TaxTMI Updates e-Newsletter
Jul 01,2020

Composite supply - Mixed supply - Principal supply - Natural bundling - Supply in the ordinary course of business - Rectification of Advance Ruling under section 102 - Error apparent on the face of the record

Rectification of Advance Ruling under section 102 - Error apparent on the face of the record - Whether the AAAR order dated 17.02.2019 required amendment under section 102 on account of non consideration of the appellant's additional submissions dated 11.02.2019. - HELD THAT: - The Appellate Authority accepted that the additional submissions of 11.02.2019 were not considered in the impugned AAAR order and that this omission amounted to an error apparent on the face of the record warranting examination under section 102. The Authority reviewed the additional material and confined its examination to those submissions not earlier considered, since the scope of rectification is limited to errors apparent on the face of the record. After perusal, it was found that the supplementary evidence and arguments did not alter the adjudicatory conclusion reached earlier: they did not establish a legal principle or factual finding that would change the classification outcome. Consequently, no amendment of the AAAR order was warranted because the additional submissions had no material bearing on the outcome. [Paras 54, 55, 57, 67]

Application for rectification under section 102 rejected; no amendment of the AAAR order.

Composite supply - Mixed supply - Principal supply - Supply in the ordinary course of business - Natural bundling - Whether the bundled supply of ElectroInk and other consumables under the Click (Tier) model is a composite supply with a principal supply or a mixed supply. - HELD THAT: - The Authority re examined the factual matrix and the additional evidence (including consumption patterns and a Chartered Engineer's certificate). The material established that all consumables supplied for the Indigo press are indispensable and functionally interdependent to achieve the print. However, that very interdependence led to the conclusion that no single element in the bundle could be identified as a principal supply to which other elements are merely ancillary. The Authority observed that mere predominance in consumption or value (e.g., 41% consumption attributed to ElectroInk) is only a guiding factor and not decisive; the essential inquiry is which element imparts the essential character of the bundle. On the facts, none of the components was shown to impart an exclusive dominant character; all were necessary and not ancillary. Applying the statutory definitions and illustrative tests (including CBIC guidance), the transaction fits the statutory description of a mixed supply-multiple individual supplies made for a single price which do not constitute a composite supply. Therefore the earlier conclusion that the bundle is a mixed supply was upheld. [Paras 59, 60, 61, 62, 66]

Supply of ElectroInk together with the listed consumables under the Click model is a mixed supply and not a composite supply.

Final Conclusion: The AAAR's earlier finding is affirmed: the additional submissions of 11.02.2019 do not warrant rectification of the AAAR order under section 102, and the supply of ElectroInk with the specified consumables under the Click model is held to be a mixed supply, not a composite supply.

Textile fabrics impregnated, coated, covered or laminated with plastics - classification under Heading 5903 - fusible interlining produced by dot printing - exclusion in Chapter Note 2(a)(4) to Chapter 59 - Circulars of the Central Board of Excise and Customs - Explanatory Notes to the HSN

Textile fabrics impregnated, coated, covered or laminated with plastics - classification under Heading 5903 - fusible interlining produced by dot printing - woven fabrics of cotton (Sub headings 5208, 5209, 5212) - exclusion in Chapter Note 2(a)(4) to Chapter 59 - Classification of the appellant's fusible interlining cloth - HELD THAT: - The material placed before the authority is a textile product which, by the dot printing/fusible process, bears a visible plastic coating on its surface. Sub headings 5208, 5209 and 5212 describe woven fabrics of cotton formed by weaving or interlacing threads; the fusible interlining as manufactured by the dot printing process is not a woven fabric in the sense required by those sub headings. Chapter Note 2 to Chapter 59 directs that textile fabrics impregnated, coated, covered or laminated with plastics fall under Heading 5903 except where specific exclusions apply. Examination of the sample and the manufacturing process shows a continuous visible plastic coating produced by dot printing across the surface rather than a mere incidental decorative partial coating; accordingly the exclusion in Chapter Note 2(a)(4) does not apply. Applying the chapter description and notes, the product satisfies the tests for classification under Heading 5903 and not under the cited cotton woven fabric sub headings. [Paras 9, 10, 11]

The fusible interlining cloth manufactured by the appellant is classifiable under sub heading 5903 and not under sub headings 5208, 5209 or 5212.

Circulars of the Central Board of Excise and Customs - Explanatory Notes to the HSN - interpretation of the Tariff Act - Reliance on CBEC circulars and Explanatory Notes in determining classification - HELD THAT: - The authority reviewed the historical position reflected in CBEC circulars (including earlier Circulars on coated fabrics and on fusible interlining) and the Explanatory Notes to the HSN. Those materials explain the scope of Heading 5903 and the practical application of Chapter notes to fusible interlining produced by dot printing. The appellant did not challenge the characterisation of the product as falling within the exception identified by the CBEC circulars. The authority found that the AAR decision relied upon by the appellant had not taken into account the relevant CBEC circulars and therefore did not reflect the complete legal position. On this basis the WBAAR's reliance on the CBEC circulars and on the Explanatory Notes as interpretative aids was held justified for resolving the classification question. [Paras 3, 8, 12, 13]

CBEC circulars and the Explanatory Notes to the HSN may be relied upon as interpretative aids and the WBAAR's reliance thereon was warranted in upholding classification under Heading 5903.

Final Conclusion: The appeal is dismissed; the Advance Ruling No. 33/WBAAR/2019 20 dated 11/11/2019 is upheld and the fusible interlining cloth is held classifiable under Heading 5903 of the Tariff Act.

Job work - inputs - bringing back of inputs - involvement of third party/regulator - minor additions by job worker - taxability of job work charges

Job work - processing resulting in electricity - Processing of inputs supplied by a principal into electricity by another person qualifies as job work under the CGST Act when statutory conditions are satisfied. - HELD THAT: - The Appellate Authority reviewed earlier findings and the case law relied upon by the appellant (including precedents recognising generation of electricity on a job-work model) and concluded that the proposed arrangement - supply of coal/inputs by JSL to JEL for conversion into electricity and return of the resultant power to JSL - falls within the definition and procedure of job work under Section 2(68) and Section 143 when the prescribed conditions are met. The Authority rescinded its earlier contrary view and held that processing though amounting to manufacture does not preclude classification as job work where statutory requirements are fulfilled. [Paras 65, 71]

The proposed conversion of coal into electricity by JEL for JSL is job work.

Inputs - coal as input for principal - Steam coal supplied to the job worker is an input of the principal where the generated electricity is used by the principal in its business. - HELD THAT: - Having considered the statutory definition of "input", the definition of "business", the appellant's memorandum of association, CBIC circular clarifying that intermediate goods used in production chain qualify as inputs, and relevant judicial authorities (including Maruti Suzuki), the Authority revised its earlier view and held that coal used for captive generation of electricity which is then used in manufacture of the principal's final product (steel) qualifies as an input of the principal. [Paras 62]

Coal is an input of JSL (the principal) for the purposes of GST.

Bringing back of inputs - involvement of third party/regulator - Involvement of a third party or regulator (such as an electricity distribution company) in transmission does not, per se, prevent the arrangement from being treated as job work or defeat the requirement of bringing back inputs under Section 143. - HELD THAT: - The Authority reconsidered its earlier concern that a regulator's role (MSEDCL) would negate the principal's ability to 'bring back' inputs and found that the presence of a third party as a medium of transfer (analogous to transporters/railways) does not disqualify a job-work arrangement. On analysis of submissions and precedents (including authorities permitting generation of power and associated input-credit principles), it was concluded that transfer of the resultant power to the principal through the grid is a permissible mode of returning the processed output and does not frustrate Section 143 conditions. [Paras 70]

Use of a third-party/regulator for transmission does not prevent qualification as job work; inputs can be brought back by the principal via such medium.

Minor additions by job worker - effect of additional inputs - Addition of air and water by the job worker, being negligible in cost relative to coal, does not disqualify the transaction from being job work. - HELD THAT: - The Authority examined the cost certificate submitted by the appellant showing coal constitutes the overwhelming proportion of cost of generation while air and water constitute an immaterial portion. Applying the principle from Prestige Engineering that only substantial contributions of raw materials by the job worker would take the activity out of the job-work domain, the Authority concluded that additions of air and water are minor and do not alter the character of the transaction. [Paras 67]

Additions of air and water by JEL are minor and do not negate job-work status.

Taxability of job work charges - notification rate provisions - Job work charges payable to the job worker are subject to GST as per the applicable rate notification. - HELD THAT: - Following the finding that the arrangement qualifies as job work, the Authority addressed the tax consequence and held that the consideration paid as job work charges to JEL by JSL is taxable under the GST law in accordance with the rates and provisions set out in the relevant rate notification (Notification No.11/2017-C.T. (Rate) dated 28.06.2017 as amended). [Paras 71]

Job work charges payable to JEL by JSL are liable to GST in terms of the applicable notification.

Final Conclusion: On reconsideration the Appellate Authority reversed its earlier order and held that the proposed arrangement - supply of coal/inputs by JSL to JEL for conversion into electricity and return of resultant power to JSL - qualifies as job work; coal supplied in that arrangement is an input of the principal; involvement of the distribution/regulatory agency in transmission does not preclude compliance with Section 143; additions of air and water by the job worker are minor and do not alter job-work character; and job work charges payable to JEL are subject to GST under the applicable rate notification.

Central Government - exemption for services by the Central Government to non business entities (nil rate) - services by way of tolerating non performance of a contract (liquidated damages / forfeiture) - exemption - input tax credit - used or intended to be used in the course or furtherance of business - ITC blocked for inputs/input services attributable to exempt supplies - ITC for health services obligatory for employer - amendment to section 17(5)(b) - proportionate reversal of ITC on lesser payment - effect of liquidated damages - applicability of Notifications Nos. 2/2018, 3/2018 and 36/2017 to a Central Government entity

Central Government - Whether Ordnance Factory Bhandara is to be treated as the Central Government for GST purposes. - HELD THAT: - The Appellate Authority examined documentary evidence showing that the factory functions under the Department of Defence Production, Ministry of Defence, performs executive acts in the name of and on behalf of the President, issues contracts and appointments on behalf of the President, and is integrated with the Ordnance Factory Board and Union administration. On that basis the Authority held that the appellant fulfils the conditions for being construed as the Central Government for the purposes of the CGST Act and set aside the contrary view of the AAR.

Ordnance Factory Bhandara is to be construed as the Central Government for GST purposes.

Exemption for services by the Central Government to non business entities (nil rate) - services by way of tolerating non performance of a contract (liquidated damages / forfeiture) - exemption - Whether the appellant is liable to pay GST on (a) liquidated damages deducted from suppliers and (b) security deposits forfeited for contract breaches. - HELD THAT: - Having held that the appellant is the Central Government, the Authority applied the exemption entry which grants nil rate for services provided by the Central Government to the extent they consist of tolerating non performance of a contract for which fines or liquidated damages are payable. The Authority concluded that liquidated damages and forfeiture of security deposits fall within that exemption when provided by the Central Government.

GST is not payable by the appellant on liquidated damages deducted or security deposits forfeited in the stated circumstances.

Exemption for services by the Central Government to non business entities (nil rate) - Whether supplies by the appellant of food and beverages at the industrial canteen, rental of community hall to employees, school bus facility for employees' children, and conducting exams for candidates attract GST. - HELD THAT: - The Authority treated these activities as supplies of services (e.g., canteen as supply of food, renting of immovable property for community hall) but, because the appellant is the Central Government and the recipients (employees or candidates) are non business entities, concluded that the supplies fall under the nil rate exemption entry for services by the Central Government to non business entities.

The appellant is not liable to pay GST on canteen supplies, community hall rental to employees, school bus services for employees' children, and examination fees charged to candidates.

Input tax credit - used or intended to be used in the course or furtherance of business - maintenance of garden inside the factory premises - Whether ITC is admissible on input services for maintenance of garden inside the factory premises. - HELD THAT: - Relying on the widened GST definition of input services and precedents holding garden maintenance as integrally connected to manufacture (and noting pollution control and operational necessity), the Authority found that garden maintenance within the plant area is an input service used in the course or furtherance of business and ITC is admissible.

ITC is available for maintenance of garden inside the factory premises.

ITC blocked for inputs/input services attributable to exempt supplies - residential colony / estate area services - Whether ITC is admissible on maintenance and upkeep services relating to estate areas outside factory premises (residential quarters, school, parks, recreational hall, roads inside colony, etc.). - HELD THAT: - The Authority analysed the nature of supplies related to the estate area and found many of them to be exempt (for example, residential accommodation and certain services provided to employees). Because the appellant was held to be the Central Government and the supplies in relation to the residential colony/estate were treated as exempt, inputs and input services attributable to those exempt supplies are blocked under the GST regime and section 17(2). Accordingly ITC on those estate area services was disallowed; however the Authority carved out taxable uses (see roads to factory gate below).

ITC is not available for maintenance/upkeep services relating to estate area outside the factory premises to the extent they are attributable to exempt supplies.

Input tax credit - used or intended to be used in the course or furtherance of business - ITC for health services obligatory for employer - amendment to section 17(5)(b) - Whether ITC is admissible on medicines and other inputs and input services used in the factory hospital run by the appellant for employees and dependents. - HELD THAT: - The Authority took cognisance of the amendment to section 17(5)(b) (via the CGST Amendment Act) which allows ITC for health services where provision is obligatory for an employer under any law. Noting that Ordnance Factory Medical Regulations make provision of occupational health services mandatory, the Authority held that inputs and input services used in the factory hospital are not blocked and ITC is admissible.

ITC is available for medicines and other inputs and input services used in the appellant's factory hospital for employees and dependents.

ITC blocked for inputs/input services attributable to exempt supplies - guest house maintenance - Whether ITC is admissible on maintenance and upkeep of guest houses maintained by the appellant. - HELD THAT: - The Authority noted that the appellant charges room rent for guest houses and, having held the appellant to be the Central Government, treated such supplies as exempt. Applying the principle that ITC is not available for inputs/input services attributable to exempt supplies, and following precedents which deny ITC for the portion of guest house services for which consideration is recovered, the Authority disallowed ITC for guest house maintenance.

ITC is not available for maintenance and upkeep of guest houses maintained by the appellant.

ITC blocked for inputs/input services attributable to exempt supplies - input tax credit - LPG for canteen - Whether ITC is admissible on purchase of LPG cylinders used in the industrial canteen. - HELD THAT: - Although the AAR had earlier allowed ITC on LPG on the view the canteen supply was taxable, the Appellate Authority held that the canteen supplies are nil rated because the appellant is the Central Government and the recipients are non business entities. As those canteen supplies are exempt/nil rated, ITC in respect of LPG used to provide them is not available under section 17(2).

ITC on LPG cylinders used in the industrial canteen is not available.

Proportionate reversal of ITC on lesser payment - effect of liquidated damages - Whether the appellant must reverse proportionate ITC where payment to a supplier is reduced due to deduction of liquidated damages. - HELD THAT: - The Authority examined accounting practice and documentary records showing that taxable value and tax as per supplier invoices were recorded and suppliers did not issue credit notes; liquidated damages deductions were recorded separately. The Authority held that deduction of liquidated damages is a separate compensatory transaction and does not alter the taxable value recorded or the supplier's tax liability; therefore the appellant need not reverse ITC on that account.

No proportionate reversal of ITC is required on account of deduction of liquidated damages from supplier dues.

Applicability of Notifications Nos. 2/2018, 3/2018 and 36/2017 to a Central Government entity - Whether Notifications Nos. 2/2018 CT (advocate/arbitral services), 3/2018 CT (renting of immovable property to registered persons) and 36/2017 CT (reverse charge on sale of used/old/scrap goods) apply to the appellant. - HELD THAT: - Since the Authority concluded that the appellant is the Central Government, it held that the said notifications apply to the appellant as applicable to a Central Government entity and that their effects follow accordingly.

Notifications Nos. 2/2018, 3/2018 and 36/2017 are applicable to Ordnance Factory Bhandara.

Final Conclusion: The Appellate Authority set aside the AAR decision and held that Ordnance Factory Bhandara is to be treated as the Central Government for GST purposes; accordingly it is not liable to pay GST on liquidated damages, forfeited security deposits, canteen supplies to employees, community hall rentals to employees, school bus facilities for employees' children and examination fees charged to candidates. ITC is allowed for garden maintenance within the factory and for inputs/input services used in the factory hospital (as obligatory employer health services), but ITC is disallowed for estate area services attributable to exempt supplies, for guest house upkeep and for LPG used in the canteen. No reversal of ITC is required where payments to suppliers are reduced by deduction of liquidated damages. Notifications 2/2018, 3/2018 and 36/2017 are applicable to the appellant.

Challenge to consequential order arising from seizure - entertainment of writ petition where challenge to parent order is pending - misconceived writ petition - permission to withdraw - leave to file statutory appeal

Challenge to consequential order arising from seizure - entertainment of writ petition where challenge to parent order is pending - The writ petition challenging the consequential order dated 17.01.2020 was not entertained because the principal seizure order dated 31.08.2018 was already the subject matter of a pending writ (Writ Tax No.1298 of 2018). - HELD THAT: - The court noted that the petitioner admitted the seizure order dated 31.08.2018 was being challenged in Writ Tax No.1298 of 2018 which remained pending. In those circumstances, there was no reason to entertain a separate writ petition directed to the consequential order dated 17.01.2020. The petition was held to be misconceived and therefore dismissed on that basis. [Paras 2, 3]

Petition dismissed as misconceived and not entertained.

Permission to withdraw - leave to file statutory appeal - The petitioner was permitted to withdraw the present petition and granted leave to file an appeal under the statutory remedy. - HELD THAT: - After delivering the decision, counsel for the petitioner stated an intention to pursue a statutory appeal under the relevant provision of the Uttar Pradesh Goods and Services Tax Act, 2017. The court granted the prayer for permission to withdraw the writ petition and allowed the petitioner to file the appellate remedy, recording the withdrawal accordingly. [Paras 4, 5, 6]

Petition permitted to be withdrawn; dismissal recorded as withdrawn and leave granted to pursue the statutory appeal.

Final Conclusion: Writ petition challenging the consequential order dismissed as misconceived and not entertained in view of the pending challenge to the primary seizure order; petitioner allowed to withdraw the petition and to pursue the statutory appeal.

Re-allocation of common expenses between 10A and non-10A units - application of a tribunal's earlier order to subsequent assessment - finality of tribunal orders pending challenge - substantial question of law under Section 260-A

Re-allocation of common expenses between 10A and non-10A units - application of a tribunal's earlier order to subsequent assessment - finality of tribunal orders pending challenge - Tribunal was justified in giving relief to the assessee by re-allocating common expenses between 10A and non-10A units based on its earlier order notwithstanding that the earlier order was challenged by the revenue. - HELD THAT: - The substantial question framed in the appeal concerned whether the tribunal could apply its earlier order (relating to the assessee's case for a prior assessment year) in reallocating common expenses between 10A and non-10A units for Assessment Year 2006-07, despite the revenue having assailed that earlier tribunal order before the High Court. Learned counsel for the revenue conceded that an identical question had been authoritatively answered by a Bench of this Court in ITA No.2834/2005 c/w ITA No.776/2006 by order dated 05.11.2013, which affirmed the tribunal's decision. Having regard to that binding decision and for the reasons recorded in the earlier order, the Court held that the substantial question of law is answered against the revenue and in favour of the assessee, leading to dismissal of the revenue's appeal.

Appeal dismissed; substantial question of law answered against the revenue and in favour of the assessee.

Final Conclusion: The High Court, applying its earlier Bench decision dated 05.11.2013, dismissed the revenue's appeal in respect of Assessment Year 2006-07 and upheld the tribunal's re-allocation of common expenses in favour of the assessee.

Levy of late fee under Section 234E - intimation under Section 200A invalid for periods prior to 1.6.2015 - rectification under Section 154 - appealability of an order under Section 154 to Commissioner (Appeals) - prospective effect of judicial decision

Rectification under Section 154 - appealability of an order under Section 154 to Commissioner (Appeals) - An order passed under Section 154 of the Act correcting TDS processing/intimation is appealable to the Commissioner (Appeals) under Section 246(1)(c). - HELD THAT: - The Tribunal examined the filing of the rectification petition and the subsequent order passed by CPC-TDS under Section 154 dated 13.03.2019. It reproduced Section 246(1)(c) which expressly makes an order under Section 154 appealable where it has the effect of enhancing an assessment or reducing a refund or refusing a claim. Applying that provision to the facts, the Tribunal held that the assessee was entitled to challenge the CPC-TDS order under Section 154 before the Commissioner (Appeals). The CIT(A)'s conclusion that levy of late fees under Section 234E could not be challenged under Section 154 was therefore incorrect as a bar to filing an appeal under Section 246(1)(c). [Paras 5]

The appeal against the order under Section 154 was permissible and the assessee could challenge the rectification/order under Section 154 before the Commissioner (Appeals).

Levy of late fee under Section 234E - intimation under Section 200A invalid for periods prior to 1.6.2015 - prospective effect of judicial decision - Levy of late fees under Section 234E arising from intimations issued under Section 200A for periods prior to 1.6.2015 is without authority and such levies are to be deleted in view of the Karnataka High Court's decision holding Section 200A amendments effective only from 1.6.2015. - HELD THAT: - The Tribunal considered the ratio of the Karnataka High Court in Sri Fatehraj Singh & Others v. UOI, which held that the amendments to Section 200A(1)(c),(d) and (f) operate from 1.6.2015 and that intimations under Section 200A in respect of periods prior to that date are without authority. The Tribunal applied that principle to the TDS returns processed for the quarters of F.Y. 2013-14 relevant to A.Y. 2014-15 (and similarly for A.Y. 2015-16 and A.Y. 2016-17 where facts were identical), holding that the demands of fees under Section 234E computed pursuant to such Section 200A intimations for periods before 1.6.2015 were invalid. Relying on the High Court's reasoning that such intimations must be set aside and that the decision has prospective effect, the Tribunal set aside the CIT(A) orders and directed deletion of the levy of late fees under Section 234E. [Paras 5, 6]

The levies of late fees under Section 234E arising from Section 200A intimations for periods prior to 1.6.2015 are quashed and the Assessing Officer is directed to delete those levies.

Final Conclusion: The Tribunal allowed the appeals for A.Y. 2014-15, A.Y. 2015-16 and A.Y. 2016-17: it held that the order under Section 154 was appealable to the CIT(A) and, applying the Karnataka High Court's decision, set aside the CIT(A) orders and directed deletion of late fee levies under Section 234E insofar as they arose from Section 200A intimations for periods prior to 1.6.2015.

Transfer Pricing - Arm's Length Price - Transactional Net Margin Method (TNMM) - Profit Level Indicator - Operating Profit to Total Cost (OP/TC) - Comparability of independent enterprises / Comparable companies - Mutual Agreement Procedure (MAP) under DTAA / Article 27 - Rule 44H - giving effect to MAP resolution - First proviso to section 92C(4) - denial of deduction under Section 10A for ALP enhancement determined by Assessing Officer - Deduction under section 10A in relation to income determined pursuant to MAP/APA

Transfer Pricing - Arm's Length Price - Comparability of independent enterprises / Comparable companies - Transactional Net Margin Method (TNMM) - Exclusion of specified comparable companies and direction to recompute ALP after reworking arithmetic mean of remaining comparables. - HELD THAT: - The Tribunal examined the set of comparables adopted by the TPO for determining the ALP of software development services and, following earlier coordinate-bench decisions in factually similar cases, directed exclusion of fourteen specified companies from the TPO's final list. The Tribunal accepted that those comparables were functionally dissimilar (for reasons including presence of product revenues, R&D/IP ownership, consolidated statements, segmental differences and abnormal margins) and that reliance on entity-level figures without appropriate segmental adjustments vitiated comparability. Having excluded the listed companies, the Tribunal directed the AO/TPO to rework the arithmetic mean profit margin of the remaining comparables and compute the ALP after giving the assessee an opportunity of being heard. The Tribunal therefore remitted the computation of ALP (and consequent quantification) to the file of the TPO/AO for compliance with these directions. [Paras 14]

The specified fourteen comparables are to be excluded and the TPO/AO is directed to rework the arithmetic mean of profit margins of the remaining comparables and recompute the ALP after affording the assessee an opportunity of being heard.

Mutual Agreement Procedure (MAP) under DTAA / Article 27 - Rule 44H - giving effect to MAP resolution - First proviso to section 92C(4) - denial of deduction under Section 10A for ALP enhancement determined by Assessing Officer - Deduction under section 10A in relation to income determined pursuant to MAP/APA - Entitlement to deduction under section 10A in respect of income enhancement agreed under MAP. - HELD THAT: - The Tribunal held that the first proviso to section 92C(4) (which denies deduction under section 10A etc. in respect of income enhanced by an ALP determination made by the Assessing Officer pursuant to TPO/AO action) applies only to ALP adjustments made by the AO under section 92CA(4). A MAP resolution is a bilateral/competent-authority procedure under the DTAA and Rule 44H, and where the MAP requires the taxpayer to invoice and realise additional amounts (resulting in actual receipt of foreign exchange), the MAP-based enhancement is not the same species of adjustment as an AO driven TP addition. Following precedent (including the reasoning in the Tribunal's treatment of APA/MAP situations), the Tribunal concluded that the MAP resolution that led to invoicing and realization of additional export income entitled the assessee to claim deduction under section 10A for the amount settled under the MAP for AY 2007-08. The Tribunal therefore allowed the relevant grounds on this point and granted the section 10A benefit in respect of the MAP-determined enhancement. [Paras 31, 36, 38]

The assessee is entitled to deduction under section 10A in respect of the income enhancement agreed under the MAP for AY 2007-08; the proviso to section 92C(4) does not operate to deny that deduction in these circumstances.

Final Conclusion: Appeal partly allowed: (a) Transfer pricing comparability issue - fourteen specified comparables excluded and ALP recomputed by AO/TPO after reworking the comparable set and giving the assessee opportunity of hearing; (b) Corporate tax issue - deduction under section 10A allowed in respect of income enhancement agreed under the MAP for AY 2007 08.

Transfer pricing adjustment - Arm's length price - Advertising and promotional (AMP) expenditure - revenue or capital nature - Bright line test for AMP expenditure - Admission of additional evidence under Rule 46A of the Income-tax Rules - Disallowance under section 14A read with Rule 8D - TDS liability and disallowance under section 40(a)(ia) - payment gateway charges and applicability of sections 194H/195 - Remand to Assessing Officer for factual verification

Transfer pricing adjustment - Arm's length price - Advertising and promotional (AMP) expenditure - revenue or capital nature - Bright line test for AMP expenditure - Admission of additional evidence under Rule 46A of the Income-tax Rules - Deletion of transfer pricing addition on account of AMP expenditure and related questions of ownership/benefit of the 'MakeMyTrip' brand. - HELD THAT: - The Tribunal affirmed the CIT(A)'s finding that MakeMyTrip (India) Pvt. Ltd. is the legal and economic owner and sole beneficiary of the 'MakeMyTrip' brand, relying on intercompany covenant and trademark registration. Because the AMP expenditure benefits the Indian entity (brand owner) and not the foreign associated enterprise, the bright line test (applied where an Indian entity promotes a brand owned by a foreign AE) is inapplicable. The CIT(A) admitted additional evidences after seeking a remand report from the AO under Rule 46A; the Tribunal held that those documents went to the root of the controversy and their admission was permissible where the AO was afforded opportunity to comment. On the question whether AMP expenditures were capital in nature, the Tribunal followed precedents recognizing that advertising/AMP outlays may be revenue expenditure where no enduring, permanent advantage is shown. Applying these conclusions, the Tribunal found no infirmity in the CIT(A)'s deletion of the TP addition of Rs. 31,81,07,110/- made by the TPO/AO under section 92CA(3). [Paras 13, 14, 16, 19]

The addition on account of AMP expenditure deleted; admission of additional evidence under Rule 46A upheld; bright line test inapplicable as Indian entity is brand owner.

Transfer pricing adjustment - Arm's length price - Restriction of transfer pricing addition relating to ticketing and tour/package services to a nominal amount. - HELD THAT: - The Tribunal upheld the CIT(A)'s approach in limiting the upward TP adjustment originally made by the AO/TPO for ticketing and tour/package services. The CIT(A) followed reasoning adopted in an earlier appellate order (A.Y. 2005-06) and accepted the assessee's allocation/working which, after appropriate factoring of the AE's operating expenses and business risk, reduced the addition to a nominal sum. No substantial challenge to that reasoning was shown to the Tribunal. [Paras 20, 21]

The AO/TPO addition of Rs. 1,47,93,024/- is restricted to Rs. 50,000/-; Revenue's and assessee's grounds on this issue are dismissed.

Disallowance under section 14A read with Rule 8D - Remand to Assessing Officer for factual verification - Whether disallowance under section 14A should be sustained; remand ordered to AO for verification of exempt income. - HELD THAT: - The CIT(A) reduced the AO's disallowance under section 14A (computed under Rule 8D) from the AO's figure to a lower amount by isolating dividend yielding investments and pro-rating the disallowance. The Tribunal, however, observed that the factual question whether any exempt income was actually earned in the year is determinative in the light of Supreme Court authority (Cheminvest). Because that factual verification lies with the AO, the Tribunal remanded the matter to the AO to ascertain whether exempt income was received and to decide the disallowance in accordance with law, directing that the assessee be given opportunity of being heard. [Paras 23, 24]

Issue remitted to the AO for factual verification of receipt of exempt income and fresh adjudication in light of applicable law; appeals allowed for statistical purposes.

TDS liability and disallowance under section 40(a)(ia) - payment gateway charges and applicability of sections 194H/195 - Remand to Assessing Officer for factual verification - Disallowance under section 40(a)(ia) for non-deduction of TDS on payment gateway charges - matter remanded to AO for fresh decision in light of the assessee's own later tribunal decision. - HELD THAT: - The AO treated payment gateway charges as commission liable to TDS (section 194H) and disallowed the payments under section 40(a)(ia). The CIT(A) excluded payments to certain banks where nil deduction certificates under section 195 were produced and held that no technical services (Explanation 2 to section 9(1)(vii)) were involved; he sustained disallowance for other payments. The Tribunal noted that an identical issue had been decided in favour of the assessee by the Tribunal for A.Y. 2009-10 (and the Revenue's challenge was dismissed by the High Court). Given that precedent and the factual nature of some aspects, the Tribunal considered it appropriate to remit the issue to the AO to decide afresh in light of the Tribunal's earlier decision and after affording the assessee an opportunity to be heard. [Paras 33, 34]

Matter remanded to the AO for fresh adjudication on TDS/disallowance on payment gateway charges, taking into account the Tribunal's prior finding in the assessee's own case and after giving the assessee opportunity of being heard; appeals allowed for statistical purposes.

Final Conclusion: The Tribunal upheld the deletion of the TP addition relating to AMP expenditure (finding the Indian group company to be brand owner and AMP to be revenue in nature), sustained the CIT(A)'s limitation of the ticketing/service TP addition to a nominal amount, upheld admission of additional evidence under Rule 46A, and remitted two factual issues - the section 14A disallowance and the TDS/disallowance on payment gateway charges - to the Assessing Officer for fresh verification and decision in accordance with law. Appeals are partly allowed for statistical purposes.

Taxability of interest under Section 28 of the Land Acquisition Act as compensation - Exemption under Section 10(37) of the Income-tax Act - Chargeability under Section 56(2)(viii) as income from other sources - Distinction between interest under Section 28 and Section 34 of the Land Acquisition Act - Year of taxability - receipt basis

Taxability of interest under Section 28 of the Land Acquisition Act as compensation - Exemption under Section 10(37) of the Income-tax Act - Chargeability under Section 56(2)(viii) as income from other sources - Distinction between interest under Section 28 and Section 34 of the Land Acquisition Act - Year of taxability - receipt basis - Interest received under Section 28 of the Land Acquisition Act on enhanced compensation is part of the compensation and not taxable separately as interest under Section 56(2)(viii). - HELD THAT: - The Tribunal held that interest awarded under Section 28 of the Land Acquisition Act is an accretion to the value of the land and forms part of the enhanced compensation/consideration. The conclusion follows the Supreme Court's reasoning in Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF) and subsequent affirmations (including Govindbhai Mamaiya, Chet Ram and Hari Singh), which distinguish Section 28 interest from interest under Section 34: Section 28 interest relates to excess determined by the court and is therefore part of enhanced compensation, whereas Section 34 interest relates to delay and is not treated as accretion to value. Since Section 45(5) and allied provisions must be read in light of the 1894 Act, interest under Section 28 partakes the character of compensation; consequently, where the underlying enhanced compensation is exempt under Section 10(37), the interest so awarded is not exigible to tax as income from other sources. The Tribunal applied this ratio and rejected the Revenue's reliance on earlier authority characterising such receipts as taxable interest, holding that the Supreme Court pronouncements constitute binding precedent to be followed by lower authorities. The Tribunal also noted that the year of taxability for such amounts is governed on a receipt basis as laid down by the Supreme Court.

Appeal allowed: interest under Section 28 treated as part of exempt compensation and not taxable under Section 56(2)(viii).

Final Conclusion: The Tribunal accepted the assessee's plea that interest awarded under Section 28 of the Land Acquisition Act on enhanced compensation is an accretion to compensation and, following binding Supreme Court decisions, is part of the compensation exempt under Section 10(37); the additions treating that interest as taxable income under Section 56(2)(viii) were set aside and the appeal allowed.

Special audit under Section 142(2A) - extension of time under proviso to Section 142(2C) - competent authority to exercise statutory power - void ab initio of assessment completed after invalid extension

Special audit under Section 142(2A) - extension of time under proviso to Section 142(2C) - competent authority to exercise statutory power - void ab initio of assessment completed after invalid extension - Validity of the extension of time for submission of special audit report and consequence for assessments completed after the extended date. - HELD THAT: - The statute contemplates two distinct steps: (i) directions for special audit under Section 142(2A) are to be given with the prior approval of the Chief Commissioner/Commissioner; and (ii) the proviso to Section 142(2C) vests the power to grant any extension of time for completion of that audit solely in the Assessing Officer, upon application or suo motu and after application of mind to the circumstances. The Tribunal examined the documentary record and found that the extension was communicated by the Commissioner of Income Tax (Central)-II by letter dated 13.04.2010 rather than being granted by the Assessing Officer after applying his mind as required by the proviso. While administrative communications between officers and the CIT's role in approving the initial special audit are acknowledged, the statutory scheme does not permit a higher authority to exercise or substitute for the specific extension power conferred on the Assessing Officer. Because the extension was thus not granted by the competent authority under the proviso to Section 142(2C), it was held to be beyond statutory power. The Tribunal concluded that assessments completed after the date so extended (but without a valid extension by the Assessing Officer) are void ab initio. In view of this finding on jurisdictional validity, consideration of the other substantive additions and disallowances was rendered academic and was not adjudicated on merits. [Paras 16, 17, 18, 20, 21]

The extension communicated by the Commissioner was beyond the power vested by statute in the Assessing Officer; therefore the extension is invalid, the assessments completed after the purported extended date are void ab initio, and further adjudication on other grounds is unnecessary.

Final Conclusion: The Tribunal held the extension for the special audit to be invalid because it was granted by the Commissioner instead of the Assessing Officer as required by the proviso to Section 142(2C); assessments completed after the invalid extension are void ab initio. Consequently the revenue appeals are dismissed and the assessee's cross objections are allowed.

Capitalisation of R & D expenditure - allowance of depreciation on technical know-how - consistency in accounting treatment - remand for fresh consideration - loss of evidence due to fire - burden to substantiate deductions

Remand for fresh consideration - loss of evidence due to fire - burden to substantiate deductions - Whether the additions made for prior period interest and exchange rate fluctuation (AY 2011-12) and write off of earnest money deposit (AY 2012-13) should be reconsidered in view of loss of records by reason of a fire and the assessee's request for an opportunity to procure supporting evidence. - HELD THAT: - The Tribunal accepted the undisputed fact that a major fire destroyed the assessee's records and that, as a result, documentary evidence to substantiate the claims was not available at the time of assessment and first appeal. In the interest of justice and fairness, and because the disallowances were founded on inability to substantiate claims rather than a finding of mala fides or that the expenditures were bogus, the Tribunal found it appropriate to permit the assessee an opportunity to procure whatever evidence is now possible and to allow the Assessing Officer to reconsider the matters after affording hearing. The Tribunal therefore restored the specified issues to the AO for fresh consideration and adjudication on merits in light of any new evidence that the assessee may produce. [Paras 7]

The disallowances in question are remanded to the Assessing Officer for fresh consideration after giving the assessee an opportunity to produce available evidence; grounds allowed for statistical purposes.

Capitalisation of R & D expenditure - allowance of depreciation on technical know-how - consistency in accounting treatment - Whether the depreciation disallowance on the written down value of technical know how (AY 2011-12 and AY 2012-13) was justified where the assessee had treated R & D expenditure as capital, consistently followed that treatment in earlier years, and the Revenue had allowed the expenditure in earlier years. - HELD THAT: - The Tribunal observed that the Revenue did not dispute the genuineness of the R & D expenditure and had itself allowed the expenditures in earlier scrutiny assessments; Revenue's present treatment resulted in allowing the entire R & D expenditure as revenue in the year incurred while simultaneously disallowing the assessee's claim for depreciation on the opening WDV - an approach which produced an inconsistent and disadvantageous result for the assessee. Given the long standing and consistent accounting treatment adopted by the assessee and prior acceptance by Revenue, the Tribunal found no justification for Revenue's disparate treatment. Applying these considerations, the Tribunal directed that the R & D expenditures be treated as capital in nature and allowed depreciation accordingly, deleting the additions made for depreciation in both years. [Paras 8]

Addition on account of depreciation on technical know how in both assessment years is deleted; depreciation allowed as claimed.

Final Conclusion: Both appeals were partly allowed: the Tribunal remanded the issues of prior period interest, exchange fluctuation (AY 2011-12) and write off of earnest money deposit (AY 2012-13) to the Assessing Officer for fresh consideration in view of loss of records by fire and granted the assessee an opportunity to produce evidence; the additions for depreciation on technical know how in both years were deleted and depreciation was directed to be allowed.

Addition to income on account of unexplained capital - addition on account of unsecured/secured loans and security deposits - addition on account of sundry creditors requiring confirmation - disallowance of business expenditure for failure to prove payment and business purpose - burden of proof on assessee to substantiate credits, gifts and expenditure - remand reports and confirmations under section 133(6) - reliance on bank records and creditor confirmations as evidentiary proof

Addition to income on account of unexplained capital - burden of proof on assessee to substantiate gifts - Confirmation of addition made to capital to the extent of Rs. 42,05,216/- and deletion of Rs. 7,50,000/-. - HELD THAT: - The Tribunal examined the findings of the CIT(A) who considered three remand reports from the Assessing Officer and the additional evidence filed by the assessee. The CIT(A) accepted gifts expressly explained and substantiated (part from father and part from father-in-law to the extent supported) but found the remainder unsubstantiated owing to absence of cogent proof such as bank account records, credible source of funds or reliable donor testimony. The CIT(A) remitted Rs. 7,50,000/- and confirmed the balance as unexplained capital. The Tribunal found the CIT(A)'s factual conclusions and application of the onus principle correct and declined to interfere.

Addition to capital of Rs. 42,05,216/- confirmed; Rs. 7,50,000/- deleted.

Addition on account of unsecured/secured loans and security deposits - reliance on bank statements and creditor confirmations - remand reports and confirmations under section 133(6) - Confirmation of addition of Rs. 72,00,000/- out of total addition of Rs. 2,09,94,924/-, with remission of Rs. 35,00,000/-. - HELD THAT: - The CIT(A) accepted the bank liabilities evidenced by PNB and Andhra Bank statements but scrutinised the claimed security deposits from dealers. After remand enquiries and issuance of notices under section 133(6), confirmations were received only from certain parties totaling Rs. 35,00,000/-. The CIT(A) allowed relief to that extent but rejected the balance security-deposit claims for lack of reliable documentary proof, inconsistent confirmations and the assessee's failure to produce initial creditors despite opportunities. The Tribunal upheld the CIT(A)'s factual appreciation and remission decision.

Addition of Rs. 72,00,000/- confirmed; Rs. 35,00,000/- allowed as substantiated.

Addition on account of sundry creditors requiring confirmation - burden of proof on assessee to substantiate creditors - use of section 133(6) confirmations in verification - Confirmation of addition of Rs. 54,51,492/- out of Rs. 67,07,216/-, with relief of Rs. 12,55,724/- for creditors whose balances were confirmed. - HELD THAT: - The CIT(A) examined the confirmations obtained during remand and appellate enquiries. Only three creditors furnished reliable confirmations matching the assessee's books and were allowed (aggregate relief Rs. 12,55,724/-). For the remaining creditors the notices remained unserved, returned with adverse postal remarks, or produced inconsistent balances; the assessee failed to produce the creditors despite opportunities. The CIT(A)'s finding that the initial onus to prove genuineness of creditors was not discharged was sustained by the Tribunal.

Addition of Rs. 54,51,492/- confirmed; relief of Rs. 12,55,724/- granted in respect of confirmed creditors.

Disallowance of business expenditure for failure to prove payment and business purpose - application of principles of section 37(1) - Disallowance (confirmation of addition) of claimed commission/minimum guarantee and similar payments amounting to the addition of Rs. 55,69,337/-. - HELD THAT: - The CIT(A) found that the assessee failed to produce direct evidence of payment (mode, dates, bank proof) or to demonstrate that the alleged payments were incurred for business purposes as required by the governing principles for deduction. Mere production of dealer agreements without proof of actual payment or corroborative confirmations was held insufficient. The assessee's contention that records were lost in a fire was not supplemented by secondary evidence such as bank payment trails or confirmations from payees. The Tribunal endorsed the CIT(A)'s conclusion that the assessee did not discharge the initial onus and therefore upheld the disallowance.

Addition of Rs. 55,69,337/- on account of commission/minimum guarantee confirmed.

Disallowance of business expenditure for failure to prove payment and business purpose - use of contemporaneous evidence to substantiate advertisement and other expenses - Confirmation of disallowance of advertisement and other unspecified expenses for want of evidence. - HELD THAT: - The Assessing Officer disallowed advertisement and other expenses because the assessee did not produce supporting evidence during assessment or appellate proceedings. The CIT(A) dismissed the ground of appeal, noting the absence of any additional evidentiary prayer or secondary proofs. The Tribunal agreed that in absence of documentary proof or credible secondary evidence the claimed expenses could not be allowed as business deductions.

Disallowance of advertisement and related expenses confirmed.

Final Conclusion: The Tribunal upheld the CIT(A)'s factual and evidentiary conclusions across the contested additions and disallowances: additions on account of unexplained capital, loans/security deposits, sundry creditors, commission/minimum guarantees, and advertisement/other expenses were largely confirmed except where specific confirmations or bank evidence justified limited relief; the appeal is dismissed.

Interim relief - status quo - reconciliation of securities entitlements - opportunity of hearing - transfer of securities - appearance before exchange - digitally signed order

Interim relief - appearance before exchange - reconciliation of securities entitlements - status quo - Interim directions in relation to disputed securities and urgent applications - HELD THAT: - Without adjudicating the merits of competing contentions about ownership of securities or the legality of the impugned directions issued by the exchange, the Tribunal directed a limited interlocutory regime. The parties were ordered to appear before the exchange on the specified date and the exchange was directed to provide contact arrangements. The exchange and the parties were required to reconcile and determine rights in respect of the securities based on the available database within one week thereafter. Pending further hearing on the listed date, a status quo was imposed: no transfer of securities pursuant to the impugned orders and the appellant was restrained from alienating the securities in question. These directions were given as interim relief to preserve the rights of parties and to enable a focused reconciliation without deciding the substantive dispute on ownership or the validity of the underlying regulatory orders. [Paras 7]

Parties to appear before NSE on June 24, 2020; reconciliation of securities entitlements to be completed within one week; status quo to be maintained until further hearing on July 03, 2020; Misc. Applications Nos.145 & 146 of 2020 disposed of on these terms.

Digitally signed order - Validity and implementation of digitally signed order in pandemic circumstances - HELD THAT: - Owing to constraints caused by the Covid-19 pandemic, the Tribunal recorded that it was not possible to physically sign or issue a certified copy of the order. The Tribunal directed that the order be digitally signed by the Presiding Officer on behalf of the bench and authorised parties to act on the digitally signed copy transmitted by fax and/or email. This procedural direction enabled immediate operation of the interim regime despite inability to issue a physical certified copy. [Paras 8]

Order to be digitally signed and to be acted upon by parties on production of the digitally signed copy sent by fax and/or email.

Final Conclusion: The Tribunal granted limited interim relief without deciding merits: parties to appear before NSE for reconciliation of securities entitlements, reconciliation to be completed within a week, status quo maintained until July 03, 2020 hearing, Miscellaneous Applications disposed of on these terms, and the order was authorised to be acted upon in digitally signed form due to pandemic constraints.

Copyright infringement - territorial jurisdiction of civil court in internet-based copyright actions (effects test) - interactivity of website and targeting of forum state - jurisdiction of the Adjudicating Authority under the Insolvency and Bankruptcy Code - bar on civil courts in matters falling within the IBC (ousting of jurisdiction) - continuity of contractual rights under an approved resolution plan

Copyright infringement - territorial jurisdiction of civil court in internet-based copyright actions (effects test) - Delhi High Court has territorial jurisdiction to entertain the suit insofar as the plaintiff pleads infringement by uploading and communicating copyrighted drawings to the public via the CPPP accessible and accessed in Delhi. - HELD THAT: - The Court held that uploading the plaintiff's drawings onto the Central Public Procurement Portal amounted to issuing copies, storing and communicating the work to the public within the meaning of the Copyright Act, and therefore gave rise to a cause of action in Delhi. The Division Bench test in Banyan Tree was considered: mere accessibility is insufficient, but where the pleaded cause of action is the act of copying/communicating on an electronic portal and at least two parties accessed/downloaded the drawings from Delhi, the effects test is satisfied and territorial jurisdiction under Section 20 of the Copyright Act is attracted. Consequently, the objection to territorial jurisdiction was rejected. [Paras 21, 22, 23]

Court accepts territorial jurisdiction of Delhi High Court over the copyright infringement claim based on uploading and communicating the drawings on CPPP.

Jurisdiction of the Adjudicating Authority under the Insolvency and Bankruptcy Code - bar on civil courts in matters falling within the IBC (ousting of jurisdiction) - continuity of contractual rights under an approved resolution plan - The dispute concerning entitlement to use or benefit from the contractual rights/drawings falls within the ambit of the IBC and must be adjudicated by the NCLT; civil court proceedings are barred and the suit is not maintainable. - HELD THAT: - The Court analysed Sections 60, 63, 231 and 238 of the IBC and the terms of the resolution plan which provide for continuity of consents, licenses and contractual rights in favour of the corporate debtor/successor. Given the wide ambit of Section 60(5)(c) to dispose of any question of law or fact arising out of or in relation to the insolvency resolution or liquidation proceedings, and the statutory bar created by Sections 63 and 231, the dispute as pleaded by the plaintiff - concerning whether rights in the drawings passed to the successor or are governed by the resolution plan - falls to be determined by the NCLT. The Court noted the plaintiff's pleadings admitting the SPV relationship and that no documents were placed to show any assignment of copyright. In view of the interrelation between the copyright entitlement and the insolvency/resolution process, the civil suit was held to be barred and therefore not maintainable. [Paras 33, 35, 36, 37]

Court holds that the cause of action falls within the jurisdiction of the NCLT under the IBC; civil suit is barred and dismissed as not maintainable.

Final Conclusion: Though the High Court accepted territorial jurisdiction in respect of the alleged copyright infringement arising from uploading the drawings on the CPPP, the dispute over entitlement to use the drawings and related contractual rights is caught by the Insolvency and Bankruptcy Code and falls within the jurisdiction of the NCLT; accordingly the civil suit before this Court is barred and is dismissed as not maintainable.

Prevention of oppression and mismanagement - right of a member to apply to the Tribunal under Sections 241 and 242 - restriction on powers of Board to sell or dispose of the whole or substantially the whole of the undertaking and requirement of shareholders' special resolution under Section 180 - remand for fresh consideration by the Tribunal after giving parties proper opportunity

Right of a member to apply to the Tribunal under Sections 241 and 242 - prevention of oppression and mismanagement - remand for fresh consideration by the Tribunal after giving parties proper opportunity - Whether the Appellant, as a member, was entitled to prosecute a petition under the Companies Act alleging oppression and mismanagement and whether the matter required fresh consideration by the NCLT after affording proper opportunity to the parties. - HELD THAT: - The Tribunal held that a member who is adversely affected or who shows that the interests of the company are prejudicially affected is entitled to file a petition under the Companies Act for prevention of oppression and mismanagement, and that the NCLT/NCLAT are the specialised fora to examine such allegations. The NCLAT noted that the NCLT had refused the Appellant leave to file a rejoinder after new material (the Board resolution) emerged and that the NCLT had relied upon other fora's orders; given the statutory scheme and the need to scrutinise the genuineness of documents and the conduct complained of, the matter ought to be reconsidered after giving the parties proper opportunity to place material before the Tribunal. Accordingly the matter was remanded to the NCLT, Chennai Bench for fresh consideration uninfluenced by earlier orders and after affording appropriate opportunities to the parties. [Paras 11, 12]

The Appellant is entitled to pursue remedies under Sections 241-242; the matter is remanded to the NCLT, Chennai Bench to decide afresh after giving parties proper opportunity to be heard.

Restriction on powers of Board to sell or dispose of the whole or substantially the whole of the undertaking and requirement of shareholders' special resolution under Section 180 - Whether the sale of substantially the whole of the company's undertaking required prior shareholder approval by special resolution under Section 180 and whether that principle bears on the Tribunal's inquiry. - HELD THAT: - The Tribunal extracted and applied the legal principle that the Board may exercise the power to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking only with the consent of the company by a special resolution. The explanation defining 'undertaking' and 'substantially the whole' was noted, and the Tribunal recorded that, because the Companies Act places such restriction on the Board, the question of shareholder approval for a transaction alleged to dispose of substantially the entire assets is a matter which the NCLT should examine when adjudicating complaints of oppression and mismanagement. [Paras 11]

The requirement of shareholder approval by special resolution under Section 180 is a relevant legal principle which the NCLT must consider while adjudicating the petition concerning alleged sale of substantially the whole of the company's undertaking.

Final Conclusion: The appeal succeeds to the extent of directing that the matter be remitted to the NCLT, Chennai Bench for fresh consideration and decision after affording the parties proper opportunity to place material and be heard; no order as to costs.

Moratorium under section 14 of the Insolvency and Bankruptcy Code - management and powers of Interim Resolution Professional - violation of moratorium and unauthorized withdrawals by suspended directors - contempt for wilful disobedience of judicial orders and breach of undertakings - power of Tribunal to register contempt and refer misconduct for criminal proceedings - Committee of Creditors - constitution and meetings - IRP's duty to preserve assets and place particulars before Adjudicating Authority for action under sections 70 and 74 of IBC

Moratorium under section 14 of the Insolvency and Bankruptcy Code - violation of moratorium and unauthorized withdrawals by suspended directors - management and powers of Interim Resolution Professional - Directors of the corporate debtor made withdrawals and transfers after initiation of CIRP in breach of moratorium and without IRP's approval, and such acts were illegal. - HELD THAT: - The Tribunal examined bank statements and particulars placed on record showing multiple withdrawals and transfers from the corporate debtor's account after admission of the section 9 application and after the moratorium had been imposed. The order of this Tribunal and the role of the IRP required that the IRP keep the company a going concern and that directors assist only with the approval of the IRP; cheques could be prepared but operated only through the hands of the IRP. The withdrawals were made without IRP approval, including payments to directors themselves, and therefore constituted a clear breach of the moratorium and the Tribunal's directions. The Tribunal held that such acts could not be justified as CIRP costs or expenses except for a small quantified sum and amounted to illegal interference with the CIRP process. [Paras 4, 5, 6, 20, 22]

Findings recorded that the directors acted illegally by withdrawing funds post-moratorium without IRP's approval; such withdrawals are not justified as CIRP costs except in limited quantified amount.

Contempt for wilful disobedience of judicial orders and breach of undertakings - power of Tribunal to register contempt and refer misconduct for criminal proceedings - Undertakings given by the directors were not honoured and their conduct prima facie constituted contempt and warranted registration of a contempt case. - HELD THAT: - The Tribunal considered the undertakings dated 5-2-2020 by the directors to deposit the withdrawn sums within a fixed time and observed non-compliance with those undertakings. The pleadings seeking further time were rejected as not bona fide and as attempts to delay and frustrate the CIRP. On the material on record and the pattern of withdrawals after moratorium, the Tribunal concluded that there was prima facie wilful non-compliance and that contempt proceedings ought to be initiated. The Registry was directed to register a contempt case and list it for hearing. [Paras 11, 13, 22, 23, 25]

I.A. seeking more time to comply with undertakings is rejected; prima facie contempt is made out and a contempt case is to be registered against the directors.

Committee of Creditors - constitution and meetings - management and powers of Interim Resolution Professional - Committee of Creditors had been constituted before the interim order; the IRP was permitted to hold CoC meetings and give effect to normal IBC processes. - HELD THAT: - The Tribunal reviewed earlier interim directions which had stated that the IRP would not constitute the CoC if not constituted; it was noted on record that the CoC had in fact been constituted prior to the interim order. The Tribunal held that where the CoC was already constituted, the natural course under the IBC would follow and the IRP may hold meetings of the CoC. The earlier restriction related only to constitution where it had not occurred; it did not bar the IRP from conducting CoC proceedings once constituted. [Paras 3, 15]

IRP is permitted to hold CoC meetings since CoC had already been constituted; normal IBC course to be followed.

IRP's duty to preserve assets and place particulars before Adjudicating Authority for action under sections 70 and 74 of IBC - power of Tribunal to register contempt and refer misconduct for criminal proceedings - IRP is at liberty to investigate, place particulars and evidence before the Adjudicating Authority and other authorities to pursue recovery and actions under relevant provisions of the IBC and other laws. - HELD THAT: - Recognising that substantial sums were withdrawn and that the CIRP has been hampered, the Tribunal expressly permitted the IRP to examine accounts and evidence and to place all particulars, including evidence of violations of sections 14, 17 and 19 of the IBC, before the Adjudicating Authority. The Tribunal noted that the Adjudicating Authority may consider actions under sections 70 and 74 of the IBC or other provisions as may be appropriate; the IRP was also permitted to approach other authorities including police to trace and recover money. [Paras 5, 26]

IRP may pursue recovery and place particulars/evidence before the Adjudicating Authority and other authorities for appropriate action, including under sections 70 and 74 of the IBC.

Final Conclusion: The Tribunal concluded that the suspended directors made unauthorised withdrawals in breach of the moratorium and Tribunal orders; undertakings to restore funds were not honoured and prima facie contempt was established, leading to rejection of the application for more time and dismissal of the appeal in default; the IRP is empowered to proceed with CIRP, convene CoC meetings and to place evidence before the Adjudicating Authority and other authorities to trace, recover and seek action under the IBC and relevant laws.

Commercial wisdom of the Committee of Creditors - limited judicial review under section 31 - compliance with the requirements of section 30(2) - maximisation of value constraint on judicial review

Commercial wisdom of the Committee of Creditors - limited judicial review under section 31 - compliance with the requirements of section 30(2) - Whether the Adjudicating Authority exceeded its jurisdiction in directing fresh bidding after the Committee of Creditors had approved a resolution plan with 84.70% voting share. - HELD THAT: - The Tribunal held that the Adjudicating Authority's power under section 31 is a limited judicial scrutiny confined to verifying that the resolution plan, as approved by the requisite voting share of CoC, meets the criteria specified in section 30(2). The adjudicating authority is not empowered to re-examine or overturn the commercial decision of the CoC or to substitute its equitable or quantitative view for the collective business judgment of financial creditors. Directing re-bidding on the ground of alleged non-maximisation of value amounted to impermissible interference with the commercial wisdom of the CoC. The Tribunal relied on the Supreme Court precedents establishing that judicial review under section 31 cannot trespass upon matters within CoC's commercial domain and is limited to the narrow statutory grounds enumerated in section 30(2). [Paras 9, 10, 11, 14, 15]

The Adjudicating Authority exceeded its jurisdiction in directing fresh bidding and that direction was set aside.

Compliance with the requirements of section 30(2) - maximisation of value constraint on judicial review - Whether alleged non-disclosure of information and the contention that the process was biased against a prospective resolution applicant justified judicial intervention to set aside CoC's approval. - HELD THAT: - The Tribunal found that the contention regarding non-receipt of complete information and alleged bias in the CIRP process did not warrant interference by the Adjudicating Authority once the CoC had approved the resolution plan by the requisite majority. The statutory mandate requires the Adjudicating Authority under section 31(1) only to ascertain that the approved plan meets the requirements of subsections (2) and (4) of section 30. Allegations about disclosure, opportunity or perceived unfairness fall within the commercial assessment of CoC and do not expand the Adjudicating Authority's limited scrutiny to a merits-based re-evaluation. [Paras 16, 19, 20, 22]

Allegations of non-disclosure and bias did not justify judicial scrutiny to overturn the CoC approval; the challenge was rejected.

Commercial wisdom of the Committee of Creditors - limited judicial review under section 31 - Whether allegations that the Resolution Professional conducted a non-transparent evaluation process and manipulated bidding vitiated the CoC's approval of the resolution plan. - HELD THAT: - The Tribunal recorded that there was no material on record to demonstrate that the Resolution Professional manipulated the process. The role of the Resolution Professional is facilitative and the evaluation matrix and selection of H1 fall within the commercial domain of the CoC. As such, questions about the RP's conduct and the evaluation methodology could not be elevated into grounds for setting aside the CoC's commercial decision absent demonstration of the narrow statutory infirmities in section 30(2). [Paras 23, 24]

The challenge alleging manipulation and non-transparency by the Resolution Professional was rejected and the appeal dismissed.

Compliance with the requirements of section 30(2) - Remand for ministerial action following setting aside of the Adjudicating Authority's direction for re-bidding. - HELD THAT: - While the direction for re-bidding was set aside, the Tribunal remitted the matter to the Adjudicating Authority with directions to pass orders for approval of the resolution plan after ascertaining that the plan satisfies the requirements of subsections (2) and (4) of section 30. The remand is for the Adjudicating Authority to complete the statutory approval process consistent with the Tribunal's findings and applicable law. [Paras 25, 26]

Matter remitted to the Adjudicating Authority to pass order for approval of the resolution plan in accordance with the Tribunal's directions.

Final Conclusion: The appeal challenging the Adjudicating Authority's direction for fresh bidding is allowed; the direction for re-bidding is set aside. The challenges alleging nondisclosure, bias and manipulation are dismissed. The matter is remitted to the Adjudicating Authority to pass orders approving the resolution plan after satisfying itself that the plan complies with the statutory requirements of section 30(2) and (4).

Maintainability of Section 7 Insolvency and Bankruptcy Code application despite concurrent SARFAESI and DRT proceedings - overriding effect of the Insolvency and Bankruptcy Code under Section 238 - moratorium under the Insolvency and Bankruptcy Code and its effect on parallel recovery proceedings - requirement of service and principles of natural justice in admission of Section 7 applications - effect of existence/value of secured assets on maintainability of an application under Section 7

Maintainability of Section 7 Insolvency and Bankruptcy Code application despite concurrent SARFAESI and DRT proceedings - overriding effect of the Insolvency and Bankruptcy Code under Section 238 - moratorium under the Insolvency and Bankruptcy Code and its effect on parallel recovery proceedings - Whether pendency of proceedings under the SARFAESI Act or the DRT Act bars admission of an application by a financial creditor under Section 7 of the IBC. - HELD THAT: - The Tribunal upheld that pendency of actions under the SARFAESI Act or proceedings before the Debt Recovery Tribunal is not a bar to filing or admitting an application under Section 7 where the Section 7 application is complete. The Code contains an express moratorium which operates to suspend parallel recovery proceedings, and Section 238 gives the IBC an overriding effect over inconsistent provisions of other laws. Reliance on previous authority concerning the SARFAESI Act does not support the contention that resort to SARFAESI or DRT remedies precludes initiation of insolvency proceedings under the later-enacted IBC. Consequently, earlier or concurrent enforcement steps under SARFAESI or DRT do not render a Section 7 petition non-maintainable. [Paras 8, 9]

Pendency of SARFAESI or DRT proceedings does not bar admission of a Section 7 IBC application; IBC's moratorium and overriding provision (Section 238) render Section 7 maintainable.

Requirement of service and principles of natural justice in admission of Section 7 applications - Whether the Corporate Debtor was not duly served with notice of the Section 7 proceedings and whether non-service vitiates the admission. - HELD THAT: - The Adjudicating Authority recorded, on the record, that notices were served and affidavits filed showing service, including postal acknowledgements. The Tribunal examined the documents relied upon by the financial creditor and found no reason to doubt that service had been effected. Although the appellant contended that directors should have been separately served, no specific prejudice or legal basis for remand was pointed out to justify reopening the question of service. In those circumstances the Tribunal declined to interfere with the finding of service and observed there was no case shown to merit remand. [Paras 7]

Service was held to be adequate on the record before the Adjudicating Authority; lack of separate service on directors did not justify remand or vitiate admission.

Effect of existence/value of secured assets on maintainability of an application under Section 7 - Whether the alleged sufficiency in value of securities held by the bank precluded filing or admission of the Section 7 application. - HELD THAT: - The appellant alleged that the securities available exceeded the claim and thus the Section 7 application ought not to have been admitted. The Tribunal noted that no convincing case was made to show that the debt was not due or that the account was not in default; the appellant did not demonstrate a legal bar arising solely from the existence of security. The Tribunal treated the Section 7 application as aimed at resolution and held that the mere existence or asserted adequacy of security does not, on the materials before it, preclude the filing or admission of a Section 7 petition. [Paras 3, 7]

Assertion that securities exceed the claim does not, on the record before the Tribunal, bar admission of the Section 7 application; no merit in the contention as presented.

Final Conclusion: The appeal was dismissed. The Tribunal held that the Section 7 application was maintainable despite SARFAESI/DRT proceedings, service on the Corporate Debtor was adequate on the record and no ground for remand was shown, and the contention regarding sufficiency of security did not vitiate admission.

Approval of resolution plan under section 31 of the IBC - compliance of a resolution plan with section 30(2) of the IBC - requirements of Regulation 38 and Regulation 39 of the CIRP Regulations - eligibility under section 29A and Form H certification - appointment and role of Monitoring Agency for implementation of a resolution plan - binding effect of an approved resolution plan and cessation of moratorium

Approval of resolution plan under section 31 of the IBC - compliance of a resolution plan with section 30(2) of the IBC - Whether the resolution plan submitted by Atyant Capital India Fund-I is to be approved under section 31 of the IBC. - HELD THAT: - The Tribunal examined the Final Resolution Plan and the record of the Committee of Creditors. The Resolution Professional certified compliance of the plan with the requirements of section 30(2) of the Code and the CIRP Regulations. The CoC approved the plan by 100% voting share in electronic voting, satisfying the requisite majority under section 30(4). The Tribunal found that the approved plan meets the statutory conditions prescribed under section 30(2) and the mandatory contents under the CIRP Regulations and accordingly approved the plan. [Paras 24, 25, 26, 33, 34]

Approved the Final Resolution Plan of Atyant Capital India Fund-I and disposed CA 55/2020 and CA 188/2019; the plan is effective from the date of the corrected order.

Requirements of Regulation 38 and Regulation 39 of the CIRP Regulations - eligibility under section 29A and Form H certification - Whether the approved resolution plan complies with Regulation 38 and Regulation 39 of the CIRP Regulations and whether the resolution applicant is eligible under section 29A. - HELD THAT: - The Tribunal recorded that the RP certified under Regulation 39(4) that the plan meets the requirements of the IBC and the Regulations. The order sets out compliance tables demonstrating that the plan provides for priority payment of CIRP costs, repayment to operational creditors, management and implementation provisions, feasibility and capability to implement, and other mandatory contents of Regulation 38. The RP also submitted Form H certifying the eligibility of the resolution applicant under section 29A and feasibility and viability of the plan. On this basis the Tribunal concluded compliance with Regulation 38/39 and section 29A. [Paras 24, 26, 27, 29]

Found that the approved plan complies with Regulation 38 and Regulation 39 and that the resolution applicant satisfies section 29A requirements as certified in Form H.

Implementation terms of the approved plan - payment to secured financial creditors and treatment of related party unsecured creditors - Whether the approved plan specifies the implementation timeline and the payment mechanism to secured and unsecured creditors. - HELD THAT: - The Tribunal noted that the approved plan provides for payment to secured financial creditors within 30 days of approval, funded out of the corporate debtor's cash and bank balances, and that CIRP costs will be paid in priority. The order records that the plan provides for upfront settlement to secured financial creditors and specifies that no payment is provided to certain unsecured related party financial creditors against a particular verified amount. These implementation and payment terms were considered part of the plan's conformity with statutory requirements. [Paras 28]

Recorded that the plan provides for specified implementation timelines and payment terms, including upfront settlement to secured financial creditors within 30 days and priority payment of CIRP costs.

Appointment and role of Monitoring Agency for implementation of a resolution plan - Whether the Resolution Professional shall be appointed as the Monitoring Agency and the terms of such appointment. - HELD THAT: - Relying on the supervisory role contemplated for monitoring implementation, the Tribunal appointed the Resolution Professional as Monitoring Agency to monitor and supervise implementation of the approved plan. The Tribunal fixed the remuneration of the Monitoring Agency and permitted the Resolution Applicant to remove or substitute the Monitoring Agency with the Tribunal's prior approval if it fails satisfactorily to perform its duties. [Paras 30, 31]

Appointed the Resolution Professional as Monitoring Agency, fixed remuneration, and permitted substitution with the Tribunal's prior approval if necessary.

Binding effect of an approved resolution plan and cessation of moratorium - Whether the approved resolution plan will be binding on stakeholders and whether the moratorium ceases on approval. - HELD THAT: - The Tribunal directed that the approved resolution plan shall be binding on the corporate debtor, its employees, members, creditors, guarantors and other stakeholders involved in the plan. It further directed that with approval of the resolution plan the moratorium previously imposed under section 14 of the Code shall cease to have effect. The RP was directed to forward records to the Board for recording on its database. [Paras 32]

Held that the resolution plan is binding on all stakeholders and the moratorium under section 14 ceases upon approval; directed filing of records with the Board.

Final Conclusion: The Tribunal corrected its prior order and, having found that the Final Resolution Plan submitted by Atyant Capital India Fund-I complies with section 30(2), section 29A and the CIRP Regulations (including Regulations 38 and 39), approved the plan under section 31 of the IBC, appointed the Resolution Professional as Monitoring Agency with specified remuneration, declared the plan binding on all stakeholders and directed cessation of the moratorium effective from the date of the corrected order.

Club or association - taxable service - incorporated members' clubs - service tax not leviable on incorporated members' clubs - continuous service - application of precedent

Incorporated members' clubs - club or association - taxable service - Levy of service tax on services rendered by the petitioner (an incorporated time share/club) to its members with effect from 16.06.2005, including amounts collected by way of installments/EMIs for contracts entered prior to 16.06.2005. - HELD THAT: - The Court applied and followed the ratio of the Supreme Court in State of West Bengal v. Calcutta Club Limited [MANU/SC/1367/2019], which held that the Finance Act, from 2005 onwards, does not levy service tax on incorporated members' clubs; the expression 'body of persons' in the statutory scheme does not encompass bodies corporate. Given that principle, the respondents are not entitled to levy, demand or collect service tax on services provided by the petitioner to its members, including post 16.06.2005 instalment receipts arising from contracts entered before that date. The administrative characterization of the service as a 'continuous service' and the consequent attempt to tax instalments received after 16.06.2005 cannot sustain a demand against an incorporated members' club where the Supreme Court's decision precludes such levy.

The writ petitions are allowed insofar as they challenge levy of service tax on the petitioner for services to its members with effect from 16.06.2005; demands, show cause notices and other actions to that effect are set aside.

Rate of service tax - application of precedent - Challenge to imposition of service tax at the higher rate (12.24%) on portions of entrance fees collected in instalments falling due after 18.04.2006 for contracts entered between 16.06.2005 and 18.04.2006. - HELD THAT: - Since the Court concluded-following the Supreme Court decision-that service tax could not be levied on the petitioner as an incorporated members' club for the services in question, the respondents' contention that portions of entrance fees collected after 18.04.2006 attract a higher rate is rendered immaterial. The attempted levy at the enhanced rate in respect of the petitioner is therefore unsustainable.

The petitioners' challenge to levy of service tax at 12.24% on the questioned portions is allowed; corresponding demands and actions are quashed.

Final Conclusion: Both writ petitions are allowed. Following the Supreme Court's decision in State of West Bengal v. Calcutta Club Limited [MANU/SC/1367/2019], the respondents are prohibited from levying, demanding or collecting service tax from the petitioner in respect of services to its members (including instalment/EMI receipts and contested portions of entrance fees); connected miscellaneous petitions are closed and there shall be no costs.

Levy of purchase tax - Interpretation of purchase-tax provision in clause (a) of Section 7-A - Meaning of 'consumes' and 'uses' in taxing statutes - Inclusion of container value in turnover by deeming provision - Effect of administrative clarifications and circulars on statutory interpretation - Taxability of cash or other discount under Explanation 2(iii) to Section 2(r)

Levy of purchase tax - Interpretation of purchase-tax provision in clause (a) of Section 7-A - Meaning of 'consumes' and 'uses' in taxing statutes - Purchase tax under Section 7-A is leviable on the turnover relating to purchase of empty bottles bought from unregistered dealers by the assessee. - HELD THAT: - Applying the ingredient analysis in M.K. Kandaswami, read with the Constitution Bench ruling in Nandanam Construction Co., clause (a) of Section 7-A covers goods which are consumed or used 'in' the manufacture or consumed or used 'otherwise'. All statutory ingredients (dealer, purchase in course of business, goods liable to tax, purchase without tax at point of purchase) were satisfied. Although the bottles did not lose identity and were not 'consumed in manufacture' nor 'used in manufacture' (manufacture of Beer/IMFL was complete before bottling), the bottles were nevertheless employed in the dealer's integrated process (bottling) and thereby 'used otherwise' such that they ceased to be available in the form purchased. That use falls within the scope of clause (a) and attracts purchase tax. The fact that the value of bottles forms part of turnover on sale (Section 3(7)) does not preclude levy of purchase tax under Section 7-A; Premier Breweries and Appollo Saline are applied to reject double counting arguments. Conclusion: purchase tax exigible on the purchases in question. [Paras 35, 49, 50, 51, 52]

Turnover relating to empty bottles purchased from unregistered dealers is exigible to purchase tax under Section 7-A.

Effect of administrative clarifications and circulars on statutory interpretation - The Clarifications dated 09.11.1989 and 27.12.2000 do not defeat the statutory construction of Section 7-A as declared by the Courts and cannot exempt the assessee from liability for the assessment years in question. - HELD THAT: - Section 28-A authorises the Commissioner to issue clarifications binding on departmental officers, but executive circulars cannot override or displace the court's declaration of law. The Court relied on the Constitution Bench precedents (Dhiren Chemical and Ratan Melting & Wire Industries) to hold that where a judicial interpretation of the statute differs from departmental clarifications, the latter cannot be used to obtain relief contrary to the judicially declared meaning. Accordingly, even if the earlier circulars were administrative instructions, they cannot be allowed to negate the levy of purchase tax where Section 7-A, correctly interpreted, applies to the facts. The High Court erred in upholding the assessee's entitlement to the clarifications for the relevant assessments. [Paras 58, 61, 62, 63, 64]

Clarifications dated 09.11.1989 and 27.12.2000 cannot be relied upon to avoid the liability under Section 7-A; the High Court's direction granting benefit of those clarifications is set aside.

Taxability of cash or other discount under Explanation 2(iii) to Section 2(r) - Cash or other discounts allowed by the assessee are not includible in turnover and are not taxable under the relevant provision. - HELD THAT: - Explanation 2(iii) to Section 2(r) expressly excludes 'any cash or other discount on the price allowed in respect of any sale' from turnover. Applying settled precedents (including Neyveli Lignite), the Court upheld the High Court's conclusion that the cash discount given to TASMAC is not includible in turnover for levy of tax. Revenue advanced no convincing ground to depart from that clear statutory explanation and doctrinal authority. [Paras 6, 8, 65]

Cash discount offered to TASMAC is not includible in turnover and is not taxable.

Final Conclusion: The appeals result in part: the revenue's appeal is allowed insofar as the Supreme Court holds that purchase tax under Section 7-A is leviable on the purchase turnover of empty bottles bought from unregistered dealers for the assessment years before the Court; the High Court's grant of relief to the assessee based on departmental Clarifications dated 09.11.1989 and 27.12.2000 is reversed; the assessee's appeal is dismissed on the principal point but sustained on the separate question that cash discounts are not includible in turnover.

Best judgment assessment - use of electricity consumption as basis for assessment - principles of natural justice - requirement of material to doubt accounts before resorting to best judgment - actual test check in assessee's factory - comparative data from similar units - arbitrariness in estimation

Use of electricity consumption as basis for assessment - requirement of material to doubt accounts before resorting to best judgment - arbitrariness in estimation - Validity of revised assessment founded solely on electricity consumption without additional supporting material - HELD THAT: - The Court held that electricity consumption cannot be adopted as the sole basis for rejecting the assessee's accounts and making an estimate of taxable turnover. The law requires that the assessing authority possess material to doubt the correctness or genuineness of the entries in the account books before proceeding to a best judgment assessment on the basis of power consumption. Further, in the absence of actual test check and comparable data, adopting a particular rate of consumption for estimation would be arbitrary and such a best judgment assessment cannot be legally upheld. [Paras 7, 9]

Revised assessment based solely on electricity consumption is legally unsustainable and arbitrary.

Principles of natural justice - actual test check in assessee's factory - Whether the assessee was afforded reasonable opportunity and whether books of accounts were verified before passing the revised assessment - HELD THAT: - The Court found as an admitted fact that the respondent did not verify the books of accounts maintained by the petitioner for the relevant year when passing the revised assessment. Although the respondent contended that the petitioner failed to produce the books despite summons, the petitioner pleaded that they were not afforded reasonable opportunity to furnish those records. Having regard to the requirement of fair opportunity for production and verification of accounts before making a best judgment assessment, the failure to verify the books and the dispute over opportunity rendered the procedure infirm. [Paras 7, 8, 9]

The failure to verify books and the lack of an established, reasonable opportunity to produce them vitiate the revised assessment.

Best judgment assessment - principles of natural justice - Remedial direction following setting aside of the impugned order - HELD THAT: - In view of the legal infirmities in the impugned revised order, the Court set aside the order and remanded the matter to the respondent for fresh consideration. The petitioner was permitted to file objections afresh and produce the books of accounts within a limited period. The respondent was directed to consider the material and pass appropriate orders on merits and in accordance with law after affording a personal hearing, within specified timeframes. [Paras 10, 11]

Impugned order set aside and matter remanded for fresh consideration with opportunity to produce records and for hearing.

Final Conclusion: The revised assessment for assessment year 2004-05, being founded solely on electricity consumption without verification of books and without ensuring a proper opportunity to the assessee, was set aside; the matter is remitted for fresh consideration permitting the assessee to produce accounts and for the authority to pass a fresh order on merits in accordance with law.

Refund of input tax credit - section 18 subject to restrictions in section 19 - assessing authority's fact finding to ascertain visible and invisible loss - uniform percentage for invisible loss not permissible - reopening of refund/order and revision after notice - show cause notice and opportunity of personal hearing before revision

Refund of input tax credit - section 18 subject to restrictions in section 19 - uniform percentage for invisible loss not permissible - Validity of the impugned order reversing/deducting input tax credit and the practice of adopting uniform percentages for invisible loss. - HELD THAT: - The Court followed the ratio in Interfit Techno Products Ltd. which held that entitlement to refund under Section 18(2) is not automatic and must be examined subject to the restrictions and conditions contained in Section 19. An assessing authority must undertake a fact-finding exercise to ascertain the quantum of loss (visible and invisible) in relation to goods purchased and used in manufacture, and to determine whether any restriction under Section 19 applies. Consequently, assessing authorities are not justified in adopting a uniform percentage as invisible loss and mechanically calling upon dealers to reverse input tax credit on that basis. Applying that principle to the facts, the Court set aside the impugned order of the second respondent which had applied deductions/reversals without the required individualized fact-finding and justification. [Paras 3]

Impugned order reversing/deducting input tax credit is set aside to the extent it proceeded without required fact-finding and by applying uniform percentage deductions.

Reopening of refund/order and revision after notice - show cause notice and opportunity of personal hearing before revision - assessing authority's fact finding to ascertain visible and invisible loss - Procedure to be followed on remand for reconsideration of the refund order relating to assessment year 2011-12. - HELD THAT: - The Court remanded the matter to the second respondent for fresh decision on merits in accordance with law. The second respondent is directed to issue a show cause notice to the petitioner clearly setting out the circumstances under which revision or reversal of the refund is proposed, and to afford the petitioner an opportunity to file objections with supporting documents and to be heard personally. Timelines were prescribed for issuance of the notice, submission of objections, and disposal of the matter: the notice to be issued within four weeks of receipt of the order, objections to be filed within two weeks thereafter, and a fresh order to be passed on merits after personal hearing within four weeks of receipt of objections. [Paras 5]

Matter remitted for fresh consideration; second respondent to issue show cause notice and decide afresh after hearing the petitioner in accordance with law within the stipulated timelines.

Final Conclusion: Writ petition allowed to the extent that the impugned order dated 25.10.2013 is set aside and the matter relating to assessment year 2011-12 is remitted to the second respondent for fresh adjudication after issuing a show cause notice and affording the petitioner an opportunity of personal hearing, in accordance with the directions and timelines specified by the Court.

Non-statutory circular - input tax credit - invisible loss - refund under Section 18(2) of the TNVAT Act - restrictions under Section 19 of the VAT Act - uniform percentage as invisible loss - show cause notice and opportunity of personal hearing

Non-statutory circular - input tax credit - refund under Section 18(2) of the TNVAT Act - Challenge to the circular dated 20.10.2011 issued by the first respondent - HELD THAT: - The Court held that the impugned circular is a non-statutory circular and is in the nature of a guideline; quashing the circular was unnecessary. The decision in Interfit Techno Products Ltd. was applied, which treats Section 18 as subject to other provisions of the Act (including Section 19) and requires the Assessing Authority to undertake fact-finding before calling for reversal of input tax credit. The Court reiterated that Assessing Authorities are not justified in adopting a uniform percentage as invisible loss and issuing blanket reversals of input tax credit without individualized enquiry. [Paras 4]

The petition seeking quashment of the circular is dismissed.

Invisible loss - uniform percentage as invisible loss - restrictions under Section 19 of the VAT Act - show cause notice and opportunity of personal hearing - Validity of the notice dated 20.02.2014 issued by the second respondent relating to assessment year 2012-13 and the correctness of proposed reversal of ITC on account of alleged invisible loss - HELD THAT: - The Court set aside the impugned notice as it pertains to assessment year 2012-13 and required the Assessing Officer to reconsider the matter afresh. Following the precedent, the Court directed that the Assessing Officer must issue an appropriate show cause notice clearly stating the circumstances under which revision or reversal of refund is proposed, afford the dealer an opportunity to file objections with supporting documents, and provide personal hearing. The reasoning emphasises that any determination of invisible loss and entitlement to retain refund must involve a fact-finding exercise and verification against the restrictions and conditions in Section 19 (including Section 19(9)), rather than mechanical application of an adhoc percentage. Timelines for issuing notice, filing objections and passing orders were prescribed. [Paras 4]

The notice dated 20.02.2014 is set aside and the matter is remitted to the Assessing Officer for fresh consideration in accordance with the directions given.

Final Conclusion: Challenge to the circular is dismissed as unnecessary; the notice for assessment year 2012-13 is set aside and remitted to the Assessing Officer to issue a detailed show cause notice, receive objections and documents, afford personal hearing and decide the matter on merits in accordance with law within the timelines directed.

Reopening of assessment and validity of assessment orders - remand for fresh consideration with issuance of show cause notice - requirement of fact-finding by Assessing Authority before adopting invisible loss percentages - Section 18 claim for refund subject to restrictions in Section 19 - prohibition on adopting uniform/adhoc percentage for invisible loss

Reopening of assessment and validity of assessment orders - Section 18 claim for refund subject to restrictions in Section 19 - Challenge to the assessment orders dated 16.05.2012 for the assessment years 2006-07 and 2007-08 rejecting the petitioner's request to drop proposals levying tax on invisible loss and on sales of cutting waste and rejected export garments. - HELD THAT: - The High Court, applying the reasoning in Interfit Techno Products Ltd. (as relied upon by the petitioner), held that the impugned assessment orders could not be sustained in the facts of the present case. The Court recognised that claims under Section 18(2) are not standalone and must be examined against the restrictions and conditions contained in Section 19; consequently Assessing Authorities must undertake fact finding to verify the quantum of loss and whether the claim falls within the statutory restrictions. Having regard to those principles and the concession by the respondent, the Court set aside the assessment orders and directed fresh consideration rather than deciding the merits of the refund claim on the papers. [Paras 2, 4, 6, 7]

The impugned assessment orders dated 16.05.2012 are set aside and the matters are remitted for fresh adjudication.

Remand for fresh consideration with issuance of show cause notice - requirement of fact-finding by Assessing Authority before adopting invisible loss percentages - prohibition on adopting uniform/adhoc percentage for invisible loss - Procedure to be followed by the Assessing Officer on remand. - HELD THAT: - The Court directed that the Assessing Officer shall issue show cause notices to the petitioner clearly setting out the circumstances under which revision of refunds or reversal of input tax credit is proposed, thereby enabling the petitioner to file objections with supporting documents. The Court emphasised that Assessing Authorities must not mechanically adopt uniform or adhoc percentages for invisible loss but must embark upon the requisite fact finding exercise contemplated by the precedents and the statute. Timelines for issuance of notices, filing of objections, consideration and hearing were prescribed to ensure expeditious fresh decision on merits and in accordance with law. [Paras 4, 6]

Respondent/Assessing Officer to issue show cause notices within four weeks, petitioner to file objections within two weeks, and respondent to decide afresh after personal hearing within four weeks thereafter.

Final Conclusion: Writ petitions allowed to the extent that the assessment orders dated 16.05.2012 for AY 2006-07 and 2007-08 are set aside and the matters are remitted to the Assessing Officer to proceed afresh by issuing show cause notices, conducting necessary fact finding (including scrutiny of invisible loss claims) and passing appropriate orders on merits and in accordance with law within the timelines directed; no order as to costs.

Detention under COFEPOSA Act, 1974 - right to make representation to the Detaining Authority - Detaining Authority obliged to consider representation expeditiously - no requirement to await Central Advisory Board's opinion before considering representation - undue delay in consideration of representation violates Articles 21 and 22(5) of the Constitution - Kamleshkumar principle regarding obligation to consider representation - prospective overruling not available to a High Court

Detaining Authority obliged to consider representation expeditiously - no requirement to await Central Advisory Board's opinion before considering representation - undue delay in consideration of representation violates Articles 21 and 22(5) of the Constitution - Kamleshkumar principle regarding obligation to consider representation - Whether the Detaining Authority was required to consider the petitioner's representation without waiting for the opinion of the Central Advisory Board and whether the delay in consideration violated the petitioner's constitutional rights. - HELD THAT: - Applying the principles in Ankit Ashok Jalan and earlier Constitution Bench authority in Kamleshkumar, the Court held that a specially empowered Detaining Authority must independently and without awaiting the Central Advisory Board's opinion consider a representation addressed to it. The Supreme Court's analysis (as summarised in Ankit Ashok Jalan) distinguishes cases where the appropriate Government alone considers representations and clarifies that the Detaining Authority's obligation to consider representations is not displaced by a pending reference to the Advisory Board. The Court found no valid explanation for the inaction here between receipt of the representation and its eventual consideration; awaiting the Advisory Board's report did not justify the delay and therefore amounted to violation of the detenue's rights under Articles 21 and 22(5). Consequently, the detention was held to be illegal and unconstitutional on that ground. The Court declined to entertain the plea that the Supreme Court's ruling should operate only prospectively, noting that the question of prospective overruling is for the Supreme Court and not for the High Court. [Paras 17, 18, 19, 20]

Detaining Authority ought to have expeditiously considered the representation without awaiting the Central Advisory Board; delay violated Articles 21 and 22(5) and rendered the detention illegal.

Final Conclusion: Writ petition allowed; Detention Order dated 21st February, 2018 quashed and the detenue directed to be set at liberty forthwith.

Separate judgments in interconnected proceedings - Judicial propriety in delivering judgments - Interplay between appeal and revision - Exercise of revision jurisdiction - Remand for rehearing - Sentence enhancement and compensation under Cr.P.C.

Separate judgments in interconnected proceedings - Judicial propriety in delivering judgments - Delivering two different judgments in appeal and revision arising from the same original proceeding is improper and liable to be deprecated; related proceedings should be decided together to avoid confusion and injustice. - HELD THAT: - The Court criticised the practice of passing separate or different judgments in matters arising out of the same original proceeding, observing that when appeal and revision are inter-connected or inter mingled a common judgment ought to have been given. The Court relied on earlier observations in a civil matter to underline that separate judgments on overlapping points produce confusion, may jeopardise parties' rights and remedies, and are practices to be deprecated. For these reasons the High Court found the approach of the Presiding Officer in delivering distinct judgments for the Criminal Appeal and Criminal Revision unacceptable and directed that related proceedings be decided together in accordance with law. [Paras 3, 4, 5, 6]

The practice of delivering separate judgments in the inter connected appeal and revision was deprecated; the impugned judgments are set aside and the matters must be decided together.

Interplay between appeal and revision - Exercise of revision jurisdiction - Sentence enhancement and compensation under Cr.P.C. - Remand for rehearing - Whether the concurrent orders of dismissing the appeal (thus maintaining conviction) and allowing the revision (thus remitting the matter for sentencing) were legally tenable, and what relief should follow from such conflicting orders. - HELD THAT: - The Court analysed the operative effect of the Additional Sessions Judge's orders: by dismissing the appeal the Sessions Court effectively brought the summary criminal proceedings to an end as to conviction, yet the Sessions Court simultaneously allowed the revision to remit the complaint for passing appropriate sentence. The Court held this course was untenable because the revisional power and its consequences were not properly applied; the Sessions Judge failed to consider the legal consequences of re opening sentencing after an appeal had been dismissed and did not apply required principles governing enhancement of sentence or award of compensation under Section 357 Cr.P.C. The Court observed that the Additional Sessions Judge misunderstood the trial court's order (there being no prior award of compensation to be enhanced), and did not engage with the discretionary character of compensation or with whether fine should be treated as part of sentence under Section 357. Given these conflicting and inadequately reasoned conclusions, the High Court refrained from adjudicating merits and concluded that the only appropriate course was to set aside the impugned orders and remit both proceedings to the Additional Sessions Judge for fresh decision in accordance with law. [Paras 15, 16, 17, 18, 19]

The conflicting orders of the Additional Sessions Judge were set aside; both proceedings are restored to the Sessions Judge to be decided together afresh in accordance with law.

Final Conclusion: The judgments and orders dated 25.11.2019 in Criminal Appeal No.82/2018 and Criminal Revision No.85/2018 are set aside; both proceedings are restored to the Additional Sessions Judge, Ahmednagar for fresh adjudication together in accordance with law, with directions for parties to appear and for the accused to furnish bail before the Sessions Judge.