TaxTMI Updates e-Newsletter
Jun 18,2021

Activities by a local authority treated as neither supply of goods nor supply of services - Functions entrusted under Article 243G/243W of the Constitution - Composite supply - Reverse charge - Agent versus independent supplier (principal-agent test) - Supply of right to collect fees - Advance Ruling Authority jurisdiction under Section 97(2)

Activities by a local authority treated as neither supply of goods nor supply of services - Functions entrusted under Article 243G/243W of the Constitution - Whether the services rendered directly by the applicant in Sl. Nos.1-5,7-9 are supply of services or are to be treated as neither supply and therefore not taxable. - HELD THAT: - Notification No.14/2017 treats activities in relation to functions entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W, when undertaken by a local authority as public authority, as neither supply of goods nor supply of services (operative from 26.07.2018 for municipalities). The services claimed (maintenance of parks; provision of market facilities daily and weekly; fees for bays in bus-stand; slaughter house facilities; pay & use toilets; and parking/vehicle stand facilities) map to entries in the Eleventh/Twelfth Schedules (e.g., parks, markets, public amenities, regulation of slaughter houses). The Authority finds that when these activities are provided by the applicant as a local authority engaged as a public authority, they are not supplies and are not taxable under GST as per Notification No.14/2017 as amended. [Paras 7]

Maintenance of park; providing market facilities (daily and weekly); providing bays in bus-stand; slaughter house facilities; providing toilet facilities; and providing stands/parking in bus-stand are not supplies and not taxable under Notification No.14/2017 as amended.

Activities by a local authority treated as neither supply of goods nor supply of services - Whether locker rent charged directly by the applicant in bus stand is covered by Notification No.14/2017 and exempted. - HELD THAT: - The applicant's locker facility in the bus stand was examined against the Twelfth Schedule entries relied upon (provision of urban amenities such as parks). The Authority found that providing lockers is not within the ambit of the cited entries of the Twelfth Schedule and therefore does not attract the treatment of 'neither supply' under Notification No.14/2017. Consequently, the locker rent constitutes a taxable service. [Paras 7]

Locker rent provided directly by the applicant is not covered by Notification No.14/2017 and is taxable.

Agent versus independent supplier (principal-agent test) - Supply of right to collect fees - Advance Ruling Authority jurisdiction under Section 97(2) - Whether services rendered through tender contractors (Sl. Nos.1-9) are exempt to the applicant and whether the Authority can rule on supplies undertaken by those contractors. - HELD THAT: - Tender documents and agreements show that successful bidders obtain the right to collect fees fixed by the applicant, pay a fixed bid consideration to the applicant, and assume control/possession of the activity during the contract period. Such contractors are not merely agents acting on behalf of the applicant (they do not merely collect and remit amounts at the principal's control); instead they are independent business entities supplied with a 'right to collect fees' by the applicant. Accordingly, the supply from the applicant to the contractor is a supply of rights and the contractors are suppliers in relation to end recipients. Further, Advance Ruling is confined to supplies being or proposed to be undertaken by the applicant; it cannot pronounce on supplies made by other persons. Therefore the applicability of exemption notifications to supplies actually made by contractors is not answered by the Authority. [Paras 8]

Contractors under the tender are independent suppliers (not agents); the question of applicability of exemptions to supplies made by those contractors is outside the Authority's remit and is not answered.

Advance Ruling Authority jurisdiction under Section 97(2) - Whether the Authority can regularise/condone the applicant's collection of tax under direct charge instead of reverse charge (Sl. Nos.10-12) and treat it as a technical lapse. - HELD THAT: - Section 97(2) enumerates the matters on which an advance ruling may be sought. A request for condonation or regularisation of past tax payment mechanics (treating direct charge instead of reverse charge as a technical lapse and condoning it) does not fall within the matters amenable to advance ruling. The Authority accordingly held that such a question is not admissible for consideration. [Paras 6]

The question seeking regularisation/condonation of tax collected under direct charge instead of reverse charge is not admitted for consideration by the Authority.

Composite supply - Reverse charge - Whether the charges for road cutting (one time) and annual track rent for laying optical fibre alongside roads (Sl. No.14) constitute a composite supply with renting of immovable property as the principal supply, thereby attracting reverse charge under the entry for telephone operators. - 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. Factual record shows road cutting charges are a one time initial charge (road restoration) while annual track rent is a recurring charge for use of space. These supplies are not naturally bundled or made in conjunction in the ordinary course of business. Consequently they do not form a composite supply and cannot be classified as renting of immovable property for the purpose of applying the reverse charge entry. [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 for reverse charge purposes.

Services by way of renting of residential dwelling for use as residence - Services provided by a local authority to another government/local authority - Whether (a) renting of residential building by the applicant is exempt under Sl. No.12 of Notification No.12/2017, and (b) renting of immovable property by the applicant to Central/State government or local authority is exempt under Sl. No.8 of Notification No.12/2017. - HELD THAT: - Entry Sl. No.12 of Notification No.12/2017 exempts renting of residential dwelling for use as residence without conditions; the exemption applies where the applicant provides residential dwellings owned by it for use as residence. Entry Sl. No.8 of Notification No.12/2017 exempts services provided by Central/State Government/Union territory/local authority to another such entity (subject to provisos). The Authority examined the lease documents and rental receipts and held that renting of immovable property by the applicant to another Central/State Government, Union territory or local authority is exempt under Sl. No.8, whereas supplies to co operative societies and nationalised banks do not qualify for the exemption under Sl. No.8. [Paras 10, 11]

Renting of residential dwellings for use as residence by the applicant is exempt under Sl. No.12 of Notification No.12/2017 (if they are residential dwellings). Renting of immovable property by the applicant to another Central/State Government, Union territory or local authority is exempt under Sl. No.8 of Notification No.12/2017; renting to co operative societies and nationalised banks is not exempt under that entry.

Final Conclusion: The Authority rules that when performed by the municipal corporation as a local authority engaged as a public authority, the specified activities (parks; market facilities daily and weekly; bays in bus stand; slaughter house facilities; pay & use toilets; and vehicle/parking stands) are neither supply of goods nor supply of services and not taxable under Notification No.14/2017 as amended. Locker rent is taxable. Supplies conferred to tender contractors constitute supply of rights and contractors are independent suppliers; applicability of exemptions to supplies by contractors is not answered. The Authority declines to regularise past collection under direct charge instead of reverse charge as outside its jurisdiction. Road cutting charges and annual track rent do not form a composite supply. Renting of residential dwellings for use as residence is exempt under Sl. No.12, and renting to Central/State government or local authority is exempt under Sl. No.8 of Notification No.12/2017, while renting to co operative societies and nationalised banks is not covered by that exemption.

Rounding off of tax under GST in a price quotation - bid evaluation and disqualification for suppression of material fact - application of tax-return rounding rule at the tender stage - tendering and procurement law - competence to determine bid arithmetic

Rounding off of tax under GST in a price quotation - application of tax-return rounding rule at the tender stage - bid evaluation and disqualification for suppression of material fact - Whether the Tender Inviting Authority erred in rejecting the petitioner's bid for having rounded off the tax component by reference to the GST rounding rule and awarding the contract to the next bidder. - HELD THAT: - The Court held that reliance on the statutory rounding rule for tax amounts (as applied in the context of filing returns and payment) is misplaced at the stage where a bidder is required to quote a price. The rounding-off rule operates at a subsequent compliance stage and does not authorise a bidder to modify or round quoted bid figures for the purpose of tender evaluation. Accordingly, the Tender Inviting Authority was entitled to treat the discrepancy in the tax figure as a material lapse in the bid and to exclude the petitioner from selection. The Court found no error in the Authority's exercise of its discretion in the evaluation and rejection of the bid. [Paras 6, 7]

The rejection of the petitioner's bid was appropriate and the writ petition is dismissed.

Final Conclusion: Petition dismissed: the Court affirmed the Tender Inviting Authority's rejection of the petitioner's bid, holding that GST rounding rules applicable at the returns/payment stage do not validate rounding of tax figures in a price quotation for tender evaluation.

Deduction under section 80IB(10) - built-up area exclusion of open terrace - date of approval for limitation under Explanation to section 80IB(10)(a) - completion certificate issued by local authority suffices despite original CMDA approval - developer versus works contractor - assessment of investment risk and infrastructure development - ownership/registration not prerequisite for entitlement under section 80IB(10)

Built-up area exclusion of open terrace - deduction under section 80IB(10) - Open terrace area is not to be included in the built-up area for the purpose of claiming deduction under section 80IB(10). - HELD THAT: - The Court followed the reasoning recorded in the assessee's earlier matter and the decisions of the Madras High Court and other High Courts, which hold that an open terrace is not a built structure and therefore cannot be included within the built-up area for denial of benefit under section 80IB(10). The Tribunal and the appellate authorities had computed the built-up area excluding open terrace and arrived at an area within the statutory ceiling; the High Court, applying those precedents, declined to interfere with that conclusion. [Paras 3, 5]

The finding that open terrace area is excluded from built-up area for section 80IB(10) purposes is affirmed and the claim is allowable on that basis.

Date of approval for limitation under Explanation to section 80IB(10)(a) - deduction under section 80IB(10) - The time limit for completion of the eligible project is to be computed from the date on which building plan approval for the project as a whole (i.e., the last unit approval) was obtained, not from an earlier layout approval or prototype approval. - HELD THAT: - Relying on the reasoning in the earlier decision and on the authority of the Bombay High Court in CIT v. Vandana Properties, the Court accepted that approval of prototype units does not amount to approval of the entire housing project. Where approvals are granted more than once, the Explanation contemplates approval of the same project; here the individual unit approvals culminated in a last approval for the final unit, and that date (29.03.2007 in the facts recited) is to be taken as the date of approval for computing the statutory time limit. Applying that approach, the project was completed within the five-year period prescribed under section 80IB(10). [Paras 3, 5]

The date of the last building plan approval for the units is the operative approval date for computing completion time under section 80IB(10), and on that basis the project met the time-limit requirement.

Completion certificate issued by local authority suffices despite original CMDA approval - deduction under section 80IB(10) - ownership/registration not prerequisite for entitlement under section 80IB(10) - developer versus works contractor - assessment of investment risk and infrastructure development - A completion certificate issued by the competent local authority (Pallikaranai Panchayat/municipal authority) satisfies the statutory requirement; the assessee was correctly treated as a developer (not a works contractor) and entitlement to deduction under section 80IB(10) does not require formal ownership or registration of the sale deed. - HELD THAT: - The Court, following the detailed findings recorded in the Tribunal/CIT(A) and consistent High Court authorities, accepted that where a project is undertaken in a CMDA-approved layout the competent authority for plan and completion certificates for individual plots may be the local authority. The assessee had undertaken development works, assumed investment risk and obtained possession/approvals and completion certificate from the local authority; these facts satisfy the conditions for being a developer and for claiming deduction. Precedents were applied to hold that formal registration of the sale deed or title in the assessee's name is not a precondition for claiming the benefit when the assessee is in part performance and the developer has carried out requisite development and construction. [Paras 3, 5]

The completion certificate from the local authority is adequate, the assessee is a developer (not a contractor), and lack of formal registration/ownership does not disentitle the assessee from deduction under section 80IB(10).

Final Conclusion: Applying the ratios of the cited High Court decisions and the Tribunal's findings in the assessee's earlier matter, the Court decided the substantial questions of law against the Revenue and dismissed the Tax Case Appeal for Assessment Year 2010-2011; no costs.

Reopening of assessment - change of opinion - failure to disclose fully and truly all material facts - extended period of limitation under proviso to section 147 - speaking order - consistency of treatment across assessment years / estoppel by prior appellate order

Reopening of assessment - change of opinion - failure to disclose fully and truly all material facts - extended period of limitation under proviso to section 147 - consistency of treatment across assessment years / estoppel by prior appellate order - Validity of notice dated 29.03.2014 under Section 148 read with Section 147 seeking reopening of assessment for Assessment Year 2007-2008. - HELD THAT: - The Court found that the assessee had made adequate disclosure of the remuneration/commission in the minutes, the schedules to the financial statements and the audit report (Form 3CA), and that a regular assessment under Section 143(3) had been completed. There was no material on record to show fresh information justifying invocation of the extended period under the proviso to Section 147; the reopening was predicated on a change of opinion which the Court noted is impermissible in law. The respondents had initiated similar proceedings for AY 2008-2009 which were dropped by the Commissioner of Income Tax (Appeals) by order dated 15.12.2017 on the ground that no fresh material existed and there was no failure to disclose; that order was not shown to have been appealed. In these circumstances the assessing authority could not permissibly proceed for AY 2007-2008 taking a view different from the view accepted in the appellate order for the closely analogous year. The Court observed that remitting the matter for a fresh speaking order would serve no useful purpose where the facts and legal position mirrored those in which the appellate authority had already declined to sustain reopening, and that the reopening amounted to impermissible change of opinion contrary to settled decisions of the Apex Court. [Paras 18, 20, 21, 22, 23]

Writ petition allowed; impugned notice dated 29.03.2014 under Section 148 and consequential communication/speaking order dated 05.12.2014 in respect of AY 2007-2008 quashed and the proceedings stood closed.

Final Conclusion: The High Court allowed the writ, quashed the reopening for AY 2007-2008 as being based on impermissible change of opinion and in view of analogous appellate disposal for AY 2008-2009; the impugned notices/orders were set aside and connected petition closed.

Reopening of assessment under proviso to Section 147 and notice under Section 148 of the Income tax Act, 1961 - change of opinion - true and full disclosure of material facts - reopening vitiated where assessment was completed after disclosure and hearing

Reopening of assessment under proviso to Section 147 and notice under Section 148 of the Income tax Act, 1961 - change of opinion - true and full disclosure of material facts - Validity of the reopening of assessment for Assessment Year 2009-2010 by invoking proviso to Section 147 read with Section 148. - HELD THAT: - The Court examined the record including pre assessment communications from the petitioner's Chartered Accountant which disclosed the nature of transactions in sale of film rights and furnished ledgers and a breakup of amounts received prior to completion of assessment. A personal hearing was held and the assessment under section 143(3) was completed accepting the returned income. The Court found that the materials before the Assessing Officer and the auditor's disclosures showed no failure by the petitioner to truly and fully disclose material facts necessary for assessment. The impugned communication did not demonstrate any fresh materials or concealment but, on the record, amounted to a mere change of opinion by the Revenue. For these reasons the exercise to invoke the proviso to Section 147 by issuing notice under Section 148 was held to be on account of change of opinion and therefore not sustainable. [Paras 12, 13, 14, 15, 16]

Impugned communication overruling the petitioner's objection to reopening is quashed and the writ petition is allowed.

Final Conclusion: The High Court quashed the communication overruling objections to reopening the assessment for Assessment Year 2009-2010, holding the reassessment to be founded on a change of opinion rather than any failure to truly and fully disclose material facts.

Deduction under section 35D - allowability of preliminary/pre operative expenditure - commencement of business versus set up of business - date of commencement of business - transfer pricing issues settled under MAP

Deduction under section 35D - ROC fees as preliminary expenditure - Whether the ROC fees paid for authorised share capital, claimed as preliminary expenditure, are allowable as deduction under section 35D. - HELD THAT: - The Assessing Officer treated the ROC fees as capital in nature relying on earlier Supreme Court decisions and disallowed the claim. The Tribunal examined the precedent relied upon by the assessee and the Revenue, noting that the authority relied upon by the assessee related to a period prior to the introduction of section 35D. The Tribunal accepted the Revenue's concession that once section 35D was introduced the expenditure in question falls within its ambit and accordingly the assessee's claim (one fifth of the total preliminary expenditure) is allowable under section 35D. The ground is allowed. [Paras 5]

ROC fees claimed as preliminary expenditure are allowable as deduction under section 35D and the ground is allowed.

Commencement of business versus set up of business - date of commencement of business - pre-operative expenditure - Whether the assessee's business was set up/commenced from the date of incorporation or a later date (VAT registration), and whether pre operative expenses incurred before VAT registration are allowable. - HELD THAT: - The Assessing Officer disallowed pre operative expenses on the ground that the business was not set up until VAT registration was obtained. The Tribunal examined the facts: incorporation and PAN on 30.8.2010; capital introduced on 15.9.2010; premises taken on 10.10.2010; first purchase order placed on 6.10.2010; appointment of key personnel and import/export code obtained subsequently; VAT registration obtained on 24.12.2010. Relying on established principles that setting up a business consists of preparatory acts and that commencement does not require simultaneous start of all activities, the Tribunal held that the assessee had taken the essential steps to set up the business and was ready to commence operations from the date of the first purchase order. Consequently, expenditure incurred from 6.10.2010 is to be treated as business expenditure and allowed (the ground is partly allowed). [Paras 11]

Business is to be treated as having commenced from 6.10.2010 (date of placing the first purchase order); pre operative expenses from that date are allowable and the ground is partly allowed.

Final Conclusion: The appeal is partly allowed: the claim for ROC fees as preliminary expenditure is allowed under section 35D, and pre operative expenses incurred from 6.10.2010 (date of first purchase order) are to be treated as business expenditure and allowed; transfer pricing grounds were not pressed as settled under MAP proceedings.

Distinction between employee's contribution and employer's contribution - deduction under section 36(1)(va) for employees' contribution subject to 'due date' under relevant PF/ESI Acts - section 43B applicability limited to employer's contribution and not to employees' contribution - requirement of remittance within statutory due date under Provident Fund/ESI Acts for allowability of deduction

Deduction under section 36(1)(va) for employees' contribution subject to 'due date' under relevant PF/ESI Acts - section 43B applicability limited to employer's contribution and not to employees' contribution - distinction between employee's contribution and employer's contribution - Whether deduction is allowable for employee's contribution to PF/ESI when such contribution was remitted after the due date prescribed under the relevant PF/ESI Acts and whether section 43B can be invoked to allow deduction by treating it as payment within the due date for filing return. - HELD THAT: - The Tribunal held that employee's contribution and employer's contribution are separate statutory concepts governed by different provisions. Section 36(1)(va) permits deduction of sums received from employees as contribution to provident fund/ESI only if such sums are credited by the employer to the employees' accounts in the relevant fund on or before the 'due date' as defined in the Explanation to section 36(1)(va) (i.e., the date prescribed under the relevant PF/ESI Act, rules or standing orders). Section 43B operates in respect of certain deductions only on actual payment, and its proviso dealing with the date of filing the return relates to the employer's contribution; it does not amend or override the requirement in section 36(1)(va) for employees' contributions to be credited by the statutory due date. Relying on precedents of High Courts and the Division Bench of the Tribunal, the Tribunal affirmed that belated remittance of employees' contribution (i.e., after the due date under PF/ESI enactments) disentitles the assessee to deduction under the Income-tax Act, and section 43B cannot be invoked to cure non-compliance with the timing requirement applicable to employees' contribution. [Paras 6, 7, 11]

The disallowance of the employee's contribution to PF/ESI was upheld; section 43B does not apply to employees' contribution and the deduction under section 36(1)(va) is allowable only if remittance was made within the due date under the PF/ESI Acts.

Final Conclusion: Appeal dismissed; the Tribunal confirmed the orders of the revenue authorities holding that deduction for employee's contribution to PF/ESI is not allowable where remittance was made after the statutory due date under the PF/ESI Acts and that section 43B cannot be invoked to permit such deduction.

Penalty under section 271(1)(c) for concealment of income - penalty on additions made on estimate - rejection of books of account under section 145(3) - Explanation 5(2) to section 271(1)(c) - bona fide disclosure / inadvertent omission

Penalty under section 271(1)(c) for concealment of income - penalty on additions made on estimate - rejection of books of account under section 145(3) - Explanation 5(2) to section 271(1)(c) - bona fide disclosure / inadvertent omission - Whether penalty under section 271(1)(c) is leviable where books were rejected under section 145(3) and additions were made on estimated basis. - HELD THAT: - The Tribunal observed that the penalty was imposed by the Assessing Officer consequent to rejection of the assessee's books under section 145(3) and on estimated additions, and that the authorities below confirmed the penalty treating the estimated addition as furnishing of inaccurate particulars leading to concealment of income. Relying on a coordinate bench decision, the Tribunal held that penalty cannot be levied where the addition is purely on estimate and is not supported by concrete evidence of concealment or filing of inaccurate particulars. The Tribunal noted the applicability of principles recognising bona fide disclosure or inadvertent omission (as reflected in Explanation 5(2) to section 271(1)(c)) and precedent authorities which cancel penalty where facts show disclosure to Revenue, voluntary surrender during search or lack of evidence rebutting the assessee's explanations. Applying these principles to the facts of the case, the Tribunal concluded that the penalty founded on estimated additions was not sustainable and directed deletion of the penalty. [Paras 7, 8, 9]

Penalty levied under section 271(1)(c) on account of estimated additions (following rejection under section 145(3)) is deleted; appeal allowed.

Final Conclusion: The Tribunal set aside the penalty order and directed deletion of the penalty under section 271(1)(c), allowing the assessee's appeal for AY 2014-15.

Reference to Valuation Officer under section 142A - valuation by Departmental Valuation Officer versus registered valuer; applicability of State PWD rates over CPWD rates - addition as deemed income under section 69B for undisclosed investment - treatment and finality of valuer's report and remand for proportionate allocation - disallowance of expenditure under section 14A read with Rule 8D

Reference to Valuation Officer under section 142A - valuation by Departmental Valuation Officer versus registered valuer; applicability of State PWD rates over CPWD rates - addition as deemed income under section 69B for undisclosed investment - treatment and finality of valuer's report and remand for proportionate allocation - Whether the addition made under section 69B on the basis of the DVO's valuation is sustainable and what valuation is to be adopted for the year under consideration in view of competing valuations and the rates applied. - HELD THAT: - The Tribunal found that the DVO had applied CPWD plinth area rates whereas, for a factory situated within State PWD jurisdiction, State PWD rates are to be applied; this conclusion follows the binding position in the cited Supreme Court and High Court precedent. The assessee had placed on record a report of a registered valuer which applied PWD rates and arrived at a construction cost materially lower than the DVO's figure. The Tribunal declined to disturb the registered valuer's report except insofar as a previously unraised contention about specific adjustments was advanced for the first time before the Tribunal; such new contentions could not be accepted without confronting the valuers and giving opportunity to rebut. Since the registered valuer was an independent expert appointed by the assessee and his valuation used the appropriate (State PWD) basis, the Tribunal directed the Assessing Officer to adopt the registered valuer's total valuation and to determine the proportionate value of investment relevant to the year under consideration. The matter was therefore remanded to the AO only for allocation/ computation in accordance with the registered valuer's figure and accepted methodology. [Paras 14, 15]

Partly allow - DVO's CPWD-based valuation rejected insofar as CPWD rates were applied; AO directed to adopt the registered valuer's valuation (as per State PWD rates) and to determine proportionate value of investment for the year under consideration; matter remanded to AO for that limited purpose.

Disallowance of expenditure under section 14A read with Rule 8D - no disallowance where no expenditure incurred for earning exempt income - Whether disallowance under section 14A read with Rule 8D is warranted in respect of dividend/exempt income claimed by the assessee. - HELD THAT: - The Tribunal examined the facts that a small amount was invested in the year under consideration, that the assessee's own funds and cash profits were available to make the investment, and that the assessee earned only a modest dividend during the year. The Tribunal held that where no actual expenditure (interest or other expenses) attributable to earning exempt income is shown to have been incurred in the year, no disallowance under section 14A can be sustained. The Tribunal further observed that even the CIT(A)'s restriction of disallowance to the amount of exempt income was not appropriate in the absence of actual expenditure and reliance on precedents did not compel sustaining the addition. Consequently, the addition was deleted. [Paras 21]

Allow - the disallowance confirmed by the lower authorities is deleted; no disallowance under section 14A read with Rule 8D is sustained on the facts.

Final Conclusion: Appeal partly allowed: the addition under section 69B based on the DVO's CPWD-rate valuation is set aside to the extent indicated and the AO is directed to adopt the registered valuer's PWD-rate valuation and to compute the proportionate investment for the relevant year; the disallowance under section 14A r.w. Rule 8D is deleted.

Limitation under Section 153B - period excluded by reference for exchange of information - notice under Section 143(2) in proceedings under Section 153A - incriminating material found during search - statement under Section 132(4) - unexplained investment under Section 69 - onus of proof for extension of limitation - disallowance under Section 14A and Rule 8D - disallowance under Section 36(1)(iii) - addition on account of unexplained cash/credits u/s 68 - penalty under Section 271(1)(c)

Limitation under Section 153B - period excluded by reference for exchange of information - onus of proof for extension of limitation - Validity of assessment dates against time-bar under Section 153B where a reference for exchange of information was made and amendment to Explanation (viii) occurred during pendency of proceedings. - HELD THAT: - The Tribunal held that the assessment for AY 2006-07/2007-08 was not time-barred. The reference for exchange of information was shown to have been made before or during pendency of proceedings and the amendment by Finance Act, 2012 (extending six months to one year w.e.f. 01.07.2012) applied because proceedings were alive when the amendment came into force. The AO's remand reports and inter-departmental communications sufficed to show a reference was made and that no substantive information was received before passing the assessment; the exclusion period under the Explanation therefore extended the limitation and the assessment dated 09.03.2015 fell within the extended period. The Tribunal rejected the assessee's contention that the AO had to produce the foreign correspondence to prove non-receipt and the contention that references made before initiation of proceedings could not give benefit of extension. (Decision paras: 107-114) [Paras 107, 108, 110, 112, 114]

Assessment for the years under challenge is not barred by limitation; the AO was entitled to the extended period under Explanation (viii) to Section 153B.

Notice under Section 143(2) in proceedings under Section 153A - Whether issuance of notice under Section 143(2) is mandatory after filing return in response to notice under Section 153A. - HELD THAT: - The Tribunal followed the jurisdictional Delhi High Court in Ashok Chadha and held that issuance of notice under Section 143(2) is not a prerequisite for completion of assessment under Section 153A consequent to search. The proceedings under Section 153A proceed on the basis of search and filing of return in response thereto; absence of a separate 143(2) notice does not invalidate jurisdiction in such search cases. The Tribunal rejected the assessee's contrary reliance on subsequent High Court decisions as distinguishable. (Decision para: 115) [Paras 115]

Non-issuance of notice under Section 143(2) did not vitiate assessments made under Section 153A.

Incriminating material found during search - statement under Section 132(4) - unexplained investment under Section 69 - Whether additions under Section 69 for undisclosed foreign bank deposits could be sustained for AY 2006-07 and 2007-08 where no incriminating material was seized during the search and the Revenue relied on a 6 page foreign information printout and a statement under Section 132(4). - HELD THAT: - The Tribunal found that the primary materials relied upon by the AO were (i) a 6 page printout/pen drive data received from French competent authority (allegedly relating to HSBC) and (ii) the assessee's statement recorded during search. The Tribunal concluded: (a) the 6 page document lacked usual features of bank statements, its provenance and authorship were not satisfactorily established and it was not part of material seized during search (it was available with the department before search); (b) the statement under Section 132(4) was retracted and, in any event, when read in entirety showed investments were made in earlier years (2002) and not in the years under consideration; (c) in completed (non abated) assessments additions under Section 69 can only be made on the basis of incriminating material found in the search for the specific year - following Kabul Chawla and related authorities; and (d) on these grounds additions of unexplained investment in AY 2006-07 and AY 2007-08 were unsustainable and directed to be deleted. The Tribunal also noted inherent inconsistencies in the foreign data (Geneva vs Zurich) and that no corroborative reply from Swiss authority had been received before assessment. (Decision paras: 119-152) [Paras 126, 131, 135, 151, 152]

Additions under Section 69 for AY 2006-07 and AY 2007-08 deleted; assessment conclusions based on the foreign printout and the 132(4) statement were unsustainable in absence of incriminating material found during search and lack of year specific investment admissions.

Penalty under Section 271(1)(c) - Whether penalties levied under Section 271(1)(c) for AYs 2006-07 and 2007-08 survive after deletion of the additions on which they were based. - HELD THAT: - The Tribunal observed that the CIT(A) had confirmed penalty only because additions (investments in the HSBC account) were upheld. Having deleted those additions, the foundational basis for penalty vanished and the Tribunal directed deletion of the penalty orders for both years. (Decision para: 241) [Paras 241]

Penalties under Section 271(1)(c) for AY 2006-07 and AY 2007-08 deleted.

Disallowance under Section 36(1)(iii) - disallowance under Section 14A and Rule 8D - Whether AO's disallowances of interest (proportionate under Section 36(1)(iii)) and disallowance under Section 14A/Rule 8D for AY 2009-10 should be sustained. - HELD THAT: - For AY 2009-10 the Tribunal upheld the CIT(A)'s findings that interest bearing borrowings had been used to make interest bearing advances and the assessee produced bank statements and confirmations showing the nexus. The CIT(A)'s detailed factual examination was accepted: no disallowance under Section 36(1)(iii) was warranted and, consequently, no separate or additional disallowance under Section 14A/Rule 8D was required. The Tribunal found AO had not recorded requisite satisfaction or reasoning before invoking Rule 8D and there was direct nexus between borrowing and earning taxable interest. (Decision paras: 162-170) [Paras 162, 167, 173]

Disallowances under Section 36(1)(iii) and Section 14A (AY 2009-10) deleted.

Unexplained expenditure - reconciliation of bank withdrawals and payments - Appeal on unexplained expenditure claimed for a marriage expense in AY 2009-10. - HELD THAT: - AO had made an addition as unexplained expenditure; CIT(A) examined bank payments, cheques and receipts and found the expenditures were traceable to bank withdrawals/payments from the assessee and his wife. The Tribunal declined to interfere with CIT(A)'s factual conclusion deleting the addition. (Decision paras: 157-161) [Paras 157, 161]

Addition on account of alleged unexplained marriage expenditure deleted.

Unexplained cash credit u/s 68 - single entry versus double entry reconciliation - Whether difference between reconciled bank balance and audited balance sheet for AY 2010-11 could be treated as unexplained cash credit under Section 68. - HELD THAT: - AO treated a balancing difference as unexplained credit; CIT(A) accepted assessee's explanation that discrepancies arose from single entry records and balancing figures, and that double entry reconciliation later produced reconciled figures. The Tribunal found no reason to disturb CIT(A)'s factual appreciation and deleted the addition. (Decision paras: 184-185) [Paras 184, 185]

Unexplained cash credit addition under Section 68 for AY 2010-11 deleted.

Treatment of family assets (jewellery/paintings) in search cases - Validity of additions in later assessment years (2011-12 and 2012-13) in respect of paintings, jewellery and other seized items. - HELD THAT: - For the later years the Tribunal upheld the CIT(A)'s detailed factual analyses: purchase payments for paintings were supported by cheques, artist confirmations and bank records; family jewellery position was reconciled with valuation reports and prior filings (Wealth Tax/returns) and part of jewellery had been offered/surrendered by other family members. The AO's additions (paintings, jewellery, unexplained investments) were deleted where the CIT(A) found credible documentary corroboration. Similar reasoning applied to other alleged unexplained investments and capital introduced-CIT(A)'s reconciliations were accepted. (Decision paras: 219-236, 240) [Paras 219, 222, 231, 236, 240]

Additions for paintings, jewellery, unexplained investments and related disallowances in AYs 2011-12 and 2012-13 were deleted in view of documentary reconciliation and prior disclosures.

Final Conclusion: The Tribunal allowed the assessee's appeals in relation to the major additions based on alleged HSBC foreign accounts for AYs 2006-07 and 2007-08 (deleting the Section 69 additions and consequent penalties) principally because no incriminating material was found in the search, the foreign printout's provenance and content were not satisfactorily proven and the statement under Section 132(4) did not establish year specific investment; the assessment dates were held within extended limitation under Explanation to Section 153B and no separate 143(2) notice was required in proceedings under Section 153A. For the other assessment years the Tribunal generally upheld the first appellate tribunal's factual findings deleting AO's additions and disallowances where bank records, reconciliations and corroborative documents established the assessee's position; revenue appeals on those points were dismissed.

Reopening of assessment under section 147/notice under section 148 - reasonable belief based on information in possession of Assessing Officer - substitution of consideration under section 50C for computation of capital gains - reliance on stamp valuation / revaluation by Stamp Authorities - proof of revaluation order or material to support enhanced stamp value

Reopening of assessment under section 147/notice under section 148 - reasonable belief based on information in possession of Assessing Officer - Validity of reopening assessment for A.Y. 2009-10 where Assessing Officer recorded reasons and issued notice under section 148 purportedly on basis of enhanced stamp valuation - HELD THAT: - The Tribunal examined whether the Assessing Officer had any information or material in his possession prior to recording reasons and issuance of notice under section 148 to form a reasonable belief that income had escaped assessment. The record shows that the AO did not possess the sub-registrar's communication or any revaluation material before recording reasons; the purported enhanced valuation emerged only after the assessee's objections when the AO called for information under section 133(6). The Court applied the settled principle that reassessment can be initiated only on the basis of information/material already in possession of the AO to form a reasonable belief and, in absence of any such pre-existing material, held the reopening to be without jurisdiction and liable to be quashed. [Paras 7, 8]

Reassessment proceedings initiated by notice under section 148 are quashed for want of pre existing information/material on which a reasonable belief could have been formed.

Substitution of consideration under section 50C for computation of capital gains - reliance on stamp valuation / revaluation by Stamp Authorities - proof of revaluation order or material to support enhanced stamp value - Whether the enhanced stamp valuation (Rs. 90,19,200) could be adopted under section 50C in the absence of any revaluation order or supporting material from the Stamp Authority - HELD THAT: - On the merits, the Tribunal considered the basis for the AO's invocation of section 50C - a communication from the Sub Registrar alleging on spot revaluation and reference to higher authorities. The material relied upon did not include any concluded revaluation order, nor was any such order produced during proceedings. The assessee produced an RTI reply from the Deputy Director of Stamps denying receipt of the alleged reference and stating no order was passed. In absence of any material or order evidencing enhancement of the stamp valuation, the Tribunal found the Revenue's case unsupported and held that the addition made by adopting the enhanced value under section 50C could not stand. [Paras 9, 10, 11]

Adoption of the alleged enhanced stamp value under section 50C is not sustained for want of any revaluation order or supporting material; the addition is deleted.

Final Conclusion: The appeal is allowed: the reopening under section 148/147 is quashed for lack of pre existing material to form reasonable belief, and on merits the addition based on an alleged enhanced stamp valuation is deleted for want of any revaluation order or supporting material.

Disallowance under section 14A read with Rule 8D - treatment of investments yielding exempt income for computation under Rule 8D(2)(iii) - disallowance of interest under Rule 8D(2)(ii) where assessee has own funds in excess of investments - allowability of uncertified R&D expenditure under section 35(1) / section 37 - deduction under section 35(1)(iv) for capital expenditure on scientific research notwithstanding non-certification under section 35(2AB) - carry forward and allowance of balance additional depreciation under section 32(1)(iia) - taxability of payments to non-residents as business profits under relevant DTAAs and consequent non-obligation to deduct TDS under section 195 - exclusion of teaching/tuition from fees for technical services under DTAA - residence by physical presence (stay less than 183/183+ days) and its effect on taxing rights

Disallowance under section 14A read with Rule 8D - disallowance of interest under Rule 8D(2)(ii) where assessee has own funds in excess of investments - treatment of investments yielding exempt income for computation under Rule 8D(2)(iii) - Extent of disallowance under section 14A/Rule 8D in respect of (a) direct expenditure, (b) interest expenditure and (c) other expenditure where investments include shares of subsidiaries and where assessee has own funds in excess of such investments. - HELD THAT: - The Tribunal held that the assessee's suo motu disallowance under Rule 8D(2)(i) is binding and therefore the AO's disallowance under that head is restricted to the amount computed by the assessee in the return. On interest disallowance under Rule 8D(2)(ii) the Tribunal followed coordinate Bench precedent in the assessee's own case and relevant High Court authorities that where an assessee has own funds in excess of investments yielding exempt income, no disallowance of interest is warranted; accordingly the AO's disallowance of interest was deleted. With respect to the ad hoc 0.5% disallowance under Rule 8D(2)(iii), the Tribunal applied the settled principle that only investments which actually yielded exempt income in the relevant year are to be considered for computing the disallowance; investments in subsidiary companies which did not yield exempt income for the year are to be excluded and the AO was directed to recompute accordingly. [Paras 9, 10, 11]

Direct expenses disallowance restricted to assessee's suo motu figure; interest disallowance deleted; other expenditure under Rule 8D(2)(iii) to be recomputed considering only investments yielding exempt income and excluding subsidiary investments where applicable.

Allowability of uncertified R&D expenditure under section 35(1) / section 37 - deduction under section 35(1)(iv) for capital expenditure on scientific research notwithstanding non-certification under section 35(2AB) - Whether amounts not certified by DSIR for the purpose of section 35(2AB) can be allowed as deduction under section 35(1)(iv) or under section 37(1). - HELD THAT: - The Tribunal accepted that DSIR certification in Form 3CL is a pre-condition for claiming the weighted deduction under section 35(2AB) but held that non-certification does not bar the assessee from claiming the same expenditure as an ordinary deductible business expenditure. Applying the reasoning of the Madras High Court in Tube Investments (as followed by the authorities below), the Tribunal held that capital expenditure on scientific research that falls within section 35(1)(iv) is allowable even if not certified for section 35(2AB); uncertified revenue R&D expenditure, while ineligible for the 200% weighted deduction, can be claimed under section 35(1) or section 37(1) if wholly and exclusively for business. [Paras 15, 16]

Deletion of disallowance in respect of uncertified R&D expenditure; capital expenditure on R&D building held allowable under section 35(1)(iv) and the AO directed to delete the addition.

Carry forward and allowance of balance additional depreciation under section 32(1)(iia) - Whether the balance 50% of additional depreciation (where only 50% was allowed in year of acquisition because asset was used for less than 180 days) can be claimed in subsequent years. - HELD THAT: - The Tribunal examined the proviso to section 32(1)(iia) and relied on High Court decisions (including Karnataka and Madras High Courts) holding that where an asset is eligible for additional depreciation but was put to use for less than 180 days in the year of acquisition, the remaining 50% can be claimed in subsequent years provided the statutory conditions for additional depreciation are satisfied. Finding no dispute that conditions were met, the Tribunal upheld the CIT(A)'s direction to allow the carry forward and grant the balance additional depreciation. [Paras 20]

Assessing Officer directed to allow the balance 50% additional depreciation in subsequent years; revenue ground rejected.

Taxability of payments to non-residents as business profits under relevant DTAAs and consequent non-obligation to deduct TDS under section 195 - exclusion of teaching/tuition from fees for technical services under DTAA - residence by physical presence (stay less than 183/183+ days) and its effect on taxing rights - Whether various payments to non-residents (warehousing & logistics, rework & subscription charges, professional fees, consultancy, tuition) were taxable in India such that TDS under section 195 was required and disallowance under section 40(a)(i) was justified. - HELD THAT: - For warehousing, logistics, rework and subscription charges the Tribunal found the payments to be business profits covered by Article 7 of the respective DTAAs and not taxable in India in the absence of a permanent establishment of the payee; consequently no TDS obligation arose and disallowance under section 40(a)(i) could not be sustained. Professional fees paid to a Thailand entity were also held to fall under business profits (Article 7) and not fees for technical services. The consultant's payments were held not taxable as the assessee proved the consultant's stay in India was below the relevant threshold under the India-Japan DTAA. Payments to foreign educational institutions for tuition were held to be within exclusions for teaching/educational services under the applicable DTAA article and thus not taxable in India. On these bases the Tribunal directed deletion of the 40(a)(i) additions. [Paras 22, 23, 24, 25]

Additions under section 40(a)(i) in respect of the specified payments to non-residents deleted; AO directed to give effect accordingly.

Final Conclusion: The cross appeals for AYs 2013-14 and 2014-15 were partly allowed: the Tribunal restricted Rule 8D(2)(i) disallowance to the assessee's suo motu figure, deleted interest disallowance under Rule 8D(2)(ii), directed recomputation under Rule 8D(2)(iii) considering only investments yielding exempt income, upheld allowance of uncertified R&D expenditure under section 35(1)/37 and of capital R&D building expenditure under section 35(1)(iv), directed allowance of carried forward additional depreciation under section 32(1)(iia), and deleted disallowances under section 40(a)(i) for various payments to non-residents held not taxable in India under applicable DTAAs.

Composite lease - inseparable letting - Income from other sources under Section 56(2)(iii) - deduction under Section 57(iii) - tests of intention from Sultan Bros. - precedential effect of jurisdictional High Court decision (Jay Metals)

Composite lease - inseparable letting - Income from other sources under Section 56(2)(iii) - tests of intention from Sultan Bros. - precedential effect of jurisdictional High Court decision (Jay Metals) - Classification of the assessee's receipts from letting as income under the head 'Income from other sources' under Section 56(2)(iii) rather than 'Income from house property'. - HELD THAT: - The Tribunal held that the lease was a composite lease including inbuilt infrastructural facilities, furniture and equipment (centralized air-conditioning with ducting, DG power supply, network and access-control equipment, VAVs, smoke detectors, installation rights for antennae, parking and maintenance services and 100% power backup), and therefore satisfied the tests of inseparability articulated by the Supreme Court in Sultan Bros. The Tribunal rejected the Assessing Officer's emphasis on the related-party nature of the transaction and the computation of rent on a per-square-foot basis as determinative against composite character; it found that the lease terms themselves and the services/amenities provided demonstrate the parties' intention that the lettings be enjoyed together and therefore attract Section 56(2)(iii). The Tribunal specifically followed the reasoning and precedent of the jurisdictional High Court in Jay Metals and Garg Dyeing in concluding that the receipts are chargeable as 'Income from other sources'. Accordingly, the income must be treated under Section 56(2)(iii) and not as 'Income from house property'. [Paras 16, 17, 18, 20, 21]

Receipts from letting are taxable as 'Income from other sources' under Section 56(2)(iii) because the lease is a composite/inseparable letting.

Deduction under Section 57(iii) - precedential effect of jurisdictional High Court decision (Jay Metals) - Entitlement to corresponding deductions (including depreciation/expenses) under Section 57(iii) where income from letting is treated as 'Income from other sources'. - HELD THAT: - Relying on the jurisdictional High Court's decision in Jay Metals, the Tribunal directed that while giving effect to the classification of income as 'Income from other sources', the Assessing Officer must grant the assessee the benefit of deductions permissible under Section 57(iii). The Tribunal noted that the High Court has already addressed the claim for corresponding deductions and that the AO should allow such benefit when giving effect to the order. [Paras 22, 23]

The assessee is entitled to the benefit of deductions under Section 57(iii) while treating the receipts as 'Income from other sources'; the AO is directed to grant such benefit.

Final Conclusion: The Tribunal, following Sultan Bros. and the jurisdictional High Court decisions (notably Jay Metals), held that the lease was a composite/inseparable letting and directed that the receipts be taxed as 'Income from other sources' under Section 56(2)(iii) for A.Y. 2011-12 and A.Y. 2012-13, with corresponding entitlement to deductions under Section 57(iii); the grounds restored by the High Court are decided in favour of the assessee and against the Revenue.

Condonation of delay for filing appeal - application of valuation provisions under Section 50C for computation of capital gains - remand for de novo consideration - relief in the interest of justice for a litigant unable to cooperate due to personal hardship - statistical disposal of appeal

Condonation of delay for filing appeal - relief in the interest of justice for a litigant unable to cooperate due to personal hardship - The Tribunal condoned the delay of 11 days in filing the assessee's appeal before the Tribunal. - HELD THAT: - The affidavit of the assessee's counsel explained that the appeal was ready earlier but remained unfiled due to oversight arising from confusion over challan particulars and the counsel's preoccupation with other stay matters; the appeal was filed immediately upon discovery of the omission. The Tribunal found the delay attributable to counsel's oversight and not to the assessee, and observed that penalising the assessee for that oversight would be inappropriate. In the interest of justice and having regard to the explanation provided, the Tribunal exercised its discretion to condone the short delay. [Paras 4]

Delay of 11 days in filing the appeal is condoned.

Application of valuation provisions under Section 50C for computation of capital gains - remand for de novo consideration - relief in the interest of justice for a litigant unable to cooperate due to personal hardship - statistical disposal of appeal - The Tribunal remitted the matter to the Assessing Officer for de novo consideration instead of adjudicating the merits of the application of Section 50C valuation. - HELD THAT: - Although the Assessing Officer applied the SRO valuation under the provisions relevant to computation of capital gains and the CIT(A) upheld that approach, the Tribunal noted mitigating circumstances: the assessee's limited cooperation before the AO caused in part by serious personal hardship (the illness and death of spouse) and the assessee's advanced age and stress. Balancing these factors, the Tribunal concluded that the assessee should be given another opportunity to prosecute the case and have the valuation issue examined afresh. The Tribunal therefore did not decide the substantive question on the application of the valuation provision but remitted the entire matter to the file of the AO for fresh consideration on merits. [Paras 7, 8]

The matter is remitted to the Assessing Officer for de novo consideration; the appeal is allowed for statistical purposes.

Final Conclusion: The Tribunal condoned the 11-day delay in filing the appeal, remitted the case to the Assessing Officer for fresh consideration of the valuation and capital gains issue (without deciding the merits), and disposed of the appeal as allowed for statistical purposes.

Representative assessee - curable defect under section 292B - determination of fair market value by Valuation Officer under section 50C(2) - application of tolerance band/proviso to section 50C (10% rule) as curative and retrospective - mixed-use valuation (part residential, part commercial) and use of actual usage/measurements in valuation

Representative assessee - curable defect under section 292B - Validity of assessment order passed in the name of the assessee as an individual instead of in his capacity as representative assessee of Smt. Pamela Jean Colleco. - HELD THAT: - The Tribunal recorded that the question whether the assessee is a representative assessee of Smt. Pamela Jean Colleco had attained finality through earlier orders of the ITAT and the Rajasthan High Court, with the consequence that proceedings and liabilities flow in terms of sections 160, 161 and 162. The impugned set-aside assessment was passed to give effect to the Tribunal's directions for revaluation and is to be read as continuing the earlier proceedings rather than an independent de novo assessment. The AO's nomenclature of showing the assessee's status as 'Individual' in the set-aside order was found to be a defect of form and not substance because the order repeatedly refers to the assessee's liability as representative/agent and to directions of earlier authorities. Such a nomenclature mistake was held curable under the statutory saving/provisio embodied in section 292B, since the order in substance assessed the capital gains in the hands of the assessee as representative and conformed to the intent and purpose of the Act. The Tribunal therefore dismissed the challenge that the order was null and void for being in the individual name. [Paras 23, 24, 25, 26]

The assessment in the set-aside proceedings is to be read as passed in the capacity of the assessee as representative assessee of Smt. Pamela Jean Colleco; the nomenclature as 'Individual' is a curable defect and does not vitiate the assessment.

Determination of fair market value by Valuation Officer under section 50C(2) - mixed-use valuation (part residential, part commercial) and use of actual usage/measurements in valuation - application of tolerance band/proviso to section 50C (10% rule) as curative and retrospective - Correct fair market value (FMV) of two plots and whether the AO/DVO valuation or the CIT(A) revision should be accepted; applicability of tolerance band under section 50C. - HELD THAT: - The DVO had treated the plots as entirely commercial and valued each at Rs. 3 crores by applying a commercial rate. The CIT(A) examined documentary evidence and the DVO's site observations and held that the properties were of mixed use (residential and commercial) and lowered the value by applying commercial and residential rates to portions, fixing each plot at Rs. 1,72,78,488/-. The Tribunal found the CIT(A)'s conclusion that part of each property was residential to be supported by the DVO's own site notes and sale-deed material (including historic lease and possession statements) and therefore confirmed mixed-use treatment. The Tribunal further preferred valuation by measurement of actual residential and commercial areas using the DVO's per-unit rates (Rs. 41,214 per sq. m for commercial and Rs. 12,000 per sq. m for residential) which produced values slightly above the declared sale considerations (difference <10%). Applying the established view that the proviso (tolerance band) to section 50C is curative and should be applied retrospectively, and having regard to consistent Tribunal decisions treating differences below the tolerance as ignorable, the Tribunal held that the small differences (5.86% and 7.79%) should be ignored and the declared sale consideration in the registered deeds must be accepted as the FMV for capital gains computation. [Paras 45, 46, 47, 48, 49]

The properties are of mixed use and the AO/DVO valuation is not sustained; because the revised values are within the recognized tolerance band, the declared sale consideration in the registered sale deeds is to be accepted and the additions based on higher valuation are to be deleted.

Final Conclusion: The assessee's challenge to the assessment being in his individual name is dismissed since the order is in substance in his capacity as representative assessee and the nomenclature error is curable; on valuation, the Tribunal confirms mixed-use treatment but, applying the tolerance band to section 50C, directs acceptance of the declared sale consideration and allows the assessee's relief while dismissing the Revenue's appeal.

Reference to Departmental Valuation Officer under section 55A - fair market value as on 01.04.1981 - valuation supported by report of Government approved/registered valuer - Assessing Officer's power to refer only when assessee's declared value is less than its fair market value (pre-amendment) - amendment to section 55A effective from 01.07.2012 and non-retrospective application

Reference to Departmental Valuation Officer under section 55A - fair market value as on 01.04.1981 - valuation supported by report of Government approved/registered valuer - Validity of the Assessing Officer's reference to the DVO and rejection of the assessee's registered valuer's report for determination of FMV as on 01.04.1981 in assessment year 2012-13. - HELD THAT: - The Tribunal held that for AY.2012-13 (pre-amendment period) a reference to the Departmental Valuation Officer under section 55A could be made by the Assessing Officer only where the value adopted by the assessee was not supported by a valuation report of a Government approved valuer or where the AO was of the opinion that the value claimed by the assessee was less than its fair market value. In the present cases the assessee's FMV as on 01.04.1981 was supported by a report of a registered/Government approved valuer and, in fact, was higher than the value estimated by the DVO. Consequently none of the pre-amendment conditions for invoking section 55A were fulfilled and the AO was not legally competent to refer the matter to the DVO or to reject the assessee's valuation on that ground. The Tribunal further relied on the coordinate decision in Jagrutiben V. Patel and other precedents to conclude that reference to DVO in such circumstances was not justified and the addition based on DVO's lower valuation was unsustainable. [Paras 4, 7, 8]

Reference to the DVO under section 55A and consequent rejection of the assessee's approved valuer's FMV for AY.2012-13 was invalid; the addition based on the DVO valuation is not justified and the assessee's appeal is allowed on this ground.

Amendment to section 55A effective from 01.07.2012 and non-retrospective application - Assessing Officer's power to refer only when assessee's declared value is less than its fair market value (pre-amendment) - Whether the 2012 amendment to section 55A (effective 01.07.2012) operates retrospectively to permit the AO to refer valuation to DVO in assessments relating to periods prior to 01.07.2012. - HELD THAT: - The Tribunal examined the legislative amendment which replaced the pre-amendment phrase with language indicating valuation 'at variance' and observed that the amendment was made effective from 01.07.2012 and thus applies to assessment years commencing on or after that date (relevant to AY.2013-14 and subsequent years). The Tribunal rejected the Revenue's contention for retrospective application of the amendment, held that the pre-amendment law must govern assessments for periods prior to 01.07.2012, and followed binding/highly persuasive precedents to the same effect. Therefore the amended provision could not be invoked for AY.2012-13 and could not validate the AO's reference to the DVO in these cases. [Paras 4, 7, 11, 12]

The 2012 amendment to section 55A is not retrospective; it does not apply to AY.2012-13 and cannot be relied upon to validate the AO's reference to the DVO for the assessments under consideration.

Final Conclusion: Appeals for AY.2012-13 are allowed: the Assessing Officer's reference to the DVO and adoption of the DVO valuation in place of the assessee's Government approved valuer's FMV was legally untenable under the pre-amendment s.55A; the 2012 amendment to s.55A is not retrospective and does not apply to these assessments.

Condonation of delay in filing appeal - application of third proviso to valuation under section 50C (less than 5% rule) as curative provision - computation of book profits under section 115JB and verification of brought forward book losses

Condonation of delay in filing appeal - Whether the delay of 29 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The Tribunal examined the affidavit explaining the delay, which attributed it to the sudden resignation of an employee who received the CIT(A)'s order and failed to inform senior officials, and to consequent practical difficulties in instituting the appeal. Although the reasons were not found to be wholly satisfactory, the Tribunal, in the interest of justice and having regard to the issues raised in the appeal, exercised its discretion to condone the delay and proceed to decide the matter on merits. [Paras 4]

Delay of 29 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.

Application of third proviso to valuation under section 50C (less than 5% rule) as curative provision - Whether the capital gains addition made by treating the sale consideration as per section 50C should be sustained where the difference between actual consideration and section 50C value is less than 5%. - HELD THAT: - The Tribunal observed that the difference between the actual sale consideration and the value determined under section 50C was less than 5%, thereby attracting the protection of the third proviso to sub-section (1). The Revenue contended that the proviso was inserted by the Finance Act, 2018 with prospective effect and so not applicable to A.Y. 2012-13. The Tribunal rejected that contention, following the decision in Maria Fernandes Cheryl v. ITO which treated the proviso as curative, and held that the proviso applies to the facts before it. Accordingly the addition made to capital gains was not sustainable. [Paras 5]

The addition to capital gains under section 50C is deleted since the difference is less than 5% and the third proviso applies.

Computation of book profits under section 115JB and verification of brought forward book losses - Whether the Assessing Officer's computation of book profits under section 115JB, adopting certain brought forward book loss figures, was correct. - HELD THAT: - Both parties agreed that the issue required fresh factual verification of the brought forward book loss figures for the earlier years. The Tribunal declined to adjudicate the matter on the record before it and directed the assessee to appear before the Assessing Officer with supporting details by a specified date for verification. The Tribunal permitted three effective opportunities of hearing before the AO for this purpose and treated the issue as remanded for factual examination. The matter was allowed to proceed to assessment-stage verification and is kept on record for statistical purposes. [Paras 6, 7]

The question of computation of book profits under section 115JB is remanded to the Assessing Officer for verification of the brought forward book loss figures; the assessee to produce supporting details and the AO to hear the matter afresh.

Final Conclusion: The appeal is partly allowed: delay in filing is condoned; the addition under the valuation provision is deleted as the less-than-5% proviso applies; the computation of book profits under section 115JB is remitted to the Assessing Officer for factual verification of brought forward book losses.

Amendment of cause title - Order I Rule 10 CPC - bona fide mistake in party's name - substitution of plaintiff - amendment of pleadings and prayer - change in nature and character of suit - limitation to be considered at trial - Benami Transactions (Prohibition) Act, 1988 applicability - conversion of partnership firm into company and dissolution of partnership - consequential declaratory relief

Amendment of cause title - Order I Rule 10 CPC - bona fide mistake in party's name - substitution of plaintiff - conversion of partnership firm into company and dissolution of partnership - Amendment of the cause title from the partnership firm to the limited company was permissible. - HELD THAT: - The Court found that the suit had been instituted in the name of a non existent partnership firm which had been converted into a limited company; where a suit is instituted in the name of the wrong person a court may, under Order I Rule 10 CPC, substitute the correct party if the wrong naming arose from a bona fide mistake and substitution is necessary for determination of the real matter in dispute. The High Court examined whether there was any ulterior intention in filing the suit in the firm's name and, noting that a decree in the name of a non existent firm would be a paper decree and that the pleadings showed the error was by oversight, concluded the mistake was bona fide. Allowing substitution was necessary to enable effective adjudication and would not prejudice the defendants. [Paras 24, 25, 26, 27, 28]

Application to amend the cause title was rightly allowed and the substitution to the company is permitted.

Amendment of pleadings and prayer - change in nature and character of suit - consequential declaratory relief - conversion of partnership firm into company and dissolution of partnership - limitation to be considered at trial - Amendment of the pleadings and prayer to change the plaintiff's claimed entitlement from 22.5% to 100% in the schedule properties was permissible and did not alter the character of the suit. - HELD THAT: - The Court observed that the suit from the beginning related to the same 27 schedule properties and the amendment only sought to alter the percentage entitlement in respect of those properties because the Memorandum of Understanding had been validated. Since no new properties were added or deleted, the basic nature of the dispute remained the same - the rights in the schedule properties would be adjudicated whether or not the amendment was permitted. Questions as to whether specific clauses of the Memorandum bind third parties, and issues of limitation, require evidence and are to be determined at trial; refusing amendment on the ground of limitation at this stage was inappropriate and the plea as to limitation can be considered during trial. [Paras 33, 34, 35, 36, 37]

Amendment of the pleadings and prayer was properly allowed; it does not change the suit's character and issues such as limitation are for trial.

Benami Transactions (Prohibition) Act, 1988 applicability - evidence and framing of issues at trial - The lower court's conclusion that the Benami Transactions (Prohibition) Act, 1988 would not apply was set aside and the question was remitted for trial. - HELD THAT: - The High Court held that the applicability of the Benami Act could not be finally determined on an amendment application without permitting the parties to lead evidence. The earlier finding by the trial court on non application of the Benami Act was therefore set aside; the matter was left to the trial court to frame appropriate issues, permit evidence and decide the question in accordance with law. [Paras 38]

Finding of non application of the Benami Act is set aside; the question is remitted for adjudication at trial after evidence is led.

Final Conclusion: Civil Revision Petition is partly allowed: the trial court's order permitting amendment of the cause title, pleadings and prayer is confirmed, but the trial court's ex parte conclusion on non application of the Benami Transactions (Prohibition) Act, 1988 is set aside and remitted for decision after evidence at trial; no costs.

Prohibition of Benami Property Transactions Act, 1988 - benami transaction - coparcenary as exception to benami prohibition - proof of execution and attestation of will under Section 68 Evidence Act and Section 63 Indian Succession Act - partition and joint family property - devolution of share under Hindu Succession Act prior to 2005 amendment

Prohibition of Benami Property Transactions Act, 1988 - benami transaction - coparcenary as exception to benami prohibition - Whether item No.1 of plaint 'A' schedule is benami and barred by Section 4(1) of the Prohibition of Benami Property Transactions Act, 1988 - HELD THAT: - The Court found that by the dates of Ex. A1 and Ex. A2 sale deeds and the suit (28.03.1985 and 17.07.1989 respectively) the erstwhile joint family status had been effectively disrupted and there was no continuing coparcenary. Section 4(1) bars a suit asserting benami ownership against the registered owner; the limited exception in Section 4(3) (coparcener holding for benefit of coparceners) is factually inapplicable. Although trial evidence suggested the deceased 1st appellant may have contributed funds and retained title deeds, the appellants failed to discharge the evidential burden under Section 104 of the Evidence Act to rebut the presumption in favour of the recitals of Ex. A1 and Ex. A2. Documentary indicia and omissions (failure to examine attestors/scribe, absence of corroborative books/accounts, mutation steps by the 1st respondent) do not suffice to establish a benami transaction. The trial Court's application of Section 4(1) and its conclusion that item No.1 is the property of the 1st respondent as per the registered sale deeds are upheld. [Paras 39, 49, 50, 53, 54]

Item No.1 of plaint 'A' schedule is not available for partition as a benami claim is barred by Section 4(1) of the Prohibition of Benami Property Transactions Act, 1988, and the appellants failed to prove the transaction to be benami.

Proof of execution and attestation of will under Section 68 Evidence Act and Section 63 Indian Succession Act - testamentary validity - Whether Ex. A24 / Ex. X1 Will executed by the deceased 1st appellant is genuine, proved and binding - HELD THAT: - The appellants sought to prove a Will allegedly executed on 02.02.1988 by adducing testimony of interested witnesses including P.W.2 (a principal beneficiary) and one attestor P.W.3, and documentary registration extracts. The Court held that the appellants bore the onus to dispel suspicious circumstances surrounding execution. Material omissions-failure to examine other attestors and the scribe, absence of the original Will or satisfactory explanation for its nondisclosure in earlier communications (legal notice/plaint), and the interested nature and inconsistent testimony of P.W.2-fatally weakened the case. The trial Judge accepted the Will without adequate reasoning or application of the requirements of Section 68 Evidence Act read with Section 63 Indian Succession Act; on appellate review those findings are set aside. The Will is not proved to be genuine or binding on the respondents. [Paras 63, 66, 67, 68, 69]

The purported Will (Ex. X1 / Ex. A24) is not proved to be genuine or binding; the appellants have failed to establish the testamentary disposition.

Partition and joint family property - movable property division - Whether the plaint 'A' and 'B' schedule properties (items 2 and 3 of A; items 1 and 2 of B) are amenable to partition among the parties - HELD THAT: - The evidence established that items 2 and 3 of plaint 'A' related to the firewood business and were agreed by the 1st respondent to be partitioned; the tractor-trailer and saw-machine (plaint 'B' schedule) were found to have been exclusively used and enjoyed by the 1st respondent and were in his name or licence. There was no persuasive proof that these movables were jointly acquired or retained for common family use after the 1979 division. The trial Court's findings that items 1 and 2 of plaint 'B' schedule and item 1 of plaint 'A' schedule are not available for partition and that items 2 and 3 of plaint 'A' schedule are subject to division are confirmed on re-appraisal. [Paras 71, 73, 74, 76, 77]

Items 1 and 2 of plaint 'B' schedule and item 1 of plaint 'A' schedule are not amenable for partition; items 2 and 3 of plaint 'A' schedule are divisible and subject to the decree.

Devolution of share under Hindu Succession Act prior to 2005 amendment - modification of preliminary decree - Whether the trial Court's preliminary decree requires modification as to the distribution of the 1/4th share attributable to the deceased 1st appellant in items 2 and 3 of plaint 'A' schedule - HELD THAT: - Applying the pre-2005 scheme of devolution under Section 6 of the Hindu Succession Act, the Court held that the 1/4th share notionally allottable to the deceased 1st appellant must be treated as divisible among the surviving co-heirs (1st appellant, 2nd appellant, 1st respondent and 2nd respondent) and, since some are deceased, among their legal heirs. Accordingly, the preliminary decree is modified to direct that items 2 and 3 of plaint 'A' schedule be divided into three equal shares: one share to the 1st respondent, one to the legal heirs of the 2nd appellant (appellants 3 & 4 and respondents 7 & 8), and one to the legal heirs of the 2nd respondent (including respondents 4 & 5). The remainder of the trial Court's decree is confirmed and parties are permitted to seek final decree applications; parties to bear their own costs. [Paras 78, 79]

Cross-objections allowed in part; preliminary decree modified to divide items 2 and 3 of plaint 'A' schedule into three equal shares as directed, while confirming other trial Court findings.

Final Conclusion: The appeal is dismissed in part and cross-objections are allowed: the trial Court's finding that item No.1 of plaint 'A' schedule is the registered property of the 1st respondent and not amenable to a benami claim is upheld; the purported Will is held not proved; items 1 and 2 of plaint 'B' schedule and item 1 of plaint 'A' schedule are not divisible; items 2 and 3 of plaint 'A' schedule are to be divided into three equal shares as directed, with modification of the preliminary decree accordingly and parties to bear their own costs.

Publication and availability of a notification for sale as a precondition to its enforcement - date for determination of rate of duty with proviso deeming bill of entry presented on date of entry inwards - mandatory nature of publication requirements for delegated legislation - Param Industries principle that non-availability of gazette copies for sale defeats retrospective enforcement of a notification - binding effect of an approved resolution plan under Section 31 of the IBC and extinguishment of claims not included in the plan - overriding effect of the IBC on other laws

Date for determination of rate of duty with proviso deeming bill of entry presented on date of entry inwards - publication and availability of a notification for sale as a precondition to its enforcement - Param Industries principle that non-availability of gazette copies for sale defeats retrospective enforcement of a notification - Whether Notification dated 17.09.2015 enhancing basic customs duty to 12.5% was applicable to the goods imported and assessed by bills of entry presented on 16.09.2015 but with vessel entry on 17.09.2015. - HELD THAT: - Section 15(1) with its proviso must be read to deem bills of entry presented before entry inwards of the vessel as presented on the date of entry inwards; accordingly the bills presented on 16.09.2015 are to be treated as presented on 17.09.2015. However, a notification under Section 25(1) becomes enforceable only when issued for publication and, where Section 25(4)(b) applies, is also published and offered for sale on the date of its issue. The court applied the principle in Union of India v. Param Industries Ltd. that both publication in the Official Gazette and availability of the printed Gazette copies for sale on the date of issue are mandatory preconditions to enforcement. The respondent relied on an RTI reply showing the printed Gazette was offered for sale only on 21.09.2015; in those circumstances the notification of 17.09.2015 could not be made applicable with effect from 17.09.2015 and therefore could not be invoked to reassess bills already assessed (de hors Section 15) on that date. The court rejected the submission that online availability alone satisfied Section 25(4)(b) where the statutory requirement remained on the statute book at the relevant time, and upheld the Single Judge's application of Param Industries on the facts. [Paras 35, 36, 38, 58, 63]

Notification dated 17.09.2015 was not enforceable against the respondent on 17.09.2015 because it was not offered for sale on that date; the reassessment and demand based on that notification were quashed and duty at 7.5% held applicable.

Binding effect of an approved resolution plan under Section 31 of the IBC and extinguishment of claims not included in the plan - overriding effect of the IBC on other laws - Whether the appeal should be dismissed under Section 31 of the IBC because the department's claim (operational debt) was extinguished by an approved resolution plan not including that claim. - HELD THAT: - The court applied the Supreme Court's decision in Ghanashyam Mishra to hold that once a resolution plan is approved by the adjudicating authority under Section 31, claims not included in the plan stand extinguished and creditors (including Central Government authorities) are bound by the plan. The respondent produced material showing insolvency proceedings, publication for claims, non filing of claim by the department, approval of the resolution plan and its implementation; the appellants did not produce any material to show the department's claim formed part of the approved plan. Given (a) the appeal has been dismissed on merits and (b) absence of any material that the claim was included in the resolution plan, the court found dismissal of the appeal on the IBC ground was appropriate and allowed IA No.1/2021. [Paras 66, 74, 76, 78, 79]

IA No.1/2021 allowed; the department's claim standing excluded from the approved resolution plan is extinguished and the appeal is dismissed as infructuous on that basis in addition to the merits.

Final Conclusion: The appeal is dismissed on merits for lack of applicability of the notification dated 17.09.2015 (not offered for sale on the date of issue) and, independently, IA No.1/2021 under the IBC is allowed since the Department's claim was not shown to be part of the approved resolution plan and therefore stands extinguished; parties to bear their own costs.

Non-compliance with statutory notice period under section 101(1) of the Companies Act, 2013 - insufficiency of explanatory statement under section 102 of the Companies Act, 2013 - observance of secretarial standards for meetings having force of law - shorter notice permitted only with 95% consent of members entitled to vote - interim injunction restraining dealing with company assets during pendency of oppression and mismanagement petition - preservation of assets pending adjudication to prevent rendering main remedies infructuous

Non-compliance with statutory notice period under section 101(1) of the Companies Act, 2013 - observance of secretarial standards for meetings having force of law - shorter notice permitted only with 95% consent of members entitled to vote - Validity of the notice dated 03.03.2021 for the Extraordinary General Meeting in relation to the prescribed notice period. - HELD THAT: - The Tribunal found that the notice dated 03.03.2021 was posted on 14.03.2021 for a meeting fixed on 30.03.2021 and thus did not satisfy the requirement of at least twenty-one clear days' notice mandated by the statute. The Tribunal observed that Secretarial Standard-2 (SS-2), approved under the Act, prescribes the same twenty-one clear days' requirement and is binding. The only statutory exception-shorter notice with the written or electronic consent of not less than ninety-five per cent of members entitled to vote-was not shown to have been obtained, and the applicants admittedly held 29.87% of the paid-up share capital, underscoring non-compliance with the shorter-notice exception. [Paras 3]

The notice was held to be in violation of the statutory and secretarial-standard notice requirements.

Insufficiency of explanatory statement under section 102 of the Companies Act, 2013 - preservation of assets pending adjudication to prevent rendering main remedies infructuous - interim injunction restraining dealing with company assets during pendency of oppression and mismanagement petition - Whether interim reliefs in the form of stay of any resolutions passed at the EGM and injunction restraining the respondent group from dealing with the company's assets should be granted pendente lite. - HELD THAT: - The Tribunal noted deficiencies in the explanatory statement attached to the EGM notice and recorded material concerns about the company's assets being effectively outside its control (one unit razed, another occupied by a third party, and a godown on rent), as well as the pendency of the main company petition and related civil suit. It concluded that allowing authorisation to deal with movable and immovable assets while the petition remains pending would risk rendering the substantive remedies nugatory by reducing the company to a shell. On this basis the Tribunal was satisfied that ad interim ex parte reliefs were required to preserve the status quo and protect the applicants' rights during the pendency of proceedings. [Paras 3]

Interim stay of any resolutions passed at the EGM dated 30.03.2021 and an injunction restraining the respondent group from dealing with the assets of the company were granted.

Appointment of receiver or special officer for symbolic possession and inventory - requirement of hearing before appointment of custodian measures - Whether a receiver/special officer should be appointed immediately to take symbolic possession of the company's assets and conduct an inventory (prayer for appointment). - HELD THAT: - The Tribunal declined at the interim ex parte stage to grant the appointment of a receiver/special officer and the consequential order for symbolic possession and inventory without hearing the other side. The request for such custodial relief was not finally adjudicated on merits and was left for consideration after service and opportunity to be heard. [Paras 3]

Prayer for appointment of a receiver/special officer to take symbolic possession and inventory was not granted at this stage and reserved for consideration after hearing the respondents.

Due notice to minority/shareholder petitioners for board and general meetings - preservation of procedural fairness during pendency - Whether any board meeting or general meeting of the company should be subject to notice to the petitioner group during the pendency of the petition. - HELD THAT: - In the interest of justice and to protect the petitioners' right to participate or to be informed during the pendency of the main petition, the Tribunal directed that no board meeting or general meeting of the company shall be conducted without due notice to the petitioner group. This direction is ancillary to the interim preservation measures already ordered. [Paras 3]

Directed that no board meeting or general meeting shall be conducted without due notice to the petitioner group.

Final Conclusion: The Tribunal held the EGM notice to be in breach of statutory and secretarial-standard notice requirements, granted ad interim ex parte reliefs staying any resolutions of the EGM of 30.03.2021 and injuncting the respondent group from dealing with the company's assets, declined at this stage to appoint a receiver/special officer without hearing the respondents, and directed that no board or general meeting be convened without due notice to the petitioner group; replies and rejoinders were ordered and further listing was directed.

Scheme of Amalgamation - Dispensation of meeting of shareholders - Convening of meetings of shareholders and creditors by virtual mode - Filing and service of notice under Section 230(5) - Accounting treatment certificate under proviso to Section 230(7) - Amalgamation between holding company and wholly owned subsidiary

Dispensation of meeting of shareholders - Scheme of Amalgamation - Dispensation of the meeting of shareholders of the Transferor Company was granted. - HELD THAT: - The Transferor Company is a wholly owned subsidiary of the Transferee Company and all equity shares are held by the Transferee Company (in its own name and/or by nominee). The Transferee Company, as the sole shareholder, filed a consent affidavit to the Scheme. On that basis the Tribunal accepted the applicants' prayer and dispensed with holding a meeting of the shareholders of the Transferor Company for the purpose of considering the Scheme of Amalgamation. [Paras 13]

Meeting of the shareholders of the Transferor Company is dispensed with.

Convening of meetings of shareholders and creditors by virtual mode - Filing and service of notice under Section 230(5) - Quorum and virtual meeting procedure - Appointment of chairperson and scrutiniser - Meetings of the Transferee Company's equity shareholders and of the secured and unsecured creditors of both companies were directed to be convened with specific procedural directions. - HELD THAT: - The Tribunal ordered that meetings be convened (via video conferencing or other audio-visual means) on specified dates for the Transferee Company's equity shareholders and for secured and unsecured creditors of both Transferor and Transferee Companies to consider the Scheme. The Tribunal prescribed compliance requirements: publication of advertisement at least 30 clear days prior, sending notices and the Scheme/Statement by email or post to stakeholders whose emails are not registered, adherence to quorum rules under Section 103, recording presence in minutes in lieu of attendance slips, acceptance of scanned board resolutions/authority letters by the chairperson, and appointment of a chairperson and scrutiniser with directions to report results in Form CAA-4 within four weeks of the meetings. These directions implement the statutory requirements for convening meetings under Section 230 and the Companies (Compromises, Arrangements & Amalgamations) Rules, 2016. [Paras 13]

Meetings to be convened as directed with the specified notice, publication, quorum, virtual procedure, chairperson and scrutiniser, and reporting obligations.

Accounting treatment certificate under proviso to Section 230(7) - Amalgamation between holding company and wholly owned subsidiary - The Tribunal recorded that the requisite certificate regarding accounting treatment was filed and noted that no valuation report or separate stock exchange/SEBI approvals were required for the proposed amalgamation between a holding company and its wholly owned subsidiary. - HELD THAT: - The petition included the certificate under the proviso to Section 230(7) confirming that the accounting treatment proposed in the Scheme conforms with applicable Accounting Standards. The Tribunal noted that the Transferor is a wholly owned subsidiary and that the entire paid-up equity would stand cancelled upon the Scheme becoming effective; accordingly, no valuation report was produced. The applicants also relied on provisions and circulars of SEBI to submit that formal approval, NOC or vetting by stock exchanges or SEBI was not required for a holding company-wholly owned subsidiary amalgamation; the Tribunal recorded these submissions while passing directions for convening meetings and statutory notices. [Paras 10, 11, 12, 13]

Certificate under proviso to Section 230(7) accepted and no valuation or separate SEBI/stock exchange approvals required for the intra-group amalgamation as represented.

Final Conclusion: The Tribunal disposed of the company application by dispensing with the Transferor Company's shareholders' meeting and directing convenance of meetings of the Transferee Company's shareholders and the secured and unsecured creditors of both companies with detailed procedural directions; the applicants were permitted to file the second motion petition after compliance and on receipt of the chairperson's report.

Scheme of Amalgamation - sanction of scheme under Section 230(6) read with Section 232(3) of the Companies Act, 2013 - dispensing with meetings of shareholders - service on statutory authorities under Section 230(5) - notice and advertisement under Rule 16(1) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - compliance with Form No. CAA3 - admission of petition and fixation of hearing date

Admission of petition and fixation of hearing date - Scheme of Amalgamation - Admission of the petition for sanction of the Scheme of Amalgamation and fixation of the next date of hearing. - HELD THAT: - On perusal of the records and submissions of the petitioners, the Tribunal admitted the petition presented under the statutory provisions for sanction of the Scheme of Amalgamation and fixed the next date of hearing for consideration of the Scheme. The Tribunal recorded that meetings of equity shareholders had been dispensed with by its earlier order in view of affidavits of consent, and that there were no secured or unsecured creditors requiring meetings. Having noted compliance steps already taken, the Tribunal proceeded to admit the petition and calendar the matter for further hearing. [Paras 6]

The petition is admitted and the next hearing is fixed on 20.05.2021.

Service on statutory authorities under Section 230(5) - notice and advertisement under Rule 16(1) of the CAA Rules - compliance with Form No. CAA3 - Directions concerning further service, advertisement, and compliance steps required before the next hearing. - HELD THAT: - The Tribunal directed that: (a) the petitioners shall publish notice of hearing at least ten clear days before the hearing in specified newspapers in accordance with the Rules; (b) another notice along with accompanying documents, including the Scheme and statement, shall be served again on the identified statutory/sectoral authorities by hand, post or email within one week of the order, in Form No. CAA3 with necessary variations; (c) the notice shall specify the next hearing date and require any representation to be filed not later than seven days before the hearing and also served on the petitioners' authorised representative; (d) absence of representation within the period will be treated as no objection by those authorities; (e) petitioners to file an affidavit of compliance three days before the next hearing; and (f) petitioners may file rejoinder affidavits dealing with any objections two days before the next hearing. These directions implement the statutory notice and compliance regime for consideration of an amalgamation scheme and ensure opportunity for statutory authorities to be heard. [Paras 7, 8, 9, 10]

Petitioners to effect the prescribed notices and service, advertise the hearing, file affidavit of compliance three days before the hearing, and may file rejoinders two days before the hearing; failure of authorities to file representations within the time will be treated as no objection.

Final Conclusion: The Tribunal admitted the petition for sanction of the Scheme of Amalgamation, fixed the next hearing for 20.05.2021, and directed specified notices, service on statutory authorities, advertisement, and filing of compliance and rejoinder affidavits within prescribed timeframes.

Moratorium under the Insolvency and Bankruptcy Code - overriding effect of Section 238 of the IBC - parallel proceedings barred by corporate insolvency process - repugnancy of State enactment to parliamentary insolvency law - quashing of subordinate proceedings consequent to IBC moratorium - definition of deposit and scope of financial establishment under the State Act

Moratorium under the Insolvency and Bankruptcy Code - overriding effect of Section 238 of the IBC - parallel proceedings barred by corporate insolvency process - quashing of subordinate proceedings consequent to IBC moratorium - Proceedings initiated under the Karnataka Protection of Interest of Depositors in Financial Establishment Act, 2004 (Section 7(1)) against the petitioner while Corporate Insolvency Resolution Process under the IBC had commenced and moratorium was in force. - HELD THAT: - The High Court held that once the petition before the NCLT was admitted and CIRP commenced with a moratorium declared, parallel proceedings of the kind instituted under the State Act could not be permitted to continue. The Court relied on the overriding scheme of the IBC, particularly the moratorium under Section 14, and the non-obstante/overriding provision under Section 238 which gives the Code primacy insofar as repugnancy exists. Precedents of higher courts regarding repugnancy and the effect of moratorium (including Innoventive Industries, Anand Rao Korada, Alchemist and the NCLT decision cited) were applied to conclude that the State proceedings initiated after the NCLT admission were inconsistent with and therefore displaced by the IBC regime. On this basis the Court found that the petitioner had made out grounds for quashing the proceedings before the Special Court. [Paras 21, 22, 23]

Proceedings in Miscellaneous No.2/2020 under Section 7(1) of the Act, 2004 are quashed as barred by the IBC moratorium and the overriding effect of Section 238 of the Code.

Definition of deposit and scope of financial establishment under the State Act - Whether the petitioner's contention that it is not a "financial establishment" and therefore outside the scope of the State Act is sustainable. - HELD THAT: - The Court examined the memorandum of association and material on record and noted that the petitioner-company undertook activities to acquire land and to sell or allot houses/apartments to persons who paid advances. The petitioner did not dispute collection of sums or failure to refund/allocate flats. Having regard to the object and the statutory definition of "deposit" under the Act, 2004 and the legislative purpose to protect depositors from default, the Court rejected the contention that the Act did not apply to the petitioner. [Paras 18, 19, 20]

The petitioner's plea that it is not a financial establishment and thus outside the State Act is not accepted.

Quashing of subordinate proceedings consequent to IBC moratorium - Whether the relief seeking handover of properties to the then Interim Resolution Professional (Sri Ashok Kriplani) should be granted by this Court. - HELD THAT: - The Court noted that the Resolution Professional initially appointed had subsequently been replaced by order of the NCLT dated 17.12.2019. Given the replacement and that the corporate insolvency proceedings remain pending before the NCLT, the Court found that a direction in favour of the petitioner to hand over properties to the former IRP did not arise. The Court left open the course of seeking appropriate orders before the NCLT. [Paras 21, 23]

The relief to hand over properties to Sri Ashok Kriplani is not granted as he has been replaced by the NCLT; petitioner may seek appropriate orders from the NCLT.

Final Conclusion: Writ petition allowed; proceedings in Miscellaneous No.2/2020 under Section 7(1) of the Karnataka Act, 2004 are quashed as barred by the IBC moratorium and the overriding effect of Section 238 of the Code. The claim to hand over properties to the earlier IRP is not granted since he was replaced by NCLT; petitioner and respondent to pursue appropriate remedies before the NCLT or in accordance with law after disposal there.

Interim-moratorium under Section 96 - appointment of Resolution Professional under Section 97 - powers and duties of Resolution Professional under Section 99 - service of demand notice under Rule 7 - principles of natural justice and opportunity to be heard

Service of demand notice under Rule 7 - admission of receipt by counsel - Validity of service of the demand notice on the Personal Guarantor - HELD THAT: - The Tribunal recorded the admission by learned counsel for the applicant that both the petition and the demand notice were received by email, and relied on the tracking report and the email evidence on the record. In view of this admission and the documentary material annexed to the petition, the contention that the demand notice was not served was rejected and the order dated 22.03.2021 was held not to suffer from any mistake apparent on the face of the record insofar as service is concerned. [Paras 8, 9, 33]

The demand notice was validly served and the challenge to service fails.

Interim-moratorium under Section 96 - prejudice to the Personal Guarantor - Whether the interim-moratorium, which attaches on filing under Chapter III, causes prejudice to the Personal Guarantor at the stage of appointment of RP - HELD THAT: - The Tribunal examined Section 96(1)(a)-(b) and observed that the interim-moratorium triggered on filing only stays legal actions in respect of debts and does not, unlike final moratorium provisions, restrain transfer or disposition of assets. On that basis the Tribunal concluded that initiation of the interim-moratorium at the filing stage does not cause prejudice to the Personal Guarantor. [Paras 21, 22, 23, 24]

The interim-moratorium at the filing stage causes no prejudice to the Personal Guarantor.

Appointment of Resolution Professional under Section 97 - powers and duties of Resolution Professional under Section 99 - principles of natural justice and opportunity to be heard - Whether notice must be issued to the Personal Guarantor at the stage when the Resolution Professional is appointed to examine an application under Section 95 - HELD THAT: - Having considered the scheme of Chapter III and the Rules, the Tribunal held that at the initial stage the Adjudicating Authority's role is limited to prima facie satisfaction and appointment of an RP to examine the application on merits. The RP is empowered by Section 99 to seek evidence and afford the guarantor an opportunity to contest the claim; the Adjudicating Authority is not vested at that preliminary stage with power to admit or reject on merits. Given the limited nature of the appointment stage, the absence of notice prior to appointment of the RP was not held to be violative of natural justice. The Tribunal observed that principles of natural justice are flexible and that a notice and opportunity will be afforded if the RP recommends initiation of the insolvency resolution process, at which stage Section 100 permits admission or rejection after hearing the guarantor. [Paras 26, 27, 28, 31, 33]

No notice to the Personal Guarantor is required at the stage of appointing the Resolution Professional; doing so does not violate the principles of natural justice.

Final Conclusion: The application is dismissed: the demand notice was validly served, the interim-moratorium at filing causes no prejudice, and the Tribunal need not issue notice to the Personal Guarantor at the stage of appointing the Resolution Professional; a notice and full opportunity will be provided if the RP recommends initiation of the insolvency resolution process.

Dissolution of corporate debtor under Section 54 of the Insolvency and Bankruptcy Code, 2016 - Application for early dissolution pursuant to insufficiency of realizable properties - Regulation 14 of the IBBI (Liquidation Process) Regulations, 2016 - Final progress report and asset memorandum as basis for dissolution - Distribution of liquidation proceeds and closure of liquidation account - NOC from Income Tax department for Assessment year 2019-2020

Dissolution of corporate debtor under Section 54 of the Insolvency and Bankruptcy Code, 2016 - Regulation 14 of the IBBI (Liquidation Process) Regulations, 2016 - assets completely liquidated - final progress report - Corporate Debtor to be dissolved as its assets have been completely liquidated and affairs do not require further investigation. - HELD THAT: - The Liquidator filed the preliminary report, asset memorandum and successive progress reports showing that the corporate debtor held only cash and listed securities, that securities were transferred and cash distributed in two tranches leaving zero bank balance, and that no realizable assets or trade receivables remained. Claims were invited, scrutinized and accepted where appropriate; the Liquidator arranged for statutory record storage; and an NOC from the Income Tax department up to Assessment year 2019-2020 was produced. Regulation 14 permits the Liquidator to apply for early dissolution where realizable properties are insufficient to cover liquidation costs and no further investigation of affairs is required. Section 54 contemplates an application to the Adjudicating Authority where assets have been completely liquidated. Applying these provisions to the materials on record, the Tribunal concluded that there were no assets left to be liquidated and that dissolution was appropriate. [Paras 13, 15, 16, 18, 21]

IA No. 2075 of 2020 is allowed; the corporate debtor is ordered to be dissolved with effect from the date of the order, the case file is to be consigned to records and the order forwarded to the Registrar of Companies and other concerned authorities.

Final Conclusion: The Tribunal granted the Liquidator's application for dissolution under Section 54 of the IBC, finding that assets had been completely liquidated, no further investigation was necessary, statutory compliance (including progress reports and Income Tax NOC for 2019-2020) was placed on record, and directed transmission of the dissolution order to the Registrar of Companies and consignment of the file to records.

Admission under Section 7 of the Insolvency and Bankruptcy Code - existence of financial debt and default - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code - public announcement of initiation of Corporate Insolvency Resolution Process - Form No. 1 under Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Form 2 - written consent of proposed Insolvency Professional

Existence of financial debt and default - The Facility Agreement established the existence of a financial debt and a corresponding default by the Corporate Debtor. - HELD THAT: - The Tribunal found on the basis of the sanction letter, Facility Agreement, Demand Promissory Note, guarantees, pledge documents, bank statements, certificates and correspondence that the Petitioner disbursed the sanctioned amount and that the Corporate Debtor had availed the loan. The Facility Agreement fixed a six month maturity and set out interest and default consequences. The Corporate Debtor failed to pay interest and repay the loan as agreed, issued dishonoured cheques and did not create agreed securities despite reminders. On these materials the Tribunal concluded that both the existence of a financial debt and a default as defined in the Code were established. [Paras 31, 32, 33, 35, 36]

Existence of financial debt and default established; ingredients for filing under Section 7 are satisfied.

Admission under Section 7 of the Insolvency and Bankruptcy Code - Form No. 1 under Rule 4 - The Company Petition filed under Section 7 was admissible and is admitted. - HELD THAT: - Having found that the financial debt and default existed and that the petition complied with Rule 4 by filing Form No.1 and supporting documents (sanction letter, facility agreement, security documents, communications, CA certificate, Information Utility report, etc.), and that the petition lay within limitation, the Tribunal held that the statutory test for admission under Section 7 was met and admitted the petition. [Paras 1, 18, 35, 36, 42]

Petition under Section 7 admitted; CIRP commenced from date of order.

Form 2 - written consent of proposed Insolvency Professional - appointment of Interim Resolution Professional - The proposed Interim Resolution Professional's written consent (Form 2) was in order and the nominated IRP was appointed. - HELD THAT: - The Tribunal examined the written consent submitted with the application and found no record of disciplinary proceedings against the proposed professional. In view of compliance with Form 2 and absence of disqualifying material, the Tribunal appointed the IRP named by the Financial Creditor to conduct the insolvency resolution process. [Paras 37, 38]

Proposed Insolvency Professional accepted; Mr. Abhijit Gokhle appointed as Interim Resolution Professional.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - public announcement of initiation of Corporate Insolvency Resolution Process - Moratorium operates from the date of the order and the IRP is required to make the public announcement and perform statutory duties. - HELD THAT: - On admission, the Tribunal declared that the moratorium prescribed under Section 14 will be operative immediately, restraining suits, proceedings and actions affecting the Corporate Debtor's assets subject to the Code's exceptions (including continued supply of essential goods and services). The Tribunal directed the IRP to carry out the public announcement and to perform duties under Sections 15 and 18, and to report progress within 30 days. [Paras 39, 40, 41]

Moratorium effective from the date of order; IRP directed to make public announcement and discharge duties under the Code.

Final Conclusion: The Tribunal admitted the Section 7 petition on the finding that a financial debt and default existed, appointed the nominated Interim Resolution Professional after accepting the written consent, declared the moratorium operative from the date of the order, and directed the IRP to make the public announcement and perform statutory duties to conduct the Corporate Insolvency Resolution Process.

Extension of liquidation period - exclusion of period for computation of time-limits due to COVID-19 - Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016 - application for extension under the Insolvency and Bankruptcy Code framework

Extension of liquidation period - exclusion of period for computation of time-limits due to COVID-19 - Regulation 44 of the IBBI (Liquidation Process) Regulations, 2016 - Application for extension of time to complete the liquidation process and for exclusion of the lockdown/COVID-19 period from the computation of the prescribed liquidation timeframe was allowed in part. - HELD THAT: - The Applicant, appointed liquidator after liquidation was ordered, sought exclusion of the period consumed during the nationwide lockdown and a further six-month extension beyond the prescribed period under Regulation 44. The Tribunal noted the impact of the COVID-19 pandemic and the nationwide lockdown starting 25.03.2020, observed the absence of hindrance attributable to the liquidator beyond pandemic constraints, and applied the Supreme Court's order restoring suspension and exclusion of limitation periods in view of COVID-19 (order dated 27.04.2021 in SMW(C) No. 3/2020). Consequently the Tribunal excluded the lockdown/COVID-affected period from the reckoning of the liquidation timeframe and granted an extension of six months from the date of the order to complete liquidation, thereby permitting the liquidator additional time to conclude asset realisation and other statutory steps under the Code and Regulations. The Tribunal expressly followed the Supreme Court's direction excluding the period from 15th March, 2020 till 14th March, 2021 and thereafter until further orders for computing limitation-related periods. [Paras 14, 16, 17]

IA No. 299 of 2021 is partly allowed: the period consumed during the COVID-19 lockdown is excluded for computation of the liquidation timeframe and the period to complete liquidation is extended by six months; the IA is disposed of.

Final Conclusion: The Tribunal granted the liquidator an exclusion of the COVID-19/lockdown period from the prescribed liquidation timeframe in accordance with the Supreme Court's order and extended the time to complete the liquidation by six months, disposing of the application.

Twin conditions for grant of bail under Section 45(1) of the PMLA - constitutional invalidation of statutory bail conditions - regular bail under Section 439 Cr.P.C. - deference to trial court on disputed factual and legal issues

Twin conditions for grant of bail under Section 45(1) of the PMLA - constitutional invalidation of statutory bail conditions - Whether the twin conditions contained in Section 45(1) of the PMLA operate for consideration of bail applications in the present petitions. - HELD THAT: - The Court examined the effect of the Supreme Court's decision in Nikesh Tarachand Shah declaring the twin conditions in Section 45(1) to be unconstitutional and the subsequent amendment by Act No.13 of 2018 which substituted the earlier phrase with "under this Act." Having regard to the decisions of several High Courts which held that the amendment did not revive the twin conditions and in the absence of any order of the Supreme Court restoring those conditions, this Court held that the twin conditions pressed into service by the Enforcement Directorate are to be ignored. Consequently, the petitions for bail fall to be considered under the ordinary jurisdiction of Section 439 Cr.P.C. rather than under the discredited twin conditions of Section 45(1) of the PMLA.

The twin conditions in Section 45(1) of the PMLA are to be disregarded for the purpose of these bail petitions; consideration is under Section 439 Cr.P.C.

Regular bail under Section 439 Cr.P.C. - conditions for bail - decongestion of prisons during the Covid-19 pandemic - Whether the petitioners should be enlarged on regular bail. - HELD THAT: - The Court took into account that investigation was complete (charge-sheet and supplementary report filed and ED complaint lodged), that the petitioners had cooperated with investigation by joining multiple times, that relevant documents had been seized in raids and properties attached, and the personal circumstances of the petitioners (senior citizens; one with cardiac history). In addition the Court noted the public health imperative of prison decongestion during the Covid-19 pandemic. Balancing these factors and reserving all merits for trial, the Court directed release on regular bail subject to the satisfaction of the Trial Court/Illaqa/Duty Magistrate, Gurugram and compliance with stringent conditions including deposit of passports and heavy local sureties.

Petitioners granted regular bail subject to Trial Court/Duty Magistrate's satisfaction and specified stringent conditions (including deposit of passports and heavy local sureties).

Deference to trial court on disputed factual and legal issues - applicability of Section 420 IPC - Whether Section 420 IPC is attracted to the facts of the case. - HELD THAT: - Although parties advanced detailed and opposing submissions on whether Section 420 IPC applies, the Court declined to undertake a mini-trial or decide this contested question at the bail stage. The supplementary charge-sheet and ED complaint allege dishonesty and fraud, and there is no challenge to those filings before this Court. Given the potential to prejudice the parties' rights at trial, the Court left the question open for determination either on a specific challenge by the parties or by the Trial Court in the course of trial.

Question of applicability of Section 420 IPC left open for consideration by the Trial Court or on a specific challenge; not decided in these petitions.

Final Conclusion: The petitions for regular bail are allowed and the petitioners are directed to be released on bail subject to the satisfaction of the Trial Court/Duty Magistrate, Gurugram and compliance with stringent conditions (including deposit of passports and furnishing of heavy local sureties); the PMLA twin-conditions for bail are to be ignored for present purposes and the question whether Section 420 IPC is attracted is left to the Trial Court or a specific challenge.

Maintainability of appeal under Section 85 - Service Tax Voluntary Compliance Encouragement Scheme (VCES), 2013 - writ jurisdiction in relation to disputed questions of fact - right to appeal and appellate duty to consider on merits with opportunity

Writ jurisdiction in relation to disputed questions of fact - Service Tax Voluntary Compliance Encouragement Scheme (VCES), 2013 - Whether writ proceedings before the High Court are an appropriate forum to adjudicate disputed questions of fact arising from the Original Authority's order under the VCES Scheme. - HELD THAT: - The Court held that the contested findings in the impugned order involve disputed questions of fact requiring examination of documents and witnesses and therefore cannot be resolved in writ proceedings. Such factual controversies fall to be decided in the appellate forum and not by the High Court in a writ petition. Consequently, the High Court declined to undertake fact finding in the writ petition and directed that the matter is to be ventilated in the appropriate appeal. [Paras 3, 4]

Writ proceedings are not an appropriate forum to adjudicate the disputed questions of fact arising from the VCES order; those issues must be raised and adjudicated in the appeal.

Maintainability of appeal under Section 85 - Service Tax Voluntary Compliance Encouragement Scheme (VCES), 2013 - Whether an order passed under the VCES Scheme is appealable to the Commissioner of Service Tax under Section 85 of the Finance Act, 1994. - HELD THAT: - Relying on this Court's earlier decision in Narasimha Mills Private Ltd (para 18 of that judgment), the Court observed that the VCES Scheme is to be construed as part of Chapter V of the Finance Act, 1994 and therefore proceedings under the scheme are subject to other provisions of the Act unless specifically excluded. On that basis the Court held that an order under the Scheme is appealable under Section 85 to the Commissioner of Service Tax and the aggrieved person is at liberty to prefer such an appeal. [Paras 5, 7, 8]

An order under the VCES Scheme is appealable to the Commissioner of Service Tax under Section 85; the petitioner is at liberty to prefer an appeal.

Right to appeal and appellate duty to consider on merits with opportunity - Obligations of the Appellate Authority on receipt of an appeal against the Original Authority's order under the VCES Scheme. - HELD THAT: - The Court directed that upon receipt of any appeal from the petitioner, the Appellate Authority (Commissioner of Service Tax) is bound to consider the appeal on merits and in accordance with law. This includes affording the petitioner an opportunity of hearing and disposing of the appeal as expeditiously as possible. The High Court thereby confined itself to directing the appropriate appellate process rather than adjudicating the substantive factual disputes. [Paras 8]

The Appellate Authority must consider any appeal on merits, afford opportunity to the petitioner, and dispose of the appeal expeditiously and in accordance with law.

Final Conclusion: Writ petition dismissed with liberty to prefer an appeal to the Commissioner of Service Tax under Section 85; disputed factual issues cannot be resolved in writ proceedings and the Appellate Authority is directed to consider the appeal on merits, afford opportunity, and dispose of it expeditiously.

Imposition of penalty under Section 78 of the Finance Act, 1994 - provisions of Section 73(3) - non-issuance of show cause notice where tax and interest already deposited - waiver of penalty under Section 80 - requirement of evidence of fraud or suppression to uphold penalty

Provisions of Section 73(3) - non-issuance of show cause notice where tax and interest already deposited - imposition of penalty under Section 78 of the Finance Act, 1994 - Validity of issuance of the Show Cause Notice and imposition of penalty where service tax and interest were deposited prior to SCN. - HELD THAT: - The Tribunal found that the shortfall of service tax for the period 2009-2010 was detected by CERA in 2011 and the assessee immediately deposited the tax with interest. The SCN was issued in 2014 proposing demand and penalty. Applying the protective purpose of Section 73(3), the Tribunal held that once the tax and interest had been paid by the assessee prior to issuance of the SCN, issuance of the SCN and imposition of penalty under Section 78 could not be sustained in the absence of any material or allegation in the SCN showing deliberate short payment. The Tribunal reasoned that permitting penalty despite prior compliance would render Section 73(3) otiose and frustrate its aim of reducing litigation where the assessee has made payment on detection of short payment. Accordingly, the authorities below erred in upholding the penalty when compliance had already been made and no evidence of deliberate evasion was produced. [Paras 7]

SCN and penalty cannot be sustained where the tax and interest were deposited prior to issuance of the SCN in absence of evidence of deliberate short payment; penalty set aside on this ground.

Waiver of penalty under Section 80 - requirement of evidence of fraud or suppression to uphold penalty - Whether penalty should be upheld or waived in absence of fraud or suppression and whether assessee is entitled to benefit under Section 80. - HELD THAT: - The Tribunal observed that there was no evidence placed on record to show fraud, suppression of facts or intent to evade tax by the assessee. In that factual matrix, the imposition of a penalty equivalent to the tax was not justified. The Tribunal therefore concluded that the penalty must be set aside. The decision implicitly recognises the assessee's entitlement to relief where payment with interest had been made and no culpable intent was shown, consistent with the object of Section 80 to provide for waiver in appropriate cases. [Paras 7, 8]

Penalty set aside for want of evidence of fraud or suppression; assessee entitled to consequential benefits, if any.

Final Conclusion: The appeal is allowed: the penalty imposed under Section 78 is set aside because the service tax and interest were deposited prior to issuance of the SCN and there is no evidence of fraud or suppression; consequential benefits, if any, shall follow.

Condonation of delay in filing refund claim under exemption notification - discretionary power to condone delay under Notification No.12/2013 ST - refund of service tax paid on input services by SEZ unit - precedential effect of earlier tribunal orders in condoning delay - remand for fresh adjudication on merits

Condonation of delay in filing refund claim under exemption notification - discretionary power to condone delay under Notification No.12/2013 ST - precedential effect of earlier tribunal orders in condoning delay - Legality of rejecting the appellant's request for condonation of delay in filing the refund claim under Notification No.12/2013 ST when the notification permits condonation for bona fide reasons. - HELD THAT: - The Tribunal found that the Assistant Commissioner/Deputy Commissioner failed to apply the discretion expressly available under Notification No.12/2013 ST and did not adequately consider the detailed reasons furnished by the appellant in the refund application dated 29.05.2018. The appellant explained plant closure, loss of employees, inadvertent misplacement of invoice files and genuine discovery on clearing old files; these reasons were held to be bona fide. The Tribunal relied on earlier decisions including the appellant's own earlier order and a decision of the Hyderabad Bench which adopted a liberal approach in condoning delay for SEZ refund claims, distinguishing authorities that dealt with statutory refund provisions not permitting condonation. Applying that ratio, the Tribunal concluded that rejection on time bar grounds was not sustainable. [Paras 6, 7]

The rejection of the condonation request was set aside and the appeal allowed on this ground.

Refund of service tax paid on input services by SEZ unit - remand for fresh adjudication on merits - Appropriate remedy following setting aside of time bar rejection-whether the matter should be remanded for adjudication on merits. - HELD THAT: - Having held that the time bar decision was unsustainable, the Tribunal directed that the refund claim be decided on merits by the original adjudicating authority. The Tribunal required the appellant to produce all documentary evidence in support of the claim and imposed a timeline for the authority to decide the claim, following the approach taken in the appellant's earlier successful proceedings and comparable tribunal decisions. [Paras 6, 7]

Matter remanded to the original authority to decide the refund claim on merits within three months of receipt of certified copy of this order.

Final Conclusion: The impugned order upholding rejection of the refund claim on time bar grounds is set aside; the appellant's request for condonation of delay is accepted as founded on bona fide reasons and the case is remanded to the original authority to adjudicate the refund claim on merits within three months.

Cenvat credit on outward transportation for FOR exports - place of removal and its effect on input service eligibility - Board clarification on place of removal for export clearance - cenvat credit on landline telephone at employees' residence - vagueness of show cause notice and burden of proof

Cenvat credit on outward transportation for FOR exports - place of removal and its effect on input service eligibility - Board clarification on place of removal for export clearance - vagueness of show cause notice and burden of proof - Admissibility of cenvat credit on service tax paid for outward road transportation from factory to port in cases of FOR export sales. - HELD THAT: - The Tribunal found the show cause notice vague as it did not specify whether the removals were for DTA clearance or for export. The assessee had replied and produced a certificate by the Unit Head certifying that the outward transport during the relevant period was for export clearance to the port, and there was no finding that this evidence was untrue. The Tribunal also noted the Board's clarification that, in manufacturer-exporter cases where shipping bills are filed and goods handed to the shipping line, the place of removal may be the port/ICD/CFS and eligibility of cenvat credit is to be determined accordingly. In the absence of contrary findings on the facts and given the vagueness of the notice, the disallowance of credit on outward transportation was not sustained and the ground was allowed. [Paras 8]

Disallowance of cenvat credit on outward transportation to the port for FOR exports set aside; credit allowed.

Cenvat credit on landline telephone at employees' residence - Allowability of cenvat credit on landline telephone connections installed at residences of employees/officers. - HELD THAT: - The Tribunal observed that the appellant did not specifically plead that the residential phones were provided to key officers whose access was essential to plant affairs. In the absence of such specific justification and pleading, the Tribunal upheld the disallowance of cenvat credit on the charges for landline telephones at employees' residences. [Paras 9]

Disallowance of cenvat credit on residential landline telephone charges upheld.

Final Conclusion: The appeal is allowed in part: cenvat credit on outward transportation for FOR exports is restored for the period 30th April, 2008 to December, 2008, while disallowance of credit on residential landline telephone charges is upheld; penalties are set aside for lack of mala fide conduct.

Offence under Section 138 of the Negotiable Instruments Act - presumption under Sections 118 and 139 of the Negotiable Instruments Act - burden of proving execution of cheque and borrowal - appellate re-appreciation of evidence - acquittal and interference by superior court

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - burden of proving execution of cheque and borrowal - offence under Section 138 of the Negotiable Instruments Act - Whether the complainant proved execution of the cheque and existence of a legally enforceable debt so as to attract statutory presumptions and sustain conviction under Section 138 of the Negotiable Instruments Act. - HELD THAT: - The complainant alleged that the accused borrowed money and issued a cheque which was returned unpaid. The statutory notice elicited a reply from the accused denying execution of the cheque and asserting that the complainant was a stranger. The cheque return memo recorded that the "drawer's signature differs." In these circumstances the Court examined whether the complainant discharged the primary burden of proving execution of the cheque and the transaction between the parties. Since execution and borrowal were not established on the evidence, the appellate court correctly held that the presumptions under Sections 118 and 139 could not be drawn in the complainant's favour. The appellate court, on re-appreciation of evidence as a fact-finding forum, found no justification to sustain the conviction and therefore set aside the trial court's conviction and sentence. This Court found no perversity in that re-appreciation and no compelling reason to interfere with the acquittal. [Paras 8, 9, 10]

The acquittal was upheld because the complainant failed to prove execution of the cheque and existence of a legally enforceable debt, negating the statutory presumptions and rendering the conviction unsustainable.

Final Conclusion: Criminal Appeal dismissed; the judgment of acquittal by the I Additional District and Sessions Judge, Coimbatore in C.A.No.432 of 2018 is confirmed and the conviction and sentence of the trial Court in C.C.No.504 of 2016 is set aside.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption / reverse onus - existence of a legally enforceable debt or liability - standard of proof on rebuttal - preponderance of probabilities - cognizance under Section 190 of the Code of Criminal Procedure

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption / reverse onus - existence of a legally enforceable debt or liability - standard of proof on rebuttal - preponderance of probabilities - Scope and effect of the statutory presumption under Section 139 and the onus on the accused to rebut it - HELD THAT: - The court reviewed conflicting precedents and held that Section 139 raises a mandatory but rebuttable presumption in favour of the cheque-holder that the cheque was issued in discharge of a legally enforceable debt or liability. The legislative scheme contemplates a reverse onus, but the burden placed on the accused is evidentiary and not a requirement to prove innocence beyond reasonable doubt. When rebutting the Section 139 presumption the accused need only raise a probable, plausible and reasonable defence on the preponderance of probabilities; in some cases the accused may not need to adduce independent evidence and may rely upon materials placed by the complainant. The degree of evidence required to rebut a statutory presumption is higher than for a simple presumption but remains an evidentiary burden capable of being discharged by demonstrating that a legally enforceable debt did not exist or the instrument was issued for some other purpose. [Paras 13, 15, 16, 17, 18]

Section 139 operates as a rebuttable statutory presumption including as to legally enforceable debt; accused must raise a probable defence on preponderance of probabilities to rebut it.

Cognizance under Section 190 of the Code of Criminal Procedure - Whether formal/ritualistic recording of cognizance under Section 190 Cr.P.C. is a prerequisite to maintain the complaint - HELD THAT: - The court explained that cognizance under Section 190 is taken when the Magistrate applies his mind to the suspected commission of an offence; there is no prescribed ritualistic form for recording cognizance. The High Court found that the learned Magistrate below had earlier recorded sufficient grounds to proceed and that a subsequent emphasis on the absence of a particular form of recording was perverse. Reliance was placed on established precedent that cognizance is constituted once the Magistrate forms an opinion there are sufficient grounds to proceed, and absence of a formalistic recital does not render the complaint non-maintainable. [Paras 8, 9]

The complaint was maintainable; the magistrate's finding that failure to record cognizance in a particular ritual form was fatal was set aside.

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption / reverse onus - standard of proof on rebuttal - preponderance of probabilities - Whether the accused's factual defence successfully rebutted the presumption and justified dismissal of the complaint - HELD THAT: - Applying the legal principles on statutory presumption and standard of proof, the court examined the evidence. The accused admitted the transactions, the promissory note and signatures, and did not challenge the signatures on the cheques. The defence that the promissory note and signatures were obtained by force was not supported by contemporaneous steps, credible corroboration, or follow-up complaints; the accused also failed to respond to the statutory notice. The court found the rebuttal evidence neither probable nor plausible in the view of a prudent person, observed that the cheques were dishonoured for insufficiency of funds, and concluded that the complainant had discharged the initial onus while the accused failed to rebut the statutory presumption. [Paras 19, 20, 21, 22, 23]

The accused failed to rebut the presumption under Section 139; the dismissal by the magistrate was erroneous and was set aside, and the accused was held guilty under Section 138.

Final Conclusion: The appeals were allowed; the impugned order dismissing the complaints was set aside. On the facts the accused failed to rebut the statutory presumption under Section 139 and was convicted under Section 138 of the Negotiable Instruments Act; the court directed payment of compensation and ordered surrender in default, with the appellate order to be communicated to the trial court.

Compounding of offence under the Negotiable Instruments Act - compounding at a late or appellate stage of proceedings - setting aside conviction on compounding - court's power to impose conditions and costs for compounding - application of guidelines in Damodar S. Prabhu for conditional compounding

Compounding of offence under the Negotiable Instruments Act - compounding at a late or appellate stage of proceedings - setting aside conviction on compounding - Compounding of the offence under the Negotiable Instruments Act was permissible at the stage when these proceedings stood, and upon compounding the conviction and sentence could be set aside. - HELD THAT: - The Court followed the settled position in the cited Supreme Court decisions that offences under the Negotiable Instruments Act are compoundable and that parties may compound even at later stages of litigation, including after conviction, with the consequence that conviction and sentence may be set aside. The Court noted authority affirming that Section 147 of the Act and analogous provisions permit compounding and that courts may, in exercise of their powers, allow compounding and consequent acquittal where the complainant has been compensated. Applying these principles to the present facts - where the parties have executed a compromise deed and the complainant states he has received the cheque amount and does not wish to pursue proceedings - the Court held it appropriate to permit compounding and to set aside the conviction and sentence, subject to compliance with conditions imposed by the Court. [Paras 7, 11, 12, 14, 15]

Permission granted to compound the offence and to set aside the conviction and sentence upon fulfilment of the conditions imposed by the Court.

Court's power to impose conditions and costs for compounding - application of guidelines in Damodar S. Prabhu for conditional compounding - Compounding was permitted subject to the payment of specified costs: a payment to the complainant as cost/interest and deposit of a percentage of the cheque amount with the High Court Legal Services Committee as directed under the Damodar S. Prabhu guidelines. - HELD THAT: - Relying on the Damodar S. Prabhu guidelines and the court's discretionary power to regulate late-stage compounding, the Court imposed conditions because the revisionist did not take effective steps to compound at an earlier stage. The Court directed payment of a specified sum as cost/interest to the opposite party within two weeks and directed the revisionist to pay 15% of the cheque amount to the High Court Legal Services Committee within three weeks. The Court made clear that upon compliance with these payments within the stipulated periods, the trial and appellate judgments of conviction would be set aside. [Paras 12, 13, 14]

Compounding permitted on condition that the revisionist pays the prescribed amounts within the specified periods, failing which the order setting aside conviction will not follow.

Final Conclusion: The revision is allowed: the offence is compounded and the conviction and sentence are set aside provided the revisionist complies with the Court's conditional payments (payment to the complainant and deposit to the High Court Legal Services Committee) within the stipulated time; upon such compliance the earlier judgments of conviction shall be quashed.

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Liability of company officials under Section 141 of the Negotiable Instruments Act - Requirement of specific averments to fasten vicarious liability - Quashing of criminal proceedings under inherent powers of the High Court (Section 482 CrPC) - Question of fact as to whether a director was in charge of and responsible for company business

Dishonour of cheque under Section 138 of the Negotiable Instruments Act - Liability of company officials under Section 141 of the Negotiable Instruments Act - Averments in the complaint suffice to constitute the ingredients of offence under Section 138 read with Section 141 of the N.I. Act against the company, its Managing Director and Director, and the proceedings cannot be quashed at this stage. - HELD THAT: - Applying the settled principles of the Supreme Court in S.M.S. Pharmaceuticals, National Small Industries Corporation, Standard Chartered Bank and A.R. Radha Krishna, the court held that a managing director who has issued cheques on behalf of the company falls within the class of persons covered by Section 141 and may be proceeded against by virtue of his office. The complaint (paras. 2 and 4) contains specific averments that the accused directors were "in charge of and responsible" for the company's business and that the Managing Director issued the cheques towards company liability. Where such averments are made, and absent unimpeachable material showing that a director could never have been in charge of the business at the relevant time, it is not appropriate to quash the prosecution under Section 482 CrPC. The petitioners' contention that the amount was already paid or that they were not responsible for day-to-day affairs raises factual questions for trial which cannot be adjudicated in the writ petitions. Consequently the magistrate's cognizance and issuance of process was held to be justified. [Paras 10, 16, 18, 19]

Proceedings under Section 138 read with Section 141 of the N.I. Act against the company, its Managing Director and Director are not liable to be quashed at this stage; the matter is to proceed to trial.

Final Conclusion: Writ petitions dismissed; the High Court declined to quash the complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, leaving questions of payment and responsibility of directors to be examined at trial; copy of order directed to the trial Court for expeditious disposal.

Anticipatory bail - apprehension of arrest as basis for anticipatory bail - apprehension of death from pandemic (Covid-19) as a ground for anticipatory bail - direction for grant of bail under Section 438 Cr.P.C. (U.P. Amendment) including interim order, notice to Public Prosecutor and 30 day disposal - doctrine of selection of remedies under Section 438(7) Cr.P.C. (U.P. Amendment) - conditions to be imposed while granting anticipatory bail - primacy of Article 21 right to life in bail consideration

Apprehension of death from pandemic (Covid-19) as a ground for anticipatory bail - primacy of Article 21 right to life in bail consideration - Apprehension of infection and death from Covid-19 constitutes a valid ground for grant of anticipatory bail. - HELD THAT: - The Court held that the law of anticipatory bail is founded on apprehension of arrest and that where arrest and consequent detention would expose an accused to a real risk to life (including risk from the Covid-19 pandemic), such apprehension can be a valid ground for anticipatory bail. Article 21's protection of life is paramount and cannot be put at peril by subjecting an accused to arrest and incarceration during a pandemic; the ordinary parameters for grant of anticipatory bail must yield where the accused's life is endangered by the current health emergency. The Court relied on recent Supreme Court directions concerning the risk of Covid-19 in prisons and the need to decongest jails, observing that arrest, detention in lock-ups, production before courts and incarceration bring the accused into contact with multiple persons and thereby risk infection. In these extraordinary circumstances the apprehension of death from Covid-19 is a determinative consideration permitting grant of anticipatory bail. [Paras 25, 27, 29, 30, 31]

Apprehension of infection and death from Covid-19 is a legitimate and sufficient ground to grant anticipatory bail in appropriate cases.

Direction for grant of bail under Section 438 Cr.P.C. (U.P. Amendment) including interim order, notice to Public Prosecutor and 30 day disposal - doctrine of selection of remedies under Section 438(7) Cr.P.C. (U.P. Amendment) - conditions to be imposed while granting anticipatory bail - The procedural scheme under the U.P. amendment of Section 438 Cr.P.C. and local practice permit dispensing with the interim order/7 day notice routine where prior notice to the Government Advocate has been served and prompt disposal is practicable; the Court may impose appropriate conditions and the selection of forum under Section 438(7) extinguishes the Sessions Court remedy. - HELD THAT: - The Court examined Section 438 as re enacted in Uttar Pradesh and observed that while Section 438(2) contemplates interim orders and Section 438(3) a notice of not less than seven days to the Public Prosecutor, in practice anticipatory bail applications are presented to this Court after prior service under Chapter XVIII, Rule 18 of the Allahabad High Court Rules. Given that most applications are listed after more than two days, and often after a week or more, the Government Advocate ordinarily has sufficient time to obtain instructions. Therefore, the formalistic requirement of first passing an interim order and then a final order (with fresh seven day notice) is not in the interest of speedy justice and can be avoided where prior notice has been served and prompt disposal is possible. The Court also explained that Section 438(7) bars a subsequent Sessions Court application once an application is made to the High Court, and reiterated that conditions in Section 438(2) are illustrative, leaving discretion to impose other suitable conditions. [Paras 11, 13, 14, 15, 20]

Where prior notice has been served on the Government Advocate and the matter is listed after reasonable time, the Court need not mechanically follow the interim order/7 day notice routine and may proceed to final disposal, while exercising discretion to impose appropriate conditions; an application to the High Court bars a later application to the Sessions Court.

Anticipatory bail - conditions to be imposed while granting anticipatory bail - The applicant is granted anticipatory bail for a limited period subject to specified conditions. - HELD THAT: - Relying on the Court's conclusion that apprehension of death from Covid 19 justifies anticipatory bail in the present extraordinary circumstances, the Court granted the applicant anticipatory bail until 03 January 2022. The order is expressly limited and conditional: the applicant must furnish contact details, not change residence without informing authorities, not leave the country without permission, not obstruct investigation, surrender passport or file an affidavit if none, refrain from inducement or threats to witnesses, maintain law and order, avoid seeking adjournments during evidence, remain personally present on key trial dates, and comply with verification requirements of a computerized copy of the order. The Court warned that misuse of liberty will attract appropriate action including bail cancellation. [Paras 34, 35, 36]

Anticipatory bail is allowed to the applicant till 03 January 2022 on the stated conditions; the grant is on special grounds and the normal grounds were not considered.

Final Conclusion: The anticipatory bail application is allowed: the Court holds that apprehension of infection and death from Covid 19 is a valid ground for anticipatory bail, clarifies procedural expectations under the U.P. amendment of Section 438 Cr.P.C. and local practice regarding interim orders and notice, and grants the applicant anticipatory bail for a limited period subject to specified conditions.