the remainder to the Assistant/Deputy Commissioner for appropriate action, after affording the exporter an opportunity to rebut any case-specific grounds.

Sanction of Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013 - Compliance with procedural requirements of section 232 - Appointed Date for scheme implementation - Transfer and vesting of assets and liabilities upon demerger - Continuance of pending proceedings against the resulting company - Tax and stamp duty liabilities subject to concerned revenue authorities - Statutory compliance and post-sanction filing obligations

Sanction of Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013 - Compliance with procedural requirements of section 232 - The Tribunal sanctioned the Scheme of Arrangement and held that the procedure specified in sub-sections (1) and (2) of section 232 has been complied with. - HELD THAT: - On consideration of the petition, the reports of the Regional Director and Registrar of Companies and the material on record, the Tribunal found the Scheme to be fair and reasonable, not detrimental to members or creditors and not contrary to public policy. The Tribunal specifically recorded satisfaction that the procedural requirements under section 232(1) and (2) had been followed and therefore granted sanction to the Scheme as approved by the boards of the Demerged Company and the Resulting Company. [Paras 11]

Scheme of Arrangement sanctioned.

Appointed Date for scheme implementation - The Appointed Date for the Scheme was fixed as 1st April, 2020. - HELD THAT: - In the operative order the Tribunal declared the Appointed Date for the Scheme to be 1st April, 2020, thereby specifying the date from which the demerger will take effect for all purposes under the sanctioned Scheme.

Appointed Date fixed as 1st April, 2020.

Transfer and vesting of assets and liabilities upon demerger - Continuance of pending proceedings against the resulting company - Assets, shares and liabilities of the Demerged Company are to be transferred and to vest in the Resulting Company, and proceedings pending by or against the Demerged Company shall continue by or against the Resulting Company. - HELD THAT: - The Tribunal ordered that, pursuant to section 232, the undertaking (assets and the interest of the Demerged Company) shall be transferred to and vest in the Resulting Company subject to existing charges. All liabilities, taxes and duties of the Demerged Company are to be transferred and become those of the Resulting Company. Further, any proceedings pending by or against the Demerged Company are to be continued by or against the Resulting Company.

Assets, liabilities and pending proceedings to be transferred to the Resulting Company.

Tax and stamp duty liabilities subject to concerned revenue authorities - Sanction of the Scheme does not exempt the companies from payment of stamp duty or taxes; tax implications arising from the Scheme are subject to final decision of the concerned Income Tax Authorities. - HELD THAT: - The Tribunal clarified that its sanction is not an order granting exemption from stamp duty, taxes or other charges and that such dues shall be dealt with by the appropriate authorities in accordance with law. Any tax implications arising from the Scheme are reserved for final determination by the concerned tax authorities and their decision will be binding on the Resulting Company.

No exemption from stamp duty/taxes; tax implications left to competent authorities.

Statutory compliance and post-sanction filing obligations - The Petitioner Companies were directed to comply with specified post-sanction obligations including filing a certified copy of the Order and Scheme with the Registrar of Companies, filing due statutory returns, periodic compliance affidavits and handing over books of account. - HELD THAT: - As part of the sanction, the Tribunal directed the Petitioner Companies to, within thirty days, deliver a certified copy of the Order and Scheme to the Registrar of Companies for registration. The companies were required to file any due statutory returns immediately, to submit quarterly/annual affidavits by the Managing Director/Director with CA/ICWA/CS certification until compliance is ensured, and, after completion of the arrangement, to hand over books of accounts and relevant documents of the Demerged Company to the Resulting Company. The Tribunal also observed that the sanction does not bar the Registrar of Companies or other authorities from taking appropriate action for any violations.

Petitioners directed to comply with post-sanction filing and compliance obligations.

Final Conclusion: The Tribunal granted sanction to the Scheme of Arrangement between Prime Progression Icom (India) Private Limited and Prime Progression Global Commerce Private Limited, fixed the Appointed Date as 1st April, 2020, directed transfer and vesting of assets and liabilities to the Resulting Company, left tax and stamp duty consequences to the concerned authorities, and imposed post-sanction filing and compliance obligations on the Petitioner Companies.

Reduction of share capital - Condonation of delay in publication - Special resolution for capital reduction - Form of minutes under section 66 - Approval by Regional Director - Compliance with other statutes (SEBI, FEMA, Income Tax) - No bar to action for statutory violations

Condonation of delay in publication - Delay of 128 days in causing the mandated newspaper publication was condoned. - HELD THAT: - The Tribunal considered the explanation that the Authorized Representative was absent from office due to the diagnosis and death of his mother, with resumption of office only from 26.12.2019. The Tribunal found the stated reasons plausible and reasonable and therefore exercised its discretion to condone the delay in publication. Consequentially MA/423/2020 was allowed and MA/1195/2020 was closed. [Paras 2]

Delay of 128 days in causing paper publication is condoned; MA/423/2020 allowed and MA/1195/2020 closed.

Reduction of share capital - Special resolution for capital reduction - Form of minutes under section 66 - Approval by Regional Director - The scheme of reduction of paid-up share capital as approved by the members was confirmed and the proposed form of minutes was approved. - HELD THAT: - The Applicant company, having passed a special resolution for reduction of paid-up share capital, filed the requisite papers including statutory certificates and the minutes form. The Regional Director, upon receipt of notice, examined the scheme and stated that it had decided not to object to the scheme. In view of the members' special resolution, the accompanying certificates, and the RD's observations, the Tribunal found it just and proper to confirm the reduction of paid-up share capital and approved the proposed form of minutes for registration under section 66. [Paras 12, 16, 17]

Reduction of paid-up share capital is confirmed as resolved by the members; proposed form of minutes approved.

Compliance with other statutes (SEBI, FEMA, Income Tax) - No bar to action for statutory violations - Sanction does not exempt compliance with or proceedings under other enactments; specified post-order compliances directed. - HELD THAT: - The Tribunal clarified that its sanction will not preclude action under any enactment, statutory rule or regulation should any deficiency or violation be found; such action may be taken in accordance with law against concerned persons. The order does not grant exemption from payment of stamp duty, taxes or other charges, and the applicant must comply with obligations under SEBI, FEMA and Income Tax laws as applicable. The Applicant was directed to publish the confirmation order in specified newspapers and to file a certified copy with the Registrar of Companies within 30 days. [Paras 18, 19, 20]

Order does not exempt liability under other laws; specified compliances including publication and filing with RoC are mandated.

Final Conclusion: The Tribunal condoned the delayed publication, allowed confirmation of the reduction of paid-up share capital and approved the minutes for registration, while recording that the sanction does not exempt compliance with or liability under other laws and directing publication and filing with the RoC.

Admission of corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - proof of date of default and non performing asset declaration - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - public announcement and submission of claims under Section 15 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional and functions of IRP - prohibition on enforcement of security and continuation of proceedings during moratorium

Admission of corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 - proof of date of default and non performing asset declaration - The petition under Section 7 of the IBC filed by the Financial Creditor was admissible and is admitted; the date of default is established. - HELD THAT: - The Tribunal examined the petition and annexures including the sanction letter, account statements and the computation sheet (Annexure E) and found that the loan was disbursed and the requisite security documents were executed. The account having been declared NPA on 29th July 2017 was accepted as the date of default. The Corporate Debtor's reply was considered and rejected as not disclosing any valid ground to avoid liability. On these findings the Tribunal concluded that the statutory requisites for admission under Section 7 were satisfied and admission was appropriate. [Paras 3, 11]

Petition under Section 7 admitted; date of default recorded as 29th July 2017.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - public announcement and submission of claims under Section 15 of the Insolvency and Bankruptcy Code, 2016 - prohibition on enforcement of security and continuation of proceedings during moratorium - Moratorium is declared from the date of admission and public announcement procedures and prohibitions under Sections 13-15 are directed to be followed. - HELD THAT: - On admitting the Section 7 petition, the Tribunal exercised its power to declare moratorium and directed a public announcement and call for claims in terms of Sections 13 and 15. The order specifies the scope of the moratorium in accordance with Section 14 - restraining institution or continuation of suits or execution, transfer or disposal of assets, and actions to enforce security interests - and confirms that supply of essential goods or services shall not be terminated except as permitted by the Code. The moratorium is to continue until completion of the CIRP or earlier approval of a resolution plan or liquidation order. [Paras 14, 15]

Moratorium declared; public announcement and claim submission directed; prohibitions under Section 14 ordered.

Appointment of Interim Resolution Professional and functions of IRP - An Interim Resolution Professional (IRP) is appointed and directed to perform statutory duties including convening the Committee of Creditors. - HELD THAT: - The Financial Creditor proposed CA Sonu Jain as IRP and placed the Form 2 consent on record. The Tribunal noted her disclosures and absence of disciplinary proceedings and appointed her as IRP to ascertain particulars of creditors, cause the public announcement, call for claims, convene the Committee of Creditors and identify prospective resolution applicants within the time frame provided by the Code. [Paras 13, 15]

CA Sonu Jain appointed as IRP; IRP to convene CoC and carry out duties as per the Code.

Interim directions regarding IRP expenses and deposit by Financial Creditor - The Financial Creditor is directed to deposit an interim amount to meet IRP preliminary expenses and fees subject to CoC approval. - HELD THAT: - As part of interim directions attendant to admission, the Tribunal ordered the Financial Creditor to deposit a specified amount with the IRP within three days to enable the IRP to meet preliminary expenses; the IRP's claims for fees and expenses are to be subject to subsequent approval by the Committee of Creditors. [Paras 15]

Financial Creditor directed to deposit the prescribed interim amount for IRP preliminary expenses; IRP fees to be approved by CoC.

Final Conclusion: The application under Section 7 of the IBC filed by the Financial Creditor against M.M. Agro Ventures Private Limited is admitted; moratorium is declared and public announcement and claim processes are directed; CA Sonu Jain is appointed as Interim Resolution Professional with directions to convene the Committee of Creditors and proceed with the corporate insolvency resolution process in accordance with the Code.

Committee of creditors' commercial wisdom - application for liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - rejection of resolution plan by voting of committee of creditors - non-interference with commercial decision of CoC by appellate forums - liquidation upon failure of corporate insolvency resolution process

Committee of creditors' commercial wisdom - rejection of resolution plan by voting of committee of creditors - application for liquidation under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 - Sustainability of the Adjudicating Authority's order directing liquidation after the Committee of Creditors rejected the resolution plan by requisite voting share. - HELD THAT: - The Tribunal noted that the Resolution Professional filed IA/1186/IB/2020 seeking liquidation and recorded that the Committee of Creditors, holding 76.02% voting share, voted against the resolution plan and thereby, in terms of the insolvency scheme, effectively voted for liquidation. Applying the principle that commercial wisdom of the Committee of Creditors is paramount and not to be interfered with except within the limited scope provided by the Code, the Tribunal relied on the Supreme Court's observations in Kalpraj Dharamshi to underscore the limited role of judicial intervention. Having regard to the CoC's negative vote (including e-voting conducted thereafter) and the statutory trigger in Section 33(2) for liquidation where CIRP fails to produce a viable resolution, the Tribunal concluded that the Adjudicating Authority's order directing liquidation was free from legal infirmity. [Paras 19, 21, 22, 23]

The Adjudicating Authority's order dated 08.04.2021 directing liquidation is sustained and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, holding that the Adjudicating Authority rightly ordered liquidation after the Committee of Creditors, acting on its commercial wisdom and by requisite majority, rejected the resolution plan; no interference with that decision was warranted.

Operational debt - operational creditor - maintainability under the Insolvency and Bankruptcy Code - premature invocation of CIRP - non-joinder of necessary parties - dispute resolution clauses and forum competence - refundable security deposit in real estate transactions

Operational debt - refundabl e security deposit in real estate transactions - Whether the refundable security deposit advanced through the petitioner qualifies as an operational debt under the IBC - HELD THAT: - The Tribunal held that a refundable security deposit given in the context of land aggregation and development does not amount to an operational debt under the Code. A refundable security deposit is a financial assurance to enable commencement of contractual performance and is not backed by provision of goods or services by the petitioner; after the entry of a contractor (Minerva) the operative relationship for delivery of services lay between the developer/contractor and Elbit India/Aayas. Consequently, the transaction is not of the service-provider/service-recipient type required by the definition of operational debt and falls outside the limited scope of operational debt under sections defining operational creditor/debt.

Refundable security deposit in this case is not an operational debt under the IBC; petition based on non-refund of such deposit is not maintainable under the Code.

Operational creditor - principal creditor vs conduit SPV - Whether the petitioner Aayas Trade Services Pvt. Ltd. is the operational creditor entitled to initiate proceedings under section 9 of the IBC - HELD THAT: - The Tribunal found that the substantive creditor role was occupied by Elbit India (and Koyenco), with Aayas acting as a conduit/SPV through which funds were advanced. The contractual architecture and subsequent SPAs treated Elbit India as the main creditor and envisaged direct payments to Elbit India. Given this arrangement and the options under the SPAs vesting rights in Elbit India (alone or jointly with Aayas), the petitioner Aayas did not have the proper position as the operational creditor to single-handedly institute proceedings under the Code.

Aayas cannot be treated as the operational creditor in respect of the claimed debt; Elbit India (and Koyenco as applicable) were the principal creditors.

Maintainability under the Insolvency and Bankruptcy Code - premature invocation of CIRP - dispute resolution clauses and forum competence - non-joinder of necessary parties - Whether the petition is maintainable or is premature in view of contractual dispute-resolution mechanisms, non-joinder and the nature of the claims - HELD THAT: - The Tribunal observed that the disputes arising from the SPAs and framework agreements involved issues suited to specific performance, settlement mechanisms, arbitration and other fora expressly provided in the contracts. Several material parties (notably Elbit India, Koyenco and Minerva) were not properly before the Tribunal. The claim effectively sought to treat the Adjudicating Authority as a recovery forum for purported settlement/default claims rather than addressing insolvency qua inability to pay within the narrow scope of the Code. Given the nature of the contracts, the in-built dispute resolution routes and the incorrect identification of parties, the petition was held to be premature and not maintainable under the IBC.

The petition is premature and not maintainable under the IBC; parties must pursue remedies in the appropriate forums identified in the agreements and by law.

Final Conclusion: CP (IB) No. 350/BB/2019 is dismissed as premature and not maintainable under the IBC; the Tribunal held that the claimed refundable security deposit is not an operational debt, the petitioner is not the principal operational creditor, and the disputes and parties are to be adjudicated in appropriate fora as per the contractual dispute-resolution mechanisms.

Maintainability of a Section 9 petition where an arbitral award is under challenge - operational debt - pre-existing dispute and effect of an appeal under Section 34 of the Arbitration and Conciliation Act - jurisdictional scope of the NCLT under Section 60(5)(c) of the IBC - misuse of the Insolvency and Bankruptcy Code for execution of an arbitral award

Maintainability of a Section 9 petition where an arbitral award is under challenge - pre-existing dispute and effect of an appeal under Section 34 of the Arbitration and Conciliation Act - misuse of the Insolvency and Bankruptcy Code for execution of an arbitral award - jurisdictional scope of the NCLT under Section 60(5)(c) of the IBC - Whether the petition under Section 9 of the IBC is maintainable to initiate CIRP for recovery of amounts awarded by an arbitral award which is under challenge before the High Court by way of a Section 34 petition, and whether invocation of the Code in such circumstances is permissible. - HELD THAT: - The Tribunal found that the dispute underlying the petition arises from a lease agreement and was adjudicated by an arbitral tribunal which passed an ex parte award. The corporate debtor has stated that it has filed a challenge to that award under Section 34 of the Arbitration and Conciliation Act which is pending. Relying on the principle that a pre-existing dispute continues to exist while an award is under challenge, and having regard to the limited jurisdiction of the NCLT under Section 60(5)(c) to adjudicate matters that arise solely from or relate to insolvency, the Tribunal held that the present proceeding is an attempt to use the IBC for enforcement of an arbitral award rather than to address insolvency. The petitioner also failed to show prima facie that the corporate debtor is insolvent or that no other remedy was available; the petitioner delayed initiating appropriate proceedings for execution of the award and did not explain the delay. In these circumstances the petition was held to be founded on a misconception of fact and law and to amount to misuse of the Code for recovery of an arbitral award that is under challenge. [Paras 6, 7, 8, 9, 10]

The Section 9 petition is not maintainable and is dismissed as an improper invocation of the IBC for execution of an arbitral award that is subject to a pending Section 34 challenge.

Final Conclusion: The petition under Section 9 of the IBC was dismissed as not maintainable because the dispute underlying the claim is the subject of a pending challenge to an arbitral award and the petitioner did not establish insolvency or absence of alternate remedies; no order as to costs.

Minimum amount of default for initiation of CIRP - admissibility of instrument not duly stamped - existence of operational debt and proof of services rendered - requirement of undisputed debt for initiation of CIRP - prohibition on using the IBC as a mere recovery forum

Minimum amount of default for initiation of CIRP - Amendment specifying a higher monetary threshold for initiation of CIRP does not apply to defaults that arose prior to the amendment. - HELD THAT: - The Tribunal held that the Notification raising the minimum amount of default to Rs. 1 crore applies prospectively to defaults committed after the amendment. The alleged default in this case pre-dates the amendment; therefore the amended threshold is inapplicable and does not oust the Petitioner's locus to file under Section 9. [Paras 7]

The objection based on the amendment to the minimum amount of default is rejected.

Admissibility of instrument not duly stamped - The unstamped consultancy agreement relied upon by the Operational Creditor is admissible in the proceedings because the Corporate Debtor had accepted and acted upon the agreement. - HELD THAT: - Although the Corporate Debtor raised a contention that the consultancy agreement is not duly stamped and therefore inadmissible, the Tribunal found that the Corporate Debtor had accepted the agreement, availed of services thereunder and made payments until the Operational Creditor ceased services. On these facts the agreement could be treated as valid for the purpose of the adjudication and the objection on stamp formalities was rejected. [Paras 7]

The objection that the consultancy agreement is inadmissible for want of stamp duty is overruled.

Existence of operational debt and proof of services rendered - requirement of undisputed debt for initiation of CIRP - prohibition on using the IBC as a mere recovery forum - The Operational Creditor failed to establish existence of the claimed unpaid consultancy fees for the period September 2018 to February 2019; the debt is denied and, being unsupported, the petition is liable to be dismissed. - HELD THAT: - The Tribunal examined the ledger and a single tax invoice dated 30.09.2018. The invoice lacked crucial particulars (period covered and acknowledgment by the Corporate Debtor) and other invoices for the claimed period were not produced. Informal emails were insufficient to prove that services were rendered and remained unpaid, particularly where the Corporate Debtor denied liability in its reply to the demand notice. Applying the settled principle that initiation of CIRP requires an existence of an undisputed debt supported by documentary evidence, and mindful that the Code is not a substitute for recovery proceedings and should not be used to destabilise viable going concerns engaged in matters of national importance, the Tribunal concluded that the Petition was filed as a recovery attempt and could not be admitted. [Paras 10, 12, 13, 14, 15]

The Petition is dismissed for failure to establish an unpaid operational debt and for being an impermissible use of the Code as a recovery forum.

Final Conclusion: C.P. (IB) No. 17/BB/2021 is dismissed for failure to establish an undisputed operational debt supported by evidence; no costs.

Withdrawal of CIRP under Section 12(A) - Regulation 30(A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Committee of Creditors' approval by sole Operational Creditor - Restoration of management and handover of assets and records - Interim Resolution Professional fees - not pressed

Withdrawal of CIRP under Section 12(A) - Regulation 30(A) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Committee of Creditors' approval by sole Operational Creditor - Application for withdrawal of the Corporate Insolvency Resolution Process was allowed. - HELD THAT: - The IRP initiated CIRP and published calls for claims; only the sole Operational Creditor filed a claim and thereby constituted the CoC with 100% voting share. The CoC, through the Operational Creditor, lodged Form FA under Regulation 30(A) seeking withdrawal and recorded its decision in the first CoC meeting. Having considered the application, the Form FA and the provisions of Section 12(A) and Regulation 30(A), the Tribunal permitted withdrawal of the CIRP initiated against the corporate debtor. [Paras 5, 6, 9]

The Tribunal allowed the withdrawal of the CIRP pursuant to Section 12(A) and Regulation 30(A) on the CoC's approval communicated through Form FA.

Interim Resolution Professional fees - not pressed - The IRP's claim for additional fees was not pressed and therefore not adjudicated in this application. - HELD THAT: - The IRP acknowledged receipt of a part payment and stated that only one CoC meeting was held with no further CIRP activity; during proceedings the IRP's counsel expressly did not press the prayer for further professional fees. Consequently, the Tribunal did not award any additional fees as that relief was not pursued before it. [Paras 8]

No order for additional IRP professional fees was made because the relief was not pressed by the Applicant.

Restoration of management and handover of assets and records - The corporate debtor's board of directors' powers were restored and the IRP directed to hand over reins, assets and records to the management. - HELD THAT: - On permitting withdrawal of the CIRP, the Tribunal directed that the powers of the board of directors, which had stood suspended on initiation of CIRP, be restored from the date of the order. The IRP was ordered to hand over control of the corporate debtor along with any assets collected and records collated during the CIRP to the board of directors/management. [Paras 10]

The Tribunal restored the management's powers and directed the IRP to hand over assets and records to the board of directors.

Final Conclusion: The Tribunal allowed the application for withdrawal of the CIRP under Section 12(A) read with Regulation 30(A) based on the CoC's approval via Form FA; the IRP's claim for further fees was not pressed and no order was made thereon; the corporate debtor's board's powers were restored and the IRP directed to hand over assets and records to the management.

Default - operational debt - demand notice in Form-3 - admission of debt by silence - initiation of Corporate Insolvency Resolution Process under section 9 - disposal of petition with direction to settle

Default - operational debt - demand notice in Form-3 - admission of debt by silence - The existence of default by the Corporate Debtor and the maintainability of the Section 9 petition by the Operational Creditor. - HELD THAT: - The Tribunal found that the Operational Creditor executed a Service Agreement and rendered services as pleaded, issued a Demand Notice in Form-3 which was served on the Corporate Debtor on 30.01.2020, and that the Corporate Debtor neither intimated existence of a dispute within ten days nor made payment. On these facts the Tribunal treated the debt and default as deemed admitted by the Corporate Debtor's silence and accepted that the Operational Creditor had substantiated the claim with relevant documents. The Tribunal therefore concluded that the preconditions for a Section 9 petition - a demand notice served and non-response within the statutory period - were satisfied.

Default by the Corporate Debtor is established and the Section 9 petition was maintainable on the pleaded facts.

Initiation of Corporate Insolvency Resolution Process under section 9 - disposal of petition with direction to settle - Whether CIRP should be initiated immediately or the parties should be permitted to settle the claim. - HELD THAT: - Although the Tribunal found default, the Respondent's counsel represented willingness to settle the claim. The Tribunal exercised its discretion to facilitate settlement rather than keep the proceeding pending; accordingly it disposed of the petition after directing the Corporate Debtor to settle the claim within one month from receipt of the order. The Tribunal recorded that failing settlement, the Operational Creditor would be entitled to file an appropriate petition before the Adjudicating Authority for the same cause of action.

Petition disposed with a direction to the Corporate Debtor to settle the claim within one month; in default the Operational Creditor may approach the Adjudicating Authority afresh.

Final Conclusion: The Tribunal found the debt and default established on the pleadings and service of the Demand Notice but, in view of the Respondent's offer to settle, disposed of the Section 9 petition by directing settlement within one month; failure to settle permits the Operational Creditor to file a fresh petition seeking initiation of CIRP.

Liquidation under Section 33(2) of the Insolvency & Bankruptcy Code, 2016 - Committee of Creditors' approval threshold of not less than sixty-six percent - Appointment of Liquidator under Section 34(1) - Liquidator's initiation of liquidation process under Chapter III and IBBI (Liquidation Process) Regulations, 2016 - Vesting of management powers in the Liquidator and cessation of powers of Board of Directors - Bar on suits and proceedings during liquidation subject to section 52 and proviso permitting liquidator to institute suits with approval - Notice of discharge to officers, employees and workmen under Section 33(7) - Filing of liquidation order with the Registrar of Companies

Liquidation under Section 33(2) of the Insolvency & Bankruptcy Code, 2016 - Committee of Creditors' approval threshold of not less than sixty-six percent - The Adjudicating Authority ordered liquidation of the Corporate Debtor pursuant to a CoC decision approving liquidation by the requisite voting share. - HELD THAT: - The Bench applied section 33(2) of the Code, which mandates that the Adjudicating Authority shall pass an order for liquidation where the resolution professional intimates that the Committee of Creditors, by not less than sixty-six percent of the voting share, has decided to liquidate the corporate debtor. In the present case the CoC recorded its decision to liquidate with 99.99% of the voting share, and the resolution professional so intimated the Adjudicating Authority. On that basis the Adjudicating Authority concluded that the statutory condition for ordering liquidation was satisfied and directed liquidation of the Corporate Debtor. [Paras 12]

Application under section 33 allowed and the Corporate Debtor ordered to be liquidated in terms of section 33(2) read with section 33(1).

Appointment of Liquidator under Section 34(1) - Liquidator's initiation of liquidation process under Chapter III and IBBI (Liquidation Process) Regulations, 2016 - Vesting of management powers in the Liquidator and cessation of powers of Board of Directors - Bar on suits and proceedings during liquidation subject to section 52 and proviso permitting liquidator to institute suits with approval - Notice of discharge to officers, employees and workmen under Section 33(7) - Filing of liquidation order with the Registrar of Companies - Appointment of the nominated resolution professional as Liquidator and the consequential directions and obligations flowing from commencement of liquidation. - HELD THAT: - The Adjudicating Authority appointed the resolution professional named by the applicant as Liquidator under section 34(1), subject to his holding a valid Authorisation for Assignment (AFA) as required by the relevant regulations. The Bench directed the Liquidator to initiate the liquidation process in accordance with Chapter III of the Code and the IBBI (Liquidation Process) Regulations, 2016, order publication of a public notice in the same newspapers earlier used, and exercise the powers which shall vest in him on cessation of the Board's and key managerial personnel's powers. The order also recorded that, on initiation of liquidation and subject to section 52, no suit or proceeding shall be instituted by or against the corporate debtor except that the Liquidator may institute suits on behalf of the corporate debtor with prior approval of the Adjudicating Authority. Further, the liquidation order was held to operate as notice of discharge to officers, employees and workmen under section 33(7), and the Liquidator was directed to file a copy of the order with the Registrar of Companies as mandated by section 33(1)(b)(iii). These directions implement the statutory regime attendant to commencement of liquidation and provide for administrative steps and safeguards specified in the Code and regulations. [Paras 13]

Mr. Krishnaswami C.V.R. appointed as Liquidator (subject to AFA); directed to carry out liquidation process, publish public notice, effect cessation and vesting of powers, observe bar on suits subject to provisos, treat order as notice of discharge to staff, and file order with Registrar of Companies.

Final Conclusion: The Tribunal allowed the application under section 33, ordered liquidation of Glaze Infrastructure Private Limited following a CoC decision with 99.99% votes, appointed the named resolution professional as Liquidator subject to regulatory authorization, and issued consequential directions for initiation and conduct of the liquidation process including publication of notice, vesting of management powers in the Liquidator, restrictions on legal proceedings, employee discharge notice and filing with the Registrar of Companies.

Interim stay - attachment and demand notice - special rate fixation under notification dated 27.03.2008 - condonation of delay - refund and recovery of Central Excise - effect of interim order vis-a -vis quashing of order

Interim stay - attachment and demand notice - refund and recovery of Central Excise - Operation of order No. 01/SR(16-17 and 17-18)/PR.COMMR/2021-22 dated 09.04.2021 and demand cum recovery/attachment notice dated 05.02.2021 stayed until further order. - HELD THAT: - The High Court after hearing rival submissions was satisfied that the controversy required further hearing and accordingly issued notices to respondents. Pending adjudication the court stayed the operation of the principal commissioner's order dated 09.04.2021 rejecting the petitioner's representation and also stayed the operation of the demand cum recovery/attachment notice issued to the Bank on 05.02.2021. The stay was granted as an interim measure while the court proceeds to hear the petition on merits, and the respondents accepted service through counsel.

Operation of the order dated 09.04.2021 and the demand/attachment notice dated 05.02.2021 is stayed until further order.

Special rate fixation under notification dated 27.03.2008 - condonation of delay - effect of interim order vis-a -vis quashing of order - Merits of the petitioner's claim for fixation of special rate (including alleged delay and condonation) was not finally adjudicated and requires fresh consideration. - HELD THAT: - Counsel for the parties addressed the court on whether the petitioner's representation seeking fixation of special rate as per the notification dated 27.03.2008 was barred by delay and whether the effect of earlier interim orders affects the entitlement. The High Court recorded the rival contentions, observed that the legal and factual questions require fuller hearing, and therefore directed issuance of notices returnable after four weeks rather than deciding the merits at the interim stage. The court did not resolve on whether delay should be condoned or on substantive entitlement under the notification and preserved those questions for final hearing.

Petitioner's claim for fixation of special rate and the question of delay/condonation are to be adjudicated on merits after issuance of notice; matter listed for further hearing.

Final Conclusion: Notice issued returnable after four weeks; interim stay granted on the principal commissioner's order dated 09.04.2021 and on the demand/attachment notice dated 05.02.2021; substantive questions regarding fixation of special rate and condonation of delay remain pending for adjudication.

Non-speaking order - requirement of a speaking order - Principles of Natural Justice - reasonable period for administrative action - limitation/period of limitation

Non-speaking order - requirement of a speaking order - Principles of Natural Justice - Impugned demand notice is non speaking and unsustainable for failure to record reasons after considering the petitioner's reply. - HELD THAT: - The Court found that the order of demand does not set out the enquiry, the findings or the reasons for concluding non payment or fabrication. Where a person has submitted explanations or a defence, the competent authority must consider those objections and pass a speaking order so that the aggrieved party can understand the basis of the decision. Such a duty to record reasons is part of the Principles of Natural Justice as applicable to statutory authorities. A non speaking order passed after considering the petitioner's reply cannot be sustained. [Paras 5, 6, 9]

Impugned demand quashed for being a non speaking order and for failure to comply with principles requiring reasons and consideration of the petitioner's submissions.

Reasonable period for administrative action - limitation/period of limitation - Demand issued after a lapse of about seven years is unreasonable and unsustainable in absence of recorded reasons justifying the delay. - HELD THAT: - The order reveals the amount related to the year 1997 while the demand was issued in 2004 after about seven years. The Court observed that, notwithstanding the respondents' contention that statutory limitation may not apply, administrative actions must be initiated within a reasonable period. Where delay is significant, especially beyond the statutory period of five years, the authority must record cogent reasons (for example, delay in detection or justification for extending time) before issuing a demand. In the absence of such recorded reasons, the court is entitled to draw an adverse inference against a belated, non speaking demand. [Paras 5, 7, 8]

Demand set aside as issued after an unreasonable lapse of time without any recorded justification for the delay.

Final Conclusion: Writ petition allowed; the impugned demand dated 12.8.2004 (O.C.No.451 of 2004) is quashed on grounds that the order is non speaking and was issued after an unreasonable lapse of time; no costs.

Option to claim special rate under Notification No.20/2008-Central Excise - stay of coercive measures pending adjudication - remand for fresh consideration of special rate claim - liberty to challenge imposition of interest

Option to claim special rate under Notification No.20/2008-Central Excise - stay of coercive measures pending adjudication - Whether coercive action including attachment of bank accounts could be taken against the petitioner before the claim for fixation of a special rate under Clause 3(1) of Notification No.20/2008 was decided. - HELD THAT: - The Court noted that Clause 3(1) of Notification No.20/2008 confers on a manufacturer an option to apply for fixation of a special rate representing actual value addition where the manufacturer can show that the prescribed ratio of actual value addition exceeds the table rate. The petitioner had made such an application dated 04.09.2012 which had not been disposed of. In view of the statutory right to seek a special rate and the pendency of the petitioner's application, the Court held that it would be inappropriate for the department to proceed with coercive measures based on the table rates without first adjudicating the contention of add ons and any resultant special rate. Accordingly, the Court directed that no coercive action pursuant to the impugned communications dated 06.01.2021 and 08.02.2021 be taken until the competent authority decides the application, and that any coercive measures already taken be restored to their original position; the petitioner was permitted to operate the specified bank account pending decision. [Paras 7, 8, 10]

Coercive measures restrained; petitioner permitted to operate the bank account and the department directed not to proceed until the claim for special rate is decided.

Remand for fresh consideration of special rate claim - Obligation of the Principal Commissioner of GST to consider the petitioner's application dated 04.09.2012 for fixation of a special rate and timeframe for such consideration. - HELD THAT: - The Court directed that the Principal Commissioner of GST, Dibrugarh, shall consider the petitioner's application under Clause 3(1) of Notification No.20/2008 and determine whether a special rate is to be fixed on account of add ons claimed by the petitioner. The adjudication is to be completed within six weeks from receipt of the certified copy of the order. The Court made clear that after such determination further action by the department may be taken as per law, thereby remitting the substantive claim to the competent authority for fresh consideration rather than deciding it on merits itself. [Paras 8, 9]

Application remitted to the Principal Commissioner of GST for determination within six weeks; further process may follow after that decision.

Liberty to challenge imposition of interest - Whether the Court adjudicated the petitioner's challenge to the imposition of interest on amounts required to be returned to the department. - HELD THAT: - The Court expressly refrained from deciding the issue of imposition of interest. It recorded that the question was not decided in the present order and therefore granted the petitioner liberty to approach the Court again on that specific contention if so advised. [Paras 11]

Issue of imposition of interest left undecided; petitioner granted liberty to seek fresh adjudication before the Court.

Final Conclusion: Writ petition allowed in part: the petitioner's application for fixation of a special rate under Clause 3(1) of Notification No.20/2008 is remitted to the Principal Commissioner of GST for decision within six weeks; coercive measures including attachment of bank accounts restrained and any taken are to be restored pending that decision; the question of imposition of interest remains undecided with liberty to the petitioner to pursue it afresh.

Similar goods under paragraph 6.8(a) of the Foreign Trade Policy - interpretation of the 90% limitation for units manufacturing multiple products - entitlement for DTA clearances subject to overall 50% FOB limit and positive NFE - applicability of extended period of limitation where Development Commissioner received intimations

Similar goods under paragraph 6.8(a) of the Foreign Trade Policy - common parlance / broad category approach to similarity - Twisted yarns and ropes manufactured/exported by the appellant are similar goods for the purposes of paragraph 6.8(a) of the FTP. - HELD THAT: - Following the corpus of tribunal and Supreme Court authority cited in the record, the tribunal applied a broad, category-based meaning to the word 'similar' rather than a restrictive tariff-heading or identicality test. The products here (HDPE/LDPE/PP twisted yarn and ropes) share common raw material base, overlapping characteristics, common placement within the SION product group 'textile products', and the Development Commissioner's green card/permission itself groups the products together. Prior decisions establish that the Customs Valuation definition need not be mechanically imported into other enactments and that common parlance/dictionary meaning and the implementing authority's categorisation are material. On these grounds the tribunal accepted that the goods fall within the same class and are similar for entitlement to concessional DTA clearance under paragraph 6.8(a). [Paras 11, 12, 18, 19, 23]

The DTA clearances of twisted yarn and ropes are accepted as clearances of similar goods and therefore eligible for concession under paragraph 6.8(a).

Interpretation of the 90% limitation for units manufacturing multiple products - construction favouring 'products' (plural) and flexibility in DTA clearance - The 90% limitation in paragraph 6.8(a) is to be read in the context of units manufacturing more than one product as permitting DTA sale of 'any of these products' up to the specified percentage within the overall 50% FOB entitlement; the tribunal endorsed the flexible interpretation adopted in earlier Tribunal decisions. - HELD THAT: - A plain reading of paragraph 6.8(a) and consistent tribunal precedents (including ABI Showatech, ABI Turnamatics and Consolidated Coin) support that when a unit manufactures and exports multiple products it may clear any of those products into DTA up to the stated 90% measure subject to the overall 50% FOB cap. The provision aims to accommodate market realities where exports of individual products vary; the 90% limit guards against clearing products with no export at all. The department's restrictive reading that DTA sales must be proportionate to exports of each particular product was rejected as contrary to the policy language and established tribunal interpretation. Applying that understanding to the facts, the appellants' DTA clearances fall within the FTP entitlement. [Paras 14, 15, 16, 18, 19]

The interpretation favouring flexibility (reading 'products' in the plural and allowing DTA clearance of any exported products within the 90%/50% constraints) is accepted and the departmental demand based on a stricter per product proportion is set aside.

Applicability of extended period of limitation where Development Commissioner received intimations - invocation of extended period and allegation of suppression - Extended period of limitation for demand cannot be invoked where the appellants had regularly intimated DTA clearances to the Development Commissioner and jurisdictional authorities and no suppression or mis-declaration was shown. - HELD THAT: - The record establishes that the appellant regularly submitted intimations to the Development Commissioner and returns to the jurisdictional authorities, and the implementing authority did not raise objections over the years. Tribunal precedents (including Meghmani and related decisions) indicate that where returns/notifications have been filed and no omissions or suppression prevented departmental awareness, extended limitation is not sustainable. The B 17 bond related to imports/procurements and does not obviate the requirement that revenue prove suppression to invoke extended period. Consequently the revenue's attempt to resort to extended limitation was held not maintainable and the substantial portion of any demand would be time barred; however, this became academic as the primary merits were decided in appellant's favour. [Paras 20, 21, 22, 23]

Extended period is not invocable on the facts; demands based on extended limitation are not sustainable.

Final Conclusion: The appeals are allowed. The tribunal held that twisted yarn and ropes are similar goods under paragraph 6.8(a) of the FTP, adopted a flexible construction of the 90% limitation for units manufacturing multiple products (subject to the overall 50% FOB cap), set aside the department's demand premised on a restrictive per product proportion, and found the extended period of limitation inapplicable on the facts; consequential relief, if any, shall follow as per law.

Deemed transfer of property in goods when supplied or used in execution of a works contract (Explanation VI) - characterisation of supply of spare parts and lubricants used in vehicle repairs as sale - definition and scope of works contract and dealer for VAT purposes - restriction of input tax credit to 75% where tax is paid under the works contract regime (Section 13(7) read with Section 4(7)(a) and Rule 17(1))

Deemed transfer of property in goods when supplied or used in execution of a works contract (Explanation VI) - characterisation of supply of spare parts and lubricants used in vehicle repairs as sale - Whether spare parts and lubricants used in the petitioner's servicing/repair transactions amount to a 'sale' within the meaning of the A.P. VAT Act, 2005. - HELD THAT: - The Court examined the definition of 'sale' and Explanation VI to Section 2 and held that where goods are supplied or used in the execution of a works contract there is deemed transfer of property in such goods and the transaction is amenable to the definition of 'sale'. Applying that provision to the facts, the spare parts and lubricants incorporated during servicing and repairs at the petitioner's workshop are to be regarded as sale. The Court noted precedent recognising that supply of materials for a price amounts to sale and accepted that characterisation; there was no dispute that property in the goods passed when incorporated in the works.

Supply/use of spare parts and lubricants in the course of the petitioner's repair works is a 'sale' by virtue of Explanation VI and the statutory definition of 'sale'.

Restriction of input tax credit to 75% where tax is paid under the works contract regime (Section 13(7) read with Section 4(7)(a) and Rule 17(1)) - definition and scope of works contract and dealer for VAT purposes - Whether the petitioner is entitled to claim 100% input tax credit (ITC) on VAT purchases of spare parts and lubricants used in workshop repairs, or whether ITC is restricted to 75%. - HELD THAT: - Even assuming the transactions constitute 'sale', the Court turned to the charging and ITC provisions applicable to dealers executing works contracts. Section 4(7)(a) contemplates payment of tax on goods at incorporation in works contracts and where tax is paid under that regime Section 13(7) limits the related input tax credit to 75%. The petitioner did not opt for the composite scheme and the authorities assessed under the non-composition method. Consequently, the statutory scheme itself imposes a 75% cap on ITC for goods used in works contracts; that statutory restriction precludes allowance of 100% ITC on the spare parts and lubricants used in the repair works. The Court found no illegality in the assessment and appellate authorities applying the 75% limitation.

The petitioner's entitlement to ITC on spare parts and lubricants used in workshop repairs is limited to 75% under the statutory scheme; 100% ITC cannot be allowed.

Final Conclusion: Writ petition dismissed; the appellate order confirming the assessment restricting ITC to 75% on spare parts and lubricants used in repair works is upheld. No costs.

Bail under Section 439 of the Criminal Procedure Code - temporary bail in view of COVID-19 disruption of trial - joint possession and apportionment of commercial quantity under the NDPS Act - reliance on memorandum under Section 27 of the Evidence Act as connecting evidence - bank transaction and WhatsApp records as corroborative material - bar under Section 37 of the NDPS Act

Bail under Section 439 of the Criminal Procedure Code - temporary bail in view of COVID-19 disruption of trial - Grant of temporary bail to the three applicants arrested in Crime No.1008/2020. - HELD THAT: - The applicants were first-time applicants under Section 439 Cr.P.C. and are in custody since the dates recorded in the case. The Court noted the nature of allegations (seizure of MDMA from one accused and inter-accusations recorded in memos under Section 27 Evidence Act) and documentary material seized during investigation. Despite prima facie incriminating material on record, having regard to the fresh spread of COVID-19 and stoppage of trial courts, the Court found it expedient to permit temporary bail. The release is limited to a period of six months subject to furnishing of personal bonds and surety, and an undertaking to surrender on expiry; failure to surrender will entail arrest and continuation of trial in accordance with law. [Paras 12, 13, 15, 16, 17]

Applications allowed partly - applicants released on temporary bail for six months on furnishing bond and surety with undertaking to surrender thereafter.

Joint possession and apportionment of commercial quantity under the NDPS Act - bar under Section 37 of the NDPS Act - Whether the commercial quantity seized in joint possession must be apportioned equally among co-accused so as to take each below commercial quantity and attract bail-favourable consequences. - HELD THAT: - The Court examined precedents relied upon by the defence and the factual matrix of joint possession. It held that those decisions do not lay down a rule that where commercial quantity is recovered in joint possession it must be apportioned equally among accused. The NDPS Act does not envisage automatic apportionment of a commercial quantity seized from joint possession to treat each accused as being below commercial quantity. Consequently, the contention for apportionment is rejected as not sustainable on the present facts. [Paras 14]

Contention for equal apportionment of commercial quantity in joint recovery rejected; submissions on this ground are without merit.

Reliance on memorandum under Section 27 of the Evidence Act as connecting evidence - bank transaction and WhatsApp records as corroborative material - Evidentiary weight of memos under Section 27 and documentary records in establishing prima facie nexus between the three applicants and the NDPS offence. - HELD THAT: - The Court recorded that memos under Section 27 contain statements linking the applicants to one another and to the seized contraband. The case diary further discloses bank transactions among the applicants and credits from one applicant to another, together with extensive WhatsApp chat records. Taken together these materials prima facie indicate a nexus among the three accused in commission of the offence. While defence challenged the evidentiary value of Section 27 memoranda, the Court treated these memoranda along with bank and telephonic/WhatsApp records as sufficient for prima facie connection at the bail stage. [Paras 12, 13]

Memos under Section 27, when considered with bank transfers and WhatsApp records, furnish prima facie evidence connecting the applicants; these materials were taken into account in the Court's assessment at bail stage.

Final Conclusion: While the Court found prima facie material linking the applicants to the NDPS offence, having regard to the disruption of trial proceedings due to COVID-19 the bail applications were partly allowed: the three applicants are released on temporary bail for six months on furnishing bonds and sureties and subject to an undertaking to surrender on expiry; the challenge to apportion commercial quantity in joint recovery was rejected.