TaxTMI Updates e-Newsletter
Jun 05,2021

Confiscation and release of goods - interim release of confiscated goods - security/bond for release of goods - deposit of tax, penalty and fine as condition for release - clarification of earlier order - interpretation of Sections 130 and 140 of Punjab Goods and Services Tax Act, 2017

Interim release of confiscated goods - deposit of tax, penalty and fine as condition for release - security/bond for release of goods - clarification of earlier order - Whether the confiscated goods should be released pending appeal and on what conditions - HELD THAT: - The court observed that the earlier resolution did not clearly indicate how interim release of the confiscated goods was to be effected, particularly when the petitioner had already deposited 100% of the tax, 100% of the penalty and 10% of the fine at the time of filing the appeal. Noting that the provisions of Sections 130 and 140 of the Punjab Goods and Services Tax Act, 2017 (as referred to in the order) were not clear in their application to release of confiscated goods, the court issued a clarification of the earlier order. In exercise of its supervisory jurisdiction the court directed that, taking into account the deposit already made by the petitioner, the confiscated goods shall be released subject to the petitioner furnishing bonds to the satisfaction of the respondents. The clarification confines the release to the condition of furnishing bonds while acknowledging the deposits made by the petitioner.

Confiscated goods directed to be released, subject to furnishing of bonds to the satisfaction of the respondents, having regard to the petitioner's deposit of 100% tax, 100% penalty and 10% of the fine.

Final Conclusion: The High Court clarified its earlier order and directed release of the confiscated goods on the condition that the petitioner furnishes bonds acceptable to the respondents, noting the petitioner's prior deposit of the tax, penalty and fine; the application is disposed of.

Interim bail made absolute - Restraint on re-arrest - Relaxation of bail conditions subject to personal undertaking to cooperate - Consideration of payment of tax dues in bail assessment - Investigation ongoing and liberty to challenge future prosecution

Interim bail made absolute - Relaxation of bail conditions subject to personal undertaking to cooperate - Consideration of payment of tax dues in bail assessment - Restraint on re-arrest - Interim bail earlier granted to the petitioner is made absolute and certain conditions are relaxed. - HELD THAT: - The Court recorded that the petitioner had been arrested and detained for about six days and had remitted a substantial sum towards tax dues, a fact taken into account when bail was initially granted. Considering that continued custody or re-arrest would not serve any purpose, the Court concluded that the interim bail should be made absolute. The earlier condition requiring the petitioner to appear twice weekly before the authority was relaxed; in place of that condition the petitioner gave a personal undertaking to appear as and when required by the authority. The Court expressly left open other contentions of the parties and declined to impose further custodial restrictions, thereby also indicating a restraint on re-arrest insofar as it would not serve any investigational purpose. [Paras 3, 5, 6]

Interim bail is made absolute; the requirement to appear twice weekly is relaxed and the petitioner shall appear before the authority as and when required; re-arrest is not directed as it would not serve any purpose.

Investigation ongoing and liberty to challenge future prosecution - Pending investigation does not preclude the petitioner from challenging any future decision to prosecute; such challenges are left open to be raised in the appropriate manner. - HELD THAT: - The Court noted that the investigation by the respondents was not complete. It clarified that, should the respondents decide to proceed with prosecution, the petitioner would be entitled to question that decision by resorting to remedies available under law. The Court did not adjudicate the merits of any prospective prosecution or substantively rule on the classification of the offence; it merely preserved the petitioner's right to seek legal redress in the future. [Paras 4]

Liberty granted to the petitioner to question any future decision to prosecute by appropriate legal proceedings; the Court did not decide the merits of ongoing investigation or classification of offences.

Final Conclusion: The writ petition is disposed of by making the interim bail absolute, relaxing the attendance condition on the petitioner's personal undertaking to cooperate, preserving the petitioner's right to challenge any future prosecution, and closing connected miscellaneous petitions; no costs.

Input Tax Credit carried forward in Electronic Credit Ledger - FORM GST TRAN-1 declaration - technical difficulties/portal glitch requirement - extension of time for TRAN-1 under Rule 117(1A) - writ relief for reflection of transitional credit

Input Tax Credit carried forward in Electronic Credit Ledger - FORM GST TRAN-1 declaration - technical difficulties/portal glitch requirement - writ relief for reflection of transitional credit - Whether petitioners whose TRAN-1 declarations were filed but whose transitional VAT credit was not reflected in the Electronic Credit Ledger are entitled to mandamus directing respondents to ensure such credit is carried forward despite absence of independent proof of portal glitches. - HELD THAT: - The Court held that the respondents' insistence that petitioners must prove demonstrable technical glitches on the portal is too narrow. The reasoning follows the earlier decision of the High Court (quoted in the judgment) which observed that the requirement to produce evidence of portal difficulty was not part of the statutory scheme prior to the specified date and that an assessee could not reasonably be expected to have anticipated and collected such evidence. Having regard to that precedent and the legislative provision permitting extension of time where submissions could not be made owing to technical difficulties, the Court directed the respondents to reconsider and take steps with the GSTIN so that the transitional VAT credit shown in the petitioners' TRAN-1 declarations is reflected in their Electronic Credit Ledgers. The Court required the exercise to be completed within a specified timeline and proceeded to grant relief by writ, rather than permitting the respondents' narrow technical objection to bar the relief sought. [Paras 4, 5, 6, 7]

Writ petitions allowed; respondents directed to take up with GSTIN and ensure the TNVAT transitional credit shown in petitioners' TRAN-1 declarations is duly reflected in their respective Electronic Credit Ledgers within twelve weeks; no costs.

Final Conclusion: The writ petitions were allowed; the Court directed respondents to secure reflection of the petitioners' transitional VAT credit (as per their TRAN-1 declarations) in the Electronic Credit Ledgers by taking up the matter with GSTIN and completing the exercise within twelve weeks, rejecting the respondents' narrow technical objection that petitioners must produce independent proof of portal glitches.

Proceedings under Section 74(1) of the Central Goods and Services Tax Act, 2017 - preliminary inquiry into irregular availing of Input Tax Credit - holding of payment subject to tax adjudication - right to personal hearing and opportunity to be heard - disposal of writ petition as infructuous pending statutory adjudication

Proceedings under Section 74(1) of the Central Goods and Services Tax Act, 2017 - right to personal hearing and opportunity to be heard - Proceeding initiated by respondent No.5 under Section 74(1) of the CGST Act, 2017 was permitted to continue and be adjudicated. - HELD THAT: - The court recorded that the principal respondent has issued a notice under Section 74(1) after a preliminary inquiry which disclosed alleged irregular availing of Input Tax Credit and non-payment of GST. The petitioner acknowledged receipt of the notice and undertook to participate in the adjudicatory process. On that basis the court held that the statutory proceeding should be allowed to reach its logical conclusion, subject to the statutory safeguards of service of notice, written reply and personal hearing. The court further directed that the respondent No.5 shall complete the proceeding within two months from the date of receipt of the petitioner's reply, thereby imposing a time-bound requirement for conclusion of the adjudication. [Paras 6, 7, 8, 9]

The Section 74(1) proceeding shall continue and be completed within two months from receipt of the petitioner's reply.

Holding of payment subject to tax adjudication - disposal of writ petition as infructuous pending statutory adjudication - Prayer for release of the withheld undisputed final bill was declined and the writ petition was disposed of as premature. - HELD THAT: - The court noted that respondent No.5 had communicated to the paying authority to hold payment pending clearance arising out of the preliminary inquiry. Given that the statutory adjudication under Section 74(1) is in progress and the petitioner will have the opportunity to file replies and be heard, the court found it inappropriate to grant the interim relief of release of the withheld payment. The court observed that keeping the writ petition pending would serve no purpose because any grievance against the final order of the statutory authority would give rise to a fresh cause of action. Consequently the writ petition was disposed of without directing release of the withheld payment. [Paras 4, 9, 10]

No direction to release the withheld payment; writ petition disposed of as infructuous in view of ongoing statutory adjudication.

Final Conclusion: The court refused interim relief for release of withheld payment, allowed the Section 74(1) CGST Act proceeding to continue and directed respondent No.5 to complete the adjudication within two months from receipt of the petitioner's reply; the writ petition is disposed of.

Doctrine of inseparability - intention of the parties in lease transactions - treatment of income as profits and gains of business or profession - treatment of income as income from house property - income chargeable under the head income from other sources - complex commercial letting of buildings with furniture and amenities - treatment of expenditures wholly and exclusively for business - precedential effect of authoritative decisions

Doctrine of inseparability - intention of the parties in lease transactions - treatment of income as income from house property - complex commercial letting of buildings with furniture and amenities - Findings that income from letting of the building with other amenities in the industrial park should be treated as 'income from house property' are perverse and incorrect. - HELD THAT: - The court applied the principle in CIT v. Velankani Information Systems that where letting of building, plant, machinery or furniture is inseparable and the intention of the parties is to exploit the immovable property as part of a commercial letting/business activity, the income ordinarily falls under the head 'profits and gains of business or profession' (and if not, under 'income from other sources'), but not under 'income from house property'. The decisive enquiry is the intention behind the lease and whether the facilities provided are inseparable for enjoyment of the leased property; if the main intention is to carry on complex commercial letting with all accessories, the income cannot be characterized as income from house property. Applying that ratio, the authorities' treatment as house property was set aside.

Concluded in favour of the assessee; income treated as business/other-source income as per Velankani, not as income from house property.

Complex commercial letting of buildings with furniture and amenities - treatment of income as profits and gains of business or profession - application of Velankani precedent - Authorities erred in treating income from complex commercial letting partly as income from house property and partly as income from other sources contrary to Velankani and departmental guidance. - HELD THAT: - Relying on the Velankani enunciation, the court held that the number of agreements or labels does not determine the nature of the transaction; what matters is the object and intention. Where agreements are contemporaneous and the enjoyment of the leased property (building together with furniture and accessories) is necessary as a whole, the transaction is inseparable. If the intention is to exploit commercial property through complex letting as a business, the income must be treated under the business head (or under other sources only if not chargeable as business), and splitting the receipts between house property and other sources in such circumstances is legally untenable.

Held for the assessee; the split characterization by lower authorities was incorrect and reversed in light of Velankani.

Treatment of expenditures wholly and exclusively for business - profits and gains of business or profession - Disallowance of expenditure claimed as wholly and exclusively for the business of complex commercial letting was unsustainable. - HELD THAT: - Given the court's acceptance that the activities constituted commercial letting/business under Velankani, expenditures incurred wholly and exclusively for that business were to be recognised accordingly. The lower authorities' disallowance, which flowed from an incorrect characterization of receipts as house property, could not stand once the receipts were held to be business income.

Assessee successful; disallowance set aside insofar as premised on incorrect characterization of income.

Precedential effect of authoritative decisions - treatment of meagre receipts from software technical services - Findings that receipts from sale of software technical services were too meagre to be considered business income were not sustained in view of binding Supreme Court authority. - HELD THAT: - The court observed that the question regarding characterization of small/ meagre receipts from software technical services had been addressed by the Supreme Court in Peerless General Finance and Investment Company Ltd. v. CIT, and that the relevant legal principle as laid down by that apex decision governs the present case. Accordingly, the lower authority's adverse finding based on the meagreness of receipts was not upheld.

Issue decided for the assessee in conformity with the Supreme Court precedent cited.

Final Conclusion: Appeal allowed; order dated 24.03.2017 in respect of Assessment Year 2010-11 quashed and matters decided in favour of the assessee in accordance with the legal principles stated above.

Tribunal's duty to independently examine evidence and record findings - Characterisation of transitional provisions as contingent liability - Deductibility of transitional liability as business expenditure under section 37(1) - Admissibility and weight of actuarial valuation in proving ascertainable liability - Remand for fresh consideration where appellate fact-finder fails to deal with parties' submissions

Tribunal's duty to independently examine evidence and record findings - Remand for fresh consideration where appellate fact-finder fails to deal with parties' submissions - Tribunal failed to independently consider and record findings on the assessee's written submissions and therefore its order was quashed and the matter remitted for fresh adjudication. - HELD THAT: - The Court found that the Tribunal, in paras. 21-22 of its order, merely affirmed the Commissioner (Appeals)'s conclusions without engaging with or independently evaluating the written submissions and material placed before it by the assessee. The Tribunal's treatment was described by the High Court as cryptic and cavalier, demonstrating that the appellate fact-finder did not discharge its obligation to advert to and decide upon the submissions made before it. In these circumstances the High Court held that the proper course was to quash the Tribunal's order and remit the matter to the Tribunal for an opportunity of hearing and fresh consideration of the submissions and material, leaving the merits open. [Paras 6, 7]

Tribunal's order quashed; matter remitted to the Tribunal for fresh hearing and decision; Court expresses no opinion on the merits.

Characterisation of transitional provisions as contingent liability - Deductibility of transitional liability as business expenditure under section 37(1) - Admissibility and weight of actuarial valuation in proving ascertainable liability - Whether the transitional liabilities relating to HTC/LFC, silver jubilee awards and resettlement expenses are contingent or ascertainable, whether the actuarial valuation furnished by the assessee establishes liability, and whether the provision is deductible under section 37(1) are left open and remitted to the Tribunal for fresh consideration. - HELD THAT: - The High Court did not decide these substantive questions on the merits. Although the Assessing Officer and the Commissioner (Appeals) had characterised the provisions as contingent and disallowed them, and the Tribunal endorsed that view, the Court remitted the issues because the Tribunal failed to independently examine the assessee's submissions and actuarial evidence. The Court explicitly refrained from expressing any view on whether the actuarial certificate or methodology suffices to render the liabilities as non-contingent or whether the provisions qualify as deductible business expenditure under section 37(1), directing the Tribunal to re-evaluate these matters after hearing the parties. [Paras 7]

Substantive issues as to contingency, admissibility of actuarial valuation, and deductibility under section 37(1) remitted to the Tribunal for fresh adjudication.

Final Conclusion: The Tribunal's order is quashed for failure to independently consider the assessee's submissions; the matter is remitted to the Tribunal for fresh hearing and decision on the characterisation and deductibility of the transitional provisions (including consideration of the actuarial valuation), the High Court expressing no opinion on the merits.

Reopening of assessment under Section 147 and the third proviso excluding matters which are the subject matter of any appeal - Bar on reassessment where the same matter is pending in appeal - Change of opinion and absence of new material as impermissible basis for reopening - Requirement of exceptional circumstances for reopening after four years - Application of Rule 6DD(k) as protection against disallowance under Section 40A(3)

Reopening of assessment under Section 147 and the third proviso excluding matters which are the subject matter of any appeal - Bar on reassessment where the same matter is pending in appeal - Impugned notice initiating proceedings under Section 147 was barred because the income sought to be reassessed was the subject matter of a pending appeal. - HELD THAT: - The third proviso to Section 147 prohibits initiation of reassessment proceedings in respect of income involving matters which are the subject matter of any appeal, reference or revision. In the present case the Department had preferred an appeal to the ITAT against the appellate authority's order which had deleted the disallowance under Section 40A(3). As that appeal was still pending, the Assessing Officer could not validly initiate proceedings under Section 147 in respect of the same matter. The writ petition is therefore maintainable and the notice issued under Section 147, being barred by the statutory proviso, lacked jurisdiction and warranted quashing. The Court relied on the categorical language of the proviso and disposed the challenge on that short ground without deciding the appealable merits afresh. [Paras 6, 10]

Notice issued under Section 147 quashed as barred by the third proviso because the matter was the subject of a pending appeal.

Change of opinion and absence of new material as impermissible basis for reopening - Requirement of exceptional circumstances for reopening after four years - Application of Rule 6DD(k) as protection against disallowance under Section 40A(3) - Reopening after more than four years could not be sustained as no new material was shown and the case did not fall within exceptional circumstances; appellate finding on applicability of Rule 6DD(k) reinforced absence of justification for reopening. - HELD THAT: - The Court observed that the assessing officer had been aware of the materials relied upon (including bank account details and agent's certificate) during earlier proceedings, and that the present proceedings amounted to a mere change of opinion. Proceedings initiated after the lapse of four years require exceptional circumstances as envisaged by the statute; none were demonstrated. The appellate authority had held that payments made through agents fell within the protection of Rule 6DD(k) against Section 40A(3) disallowance, and similar factual materials were available earlier. On that basis the Court recorded that the reassessment could not be upheld for want of new material or exceptional circumstances, reinforcing the jurisdictional bar. [Paras 9]

Reopening was unjustified on the additional ground of absence of new material and exceptional circumstances; the appellate finding that Rule 6DD(k) applied supported the conclusion against reassessment.

Final Conclusion: The notice initiating reassessment for AY 2012-13 under Section 147 is quashed: the matter was subject to a pending appeal (bar under the third proviso), and in any event no new material or exceptional circumstances justified reopening; writ petition allowed.

Spreading over of arrear income - taxability on receipt versus accrual - refund of tax deducted at source - burden to demonstrate absence of tax liability for refund

Spreading over of arrear income - taxability on receipt versus accrual - Whether the interest component received on compulsory acquisition of land is to be assessed wholly in AY 2007-2008 or can be spread over earlier years from date of accrual - HELD THAT: - The Court accepted the legal principle that interest awarded on land acquisition, though received in a lump sum in the year of payment, is not necessarily taxable only as a single receipt for that assessment year and may be considered with reference to accrual over the period for which it was granted. However, the Court proceeded to examine the petitioner's entitlement to relief and required demonstration that spreading the interest over the relevant years would result in no tax liability. The Court invited calculations from both sides and, on the material before it, observed that prima facie tax would remain payable even after spreading over. Because the petitioner did not establish that spreading the interest over the earlier years would extinguish any tax liability, the Court declined to grant the relief sought. [Paras 4]

The principle that the interest need not be taxed solely in AY 2007-2008 was recognised, but relief was refused because the petitioner failed to demonstrate that spreading over would result in zero tax liability.

Refund of tax deducted at source - burden to demonstrate absence of tax liability for refund - Whether the sum retained/deducted at source by the authority should be refunded to the petitioner - HELD THAT: - The petitioner sought refund of tax deducted at source on the ground that the interest income should be spread over earlier years and would not attract tax in the relevant assessment year. The Court held that a refund could be ordered only if the petitioner demonstrated he was not liable to pay any tax after applying the spreading principle. The petitioner did not produce calculations proving nil tax liability; the respondents' statement indicated a continuing tax liability even after spreading. On that basis the Court found no basis to interfere with the orders of the assessing/revisional authorities and refused the refund. [Paras 4]

Refund of tax deducted at source was refused because the petitioner failed to prove absence of tax liability upon spreading the interest.

Final Conclusion: The Court recognised that the interest component awarded on acquisition could, in principle, be spread over the period of accrual rather than taxed solely in AY 2007-2008, but dismissed the writ petition and refused refund of TDS because the petitioner did not demonstrate that such spreading would eliminate any tax liability.

Forfeiture of exemption under Section 13(1)(c) - denial of exemption under Section 11 - show cause notice-interim relief - CBDT Circular 387 of 1984-partial forfeiture principle - maximum marginal rate applicable only to income forfeited

Show cause notice-interim relief - denial of exemption under Section 11 - CBDT Circular 387 of 1984-partial forfeiture principle - Whether the writ petitions filed at the show cause notice stage could be entertained and whether the impugned notices threatened total denial of exemption under Section 11. - HELD THAT: - The Court declined to quash the show cause notices at this stage but examined the legal effect of the notices in light of the CBDT Circular 387 of 1984 and the authority in Commissioner of Income Tax v. Working Women's Forum. The circular and the cited decision establish that where a charitable trust contravenes provisions akin to Section 13(1)(c), forfeiture of exemption is confined to the part of income which has forfeited exemption, and the maximum marginal rate applies only to that forfeited part. Applying that principle, the court concluded that the departmental action was limited to forfeiting exemption only in respect of the offending payments and did not, on the materials before it, indicate a lawful denial of the Trusts' entire exemption under Section 11. The Court therefore afforded the petitioners an opportunity to respond to the show cause notices and directed that the respondents consider those explanations and pass orders in accordance with law. [Paras 6, 7]

Writ petitions disposed by clarification that forfeiture, if any, will be only in respect of offending payments (not total denial of Section 11 exemption); petitioners granted three weeks to reply and respondents directed to consider explanations and pass orders in accordance with law.

Final Conclusion: The petitions are disposed with a clarification that any forfeiture of exemption will be confined to the income attributable to the offending payments; petitioners are granted three weeks to answer the show cause notices and the respondents are directed to consider the explanations and pass orders in accordance with law.

Deduction under section 80IA(4)(b) - treatment of alleged bogus purchases as part of infrastructural profit - rectification of tribunal order - remand for fresh adjudication to appellate authority - binding precedent of the High Court of Bombay

Deduction under section 80IA(4)(b) - treatment of alleged bogus purchases as part of infrastructural profit - binding precedent of the High Court of Bombay - Whether the assessee's alternative claim that, if bogus purchases are added, the inflated profits qualify for deduction under section 80IA(4)(b) was required to be decided and whether the Tribunal should have allowed the additional ground instead of remanding the matter. - HELD THAT: - The Tribunal noted that the assessee had advanced an alternative claim before the CIT(A) that if alleged bogus purchases were added to income, those amounts would form part of the infrastructural profit eligible for deduction under section 80IA(4)(b). The Assessing Officer had considered the issues of the 80IA claim and the disallowance for alleged bogus purchases separately. The CIT(A) allowed the deduction under section 80IA(4) but confirmed the disallowance; however, the alternative claim was not addressed by a speaking order. The Tribunal observed that the legal position on treating alleged bogus purchases as forming part of infrastructural profit eligible for exemption is squarely covered by the Bombay High Court decision in CIT v. Gems Plus Jewellery Ltd., according to which such additions would be added to infrastructural profit exempt under section 80IA(4)(b) read with the explanation. In these circumstances, rather than remanding the matter to the Assessing Officer, the proper course is to direct the CIT(A) to examine and decide the alternative claim in accordance with the High Court ratio, because the appellate authority had not given a speaking decision on that claim. [Paras 9]

The Tribunal held that the alternative claim must be examined and decided by the CIT(A) in accordance with the ratio of the Bombay High Court in CIT v. Gems Plus Jewellery Ltd.

Rectification of tribunal order - remand for fresh adjudication to appellate authority - Whether the Tribunal's order dated 28-01-2020 should be rectified to alter the remand direction from the Assessing Officer to the CIT(A). - HELD THAT: - The Tribunal found that paragraph 6 of its order of 28-01-2020 erroneously remanded the additional ground and original grounds to the Assessing Officer despite the fact that the CIT(A) had not dealt with the alternative claim by a speaking order. Given that the appellate authority (CIT(A)) needs to examine and decide the alternative claim in light of the relevant High Court precedent, the Tribunal corrected its earlier direction. The effective lines in paragraph 6 were deleted and substituted so that the additional and original grounds are remanded to the file of the CIT(A) for fresh adjudication. [Paras 6, 9]

The Miscellaneous Application is allowed and paragraph 6 of the Tribunal's order dated 28-01-2020 is modified to remand the matters to the CIT(A) for fresh adjudication.

Final Conclusion: Miscellaneous Application allowed; Tribunal's order dated 28-01-2020 (ITA No.13/PUN/2016) is rectified so that the additional and original grounds are remanded to the CIT(A) for fresh adjudication, the CIT(A) to decide the assessee's alternative claim in accordance with the Bombay High Court ratio in CIT v. Gems Plus Jewellery Ltd.

Exemption under section 54 - completion/certificate of satisfactory progress for construction within three years - giving effect to appellate order - re-opening of assessment for taxation in the correct assessment year

Exemption under section 54 - giving effect to appellate order - re-opening of assessment for taxation in the correct assessment year - Whether the Assessing Officer gave effect to the CIT(A)'s order allowing exemption under section 54 and whether the CIT(A) was right to sustain the AO's appeal-effect order declining the exemption. - HELD THAT: - The Tribunal found that the AO, while reproducing the CIT(A)'s direction, only enforced the requirement for production of completion or progress certificate and declined relief for non-production, but failed to give effect to the CIT(A)'s further direction permitting re-opening of the relevant assessment year for taxation if law permits. The Tribunal held that the CIT(A) below mechanically sustained the AO's order without explaining why the appellate direction regarding possible re-opening for taxability in the correct assessment year was not given effect. In these circumstances the Tribunal concluded that the AO had not fully given effect to the appellate order and therefore set aside the impugned order and directed the AO to give effect to the CIT(A)'s order in accordance with law; it clarified that the AO remained at liberty to re-open the relevant assessment year if permitted by law. [Paras 14, 15]

Impugned order set aside; AO directed to give effect to the CIT(A)'s order in accordance with law and may re-open the relevant assessment year if law so permits; appeal allowed.

Exemption under section 54 - Whether the appeal against the original appellate order (which had imposed a condition while allowing exemption under section 54) remained live after the AO had already passed the assessment order. - HELD THAT: - The Tribunal noted that since the Assessing Officer had already framed the assessment order, the challenge to the original appellate order became infructuous. The Tribunal therefore did not adjudicate the substantive contention about the additional condition imposed by the CIT(A) and dismissed the appeal as infructuous. [Paras 17, 18]

Appeal dismissed as infructuous.

Final Conclusion: For Assessment Year 2011-12 the Tribunal allowed the appeal in ITA No.3270/Del/2019 by setting aside the order under appeal and directing the Assessing Officer to give full effect to the CIT(A)'s order (with liberty to re-open the relevant assessment year if law permits); the separate appeal in ITA No.5559/Del/2018 was dismissed as infructuous.

Arm's Length Price determination - segmental versus entity-level benchmarking - comparability and inclusion of comparables - treatment of export incentives as operating revenue - proportionate adjustment of entity-level transfer pricing variation to international transactions - working capital adjustment in transfer pricing - admission and adjudication of additional question of law

Arm's Length Price determination - segmental versus entity-level benchmarking - Whether ALP determination could be made on entity-level (combined accounts) basis rather than the assessee's segmental P&L for RTSF segment. - HELD THAT: - The assessee maintained consolidated books for three segments and prepared a separate RTSF segmental income statement by allocating costs using asserted allocation keys. The Tribunal found that certain important raw material costs were common and the assessee failed to demonstrate a rational, verifiable allocation of such costs to the RTSF segment. The assessee did not pursue its challenge to the TPO's combined accounts approach at hearing. In these circumstances the authorities below were justified in determining the PLI on the basis of the entity-level profit and loss account. [Paras 3]

ALP determination on combined (entity-level) accounts upheld as the assessee failed to substantiate its segmental allocation.

Comparability and inclusion of comparables - Whether Madhur Industries Limited should be excluded from the comparable set. - HELD THAT: - The TPO/DRP excluded Madhur Industries inter alia on grounds of higher turnover and that the company's business was not legible from its annual report. The Tribunal observed that turnover within the accepted filter cannot alone justify exclusion and that functional similarity is a precondition for comparability. The assessee was unable to point out the nature of business from the annual report, but sought an opportunity to establish functional comparability. Considering the totality, the Tribunal set aside the exclusion and directed the AO/TPO to re-decide the issue afresh, placing the onus on the assessee to prove functional comparability and allowing a reasonable opportunity of hearing. [Paras 4, 5, 6]

Exclusion of Madhur Industries Limited overturned and matter remitted to AO/TPO for fresh consideration on functional comparability, with opportunity to the assessee to substantiate inclusion.

Treatment of export incentives as operating revenue - Whether export incentives received on RTSF exports are operating income for determining PLI. - HELD THAT: - The assessee included export incentives as part of 'other operating income' and included amounts attributable to RTSF exports in segmental operational income. The Tribunal held that export incentives are an integral part of export revenue, being granted to promote competitiveness and reflected in export pricing; they cannot be treated as non-operating or extraordinary income. The DRP's departure from its earlier directions for preceding years and its discussion of unrelated subsidy principles were held to be erroneous. Prior Tribunal directions treating such incentives as operating income were noted. Accordingly, export incentives attributable to RTSF exports were to be considered as operating revenue. [Paras 7, 8]

Export incentives attributable to RTSF exports are operating revenue and must be included for PLI computation.

Proportionate adjustment of entity-level transfer pricing variation to international transactions - Whether the transfer pricing adjustment computed at entity level must be proportionately restricted to the international transactions. - HELD THAT: - The Tribunal applied binding precedents of the jurisdictional High Court and the Supreme Court which hold that an entity-level transfer pricing adjustment should be restricted to the extent of international transactions. Reliance was placed on the cited authorities to direct that the transfer pricing addition be confined to the international transactions of the RTSF segment. [Paras 9, 10]

Transfer pricing addition computed at entity level to be restricted proportionately to the international transactions in the RTSF segment.

Working capital adjustment in transfer pricing - binding effect of DRP directions - Whether working capital adjustment directed by the DRP should be given effect by the AO/TPO. - HELD THAT: - The DRP had directed examination and recomputation of the working capital adjustment and, if disputed, to follow the OECD example in Annexure to Chapter III, 2010. Section 144C(13) mandates the AO to complete the assessment in conformity with DRP directions. The AO failed to give effect and has not decided the rectification application filed by the assessee. The Tribunal held the DRP direction binding and directed the AO/TPO to grant the working capital adjustment as per the DRP-specified methodology, allowing the assessee no principled objection to the methodology. [Paras 11, 12]

AO/TPO directed to grant working capital adjustment and recompute it in conformity with the DRP's methodology; rectification application to be disposed of accordingly.

Admission and adjudication of additional question of law - Whether the additional ground regarding allowability of education cess as deductible (not covered by section 40(a)(ii)) could be admitted and decided. - HELD THAT: - Relying on settled principle that the Tribunal may examine a pure question of law arising on facts on record even if not raised before lower authorities, the Tribunal admitted the additional ground. On merits, the Tribunal followed jurisdictional High Court precedent holding that education cess is not disallowable under section 40(a)(ii) and directed the AO to ascertain the correct amount and allow the deduction after giving the assessee an opportunity of hearing. [Paras 14, 15, 16]

Additional ground admitted; education cess to be allowed as deductible expense subject to verification and opportunity of hearing.

Final Conclusion: The impugned assessment order is set aside and remitted to the AO/TPO: ALP determination on combined accounts sustained due to failure of segmental allocation, Madhur Industries remitted for fresh functional comparability verification, export incentives to be treated as operating revenue, transfer pricing addition to be restricted to international transactions, DRP-directed working capital adjustment to be given effect, and education cess deduction to be allowed after verification. Appeal partly allowed.

Allowability of rent paid to related party - business nexus for deduction - proportionate disallowance of interest under section 36(1)(iii) - related party lease transactions - personal use adjustment in expenditure claims

Allowability of rent paid to related party - business nexus for deduction - personal use adjustment in expenditure claims - Whether the rent paid to the director's wife for the leased bungalow is allowable as business expenditure and if any part should be disallowed for personal use. - HELD THAT: - The Tribunal found that the assessee had taken the bungalow on lease by a registered lease agreement and used the premises as a guest house for staff and business guests, which had served a business purpose by improving employee morale and customer relations. The fact that the landlord (the director's wife) retained a small portion for personal use did not negate the business nexus for the portion leased to the company. The Assessing Officer's wholesale disallowance was therefore not justified. The assessee's representative, however, accepted an adhoc adjustment to account for shared/common facilities and personal usage; the Tribunal accordingly sustained a 20% disallowance of the rent amount and allowed the balance as deductible expenditure.

Rent payment is allowable except for an adhoc disallowance of 20% to account for personal/common use; the remaining rent is deductible.

Proportionate disallowance of interest under section 36(1)(iii) - related party lease transactions - business nexus for deduction - Whether interest expense proportionately attributable to the security deposit paid to the director's wife is disallowable under section 36(1)(iii) on the ground that the payment was for non-business purposes. - HELD THAT: - The Tribunal held that the security deposit was paid in connection with a bona fide lease of the bungalow for business use and that payment of a security deposit to the landlord in such circumstances is normal and not inherently for non-business purposes. The Assessing Officer's conclusion that the security deposit was non-business and the consequent proportionate disallowance of interest were therefore not sustainable. The Tribunal found no basis to disallow interest under section 36(1)(iii) in respect of the security deposit and directed deletion of the disallowance.

Disallowance of interest under section 36(1)(iii) in respect of the security deposit is deleted; interest is allowable.

Final Conclusion: Both appeals are partly allowed: the rent disallowance is reduced to an adhoc 20% (balance allowed) and the disallowance of interest related to the security deposit is deleted.

Reassessment under section 147 - first proviso to section 147 - failure to disclose fully and truly all material facts - disallowance under section 40(a)(ia) for failure to deduct tax at source - survey under section 133A(2A)

Reassessment under section 147 - first proviso to section 147 - failure to disclose fully and truly all material facts - survey under section 133A(2A) - Validity of initiation of reassessment proceedings under section 147 after the four year period by relying on survey findings. - HELD THAT: - The reassessment was initiated after the four year period on the basis that the assessee had failed to deduct TDS on discounts to stockists, bonus and interest, and had claimed a contingent interest provision. The Court held that the alleged non deduction and the provision were apparent from the return and accompanying documents filed earlier; therefore there was no failure to "disclose fully and truly all material facts" within the meaning of the first proviso to section 147. The AO could not invoke section 147 on the same material which was available at the time of the original assessment. Consequently the initiation of reassessment was quashed. [Paras 5, 6]

Reassessment initiation quashed for want of requisite failure to disclose; CIT(A)'s order in that regard upheld.

Disallowance under section 40(a)(ia) for failure to deduct tax at source - order under section 201(1)/(1A) - Sustainability of additions made by AO under section 40(a)(ia) on account of alleged failure to deduct TDS. - HELD THAT: - The additions in the reassessment were founded on an order under section 201(1)/(1A) treating the assessee in default. The appellate process in the TDS proceedings resulted in deletion of that default (first appeal in favour of the assessee and the Tribunal in ITA No.6803/Mum/2018 affirming the view). Since the foundational TDS order was quashed/accepted against the Revenue, there was no basis to sustain the disallowances in the reassessment. Moreover, having quashed the reassessment initiation on the preliminary legal issue, there was no need to examine merits, and in any event the deletions were upheld. [Paras 7, 8]

Additions under section 40(a)(ia) deleted; impugned order upheld on merits as well.

Final Conclusion: The Revenue's appeal is dismissed; initiation of reassessment under section 147 quashed for lack of failure to disclose, and the additions under section 40(a)(ia) (premised on the TDS default) are deleted.

Suo motu revisional jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - order passed without making enquiry or verification - limited scrutiny under Computer Assisted Scrutiny System (CASS) - assessing officer's exercise of quasi judicial discretion versus Commissioner's supervisory power - reliance on Explanation 2 to section 263 (order passed without enquiry)

Order passed without making enquiry or verification - erroneous and prejudicial to the interests of the revenue - limited scrutiny under Computer Assisted Scrutiny System (CASS) - Validity of revision under section 263 in respect of advance of Rs.50 lakhs given to Amrutbhai I. Patel - HELD THAT: - On the material on record the assessee had furnished replies during assessment proceedings (acknowledged by the AO) showing that the advance was given as advance for purchase of property and that the amount was subsequently returned; ledger and bank statements corroborated that the amount was repaid. The Assessing Officer had made enquiries, considered the explanations and materials and did not make any adverse addition on this issue. The Tribunal applied the settled jurisprudence that section 263 requires the Commissioner to establish that the AO's order is both erroneous and prejudicial to revenue and that mere difference of opinion is not sufficient. In the absence of any prima facie material to show that the AO's conclusion was contrary to law or was reached without making necessary enquiries, the PCIT was not justified in treating the assessment order as erroneous and prejudicial. Accordingly the Tribunal held the revision in respect of the advance to be unwarranted and the assessment order not erroneous on this issue. [Paras 10, 11]

Revision under section 263 in respect of the advance to Amrutbhai I. Patel quashed; assessment order not erroneous or prejudicial on this issue.

Suo motu revisional jurisdiction under section 263 - assessing officer's exercise of quasi judicial discretion versus Commissioner's supervisory power - erroneous and prejudicial to the interests of the revenue - Validity of revision under section 263 in respect of commission payments to Deepakbhai M. Dama and Manjibhai L. Bhanushali - HELD THAT: - The assessee produced details, confirmations, sales registers and explanations before the Assessing Officer and again during the section 263 proceedings. The AO, after considering the materials, had taken a view (adopted in assessment) and there is no record that the AO was passive or failed to make required enquiries. The PCIT, while expressing that further verification was desirable, did not record that the AO's conclusion was contrary to law or arrived at without enquiry; instead the PCIT asked for re examination. Applying authoritative principles that section 263 cannot be used to substitute the Commissioner's view where the AO has applied his mind and two views are possible, the Tribunal found that mere difference of opinion does not render the AO's order erroneous and prejudicial. Since the AO had considered the evidence and reached a permissible view, the PCIT's revision was unjustified. [Paras 11, 16, 17]

Revision under section 263 in respect of the commission payments set aside; assessment order cannot be treated as erroneous and prejudicial on this issue.

Final Conclusion: The Tribunal allowed the appeal on grounds 5 and 8, holding that the PCIT erred in invoking section 263 as the Assessing Officer had made enquiries and taken permissible views on the advance and commission payments; the revision was therefore not sustainable and the assessment order is not erroneous or prejudicial to the revenue in respect of those issues.

Deemed income from house property - classification of income as business income versus income from house property - annual value / notional annual letting value (ALV) - municipal ratable value as basis for computation of annual value - prospective operation of statutory amendment to exclude notional income for stock-in-trade

Deemed income from house property - classification of income as business income versus income from house property - Deemed rent on unsold completed units held as stock-in-trade of a builder is exigible to tax under the head income from house property where the assessee is not in the business of letting out properties. - HELD THAT: - The Tribunal applied the settled principle that the characterisation of income depends on the nature of the activity and operations of the assessee and not merely on ownership. The assessee did not contend that its business included letting of properties and had admitted that it never intended to let the premises. Reliance was placed on the decision of the jurisdictional High Court in CIT v. Gundecha Builders and the Delhi High Court in Ansal Housing Finance & Leasing Co. Ltd., which support taxing notional rent from unsold flats as income from house property where letting is not the business activity. On these authorities and the facts of the case, the Tribunal held that deemed rent on the unsold stock is assessable as income from house property. [Paras 9, 18]

Addition of deemed rent on unsold units is principally sustainable and the appeal on this ground is dismissed.

Prospective operation of statutory amendment to exclude notional income for stock-in-trade - The plea that the amendment to exclude notional income for house property held as stock-in-trade (effective from 1.4.2018) renders deemed rent not leviable for AY 2015-16 is unsustainable. - HELD THAT: - The Tribunal noted the text and legislative intent of the amendment which took effect from 1 April 2018 to provide temporary relief to developers for periods from that date. It observed that it was not the case on record that the assessing officer had levied deemed rent under the newly inserted provision. Consequently, the assessees' contention that deemed rent could not be levied for the impugned year because section 23(5) was prospective was rejected as untenable. [Paras 17]

The contention based on prospective operation of the amendment is rejected and does not avail the assessee for AY 2015-16.

Annual value / notional annual letting value (ALV) - municipal ratable value as basis for computation of annual value - The assessing officer's adhoc computation of annual value at 8.5% of cost is unsustainable; the annual value should be determined with reference to municipal ratable value and, if necessary, the assessing officer should obtain it from appropriate authorities and recompute the deemed rent accordingly. - HELD THAT: - While upholding the liability to tax deemed rent, the Tribunal found the method of computing ALV by applying an ad-hoc percentage of cost (8.5%) impermissible in the absence of proper basis. The Tribunal relied on the principle that municipal ratable value is a reliable benchmark (as affirmed by precedent of the Bombay High Court) and directed that the assessing officer must compute annual value taking municipal ratable value into account and may obtain such value from departmental or government machinery rather than making an adhoc estimate. [Paras 19]

The matter is remitted for recomputation of annual value and reassessment of deemed rent in accordance with municipal ratable value and the Tribunal's observations.

Final Conclusion: Appeal partly allowed: the Tribunal affirms that deemed rent on unsold completed units of a developer (not in the business of letting) is taxable as income from house property for AY 2015-16; the plea based on the later amendment to exclude notional income is rejected; however, the computation by AO on an ad hoc 8.5% basis is set aside and the matter is remanded for recomputation using municipal ratable value.

Ownership of land - income to be assessed in the hands of the right person - agency/agent of the State - scheme of the Maharashtra Industrial Development Corporation Act, 1961 - vesting of land under the MIDC Act and transfer mechanism - lease premiums and other receipts held on behalf of the State - precedential effect of the Tribunal's order

Ownership of land - lease premiums and other receipts held on behalf of the State - scheme of the Maharashtra Industrial Development Corporation Act, 1961 - vesting of land under the MIDC Act and transfer mechanism - Whether the income from lease premiums, rent and related receipts for AY 2008-09 was assessable as the income of the assessee or belonged to the State - HELD THAT: - The Tribunal analysed the scheme and statutory mechanism under the MIDC Act governing acquisition, vesting and transfer of land and the powers and functions of the corporation in developing and dealing with industrial estates. On the material on record, and in the absence of any instrument evidencing transfer of ownership in favour of the corporation, the Tribunal concluded that the revenue had not adduced documentary evidence to displace the assessee's claim that the lands were held for and on behalf of the State. Having regard to the MIDC Act's provisions concerning acquisition, vesting in the State, transfer to the corporation and conditions attached to lands placed at the corporation's disposal, the Tribunal rejected the revenue's contention that the receipts in question were the assessee's income and held that they could not be assessed as the income of the corporation for the year under appeal. [Paras 4, 5]

The claim of the revenue that the lease premiums, rent and related receipts were assessable as the assessee's income was rejected; the incomes were not held to belong to the assessee for AY 2008-09.

Income to be assessed in the hands of the right person - precedential effect of the Tribunal's order - agency/agent of the State - Whether the CIT(A) was correct in following the Tribunal's earlier order in the assessee's own case for A.Y. 2011-12 and whether that order applied to the present year - HELD THAT: - The Tribunal noted the settled obligation to assess income in the hands of the right person and observed that the factual position for the year in appeal was not different from that considered in the Tribunal's earlier order for A.Y. 2011-12. The Revenue and the parties before the Tribunal agreed that the grounds were covered by the Tribunal's earlier decision, which had not been reversed by the High Court. On that basis the Tribunal held that the CIT(A) correctly followed the earlier Tribunal order and that the earlier decision applied to the subject year. [Paras 4, 5]

The CIT(A)'s reliance on the Tribunal's earlier order for A.Y. 2011-12 was upheld and applied to AY 2008-09; the appeal of the revenue was dismissed.

Final Conclusion: The appeals by the Revenue are dismissed; the order of the CIT(A), which followed the Tribunal's earlier decision for A.Y. 2011-12, is upheld and the additions treating lease premiums and related receipts as the assessee's income for AY 2008-09 are rejected.

Exclusion of limitation period from 15.3.2020 to 14.3.2021 - condonation of delay - disallowance of employees' contribution collected but not remitted to Provident Fund/ESI as business expenditure - benefit to assessee where two views are possible on a debatable legal issue

Exclusion of limitation period from 15.3.2020 to 14.3.2021 - condonation of delay - Delay in filing the appeal before the Tribunal - HELD THAT: - The Tribunal held that the period from 15.3.2020 to 14.3.2021 is excluded for computing limitation pursuant to the directions of the Hon'ble Supreme Court in Suo Motu Writ Petition (Civil) No. 3 of 2020. The assessee received the CIT(A) order on 01.08.2020, the last date for filing was 01.10.2020 and the appeal was filed on 01.03.2021; all these dates fall within the excluded period. Consequently, there is no delay in filing the appeal before the Tribunal and the application for condonation does not have to be treated as indicating inordinate delay. [Paras 1]

No delay in filing; application for condonation not required as period stood excluded by the Supreme Court's directions.

Disallowance of employees' contribution collected but not remitted to Provident Fund/ESI as business expenditure - benefit to assessee where two views are possible on a debatable legal issue - Validity of disallowance under the provision treating employee contributions not remitted as disallowable expense - HELD THAT: - The Tribunal, following its earlier decision in Shishir Kumar Das (ITA No. 38/Hyd/2020 dated 02.02.2021), observed that the question is debatable with conflicting High Court decisions and that where two views are possible the view favourable to the assessee should be adopted. Applying that reasoning, the Tribunal held in favour of the assessee and treated the appeal as allowed for statistical purposes. The order also directed that the Assessing Officer be called upon to reconsider the issue in the event the contrary view is upheld by the Apex Court in pending appeals, indicating that the present determination is based on the existing state of conflicting authority and the Tribunal's precedent. [Paras 2, 3]

Assessee's appeal allowed for statistical purposes; disallowance not sustained and AO directed to reconsider if the Supreme Court ultimately takes a contrary view.

Final Conclusion: The Tribunal held that there was no delay in filing the appeal because the limitation period from 15.3.2020 to 14.3.2021 stood excluded; on the merits, following its earlier precedent and in view of conflicting authorities, the Tribunal allowed the assessee's appeal against the disallowance relating to employees' contributions and directed the AO to reconsider the issue if the Supreme Court upholds the contrary view.

Deduction under section 54F - rejection without examination of claim - remand to Assessing Officer for fresh examination - power of appellate tribunal to consider belated claims - no taxation except under law

Deduction under section 54F - rejection without examination of claim - remand to Assessing Officer for fresh examination - power of appellate tribunal to consider belated claims - no taxation except under law - Assessee's claim for deduction under section 54F was rejected by the CIT(A) without due examination and required fresh consideration by the Assessing Officer. - HELD THAT: - The Tribunal found that the claim for deduction under section 54F had been denied by the assessing authority and confirmed by the CIT(A) on the ground that the claim was not made in the original return or during scrutiny and that complete details were not filed before the authorities. The Tribunal held that rejection of a claim without due examination is not permissible since no tax can be collected or imposed except under the mandate of law. Relying on the principle that the Tribunal has power to consider claims made otherwise than by revised return, and in the interest of justice, the Tribunal remitted the matter to the Assessing Officer for examination and decision on merits, directing the AO to examine the assessee's claim and decide it afresh. [Paras 6, 7]

Claim remitted to the Assessing Officer for fresh examination and decision; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal held that the denial of the deduction without examination was impermissible, remitted the claim for deduction under section 54F to the Assessing Officer for fresh consideration and decision, and allowed the appeal for statistical purposes.

Maintainability of section 7 petition by homebuyers post-2019 amendment - Threshold requirement of 100 or 10% homebuyers for initiation of CIRP - Execution of a decree not maintainable under section 7 of the IBC - Decree-holder not falling within the class of financial creditors for CIRP purposes - Effect of tripartite subrogation to a bank on financial creditor status and non-joinder - I&B Code not a substitute for ordinary recovery proceedings / forum shopping

Maintainability of section 7 petition by homebuyers post-2019 amendment - Threshold requirement of 100 or 10% homebuyers for initiation of CIRP - The petition filed under section 7 by two homebuyers is not maintainable as it does not meet the statutory threshold introduced by the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019. - HELD THAT: - The Tribunal noted that the 2019 amendment permits homebuyers to file jointly under section 7 only if they constitute 100 homebuyers or 10% of the total homebuyers, whichever is less. The instant petition was presented by only two homebuyers and therefore does not satisfy the minimum threshold required to initiate Corporate Insolvency Resolution Process against the developer. The Tribunal emphasised that the Code's amendment imposes a threshold which is mandatory and the present petition cannot be entertained on that ground. [Paras 7]

Petition dismissed for failure to meet the statutory threshold for homebuyer-initiated section 7 petitions.

Execution of a decree not maintainable under section 7 of the IBC - Decree-holder not falling within the class of financial creditors for CIRP purposes - I&B Code not a substitute for ordinary recovery proceedings / forum shopping - A decree-holder who seeks execution of an adjudicated amount cannot ordinarily invoke section 7 to initiate CIRP; a decree does not convert the claim into a financial debt for the purpose of triggering CIRP under section 7. - HELD THAT: - Relying on precedents and statutory interpretation, the Tribunal held that a decree-holder, though within the broad definition of 'creditor' under section 3(10), does not necessarily fall within the class of financial creditors entitled to initiate CIRP under section 7 where the claim arises from an adjudicated decree. The Tribunal observed that the IBC is not intended to be a substitute forum for execution of decrees or for routine recovery; allowing decree-holders to invoke section 7 to execute decrees would frustrate the object of the amendment which sets thresholds for homebuyers. The petition, being essentially an attempt to execute the RERA decree, amounted to forum shopping and was inappropriate under the Code. [Paras 8, 9, 10]

Petitioner cannot use section 7 to execute the RERA decree; petition fails on this ground.

Effect of tripartite subrogation to a bank on financial creditor status and non-joinder - Where the allottee has subrogated rights in favour of the bank under a tripartite agreement, the allottee is not the financial creditor entitled to claim repayment from the corporate debtor and non-joinder of the bank is fatal to the petition. - HELD THAT: - The Tribunal examined the tripartite agreement and accepted the respondent's contention that amounts payable on cancellation were payable to PNB Housing Finance Limited and that the allottee had, by the tripartite arrangement, subrogated its rights to the bank. Consequently, the bank, not the petitioner, is the proper financial creditor for the disbursed loan amount. The petition did not make the bank a party, resulting in non-joinder of the necessary financial creditor and further undermining the maintainability of the petition. The Tribunal noted precedent supporting the proposition that subrogation to the bank precludes the allottee from being treated as the financial creditor for CIRP purposes. [Paras 11]

Petition fails for non-joinder and because the petitioner is not the financial creditor in respect of the loan disbursed under the tripartite agreement.

Final Conclusion: C.P. (IB) No. 367/BB/2019 is dismissed as the petitioners do not meet the statutory threshold for homebuyer-initiated CIRP, the petitioner cannot invoke section 7 to execute a RERA decree, and the tripartite subrogation to the bank renders the petitioner not the financial creditor; the petitioner remains free to pursue other remedies under law. No order as to costs.

Existence of financial debt and its default as determinative for admission of a Section 7 application - admission under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - inapplicability of the increased default threshold notification to pending Section 7 applications - inapplicability of Section 10A exclusion for defaults prior to 25.03.2020

Existence of financial debt and its default as determinative for admission of a Section 7 application - admission under Section 7(5) of the Insolvency and Bankruptcy Code, 2016 - Whether the Section 7 application filed by the Financial Creditor against the Corporate Debtor is liable to be admitted. - HELD THAT: - The Tribunal found that the Financial Creditor has produced documents evidencing a loan agreement, demand promissory note, statement of account and related documents showing a sum in default and that the account was classified as NPA. Applying the settled principle in Innoventive Industries Ltd. and Mobilox Innovations Pvt. Ltd., where existence of a financial debt and default are established and exceed the statutory threshold applicable at the time of filing, the Adjudicating Authority is bound to admit a Section 7 application. The present petition, filed on 10.10.2019, discloses default occurring prior to 25.03.2020 and the amount claimed in default exceeds the earlier threshold; accordingly the Application is required to be admitted under Section 7(5) of the Code. [Paras 5, 6, 7, 12, 15]

The Section 7 application is admitted under Section 7(5) of the IBC, 2016.

Appointment of Interim Resolution Professional - Whether the proposed person is fit to be appointed as Interim Resolution Professional and his appointment consequences. - HELD THAT: - The Financial Creditor proposed A. Mohan Kumar as Interim Resolution Professional and placed the prescribed written communication in Form 2. The Tribunal appointed the proposed IRP to take forward the CIRP and directed him to undertake steps under the Code, including actions in terms of Sections 15, 17 and 18 and to file his report within 20 days. The appointment also results in supersession of the board of directors of the Corporate Debtor for the CIRP period. [Paras 3, 16]

A. Mohan Kumar is appointed as Interim Resolution Professional and shall perform statutory duties; the board's powers stand superseded for the CIRP.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - What consequences follow upon admission of the Section 7 application in respect of moratorium. - HELD THAT: - On admission, the moratorium envisaged under Section 14(1) comes into effect immediately. The Tribunal reproduced and applied the statutory bar on institution or continuation of suits, transfer or disposition of assets, enforcement of security interests (including actions under SARFAESI Act), and recovery of property occupied by the corporate debtor. The order also records the duration of moratorium and exceptions contained in Sections 14(2), 14(2A) and 14(3). [Paras 17, 18, 19, 20]

Moratorium under Section 14 is declared with immediate effect upon admission of the CIRP.

Inapplicability of the increased default threshold notification to pending Section 7 applications - inapplicability of Section 10A exclusion for defaults prior to 25.03.2020 - Whether the Central Government notification increasing the default threshold and the Section 10A exclusion operate to defeat the present Section 7 filing. - HELD THAT: - The Tribunal noted the Section 7 application was filed on 10.10.2019 and the amount claimed in default exceeds the threshold in force at the time; therefore the subsequent notification raising the threshold does not apply to the present case. Further, Section 10A, which excludes defaults arising between 25.03.2020 and a later date, is also inapplicable because the defaults in this matter occurred prior to 25.03.2020. [Paras 13, 14]

Neither the increased threshold notification nor Section 10A exclusion applies to the present proceedings.

Final Conclusion: The Tribunal admitted the Financial Creditor's Section 7 application, appointed the proposed Interim Resolution Professional to conduct the CIRP and declared the statutory moratorium with immediate effect; the increased default threshold notification and Section 10A exclusion were held inapplicable to this case.

Exclusion of lockdown period from CIRP timeline - extension of limitation owing to COVID-19 - special provision relating to timeline during lockdown under IBBI regulations - application of NCLAT directions on exclusion of lockdown period for resolution process

Exclusion of lockdown period from CIRP timeline - special provision relating to timeline during lockdown under IBBI regulations - extension of limitation owing to COVID-19 - Whether the period from 01.08.2020 to 31.10.2020 should be excluded from computation of the CIRP timeline of M/s. Kopargaon Ahmednagar Tollways (Phase I) Pvt. Ltd. - HELD THAT: - The Tribunal allowed the application filed by the Resolution Professional to the limited extent of excluding the period w.e.f. 01.08.2020 to 31.10.2020 from the CIRP period. The decision applies the Supreme Court's suo motu order extending periods of limitation in view of COVID 19, the NCLAT direction excluding lockdown periods for computation of timelines under the Code, and the Insolvency and Bankruptcy Board of India's regulatory insertions providing that lockdown periods shall not be counted for timelines for insolvency or liquidation processes where activities could not be completed due to lockdown. In the circumstances and in the interest of justice, having regard to those authoritative orders and regulations, the Tribunal directed exclusion of the specified period from the CIRP computation and disposed of the IA accordingly. [Paras 8, 9]

IA allowed to the limited extent of excluding 01.08.2020 to 31.10.2020 from the CIRP period; IA disposed of.

Final Conclusion: The Tribunal, applying the Supreme Court's extension of limitation orders, NCLAT directions, and the IBBI regulations, directed that the period 01.08.2020 to 31.10.2020 be excluded from computation of the Corporate Insolvency Resolution Process period and disposed of the application accordingly.

Extension of liquidation period - Regulation 44(2) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - effect of appellate orders on liquidation process - status quo with respect to auctioned assets

Extension of liquidation period - Regulation 44(2) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - effect of appellate orders on liquidation process - Application for extension of the liquidation period of the corporate debtor for two years beyond 10-10-2020 under Regulation 44(2) was considered and determined. - HELD THAT: - The Tribunal recorded the liquidation timeline and sale process undertaken by the liquidator, noted the challenge by a third party and the appellate proceedings which culminated in the cancellation of the e-auction by the Appellate Tribunal and subsequent stay by the Supreme Court maintaining status quo in respect of the auctioned plant, machinery and equipment. In view of the reversal of the auction process by the Appellate Tribunal and the directions affecting custody and re-auction, the liquidator is required to resume duties, take custody of assets, and, if necessary, cause fresh valuation and re-auction. Given these developments and the inability to complete the liquidation within the original two year period ending 10-10-2020, the Tribunal applied Regulation 44(2) and granted an extension of the liquidation period for two more years to enable successful completion of the liquidation process. [Paras 11, 12, 13]

Extension of the liquidation period granted for two years beyond 10-10-2020 and IA 48(KB)/2021 allowed and disposed of.

Final Conclusion: The Tribunal allowed the liquidator's application and extended the liquidation period of the corporate debtor by two years beyond 10-10-2020 under Regulation 44(2) to enable completion of liquidation affected by intervening appellate orders and the Supreme Court stay.

Exclusion of time from the Corporate Insolvency Resolution Process on account of lockdown - exclusion of time from the Corporate Insolvency Resolution Process on account of pendency of an application for replacement of the resolution professional - interpretation of the second proviso of Section 12(3) of the Insolvency and Bankruptcy Code - extension of CIRP beyond 330 days only in exceptional circumstances

Exclusion of time from the Corporate Insolvency Resolution Process on account of lockdown - extension of CIRP beyond 330 days only in exceptional circumstances - Exclusion of the lockdown period from the computation of the maximum 330 days for CIRP - HELD THAT: - The Tribunal accepted that the nationwide lockdown and its consequences impeded progress of the CIRP and noted prior decisions in which lockdown periods were excluded. Applying its practice, the Tribunal declined the applicant's prayer to exclude the entire period up to 31.08.2020 (160 days) and instead excluded the period from 25.03.2020 to 30.06.2020, i.e., 97 days, for the purpose of calculating the CIRP timeline. The Tribunal reached this conclusion by analogy to other matters where the lockdown exclusion was limited to 25.03.2020-30.06.2020 rather than the longer period sought by the applicant, and by taking into account the orders of higher fora relied upon by the applicant as background, while exercising its discretion in the present case. [Paras 9]

The period from 25.03.2020 to 30.06.2020 (97 days) is excluded from the 330-day CIRP timeline.

Exclusion of time from the Corporate Insolvency Resolution Process on account of pendency of an application for replacement of the resolution professional - interpretation of the second proviso of Section 12(3) of the Insolvency and Bankruptcy Code - extension of CIRP beyond 330 days only in exceptional circumstances - Claim to exclude period during which IA for replacement of the resolution professional remained pending - HELD THAT: - The Tribunal examined the applicant's request to exclude the period from the filing of IA 4208/2020 until its disposal on the ground that that pendency justified exclusion. While noting the Supreme Court's observation that the second proviso to Section 12(3) is not mandatory, the Tribunal emphasised that extensions beyond 330 days are permissible only in exceptional circumstances. The applicant did not seek an extension on the basis of exceptional circumstances but sought exclusion merely on account of pendency of the application. The Tribunal also observed there was no stay of the CIRP or the RP's functions by the Adjudicating Authority. In view of these facts and the legal position, the Tribunal held that exclusion on the ground of pendency of the IA cannot be allowed. [Paras 10]

Prayer to exclude the period of pendency of IA 4208/2020 is rejected.

Final Conclusion: The application is disposed of: the Tribunal allows exclusion of 97 days (25.03.2020-30.06.2020) from the 330-day CIRP period and rejects the applicant's prayer to exclude the period of pendency of IA 4208/2020; no other relief is granted.

Power under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to exclude time from the CIRP period - exclusion of period from Corporate Insolvency Resolution Process (CIRP) - Corporate Insolvency Resolution Process (CIRP) time-limit and permissible grounds for exclusion - any other circumstances which justifies exclusion of certain period - lockdown / governmental restrictions as ground for time exclusion - maximisation of asset value as object of CIRP

Exclusion of period from Corporate Insolvency Resolution Process (CIRP) - power under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 to exclude time from the CIRP period - lockdown / governmental restrictions as ground for time exclusion - any other circumstances which justifies exclusion of certain period - Application for exclusion of 15 days from the CIRP period in respect of M/s. PPS Enviro Power Pvt. Ltd. - HELD THAT: - The Tribunal considered the Resolution Professional's request under the jurisdiction of the Adjudicating Authority to exclude a further 15 days from the CIRP period, relying on the clause permitting exclusion for "any other circumstances which justifies exclusion of certain period" as applied in the cited NCLAT decision. The Bench noted the stage of the CIRP, the steps already taken by the Resolution Professional, the need for meetings of the Committee of Creditors to finalise an improved resolution plan aimed at maximisation of asset value, and the impact of governmental restrictions in Tamil Nadu (G.O.(Ms) No. 673 dated 30.11.2020) extending restrictions which affected decision-making by the financial creditor. In view of these circumstances and the objective of enabling completion of the remaining CIRP steps, the Tribunal treated the lockdown-related restrictions and the ongoing COC proceedings as sufficient justification to permit the limited exclusion sought as a special case.

Application allowed; 15 days excluded from the CIRP period from 15.01.2021 to 29.01.2021 and the Resolution Professional directed to complete the remaining CIRP process within the extended time.

Final Conclusion: The Tribunal exercised its power under Section 60(5) of the I&B Code to exclude 15 days from the CIRP period as a special case, having regard to the stage of the CIRP, steps already taken, creditor meetings and pandemic-related governmental restrictions, and directed completion of the remaining process within the excluded period.

Acknowledgement of debt under Section 18 of the Limitation Act - deduction of tax at source (TDS) and issuance of TDS certificate as admission of liability - ledger entries/financial statements as acknowledgement of debt - limitation of actions governed by Article 137

Deduction of tax at source (TDS) and issuance of TDS certificate as admission of liability - acknowledgement of debt under Section 18 of the Limitation Act - Whether deduction of TDS and issuance of TDS certificate by the corporate debtor constitutes an acknowledgement of debt for the purpose of extending limitation. - HELD THAT: - The Tribunal applied the reasoning of the Delhi High Court (referring to Utility Power Tech Ltd.) and the Supreme Court in Commissioner of Income Tax v. Gujarat Fluoro Chemicals to conclude that deduction of TDS and issuance of TDS certificates are evidentiary of tax deduction and estimation of liability, but do not, by themselves, amount to an admission or acknowledgement of debt within the meaning of the Limitation Act. The TDS certificate primarily acknowledges deduction of tax at source and may reflect an expectation or estimate rather than a contractual acknowledgement of liability that restarts or extends the limitation period.

Deduction of TDS and issuance of TDS certificate do not constitute an acknowledgement of debt for limitation purposes.

Ledger entries/financial statements as acknowledgement of debt - acknowledgement of debt under Section 18 of the Limitation Act - Whether amounts reflected in the applicant's ledger account constitute an acknowledgement of debt under Section 18 of the Limitation Act. - HELD THAT: - Relying on the majority view of the NCLAT in V. Padmakumar v. Stressed Assets Stabilisation, the Tribunal held that statutory or routine entries in balance sheets, annual returns or ledger accounts cannot be treated as an acknowledgement which restarts limitation. The Tribunal noted that mandatory filings and internal accounting entries, being periodic and obligatory, cannot be equated with a voluntary admission of liability sufficient to invoke Section 18. Given the applicant's own admission of the date of last payment in its filing, the ledger entries did not alter the limitation analysis.

Amounts shown in the ledger account do not amount to an acknowledgement of debt sufficient to extend the limitation period.

Limitation of actions governed by Article 137 - acknowledgement of debt under Section 18 of the Limitation Act - Whether the petition under Section 7 of the Code was filed within the period of limitation, and the consequent fate of the application. - HELD THAT: - The Tribunal recorded the applicant's admission that the last payment was made on 28.03.2017 (and a part payment on 28.04.2017) and observed that, absent an acknowledgement capable of restarting limitation, the right to institute proceedings accrued thereafter. Applying Article 137, and in view of the findings that neither TDS deduction nor ledger entries constituted acknowledgement under Section 18, the Tribunal concluded that the Section 7 petition filed on 04.02.2021 was time-barred. No contrary admissible act was found to revive the limitation.

The petition is barred by limitation and is dismissed.

Final Conclusion: The Tribunal held that deduction of TDS and ledger/accounting entries do not constitute an acknowledgement of debt under Section 18 of the Limitation Act; applying Article 137, the Section 7 petition filed on 04.02.2021 was thereby held to be time barred and the application was dismissed.

Continuing guarantee - limitation and computation of period of limitation for guarantee claims - acknowledgement in writing/promise to pay under the Indian Contract Act - effect of variation/amendment of facility agreement on surety's liability - successor-in-interest/lender by amalgamation - jurisdiction of Adjudicating Authority in corporate guarantee matters - appointment of Interim Resolution Professional - moratorium under the Insolvency and Bankruptcy Code

Successor-in-interest/lender by amalgamation - locus to file section 7 application - maintainability of the Section 7 application by the present Financial Creditor as successor of the original lender - HELD THAT: - The Tribunal found that the original financial creditor had been amalgamated into the petitioner and that the facility agreement defined the lender to include successors in title. There was a board resolution and supporting documents to show authority. Accordingly, the plea that the applicant lacked locus because no separate assignment document was executed was rejected as without merit. [Paras 15]

The application is maintainable by the petitioner as successor of the original financial creditor.

Limitation and computation of period of limitation for guarantee claims - acknowledgement in writing/promise to pay under the Indian Contract Act - whether the Section 7 application was barred by limitation - HELD THAT: - The Tribunal analysed the terms of the facility agreement and the guarantee, noted multiple dates on which interest and portions of the debt became due, and held that there were instances of defaults on different dates culminating in a cumulative default on 8 February 2019. The Tribunal further held that the corporate debtor's letter dated 13 September 2019 amounted to an acknowledgment/promise to pay within the meaning of the Indian Contract Act and revived/extended rights insofar as limitation is concerned. Taking these facts into account, the petition filed on 21 January 2020 was held not to be time barred. [Paras 26, 27, 28]

The Section 7 application is not barred by limitation.

Continuing guarantee - effect of variation/amendment of facility agreement on surety's liability - whether amendment/variation of the facility agreement between lender and principal borrower discharged the corporate guarantor - HELD THAT: - The Tribunal examined the deed of guarantee (noting Clauses 6, 7, 8, 10, 11, 16, 17, 19 and 23) and concluded that the guarantee was expressed to be continuing, irrevocable, and to survive variations, indulgences or release of securities without the guarantor's concurrence. Clause 23 expressly provided that limitation would commence only after a written demand in accordance with the clause. On this basis the Tribunal held that modifications between lender and borrower did not discharge the guarantor and that the guarantor remained liable. [Paras 19, 20, 21, 22, 23]

The amendment/variation between lender and borrower did not discharge the corporate guarantor; the guarantee remained enforceable.

Jurisdiction of Adjudicating Authority in corporate guarantee matters - competent forum and jurisdictional plea regarding place of filing - HELD THAT: - The Tribunal considered the contention that the Mumbai Bench had exclusive jurisdiction because proceedings against the principal borrower were pending there. It noted the scheme of the Code that the Bench seized with an admitted CIRP or liquidation has jurisdiction as contemplated by Section 60(2), but observed that CIRP against the principal borrower had not commenced. On the facts, the plea seeking to oust jurisdiction of this Bench was rejected. [Paras 15]

The plea that this Bench lacked jurisdiction is rejected; the application before this Adjudicating Authority is maintainable.

Record of default in Information Utility not mandatory - requirement of Information Utility default record for filing Section 7 - HELD THAT: - The Tribunal held that record of default as per the Information Utility is not a mandatory prerequisite for filing a Section 7 application and consequently rejected the corporate debtor's contention that absence of such record vitiated the petition. [Paras 15]

Absence of an Information Utility record of default does not render the Section 7 application incompetent.

Appointment of Interim Resolution Professional - moratorium under the Insolvency and Bankruptcy Code - appointment of IRP and imposition of moratorium upon admission - HELD THAT: - Having found the petition complete and not barred, the Tribunal appointed the proposed IRP (consent on record and no disciplinary proceedings) and declared the moratorium operative from the date of the order in terms of the Code, directing the IRP to perform statutory duties including public announcement and claim collection. The separate IA seeking interim relief was held infructuous in view of the admission and resultant operation of Section 14. [Paras 29, 30, 31, 32]

IRP appointed and moratorium declared; IA dismissed as infructuous.

Final Conclusion: The Section 7 petition filed by the Financial Creditor was admitted: the petitioner was held to have locus as successor of the original lender; the guarantee was held continuing and not vitiated by amendments between lender and borrower; the claim was not time-barred (including having regard to the corporate debtor's acknowledgement); Information Utility record was not obligatory; the Tribunal appointed the proposed IRP and declared the moratorium, and the related interlocutory application was dismissed as infructuous.

Preponement of hearing - withdrawal of insolvency petition pursuant to settlement / Memorandum of Understanding - interim order to continue - powers of Interim Resolution Professional to run the affairs of the corporate debtor as a going concern - procurement from a related party pending approval of the Committee of Creditors - in rem nature of Corporate Insolvency Resolution Process and interest of all stakeholders - exit from CIRP at pre-constitution of Committee of Creditors - routine adjournments and Rule 92 ordersheet provisions

Preponement of hearing - routine adjournments and Rule 92 ordersheet provisions - Adjournment of the petition and refusal to accede to the prayer for preponement; routine interim orders to continue until regular Division Bench hearing on scheduled date. - HELD THAT: - The Bench considered the application for preponement filed by the corporate debtor and the objections of a financial creditor. Having noted the absence of urgency proved on record and the pendency of multiple related applications, the Bench held that the matter ought to be heard by the regular Division Bench on its original date. The Court observed that routine adjournments fall within the proviso to Rule 92(2) of the NCLT Rules and recorded the decision to adjourn the matter to the scheduled date, with existing interim directions to continue until further orders. [Paras 9, 21]

Prayer for preponement rejected; matter adjourned to 01.03.2021 and interim order to continue till further order.

Withdrawal of insolvency petition pursuant to settlement / Memorandum of Understanding - exit from CIRP at pre-constitution of Committee of Creditors - in rem nature of Corporate Insolvency Resolution Process and interest of all stakeholders - Existence of a Memorandum of Understanding with part payment to the Operational Creditor and the Operational Creditor's stated lack of objection to withdrawal of the admitted Section 9 petition (subject to further consideration). - HELD THAT: - The Bench recorded that on admission of CP(IB) No. 759 of 2019 the corporate debtor entered into an MOU with the Operational Creditor providing for payment terms, and that the Operational Creditor had accepted part payment and stated it had no objection to withdrawal of the petition. The Court nevertheless emphasised that the CIRP is in rem and that the interests of all stakeholders and multiple pending applications must be considered before any order setting aside CIRP is passed; no final order setting aside the CIRP was recorded on the day and the matter was directed to be heard on the scheduled date. [Paras 3, 13, 20]

Operational Creditor has received part payment and has no objection to withdrawal; no final setting aside of CIRP granted at this stage and matter to be considered on scheduled hearing.

Powers of Interim Resolution Professional to run the affairs of the corporate debtor as a going concern - procurement from a related party pending approval of the Committee of Creditors - The Interim Resolution Professional is permitted, pending final decision, to continue running the corporate debtor as a going concern and to procure materials from a related party as previously done despite the requirement of prior Committee of Creditors' approval. - HELD THAT: - On enquiry, the IRP stated that he was running the company's affairs and that operations were being maintained. The Bench observed that Sections 17, 18, 20 and 23 of the Code confer broad powers on the IRP to manage the corporate debtor pending adjudication. The Tribunal recorded that, pending final determination of the application concerning the CIRP, the IRP was free to procure materials or operational services from a related party as had been done earlier, and that post-facto approval of the COC could be taken if required. [Paras 16, 17]

IRP may continue to run the corporate debtor and procure materials from the related party pending final decision; post-facto COC approval may be obtained if necessary.

Final Conclusion: The application for preponement was refused and the matters were adjourned to the originally scheduled hearing date (01.03.2021) with interim directions continuing; the record notes the MOU and part payment to the Operational Creditor (who stated no objection to withdrawal) but no final setting aside of CIRP was ordered; the IRP is permitted to continue management of the corporate debtor and to procure material from the related party pending final adjudication, with due regard to the in rem nature of CIRP and interests of all stakeholders.

Classification of lease rent as operational debt - operational debt - claim - default - initiation of CIRP under Section 9 - moratorium under Section 14 - pre-existing dispute - doctrine of approbate and reprobate - equitable estoppel

Classification of lease rent as operational debt - operational debt - claim - Arrears of lease/license rent and attendant service charges held to be an operational debt permitting initiation of CIRP under Section 9. - HELD THAT: - The Tribunal examined the statutory definitions of "claim", "debt" and "operational debt" and relevant policy material, concluding that an outstanding sum arising from letting out premises for rent/licence is a claim within section 3(6) and falls within the inclusive meaning of "operational debt" under section 5(21). The Tribunal relied on the object and scheme of the Code, analogous regulatory treatment (supply of services under GST), prior decisions including the view in Sarala Tantia and Mobilox Innovations, and Viswanathan Committee observations to adopt a broad purposive construction of "services" so as to include lease/licence obligations. It rejected a narrow test requiring that services be direct inputs to the corporate debtor's output, noting that such restriction is neither prescribed by section 5(21) nor consistent with the Code's objectives. Divergent decisions on factually distinguishable cases were considered but not followed where facts differed. On this basis the contention that outstanding lease/licence payments are not operational debt was rejected. [Paras 21, 22, 23, 24, 25]

Arrears of lease/licence rent are operational debt and the application under Section 9 is maintainable.

Pre-existing dispute - default - limitation - Pre-existing dispute, limitation and time-bar contentions did not preclude admission in view of admitted undisputed invoices exceeding the statutory threshold. - HELD THAT: - The Tribunal noted the Corporate Debtor's assertions of a pre-existing dispute, pending criminal complaint and claims of time-barred invoices, but observed that certain outstanding rent invoices (Unit 6A and 6B for Feb-Jun 2018) were not disputed and their admitted quantum exceeded the statutory threshold for initiating CIRP. Accordingly, the Bench held it unnecessary to delve into detailed dispute or limitation arguments which would not affect the outcome of admission. The Tribunal also addressed a contention about an inconsistent date of default in pleadings and found no merit since the application and tabular particulars showed debt had fallen due from the asserted date and invoices for subsequent years were on record. [Paras 15, 16]

Pre-existing dispute and limitation objections were not sufficient to defeat admission of the Section 9 application.

Initiation of CIRP under Section 9 - moratorium under Section 14 - The Section 9 application was admitted; moratorium declared and an Interim Resolution Professional appointed. - HELD THAT: - Having found the application complete and the claim to be an operational debt with default established, the Tribunal admitted the petition under Section 9. It declared the moratorium as prescribed by the Code, listed the specific prohibitions (institution/continuation of suits, transfer/encumbrance of assets, enforcement of security, recovery of property from possession), and directed appointment of an Interim Resolution Professional from the IBBI-approved panel. The IRP was directed to perform statutory functions, make the public announcement, call for claims and preserve the corporate debtor as a going concern; the Operational Creditor was directed to pay an advance to the IRP for CIRP conduct. The Registry was directed to communicate and upload the order. [Paras 20, 21, 22]

The petition is admitted; moratorium is in force and an IRP is appointed to carry out CIRP formalities.

Final Conclusion: The Tribunal admitted the Section 9 petition by the Operational Creditor, holding that arrears of lease/licence rent constitute an operational debt; pre-existing dispute and limitation objections did not preclude admission given undisputed invoices exceeding the threshold; moratorium was declared and an Interim Resolution Professional appointed to proceed with CIRP.

Operational debt and default - maintainability of Section 9 application - absence of pre-existing dispute - limitation - admission of application under Section 9 - declaration of moratorium under Section 14 - appointment of Interim Resolution Professional - public announcement and calling of claims

Operational debt and default - maintainability of Section 9 application - The corporate debtor owed an operational debt to the applicant and committed default; the Section 9 application was maintainable. - HELD THAT: - From the invoices, ledger entries, GST returns, bank statement and demand notice placed on record by the applicant, this Authority is satisfied that there exists an operational debt and that the corporate debtor committed default in payment. The application was examined in light of the tests stated in Mobilox Innovative Pvt. Ltd. v. Kirusa Software Pvt. Ltd., namely existence of operational debt, documentary proof of debt being due and payable, and absence of a pre-existing dispute. The material on record established the debt and default and showed that the petition was complete and within limitation. No denial or dispute over the operational debt was raised by the corporate debtor. [Paras 3, 9, 10, 12, 14]

Application under Section 9 is maintainable as the operational debt and default are established and the petition is within limitation.

Absence of pre-existing dispute - limitation - There was no pre-existing dispute and the petition was filed within the limitation period. - HELD THAT: - The record shows service of the demand notice on 24.09.2019 and filing of the petition on 09.12.2019. The corporate debtor did not file a reply despite opportunities and did not raise any dispute over the operational debt. The adjudicating authority found that the petition was well within limitation and that no pre-existing dispute or pending suit/arbitration prior to the demand notice had been demonstrated by the corporate debtor. [Paras 7, 8, 12]

No pre-existing dispute exists and the petition is not time-barred.

Admission of application under Section 9 - declaration of moratorium under Section 14 - public announcement and calling of claims - The petition was admitted under Section 9 and consequent directions were issued to declare moratorium, make public announcement and call for claims. - HELD THAT: - Having found existence of operational debt and occurrence of default, the Authority exercised its discretion under Section 13 to admit the application under Section 9(5)(i). Consequential directions were issued to the Interim Resolution Professional to make the public announcement and call for submission of claims under Section 15, and moratorium was declared prohibiting, inter alia, institution or continuation of suits, transfer or disposition of assets, enforcement of security interest and recovery of property by owners or lessors, with effect from receipt of authenticated copy of the order until completion of the corporate insolvency resolution process or further order. [Paras 14, 15, 16, 17, 19]

Application admitted; moratorium declared and public announcement/call for claims directed.

Appointment of Interim Resolution Professional - An Interim Resolution Professional was appointed to conduct the corporate insolvency resolution process. - HELD THAT: - The applicant did not propose a name for the Interim Resolution Professional. In exercise of the power under Section 13(1)(c), this Adjudicating Authority appointed the named registered insolvency professional to act as Interim Resolution Professional and directed communication of the order to stakeholders and the Registrar of Companies. [Paras 18, 20, 21]

Mr. Nandish Sunilbhai Vin appointed as Interim Resolution Professional and stakeholders/ROC to be informed.

Final Conclusion: The Tribunal admitted the Section 9 petition, finding that an operational debt and default were established, no pre-existing dispute or limitation bar existed, directed appointment of an Interim Resolution Professional, ordered public announcement and calling of claims, and declared the moratorium under Section 14 effective from receipt of the authenticated order.

Special rate under Notification No.20/2008-Central Excise - refund of excise duty - option to seek fixation of a special rate representing actual value addition - stay of coercive action pending adjudication - restoration of Notification No.20/2008-Central Excise by higher court

Special rate under Notification No.20/2008-Central Excise - option to seek fixation of a special rate representing actual value addition - Application dated 28.09.2020 under Clause 3(1) of Notification No.20/2008-Central Excise seeking fixation of a special rate on account of add ons to manufactured goods was to be considered afresh by the Principal Commissioner. - HELD THAT: - The petitioner invoked Clause 3(1) of Notification No.20/2008-Central Excise to claim fixation of a special rate representing actual value addition on the ground of add ons to goods. The Court noted that the Notification, having been restored by the Supreme Court, confers a legal right on manufacturers to seek such fixation and that the petitioner had filed the requisite application on 28.09.2020. In view of this legal entitlement and because the Department had not given due consideration to the petitioner's claim, the matter was directed to be considered by the Principal Commissioner of GST Dibrugarh. The Principal Commissioner is required to examine and decide the application and, after arriving at the special rate, to proceed further in accordance with law. This constitutes a remand for fresh administrative adjudication on the claim for a special rate under Clause 3(1). [Paras 5, 7, 8, 9]

Principal Commissioner of GST Dibrugarh to consider and decide the petitioner's Clause 3(1) application for fixation of a special rate within six weeks of receipt of the certified copy of the order.

Refund of excise duty - stay of coercive action pending adjudication - Whether coercive action should be taken against the petitioner before adjudication of its claim for a special rate under the Notification. - HELD THAT: - The Court observed that, in light of the petitioner's pending application under Clause 3(1) asserting add ons and entitlement to a special rate, it would be inappropriate for the Department to initiate coercive measures based on the Table rates in the Notification without first deciding the petitioner's claim. Accordingly, the Court restrained the Department from taking coercive action, including attachment of bank accounts, until the Principal Commissioner renders a decision on the application. After such decision, the Department may proceed further as per law. [Paras 7, 8, 9]

No coercive action shall be taken against the petitioner until the Principal Commissioner decides the Clause 3(1) application; thereafter, further action may follow as per law.

Final Conclusion: Writ petition allowed to the extent that the Principal Commissioner of GST, Dibrugarh, is directed to consider and decide the petitioner's application under Clause 3(1) of Notification No.20/2008-Central Excise dated 27.03.2008 within six weeks from receipt of the certified copy; meanwhile, coercive action against the petitioner is stayed.

Priority of secured creditor over government dues - Mortgage creates prior right in favour of the mortgagee - Primacy of SARFAESI proceedings - Registration of sale certificate despite subsequent interim attachment - Deletion of encumbrance/attachment entry recorded after prior mortgage

Mortgage creates prior right in favour of the mortgagee - Registration of sale certificate despite subsequent interim attachment - Primacy of SARFAESI proceedings - Sale certificate issued by the secured creditor (bank) in exercise of SARFAESI rights, where there is an earlier registered mortgage, must be registered and cannot be defeated by a subsequent interim attachment recorded by the Commercial Tax Department or an Arbitration Tribunal. - HELD THAT: - The Court held that where a registered mortgage in favour of the bank predates an interim attachment order recorded by the Commercial Tax Department/Arbitration Tribunal, the prior mortgagee's rights prevail. Relying on earlier decisions and the principle embodied in the Enforcement of Security Interest amendment (Section 31B), the Court observed that proceedings under SARFAESI have primacy and secured creditors' rights to realise secured debts by sale of secured assets have priority over government dues. Consequently, the Sub-Registrar was directed to register the sale certificate issued by the bank and to delete the subsequent encumbrance/attachment entry insofar as it affects the properties subject to the earlier mortgage. The Court rejected the contention that the writ was not maintainable on grounds that the interim order could be challenged only by other remedies, clarifying that the petition sought protection of an existing prior right rather than a collateral attack on tribunal proceedings. [Paras 3, 4, 5, 6]

Writ petition allowed; Sub-Registrar directed to register the sale certificate and delete the encumbrance/attachment entry affecting the mortgaged properties.

Priority of secured creditor over government dues - Deletion of encumbrance/attachment entry recorded after prior mortgage - Deletion of the encumbrance/attachment entry does not extinguish or prejudice the Commercial Tax Department's right to collect dues from the defaulting assessee by due process of law. - HELD THAT: - While directing deletion of the attachment entry from the encumbrance records to give effect to the prior mortgagee's sale certificate, the Court expressly clarified that such deletion is administrative and shall not affect the Department's substantive right to recover taxes or other dues from the defaulting assessee by following the prescribed legal procedures. The order therefore balances the secured creditor's priority in realisation with the Department's continuing remedy against the defaulting party. [Paras 5]

Encumbrance/attachment entry ordered deleted; deletion will not affect the Commercial Tax Department's right to proceed against the defaulting assessee to collect dues.

Final Conclusion: The writ petition is allowed: the Sub-Registrar is directed to register the bank's sale certificate and to delete the subsequent encumbrance/attachment entries affecting the mortgaged properties, subject to the Commercial Tax Department's preserved right to recover dues from the defaulting assessee; no costs.

Subordinate authority cannot pass an order contrary to an appellate authority - administrative discipline requiring subordinate authorities to follow orders of appellate authority - quashing of impugned tax order in writ jurisdiction - liberty to pursue statutory appeal before the Tribunal on merits - adjustment of excess tax subject to outcome of pending appeal

Subordinate authority cannot pass an order contrary to an appellate authority - administrative discipline requiring subordinate authorities to follow orders of appellate authority - quashing of impugned tax order in writ jurisdiction - Whether the order dated 29.01.2016 passed by the Commercial Tax Officer, which runs counter to the order of the Appellate Deputy Commissioner (CT), is sustainable. - HELD THAT: - The Court found that the Appellate Deputy Commissioner had considered the matters in detail and allowed a portion of the petitioner's claim. The impugned order by the subordinate authority revisited the same issues and reached a contrary result. A subordinate authority is not empowered to supersede or override an order passed by the appellate authority; administrative discipline requires subordinate authorities to follow such appellate orders and, if dissatisfied, to seek recourse before the appropriate higher forum. Consequently, the impugned order, being contrary to the order of the Appellate Deputy Commissioner and passed by a subordinate authority without appropriate jurisdictional basis, is susceptible to quashing in writ jurisdiction. [Paras 9, 10, 11]

Impugned order dated 29.01.2016 is quashed as it runs counter to the Appellate Deputy Commissioner's order and is beyond the subordinate authority's competence.

Liberty to pursue statutory appeal before the Tribunal on merits - Whether the respondent-Department may proceed with the appeal already filed before the Tribunal against the Appellate Deputy Commissioner's order. - HELD THAT: - The Court noted that the Department had filed an appeal before the Tribunal in 2016 challenging the Appellate Deputy Commissioner's order. The respondents were granted liberty to pursue that statutory appeal and the Tribunal was expected to consider the appeal on merits, affording opportunity to the parties. The High Court did not shut out the Department's statutory remedy but exercised supervisory jurisdiction to quash the impugned subordinate order while leaving the departmental appeal pending for adjudication in accordance with law. [Paras 8, 10]

Respondents are at liberty to pursue the appeal pending before the Tribunal, which shall be decided on merits in accordance with law.

Adjustment of excess tax subject to outcome of pending appeal - Whether the excess amount of tax paid by the petitioner is to be adjusted and the manner of such adjustment. - HELD THAT: - Having quashed the impugned order, the Court directed that the excess tax already paid by the petitioner be adjusted with reference to the financial year 2010-11. This direction was made subject to the final orders that may be passed in the appeal pending before the Tribunal. The Court also permitted the parties to the appeal before the Tribunal to file additional grounds, pleadings or documents, and directed the Tribunal to receive and consider any such material on merits. [Paras 11, 12]

Excess tax paid to be adjusted with reference to financial year 2010-11, subject to the orders to be passed in the appeal pending before the Tribunal.

Final Conclusion: Writ petition allowed; impugned order dated 29.01.2016 quashed for being contrary to the Appellate Deputy Commissioner's order; respondents permitted to pursue their appeal before the Tribunal; excess tax to be adjusted for financial year 2010-11 subject to the Tribunal's final decision; parties permitted to file additional grounds or documents before the Tribunal.

Deemed assessment - vulnerability of assessment passed without personal hearing - suo motu reopening of assessment proceedings - predetermination by assessing authority and undue reliance on Enforcement Wing inspection - obligation of assessing officer to independently consider and record reasons on objections - requirement to verify alleged mismatch with the other-end dealer - remand for fresh consideration and personal hearing

Vulnerability of assessment passed without personal hearing - suo motu reopening of assessment proceedings - Validity of the original assessment orders dated 28.03.2017 which were passed before the petitioner's reply and without affording personal hearing, in light of the assessing authority's subsequent suo motu reopening. - HELD THAT: - The assessing authority had passed assessment orders on 28.03.2017 before receipt of the petitioner's objections and without affording a personal hearing. The same assessing authority thereafter invoked suo motu reopening jurisdiction under the relevant provisions, thereby reopening the proceedings. Because the reopening was judicially avowed by the assessing authority, the original orders stand displaced. The Court observed that passing the original orders without personal hearing rendered them vulnerable and, in consequence, it was appropriate to set aside those orders and treat the reopening as effective to void the prior orders. [Paras 7]

Original assessment orders dated 28.03.2017 are set aside; reopening invoked by the assessing authority renders the earlier orders ineffective.

Predetermination by assessing authority and undue reliance on Enforcement Wing inspection - obligation of assessing officer to independently consider and record reasons on objections - requirement to verify alleged mismatch with the other-end dealer - remand for fresh consideration and personal hearing - Whether the impugned assessment orders dated 11.08.2017 are sustainable, having regard to alleged predetermination, reliance on inspection notes, failure to consider objections, and legal requirement to examine the other-end dealer in mismatch cases. - HELD THAT: - The impugned orders repeatedly adopt the findings of the Enforcement Wing inspection and state a predisposition to issue revision notices based on those inspection records; they also placed the onus on the assessee to prove that the seller had paid tax. The Court noted binding authority that where a mismatch arises, the enquiry must include verification with the other-end dealer. The assessing officer is a quasi-judicial functionary and must apply independent mind to objections, give reasons and not act as a mere rubber stamp of enforcement proposals. The impugned orders employed pejorative language about the assessee and failed to address the objections on merits, merely stating that the records submitted were incorrect and incomplete. For these reasons the Court found the impugned orders unsustainable and remitted the matters for fresh consideration with directions. [Paras 8, 9, 12, 13]

Impugned orders dated 11.08.2017 are set aside; matters remitted to the assessing authority for fresh consideration after issuing a fresh personal hearing notice, permitting the assessee to file written submissions and additional records, and directing the assessing authority to consider objections and pass orders in accordance with law (with the assessee directed not to seek adjournment on the notified date).

Final Conclusion: The Court set aside the original assessment orders of 28.03.2017 and held the impugned orders of 11.08.2017 unsustainable for predetermination, undue reliance on Enforcement Wing inspection and failure to consider objections; the matters are remitted for fresh consideration after affording personal hearing and permitting filing of relevant documents, and connected writ petitions rendered infructuous or closed accordingly.

Recovery of dues from the estate of a deceased dealer - charge/encumbrance on immovable property - status of property as not forming part of deceased's estate - cancellation of encumbrance/mutation entry - mandamus for deletion of charge

Recovery of dues from the estate of a deceased dealer - status of property as not forming part of deceased's estate - Whether the immovable property in question could be subjected to recovery proceedings for dues of the deceased dealer - HELD THAT: - The Court found on the material before it, and on the learned AGP's candid submission, that there was no cogent material to indicate that the deceased proprietor had any right, title or interest in the immovable property. The Department's own communication dated 22.12.2014 records that the property stands in the name of the writ applicant and that the deceased was not the owner; it therefore ordered cancellation of the encumbrance entry. In these circumstances the Court held that the dues of the deceased dealer could not be recovered from the immovable property which is not the estate of the deceased. The determinative reasoning is based on the factual absence of any ownership or co-ownership of the property by the deceased and the Department's administrative finding cancelling the mutation/encumbrance.

Recovery proceedings could not be sustained against the immovable property because it does not form part of the deceased dealer's estate; the charge cannot be enforced against that property.

Cancellation of encumbrance/mutation entry - mandamus for deletion of charge - Whether the Department's communication cancelling the encumbrance entry over the property should be given effect - HELD THAT: - The Court took note of the communication dated 22.12.2014 by the Commercial Tax Officer addressed to the Mamlatdar recording that, having considered evidence submitted by the owner, the encumbrance entry No.21919 was cancelled and the property discharged from encumbrances. Having concluded that the property is owned by the writ applicant and not by the deceased, the Court directed that the Department's communication to cancel the mutation/encumbrance be implemented. The direction flows from the Department's own administrative finding and the absence of any material to justify continued encumbrance or coercive steps against the property.

The communication cancelling the encumbrance shall be given effect at the earliest and the charge on the property shall be deleted/treated as discharged.

Final Conclusion: Writ petition disposed of: the Court held that the impugned property is not the estate of the deceased dealer and therefore cannot be made liable for recovery of his dues; the Department's communication cancelling the encumbrance is to be given effect forthwith and no coercive steps shall be taken against the property.