TaxTMI Updates e-Newsletter
Jun 23,2020

Rate of GST on royalty payable under Reverse Charge Mechanism - Classification of the activity as leasing or renting of goods under Heading 9973 residual entry 17(viii) - Taxation of service at same rate as on supply of like goods involving transfer of title - Applicability of Notification No. 11/2017-Central Tax (Rate) and its amendment Notification No. 27/2018-Central Tax (Rate)

Classification of the activity as leasing or renting of goods under Heading 9973 residual entry 17(viii) - Taxation of service at same rate as on supply of like goods involving transfer of title - Rate of GST on royalty payable under Reverse Charge Mechanism - Whether royalty paid to the State by the applicant for extraction of sand, gravel and boulders (minor minerals) is a service covered by residual entry 17(viii) of Heading 9973 and the applicable GST rate for the periods 01.07.2017 to 31.12.2018 and w.e.f. 01.01.2019 - HELD THAT: - The Authority examined Notification No. 11/2017-Central Tax (Rate) and the amendment by Notification No. 27/2018-Central Tax (Rate). The services rendered by the applicant - permitting extraction of minor minerals and payment of royalty to the State - fall within the residual entry 17(viii) of Heading 9973 (leasing or rental services, with or without operator). The amendment effective from 01.01.2019 altered the rate applicable to this residual entry: services of this description provided during 01.07.2017 to 31.12.2018 attract GST at the same rate as applicable on supply of like goods involving transfer of title, whereas w.e.f. 01.01.2019 the entry attracts GST at 18%. The goods involved (sand, gravel, stone boulders) are classifiable under the Tariff as attracting 5% GST on transfer of title; accordingly, the impugned service attracts GST at 5% for the period 01.07.2017 to 31.12.2018 and attracts 18% w.e.f. 01.01.2019.

The royalty-based service is covered by residual entry 17(viii) of Heading 9973; GST at the same rate as on transfer of title (5%) applies for 01.07.2017 to 31.12.2018 and GST at 18% applies w.e.f. 01.01.2019.

Final Conclusion: The Authority rules that the applicant's services (royalty for extraction of sand, gravel and boulders) attract GST at 5% for the period 01.07.2017 to 31.12.2018 (being the rate applicable to the supply of like goods involving transfer of title) and attract GST at 18% w.e.f. 01.01.2019.

Reverse charge mechanism - goods transport agency (GTA) - consignment note - supply of services by unregistered supplier to a registered recipient - liability to pay tax by recipient under RCM

Goods transport agency (GTA) - reverse charge mechanism - supply of services by unregistered supplier to a registered recipient - Services received from unregistered road transporters by the applicant fall within the definition of GTA services and are exigible to tax under the reverse charge mechanism. - HELD THAT: - The Authority examined Notifications relating to RCM and the definition of 'goods transport agency' in the rate Notification. The services of transporting goods by road provided to the applicant correspond to services rendered by a GTA as notified under the RCM provision. Section 9(3) and 9(4) of the Act and Notification No. 13/2017-Central Tax (Rate) identify GTA services as a category on which tax is payable by the recipient under RCM. Given that the transporters performed transportation of goods by road for the applicant and no consignment notes were issued by the transporters, the consequence under the statutory scheme is that the recipient (the applicant) is liable to discharge tax under the reverse charge mechanism in respect of such supplies from unregistered transporters. [Paras 7]

The services procured from unregistered transporters constitute GTA services and are taxable under RCM; the applicant is liable to pay GST as recipient under RCM.

Consignment note - reverse charge mechanism - evidentiary effect of transport documentation - Form 2.1 issued by the applicant constitutes a consignment note for the purposes of the GTA definition and RCM. - HELD THAT: - Although 'consignment note' is not defined in the Act, the Authority relied on the Explanation to Rule 4B of the Service Tax Rules (1994) for guidance as to the character of a consignment note. Form 2.1, prepared and signed by the applicant, contains particulars conventionally found in a consignment note (consignor and consignee, vehicle registration, details of goods, etc.), is handed over to the transporter at the time of taking charge of goods, and on delivery the transporter receives Form 3.3 from the depot as proof of delivery. The form effectually transfers the lien and responsibility for safe delivery to the transporter in the same manner as a conventional consignment note. The Authority further observed that requiring a consignment note to be issued only by the transporter would enable avoidance; treating the Form 2.1 as a consignment note prevents such evasion and fulfils the condition in the GTA definition. [Paras 7]

Form 2.1 is to be treated as a consignment note; accordingly the condition in the GTA definition is satisfied and RCM applies.

Final Conclusion: The Authority ruled that (i) services received from unregistered road transporters by the applicant fall within the definition of GTA and are taxable under the reverse charge mechanism, and (ii) the applicant's Form 2.1 qualifies as a consignment note for these purposes, rendering the applicant liable to pay GST under RCM.

Non-availability of input tax credit on hiring of motor vehicles for transportation of persons unless employer is statutorily obliged to provide such facility - exclusion of ITC in respect of leasing, renting or hiring of motor vehicles as per the provisos to section 17(5)(b) - second proviso to section 17(5)(b) - ITC available where supply is obligatory for employer under law - GST rate on renting of motor cab - 5% with limited ITC; 12% with full ITC

Non-availability of input tax credit on hiring of motor vehicles for transportation of persons unless employer is statutorily obliged to provide such facility - second proviso to section 17(5)(b) - ITC available where supply is obligatory for employer under law - Input tax credit on services of hiring taxis for transportation of employees is not available to the applicant because the applicant has not shown any law obliging the employer to provide such transportation. - HELD THAT: - Section 16 entitles a registered person to take credit of input tax on goods or services used in the course or furtherance of business, subject to exceptions in section 17(5). Clause (b) of section 17(5) excludes, inter alia, leasing, renting or hiring of motor vehicles. The second proviso to section 17(5)(b) makes an exception where the inward supply is used by a registered person to provide the same category of outward taxable supply or where it is obligatory for an employer to provide the same to its employees under any law for the time being in force. The applicant was given opportunity to cite any statutory obligation but failed to produce any law making transportation of employees obligatory. On that factual and legal basis, the Authority held that the proviso is not attracted and ITC is therefore not available to the applicant on the taxi-hiring services supplied for transportation of its employees.

No input tax credit is available to the applicant on the hired taxi services for transporting employees in the absence of any statutory obligation on the employer to provide such facility.

GST rate on renting of motor cab - 5% with limited ITC; 12% with full ITC - The applicable GST rates on renting of motor cabs are 5% with restricted (limited) ITC and 12% with full ITC as per Notification No. 20/2017 and related guidance. - HELD THAT: - The Authority noted the relevant notification and circular which classify transport of passengers by motor cab into two tax rates depending on whether the cost of fuel is included and on the entitlement to input tax credit. The ruling records that renting of cabs attracts 5% with limited ITC (input services in the same line of business) or 12% with full ITC, aligning the tax incidence with the conditions specified in the notification and circular.

Renting of motor cabs is taxable at 5% with limited ITC or at 12% with full ITC, subject to the conditions laid down in the notification and circular.

Final Conclusion: The Authority ruled that the applicant cannot claim ITC on hired taxi services for employee transportation in the absence of any statutory obligation on the employer to provide such transport; and that renting of motor cabs is taxable at 5% with limited ITC or 12% with full ITC as per the relevant notification and circular.

Licensing services for the right to use minerals including its exploration and evaluation - Classification under Service Accounting Code 997337 / Heading 9973 - Residuary rate entry for leasing or rental services under Notification No. 11/2017-C.T.(Rate) as amended - Clarificatory amendment (Notification No. 27/2018) and retrospective effect of clarificatory notification - Reverse charge mechanism for services supplied by Government to a business entity (Notification No. 13/2017-C.T.(Rate))

Licensing services for the right to use minerals including its exploration and evaluation - Classification under Service Accounting Code 997337 / Heading 9973 - Classification of the service provided by the State Government to M/s Raj Quarry Works for which royalty is paid - HELD THAT: - The advance ruling authority examined the annexure to Notification No. 11/2017-C.T.(Rate) and the Service Accounting Code structure and found that the grant of mining/quarrying rights by the State is a supply of service and falls within Group 99733. The specific description 'Licensing services for the right to use minerals including its exploration and evaluation' corresponds to SAC 997337, and the payments of rent/royalty are consideration for that licensing service. The Authority therefore classified the activity under Heading 9973 (Leasing or rental services, with or without operator) and specifically under SAC 997337. The finding rests on the statutory scheme treating leases/licenses of land and similar rights as supply of service and on the Annexure entries treating licensing for minerals as a distinct service. [Paras 15, 16, 18, 24]

The activity is classifiable under Heading 9973 and sub-heading/SAC 997337 as licensing services for the right to use minerals including its exploration and evaluation.

Residuary rate entry for leasing or rental services under Notification No. 11/2017-C.T.(Rate) as amended - Clarificatory amendment (Notification No. 27/2018) and retrospective effect of clarificatory notification - Rate of GST applicable on the said service - HELD THAT: - The Authority analysed the sequence of amendments to Notification No. 11/2017-C.T.(Rate) and the recommendations of the 31st GST Council leading to Notification No. 27/2018. It held that the licensing service for minerals is not a lease of goods and therefore could not be taxed by importing the rate applicable to sale/transfer of goods. The Council's amendments (including creation of specific residuary entries) were clarificatory and intended to resolve unintended interpretations. Relying on the principle that a clarificatory notification takes effect retrospectively, the Authority concluded that the residuary entry created by the amendments applies to the impugned service and prescribes the rate of 18% (9% CGST + 9% SGST) from July 2017 onwards. [Paras 19, 20, 21, 24]

The service attracts GST at 18% (9% CGST + 9% SGST), effective from July 2017 onwards.

Reverse charge mechanism for services supplied by Government to a business entity (Notification No. 13/2017-C.T.(Rate)) - Liability to pay GST: whether M/s Raj Quarry Works is required to discharge tax under reverse charge or the State is liable - HELD THAT: - Notification No. 13/2017-C.T.(Rate) (Serial No. 5) makes services supplied by Government to a business entity taxable under reverse charge subject to specified exclusions. The Authority examined the exclusion clause which exempts 'renting of immovable property' and found that leasing of mining/quarrying rights is licensing for extraction and use of minerals, not renting of immovable property. Consequently the transaction does not fall within the exclusion and the recipient, being a business entity, is liable to pay tax under the reverse charge mechanism as per the Notification. [Paras 23, 24]

M/s Raj Quarry Works, as the recipient, is liable to discharge GST under the reverse charge mechanism; the service is not covered by exclusion (1) of Serial No. 5.

Final Conclusion: The Authority ruled that the royalties/dead rent paid to the State for mining rights constitute 'Licensing services for the right to use minerals including its exploration and evaluation' (SAC 997337 under Heading 9973), attract GST at 18% (9% CGST + 9% SGST) with retrospective effect from July 2017, and that the applicant (recipient) is liable to pay the tax under the reverse charge mechanism as Notification No. 13/2017-C.T.(Rate) applies.

Summary order. Notice issued; matter to be heard along with SLP(C) No. 26626 of 2019 and SLP (C) D.No. 38404 of 2019; operation of the impugned order stayed in the meantime.

Joinder of a necessary and proper party - impleadment - service of notice - appearance by counsel and responsible officer via video conferencing - urgent listing of petition

Joinder of a necessary and proper party - impleadment - DGGI (Directorate General of Goods and Services Tax Intelligence, Ghaziabad Region Unit) to be impleaded as respondent no. 3 in the writ petition - HELD THAT: - The Court, on being informed that respondent no.1 has handed over the investigation to DGGI which has been investigating since 5th December, 2018, held that DGGI is a necessary and proper party to the proceedings. In consequence, the Court ordered impleadment of DGGI as respondent no.3 and directed that notice be issued to it. The determination is limited to impleading DGGI as a party and issuing notice; no adjudication on merits of the underlying investigation or claims was undertaken.

DGGI impleaded as respondent no.3 and notice directed to be issued

Service of notice - appearance by counsel and responsible officer via video conferencing - Directions for service of the order and for appearance of counsel and a responsible officer for the newly impleaded respondent via video conferencing - HELD THAT: - Having impleaded DGGI, the Court directed issuance of notice to respondent no.3. The learned senior standing counsel undertook to inform respondent nos.1 and 2's order to the newly impleaded respondent. The Court further directed that a counsel as well as a responsible officer conversant with the facts appear on behalf of respondent no.3 through video conferencing on the next date of hearing. The order also required uploading on the website and emailing copies to learned counsel.

Notice to be issued to respondent no.3; counsel and responsible officer to appear by video conferencing on the next date; order to be uploaded and emailed

Urgent listing of petition - Continuation of the hearing with a specified listing date - HELD THAT: - The petition, listed by the Registry in view of urgency and heard by video conferencing, was ordered to be listed next on 29th June, 2020. The Court recorded that the matter was heard and gave the directions above accordingly. No substantive adjudication on the merits of the petition was made in the order.

Matter listed on 29th June, 2020 for further hearing

Final Conclusion: DGGI (Ghaziabad Region) was impleaded as respondent no.3, notice directed to be issued, and the newly impleaded respondent was ordered to cause appearance by counsel and a responsible officer via video conferencing; the matter was listed for further hearing on 29th June, 2020, and the order was directed to be uploaded and emailed.

Summary order. CM application allowed; notice issued in W.P.(C) 3620/2020; respondents permitted ten days to obtain instructions; matter listed on 03rd July, 2020.

Exemption under Section 54F(1) - meaning of "residential house" - usage of property as criterion for classification - owning more than one residential house proviso - serviced apartments treated as commercial use - multiple independent units in the same building treated as one residential unit - beneficial construction of taxing statute

Meaning of "residential house" - usage of property as criterion for classification - serviced apartments treated as commercial use - Whether apartments sanctioned as residential but actually used as serviced/commercial apartments qualify as "residential house" for the purposes of proviso (a)(i) and (b) to Section 54F(1). - HELD THAT: - The Court held that the actual usage of the property must be considered in determining whether it is a residential house. Noting authorities which treat user as relevant and construing Section 54F(1) as a beneficial provision to be construed liberally, the Court accepted that where apartments are put to commercial use as serviced apartments they cannot be treated as residential houses for the proviso. The revenue's submission that classification must rest solely on sanctioned plan and not on user was rejected in light of consistent judicial views that usage is a material criterion for tax classification of house property. [Paras 10]

The two apartments, though sanctioned as residential, were being used as serviced/commercial apartments and therefore are not to be treated as "residential house" for the proviso to Section 54F(1).

Multiple independent units in the same building treated as one residential unit - owning more than one residential house proviso - Exemption under Section 54F(1) - Whether two small apartments of 500 sq. ft. each in the same building must, as a matter of law, be treated as two separate residential houses for the proviso to Section 54F(1), thereby disqualifying the assessee. - HELD THAT: - Alternatively, the Court held that two independent apartments of 500 square feet each situated in the same building should be treated as a single residential unit for the purposes of Section 54F(1). Relying on precedent which permitted treating a residential house consisting of several independent units as eligible for exemption, the Court concluded that technical multiplicity of units within the same building ought not to defeat the beneficial object of Section 54F(1). This reasoning operates even if the question of user did not arise or were answered otherwise. [Paras 11]

Two small apartments in the same building are to be treated as one residential unit for the proviso to Section 54F(1), and therefore do not disqualify the assessee from claiming exemption.

Final Conclusion: Substantial questions of law answered in favour of the assessee; the denial of exemption under Section 54F(1) by the Assessing Officer, CIT(A) and ITAT is quashed and the appeal is allowed.

Exemption under Section 54(1) of the Income-Tax Act - interpretation of 'a residential house' - clarificatory prospective amendment to Section 54(1) - ratio decidendi as binding precedent

Exemption under Section 54(1) of the Income-Tax Act - interpretation of 'a residential house' - Entitlement to exemption under Section 54(1) where the assessee purchased more than one residential house prior to the 2015 amendment - HELD THAT: - The court examined Section 54(1) as it stood prior to amendment and concluded that the expression 'a residential house', in context with the words 'buildings or lands appurtenant thereto', is not confined to a single residential unit. Reliance was placed on earlier decisions of this Court and other High Courts which construed the singular 'a' to include plural unless repugnance in context requires otherwise. The court observed that the subsequent amendment substituting 'one residential house' was prospective and enacted to restrict an interpretation already being given by courts; this confirmed that the pre-amendment provision permitted plurality. Applying these principles to the facts, and noting there was no finding of tax-evasion or abuse of law by the assessee, the court held that the assessee was entitled to claim exemption under Section 54(1) in respect of purchases of more than one residential house made after the transfer, as permitted by the pre-amendment statute. [Paras 11, 12, 13, 14, 15]

The substantial question of law is answered in favour of the assessee; the expression 'a residential house' in Section 54(1) (pre-amendment) includes plural and the assessee is entitled to the exemption.

Final Conclusion: The High Court allowed the appeal: orders of the assessing officer, CIT(A) and the Tribunal insofar as they deprived the assessee of exemption under Section 54(1) (as it stood prior to the 2015 amendment) are quashed and the assessee is held entitled to the said exemption for Assessment year 2003-04.

Set-off of interest against public issue expenses - characterisation of interest income as revenue or capital receipt - binding effect of Supreme Court precedent

Set-off of interest against public issue expenses - binding effect of Supreme Court precedent - The Tribunal's conclusion that interest earned on deposits could be set off against expenses incurred towards the public issue was upheld. - HELD THAT: - The revenue conceded that the first substantial question (relating to taxation of interest under the head "income from other sources") was not pressed and did not arise on the facts. On the second substantial question, learned counsel for the revenue accepted that the Supreme Court's decision in COMMISSIONER OF INCOME TAX-IV, AHMEDABAD Vs. SHREE RAMA MULTI TECH LTD. [(2018) 92 TAXMANN.COM 363 (SC)] is decisive and answers the question against the revenue. In light of that binding precedent and the revenue's concession, the Court held that the second substantial question must be answered in favour of the assessee and against the revenue, thereby upholding the Tribunal's conclusion concerning set-off of the interest against public issue expenses. [Paras 3, 4]

Appeal dismissed; second substantial question answered against the revenue and in favour of the assessee pursuant to the cited Supreme Court authority.

Final Conclusion: The appeal under Section 260-A is dismissed; the Tribunal's view allowing set-off of interest against public issue expenses is affirmed in light of the Supreme Court ruling relied upon by the revenue, and the first substantial question was not pressed.

Exercise of powers under section 263 - requirement of assessment to be erroneous and prejudicial to the interests of the revenue - computation of deduction under section 10A and set-off of unabsorbed brought forward depreciation - application of mind by the Assessing Officer

Exercise of powers under section 263 - application of mind by the Assessing Officer - The Tribunal correctly held that the order passed under section 263 was not sustainable because the Assessing Officer had applied his mind in passing the assessment order. - HELD THAT: - The revenue's substantial question that the Tribunal erred in holding the section 263 order unsustainable insofar as the Assessing Officer had applied his mind was addressed by the High Court. Parties placed reliance on the Supreme Court decision in Commissioner of Income-Tax v. Yokogawa India Ltd., which the High Court accepted as determinative. In light of that precedent and the parties' concession, the Court concluded that the Tribunal was correct in holding that the Assessing Officer had applied his mind and that the exercise of power under section 263 was unwarranted on that ground. [Paras 3, 4]

Substantial question answered against the revenue; section 263 order held unsustainable on the basis that the Assessing Officer had applied his mind.

Computation of deduction under section 10A and set-off of unabsorbed brought forward depreciation - requirement of assessment to be erroneous and prejudicial to the interests of the revenue - The Tribunal correctly declined to treat non-set off of unabsorbed brought forward depreciation for computing deduction under section 10A as rendering the assessment erroneous and prejudicial to revenue. - HELD THAT: - The High Court accepted the parties' joint submission that the legal question had been decided against the revenue by the Supreme Court in Commissioner of Income-Tax v. Yokogawa India Ltd. Applying that enunciation, the Court answered the substantial question in favour of the assessee and against the revenue, thereby negating the contention that failure to set off unabsorbed brought forward depreciation amounted to an assessment per se erroneous and prejudicial justifying invocation of section 263. [Paras 3, 4]

Substantial question answered against the revenue; non-set off of unabsorbed depreciation under the facts did not render the assessment erroneous and prejudicial for purposes of section 263.

Final Conclusion: The appeals are dismissed; the substantial questions of law are answered against the revenue and in favour of the assessee, applying the Supreme Court's decision in Commissioner of Income-Tax v. Yokogawa India Ltd.

Definition of "co-operative society" under Section 2(19) of the Income Tax Act - benefit under Section 80P of the Income Tax Act - arbitrary administrative action - violation of Article 14 and 19(1)(c) of the Constitution - quashing of assessment and consequential orders - direction to pass fresh order / remand for consideration

Definition of "co-operative society" under Section 2(19) of the Income Tax Act - benefit under Section 80P of the Income Tax Act - Entities registered under the Karnataka Souharda Sahakari Act, 1997 fall within the definition of "co-operative society" for the purposes of Section 80P of the Income Tax Act and are entitled to stake a claim for the benefit thereunder subject to applicable exceptions. - HELD THAT: - The High Court, following the decision in Writ Petition No.48414 of 2018 and connected matters, examined the Karnataka Souharda Sahakari Act, 1997 alongside the Karnataka Cooperative Societies Act, 1959 and Section 80P of the Income Tax Act. It held that the entities registered under the Souharda Act fit into the statutory concept of a "co-operative society" as contemplated by Section 2(19) and therefore, subject to the statutory exceptions and other provisions of Section 80P, are entitled to claim the fiscal benefit accorded by Section 80P. The court left the application of other provisions and exceptions under Section 80P to the concerned authorities for determination in accordance with law. [Paras 7]

Declaration issued that the petitioner-society registered under the Karnataka Souharda Sahakari Act, 1997 fits the definition of "co-operative society" for Section 80P and may claim relevant benefits subject to exceptions.

Arbitrary administrative action - violation of Article 14 and 19(1)(c) of the Constitution - quashing of assessment and consequential orders - The interpretation by the assessing authority that the petitioner is not a "co-operative society" was arbitrary and violative of Articles 14 and 19(1)(c); the assessment order and the order freezing the petitioner's bank accounts were quashed. - HELD THAT: - Relying on the principal bench's reasoning, the court found the respondent's contrary interpretation to be arbitrary, illegal and ultra vires, and in breach of the petitioner's fundamental rights under Articles 14 and 19(1)(c). Consequentially, the impugned assessment order dated 05.12.2019 was set aside. The court also quashed the administrative order freezing the petitioner's specified bank accounts, as those measures followed from the same erroneous legal stance of the authority. [Paras 9, 11]

Impugned assessment order dated 05.12.2019 and the order freezing the petitioner's bank accounts are quashed as arbitrary and violative of Articles 14 and 19(1)(c).

Direction to pass fresh order / remand for consideration - benefit under Section 80P of the Income Tax Act - The matter was remitted to the assessing authority to pass a fresh order treating the petitioner as a co-operative society and extend benefit under Section 80P, subject to the exceptions noted in the principal bench's order. - HELD THAT: - Although the court declared the legal position in favour of the petitioner and quashed the impugned orders, it directed the assessing authority to pass a fresh order treating the petitioner as a co-operative society and to consider and extend the benefit under Section 80P in accordance with law and the exceptions indicated in the earlier order dated 16.01.2020. This constitutes a remand for fresh consideration and implementation consistent with the court's declaration and applicable exceptions. [Paras 10]

Respondent No.3 directed to pass a fresh order treating the petitioner as a co-operative society and to consider extension of Section 80P benefits subject to the exceptions recorded in the prior decision.

Final Conclusion: The writ petition is allowed: the petitioner-society under the Karnataka Souharda Sahakari Act, 1997 is declared to fall within the definition of a "co-operative society" for Section 80P and may claim benefits subject to statutory exceptions; the assessment order and bank-freeze order are quashed; and the assessing authority is directed to pass fresh orders in conformity with this declaration and the earlier order of the Principal Bench.

Maintainability of appeal - tax effect threshold for revival under Government of India circular dated 08.08.2019 - liberty to revive appeal conditioned on tax effect exceeding Rs.1 Crore or exceptions in the notification dated 08.08.2019 - exercise of revisional jurisdiction under Section 263 of the Income tax Act, 1961

Maintainability of appeal - tax effect threshold for revival under Government of India circular dated 08.08.2019 - Appeal disposed for non-maintainability on the basis that the tax impact is less than Rs. 1 Crore and therefore falls within the limits contemplated by the circular dated 08.08.2019. - HELD THAT: - The Court noted the revenue's appeal (admitted earlier on substantial questions of law) but, on the assessee's representation that the tax impact is below the Rs. 1 Crore threshold specified in the Government of India, Ministry of Finance circular dated 08.08.2019, held that the appeal could not be maintained at this stage. The revenue accepted disposal subject to liberty to revive the appeal if the tax effect exceeds Rs. 1 Crore or if the exceptions in the said notification are attracted. The Court therefore disposed of the appeal without deciding the merits of the issues earlier framed for admission. [Paras 3, 4, 5]

Appeal disposed as not maintainable in present circumstances; liberty granted to the revenue to revive the appeal if tax effect exceeds Rs.1 Crore or exceptions in the notification are attracted.

Exercise of revisional jurisdiction under Section 263 of the Income tax Act, 1961 - Earlier substantial questions of law concerning jurisdiction and service under proceedings under Section 263 were not adjudicated and remain open for consideration if the appeal is revived. - HELD THAT: - The substantial questions of law recorded at the time of admission - including whether the Commissioner's order under Section 263 was without jurisdiction because the notice was issued in a different name, and whether service under Section 170 and related provisions constituted sufficient compliance - were not finally decided. The Court did not address these merits and left them available for fresh consideration upon revival of the appeal in accordance with the conditions stated by the Court. [Paras 2, 5]

Substantial questions admitted earlier are not decided and remain for adjudication if the appeal is revived under the conditions stated.

Final Conclusion: The appeal relating to Assessment year 2001-02 is disposed of as not maintainable at this stage because the tax effect is represented to be below Rs.1 Crore; the revenue is granted liberty to revive the appeal if the tax effect exceeds Rs.1 Crore or if exceptions in the notification dated 08.08.2019 are attracted, and the substantive questions admitted earlier were not decided and remain open for consideration upon such revival.

Exclusion from export and total turnover - deduction under Section 10A - telecommunication expenses - per diem expenses for employees on foreign assignment - insurance expenses relating to employees abroad - verification of claim by assessing officer

Exclusion from export and total turnover - deduction under Section 10A - telecommunication expenses - per diem expenses for employees on foreign assignment - Whether telecommunication and per diem expenses incurred in foreign currency are to be excluded from total turnover for computation of deduction under Section 10A - HELD THAT: - The Court held that the tribunal was justified in directing the assessing officer to exclude telecommunication expenses and per diem expenses from total turnover for the purpose of computing deduction under Section 10A. The court treated the question as no longer res integra and observed that the legal position enunciated by higher authority supports exclusion of such expenses attributable to export of software from both export turnover and total turnover. The assessing officer is to act consistently with that legal position and exclude the expenses shown to be relatable to export operations. [Paras 5]

Answered against the revenue insofar as exclusion of telecommunication and per diem expenses is concerned; such expenses are to be excluded from total turnover for Section 10A computation.

Insurance expenses relating to employees abroad - verification of claim by assessing officer - Whether the claimed insurance expenditure of Rs. 51,90,128/- is relatable to medical insurance of employees on client visits and therefore excludable from export turnover - HELD THAT: - The court observed that there is a dispute as to whether the expenditure claimed is for medical insurance of employees visiting clients (thus relatable and excludable) or not. The tribunal had remitted this factual and factual-legal question to the assessing officer. The Division Bench has directed that the assessing officer, while deciding afresh, shall bear in mind the legal principles laid down by this Court in earlier proceedings; consequently the matter requires adjudication at the assessing officer level and is not decided on merits by this Court. [Paras 6]

Remitted to the assessing officer for fresh adjudication; second substantial question not answered by this Court.

Final Conclusion: The revenue appeal is disposed of. The Court affirmed the tribunal's direction to exclude telecommunication and per diem expenses from total turnover for computation of deduction under Section 10A, while the dispute regarding the claimed insurance expenditure is remitted to the assessing officer for fresh verification and adjudication; the second substantial question of law is left undecided and remitted.

Reasonable cause - penalty under Section 271D - prohibition on cash receipts under Section 269SS - 2nd proviso exemption for agricultural income - exemption as banking company/non-banking financial company

Reasonable cause - penalty under Section 271D - prohibition on cash receipts under Section 269SS - Imposition of penalty under Section 271D for accepting deposits in cash in breach of the prohibition in Section 269SS. - HELD THAT: - The authorities reconsidered the transactions after remand and found that the assessee failed to establish any reasonable cause for receiving deposits in cash exceeding the permissible limit. Reliance was placed on the settled principle that to avoid penal consequences the assessee must prove a compelling and acceptable reason for not receiving deposits by account-payee cheque or demand draft; mere genuineness of transactions, absence of intent to introduce black money or ignorance of law do not constitute such a reasonable cause. On that basis the Tribunal's affirmation of imposition of penalty was upheld by this Court. [Paras 4, 6, 10]

Penalty under Section 271D sustained as the assessee failed to show reasonable cause for accepting cash deposits in contravention of Section 269SS.

2nd proviso exemption for agricultural income - Applicability of the 2nd proviso to Section 269SS (transactions between persons having agricultural income). - HELD THAT: - The contention that the transactions fell within the 2nd proviso exemption for agricultural income was rejected because the admitted facts show the appellant was a company engaged in finance/money lending business. That commercial character of the appellant precludes application of the agricultural income proviso to excuse the cash receipts. [Paras 7]

2nd proviso exemption for agricultural income held inapplicable to the appellant's transactions.

Exemption as banking company/non-banking financial company - Claim that the appellant was exempt under the 1st proviso to Section 269SS as a banking company or authorised non-banking financial company. - HELD THAT: - The argument that the appellant fell within the exemption as banking company/non-banking financial company was negatived on the ground that there was no material to show registration as a banking company under the Banking Regulation Act or authorisation from the Reserve Bank of India as an NBFC. In absence of such status the proviso cannot be invoked to avoid the statutory prohibition and penalty. [Paras 8]

Claim of exemption as a banking company or authorised NBFC rejected.

Computation of penalty - transactions below threshold limit - Allegation that the penalty computation included transactions below the statutory threshold and whether rectification is available. - HELD THAT: - The Court noted the annexure to the revised order lists all transactions and computes the total penalty. The appellant pointed out that some listed transactions were below the Rs.20,000 threshold. The Court did not decide the computation on merits but left open the limited question of rectification of any computational error to be sought before the original authority who imposed the penalty. [Paras 9]

Computation issue left open for rectification before the original assessing/penalising authority.

Final Conclusion: The Tribunal's dismissal of the assessee's appeal is upheld: penalty under Section 271D sustained for breach of Section 269SS as no reasonable cause was shown; statutory provisos claimed by the assessee are inapplicable; any challenge to the arithmetic computation of the penalty may be pursued by rectification before the original authority. The appeal is dismissed.

Registration under section 12AA - proviso to section 12A(2) - applicability of sections 11 and 12 to prior assessment years pending on date of registration - assessment proceedings pending before the assessing officer to include appeals pending before appellate authority - registration does not automatically confer exemption under section 11; eligibility and conditions to be examined by the Assessing Officer - procedural nature of sections 12A and 12AA and purposive interpretation to remove hardship

Proviso to section 12A(2) - applicability of sections 11 and 12 to prior assessment years pending on date of registration - assessment proceedings pending before the assessing officer to include appeals pending before appellate authority - registration under section 12AA - Whether registration granted under section 12AA during the pendency of appeals results in the proviso to section 12A(2) operating so that sections 11 and 12 apply to the earlier assessment year(s) for which assessment proceedings were pending as on the date of registration. - HELD THAT: - Relying on and following the reasoning of the ITAT, Cochin Bench in SNDP Yogam, the Tribunal held that an assessment proceeding pending in appeal before the first appellate authority must be treated as 'assessment proceedings pending before the assessing officer' for the purpose of the proviso to section 12A(2). The amendment embodied in the proviso was intended to relieve genuine hardship where non-registration had led to tax liability despite substantive eligibility for exemption. Sections 12A and 12AA are procedural, and a purposive and liberal interpretation that includes appellate pendency within 'pending before the assessing officer' gives effect to the legislative object of the proviso. Applying that principle to the facts, registration granted under section 12AA during pendency of appeal renders the proviso applicable to the earlier assessment year(s), subject to satisfaction of the substantive conditions for exemption under sections 11 and 12. [Paras 13]

An assessment proceeding pending on appeal is to be deemed pending before the assessing officer for the purpose of the proviso to section 12A(2); registration under section 12AA obtained during such pendency attracts the benefit of the proviso.

Registration does not automatically confer exemption under section 11; eligibility and conditions to be examined by the Assessing Officer - registration under section 12AA - Whether grant of registration under section 12AA automatically entitles the assessee to exemption under section 11 for the earlier assessment year, or whether the Assessing Officer must examine eligibility and other conditions for exemption. - HELD THAT: - The Tribunal held that mere existence of registration under section 12AA does not automatically confer exemption under section 11. The Assessing Officer must examine whether the assessee satisfies the substantive conditions for exemption (including compliance with relevant provisions such as sections 2(15), 11, 12 and 13) and determine taxability of receipts at the assessment stage. Because the assessee had not claimed the section 11 exemption before the AO, and the AO had no opportunity to examine such claim, the Tribunal set aside the appellate order and remanded the matter to the Assessing Officer for fresh adjudication on the question of allowing exemption under section 11, with opportunity to the assessee to be heard. [Paras 14]

Registration under section 12AA does not automatically exempt income; the question of exemption under section 11 is remitted to the Assessing Officer for adjudication after affording the assessee an opportunity of being heard.

Final Conclusion: The Tribunal held that registration under section 12AA granted during pendency of appeal attracts the proviso to section 12A(2) so as to make sections 11 and 12 applicable to the earlier assessment year(s) whose proceedings were pending on the date of registration; however, since the section 11 claim was not examined by the AO, the matter is remanded to the Assessing Officer to decide entitlement to exemption after giving the assessee an opportunity of being heard. The appeal is treated as allowed for statistical purposes.

Allowability of interest on Compulsorily Convertible Debentures as business expenditure - characterisation of CCDs as debt until conversion - deduction under section 36(1)(iii) of the Income-tax Act - distinction between expenditure on issue of convertible debentures and interest on CCDs for the pre conversion period - inapplicability of RBI FDI classification for tax treatment of interest prior to conversion - non application of Thin Capitalisation principle for the relevant assessment year

Allowability of interest on Compulsorily Convertible Debentures as business expenditure - characterisation of CCDs as debt until conversion - deduction under section 36(1)(iii) of the Income-tax Act - distinction between expenditure on issue of convertible debentures and interest on CCDs for the pre conversion period - inapplicability of RBI FDI classification for tax treatment of interest prior to conversion - non application of Thin Capitalisation principle for the relevant assessment year - Deduction of interest paid on Compulsorily Convertible Debentures for the period prior to conversion is allowable under section 36(1)(iii) for AY 2015-16. - HELD THAT: - The Tribunal held that until conversion, CCDs retain the character of borrowings and interest paid thereon for the pre conversion period is allowable as business expenditure under section 36(1)(iii). The decision followed the ITAT Bangalore precedent in CAE Flight Training (I) Pvt. Ltd., which rejected application of RBI/FDI classifications and the Thin Capitalisation principle to deny interest deductibility where those principles were not part of the statutory law for the relevant year. The Special Bench decision in Ashima Syntex - which concerned expenses incurred on the issue of convertible debentures (issue expenses) and facts where part of the debenture was converted immediately - was distinguished as addressing a different question (allowability of issue expenses) and not interest on CCDs prior to conversion. The Tribunal observed that RBI's classification of fully/mandatorily convertible debentures as equity for FDI control purposes does not determine tax consequences as to whether interest paid before conversion is interest on debt; rights and obligations of CCD holders before conversion (such as absence of voting rights or dividends) do not transform pre conversion interest into non deductible equity return for income tax purposes. Thin capitalisation rules were not invoked by the authorities and were not in force for the relevant assessment year, reinforcing allowability.

The deduction claimed in respect of interest paid on CCDs for the pre conversion period is allowed.

Final Conclusion: The assessee's appeal is allowed: interest paid on the Compulsorily Convertible Debentures for the period prior to conversion is deductible under section 36(1)(iii) for Assessment Year 2015-16.

Disallowance under section 40(a)(ia) - Section 194H TDS threshold - Retrospective application of curative amendment (Finance Act (No.2)) - Restriction of disallowance to 30%

Section 194H TDS threshold - Disallowance under section 40(a)(ia) - Whether commission payments individually below Rs. 10,000 which did not attract TDS under section 194H are liable to be disallowed under section 40(a)(ia). - HELD THAT: - The Tribunal examined the person-wise payment details and found payments made to four persons (Anuj Kumar, Surya Kumar, Mukesh Tyagi and Krishna Dayal) were individually below Rs. 10,000. Applying the threshold under section 194H, the Tribunal held that TDS was not required to be deducted on those payments and consequently they could not be disallowed under section 40(a)(ia). The Tribunal therefore directed deletion of the disallowance in respect of those payments. [Paras 10]

Disallowance under section 40(a)(ia) deleted insofar as payments individually below Rs. 10,000 which did not attract TDS under section 194H.

Retrospective application of curative amendment (Finance Act (No.2)) - Restriction of disallowance to 30% - Disallowance under section 40(a)(ia) - Whether, in respect of commission payments exceeding Rs. 10,000 where TDS was not deducted, the disallowance under section 40(a)(ia) should be limited to 30% in view of the Finance (No.2) Act amendment being curative and applied retrospectively. - HELD THAT: - The Tribunal noted that the Finance (No.2) Act amendment to section 40(a)(ia) effective from 01.04.2015 has been regarded by various Tribunal benches, including coordinates of the Delhi Benches, as curative in nature. Relying on those decisions (including R.H. International), and in absence of any contrary binding authority or distinguishing features pointed out by the Revenue, the Tribunal accepted the assessee's submission that the curative amendment should be applied retrospectively. Accordingly, the Tribunal held that where amounts paid exceed Rs. 10,000 and TDS was not deducted, the disallowance under section 40(a)(ia) should be restricted to 30% of the expense rather than 100%. [Paras 11]

Disallowance under section 40(a)(ia) in respect of payments exceeding Rs. 10,000 limited to 30% of the expenses in view of the curative amendment's retrospective application.

Final Conclusion: The appeal is partly allowed: disallowance deleted for commission payments individually below Rs. 10,000 which did not attract TDS; for other payments exceeding Rs. 10,000 the disallowance under section 40(a)(ia) is restricted to 30% of the expenses.

Rejection of books of account under section 145(3) of the Income Tax Act - best judgment assessment under section 144 - ad-hoc disallowance - use of decline in gross profit ratio to reject accounts - requirement of specific reasons and enquiries before rejecting books

Rejection of books of account under section 145(3) of the Income Tax Act - use of decline in gross profit ratio to reject accounts - requirement of specific reasons and enquiries before rejecting books - ad-hoc disallowance - Whether the assessing officer was justified in rejecting the assessee's books of account and making additions by applying a higher sales figure, and whether the Commissioner (Appeals) was justified in sustaining an ad-hoc disallowance. - HELD THAT: - The Tribunal held that rejection of books under section 145(3) cannot be based merely on a variation or decline in gross profit ratio; the assessing officer must record specific reasons and substantiate dissatisfaction with completeness or correctness of accounts by reference to facts, figures and enquiries. In the present case the AO observed sales below purchase price and a fall in gross profit rate but did not point out specific defects in stock statements, purchase and sales records or bank statements, nor did he verify transactions with the parties concerned or produce comparable market evidence. The assessee's explanation that lower prices arose from inferior quality of goods was not controverted. Precedents establish that mere lower GP or typographical/registrational gaps, absent other incriminating factors, do not justify rejection and estimate-based additions. Further, the CIT(A)'s confirmation of an ad-hoc disallowance of Rs.10 lakh was inconsistent with acceptance of the books and lacked specific material; ad-hoc disallowance without reasons is impermissible. Applying these principles, the Tribunal set aside the rejection and directed deletion of the addition. [Paras 7]

Addition made by the AO was deleted and the ad-hoc disallowance confirmed by the CIT(A) was set aside; the assessee's appeal was allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal for Assessment Year 2011-2012, holding that the books of account could not be rejected on the material on record and that the ad-hoc addition was unjustified; the AO was directed to delete the addition.

Addition under section 68 of the Income-tax Act (unexplained cash deposits) - disallowance under section 80C of the Income-tax Act - application of section 69A of the Income-tax Act (undisclosed income) - remand for de-novo consideration - opportunity to produce evidence

Addition under section 68 of the Income-tax Act (unexplained cash deposits) - remand for de-novo consideration - opportunity to produce evidence - Addition made by the Assessing Officer under section 68 confirmed by the Commissioner (Appeals) was remitted to the Assessing Officer for de-novo consideration. - HELD THAT: - The Tribunal recorded that the Assessing Officer and the Commissioner (Appeals) had given opportunities to the assessee to justify the cash deposits which resulted in the addition. Noting the assessee's continuing inability to produce sufficient evidence before the Revenue authorities but also taking into account the assessee's claimed financial strain and the nature of the addition, the Tribunal declined to adjudicate the merits itself. Instead, the matter was remitted to the Assessing Officer for fresh consideration de novo, with an express direction that the assessee and his authorised representative shall promptly cooperate and furnish the evidence before the Assessing Officer. The Assessing Officer was given liberty to pass appropriate orders in accordance with law and on the merits if the assessee fails to cooperate.

Addition under section 68 remitted to the Assessing Officer for de-novo consideration; assessee directed to cooperate and AO permitted to decide on merits if cooperation is not forthcoming.

Disallowance under section 80C of the Income-tax Act - remand for de-novo consideration - opportunity to produce evidence - Disallowance under section 80C confirmed by the Commissioner (Appeals) was remitted to the Assessing Officer for de-novo consideration. - HELD THAT: - Although the Assessing Officer had disallowed the claim under section 80C and the Commissioner (Appeals) upheld that view, the Tribunal, having regard to the procedural history and the assessee's representations about financial difficulty, chose not to decide the matter on merits. The Tribunal remitted the question of the disallowance to the Assessing Officer for fresh adjudication, subject to the same directions that the assessee must cooperate and that the Assessing Officer may pass orders on the available material in law and on merits if cooperation is not provided.

Disallowance under section 80C remitted to the Assessing Officer for de-novo consideration; assessee to cooperate and AO to proceed on merits if necessary.

Application of section 69A of the Income-tax Act (undisclosed income) - remand for de-novo consideration - Tribunal remitted for de-novo consideration the question whether provisions of section 69A apply to the amounts forming part of the enhancement and admitted income. - HELD THAT: - The Tribunal observed that the Commissioner (Appeals) had applied section 69A in relation to the enhancement but, rather than resolving the applicability itself, the Tribunal directed the Assessing Officer to examine the matter afresh. The remand requires the Assessing Officer to consider applicability of section 69A in the light of materials that may be produced on fresh consideration, with the usual direction for prompt cooperation from the assessee and liberty to the Assessing Officer to decide on merits in accordance with law if cooperation is not forthcoming.

Applicability of section 69A remitted to the Assessing Officer for de-novo consideration; assessee to cooperate and AO to decide on merits if cooperation fails.

Final Conclusion: The appeal is allowed for statistical purposes by remitting the matters (addition under section 68, disallowance under section 80C and applicability of section 69A) to the Assessing Officer for de-novo consideration; the assessee and authorised representative are directed to promptly cooperate and the Assessing Officer is at liberty to pass appropriate orders in accordance with law and on merits if cooperation is not forthcoming.

Remand report - acceptance of claim by Assessing Officer - endorsement by supervisory officer - binding effect of remand proceedings on Revenue - non-speaking order - maintainability of appeal where Revenue has accepted the assessee's claim in remand proceedings

Remand report - acceptance of claim by Assessing Officer - endorsement by supervisory officer - maintainability of appeal where Revenue has accepted the assessee's claim in remand proceedings - non-speaking order - Validity of the CIT(A)'s orders disposing appeals in terms of the Assessing Officer's remand report (for AY 2009-10 and AY 2010-11) and whether those orders were infirm for being non-speaking. - HELD THAT: - The Tribunal found on the material on record that in the remand proceedings the Assessing Officer accepted the assessee's claims; that remand report was forwarded by the Joint Commissioner of Income Tax (supervisory officer); and that the assessee communicated its acceptance of the remand report. The CIT(A) disposed the appeals in terms of that remand report. The Tribunal held that where the Assessing Officer and the supervisory officer endorse acceptance of the assessee's claim in remand proceedings, that stand constitutes the Revenue's position unless mala fides in the remand action is shown. Consequently, the fact that the CIT(A) did not recite detailed facts or elaborate findings in the order did not vitiate the disposal because the determinative basis for allowance was the remand report which recorded the Assessing Officer's acceptance and which was not controverted by the Revenue. In those circumstances an appeal by the Revenue was not sustainable, and the CIT(A)'s reliance on the remand report was proper. [Paras 5, 6, 7]

The Tribunal upheld the CIT(A)'s orders for AY 2009-10 and AY 2010-11, finding no infirmity in disposing the appeals in terms of the remand report, and dismissed the Revenue's appeals.

Final Conclusion: Both appeals filed by the Revenue against the CIT(A)'s orders for assessment years 2009-10 and 2010-11 were dismissed as the appeals were disposed by the CIT(A) on the basis of the Assessing Officer's remand report (endorsed by the supervisory officer) which accepted the assessee's claims and was unchallenged before the Tribunal.

Date of importation - applicability of amended EXIM Policy - date for determination of rate of duty and tariff valuation - relevance of date of filing of bill of entry - retrospective operation of a customs notification

Date of importation - applicability of amended EXIM Policy - Imported goods were not exempt from customs duty because importation was completed before the amended EXIM Policy became operative. - HELD THAT: - The court held that, for the Foreign Trade (Development and Regulation) Act, 1992, import means bringing goods into India and, on the facts, importation of the textile machines was completed in February, 1999 when the goods reached the port. The amended EXIM Policy was operative from 1st April, 1999; accordingly the company could not claim benefit of that policy for goods already imported prior to that date. The Director General of Foreign Trade's contrary conclusion was therefore incorrect and the amended EXIM Policy did not yield benefit to the import in question. [Paras 24, 25, 26]

Company not entitled to exemption under the amended EXIM Policy as importation was completed before 1st April, 1999.

Date for determination of rate of duty and tariff valuation - relevance of date of filing of bill of entry - Date of filing of bill of entry is irrelevant to applicability of the EXIM Policy under the Foreign Trade Act; the bill filing date did not confer entitlement to the amended policy in these facts. - HELD THAT: - Sections 15 and 46 of the Customs Act govern the date for determination of rate of duty for purposes of customs notifications under Section 25, but that date is not relatable to the Foreign Trade (Development and Regulation) Act or to the operative date of an EXIM Policy. Because the amended EXIM Policy itself did not apply to goods imported in February 1999, any later filing of the bill of entry in August 1999 could not retrospectively confer the benefit of the policy. The court distinguished the facts of Bharat Surfactants where the bill was filed prior to arrival of goods. [Paras 27, 28, 29, 30, 31]

Bill of entry filing date does not make the amended EXIM Policy applicable to goods already imported before the policy's operative date.

Retrospective operation of a customs notification - The customs notification dated November 04, 1999 was not to be read as having retrospective effect so as to cover imports prior to the operative date of the amended EXIM Policy. - HELD THAT: - The court examined whether the November 04, 1999 amendment could be construed as relating back to earlier dates. Although the notification used the term 'substitution', the amendment in substance introduced new import items (textile and chemical sectors) rather than merely correcting a mistake in the original notification. Reading the notification as retrospective would create an anomaly (making it operate before the EXIM Policy took effect) and would have the unintended consequence of requiring refunds of duties levied earlier. The court found Indian Tobacco Association distinguishable because there the amendment rectified an omission; here no such rectification was shown. Consequently the notification was not retrospective. [Paras 33, 34, 35, 36, 37]

Notification dated November 04, 1999 is not retrospective and does not entitle the company to relief for imports completed before the EXIM Policy became operative.

Final Conclusion: The Single Judge's order was set aside; W.P. No. 1466 of 2004 dismissed and the appeals allowed, with no order as to costs.

Public announcement in voluntary liquidation - duty of insolvency professional to adhere to timelines and exercise due care - compliance after the prescribed time not constituting compliance - prohibition on engaging a professional who served as auditor within five years - independence of insolvency professional - monetary penalty and bar on accepting assignments pending payment

Public announcement in voluntary liquidation - duty of insolvency professional to adhere to timelines and exercise due care - compliance after the prescribed time not constituting compliance - Whether the liquidator's delayed publication of the statutory public announcement in newspapers in the voluntary liquidations of Viber Media India Pvt. Ltd. and MGI Group India Pvt. Ltd. contravened the Code and the Voluntary Liquidation Process Regulations and amounted to breach of the Code of Conduct for insolvency professionals. - HELD THAT: - Regulation 14 of the Voluntary Liquidation Process Regulations mandates that the liquidator make a public announcement in the prescribed form within five days of appointment, by publication in one English and one regional language newspaper and on specified websites, so as to enable stakeholders to submit claims. In both matters the public announcement was uploaded on the Board's website within five days, but publication in newspapers was not made within the statutory period; in one case publication occurred after about 18 months and in the other after about eight months. The liquidator's assertion that there were no creditors or that publication was unnecessary is not a substitute for the mandatory publication requirement. Belated publication does not cure non-compliance with the time-bound obligation. The liquidator admitted inadvertent omission and that he sought belated permission from the Board, which did not condone the breach. Taking reasonable care and diligence in performance of duties requires strict adherence to such timelines; failure to do so constitutes a contravention of the duty under the Code and corresponding provisions of the Regulations and Code of Conduct.

The delayed newspaper publications in both voluntary liquidations contravened section 208(2)(a) of the Code, Regulations 14(1) and 14(3)(a) of the Voluntary Liquidation Process Regulations and the relevant duties in the IP Regulations and Code of Conduct; the liquidator is held to have failed to comply with the mandatory timelines.

Prohibition on engaging a professional who served as auditor within five years - independence of insolvency professional - duty of insolvency professional to adhere to timelines and exercise due care - Whether the liquidator's engagement of Deloitte Haskins & Sells to audit the financial information of MGI Group India Pvt. Ltd., where the firm had been the company's statutory auditor prior to liquidation, violated the Voluntary Liquidation Process Regulations and undermined the liquidator's independence. - HELD THAT: - Regulation 11(2) of the Voluntary Liquidation Process Regulations prohibits the liquidator from engaging a professional who has served as an auditor to the corporate person at any time during the five years preceding the liquidation commencement date. The record shows Deloitte Haskins & Sells had been statutory auditors to the company before liquidation and thereafter accepted engagement to audit the liquidation-period financial information at the liquidator's request. The liquidator's reliance on members' wishes or on the fact there were no creditors does not relieve him of the statutory obligation to ensure the independence of professionals engaged. The liquidator neither produced any members' resolution authorising such engagement nor demonstrated compliance with the prohibition. By requesting and continuing the engagement of the former auditor, the liquidator compromised his independence and breached his duties of care and independence under the Code, the Voluntary Liquidation Process Regulations and the IP Code of Conduct.

The engagement of the firm's audit services was in contravention of Regulation 11(2) and amounted to failure to maintain required independence and thus contravened section 208(2)(a) of the Code and the relevant provisions of the IP Regulations and Code of Conduct.

Monetary penalty and bar on accepting assignments pending payment - duty of insolvency professional to adhere to timelines and exercise due care - What disciplinary directions are to be imposed for the contraventions found against the liquidator. - HELD THAT: - The Disciplinary Committee noted the need for diligence and independence in the insolvency profession but also considered the liquidator's voluntary approach in seeking permission for belated publication. Balancing the need to uphold statutory compliance and to allow for the profession's learning curve, the Committee exercised its powers under section 220(2) of the Code and the IP Regulations to impose regulatory sanctions. The Committee determined that a monetary penalty coupled with a temporary bar on accepting new assignments until the penalty is paid is an appropriate disciplinary measure to vindicate the statutory standards and protect stakeholders' interests.

A monetary penalty of Rs. 1,00,000 is imposed on the liquidator and he is directed not to accept any new assignment as an insolvency professional until evidence of payment of the penalty is produced to the Board; the order comes into force after 30 days from its issue.

Final Conclusion: The Disciplinary Committee found the liquidator guilty of failing to make time bound newspaper publications required under the Voluntary Liquidation Process Regulations and of engaging a former auditor in breach of the statutory prohibition, and accordingly imposed a monetary penalty and a temporary bar on accepting new assignments until the penalty is deposited.

Exclusion of lockdown period from computation of time for Corporate Insolvency Resolution Process - continuation of interim orders and stays until next date of hearing - exercise of powers under Rule 11 of the NCLAT Rules, 2016

Exclusion of lockdown period from computation of time for Corporate Insolvency Resolution Process - The period of lockdown ordered by Central and State Governments shall be excluded for the purpose of counting the period for the Resolution Process under Section 12 of the Insolvency and Bankruptcy Code, 2016 in cases where CIRP has been initiated and is pending before any Bench of the NCLT or in appeal before this Appellate Tribunal. - HELD THAT: - Having taken suo moto cognizance of the hardships caused by the COVID-19 pandemic and the nationwide lockdown, the Appellate Tribunal, invoking its administrative powers under Rule 11 of its Rules and consistent with earlier appellate practice cited, ordered that the lockdown period (including any extensions applicable to the place where the corporate debtor's registered office is located) be excluded from the computation of time-limit prescribed for the Resolution Process under Section 12 of the IBC. The direction is prospective and applies to all pending CIRP matters before any Bench of the NCLT and appeals before this Tribunal to obviate prejudice arising from inability to take steps owing to lockdown restrictions.

Lockdown period excluded from computation of time for CIRP under Section 12 IBC in pending NCLT and appellate matters.

Continuation of interim orders and stays until next date of hearing - Any interim order or stay passed by this Appellate Tribunal in appeals under the Insolvency and Bankruptcy Code, 2016 shall continue to operate until the next date of hearing, to be notified later. - HELD THAT: - In view of restrictions on physical filing and listing during the lockdown, and to prevent prejudice to parties arising from the inability to procure urgent listing, the Tribunal ordered that existing interim orders or stays granted in appeals under the IBC will remain in force until further hearing. This administrative direction ensures continuity of interlocutory protections pending re-notification of hearing dates.

Interim orders and stays granted by the Tribunal in IBC appeals continue to operate until the next hearing date.

Final Conclusion: The Appellate Tribunal, exercising its Rule 11 powers, directed exclusion of the lockdown period from the time limits for CIRP under Section 12 IBC in pending NCLT and appellate matters and ordered that existing interim orders or stays in IBC appeals will continue until the next hearing, with copies of the order to be circulated to NCLT Benches and the Ministry of Corporate Affairs for information and compliance.

Approval of resolution plan under Section 31 of the I&B Code - power of the Adjudicating Authority to call for fresh valuation - judicial interference with procedural steps in the Corporate Insolvency Resolution Process - role of the Committee of Creditors in approving a resolution plan - condonation of delay

Power of the Adjudicating Authority to call for fresh valuation - judicial interference with procedural steps in the Corporate Insolvency Resolution Process - approval of resolution plan under Section 31 of the I&B Code - role of the Committee of Creditors in approving a resolution plan - Whether the Appellate Tribunal should interfere with the Adjudicating Authority's order calling for a fresh valuation before passing an order under Section 31 approving or rejecting the resolution plan. - HELD THAT: - The Tribunal declined to interfere with the Adjudicating Authority's decision to call for fresh valuation. It held that no party has a right to prevent the Adjudicating Authority from seeking further valuation and that it is open to the Adjudicating Authority to satisfy itself about the plan approved by the Committee of Creditors before deciding under Section 31. The Tribunal emphasised the Adjudicating Authority's discretion to verify valuation and the plan prior to approval and refrained from substituting its view for that discretion, while noting the pendency and directing the Adjudicating Authority to proceed to pass an appropriate order under Section 31 taking into account the valuation and the plan approved by the Committee of Creditors. [Paras 3]

The Tribunal refused to interfere with the order calling for fresh valuation and upheld the Adjudicating Authority's discretion to obtain valuation before deciding under Section 31.

Condonation of delay - Whether the delay in preferring the appeal should be condoned. - HELD THAT: - The Tribunal recorded and allowed the explanation for delay and expressly condoned the delay of 12 days in filing the appeal, thereby admitting the appeal for adjudication on its merits. [Paras 3]

Delay of 12 days in preferring the appeal is condoned and the appeal is disposed of with observations as recorded.

Final Conclusion: The appeal was disposed of by refusing to interfere with the Adjudicating Authority's call for fresh valuation-the Adjudicating Authority may verify valuation and the plan before passing an order under Section 31-and the Tribunal condoned the 12-day delay in filing the appeal.

Voluntary liquidation of corporate persons - Dissolution under section 59(7) of the Insolvency and Bankruptcy Code, 2016 - Completion of winding up and full realisation of assets - Compliance with procedural requirements of the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 - Notification to Registrar of Companies and the Insolvency and Bankruptcy Board of India

Voluntary liquidation of corporate persons - Completion of winding up and full realisation of assets - Dissolution under section 59(7) of the Insolvency and Bankruptcy Code, 2016 - Whether the liquidator has satisfied the statutory requirements for voluntary liquidation and the corporate person should be dissolved. - HELD THAT: - The Tribunal examined the materials and the statutory scheme under section 59 of the Insolvency and Bankruptcy Code, 2016 and the related IBBI Regulations, 2017. The liquidator filed the declaration of majority directors, audited financial statements for the required period, the special resolution appointing the insolvency professional, public announcement and claims process, preliminary and final reports, bank account statements showing distribution and closure of the liquidation account, and communications to statutory authorities. The Adjudicating Authority found on the record that the affairs of the company have been completely wound up and its assets completely liquidated, that there were no creditors or liabilities remaining, and that the liquidator completed the procedural steps mandated for voluntary liquidation and filed the application under section 59(7) seeking dissolution. Having regard to the statutory conditions for voluntary liquidation and the evidence of full realisation and distribution, the Tribunal concluded that the requirements of section 59 were met and that dissolution should be ordered. [Paras 23, 25]

The petition under section 59(7) is allowed and the corporate debtor is ordered to be dissolved.

Notification to Registrar of Companies and the Insolvency and Bankruptcy Board of India - Post-dissolution compliance by the liquidator - Directions to be given following the order of dissolution. - HELD THAT: - The Tribunal directed the liquidator to serve an authentic copy of the dissolution order on the concerned Registrar of Companies within fourteen days of receipt of the order, and directed the Registrar to take necessary action under law upon receipt of the order. These directions follow from the statutory requirement to communicate dissolution to the authority with which the corporate person is registered and to enable the Registrar to effect entries consequential to dissolution. [Paras 26]

Liquidator to serve copy of the order on the Registrar of Companies within fourteen days; Registrar to take necessary action as per law.

Final Conclusion: The Tribunal found that the company's affairs were fully wound up and assets fully liquidated in compliance with section 59 and the IBBI Regulations, allowed the petition and ordered dissolution of the company with a direction to the liquidator to forward a copy of the order to the Registrar of Companies for necessary action.

Acceptance of resolution plan below liquidation value - maximisation of value and time bound corporate insolvency resolution process - viability and feasibility of resolution plan - manual of committee of creditors' commercial satisfaction and judicial review - priority of Insolvency and Bankruptcy Code over contractual termination clauses during CIRP - preservation of assets and going concern during CIRP and liquidation - return of third party property during liquidation subject to adjudication and distribution

Acceptance of resolution plan below liquidation value - viability and feasibility of resolution plan - Resolution plans proposing realization below the liquidation value were rightly rejected and not to be approved. - HELD THAT: - The Tribunal held that both resolution applicants proposed amounts less than the accepted liquidation value. A resolution plan which offers less than the liquidation value would be contrary to the statutory mandate that liquidation value is to be paid to operational creditors and dissenting financial creditors. The object of the Code is to maximise asset value in a time bound manner; a plan that does not provide for infusion or maximisation and yields below liquidation value is against section 30(2) and cannot be accepted. On these grounds the Committee of Creditors and the Adjudicating Authority were justified in refusing approval and in rejecting applications for reconsideration. [Paras 10, 11, 12]

The rejection of the resolution plans (as offering below liquidation value) was upheld and requires no interference.

Maximisation of value and time bound corporate insolvency resolution process - viability and feasibility of resolution plan - Order directing liquidation under section 33 was justified in the absence of a viable and feasible resolution plan and where the CIRP could not be completed within the statutory/time bound framework. - HELD THAT: - The Tribunal emphasised that CIRP is time bound and intended to maximise asset value; delay diminishes value. Where viability and feasibility are lacking and the process cannot be consummated within the prescribed time, the Adjudicating Authority may entertain an application for liquidation. Having found absence of viability and feasible plans and in view of the statutory emphasis on time bound resolution, the Adjudicating Authority rightly proceeded under section 33 to order liquidation. Consequently, there was no basis to direct re initiation of the resolution process. [Paras 16, 17]

The liquidation order dated 31st October, 2018 was affirmed.

Priority of Insolvency and Bankruptcy Code over contractual termination clauses during CIRP - preservation of assets and going concern during CIRP and liquidation - return of third party property during liquidation subject to adjudication and distribution - A supplier's contractual right to terminate on insolvency cannot be invoked to claim immediate return of plant and machinery during CIRP; any claim to third party assets must await liquidation procedures or sale as a going concern and adjudication by the liquidator. - HELD THAT: - The Tribunal observed that once CIRP commences the Interim Resolution Professional/liquidator must preserve and protect the corporate debtor's property and endeavour to run it as a going concern. Contractual termination clauses (clause 15.3(b) relied upon) cannot override the Code's mandate that assets be preserved for resolution and potential revival. The parties' competing claims to alleged dues and counterclaims require adjudication; therefore handing over the plant and machinery to the supplier is premature. If revival arrangements/sale as a going concern under relevant company law provisions fail and assets are ultimately sold and distributed under Sections 52/53, the third party may then seek return of assets proven to belong to it from the liquidator. [Paras 22, 23, 24, 25, 26]

The claim for immediate delivery of plant and machinery was rejected; any right to recovery of third party assets must be pursued through the liquidator at the appropriate stage of the liquidation process.

Final Conclusion: All appeals are dismissed; the Tribunal affirmed the refusal to approve the resolution plans offering less than liquidation value, upheld the order for liquidation in absence of viable plans and time bound resolution, and ruled that contractual termination cannot override the Code's protections for preservation of assets-claims to third party property must be addressed by the liquidator in the liquidation process.

Cenvat credit on inputs - Cenvat credit on input services - towers and shelters as inputs - functional utility test - permanency/immovability (permanency) test - eligibility to claim credit determined at time of receipt - use of inputs in providing output service

Cenvat credit on inputs - towers and shelters as inputs - permanency/immovability (permanency) test - functional utility test - eligibility to claim credit determined at time of receipt - Appellant entitled to avail cenvat credit on towers and shelters (and parts thereof) used in provision of telecommunication services/passive infrastructure under the Cenvat Credit Rules, 2004. - HELD THAT: - Relying on this Tribunal's decision in M/s Bharati Infratel Limited, the Tribunal held that towers and shelters which are bolted or fastened to foundations do not become immovable so as to disentitle the assessee from cenvat credit. The permanency test was considered and rejected as determinative in the facts examined: fastening to earth serves stability and does not amount to assimilation or permanent annexation. The Tribunal applied the functional utility test, observing that towers and shelters form part of the integrated BTS infrastructure and are actually used in conjunction with capital goods (BTS and antennae), thereby qualifying as "inputs" under the Rules. Further, eligibility to claim credit is to be determined at the time of receipt of goods; subsequent emergence of immovability in an intermediate stage does not defeat a credit properly taken on receipt. On these grounds the impugned denial of credit was set aside and the credit availed was allowed.

Denial of cenvat credit on towers and shelters set aside; appellant permitted to retain/avail the credit on those items.

Cenvat credit on input services - use of inputs in providing output service - Appellant entitled to avail cenvat credit on input services used for providing telecommunication services/passive infrastructure. - HELD THAT: - The Tribunal, applying the reasoning in the cited decision, allowed the credit claimed by the appellant which included credit on input services used in provision of output service. The decision recognises that services employed in providing the telecommunication/passive infrastructure qualify for cenvat credit under the Cenvat Credit Rules, 2004, and the impugned denial in the order under challenge was set aside accordingly.

Denial of cenvat credit on input services set aside; appellant entitled to the credit claimed.

Final Conclusion: Appeal allowed; impugned order set aside and cenvat credit availed by the appellant on towers, shelters (and parts) and on input services used for providing telecommunication/passive infrastructure is permitted, with consequential relief if any.

Stock variation - departmental delivery notes - evidentiary burden to substantiate stock assertions - best judgment assessment - addition for probable omissions and suppression - undervaluation of turnover - addition on purchase return

Stock variation - departmental delivery notes - evidentiary burden to substantiate stock assertions - Tribunal was right to uphold the stock variation detected on inspection despite the assessee's contention of deliveries to hospitals without departmental delivery notes. - HELD THAT: - The Tribunal found that the assessee merely asserted that stents were delivered to and stocked at hospitals without producing corroborative material such as branch/agency agreements or evidence showing continued lawful custody. The assessee did not have departmental delivery notes up to September of the assessment year and offered only assertions about stocking; such unsupported assertions were inadequate to displace the stock variation revealed by the Shop Inspection Report. In these circumstances the Tribunal's confirmation of the addition made on account of stock variation and the one-time addition for probable omissions and suppression cannot be interfered with. [Paras 5]

Assessee's revision dismissed; Tribunal rightly upheld the stock variation and related additions.

Undervaluation of turnover - best judgment assessment - addition for probable omissions and suppression - addition on purchase return - Tribunal was not justified in wholly deleting the addition for undervaluation of turnover between October and March; the correct under-valuation addition is the difference between departmental delivery note values and sales conceded for that period. - HELD THAT: - The Assessing Officer had made an addition on undervaluation for October to March based on delivery notes which the assessee began using only after the inspection; the Tribunal deleted that addition reasoning that it would be covered by the addition for suppression. The Court held that the suppression-related addition covered only the period up to September and therefore did not subsume undervaluation for October-March. While the Court expressed doubt about the Assessing Officer's quantified figure, it computed the correct difference from the assessment record: total value shown in delivery notes for October-March exceeded sales conceded in that period by Rs. 28,47,015/-, and directed that this figure alone be added. The Court accordingly affirmed the stock-variation addition and the purchase-return addition, allowed the State's revision on this question of law, but modified the quantum of the undervaluation addition. [Paras 6, 7, 8, 9]

State's revision allowed in part: Tribunal's deletion of undervaluation addition set aside; undervaluation addition fixed at the difference of Rs. 28,47,015/-, other additions affirmed and assessment to be modified accordingly.

Final Conclusion: Assessee's revision dismissed; State's revision allowed in part - additions on stock variation and purchase return affirmed; undervaluation addition for October-March upheld but reduced to the computed difference, and the Assessing Officer directed to modify the assessment in accordance with these directions.

Rectification under Sec.66 of the Kerala Value Added Tax Act, 2003 - pre-assessment notice must disclose grounds relied upon in final assessment - Wednesbury unreasonableness in administrative decision-making - remand for fresh consideration after hearing

Rectification under Sec.66 of the Kerala Value Added Tax Act, 2003 - pre-assessment notice must disclose grounds relied upon in final assessment - Ext.P-7 order rejecting the Ext.P-6 rectification application is set aside and Ext.P-6 is remitted for fresh consideration. - HELD THAT: - The petitioner's grievance that the assessment order (Ext.P-5) relied on grounds which were not disclosed in the pre-assessment notice and that the rectification plea under Sec.66 was thus appropriately maintainable was found to be substantiated on the materials placed before the Court. The Court examined the decision-making process and concluded that the rejection in Ext.P-7 merited reconsideration because the assessee had specifically pointed out that the assessment had taken into account elements outside the scope of VAT assessment and that the earlier notice did not notify those grounds. The High Court confined itself to reviewing the legality of the procedure adopted by the assessing authority and did not enter into the merits of the assessment itself. [Paras 5]

Ext.P-7 is quashed; Ext.P-6 rectification application is remitted to the assessing authority for fresh consideration after hearing the petitioner.

Wednesbury unreasonableness in administrative decision-making - inclusion of non-taxable components in value for VAT - remand for fresh consideration after hearing - Allegation that the assessing officer reckoned non-taxable components (land cost, corpus fund, electrical and water charges) in determining VAT was held to raise a colourable case of Wednesbury unreasonableness warranting remand rather than judicial determination on merits. - HELD THAT: - The Court noted the appendix to the rectification application which, according to the petitioner, showed that items such as land cost, corpus fund and electrical and water charges had been included in the valuation for VAT. The High Court treated this as indicative of an unreasonable decision-making process that required reconsideration by the assessing authority. Rather than adjudicating the substantive correctness of the assessment, the Court directed that the assessing officer should afford the petitioner an opportunity to make written submissions and be heard and then decide the rectification application afresh. The Court expressly refrained from entering into the merits of whether those components are taxable, leaving such adjudication to the assessing officer. [Paras 5]

The contention of Wednesbury unreasonableness furnished sufficient basis for setting aside the rejection and remitting the matter for fresh consideration; merits to be decided by the assessing authority after hearing the petitioner.

Final Conclusion: The writ petition is allowed to the limited extent of setting aside Ext.P-7 and remitting Ext.P-6 (rectification under Sec.66 KVAT Act, 2003) to the assessing authority for fresh consideration and decision after giving the petitioner an opportunity to file submissions and be heard; the High Court has not adjudicated the merits of the assessment.

Refund of excess tax - interest on delayed refund under Sec.89(4) of the KVAT Act - reasonable opportunity of being heard - mandamus directing administrative decision within fixed time

Refund of excess tax - reasonable opportunity of being heard - mandamus directing administrative decision within fixed time - Claim for refund of excess tax for the years 2014-15, 2015-16 and 2016-17 to be taken up and decided by the respondent authority after affording a reasonable opportunity of hearing. - HELD THAT: - The petitioner, a registered dealer, asserted that assessment orders for 2014-15, 2015-16 and 2016-17 disclose excess payments totaling the stated amount and filed Ext.P4 petition seeking refund. The High Court did not adjudicate the merits of the refund claim on the papers; instead, having noted the existence of the petition and statutory entitlement to refund, the Court directed the respondent to immediately take up the petitioner's Ext.P4 plea, afford a reasonable opportunity of being heard and pass a considered order thereon. The Court fixed a mandatory timeline for administrative decision-making and subsequent disbursement to ensure finality and speedy compliance with the petitioner's claim. [Paras 4]

Respondents to consider the Ext.P4 refund plea, afford hearing and pass orders within 4 weeks from production of certified copy of the judgment, and complete consequential disbursement steps within 4 weeks thereafter.

Interest on delayed refund under Sec.89(4) of the KVAT Act - Claim for interest on the refund to be considered and determined by the respondent in accordance with Sec.89(4) of the KVAT Act. - HELD THAT: - The petitioner specifically claimed interest at the rate indicated in his pleadings. The Court referred to the mandatory provision in Sec.89(4) of the KVAT Act which entitles a dealer to claim interest where refund or adjustment is not made within the statutory period. The Court directed that the respondent officer must consider the petitioner's claim for interest in light of Sec.89(4) and, if found due, disburse the admissible interest along with the principal refund. The Court thereby required the authority to apply the statutory entitlement when deciding the Ext.P4 petition rather than adjudicating the interest claim itself. [Paras 4, 5]

Respondent to decide the claim for interest under Sec.89(4) while disposing of the refund plea and, if admissible, disburse the interest along with the refund.

Final Conclusion: Writ petition disposed by directing the respondent to consider the petitioner's Ext.P4 refund application for AYs 2014-15, 2015-16 and 2016-17, afford a reasonable hearing, decide the refund and the claim for interest under Sec.89(4) of the KVAT Act within 4 weeks from production of the certified copy, and complete disbursement within a further 4 weeks.