TaxTMI Updates e-Newsletter
Jul 08,2020

Statutory bail under Section 167(2) - indefeasible right to statutory bail - onerous bail conditions defeating statutory right - modification of bail conditions - substitution of cash deposit by sureties and immovable property documents - pre-trial detention and liberty pending investigation

Statutory bail under Section 167(2) - indefeasible right to statutory bail - onerous bail conditions defeating statutory right - The condition directing each petitioner to deposit a cash surety of Rs. 5,00,000/- as a pre-condition to avail statutory bail was set aside. - HELD THAT: - The Court applied the principle that the indefeasible right conferred by Section 167(2) cannot be extinguished by imposing onerous conditions which effectively prevent release on statutory bail. Relying on the reasoning in Umadevi v. State (paragraph 18), the Court held that a condition requiring a substantial cash deposit would indirectly defeat the statutory right where compliance is impracticable, and that such a condition imposed by the Magistrate and maintained by the Sessions Court was unreasonable in the facts of the case. Having regard to the petitioners' arrest, grant of statutory bail on 19.02.2020, and the inability to raise the cash (exacerbated by the Covid-19 lockdown), the Court concluded that the cash-deposit condition must be set aside to give effect to the statutory entitlement to bail. [Paras 7, 8, 9]

The direction to deposit cash of Rs. 5,00,000/- as a pre-condition to statutory bail is set aside.

Modification of bail conditions - substitution of cash deposit by sureties and immovable property documents - reporting conditions - The Court substituted the vacated cash-deposit condition with specified bail conditions: execution of personal bond, furnishing of sureties who will deposit title deeds to the value specified within a time-frame linked to lifting of lockdown, identity verification of sureties, and daily police reporting. - HELD THAT: - Balancing the petitioners' statutory right to bail with the need to secure return and investigation, the Court directed release on execution of an own bond for Rs. 50,000 each, and required each petitioner to furnish two sureties who shall deposit title deeds of immovable properties each worth Rs. 20 lakhs before the Magistrate within four weeks from the lifting of the lockdown or resumption of normal Court functioning. The Court imposed safeguards: sureties must affix photograph and left thumb impression on the surety bond and Magistrate may obtain copies of Aadhar or bank passbook to verify identity. Failure to comply within the specified time would result in automatic dismissal of bail. Additionally, the petitioners must report daily to the respondent police at 10:30 a.m. until further orders. These substituted conditions were held to be reasonable means to secure attendance without imposing the onerous cash deposit that defeated the statutory right. [Paras 9, 10]

Petitioners to be released on the substituted bail conditions (own bond of Rs.50,000; two sureties each depositing title deeds worth Rs.20 lakhs within the specified post-lockdown period; identification formalities for sureties; daily reporting), failing which bail shall stand dismissed.

Final Conclusion: The petitions succeed insofar as the cash-deposit condition for statutory bail is set aside; petitioners are ordered released on specified substituted conditions (personal bond, sureties furnishing title deeds within the time-frame linked to lifting of the lockdown, identity verification of sureties, and daily police reporting), with automatic dismissal of bail on non-compliance.

Vires of Rule 117(1A) of Haryana GST Rules, 2017 - entitlement to carry forward CENVAT/ITC via Form GST TRAN-1 - extension of time for filing TRAN-1 on account of technical difficulties - Article 14 - arbitrariness and discrimination - Article 300A - vested property right in input tax credit - remedial alternative of claiming input tax credit in GSTR-3B where portal is not opened

Entitlement to carry forward CENVAT/ITC via Form GST TRAN-1 - extension of time for filing TRAN-1 on account of technical difficulties - remedial alternative of claiming input tax credit in GSTR-3B where portal is not opened - vires of Rule 117(1A) of Haryana GST Rules, 2017 - Article 14 - arbitrariness and discrimination - Article 300A - vested property right in input tax credit - Petitioner entitled to be permitted to upload Form TRAN-1 (or, alternatively, to avail the claimed ITC in GSTR-3B) despite failure to file within original time due to technical difficulties; Rule 117(1A) not declared invalid but its application condemned as potentially violative of Article 14 and Article 300A and relief granted in exercise of judicial discretion following precedents. - HELD THAT: - The Court held that the present petition is governed by this Court's decision in Adfert Technologies and the Delhi High Court's rulings in Brand Equity and SKH Sheet Metals, which recognise that technical difficulties surrounding migration to GST may justify permitting delayed TRAN-1 filing or alternative remedies. While the petitioner challenged the vires of sub rule (1A) of Rule 117, the Court declined to strike down the provision. Relying on the cited authorities, the Court observed that denial of the transitional right to credit where taxpayers could not furnish evidence of attempted upload because of portal or other technical problems would amount to arbitrary or discriminatory treatment under Article 14 and could impinge the vested property right in input tax credit under Article 300A. In exercise of the Court's remedial powers and applying the precedent, the petitioner was directed to be permitted to upload TRAN-1 on or before 30.06.2020; if respondents fail to open the portal, the petitioner may avail the claimed ITC in the GSTR-3B return for July 2020. The respondents remain entitled to verify the genuineness of the claim. The relief was granted on the basis of existing precedents and the court's assessment of fairness, rather than by invalidating the Rule itself. [Paras 6, 7, 8, 9]

Petition allowed; respondents directed to permit upload of TRAN-1 by 30.06.2020, failing which petitioner may claim the ITC in GSTR-3B of July 2020; respondents may verify genuineness of the claim; Rule 117(1A) not struck down.

Final Conclusion: Following this Court's and the Delhi High Court's precedents, the petition is allowed: the petitioner may upload Form TRAN-1 by 30.06.2020, and if the portal is not opened the petitioner may claim the input tax credit in the July 2020 GSTR-3B; the respondents may verify claims; the challenged rule was not declared invalid though its restrictive application was disapproved.

Power to transfer cases under Section 127 - Reasoned show cause notice for transfer - Opportunity of hearing before transfer - Concurrent exercise of transfer powers and non abdication of jurisdiction - Judicial review of sufficiency of reasons for transfer - Distinction between intra State transfer and inter State transfer in fairness of notice - Effect of stay of transfer on limitation and continuation of proceedings under Section 153A

Reasoned show cause notice for transfer - Opportunity of hearing before transfer - Judicial review of sufficiency of reasons for transfer - Distinction between intra State transfer and inter State transfer in fairness of notice - Validity of the show cause notice dated 28.01.2019 and the transfer order dated 19.02.2019 insofar as the notice gave the reason 'detailed, coordinated and centralized investigation is necessary'. - HELD THAT: - The show cause notice expressly stated that the reason for proposed transfer was that detailed, coordinated and centralized investigation was necessary. The Court found that the notice therefore did disclose the reason or gist of the proposal to transfer, unlike decisions relied upon by the appellant where transfers involved different States and the notices did not disclose such reason. The Court held that whether the reason is more or less elaborate is not a matter for judicial re weighing in this context; what is required is disclosure of the reason so as to afford a reasonable opportunity of hearing. Given the proximity of the transfer (Tirunelveli to Madurai, 158 kms) and the fact that large, coordinated searches and alleged undisclosed income across many locations were involved, the notice was held sufficient and the transfer order sustainable against challenge on the ground of absence of reasons.

The show cause notice and the transfer order are valid; the notice sufficiently disclosed reasons and afforded opportunity of hearing.

Concurrent exercise of transfer powers and non abdication of jurisdiction - Power to transfer cases under Section 127 - Whether the Principal Commissioner acted without application of mind by acting on a proposal from the Director General of Income Tax (Investigation), Chennai, having concurrent powers under Section 127. - HELD THAT: - The Court examined Section 127(1) and the transfer order and observed that the Director General's letter proposed transfer but the Chief Commissioner approved the proposal and the show cause notice was issued and a hearing afforded by the Principal Commissioner. The Court found no demonstration that the Principal Commissioner blindly followed the Director General or abdicated his own jurisdiction; sending a proposal does not ipso facto show non application of mind by the officer who issues the transfer order. The materials showed administrative steps and approval, and the Principal Commissioner recorded reasons and afforded hearing before directing the transfer.

There was no abdication of power or want of application of mind by the Principal Commissioner; the transfer was lawfully exercised.

Requirement of documents for effective representation - Opportunity of hearing before transfer - Whether the assessees were entitled to be supplied with search/seizure documents or other unspecified documents to make effective representation against transfer, and whether claimed hardship of the elderly chartered accountant justified quashing the transfer. - HELD THAT: - The Court observed that search and seizure documents are not ordinarily furnished in a Section 127 proceeding and it was unclear what additional documents the appellant sought to be supplied to contest the transfer. The claimed hardship due to the age and location of the chartered accountant was considered speculative and insufficient to vitiate the transfer, especially where returns are filed online and the transfer was to a neighbouring circle with better infrastructure for handling seized material. The Court treated these contentions as not meriting interference with the transfer order.

No obligation to furnish the search/seizure documents in the transfer proceeding was found; claimed hardship did not invalidate the transfer.

Effect of stay of transfer on limitation and continuation of proceedings under Section 153A - Whether the interim stay of the transfer order operates to halt the running of limitation or to prevent continuation of proceedings under Section 153A issued by the transferee authority. - HELD THAT: - The Court accepted the Department's submission that the appellant had challenged only the transfer order and had not obtained a stay of the substantive proceedings under Section 153A. Consequently, the stay of the transfer order does not, by itself, stop the running of limitation or inhibit the transferee authority from proceeding under Section 153A within statutory timelines; the stay confined to transfer does not equate to stay of assessment proceedings.

Stay of transfer does not operate to halt limitation or continuation of proceedings under Section 153A unless those proceedings are specifically stayed.

Final Conclusion: The intra Court appeal is dismissed. The High Court sustained the transfer of the assessment files from the Tirunelveli Circle to Central Circle 2, Madurai, holding that the show cause notice gave sufficient reasons, the Principal Commissioner independently applied his mind, the assessees were not entitled to search/seizure documents in the transfer proceeding, and the interim stay of transfer did not impede continuation or limitation of Section 153A proceedings.

Extraordinary writ jurisdiction under Article 226 - direction to adjudicate appellate matter expeditiously - interim stay of coercive action pending adjudication - opportunity of hearing in accordance with law

Direction to adjudicate appellate matter expeditiously - opportunity of hearing in accordance with law - The first respondent is directed to adjudicate the appeal filed by the petitioner expeditiously after affording an opportunity of hearing in accordance with law. - HELD THAT: - The Court, exercising its extraordinary writ jurisdiction under Article 226, recorded that the appeal against the assessment order had not been adjudicated. Without commenting on the merits, the Court directed the 1st respondent to take a call on the appeal or any interim application against the assessment order and to adjudicate the same as expeditiously as possible within one month from receipt of this judgment, after affording the petitioner an opportunity of hearing in accordance with law. The direction is procedural and limited to ensuring timely adjudication; the Court did not decide the substantive merits of the appeal. [Paras 2]

Directed adjudication of the appeal within one month after hearing the petitioner.

Interim stay of coercive action pending adjudication - Coercive action under the assessment order is to be kept in abeyance until the appeal is adjudicated. - HELD THAT: - As an ancillary and interim relief linked to the primary direction for adjudication, the Court ordered that any coercive action pertaining to the assessment order shall be kept in abeyance until the appeal is decided. The Court clarified that this interim direction is operative only until the adjudication of the appeal, thereby preserving the respondents' rights thereafter and limiting the stay to the period of pending adjudication. [Paras 2]

Ordered that coercive action be kept in abeyance until adjudication of the appeal; interim direction operative only till such adjudication.

Final Conclusion: Writ petition disposed of by directing the 1st respondent to expeditiously adjudicate the pending appeal after affording a hearing within one month; coercive action under the assessment order stayed until such adjudication.

Charitable purpose - proviso to section 2(15) - dominant and prime objective test - exemption under section 11 - application of income - remand for verification of application of income - depreciation after capitalisation / subsequent years - prospective operation of amendment to section 11(6)

Charitable purpose - proviso to section 2(15) - dominant and prime objective test - exemption under section 11 - Whether the appellant (KIADB), a statutory board constituted under the KIAD Act, is entitled to exemption under section 11 because the proviso to section 2(15) is not attracted. - HELD THAT: - The Tribunal accepted that the Board is a creation of a special statute (KIAD Act) with objects and functions ring fenced by that Act, operating under State Government control and on a no profit-no loss basis. Applying the interpretative principles laid down in the decision relied upon (India Trade Promotion Organization v. DGFT) and examining the Board's objects, governance, funding and income profile, the Tribunal held that the proviso to section 2(15) (which excepts activities genuinely driven by profit motive) does not apply because the Board's dominant and prime objective is not profit making but advancement of an object of general public utility. The Tribunal therefore held that the Board qualifies as an institution established for charitable purposes and is entitled to claim exemption under section 11 for the year under consideration.

Assessee entitled to exemption under section 11 as proviso to section 2(15) is not applicable; grounds allowing this relief are allowed.

Application of income - remand for verification of application of income - Whether the Assessing Officer had verified compliance with the conditions of section 11 relating to application of income for allowance of exemption. - HELD THAT: - Although the Tribunal accepted the assessee's entitlement to exemption on the question of charitable character, it observed that the Assessing Officer had not verified whether the conditions of section 11 as to actual application of income were satisfied for claiming the exemption. Accordingly the Tribunal directed the AO to verify compliance with section 11 and to consider the assessee's claim in accordance with law. The direction is for factual verification and consideration rather than final determination on merits by the Tribunal.

Matter remitted to the Assessing Officer for verification of compliance with section 11 (application of income) and decision in accordance with law; grounds allowed for statistical purposes.

Depreciation after capitalisation / subsequent years - prospective operation of amendment to section 11(6) - Whether depreciation can be claimed in the assessment year when assets-whose cost had earlier been treated as application of income-are allowed to be depreciated in subsequent years. - HELD THAT: - The Tribunal followed the binding pronouncement of the Hon'ble Supreme Court in the cited authority which held that the amendment to section 11(6) is prospective with effect from assessment year 2015 16 and does not preclude taking depreciation in years subsequent to the year in which the cost of asset was treated as application of income. Relying on that precedent, the Tribunal found no infirmity in the CIT(A)'s allowance of depreciation and dismissed the revenue's appeal on this point.

Revenue's challenge to allowance of depreciation dismissed; CIT(A)'s view upheld.

Final Conclusion: For AY 2012 13 the Tribunal allowed the assessee's appeal on the core question of charitable character and exemption under section 11 by holding that the proviso to section 2(15) is not attracted; directed the AO to verify and decide compliance with section 11 (application of income); and dismissed the revenue's appeal against the allowance of depreciation in view of the Supreme Court precedent and the prospective effect of the amendment to section 11(6).

Rectification under Section 154 - MAT credit carry forward and set-off under Section 115JAA - mistake apparent from record - effect of pendency of appeal/subjudice on rectification - interest for default in payment of advance tax under Section 234B

MAT credit carry forward and set-off under Section 115JAA - rectification under Section 154 - mistake apparent from record - Validity of the assessing officer's rectification under Section 154 to reduce MAT credit allowed in AY 2013-14 on account of transfer pricing adjustments in AY 2011-12. - HELD THAT: - The Tribunal held that Section 115JAA prescribes an automatic mechanism for carrying forward and set-off of MAT credit when tax computed under normal provisions exceeds MAT, subject only to the outer time limit. There is no provision making grant of MAT credit an option for the assessee or requiring a separate determination by the assessing officer; application of the statutory formula yields the credit. Consequently, where MAT credit was wrongly allowed because of a transfer pricing adjustment in AY 2011-12, the excess credit constituted a mistake apparent from the record and was amenable to correction under Section 154. The Tribunal found no debatable question of law or fact that would preclude rectification and upheld the lower authorities' exercise of jurisdiction under Section 154 to withdraw the MAT credit. [Paras 12]

Rectification under Section 154 to reduce MAT credit in AY 2013-14 was valid; the excess MAT credit was a mistake apparent from the record and not a debatable issue.

Effect of pendency of appeal/subjudice on rectification - rectification under Section 154 - Whether pendency of the transfer pricing dispute before the Tribunal in respect of AY 2011-12 precluded the AO from rectifying the MAT credit in AY 2013-14. - HELD THAT: - The Tribunal rejected the contention that subjudice status of the transfer pricing issue before the appellate forum prevents the revenue from exercising rectification powers under Section 154. Pendency of appeal does not bar correction of an apparent error in the assessment if the action falls within the scope of Section 154; if the assessee subsequently obtains relief from appellate authorities that affects income or tax, adjustments will follow. Accordingly, the fact that the transfer pricing adjustment for AY 2011-12 was contested before the Tribunal did not preclude withdrawal of the erroneously allowed MAT credit in AY 2013-14. [Paras 13]

Pendency of the related transfer pricing appeal does not prevent rectification under Section 154; the AO was entitled to withdraw the excess MAT credit.

Interest for default in payment of advance tax under Section 234B - rectification under Section 154 - Whether interest under Section 234B is chargeable consequential to withdrawal of MAT credit by rectification. - HELD THAT: - Section 234B mandates interest for default in payment of advance tax where an assessee liable to pay advance tax has failed to do so; interest is calculated from the relevant date to determination of income. The Tribunal held that where MAT credit was wrongly allowed at the time of assessment, correct computation would have resulted in higher tax payable earlier and thereby triggered advance tax liability and interest under Section 234B. The case did not involve unforeseeable income or retrospective amendment warranting leniency; it was a computational error attracting mandatory interest. Judicial decisions affording relief in cases of unexpected income or retrospective amendments were held distinguishable on facts. [Paras 17, 18]

Interest under Section 234B is chargeable as a consequence of withdrawal of the MAT credit; the charging of interest was mandatory and correctly upheld.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2013-14: (i) rectification under Section 154 to reduce wrongly allowed MAT credit was valid as the credit arises automatically under Section 115JAA and the excess constituted a mistake apparent from record; (ii) pendency of the related AY 2011-12 dispute before the Tribunal did not preclude rectification; and (iii) interest under Section 234B consequent to the withdrawal of MAT credit was correctly levied and upheld.

Percentage of completion method - recognition of revenue on achievement of contractual/contract cost threshold - change in accounting estimates under Accounting Standard 7 - inadmissibility of retrospective substitution of project estimates for earlier accounting year - binding effect of subsequent assessment years on earlier year reassessment where fundamental position remains unchanged

Inadmissibility of retrospective substitution of project estimates for earlier accounting year - percentage of completion method - Whether the Assessing Officer was justified in replacing the assessee's estimated total project cost as on 31.03.2014 with the later estimate as on 31.03.2016 for computing percentage completion and recognizing revenue in Assessment Year 2014-15. - HELD THAT: - The Tribunal examined the assessee's accounting policy of recognizing revenue under the percentage of completion method only upon actual cost incurred being 30% or more of the total estimated cost and the contemporaneous project cost estimate as on 31.03.2014. The Assessing Officer substituted the assessee's 31.03.2014 estimated total cost with a reduced figure from 31.03.2016 and thereby computed a higher percentage completion for 2013-14; the Tribunal held that such substitution was impermissible because the later revision (including a reduction due to reassessed selling costs) related to a subsequent change in estimates and could not be retroactively imposed for computing completion in the earlier year. Having regard to the assessee's audited accounting policy and the fact that revenue was recognized in subsequent assessment years only when the 30% threshold was actually reached, the AO's retrospective reworking of the 2014 position was unsustainable. [Paras 12, 13, 16, 19]

Substitution of the 2014 estimated project cost with the 2016 figure for determining completion in Assessment Year 2014-15 was not justified; the addition based on that substitution is to be deleted.

Change in accounting estimates under Accounting Standard 7 - binding effect of subsequent assessment years on earlier year reassessment where fundamental position remains unchanged - Whether the assessee's reduction in estimated project cost and consequent delayed revenue recognition, explained as a change in estimates under AS 7 and reflected in subsequent assessment years, justified denial of the addition for AY 2014-15. - HELD THAT: - The Tribunal relied on Accounting Standard 7 which permits application of the percentage of completion method on current estimates and requires changed estimates to be accounted for in the period of change and thereafter. The assessee explained the reduction in estimated selling costs and consequent decrease in total estimated project cost; the Tribunal accepted that this was a permissible change in accounting estimate under AS 7. The Tribunal also noted that the Revenue accepted the assessee's revenue recognition in Assessment Years 2015-16, 2016-17 and 2017-18 when the threshold was crossed and that reopening the 2014-15 computation by importing a later estimate would contravene the settled approach, relying on the principle that a fundamental aspect consistently accepted in subsequent years should not be reopened without material change. On these grounds the addition was held unjustified. [Paras 15, 16, 17, 18, 19]

The reduction in estimated project cost was a permissible change in accounting estimate under AS 7 and, coupled with the Revenue's acceptance of subsequent years' returns, warranted deletion of the addition for AY 2014-15.

Final Conclusion: The Tribunal allowed the appeal and directed deletion of the addition of Rs. 17,32,78,878 made in Assessment Year 2014-15, holding that the Assessing Officer was not justified in substituting later project estimates for the earlier year and that the change in estimates was allowable under AS 7, particularly in view of the Revenue's acceptance of the assessee's position in subsequent assessment years.

Disallowance under section 40(a)(i) for failure to deduct tax at source - payments to non-resident agents for services rendered abroad not subject to TDS - precedent of Tribunal's earlier decision for identical facts

Disallowance under section 40(a)(i) for failure to deduct tax at source - payments to non-resident agents for services rendered abroad not subject to TDS - precedent of Tribunal's earlier decision for identical facts - Whether the addition under section 40(a)(i) disallowing commission payments to non-resident agents without deduction of tax at source is sustainable where the agents had offices abroad and rendered services outside India. - HELD THAT: - The Tribunal noted that the Assessing Officer made the disallowance under section 40(a)(i) because no TDS was deducted on commission payments to agents. The facts in the assessment year under appeal were identical to those in the assessee's earlier year (A.Y. 2010-2011), where the Tribunal had examined the agreement and material and held that the agents were based abroad and rendered services outside India, so the assessee was not required to deduct tax at source. The Revenue did not dispute that the facts and parties were the same. Applying the earlier Tribunal decision to the identical facts in the present year, the Tribunal set aside the orders of the authorities below and deleted the addition under section 40(a)(i).

Addition under section 40(a)(i) disallowing the commission payments deleted; appeal allowed.

Final Conclusion: The Tribunal, following its earlier decision for the assessee in A.Y. 2010-2011 on identical facts, deleted the addition made under section 40(a)(i) for failure to deduct TDS on commission payments to agents based abroad who rendered services outside India and allowed the appeal.

Depreciation on non compete fee - intangible asset - recurring issue and parity of reasons - remand for de novo adjudication - disallowance under section 36(1)(iii) - business purpose of investments in group concerns - transfer pricing adjustments - interest on interest free loans and corporate guarantee commission - application of Dispute Resolution Panel directions - disallowance under section 14A r.w. r.8D - treatment for book profit under section 115JB - short grant of TDS - restoration for verification - computation of time for pronouncement of orders under Rule 34(5) of ITAT Rules in light of COVID 19 lockdown

Depreciation on non compete fee - recurring issue and parity of reasons - Disallowance of depreciation claimed on allocation of non compete fee over fixed assets transferred on slump sale (Ground I) and alternative claim of depreciation @25% treating non compete fee as an intangible asset (Ground II). - HELD THAT: - The Tribunal recorded that the contention on depreciation allotted to fixed assets from the non compete fee has been consistently decided against the assessee in earlier assessment years and accordingly dismissed Ground I. However, on the alternate plea (Ground II) the Co ordinate Bench in the assessee's own case had allowed depreciation @25% treating the non compete fee as an intangible asset. Revenue failed to distinguish those Tribunal findings on facts or law. Following the consistent view in the earlier orders of the Tribunal and for parity of reasons the claim for depreciation @25% on the non compete fee was allowed. [Paras 4]

Ground I dismissed; Ground II allowed and depreciation on non compete fee to be allowed @25% as an intangible asset.

Remand for de novo adjudication - actual cost of transferred depreciable assets - Whether depreciation was correctly disallowed by adopting the written down value in the hands of the transferor as actual cost (Ground IV). - HELD THAT: - The Tribunal found the issue identical to that decided in the assessee's own case in earlier years where the Co ordinate Bench had restored the matter to the Assessing Officer for fresh adjudication. Following the consistent view expressed in those precedents, and in view of identical facts, the Tribunal restored the issue to the Assessing Officer for de novo consideration with similar directions. [Paras 4]

Ground IV allowed for statistical purposes and remitted to the Assessing Officer for fresh adjudication.

Disallowance under section 36(1)(iii) - business purpose of investments in group concerns - recurring issue and parity of reasons - Disallowance of interest under section 36(1)(iii) on the ground that investments in subsidiary/sister concerns were not for the purpose of business (Ground V). - HELD THAT: - On identical facts the Tribunal in earlier assessment years had held that investments in sister concerns engaged in the same line of business were for the purpose of business and had deleted the disallowance; the Bombay High Court had dismissed Revenue's appeal. Applying the Co ordinate Bench's consistent reasoning and in view of parity of facts, the Tribunal deleted the disallowance made by the Assessing Officer under section 36(1)(iii). [Paras 4]

Ground V allowed; disallowance under section 36(1)(iii) deleted.

Recurring issue - rendered infructuous - Whether deduction to the extent of 1/18th of non compete fees is allowable (Ground III) and alternative disallowance under section 57(iii) (Ground VI). - HELD THAT: - Ground III was framed without prejudice to Grounds I and II; having allowed the alternative Ground II, Ground III became infructuous and was dismissed as such. Ground VI was contingent on Ground V being disallowed; since Ground V was allowed, Ground VI became infructuous and was dismissed. [Paras 4]

Ground III dismissed as infructuous; Ground VI dismissed as infructuous.

Unutilized CENVAT credit - valuation under section 145A - remand for de novo adjudication - Addition on account of unutilized CENVAT credit under section 145A (Ground VII). - HELD THAT: - The Tribunal noted that an identical issue arose in earlier assessment years and that the Tribunal had directed the Assessing Officer to value closing stock strictly in terms of section 145A, making corresponding adjustments to opening stock and after giving the assessee an opportunity of being heard. In view of identical facts the matter was restored to the Assessing Officer for fresh decision in line with earlier directions. [Paras 4]

Ground VII allowed for statistical purposes and remitted to the Assessing Officer for de novo adjudication.

Transfer pricing adjustments - interest on interest free loans and corporate guarantee commission - parity with Co ordinate Bench decisions - Arm's length additions by TPO under section 92CA(3) in respect of corporate guarantee commission and interest on loans to AE (Ground VIII). - HELD THAT: - The Tribunal followed its Co ordinate Bench's earlier decisions in the assessee's own case for preceding years: interest on interest free loans advanced to associated enterprises to be computed at LIBOR plus 200 basis points; corporate guarantee commission to be computed at 0.5%. As there was no change in facts, the Tribunal partly allowed the ground in those terms. [Paras 4]

Ground VIII partly allowed - interest on interest free loans to be computed at LIBOR + 200 bps and corporate guarantee commission at 0.5%.

Application of Dispute Resolution Panel directions - remand for giving effect to DRP directions - Assessing Officer's alleged failure to follow DRP directions on disallowance under section 14A r.w. r.8D and the quantum of disallowance (Grounds IX and X). - HELD THAT: - The DRP had directed deletion of a part of the disallowance. The Tribunal observed that the Assessing Officer had not given effect to the DRP directions. In consequence, the Tribunal restored the matters to the Assessing Officer to give effect to the DRP directions and verify the correct quantum of disallowance under section 14A r.w. r.8D. [Paras 4]

Grounds IX and X allowed for statistical purposes and remitted to the Assessing Officer to give effect to DRP directions.

Computation of book profit under section 115JB - interaction with section 14A r.w. r.8D - remand for reconsideration in line with Special Bench precedent - Whether disallowance under section 14A r.w. r.8D is to be included for computing book profit under section 115JB (Ground XI). - HELD THAT: - The Tribunal, noting the Special Bench decision in ACIT vs. Vireet Investments Pvt. Ltd., restored Ground XI to the Assessing Officer for reconsideration in line with that precedent. The issue was remitted for determination after the Assessing Officer gives effect to the DRP directions on section 14A, and in accordance with the Special Bench's view on computation of book profits. [Paras 4]

Ground XI allowed for statistical purposes and remitted to the Assessing Officer for reconsideration.

Short grant of TDS - restoration for verification - Short grant of TDS credit (Ground XII). - HELD THAT: - Both parties agreed the limited issue of short grant of TDS could be verified by the Assessing Officer. The Tribunal restored the matter to the Assessing Officer with a direction to verify records and allow TDS credit as per actual records. [Paras 4]

Ground XII allowed for statistical purposes and remitted to the Assessing Officer for verification and grant of TDS credit as per records.

Consequential dismissal - Short grant of interest under section 244A (Ground XIII). - HELD THAT: - The Tribunal treated Ground XIII as consequential to other findings and dismissed it accordingly. [Paras 4]

Ground XIII dismissed as consequential.

Computation of time for pronouncement of orders under Rule 34(5) of ITAT Rules in light of COVID 19 lockdown - Whether pronouncement of the Tribunal's order beyond 90 days from conclusion of hearing was permissible in view of the COVID 19 lockdown and Rule 34(5). - HELD THAT: - The Tribunal referred to the approach adopted by a Co ordinate Bench in similar circumstances and observed that the period of lockdown should be excluded when computing the 90 day period under Rule 34(5). Given the extraordinary disruption caused by the COVID 19 lockdown and analogous judicial directions, the Tribunal treated the delay as not being under 'ordinary' circumstances and pronounced the order beyond 90 days. [Paras 6]

Order pronounced beyond the 90 day period having excluded the lockdown period for computation under Rule 34(5).

Final Conclusion: The appeal for Assessment Year 2013 14 is partly allowed: depreciation on the non compete fee is allowed @25% as an intangible asset; disallowance under section 36(1)(iii) deleted; certain transfer pricing adjustments partly allowed (interest at LIBOR+200 bps; corporate guarantee fee at 0.5%); several issues (adoption of actual cost for transferred assets, unutilized CENVAT, section 14A/section 115JB interactions, DRP directions on section 14A, and short grant of TDS) are remitted to the Assessing Officer for fresh consideration or to give effect to DRP directions; remaining contested or consequential grounds are dismissed. Order pronounced beyond the 90 day period after excluding the COVID 19 lockdown interval.

Slump sale - undertaking - computation of capital gains in case of slump sale under section 50B - net worth as cost of acquisition for slump sale - separate business unit / deduction under section 80IA as evidence of separate undertaking

Slump sale - undertaking - separate business unit / deduction under section 80IA as evidence of separate undertaking - Whether the three windmills sold by the assessee constituted one or more 'undertakings' so as to qualify the transaction as a slump sale. - HELD THAT: - The Tribunal examined the statutory definitions of 'slump sale' and 'undertaking' together with the sale deeds and the facts that the assessee operated windmill generation as a distinct business activity, maintained separate ledger entries for the windmill operations and had been claiming deductions under section 80IA from AY 2009-10. The sale deeds described the windmills as transferred as a going concern inclusive of lands, buildings and related assets, for lump-sum consideration without allocation to individual assets. The Tribunal accepted the CIT(A)'s finding that mere inclusion of assets in a block for depreciation or absence of fully separate formal books does not preclude characterization as an undertaking where the business activity can be identified and income/expenses are ascertainable separately. The fact that the assets were situated at different locations did not negate the nature of the transfer as a slump sale. Applying these factors, the Tribunal held that each windmill constituted a unit/part of an undertaking and the combined sale fell within the definition of slump sale. [Paras 6]

The windmills constitute separate undertaking(s) and the sale is a slump sale; the CIT(A)'s direction to treat the sale as slump sale is upheld.

Computation of capital gains in case of slump sale under section 50B - net worth as cost of acquisition for slump sale - The method of computing capital gains on the slump sale and the role of net-worth under section 50B(2). - HELD THAT: - The Tribunal endorsed the CIT(A)'s conclusion that section 50B is a special code for computing capital gains on slump sale and requires use of the net-worth of the undertaking or division as the cost of acquisition/improvement. Consequently, other provisions requiring indexed cost under sections 48 and 49 do not apply for slump sale computation. The net-worth figure ascertained in the books (not disputed) is to be deducted from the lump-sum consideration to arrive at long-term capital gains. The Tribunal noted the net-worth and lump-sum consideration were not in dispute and directed computation accordingly. [Paras 6]

Long-term capital gains on the slump sale are to be computed by deducting the net-worth of the undertaking from the lump-sum consideration as required by section 50B; the CIT(A)'s directions on computation are upheld.

Final Conclusion: The revenue's appeal is dismissed; the CIT(A)'s order treating the sale of the windmills as a slump sale and directing computation of long-term capital gains under section 50B is upheld; the assessee's cross-objections are rendered infructuous and dismissed.

Assumption of jurisdiction under Section 153C - Pre-amendment versus post-amendment applicability of Section 153C - Distinction between documents "belonging to" a person and documents "pertaining to" or "relating to" a person - Presumption of ownership under Section 132(4A)(i) and Section 292C(1)(i) - Requirement that the satisfaction note must disclose reasons to rebut statutory presumptions - Vacatur of assessment for want of jurisdiction

Assumption of jurisdiction under Section 153C - Pre-amendment versus post-amendment applicability of Section 153C - Distinction between documents "belonging to" a person and documents "pertaining to" or "relating to" a person - Presumption of ownership under Section 132(4A)(i) and Section 292C(1)(i) - Requirement that the satisfaction note must disclose reasons to rebut statutory presumptions - Validity of the Assessing Officer's assumption of jurisdiction under Section 153C in respect of A.Y. 2013-14 - HELD THAT: - The Tribunal held that the correct test is governed by the law as it stood on the date of the search (24.09.2014), so the pre-amendment language of Section 153C (applicable prior to 01.06.2015) applies. Under the pre-amended provision the jurisdictional requirement is that the books or documents seized must "belong to" a person other than the person searched; mere proof that seized material "pertains to" or "relates to" another person is insufficient. Where documents are seized from the searched person, statutory presumptions under Section 132(4A)(i) and Section 292C(1)(i) raise a presumption that the documents belong to the searched person, and the satisfaction note must disclose cogent material to rebut that presumption. In the present case the excel file and other tally/email material were seized from Cosmos group and undisputedly did not belong to the assessee; the satisfaction note did not demonstrate any cogent basis to rebut the presumption that the seized material belonged to the searched person. Following authoritative High Court precedents, the Tribunal concluded the jurisdictional requirement under the pre-amended Section 153C was not satisfied and consequently the assumption of jurisdiction was invalid. [Paras 11, 12, 13]

Assumption of jurisdiction under Section 153C in respect of A.Y. 2013-14 is vacated for want of jurisdiction; assessment framed under Section 153C r.w.s. 143(3) is quashed.

Assumption of jurisdiction under Section 153C - Pre-amendment versus post-amendment applicability of Section 153C - Vacatur of assessment for want of jurisdiction - Validity of the Assessing Officer's assumption of jurisdiction under Section 153C in respect of A.Y. 2014-15 - HELD THAT: - The Tribunal applied the same legal conclusion reached for A.Y. 2013-14 mutatis mutandis. Since the search was conducted on 24.09.2014 (pre-amendment), the pre-amended Section 153C governs the validity of jurisdiction. For the reasons explained in the decision on A.Y. 2013-14 - namely that the seized material did not "belong to" the assessee and the statutory presumption was not rebutted in the satisfaction note - the jurisdictional requirement was not met and the proceedings under Section 153C could not be sustained. [Paras 18]

Assumption of jurisdiction under Section 153C in respect of A.Y. 2014-15 is vacated for want of jurisdiction; assessment framed under Section 153C r.w.s. 143(3) is quashed.

Final Conclusion: The Tribunal held that the pre-amendment test of Section 153C applies because the search took place on 24.09.2014; seized documents taken from Cosmos group did not "belong to" the assessee and the satisfaction note failed to rebut statutory presumptions of ownership, therefore the Assessing Officer's jurisdiction under Section 153C for both A.Y. 2013-14 and A.Y. 2014-15 was invalid and the assessments under Section 153C r.w.s. 143(3) are vacated; merits of the additions were left open.

Exemption under section 10(24) - reassessment under section 147/148 - treatment of belated return - opportunity of being heard / ex parte dismissal - remand for de novo assessment - claim of exemption to be decided on documentary evidence

Reassessment under section 147/148 - treatment of belated return - opportunity of being heard / ex parte dismissal - Whether the reassessment framed after a belated return and ex parte disposal before the Commissioner (Appeals) must be set aside for fresh adjudication. - HELD THAT: - The Tribunal recorded that the assessee did not file a return under section 139(1) and the Assessing Officer initiated proceedings under section 147/148 based on AIR information. The assessee subsequently filed a belated return claiming exemption under section 10(24), which the AO did not accept as valid and denied the exemption for want of supporting evidence. The appeal before the CIT(A) was dismissed ex parte as no representative appeared. Documentary evidence of registration and other records were not before the authorities below but were produced before the Tribunal for the first time. In view of these facts and in the interest of justice, the Tribunal found it appropriate to set aside the reassessment and remit the matter to the AO for fresh adjudication so that the assessee's documentary evidence and claims may be considered after affording opportunity of hearing. [Paras 6]

Assessment set aside and matter remanded to the Assessing Officer to frame assessment de novo after considering all documentary evidence and after affording opportunity to the assessee.

Exemption under section 10(24) - claim of exemption to be decided on documentary evidence - remand for de novo assessment - Whether the assessee's claim of exemption under section 10(24) requires fresh consideration by the Assessing Officer. - HELD THAT: - The Tribunal noted that the AO did not dispute the source or quantum of income shown (interest and rental) but denied exemption for lack of documentary proof. The assessee, a registered trade union, produced registration certificate and other relevant records before the Tribunal which were not available to the authorities below. Given that the CIT(A) disposed of the appeal ex parte and the material was not earlier considered, the Tribunal directed that the AO should examine the claimant's eligibility for exemption under section 10(24) on the basis of the documentary evidence and record a fresh decision in the reassessment proceedings. [Paras 6]

Claim of exemption under section 10(24) remitted to the Assessing Officer for fresh consideration on merits and on the basis of documentary evidence.

Statutory appeal allowed for statistical purposes - Final dispositional character of the Tribunal's order. - HELD THAT: - After setting aside the reassessment and remitting the matter for de novo consideration, the Tribunal recorded its order and directed fresh adjudication. The Tribunal's allowance is limited to sending the matter back for rehearing and decision by the Assessing Officer; it does not decide the merits of the exemption claim. [Paras 7]

Appeal allowed for statistical purposes only.

Final Conclusion: The impugned reassessment order is set aside and the matter is remitted to the Assessing Officer to frame the assessment de novo after affording the assessee an opportunity to be heard and after considering the documentary evidence regarding the assessee's registration and eligibility for exemption under section 10(24); the Tribunal's order allows the appeal for statistical purposes only.

Section 263 jurisdiction to revise erroneous assessment prejudicial to revenue - onus of proof for genuineness of purchases - addition of profit margin versus disallowance of entire bogus purchases - requirement to examine audited accounts and closing stock before restricting addition to profit element - application of precedent NK Proteins to cases of wholly bogus purchases - CBDT Instruction No.2 of 2008 on acceptance of trading result where declared profit 6% of turnover

Section 263 jurisdiction to revise erroneous assessment prejudicial to revenue - Whether the Principal Commissioner of Income Tax validly exercised jurisdiction under section 263 in setting aside the assessment order. - HELD THAT: - The Tribunal found that the PCIT did not act on mere borrowed satisfaction from JCIT's proposal but independently perused the assessment order and records and reached his own conclusion that the assessment under section 147/143(3) was erroneous insofar as prejudicial to the interest of revenue. The impugned order records reasons-principally the Assessing Officer's failure to examine certain material (including payments actually made and outstanding purchases) and omission to consider relevant judicial precedent-sufficient to show independent satisfaction. Accordingly the PCIT's assumption of jurisdiction under section 263 was upheld. [Paras 13, 22]

PCIT rightly assumed and exercised jurisdiction under section 263 after independent perusal of the assessment order and records.

Onus of proof for genuineness of purchases - addition of profit margin versus disallowance of entire bogus purchases - application of precedent NK Proteins to cases of wholly bogus purchases - requirement to examine audited accounts and closing stock before restricting addition to profit element - Whether the Assessing Officer could restrict the addition to the profit margin embedded in disputed purchases instead of disallowing the entire purchases without examining the assessee's books and relevant evidence. - HELD THAT: - The Tribunal held that although the Assessing Officer raised the correct question-whether to add back entire purchases or only the profit element-the assessment order does not show he examined the audited accounts, closing stock records, or reconciled payments (Rs. paid versus outstanding) to support a finding that purchases genuinely occurred but bills were accommodation entries. The PCIT correctly observed that in the absence of any proof that purchases were actually made from another source, and given the substantial outstanding amount vis-a -vis payments made, the entire purchases could not be presumed genuine and the Assessing Officer's conclusion limiting addition to profit element was not supported by reasons. Where the entire transaction is found to be bogus and no alternative source is proved, the precedents such as NK Proteins require disallowance of the whole amount; failure to consider that line made the assessment order erroneous and prejudicial to revenue. [Paras 17, 18, 19, 20, 21]

Assessment order failing to examine accounts and payments was unsustainable; PCIT rightly set it aside for fresh adjudication on whether entire purchases or only profit margin should be taxed.

CBDT Instruction No.2 of 2008 on acceptance of trading result where declared profit 6% of turnover - requirement to examine audited accounts and closing stock before restricting addition to profit element - Whether the matter should be remitted to the Assessing Officer for de novo assessment and specific directions regarding examination of records and consideration of CBDT instruction. - HELD THAT: - The Tribunal directed that the matter be remitted to the Assessing Officer to examine the assessee's books of account in light of the PCIT's observations, verify payments made and outstanding, consider audited accounts and closing stock, and take into account CBDT Instruction No.2 of 2008 (which prescribes acceptance of trading result where declared profit is at least 6% of turnover) before taking a plausible view and passing a fresh assessment order. The remand was for fresh consideration and factual verification, not for pronouncement on merits. [Paras 24]

Matter remitted to Assessing Officer to pass fresh assessment after examining accounts, payments, and relevant instruction, and after affording opportunity to the assessee.

Final Conclusion: Appeal allowed in part: the Tribunal upheld the PCIT's exercise of jurisdiction under section 263, set aside the assessment as erroneous and prejudicial to revenue for failure to examine material and relevant precedent, and remitted the matter to the Assessing Officer to examine the books, payments and closing stock, consider CBDT Instruction No.2 of 2008, and pass a fresh assessment order after giving opportunity to the assessee.

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to the interests of revenue - limited scrutiny - scope and duty of Assessing Officer - non-application of mind / failure to make enquiries - remand for de novo assessment after setting aside

Revisionary jurisdiction under Section 263 - erroneous and prejudicial to the interests of revenue - non-application of mind / failure to make enquiries - Legality of invoking Section 263 in respect of reasons: High ratio of refund to TDS; Low net profit or loss from large gross receipts; and mismatch in amounts paid to related persons under section 40A(2)(b). - HELD THAT: - The Tribunal found that for reasons No.1 and No.2 (high refund-to-TDS ratio and low net profit from large receipts) the Assessing Officer had merely accepted the assessee's brief explanations without undertaking the minimum enquiries that the limited scrutiny selection required; material disparities in turnover and cost ratios called for further examination which the AO did not conduct. As to reason No.4 (mismatch in payments to related persons under section 40A(2)(b)), the AO accepted a terse assertion of genuineness without calling for or recording verification of details necessary to assess reasonableness under section 40A(2)(b). In each of these respects the Tribunal held that the AO's failure to make the requisite enquiries amounted to non-application of mind and rendered the assessment order erroneous and prejudicial to revenue, thereby justifying exercise of revisionary powers under Section 263 and directing de novo assessment by the AO after giving opportunity to the assessee. [Paras 29, 30, 31, 32]

Order under Section 263 confirmed insofar as reasons No.1, No.2 and No.4; assessment set aside and remitted to the AO for fresh adjudication.

Limited scrutiny - scope and duty of Assessing Officer - revisionary jurisdiction under Section 263 - Legality of invoking Section 263 in respect of reasons: Large other expenses claimed in P&L account; and mismatch between amounts credited to P&L and other heads of income. - HELD THAT: - The Tribunal recorded that the AO had test checked books, bills and vouchers and made specific ad hoc disallowances after examination in respect of 'other expenses' and the characterization of receipts under other heads. Having documented that enquiries and verifications were carried out and that the AO applied his mind in these areas, the Tribunal held that the PCIT was not justified in interfering under Section 263 merely because, in the PCIT's view, further or different enquiries could have been made. Consequently, no further enquiry was to be directed by the AO in the remand proceedings in respect of these reasons. [Paras 26, 32]

Order under Section 263 quashed insofar as reasons No.3 and No.5; AO need not make further enquiries on these matters in the set aside proceedings.

Final Conclusion: Appeal partly allowed: the Tribunal upholds the revision under Section 263 and sets aside the assessment for re adjudication on reasons relating to high refund/TDS ratio, low net profit vis a vis large receipts, and payments to related persons; the Tribunal rejects revision insofar as large other expenses and classification of certain receipts are concerned.

Indexation of cost of improvement - exemption under section 54G - transfer of industrial undertaking - utilisation of capital gains for acquisition outside urban area - evidentiary requirement for proving cost of improvements - remand for verification of valuation reports - beneficial construction of exemptionary provisions - agreement to purchase suffices for 54G

Indexation of cost of improvement - evidentiary requirement for proving cost of improvements - remand for verification of valuation reports - Whether the assessee is entitled to indexation of cost of improvements and quantification thereof. - HELD THAT: - The Tribunal rejected the finding of the CIT(A) that the assessee sold a vacant plot, holding that sufficient evidence in the paper book establishes that buildings/sheds existed on the original plot. However, the assessee failed to satisfactorily quantify the entire claimed amount of improvements with supporting bills/vouchers and the valuation reports relied upon by the assessee were not shown to have been verified by the AO. The Tribunal therefore could not accept the full claimed figure for cost of improvement but found that some quantified construction (as per valuation report dated 06/12/2012) was supportable. In the interest of justice the Tribunal directed the AO to verify the valuation reports and to ascertain, by proper enquiries, the construction/improvements that existed at the time of purchase and any subsequent construction, and thereafter to consider and compute the cost of improvement/construction in accordance with law. [Paras 4]

Partly allowed; remitted to the AO for verification of valuation reports and fresh consideration/quantification of cost of improvements in accordance with law.

Exemption under section 54G - transfer of industrial undertaking - utilisation of capital gains for acquisition outside urban area - beneficial construction of exemptionary provisions - agreement to purchase suffices for 54G - Whether the assessee is eligible for exemption under section 54G in respect of capital gains from sale of the industrial property. - HELD THAT: - The Tribunal examined the statutory requirement of section 54G and observed that the assessee had utilised the capital gains to acquire land (with an industrial godown) outside the urban limits within the time permitted by the statute. Relying on the ratio in Fibre Boards (that even an agreement to purchase can suffice and actual commencement of production is not a pre-condition), the Tribunal rejected the AO's ground that exemption should be denied because industrial production had not started at the new site and the CIT(A)'s conclusion that a transfer of an industrial undertaking had not occurred because the original asset was a vacant plot. Having found on the evidence that structures existed on the original asset and that the statutory conditions for investment outside the urban area were satisfied, the Tribunal held that the assessee is eligible for exemption under section 54G and directed the AO to grant the benefit and compute the quantum of capital gains in accordance with law. [Paras 5]

Allowed; AO directed to grant exemption under section 54G and compute capital gains in accordance with law.

Consequential relief - Consequences of the foregoing decisions on interest and other consequential determinations. - HELD THAT: - The assessee's challenge to interest was consequential to the primary issues decided. As the Tribunal allowed the section 54G claim and remitted quantification of cost of improvements to the AO, the question of interest under sections 234A/B/C is to be considered in the light of the recomputation ordered and consequent tax liability. [Paras 7]

Consequential relief to follow from recomputation; appeal partly allowed.

Final Conclusion: The appeal is partly allowed: (a) the denial of exemption under section 54G is set aside and the AO is directed to allow the exemption and compute capital gains in accordance with law; (b) the claim for indexed cost of improvements is partly accepted on the question of existence of structures but remitted to the AO for verification of valuation reports and fresh quantification; consequential issues including interest to be determined after recomputation.

Grant of bail - non-bailable offences under the Customs Act - conspiracy to smuggle - apprehension of continuance/recidivism

Grant of bail - non-bailable offences under the Customs Act - conspiracy to smuggle - apprehension of continuance/recidivism - Whether bail should be granted to the petitioners arrested and remanded in connection with alleged seizure of imported gold and offences under the Customs Act. - HELD THAT: - The petitioners were arrested and remanded in connection with the seizure of a large quantity of foreign-origin gold and prosecuted for offences under the Customs Act in the factual matrix of an alleged organised smuggling operation. The court noted the prosecution's case that the seizure and related material arose from specific intelligence pointing to a conspiratorial arrangement to smuggle gold through Chennai Airport, and that multiple passengers were intercepted as part of the same operation. Having considered the submissions, the court found the offences to be serious in nature and observed an apprehension that the accused might continue to be involved in mobilising gold in large quantities. In view of the gravity of the allegations and the perceived risk of continuance of the criminal activity, the court exercised its discretion against releasing the petitioners on bail.

Bail refused and the criminal original petitions dismissed.

Final Conclusion: The petitions for bail by the arrested persons in the customs smuggling matter are dismissed; the court declined bail on the basis of the seriousness of the offences and the apprehension of continuance of the alleged smuggling activity.

Shortage of stock - re-imported goods and eligibility under exemption notifications - warehousing period and extension - bond liability to pay duty and interest - penalty under Section 114A of the Customs Act, 1962 - confiscation under customs law - requirement of physical stock verification

Shortage of stock - requirement of physical stock verification - Validity of duty demands in respect of shortages recorded by statutory auditors (items at Serial Nos. 1 to 5 and 7) and whether those demands were sustainable. - HELD THAT: - The Tribunal found that the discrepancies in respect of Serial Nos.1 to 5 and 7 were based on statutory auditors' reports which had not been followed by physical stock verification by the officers. The audit reports were prepared from the appellant's own records and, absent independent physical verification by revenue officers, could not sustain a demand under the Customs Act. Contention that work in progress, samples retained under FTP, or partial/check-based verification explained the shortages was not investigated sufficiently by the Department; accordingly the Tribunal held those demands unsustainable. [Paras 18]

Demand of duty in respect of Serial Nos. 1 to 5 and 7 is not sustainable and is set aside.

Re-imported goods and eligibility under exemption notifications - warehousing period and extension - bond liability to pay duty and interest - Whether duty demand in respect of shortages of re-imported goods (Serial No. 6) was sustainable. - HELD THAT: - The Tribunal accepted the Commissioner's findings that the appellants failed to maintain proper accounts for re-imported goods, did not apply for extension of warehousing period, and could not prove re-export of the re imported stock. Physical stock was taken by officers and shortages were accepted in statements. The appellants' plea that re import, re processing and re export constitute a continuous process and that one to one correlation was impossible was rejected because no records showing receipt, utilization and disposal of re imported goods were produced. As the appellants violated conditions of the relevant notifications and the bond, duty together with interest is recoverable under the bond. [Paras 19, 20]

Duty demand in respect of Serial No. 6 (re imported goods) is sustained to the extent confirmed by the adjudicating authority (Rs. 72,79,538 as recorded) and is upheld; recovery may proceed under the bond together with applicable interest.

Penalty under Section 114A of the Customs Act, 1962 - confiscation under customs law - bond liability to pay duty and interest - Sustainability of penalty under Section 114A and of confiscation/fines when imports were assessed by proper officers and the notifications are self-contained. - HELD THAT: - The Tribunal held that the Notifications under which the imports were permitted are self-contained and the bond executed by the appellants contemplates recovery of duty and interest in event of violation. Because the bills of entry had been assessed by proper officers at import and the Notification regime permits recovery under the bond, penal provisions including penalty under Section 114A and confiscation/fine in lieu of confiscation cannot be invoked in the circumstances. Consequently, the mandatory penalty imposed by the Commissioner was set aside. The Revenue, however, remains entitled to recover duty with interest under the terms of the Notification and bond. [Paras 21]

Penalty under Section 114A and other penal consequences confirmed by the Commissioner are set aside; recovery of duty with interest under the bond/notification is permitted.

Final Conclusion: The appeal is partly allowed: demands founded solely on auditors' shortages (Serial Nos.1-5 & 7) are set aside for want of independent physical verification; duty demand in respect of shortages of re imported goods (Serial No.6) is upheld and recoverable under the bond with interest; penalty under Section 114A and other penal measures are set aside.

Liquidator's duty to institute or defend proceedings under Section 35(1)(k) of the Insolvency and Bankruptcy Code, 2016 - reimbursement of compounding fees as part of liquidation costs under the insolvency regime - personal criminal liability of a former director for failure to deposit TDS - distinction between prosecution attaching to the company and prosecution attaching personally to an officer

Liquidator's duty to institute or defend proceedings under Section 35(1)(k) of the Insolvency and Bankruptcy Code, 2016 - reimbursement of compounding fees as part of liquidation costs under the insolvency regime - Whether the Adjudicating Authority was justified in directing the liquidator to reimburse compounding fees paid by the erstwhile Managing Director on account of a criminal complaint relating to TDS defaults - HELD THAT: - The Tribunal held that Section 35(1)(k) imposes on the liquidator the duty to institute or defend suits or prosecutions in the name of, or on behalf of, the corporate debtor, but does not require the liquidator to accept or compound personal offences committed by former officers. The compounding application filed before the criminal forum concerned alleged offences said to be committed during Financial Year 2012-13 by the person who, at the relevant time, was the managing director and the person responsible for day-to-day affairs. The liquidator has not himself committed the alleged offence and therefore is not the party who should file an application admitting commission of that offence. The Adjudicating Authority's direction that the liquidator reimburse the compounding fees to the former managing director was therefore a misconstruction of the liquidator's statutory duties and of the relationship between liquidation costs and personal criminal liability of former officers. Consequently the order directing reimbursement was held unsustainable and was set aside. [Paras 11, 13, 14, 16]

The direction that the liquidator reimburse the compounding fees was set aside; the liquidator is not required to reimburse fees paid by the former managing director for compounding his personal criminal liability.

Personal criminal liability of a former director for failure to deposit TDS - distinction between prosecution attaching to the company and prosecution attaching personally to an officer - Whether the prosecution for non-deposit of TDS in 2012-13 attached to the company only or also to the individual who was managing director at the relevant time - HELD THAT: - The Tribunal examined the record and observed that the complaint was filed on 31-3-2016, i.e., well before the commencement of the corporate insolvency resolution process, and related to alleged defaults in Financial Year 2012-13. The allegations were that the managing director was the person responsible for day-to-day affairs when the defaults occurred. The Tribunal accepted that a juristic person cannot be subjected to imprisonment, and that where an officer is alleged to have, in his personal capacity, failed to deposit deducted tax, criminal prosecution may attach to that individual. Accordingly, even though proceedings were also brought against the company, the managing director faced trial in his personal capacity and could be punished if the offence were proved; that personal liability could not be made the basis for obliging the liquidator to admit or compound the officer's personal offence. [Paras 12, 13, 15]

The prosecution was held to attach personally to the former managing director as well as to the company; personal criminal liability of the officer was distinct from the company's exposure and did not impose on the liquidator an obligation to compound or reimburse the officer's compounding fees.

Final Conclusion: The appeal is allowed: the Adjudicating Authority's order directing the liquidator to reimburse compounding fees paid by the erstwhile managing director is set aside because the liquidator is not obliged to compound or admit personal offences of former officers and the alleged offence relates to the personal liability of the director arising from Financial Year 2012-13. No order as to costs.

Default under the Insolvency and Bankruptcy Code - date of handing over possession - computation of possession period from fulfillment of plan-approval pre-conditions - pre-conditions to building plan approval (environmental / fire safety) - delay not attributable to the corporate debtor - application under section 7 of the I&B Code - principle in Pioneer Urban - inadmissibility of s.7 where delay is not due to corporate debtor

Application under section 7 of the I&B Code - default under the Insolvency and Bankruptcy Code - date of handing over possession - Whether the Adjudicating Authority rightly rejected the section 7 application on the ground that no default had occurred because the period for delivery of possession was to be computed from fulfilment of pre-conditions to plan approval. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that the building-plan approval dated 23 July 2013 was subject to pre-conditions, the last of which (Fire Safety Approval) was granted on 27 November 2014, and that the timelines for handing over possession were to be computed from fulfillment of those pre-conditions. Applying the contractual scheme (commitment period plus grace/extended periods) the corporate debtor's proposed timeline for delivery extended to 27 November 2019. The Adjudicating Authority's conclusion that no debt was then due and payable and that no default had occurred was affirmed, since the corporate debtor could not be said to have failed to perform before the pre-conditions were satisfied. The Tribunal also recorded that the corporate debtor had applied for and obtained the Occupational Certificate and had offered possession thereafter, corroborating the absence of an actionable default for the purposes of section 7. [Paras 4, 9, 10, 16, 17]

The rejection of the section 7 application was correct as no default had occurred when computed from the date of fulfillment of plan-approval pre-conditions; the Adjudicating Authority's order is affirmed.

Principle in Pioneer Urban - inadmissibility of s.7 where delay is not due to corporate debtor - delay not attributable to the corporate debtor - Whether the Tribunal should apply the principle that a section 7 petition is unsustainable where delay in possession is not attributable to the corporate debtor. - HELD THAT: - The Tribunal applied the Supreme Court's principle in Pioneer Urban and related authority that the Adjudicating Authority must examine whether delay in delivery of possession is attributable to the corporate debtor; if delay arises from factors outside the corporate debtor's control (including pre-conditions imposed in approvals), the default for initiating CIRP under section 7 cannot be assumed. On the facts, the Tribunal accepted that environmental and fire-safety pre-conditions prevented commencement of construction and that the computation of the possession date accordingly began only after those pre-conditions were satisfied. Given that position, the Tribunal found no basis to treat the delay as a default attributable to the corporate debtor and declined to interfere with the Impugned Order. [Paras 15, 16, 17]

Pioneer Urban principle applies; where delay is due to the need to fulfil external pre-conditions the section 7 petition is not maintainable on ground of default.

Final Conclusion: The Appellate Tribunal found no merit in the appeal and dismissed it, holding that the Adjudicating Authority correctly rejected the section 7 application because the date for delivery of possession was to be computed from fulfilment of plan-approval pre-conditions (including fire-safety approval) and hence no default attributable to the corporate debtor was established.

Classification as Works Contract Service - exclusion from definition of Works Contract Service under Section 65(105)(zzzza) - exemption of services rendered in respect of Airport - definition of Aerodrome - adjacency and integral part test for airport amenities

Exemption of services rendered in respect of Airport - classification as Works Contract Service - definition of Aerodrome - adjacency and integral part test for airport amenities - Whether the Multi Level Car Parking constructed at IGI Airport (Terminal III) formed part of the airport and was therefore excluded from the definition of 'Works Contract Service' and exempt from service tax. - HELD THAT: - The Tribunal examined the statutory definitions and the contractual obligations under the OMDA and held that the Multi Level Car Parking (MLCP), being adjacent to the main terminal building and an amenity primarily for passengers, falls within the definition of an aerodrome/airport. The Tribunal relied on the definition of 'Airport' in the Airports Authority of India Act read with the definition of 'Aerodrome' in the Aircraft Act to conclude that buildings and structures appertaining to an aerodrome are part of the airport. The contractual mandate in the OMDA (mandatory capital projects and provision of aeronautical and non aeronautical services including vehicle parking) reinforced that the MLCP was an integral component of airport infrastructure. The Tribunal found the precedents relied on by Revenue distinguishable: the GMR Hyderabad matter concerned Cenvat credit and hotel construction facts not present here, and the DIAL decision on advance development fees involved different factual and legal issues. The Tribunal also noted authority where ancillary airport facilities (air catering unit) were held to be part of the airport and hence exempt. Applying the adjacency/integrality test to the material facts, the Tribunal concluded that the MLCP is part of the airport and not assessable as a standalone works contract service. [Paras 12, 13, 14]

The MLCP at IGI Airport is part of the airport and exempt from service tax as excluded from 'Works Contract Service'; the impugned demand and penalties are set aside and the appellant is entitled to consequential relief.

Final Conclusion: Appeal allowed; MLCP held to be part of the airport and exempt from service tax for the period in dispute, impugned demand and penalties set aside with consequential benefits to the appellant.