TaxTMI Updates e-Newsletter
Jun 24,2020

Exemption for transportation of goods by inland waterways - definition of "inland waterways" under the GST exemption notification - national waterways declared under the National Waterways Act, 2016 - "other waterway on any inland water" as defined in the Inland Vessels Act, 1917

Exemption for transportation of goods by inland waterways - definition of "inland waterways" under the GST exemption notification - Whether transportation of goods between Magdalla Port, Surat and its General Lighterage Area (anchorage of mother vessels) is exempt under Entry No.18 of Notification No.12/2017-Central Tax (Rate). - HELD THAT: - Entry No.18 of Notification No.12/2017-Central Tax (Rate) exempts services by way of transportation of goods by "inland waterways", which is defined to include (i) national waterways and (ii) other waterways on any inland water as per the relevant statutes. The Authority examined whether the applicant's lighterage operations fall within either category. The record shows that National Waterway No.100 (Tapi River) is declared under the National Waterways Act, 2016 but the General Lighterage Area (anchorage) does not fall within the limits of National Waterway 100. The applicant's operations occur in an area forming part of the Arabian Sea and not within the limits of a national waterway as declared. Because the activity is neither within the declared national waterway nor within an inland water as understood for the second category, the activity does not satisfy the statutory definition of "inland waterways" that underpins the exemption. On this basis, the service does not qualify for the exemption under Entry No.18 of Notification No.12/2017-Central Tax (Rate). [Paras 13, 14, 15, 16]

Answered in the negative; the transportation service is not exempt under Entry No.18 of Notification No.12/2017-Central Tax (Rate).

"other waterway on any inland water" as defined in the Inland Vessels Act, 1917 - territorial/sea waters vs. inland water distinction - Whether the transportation service between Magdalla Port and its General Lighterage Area falls within the definition of "inland waterways" (specifically as an "other waterway on any inland water"). - HELD THAT: - The definition of "other waterway on any inland water" under Clause (b) of Section 2 of the Inland Vessels Act, 1917 covers waterways on any canal, river, lake or other navigable water within a State, or certain tidal/declared inland waters. The Authority found that the stretch used for the applicant's lighterage operations is part of the Arabian Sea and not a canal, river, lake or other navigable water within the State; the General Lighterage Area lies outside the limits of the declared National Waterway 100. The Arabian Sea is not part of the State of Gujarat for purposes of the statutory definition of "inland water." Accordingly, the activity does not fall within the second category of "inland waterways" as defined in the Inland Vessels Act, 1917 and relied upon in the GST exemption notification. [Paras 14, 15]

Answered in the negative; the transportation does not fall within the definition of "inland waterways."

Final Conclusion: The Authority ruled that the applicant's lighterage transportation between Magdalla Port and its General Lighterage Area is neither within the declared national waterways nor within the statutory concept of an "other waterway on any inland water," and therefore the services do not qualify for the exemption under Entry No.18 of Notification No.12/2017-Central Tax (Rate).

Exemption for transportation of goods by inland waterways - definition of "inland waterways" (national waterways and other waterway on any inland water) - national waterways declared under the National Waterways Act, 2016 - other waterway on any inland water as per the Inland Vessels Act, 1917

Exemption for transportation of goods by inland waterways - national waterways declared under the National Waterways Act, 2016 - Whether transportation of goods between Magdalla Port and its General Lighterage Area is exempt under Entry No.18 of Notification No.12/2017-Central Tax (Rate). - HELD THAT: - Entry No.18 exempts services by way of transportation of goods by "inland waterways", which comprises (i) national waterways declared under the Inland Waterways Authority regime and (ii) other waterways on any inland water as defined in the Inland Vessels Act, 1917. The National Waterways Act, 2016 Schedule declares National Waterway 100 as the Tapi River with specified limits. The General Lighterage Area where mother vessels anchor does not fall within the limits of National Waterway 100 as declared in the Schedule. Consequently, the activity between Magdalla Port and its General Lighterage Area cannot be treated as transportation over a national waterway and thus does not attract the Entry No.18 exemption on that basis. [Paras 13, 14, 15, 16]

Transportation between Magdalla Port and its General Lighterage Area is not exempt under Entry No.18 of Notification No.12/2017-Central Tax (Rate).

Definition of "inland waterways" (other waterway on any inland water) - other waterway on any inland water as per the Inland Vessels Act, 1917 - Whether the transportation service falls within the definition of "other waterway on any inland water" under the Inland Vessels Act, 1917. - HELD THAT: - Clause (b) of Section 2 of the Inland Vessels Act, 1917 defines "inland water" to include inter alia "any canal, river, lake or other navigable water within a State." The activity under consideration involves carriage between Magdalla Port and the General Lighterage Area over a stretch that is part of the Arabian Sea, and not a canal, river, lake or other navigable water within the State. The Authority found the applicant's contention that the transportation occurs on the River Tapi to be incorrect. The Arabian Sea is not within the territorial ambit of the State for the purpose of the statutory definition. Therefore the service does not qualify as transportation by an "other waterway on any inland water." [Paras 13, 14, 15]

The transportation service does not fall within the definition of "other waterway on any inland water" under the Inland Vessels Act, 1917, and hence is not an "inland waterway" for exemption purposes.

Final Conclusion: The Authority rules that the transportation of goods between Magdalla Port, Surat and its General Lighterage Area (anchorage of mother vessels) is neither a national waterway nor an "other waterway on any inland water" and therefore does not qualify for exemption under Entry No.18 of Notification No.12/2017-Central Tax (Rate).

Benefit of reduced GST rate under Entry No.3(v)(da) of Notification No.11/2017-Central Tax(Rate) as amended by Notification No.01/2018-Central Tax(Rate) - affordable housing defined by Floor Space Index/FAR threshold of 50% for units with carpet area up to 60 sq. metres - housing project as a development having common land, common facilities and common entrance - carpet area as determinant for eligibility - infrastructure status notification F.No.13/6/2009-INF dated 30.03.2017

Benefit of reduced GST rate under Entry No.3(v)(da) of Notification No.11/2017-Central Tax(Rate) as amended by Notification No.01/2018-Central Tax(Rate) - housing project as a development having common land, common facilities and common entrance - affordable housing defined by Floor Space Index/FAR threshold of 50% for units with carpet area up to 60 sq. metres - carpet area as determinant for eligibility - Whether the applicant's Part B of Sector 4 qualifies for the reduced GST rate under Entry No.3(v)(da) as an 'affordable housing' project - HELD THAT: - The Authority construed 'housing project' generically as a development comprising buildings or apartments with common land, common facilities and a common entrance; eligibility under Entry No.3(v)(da) requires an affordable housing project that uses at least 50% of FAR/FSI for dwelling units of carpet area not exceeding 60 sq. metres as per the infrastructure status notification. The facts establish that Sector 4 (including Part A and Part B) was developed with common permission, a common entrance, common facilities and undivided share of land; the applicant itself treated Sector 4 holistically in permissions and sales. Consequently, Part B cannot be treated as an independent/standalone housing project for the purpose of computing the FAR/FSI denominator. Although Part B alone has 74.08% of its FSI allocated to units up to 60 sq. metres, the applicable test requires measuring 50% against the entire housing project (Sector 4), and that threshold is not met for the whole project. For these reasons the applicant does not satisfy the conditions of Entry No.3(v)(da) and is not entitled to the reduced rate. [Paras 10, 11]

The applicant's Part B of Sector 4 does not qualify as an 'affordable housing project' for Entry No.3(v)(da); the reduced GST rate is not available to the applicant.

Final Conclusion: The Authority rules that M/s. Amba Township Pvt. Ltd. is not eligible for the reduced GST rate under Entry No.3(v)(da) of Notification No.11/2017 (as amended), because Part B of Sector 4 cannot be treated as a standalone housing project and the 50% FAR/FSI threshold for the entire housing project is not satisfied.

Classification of LPG under Schedule I and Schedule III of Notification No.1/2017-Central Tax (Rate) - Tax rate of 5% for LPG supplied to household domestic consumers with effect from 25.01.2018 - Tax rate of 18% for LPG not covered by Schedule I (supplies by entities other than specified PSU oil companies) - Eligibility for input tax credit under Sections 16 to 18 of the CGST Act, 2017 - Documentary and procedural conditions for availing input tax credit under Rules 36, 37, 40, 41 and 42 of the CGST Rules, 2017

Classification of LPG under Schedule I and Schedule III of Notification No.1/2017-Central Tax (Rate) - Tax rate of 5% for LPG supplied to household domestic consumers with effect from 25.01.2018 - Tax rate of 18% for LPG not covered by Schedule I (supplies by entities other than specified PSU oil companies) - Determination of GST rate on LPG sold in bottles to commercial customers and to domestic customers. - HELD THAT: - The Authority examined the entries in Notification No.1/2017-Central Tax (Rate) and its amendment. The LPG tariff entry at Sr. No.165 in Schedule I applied only to supplies by Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Ltd. or Bharat Petroleum Corporation Ltd. to household domestic or specified NDEC customers and therefore did not cover LPG purchased from other suppliers. The Notification was amended by insertion of Sr. No.165A making LPG supplied to household domestic customers taxable at 5% with effect from 25.01.2018. Consequently, LPG sold by the applicant (received in bulk from a private supplier and refilled into cylinders) to commercial customers is not covered by Schedule I and falls under the residuary entry in Schedule III (Sr. No.453), attracting 18% GST. For domestic customers, the 5% rate applies only from 25.01.2018; sales up to 24.01.2018 remain taxable at 18%. [Paras 6, 8, 12]

Applicant must pay 18% GST on LPG sold to commercial customers; LPG sold to domestic customers attracts 18% up to 24.01.2018 and 5% with effect from 25.01.2018.

Eligibility for input tax credit under Sections 16 to 18 of the CGST Act, 2017 - Documentary and procedural conditions for availing input tax credit under Rules 36, 37, 40, 41 and 42 of the CGST Rules, 2017 - Whether the applicant is eligible to claim the entire input tax credit at 18% on purchases of bulk LPG received through tanker. - HELD THAT: - The Authority reviewed the statutory scheme for input tax credit in Sections 16-18 of the CGST Act and the procedural and attribution rules in Rules 36, 37, 40, 41 and 42 of the CGST Rules. Subject to fulfilment of the conditions and restrictions prescribed (possession of proper tax invoices, receipt of goods, payment of tax to the Government, compliance with return and documentary requirements and attribution/reversal rules where inputs are partly used for exempt/non-business purposes), the applicant is entitled to claim the input tax credit on bulk LPG purchased at the rate charged (18%). The entitlement is conditional on compliance with the statutory and rule-based requirements governing availment and reversal/attribution of credit. [Paras 11, 12]

Applicant is eligible to take the entire input tax credit at 18% on purchases of bulk LPG through tanker, subject to meeting the conditions and procedural requirements in Sections 16-18 of the CGST Act and Rules 36, 37, 40, 41 and 42 of the CGST Rules.

Final Conclusion: Advance Ruling: (i) LPG sold by the applicant to commercial customers is taxable at 18%; LPG sold to domestic customers is taxable at 18% up to 24.01.2018 and at 5% from 25.01.2018; (ii) the applicant may claim input tax credit on bulk LPG purchased at 18% provided all statutory and rule-based conditions for availment and attribution/reversal of credit are complied with.

Composite supply of works contract - Original work - Works contract definition - Government Entity / Governmental Authority - Predominantly meant for use other than for commerce, industry or any other business or profession - Explanation excluding activities of Central/State/local Government as public authorities

Composite supply of works contract - Works contract definition - Whether the contract falls within the definition of a works contract and thus satisfies the requirement of being a composite supply of works contract under the Notification - HELD THAT: - The Authority applied the definition of 'works contract' in clause (119) of section 2 of the CGST Act and the definition of 'original work' in Notification No.12/2017. The contracts awarded to the applicant involve excavation, laying of OFC through ducts, testing, commissioning and maintenance, are turnkey in nature and involve transfer of property in goods in execution. Consequently, the Authority found that the first and second conditions for entry 3(vi) - being a composite works contract and involving original work (erection/installation/commissioning) - are satisfied. [Paras 14]

The contracts qualify as works contracts and original works for the purposes of the notification's first two conditions.

Government Entity / Governmental Authority - Functions entrusted to Panchayats / Municipalities - Whether the contracts were provided to a Governmental Authority or a Government Entity as envisaged in the notification - HELD THAT: - The Authority examined the definitions of 'Governmental Authority' and 'Government Entity' in paragraph 4 of the Notification and compared the scope of the applicant's contracts and documents (agreement and letters of acceptance) with the constitutional lists of functions entrusted to Panchayats (Article 243G) and Municipalities (Article 243W). Although Railtel and Bharat Broadband Network Ltd. are government-owned corporations (90%+ government shareholding), the contracts and tender documents did not demonstrate that the specific works were functions entrusted to a Panchayat or Municipality or that the works were entrusted to the entity by the Central/State/UT/local authority. There was no contractual reference showing the work was entrusted by government to the entities. Therefore the Authority held that the recipient does not qualify as a 'Governmental Authority' or as a 'Government Entity' for the purposes of entry 3(vi). [Paras 13, 14]

The recipient of the services does not qualify as a Governmental Authority or Government Entity under the notification; the third condition is not satisfied.

Predominantly meant for use other than for commerce, industry or any other business or profession - Explanation excluding activities of Central/State/local Government as public authorities - Whether the civil structure/original work (underground optical fiber cables) is predominantly meant for use other than commerce, industry or any other business or profession - HELD THAT: - The Authority considered the nature and end use of the optical fibre cables laid by the applicant. Though the project objective included connecting gram panchayats, the Authority found that the laid underground OFC cannot be construed as meant predominantly for non commercial use because such infrastructure can be used for commerce, industry or other business/professional activities. The explanation excluding activities undertaken by Central/State/local Governments as public authorities did not apply since the works were carried out by government owned corporations on their behalf and not by the governments themselves. Applying the statutory definition of 'business' under section 2(17) of the CGST Act, the Authority concluded that the fourth condition of predominant non commercial use was not satisfied. [Paras 14, 15]

The resultant structure is not predominantly for non commercial use; the fourth condition is not satisfied.

Composite supply of works contract - Notification 24/2017 - entry 3(vi) - Whether the contract satisfies all conditions of entry 3(vi) of Notification No.24/2017 and is therefore taxable at the concessional rate of 12% - HELD THAT: - Having tested all four conditions specified by entry 3(vi) - (i) being a composite works contract, (ii) relating to original works, (iii) supplied to a Governmental Authority or Government Entity, and (iv) the works being predominantly meant for non commercial use - the Authority found that only the first two conditions were met. Conditions (iii) and (iv) were not satisfied on the facts and documents before it. Accordingly, the contract does not fall within entry 3(vi) of Notification No.24/2017. [Paras 14, 16]

The contract does not fall under entry 3(vi) of Notification No.24/2017 and is not entitled to tax at the specified 12% rate under that entry.

Final Conclusion: The Advance Ruling holds that the contracts executed by M/s. Shree Hari Engineers & Contractors for excavation and laying of OFC for Railtel/Bharat Broadband Network do not satisfy all conditions of entry 3(vi) of Notification No.24/2017 (notably the recipient is not a Governmental Authority/Entity for the work entrusted and the works are not predominantly for non commercial use); therefore the contracts do not fall under that notification and cannot be taxed at the concessional 12% rate under entry 3(vi).

Classification of parts and accessories of motor vehicles under Chapter 87 - HSN code 87089900 - GST rate 28% (14% SGST + 14% CGST) - Advance Ruling on classification and tax rate

Classification of parts and accessories of motor vehicles under Chapter 87 - HSN code 87089900 - The proper HSN classification of the applicant's products (change over switch, emulator, timing advance processor, pressure gauge). - HELD THAT: - The products described by the applicant are components used to enable vehicles to run alternatively on petrol and CNG/LPG and to manage/indicate gas flow and engine timing. Such vehicles fall within headings 8702 to 8704 of the First Schedule to the Customs Tariff Act, 1975. Parts and accessories of motor vehicles of headings 8701 to 8705 are classified under heading 8708. Applying the description and use of the applicant's parts, the Authority concluded that they fall within the residual provision for other parts and accessories under heading 8708, namely subheading 87089900. [Paras 4]

The HSN applicable to the products is 87089900.

GST rate 28% (14% SGST + 14% CGST) - Advance Ruling on classification and tax rate - The GST rate (SGST and CGST) applicable on the products so classified. - HELD THAT: - The Authority placed the classified item at Sr. No.170 of Schedule-IV of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, which covers 'Parts and accessories of the motor vehicles of headings 8701 to 8705' and attracts the rate specified in Schedule IV. On that basis, the Authority held that the applicable combined GST rate is 28%, comprising 14% SGST and 14% CGST. [Paras 4, 5]

The tax rate on the products is 28% (14% SGST + 14% CGST).

Final Conclusion: Advance Ruling: the applicant's described components are classified under HSN 87089900 and attract GST at the rate of 28% (14% SGST + 14% CGST).

Pure services - Exemption under Notification No.12/2017-Central Tax (Rate) - Functions entrusted under Article 243G of the Constitution - Functions entrusted under Article 243W of the Constitution - Governmental authority, Government entity and Local authority as defined in GST - Exclusion of works contract services and composite supplies involving supply of goods

Pure services - Exclusion of works contract services and composite supplies involving supply of goods - Whether the manpower supply and security services rendered by the applicant constitute 'pure services' for the purpose of the exemption in the notification. - HELD THAT: - The Authority observed that 'pure service' is not defined in GST and therefore is to be construed in general terms as a supply that is service-only (i.e., services which are deemed as services under Schedule II or are not goods) and which does not involve supply of goods. The notification expressly excludes works contract services or other composite supplies involving supply of any goods. Examination of the work orders submitted shows that the applicant's supplies in question are limited to manpower supply or security services with no involvement of goods. Accordingly the Authority held that those supplies are 'pure services' and the first condition for exemption is fulfilled. [Paras 13]

Manpower supply and security services, where no goods are supplied, qualify as 'pure services' for the purpose of the notification.

Governmental authority, Government entity and Local authority as defined in GST - Exemption under Notification No.12/2017-Central Tax (Rate) - Whether the recipients to whom the applicant supplied services fall within the categories (Central Government, State Government, local authority, governmental authority or government entity) specified in the notification. - HELD THAT: - The Authority applied statutory definitions in the CGST/Gujarat GST Acts and the explanations in the notification (including the amended definitions of 'Governmental Authority' and 'Government Entity'). On examination of the material submitted and public data, the Authority classified the entities listed by the applicant (Coast Guard Region (NW), various Collectors' offices, Bhavnagar Forest Department, Jilla Panchayat Mehsana, Ahmedabad and Mehsana Municipal Corporations, Industrial Extension Bureau, Sardar Sarovar Narmada Nigam Limited, Gujarat State Nagrik Purvatha Limited and Chief Engineer, PGVCL) as Central Government, State Government, Local Authority or Governmental Authority as appropriate. Thus the second condition in the notification is satisfied for those listed entities. [Paras 13]

The specified recipients, as identified in the ruling, fall within the statutory categories required by the notification.

Functions entrusted under Article 243G of the Constitution - Functions entrusted under Article 243W of the Constitution - Exemption under Notification No.12/2017-Central Tax (Rate) - Whether the services supplied by the applicant to those recipients are 'by way of any activity in relation to any function' entrusted to a Panchayat under Article 243G or to a Municipality under Article 243W, thereby satisfying the third condition of the notification. - HELD THAT: - The Authority framed the third condition as a functional nexus test: the exempted 'pure services' must be provided by way of an activity in relation to functions listed in Article 243G (panchayats) or Article 243W (municipalities). The Authority held that this is a contract- and fact-specific determination because different work orders and agreements may involve different activities and duties; modifications to contracts could also alter the character of the services. Consequently, while the Authority examined some work orders submitted and found several of them to relate to listed functions (for example, services related to public distribution system, rural electrification/distribution of electricity, maintenance of community assets, provision of urban amenities, water management and urban forestry), it concluded that eligibility for exemption depends on whether, in each instance, the service as performed relates to an Article 243G/243W function. The Authority therefore qualified the ruling: the applicant is eligible for the exemption only insofar as the services supplied under particular contracts are shown to be in relation to functions entrusted under Article 243G or 243W. [Paras 13, 14]

Exemption is available only if the specific services under the particular contracts are provided by way of an activity in relation to functions entrusted under Article 243G or Article 243W; this requires contract-specific factual satisfaction.

Final Conclusion: The applicant's manpower supply and security services qualify as 'pure services' and several of the listed recipients qualify as Central/State/Local/Governmental bodies; consequently the applicant is eligible to claim the NIL-rate exemption under Sr. No.3 of Notification No.12/2017-Central Tax (Rate) dated 28.06.2017 (and the corresponding State notification) only to the extent that the services supplied under each contract are shown to be by way of an activity in relation to functions entrusted to Panchayats under Article 243G or to Municipalities under Article 243W of the Constitution.

Assessment u/s 153A - Requirement of nexus between seized material and additions in post-search assessments

Appeals under Section 260A dismissed. In the absence of incriminating material seized during search, additions in assessments framed under Section 153A founded on conjecture and surmise cannot be sustained [2019 (7) TMI 1050 - MADHYA PRADESH HIGH COURT] - HELD THAT:- Delay condoned. Leave granted.

Rectification under Section 154 - intimation under Section 143(1) - time bound disposal of rectification application by jurisdictional assessing officer - abeyance of demand pending decision on rectification

Rectification under Section 154 - time bound disposal of rectification application by jurisdictional assessing officer - abeyance of demand pending decision on rectification - intimation under Section 143(1) - Direction to the respondent to decide the petitioner's pending rectification application and suspension of the demand notices till decision. - HELD THAT: - The court recorded undisputed facts showing that the petitioner's return was processed under the intimation procedure and that a rectification application was filed and its pendency before the jurisdictional assessing officer was evidenced by the departmental record (Ext.P9). In light of the demonstrated pendency and the availability of the statutory remedy by way of rectification under Section 154, the court directed the respondent to take a call on the rectification application and decide it within 45 days from receipt of a copy of the order. As an incidental and protective measure, the court ordered that the demands raised by the intimation orders be kept in abeyance until the rectification application is decided, without prejudicing the petitioner's right to challenge the outcome of that decision in accordance with law. The court also granted liberty to the Income Tax Authority to move appropriate application if the writ petition averments are found false. [Paras 5]

Respondent directed to decide the rectification application within 45 days; notices of demand kept in abeyance until such decision; petitioner free to challenge the result in accordance with law.

Final Conclusion: Writ petition disposed by directing time bound disposal of the pending rectification application and keeping challenged demands in abeyance until such disposal; liberty granted to parties to pursue further remedies in law.

Speculative loss - Explanation to Section 73 - eligible transaction under Section 43(5) - set off of business loss - genuineness of transactions - consistency principle - section 14A disallowance - proportional disallowance under Rule 8D(2)

Speculative loss - Explanation to Section 73 - set off of business loss - consistency principle - Whether the loss of Rs. 63,47,155/- on F&O derivative transactions is a speculative loss under the Explanation to Section 73 or a regular business loss eligible for set off against other income - HELD THAT: - The Tribunal found on the material on record that the assessee's Gross Total Income for the year mainly comprised income from house property, capital gains and other sources (69% of GTI), bringing the case within the first exception in the Explanation to Section 73 and therefore outside its ambit (para 2.5). The assessee filed documentary evidence and an affidavit attesting to production of contract files, demat statements and broker confirmations; the Revenue did not rebut those particulars and the Tribunal held the CIT(A)'s adverse finding on genuineness to be contrary to the record (para 2.9). Applying the principle of consistency, noting that earlier years' F&O results were treated as business income and there was no change in facts, the Tribunal held that the loss should be treated as regular business loss and allowed for set off against other income (para 2.11). [Paras 2]

Loss on F&O transactions is not to be treated as speculative loss under the Explanation to Section 73 and is allowable as regular business loss to be set off against other income.

Genuineness of transactions - Whether the F&O transactions carried out by the assessee were not genuine - HELD THAT: - The Tribunal examined the affidavit of the director and the documentary material placed on record (contract files, global broker statements, demat statements and contract notes). The Revenue produced no contrary evidence. The Tribunal therefore concluded that the CIT(A)'s observation that the transactions were not genuine was unsupported by the evidence and set aside that finding (para 2.9). [Paras 2]

CIT(A)'s finding that the F&O transactions were not genuine is set aside as contrary to the evidence on record.

Apportionment of expenditure - speculative loss - Whether the apportionment and disallowance of expenditure of Rs. 16,55,463/- as attributable to F&O (speculative) transactions was justified - HELD THAT: - Because the Tribunal held that the F&O loss is a regular business loss, the basis for apportioning employee and administrative costs to speculation falls away. The AO had apportioned such costs in proportion to derivative loss; once the loss is allowed as business loss, that apportionment and consequent disallowance is not sustainable (paras 2.11-2.12). [Paras 2]

Disallowance of Rs. 16,55,463/- on account of apportionment to F&O/speculation is deleted.

Section 14A disallowance - proportional disallowance under Rule 8D(2) - Whether disallowance under Section 14A (computed under Rule 8D(2)) in respect of interest and administrative expenses attributable to exempt dividend income was correctly made - HELD THAT: - The assessee produced the order of the Maharashtra State Consumer Disputes Redressal Commission showing that the interest payment of Rs. 5,31,274/- represented interest awarded for delayed delivery of a flat and was not on borrowings used for making investments. The Tribunal found no nexus between that interest and the investment activity, and held that the second limb of Rule 8D(2) disallowance was not tenable; accordingly the interest-related disallowance of Rs. 2,42,158/- is deleted (para 3.2). However, the assessee failed to establish that general administrative expenses were incurred specifically for earning exempt dividend income; in absence of plausible evidence the Tribunal confirmed the disallowance under the third limb of Rule 8D(2) of Rs. 1,86,555/- (para 3.3). [Paras 3]

Interest-related disallowance under Rule 8D(2)(ii) is deleted; disallowance of administrative expenses under Rule 8D(2)(iii) is confirmed.

Final Conclusion: The appeal is partly allowed: the loss on F&O for A.Y.2011-12 is held to be a regular business loss (not speculative) and is allowed to be set off; the apportionment disallowance of Rs.16,55,463/- is deleted; Section 14A disallowance in respect of interest (Rule 8D(2)(ii)) is deleted but the disallowance of administrative expenses under Rule 8D(2)(iii) is sustained.

Transfer - capital gains - real income v. hypothetical income - evidentiary value of registered sale deed and proof of sham transaction - intention of the parties and condition precedent to transfer - accrual/receipt - requirement of corresponding liability - part performance - section 53A of the Transfer of Property Act - allowability of expenses as cost of acquisition/improvement or expenses on transfer - deductibility under section 57 vis-a -vis section 37(1) - remand for fresh verification of nexus and particulars of expenditure

Transfer - evidentiary value of registered sale deed and proof of sham transaction - intention of the parties and condition precedent to transfer - capital gains - real income v. hypothetical income - Whether two registered sale deeds executed with Shri Rajeev Singh resulted in a transfer attracting long term capital gains tax. - HELD THAT: - The Tribunal examined the factual matrix (post dated cheques, one RTGS payment, subsequent dishonour/stop payment of remaining cheques, non delivery of possession, civil litigation and High Court stay) and legal authorities holding that registration is prima facie evidence but not conclusive where cogent evidence shows no operative transfer. Applying the principles that income-tax cannot be levied on hypothetical income and that accrual requires a corresponding liability on the other party, the Tribunal found that the operative transfer was conditional on realisation of full consideration which did not occur; transferee did not take possession nor manifested willingness to perform; proceedings under NI Act and civil suits demonstrate breach. Consequently, there was no transfer and no accrual/receipt of capital gains in respect of those two deeds. [Paras 22, 23, 24, 26, 29]

Findings of the CIT(A) that the two sale deeds with Shri Rajeev Singh are not chargeable to capital gains are affirmed; Revenue's ground on this issue is dismissed.

Allowability of expenses as cost of acquisition/improvement or expenses on transfer - evidentiary value of valuation reports and DVO findings - Whether cost attributable to wells, baories, roads and boundary wall forming part of the land sold to Shri Neeraj Suwalka (third transaction) is allowable as part of indexed cost of acquisition. - HELD THAT: - The DVO acknowledged existence of roads, wells, baories and boundary wall; the registered valuer and site plan also record these structures. The Tribunal noted these structures were attached to the land and transferred with it, and the assessee swore by affidavit that title and possession in respect of these structures passed to the purchaser. Absent contrary material, the Tribunal allowed proportionate cost (after indexation) of these structures to be deducted against the full value of consideration in computing capital gains for the Neeraj Suwalka sale. [Paras 53, 54, 55, 57]

Assessee's ground is allowed: proportionate indexed cost of the acknowledged structures is permitted as part of cost of acquisition for computing capital gains in respect of the Neeraj Suwalka transaction.

Allowability of development/transfer expenses - brokerage and improvement - Whether proportionate development/brokerage expenses claimed by the assessee (part of Rs. 8,45,000) are allowable in computing long term capital gain for the Neeraj Suwalka transaction. - HELD THAT: - The DVO and documents establish existence of development works and structures; the CIT(A) examined particulars and allowed proportionate expenses as cost of improvement. The Tribunal found no infirmity in CIT(A)'s appreciation of the materials and affirmed the allowance of the proportionate claim of Rs. 4,55,953 (rounded in text). [Paras 30, 31, 32, 34, 35]

Revenue's challenge is dismissed; the CIT(A)'s allowance of the proportionate development/brokerage expenses is affirmed.

Deductibility of expenses against interest and remuneration from partnership firms - rule of consistency and reliance on earlier Coordinate Bench authority - Whether expenses totalling Rs. 3,50,536 claimed against interest and remuneration received from partnership firms are deductible. - HELD THAT: - The assessee offered such receipts as business income and claimed ordinary business expenses. The Tribunal relied on the earlier Coordinate Bench decision in the assessee's own case (A.Y. 2010 11) and on binding precedents recognising that a partner assessed under section 28 is entitled to deductions wholly and exclusively incurred in earning such income. In absence of contrary authority and given unchanged facts, the Tribunal followed the rule of consistency and upheld the CIT(A)'s allowance. [Paras 36, 40, 41, 42]

Deletion of the addition is upheld; the claimed expenses against partnership receipts are allowable.

Deductibility under section 57 vis-a -vis section 37(1) - nexus between expenditure and passive interest income - remand for fresh verification of nexus and particulars of expenditure - Whether expenses of Rs. 14,32,160 claimed under section 57 against interest income from bank deposits are allowable. - HELD THAT: - The Tribunal observed a factual and legal distinction between expenditure allowable under section 37(1) (business) and section 57 (income from other sources). The AO rejected the claim for want of nexus; the CIT(A) allowed the claim relying on earlier Coordinate Bench orders. The Tribunal held that the factual matrix (pooling of funds, periodicity of transactions, need for managerial assistance, existence of an office/staff to manage funds akin to a family office) required fresh examination. As these factors were not independently considered by lower authorities, the Tribunal remanded the issue to the Assessing Officer for fresh adjudication after giving the assessee an opportunity of being heard and taking into account the Coordinate Bench decision referred to. [Paras 43, 46, 48, 49]

Matter remitted to the Assessing Officer for fresh examination and verification of nexus and supporting particulars; remand directed for statistical purposes.

Allowability of legal and litigation expenses connected with alleged invalid sale deeds - principle that disallowance follows where underlying transaction not subject to tax - Whether legal and other expenses claimed in connection with litigation regarding the two sale deeds (claimed as invalid) are deductible from capital gains computed for the taxed transaction. - HELD THAT: - The challenged legal expenses relate to litigation and stamp/consultancy fees incurred in respect of the two sale deeds with Shri Rajeev Singh which the Tribunal has held do not give rise to capital gains. Given that those transactions do not produce taxable capital gains, the corresponding litigation expenses cannot be allowed as deductions while computing capital gains on the separate transaction that is brought to tax. The AO's finding that these expenses were incurred post the transfer year and lack direct nexus to the taxed transfer was sustained in the factual matrix of the case. [Paras 58, 59, 60, 63]

Assessee's challenge is dismissed; the disallowance of the litigation/legal expenses in computing capital gains is sustained.

Final Conclusion: The Tribunal affirmed the CIT(A)'s finding that two sale deeds executed with Shri Rajeev Singh did not result in a transfer chargeable to capital gains (Revenue's primary ground dismissed); allowed proportionate indexed cost for acknowledged structures and proportionate development/brokerage expenses in respect of the Neeraj Suwalka sale; upheld allowance of business related expenses claimed against partnership receipts; sustained disallowance of litigation expenses linked to the two invalidated deeds; and remanded the question of allowability of Rs. 14,32,160 claimed under section 57 against interest income to the Assessing Officer for fresh verification and decision.

Allowability of reversal of provision for bad and doubtful debts - binding effect of Directions of Dispute Resolution Panel (DRP) - prohibition on ad hoc disallowance without rejecting books of account / making best judgment assessment - application of section 14A read with Rule 8D(2)(iii) - limit to dividend bearing investments - treatment of prepaid expense under mercantile system of accounting - claim of foreign tax credit (FTC) under rule 128 and India-USA tax treaty - allowance on verification - entitlement to tax deducted at source (TDS) credit as per revised return

Allowability of reversal of provision for bad and doubtful debts - binding effect of Directions of Dispute Resolution Panel (DRP) - Reversal of provision for bad and doubtful debts amounting to Rs. 1,17,57,533/- is not liable to be disallowed where it has been shown to arise out of provisions created and offered to tax in an earlier year, and the Assessing Officer must follow and verify pursuant to the DRP's directions. - HELD THAT: - The DRP had directed verification on whether the provisions reversed in the year under appeal had been offered to tax in the preceding year and related to business transactions, observing that on the available facts the reversal appeared allowable. The AO failed to follow those directions and made an addition without properly examining the party-wise reconciliations, invoices and year wise movement of provisions submitted by the assessee. Judicial discipline requires subordinate authorities to act in accordance with DRP directions. The AO is directed to examine the details already furnished (party wise reconciliations, invoices, year wise movements and supporting documents) and adjudicate the claim in accordance with law consistent with the DRP's observations. [Paras 5, 6]

Addition deleted and AO directed to verify and adjudicate the reversal claim in accordance with the DRP's directions.

Application of section 14A read with Rule 8D(2)(iii) - limit to dividend bearing investments - Disallowance under section 14A read with Rule 8D(2)(iii) must be computed by taking into account only those investments which have given rise to the exempt income (dividend bearing securities); the AO to recompute accordingly. - HELD THAT: - The DRP upheld the disallowance under the third limb of Rule 8D(2)(iii) but the Tribunal relied on earlier coordinate bench precedent that only investments yielding the exempt income should be considered for computation under Rule 8D(2)(iii). Investments from which no dividend was received during the year cannot be included for the purpose of this disallowance. The AO is therefore directed to recompute the disallowance under Rule 8D(2)(iii) considering dividend bearing securities only. [Paras 9, 10]

Disallowance sustained only to the extent that it relates to dividend bearing investments; AO to recompute under Rule 8D(2)(iii) accordingly.

Prohibition on ad hoc disallowance without rejecting books of account / making best judgment assessment - Ad hoc percentage disallowances of entertainment and seminar/conference expenses are unsustainable where the books of account have not been rejected and there is no material showing non business character; the adhoc additions are to be deleted. - HELD THAT: - The DRP/AO made ad hoc disallowances of 15% on certain entertainment reimbursements and 10% on seminar/conference expenses (over amounts already disallowed by the assessee). The Tribunal held that estimation by percentage is permissible only after rejection of books under section 145(3) followed by an assessment under section 144; absent such rejection, AO/DRP should examine vouchers and disallow only item wise unsupported or non genuine expenditures. The assessee's audited books, tax audit report and extensive supporting documents were on record and there was no material to show expenditures were for non business purposes. Reliance placed on judicial authorities emphasising that ad hoc disallowance without basis is arbitrary. [Paras 11, 19, 21]

Ad hoc additions of Rs. 8,13,368 (entertainment) and Rs. 53,00,938 (seminar/conferences) deleted; AO/DRP not permitted to make percentage estimates without rejecting books and conducting best judgment assessment.

Treatment of prepaid expense under mercantile system of accounting - Amount disallowed as relating to a preceding year must be examined afresh; where an expense was carried as prepaid and charged to profit and loss in the year under consideration under mercantile accounting, AO to verify invoices and allow if related to the year. - HELD THAT: - The AO disallowed an amount on the basis that tax was deducted in an earlier year. The assessee produced the transaction details and TDS certificate showing the total transaction, amounts charged to P&L in earlier year and amounts carried as prepaid and charged in the year under consideration. The DRP had directed the AO to verify invoices and give clear findings as to which year the expense relates. The Tribunal directs the AO to examine the submissions and documents and adjudicate the issue in accordance with law. [Paras 23, 26]

Ground allowed for statistical purposes; AO directed to verify invoices and determine whether the expense pertains to AY 2014 15 and allow if so.

Claim of foreign tax credit (FTC) under rule 128 and India-USA tax treaty - allowance on verification - Claim for foreign tax credit for taxes paid in the USA after filing the Indian return may be considered and allowed subject to verification in accordance with Rule 128 and the India-USA treaty; AO to examine and allow if in order. - HELD THAT: - The assessee paid US tax after filing the Indian return and submitted its claim under Rule 128 within the assessment proceedings. Rule 128 permits credit where foreign tax is paid in the year in which the income is offered to tax in India and provides a procedure for disputed taxes. The Revenue did not dispute the legal competence to consider the claim. The Tribunal directed the AO to verify the correctness of the FTC claim in accordance with law and the India-USA tax treaty, noting precedents where AO was directed to verify and consider similar claims. [Paras 28, 31, 32]

AO to verify and allow the foreign tax credit in accordance with Rule 128 and the India-USA treaty if the claim is supported and duly paid.

Entitlement to tax deducted at source (TDS) credit as per revised return - Assessee entitled to TDS credit as claimed in the revised return filed on 31 March 2016; AO directed to give the TDS credit accordingly. - HELD THAT: - The assessee sought credit of TDS as reflected in the revised return and form 26AS. The Tribunal observed that the assessee is entitled to the claimed TDS credit and directed the AO to grant credit as claimed in the revised return in accordance with law. [Paras 33, 34]

AO directed to grant TDS credit as per the assessee's revised return of 31 March 2016.

Final Conclusion: The appeal is partly allowed: the addition for reversal of provisions is to be re examined and adjudicated by the AO in accordance with DRP directions; disallowance under Rule 8D(2)(iii) to be recomputed considering only dividend bearing investments; ad hoc percentage disallowances on entertainment and seminar/conference expenses deleted; prepaid software expense to be verified by the AO and allowed if pertaining to AY 2014 15; foreign tax credit claim to be examined and allowed if supported under Rule 128 and the India-USA treaty; and TDS credit to be granted as per the revised return.

Allowability of business expenditure under section 37(1) of the Income tax Act - disallowance under section 40A(2) - evidentiary onus on the assessee to prove expenditure wholly and exclusively for business - treatment of payments to related/associated parties and arm's length requirement - confrontation of adverse material before the assessee - finality and bearing of an Income Tax Settlement Commission order - separate adjudication of distinct assessment years (res judicata in tax matters)

Allowability of business expenditure under section 37(1) of the Income tax Act - treatment of payments to related/associated parties and arm's length requirement - disallowance under section 40A(2) - evidentiary onus on the assessee to prove expenditure wholly and exclusively for business - Deletion of addition of Rs. 9,00,00,000 made by AO in respect of direct expenses (materials purchases). - HELD THAT: - The Tribunal examined whether the AO was justified in disallowing the entire claimed direct material purchases on the grounds that major purchases were from sister/associated concerns and that one supplier appeared in a sales tax list of entry providers. The Tribunal observed that section 37(1) places the onus on the assessee to prove that expenditure was wholly and exclusively for business, but also held that mere purchases from associate concerns or a supplier's adverse listing does not automatically permit total disallowance. The assessee had filed bills, vouchers and established nexus between purchases and the land development activity. The CIT(A)'s ad hoc confirmation of 50% disallowance was not supported by reasoned analysis. In the absence of specific evidence showing that purchases were not at arm's length or not for business, the AO's estimate based disallowance was held unsustainable and the addition was directed to be deleted.

Addition of Rs. 9,00,00,000 made in respect of direct material purchases is deleted.

Allowability of business expenditure under section 37(1) of the Income tax Act - confrontation of adverse material before the assessee - finality and bearing of an Income Tax Settlement Commission order - Deletion of addition of Rs. 34,08,96,156 (part of contract charges) disallowed by AO and upheld by CIT(A) in favour of the assessee. - HELD THAT: - The Tribunal considered whether the AO could disallow the bulk of contract payments to M/s Metcon India on the basis that no development work had been carried out. The assessee produced contracts, work orders, payment records (with TDS), photographs, and confirmations from both vendor (MSHCL) and purchaser (Nunlet/NPPL) corroborating development activity (removal of encroachments, rock cutting, levelling, fencing and conversion work). The AO had relied on photographs and public domain images which were not confronted to the assessee; the Tribunal reiterated that adverse material must be confronted before reliance. Further, the Income Tax Settlement Commission had accepted that accommodation bills admitted by Metcon India related to the Nagpur development and Metcon India had offered corresponding income; the Tribunal gave weight to that final finding. In the absence of concrete evidence that the payments were sham or that cash was returned to the assessee, the AO's estimate and surmise based disallowance was held unsustainable.

Addition of Rs. 34,08,96,156 in respect of contract charges is deleted.

Allowability of business expenditure under section 37(1) of the Income tax Act - separate adjudication of distinct assessment years (res judicata in tax matters) - Confirmation of addition disallowing compensation paid to retiring/erstwhile partners. - HELD THAT: - The Tribunal agreed with the authorities below that payments made to settle personal disputes among partners do not constitute expenditure 'wholly and exclusively' for business. The capital accounts of the retiring partners did not reflect corresponding balances in the balance sheet, and no cogent basis or working were furnished to treat the payments as allowable business deductions. Prior allowance in an earlier year was held not to bind the assessment for the year under appeal because each year is separate; hence the disallowance was sustained.

Addition in respect of compensation to retiring partners is confirmed.

Allowability of business expenditure under section 37(1) of the Income tax Act - Confirmation of addition disallowing salary and wages expenses (partially or wholly as assessed). - HELD THAT: - The Tribunal found that the assessee failed to produce cogent evidence to justify large salary and wage payments in a year when substantive business activity had ceased after the sale of the Nagpur land. Mere filing of PANs and TDS deductee details were not sufficient to establish that the payments were bonafide and wholly for business purposes. The CIT(A) and AO had recorded credible reasons to treat the amount as excessive and unverifiable; the assessee did not successfully controvert those findings.

Addition in respect of salary and wages is confirmed.

Final Conclusion: For Assessment Year 2009 10 the Tribunal deleted the additions made by the AO in respect of direct material purchases and contract charges (payments to M/s Metcon India) but upheld additions relating to compensation to retiring partners and salary and wages; the Revenue's appeal was dismissed and the assessee's appeal was partly allowed.

Diversion of funds under section 13(1)(c) read with section 13(2)(g) and section 13(3) - refund of excess charges in the normal course of business not amounting to application for benefit of founders/authors - income tax payment as application of income for trusts claiming exemption under section 11 - cash system of accounting as determinative for computation of income under sections 11-13 - rejection of books of account and estimation of income under section 144 where accounts are consistently maintained on cash basis - registration under section 12A once granted is a fait accompli and not open to probing in assessment proceedings - remand for verification of documentary proof of expenditure where appellate authority allowed claims without independent verification

Diversion of funds under section 13(1)(c) read with section 13(2)(g) and section 13(3) - refund of excess charges in the normal course of business not amounting to application for benefit of founders/authors - Whether amounts refunded to M/s. South India Corporation Ltd. constitute diversion of funds attracting denial of exemption under section 13(1)(c) read with section 13(2)(g) and section 13(3). - HELD THAT: - The tribunal followed the coordinate bench findings in the assessee's own earlier proceedings that the excess fees were refunded in the normal course, pursuant to determinations by the Visakhapatnam Dock Labour Board/Port Trust, and that refunding amounts legally due cannot be treated as diversion to interested persons. The factual position that the representative of M/s. South India Corporation Ltd. was not a trustee during the refund period and that the refunds were effected to avoid undue enrichment was accepted. On these facts and by following the earlier co ordinate bench rulings, the tribunal found no violation of the provisions of section 13(1)(c) read with section 13(2)(g) and section 13(3) and sustained the deletion of the addition made by the Assessing Officer. [Paras 10, 11]

Addition made by the AO on account of refund to M/s. SICL deleted; no violation of section 13(1)(c) read with section 13(2)(g) and section 13(3).

Income tax payment as application of income for trusts claiming exemption under section 11 - application of High Court precedent in assessing allowable deductions for trusts - Whether income tax payments made by the trust are allowable as application of income when computing income for charitable application under section 11. - HELD THAT: - Relying on the coordinate bench's decision which applied the Andhra Pradesh High Court precedent, the tribunal accepted that income of a trust is to be computed on normal commercial principles and that payment of income tax is an outgo from the income of the trust. Consequently, such payments amount to an application of income and are allowable in computing income available for charitable purposes. The Assessing Officer's disallowance of income tax payments was therefore held incorrect. [Paras 13, 15]

Income tax payments allowed as application of income; additions in respect of such payments deleted.

Cash system of accounting as determinative for computation of income under sections 11-13 - rejection of books of account and estimation under section 144 - Whether the Assessing Officer was justified in rejecting the assessee's books and estimating income where the assessee consistently follows cash system of accounting. - HELD THAT: - The tribunal followed earlier co ordinate bench conclusions that the assessee consistently follows the cash system of accounting for computation of income under section 11. Where the Assessing Officer had accepted the cash basis in other years, rejecting the books for the year under consideration without establishing defects was held to be inconsistent and not sustainable. On that basis the CIT(A)'s deletion of the addition arising from estimation was upheld. [Paras 21, 27]

Rejection of books and estimation set aside; income to be computed as per cash system followed by the assessee.

Registration under section 12A once granted is a fait accompli and not open to probing in assessment proceedings - effect of restoration of 12A registration on allowability of expenditures - Whether expenditures disallowed by the AO on the ground that the trust lacked registration under section 12A are allowable where registration was restored by the tribunal. - HELD THAT: - The tribunal recalled its earlier orders restoring the trust's registration under section 12A and the settled principle that registration once granted is not open to probing by the Assessing Officer. Where registration was restored by co ordinate bench orders, the CIT(A) allowed the expenditures (including various staff payments and welfare payments) as application of income. The tribunal found no infirmity in allowing those expenditures where the registration stood restored. [Paras 16, 31, 35]

Expenditures disallowed solely for lack of 12A registration held allowable after restoration of registration; additions deleted.

Remand for verification of documentary proof of expenditure - remit to Assessing Officer to examine whether payments were actually incurred - Whether the CIT(A) erred in allowing large expenditures without independent verification of whether payments were actually made, and whether the matter should be remitted for verification and recomputation under sections 11-13. - HELD THAT: - The tribunal observed that the CIT(A) allowed substantial payments (including voluntary retirement scheme payments, retrenchment compensation, gratuity and related payments) largely on the basis of the appellant's submissions and without independently verifying whether the payments were actually made. Given the factual nature of the controversy and the need for documentary verification (bank records and supporting particulars), the tribunal held that these matters require remand to the Assessing Officer for examination and for recomputation of income under sections 11 to 13, with directions that the assessee file all relevant details. [Paras 31, 36, 37]

Order of the CIT(A) set aside on these points; issues remitted to the Assessing Officer for verification of payments and recomputation of income as per sections 11-13.

Final Conclusion: Appeals by the Revenue in ITA Nos. 312 and 313/VIZ/2018 are dismissed; the appeal challenging restoration of exemption and allowance of certain large expenditures (ITA No. 314/VIZ/2018) is allowed in part and remitted to the Assessing Officer for verification and recomputation of income under sections 11-13. The tribunal followed co ordinate bench and appellate precedents on refund of excess charges, treatment of income tax payments as application of income, the cash system of accounting, and the finality of registration under section 12A.

Concealment of particulars of income - penalty under Section 271(1)(c) - estimation-based additions - remand for fresh adjudication - opportunity of hearing / principles of natural justice

Concealment of particulars of income - penalty under Section 271(1)(c) - estimation-based additions - opportunity of hearing / principles of natural justice - Whether the additions made/confirmed in assessment for A.Y. 2010-11 (unsecured loan, receipts of cash and insurance commission) sustain levy of penalty under Section 271(1)(c), and whether the appellate authority recorded reasons and considered assessee's submissions. - HELD THAT: - The Tribunal examined the order of the CIT(A) and found absence of detailed findings explaining how the confirmed additions in respect of unsecured loan, cash receipts and insurance commission fall within the ambit of concealment under Section 271(1)(c). The CIT(A) did not deal with the assessee's submissions on these matters. Given the lack of reasoned adjudication, the Tribunal held that the question of applicability of penalty could not be finally resolved on the record before it and that the matter requires fresh consideration with reasons. The assessee must be afforded an opportunity of hearing in accordance with principles of natural justice. Accordingly, the issue is remanded to the CIT(A) for deciding with a reasoned order after giving the assessee a hearing. [Paras 7]

Remanded to the CIT(A) for fresh, reasoned adjudication on whether the confirmed additions attract penalty under Section 271(1)(c), after giving the assessee an opportunity of hearing.

Concealment of particulars of income - penalty under Section 271(1)(c) - estimation-based additions - opportunity of hearing / principles of natural justice - Whether the additions made/confirmed in assessment for A.Y. 2011-12 (unsecured loan, receipts of cash and insurance commission) sustain levy of penalty under Section 271(1)(c), and whether the appellate authority recorded reasons and considered assessee's submissions. - HELD THAT: - The Tribunal noted that the facts and treatment in A.Y. 2011-12 are identical to A.Y. 2010-11 and that the CIT(A) again failed to furnish detailed findings or to deal with the assessee's submissions on how the additions amount to concealment of income. In these circumstances the Tribunal concluded that the matter cannot be conclusively decided on the existing record and required fresh adjudication. The assessee is to be heard and the CIT(A) to pass a reasoned order addressing the points raised. [Paras 8]

Remanded to the CIT(A) for fresh, reasoned adjudication on whether the confirmed additions attract penalty under Section 271(1)(c), after giving the assessee an opportunity of hearing.

Final Conclusion: Both appeals are partly allowed for statistical purposes and the issues concerning levy of penalty in respect of unsecured loan, cash receipts and insurance commission for A.Y. 2010-11 and 2011-12 are remitted to the CIT(A) for fresh, reasoned consideration after affording the assessee an opportunity of hearing.

Rejection of books of account under section 145(3) of Income Tax Act - assessment on estimated gross profit - acceptance of revised books and commission-based income - comparative gross profit from preceding assessment years as basis for estimation - direction to assess income by applying a fixed gross profit rate

Rejection of books of account under section 145(3) of Income Tax Act - Assessee's decision not to press challenge to confirmation of rejection of books of account. - HELD THAT: - At the hearing the assessee's authorised representative expressly did not press Ground No.1 which challenged the confirmation by the CIT(A) of the Assessing Officer's rejection of book results. The Tribunal accordingly treated the ground as not pressed and dismissed it without further adjudication on the merits. [Paras 6]

Ground No.1 dismissed as not pressed.

Assessment on estimated gross profit - acceptance of revised books and commission-based income - comparative gross profit from preceding assessment years as basis for estimation - direction to assess income by applying a fixed gross profit rate - Appropriate gross profit rate to be applied for assessment after rejecting the assessee's unsubstantiated book results. - HELD THAT: - The Tribunal noted that the assessee is a milk supplier whose real income consists of commission on sales and that earlier years' gross profit percentages were 5.93% and 6.3%. The Assessing Officer had estimated gross profit at 15% while the CIT(A) adopted 11% based on the original books; the assessee contended for acceptance of revised books showing commission-based margins averaging about 4.3%. Observing that the assessee must be assessed on real income and that the 11.08% disclosed in the original return was not substantiated, the Tribunal used the contemporaneous comparative figures from preceding assessment years and prospectively allowed a modest increase, concluding that a gross profit rate of 7% is appropriate for assessment in the year under appeal. The Tribunal thereby directed the AO to compute income applying the 7% gross profit rate. [Paras 9, 10]

Appeal partly allowed; AO directed to assess income by applying gross profit rate of 7%.

Final Conclusion: The appeal is partly allowed: Ground No.1 (rejection of books) is dismissed as not pressed; on the substantive issue the Tribunal directs the Assessing Officer to assess the assessee's income for AY 2013-14 by applying a gross profit rate of 7%.

Classification of intangibles as financial asset - application of Explanation 1(i)(e) to section 2(42A) - application of Explanation 1(i)(b) to section 2(42A) - operation of section 47(vi) and section 49(1) regarding amalgamation - distinction between financial asset and block of assets for depreciation - computation of period of holding including previous owner - characterisation of capital gain as long-term or short-term

Classification of intangibles as financial asset - application of Explanation 1(i)(e) to section 2(42A) - distinction between financial asset and block of assets for depreciation - The assets transferred by the assessee are not 'financial assets' governed by Explanation 1(i)(e) to section 2(42A). - HELD THAT: - The Tribunal accepted the reasoning that Explanation 1(i)(d) to section 2(42A) defines 'financial asset' as a capital asset being a share or any other security and that 'security' has the meaning given in the Securities Contracts (Regulation) Act. The intangibles sold (brand name, trademark, packaging design, knowhow, product and marketing intangibles) do not fall within that description of shares or securities. This conclusion is reinforced by reference to section 2(11) (definition of 'block of asset') which includes intangible assets for depreciation purposes; such coverage indicates that those intangibles are not to be recast as 'financial assets' under Explanation 1(i)(e). Accordingly, the Assessing Officer was not correct in treating the assets as financial assets and applying Explanation 1(i)(e) to determine holding period. [Paras 9]

Assets are not financial assets for the purpose of Explanation 1(i)(e) to section 2(42A).

Application of Explanation 1(i)(b) to section 2(42A) - operation of section 47(vi) and section 49(1) regarding amalgamation - computation of period of holding including previous owner - Period of holding is to be determined by including the period the asset was held by the previous owner under Explanation 1(i)(b) to section 2(42A) read with section 49(1), in the context of amalgamation under section 47(vi). - HELD THAT: - On the facts the asset became property of the assessee pursuant to an amalgamation within the meaning of section 47(vi) and section 2(IB). Explanation 1(i)(b) to section 2(42A) provides that where a capital asset becomes the property of the assessee under subsection (1) of section 49, the period for which the asset was held by the previous owner shall be included. The Tribunal held that there was no transfer on the amalgamation effective date which would reset the holding period; the brand had been held by the amalgamating company prior to 01.04.2008 (registered earlier) and therefore that prior period must be included in computing the holding period of the assessee. The Explanation to section 49(1) operates to extend the 'previous owner' concept in such cases, even though the cost to the amalgamating company was taken as nil under the relevant provisions. [Paras 9]

Holding period includes the period for which the asset was held by the previous owner pursuant to amalgamation; Explanation 1(i)(b) and section 49(1) apply.

Characterisation of capital gain as long-term or short-term - The gain on sale of the intangibles is Long Term Capital Gain (LTCG) and not Short Term Capital Gain (STCG). - HELD THAT: - Because the assets are not financial assets under Explanation 1(i)(e) and the period of holding must include the previous owner's holding under Explanation 1(i)(b) read with section 49(1) and section 47(vi), the aggregate holding period exceeded 36 months at the time of relinquishment on 18.05.2010. The Tribunal therefore agreed with the CIT(A) (and relied upon an earlier High Court decision cited by the authorities) that the receipts on sale are taxable as LTCG and not STCG, and that the Assessing Officer's characterisation as STCG was incorrect. [Paras 9, 10]

Receipts on sale of the intangibles are to be taxed as long-term capital gains.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal holds that the intangibles are not 'financial assets' under Explanation 1(i)(e), the holding period includes the previous owner's period under Explanation 1(i)(b) read with section 49(1) and section 47(vi), and accordingly the gain on sale for AY 2011-2012 is long-term capital gain.

Validity of notice under section 143(2) - Jurisdiction of the Assessing Officer - Limitation for issuance of notice under section 143(2) - Section 292BB - waiver of objections to service by participation - Master notification and delegation of jurisdiction for contractor cases

Validity of notice under section 143(2) - Jurisdiction of the Assessing Officer - Master notification and delegation of jurisdiction for contractor cases - Notice dated 01/09/2011 issued by a non jurisdictional officer was invalid. - HELD THAT: - The Tribunal found on the material on record, including the CBDT master notification and departmental allocation orders, that jurisdiction over persons engaged in contractorship (including supply of labour) lay with Range 38 and that earlier assessments for the assessee were completed by officers under Range 38. The notice dated 01/09/2011 was issued by Deputy Commissioner/Circle 21(1), who did not have territorial jurisdiction over the assessee; accordingly that notice was without jurisdiction and therefore invalid. The departmental allocation and ITS/PAN records confirming where jurisdiction lay were relied upon to establish that the first scrutinising notice was issued by an incorrect authority. (See paras 3.5-3.8, 3.9, 3.13.) [Paras 3]

Notice dated 01/09/2011 issued by the non jurisdictional officer was invalid.

Limitation for issuance of notice under section 143(2) - Section 292BB - waiver of objections to service by participation - Validity of subsequent notice issued after expiry of limitation - Notice dated 30/08/2012 issued by the jurisdictional Assessing Officer was time barred and could not cure the defect; assessment based on such notice was void. - HELD THAT: - The Tribunal held that even though the assessment record was subsequently transferred and a notice in the correct jurisdiction was issued on 30/08/2012, the statutory proviso to section 143(2) prevented issuance of any notice after six months from the end of the financial year in which the return was filed. The limitation for AY 2010 11 had expired on 30/09/2011; the notice of 30/08/2012 was therefore beyond the period. Section 292BB, which operates to waive objections as to service where the assessee participates in proceedings, does not cure a substantive defect arising from the proviso to section 143(2) and cannot validate a notice issued after the prescribed time limit. The departmental error in issuing the first notice from a non jurisdictional office could not be placed on the assessee nor used to extend the statutory limitation. Following the reasoning in the cited High Court authority, the Tribunal concluded that the assessment framed without a valid notice within the limitation period was void ab initio, and accordingly it declined to adjudicate the additions on merits. (See paras 3.9-3.11, 3.12-3.13.) [Paras 3]

Notice dated 30/08/2012 was time barred; assessment framed thereon is void and quashed.

Final Conclusion: The Tribunal allowed the appeal, holding that the initial notice was issued by a non jurisdictional officer and the subsequent notice by the correct jurisdictional officer was issued after the statutory limitation; accordingly the assessment for AY 2010 11 was void ab initio and is quashed.

Amortisation of expenditure in case of amalgamation or demerger - Deduction under section 10B for profits of an eligible undertaking - Disallowance under section 14A - allocation and Rule 8D methodology - Availability of interest-free funds - presumption against attribution of borrowed funds - Bad debts written off in books - entitlement on writing off and requirement of earlier inclusion - Commuted lease rent - revenue v. capital character and apportionment over lease term

Amortisation of expenditure in case of amalgamation or demerger - Allowability of one-fifth annual amortisation under the demerger provision in the hands of the resultant (post-demerger) company - HELD THAT: - Section 35DD gives an amortisation deduction to the "assessee" that "incurs" expenditure wholly and exclusively for amalgamation or demerger, allowing one-fifth in each of five successive previous years beginning with the year in which the demerger takes place. The Tribunal held that the statutory language is clear: where demerger takes place from a parent (demerged) company, the expenditure is incurred by that parent and the term "assessee" in the provision refers to the company which incurred the expense (the demerged/parent entity) and not to the resultant company which comes into existence as a consequence of the demerger. The Tribunal rejected the assessee's reliance on pre section-35DD precedents and on the rule of consistency, observing that the specific statutory provision introduced by Parliament governs the issue. Consequentially, the claim made by the resultant company for 1/5th of the demerger expenses was held not allowable.

Deduction under section 35DD is not allowable to the resultant company in the facts of the case; grounds dismissed.

Disallowance under section 14A - allocation and Rule 8D methodology - Availability of interest-free funds - presumption against attribution of borrowed funds - Extent of disallowance under section 14A for (a) indirect interest and (b) administrative/management expenses for exempt dividend income - HELD THAT: - The Assessing Officer recorded dissatisfaction with the assessee's claim of no expenditure in relation to exempt income and applied a rule based computation. The Tribunal held that an AO's implied dissatisfaction suffices to invoke section 14A and the prescribed methodology, but applied the facts to reduce the disallowance. On indirect interest, the Tribunal found that the assessee had sufficient interest free funds (share capital and reserves) to meet investments yielding exempt income and, following the relevant authority, drew the presumption that investments were financed from interest free funds; therefore the indirect interest disallowance sustained by the CIT(A) was deleted. As to administrative and management expenses, the Tribunal accepted that some expenses necessarily relate to investment activity and, in absence of detailed bifurcation, directed the AO to restrict disallowance to 0.5% of the average value of those investments yielding exempt income (excluding foreign subsidiaries) - adopting the Rule 8D(2)(iii) percentage as a reasonable basis for estimation for the years before/around Rule 8D's prospective applicability.

Indirect interest disallowance deleted; administrative/management expense disallowance restricted to 0.5% of investments yielding exempt income (partial allowance of assessee's appeal).

Bad debts written off in books - entitlement on writing off and requirement of earlier inclusion - Allowability of bad debts written off where the assessee seeks deduction but has not shown that the debts were reflected as sundry debtors in the earlier balance sheet - HELD THAT: - The CIT(A) accepted law that once debts are written off in the books as irrecoverable, deduction is generally allowable without proving irrecoverability, but also required that the debts claimed as written off should have been shown as sundry debtors in the earlier balance sheet (here, as at 31/03/2006) to establish continuity. The assessee undertook to furnish the required particulars which were not on record before the CIT(A). In the interest of justice, the Tribunal restored the issue to the file of the CIT(A) for fresh adjudication after the assessee produces the documentary evidence; both parties to be given opportunity of hearing.

Issue remanded to the CIT(A) for fresh decision on production/verification of particulars showing that the written off debts were earlier shown as sundry debtors; matter allowed for statistical purposes.

Deduction under section 10B for profits of an eligible undertaking - Whether deduction under section 10B must be computed with reference to profits of each eligible undertaking (even where consolidated books are maintained) and timing of adjustment vis a vis brought forward losses/depreciation - HELD THAT: - The Tribunal followed the earlier appellate findings and authoritative precedents holding that deduction under section 10B (analogous to section 10A jurisprudence) is to be computed with reference to the profits of the eligible undertaking(s) and not by proportioning global profits of the assessee. Separate physical location, STPI approvals, customs licences and ERP coding demonstrating unit wise accounting supported the assessee's claim that the units were independent eligible undertakings despite consolidated books. The Tribunal also held that brought forward unabsorbed depreciation of non eligible units could not be set off against profits of eligible undertakings for computing the section 10B deduction where such brought forward items related to non eligible units; hence the deduction must be allowed at source with recomputation accordingly.

Deduction under section 10B allowed in favour of the assessee; Revenue's grounds dismissed (AY 2007-08 and 2008-09).

Commuted lease rent - revenue v. capital character and apportionment over lease term - Tax treatment of commuted one time lease rent paid for a long term lease: capital or revenue and the correct apportionment for the year under consideration - HELD THAT: - The assessee paid an optionally commuted one time lease rent for a 90 year lease and treated the payment as revenue. The Tribunal adopted the commercial advantage test from Supreme Court authorities, finding that the payment did not create or transfer ownership of a capital asset; it substituted payment of recurring annual lease rent by a lump sum. The Tribunal held that only the portion of the commuted payment attributable to the current year is deductible as revenue - applying a temporal apportionment of 1/90th for the year under consideration - and directed that the balance be treated as prepaid/advance rent on the balance sheet.

Allowed 1/90th of the commuted one time lease rent as revenue expenditure for the year; the remainder to be treated as advance rent (Grounds partly allowed).

Final Conclusion: For assessment years 2007-08 and 2008-09 the Tribunal (ITAT Delhi) (i) held that section 35DD amortisation for demerger expenses is not allowable to the resultant company and dismissed the assessee's grounds; (ii) deleted the indirect interest disallowance under section 14A on facts showing availability of interest free funds and limited administrative/management expense disallowance to 0.5% of investments yielding exempt income; (iii) remanded the bad debts issue to the CIT(A) for fresh consideration on production of required particulars; (iv) upheld the assessee's entitlement to deduction under section 10B with unit specific computation despite consolidated books; and (v) held that the commuted one time lease rent is revenue in character only to the extent attributable to the year (1/90th), the balance being advance rent.

Charitable purpose as defined in section 2(15) of the Income tax Act - advancement of any other object of general public utility and the proviso excluding activities in the nature of trade, commerce or business - exemption under section 11 of the Income tax Act - registration under section 12A/12AA and its evidentiary/conclusive effect - distinction between cultural/heritage/educational activities and commercial activities of development boards/real estate - application of section 11(5) regarding investment of surplus

Charitable purpose as defined in section 2(15) of the Income tax Act - advancement of any other object of general public utility and the proviso excluding activities in the nature of trade, commerce or business - exemption under section 11 of the Income tax Act - application of section 11(5) regarding investment of surplus - Whether the assessee's activities (maintenance and upgradation of Krishna Museum, light and sound show, celebration of Gita Jayanti and related expenditures) fall within charitable purpose under section 2(15) and are entitled to exemption under section 11. - HELD THAT: - On the stated aims and objects of the society (facilitation of tourists/pilgrims, preservation of historical places within 48 km of Kurukshetra, maintenance of Krishna Museum, support for Gita Jayanti), the Tribunal found no material or specific factual basis in the assessment order to characterise these activities as commercial or profit motivated. The assessee's dominant receipts were government grants, the surplus was applied/invested as per section 11(5), and the light and sound show and museum were held to disseminate cultural, historical and philosophical knowledge accessible to all (including the illiterate), thereby serving educational and preservation functions encompassed by the main limb of charitable purpose as defined in section 2(15). Reliance on modes of dissemination that involve modest admission or use of audio visual media does not, without evidence of trade/commerce or fee driven profit motive, convert the activities into excluded commercial activities under the proviso. The Tribunal additionally took into account the cultural and constitutional context (Directive Principles and citizens' duty to preserve heritage) and international policy recognition of cultural preservation as part of development, concluding that these facts support the charitable character. In the absence of any specific instance, fact or evidence to the contrary, the appellate authority's conclusion that there is no commercial element was upheld. [Paras 13, 14, 18, 19, 20]

The activities of the assessee like the museum, light and sound show and celebration of Gita Jayanti are within the charitable purpose under section 2(15) and eligible for exemption under section 11.

Distinction between cultural/heritage/educational activities and commercial activities of development boards/real estate - registration under section 12A/12AA and its evidentiary/conclusive effect - advancement of any other object of general public utility and the proviso excluding activities in the nature of trade, commerce or business - Whether the Assessing Officer's reliance on precedents involving development authorities (Jammu Development Authority, HUDA, PUDA) justified denial of exemption by treating the assessee as akin to a real estate/development board engaged in commercial activity. - HELD THAT: - The Tribunal examined the assessment order and found that the Assessing Officer's reliance on other development authorities was generalised and unsupported by specific comparison of facts. In the Jammu Development Authority the factual matrix showed activity akin to real estate development and cancellation of registration under section 12AA; no comparable facts or proceedings to cancel registration were shown against the assessee. The Tribunal held that absent parimateria facts demonstrating that the assessee engaged in activities akin to a real estate builder or that its registration was under challenge, reliance on those authorities was misplaced. The appellate finding that the assessee's activities are distinguishable from HUDA/PUDA and Jammu Development Authority was therefore sustained. [Paras 9, 10, 11]

The Assessing Officer's comparison with development authorities was unsustainable; the precedents relied upon do not apply to the assessee's factual matrix and cannot justify denial of exemption.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) and dismissed the Revenue's appeal: the assessee's activities were held to be charitable within section 2(15) and eligible for exemption under section 11 for AY 2013 14; reliance on development authority precedents was rejected for want of comparable facts.

Operational debt and default - pre-existing dispute - limitation and date of default - jurisdiction of adjudicating authority - admission under Section 9 of the IBC, 2016 and commencement of CIRP - appointment of Interim Resolution Professional and interim reliefs - moratorium under Section 14 of the IBC, 2016

Operational debt and default - The applicant established an operational debt in respect of unpaid invoices and the corporate debtor was in default. - HELD THAT: - The Tribunal examined the invoices, payment history and the corporate debtor's correspondent admission in reply to the demand notice. The record shows that invoices issued between 19-1-2018 and 28-5-2018 remained unpaid, payments last having been made on 16-4-2018. The corporate debtor's email of 25-5-2019 acknowledged liability by stating payment would be made upon receiving funds from a third party, which the Tribunal treated as an admission of the debt and non-payment. On the material before it, the Tribunal concluded that default in payment of the operational debt had occurred. [Paras 16, 19]

Default in respect of the operational debt is established and proved.

Pre-existing dispute - The corporate debtor's plea of a pre-existing dispute regarding quality and price of supplies was rejected as not prima facie plausible. - HELD THAT: - The corporate debtor alleged sub-standard supply and excessive pricing, and relied on a purported settlement letter. The Tribunal noted absence of contemporaneous communications or documents evidencing any complaint during the period of supply (July 2017 to April 2018) and observed that the dispute was raised only after initiation of the section 9 process. The corporate debtor failed to place on record documents demonstrating a plausible dispute that could defeat the section 9 claim, leading the Tribunal to conclude there was no merit in the asserted pre-existing dispute. [Paras 11, 12, 13, 15, 16]

The alleged pre-existing dispute is not accepted; it does not bar admission of the section 9 application.

Limitation and date of default - The application was not time-barred; the date of default was held to be 16-4-2018 and the application was filed within the period of limitation. - HELD THAT: - The Tribunal identified 16-4-2018 as the date when the last payment was made and thereafter the default occurred. Having regard to that date and the filing particulars reflected in the record (Form V showing outstanding as on 20-5-2019), the Tribunal found the application to be within the prescribed limitation period and therefore maintainable on limitation grounds. [Paras 5, 17]

The application is within limitation; the date of default is 16-4-2018.

Jurisdiction of adjudicating authority - The Tribunal has jurisdiction to entertain the application as the registered office of the corporate debtor is situated within its territorial jurisdiction. - HELD THAT: - The Tribunal relied on the registered office address of the corporate debtor as recorded in the record and observed that jurisdiction to adjudicate under the IBC lies where the corporate debtor's registered office is located. On that basis the Tribunal concluded that the New Delhi Bench has territorial jurisdiction to try the application. [Paras 18]

The application is maintainable before this Tribunal; territorial jurisdiction is established.

Admission under Section 9 of the IBC, 2016 and commencement of CIRP - appointment of Interim Resolution Professional and interim reliefs - moratorium under Section 14 of the IBC, 2016 - The section 9 application was admitted and consequential orders were passed: appointment of an Interim Resolution Professional (IRP) subject to disclosures and consent, deposit by the operational creditor for IRP expenses, communication to ROC, and imposition of moratorium. - HELD THAT: - Having found default, absence of a prima facie dispute, and maintainability, the Tribunal held that the requirements of Section 9 were satisfied and admitted the application under Section 9(5). The Tribunal appointed an IRP from the IBBI panel subject to there being no disciplinary proceedings and upon his filing Form 2 and requisite disclosures. The Tribunal directed the operational creditor to deposit an upfront amount with the IRP to meet expenses in accordance with the regulations, permitted adjustment by the Committee of Creditors, and ordered communication of the order and relevant papers to statutory authorities (including ROC). Consequent to admission, the moratorium under Section 14(1) was declared and the provisions of Sections 14(2) to 14(4) were directed to apply during the moratorium. [Paras 19, 20, 21, 22, 23]

Application admitted under Section 9(5); IRP appointed subject to conditions; deposit directed; moratorium declared and consequential directions issued.

Final Conclusion: The Tribunal admitted the section 9 application: it found an operational debt and default, rejected the corporate debtor's plea of a pre-existing dispute, held the application timely and within jurisdiction, appointed an Interim Resolution Professional subject to conditions, directed an initial deposit by the operational creditor for IRP expenses, and declared the moratorium with consequential directions to communicate the order and update statutory records.

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Existence of financial debt and default - Limitation not bar when claim is based on a final decree - Form No.1 compliance under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Appointment of Interim Resolution Professional - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Public announcement of Corporate Insolvency Resolution Process and duties of IRP

Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Existence of financial debt and default - Form No.1 compliance under the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Petition under Section 7 of I&B Code admitted on satisfaction of existence of financial debt, default and completeness of application. - HELD THAT: - The Tribunal examined the application filed by the financial creditor based on the final DRT decree dated 22.10.2016 and the annexed documents, including the assignment deed and board resolution authorising the applicant. The application was found to be in prescribed Form No.1 and complete as per the Insolvency Rules. The record establishes a financial debt in excess of the statutory threshold and a continuing default exceeding Rs. 1,00,000/-. On that basis, the petition met the statutory requirements for admission under Section 7 and warranted initiation of the corporate insolvency resolution process. [Paras 8, 9, 10, 11, 12]

The petition under Section 7 of the I&B Code is admitted and the initiation of CIRP against the corporate debtor is ordered.

Limitation not bar when claim is based on a final decree - Limitation objection rejected because the application is founded on the final DRT order dated 22.10.2016 and the date of default is the date of that decree. - HELD THAT: - The corporate debtor contended that the default occurred in 2013 and therefore the petition was time barred. The Tribunal observed that the application is founded on the DRT's final order dated 22.10.2016, which fixed the decretal liability and the date of default as 22.10.2016. Consequently, the application falls within the period of limitation when measured from the date of that final order, and the limitation objection does not preclude admission. [Paras 6, 8, 9]

The objection of limitation is repelled and does not bar the Section 7 petition.

Appointment of Interim Resolution Professional - Public announcement of Corporate Insolvency Resolution Process and duties of IRP - Interim Resolution Professional appointed and directions given for public announcement and compliance with statutory duties. - HELD THAT: - The applicant proposed a registered insolvency professional and furnished Form 2, in which the proposed IRP declared absence of disciplinary proceedings. On admission of the petition, the Tribunal appointed the proposed IRP to perform functions under the I&B Code, directed immediate public announcement of the CIRP as specified under the statute, and required the IRP's fee to conform to applicable IBBI regulations, circulars and directions. [Paras 11, 12]

Mr Rajesh Jhunjhunwala is appointed as Interim Resolution Professional; public announcement and compliance obligations are directed.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Moratorium declared with consequential prohibitions and ancillary directions. - HELD THAT: - Upon admission, the Tribunal declared the statutory moratorium under Section 14, prohibiting institution or continuation of suits or execution of decrees against the corporate debtor, alienation or encumbrance of its assets, enforcement of security including actions under the SARFAESI Act, and recovery of property from the corporate debtor's possession. The Tribunal further directed continuity of supply of essential goods or services during the moratorium, noted exceptions as may be notified by the Central Government, specified the duration of the moratorium until completion of CIRP or approval of a resolution plan or order of liquidation, and required immediate communication of the order to relevant parties. [Paras 12]

Statutory moratorium under Section 14 is effective from the date of the order with the specified prohibitions and ancillary directions.

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted; the Tribunal appointed the proposed Interim Resolution Professional, declared the moratorium under Section 14 with consequential directions, and directed immediate public announcement and communication of the order.

Adjustment of refund against tax arrears - disposal of pending appeals by Sales Tax Appellate Tribunal - refund subject to outcome of appeal - interest on delayed refund

Disposal of pending appeals by Sales Tax Appellate Tribunal - adjournment/expeditious hearing - Direction to the Sales Tax Appellate Tribunal, Coimbatore to take up and dispose the petitioner's pending appeals within six months. - HELD THAT: - The High Court did not adjudicate the merits of the disputes in the pending appeals but observed that the appeals have been pending since 2014 and 2017 and the writ petition had been pending for seven years. In lieu of granting the substantive relief sought, the Court directed the Sales Tax Appellate Tribunal, Coimbatore to take up and dispose the respective appeals (CTA 9/14, CTA 10/14 and the unnumbered appeal in Ref. No.1690 of 2017) within six months from the date of receipt of this order. The Registry was directed to communicate the order to the Tribunal and the petitioner was permitted to serve a certified copy on the Tribunal requesting speedy listing. [Paras 5, 7]

The Tribunal is directed to list and dispose the petitioner's appeals within six months from receipt of this order.

Adjustment of refund against tax arrears - refund subject to outcome of appeal - interest on delayed refund - Interim position on the impugned adjustment of refund and consequential refund/interest if the petitioner succeeds on appeal. - HELD THAT: - The Court declined to grant immediate relief against the adjustment of the refund by the respondent, noting the pendency of appeals and arrears under the Central Sales Tax Act. The Court directed that in the event the petitioner succeeds in the appeals before the Tribunal, the respondent shall refund the amount forthwith after making any due adjustments of tax then found payable. The petitioner is entitled to interest on the delayed refund at the same rate at which arrears of tax are collected by the respondents under the Act. The order leaves the substantive adjudication to the Tribunal and provides the consequential remedy if appeals succeed. [Paras 5, 6, 7]

No immediate relief against the adjustment; if petitioner succeeds on appeal, respondent to refund after due adjustments and pay interest on delayed refund.

Final Conclusion: Writ petition disposed by directing the Sales Tax Appellate Tribunal, Coimbatore to expeditiously dispose the petitioner's three pending CST appeals within six months; no interim relief granted against the adjustment of refund, but if appeals succeed the respondent must refund after adjustments and pay interest.