TaxTMI Updates e-Newsletter
Jun 10,2020

Renting or leasing of immovable property treated as supply of service - supply of storage or warehousing services in relation to agricultural produce exempt - Schedule II para 5(a) read with Section 7: renting of immovable property as service - residuary taxable entry for non-residential property rental attracting 18% GST - exemption entry for services relating to agricultural produce including storage and warehousing

Renting or leasing of immovable property treated as supply of service - Schedule II para 5(a) read with Section 7: renting of immovable property as service - residuary taxable entry for non-residential property rental attracting 18% GST - Tax treatment of leasing cold storage premises when the agreement is for renting/leasing of the premises. - HELD THAT: - The Authority held that where the agreement is purely for renting/leasing of cold storage premises by one entity to another, the activity constitutes renting/leasing of immovable property and does not fall within the ambit of storage services. In terms of Schedule II para 5(a) read with Section 7, renting of immovable property is to be treated as supply of service. Such provision is classifiable under the relevant SAC for non residential property rental and is taxable under the residuary entry attracting GST at 18%. The Authority therefore treated leasing charges for cold storage premises as taxable service. [Paras 8, 9]

Leasing of cold storage premises for use is taxable at 18% as renting/leasing of immovable property.

Renting or leasing of immovable property treated as supply of service - residuary taxable entry for non-residential property rental attracting 18% GST - Tax treatment of cold storage leased on rent for storage with or without preservation and maintenance to private enterprises. - HELD THAT: - The Authority applied the same reasoning as for pure leasing arrangements: where the supply by way of lease/rent pertains to immovable property (cold storage), it is a supply of service under Schedule II and is taxable. Ancillary preservation and maintenance by the lessor does not convert the lease into an exempt storage service where the underlying agreement is for lease of premises; such rent remains taxable under the residuary entry at 18%. [Paras 8, 9]

Cold storage leased on rent to private enterprises (with or without preservation and maintenance) is taxable at 18%.

Supply of storage or warehousing services in relation to agricultural produce exempt - exemption entry for services relating to agricultural produce including storage and warehousing - Tax treatment of storage or warehousing of seeds/agricultural produce on behalf of farmers and traders. - HELD THAT: - The Authority referred to Sl. No. 54(e) of Notification No. 12/2017 CT (R) (as amended) which exempts supply of services of loading, unloading, packing, storage or warehousing of agricultural produce. The term 'agricultural produce' is defined in the notification; the exemption is service based and not person specific. Consequently, storage or warehousing services provided in relation to agricultural produce (as defined) are exempt from GST whether supplied for farmers or traders. [Paras 8, 9]

Storage or warehousing of seeds/agricultural produce on behalf of farmers and traders is exempt if it falls within the definition of 'agricultural produce' under the notification.

Final Conclusion: The Authority ruled that (i) leasing/renting of cold storage premises is a taxable supply treated as renting of immovable property and liable to GST at 18%, (ii) cold storage leased to private enterprises (even with preservation/maintenance) is taxable at 18%, and (iii) supply of storage or warehousing services in relation to agricultural produce (as defined in the notification) is exempt from GST.

Book profit under Section 115JB - deduction of brought forward loss and unabsorbed depreciation as per books of account - treatment of profits of Section 10A/STPI unit in computing book profit - limits on reassessment or re opening of entries in company books under Section 115JB - remand for fresh decision by the Tribunal where statutory provisions are misconstrued or claims not adjudicated

Book profit under Section 115JB - deduction of brought forward loss and unabsorbed depreciation as per books of account - Whether the deduction of brought forward loss or unabsorbed depreciation relating to non STPI units should be allowed in computing book profit under Section 115JB. - HELD THAT: - The Tribunal treated computation of net profit as governed solely by preparation of financial statements under the Companies Act and disallowed adjustment of brought forward loss/unabsorbed depreciation claimed by the assessee. The High Court found that the Tribunal misconstrued the relevant statutory scheme and did not address the assessee's claim arising under Section 10A; consequently the Tribunal's conclusion on the claimed deduction could not stand without fresh consideration. The Court therefore did not decide the substantive entitlement on merits but held that the matter requires adjudication afresh by the Tribunal in accordance with law. [Paras 8]

Quashed the Tribunal's decision on this point and remitted the matter to the Tribunal for fresh consideration.

Treatment of profits of Section 10A/STPI unit in computing book profit - limits on reassessment or re opening of entries in company books under Section 115JB - Whether past profits of the STPI/Section 10A unit ought to be excluded while computing brought forward loss or unabsorbed depreciation for the purpose of book profit under Section 115JB. - HELD THAT: - The Tribunal did not deal with the assessee's contention under Section 10A and proceeded to adjust past profits of the STPI unit against brought forward loss/unabsorbed depreciation. The High Court observed that because the Tribunal misconstrued the statute and omitted to consider the Section 10A claim, the question of how STPI/Section 10A unit profits affect the computation of brought forward losses and unabsorbed depreciation under Section 115JB must be examined afresh by the Tribunal. [Paras 8]

Matter remitted to the Tribunal for fresh decision on the effect of STPI/Section 10A unit profits on brought forward loss and unabsorbed depreciation while computing book profit.

Final Conclusion: The Income Tax Appellate Tribunal's order is quashed and the matter is remitted to the Tribunal for fresh adjudication in accordance with law on the claims concerning deduction of brought forward loss/unabsorbed depreciation and the treatment of STPI/Section 10A unit profits while computing book profit under Section 115JB for Assessment year 2005-06.

Registration under Section 12A of the Income Tax Act - deemed registration after six months - non compliance with statutory time limit for adjudication - registration under Section 12AA - benefit under Sections 11 and 12 not automatic - regular assessment to be completed subject to law of limitation - substantial questions rendered academic

Registration under Section 12A of the Income Tax Act - deemed registration after six months - non compliance with statutory time limit for adjudication - Effect of the delay in passing the order on the application for registration and the legal consequence for the assessee's registration status. - HELD THAT: - The application for registration under Section 12A was filed on 17.09.1999 but the order refusing registration was passed only on 31.10.2001, well beyond the six month period prescribed for deciding such applications. The court applied the principle that where the statutory time limit for passing an order on an application under Section 12A is not complied with, registration is deemed to have taken effect after six months from presentation of the application. The court noted that registration in favour of the assessee has in any event been granted by a subsequent order dated 03.06.2003, and therefore the substantive challenge to the tribunal's earlier order was rendered academic. [Paras 7]

Registration under Section 12A is deemed to have taken effect after six months from filing the application; since registration was subsequently granted, the substantial questions before the court are rendered academic.

Benefit under Sections 11 and 12 not automatic - regular assessment to be completed subject to law of limitation - Whether grant of registration ipso facto entitles the assessee to exemption benefits under Sections 11 and 12 and the consequence for pending or future assessments. - HELD THAT: - The court expressly observed that mere grant of registration under Section 12A/12AA does not automatically entitle the assessee to exemption under Sections 11 and 12. Any claim to those benefits must be tested in the course of regular assessment proceedings. The court further clarified that if any regular assessment is pending or initiated, it must be completed in accordance with law and subject to the applicable law of limitation. [Paras 7]

Grant of registration does not ipso facto confer exemptions under Sections 11 and 12; assessments may be carried out in accordance with law and limitation.

Final Conclusion: The appeal is disposed of as academic since registration either deemed after six months or already granted; however, registration does not automatically confer exemptions under Sections 11 and 12 and any regular assessment shall proceed in accordance with law and subject to limitation.

Tax holiday deduction under Section 80-1B(11C) - invocation of alternate minimum tax provisions under Section 115JC - principles of natural justice - promissory estoppel - useless formality / prejudice requirement in breach of natural justice - remand and reassessment following appellate direction

Invocation of alternate minimum tax provisions under Section 115JC - tax holiday deduction under Section 80-1B(11C) - remand and reassessment following appellate direction - Validity of invocation of Section 115JC in the assessment for 2017-2018 and its effect on claim for deduction under Section 80-1B(11C). - HELD THAT: - The Court held that Section 115JC (alternate minimum tax) is a special, notwithstanding provision which may be invoked where materials indicate transactions that are not genuine. The Assessing Officer, on scrutiny after search and on enquiry, found large purported purchases from M/s. Sowdambika Traders which were unsubstantiated, payments by demand draft not reflected in books, disowned by persons whose names appeared, admissions that cash was handed to the petitioner after commission, and substantial unexplained cash deposits during demonetisation. These materials justified invocation of Section 115JC and legitimately defeated the grant of the tax holiday where the claimed transactions appeared bogus. On that basis the Court concluded that the Assessing Officer's reliance on Section 115JC in the first instance was justified and applicable to the assessment for 2017-2018. [Paras 24, 25, 26, 27, 28]

Invocation of Section 115JC in the assessment for 2017-2018 was justified on the materials indicating bogus transactions, and the claim for tax holiday could not be allowed on that basis.

Principles of natural justice - promissory estoppel - useless formality / prejudice requirement in breach of natural justice - Whether the petitioner was denied principles of natural justice or entitled to rely on interim orders / promissory estoppel from earlier pending writs to prevent invocation of Section 115JC in the present assessment. - HELD THAT: - The Court found factual and procedural distinctions between the earlier matters (where only interim stay had been granted) and the present assessment; the interim order did not amount to a final adjudication binding on this matter. The petitioner had elected to approach the writ forum without exhausting the available statutory appellate remedy; the Court emphasised that an assessment challenged directly by writ when an appeal remedy exists weakens the petitioner's position. The Court applied the established nuance to natural justice: breach does not automatically require quashing where no prejudice is shown or where the 'useless formality' exception applies. Given the cogent materials of inauthentic transactions and unexplained cash, any alleged procedural deficiency did not produce de facto prejudice requiring interference. Promissory estoppel contentions were not the basis on which the interim order proceeded and were not upheld here. [Paras 21, 30, 31, 33, 34]

Allegations of violation of principles of natural justice and reliance on interim orders/promissory estoppel did not preclude invocation of Section 115JC; no interference was warranted.

Final Conclusion: The writ petition challenging the assessment for 2017-2018 was dismissed: the Assessing Officer was justified in invoking the alternate minimum tax provision on the available materials indicating bogus transactions, and the petitioner could not succeed on grounds of breach of natural justice or reliance on interim orders in related proceedings.

Condonation of delay in filing revised return - assessee's right to contest claim notwithstanding delay - processing of revised return by Assessing Officer in accordance with law - Board Circular dated 9-6-2015 - pendency of reference to larger Bench of the Supreme Court not a ground for refusing condonation

Condonation of delay in filing revised return - assessee's right to contest claim notwithstanding delay - Board Circular dated 9-6-2015 - The writ petition against rejection of application seeking condonation of delay in filing the revised return was allowed and the delay was condoned. - HELD THAT: - The Court found that the reasons for delay were set out in the assessee's statement dated 10-05-2016 (paragraphs 2.1 and 2.2) and were not considered on a question of law by the authority. The Single Judge's conclusion that the assessee could not seek condonation as a matter of right and that the authority's discretion was unimpeachable was interfered with. Having examined the explanation for the four-year delay and the way the Board's Circular was read by the Assessing Officer, the Court held that the assessee ought not to be non-suited merely on the ground of delay and that condonation should be granted so that the substantive claim can be adjudicated. [Paras 4, 5]

Delay in filing the revised return is condoned and the order rejecting condonation is set aside.

Processing of revised return by Assessing Officer in accordance with law - pendency of reference to larger Bench of the Supreme Court not a ground for refusing condonation - The Assessing Officer was directed to process and decide the revised return in accordance with law; no stay on processing was issued despite pending reference to a larger Bench. - HELD THAT: - Although counsel for the respondent relied on the pendency of the reference in the Micro Labs matter before a larger Bench, the Court declined to stay the Assessing Officer from processing the revised return. The Court held that it is appropriate that the Assessing Officer consider and decide the claim on merits in accordance with law and is free to pass such orders as deemed fit; the pendency of the Supreme Court reference does not automatically preclude processing of the revised return. [Paras 4, 5]

Assessing Officer to process the revised return and decide the claim in accordance with law; no stay on processing directed.

Final Conclusion: The Single Judge's order is set aside, the delay of four years in filing the revised return for assessment year 1997-98 is condoned, and the Assessing Officer is directed to process and decide the revised return in accordance with law without a stay.

Power of Assessing Officer under section 153A to disturb concluded assessments - incriminating material requirement for making additions in search assessments - finality of assessment and protection of unabated assessments - eligibility for deduction as developer under section 80IA(4) - distinction between developer and works contractor for claim of deduction - rule of consistency in tax proceedings (precedent of same Tribunal Bench)

Power of Assessing Officer under section 153A to disturb concluded assessments - incriminating material requirement for making additions in search assessments - finality of assessment and protection of unabated assessments - Whether assessments which stood concluded (unabated) as on date of search could be reopened under section 153A/143(3) and additions be made in absence of any incriminating material found during the search - HELD THAT: - The Tribunal held that where an assessment had attained finality (was unabated) on the date of search the Assessing Officer could not, in proceedings under section 153A read with section 143(3), disturb the findings or income determined earlier unless material unearthed in the course of the search or 153A proceedings established that the reliefs granted earlier were contrary to facts revealed during the search. The Act treats abated and unabated assessments differently; for unabated (concluded) assessments the legislature has not conferred a power to disturb the concluded assessment in absence of incriminating material. The Tribunal relied on precedent of coordinate High Courts and Tribunals which apply the principle that additions in search assessments must be founded on material collected during the search or requisition, and directed deletion of additions made for the concluded years where no incriminating material was found. [Paras 13, 14, 18]

Additions made in AYs 2005-06 and 2006-07 (which were unabated on date of search) are deleted insofar as they were not based on any incriminating material found during the search; corresponding appeals of the Revenue are dismissed and assessee's grounds allowed.

Eligibility for deduction as developer under section 80IA(4) - distinction between developer and works contractor for claim of deduction - rule of consistency in tax proceedings (precedent of same Tribunal Bench) - Whether the assessee was entitled to deduction under section 80IA(4) as a developer (and not merely as a works contractor) in respect of specified infrastructure projects for AYs 2008-09 and 2009-10 - HELD THAT: - The Tribunal examined the terms of the contracts, tender conditions and the nature of obligations undertaken by the assessee (planning, designing, financing, mobilising manpower and machinery, taking execution risk, providing guarantees and maintenance obligations, and handing over developed infrastructure to authorities). Applying precedents and the Tribunal's earlier findings in the assessee's own case for prior years, the Bench found that for the majority of projects the assessee acted as a developer and satisfied conditions of section 80IA(4), and therefore deduction was allowable. Exception was noted where the assessee executed work as a sub-lessee/sub-contractor (original contract sublet), in which case benefits of section 80IA(4) were not available. The Tribunal adhered to its prior view in the assessee's earlier year and invoked the principle of consistency applicable in tax proceedings where facts are identical. [Paras 23, 35, 36, 38]

For AY 2008-09 the Tribunal allowed deduction under section 80IA(4) for the projects examined (holding the assessee to be a developer) and dismissed Revenue's appeal; the claim was rejected insofar as the contract was on subletting basis. For AY 2009-10 the Tribunal applied the same approach and upheld the CIT(A)'s finding that the Bhavnagar contract (supply of machinery on hire) did not qualify for deduction, dismissing the assessee's ground on that contract while applying the developer finding to other projects.

Administrative time-limit for pronouncement of orders and exceptional extension due to pandemic - Whether pronouncement of the Tribunal's order beyond the 90-day period prescribed by the Tribunal Rules was permissible in view of the Covid-19 lockdown - HELD THAT: - The Tribunal noted the rule requiring pronouncement within 60 days (extendable ordinarily up to 90 days) and observed that the exceptional nationwide lockdown and judicial extensions justified exclusion of lockdown period for computation of the timeline. The Tribunal referred to a Mumbai Bench decision and higher court directions relating to extension of limitation during the pandemic and consequently proceeded to pronounce the order beyond the ordinary 90-day timeline. [Paras 49]

Order pronounced beyond 90 days was held justified by the exceptional circumstances of the Covid-19 pandemic.

Final Conclusion: The Tribunal (ITAT Rajkot) held that (a) concluded/unabated assessments as on date of search cannot be disturbed under section 153A/143(3) in absence of incriminating material-additions for AYs 2005-06 and 2006-07 were deleted and Revenue appeals dismissed; (b) on facts and precedent the assessee qualified as a developer for numerous projects and was entitled to deduction under section 80IA(4) for the years considered (subject to disallowance where work was sublet or where the contract did not amount to development, e.g., Bhavnagar), with Revenue appeals on those points dismissed; and (c) pronouncement beyond the ordinary 90-day period was justified by the Covid-19 lockdown.

Deduction under Section 10A/10AA - deduction under Chapter VI A on enhanced profits - disallowance under Section 40(a)(i) - reopening of assessment under Section 147/148 - taxability of payments to non resident associated enterprises

Deduction under Section 10A/10AA - deduction under Chapter VI A on enhanced profits - disallowance under Section 40(a)(i) - Whether deduction under Section 10A/10AA is allowable on business profits after enhancement by disallowance under Section 40(a)(i). - HELD THAT: - The Tribunal held that where disallowance under Section 40(a)(i) results in enhancement of business profits which are otherwise eligible for deduction under Section 10A/10AA (Chapter VI A), the deduction must be allowed on the enhanced profits. The conclusion follows the view taken by relevant High Courts and the Central Board of Direct Taxes (Circular No.37/2016) recognising that specific disallowances related to the eligible business activity increase the profits on which Chapter VI A deductions are to be computed. Given the undisputed genuineness and business nexus of the expenditure, the Tribunal accepted the alternate plea that the addition would merely increase the profits eligible for Section 10A/10AA and directed that deduction be allowed accordingly. [Paras 10, 11, 12, 13]

Deduction under Section 10A/10AA to be allowed on profits as enhanced by disallowance under Section 40(a)(i).

Reopening of assessment under Section 147/148 - taxability of payments to non resident associated enterprises - Validity of reassessment initiation under Section 147/148 and whether the payments to AEs are chargeable to tax in India. - HELD THAT: - The Tribunal did not adjudicate these issues on merits. It observed that, in light of dismissal of the revenue's appeal and the alternate relief allowing deduction on enhanced profits, the questions concerning validity of reopening and taxability of the payments are academic for the present assessment year and therefore left open. The assessee was afforded liberty to agitate the reopening point if circumstances warrant; the Tribunal expressly declined to decide the taxability question. [Paras 14, 15]

Validity of reopening and taxability of payments left open for future adjudication; not decided in this order.

Final Conclusion: Both appeals are dismissed. The Tribunal confirmed that deduction under Section 10A/10AA is admissible on profits increased by disallowance under Section 40(a)(i); questions on validity of reassessment and taxability of the payments to non resident AEs were left open without adjudication.

Order under section 263 of the Act - erroneous and prejudicial to the interest of revenue - application of mind by the Assessing Officer - inquiry during assessment and adequacy of enquiry - non-discussion in assessment order not indicative of lack of enquiry

Order under section 263 of the Act - erroneous and prejudicial to the interest of revenue - application of mind by the Assessing Officer - inquiry during assessment and adequacy of enquiry - non-discussion in assessment order not indicative of lack of enquiry - Validity of the Pr. CIT's exercise of revisional jurisdiction under section 263 to set aside the assessment dated 08.11.2016 on the ground that the Assessing Officer did not examine source of cash deposits of Rs. 29,40,000/- - HELD THAT: - The Tribunal found on the record that specific queries regarding cash deposits were raised by the Assessing Officer by notice under section 142(1), and the assessee furnished detailed replies, bank particulars, cash book entries and partners' capital accounts during assessment proceedings. The Assessing Officer examined those documents, was satisfied with the explanation that the deposits flowed from cash available from partnership receipts and applied his mind before framing the assessment. The mere absence of elaborate discussion of the inquiry in the body of the assessment order does not demonstrate lack of enquiry; established authorities hold that where enquiries were made and the AO was satisfied, invoking section 263 on the ground that the AO did not apply his mind is unjustified. Applying these principles to the facts - including the documentary evidence and the AO's satisfaction - the Tribunal concluded that the Pr. CIT erred in assuming jurisdiction under section 263 and that the assessment order was neither erroneous nor prejudicial to revenue. [Paras 8, 9, 10, 16]

Order passed by Pr. CIT under section 263 is quashed and the assessment order dated 08.11.2016 under section 143(3) is restored.

Final Conclusion: Appeal allowed; revisional order under section 263 set aside and original assessment under section 143(3) reinstated for AY 2014-15.

Disallowance under section 40A(2) for payment to related parties being excessive/unreasonable having regard to fair market value - principle of consistency and treatment of opening balance borrowed funds (treatment in earlier years) - disallowance under section 14A read with rule 8D for exempt income - presumption that investments are made out of own/interest-free funds where own funds exceed investments - application of clause (f) to Explanation 1 of section 115JB for disallowance relating to exempt income (and independence from section 14A computation) - adhoc 1% disallowance of exempt income for computing book profit under section 115JB where no mechanism is provided - disallowance under section 36(1)(va) for delay in deposit of employees' contributions - pronouncement of Tribunal order beyond 90 days due to exceptional COVID-19 circumstances

Disallowance under section 40A(2) for payment to related parties being excessive/unreasonable having regard to fair market value - principle of consistency and treatment of opening balance borrowed funds (treatment in earlier years) - Validity of disallowance of interest paid to related parties as excessive under section 40A(2) of the Act - HELD THAT: - The Tribunal held that the Assessing Officer could not make a disallowance under section 40A(2) without bringing cogent comparable material demonstrating the fair market rate of interest. Further, where monies were borrowed in earlier years and interest paid in those years was accepted in assessments, it would be inequitable for Revenue to take a contrary stance in a subsequent year; the opening balance treatment in past assessments precluded fresh disallowance for the same borrowed funds in the year under appeal. Applying these principles and relying on the rationale in CIT vs. Sridev Enterprise, the Tribunal set aside the disallowance and directed deletion of the addition made by the AO. [Paras 11, 12, 13, 14]

Disallowance under section 40A(2) on account of interest paid to related parties is set aside and the AO directed to delete the addition.

Disallowance under section 14A read with rule 8D for exempt income - presumption that investments are made out of own/interest-free funds where own funds exceed investments - Correctness of disallowance of interest expenses under section 14A r.w. r.8D in respect of exempt income - HELD THAT: - The Tribunal applied the established principle that if an assessee's own funds (capital, reserves and interest-free funds) are sufficient to meet tax-free investments, a presumption arises that investments were made from such interest-free funds and not from borrowed funds; accordingly, no disallowance under section 14A r.w. r.8D is warranted. On the facts the assessee's own funds exceeded its investments, and therefore the Tribunal reversed the authorities' disallowance of interest expenses. The Tribunal confirmed, however, that administrative expenses disallowed by the authorities could stand where no argument was pressed by the assessee. [Paras 22, 23, 24, 25, 26]

Disallowance of interest under section 14A r.w. r.8D deleted; administrative expenses disallowance confirmed.

Application of clause (f) to Explanation 1 of section 115JB for disallowance relating to exempt income (and independence from section 14A computation) - adhoc 1% disallowance of exempt income for computing book profit under section 115JB where no mechanism is provided - Whether disallowances computed under section 14A r.w. r.8D can be applied while determining book profit under section 115JB, and the manner of making disallowance under clause (f) to Explanation 1 of section 115JB - HELD THAT: - The Tribunal held that computation under section 14A r.w. r.8D cannot be transposed into the computation of book profit under section 115JB; clause (f) to Explanation 1 of section 115JB requires an independent determination of disallowance relating to exempt income. Noting absence of any statutory mechanism to compute such disallowance under clause (f), and to avoid multiplicity of proceedings, the Tribunal directed an adhoc disallowance of 1% of the exempt income for MAT computation, subject to it not exceeding the disallowance already determined under section 14A r.w. r.8D by the authorities. [Paras 31, 33, 36, 38]

Disallowance under section 14A r.w. r.8D shall not be applied for section 115JB; AO directed to make an adhoc disallowance of 1% of exempt income under clause (f) to Explanation 1 of section 115JB (capped as directed).

Disallowance under section 36(1)(va) for delay in deposit of employees' contributions - Whether amounts representing employees' contributions to PF/ESI, deposited after the due date, are allowable deductions under section 36(1)(va) - HELD THAT: - The assessee conceded that delayed deposit of employees' statutory contributions is not eligible for deduction. The Tribunal relied on the Gujarat High Court decision in CIT vs. GSRTC and upheld the position that employees' contributions not credited to the relevant funds by the specified due date are not deductible under section 36(1)(va). [Paras 39, 40, 41]

Disallowance under section 36(1)(va) for delayed deposit of employees' contributions confirmed and the ground of appeal dismissed.

Pronouncement of Tribunal order beyond 90 days due to exceptional COVID-19 circumstances - Validity of pronouncing the Tribunal order beyond the 90-day period prescribed by rule 34 of the Appellate Tribunal Rules in light of COVID-19 lockdown - HELD THAT: - The Tribunal noted exceptional disruptions caused by the COVID-19 lockdown and followed the pragmatic approach adopted by other benches and courts to exclude lockdown period when computing the 90-day limit for pronouncement of orders. Having considered the exceptional circumstances, the Tribunal proceeded to pronounce the order beyond the ordinary 90-day period. [Paras 42]

Pronouncement of the order beyond 90 days is justified on exceptional COVID-19 grounds and the order was pronounced as on the date recorded.

Final Conclusion: The appeal is partly allowed: the disallowance of interest to related parties under section 40A(2) is set aside; interest disallowance under section 14A r.w. r.8D is deleted (administrative expenses disallowance confirmed); for MAT under section 115JB an adhoc disallowance of 1% of exempt income is directed (subject to cap); the disallowance under section 36(1)(va) for delayed employees' contributions is upheld; the Tribunal's pronouncement beyond the 90-day rule is justified by exceptional COVID-19 circumstances.

Application of section 50C valuation - unexplained cash credit under section 68 - onus under section 68 to prove identity, genuineness and creditworthiness - treatment of agricultural income as income from other sources - admission of additional evidence by appellate authority pending remand report - pronouncement time limit under rule 34 of the Appellate Tribunal Rules and COVID 19 extension

Application of section 50C valuation - Deletion of addition by AO treating sale of land (power of attorney) as short term capital gain by applying stamp duty value under section 50C - HELD THAT: - The Tribunal accepted the finding of the CIT(A) that the assessee was only a general power of attorney holder, the impugned sale deed stood cancelled and the land was never transferred; there was no documentary evidence that the assessee received consideration. The AO had not obtained independent DVO valuation despite divergence between sale deed and stamp valuation and estimated purchase consideration on an arbitrary basis. In view of those findings and absence of contrary material, the Tribunal confirmed deletion of the addition made under section 50C. [Paras 13, 16, 17]

Addition on account of short term capital gain under section 50C deleted; Revenue's ground dismissed.

Unexplained cash credit under section 68 - Deletion of addition of alleged unexplained loan of Rs. 23,72,127 treated as cash credit under section 68 (share sale proceeds) - HELD THAT: - The assessee furnished notarised share transfer agreement, confirmations, PAN, bank statements and ITR of the counter parties and supporting ledger entries showing the transactions as sale consideration for shares. The CIT(A) found full particulars of creditors on record and that the entries were not liable to be treated as unexplained cash credits. The Tribunal found no contrary material placed by Revenue and confirmed the CIT(A)'s conclusion accepting the evidentiary documents as discharging the assessee's onus. [Paras 23, 26, 27]

Addition under section 68 in respect of the alleged loan of Rs. 23,72,127 deleted; Revenue's ground dismissed.

Unexplained cash credit under section 68 - onus under section 68 to prove identity, genuineness and creditworthiness - Deletion of addition of alleged unexplained investment/advance of Rs. 15,64,00,000 treated as cash credit under section 68 (investment in Yuva Sports Academy Pvt. Ltd.) - HELD THAT: - The assessee produced confirmations, PANs, bank statements and ITRs of the parties who advanced the funds and evidence of repayments in subsequent periods. The CIT(A) relying on precedent held that once the assessee identifies creditors, produces confirmations and banking evidence, the onus is discharged and AO cannot be required to trace the 'source of source'. The Tribunal concurred, observing genuineness and creditworthiness were established and repayments accepted by Revenue, hence the addition under section 68 could not be sustained. [Paras 34, 37, 42, 43, 45]

Addition under section 68 in respect of the alleged investment/advance deleted; Revenue's ground dismissed.

Treatment of agricultural income as income from other sources - Deletion of addition treating declared agricultural income as income from other sources - HELD THAT: - Although the assessee did not produce contemporaneous sale bills, the assessee had consistently shown agricultural income in earlier years which had been accepted by Revenue; affidavit of the cultivator confirming agricultural activity and confirmations by departmental inspector regarding existence of mango trees were on record and not controverted by Revenue. On totality of facts and absence of adverse material, the Tribunal found no reason to interfere with CIT(A)'s deletion of the addition. [Paras 51, 52, 53]

Addition treating agricultural income as income from other sources deleted; Revenue's ground dismissed.

Admission of additional evidence by appellate authority pending remand report - Validity of CIT(A)'s admission of additional evidence before receipt of remand report from AO - HELD THAT: - The record showed that additional evidence filed by the assessee on a specified date was considered by the CIT(A) and that a remand report was subsequently received from the AO; the Revenue did not produce material to demonstrate that the CIT(A) passed order without considering the remand report. On that basis the Tribunal found no merit in the Revenue's challenge to admission of additional evidence. [Paras 54, 55]

CIT(A)'s admission of additional evidence upheld; Revenue's ground dismissed.

Final Conclusion: All grounds of the Revenue's appeal against the CIT(A)'s order for A.Y. 2011-12 were dismissed by the Tribunal: additions under section 50C and section 68 were deleted, agricultural income was accepted as such, and the CIT(A)'s admission of additional evidence was upheld; the appeal is dismissed.

Penalty under section 271(1)(c) - furnishing inaccurate particulars of income - concealment of particulars of income - penalty notice under section 274 - revised computation during assessment proceedings - mens rea / deliberate act or omission - necessity of a positive finding for levy of penalty - addition in assessment not automatically justifying penalty

Penalty notice under section 274 - necessity of a positive finding for levy of penalty - penalty under section 271(1)(c) - Whether ambiguity in the penalty notice (as to whether penalty is for concealment or for furnishing inaccurate particulars) vitiates the penalty proceedings. - HELD THAT: - The Tribunal noted that the Assessing Officer in the final penalty order specifically held that the assessee had furnished inaccurate particulars of income. Thus the assessee cannot escape penal consequences merely because the original notice lacked express specificity; what matters is the clear charge in the final order. The decision referred to the principle that a positive finding is required when a notice uses conjunctive or disjunctive language, but found on the facts that the AO's final order did specify the charge as furnishing inaccurate particulars. Consequently the ambiguity in earlier communications did not render the penalty proceedings void in this case. [Paras 8]

Ambiguity in the earlier notice did not vitiate the penalty where the final penalty order clearly charged the assessee with furnishing inaccurate particulars of income.

Furnishing inaccurate particulars of income - mens rea / deliberate act or omission - revised computation during assessment proceedings - addition in assessment not automatically justifying penalty - Whether the assessee furnished inaccurate particulars of income with requisite deliberate or dishonest intent so as to attract penalty under section 271(1)(c). - HELD THAT: - The Tribunal applied the settled meaning of 'inaccurate particulars' as involving a deliberate act or omission. On the facts the assessee had claimed deduction under section 54F for investments in two properties; the fact of purchase of both properties was not disputed. The assessee, on receipt of notice under section 142(1), revised the computation to reduce the claimed deduction and paid the tax due. Revenue produced no material to demonstrate that the assessee deliberately furnished inaccurate particulars. The Tribunal emphasised that additions in quantum proceedings do not automatically equate to conscious concealment or furnishing inaccurate particulars; there must be material or circumstances from which a deliberate concealment or dishonest intent can reasonably be inferred. Absent such material, the penalty could not be sustained. [Paras 8]

On the facts there was no proof of deliberate or dishonest furnishing of inaccurate particulars; penalty under section 271(1)(c) is not sustainable and is to be deleted.

Final Conclusion: The assessee's appeal is allowed for Assessment Year 2013-2014: the penalty under section 271(1)(c) is deleted because the Revenue failed to demonstrate deliberate or dishonest furnishing of inaccurate particulars, and ambiguity in earlier notice did not vitiate proceedings where the final penalty order specified the charge.

Deduction of bad debts under section 36(1)(viia) - condition of prior taxation under section 36(2) - burden of proof on the assessee to show prior inclusion - circumstantial evidence and the test of human probabilities - classification as sundry debtors in audited accounts as evidential support - alternative claim as business loss under section 37(1) - remand for fresh adjudication on the agricultural character of land - onus on assessee to prove agricultural land within meaning of section 2(14)

Deduction of bad debts under section 36(1)(viia) - condition of prior taxation under section 36(2) - burden of proof on the assessee to show prior inclusion - circumstantial evidence and the test of human probabilities - classification as sundry debtors in audited accounts as evidential support - Allowability of bad debt disallowance of Rs. 6,75,359/- (claimed for F.Y. 1999-2000 & 2000-2001) in assessment year 2012-13. - HELD THAT: - The Tribunal held that while the onus to prove prior inclusion of the debt as income in earlier years lies on the assessee, absence of direct ledger copies did not preclude relief where audited balance sheets consistently classified the amounts as sundry debtors in the relevant earlier years. Applying the principle of circumstantial evidence and the test of human probabilities as explained in Sumati Dayal v. CIT, the Tribunal found prima facie cogent circumstantial material (audited accounts showing the amounts as debtors and their appearance in earlier assessment years' records accepted by revenue) to conclude that the impugned debts were offered to tax in the earlier years. The Tribunal therefore found the statutory condition in section 36(2) to be satisfied on the available evidence and allowed the deduction under section 36(1)(viia). The alternative contention under section 37(1) was considered but the primary conclusion on section 36 was dispositive. [Paras 7]

Disallowance confirmed by lower authorities set aside; deduction of the impugned bad debt allowed.

Deduction of bad debts under section 36(1)(viia) - condition of prior taxation under section 36(2) - burden of proof on the assessee to show prior inclusion - circumstantial evidence and the test of human probabilities - Allowability of bad debt disallowance of Rs. 6,59,939/- in assessment year 2013-14 by following the decision in the co-pending appeal. - HELD THAT: - The Tribunal applied the reasoning recorded in the decision for assessment year 2012-13 (paras. 7 et seq.) to the identical factual and legal contention raised in respect of AY 2013-14. Having found the earlier analysis determinative, the Tribunal respectfully followed that finding and allowed the claim of bad debt in this year as well. [Paras 8, 9]

Disallowance set aside; deduction allowed, following the reasoning in ITA No.1909/Ahd/2018.

Remand for fresh adjudication on the agricultural character of land - onus on assessee to prove agricultural land within meaning of section 2(14) - Additional ground in AY 2013-14 contesting characterization of land as agricultural was admitted and remanded to the Assessing Officer for fresh adjudication. - HELD THAT: - The Tribunal admitted the additional legal ground at the appellate stage (citing the principle that legal grounds can be admitted at any stage). Noting that necessary details and findings on the agricultural character were not available in the record before the Tribunal, and that the assessee bears the onus of proving that the land falls within the statutory definition, the Tribunal restored the matter to the file of the AO for fresh consideration in accordance with law. [Paras 10, 11, 12]

Issue restored to the Assessing Officer for fresh adjudication; appeal partly allowed for statistical purposes.

Deduction of bad debts under section 36(1)(viia) - condition of prior taxation under section 36(2) - circumstantial evidence and the test of human probabilities - Allowability of bad debt disallowance of Rs. 4,13,212/- in assessment year 2014-15. - HELD THAT: - The Tribunal applied the same reasoning as in AY 2012-13 (paras. 7 et seq.) to the identical contention in AY 2014-15. Finding the factual matrix and legal tests similar, the Tribunal allowed the claim of bad debt in this assessment year as well. [Paras 14, 15]

Disallowance set aside; deduction allowed, following the reasoning in ITA No.1909/Ahd/2018.

Final Conclusion: The Tribunal allowed the appeals in ITA Nos.1909/Ahd/2018 (AY 2012-13) and 1911/Ahd/2018 (AY 2014-15) by permitting the claimed bad debt deductions on the basis of circumstantial evidence in audited accounts and the Sumati Dayal principle; ITA No.1910/Ahd/2018 (AY 2013-14) was allowed in part - the bad debt issue was allowed following the same reasoning, while the additional contention regarding agricultural character of the land was admitted and remanded to the Assessing Officer for fresh adjudication.

Penalty under section 271(1)(c) - inaccurate particulars of income - mens rea / dishonest intent - deemed income under section 45(3) - onus on Revenue to prove real income for deemed additions

Penalty under section 271(1)(c) - inaccurate particulars of income - mens rea / dishonest intent - Whether penalty under section 271(1)(c) is leviable where the assessee filed a revised computation and paid tax before detection by the AO, in respect of capital gain and excess interest claimed. - HELD THAT: - The Tribunal found on the record that the assessee filed a revised computation and discharged tax by challan dated 31.12.2015, prior to issuance of the relevant notices and prior to detection of the additions in assessment proceedings (para 16). Applying the principle that 'inaccurate particulars' under section 271(1)(c) presupposes a deliberate act or omission and requires dishonest intent as explained in Reliance Petroproducts (paras reproduced at para 17), the Tribunal held that the facts did not establish any dishonest concealment. Because the assessee voluntarily revised the return and paid tax before detection, the particulars could not be treated as furnished with dishonest intent and penalty was not attracted (para 18). [Paras 16, 17, 18]

Penalty under section 271(1)(c) cannot be levied on the facts; the assessee did not furnish inaccurate particulars with dishonest intent and the penalty is not sustainable.

Deemed income under section 45(3) - onus on Revenue to prove real income for deemed additions - Whether an addition made as 'deemed income' under section 45(3) automatically attracts penalty under section 271(1)(c). - HELD THAT: - The Tribunal observed that additions characterized as 'deemed income' under section 45(3) do not ipso facto attract penalty; the Revenue carries the burden to prove that such deemed income represents the assessee's real income before invoking penalty provisions (para 19). Relying on the reasoning in CIT v. Baroda Tin Works Box (as cited), the Tribunal held that deemed income provisions create a legal fiction for charging tax but do not relieve the department of proving the real income when seeking to impose penalty. On the facts, this requirement was not satisfied and therefore penalty could not be sustained on the basis of the deemed addition (paras 19-20). [Paras 19, 20]

Deemed income under section 45(3) does not automatically attract penalty; Revenue must prove such income is the assessee's real income, and on the present facts penalty is not justified.

Final Conclusion: The Tribunal allowed the assessee's appeal for A.Y. 2014-15, set aside the confirmation of penalty under section 271(1)(c) and directed the Assessing Officer to delete the penalty.

Deemed transfer under section 2(47)(v) of the Income-tax Act as part-performance under section 53A of the Transfer of Property Act - penalty under section 271(1)(c) of the Income-tax Act - inaccurate particulars requiring deliberate/ dishonest intent - bona fide omission as defence to penalty

Deemed transfer under section 2(47)(v) of the Income-tax Act as part-performance under section 53A of the Transfer of Property Act - The transfer of the land to the developer occurred in assessment year 2012-13 and the income arising therefrom was chargeable to tax in assessment year 2012-13. - HELD THAT: - The Bench examined the ingredients of section 2(47)(v) and the conditions necessary for part performance under section 53A as expounded in Nathulal v. Phoolchand. The agreement dated 10th February 2012, handing over of possession to the developer and acts in furtherance of the contract satisfy the conditions of section 53A. On that basis the Tribunal held that the transfer took place in assessment year 2012-13 and therefore the capital gain was chargeable to tax in that year rather than in the year in which part consideration was received. [Paras 11, 12, 13, 14]

Transfer occurred in assessment year 2012-13 and the capital gain was taxable in assessment year 2012-13.

Penalty under section 271(1)(c) of the Income-tax Act - inaccurate particulars requiring deliberate/ dishonest intent - bona fide omission as defence to penalty - No penalty under section 271(1)(c) can be sustained for the year under consideration because the assessee did not deliberately furnish inaccurate particulars and the income was not chargeable in that year. - HELD THAT: - The Tribunal noted that penalty under section 271(1)(c) presupposes either concealment of income or furnishing of inaccurate particulars, which, as construed by the Supreme Court in Reliance Petroproducts, involves a deliberate or dishonest act. The assessee's explanation that the capital gain was omitted under a bona fide belief that it would be taxable only on project completion was not disbelieved by the authorities below. Further, the Tribunal held that where the income was not chargeable to tax in the year under consideration (being chargeable in 2012-13), mere inclusion of that income during assessment proceedings does not justify levy of penalty. Applying the legal test of mens rea and the factual record, the Tribunal concluded that there was no deliberate concealment or inaccurate furnishing warranting penalty. [Paras 15, 16, 17, 18]

Penalty under section 271(1)(c) deleted; finding of deliberate furnishing of inaccurate particulars set aside and appeal allowed.

Final Conclusion: The Tribunal held that the land transfer was a deemed transfer in assessment year 2012-13 (thus the capital gain was taxable in 2012-13) and, applying the requirement of deliberate inaccuracy for levy of penalty, set aside the penalty under section 271(1)(c) and allowed the assessee's appeal.

Power to revise assessment under section 263 for orders erroneous and prejudicial to the interest of revenue - treatment of government subsidy as capital receipt under Explanation 10 to section 43(1) - requirement of Assessing Officer's application of mind and prior examination of relevant material - precedential effect of a jurisdictional High Court decision on revenue action

Power to revise assessment under section 263 for orders erroneous and prejudicial to the interest of revenue - requirement of Assessing Officer's application of mind and prior examination of relevant material - Whether the Pr. Commissioner of Income Tax rightly exercised jurisdiction under section 263 in setting aside the assessment order for A.Y. 2014-15. - HELD THAT: - The Tribunal held that the Assessing Officer had in fact noticed, examined and formed a view on the subsidy receipts under the Rajasthan Investment Promotion Scheme (RIPS 2010) in earlier and the impugned assessment years. The record shows specific show-cause entries, written submissions by the assessee and that the AO accepted the view of the assessee in earlier years (treating the RIPS subsidy as capital receipt) and continued the consistent treatment in A.Y. 2014-15 after issuing notices and test-checking books. Silence of the assessment order on detailed discussion did not demonstrate lack of application of mind where the AO had considered the matter on record. In these circumstances the prerequisite for exercise of revisional power under section 263 - namely, that the AO's order is without application of mind or is otherwise erroneous and prejudicial to revenue - was not satisfied. The Pr. CIT's conclusion that the AO had not examined the nature and use of the subsidy was therefore not borne out by the material available to the revenue when section 263 was invoked, and the exercise of power was held to be unjustified. [Paras 7, 11]

Pr. CIT's exercise of jurisdiction under section 263 was incorrect and the order passed under section 263 is set aside; the AO's assessment order under section 143(3) is sustained.

Treatment of government subsidy as capital receipt under Explanation 10 to section 43(1) - precedential effect of a jurisdictional High Court decision on revenue action - Whether the AO could lawfully follow the jurisdictional High Court decision treating the RIPS subsidy as capital receipt, and whether that justified not treating the subsidy as taxable for the impugned year. - HELD THAT: - The Tribunal noted that the AO consistently followed the view of the Hon'ble Rajasthan High Court (Shree Cement Ltd.) in treating the RIPS subsidy as capital receipt and that there was nothing on record to show that the High Court decision had been set aside or was subject to appeal to the Supreme Court at the time the AO passed the assessment. Reliance on the principle that where a jurisdictional High Court decision is operative, an AO acting in conformity with that decision cannot be faulted, the Tribunal referred to the Supreme Court's enunciation that the revisional power under section 263 must be exercised on the basis of material available at the time and cannot disregard an existing binding High Court ruling. In absence of a contrary change in law or facts, the AO's adherence to the jurisdictional High Court precedent rendered his non-taxation of the subsidy not erroneous. [Paras 8, 9]

The AO's reliance on the jurisdictional High Court decision in treating the subsidy as capital receipt was lawful and provided no basis for invoking section 263.

Final Conclusion: The Tribunal allowed the assessee's appeal, set aside the Pr. CIT's order passed under section 263 and sustained the assessment order under section 143(3) for A.Y. 2014-15 on the ground that the AO had applied his mind and followed the binding jurisdictional High Court precedent in treating the subsidy as a capital receipt.

Unexplained cash deposits - authenticity of books of account / cash book verification - remand for verification of records - admissibility of cost of improvement - exemption under section 54F - ownership test for exclusion under proviso (a) to section 54F - purchase of new asset within statutory period and proviso (a)(ii)

Unexplained cash deposits - authenticity of books of account / cash book verification - remand for verification of records - Whether addition on account of cash deposits of Rs.13,10,000/- should be sustained or whether matter should be remanded for verification of the cash book abstract. - HELD THAT: - The assessee produced an abstract of the cash book for November 2009 showing an opening cash balance and cash sales for the month substantially exceeding the bank deposits in question. If the abstract for November 2009 accords with the regular books of account maintained by the assessee, the deposits can be presumed to arise from cash sales and no addition is justified. The authenticity of the abstract was challenged; accordingly the Tribunal set aside the addition and remitted the matter to the Assessing Officer to examine the cash book abstract against the regular books, directing that if it accords no addition should be made, otherwise the AO may proceed according to law. [Paras 4]

Addition set aside and matter remitted to the AO for verification of the cash book abstract; if verified no addition to be made, otherwise AO to act as per law.

Admissibility of cost of improvement - Whether the claimed cost of improvement of Rs.10,75,920/- is allowable in computing capital gain on sale of the shop. - HELD THAT: - The assessee produced a bill from M/s S.S. Rathi Developers and the ledger/contract receipts of that party show receipt of the claimed amount from the assessee, which has been reflected in that party's profit and loss account and return. Given the bill and corroboration that the recipient treated the amount as income, the Tribunal found no reason to sustain the disallowance made for want of proof of payment or improvement. The disallowance was therefore overturned pro tanto and the claim allowed. [Paras 7]

Disallowance of cost of improvement reversed and the claimed cost allowed.

Exemption under section 54F - ownership test for exclusion under proviso (a) to section 54F - purchase of new asset within statutory period and proviso (a)(ii) - Whether the assessee was entitled to exemption under section 54F in respect of long term capital gain on sale of agricultural land, having regard to ownership of other residential houses and purchases within the relevant periods. - HELD THAT: - The agricultural land was transferred during FY 2009-10. The assessee purchased a flat on 08-03-2010 but sold it after the year end; no exemption was claimed in respect of that short held property. The new asset in respect of which exemption was claimed was purchased on 28-09-2010. Proviso (a)(ii) (disallowing exemption if any other residential house, other than the new asset, is purchased within one year after the transfer) was inapplicable because the only relevant new asset was that of 28-09-2010 and no other purchase within one year was pleaded. As to proviso (a)(i) (disallowing exemption where the assessee owns more than one residential house, other than the new asset, on the date of transfer), the balance sheet as on 31-03-2010 showed only the Salisbury Park flat as owned on the date of transfer; the Rathi Niwas address was held to belong to the assessee's father (supported by house tax entries) and thus was not an asset of the assessee. On these findings the Tribunal held that neither limb of the proviso operated to deny the exemption and allowed the claim under section 54F. [Paras 10, 11, 12]

Exemption under section 54F allowed; the proviso to section 54F relied upon by the authorities is inapplicable on the facts.

Final Conclusion: The appeal is partly allowed: additions in respect of cost of improvement and the exemption under section 54F are set aside in favour of the assessee; the addition for cash deposits is set aside and remitted to the Assessing Officer for verification of the cash book abstract, with directions as stated by the Tribunal.

Violation of Regulation 11(d) of CBLR 2013 - Violation of Regulation 11(n) of CBLR 2013 - Verification of IEC and antecedents (KYC) by customs broker - Requirement of physical verification of client premises - Lending of IEC not an offence under the Customs Act, 1962 - Mandatory nature of time limit under Regulation 17(7) of CBLR 2018 - Setting aside revocation of customs broker licence, forfeiture of security and penalty

Violation of Regulation 11(d) of CBLR 2013 - Lending of IEC not an offence under the Customs Act, 1962 - Verification of IEC and antecedents (KYC) by customs broker - Whether the appellant violated Regulations 11(d) and 11(n) of CBLR 2013 by not interacting with IEC holders, failing to verify antecedents and by not informing the Department about alleged lending of IECs. - HELD THAT: - The Tribunal found the Commissioner's factual finding - that the customs broker did not directly interact with the IEC holders - to be incorrect in view of the statement of the G card holder and power of attorney, which recorded interaction with the IEC holders. The record contains copies of PAN, Aadhaar, GST registration and IEC certificates for the exporters, and the Tribunal accepted that such documentary KYC conforms to the verification required under Regulation 11(n). The Tribunal held that physical inspection of the premises is not mandated by the Regulation or by Board Circular No.9/2010 Cus. There is no material on record to show that the appellant had knowledge of lending of IECs such that it was obliged to inform the Department, and lending of IECs itself is not an offence under the Customs Act, 1962 as reflected in authorities relied upon. Applying the principle that mere mis declaration by an importer/exporter does not, without evidence of broker's mala fides or connivance, establish a breach of due diligence, the Tribunal concluded the charges under Regulations 11(d) and 11(n) were not made out. [Paras 6]

Findings of violation of Regulations 11(d) and 11(n) not sustained; documentary KYC adequate and no evidence of knowledge of lending of IECs or collusion.

Mandatory nature of time limit under Regulation 17(7) of CBLR 2018 - Whether the Commissioner complied with the time limit prescribed under Regulation 17(7) of CBLR 2018 for passing the final order after receipt of the inquiry report, and the consequence of non compliance. - HELD THAT: - The Inquiry Report bears date 15/07/2019. Even accepting submission that the report was submitted on that date, the Commissioner's final order was passed after the 90 day period prescribed by Regulation 17(7). The Tribunal invoked precedents holding that the time limit in Regulation 17(7) is mandatory, not directory, and concluded that the Commissioner's failure to pass the order within the statutory period rendered the impugned order liable to be set aside on account of non compliance with the Regulation. [Paras 6]

Impugned order set aside for violation of Regulation 17(7) of CBLR 2018.

Setting aside revocation of customs broker licence, forfeiture of security and penalty - Whether the impugned order revoking the broker licence, forfeiting the security deposit and imposing penalty should be sustained. - HELD THAT: - Having held that the substantive charges under Regulations 11(d) and 11(n) were not established on the record and that the statutory time limit under Regulation 17(7) was breached, the Tribunal proceeded to set aside the impugned order. The Tribunal considered both the merits (absence of evidence of breach and adequacy of documentary KYC) and the procedural lapse (delay in passing the order) in reaching its conclusion. [Paras 7]

Impugned order revoking licence, forfeiting security and imposing penalty is set aside; appeal allowed.

Final Conclusion: The Tribunal set aside the Commissioner's order of revocation, forfeiture and penalty: the charges under Regulations 11(d) and 11(n) were not established on the record (documentary KYC sufficed and no evidence of knowledge of lending of IECs or broker's connivance), and the Commissioner failed to comply with the mandatory 90 day period under Regulation 17(7) of CBLR 2018; the appeal is allowed.

Applicability of Section 4A for valuation of medicaments sold as physician samples - valuation under Section 4 (transaction value) for clearances to brand owner/industrial purchaser - distinction between physician samples sold for consideration and free-of-cost samples

Applicability of Section 4A for valuation of medicaments sold as physician samples - valuation under Section 4 (transaction value) for clearances to brand owner/industrial purchaser - distinction between physician samples sold for consideration and free-of-cost samples - Physician samples cleared by the manufacturer to the brand owner are to be valued under Section 4 (transaction value) and not under Section 4A where the sales are to industrial/brand-owner purchasers and price is the sole consideration. - HELD THAT: - The Tribunal found the question no longer res integra and relied upon prevailing judicial precedents including the Apex Court decision cited by the assessee. The determinative facts are that the appellant-manufacturer sold physician samples to its brand owner/principal manufacturers and received consideration as per written agreements; the clearances were to industrial consumers (the brand owner) and not to retail consumers. On that basis, the special valuation rule in Section 4A, which applies with reference to MRP on packs for retail-type disposals, is not attracted. Where physician samples are cleared for consideration to distributors/brand owners, the assessable value is the transaction value under Section 4(1)(a) (the price actually paid or payable) rather than a pro rata of MRP under Section 4A. The Tribunal therefore accepted the assessee's contention and rejected the revenue's reliance on authorities applicable to free-of-cost clearances or different fact patterns, holding that Section 4A does not apply on the facts of these appeals. [Paras 5, 6]

Appeals allowed for the assessee and dismissed for the revenue: physician samples are valued under Section 4 (transaction value) and not under Section 4A on the facts before the Tribunal.

Final Conclusion: The revenue appeal (E/2451/2012) is dismissed and the assessee's appeal (E/20955/2014) is allowed; physician samples cleared to the brand owner are to be assessed on transaction value under Section 4, not under Section 4A, with consequential relief as per law.