TaxTMI Updates e-Newsletter
Jun 12,2019

Exemption under Sl No. 3A of Notification No. 9/2017 - Integrated Tax (Rate) - pure service and composite supply with goods not exceeding 25% of value - activity in relation to a function entrusted to a Panchayat under Article 243G of the Constitution - supply to State Government as recipient - continuity of scope from service-tax exemption to GST exemptions - Eleventh Schedule, item 5: minor irrigation, water management and watershed development

Pure service and composite supply with goods not exceeding 25% of value - Whether the Applicant's contract is a pure service or a composite supply in which the value of goods does not exceed 25% of the value of the supply. - HELD THAT: - The Bench examined the contract particulars and price schedule and found that the works comprise pumping out water, excavation and re-excavation of drainage channels, lifting and deposit of excavated materials, and compacting earthwork. Although materials are supplied in the course of compacting, the cost of supplied goods is not a significant portion of the contract value. The Bench recorded that supply of goods constitutes only 2% of the value of the contract, and accordingly the supply is a composite supply primarily of services with the goods component well below the 25% threshold in Sl No. 3A of the Exemption Notification. [Paras 4]

The supply qualifies as a composite supply predominantly of services where the goods component is below 25% and thus meets the condition in Sl No. 3A.

Supply to State Government as recipient - Whether the recipient of the supply is a government, local authority, governmental authority or government entity for purposes of the exemption. - HELD THAT: - The Bench noted the recipient is the Irrigation and Waterways Directorate, Government of West Bengal, and accordingly is a State Government entity. The admission and factual record confirmed the contract was awarded by the recipient department of the State Government. [Paras 1, 4]

The recipient is a State Government entity and thus satisfies the recipient condition of Sl No. 3/3A.

Activity in relation to a function entrusted to a Panchayat under Article 243G of the Constitution - Eleventh Schedule, item 5: minor irrigation, water management and watershed development - continuity of scope from service-tax exemption to GST exemptions - Whether the resuscitation of the river by re-excavation relates to a function entrusted to a Panchayat under Article 243G (Eleventh Schedule item 5) and thereby falls within the exemption. - HELD THAT: - Relying on the explanatory Circular and comparison with the earlier service-tax exemption scheme, the Bench held that the phrase 'in relation to any function' under Sl Nos. 3 and 3A bears similar application as the earlier service-tax provision. The Eleventh Schedule includes 'minor irrigation, water management and watershed development' at item 5. The Bench found that resuscitation of the river, which revives water flow and is undertaken by the State department responsible for irrigation and waterways, is relatable to the function listed in item 5 and thus is an activity in relation to a function entrusted to Panchayats under Article 243G for purposes of the exemption. [Paras 4]

The resuscitation work relates to a function in the Eleventh Schedule (item 5) entrusted to Panchayats and therefore falls within the scope of Sl No. 3A when other conditions are satisfied.

Final Conclusion: The supply by M/s. Neo Built Corporation to the Irrigation and Waterways Directorate, Government of West Bengal, being a composite supply predominantly of services with goods comprising well below 25% of the value, and being in relation to a function relatable to Eleventh Schedule item 5 (minor irrigation/water management) entrusted under Article 243G, is exempt from GST under Sl No. 3A of Notification No. 9/2017 - Integrated Tax (Rate).

Admissibility of input tax credit on purchase of motor vehicles - Distinction between passenger transportation service (SAC 9964) and renting/hiring of motor vehicles (SAC 9966) - Classification of supply by essential character of service for GST treatment - Restriction on credit for supply of renting or hiring of motor vehicles under section 17(5)(b)(i) of the GST Act (post amendment) - Effect of amendment effective 01/02/2019 on availability of input tax credit

Admissibility of input tax credit on purchase of motor vehicles - Distinction between passenger transportation service (SAC 9964) and renting/hiring of motor vehicles (SAC 9966) - Restriction on credit for supply of renting or hiring of motor vehicles under section 17(5)(b)(i) of the GST Act (post amendment) - Input tax credit on GST paid for purchase of motor vehicles used to supply the applicant's rent a cab service is not admissible. - HELD THAT: - The Authority examined whether the applicant's rent a cab service falls within passenger transportation (SAC 9964) or renting/hiring of motor vehicles (SAC 9966). Passenger transportation is characterised by the recipient being carried as a passenger and payment being for distance travelled. Renting or hiring is characterised by granting the right to use the vehicle for a specified duration, with consideration based on time (and optionally fuel/distance beyond a threshold). The applicant's invoices and service model-fixed monthly charges for hours, extra charges for requisition or additional hours, and cost plus distance adjustments beyond thresholds for fuel-demonstrate that the service's essential character is renting/hiring (SAC 9966), often provided to institutional recipients who are not passengers. Pre amendment rules (prior to 01/02/2019) excluded credit in specified cases; post amendment, section 17(5)(b)(i) disallows input tax credit in respect of renting or hiring of motor vehicles unless inward and outward supplies are of the same category as specified. Applying this legal framework to the applicant's factual model, the Authority concluded that the outward supply is renting/hiring of motor vehicles and therefore the input tax credit on purchase of motor vehicles is not available under section 17(5)(b)(i) of the GST Act. [Paras 4]

Credit of GST paid on purchase of motor vehicles for the applicant's rent a cab service is not admissible under section 17(5)(b)(i) of the GST Act.

Final Conclusion: The Authority ruled that the applicant's rent a cab service is classifiable as renting/hiring of motor vehicles (SAC 9966) and accordingly GST paid on purchase of motor vehicles is not eligible for input tax credit under section 17(5)(b)(i) of the GST Act; the ruling is subject to Sections 103 and 104(1) of the Act.

Exemption for services in relation to functions entrusted to a Municipality under Article 243W - pure service versus composite supply where value of goods does not exceed 25% - municipal corporation as a local authority - TDS under section 51 of the GST Act not leviable on exempt supplies

Exemption for services in relation to functions entrusted to a Municipality under Article 243W - pure service versus composite supply where value of goods does not exceed 25% - municipal corporation as a local authority - Applicant's supply of conservancy/solid waste management services to Howrah Municipal Corporation is exempt under Sl. No. 3 of Notification No. 12/2017 - Central Tax (Rate). - HELD THAT: - The supply must be assessed on (i) whether it is a pure service or a composite supply with goods not exceeding 25% of value, (ii) whether the recipient is a government/local authority, and (iii) whether the supply is in relation to a function entrusted to a Panchayat or Municipality under the Constitution. The recipient, being Howrah Municipal Corporation, is a local authority. The work orders and specifications describe removal and lifting of garbage, provision and maintenance of vehicles and fuel for execution, with no transfer of property in goods to HMC and consideration measured by quantity of garbage removed; on these documents the supply is a pure service. Article 243W read with the Twelfth Schedule (item 6) includes public health, sanitation, conservancy and solid waste management as municipal functions. The activity supplied falls within that function and therefore qualifies for exemption under Sl. No. 3 of the Exemption Notification. [Paras 3]

The Applicant's conservancy/solid waste management service to HMC is a pure service and is exempt under Sl. No. 3 of Notification No. 12/2017 - Central Tax (Rate).

TDS under section 51 of the GST Act not leviable on exempt supplies - Notifications mandating deduction of TDS (Notification No. 50/2018 - Central Tax and corresponding State instruments) and section 51 do not apply to the Applicant's exempt supply. - HELD THAT: - The TDS Notifications give effect to section 51 and prescribe persons required to deduct TDS on taxable supplies. Section 51 empowers specified authorities, including local authorities, to deduct TDS while making payment for taxable goods or services. Because the Applicant's supply to HMC is held to be exempt under Sl. No. 3, it is not a taxable supply for purposes of section 51; consequently the notifications and mechanism for deduction of TDS do not apply to this supply. [Paras 3]

As the Applicant is making an exempt supply, section 51 and the TDS Notifications do not apply to his supply to HMC.

Final Conclusion: The Advance Ruling holds that the applicant's conservancy/solid waste management service to Howrah Municipal Corporation is a pure service exempt under Sl. No. 3 of Notification No. 12/2017 and, being an exempt supply, is not subject to deduction of TDS under section 51 or the TDS Notifications.

Reimbursement of costs - Deduction of tax at source - Revisional powers under Section 263 - Disallowance under Section 40A

Reimbursement of costs - Deduction of tax at source - Requirement to deduct tax at source on payments characterized as reimbursement of costs - HELD THAT: - The Court adhered to the Tribunal's finding - supported by an earlier order of this Court - that the amounts in question were payments by way of reimbursement of administrative costs (employee cost, rent, finance and legal corporate recharge) made to a related service-provider. Applying the settled principle that liability to deduct tax at source does not arise where a payment is a mere reimbursement of costs (as recognised in the cited authorities relied upon by the Court), the obligation to deduct tax at source was held not to arise. The Court observed that the Revenue had not displaced the factual finding that the payments were reimbursements and therefore concluded that no question of law arose warranting interference. [Paras 4, 5, 6]

The requirement to deduct tax at source did not arise on the payments found to be reimbursements of costs; the Revenue's appeal on this point fails.

Final Conclusion: The Revenue's appeal is dismissed. The Court upheld the Tribunal's conclusion - following earlier orders of this Court - that the impugned payments were reimbursements of costs and hence did not attract a requirement to deduct tax at source; the Court did not go into the first question regarding exercise of revisional power under Section 263.

Deduction under Chapter VI-A (including Section 80-IB(10)) - where the assessee fails to make a claim in his return - bar on allowance of deduction where not claimed in return (Section 80A(5)) - revisional powers of the Commissioner under Section 264 - reading down and retrospectivity of statutory provisions

Bar on allowance of deduction where not claimed in return (Section 80A(5)) - revisional powers of the Commissioner under Section 264 - deduction under Chapter VI-A (including Section 80-IB(10)) - Whether the Commissioner in exercise of revisional jurisdiction under Section 264 can allow deduction under Section 80-IB(10) when the deduction was not claimed in the return of income and is therefore hit by Section 80A(5). - HELD THAT: - Section 80A(5) (inserted with retrospective effect) imposes an additional plenary condition that a deduction under the provisions of Chapter VI-A must be claimed in the return of income or it shall not be allowed. That restriction attaches to the claim itself and is not confined to the Assessing Officer; it must be implemented by any income-tax authority called upon to consider the claim. Consequently the wide revisional powers of the Commissioner under Section 264 do not permit him to grant a deduction contrary to the statutory bar in Section 80A(5). Authorities permitting a revisional grant of a fresh claim in the absence of Section 80A(5) (as reflected in earlier decisions) cannot be read to override the specific statutory interdiction. The decision relied upon (Goetze) concerned different facts and did not involve interpretation of Section 80A(5) in the context of revisional or appellate powers. The petitioners having abandoned the challenge to the retrospective insertion, the Court must apply Section 80A(5) as on the statute book and may not read it down to permit the claim. [Paras 5, 8, 9, 10, 11]

The Commissioner could not allow the deduction under Section 80-IB(10) in revision where the claim was not made in the return because Section 80A(5) precludes allowance of such a claim; the writ petition is dismissed.

Final Conclusion: Writ petition dismissed; the revisional order rejecting the claim under Section 80-IB(10) was upheld because Section 80A(5) bars allowance of deductions not claimed in the return of income.

Disallowance under Section 14-A - Apportionment of expenditure between taxable and non-taxable income - Dominant purpose test - Strategic investment - Attributability of expenditure to exempt income

Disallowance under Section 14-A - Dominant purpose test - Apportionment of expenditure between taxable and non-taxable income - Strategic investment - Whether the ITAT erred in holding that disallowance under Section 14-A was not warranted because the underlying investment was for strategic purposes - HELD THAT: - The Court answered this question in the affirmative. Reliance was placed on the principle that Section 14-A requires disallowance of expenditure that is attributable to income which does not form part of total income. The dominant purpose for which an investment is made (for example, to obtain or retain control of an investee) is not decisive for excluding application of Section 14-A. The correct approach is one of apportionment: where expenditure has a causal connection to exempt income, that portion must be disallowed. Consequently, the ITAT's conclusion that strategic purpose alone precludes disallowance was incorrect and the doctrine of apportionment governs the determination.

The question of law is answered in favour of the Revenue: Section 14-A disallowance cannot be avoided merely because the investment was strategic; apportionment applies.

Attributability of expenditure to exempt income - Disallowance under Section 14-A - Remand for factual determination - Whether any expenditure was in fact attributable to the exempt dividend income from mutual funds and therefore required disallowance under Section 14-A - HELD THAT: - The Court found that the factual question of whether any expenditure was incurred or attributable to the exempt income remained unresolved. The CIT(A) had recorded diverse factual reasoning in respect of the nature and purpose of investments and whether they were one time legacy investments with no expenditure. Because attributability is ultimately a question of fact requiring scrutiny and further hearing, the Court declined to decide the factual issue on the record before it and remitted the matter to the ITAT for fresh consideration and findings on the substantive question of attributability of expenditure to the dividend income from the mutual funds.

Matter remitted to the ITAT for further hearing and factual findings on whether any expenditure is attributable to the exempt dividend income.

Final Conclusion: The appeals are partly allowed: the Court holds that strategic purpose does not preclude disallowance under Section 14-A and that apportionment governs; however, the question whether expenditure was in fact attributable to the exempt income is remitted to the ITAT for fresh factual determination. All rights and contentions are kept open.

Treatment of compensation on transfer of agricultural land under Section 10(37) - method of computation of income - accrual versus receipt (Section 145A) - remand for reassessment

Treatment of compensation on transfer of agricultural land under Section 10(37) - method of computation of income - accrual versus receipt (Section 145A) - remand for reassessment - Appeal requires remand because assessments were made without reference to Section 10(37) and Section 145A of the Income Tax Act. - HELD THAT: - The High Court considered the contention that the Assessing Officer did not apply the amended exemption in Section 10(37) (inserted with effect from 01.04.2005) and the substituted provision of Section 145A (effective from 01.04.2010), and that income by way of interest and compensation had been declared on accrual basis whereas judicial precedent addressed computation on receipt basis. Although the Revenue submitted that the specific submissions based on Sections 10(37) and 145A were not raised below and required examination by the Assessing Officer, the Court found merit in the substantial question of law framed and concluded that the assessments ought to be reconsidered with specific reference to those provisions. Consequently the Court set aside the impugned order and remitted the matter to the competent authority for reassessment in accordance with law, particularly with reference to Sections 10(37) and 145A. [Paras 7, 8]

Appeal allowed in part; impugned order set aside and matter remitted for reassessment with reference to Sections 10(37) and 145A; no order as to costs.

Final Conclusion: The High Court answered the substantial question of law in the affirmative, allowed the appeal in part, set aside the order under challenge and remitted the matter to the competent authority for reassessment in accordance with law with specific reference to Sections 10(37) and 145A of the Income Tax Act; no order as to costs.

Applicability of Section 153(3) for giving effect to findings or directions without setting aside an assessment - limitation under Section 153(2A) where an assessment is set aside or cancelled - reasonableness requirement where no statutory time limit is prescribed - inordinate delay vitiates reassessment or recomputation proceedings

Applicability of Section 153(3) for giving effect to findings or directions without setting aside an assessment - limitation under Section 153(2A) where an assessment is set aside or cancelled - Whether the consequential proceedings initiated to give effect to the Commissioner's order under Section 263 fall under Section 153(2A) or under Section 153(3) of the Act. - HELD THAT: - The Commissioner's order under Section 263 did not set aside or cancel the assessment but recorded definite findings and gave directions for reassessment/recomputation in seven identified clauses. Where a revisional order renders findings or issues directions to the Assessing Officer for reassessment or recomputation without effectively setting aside the assessment, such exercise is to be governed by Section 153(3) and not by Section 153(2A). Section 153(2A) applies where an assessment is set aside or cancelled and prescribes the two year window thereafter; construing every remand as falling under Section 153(2A) would render Section 153(3) redundant. Applying those principles to the Commissioner's directions in this case, the notice impugned seeks to act under Section 153(3) to give effect to findings and directions and is not barred by the two year limit in Section 153(2A). [Paras 17, 18, 21]

The proceedings to give effect to the Commissioner's order under Section 263 fall under Section 153(3) and are not governed by the two year limitation of Section 153(2A).

Reasonableness requirement where no statutory time limit is prescribed - inordinate delay vitiates reassessment or recomputation proceedings - Whether the delay of eight years and seven months in initiating proceedings under Section 153(3) was reasonable or whether the delay was inordinate and fatal to the Department's action. - HELD THAT: - Where no time limit is prescribed by statute for completing reassessment under Section 153(3), the power must be exercised within a reasonable time; what is reasonable depends on facts and circumstances. The departmental explanation for the 8 years 7 months delay - namely, repeated changes in the assessee's name and retrieval of old files while processing a refund claim - was found inadequate. The PAN and relevant files existed and the change of name did not justify prolonged inaction; retrieval of files upon a refund claim indicated the department had slept over the matter. Applying settled authorities that powers must be exercised bona fide and within a reasonable time, the court concluded that the unexplained delay was inordinate and rendered the consequential proceedings unlawful. [Paras 22, 24, 26, 27]

The delay of eight years and seven months in initiating the proceedings under Section 153(3) was inordinate and unreasonable and vitiates the impugned notice.

Final Conclusion: The impugned notice dated 18.09.2003 seeking to give effect to the Commissioner's order under Section 263 relates to reassessment/recomputation under Section 153(3) and is not barred by Section 153(2A); however, the 8 years 7 months delay in initiating those proceedings was inordinate and the notice is set aside, with the Department directed to refrain from further proceedings for Assessment Year 1990-91.

Mandamus to direct disposal of stay application - stay of demand - protection from coercive recovery pending appeal - consideration of genuine hardship in stay applications - Instruction No.4(B)(b) of the Circular dated 29.2.2016 - direction to decide stay application expeditiously

Mandamus to direct disposal of stay application - direction to decide stay application expeditiously - consideration of genuine hardship in stay applications - protection from coercive recovery pending appeal - Instruction No.4(B)(b) of the Circular dated 29.2.2016 - Whether respondent No.3 should be directed to consider and decide the stay application filed by the petitioner and to restrain coercive recovery pending such decision - HELD THAT: - The court confined the relief sought to a direction that respondent No.3 consider the stay application filed on 15/16.5.2018 and pass orders expeditiously. The petitioner had sought stay of collection of demand arising from the assessment for 2015-16, alleging the assessment was high-pitched and that earlier authorities had demanded payment of 20% despite the stay application. The Revenue accepted that respondent No.3 may be directed to consider the stay application in accordance with law. The court observed that, given the assessment being unreasonably high-pitched and the matter having been heard by the appellate authority, the petitioner should be protected from coercive action pending the appellate decision. The court instructed that respondent No.3, when deciding the stay application, should take into account genuine hardship and the guidance in Instruction No.4(B)(b) of the Circular dated 29.2.2016, and dispose of the application in an expedited manner. The court therefore issued a mandamus-style direction limited to consideration and decision of the stay application and a temporary restraint on coercive recovery until respondent No.3 decides the application. [Paras 5, 6, 7, 8]

Respondent No.3 is directed to consider and decide the stay application dated 15/16.5.2018 expeditiously, having regard to genuine hardship and Instruction No.4(B)(b) of the Circular dated 29.2.2016; no coercive recovery action shall be taken until respondent No.3 decides the application.

Final Conclusion: Writ petition disposed by directing respondent No.3 to expeditiously decide the stay application filed on 15/16.5.2018 with regard to genuine hardship and the said instruction, and restraining coercive recovery until such decision is taken.

Discharge under Section 245 Cr.P.C. - Criminal liability for failure to pay tax under Chapter XVIIB - Offence under Section 276-B/276-C of the Income tax Act - Compounding of offence - Reasonable cause defence to penal liability - Reconstitution of partnership and liability of retiring partner - Admissibility of unregistered partnership deed (bar under Partnership law) - Trial court's discretion to frame charges

Discharge under Section 245 Cr.P.C. - Trial court's discretion to frame charges - Offence under Section 276-B/276-C of the Income tax Act - Admissibility of unregistered partnership deed (bar under Partnership law) - Whether the petitioners were entitled to discharge under Section 245 Cr.P.C. from prosecution for failure to pay tax for financial year 2009-2010. - HELD THAT: - The petitioners sought discharge on the basis of a reconstitution deed claiming retirement and exemption from firm liabilities; the trial Court examined the evidence of the Income Tax Officer (PW1) and documents (Exs.P1-P9) and held that charges could be framed. The learned Public Prosecutor pointed out that the reconstitution deed was unregistered and could not be relied upon in view of the bar under the Partnership law, and that the petitioners were responsible for day to day affairs of the firm for the relevant period. The High Court found no infirmity or illegality in the trial Court's order refusing discharge and declined to interfere.

Trial Court's order refusing discharge under Section 245 Cr.P.C. is upheld; petitioners are not discharged and charges can be framed.

Compounding of offence - Reasonable cause defence to penal liability - Criminal liability for failure to pay tax under Chapter XVIIB - Whether the petitioners could seek compounding of the offence or rely on subsequent payment and reasonable cause to avoid punishment. - HELD THAT: - Counsel for the petitioners submitted that tax was subsequently paid and invoked the statutory provision permitting avoidance of punishment where reasonable cause is shown, and further urged that the offence is compoundable. The High Court did not decide the merits of compounding or suppression of penal liability on the basis of payment or reasonable cause; instead, having found no fault with the trial Court's order, the Court observed that the petitioners were at liberty to make a representation to the competent authority seeking compounding if the offence is compoundable under the law.

Petitioners may make representation to the appropriate authority for compounding; the High Court makes no substantive determination on compounding or existence of reasonable cause.

Final Conclusion: Criminal Revision dismissed; the High Court upholds the trial Court's refusal to discharge the accused while permitting the accused to approach the competent authority for compounding of the offence, if permissible under law; connected miscellaneous petitions, if any, are disposed of as infructuous.

Treatment of foreign exchange gain/loss as operating income/cost for transfer pricing - application of Transactional Net Margin Method (TNMM) - inclusion of forex in operating profit - second proviso to section 92C(2) - de minimis +/-5% safe margin - comparability and selection/exclusion of comparable companies in transfer pricing - limits of appellate power of CIT(A) after Finance Act, 2001 - restoration of matters to assessing officer

Treatment of foreign exchange gain/loss as operating income/cost for transfer pricing - application of Transactional Net Margin Method (TNMM) - inclusion of forex in operating profit - Foreign exchange gain/loss arising from trading/international transactions to be treated as an item of operating revenue/cost for computation of arm's length price under TNMM for both the assessee and comparables. - HELD THAT: - The Tribunal restricted consideration to whether forex gain/loss should be included in operating margins under the TNMM. On facts the forex gains/losses arose directly from trading international transactions and were not shown to be independent non-operating receipts. The Special Bench decision in ACIT v. Prakash I. Shah was held persuasive that exchange fluctuation gain/loss integral to the underlying export/trading transaction cannot be detached and treated as a separate non-operating item. Reliance on Safe Harbour rules treating forex as non-operating was rejected since those rules were not applicable for the year under consideration. In view of judicial precedents accepting forex arising from trading/international transactions as operating, the Tribunal held that such amounts must be included in operating revenue/costs of the assessee and of comparables and allowed the assessee's ground on this issue. [Paras 4, 6, 7, 8]

Forex gain/loss pertaining to trading/international transactions is operating in nature and must be included in TNMM computations for the assessee and comparables; assessee's ground allowed.

Second proviso to section 92C(2) - de minimis +/-5% safe margin - Benefit of the +/-5% variation proviso (second proviso to section 92C(2)) applies to the assessment year under consideration and the CIT(A) was justified in extending that benefit. - HELD THAT: - The Tribunal noted the substitution of the second proviso by the Finance (No.2) Act, 2009 and the Explanation to section 92C(2) making the proviso applicable to proceedings pending before the AO as on 1-10-2009. Accordingly, for AY 2010-11 the assessee was entitled to the de minimis +/-5% margin such that no transfer pricing adjustment is warranted where the computed ALP variation is within that margin. The CIT(A)'s grant of the +/-5% benefit was therefore upheld. [Paras 15]

CIT(A) was justified in applying the +/-5% proviso; Revenue ground on this point fails.

Limits of appellate power of CIT(A) after Finance Act, 2001 - restoration of matters to assessing officer - Adjudication by the CIT(A) on the management fees issue (where no transfer pricing addition had been made by the AO) was set aside and the matter restored to the position prevailing under the assessment order; the CIT(A)'s direction to the AO for further enquiry/enhancement was vacated as beyond power. - HELD THAT: - The Tribunal found that no transfer pricing addition in respect of management fees was finally made by the AO, yet the CIT(A) adjudicated the issue and sought a remand report leading to a proposed enhancement by the TPO. The CIT(A)'s impugned order directed further enquiry and potential enhancement, a course held impermissible because restoration powers had been withdrawn from the CIT(A) by the Finance Act, 2001. Consequently the Tribunal vacated the adjudication by the CIT(A) on this issue and restored the position as per the assessment order (i.e., no addition on management fees as per the AO's order). [Paras 11, 12, 13]

CIT(A)'s order on management fee was vacated and the position under the assessment order restored; direction for further inquiry/enhancement by CIT(A) set aside.

Comparability and selection/exclusion of comparable companies in transfer pricing - effect of inclusion/exclusion of comparables on ALP when forex treated as operating - The CIT(A)'s exclusion of certain comparables was challenged by the Revenue; while the Tribunal technically accepted the Revenue's ground, inclusion of those companies would not change the final outcome because the assessee's profit margin (with forex treated as operating) would remain within the permissible +/-5% range, rendering the point academic. - HELD THAT: - The TPO had modified the assessee's list of comparables by introducing additional companies; the CIT(A) directed exclusion of certain freshly introduced comparables. The Revenue contested that exclusion. The assessee's representative demonstrated that even if the excluded comparables were included, once forex gain/loss is treated as operating the assessee's margin would still fall within the +/-5% tolerance. The Revenue did not dispute that position. Consequently, although the Tribunal accepted the Revenue's technical grievance, it found no increase in total income would result and treated the appeal on this aspect as partly dismissed and partly academic. [Paras 16, 17, 18]

Revenue's contention on exclusion/inclusion of comparables is technically accepted but academic; inclusion would not change income because margin remains within +/-5% when forex is treated as operating.

Remand for fresh determination of ALP of Trading segment - The matter is remitted to the AO/TPO for fresh determination of the ALP of the international transactions of the Trading segment in conformity with the Tribunal's findings (including inclusion of forex as operating). - HELD THAT: - Having decided that forex must be included in operating results and having set aside the CIT(A)'s impermissible adjudication on management fees, the Tribunal directed that the ALP of the Trading segment be freshly determined by the AO/TPO in accordance with the Tribunal's conclusions. The remand is for recomputation/determination consistent with the principles laid down in the order. [Paras 4, 8, 13, 20]

Matter remitted to AO/TPO for fresh determination of ALP of the Trading segment in conformity with the Tribunal's directions.

Final Conclusion: The Tribunal held that foreign exchange gain/loss arising from trading/international transactions is operating in nature and must be included in TNMM computations for the assessee and comparables; upheld CIT(A)'s grant of the +/-5% proviso; vacated the CIT(A)'s adjudication and direction to reopen the management fees issue (restoring the assessment position on that score); accepted the Revenue's technical grievance on comparables as academic since inclusion would not alter income within the +/-5% margin; and remitted the Trading-segment ALP to the AO/TPO for fresh determination in accordance with these conclusions.

Deduction under section 80IA(4) for income from infrastructure facility - status of Container Freight Station (CFS) / Inland Container Depot (ICD) as an "inland port" - requirement of agreement with Central/State Government or local authority for claiming 80IA(4) benefit - relevance of customs notifications/approvals and Ministry of Commerce letters for entitlement - precedential value of judicial and departmental circulars on classification of CFS/ICD as infrastructure

Deduction under section 80IA(4) for income from infrastructure facility - status of Container Freight Station (CFS) / Inland Container Depot (ICD) as an "inland port" - precedential value of judicial and departmental circulars on classification of CFS/ICD as infrastructure - Entitlement to deduction under section 80IA(4) in respect of income from operation of the Container Freight Station for the assessment years in dispute. - HELD THAT: - The Tribunal considered whether income from the assessee's CFS qualifies for deduction under section 80IA(4) as income from an "inland port"/infrastructure facility. It examined the approvals and notifications issued by Customs and the Ministry of Commerce, departmental circulars and judicial precedents including the Supreme Court and High Court decisions treating ICDs/CFSs as inland ports for section 80IA(4) purposes. Following the coordinate Bench decision in Gateway East India (P) Ltd. and higher court authority (including the Supreme Court's view that ICDs/CFSs fall within the term "inland port" for the section), and having found parity of facts and supporting customs notifications declaring the assessee's CFS as a customs area, the Tribunal held that the CFS constitutes an infrastructure facility/inland port and is eligible for deduction under section 80IA(4). The Tribunal therefore upheld the CIT(A)'s deletion of the addition made by the AO. [Paras 6, 8]

The assessee is entitled to deduction under section 80IA(4) in respect of income from operation of the Container Freight Station; the revenue's appeals are dismissed on this issue.

Requirement of agreement with Central/State Government or local authority for claiming 80IA(4) benefit - relevance of customs notifications/approvals and Ministry of Commerce letters for entitlement - Whether absence of a specific executed agreement with government or statutory authority disentitles the assessee from claiming deduction under section 80IA(4). - HELD THAT: - The Tribunal addressed the AO's contention that no formal agreement with the Central/State Government or local authority had been executed. It reviewed the sequence of governmental approvals, letters of intent and customs notifications that authorised and notified the assessee's CFS as a customs area and the line of authority holding that compliance with governmental approvals and notification may obviate the need for a separate formal agreement. Reliance was placed on Tribunal and High Court decisions which held that where the Government has accepted and approved the proposal subject to conditions (and those conditions are complied with), a separate executed agreement is not a prerequisite for claiming the deduction under section 80IA(4). The Tribunal found the assessee's approvals and notifications sufficient and rejected the AO's objection. [Paras 6, 8]

Non-execution of a specific agreement does not disentitle the assessee where governmental approvals/notifications and compliance therewith demonstrate entitlement; the AO's addition on this ground is to be deleted.

Final Conclusion: Appeals of the revenue are dismissed and the CIT(A)'s orders allowing the assessee's claim for deduction under section 80IA(4) in respect of the Container Freight Station for A.Y.2011-12 to A.Y.2014-15 are upheld; the assessee's cross-objections are rendered infructuous.

Recognition under Section 80G - scope of inquiry by the Director under Section 80G(5) - continuation/renewal of 80G recognition - condonation of delay in filing appeal - application of findings of fact in denying charitable status

Condonation of delay in filing appeal - Delay in filing the appeal was condoned. - HELD THAT: - The Tribunal examined the explanation for the delay (illness of the trustee responsible for income-tax matters) and found the reasons bona fide and not controverted by the Revenue. Applying the established principle that the quality of reasons for delay governs condonation rather than mere length, and having regard to the interests of justice as enunciated in Collector, Land Acquisition v. Mst. Katiji, the Tribunal held that delay should be condoned and proceeded to decide the merits of the appeal. [Paras 5]

Delay of 324 days in filing the appeal is condoned.

Recognition under Section 80G - scope of inquiry by the Director under Section 80G(5) - application of findings of fact in denying charitable status - The Director wrongly rejected the application for continuation of recognition under Section 80G and the rejection was set aside. - HELD THAT: - The Tribunal examined whether the Director was justified in refusing continuation of 80G recognition on the ground that the trust had not incurred expenditure towards its objects. It held that the permissible scope of inquiry at the evaluation stage under Section 80G(5) extends to eligibility for exemption but does not permit a de novo computation of income or unsupported factual conclusions about expenditure. The Tribunal noted material demonstrating the trust's charitable activities (publications, programs, courses, exhibitions, periodicals and other activities) and perused Income & Expenditure statements showing income streams tied to such activities. The Director's bald assertion that no expenditure was incurred was found to lack factual support and to be otiose to the statutory requirements. Reliance on precedents involving different factual matrices (diversion of funds to non-charitable commercial constructions) was held to be inapplicable. In view of these findings, the Tribunal concluded that there was no justification to deny continuation of recognition. [Paras 9, 10, 11, 16]

Order of the Director rejecting continuation of recognition under Section 80G is set aside and the application dated 17.06.2008 is to be allowed.

Final Conclusion: The appeal is allowed: the delay in filing the appeal is condoned and the Director's rejection of the application for continuation of recognition under Section 80G is set aside with a direction to allow the renewal application dated 17.06.2008.

Long Term Capital Gains exemption under section 10(38) - bogus transaction / accommodation entry - dematerialised transactions and trading on recognised stock exchange as evidentiary support for genuineness - onus of proof and burden to disprove genuineness - reliance on third party statements without opportunity for cross examination - treatment as unexplained cash credit under section 68

Long Term Capital Gains exemption under section 10(38) - bogus transaction / accommodation entry - dematerialised transactions and trading on recognised stock exchange as evidentiary support for genuineness - reliance on third party statements without opportunity for cross examination - onus of proof and burden to disprove genuineness - treatment as unexplained cash credit under section 68 - Confirmation of addition by AO and CIT(A) by treating claimed LTCG of the assessee on sale of 5,000 shares of M/s. CCL International Ltd. as bogus and taxable (i.e., to reject exemption under section 10(38)). - HELD THAT: - The Tribunal examined the evidentiary material produced by the assessee - purchase documents, payment by account payee cheque, demat account entries, contract notes for sale through a registered broker on Bombay Stock Exchange, receipt of sale proceeds into bank account and payment of STT - and noted that the AO did not controvert these primary records nor show any infirmity in them. The AO's addition was founded on a general investigation report identifying a pattern of manipulation in certain penny stocks (including CCL International Ltd.) and on third party statements, but no material was brought to connect the assessee specifically with any price rigging or accommodation operation. The Tribunal held that once the assessee produces direct documentary evidence of purchase, dematerialisation and sale through recognised market and banking channels, the burden shifts to the Revenue to rebut that evidence with specific material. Further, adverse third party statements relied upon by the AO/Investigation Wing were recorded without furnishing copies to the assessee or affording opportunity for cross examination; such statements could not be the sole basis to displace the documentary evidence. The Tribunal also observed that transactions executed through recognised stock exchange mechanisms and demat accounts cannot be branded bogus merely on the basis of suspicion about market manipulation by unrelated actors; absent proof that the assessee was a party to such manipulation or that the transactions were show documents, the claimed LTCG could not be treated as unexplained income under section 68. Applying these principles and following coordinate decisions on identical facts (including a Tribunal decision holding CCL International Ltd. scrip not bogus and various High Court/Tribunal precedents), the Tribunal set aside the orders of the AO and CIT(A) and directed deletion of the addition. [Paras 12, 13, 14, 24, 25]

Addition confirmed by AO and CIT(A) was set aside; the claimed LTCG treated as genuine and exemption under section 10(38) to be allowed, with consequential deletion of the addition.

Final Conclusion: Appeal allowed: having accepted the assessee's documentary evidence of purchase, dematerialisation, sale through a recognised exchange and receipt of proceeds through banking channels, and in the absence of any specific material linking the assessee to price rigging or accommodation entries (and given reliance on third party statements not subjected to cross examination), the Tribunal set aside the orders of the AO and CIT(A) and directed deletion of the addition so that the claimed long term capital gain is not treated as bogus income.

Deductibility under section 37(1) for contractual gratuity payments - notional lease/revenue equalization reserve under AS 19 non-allowable - capitalization of borrowing costs and allowance of depreciation when asset is ready for use - veracity of confirmations under notice u/s 133(6) and admissibility of IRU charges - loan processing fee treated as revenue expenditure under section 37(1)

Deductibility under section 37(1) for contractual gratuity payments - Allowability of gratuity/ex-gratia payments as business expenditure under section 37(1). - HELD THAT: - The Tribunal examined the contractual terms, sample employment contracts and evidence of actual payment to transferred employees and found that gratuity/ex-gratia payments were contractual obligations arising on transfer of employees from group companies and were actually paid. The Assessing Officer's contrary factual conclusion was not sustained on the material placed before the CIT(A), and reliance on precedents recognising contractual obligations as deductible business expenditure supported allowing the claim. The addition disallowing gratuity payments was therefore deleted. [Paras 7]

Addition disallowing gratuity payments deleted; Revenue's ground dismissed.

Notional lease/revenue equalization reserve under AS 19 non-allowable - Whether additional amounts debited/credited to profit and loss as lease/revenue equalization reserve under AS 19 are allowable/deductible. - HELD THAT: - The Tribunal held that the amounts representing lease/revenue equalization reserve under AS 19 were notional and contingent (reflecting averaging of future lease rentals) and therefore do not constitute real expenditure or income for tax purposes. Citing principles that only real income and real expenses are relevant to tax computation, the Tribunal agreed with the view that such notional entries are not allowable under section 37 and upheld the disallowance. [Paras 10]

Additional lease/revenue equalization reserve disallowance sustained; Revenue's ground dismissed.

Capitalization of borrowing costs and allowance of depreciation when asset is ready for use - Whether interest on loans and depreciation on telecom towers should be capitalised or treated as revenue expenditure/allowed where towers were ready for use. - HELD THAT: - On the record that tower construction commenced before the IRU agreements and that sites were accounted as CWIP and capitalised only when ready for use, the Tribunal accepted the assessee's evidence (including sample RFAI certificates) that towers were completed and ready to use within the claimed timelines. The Assessing Officer's contrary inference about utilisation of loans for construction was found factually incorrect. The CIT(A)'s deletion of additions relating to capitalization of interest and disallowance of depreciation was held to be supported by the material and was not interfered with. [Paras 13]

Additions for capitalization of interest and disallowance of depreciation deleted; Revenue's ground dismissed.

Veracity of confirmations under notice u/s 133(6) and admissibility of IRU charges - Admissibility and verification of IRU charges claimed by assessee and the reliability of confirmations obtained under notice u/s 133(6). - HELD THAT: - The Tribunal found that neither the Assessing Officer nor the CIT(A) had adequately examined the relevant clauses of the IRU agreements or properly verified the confirmations received under notice u/s 133(6). Given defects in verification and the existence of contractual clauses bearing on consideration and number of sites, the Tribunal considered it appropriate to remit the matter to the Assessing Officer for fresh consideration after taking into account all relevant evidence and affording the assessee an opportunity of hearing in accordance with principles of natural justice. [Paras 16]

Issue remanded to the Assessing Officer for fresh verification and decision; appeals partly allowed for statistical purposes.

Loan processing fee treated as revenue expenditure under section 37(1) - Whether one time loan processing fees charged by banks are allowable as revenue expenditure or are capital in nature. - HELD THAT: - The Tribunal accepted the assessee's contention that the processing fees were incurred in raising finance for ordinary business operations, did not confer an enduring benefit, and were routine business expenses. The CIT(A)'s factual findings indicated that loans were not utilised for incomplete capital works, supporting the characterisation of the fees as revenue. On these facts the Tribunal allowed the claim as revenue expenditure. [Paras 19]

Loan processing fees held to be revenue expenditure and allowable; assessee's appeal allowed on this ground.

Final Conclusion: The appeals result in mixed outcomes: additions disallowing gratuity payments, capitalization of interest and disallowance of depreciation were deleted; lease/revenue equalization reserve treated as notional and disallowance sustained; loan processing fees were held revenue in nature and allowed; the claim of IRU charges was remanded to the Assessing Officer for fresh verification and decision after affording opportunity of hearing. Both Revenue's and assessee's appeals are partly allowed for statistical purposes.

Rebate under section 88E - Rebate in respect of securities transaction - Allocation of expenses for computing rebate under section 88E - Remand for fresh computation

Rebate under section 88E - Rebate in respect of securities transaction - Rebate under section 88E is admissible only in respect of income chargeable as "Profits and gains of business or profession" arising from taxable securities transactions. - HELD THAT: - The Tribunal noted that section 88E confines the rebate to tax on income arising from taxable securities transactions falling under the head "Profits and gains of business or profession." The orders of the Assessing Officer and the Commissioner (Appeals) which restricted the rebate to such income were consistent with the statutory language. There was no ambiguity in the statutory provision counselling allowance of rebate only to the extent of income arising from taxable securities transactions.

The restriction of rebate to income arising from taxable securities transactions as applied by the AO and upheld by the CIT(A) is affirmed.

Allocation of expenses for computing rebate under section 88E - Remand for fresh computation - Whether expenses attributable to incomes excluded from eligibility for rebate under section 88E should be allocated and allowed to be excluded when computing the rebate - remanded for fresh consideration. - HELD THAT: - The Tribunal disapproved the AO's and CIT(A)'s blanket refusal to allocate any expenses against incomes excluded from the section 88E rebate merely because such incomes formed a small percentage of total income or were considered to not require substantial expenditure. The Tribunal found no credible material in the records to support the conclusion that such incomes required no expenditure. Recognising the reasonableness of the assessee's claim to proportionate allocation of operating expenses between STT-paid income and non-STT income, the Tribunal directed that the AO should allocate expenses to the incomes on which rebate was denied and recompute the rebate accordingly. For this limited purpose the matter was set aside and remanded to the AO for fresh order in accordance with the Tribunal's views and directions.

Issue remanded to the Assessing Officer to allocate expenses to non-eligible incomes and recompute the rebate under section 88E in accordance with the Tribunal's directions.

Final Conclusion: The Tribunal affirms that rebate under section 88E is available only in respect of income arising from taxable securities transactions, but sets aside the CIT(A)'s order and remands the limited issue of allocation of expenses to the AO for fresh computation of the rebate.

Reopening of assessment on information from investigation wing with recorded reasons and application of mind - validity of reassessment proceedings where clerical irregularity in notice was rectified - treatment of share application money as unexplained/ accommodation entry and onus under Section 68 - addition of commission/amounts paid for arranging accommodation entries as unexplained income - remand for fresh adjudication with opportunity to substantiate identity and credit-worthiness of investors

Reopening of assessment on information from investigation wing with recorded reasons and application of mind - validity of reassessment proceedings where clerical irregularity in notice was rectified - Validity of reassessment proceedings under which assessment was reopened after information from the Investigation Wing. - HELD THAT: - The Tribunal found that the Assessing Officer recorded reasons before issuing notice under section 148 and applied his mind to information received from the Investigation Wing identifying the assessee as a beneficiary of accommodation entries. The issuance of multiple notices caused by a clerical mistake (wrong name/address) was corrected on the same date and did not vitiate the reassessment. The Tribunal concurred with the CIT(A)'s conclusion that the AO's action was bona fide and that the procedural irregularity, being immediately rectified, did not impair the legality of reopening. [Paras 9]

Grounds challenging validity of reassessment proceedings dismissed.

Treatment of share application money as unexplained/ accommodation entry and onus under Section 68 - remand for fresh adjudication with opportunity to substantiate identity and credit-worthiness of investors - addition of commission/amounts paid for arranging accommodation entries as unexplained income - Whether the share application money and alleged commission should be treated as accommodation entries and added to income, and the appropriate course of adjudication. - HELD THAT: - The Tribunal noted that the AO had made additions under the provisions relating to unexplained share capital/entries because the assessee did not produce the directors of subscriber companies or otherwise fully satisfy the onus under the law. However, in view of subsequent authoritative decisions (including the Supreme Court and Delhi High Court decisions cited), and considering the totality of facts, the Tribunal considered it appropriate in the interest of justice to remit the matter to the AO. The AO was directed to give the assessee one more opportunity to substantiate identity and credit-worthiness of the share applicants and the genuineness of the transactions, and to decide the issue on facts and law after hearing the assessee while keeping the cited precedents in mind. [Paras 10]

Issue remanded to the Assessing Officer for fresh adjudication after affording opportunity to the assessee; grounds on merits partly allowed for statistical purposes.

Final Conclusion: The Tribunal upheld the validity of the reassessment proceedings but remitted the merits relating to treatment of the share application money and alleged commission to the Assessing Officer for fresh consideration after affording the assessee an opportunity to substantiate identity and credit-worthiness, and directed the AO to decide the matter in accordance with law and the cited decisions; appeal partly allowed for statistical purposes.

Allowability of amortised operating expense versus capital expenditure - consistency of accounting treatment - allowability of advertisement and sales promotion expenditure under Section 37(1) - treatment of recruitment and training expenses as revenue expenditure - allowability of conference/seminar sponsorship expenses and applicability of professional conduct regulations - transfer pricing: characterization of AMP expenditures as international transactions and development of marketing intangibles - benchmarks and use of Bright Line Test in ALP determination - remand for factual verification and principles of natural justice

Allowability of amortised operating expense versus capital expenditure - consistency of accounting treatment - Deletion of addition disallowing amortised expense of loaner sets and treating them as capital; direction to recompute after allowing amortisation/expense treatment. - HELD THAT: - The Tribunal followed its earlier decisions in the assessee's own case for earlier years where expenditure on loaner sets (equipment supplied on returnable basis to facilitate sales) was held not to be capital in nature and the amortisation claimed by the assessee was allowable. No change in material facts was shown. Accordingly, the addition of the net amount treated as capital was deleted and the Assessing Officer was directed to recompute in terms of Tribunal's directions. [Paras 4]

Impugned additions in respect of amortised loaner-set expenses deleted; grounds allowed.

Allowability of advertisement and sales promotion expenditure under Section 37(1) - requirement of evidence and proof of business purpose - Deletion of disallowance of 50% of advertisement and sales promotion expenditure; prior consistent Tribunal view accepted. - HELD THAT: - The Tribunal, applying its earlier reasoning, held that revenue authorities had no basis to restrict the expenditure to 50% or to treat it as deferred revenue expenditure where genuineness was not disputed and no material was produced to show the expenditure was not wholly and exclusively for business. Reliance on suspicion was held untenable and the disallowance was deleted. [Paras 5]

Disallowance deleted; ground allowed (with one consequential ground becoming infructuous).

Treatment of recruitment and training expenses as revenue expenditure - no creation of asset by recruitment/training expenditure - Full allowance of recruitment and training expenses disallowed earlier as deferred revenue expenditure. - HELD THAT: - Following earlier Tribunal orders, it was held that recruitment and training outgo did not create an asset and thus could not be treated as capital/expenditure to be amortised. The Assessing Officer's action was contrary to accounting principles and inconsistent with prior orders; accordingly the expenditure was allowable in full for the year. [Paras 6]

Disallowance of 4/5th deleted; entire recruitment and training expenditure allowed.

Allowability of conference/seminar sponsorship expenses and applicability of professional conduct regulations - genuineness of expenditure and absence of material to displace commercial expediency - Deletion of disallowance of conference, seminar and sponsorship expenses held to be permissible revenue expenditure. - HELD THAT: - On the facts and following earlier Tribunal and other judicial decisions, the Tribunal held that convention, education support, seminar and symposium sponsorships incurred to promote business were allowable. Reliance on professional conduct guidelines and departmental suspicion that such expenses amounted to inducements was insufficient to sustain disallowance where binding precedents had accepted such expenditures. [Paras 7]

Impugned additions in respect of conference/seminar expenses deleted; ground allowed.

Transfer pricing: characterization of AMP expenditures as international transactions and development of marketing intangibles - benchmarks and use of Bright Line Test in ALP determination - Deletion of TP adjustment in respect of AMP expenses where no agreement or arrangement existed with Associated Enterprises to characterize AMP as international transaction. - HELD THAT: - The Tribunal accepted the assessee's position, following its earlier order for another year, that in the absence of any agreement or arrangement with AEs for brand-building or transfer of marketing intangibles, mere domestic payments to third parties do not constitute an international transaction under the transfer pricing provisions. Consequently, the TPO's adoption of a Bright Line Test and ALP adjustment was not sustainable. [Paras 9]

TP additions deleted; ground allowed.

Remand for factual verification and principles of natural justice - requirement to substantiate recipients of promotional/gift-card expenditure - Remand of addition relating to gift cards (advertisement/sales promotion) for reconsideration by Assessing Officer with direction to assessee to furnish substantiation. - HELD THAT: - For AY 2013-14 the disputed gift-card expenditure (Reliance Digital gift cards) lacked documentary particulars as to recipients. Rather than sustain an addition on mere presumption, the Tribunal remitted the matter to the AO for fresh adjudication, directing the assessee to substantiate the claim and observing that natural justice required such verification before making any final disallowance. [Paras 11]

Matter remitted to Assessing Officer for re-adjudication with direction to assessee to substantiate; ground allowed for statistical purposes.

Final Conclusion: Both appeals for AY 2012-13 and 2013-14 were partly allowed: the Tribunal deleted additions in respect of amortised loaner-set expenses, advertisement and promotion expenditures (generally), recruitment and training expenses, conference/seminar sponsorships and the transfer-pricing AMP adjustment; the gift-card expenditure issue for 2013-14 was remitted to the Assessing Officer for verification and reconsideration. Consequential and premature grounds (interest/penalty) were not adjudicated.

Pre-existing dispute - notice of dispute under Section 8(2) of the I&B Code - maintainability of an application under Section 9 of the I&B Code - limited jurisdiction of the adjudicating authority to sift material - spurious, hypothetical or illusory defence - liquidated damages clause in contract - completion certificate and release of bank guarantees not amounting to admission of debt

Pre-existing dispute - notice of dispute under Section 8(2) of the I&B Code - maintainability of an application under Section 9 of the I&B Code - liquidated damages clause in contract - spurious, hypothetical or illusory defence - limited jurisdiction of the adjudicating authority to sift material - completion certificate and release of bank guarantees not amounting to admission of debt - Whether a pre-existing dispute concerning liquidated damages existed prior to the demand notice and whether its existence rendered the Section 9 application non-maintainable. - HELD THAT: - The Tribunal held that where an operational creditor files a complete Section 9 application the adjudicating authority must reject it if a notice of dispute is received or the record discloses a pre-existing dispute which is not merely a patently feeble or spurious defence. The court's function is limited to separating the grain from the chaff and not to decide merits. The Work Order contained an LD clause and the contractual history showed fifteen revisions and correspondence in which the Corporate Debtor asserted a claim for liquidated damages before the demand notice. The Operational Creditor's own letter of 1st February, 2017 evidences that the Corporate Debtor had raised the issue of levy of liquidated damages prior to service of the demand notice, and that the parties were in dispute over delay and liability for liquidated damages. Release of bank guarantees and issuance of a completion certificate did not amount to acceptance of the Operational Creditor's claim or preclude the existence of a pre existing dispute. Given that the dispute was neither spurious nor illusory and required adjudication by a competent forum, the Section 9 application fell outside the scope of the Code. [Paras 7, 8, 9]

The pre-existing dispute relating to liquidated damages, raised before the demand notice and not shown to be spurious, rendered the Section 9 application non-maintainable; the Adjudicating Authority's rejection is affirmed.

Final Conclusion: The appeal is dismissed. The order rejecting the Section 9 application on the ground of a pre-existing dispute is upheld. No order as to costs.

Power of Adjudicating Authority under Section 31 - effect of resolution plan on pending civil and criminal proceedings - liberty to file suit or application after moratorium under sub-section (6) of Section 60 - jurisdictional limitation of Resolution Professional

Effect of resolution plan on pending civil and criminal proceedings - power of Adjudicating Authority under Section 31 - Validity of the Adjudicating Authority's direction (paragraph 13 of its order) purporting to withdraw or dismiss all inquiries, investigations, proceedings, suits and claims, including criminal proceedings, from the plan approval date. - HELD THAT: - The Appellate Tribunal held that the Adjudicating Authority has no jurisdiction to pass an order which purports to prohibit or extinguish inquiries or criminal proceedings pending before courts of criminal jurisdiction. The Tribunal observed that, having given aggrieved persons the opportunity to pursue remedies under sub-section (6) of Section 60, the Adjudicating Authority cannot, by its approval order under Section 31, bar those persons from filing claims or instituting proceedings before competent fora. Accordingly, the observation and direction in paragraph 13 of the impugned order to the extent it relates to inquiries, investigations, proceedings whether civil or criminal, suits etc., was set aside. The remainder of the approval order was left intact as there was no ground to interfere with the approval of the plan itself. [Paras 3, 4, 5]

Paragraph 13 of the Adjudicating Authority's order is set aside insofar as it purports to withdraw or dismiss pending or threatened civil or criminal proceedings; the approval of the resolution plan otherwise is maintained.

Liberty to file suit or application after moratorium under sub-section (6) of Section 60 - jurisdictional limitation of Resolution Professional - Whether the appellant may be permitted to pursue its claim before appropriate fora under sub-section (6) of Section 60 and whether the Tribunal had earlier correctly recorded such liberty. - HELD THAT: - The Tribunal recalled its earlier order granting the appellant liberty to file a claim under sub-section (6) of Section 60 against the corporate debtor and reaffirmed that position. The Appellate Tribunal emphasised that the Resolution Professional lacks adjudicatory power to finally determine claims and that sub-section (6) of Section 60 permits filing of suits or applications after exclusion of the moratorium period for limitation purposes. Consequently, the appellant was allowed to file its claim before the appropriate court of law or to file an appropriate application against the corporate debtor if the approved resolution plan does not protect its asserted interests; if liquidation ensues, the appellant may present its claim to the Liquidator to be decided under the Code. [Paras 1, 11, 12]

Appellant is permitted to pursue its claim in terms of sub-section (6) of Section 60 before the appropriate forum; alternative remedies on liquidation were also preserved.

Jurisdictional limitation of Resolution Professional - power of Adjudicating Authority under Section 31 - Whether the Tribunal was expressing any opinion on the merits of the appellant's claim or on the pending suits or proceedings included in the impugned order. - HELD THAT: - The Appellate Tribunal made clear that it did not decide the merits of the appellant's claim nor express any opinion on the pending suits or proceedings which may attain finality in terms of Section 31. The order was limited to setting aside the impugned paragraph to the extent it infringed jurisdiction to pursue civil or criminal proceedings and to reaffirming procedural liberties; no adjudication on the substantive claims was undertaken. [Paras 6]

No expression of opinion was made on merits; substantive claims remain open for determination by competent fora.

Final Conclusion: The appeal is allowed in part: the Adjudicating Authority's observation and direction in paragraph 13 purporting to withdraw or dismiss pending or threatened civil or criminal proceedings is set aside, the approval of the resolution plan is otherwise sustained, and the appellant is granted liberty to pursue its claim under sub-section (6) of Section 60 before the appropriate forum; no decision was recorded on the merits of the claim.

Summary order. [Delay condoned; notice issued; stay of operation granted on the impugned CESTAT, New Delhi order until further orders; matter tagged with C.A. No. 105/2019.]

Summary order. Delay condoned; application for exemption from filing certified copy of the impugned order allowed; appeals admitted and tagged with Civil Appeal Nos. 2471-2473 of 2015.

Summary order. Delay condoned; notice issued returnable within six weeks; matter tagged with Civil Appeal D. No. 1366 of 2015.

Summary order. Delay condoned; leave granted; appeal to be heard along with Civil Appeal Nos. 3693-3748 of 2016.

Summary order. Delay condoned; appeals admitted and tagged with Civil Appeal Nos. 3987-3988 of 2009.

Export of services - refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - Rule 3(iii) of the Export of Services Rules, 2005 - centralised invoicing, ISD credit distribution and Rule 7 of the CENVAT Credit Rules, 2004 - definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 - admissibility of credit on rent-a-cab, convention and club or association services for periods prior to 01.04.2011

Export of services - Rule 3(iii) of the Export of Services Rules, 2005 - refund of accumulated CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - Services provided by the appellant to Qualcomm, USA qualify as export of service and entitle the appellant to refund of accumulated CENVAT credit for the period in dispute. - HELD THAT: - The Tribunal examined the service agreement describing marketing, promotional, technical guidance, support and related services furnished to Qualcomm, USA and observed that the department had in earlier and subsequent periods accepted identical claims as export under Rule 3(iii) of the Export of Services Rules, 2005. No contrary appellate determination was placed on record. On that factual and precedential backdrop the Tribunal held that denial of cash refund of accumulated CENVAT credit for the interregnum period was unsustainable and the refund claims must be allowed. The Tribunal thus applied the settled principle that identical transactions previously treated as exports and not subsequently reversed by an appellate forum cannot be disallowed in the interregnum without fresh adjudicatory basis. [Paras 9]

Denial of refund on the ground that the services were not export services set aside; refund allowed.

Centralised invoicing, ISD credit distribution and Rule 7 of the CENVAT Credit Rules, 2004 - CENVAT credit of service tax paid on input services availed at the Delhi office is admissible at the Mumbai office where centralised billing and ISD distribution operated. - HELD THAT: - The Tribunal noted that the appellant operated a centralised accounting and billing system from Mumbai, raised consolidated invoices from Mumbai, and the Delhi unit obtained ISD registration and distributed credit to Mumbai under Rule 7. Having earlier held in the appellant's own case that such credit was admissible, the Tribunal found denial of credit on the ground that no output service was rendered from Delhi to be incorrect and directed grant of refund on this count. [Paras 9]

Denial of credit attributable to the Delhi unit reversed; credit/refund admissible.

Definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004 - admissibility of credit on rent-a-cab, convention and club or association services for periods prior to 01.04.2011 - Credit on input services such as rent-a-cab, convention and club or association services availed prior to 01.04.2011 is admissible as 'input service' under Rule 2(l) of the CENVAT Credit Rules, 2004. - HELD THAT: - Relying on earlier Tribunal precedents which have held that the specified services fall within the scope of 'input service' under Rule 2(l) for periods prior to 01.04.2011, the Tribunal held such input credits admissible. The Tribunal therefore allowed the claims for credit in respect of those input services for the period in question. [Paras 10]

Claims for credit on the specified input services allowed.

Final Conclusion: Impugned orders denying refund and credits are set aside; appeals allowed with consequential relief as per law.

Classification of activity as Site Formation and Clearances, Excavation and Earth moving and Demolition services - supply of earth moving machines on rental basis - effective control and possession - classification as supply of tangible goods - onus on revenue to adduce evidence to controvert adjudicating authority's findings

Classification of activity as Site Formation and Clearances, Excavation and Earth moving and Demolition services - supply of earth moving machines on rental basis - effective control and possession - Whether the respondent assessee's activity fell within the taxable service of site formation, excavation and earth moving services or amounted to supply of earth moving machines on rental basis - HELD THAT: - The Tribunal upheld the adjudicating authority's conclusion that the assessee supplied excavators and other earth moving equipment on hire and that the hirers arranged manpower and operated the machines themselves, so that physical possession and effective control remained with the clients. That factual classification was reached after examination of agreements, invoices and related documents. The Department did not produce evidence to rebut the adjudicating authority's finding that the activity was rental of machinery and not the provision of site formation or excavation services. [Paras 5]

The activity was held to be supply of earth moving machines on rental basis and not taxable as site formation, excavation and earth moving services.

Classification as supply of tangible goods - effective control and possession - Whether the amounts received by the respondent assessee could be classified as consideration for supply of tangible goods - HELD THAT: - The adjudicating authority considered whether the transactions amounted to sale of tangible goods but found that possession and effective control of the machines were with the hiring parties, and therefore the transactions could not be treated as supply of tangible goods. The Tribunal found no material placed by the Department to disturb this conclusion reached on documentary verification. [Paras 5]

The receipts were not classified as consideration for supply of tangible goods.

Final Conclusion: The appeal by the Department is dismissed; the Order in Original dropping the demand except for a small confirmed amount is upheld, the Revenue having failed to rebut the adjudicating authority's documentary findings on classification and control.

Failure to comply with summons and pre-assessment notice - delay and laches in seeking writ relief - input tax credit reversal and penalty

Failure to comply with summons and pre-assessment notice - delay and laches in seeking writ relief - input tax credit reversal and penalty - Whether the reassessment order reversing Input Tax Credit and levying penalty could be interfered with in writ jurisdiction where the assessee failed to respond to summons and pre assessment notice and delayed filing the writ petition. - HELD THAT: - The Court found on the admitted facts that summons and a pre assessment notice were issued and the petitioner did not respond to either. A substantial period (about one and a half years) elapsed in the course of those proceedings without any reply from the petitioner. The impugned reassessment order, which reversed ITC and imposed a penalty, was passed on 10.04.2018, and the writ petition was filed only on 12.04.2019. The petitioner's belated explanation that one partner was indisposed was unsupported and unacceptable, particularly since all partners share equal responsibility. Given the petitioner's recalcitrance in the statutory proceedings and the unexplained delay in seeking equitable relief, there was no basis for the Court to interfere with the impugned order. [Paras 10, 11, 13, 14]

Writ petition dismissed for want of merit; no interference with reassessment order reversing ITC and imposing penalty.

Final Conclusion: The writ petition is dismissed for failure to participate in mandatory assessment proceedings and for inordinate delay; no order as to costs.

Input Tax Credit - concessionary nature of Input Tax Credit - factual satisfaction of vendor tax payment - onus of proof relating to tax payment by vendors - perverse finding

Input Tax Credit - concessionary nature of Input Tax Credit - factual satisfaction of vendor tax payment - onus of proof relating to tax payment by vendors - Whether the Tribunal was justified in disallowing Input Tax Credit when the appellant produced tax invoices and recorded them in its books of account. - HELD THAT: - The Tribunal confirmed the finding of the First Appellate Authority that, on the material placed before it, evidence that the vendors had paid tax to the State was not forthcoming in respect of certain vendors. The First Appellate Authority had undertaken enquiries including deputing an inspector to vendors and examining Mahvikas records, and on that basis granted relief to the extent it was satisfied taxes had been paid. The Court noted that the appellant made no independent effort to procure vendor records evidencing payment and that the entitlement to ITC is concessionary and not an absolute right, as earlier held by this Court. The impugned order involved primarily a concurrent finding of fact by the Tribunal and the First Appellate Authority that the requisite proof of vendor tax payment was lacking in several instances; such a finding was not shown to be perverse. [Paras 7, 9, 10]

The Tribunal's factual conclusion upholding disallowance of the claimed Input Tax Credit was not perverse and does not raise a substantial question of law; the appeals are dismissed.

Final Conclusion: The appeals against the Tribunal's common order for the Financial Years 2005-06 and 2006-07 are dismissed; the Tribunal's concurrent factual finding that proof of vendor tax payment was not established is upheld and thus the disallowance of Input Tax Credit does not give rise to a substantial question of law.

Reward for information leading to tax recovery - irrevocability of tax recovery - pendency of appeals and references - contempt for non-compliance with court orders - verification of finality of proceedings

Contempt for non-compliance with court orders - irrevocability of tax recovery - pendency of appeals and references - Whether the Contempt Petition for non-payment of the reward can be sustained in view of pending appeals and references and the respondents' affidavit that recoveries are not irrevocable - HELD THAT: - The Court accepted the statement on affidavit of the Joint Commissioner that the quantified reward is a mere computation contingent upon final tax recoveries, and that parts of the recovery remain subject to first or second appeals or references to the High Court. The affidavit expressly recorded that if appeals or references are decided in favour of the assessee, previously enforced recoveries may be refunded, and therefore the amount cannot be treated as irrevocably recovered. On that basis the Court found no disobedience of its earlier directions and concluded that contempt proceedings were not maintainable at this stage. [Paras 3, 4, 5]

Contempt Petition closed for want of disobedience as the reward cannot be released while tax recoveries remain contestable on appeal or reference.

Verification of finality of proceedings - pendency of appeals and references - Provision of information about pending appeals and the procedure if any proceedings attain finality - HELD THAT: - Although the contempt petition was closed, the Court directed the respondents to furnish details of tax appeals and references pending before various authorities and courts by a specified date to enable verification of which matters, if any, have attained finality. The petitioner was permitted to seek further information from the authority if required, and to bring to the authority's notice any proceedings that have become final; if reward in respect of such finalized proceedings is not paid, the petitioner may apply in the pending writ petition. [Paras 6, 7]

Respondents directed to provide details of pending appeals and references by 15th January, 2019; petitioner may seek further information or apply if any proceedings are shown to be final.

Final Conclusion: Contempt petition disposed of: closed for lack of disobedience on the ground that tax recoveries are not irrevocable due to pending appeals/references; respondents ordered to furnish details of pending appeals/references by 15 January 2019 and petitioner permitted to pursue further information or apply if any matters attain finality.

Quashing of criminal proceedings as abuse of process - Exercise of jurisdiction under Article 227 and inherent power under Section 482 CrPC - Prima facie satisfaction for issuance of process - Concurrent civil remedy and bar to criminal prosecution - Offence under Section 138 of the Negotiable Instruments Act in counterblast context

Quashing of criminal proceedings as abuse of process - Concurrent civil remedy and bar to criminal prosecution - Proceedings in the private complaint against the petitioners were to be quashed as an abuse of the process of law. - HELD THAT: - The Court found on the material before it that the disputed cheques had been dishonoured for insufficiency of funds and that the complainant's subsequent letters and police complaint were made only after dishonour. There was no prima facie evidence of fabrication of documents or that the accused had misappropriated amounts by fabricating cheques; the allegations of forgery and fabrication appeared to be afterthoughts. Civil proceedings between the parties were pending and the claims as to sale, delivery and liability were the subject of those suits. Several accused were impleaded and the allegations against them were vague. In these circumstances continuation of the criminal prosecution would amount to an abuse of process and the extraordinary jurisdiction under Article 227 of the Constitution and the inherent power under Section 482 CrPC justified quashing the complaint insofar as the petitioners were concerned. [Paras 13, 14, 15]

Proceedings against the petitioners in the impugned complaint were quashed and set aside as an abuse of process.

Prima facie satisfaction for issuance of process - Exercise of jurisdiction under Article 227 and inherent power under Section 482 CrPC - The Magistrate's order issuing process against the petitioners was inappropriate and amounted to mechanical issuance of process. - HELD THAT: - The Metropolitan Magistrate had issued process on a broad range of offences against all accused on the ground of sufficient ground to proceed. On scrutiny, the Court observed that material relied upon by the complainant did not establish the essential ingredients of the offences alleged against the petitioners and that several documents and events relied upon occurred after the cheques were dishonoured. Given the absence of a clear prima facie case against the petitioners and the mechanical character of the issuance of process, the High Court found that the issuance of process warranted interference under its supervisory and inherent jurisdiction. [Paras 4, 14]

The order issuing process against the petitioners was set aside as having been issued mechanically and without requisite prima facie satisfaction.

Final Conclusion: Criminal Writ Petitions Nos. 763/2001, 764/2001 and 836/2001 are allowed; the proceedings in Complaint No.10/S/2001 and the order issuing process therein are quashed and set aside insofar as they relate to the petitioners.