TaxTMI Updates e-Newsletter
Jun 30,2012

Extension of tax holiday period from five years to ten years - beneficial construction of amendment - ten consecutive assessment years beginning with the assessment year relevant to commencement of production - application of amended provision to unexpired portion of tax holiday

Extension of tax holiday period from five years to ten years - application of amended provision to unexpired portion of tax holiday - beneficial construction of amendment - Whether the amendment extending the tax holiday from five years to ten years applies to an undertaking which commenced production before the amendment and had already availed part of the original five-year benefit, permitting claim of the remaining unexpired period under the amended provision. - HELD THAT: - The Court applied a purposive and beneficial construction of the amendment which extended the tax holiday to ten consecutive assessment years beginning with the assessment year relevant to commencement of production. The object of the amendment was to give added thrust to exports by extending, not reducing, the period of benefit. Where an undertaking commenced production before the amendment but the ten-year period as reconstructed from the date of commencement had not fully expired before the amendment came into force (1-4-1999), the assessee is entitled to the benefit of the amended provision for the unexpired portion of the ten consecutive years. Conversely, if the entire ten-year period had already expired prior to the amendment coming into force, the amended benefit would not apply. Applying these principles to the facts, the assessee who began production in 1993-94 and had enjoyed five years' benefit was entitled to claim the remaining years under the amended provision commencing from 1999-2000.

The Tribunal's order holding that the benefit of extension to ten years applies to the assessee for the unexpired period is upheld; the appeal is dismissed.

Final Conclusion: Appeal dismissed; amendment extending tax holiday to ten consecutive assessment years applies beneficially to units which commenced production before the amendment for the unexpired portion of the ten-year period, and the assessee is entitled to the remaining years under the amended provision.

Taxability of non-compete consideration as capital gain under proviso to section 28(va)(a) - exclusion of compensation from taxation under the second proviso to section 28(va) for amounts received from the Multilateral Fund of the Montreal Protocol - application of section 14A and Rule 8D in disallowance of expenses attributable to exempt (dividend) income - distinction between revenue and capital expenditure for repairs/road construction and product development - admissibility and effect of additional evidence before Commissioner (Appeals) in appellate adjudication

Taxability of non-compete consideration as capital gain under proviso to section 28(va)(a) - Whether the amount received as 'non-compete fees' on sale of the Saffolin-DS business is chargeable as capital gains or as business income. - HELD THAT: - The Tribunal found that the assessee had transferred its entire Saffolin-DS business, thereby transferring the right to manufacture/produce/process the product. The proviso to section 28(va)(a) excludes from business income any sum on account of transfer of the right to manufacture, produce or process any article or right to carry on any business which is chargeable as capital gains. The Assessing Officer had treated the non-compete fee as business income without giving effect to the proviso despite recording that the entire business and associated rights were transferred. Having regard to the clauses of the agreement and the admitted sale of business, the Tribunal concurred with the CIT(A) that the non-compete consideration falls within the proviso and is taxable as capital gains rather than as profits and gains of business. [Paras 4]

Non-compete fees received on sale of the Saffolin-DS business are taxable as capital gains; Revenue's ground dismissed.

Exclusion of compensation from taxation under the second proviso to section 28(va) for amounts received from the Multilateral Fund of the Montreal Protocol - admissibility and effect of additional evidence before Commissioner (Appeals) - Whether compensation received from the Multilateral Fund under the Montreal Protocol for phasing out Carbon Tetrachloride is exigible to tax as business income or excluded by the second proviso to section 28(va). - HELD THAT: - The assessee produced documentation before the CIT(A) showing that the amount was compensation under the Montreal Protocol released through IDBI as agent of Government of India after satisfaction of conditions for phasing out CTC. The second proviso to section 28(va) expressly excludes such compensation received in accordance with agreement entered into with Government of India from being treated as business income. The Tribunal accepted the CIT(A)'s satisfaction on the material placed before him and noted that no challenge was made to admission of that material; consequently the proviso's conditions were held fulfilled and the amount held not taxable as business income. [Paras 5, 6]

Compensation from the Multilateral Fund received in accordance with the Government of India arrangement is excluded from taxation as business income under the second proviso to section 28(va); Revenue's ground dismissed.

Application of section 14A and Rule 8D in disallowance of expenses attributable to exempt (dividend) income - Extent and correctness of disallowance under section 14A and Rule 8D in respect of expenses attributable to dividend income. - HELD THAT: - The Assessing Officer made a disallowance following precedent, but both parties agreed that the issue requires fresh adjudication in light of the jurisdictional High Court's decision in Godrej Boyce. The Tribunal observed that the matter should be reconsidered by the AO applying the controlling ratio and directed restoration to the AO for fresh adjudication with opportunity to the assessee. [Paras 7]

Issue restored to the file of the Assessing Officer for fresh adjudication in accordance with law; ground allowed for statistical purposes (remanded).

Distinction between revenue and capital expenditure for repairs/road construction - Whether expenditure on road works is revenue (repairs and maintenance) or capital (construction of new road). - HELD THAT: - The records did not clearly establish whether the expenditure related to repair of an existing road or construction of a new approach road; the final bill described works consistent with construction. The assessee sought verification of the prior existence of the road. In these circumstances the Tribunal directed a factual verification by the AO to determine whether the outlay is repair (revenue) or new construction (capital), with appropriate relief or capitalisation/depreciation to follow based on findings. [Paras 8]

Issue restored to the file of the Assessing Officer for factual verification and fresh decision; remanded.

Distinction between revenue and capital expenditure for product development - Whether consultancy charges paid for product development are revenue expenses or capital expenditure. - HELD THAT: - The assessee failed to substantiate that the consultancy charges related to development of new products for the existing business; submissions were unaccompanied by documentary evidence demonstrating a link to the existing business. The CIT(A)'s conclusion that the expenditure related to development of new products and hence was capital in nature was upheld due to absence of supporting factual material from the assessee. [Paras 9]

Assessment disallowance confirmed; expenditure treated as capital and ground dismissed.

Admissibility and effect of additional evidence before Commissioner (Appeals) - Whether the adhoc disallowance in respect of foreign travel expenses should be reconsidered in view of additional evidence filed and prior Tribunal directions in the assessee's own case. - HELD THAT: - The AO had not called for foreign travel details in his questionnaire; the CIT(A) rejected additional evidence without verifying assessment records. The Tribunal noted a prior Tribunal order in the assessee's own case and found it appropriate in the interests of justice to restore the matter to the AO to verify and decide afresh after allowing the assessee an opportunity and keeping in mind the earlier Tribunal direction. [Paras 10]

Issue restored to the AO for fresh adjudication after verification and opportunity to the assessee; ground allowed for statistical purposes (remanded).

Procedural consequence of not pressing a ground before Commissioner (Appeals) - Whether the assessee's challenge to adhoc disallowance of miscellaneous expenses could be entertained when not pressed before the CIT(A). - HELD THAT: - The assessee conceded that the ground was not pressed before the CIT(A). In such circumstances the Tribunal dismissed the ground as not pressed by the assessee. [Paras 11]

Ground dismissed as not pressed.

Final Conclusion: The Tribunal dismissed the Revenue appeals for AY 2004-05 and AY 2006-07 on the points decided: non-compete consideration on sale of business held taxable as capital gains under the proviso to section 28(va)(a), and Multilateral Fund compensation excluded under the second proviso to section 28(va). The assessee's appeal for AY 2006-07 was partly allowed for statistical purposes: certain factual issues (section 14A disallowance, road expenditure, foreign travel expenses) were remanded to the Assessing Officer for fresh adjudication; product development expenditure disallowance was affirmed; one miscellaneous ground was dismissed as not pressed.

Valuation of closing stock on succession or conversion of a firm into a company - succession to business and assessment under section 170 - vesting of assets on conversion under Chapter IX and distinction from distribution - applicability of capital gains provisions on transfer by way of distribution or vesting - tests of change of ownership, identity, continuity and integrity of business

Valuation of closing stock on succession or conversion of a firm into a company - vesting of assets on conversion under Chapter IX and distinction from distribution - applicability of capital gains provisions on transfer by way of distribution or vesting - Closing stock of a partnership firm converted into a company under Chapter IX is to be valued at cost and not at market value where the assets vest in the company and there is no transfer by way of distribution giving rise to capital gains. - HELD THAT: - The Court accepted the Tribunal's conclusion that conversion of the partnership firm into a private limited company under Chapter IX resulted in vesting of the firm's assets in the company and not in a distribution or appropriation of assets. On the facts, the erstwhile partners became shareholders in the company in the same proportions, and the business continued in substance, so there was effectively no transfer of assets that would attract computation of capital gains under the relevant provisions. The decision followed earlier authorities considering the tests of change of ownership, identity, continuity and integrity of the business as determinative of succession and distinguishing vesting on conversion from distribution on dissolution. Prior decisions of this Court and High Courts were applied to hold that where assets merely vest in the company on conversion under Chapter IX (and not distributed), the market-value based deeming provision for computation of capital gains does not apply and closing stock need not be brought to tax at market value. [Paras 16, 17, 18]

Tribunal's view upheld; closing stock to be valued at cost and not market value, as no transfer by way of distribution occurred on conversion under Chapter IX.

Final Conclusion: Substantial question answered in favour of the assessee: where a firm is converted into a company under Chapter IX and assets vest in the company with the same persons holding shareholdings in like proportions, there is no transfer by distribution attracting capital gains and the closing stock of the firm is to be valued at cost.

Assessment under Section 153A/153C - Inapplicability of Chapter XIV-B to proceedings under Sections 153A/153C by virtue of Section 158BI - Scope of materials in search assessments - not confined to material found during search - Best-judgment assessment and estimation of undisclosed income - Concurrent findings of fact and perversity standard - Attribution of undisclosed receipts (on-money) to the assessee

Assessment under Section 153A/153C - Inapplicability of Chapter XIV-B to proceedings under Sections 153A/153C by virtue of Section 158BI - Scope of materials in search assessments - not confined to material found during search - Assessing Officer not restricted to only materials found during search when making assessments under Sections 153A/153C. - HELD THAT: - The Court examined the effect of Section 158BI which renders provisions of Chapter XIV-B inapplicable to proceedings under Sections 153A/153C. Because Chapter XIV-B (which limits inquiry to materials found during search) does not apply, the Assessing Officer may take into account material other than that discovered during the search or requisition in computing undisclosed income under Sections 153A/153C. The Court rejected reliance on precedents interpreting the Chapter XIV-B limitation (notably the decision relied upon by the assessee) as inapplicable to Sections 153A/153C since Section 158BI removes that constraint. Consequently the statutory scheme permits wider inquiry for assessments under Sections 153A/153C. [Paras 15, 16, 17, 18]

The Tribunal was correct in holding that assessments under Sections 153A/153C need not be confined to materials found during the search; no substantial question of law arises on this point.

Best-judgment assessment and estimation of undisclosed income - Evidence of on-money and attribution to the firm - Concurrent findings of fact and perversity standard - Whether the Assessing Officer could, on available material (including eight sale deeds and statements), estimate undisclosed on-money for a larger set of transactions and attribute such undisclosed income to Ahura Holdings. - HELD THAT: - The Court applied the established principle that best-judgment assessments necessarily involve some estimation and that such estimates are sustainable if they are bona fide and founded on a rational basis. There was sufficient material-sale deeds for eight transactions and statements by Gopal-permitting the Assessing Officer to form an inference about on-money being received. Appreciation of such evidence falls within the domain of the assessing authorities; absent perversity the concurrent factual conclusions reached by the Assessing Officer, the CIT(A) and the Tribunal cannot be interfered with. The Court thus upheld the estimation and its application to similar transactions on the basis that the estimate was rational and not vitiated by perversity. [Paras 20, 21, 23]

The estimation of undisclosed income and its attribution to Ahura Holdings on the basis of the available material was permissible and not perverse; no substantial question of law arises.

Attribution of undisclosed receipts (on-money) to the assessee - Concurrent findings of fact and perversity standard - Whether undisclosed on-money was correctly assessed as income of Ahura Holdings despite statements by partners claiming receipt in their personal hands. - HELD THAT: - On appreciation of the evidence, the Assessing Officer, the CIT(A) and the Tribunal concurrently concluded that the undisclosed receipts were of Ahura Holdings. The Court found no perversity in these concurrent findings and observed that such a factual conclusion does not give rise to a substantial question of law warranting interference. [Paras 22, 23]

Concurrent factual finding that on-money belonged to Ahura Holdings is upheld; no substantial question of law is made out.

Expenditure consideration in assessment - Factual nature of disallowance and appellate remand for verification - Whether the Assessing Officer failed to consider development expenditure and other claimed deductions in completing the assessment. - HELD THAT: - The Court examined the assessment and appellate orders and found that the CIT(A) agreed that disallowance of cost of land was not justified and directed the Assessing Officer to re-examine certain development expenses and legal/consultancy fees. Consultancy fees which lacked proof were disallowed. Thus expenditure claims were considered and directed for verification where necessary. The Court treated this as a question of fact and not a substantial question of law. [Paras 24]

The contention that expenditure was ignored is unfounded; the matter involved factual appreciation and does not raise a substantial question of law.

Final Conclusion: All appeals dismissed; no substantial question of law arises as the Tribunal and the authorities below correctly applied the law and reached concurrent factual findings which are not vitiated by perversity.

Registration under section 12AA - Genuineness of activities - Dominant charitable object - Divesting of ownership / creation of trust - Preference to settlor's relatives and public character - Limited scope of enquiry at registration stage vis-a -vis assessment (section 13)

Divesting of ownership / creation of trust - Registration under section 12AA - Whether a valid inter vivos trust came into existence by divesting ownership so as to permit registration under section 12AA. - HELD THAT: - The Tribunal examined the trust deed and found that the settlor had transferred Government of India inscribed stock into the joint names of trustees and the deed satisfied the indicia of a trust under the Indian Trust Act (intention, trust property, beneficiaries, transfer to trustees). The Commissioner's conclusion that no trust came into existence because the settlor retained income during his lifetime was rejected: the trust property and its charitable objects were held to exist, and the circumstance that income was payable to the settlor during his life did not negate the creation of an inter vivos trust. The Tribunal distinguished authorities relied upon by the Revenue as factually different (where property was contingent or the assets were not divested). The Tribunal therefore held that the condition of divesting ownership for constitution of the trust was satisfied for purposes of registration under section 12AA.

The finding that no trust came into existence for want of divesting of ownership was not sustained and did not justify refusal of registration.

Dominant charitable object - Preference to settlor's relatives and public character - Genuineness of activities - Limited scope of enquiry at registration stage vis-a -vis assessment (section 13) - Whether preference in the deed to lineal descendants of the settlor's family renders the trust non-charitable and permits refusal of registration under section 12AA. - HELD THAT: - The Tribunal assessed the trust deed's objects and concluded that the dominant object - relief of poor or indigent Parsis, education and medical relief - is charitable. The proviso giving preference to certain lineal descendants applies only 'in competing cases' and operates as a preference among eligible beneficiaries when disbursing charitable relief; it does not convert the trust into a family trust where relatives are the sole or primary objects. Precedents where mere preference to relatives did not destroy charitable character were applied, and cases relied upon by the Commissioner were held distinguishable on facts (those involved trusts conferring primary or exclusive benefit on relatives or lacked divestment). The Tribunal also emphasised that detailed scrutiny of application of funds and any contravention falling under section 13(1) is a matter for assessment proceedings, not for the limited, prima facie registration enquiry under section 12AA, which is confined to objects and genuineness of activities.

The proviso preferring certain relatives did not render the trust non-charitable and was not a valid ground to refuse registration under section 12AA.

Final Conclusion: The Tribunal (majority) allowed the appeal, holding that the trust was validly constituted and its dominant objects were charitable; the Director of Income-tax (Exemption) erred in refusing registration and was directed to register the trust under section 12AA from the date of filing of the application.

Carry forward of unabsorbed business loss - return filed within the statutory period under Section 139(1) - disentitlement under Section 139(3) and Section 80 - return treated as one under Section 139(4) - carry forward of unabsorbed depreciation

Carry forward of unabsorbed business loss - return filed within the statutory period under Section 139(1) - disentitlement under Section 139(3) and Section 80 - Assessee not entitled to carry forward unabsorbed business loss for AY 2005-06 where return was filed after the statutory due date. - HELD THAT: - The Court held that entitlement to carry forward business loss depends on loss being determined in pursuance of a return filed within the time prescribed by Section 139(1). Sections 139(3) and 80 operate to disentitle an assessee from carrying forward business loss unless the return of loss is furnished within the statutory period; a return filed after the due date cannot be treated as a return under Section 139(1) for that purpose. In the present case the return was dispatched on the last date but received by the Assessing Officer after the statutory due date, and therefore could not confer the statutory right to carry forward unabsorbed business loss. The Tribunal's conclusion declining carry forward of business loss was affirmed for these reasons. [Paras 4, 5]

Carry forward of unabsorbed business loss denied as return was not filed within the statutory period and Sections 139(3) and 80 disentitle such carry forward.

Return treated as one under Section 139(4) - carry forward of unabsorbed depreciation - Assessee entitled to carry forward unabsorbed depreciation computed in assessment completed on the basis of a belated return treated under Section 139(4). - HELD THAT: - The Court observed that an assessing officer may complete assessment on the basis of a return filed after the due date under Section 139(4), and such assessment can determine losses and depreciation for that assessment. Unlike business loss, there is no provision equivalent to Sections 139(3) and 80 that bars carry forward of depreciation determined in an assessment based on a belated return. Consequently, the Tribunal was correct in allowing carry forward of unabsorbed depreciation while treating the return as one under Section 139(4). [Paras 5]

Carry forward of unabsorbed depreciation allowed as there is no statutory bar to carrying forward depreciation determined in an assessment based on a belated return under Section 139(4).

Final Conclusion: The appeal is dismissed: the Tribunal correctly refused carry forward of unabsorbed business loss because the return was not filed within the statutory period, and correctly allowed carry forward of unabsorbed depreciation determined in the assessment based on the belated return.

Erroneous and prejudicial to the interest of the Revenue - jurisdiction under section 263 of the Income Tax Act - non-application of mind

Erroneous and prejudicial to the interest of the Revenue - non-application of mind - jurisdiction under section 263 of the Income Tax Act - Validity of the Commissioner's exercise of power under section 263 in setting aside assessments for the years 1978-79 to 1983-84 which the Tribunal had quashed as not being erroneous or prejudicial to the Revenue. - HELD THAT: - The Court examined whether the Assessing Officer's consolidated assessments for the six years reflected application of mind or were so sketchy and perfunctory as to be legally erroneous and prejudicial to the Revenue. The Assessing Officer accepted the assessee's admitted investment based on the assessee's valuer without addressing the disparity with the Departmental Valuer's estimate, completed the assessments on the date of his retirement, and recorded no reasoned findings explaining the basis for accepting the assessee's figures or reconciling the conflicting valuation reports. Such omission amounted to non-application of mind, which falls within the expression "erroneous" for the purposes of section 263. On that basis the Commissioner, after considering the replies, was justified in treating the orders as erroneous and prejudicial and setting them aside for fresh adjudication. The Tribunal's conclusion that the Assessing Officer had applied mind and that the Commissioner had not pinpointed any legal error was held to be incorrect in the facts of this case. [Paras 11, 12]

The Tribunal's order quashing the proceedings under section 263 is disapproved; the assessments were held to be erroneous and prejudicial to the Revenue and the question is answered in favour of the Revenue.

Final Conclusion: The reference is answered against the assessee and in favour of the Revenue: the Commissioner was justified in invoking section 263 to set aside the assessments for the years 1978-79 to 1983-84 on grounds of non-application of mind, and the Tribunal's quashing of those proceedings is not sustained.

Income from house property - Profits and gains of business or profession - Developing, operating and maintaining an industrial park as business activity - Deduction under section 80IA(4)(iii) - Deduction of tax at source under section 194I not determinative of head of income

Income from house property - Profits and gains of business or profession - Developing, operating and maintaining an industrial park as business activity - Deduction under section 80IA(4)(iii) - Deduction of tax at source under section 194I not determinative of head of income - Whether the rental income from letting out premises should be assessed as income from house property or as business income arising from development and operation of an industrial park - HELD THAT: - The Tribunal examined competing findings of the Assessing Officer and the CIT(A). It accepted that income from developing and operating an industrial park may constitute business income (and may attract deduction under section 80IA(4)(iii)) and rejected the Revenue's submission that TDS under section 194I conclusively determines the head of income. The Tribunal found the record before it deficient to determine whether the assessee's premises had been held out, notified or operated as an industrial park within the meaning of the scheme and whether the activity of providing amenities and services was predominant over mere letting out of buildings. Because material showing notification or that the industrial-park character and predominance of amenities over letting out were established was absent, the Tribunal held that the question requires further verification and fresh adjudication by the Assessing Officer with opportunity to the assessee. The Tribunal therefore remitted the issue to the Assessing Officer for proper verification of (a) whether the premises qualified as an industrial park for the purposes of section 80IA(4)(iii) and applicable rules/scheme, and (b) whether on facts the predominant character of the activity was development/operation of an industrial park (with amenities and services) or mere letting out of buildings, directing readjudication in accordance with law after affording hearing. [Paras 17, 18, 20, 21, 22]

Issue remitted to the Assessing Officer for verification and fresh adjudication as to whether the receipts are business income from developing/operating an industrial park or income from house property; appeals of the Revenue allowed for statistical purposes.

Final Conclusion: The Tribunal did not finally decide the head of income; it remitted the question to the Assessing Officer for fresh verification and readjudication (with hearing) whether the assessee's activities and governmental approvals establish an industrial-park character such that the receipts are business income; Revenue's appeals allowed for statistical purposes.

Power under section 119(2)(b) to condone delay - discretionary relief for avoiding genuine hardship - quashing administrative orders for failure to apply beneficent provision - remand for fresh disposal after affording opportunity

Power under section 119(2)(b) to condone delay - discretionary relief for avoiding genuine hardship - Central Board of Direct Taxes' power under section 119(2)(b) to consider condoning delay and grant relief even after the period of limitation and whether impugned orders rejecting petitions on the ground of lack of power were liable to be quashed. - HELD THAT: - The Court applied the principle laid down by the Division Bench in Mysore Sales International Ltd. v. Member, CBDT that the CBDT possesses sufficient powers under section 119(2)(b) of the Income-tax Act to consider the desirability or expediency of granting relief under the Act even after expiry of any specific period of limitation, where relief is intended to avoid genuine hardship. The impugned orders rejected the petitions solely on the ground that the CBDT had no power to condone the delay and therefore failed to apply itself to the benevolent provision in section 119(2)(b). For that reason the orders were held to be unsustainable. The matter was remitted to the CBDT for fresh disposal on merits after affording the petitioner an opportunity to be heard. [Paras 3, 4]

Impugned orders quashed and matter remanded to CBDT for fresh consideration and disposal on merits after affording opportunity to the petitioner.

Final Conclusion: Writ petitions allowed; orders dated March 7, 2008, July 1, 2009 and February 24, 2010 are quashed and the matter is remanded to the CBDT for fresh disposal in accordance with law after giving the petitioner an opportunity.

Assessment on the basis of unexplained seized assets - burden to explain source of seized goods - assessment under section 69B - appellate remand for fresh consideration

Appellate remand for fresh consideration - assessment under section 69B - Validity of the Tribunal's remand to the first appellate authority that CIT(A) had not considered materials on which the assessment was made - HELD THAT: - The Tribunal remanded the Revenue's appeal on the ground that the CIT(A) had not considered the assessment order with reference to the materials relied upon, particularly in relation to section 69B. The High Court observed that such remand simply affords the assessee an opportunity before the first appellate authority to substantiate its case and does not prejudice the assessee. The Court found no infirmity in the Tribunal's approach and no ground for interference with the remand direction. [Paras 3]

The challenge to the remand was dismissed and the remanded matter may be pursued before the first appellate authority.

Assessment on the basis of unexplained seized assets - burden to explain source of seized goods - Sustainability of additions made in block assessment based on recovery of unaccounted gold when the assessee failed to establish the source - HELD THAT: - The assessment, arising from search and seizure of gold, required the assessee to explain the source of the recovered gold. The assessee's defence-that the gold belonged to 27 goldsmiths and was held as security-was examined by the AO, CIT(A) and the Tribunal. The authorities found the goldsmiths' confirmations and receipts to be stereotyped and unconvincing, and held that the assessee failed to establish the claimed source. The High Court found no reason to interfere with the Tribunal's reconfirmation of the additions where the source of the seized gold remained unproved. [Paras 4]

The Tribunal's dismissal of the assessee's appeal against additions based on recovered gold was upheld.

Final Conclusion: Both appeals were dismissed: the remand to the first appellate authority was sustained, and the Tribunal's confirmation of additions in the block assessment (for unexplained gold) was upheld; the assessee remains free to pursue the remanded proceedings before the CIT(A).

Transfer Pricing adjustment - Arm's Length Price - Comparable selection in transfer pricing analysis - Transactional Net Margin Method (TNMM) - proviso to section 92C(2) regarding de minimis adjustment

Transfer Pricing adjustment - Arm's Length Price - Comparable selection in transfer pricing analysis - Transactional Net Margin Method (TNMM) - proviso to section 92C(2) regarding de minimis adjustment - Deletion of the transfer pricing adjustment of Rs. 1,45,52,537/- made by the TPO/AO to import price from the associated enterprise. - HELD THAT: - Tribunal examined the TPO's selection and rejection of comparables, the treatment of closing stock of traded goods, and the methodology applied under TNMM. The tribunal upheld the CIT(A)'s finding that the TPO incorrectly reduced operating profit by simply excluding closing stock of trading goods; instead the operating profit attributable to trading activity must be worked out and excluded on a pro rata basis, yielding a higher manufacturing operating profit. The Tribunal accepted CIT(A)'s conclusion to exclude Indian Toners & Developers Ltd. as a comparable on facts (product characteristics, raw-material intensity, packaging, excise/tariff headings and differing NIC codes) and to include Atul Ltd. (its related-party transactions falling within the range recognised by prior authority). On recalculation (after excluding Indian Toners and including Atul) the mean operating profit was lowered to 4.98% and the resulting adjustment fell below the 5% threshold in the proviso to section 92C(2), so no transfer pricing adjustment was warranted. The Tribunal therefore confirmed deletion of the TPO/AO addition to the extent considered by CIT(A), subject to the separate remand noted below. [Paras 21, 22]

Confirmed deletion of the TPO/AO transfer pricing adjustment; no adjustment required as recalculated OPM produces an adjustment below the 5% proviso threshold.

Transfer Pricing adjustment - Remand to CIT(A) of issues left undecided by CIT(A) in rectification under section 154 and consequential grounds in cross-objection and appeal under section 154. - HELD THAT: - The Tribunal observed that ground no. 6.6 before the CIT(A) was not disposed of and that the CIT(A)'s rectification under section 154, which sustained an addition of Rs. 40.42 lacs, was passed without affording the assessee an opportunity of being heard. The Tribunal restored the unresolved issue(s) and all grounds challenging the section 154 order to the file of the CIT(A) for fresh decision after affording reasonable opportunity to both parties, so that the rectification and related grounds are decided together. [Paras 19]

Issue remanded to CIT(A) for fresh consideration and decision after affording reasonable opportunity of being heard.

Deductibility of employee welfare expenditure - Allowability of amount disallowed by AO out of picnic and other welfare expenses (Rs. 3,09,031/-). - HELD THAT: - AO disallowed one-fourth of claimed staff welfare expenditure as not sufficiently explained. CIT(A) examined the material and found the expenditure was incurred for employees' welfare and for business expediency, relying on factual satisfaction and relevant precedent. No contrary material was placed before the Tribunal to disturb CIT(A)'s factual finding. The Tribunal treated the CIT(A)'s conclusion as a finding of fact uncontroverted by the department and affirmed the allowance. [Paras 26, 27]

Disallowance deleted; entire welfare/picnic expenditure allowed.

Set-off of brought forward unabsorbed depreciation - Allowability of set-off of brought forward unabsorbed depreciation against current year's income from other sources. - HELD THAT: - AO denied the set-off; CIT(A) allowed it following the decision of the Delhi High Court in Escorts Electronics Ltd. Tribunal found CIT(A)'s conclusion remained uncontroverted by the department, treated it as a binding factual-legal finding on the record and confirmed the allowance of the set-off of unabsorbed depreciation against income from other sources for the year under appeal. [Paras 29, 30]

Allowance of set-off of brought forward unabsorbed depreciation against current year's income from other sources confirmed.

Final Conclusion: Tribunal confirms deletion of the major transfer pricing adjustment after reassessing comparables and TNMM calculations (no adjustment required under the proviso to section 92C(2)); directs remand to CIT(A) for fresh decision on issues left undecided and on the rectification under section 154 after affording opportunity to parties; affirms deletion of the welfare expense disallowance and confirms allowance of set-off of brought forward unabsorbed depreciation. Appeals disposed accordingly.

Valuation of closing stock on cost or net realizable value, whichever is less - bona fide accounting estimate and consistency in valuation - application of section 145A - valuation in accordance with method of accounts regularly employed - disallowance under section 14A and presumption of investment from non interest bearing funds - allowability of provident fund contribution paid before filing return despite being beyond statutory grace period - consequential recomputation and adjustment of interest

Valuation of closing stock on cost or net realizable value, whichever is less - bona fide accounting estimate and consistency in valuation - application of section 145A - valuation in accordance with method of accounts regularly employed - Validity of the assessee's valuation of closing stock of news programmes and TV serials and deletion of addition made for undervaluation - HELD THAT: - The Tribunal found that the assessee consistently followed the recognized accounting method of valuing inventory at cost or net realizable value, whichever is less, and that the change in net realizable value assigned to news programmes (to nil after first exploitation) and to TV serials (to 3.33% after second exploitation) reflected a bona fide valuation in light of market practice. Comparative accounting policies of industry peers showed that current/topical programmes are fully amortised on first exploitation. The Tribunal rejected the Revenue's reliance on section 145A as inapplicable to negate the assessee's regularly followed valuation method, and distinguished authorities cited by the Department as factually inapposite. On these grounds the addition on account of alleged undervaluation of closing stock was deleted.

Addition of Rs. 2,14,16,107 for undervaluation of closing stock deleted; assessee's valuation upheld as bonafide and consistent.

Disallowance under section 14A and presumption of investment from non interest bearing funds - Validity of disallowance under section 14A in respect of investments and deletion of such disallowance - HELD THAT: - The Tribunal examined the composition and timing of investments relied upon by the Assessing Officer and found factual errors in the AO's computation: certain amounts treated as investments in shares included debentures and non cumulative preference shares, the latter having been made prior to 31 March 2001 when the assessee had no borrowed funds. Only Rs. 46,99,000 represented investments made during the year; the assessee had readily available non interest bearing funds of Rs. 90,47,73,000. Applying the presumption endorsed by the Bombay High Court that investments are to be presumed funded from non interest bearing funds when such funds are available, the Tribunal held that no disallowance under section 14A was warranted and deleted the disallowance.

Disallowance under section 14A deleted; assessee succeeds on this ground.

Allowability of provident fund contribution paid before filing return despite being beyond statutory grace period - Allowability of employers' and employees' provident fund contributions paid partly within statutory grace period and partly after that but before filing the return - HELD THAT: - The Tribunal reviewed the payment dates and observed that contributions for several months were made within the statutory grace period. For the remaining months, payments were made before the end of the accounting year and in any event before the due date for filing the return. Relying on a coordinate decision of the Mumbai Bench which allowed employees' provident fund contributions paid beyond the grace period if paid before return filing, the Tribunal permitted the deductions. Consequently the addition in respect of provident fund contributions was deleted.

Addition of Rs. 3,89,610 relating to provident fund contributions deleted; deductions allowed.

Deduction under section 80HHF - ground not pressed - Claim under section 80HHF not pressed and accordingly not adjudicated on merits - HELD THAT: - The assessee declined to press ground relating to section 80HHF and the Department did not oppose. The Tribunal therefore recorded that the ground was not pressed and did not decide the substantive entitlement.

Ground relating to deduction under section 80HHF dismissed as not pressed.

Consequential recomputation and adjustment of interest - Direction to Assessing Officer to give consequential effect to appellate deletions and recompute interest under sections 234B and 234C - HELD THAT: - The Tribunal observed that adjustments arising from allowance of grounds would have consequential impact on computation of income and related interest. It directed the Assessing Officer to make recomputation and give consequential effect in accordance with law.

Assessing Officer directed to give consequential effect and recompute income and interest accordingly.

Final Conclusion: Assessee's appeal allowed in part: additions for undervaluation of closing stock, disallowance under section 14A and provident fund contribution addition deleted; section 80HHF ground dismissed as not pressed; Assessing Officer to give consequential effect and recompute income and interest in accordance with law.

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - Concealment of particulars or furnishing inaccurate particulars of income - Bona fide claim and disclosure in the return - Relevance of quantum findings to penalty proceedings - Duty to disclose material facts at time of filing return

Penalty under section 271(1)(c) - Explanation 1 to section 271(1)(c) - Concealment of particulars or furnishing inaccurate particulars of income - Bona fide claim and disclosure in the return - Relevance of quantum findings to penalty proceedings - Whether penalty under section 271(1)(c) was leviable for the addition made in Assessment year 2002-03 - HELD THAT: - The Tribunal examined whether the assessee had concealed particulars of income or furnished inaccurate particulars so as to attract section 271(1)(c). The Court held that findings in the quantum proceedings, though relevant, are not conclusive for penalty since penalty requires independent satisfaction that concealment or inaccurate particulars existed. Explanation 1 to section 271(1)(c) was considered: the deeming provision applies only where (A) no explanation is offered or the explanation is found false, or (B) the explanation is not substantiated and the assessee fails to prove that the explanation is bona fide and that all material facts were disclosed. Both limbs of clause (B) must be cumulatively satisfied. On the facts the assessee had in its books and in the return disclosed the payment to NOPL and furnished the background (note to accounts and Schedule M reference to suit No. 3578), and the payment was of the same character as interim payments earlier allowed in prior years. The Tribunal's quantum conclusion that the payment was not deductible did not by itself establish concealment or furnishing of inaccurate particulars. The Tribunal's reliance on the Special Bench decision about character of the receipt in the hands of the recipient does not conclusive ly determine the assessee's bona fides at the time of filing. Applying Explanation 1, the Court found the assessee did offer an explanation (so clause (A) not attracted); although the Assessing Officer disbelieved the explanation (so the first part of clause (B) was engaged), the assessee nevertheless proved the explanation was bona fide and that material facts had been disclosed at the time of filing the return. Because both elements required by clause (B) were not satisfied cumulatively, the deeming provision did not apply and penalty could not be sustained. Consequently the majority concluded penalty under section 271(1)(c) was not leviable for Assessment year 2002-03.

Penalty under section 271(1)(c) is not leviable in respect of the addition for Assessment year 2002-03; the assessee's appeal is allowed.

Final Conclusion: Penalty imposed under section 271(1)(c) in relation to the disallowance for Assessment year 2002-03 is quashed: the assessee made a bona fide claim and disclosed material facts in the return, and Explanation 1 to section 271(1)(c) was not attracted; the appeal is allowed.

Transfer by way of distribution of capital assets - dissolution of a firm and chargeability under section 45(4) - statutory vesting under Part IX of the Companies Act - statutory vesting not constituting distribution for section 45(4) - capital gains chargeability and timing of transfer - allowability of depreciation where firm continues

Transfer by way of distribution of capital assets - dissolution of a firm and chargeability under section 45(4) - statutory vesting under Part IX of the Companies Act - statutory vesting not constituting distribution for section 45(4) - Applicability of section 45(4) where a partnership firm is treated as a company under Part IX of the Companies Act - HELD THAT: - The Court held that section 45(4) requires (a) a transfer by way of distribution of capital assets and (b) dissolution of the firm (or similar). Vesting of the firm's properties in a company under Part IX is a statutory vesting and not a distribution by way of dissolution. Distribution on dissolution presupposes division, realisation and appropriation; statutory vesting under Part IX effects succession without such distribution. Prior decisions relied on by Revenue were distinguishable on facts. The legislative history and subsequent amendment to section 47 corroborate that succession under Part IX does not attract section 45(4). Accordingly section 45(4) is not attracted in the conversion under Part IX. [Paras 14, 16, 17, 18, 23]

Section 45(4) does not apply where a firm is treated as a company under Part IX; no capital gain arises under section 45(4) in such conversion.

Capital gains chargeability and timing of transfer - transfer by way of distribution of capital assets - Whether any capital gain arose in assessment year 1995-96 or in assessment year 1996-97 as a result of the formation of the company - HELD THAT: - The Tribunal had divergent views, but the Court found that, on the correct interpretation of section 45(4) and the facts of statutory succession under Part IX, no capital gain arose in assessment year 1995-96. The Revenue's contention that chargeability belonged to AY 1996-97 was rejected because the primary premise that a transfer (by distribution) had occurred in the conversion was held not to exist. Thus there was no capital gain chargeable in AY 1995-96. [Paras 5, 23]

No capital gain was chargeable in assessment year 1995-96; the Revenue's contention as to timing is answered against it.

Allowability of depreciation where firm continues - Allowability of depreciation to the firm for assessment year 1995-96 despite alleged dissolution on March 31, 1995 - HELD THAT: - The lower authorities concurrently found that the firm continued up to the date of incorporation of the company (April 3, 1995) and that no dissolution occurred on March 31, 1995. That finding was not shown to be perverse or erroneous. Given continuation of the firm through the relevant period, depreciation for assets pertaining to that period was allowable to the firm for AY 1995-96. [Paras 5, 24]

Depreciation claimed by the firm for the period up to March 31, 1995 is allowable; question answered against the Revenue.

Final Conclusion: The appeal is dismissed. Conversion of the partnership into a company under Part IX does not attract section 45(4) and no capital gain arose in AY 1995-96; depreciation claimed for the period up to the continuation of the firm is allowable.

Rejection of books of account under section 145(3) - additions by deeming unexplained money/stock/expenditure as income under sections 69, 69A and 69C - best judgment assessment under section 144 - satisfaction of the Assessing Officer as determinative for invoking deeming provisions - disallowance of interest as non-business expenditure in respect of interest free advances to a related concern - concurrent findings of fact by AO, CIT(A) and ITAT

Rejection of books of account under section 145(3) - additions by deeming unexplained money/stock as income under sections 69 and 69A - satisfaction of the Assessing Officer as determinative for invoking deeming provisions - Whether the Assessing Officer rightly rejected the books of account and made additions under the deeming provisions in respect of unexplained cash and stock - HELD THAT: - The courts below found on concurrent factual satisfaction that certain sale transactions were recorded on loose slips discovered during survey and were not entered in the regular books, and that cash book entries for the period 26 April 2002 to 6 May 2002 were missing. Physical verification disclosed discrepancies in cash and stock which the assessee partly surrendered in the return but failed to explain fully. The Assessing Officer therefore invoked section 145(3) to reject the accounts and, relying on his satisfaction about unexplained money/stock, made additions by applying the deeming provisions (sections 69, 69A and 69C) and/or estimated income under section 144. The court held that whether the explanation is satisfactory is a matter of the Assessing Officer's satisfaction and that the concurrent findings of fact recorded by the AO, CIT(A) and ITAT that the explanations and evidence were not cogent cannot be said to be perverse. The High Court distinguished the relied upon authorities on their facts and found no infirmity in upholding the rejection and additions. [Paras 13, 17, 18, 21, 22]

The rejection of the books of account and the additions under the deeming provisions were held to be justified and were upheld.

Disallowance of interest as non-business expenditure - advances to sister concern on interest free basis - Whether the disallowance of part of the interest claimed, on the ground that interest free advances to a sister concern represented funds used for non business purposes, was valid - HELD THAT: - The Assessing Officer found that the assessee advanced funds to a sister concern without charging interest while the assessee itself had incurred interest expense. On the factual material the AO computed deemed interest on the advance (at the rate applied by him) and disallowed that portion as incurred for non business purpose. The CIT(A) and the ITAT upheld the factual satisfaction and the disallowance. The High Court accepted the concurrent factual findings and held that these findings are not open to interference in exercise of its jurisdiction. [Paras 14]

The disallowance of interest in respect of the interest free advance to the sister concern was upheld.

Final Conclusion: The High Court dismissed the appeal, upholding the concurrent factual findings of the Assessing Officer, Commissioner (Appeals) and ITAT regarding rejection of books, additions under the deeming provisions and the disallowance of interest, and found no merit to interfere with those determinations.

Confiscation for non-conformity with PFA standards - redemption fine - penalty under section 112(a) of the Act - bonafide reliance on foreign test certificate - re-export accepted by foreign supplier

Confiscation for non-conformity with PFA standards - redemption fine - Liability to confiscation for goods not conforming to Prevention of Food Adulteration standards and the quantum of redemption fine. - HELD THAT: - The Tribunal accepted that bakery shortening not conforming to standards under the Prevention of Food Adulteration Act, 1954 read with PFA Rules, 1955 is liable to confiscation; however, having regard to the absence of any role or mala fides attributable to the importer and considering the duty involved, the Tribunal found the originally imposed redemption fine excessive and reduced it. The Tribunal applied its earlier reasoning in C/379/11 dated 18.8.11 which held that where no culpability is attributed to the importer and the importer had acted on the supplier's certificate, a high redemption fine disproportionate to the duty involved should be reduced. Following that precedent, the redemption fine in the present appeal was reduced to Rs.3.5 lakhs. [Paras 4, 5]

Goods liable to confiscation for non-conformity with PFA standards; redemption fine reduced to Rs.3.5 lakhs.

Penalty under section 112(a) of the Act - bonafide reliance on foreign test certificate - re-export accepted by foreign supplier - Validity of imposition of penalty on the importer under section 112(a) in view of importer's bona fide reliance on foreign test certificates and the supplier's agreement to re-export. - HELD THAT: - The Tribunal observed that the importer had produced certificates from the foreign testing agency indicating conformity and had bona fide believed those certificates. The impugned order did not attribute knowledge or mala fide to the importer, and the importer promptly arranged with the foreign supplier for re-export when non-conformity was detected. On these facts, and by application of the Tribunal's earlier decision in the identical matter, the imposition of penalty on the importer was held unjustified and was set aside. [Paras 4, 5]

Penalty of Rs.5 lakhs imposed on the importer under section 112(a) is set aside.

Final Conclusion: The appeal is allowed in part: confiscation for non-conformity upheld, redemption fine reduced to Rs.3.5 lakhs, and the penalty imposed on the importer is set aside; appeal disposed of accordingly.

Winding up petition for inability to pay debts - bona fide and substantial dispute (bar to winding up) - afterthought defence / contemporaneously raised dispute test - statutory notice under Sections 433 and 434 of the Companies Act - filing of civil suit or arbitration clause not a bar to winding up - court's discretion to admit petition subject to deposit

Bona fide and substantial dispute (bar to winding up) - afterthought defence / contemporaneously raised dispute test - The respondent's defence that the debt is disputed is not a bona fide and substantial dispute and is an afterthought. - HELD THAT: - Applying the test that a bona fide dispute must be raised contemporaneously and should not be a spurious or belated mask to defeat a creditor's claim, the Court examined the chronology of events, correspondence and conduct of the parties. The respondent did not raise any grievance about alleged non-performance, delay or omission until well after the invoices were raised and after repeated reminders; the assignment of work to a third party occurred without prior notice to the petitioner and the respondent first set out its objections only in its letter dated 04.05.2010. The respondent likewise failed to specify what items were left unperformed or to produce contemporaneous communications evidencing complaints. On the record and in light of the authorities, the Court concluded that the dispute was raised as an afterthought, lacked bonafides and therefore did not constitute a substantial defence to bar the winding up petition. [Paras 15, 16, 17, 19]

The defence is not bona fide or substantial; it is an afterthought and does not preclude admission of the winding up petition.

Statutory notice under Sections 433 and 434 of the Companies Act - filing of civil suit or arbitration clause not a bar to winding up - Neither the pendency of a civil suit for recovery nor the existence of an arbitration clause in the contract bars maintenance of a winding up petition where the debt is not bona fide disputed. - HELD THAT: - The Court reiterated that remedy under Sections 433 and 434 is a special statutory remedy and is not eclipsed by an ordinary civil suit; filing a suit for recovery to preserve limitation does not preclude a creditor from seeking winding up. Further, arbitration clauses do not preclude proceedings in rem such as insolvency or winding up, and insolvency/winding up matters are generally non-arbitrable. Therefore the respondent's reliance on the pending suit or on the arbitration clause does not operate as a bar where, as here, the defence to the debt is found to be spurious and not bona fide. [Paras 20, 21]

The existence of a civil suit or an arbitration clause does not defeat the petition once the Court is satisfied the debt is not bona fide disputed.

Winding up petition for inability to pay debts - court's discretion to admit petition subject to deposit - The petition is fit for admission; the Court admits the petition subject to an opportunity to the respondent to deposit the invoiced amounts within a stipulated time. - HELD THAT: - Having found the respondent's defence to be an afterthought and lacking bonafides, and having considered authorities permitting the court to require payment before ordering advertisement/admission in appropriate cases, the Court held that the petition should not be dismissed at threshold. In exercise of its discretion and mindful of other aspects urged by the respondent, the Court granted the respondent a limited period to deposit the invoice amounts in Court and directed that the question of admission and publication of advertisement would be considered thereafter. [Paras 26, 29, 30, 31]

The petition is admitted in substance; respondent is granted time to deposit the invoice amounts and the Court will consider admission/publication thereafter.

Final Conclusion: The High Court found the respondent's defence to be an afterthought and not a bona fide substantial dispute, held that neither a pending civil suit nor an arbitration clause bars the winding up petition in these circumstances, and directed that the respondent be given four weeks to deposit the invoiced amounts in Court; the Court will thereafter consider the petitioner's request for admission and publication of advertisement.

Res judicata - Constructive res judicata - Acquiescence and delay as bar to relief - Privy/representation and alter ego doctrine - Fraud vitiates proceedings and court orders - Implementation of a court sanctioned scheme and protection of third party rights

Res judicata - Constructive res judicata - Privy/representation and alter ego doctrine - Whether the application to recall and set aside the court sanctioned scheme of amalgamation is barred by res judicata/constructive res judicata and by representation of interests (privies/alter egos) of the applicants in earlier proceedings. - HELD THAT: - The court held that the present applicants (including private companies) were bound by the findings in the earlier proceedings because the living shareholders who controlled those companies had participated in the earlier litigation by filing supporting affidavits and thereby represented the interests of the companies. Applying principles of representation, privy and res judicata, the court concluded that the issues raised in the present application had been previously raised or were matters which ought to have been raised earlier; earlier findings and the appellate affirmance and dismissal of special leave petition rendered the point final between these parties or their privies. Consequently the learned trial judge rightly dismissed the application on the ground of res judicata/constructive res judicata. [Paras 11, 12, 13, 25, 26]

Application dismissed on the ground that it is barred by res judicata/constructive res judicata and because the applicants (through their controlling shareholders) are privies/represented in earlier proceedings.

Acquiescence and delay as bar to relief - Fraud vitiates proceedings and court orders - Implementation of a court sanctioned scheme and protection of third party rights - Whether the alleged fraud and irregularity in service of notice and conduct of meetings - though found in the record - can sustain relief after long delay and acquiescence where the scheme has been implemented and third party rights have intervened. - HELD THAT: - The court recognised that allegations and materials in the record established irregularities in convening and conduct of the meetings and recorded findings to the effect that such meetings were illegally convened and that there was evidence of fraud in the proceedings. However, the court also upheld earlier findings of delay and acquiescence: the applicants had constructive or actual knowledge and failed to act within a reasonable time, some of them participated in earlier proceedings, and substantial implementation of the sanctioned scheme had taken place such that companies no longer existed in their prior form and third party rights had arisen. For these reasons the court held that despite the evidence of irregularity/fraud, the belated challenge could not be entertained and relief could not be granted. [Paras 35, 36, 37, 38, 39]

Relief denied because of inordinate delay and acquiescence and because the scheme has been implemented and third party rights intervened, notwithstanding the recorded irregularities.

Judicial economy: bar of res judicata precluding determination of collateral issues - Whether the learned trial judge ought to have gone on to decide the detailed service of notice and related findings after correctly holding the matter barred by res judicata/acquiescence. - HELD THAT: - The court held that once the matter was found to be barred by res judicata and acquiescence, the exercise of going on to decide collateral questions of service and notice was unnecessary and uncalled for. Accordingly, those findings of the trial judge on the notice point were set aside as they were rendered superfluous by the primary bar. [Paras 14, 15]

Findings of the trial judge on the notice point were set aside as uncalled for after determining the bar of res judicata/acquiescence.

Final Conclusion: The appeal is dismissed and the cross objection allowed: the application to recall and set aside the court sanctioned scheme of amalgamation is barred by res judicata, constructive res judicata and by the applicants' acquiescence and delay; collateral findings on service and notice are set aside as unnecessary, and no relief is granted because the scheme has been implemented and third party rights have intervened.

Service tax liability for supervision, sampling and analysis charges - Burden of production of invoices and documentary proof to establish tax payment - Remand for verification of prior tax payment by a third party - Stay of demand pending fresh adjudication

Service tax liability for supervision, sampling and analysis charges - Burden of production of invoices and documentary proof to establish tax payment - Whether the demand of service tax on supervision, sampling and analysis charges against the appellant is sustainable where it is alleged that such services were taxed and invoiced to KPCL by the service provider. - HELD THAT: - The Tribunal found that the appellant contended the supervision, sampling and analysis services were performed by M/s SGL who paid service tax and issued invoices in the name of KPCL. Those invoices were not placed before the lower authorities. The Bench observed that if KPCL had in fact paid service tax on those charges, the demand against the appellant would not survive. Because the appellant failed to produce the invoices before the adjudicating authority, the question of whether the service tax on the entire activity has been discharged remains unresolved. Consequently the matter requires re-examination by the original adjudicating authority to correlate facts and verify whether service tax has already been paid on the said activities. The adjudicating authority is directed to afford the appellant a reasonable opportunity of hearing to present documentary evidence establishing prior tax payment. [Paras 5]

Matter remanded to the original adjudicating authority for verification of whether service tax on supervision, sampling and analysis charges has been paid and for fresh adjudication after giving the appellant an opportunity of hearing.

Stay of demand pending fresh adjudication - Whether the stay application against the demand should be allowed pending disposal of the appeal/re-examination. - HELD THAT: - The Tribunal considered the stay application and, noting the need to decide the appeal on merits and to obtain documentary verification from the adjudicating authority, allowed the stay petition and proceeded to remand the substantive matter for fresh consideration. The stay was granted as an interim measure in aid of effective adjudication on remand. [Paras 4, 6]

Stay of the demand granted pending fresh adjudication; stay application disposed of accordingly.

Final Conclusion: The appeal is disposed by remanding the matter to the original adjudicating authority to verify whether service tax on supervision, sampling and analysis charges has already been paid (with a direction to afford a reasonable opportunity of hearing to the appellant); the interim stay of the demand is granted pending such fresh adjudication.

Eligibility for small scale exemption - exemption for services provided in relation to agriculture - Business Auxiliary Service - exemption notification - principles of natural justice - remand for fresh adjudication

Eligibility for small scale exemption - Business Auxiliary Service - Whether the appellant was correctly denied benefit of small scale exemption in computation of Service Tax liability for the period 2005-2006. - HELD THAT: - The adjudicating authority itself recorded that the appellant is eligible for small scale exemption but nevertheless included the said amount in confirming demand. The Tribunal found this conclusion erroneous. Because the lower authority's treatment is inconsistent with its recording of eligibility, the matter cannot be sustained and requires fresh consideration. The Tribunal did not decide the merits but set aside the impugned order and remanded the issue to the adjudicating authority for reconsideration. [Paras 5]

Set aside and remanded to adjudicating authority for fresh consideration of small scale exemption, keeping all issues open.

Exemption for services provided in relation to agriculture - exemption notification - principles of natural justice - Whether services rendered by the appellant in relation to agriculture and on behalf of a client (M/s PICRIC Ltd.) are exempt from Service Tax for the period 2006-2007. - HELD THAT: - The Tribunal found the findings of the lower authorities on this point to be sketchy and noted absence of any reasoned adjudication on the merits. On perusal of the definition and the related notification governing taxability under Business Auxiliary Service, the Tribunal considered that the appellant may be eligible for the benefit of the exemption notification. Because no substantive findings were recorded, the Tribunal refused to express an opinion on merits and remanded the matter to the adjudicating authority to reconsider the question afresh after following the principles of natural justice. [Paras 5]

Set aside and remanded to adjudicating authority for fresh adjudication of agricultural-services exemption, with all issues kept open.

Final Conclusion: The appeal is allowed by way of remand: the impugned order is set aside and the matters concerning small scale exemption and exemption for services in relation to agriculture are remitted to the adjudicating authority for fresh consideration after affording opportunity under the principles of natural justice.

Waiver of pre-deposit - stay of recovery - prima facie classification - Erection, Commissioning and Installation Service - Consulting Engineering Service - service tax liability - reimbursement to service engineers

Waiver of pre-deposit - stay of recovery - prima facie classification - Application for waiver of pre-deposit of the disputed service tax, interest and penalty and stay of recovery - HELD THAT: - The Tribunal examined the appellant's application for waiver of the pre-deposit and a stay of recovery of the confirmed demand for service tax, interest and equal penalty. It found that, prima facie, the services in question - reimbursements received by service engineers for erection and commissioning of textile machinery - fall within the category of Erection, Commissioning and Installation Service and not within Consulting Engineering Service. The Tribunal observed that the lower authorities had not recorded any prima facie finding to justify classification of the services as Consulting Engineering Service. In view of this prima facie assessment and the absence of contrary provisional findings by the adjudicating authorities, the Tribunal concluded that the appellant had made out a case for unconditional waiver of the pre-deposit and for staying recovery pending disposal of the appeal.

Pre-deposit waived unconditionally and recovery stayed pending the appeal.

Final Conclusion: The Tribunal granted unconditional waiver of the pre-deposit and stayed recovery of the disputed service tax, interest and penalty, on the prima facie conclusion that the services are Erection, Commissioning and Installation Service rather than Consulting Engineering Service.

Cenvat credit on input services - Mandap Keeper Service - Requirement of particulars in invoices under Rule 4A of Service Tax Rules and Rule 9 of Cenvat Credit Rules - Pre-deposit for stay of recovery in appeal

Cenvat credit on input services - Mandap Keeper Service - Whether cenvat credit taken on service tax paid to five star hotels for conference facilities used in commercial training/coaching is prima facie admissible and whether pre-deposit on that head is required for admission of the appeal - HELD THAT: - The Tribunal observed that the appellants had availed five star hotel services for conducting their training and that the main component of those services is provision of conference halls which falls within the meaning of Mandap Keeper Service. The aggregate value is that received by the mandap keeper; where food is separately valued a rebate/abatement may be available to the service provider, but the Revenue cannot compel the provider to claim such rebate. On the material before it, prima facie the appellants appear to have availed the hotel services as input services for their output activity and there is no sufficient basis at the admission stage to call for a pre deposit in respect of these disputed hotel bills except as limited elsewhere in the order.

Pre-deposit in respect of cenvat credit claimed on five star hotel (mandap keeper) services is not required at the admission stage; merits to be examined during final hearing.

Requirement of particulars in invoices under Rule 4A of Service Tax Rules and Rule 9 of Cenvat Credit Rules - Whether absence or omission of prescribed invoice particulars in telephone and courier service bills justifies calling for pre-deposit for admission of appeal - HELD THAT: - The Revenue's objection was that certain invoices for telephone and similar services lacked details mandated by the Rules. The appellants produced letters from service providers (Reliance Infocom, Bharti Airtel etc.) certifying provision of services, payment of service tax and indicating registration numbers. The Tribunal found that, prima facie, the defects related to missing particulars which were subsequently addressed and that there was no sufficient reason to require pre deposit on this issue for admission.

No pre-deposit required at admission in respect of disputed telephone/courier invoices; merits to be considered at final hearing.

Pre-deposit for stay of recovery - Whether a specific portion of the confirmed demand corresponding to invoices raised in the name of the Director must be called for as pre-deposit - HELD THAT: - Counsel for the appellants conceded that certain five star hotel invoices (amounting to the specified sum) were in the name of the Director. The Tribunal recorded that such invoices give rise to reasonable doubt whether the services were for the Director's personal use rather than for the company's output service. In view of this conceded fact and the reasonable doubt, the Tribunal directed that that portion be called for as pre deposit for admission of the appeal.

Appellants to make the specified pre deposit (Rs.8,722) in respect of invoices in the Director's name within two weeks; pre deposit of the balance qua the impugned demand is waived for admission and collection stayed during pendency of the appeal.

Cenvat credit on input services - Requirement of particulars in invoices under Rule 4A of Service Tax Rules and Rule 9 of Cenvat Credit Rules - Remand of the merits of other disputed claims for final adjudication - HELD THAT: - The Tribunal limited its order at the admission stage to calling for a narrow pre deposit relating to invoices in the Director's name and observed that other contentions - including the admissibility of cenvat credit on hotel bills described as 'banquets' and on advertisement/telephone invoices where particulars were contested - require fuller examination on merits. Those matters were therefore left open for determination at the final hearing of the appeal.

Merits of the remaining disputed issues are remanded for fresh consideration at the final hearing; only the specified pre deposit is required for admission.

Final Conclusion: Deposit of the specified amount corresponding to invoices in the Director's name is directed as pre deposit; pre deposit of the balance is waived for admission and collection stayed, while the substantive merits of other disputed cenvat credit claims and invoice particulars objections are left to be decided at the final hearing.

Waiver of pre-deposit - stay of recovery - tour operator service - service tax liability - definition of "tour operator"

Waiver of pre-deposit - stay of recovery - tour operator service - Waiver of pre-deposit and stay of recovery in respect of the demand for service tax, education cess and penalty was allowed and the appeal was directed to be listed for hearing on 29.11.2011. - HELD THAT: - The application for waiver of pre-deposit and stay of recovery was considered in the context of a demand alleged to arise from provision of tour operator service for the period December 2002 to May 2005. The Bench noted that similar appeals on the same legal question (including issues arising from the amended definition of "tour operator") were listed for hearing on 29.11.2011 and that in some of those matters waiver and stay had been granted by this Bench. Given the relatively small amounts involved and the existence of parallel matters in which waiver and stay were allowed, the Bench exercised its discretion to grant the relief sought and directed that the appeal be placed for hearing on the specified date.

Waiver of pre-deposit and stay of recovery granted; appeal listed for hearing on 29.11.2011.

Final Conclusion: The application for waiver of pre-deposit and stay of recovery in respect of the service tax demand (including education cess and penalty) relating to December 2002 to May 2005 is allowed and the appeal is listed for hearing on 29.11.2011.

Waiver of pre-deposit - stay of recovery - prima facie case - input service - entitlement to input tax credit - credit of service tax paid on 'Share Registry Services' - reliance on tribunal precedent

Waiver of pre-deposit - stay of recovery - prima facie case - Application for waiver of pre-deposit of service tax, interest and equal penalty, and stay of recovery pending appeal. - HELD THAT: - The Tribunal considered the assessee's application for unconditional waiver of the pre-deposit and for a stay of recovery. The bench found that the assessee had established a strong prima facie case, and on that basis granted the prayer for waiver of the pre-deposit of tax and penalty and stayed recovery pending the appeal. The order records that the finding of a prima facie case was the determinative basis for exercising the Tribunal's discretionary power to waive the pre-deposit and to stay recovery.

Prayer for waiver of pre-deposit and stay of recovery granted; recovery stayed pending appeal.

Input service - entitlement to input tax credit - credit of service tax paid on 'Share Registry Services' - reliance on tribunal precedent - Whether the assessee was prima facie entitled to take credit of service tax paid on Share Registry Services as an input service. - HELD THAT: - The Tribunal examined the characterisation of 'Share Registry Service' and concluded that it falls within the second part of the definition of specified services constituting an input service. The bench relied on the stay order previously passed by the Tribunal in M/s. L&T Komatsu Ltd. v. Commissioner of Central Excise, Bangalore, which held that since 'sales promotion' is covered within the definition of input service, the credit claimed appears to have been availed in accordance with law. Acting upon that precedent and the claimed classification, the Tribunal found that the assessee had made out a strong prima facie case for entitlement to input tax credit on Share Registry Services, which justified granting the waiver and stay.

Assessee prima facie entitled to credit of service tax on Share Registry Services; this finding supported the grant of waiver and stay.

Final Conclusion: The Tribunal granted unconditional waiver of the pre-deposit of tax and penalty and stayed recovery pending appeal, having found a strong prima facie case that Share Registry Services qualify as an input service and that the claimed credit appears to have been availed in accordance with law, having regard to existing tribunal precedent.

Classification of goods for excise - prospective effect of Board circular issued under Section 37B - binding effect and finality of Tribunal majority order - restriction of duty demand to six months' period (limitation) - de novo adjudication bound by appellate directions - retrospective validation of show-cause notices by amendment to limitation provisions (Section 110, Finance Act, 2000 re Section 11A)

De novo adjudication bound by appellate directions - binding effect and finality of Tribunal majority order - Whether the Commissioner in de novo proceedings was bound to follow the earlier Tribunal majority order restricting duty demands to a six months period. - HELD THAT: - The Court held that the Commissioner, conducting de novo proceedings after remand, was bound by the clear directions in the Tribunal's majority order which had remanded the matter with an express instruction to restrict demands to a six months period. The Tribunal's majority decision had attained finality because it was not appealed against to any higher forum; consequently the Commissioner could not quantify or confirm duty for a period shorter than, or inconsistent with, the six months limitation laid down by the Tribunal. The adjudicating authority was therefore required to implement the Tribunal's directions in the remand proceedings rather than re-open the question of the period of demand. [Paras 11, 12, 13]

The Commissioner was bound by the Tribunal's majority order and had to restrict and quantify the demand in accordance with the six months period directed by the Tribunal.

Prospective effect of Board circular issued under Section 37B - classification of goods for excise - Whether the Board's circular classifying the circuit breakers under a different heading had retrospective effect so as to affect past demands. - HELD THAT: - Although the question whether the Board's circular should operate prospectively was discussed in earlier proceedings, the Court refrained from re-deciding the merits of that issue because the earlier majority order of the Tribunal - which remanded the classification issue and directed restriction of demand to six months - had become final. The Court observed that it need not examine the intention of the members or the prospective/retrospective aspects further since the operative effect of the earlier order limited the period for which duty could be demanded; hence the Commissioner was to follow the Tribunal's directions on remand. [Paras 14, 15]

The Court did not re-open the question of the prospective effect of the Board circular and adhered to the Tribunal's prior direction limiting demand to six months.

Restriction of duty demand to six months' period (limitation) - retrospective validation of show-cause notices by amendment to limitation provisions (Section 110, Finance Act, 2000 re Section 11A) - Whether the Revenue's contention that amendment by Section 110 of the Finance Act, 2000 (revalidating issuance of SCNs under Section 11A) entitled it to confirm demands for the entire earlier periods was maintainable despite the Tribunal's earlier order. - HELD THAT: - The Court rejected the Revenue's submission that the retrospective amendment validating longer limitation should permit confirmation of demands for the entire SCN periods. The earlier Tribunal order had expressly held that the extended period was not available and had restricted demands to six months; that order had attained finality and was binding. Consequently the Revenue could not, in the remand proceedings, invoke the later amendment to overturn the Tribunal's binding direction. The Court therefore held that the extended period could not be invoked in the present proceedings and the adjudication must be limited to the six months directed by the Tribunal. [Paras 16, 18]

The Revenue's plea based on the amendment to limitation provisions was not accepted; extended period is unavailable and demands are to be restricted to six months as per the Tribunal's order.

Final Conclusion: The Revenue's appeal is allowed to the limited extent of directing remand: the matter is remanded to the Commissioner for quantification of duty for a period of six months in respect of each SCN; the earlier Tribunal majority order restricting the demand to six months is final and binding, and the Revenue cannot invoke the subsequent amendment to limitation provisions to secure confirmation of demands for the longer periods.

Levy of excise duty on scrap - mechanical working of metals - manufacture as generating chargeability to duty - remnants arising from cutting for replacement of worn-out plant parts - distinction between re-rollable scrap and melting scrap not determinative

Levy of excise duty on scrap - mechanical working of metals - remnants arising from cutting for replacement of worn-out plant parts - Scrap arising from cutting duty-paid plates, pipes and fittings to required sizes for replacement of corroded or worn-out parts in respondent's chemical plant is not leviable to excise duty as arising from mechanical working or manufacture. - HELD THAT: - The Tribunal accepted the Commissioner (Appeals)'s finding that the only operation performed on the new metal plates and pipes was cutting them to required sizes for replacement, and that the remnants so produced are scrap. The Assistant Commissioner's conclusion that such scrap resulted from mechanical working of metals was held to be without basis: common definitions of mechanical working (rolling, spinning, pressing, hammering etc.) do not encompass mere cutting to size. The Tribunal relied on the principle, as illustrated in Hindalco Industries Ltd. , that the determinative question for levy is whether the scrap was generated as a result of a manufacturing process; where no manufacture takes place, the character of the scrap (whether called re-rollable or melting scrap) does not render it dutiable. Applying this approach, the Tribunal held that remnants from cutting duty-paid sheets, plates and pipes for replacement of worn or corroded plant parts were not produced by manufacture or mechanical working and therefore not chargeable to duty. The Tribunal accordingly set aside the demand confirmed by the Assistant Commissioner in respect of such scrap.

Revenue's appeal is rejected; demand of duty on the scrap arising from cutting new plates, pipes and fittings for replacement of worn-out plant parts is set aside.

Final Conclusion: The appeal by Revenue was dismissed; the Tribunal upheld the Commissioner (Appeals) in holding that scrap consisting of remnants from cutting duty-paid plates, pipes and fittings for replacement of corroded or worn parts in the respondent's plant does not attract excise duty as it is not the product of mechanical working or manufacture.

Cenvat credit on input service - canteen/catering service for factory workers - discharge of obligation under the Factories Act - remand for fresh consideration in light of High Court ratio

Cenvat credit on input service - canteen/catering service for factory workers - discharge of obligation under the Factories Act - remand for fresh consideration in light of High Court ratio - Whether the question of entitlement to Cenvat credit on catering services availed for factory workers should be adjudicated afresh by the Adjudicating Authority in the light of the High Court's ratio - HELD THAT: - The Tribunal accepted the respondent's submission that canteen/catering services provided for coal mill, kiln and mechanical department workers were availed in discharge of the factory's statutory obligation under the Factories Act and that such services qualify as input services for Cenvat credit purposes. Noting that the Revenue did not file a copy of the show cause notice with the appeal and that the factual invoices placed on record indicate discharge of the statutory obligation, the Tribunal held that the matter requires reconsideration by the Adjudicating Authority applying the legal principle stated in paragraph 6 of the Gujarat High Court's decision relied upon by the respondent. Consequently, the Tribunal did not decide admissibility on merits but directed remand so that all relevant evidence and points of law may be placed before and examined by the Adjudicating Authority in accordance with that High Court ratio. [Paras 5]

Matter remanded to the Adjudicating Authority to consider admissibility of Cenvat credit on the catering service, applying the ratio in paragraph 6 of the Gujarat High Court judgment.

Final Conclusion: The appeal does not decide the substantive question of entitlement to Cenvat credit; the matter is remanded to the Adjudicating Authority for fresh adjudication in accordance with the Gujarat High Court's ratio, with opportunity to place all relevant evidence and legal submissions.

Fraud vitiates relief - undue gain at the cost of Revenue - Cenvat credit claimed on paper transactions - mode of transportation as evidentiary test - restoration of adjudication order

Fraud vitiates relief - Cenvat credit claimed on paper transactions - mode of transportation as evidentiary test - restoration of adjudication order - Whether the consequential appeals should be remanded or whether the appellate order should be set aside and the adjudication order restored in view of findings of fraudulent paper transactions. - HELD THAT: - The Tribunal declined to remand the consequential appeals because the record disclosed a clear fraud on Revenue. The show cause notice and adjudication record established that heavy consignments of metal scrap were purportedly transported in vehicles identified as motor cycle and scooter and included non-existent registration numbers; carrying the stated quantities by such vehicles was found to be inconceivable. The Tribunal applied the established principle that fraud disentitles a party to relief and relied on S.P. Chengalavaraya Naidu for the proposition that courts will not permit an offender to retain undue benefit obtained at the public's expense. Given the falsity of the mode of transportation and the conclusion that the transactions were paper transactions to claim Cenvat credit, the appellate order which had allowed the appellants was reversed and the adjudication order restored.

First appellate order reversed; adjudication order restored and the five consequential appeals allowed in favour of Revenue.

Undue gain at the cost of Revenue - Whether any administrative step is required to protect Revenue in respect of the main appeal remanded earlier by the Tribunal. - HELD THAT: - The Tribunal noted that the main appeal had been remanded earlier for fresh consideration. To safeguard Revenue's interest pending that remand, the Tribunal directed the Registrar/Clerk to send a copy of the present order to the jurisdictional Commissioner expeditiously so that appropriate measures may be taken before the adjudicating authority on remand.

Registrar/Clerk directed to send a copy of the order to the jurisdictional Commissioner expeditiously to safeguard Revenue's interest in the matter pending on remand.

Final Conclusion: On the facts and record indicating paper transactions and falsified mode of transportation, the Tribunal held that fraud disentitles appellants to relief, reversed the first appellate order, restored the adjudication order and allowed the appeals in favour of Revenue; it also directed that a copy of the order be sent to the jurisdictional Commissioner to protect Revenue's interest in the related matter pending on remand.

Definition of 'asset' under section 2(ea) of the Wealth-tax Act - exclusion of business assets from wealth-tax - commercial building used for letting out of properties - legislative intent as reflected in explanatory memorandum and administrative circular

Definition of 'asset' under section 2(ea) of the Wealth-tax Act - exclusion of business assets from wealth-tax - commercial building used for letting out of properties - legislative intent as reflected in explanatory memorandum and administrative circular - Whether the amended definition of 'assets' (effective 1 April 1997) brings the assessee's M.G. Road commercial property within wealth-tax or the property is excluded as a business asset used in the business of letting out properties. - HELD THAT: - The Court examined the amendment to clause (ea) and the accompanying Explanatory Note and Central Board circular, noting that prior to the 1996 amendment commercial properties were not subjected to wealth-tax. The legislative change brought commercial buildings within the definition of asset except those occupied by the assessee for the purposes of his business or profession and, by express wording and subsequent legislative action, excluded properties which are business assets or are let out where the assessee is in the business of letting out properties. On that basis the appellate authorities and the Tribunal correctly construed the amendment and administrative explanations to mean that a commercial building forming part of the assessee's business of letting out properties is not an 'asset' taxable under the Wealth-tax Act for the years in question. The Court found no error in the findings of fact and law recorded by the Tribunal and agreed with its conclusion that the M.G. Road property is excluded from wealth-tax as a business asset exploited in the letting-out business. [Paras 3, 4, 5]

The amended definition of 'asset' does not bring the assessee's M.G. Road property to wealth-tax because it is a business asset in the letting-out of properties and is therefore excluded.

Commercial building used for letting out of properties - legislative intent as reflected in explanatory memorandum and administrative circular - Whether the treatment of the rental income as 'income from house property' under the Income-tax Act prevents treating the property as a business asset excluded from wealth-tax. - HELD THAT: - The Court endorsed the appellate authorities' approach that classification in income-tax proceedings does not negate the legislative intent and administrative interpretation under the Wealth-tax Act. Having regard to the Explanatory Note and the Board's circular, the decisive factor is whether the assessee is in the business of letting out properties and whether the property is a business asset; the mere head under which income was assessed for income-tax purposes does not override the exclusion provided under the Wealth-tax Act for business assets of a letting business. The Tribunal's factual finding that the assessee is in the business of letting properties and that the asset is used in that business was accepted. [Paras 3, 4, 5]

Classification of rental receipts under income-tax as 'income from house property' does not preclude the property being treated as a business asset excluded from wealth-tax where the assessee is in the business of letting out properties.

Final Conclusion: Appeals dismissed; the M.G. Road commercial property for assessment years 1997-98 and 1998-99 is excluded from wealth-tax as a business asset used in the business of letting out properties, and the Tribunal's orders are upheld.

Exemption under section 8(1)(e) of the Right to Information Act, 2005 - exemption under section 8(1)(d) of the Right to Information Act, 2005 - section 9 of the Right to Information Act, 2005 - copyright - intellectual property of a public authority - information available to a person in fiduciary relationship - moderation in examination evaluation - larger public interest override

Intellectual property of a public authority - exemption under section 8(1)(d) of the Right to Information Act, 2005 - larger public interest override - Whether instructions and solutions supplied to examiners and moderators are intellectual property the disclosure of which is exempt under section 8(1)(d) of the RTI Act. - HELD THAT: - The Court accepted that question papers, solutions and instructions are literary works constituting intellectual property of ICAI (copyrights having been assigned or vested in ICAI). However, section 8(1)(d) protects only such intellectual property the disclosure of which would harm the competitive position of third parties. While disclosure before an examination would harm competitors, once the examination is held and evaluation completed the competitive harm disappears; moreover ICAI itself publishes suggested answers after the examination. Thus intellectual property status alone does not indefinitely bar disclosure under section 8(1)(d), and the exemption cannot be invoked to refuse disclosure of question papers/solutions/instructions merely because they are IP after the relevant examination has concluded. [Paras 10, 11, 12]

Question papers, solutions and instructions are intellectual property of ICAI but disclosure after the examination and completion of evaluation is not barred by section 8(1)(d) merely by reason of their IP status.

Section 9 of the Right to Information Act, 2005 - copyright - Whether furnishing the requested material would have to be rejected under section 9 of the RTI Act on the ground that disclosure would infringe copyright subsisting in a person other than the State. - HELD THAT: - Section 9 permits refusal where disclosure would infringe a copyright subsisting in a person other than the State. ICAI is a statutory body falling within the definition of 'State' and claims the copyright in the material; moreover the Court noted that furnishing information under the RTI Act may not amount to copyright infringement in any event (having regard to the Copyright Act and its exceptions). Since ICAI itself holds the copyright and no third-party copyright is shown, section 9 is inapplicable. [Paras 13, 14]

Section 9 does not permit refusal of the requested information because ICAI, a 'State' body, holds the copyright and there is no infringement of a copyright subsisting in a person other than the State.

Information available to a person in fiduciary relationship - exemption under section 8(1)(e) of the Right to Information Act, 2005 - larger public interest override - Whether the instructions and solutions given to examiners and moderators are information made available in fiduciary capacity and thus exempt under section 8(1)(e) of the RTI Act. - HELD THAT: - The Court applied the accepted meaning of 'fiduciary relationship' and held that the material supplied to examiners, head-examiners and moderators is given and taken in confidence to secure uniformity and correctness in evaluation. Examiners and moderators act as agents in a relationship of trust with ICAI as principal; the information is supplied on the expectation of secrecy. Accordingly, such information falls within the scope of section 8(1)(e). Clauses (d) and (e) are conditional exemptions subject to disclosure in larger public interest; the Chief Information Commissioner correctly held that there was no larger public interest necessitating disclosure in this case. The High Court erred in holding otherwise. [Paras 16, 17, 18, 19, 20]

The instructions and solutions provided to examiners and moderators are information available to persons in a fiduciary relationship and are therefore exempt from disclosure under section 8(1)(e), there being no sufficient larger public interest to override the exemption.

Moderation in examination evaluation - exemption under section 8(1)(d) of the Right to Information Act, 2005 - What information concerning revisions under Regulation 39(2) (moderation) must be disclosed in response to query No.13, and whether ICAI must furnish historical data and particulars requested. - HELD THAT: - Regulation 39(2) contemplates 'moderation' and vests the Examination Committee with discretion to revise marks; ICAI's communication already identified the Examination Committee as the authority exercising that discretion. The Court held that ICAI must disclose any standard criteria or norms it employs for moderation (i.e., the standards of moderation it follows), because those standards pertain to institutional procedures and uniformity of evaluation. However, where ICAI does not maintain the specific data requested (such as counts, quanta of revision, or particulars not recorded in its files), the RTI Act does not obligate the authority to collect or compile non existent information; therefore ICAI need not furnish data it does not maintain. [Paras 21, 22, 23, 24]

ICAI must disclose the standard criteria, if any, it employs for moderation under Regulation 39(2); it need not supply particulars or historical data that are not maintained in its records.

Final Conclusion: The appeal is allowed in part: the High Court order is set aside and the decision of the Central Information Commission restored, with the modification that ICAI must disclose to the applicant the standard criteria (if any) it uses for moderation under Regulation 39(2); instructions and solutions supplied to examiners and moderators are exempt under section 8(1)(e) and section 9 is inapplicable.