TaxTMI Updates e-Newsletter
Jun 17,2021

Transfer of right to use - renting of motor vehicle - hiring of motor vehicle - effective possession and effective control - rental services of transport vehicles - Tariff Heading 9966 - effect of amendment w.e.f. 13.10.2017 on applicable rates - input tax credit and rate choice - residuary entry and preferring specific tariff entries

Transfer of right to use - renting of motor vehicle - effective possession and effective control - Tariff Heading 9966 - Whether the applicant's activity of operating mini AC buses for BEST is exempt as 'services by way of giving on hire to a state transport undertaking' under Notification No.12/2017-CT(R). - HELD THAT: - On the facts of the agreement the applicant owns the buses and provides drivers and maintenance, but BEST controls deployment, routes, schedules, fleet specifications and effectively directs operation; consideration for the service is charged to BEST (not passengers) on a per-kilometre basis. The Authority concludes that there is transfer of the right to use the buses to BEST by effective possession and control, and therefore the transaction constitutes renting of motor vehicles under the GST scheme rather than a passenger-transport service to the public. Because the recipient of the supply is BEST and the activity falls within renting of vehicles, Notification No.12/2017-CT(R) (exemption as hire to a State Transport Undertaking) is not attracted to the subject activity. [Paras 5]

The service is not exempt under Notification No.12/2017-CT(R); answered in the negative.

Renting of motor vehicle - Tariff Heading 9966 - effect of amendment w.e.f. 13.10.2017 on applicable rates - input tax credit and rate choice - Whether the service would attract GST at 12% under the amended Sr. No.10 of Notification No.11/2017-CT(R) (as amended w.e.f. 13.10.2017) - 'renting of any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient'. - HELD THAT: - The agreement provides for payment on kilometer basis which includes fuel component in the service charges; the amended Sr. No.10 of Notification No.11/2017-CT(R) (w.e.f. 13.10.2017) classifies renting of passenger vehicles where fuel cost is included as chargeable at reduced rates depending on availment of input tax credit. Applying the amendment to the facts, the Authority finds the applicant's activity falls within the entry for renting where fuel is included; consequently, from 13.10.2017 the applicable rate is 12% (subject to the condition regarding input tax credit as set out in the notification). [Paras 5]

From 13.10.2017 the service is taxable at 12% under the amended Sr. No.10 of Notification No.11/2017-CT(R), subject to the notification's conditions on input tax credit.

Rental services of transport vehicles - Tariff Heading 9966 - effect of amendment w.e.f. 13.10.2017 on applicable rates - Whether the service would attract GST at 18% under the original Sr. No.10 of Notification No.11/2017-CT(R) prior to its amendment on 13.10.2017. - HELD THAT: - Prior to the amendment effective 13.10.2017, Sr. No.10 of Notification No.11/2017-CT(R) treated rental services of transport vehicles with or without operators as taxable at the higher rate (18% as applied by the Authority). The Authority therefore holds that for the period up to 13.10.2017 the applicant's rental services (being transport vehicle rentals with operators) attracted the pre-amendment rate. [Paras 5]

The service attracted GST at the pre-amendment rate (18%) up to 13.10.2017.

Final Conclusion: The Authority holds that the applicant's operation of mini AC buses for BEST constitutes renting of motor vehicles (transfer of right to use) and is not exempt under Notification No.12/2017-CT(R). The service attracted GST at the pre-amendment rate (18%) until 13.10.2017, and, pursuant to the amendment effective 13.10.2017, the service is chargeable at 12% (subject to the notification's input tax credit conditions) from that date.

Strict construction of exemption notifications - Condition precedent of production of prescribed certificate for concessional rate - Validity of pre GST DSIR registration certificates for claiming GST concessions - Applicability of concessional rate only from date of notification

Condition precedent of production of prescribed certificate for concessional rate - Strict construction of exemption notifications - Entitlement to concessional rate of tax under Notification Nos.45/2017 (C.T./S.T. Rate) and 47/2017 (I.T. Rate) depends on satisfaction of all conditions specified in those notifications, including production of the prescribed certificates. - HELD THAT: - The Authority examined the notifications and the conditions in column (4) thereof and held that the exemption is available only when all prescribed conditions are satisfied. The notifications mandate production of specific certificates at the time of supply; exemption provisions must be construed strictly and conditions cannot be relaxed or read in where not provided. Consequently, entitlement to the reduced rate (2.5% CGST and SGST each or 5% IGST) is conditional on production of the certificates as mandated by the relevant notifications. [Paras 5]

Exemption under the impugned notifications is available only upon satisfaction of all conditions specified therein, including production of the prescribed certificates.

Validity of pre GST DSIR registration certificates for claiming GST concessions - Strict construction of exemption notifications - Certificates issued under the pre GST/erstwhile Central Excise or Customs notifications do not automatically entitle the holder to concessional GST unless the certificates satisfy the requirements of the GST era notifications. - HELD THAT: - The applicant relied on DSIR registration certificates issued under earlier notifications (e.g., Notification No.51/96 Cus and Central Excise Notification No.10/97 CE). The Authority observed that some submitted certificates explicitly reference erstwhile Central Excise/Customs notifications and, where a certificate expressly confines eligibility to an earlier regime, it cannot be extended to claim exemption under the GST notifications. Mere production of an unamended pre GST certificate is not automatically sufficient to claim the GST concessional rate unless it meets the documentary requirements of the current notifications. [Paras 5]

Pre GST DSIR certificates that expressly limit entitlement to erstwhile notifications are not sufficient to claim exemption under the GST notifications; current notification requirements must be met.

Effectiveness of concessional rate from date of notification - Concessional GST rate under the said notifications applies only with effect from the date of issue of those notifications (14.11.2017 / applicable from 15.11.2017 as per Explanation). - HELD THAT: - The Authority noted that the notifications (and Explanation 2 to Notification No.47/2017) tie the concessional exemption to the GST notifications and their effective date. Therefore, even where all conditions are satisfied, the reduced rate is available only from the date the notifications became operative. [Paras 5]

Reduced rate under the impugned notifications is available only from the notifications' effective date (14.11.2017 / applicable from 15.11.2017).

Condition precedent of production of prescribed certificate for concessional rate - Applicant is not entitled to a blanket exemption; eligibility was examined only in respect of the specific certificates produced and found acceptable in four cases. - HELD THAT: - The Authority declined to grant a blanket ruling in favour of the applicant in the absence of production of the necessary certificates in each case. The files contained nine specimen certificates; several had expired and one explicitly referred only to an earlier Central Excise notification. On examination, only four certificates met the requirements of the impugned notifications; accordingly, the Authority limited the favourable finding to those specific supplies for which complete and proper certificates had been produced. [Paras 5]

No blanket entitlement; applicant may charge the concessional rate only in respect of supplies supported by proper certificates satisfying the notifications' conditions (four identified cases).

Final Conclusion: The applicant may apply the concessional GST rate (2.5% CGST and 2.5% SGST or 5% IGST) only where all conditions of Notification Nos.45/2017 (C.T./S.T. Rate) and 47/2017 (I.T. Rate) are satisfied by production of the prescribed certificates; the Authority found such compliance in four specific cases and denied a blanket entitlement for supplies supported by expired or pre GST certificates that do not meet the current notification requirements.

Services by way of any activity in relation to a function entrusted to a Municipality under Article 243W / Panchayat under Article 243G - Local authority treated as neither a supply of goods nor a supply of services under Notification No. 14/2017 - Applicability of exemption entries in Notification No. 12/2017 (including Sl. No. 4 and Sl. No. 14) - Advance ruling jurisdiction and admissibility under Section 95/97(2) of the CGST Act - Agent versus independent supplier - contractor status under GST (Section 2(5) and Section 2(105)) - Composite supply and principal supply test under Section 2(30) of the CGST Act - Exemption for supplies between Governmental/Local authorities under Sl. No. 8 of Notification No. 12/2017

Services by way of any activity in relation to a function entrusted to a Municipality under Article 243W / Panchayat under Article 243G - Local authority treated as neither a supply of goods nor a supply of services under Notification No. 14/2017 - Applicability of exemption entries in Notification No. 12/2017 (Sl. No. 14) - Classification and taxability of specified services provided directly by the Municipal Corporation (parks, market fees daily/weekly, bays in bus-stand, cycle/scooter/auto/car stands, slaughter house fees, pay-&-use toilets, entry of vehicle in market; and locker rent and room-rental items at bus-stand and municipal lodge). - HELD THAT: - The Authority applied Notification No. 14/2017 (as amended effective 26.07.2018) which treats activities in relation to functions entrusted to a Municipality/Panchayat, when undertaken by a local authority as public authority, as neither supply of goods nor supply of services. On examining the nature of each activity against the Eleventh and Twelfth Schedule entries, the Authority held that maintenance of parks, provision of market facilities (daily/weekly), fees for bays in bus-stand, provision of parking stands for cycle/scooter/auto/four wheelers, slaughter house facilities, fees for pay-&-use toilets and entry of vehicle in the market are activities in relation to functions under Articles 243G/243W and thus fall under Notification No. 14/2017 and are not taxable. Conversely, providing locker facilities and letting rooms for temporary stay (in bus-stand and travellers' bungalows/municipal lodge) were found not to fall within the relevant entries of the Schedules; room letting was nonetheless exempt under Sl. No. 14 of Notification No. 12/2017 (value per unit Rs.1,000) on the facts, while locker rent is liable to GST. The Authority therefore separated the activities that are 'neither supply' from those that remain taxable or separately exempt under Notification No. 12/2017. [Paras 7]

Maintenance of parks, market facilities (daily/weekly), bays in bus-stand, parking stands, slaughter house facilities, pay-&-use toilets and vehicle entry in markets are not supplies when provided by the applicant as public authority (Notification No. 14/2017). Locker rent is taxable. Room rentals for temporary stay are exempt under Sl. No. 14 of Notification No. 12/2017 on the facts.

Agent versus independent supplier - contractor status under GST (Section 2(5) and Section 2(105)) - Advance ruling limited to supplies undertaken by the applicant (Section 95/103) - Whether services/activities carried out by tender contractors (SI Nos.1-13) are covered by the applicant's entitlement to exemption under Notification No. 14/2017 or otherwise; and whether contractors are agents of the Municipality for GST purposes. - HELD THAT: - The Authority examined tender documents and contracts and found that successful bidders obtain the right to collect fees/rights for specified amenities for a period and pay a fixed consideration to the Municipality. The contractors, while treated as 'public servants' under local municipal law for certain purposes, exercise control and hold possession of the transferred rights and do not merely act on behalf of the Municipality. Thus they are independent business entities, not agents within the meaning of Section 2(5). The supply by the applicant to contractors is a supply of rights; the contractors are suppliers of the services to the public under the tender conditions. Further, advance rulings may be issued only on supplies by the applicant; the Authority cannot rule on supplies undertaken by third parties. Consequently the question of applicability of Notification No. 14/2017 (or other exemptions) to supplies made by the contractors was not answered. [Paras 8]

Contractors are independent suppliers (not agents); the Authority will not decide applicability of exemption notifications to supplies made by those contractors and does not answer the question insofar as it concerns supplies by third parties.

Composite supply and principal supply test under Section 2(30) of the CGST Act - Whether the charges for road cutting (one time) and annual track rent for optical fibre cable constitute a single composite supply with 'renting of immovable property' as the principal supply (SI No. 14). - HELD THAT: - A composite supply requires two or more taxable supplies that are 'naturally bundled and supplied in conjunction with each other in the ordinary course of business' with one being the principal supply. Here, road cutting charges are a one time charge for initial laying/restoration, while annual track rent is a recurring periodic charge for occupying space alongside the road. The supplies are not ordinarily supplied in conjunction with each other as a bundled package; they differ in character and timing. Therefore the two charges do not form a composite supply with renting as principal supply, and classification by composite supply aggregation is not appropriate. [Paras 9]

Road cutting charges and annual track rent are not a composite supply; composite supply cannot be applied to classify the whole as renting of immovable property.

Advance ruling jurisdiction and admissibility under Section 95/97(2) of the CGST Act - Admissibility of the applicant's request to regularize/condone collection of tax under direct charge instead of reverse charge (SI No. 15 / Q.4). - HELD THAT: - Section 97(2) enumerates matters on which an advance ruling may be sought. The applicant's request sought retrospective regularization/condonation of a past mode of collection (treatment as technical lapse), which is not a question listed under Section 97(2). The Authority observed that such a request for regularization of past payment/collection is outside the AAR's permitted scope. The matter was accordingly held not admissible for decision by this Authority. [Paras 6]

The question seeking regularization of tax collection under direct charge in place of reverse charge is not admitted and is outside the Authority's jurisdiction to decide.

Exemption for supplies between Governmental/Local authorities under Sl. No. 8 of Notification No. 12/2017 - Whether renting of immovable property by the applicant to (i) pure State/Central Government offices, (ii) co operative societies/transport corporations, and (iii) nationalised banks is exempt under Sl. No. 8 of Notification No. 12/2017. - HELD THAT: - Sl. No. 8 of Notification No. 12/2017 exempts services provided by Central/State/Union territory or a local authority to another Central/State/Union territory or local authority (subject to provisos). The Authority examined lease agreements and receipts and held that supplies of renting immovable property by the applicant to other Central/State Government entities or local authorities fall within this exemption and are not taxable. However, co operative societies, transport corporations and nationalised banks do not qualify as Central/State/Union/local authorities for the purpose of this entry and therefore renting to such entities is not covered by Sl. No. 8 and remains taxable. [Paras 10]

Renting of immovable property to another Central/State Government or local authority is exempt under Sl. No. 8 of Notification No. 12/2017; renting to co operative societies, transport corporations or nationalised banks is not exempt under that entry.

Final Conclusion: The Authority ruled that, when provided directly by the Municipal Corporation as a local authority acting as a public authority, specific activities (maintenance of parks, market facilities, bus bay fees, vehicle entry in markets, parking stands, slaughter house facilities, pay and use toilets) are neither supply of goods nor services under Notification No. 14/2017 and not taxable; locker rent is taxable while room rentals meeting the notified value condition are exempt under Notification No. 12/2017. The Authority declined to rule on supplies made by tender contractors (who are independent suppliers), held road cutting and track rent not to be a composite supply, refused to admit a request for regularisation of past reverse charge compliance, and held renting to other Government/local authorities exempt under Sl. No. 8 of Notification No. 12/2017 while renting to co operatives, transport undertakings and banks is not so exempt.

Confiscation of goods - release of seized goods on payment equivalent to market price - appeal under Section 107 of the CGST Act - payment condition for entertaining appeal under Section 107(6) - existence of efficacious statutory remedy as bar to writ

Confiscation of goods - appeal under Section 107 of the CGST Act - existence of efficacious statutory remedy as bar to writ - payment condition for entertaining appeal under Section 107(6) - release of seized goods on payment equivalent to market price - Writ petition against the order of confiscation and demand under the CGST Act was not entertained because an appeal under Section 107 is the appropriate statutory remedy; the petitioner was granted liberty to raise all contentions before the appellate authority. - HELD THAT: - The Court noted that the impugned order of confiscation and demand was passed under Section 130 of the CGST Act and that Section 107 provides an appeal against orders of the adjudicating authority. The Court observed the payment condition in Section 107(6) requiring payment of admitted amounts and a percentage of the remaining tax in dispute, and recorded reliance placed on Rule 141 which permits release of seized goods upon payment equivalent to the market price or the amount of tax, interest and penalty, whichever is lower. In these circumstances the Court treated the statutory appeal as the efficacious remedy and declined to entertain the writ, while leaving the petitioner free to pursue all available grounds before the appellate forum.

Special leave petition disposed; petitioner may pursue appeal under Section 107 of the CGST Act and raise all issues before the appellate authority; pending applications disposed.

Final Conclusion: The special leave petition seeking relief against the confiscation and demand was disposed of on the ground that the statutory appeal under Section 107 of the CGST Act is the proper remedy; the petitioner is at liberty to raise all contentions before the appellate authority and all pending applications stand disposed.

Cancellation of bail - anticipatory bail - supervening circumstances - co-operation with investigation - tampering with evidence - economic offences and gravity of offence

Cancellation of bail - anticipatory bail - supervening circumstances - co-operation with investigation - tampering with evidence - Validity of the order granting anticipatory bail to the respondents and whether that bail should be cancelled - HELD THAT: - The court applied the established principle that cancellation of bail already granted is permissible only upon the emergence of cogent, overwhelming or supervening circumstances rendering continued bail inimical to a fair trial. Reliance was placed on the distinction between rejection of bail and cancellation of bail and on guidelines in Dolat Ram, holding that cancellation requires demonstration of interference with the administration of justice, evasion of process, abuse of bail or similar supervening factors. The petitioner alleged non-cooperation, involvement of respondents in procuring fake input tax credit and risk of tampering with evidence; however the record showed that the respondents had appeared pursuant to summons, cooperated with the investigation, and their detailed statements were recorded subsequently. No material was produced showing attempts to tamper with evidence, influence witnesses, flight risk or misuse of bail. The court observed that interim deposit and the respondents' cooperation militated against a finding of supervening circumstances. As the petitioner failed to establish any of the exceptional grounds necessary for cancellation, the order granting anticipatory bail could not be disturbed. [Paras 19, 20, 21, 22]

Petition to cancel anticipatory bail dismissed; impugned order granting anticipatory bail stands.

Final Conclusion: The High Court dismissed the petition seeking cancellation of anticipatory bail, holding that the petitioner failed to establish supervening circumstances (such as non-cooperation, tampering with evidence, or flight risk) necessary to revoke bail already granted, and therefore the anticipatory bail order is not liable to be set aside.

Anticipatory bail - Power of arrest under GST and exercise of coercive measures - Pre condition of adjudication / issuance of show cause notice before launching prosecution - Habitual offender exception to pre adjudication coercive action - Cooperation with investigation and absence of risk of tampering or absconding - Freezing and conditional defreezing of bank accounts as a revenue protective measure

Anticipatory bail - Power of arrest under GST and exercise of coercive measures - Pre condition of adjudication / issuance of show cause notice before launching prosecution - Habitual offender exception to pre adjudication coercive action - Cooperation with investigation and absence of risk of tampering or absconding - Whether the petitioners are entitled to anticipatory bail pending investigation into alleged wrongful availment of ITC where adjudication is not complete and petitioners have cooperated with investigation and have no prior antecedents. - HELD THAT: - The Court applied established authorities holding that coercive measures including arrest should be exercised with circumspection and, as a rule, prosecution under penal provisions arising from the GST code ought to follow determination of liability by the adjudicatory process (issuance of show cause notice and completion of assessment), save in exceptional cases such as where an accused is a habitual evader or there is credible material showing likelihood of absconding, tampering with evidence or influencing witnesses. The petitioners had no prior criminal antecedents, had repeatedly joined the investigation, their premises and employees had been examined, key documents were in departmental custody, bank accounts had been frozen and partially unfrozen on deposit, and the department did not assert risk of flight, tampering or non cooperation. The main accused has been arrested and is on bail and show cause notices have been issued to certain persons; no final adjudication or show cause notice has been issued finally fixing liability of the petitioners. Balancing the need to protect the integrity of investigation with prevention of harassment and unjustified detention, and applying the illustrative factors articulated by the Punjab & Haryana High Court and other High Courts, the court concluded that custodial interrogation was not warranted in the facts of this case and anticipatory bail should be granted subject to conditions. [Paras 13, 14, 15]

Anticipatory bail granted; in the event of arrest petitioners to be released on furnishing personal bond of Rs. 5,00,000 each with one surety of like amount, subject to conditions including availability for interrogation, no inducement or threat to witnesses, deposit of passports/permission for travel and automatic rejection of protection on failure to appear before proper officer.

Final Conclusion: Anticipatory bail allowed on conditions because investigation relates to 2018, petitioners have cooperated, there is no allegation of prior habitual evasion or risk of tampering or absconding, and adjudication fixing liability has not been completed; custodial arrest was held unwarranted in the circumstances.

Royalty - meaning under Article 12 of the DTAA - Business profits and Permanent Establishment (PE) under Article 7 and Article 5 of the DTAA - Explanation 4 to section 9(1)(vi) - prospective effect - Most beneficial rule under section 90(2) of the Act

Royalty - meaning under Article 12 of the DTAA - Explanation 4 to section 9(1)(vi) - prospective effect - Whether the receipt from sale of software/license amounting to Rs. 2,42,02,485 for A.Y. 2009-10 is taxable as 'Royalty' under Article 12 of the DTAA and/or under section 9(1)(vi) of the Act. - HELD THAT: - The Tribunal applied the Supreme Court's reasoning in Engineering Analysis Centre of Excellence Pvt. Ltd., holding that copyright ownership is distinct from ownership of the physical medium and that licences which merely authorise end users non exclusively to use software do not amount to parting with copyright. The Assessing Officer's reliance on Explanation 4 to section 9(1)(vi) was examined in light of the Supreme Court's conclusion that Explanation 4 (inserted by Finance Act 2012) is not clarificatory but expansive and therefore prospective; the assessment year in issue is 2009 10. On the facts, the receipt arose from sale of software/license without transfer of copyright. Applying Article 12(3)'s definition of 'royalties' and the Supreme Court's precedent, the Tribunal held the receipt did not constitute 'royalty' under the DTAA and could not be taxed as such under the Act for A.Y. 2009 10. [Paras 5, 6, 7]

Amount of Rs. 2,42,02,485 received on sale of software/license is not taxable as 'Royalty' for A.Y. 2009 10 and is held in favour of the assessee.

Business profits and Permanent Establishment (PE) under Article 7 and Article 5 of the DTAA - Most beneficial rule under section 90(2) of the Act - Whether the receipt from sale of software/license amounting to Rs. 86,05,13,407 for A.Y. 2014-15 is taxable as 'Royalty' or as 'Business profits' notwithstanding absence of a PE, and the applicability of the Act vis a vis the DTAA. - HELD THAT: - The Tribunal, following its reasoning in the earlier year, held that the software licence receipts do not amount to 'royalties' under Article 12 of the DTAA. As to taxation as 'Business profits' under Article 7, the Tribunal noted that Article 7 requires the taxpayer to have a PE in India under Article 5; the assessee did not have a PE (a fact recorded by the DRP). Although Explanation 4 to section 9(1)(vi) is applicable to this assessment year, section 90(2) of the Act mandates that where a DTAA applies, the provisions more beneficial to the assessee shall prevail. The DTAA's position was more beneficial; accordingly the receipts were not taxable in India either as 'royalty' or as 'business profits'. [Paras 10, 11]

Amount of Rs. 86,05,13,407 received on sale of software/license is not chargeable to tax in India for A.Y. 2014 15; appeal allowed.

Final Conclusion: Appeal for A.Y. 2009 10 is partly allowed by holding the disputed software licence receipt not taxable as 'royalty'; appeal for A.Y. 2014 15 is allowed by holding the software licence receipt not taxable as 'royalty' or as 'business profits' in view of absence of PE and the application of the more beneficial DTAA.

Remand for de novo adjudication - Allowing appeal for statistical purposes - Section 50C - valuation for capital gains - Agricultural land classification and Section 2(14) - Trading in land versus investment - intention and relevant factors

Remand for de novo adjudication - Section 50C - valuation for capital gains - Agricultural land classification and Section 2(14) - Trading in land versus investment - intention and relevant factors - Appeal remanded to the Assessing Officer for fresh adjudication on the disputed receipt of sale consideration and related capital gains consequences, including valuation under Section 50C and classification of land. - HELD THAT: - The Tribunal noted that a dispute concerning receipt of sale consideration by the assessee was pending before the Civil Court and that the resolution of that civil dispute would affect the tax issues in controversy. By consent of the parties, the Tribunal remanded the matter to the Assessing Officer for de novo adjudication to decide the disputed issues in accordance with law, taking into account the final outcome of the Civil Court proceedings as they evolve. The Tribunal directed the assessee to inform the Assessing Officer of the Civil Court's progress and ordered that the Assessing Officer reassess the facts and law (including any question of valuation under Section 50C, the characterisation of land as agricultural or non agricultural under principles relevant to Section 2(14), and the assessment of whether dealings amounted to trading rather than investment by reference to frequency, volume, books, funds used, holding period and intention) in light of the Civil Court's findings. The Tribunal did not undertake a final adjudication on the merits of these tax issues and therefore remitted them for fresh consideration by the Assessing Officer.

Matter remitted to the Assessing Officer for fresh adjudication in accordance with law, with directions to consider the Civil Court's final outcome; grounds allowed for statistical purposes.

Final Conclusion: The appeal is allowed for statistical purposes and the dispute concerning receipt of sale consideration and the attendant capital gains issues (including valuation under Section 50C and land classification) is remitted to the Assessing Officer for de novo adjudication in accordance with law, having regard to the eventual decision of the Civil Court.

Treatment of advance payments and work-in-progress for recognition of contract receipts - reconciliation of contractual payments shown in TDS certificates with books of account - work-in-progress/closing stock is not an item of income under revenue cost matching principle - TDS credit linkage to assessable income under sec.199(3) read with Rule 37BA - remand for fresh examination and verification by assessing officer

Reconciliation of contractual payments shown in TDS certificates with books of account - Whether the difference between contractual payments shown in TDS certificates and turnover disclosed in profit and loss account is exigible to tax in the year under consideration or can be verified by reconciliation with books of account. - HELD THAT: - The Tribunal held that the assessing officer cannot treat the entire contractual payments shown in TDS certificates as gross receipts for the year without verifying whether those payments have been accounted as income, advances or work-in-progress in the assessee's books. The assessee reconciled receipts from one deductor (M/s Iconica Constructions) by showing invoiced sales and advance balance; similar party-wise reconciliations are required for the remaining four deductors. The Tribunal found the summary reconciliation submitted by the assessee to be inadequate and directed that the assessee be given one more opportunity to furnish individual reconciliation statements and ledger copies so that the AO can examine how each payment is reflected in the books before taking a view on assessability of the difference. [Paras 11, 12, 15, 19]

Remanded to the assessing officer for fresh examination after the assessee furnishes party-wise reconciliation statements and relevant ledger copies.

Work-in-progress/closing stock is not an item of income under revenue cost matching principle - Whether the amount of closing work-in-progress constitutes income offered by the assessee for the year. - HELD THAT: - The Tribunal explained that closing work-in-progress (analogous to closing stock) is credited to the profit and loss account under the revenue cost-matching principle to neutralise excess charge of costs and does not itself constitute income. The Tribunal illustrated that closing stock merely offsets purchases charged to profit and loss so that only the cost of goods or services consumed in the year is allowed as deduction. Applying this principle, the Tribunal held that the assessee's claim that closing WIP is an item of income is incorrect and cannot be treated as such. [Paras 13, 14]

Work-in-progress/closing stock cannot be treated as income in the year; it is not an item of income but an accounting adjustment under the cost-matching principle.

TDS credit linkage to assessable income under sec.199(3) read with Rule 37BA - Extent and timing of allowance of TDS credit where the assessee has claimed credit of TDS shown in certificates but corresponding contract receipts are not disclosed as income in the year. - HELD THAT: - The Tribunal noted the statutory/administrative principle that TDS credit is linked to the year in which the corresponding income is assessable and that Rule 37BA(3) and section 199(3) permit deferral of TDS credit to the year in which the income is offered. The Tribunal observed the Revenue's contention that TDS credit should be allowed proportionately to the amount of contractual receipts recognized as income in the year and that balance credit may be allowed when the receipts are offered in subsequent years. However, in view of the assessee's contention and precedent reliance, the Tribunal declined to decide the precise extent of TDS credit entitlement on the record before it and left the question open for the assessing officer to decide after examining the reconciliations and other material. [Paras 8, 16, 17, 18, 19]

Left open and remitted to the assessing officer to determine the appropriate allowance of TDS credit in accordance with law after fresh examination.

Final Conclusion: The order of the CIT(A) is set aside and the matter is remitted to the assessing officer for fresh examination: the assessee shall furnish party-wise reconciliation statements and ledger copies; the AO shall examine those reconciliations (and any other information) and decide the assessability of the disputed receipts and the correct allowance of TDS credit in accordance with law. The appeal is treated as allowed for statistical purposes.

Applicability of section 43B to tax liabilities not claimed as deduction - Deduction "otherwise allowable" - requirement of claim or debit to Profit & Loss account - Construction of fiscal taxing provisions strictly - Mercantile system of accounting and treatment of collected taxes

Applicability of section 43B to tax liabilities not claimed as deduction - Mercantile system of accounting and treatment of collected taxes - Whether outstanding service tax liability not routed through Profit & Loss account and not claimed as a deduction is liable to be disallowed by applying section 43B. - HELD THAT: - The Tribunal examined whether the words "a deduction otherwise allowable" in section 43B attract an addition where the assessee has not debited the service tax to the Profit & Loss account nor claimed it as a deduction. The Assessing Officer disallowed the unpaid service tax balance and the CIT(A) confirmed the disallowance. The assessee's case was that service tax collections and payments were maintained as a balance-sheet item and not charged to the Profit & Loss account; therefore no deduction was ever claimed. The Tribunal noted authorities discussed by coordinate benches and High Courts, including Chowringhee Sales Bureau , Knight & Frank (India) Pvt. Ltd. and Noble & Hewitt (I) Pvt. Ltd. , and analysed their applicability in the context of section 43B. While the Supreme Court in Chowringhee held that sales-tax collected formed part of trading receipts and, under the mercantile system, an estimated liability could be deducted, section 43B was enacted later and operates differently: it postpones allowance of deductions "otherwise allowable" until actual payment. Where no deduction has been claimed because the amount was neither debited to P&L nor treated as an expense, there is nothing "otherwise allowable" which section 43B can postpone. The Tribunal relied on the reasoning in Noble & Hewitt and coordinate decisions (including N.R. Kumaraswamy and SDCE Projects ) that, if an item is not claimed as a deduction under the mercantile system (i.e., not routed through P&L), section 43B does not get attracted. Applying that principle, the Tribunal held that outstanding service tax which was shown only as a balance-sheet liability and not claimed as deduction could not be added back under section 43B, and directed deletion of the addition. [Paras 7, 8, 10, 11, 13]

Outstanding service tax liability not debited to Profit & Loss account and not claimed as deduction is not liable to be disallowed under section 43B; impugned addition deleted.

Final Conclusion: The appeal is allowed: the Tribunal set aside the CIT(A)'s order and directed deletion of the addition under section 43B in respect of the outstanding service tax for AY 2012-13; the appeal against the rectification order was dismissed as infructuous.

Penalty under Section 271(1)(c) - furnishing inaccurate particulars of income - survey under Section 133A - estimation of income based on undisputed survey facts - onus under Explanation 1 to Section 271(1)(c)

Penalty under Section 271(1)(c) - furnishing inaccurate particulars of income - estimation of income based on undisputed survey facts - onus under Explanation 1 to Section 271(1)(c) - Whether the penalty levied under Section 271(1)(c) is sustainable where the Assessing Officer computed additional school fee by annualising month wise figures recorded during a survey and the assessee failed to produce a bona fide and reasonable explanation supported by evidence. - HELD THAT: - The Tribunal held that the Assessing Officer's computation of annual school fee by multiplying the one month figures recorded during the survey by 12 was founded on undisputed factual material - namely the number of students and fee per student as recorded during survey proceedings. The assessee did not produce evidence to show non receipt of fee or particulars to rebut those facts. While defaults or dropouts might affect actual receipts, such facts had to be placed on record by the assessee to qualify as specific deductions; mere unsupported explanations were neither bona fide nor reasonable. Under Explanation 1 to Section 271(1)(c) the primary onus to furnish a bona fide explanation lies on the assessee and, where the Assessing Officer is not satisfied, the burden to produce contrary material lies on the assessee. The Tribunal distinguished authorities relied upon by the assessee on the ground that those cases involved different factual matrices (for example, issues of disallowance under Section 14A or trading additions after rejection of books), whereas in the present case the addition was based on undisputed survey findings rather than speculative estimation. Having affirmed the addition in the quantum proceedings and noting absence of any new material from the assessee to contradict the assessed computation, the Tribunal concluded that the discrepancy amounted to furnishing inaccurate particulars of income and sustained the penalty. [Paras 6]

Penalty under Section 271(1)(c) confirmed; appeal dismissed.

Final Conclusion: The Tribunal upheld the confirmation of penalty under Section 271(1)(c) for AY 2007-08, concluding that the addition was based on undisputed survey facts, the assessee failed to furnish a bona fide, evidence based explanation, and therefore the discrepancy amounted to furnishing inaccurate particulars of income.

Binding nature of jurisdictional High Court precedent - doctrine of stare decisis within territorial jurisdiction - faceless appeal scheme and competence of National Faceless Appeal Centre (NFAC) - interaction between 43B and 36(1)(va) regarding employees' contribution to provident fund/ESI - allowability of employees' contributions paid before due date of filing return under section 139(1)

Binding nature of jurisdictional High Court precedent - faceless appeal scheme and competence of National Faceless Appeal Centre (NFAC) - doctrine of stare decisis within territorial jurisdiction - Whether the National Faceless Appeal Centre (NFAC) is bound to follow a binding decision of the jurisdictional High Court (Allahabad High Court) in respect of appeals arising from an assessing officer within that High Court's territorial jurisdiction. - HELD THAT: - The Tribunal examined the notification establishing the Faceless Appeal Scheme and the statutory framework empowering centralised e-appeals. While NFAC operates through draft orders, review units and finalisation processes, it remains subject to the statutory appellate hierarchy. Where the assessing officer and the ITAT seat fall within the territorial jurisdiction of a particular High Court, decisions of that jurisdictional High Court are binding on authorities and tribunals operating within that territory. The Tribunal held that NFAC, although centralised and sitting in Delhi, cannot ignore a binding decision of the jurisdictional High Court in favour of a conflicting non jurisdictional High Court decision. The principles of precedent, Articles 141 and 227 jurisprudence, and settled case-law require adherence to the jurisdictional High Court's rulings by subordinate adjudicatory forums, including centralized appellate units functioning under the Scheme. Consequently NFAC was required to follow the Allahabad High Court decision applicable to the present appeals and not the contrary Gujarat High Court view relied upon in the impugned order. [Paras 38]

NFAC is bound to follow the binding decision of the jurisdictional Allahabad High Court and cannot apply a non jurisdictional High Court decision in preference where the jurisdictional High Court has decided the issue.

Interaction between 43B and 36(1)(va) regarding employees' contribution to provident fund/ESI - allowability of employees' contributions paid before due date of filing return under section 139(1) - Whether the employees' contributions to EPF/ESI paid by the assessee before the due date for filing the return under section 139(1) are allowable for deduction and whether the additions made by the AO/CIT(A) disallowing such amounts are sustainable. - HELD THAT: - The Tribunal considered the conflicting high court decisions and the statutory scheme. Applying the binding decision of the Allahabad High Court in Sagun Foundry (P) Ltd. v. CIT, the Tribunal held that where employees' contributions have been deposited by the employer before the due date for filing the return under section 139(1), such amounts are allowable in computing income and the disallowance under the processing under section 143(1)/application of section 36(1)(va) is not sustainable. The Tribunal rejected reliance on the Gujarat High Court decision to deny relief when such jurisdictional precedent in favour of the assessee exists, and concluded that the additions disallowing employees' contribution should be deleted. [Paras 38, 39]

The additions disallowing employees' contribution to EPF/ESI paid before the due date of filing the return are not sustainable; the disallowances are deleted and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals: NFAC must follow the binding decision of the jurisdictional Allahabad High Court; employees' contributions to EPF/ESI paid before the due date for filing the return under section 139(1) are allowable and the additions disallowing those amounts are deleted.

Treatment of loss on trading in derivatives and shares as non-speculative business loss - onus of proof under section 68 in respect of unexplained credits - admissibility of remand evidence and requirement of opportunity to produce creditors - confirmation and deletion of additions made as unexplained cash credits

Summary withdrawal of ground - Ground challenging small addition for late payment and auction fee was not pressed and dismissed as withdrawn. - HELD THAT: - The assessee's counsel expressly withdrew the first ground alleging erroneous addition on account of late payment and auction fee. The Tribunal recorded the withdrawal, dismissed the ground as not pressed and clarified that such withdrawal would not amount to acceptance of liability nor be used in subsequent years. [Paras 1, 2]

Ground No.1 dismissed as not pressed; withdrawal not to be treated as acceptance of liability.

Treatment of loss on trading in derivatives and shares as non-speculative business loss - Loss from trading in futures & options and share trading was held to be business loss (not speculative) and set-off/disallowance held to be without basis. - HELD THAT: - The AO had treated loss on F&O separately and classified trading as speculative; however the Tribunal noted that the assessee consistently reported share trading as business income and that the Tribunal's earlier decision in AY 2006-07 in favour of the assessee had attained finality. In view of the earlier adjudication and the assessee's regular practice of treating such transactions as business, the findings of AO and CIT(A) holding the loss to be speculative were found without basis. [Paras 3, 4, 8, 10]

Ground No.4 allowed; losses from derivative and share trading treated as business loss (not speculative) and disallowance set aside.

Onus of proof under section 68 in respect of unexplained credits - deletion of addition treated as unexplained loan from creditor - Addition made as unexplained deposit/loan from Smt. Sita Devi was deleted after satisfaction that identity, creditworthiness and genuineness were established. - HELD THAT: - The assessee produced confirmation, bank statements, evidence of source (54EC bond maturity), registered will and other documents before the AO and on appeal. The AO had not disputed the identity, creditworthiness or relationship of Smt. Sita Devi. The Tribunal found that the assessee discharged the onus under section 68 by producing requisite documents and that the addition was therefore devoid of merit. [Paras 11, 14, 16, 17, 19]

Addition of Rs. 600,528 made as unexplained loan from Smt. Sita Devi deleted; Ground No.3 allowed.

Admissibility of remand evidence and requirement of opportunity to produce creditors - remand for fresh adjudication limited to specific creditors - confirmation of additions where creditors appeared but creditworthiness not established - Additions of Rs. 6 lakhs treated partly confirmed and partly remitted: additions concerning two creditors (Smt. Sarita Goel and Sh. Arvind Goel) confirmed; matter remitted for fresh adjudication limited to four creditors (Raja Ram Ramchandra, Ajay Kumar Garg, Gauri Goyal and Devendra Goyal) so that AO/CIT(A) may examine additional evidence and afford opportunity. - HELD THAT: - The assessee submitted confirmations, bank entries, broker confirmations and other documents in respect of six lenders. The AO issued summons under section 131 and recorded statements of two creditors (Arvind Goel and Sarita Goel) whose submissions the AO found not to establish creditworthiness (cash deposits just before issuance of cheque, limited prior balances, belated ITRs). The Tribunal examined whether remand report was supplied and whether sufficient opportunity was given to produce lenders; it concluded that for four creditors the assessee had additional evidence which had not been effectively considered and that insufficient time/opportunity had been given in remand proceedings, warranting admission of that additional evidence and remand for fresh adjudication limited to those four persons. For Sarita Goel and Arvind Goel the Tribunal found sufficient opportunity had been afforded and, on merits, confirmed the additions. [Paras 36, 37, 38, 39, 40]

Ground No.2 partly allowed and partly remitted: additions confirmed as to Smt. Sarita Goel and Sh. Arvind Goel; matter remitted to CIT(A) for fresh adjudication limited to Raja Ram Ramchandra, Ajay Kumar Garg, Gauri Goyal and Devendra Goyal after affording opportunity and examining the additional evidence.

Final Conclusion: The appeal is partly allowed. Ground No.1 is dismissed as not pressed; Ground No.4 (treatment of trading losses as non-speculative business loss) and Ground No.3 (deletion of addition relating to loan from Smt. Sita Devi) are allowed; Ground No.2 is partly allowed and partly remitted - additions in respect of two creditors are confirmed while the matter is remitted for limited fresh adjudication in respect of four creditors.

Penalty for delay in filing TDS statements under Section 272A(2)(k) of the Income Tax Act, 1961 - filing of TDS statements under section 200(3) of the Income Tax Act, 1961 - reasonable cause under section 273B of the Income Tax Act, 1961 - no loss to the exchequer - technical and venial breach

Penalty for delay in filing TDS statements under Section 272A(2)(k) of the Income Tax Act, 1961 - filing of TDS statements under section 200(3) of the Income Tax Act, 1961 - reasonable cause under section 273B of the Income Tax Act, 1961 - no loss to the exchequer - technical and venial breach - Validity of levy of penalty under Section 272A(2)(k) for delayed filing of TDS statements when tax was deducted and ultimately remitted (with interest) and statements were filed belatedly. - HELD THAT: - The Tribunal noted that the assessee had failed to file four quarterly TDS statements within the prescribed dates resulting in aggregate delay. The Assessing Officer levied penalty at the prescribed per-day rate under Section 272A(2)(k), and the Commissioner (Appeals) upheld that levy for want of any plausible explanation. The assessee, however, had deducted tax at source, subsequently remitted the outstanding tax (albeit with delay) and paid interest under the relevant provisions; the TDS statements were ultimately filed. The Tribunal applied the principle that where the default is a mere technical or venial breach and there is no loss to the revenue because tax due has been paid, imposition of penalty is not warranted. The assessee's inability to file electronic TDS statements earlier was linked to the delayed payment of tax; taking into account that the entire tax liability had been discharged and interest paid, the Tribunal found the default to be a minor technical breach attracting no penalty. On these facts the Tribunal directed deletion of the penalty levied under Section 272A(2)(k). [Paras 3]

Penalty imposed under Section 272A(2)(k) deleted.

Final Conclusion: Appeal allowed; penalty levied for delayed filing of TDS statements under Section 272A(2)(k) set aside in view of deduction and eventual remittance of tax (with interest), absence of loss to the revenue and the technical, venial nature of the breach.

Deduction under section 80P(2)(a)(i) for providing credit facilities to members - deduction under section 80P(2)(d) for interest/dividend from investments with other co-operative societies - interpretation of providing credit facilities to its members under section 80P - distinction between activities attributable to members and non-members for section 80P - scope of section 80P(4) and its limited exclusion of co-operative banks - disallowance under section 40(a)(ia) and coverage by section 194A(3)(v)

Deduction under section 80P(2)(a)(i) for providing credit facilities to members - interpretation of providing credit facilities to its members under section 80P - distinction between members and nominal/associate members for attributability - Assessee entitled to deduction under section 80P(2)(a)(i) to the extent income is attributable to providing credit facilities to its members - HELD THAT: - The Tribunal examined the factual finds and the reasoning of the CIT(A) and found the Assessing Officer's conclusions-based on alleged violations and characterization as banking business-misdirected because the society is registered under the A.P. Mutually Aided Cooperative Societies Act and not the A.P. Cooperative Societies Act. The assessee's bye-laws distinguish shareholder members from associate/nominal members and the society's primary activity, on the material before authorities, is providing credit facilities to its members. Following the Supreme Court's guidance in Mavilayi Service Cooperative Bank Ltd. regarding the meaning of 'providing credit facilities to its members' and the necessity of a factual enquiry, the Tribunal accepted the CIT(A)'s factual adjustments (including exclusion of non-member receipts) and held that loans and receipts attributable to members qualify for proportionate deduction under section 80P(2)(a)(i), while profits attributable to transactions with non-members remain taxable. The Tribunal therefore allowed the assessee's appeals on this issue and dismissed the Revenue's contention that acceptance of deposits from non-members or lack of RBI licence disentitles the society from section 80P(2)(a)(i). [Paras 8, 9]

Assessee's claim of deduction under section 80P(2)(a)(i) allowed to the extent attributable to credit facilities provided to members; Revenue's appeal dismissed on this issue.

Deduction under section 80P(2)(d) for interest/dividend from investments with other co-operative societies - scope of section 80P(4) and its limited exclusion of co-operative banks - attributability of interest from cooperative banks/societies - Deduction under section 80P(2)(d) allowed in respect of interest/dividend received from other co-operative societies/banks as held by the coordinate bench and applied by the Tribunal - HELD THAT: - The Tribunal followed the coordinate-bench finding in the assessee's earlier years and the reasoning in Totgars and Mavilayi regarding section 80P. It agreed that section 80P(2)(d) covers interest/dividend derived from investments with other co-operative societies and that section 80P(4) was intended only to exclude co-operative banks that operate like commercial banks; it does not deprive a co-operative society (not being a co-operative bank) of deduction on interest received from other co-operative societies. The CIT(A)'s corrections to the AO's computations and his direction to allow deduction under section 80P(2)(d) were accepted. Consequently, the disallowance made by the AO under this head was deleted. [Paras 8, 9]

Deduction under section 80P(2)(d) allowed; the AO's disallowance deleted and Revenue's challenge dismissed.

Disallowance under section 40(a)(ia) - coverage by section 194A(3)(v) - Disallowance under section 40(a)(ia) deleted as the payments fell within section 194A(3)(v) - HELD THAT: - The Tribunal found that the impugned payment made by the society to its members was covered by the exception in section 194A(3)(v), and accordingly the disallowance under section 40(a)(ia) made by the Assessing Officer had no application. The CIT(A)'s deletion of the disallowance was sustained by the Tribunal. [Paras 10, 11]

Disallowance under section 40(a)(ia) of Rs. 1,06,658 deleted.

Final Conclusion: Following analysis of facts, bye-laws and precedents (including Totgars and Mavilayi), the Tribunal allowed the assessee's appeals for AY 2011-12 and AY 2014-15 by permitting deductions under section 80P(2)(a)(i) (to the extent attributable to members) and under section 80P(2)(d), and deleted the disallowance under section 40(a)(ia); the Revenue's appeals were dismissed.

Transfer within the meaning of Section 2(47) of the Income-tax Act - capital gains assessment - receipt of consideration / non-refundable receipt - subjudice and civil proceedings affecting tax assessment - remand for fresh adjudication

Receipt of consideration / non-refundable receipt - capital gains assessment - Confirmation of assessment to the extent of actual consideration received by the assessee - HELD THAT: - The Tribunal upheld the view that only the amount actually received by the assessee can form the basis of assessment. The record prima facie shows that only Rs. 50 lakhs was paid to the assessee and there is no material demonstrating payment of the balance consideration. The Tribunal observed that the Revenue did not contend that any further amount was received after the CIT(A)'s order. On that factual basis the Tribunal confirmed the lower authorities' action insofar as it relates to the amount actually received which is non-refundable in nature and therefore assessable. [Paras 3, 4, 5]

Action of the lower authorities is confirmed to the extent of assessment of the actual receipt of Rs. 50 lakhs.

Transfer within the meaning of Section 2(47) of the Income-tax Act - subjudice and civil proceedings affecting tax assessment - remand for fresh adjudication - Adjudication of long-term capital gains on the balance consideration remitted to the CIT(A) for fresh consideration - HELD THAT: - The Tribunal found that disputed questions of fact and the pendency of civil proceedings bearing on whether there was a valid transfer and whether the balance sale consideration was paid require fresh consideration. Although the Revenue characterised the GPA and related transactions as a transfer giving rise to capital gains, the Tribunal noted that the assessee has pleaded non-payment of the balance consideration and that the civil courts have recorded triable issues and granted limited relief. In view of these material factual disputes, the Tribunal restored the issue of long-term capital gains attributable to the balance sum for fresh adjudication by the CIT(A), directing that the CIT(A) consider the transferee's alleged failure to pay the balance and the final outcome of the civil proceedings, and afford the assessee three effective opportunities of hearing. The assessee or authorised representative was directed to appear before the CIT(A) on or before 30-09-2021 with relevant details for verification. [Paras 5]

Long-term capital gains addition in respect of the balance consideration is remitted to the CIT(A) for fresh adjudication with specific directions and limited opportunities for hearing.

Final Conclusion: The Tribunal confirmed assessment only to the extent of the actual consideration received by the assessee and remanded the remainder of the long-term capital gains addition to the CIT(A) for de novo consideration in light of the transferee's alleged non-payment and the outcome of pending civil proceedings, with directions as to hearing and verification.

Deduction under section 80IB(11A) for integrated business of handling, storage and transportation of food grains - requirement of commencement of undertaking on or after 1st April 2001 - eligibility where warehouses are leased, sub let or not owned by the assessee - distinction between revenue from eligible business activities and incidental receipts

Deduction under section 80IB(11A) for integrated business of handling, storage and transportation of food grains - distinction between primary integrated activities and incidental receipts - Claim for deduction under section 80IB(11A) upheld on finding that the assessee carried on the integrated business of handling, storage and transportation of food grains. - HELD THAT: - The Tribunal examined the nature and composition of the assessee's receipts and the substance of its operations. Revenue relied on the Assessing Officer's view that transportation and handling receipts were meagre and that the assessee was effectively only sub letting existing godowns. The Tribunal accepted the appellate authority's conclusion that the assessee's principal activities comprised storage, handling and transportation of food grains and that the level of receipts from individual legs did not by itself disentitle the assessee. The Tribunal followed and applied the reasoning in the decision of the ITAT Hyderabad in AP State Warehousing Corporation v. DCIT, which holds that the statutory provision applies to income derived from the integrated business and that one leg yielding more revenue does not negate the integrated character of the undertaking. The Assessing Officer's emphasis on relative quantum of individual receipts and on the existence of some rental arrangements was rejected as inconsistent with the statutory criterion, which focuses on whether the integrated activities are carried out, not on precise revenue splits. [Paras 12, 13]

The assessee is carrying on the integrated business of handling, storage and transportation of food grains and is eligible for deduction under section 80IB(11A) on this ground.

Eligibility where warehouses are leased, sub let or not owned by the assessee - intention of provision to encourage warehousing infrastructure irrespective of ownership - Ownership of warehouses is not a prerequisite for entitlement to deduction under section 80IB(11A); leased or rented warehouses and sub letting do not automatically disentitle the assessee. - HELD THAT: - The Tribunal agreed with the CIT(A) and the Hyderabad Bench decision that the statutory language does not require the assessee to own the warehouses. The object of the provision is to encourage storage, handling and transportation capacity; therefore using leased premises or engaging in sub letting does not per se negate the contribution to infrastructure or the integrated nature of the business. The Assessing Officer's conclusion that income from sub letting and use of existing infrastructure disqualified the claim was held to be untenable in law and on the facts of this case. [Paras 12, 13]

Assessee's use of rented or sub let godowns does not defeat entitlement to deduction under section 80IB(11A).

Requirement of commencement of undertaking on or after 1st April 2001 - initial assessment year and commencement of operations for eligibility - Assessee satisfies the condition that the undertaking began to operate on or after 1st April 2001 for the purpose of claiming deduction under section 80IB(11A). - HELD THAT: - The Assessing Officer questioned whether the undertaking commenced operations after 1 April 2001. The assessee produced audited balance sheets and other material showing that the business of storage, handling and transportation (and construction/operation of godowns) commenced after 31 March 2007. The Tribunal accepted the appellate authority's finding that operations began post 2001 and that the condition in the section is therefore fulfilled. The Tribunal accordingly found no bar to the claim on this ground. [Paras 15]

The undertaking commenced operations on or after 1st April 2001 and the condition for claiming deduction under section 80IB(11A) is satisfied.

Final Conclusion: The Tribunal confirmed the CIT(A)'s deletion of the disallowance and held that the assessee meets the statutory conditions for deduction under section 80IB(11A) for AY 2014 15: the business is an integrated undertaking of handling, storage and transportation of food grains; ownership of warehouses is not a prerequisite; and the undertaking commenced operations after 1 April 2001. Revenue's appeal is dismissed.

Taxability of share premium under Section 56(2)(viib) - company in which the public are substantially interested (deemed public limited company) - application of the definition in Section 2(18) to determine exempt status - obligation to afford opportunity and principles of natural justice in valuation additions - use of coordinate bench precedent in appellate adjudication

Taxability of share premium under Section 56(2)(viib) - company in which the public are substantially interested (deemed public limited company) - application of the definition in Section 2(18) to determine exempt status - Assessee's entitlement to protection from charge under Section 56(2)(viib) on the ground that it was a company in which the public are substantially interested under Section 2(18). - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee qualified as a company in which the public are substantially interested. The assessee had placed on record its shareholding chart and detailed submissions before the Assessing Officer and on appeal, demonstrating that the ultimate holding structure involved a listed company and that the relevant voting power thresholds in Section 2(18) were satisfied. The CIT(A) also relied on a coordinate bench decision on similar facts. The Revenue did not rebut the shareholding particulars or show lack of opportunity to the Assessing Officer to verify those facts. Given that Section 56(2)(viib) applies only to a company "not being a company in which the public are substantially interested", the Tribunal found deletion of the addition under that provision to be correct and interfered with neither the factual findings nor the legal application of Section 2(18). [Paras 3, 4]

Addition under Section 56(2)(viib) deleted as the assessee was held to be a company in which the public are substantially interested.

Obligation to afford opportunity and principles of natural justice in valuation additions - use of coordinate bench precedent in appellate adjudication - Whether the CIT(A) erred in admitting and deciding the assessee's plea that Section 56(2)(viib) did not apply without giving the Assessing Officer an opportunity to verify the factual claims. - HELD THAT: - The Tribunal found no merit in the Revenue's contention that the CIT(A) reached the conclusion without affording the Assessing Officer a chance to verify the claim. The record showed that the assessee had made detailed submissions and filed its shareholding details before the Assessing Officer during assessment proceedings. The Tribunal therefore rejected the technical objection and accepted the CIT(A)'s approach, including reliance on a coordinate bench decision addressing similar factual and legal issues. [Paras 3, 4]

CIT(A) did not err; Revenue's objection that the AO was denied verification opportunity rejected.

Final Conclusion: Revenue's appeal is dismissed; the impugned addition under Section 56(2)(viib) for AY 2014-15 is deleted because the assessee was held to be a company in which the public are substantially interested, and the Revenue's procedural objection to CIT(A)'s decision is rejected; assessee's cross objection is dismissed as not pressed.

Reopening of assessment under section 147 - reassessment void ab initio - change of opinion versus tangible material for reopening - audit objection does not constitute information for reassessment - formation of 'reason to believe'-requirement of live link to escapement of income - primacy of assessing officer/Pr.CIT's conclusion where no escapement is found

Reopening of assessment under section 147 - audit objection does not constitute information for reassessment - change of opinion versus tangible material for reopening - Whether the reassessment for AY.2008-09 under section 147 could be sustained where reopening was founded on an audit objection and amounted to a change of opinion. - HELD THAT: - The Tribunal upheld the CIT(A)'s quashing of the reassessment, concluding that the reopening was founded on an audit objection and a change of opinion rather than on any tangible material newly discovered that had a live link to escapement of income. The record showed that the assessing officer and the Pr.CIT had examined the matter and concluded that the exemption issue arose from a typographical mistake and that no income had escaped assessment. The reassessment, being based on the audit party's view and on reappraisal of information already on record, amounted to a change of opinion and was therefore invalid. The Tribunal relied on the established principle that formation of 'reason to believe' for reopening must rest on tangible fresh information pointing to escapement of income and that an audit opinion on application or interpretation of law does not, by itself, constitute such information; accordingly the reassessment was void ab initio. The Revenue's sole substantive ground of appeal was rejected for these reasons. [Paras 3]

Reopening of assessment for AY.2008-09 quashed as void ab initio; Revenue's appeal dismissed.

Academic nature of connected grounds - cross-objection rendered infructuous - Whether the remaining grounds and the assessee's cross-objection require adjudication after the reassessment was quashed. - HELD THAT: - As the reassessment was quashed, the Tribunal held that the other grounds of appeal raised by the Revenue were academic. The assessee's cross-objection on merits was consequently rendered infructuous and required no adjudication. [Paras 4, 5]

Other grounds are academic and the assessee's cross-objection is dismissed as infructuous.

Final Conclusion: The ITAT dismissed the Revenue's appeal and upheld the CIT(A)'s order quashing the reassessment for AY.2008-09 as void ab initio because it was predicated on an audit objection/change of opinion rather than fresh tangible material indicating escapement of income; connected grounds were treated as academic and the assessee's cross-objection was dismissed as infructuous.

Computation of disallowance under Rule 8D(2)(iii) - average value of investments yielding exempt income - remand for recomputation of disallowance

Computation of disallowance under Rule 8D(2)(iii) - average value of investments yielding exempt income - Whether, for computing the disallowance under sub-clause (iii) of sub-rule (2) of Rule 8D, only the value of investments which yielded exempt income should be taken for arriving at the average value of investment. - HELD THAT: - The Tribunal held that while the applicability of section 14A was not in dispute, the correct method of computing the amount under sub-clause (iii) of sub-rule (2) of Rule 8D requires that the value of investments which yielded exempt income alone be taken into account for determining the average value of investments. The Tribunal noted and followed precedents including ACB India Ltd. , the Special Bench decision in Asstt. CIT v. Vireet Investment (P) Ltd. , and decisions of the Madras and Karnataka High Courts cited in the order, which support treating only those investments that actually yielded exempt income as relevant for the average investment computation under the specified sub-clause. In view of these authorities and the legal principle thereby applied, the Tribunal found merit in the assessee's contention and set aside the computation made by the Assessing Officer, restoring the matter to the file of the Assessing Officer for recomputation in the manner indicated.

Amount of investment which yielded exempt income alone shall be considered for arriving at average value of investment under sub-clause (iii) of sub-rule (2) of Rule 8D; matter remitted to the Assessing Officer for recomputation accordingly.

Final Conclusion: The appeal is partly allowed; the disallowance computation under Rule 8D(2)(iii) is to be redone by the Assessing Officer considering only investments that yielded exempt income for arriving at the average value of investments for Assessment Year 2013-14.

Reopening of assessment under section 147 - proviso to section 147 - failure to disclose all material facts - change of opinion - borrowed satisfaction - broken period interest

Reopening of assessment under section 147 - proviso to section 147 - failure to disclose all material facts - change of opinion - borrowed satisfaction - Validity of reopening assessment after four years from the end of the relevant assessment year - HELD THAT: - The Tribunal found that the original assessment under section 143(3) was completed after thorough enquiry, during which notices under section 142(1) sought and the assessee furnished detailed documents and explanations specifically addressing the interest receivable and the amount offered to tax. The proviso to section 147 applies because the reopening was after four years; consequently the revenue had to demonstrate failure by the assessee to fully and truly disclose material facts. No fresh tangible material was brought to the assessing officer's notice between completion of the original assessment and the reopening; the reasons recorded show the assessing officer merely revisited and re-evaluated material already considered and reached a different conclusion. The reopening therefore amounted to a review based on a change of opinion and was also prompted by an audit objection leaving the assessing officer with a borrowed satisfaction. For these reasons the conditions of the proviso were not satisfied and the reopening was held invalid and void ab initio. [Paras 9, 10, 11, 12, 13]

Reopening of assessment after four years was invalid - assessment order under section 143(3) r.w.s. 147 quashed.

Broken period interest - Addition of broken period interest not adjudicated by the Tribunal - HELD THAT: - Because the Tribunal quashed the assessment order on jurisdictional grounds related to reopening, it did not decide the substantive challenge to the addition of broken period interest. The Tribunal expressly declined to adjudicate the merits of the addition and kept the issue open for determination if it arises subsequently in the assessee's case. [Paras 14]

Merits of the addition of broken period interest left undecided and kept open for future adjudication.

Final Conclusion: Appeal allowed: the assessment framed under section 143(3) r.w.s. 147 for AY 2009-10 is quashed as the reopening was invalid; the substantive issue on broken period interest was not decided and remains open for future adjudication if it arises.

Scheme of Arrangement - Dispensing with statutory meetings under Section 230 - Convening meetings of unsecured creditors - Notice and service under Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Quorum and voting by proxy - Appointment of Chairperson and Scrutinizer for creditor meetings - Accounting treatment compliance with Accounting Standards - Valuation for demerger

Dispensing with statutory meetings under Section 230 - Scheme of Arrangement - Dispense with convening meetings of equity shareholders and preference shareholders of the first Applicant Company. - HELD THAT: - The Tribunal recorded that all equity shareholders and preference shareholders of the first Applicant Company filed consent affidavits expressing no objection to the proposed Scheme of Arrangement. In view of those unanimous consents, the requirement to hold meetings of the equity and preference shareholders of the first Applicant Company as contemplated under the Companies Act was dispensed with and the meeting abridgement permitted by the Tribunal was ordered. [Paras 10, 11]

Meeting of equity shareholders and preference shareholders of the first Applicant Company dispensed with.

Convening meetings of unsecured creditors - Quorum and voting by proxy - Appointment of Chairperson and Scrutinizer for creditor meetings - Notice and service under Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Convene meeting of unsecured creditors of the first Applicant Company and prescribe procedural directions for that meeting. - HELD THAT: - The Tribunal noted that the unsecured creditors of the first Applicant Company had not given consent affidavits; accordingly, a meeting of the unsecured creditors was directed to be convened. The Tribunal fixed the date, time and place for the meeting, prescribed a quorum of two unsecured creditors (in person or by proxy), permitted voting in person or by proxy (with proxies to be filed forty eight hours before the meeting), required publication of notices in specified newspapers and directed service of notices to unsecured creditors and statutory authorities (Regional Director, Registrar of Companies and the Income Tax Authority) in accordance with Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. The Tribunal also appointed a Chairperson and a Scrutinizer, fixed their fees, and required the Chairperson to file an affidavit within seven days after the meeting certifying compliance and reporting its conclusion. [Paras 10, 11]

Meeting of unsecured creditors of the first Applicant Company to be convened with specified quorum, notice, publication, voting, appointment of Chairperson and Scrutinizer, and statutory service and reporting directions.

Dispensing with statutory meetings under Section 230 - Scheme of Arrangement - Dispense with convening meetings of equity shareholders and unsecured creditors of the second and third Applicant Companies. - HELD THAT: - The Tribunal recorded that the equity shareholders and the sole unsecured creditor in each of the second and third Applicant Companies had filed consent affidavits stating no objection to the Scheme. Having received those consents, the Tribunal dispensed with holding meetings of the equity shareholders and unsecured creditors of the second and third Applicant Companies. [Paras 10, 11]

Meetings of equity shareholders and unsecured creditors of the second and third Applicant Companies dispensed with.

Final Conclusion: The Tribunal sanctioned procedural directions in respect of the proposed Scheme of Arrangement: it dispensed with meetings of equity and preference shareholders of the first Applicant Company and of equity shareholders and unsecured creditors of the second and third Applicant Companies where unanimous consents were on record; it directed convening of the unsecured creditors' meeting of the first Applicant Company with specified quorum, notice, publication, voting, statutory service and reporting formalities and appointed a Chairperson and Scrutinizer to conduct and report the meeting.

Scheme of Amalgamation - sanction under Sections 230 and 232 of the Companies Act, 2013 - compliance with notice and meeting requirements under Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 - dispensation of meetings - binding effect of sanctioned scheme on companies, shareholders and creditors - undertakings to statutory authorities (Regional Director, Official Liquidator, Income Tax authorities) - filing of order in Form INC-28 - quantification of fees payable to Regional Director and Official Liquidator - sanction not precluding action by competent authorities

Sanction under Sections 230 and 232 of the Companies Act, 2013 - Scheme of Amalgamation - binding effect of sanctioned scheme on companies, shareholders and creditors - Satisfaction of statutory requirements for sanctioning the Scheme of Amalgamation and sanction of the Scheme. - HELD THAT: - The Tribunal, after considering the Scheme and documents on record, held that the requirements of Sections 230 and 232 of the Companies Act, 2013 were satisfied. On that basis the petition was allowed and the Scheme of Merger (as amended and annexed to the petition) was sanctioned. The sanction was declared binding on the petitioner companies, their shareholders and all concerned under the Scheme. [Paras 10, 11]

The Scheme is sanctioned and declared binding on the petitioner companies, their shareholders and creditors.

Compliance with notice and meeting requirements under Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 - dispensation of meetings - Compliance with directions regarding service of notices, publication, convening of meetings and results of shareholders' and creditors' meetings. - HELD THAT: - The Tribunal recorded that notices in prescribed form were served on statutory authorities and on equity shareholders and unsecured creditors in compliance with earlier directions; publication requirements were met. Meetings convened for the transferee company's equity shareholders and unsecured creditors were held as directed, and the Chairman's affidavit and scrutinizer's report showed approval of the Scheme by overwhelming majorities of those present and voting. The Tribunal relied on these compliance materials in sanctioning the Scheme. [Paras 3, 4, 6, 7]

The statutory notice, publication and meeting requirements have been complied with and the meetings' approvals are recorded.

Undertakings to statutory authorities (Regional Director, Official Liquidator, Income Tax authorities) - Scheme of Amalgamation - Responses to representations filed by the Regional Director, Official Liquidator and Income Tax Department and acceptance of undertakings given by the petitioner companies. - HELD THAT: - The petitioners filed detailed responses to the Regional Director's observations, including undertakings to pay any enhanced fees on increased authorized capital, to comply with SEBI requirements where applicable, and to adhere to FEMA/RBI norms. The Official Liquidator's representations were met with specific undertakings (preservation of books and records, statutory compliance, payment of related office expenses, filing of certified copy of the sanction order). The Tribunal noted these responses and undertakings in concluding that the statutory requirements were met and in sanctioning the Scheme. [Paras 8, 11]

The representations have been addressed and the undertakings given by the petitioner companies are accepted for the purposes of sanction.

Filing of order in Form INC-28 - quantification of fees payable to Regional Director and Official Liquidator - Post-sanction compliance obligations including filing of the sanction order and quantification of statutory fees. - HELD THAT: - The Tribunal directed compliance with Rule 17(2) of the Companies (CAA) Rules, 2016 by filing, if required, the order in Form INC-28 with the Registrar of Companies, Gujarat. The Tribunal quantified the fees payable to the Regional Director and to the Official Liquidator in respect of the petitioner companies and ordered compliance with filing obligations. [Paras 13, 14]

Petitioner companies directed to comply with filing obligations (Form INC-28) and statutory fees as quantified are payable to the Regional Director and Official Liquidator.

Sanction not precluding action by competent authorities - Effect of sanction on powers of other competent authorities to take action for violation of law. - HELD THAT: - The Tribunal expressly recorded that sanctioning the Scheme does not prevent any competent authority from taking action in the event of violation of any law in force. That limitation was incorporated into the order to preserve the regulatory and enforcement powers of other authorities notwithstanding the sanction. [Paras 12]

Sanction of the Scheme does not bar competent authorities from taking action for violations of law.

Dispensation of drawn up orders and authenticated copies - Dispensation of drawn up orders and direction to act on authenticated copy of the order and Scheme. - HELD THAT: - The Tribunal dispensed with the filing and issuance of drawn up orders and directed that all concerned authorities may act on a copy of the order along with the Scheme duly authenticated by the Registrar of the Tribunal. This procedural dispensation was ordered as part of the final disposal. [Paras 15]

Filing and issuance of drawn up orders dispensed with; authorities may act on authenticated copy of the order and Scheme.

Final Conclusion: The Company Petition is allowed and the Scheme of Amalgamation between Parsec Enterprises Private Limited and Saurashtra Cement Limited is sanctioned; statutory notices, meetings and responses to statutory representations are found to be in order, undertakings given are accepted, post-sanction filing and fee compliance directed, the sanction does not inhibit other authorities from taking action for statutory violations, and the petition is disposed of.

Scheme of Amalgamation - Dispensing with meetings of Equity Shareholders and Secured Creditors - Convening meetings of Unsecured Creditors - Compliance with the Companies Act, 2013 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Certificate of Statutory Auditors / Chartered Accountants - Appointment of Chairperson and Scrutinizer for creditors' meetings - Quorum for creditors' meeting

Dispensing with meetings of Equity Shareholders and Secured Creditors - Certificate of Statutory Auditors / Chartered Accountants - Whether meetings of the Equity Shareholders and Secured Creditors of the Applicant Companies could be dispensed with - HELD THAT: - The Tribunal examined the Company Application, the Board approvals, and certificates issued by the Chartered Accountants and Statutory Auditors certifying the particulars of equity shareholders and secured creditors and conformity of accounting treatment. Having found that the Applicants disclosed material facts, complied with statutory procedures in framing the Scheme and produced the requisite certifications and affidavits of shareholders and secured creditors expressing consent or no-objection, the Tribunal was satisfied that convening meetings of Equity Shareholders and Secured Creditors was unnecessary. The Tribunal accordingly concluded that the statutory scheme for dispensing with such meetings was properly invoked on the material placed before it. [Paras 5, 6]

Meetings of the Equity Shareholders and Secured Creditors of the Applicant Companies are dispensed with.

Convening meetings of Unsecured Creditors - Appointment of Chairperson and Scrutinizer for creditors' meetings - Quorum for creditors' meeting - Compliance with the Companies Act, 2013 and Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Directions for convening meetings of Unsecured Creditors, including appointment of Chairperson and Scrutinizer, fixing quorum, notice and related procedural steps - HELD THAT: - The Tribunal directed that separate meetings of the Unsecured Creditors of the Transferor and Transferee Companies be convened on specified dates and times at the registered office for consideration of the proposed Scheme of Amalgamation. The Tribunal appointed a Chairperson and a Scrutinizer for each meeting, specified that notices be published in stated newspapers, fixed the quorum at 30% of the total value of Unsecured Creditors for the meeting (noting the statutory requirement of three-fourth for later consideration of the Scheme), and fixed remuneration for the Chairperson and Scrutinizer. The Tribunal also directed strict adherence to the Companies Act, 2013 and the relevant Rules in convening the meetings and required filing of the Chairperson's and Scrutinizer's reports with the Registry within two weeks of the conclusion of the meetings, followed by filing of the Company petition for sanction of the Scheme subject to statutory compliances. [Paras 5, 6]

Meetings of Unsecured Creditors of each Applicant Company are to be convened as directed; Chairperson and Scrutinizer are appointed; quorum, notice publication, compliance and filing directions are given.

Final Conclusion: The Tribunal, satisfied with the disclosures, board approvals and auditors' certifications, dispensed with convening meetings of Equity Shareholders and Secured Creditors and directed convening of meetings of Unsecured Creditors with appointed Chairperson and Scrutinizer, fixed quorum and procedural requirements, and ordered compliance with statutory rules and filing of reports and the subsequent Company petition for sanction of the Scheme.

Reduction of share capital under Section 66 of the Companies Act, 2013 - special resolution approving capital reduction - adjustment of cancelled face value with accumulated losses - compliance with National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 - statutory auditor's certificate on conformity of accounting treatment with Accounting Standards - service and publication of notices to creditors and regulatory authorities - confirmation and registration of minute of reduction and issuance of Form RSC-7

Reduction of share capital under Section 66 of the Companies Act, 2013 - special resolution approving capital reduction - compliance with National Company Law Tribunal (Procedure for Reduction of Share Capital of Company) Rules, 2016 - service and publication of notices to creditors and regulatory authorities - confirmation and registration of minute of reduction and issuance of Form RSC-7 - Approval and confirmation of the proposed reduction of equity share capital by cancelling part of the face value and consequent registration of the minute. - HELD THAT: - The Tribunal considered the petition for reduction of the issued, subscribed and paid-up equity share capital by reducing face value from Rs.10 to Re.1 per share and cancelling the aggregate face value thereby adjusted against the accumulated negative balance in the statement of profit and loss. The record shows that the reduction was authorised by a Special Resolution passed at the EOGM on 03.06.2020, the Board had approved the proposal, and the petition was supported by the statutory documents contemplated by the Rules, including the list of shareholders, list of creditors as on 29.02.2020, certificates from the Statutory Auditors regarding creditors/deposits and the opinion that the proposed accounting treatment conforms with applicable Accounting Standards. The Petitioner complied with the Tribunal's directions under Rule 3 for service of Form RSC-2 on the Central Government and Registrar of Companies, despatch of notices to creditors/other stakeholders in Form RSC-3, publication of the statutory notice in newspapers and uploading on the company's website, and filed affidavits of compliance. The Regional Director (Eastern Region) examined the records, filed an affidavit indicating no representations adverse to the proposal and raised no objections. No representations or objections were received in response to the public notice. Having regard to the statutory compliance, the affidavits, auditor certificates and the absence of objections from the Regional Director and creditors, the Tribunal concluded that the reduction would not prejudice members or creditors and accordingly confirmed the reduction, approved the minute and directed registration and consequential steps. [Paras 11, 12, 13, 14, 15]

The Tribunal confirmed the reduction of share capital effected by the Special Resolution, approved the Minute, directed delivery of certified copy for registration and issuance of Form RSC-7, permitted publication of the registration notice and ordered compliance with statutory requirements; C.P. No. 917/KB/2020 disposed of accordingly.

Final Conclusion: The Tribunal, having found that the procedural and substantive prerequisites for reduction of share capital were met, confirmed the capital reduction (face value from Rs.10 to Re.1 per share with adjustment against accumulated losses), approved the minute, directed registration and publication formalities and disposed of the petition with no order as to costs.

Rectification of mistake apparent from the record - power to recall or set aside order in insolvency proceedings - deadline for submission and verification of claims in CIRP - treatment of undecided claims after approval of resolution plan - finality of approved resolution plan

Rectification of mistake apparent from the record - power to recall or set aside order in insolvency proceedings - Whether the Adjudicating Authority is empowered to recall, review or set aside its order approving the resolution plan in the absence of a statutory review provision under the IBC. - HELD THAT: - The Tribunal examined the limited remedy under Section 420 of the Companies Act, 2013 which permits the Tribunal to amend an order within two years to rectify a mistake apparent from the record. The Tribunal held that Section 420 confers only a narrow power to correct apparent errors and is inapplicable where no mistake apparent from the record is shown. On the facts, the applicant did not challenge the resolution plan itself, and the Resolution Professional had taken note of the applicant's position in the Information Memorandum; the order approving the plan contained the relevant consideration. The Tribunal found no mistake apparent from the record warranting rectification and, therefore, concluded that there is no basis to recall or set aside the approval order in these proceedings. [Paras 24, 25, 26, 27, 28]

Application to recall or set aside the order approving the resolution plan rejected; Section 420 Companies Act, 2013 not applicable on the facts and no power to review the order under IBC was found.

Deadline for submission and verification of claims in CIRP - treatment of undecided claims after approval of resolution plan - finality of approved resolution plan - Whether, after approval of a resolution plan by the Committee of Creditors and the Adjudicating Authority, the Adjudicating Authority can direct the Resolution Professional to consider claims filed belatedly by creditors. - HELD THAT: - The Tribunal relied on the Supreme Court's rulings in Essar Steel and its subsequent reiteration in the Jaypee Kensington matter emphasizing that claims must be submitted and decided during the CIRP timelines so that a prospective resolution applicant takes over a company free from undecided liabilities. The Code and Regulations prescribe timelines for public announcement, claim submission and verification; claims not submitted within stipulated time ordinarily do not form part of the Information Memorandum and cannot be imposed on a successful resolution applicant. Applying these principles to the present facts, the Tribunal held that where a claim was filed after the Committee had approved the resolution plan (even if before the Adjudicating Authority's approval), the Adjudicating Authority cannot direct the RP to entertain such belated claims so as to disturb the finality of the approved plan. [Paras 30, 31, 32, 33, 34]

No direction could be given to the Resolution Professional to consider belatedly filed claims after approval of the resolution plan; such claims cannot be allowed to upset the finality of the approved plan.

Final Conclusion: Both interlocutory applications by GNIDA were dismissed: the Tribunal found no jurisdiction or basis to recall or set aside the order approving the resolution plan and held that belated claims could not be directed to be considered so as to disturb the approved resolution plan.

Pre-existing dispute - clear and undisputed debt - use of the IBC as a substitute for debt-recovery - insolvency and inability to pay - Corporate Insolvency Resolution Process - exclusion of moratorium period in computation of limitation under Section 60(6) of the Code

Pre-existing dispute - use of the IBC as a substitute for debt-recovery - clear and undisputed debt - Whether the petition under Section 9 was maintainable in the presence of a pre-existing dispute about quality and completion of work and whether the application was an impermissible attempt to use the IBC as a recovery mechanism. - HELD THAT: - Having regard to the pleadings and material on record, including the email dated 13.03.2015 and the arbitration notice, the Tribunal held that a genuine dispute existed prior to the demand notice concerning the quality of services and completion of works by the petitioner. The Tribunal applied the settled principle that the IBC cannot be used as a substitute for recovery proceedings and that an undisputed debt is a sine qua non for a Section 9 petition. The email and correspondence demonstrated dissatisfaction and asserted breaches which required trial before the appropriate forum; consequently the petition amounted to an attempt to convert a disputed claim into an insolvency proceeding without establishing the absence of a real dispute. [Paras 9, 10, 12]

The petition was not maintainable because a pre-existing genuine dispute about performance and quality of work existed, and the IBC cannot be used as a substitute for debt recovery.

Insolvency and inability to pay - Corporate Insolvency Resolution Process - exclusion of moratorium period in computation of limitation under Section 60(6) of the Code - Whether the petitioner established insolvency of the corporate debtor and whether limitation was saved by exclusion of the moratorium period. - HELD THAT: - The Tribunal observed from the Master data on the MCA portal that no charge existed against the corporate debtor and that the company appeared active and compliant. The petitioner did not place material demonstrating that the corporate debtor was insolvent or unable to pay its debts so as to justify initiation of CIRP. Although the petitioner invoked the provision excluding the moratorium period under Section 60(6) for limitation computation, the Tribunal's decision did not rest on a detailed adjudication of limitation; rather, absence of evidence of insolvency and the presence of a pre-existing dispute were determinative. On this basis, the petition could not be sustained to initiate CIRP. [Paras 11]

The petitioner failed to show that the corporate debtor was insolvent; lack of evidence of insolvency (and the presence of a dispute) warranted dismissal of the Section 9 petition.

Final Conclusion: CP(IB) No. 187/BB/2020 filed under Section 9 was dismissed: the petition was filed in respect of a disputed claim and without material establishing insolvency of the corporate debtor, and thus amounted to an impermissible attempt to use the IBC as a substitute for recovery; no order as to costs.

Debt and default under the Insolvency and Bankruptcy Code - contingent default - enforceability of security contingent on completion of project - escrow receipts governing repayment - IBC not to be used as a recovery mechanism - COVID-19 pandemic impact on insolvency proceedings

Debt and default under the Insolvency and Bankruptcy Code - contingent default - enforceability of security contingent on completion of project - escrow receipts governing repayment - Whether a valid default existed so as to admit a petition under Section 7 of the Code against the corporate debtor - HELD THAT: - The Tribunal analysed the contractual scheme comprising the Loan Sanction Letter, Loan Agreement, Assignment Deed of Receivables, Escrow Agreement and Memorandum of Deposit of Title Deeds and held that although a debt existed, the alleged default was contingent. The repayment schedule depended materially on (a) release of the Additional Security by the financial creditor upon completion of the moratorium or reduction of outstanding, and (b) receipts credited to the Escrow Account from apartment sales which were controlled by the financial creditor and contingent on project completion. The lender had refused to release the Additional Security despite the moratorium condition being met, and receivables continued to flow through the escrow mechanism. Taking into account the pandemic-induced slowdown in the real estate sector and authorities permitting restructuring and reliefs, the Tribunal concluded that the impugned non-payment was not an immediate, unconditional default contemplated by the Code but a contingent shortfall linked to the creditor's own obligations and wider market disruption. Consequently, the facts did not establish the kind of default that would properly trigger CIRP under Section 7. [Paras 8, 9, 15, 21]

No case of default under the Code was made out; the petition under Section 7 could not be admitted.

IBC not to be used as a recovery mechanism - repayment methodology - COVID-19 pandemic impact on insolvency proceedings - liberty to file fresh petition - Relief to be granted given the Tribunal's conclusion on default and the surrounding circumstances - HELD THAT: - Having found that insolvency proceedings were not warranted on the present material, and noting continuing receivables, security in favour of the financial creditor and ongoing negotiations between the parties, the Tribunal exercised its discretion to avoid pushing a near-complete real estate project into insolvency during pandemic conditions. Instead of admitting the petition, the Tribunal directed the parties to negotiate and formulate a repayment methodology to clear the debt within a limited period. The order preserves the financial creditor's right to pursue recovery in other fora and grants liberty to file a fresh insolvency petition in the event the agreed repayment is not honoured, subject to the Code. [Paras 22]

Petition disposed of with direction to work out repayment methodology to clear the debt within six months; liberty granted to the petitioner to file a fresh petition if repayment is not effected; petitioner retains other recovery remedies.

Final Conclusion: The Tribunal held that while a debt existed, the alleged default was contingent upon the financial creditor's failure to release additional security and the operation of escrow receipts, together with pandemic-related disruption; CIRP under Section 7 was therefore not justified. The parties were directed to agree a repayment plan to clear the debt within six months, with liberty to the financial creditor to initiate fresh proceedings if repayment does not occur and without prejudice to other recovery remedies.

Possession and custody of corporate assets during CIRP - duty to cooperate with interim resolution professional under Section 19 - interim moratorium and prohibition on enforcement of security under Section 14 - vesting of management powers in the interim resolution professional under Section 16 - obligation of the resolution professional to take control of assets recorded in the balance sheet under Section 18

Possession and custody of corporate assets during CIRP - duty to cooperate with interim resolution professional under Section 19 - obligation of the resolution professional to take control of assets recorded in the balance sheet under Section 18 - interim moratorium and prohibition on enforcement of security under Section 14 - vesting of management powers in the interim resolution professional under Section 16 - Whether the respondents in possession of certain vehicles must hand over immediate possession of those vehicles to the Interim Resolution Professional as assets of the corporate debtor and whether they must extend cooperation under Section 19. - HELD THAT: - The registration certificates of the vehicles were admittedly in the name of the corporate debtor on the date of commencement of the corporate insolvency resolution process (para. 18). On commencement, the powers of the board and key managerial personnel vest in the Interim Resolution Professional (para. 3) and the IRP is required to take control and custody of assets over which the corporate debtor has ownership rights as recorded in its balance sheet (para. 4). The Code also imposes on persons associated with the management a duty to extend cooperation to the IRP (para. 16) and places a prohibition on enforcement of security or actions inconsistent with the moratorium (para. 19). Applying these legal principles to the material before the Tribunal, the vehicles in respondents' possession form part of the corporate debtor's assets and therefore must be handed over to the Applicant. The respondents remain at liberty to present any dues or claims to the resolution professional for adjudication (para. 20). [Paras 4, 16, 18, 19, 20]

The application is allowed; the respondents are directed to hand over possession of the vehicles to the Interim Resolution Professional and may file their claims with the IRP.

Final Conclusion: Application IA 225 of 2020 allowed and disposed of: vehicles registered in the name of the corporate debtor must be handed over to the Interim Resolution Professional; respondents may lodge claims with the IRP; no order as to costs.

Service of notice on corporate debtor and key managerial personnel - maintainability of a petition under Section 9 of the I&B Code - initiation of Corporate Insolvency Resolution Process (CIRP) - liberty to revive or file fresh petition

Service of notice on corporate debtor and key managerial personnel - maintainability of a petition under Section 9 of the I&B Code - Adequacy of service on the Corporate Debtor and its key managerial personnel and its effect on proceeding under Section 9. - HELD THAT: - The Tribunal recorded that notices had often not been served at the registered address and that, although there were two instances of RPAD service, the Corporate Debtor did not appear throughout the proceedings. Having regard to the absence of the Respondent and uncertainty about whether key managerial personnel had been physically served or were avoiding appearance, the Tribunal held that it would not order initiation of CIRP in such circumstances. The petitioner was directed to place on record clear evidence regarding service on the key managerial personnel, their availability and the status of the company so that any order initiating CIRP would be meaningful. The reasoning emphasises that absence of adequate service and uncertainty about availability of management affects the maintainability of the Section 9 petition and precludes a substantive adjudication at that stage. [Paras 7, 8, 9]

Petition not admitted at this stage for lack of satisfactory evidence of service on key managerial personnel; petitioner granted time to produce evidence.

Initiation of Corporate Insolvency Resolution Process (CIRP) - liberty to revive or file fresh petition - Whether to order initiation of CIRP on the material then on record. - HELD THAT: - Although the Tribunal noted that an operational debt was owed to the petitioner, it declined to initiate CIRP on the existing record because the circumstances showed the Respondent had not engaged in the proceedings and service/availability of management remained uncertain. Rather than decide the merits in absence of clear service on the management, the Tribunal disposed of the petition while expressly granting liberty to the petitioner to revive or file a fresh petition once the required details and evidence are available; any future petition will be considered on the material on record and on merits. [Paras 9, 10]

No order initiating CIRP; petition disposed of with liberty to revive or file afresh when evidentiary material regarding service and availability is furnished.

Final Conclusion: The Tribunal declined to admit the Section 9 petition and did not initiate CIRP due to inadequate evidence of service and non-appearance of the Corporate Debtor and its management, but granted liberty to the Operational Creditor to revive or refile the petition with appropriate evidence, directing that any future petition will be considered on the record and merits; no order as to costs.

Financial debt - default - Section 7 of the Insolvency and Bankruptcy Code, 2016 - corporate insolvency resolution process - requirement of documentary proof - completeness of application

Financial debt - default - requirement of documentary proof - completeness of application - The Section 7 application was not maintainable for want of requisite documentary proof to establish existence of a financial debt and a corresponding default. - HELD THAT: - The Tribunal found that the Financial Creditor failed to place on record material documents necessary to establish a financial debt and default. There was no loan agreement, no document proving the loan was advanced at the time value of money or on interest-bearing terms, and no board resolution authorising the disbursement. The bank evidence produced was partial and did not establish that the alleged disbursement was the only or final payment; the bank certificate covered a limited period and did not state non-repayment of the alleged loan. The cheque relied upon was contested as a blank cheque and the Form 26AS alone was held insufficient to prove debt or default. Several clerical deficiencies and omissions in the application further undermined its completeness. In view of these defects, the Tribunal concluded that from the application and annexures it could not be ascertained that the Corporate Debtor was in default of a debt due and payable or that the default met the statutory threshold, and therefore the application did not satisfy the statutory requirements for initiation of CIRP under Section 7. [Paras 10, 11, 12, 13, 15]

Application under Section 7 dismissed; Financial Creditor free to pursue remedy under any other law before appropriate forum.

Final Conclusion: The Tribunal dismissed the Section 7 petition for lack of necessary documentary proof to establish a financial debt and default and for incompleteness of the application, while leaving the Financial Creditor at liberty to seek relief under other legal remedies.

Approval of resolution plan under Section 30(6) of the Insolvency & Bankruptcy Code - Limited judicial review under Section 30(2) of the Insolvency & Bankruptcy Code - Ineligibility under Section 29A of the Insolvency & Bankruptcy Code - Binding effect of an approved resolution plan on stakeholders - No modification of commercial decision of the Committee of Creditors by the Adjudicating Authority - Requirement to obtain statutory approvals post-approval of the resolution plan - Ceasure of moratorium on approval of resolution plan

Approval of resolution plan under Section 30(6) of the Insolvency & Bankruptcy Code - Limited judicial review under Section 30(2) of the Insolvency & Bankruptcy Code - Whether the Resolution Plan submitted by Mikata Industries and Tech Services LLP approved by the Committee of Creditors satisfies the requirements of Section 30(2) and merits approval under Section 30(6). - HELD THAT: - The Tribunal examined the Resolution Plan as approved by the Committee of Creditors and applied the limited scrutiny mandated by the Supreme Court in K. Sashidhar and Essar Steel decisions. The adjudicatory role was confined to verifying compliance with the statutory requirements of Section 30(2) and relevant Regulations (37, 38, 38(1A), 39(4)), without re-opening or substituting the commercial evaluation of the Committee of Creditors. Finding that the Plan complied with the mandatory contents, declarations, and the evaluation matrix adopted by the CoC, the Tribunal held the Plan met the requirements of Section 30(2) and was fit for approval under Section 30(6). [Paras 10, 11, 12, 13]

The Resolution Plan is approved and shall become effective from the date of the order.

Ineligibility under Section 29A of the Insolvency & Bankruptcy Code - Whether the Resolution Applicant is ineligible under Section 29A of the Code. - HELD THAT: - The Resolution Professional conducted the prescribed checks and submitted Form H under Regulation 39(4), and the Tribunal accepted the declaration that the Resolution Applicant is not ineligible under Section 29A. The Tribunal recorded that the Plan is not in contravention of Section 29A. [Paras 3, 13]

The Resolution Applicant is not ineligible under Section 29A and the Plan complies with that requirement.

Requirement to obtain statutory approvals post-approval of the resolution plan - No modification of commercial decision of the Committee of Creditors by the Adjudicating Authority - Whether the Tribunal will grant the statutory concessions and waivers sought in the Resolution Plan and what is the scope of directions the Tribunal may issue regarding such reliefs. - HELD THAT: - The Tribunal declined to grant ad hoc statutory remissions or exemptions (including tax or capital gains relief) sought in the Plan, observing that such concessions must be obtained from the competent authorities in accordance with law. While the Tribunal approved the Plan, it emphasised that approval does not amount to waiver of statutory obligations and that the Resolution Applicant must secure required permits and approvals from the relevant authorities. The Tribunal also relied on precedents to limit its role to scrutiny and not to re-write or grant statutory concessions beyond its jurisdiction. [Paras 6, 12, 13]

Concessions or waivers sought in the Plan are not granted by the Tribunal; the Resolution Applicant must approach the concerned authorities for such reliefs, which will be considered in accordance with law.

Binding effect of an approved resolution plan on stakeholders - Ceasure of moratorium on approval of resolution plan - The legal consequences flowing from approval of the Resolution Plan in terms of binding effect on stakeholders and continuation/cessation of moratorium. - HELD THAT: - The Tribunal held that, upon approval, the Resolution Plan becomes binding on the Corporate Debtor, its employees, members, creditors (including Central/State Governments and local authorities), guarantors and other stakeholders. The approval does not extinguish statutory liabilities, which remain enforceable by competent authorities. Further, the moratorium under Section 14 ceases to have effect from the date of the order. [Paras 13]

The approved Resolution Plan is binding on all stakeholders; statutory liabilities survive and the moratorium under Section 14 ceases from the date of approval.

Implementation and supervision of the approved resolution plan - Directions as to implementation, supervision, corporate governance changes and reporting consequent to approval of the Resolution Plan. - HELD THAT: - The Tribunal directed dissolution of the suspended Board and appointment of nominees of the Resolution Applicant as directors as provided in the Plan, mandating amendment and filing of the MoA/AoA with the Registrar of Companies. A Monitoring Committee comprising nominees of the Financial Creditors, the Resolution Applicant and a director of the Corporate Debtor is to supervise implementation. The Applicant and Monitoring Committee are required to file quarterly implementation status reports before the Tribunal. The Tribunal also directed transmission of CIRP records to IBBI, communication of the order to the CoC and Resolution Applicant, and updating of ROC master data. [Paras 3, 13]

The Plan's management and supervision measures shall be implemented; MoA/AoA amended and filed; Monitoring Committee to supervise implementation and report quarterly; records to be sent to IBBI and Registrar of Companies updated.

Finality of liabilities recorded in the resolution plan - Whether creditors can claim liabilities beyond those provided for in the approved Resolution Plan. - HELD THAT: - The Tribunal held that, following approval, no creditor of the erstwhile Corporate Debtor can claim anything other than the liabilities referred to in the Plan (as described in para 3(B) of the order). This reflects the finality of the liabilities as crystallised by the approved Plan subject to statutory rights of enforcement by competent authorities. [Paras 13]

Creditors are restricted to claims and liabilities as set out in the approved Resolution Plan.

Final Conclusion: The Resolution Plan submitted by Mikata Industries and Tech Services LLP is approved under the limited scrutiny of Section 30(2)/30(6); the Resolution Applicant is not ineligible under Section 29A; statutory waivers sought in the Plan are not granted and must be obtained from competent authorities; the Plan is binding on stakeholders, the moratorium ceases, corporate governance and implementation directions are given, and supervisory and reporting obligations are imposed.

Refund of CENVAT credit - scope of show cause notice - time-bar for refund claims - claim under Notification No.05/2006 - requirement to debit CENVAT credit under Notification No.27/2012 - transfer of credit to GST via TRAN-1 - invocation of proviso to Section 142(3) of the CGST Act, 2017 - remand for fresh adjudication

Scope of show cause notice - refund of CENVAT credit - Whether the original authority and Commissioner (Appeals) decided the refund claim beyond the scope of the show cause notice. - HELD THAT: - The Tribunal found that in the denovo proceedings the original authority proceeded to reject the refund on grounds that were not part of the original SCN, which included treating the claim under a different notification and invoking provisions not pleaded in the SCN. Having considered the appellant's submissions and binding precedents cited, the Tribunal held that an order going beyond the scope of the SCN is not sustainable in law. The Tribunal also noted that the Commissioner (Appeals) had earlier remanded the matter to the original authority to decide on merits in accordance with directions and applicable law, but the denovo order failed to respect that remit and introduced new grounds of rejection. [Paras 6]

Findings in the denovo order that go beyond the original SCN are not sustainable; the matter requires reconsideration.

Claim under Notification No.05/2006 - requirement to debit CENVAT credit under Notification No.27/2012 - time-bar for refund claims - Whether the refund claim filed under Notification No.05/2006 could be rejected on the ground that the appellant failed to debit credit as required under Notification No.27/2012, and whether the claim was time-barred. - HELD THAT: - The Tribunal observed that the appellant's refund claim related to February 2012 to March 2012 and was filed under Notification No.05/2006, which did not impose the debiting requirement that appears in Notification No.27/2012. The Commissioner (Appeals) and original authority had relied on the debiting requirement of Notification No.27/2012 and on Section 142(3) of the CGST Act to reject the claim; the Tribunal held that treating the claim as governed by Notification No.27/2012 was incorrect. On limitation, the Tribunal referred to the Larger Bench decision cited by the appellant that the one-year period is to be counted from the last day of the quarter in which foreign exchange was received and noted that the refund filed on 27.02.2013 for the period February-March 2012 was within the available time, thereby undermining the original time-bar rejection. The Tribunal concluded that the impugned reliance on Notification No.27/2012 and the related authorities was not applicable to the facts of this case. [Paras 6]

Rejection of the claim on the basis of debiting under Notification No.27/2012 and the authorities cited is erroneous; the matter requires fresh adjudication consistent with Notification No.05/2006 and relevant precedents on limitation.

Transfer of credit to GST via TRAN-1 - invocation of proviso to Section 142(3) of the CGST Act, 2017 - remand for fresh adjudication - Whether the appellant's transfer of credit into TRAN-1 rendered the refund claim inadmissible and what relief or directions should follow. - HELD THAT: - The Tribunal accepted the appellant's explanation that the credit was transferred into TRAN-1 while the appeal was pending because of the long delay (over four years) in adjudication and the impending deadline for TRAN-1, and that the appellant transferred eligible credit to avoid losing it. The Tribunal found that the appellant had not carried forward ineligible credit and that rejection under Section 142(3) was not appropriate on the present facts. In view of these findings and the procedural irregularity of introducing new grounds in denovo adjudication, the Tribunal directed that the TRAN-1 credit taken by the appellant be directed to be reversed and that the original authority consider the refund claim afresh in accordance with the Commissioner (Appeals)'s directions and Tribunal decisions. A time limit of three months was imposed for compliance and fresh adjudication. [Paras 6, 7]

TRAN-1 credit is to be reversed and the refund claim remitted to the original authority for fresh adjudication in accordance with appellate directions and Tribunal precedents within three months.

Final Conclusion: The impugned order is set aside and the appeal is allowed by way of remand: the TRAN-1 credit taken by the appellant is to be directed to be reversed and the original authority is to reconsider the refund claim in accordance with the Commissioner (Appeals)'s directions and relevant Tribunal decisions, to be completed within three months from receipt of the certified copy of this order.

Restoration of appeal to administrative tribunal (CESTAT) - pre-deposit requirement under Section 35F of the Central Excise Act, 1944 - attachment and recovery proceedings under Section 174(2)(e) of the Central Goods and Services Tax Act, 2017 - interim undertaking restraining alienation of movable and immovable property and creation of third party rights - defreezing of bank accounts subject to undertaking for business use

Restoration of appeal to administrative tribunal (CESTAT) - pre-deposit requirement under Section 35F of the Central Excise Act, 1944 - Whether the appeal before the CESTAT which was dismissed for non-compliance with the pre-deposit requirement should be restored despite belated deposit. - HELD THAT: - The Court noted that the adjudicated demand had been confirmed and that the appeal to CESTAT was dismissed for non-deposit of the prescribed percentage under the erstwhile Central Excise law. The petitioner deposited a portion of the demanded amount thereafter and sought condonation of delay and restoration of the appeal. Having regard to the facts and the interests of justice, the Supreme Court exercised its discretionary supervisory jurisdiction to restore the appeal to the CESTAT to be decided on merits. The order restores the right of the petitioner to have the appeal adjudicated on merits notwithstanding earlier dismissal for non-compliance, subject to the other terms imposed by the Court.

Appeal before the CESTAT restored and directed to be decided on merits.

Attachment and recovery proceedings under Section 174(2)(e) of the Central Goods and Services Tax Act, 2017 - interim undertaking restraining alienation of movable and immovable property and creation of third party rights - defreezing of bank accounts subject to undertaking for business use - Interim measures to be imposed while restoring the appeal, including treatment of attachments and bank account freezes. - HELD THAT: - The Court recorded that notices and attachments had been issued under the GST recovery provisions and that bank accounts of the unit were frozen. In the exercise of its discretion it conditioned restoration of the appeal on the petitioner giving an undertaking not to alienate movable or immovable property or create third party rights. The respondents were directed to defreeze the petitioner's bank accounts with the express undertaking that the petitioner will utilize the funds only for business purposes. These measures preserve the respondents' recovery rights while permitting the petitioner to prosecute its appeal.

Petitioner to give undertaking restraining alienation and creation of third party rights; respondents to defreeze bank accounts subject to undertaking restricting use to business purposes.

Final Conclusion: The Special Leave Petition is disposed of by restoring the appeal to the CESTAT for decision on merits; restoration is subject to the petitioner's undertaking not to alienate property or create third party rights, and the respondents are directed to defreeze the petitioner's bank accounts for business use under the stated undertaking.

Pre-deposit under Section 35F of the Central Excise Act - Stay of recovery during pendency of appeal - Refund of amounts recovered without authority of law - Requirement to supply copy of Order in Appeal before effecting recovery - Article 265 of the Constitution (taxation only by authority of law) - Scope and applicability of refund provision invoked under Section 11B

Pre-deposit under Section 35F of the Central Excise Act - Stay of recovery during pendency of appeal - Requirement to supply copy of Order in Appeal before effecting recovery - Refund of amounts recovered without authority of law - Article 265 of the Constitution (taxation only by authority of law) - Validity of recovery from the appellant's bank account after the appellant made the mandatory 10% pre-deposit and filed an appeal which was subsequently admitted by the Tribunal; and whether the amount so recovered is liable to be refunded where the Order in Appeal was not supplied to the appellant before recovery. - HELD THAT: - The Tribunal found on the record that the Commissioner (Appeals) had passed the Order in Appeal on 30.12.2014 but did not supply a copy to the appellant; the appellant only learnt of that order on receipt of a departmental letter on 21.02.2019 and promptly sought a certified copy from the Department. Recovery of the disputed amount from the appellant's bank account was effected on 12.03.2019 before the appellant had been supplied the Order in Appeal and after the appellant had made the statutory 10% pre deposit and filed an appeal which was admitted by the Tribunal. The Tribunal held that after compliance with the mandatory pre deposit under Section 35F and admission of the appeal, the balance demand is stayed and the revenue has no authority to retain or recover amounts during the pendency of the appeal. Retention of the money recovered without supplying the Order in Appeal and during the pendency of the admitted appeal was therefore without authority of law and offended the principle under Article 265 of the Constitution that tax can be levied or collected only by authority of law. The Tribunal also noted that no recovery action was taken for over four years and that the sudden recovery without issuing the impugned order to the appellant was improper. Reliance was placed on the administrative circular and earlier decisions holding that excess or wrongly recovered pre deposits must be refunded. The Tribunal accordingly set aside the impugned order rejecting the refund claim and allowed the appeal with consequential relief. [Paras 6, 7]

The recovery effected on 12.03.2019 from the appellant's bank account was without authority of law and the impugned order rejecting the refund is set aside; the appeal is allowed with consequential relief.

Scope and applicability of refund provision invoked under Section 11B - Refund of amounts recovered without authority of law - Whether the denial of the refund claim on the ground that refund could be granted only under Section 11B was legally sustainable where the appellant's claim arose from recovery effected during the pendency of an admitted appeal after pre deposit under Section 35F. - HELD THAT: - The Tribunal observed that the authorities below treated the claim as one under Section 11B, whereas the appellant's claim was based on the statutory pre deposit under Section 35F and the admitted appeal before the Tribunal. The denial of the refund on the basis that a valid refund order under Section 11B alone could sustain a refund was incorrectly applied to facts where recovery had been made without authority and in breach of the appellant's right to appeal. Given the admitted appeal and compliance with the mandatory pre deposit, the refund claim could not be negated by invoking Section 11B in the circumstances and the Department's approach to refuse refund on that ground was unsustainable. The Tribunal therefore allowed the refund claim and set aside the order rejecting it. [Paras 6, 7]

The rejection of the refund claim by invoking Section 11B was unsustainable in the facts; the refund claim is allowed and the impugned order is set aside.

Final Conclusion: The appeal is allowed; the impugned order rejecting the refund is set aside and the amount recovered without authority during the pendency of the admitted appeal (after statutory pre deposit) is to be treated as refundable, with consequential relief.

Violation of principles of natural justice in assessment proceedings - pre-assessment notice and duty to afford effective opportunity of hearing - inclusion of residue/captive consumption in turnover for VAT - burden on department to establish sale as opposed to self-consumption

Violation of principles of natural justice in assessment proceedings - pre-assessment notice and duty to afford effective opportunity of hearing - Whether the assessment order in annexure A was vitiated for lack of enquiry and for not affording an effective opportunity to the dealer after receipt of its reply under section 25(1) of the KVAT Act. - HELD THAT: - The Court applied the principle that issuance of a pre-assessment notice is a prerequisite to determine tax to the best of the assessing officer's judgment and that, upon receipt of objections, the assessing authority is duty bound to give an effective opportunity of hearing as to the pleadings brought on record. The order in annexure A was passed on the same day the assessing officer received the dealer's reply, without any recorded enquiry or hearing. Reliance was placed on Suzion Infrastructure Service Ltd. recognizing that merely stating the dealer may seek a hearing within the time for filing objections does not satisfy the statutory requirement; the authority must indicate and afford an effective opportunity to sustain contentions. In the factual matrix the Court found the assessment order to be ipsedixit and not preceded by any enquiry, thereby violating the procedural safeguards and principles of natural justice. [Paras 7]

The assessment order in annexure A is vitiated for not holding an enquiry or affording an effective opportunity of hearing and is liable to be set aside on that ground.

Inclusion of residue/captive consumption in turnover for VAT - burden on department to establish sale as opposed to self-consumption - Whether the inclusion of coffee husk in the dealer's turnover (assessed as sale) was justified where the dealer asserted captive consumption of husk as compost and the Department proceeded on assumption of sale. - HELD THAT: - The Court examined the pre-assessment notice and the dealer's reply and identified that the assessing officer's conclusion proceeded on an assumption that husk generated in the hulling process had been sold. The Court held that there is no legal prohibition on a dealer using residue for captive consumption and that such self-consumption does not, without more, attract VAT. The liability to tax requires evidence that the residue was in fact sold or otherwise transferred in a manner taxable under the Act. The assessment and concurrent orders did not record material showing that the dealer had sold the coffee husk or that the self-consumption contention was a mere pretence; instead they relied on assumption. Consequently the inclusion of husk in turnover and the consequential additions were unsustainable. The Court also treated the omission/suppression addition as ancillary to the main unsupported allegation of sale. [Paras 8, 9]

The proposed inclusion of coffee husk in the dealer's turnover for the assessment years is unsustainable and illegal; the additions based on assumed sale are set aside.

Final Conclusion: Both revision petitions are allowed; the assessment order in annexure A and the consequent orders (as modified by the Tribunal) are set aside for failure to afford an effective hearing and for basing turnover additions on an unsupported assumption of sale of coffee husk.

Restoration of complaint dismissed for non-prosecution at pre-summoning stage - procedural orders vis-a -vis substantive merits in revisional jurisdiction - condonation of delay in filing revision for restoration of complaint - presumption in favour of holder under Section 139 of the Negotiable Instruments Act - offence under Section 138 of the Negotiable Instruments Act where cheque bears endorsement "Payment stopped by drawer" - exercise of revisional power and notice requirement in cases not touching merits

Restoration of complaint dismissed for non-prosecution at pre-summoning stage - procedural orders vis-a -vis substantive merits in revisional jurisdiction - exercise of revisional power and notice requirement in cases not touching merits - Validity of the order of the Principal District & Sessions Judge restoring the complaint dismissed for non-prosecution at pre-summoning stage and whether this Court should interfere with that order under Section 482 Cr.P.C. - HELD THAT: - The High Court upheld the revision court's conclusion that an order dismissing a complaint for non-prosecution at the pre-summoning stage is procedural and does not touch the factual or legal merits of the complaint. Reliance was placed on the Division Bench precedent distinguishing procedural dismissals from substantive orders requiring notice under revisional jurisdiction; where no application of mind to merits is recorded, restoration does not cause prejudice to the opposite party. The learned Principal District & Sessions Judge found no resultant prejudice to the petitioners from restoration and imposed costs and conditions to prevent unnecessary adjournments. This Court found the revisional court's exercise of discretion to condone delay and restore the complaint was not perverse and declined to substitute its own conclusion. [Paras 5, 8, 9]

Order restoring the complaint was validly passed and will not be interfered with; petition to set aside that order dismissed.

Condonation of delay in filing revision for restoration of complaint - presumption in favour of holder under Section 139 of the Negotiable Instruments Act - offence under Section 138 of the Negotiable Instruments Act where cheque bears endorsement "Payment stopped by drawer" - Whether the revision court rightly condoned the delay in filing the revision petition and whether the underlying complaint based on a dishonoured cheque was maintainable. - HELD THAT: - The revisional court accepted the complainant's explanation that he was absconding fearing arrest and was subsequently in custody, and that after release the COVID-19 lockdown contributed to delay in filing the revision; these reasons were held to justify condonation of the delay. The High Court noted the statutory presumption under Section 139 of the Negotiable Instruments Act in favour of the cheque holder and reiterated that dishonour endorsements such as "Payment stopped by drawer" can amount to an offence under Section 138 when supported by facts. Given that the petitioners had not been summoned and no decision on merits had been reached, restoration was appropriate subject to the imposed conditions. [Paras 3, 4, 6, 7, 9]

Delay in filing the revision was properly condoned and the complaint based on the dishonoured cheque is maintainable; no interference warranted.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed; the order of the Principal District & Sessions Judge dated 23.11.2020 restoring the complaint (subject to costs and conditions) is upheld.