TaxTMI Updates e-Newsletter
Jul 10,2020

Supply - Consideration - Course or furtherance of business - Person (co-operative society) - Business includes provision by a club, association, society of facilities or benefits to its members - Principle of mutuality - Deeming provision treating an unincorporated association and its members as distinct persons (with effect from 01.07.2012) - Advance Ruling jurisdiction under Section 97(2) - Exemption for reimbursement/share of contribution by RWA up to Rs. 7500 per month per member

Supply - Consideration - Course or furtherance of business - Person (co-operative society) - Business includes provision by a club, association, society of facilities or benefits to its members - Principle of mutuality - Deeming provision treating an unincorporated association and its members as distinct persons (with effect from 01.07.2012) - Exemption for reimbursement/share of contribution by RWA up to Rs. 7500 per month per member - Whether the activities carried out by the applicant for its members qualify as "supply" under Section 7 of the CGST Act, 2017. - HELD THAT: - The Authority found that the applicant, a registered co operative housing society, is a "person" within the GST Act and that the amounts collected from its members constitute "consideration" as defined in the Act. The activities described (obtaining conveyance, managing, maintaining and administering the property, raising funds, and providing social/cultural/recreational activities) fall within the wide, inclusive definition of "supply" and satisfy the twin requirements of being for a consideration and in the course or furtherance of "business." The definition of "business" expressly includes provision by a club, association or society (for a subscription or any other consideration) of facilities or benefits to members. The Authority rejected the applicant's reliance on the principle of mutuality, observing that the law now contains a deeming provision treating an unincorporated association and its members as distinct persons and that earlier Income tax or pre deeming service tax decisions are not determinative. The Authority also noted the Government clarification exempting reimbursement/share of contribution by RWAs up to the stated monetary threshold, demonstrating that housing societies are within the tax net subject to specified exemptions. Applying these legal propositions to the facts, the Authority concluded that the conditions for "supply" under Section 7 are fulfilled. [Paras 5]

Answered in the affirmative: the activities of the applicant for its members qualify as "supply" under Section 7 of the CGST Act, 2017.

Advance Ruling jurisdiction under Section 97(2) - Whether the Authority may rule on whether the applicant has correctly discharged GST as per the illustrative invoice generated by the applicant. - HELD THAT: - The Authority examined the scope of questions admissible for an advance ruling under Section 97(2) and reproduced the enumerated categories (classification, applicability of notifications, time and value of supply, admissibility of input tax credit, determination of liability to pay tax, requirement to be registered, and whether a particular thing amounts to a supply). The question posed by the applicant concerning correctness of GST discharged and format/content of the illustrative invoice does not fall within any category specified in Section 97(2). Consequently the Authority held that it lacks jurisdiction to decide on the correctness of the GST discharge or invoice format as framed in the application, and that the question is not maintainable for an advance ruling. [Paras 5]

Not answered: the question is not maintainable before this Authority under Section 97(2) and therefore cannot be decided.

Final Conclusion: The Authority ruled that the society's activities for its members constitute a "supply" under Section 7 of the CGST Act, 2017 and are therefore liable to GST subject to any applicable exemptions; the separate question on whether the applicant has correctly discharged GST as per its illustrative invoice was held not maintainable and was not decided by the Authority.

Summary order. Exemption applications allowed; notice issued; respondents permitted four weeks to file counter affidavits and rejoinder within four weeks thereafter; matter adjourned to await the Supreme Court judgment in Union of India v. Brand Equity Treaties Limited & Ors., SLP (C) 7425-7428/2020 listed on 16.09.2020.

Constitutional validity of Section 171 of the Central Goods and Services Tax Act, 2017 - legality of Rule 126 of the Central Goods and Services Tax Rules, 2017 - consolidation of connected matters for joint hearing - issue of default notice without process fee

Constitutional validity of Section 171 of the Central Goods and Services Tax Act, 2017 - legality of Rule 126 of the Central Goods and Services Tax Rules, 2017 - consolidation of connected matters for joint hearing - Connected writ petitions raising challenges to the constitutional validity of Section 171 CGST Act and/or legality of Rule 126 CGST Rules be heard together for a holistic adjudication. - HELD THAT: - The Court observed that thirty-three matters before it involve the question of constitutional validity and/or legality of the specified statutory provisions. In order to take a holistic view and ensure coherent determination of the common legal questions, the Court directed the Registry to list the present petition together with all connected matters for joint hearing on 24th August, 2020. The direction to consolidate listing was given to facilitate collective hearing of the common issue across the identified matters.

All identified connected matters involving the stated challenges are to be listed together on 24th August, 2020 for joint hearing.

Issue of default notice without process fee - Default notice to be issued to the petitioner and respondent no. 5 in the present petition for non-appearance. - HELD THAT: - Noting the absence of counsel for the petitioner and for respondent no. 5, the Court ordered that a default notice be issued to both, without requiring payment of process fee. The notice is to be issued by all modes, including e-mail, addressed to the learned counsel for the petitioner and to the standing counsel for respondent no. 5, thereby ensuring service despite non-attendance.

Default notice to petitioner and respondent no. 5 to be issued without process fee by all modes including e-mail.

Final Conclusion: The Court directed issue of default notices to the absent parties without process fee and ordered that the present petition and all identified connected matters raising challenges to Section 171 CGST Act, 2017 and/or Rule 126 CGST Rules, 2017 be listed together for joint hearing on 24th August, 2020; the order is to be uploaded and emailed to counsel.

Entitlement to migrate and carry forward pre-GST input tax credit - technical difficulties on the GST common portal - reasonableness and arbitrariness under Article 14 - vested property right in input tax credit under Article 300A - discretion to extend time under delegated rule-making read with transitory provisions - alternative remedy of claiming input tax credit in periodic return

Entitlement to migrate and carry forward pre-GST input tax credit - technical difficulties on the GST common portal - reasonableness and arbitrariness under Article 14 - Petitioner entitled to avail and carry forward CENVAT/ VAT credit by filing Form GST TRAN-1 despite failing to upload by the statutory cut-off on account of technical difficulties. - HELD THAT: - The Court held that the issue is covered by earlier decisions of this Court and the Delhi High Court which recognised that difficulties relating to migration and uploading of TRAN-I - including those not recorded in system logs or arising from taxpayers' inability to operate a new online regime - fall within the ambit of 'technical difficulties' contemplated by the transitory mechanism. Denial of the benefit to taxpayers who could not file TRAN-I for such reasons would be arbitrary and discriminatory and therefore offend the principle of equality under Article 14. The Court noted that repeated administrative extensions granted for filing TRAN-I in cases of technical glitches support the view that taxpayers who could not upload TRAN-I should not be deprived of accrued credits. [Paras 6, 7, 8]

Petitioner is entitled to carry forward the unutilised pre-GST credit and to be permitted to file TRAN-I despite having missed the original deadline.

Vested property right in input tax credit under Article 300A - reasonableness and arbitrariness under Article 14 - discretion to extend time under delegated rule-making read with transitory provisions - Challenge to the vires of Rule 117(1A) was considered but the Rule was not declared invalid; the court recognised constitutional concerns in denying migrated credit yet did not strike down the provision. - HELD THAT: - While the petition impugned the vires of sub rule (1A) of Rule 117, the Court declined to invalidate the Rule. The Court observed that the credit accrued prior to GST is a vested right attracting protection under Article 300A and that a restrictive construction of 'technical difficulty' would be arbitrary under Article 14. However, rather than invalidate the delegated provision, the Court applied existing precedents to afford relief to the petitioner in the particular circumstances of the case. [Paras 7, 8]

Rule 117(1A) was not struck down; nevertheless, the petitioner's vested credit rights were protected in the facts of the case without declaring the rule invalid.

Alternative remedy of claiming input tax credit in periodic return - discretion to extend time under delegated rule-making read with transitory provisions - Appropriate relief and remedial directions to permit filing of TRAN-I and provision of an alternative route to claim credit were granted. - HELD THAT: - Relying on precedents of this Court and the Delhi High Court, the Bench directed the respondents to permit the petitioner to upload Form TRAN-I on or before 30.06.2020. As a consequential and alternative remedy, if the respondents failed to open the portal, the petitioner was permitted to claim the input tax credit in the GSTR-3B return for July 2020. The respondents retained the right to verify the genuineness of the claims made by the petitioner. [Paras 8, 9]

Respondents directed to permit TRAN-I upload till 30.06.2020; failing which petitioner may avail the disputed ITC in GSTR-3B of July 2020, subject to verification.

Final Conclusion: Writ petition allowed: petitioner granted relief to migrate pre-GST credit by permitting TRAN-I to be uploaded until 30.06.2020, with liberty to claim the credit in GSTR-3B of July 2020 if the portal is not opened; Rule 117(1A) not struck down though its restrictive application was disapproved as potentially arbitrary and inconsistent with vested credit rights.

Mandamus to tax authorities to disclose tax credit - liability to pay service tax/GST on renting of immovable property - availability of input tax credit - availment of input tax credit does not affect liability of registered taxpayer - no legal obligation on tax department to disclose taxpayer's returns

Mandamus to tax authorities to disclose tax credit - no legal obligation on tax department to disclose taxpayer's returns - Whether the Court should direct the Principal Chief Commissioner (Respondent No.2) to disclose whether Respondent No.1 availed credit of Service Tax/GST charged in the petitioner's rent invoices. - HELD THAT: - The Court held that the petition seeking a writ of mandamus directing Respondent No.2 to furnish information about Respondent No.1's alleged availment of tax credit is misconceived. The petitioner has not shown any statutory right or provision imposing an obligation on the tax authority to disclose another taxpayer's returns or credit claims. The dispute as to liability to pay or to recover the tax component from Respondent No.1 arises from the lease agreement (notably Clause 13) and must be adjudicated in appropriate proceedings inter se the parties. The Court observed that disclosure of whether Respondent No.1 availed credit is not a matter for mandamus against the tax department in the absence of a legal entitlement to such information. [Paras 9, 10]

Prayer for a direction to Respondent No.2 to disclose whether Respondent No.1 took input credit is rejected and the petition is dismissed.

Liability to pay service tax/GST on renting of immovable property - availability of input tax credit - availment of input tax credit does not affect liability of registered taxpayer - Whether Respondent No.1's alleged availment of input tax credit affects the petitioner's obligation or right in relation to tax liability and recovery. - HELD THAT: - The Court clarified that as between the taxpayer and the tax department the registered landlord (the petitioner) is obligated to register and discharge service tax/GST where taxable renting services are provided. Payment of tax by the registered taxpayer and subsequent availment of Input Tax Credit by the recipient is governed by the CGST scheme, but such availment does not alter the registered taxpayer's liability to pay the tax to the revenue. Any right of the petitioner to recover unpaid tax components from the tenant must be determined by reference to the contractual terms of the lease and in appropriate proceedings; the question of the tenant's credit availment is immaterial to the petitioner's liability to the tax authorities. [Paras 9]

The Court held that alleged availment of credit by the tenant does not affect the petitioner's liability to pay tax nor entitle the petitioner to the relief sought against the tax authorities; rights to recover from the tenant remain for contractual adjudication.

Final Conclusion: The petition for a writ directing disclosure by the tax authority is dismissed for lack of legal entitlement to the information; questions of recovery of tax components between landlord and tenant are left open for adjudication under the lease terms.

Carry forward of losses by charitable trusts - application of income for determining assessable income of a trust - treatment of excess expenditure/deficit of earlier years against current year income - precedential effect of High Court and Supreme Court decisions on assessment of trusts

Carry forward of losses by charitable trusts - application of income for determining assessable income of a trust - precedential effect of High Court and Supreme Court decisions on assessment of trusts - Whether the deficit/excess expenditure of earlier years can be set off against the income of the assessment year 2013-14 for a trust assessed under the provisions applicable to charitable trusts. - HELD THAT: - The Assessing Officer disallowed adjustment of a carried forward deficit on the ground that such excess expenditure could not be treated as an application of the current year's income. On appeal the CIT(A) allowed the set-off relying particularly on the judgment of the Hon'ble High Court of Delhi in DIT v. Raghuvanshi Charitable Trust and several other High Court decisions. Before the Tribunal the parties accepted that the legal position in Raghuvanshi Charitable Trust continues to apply. The Bench also noted that the Hon'ble Supreme Court in CIT(E) v. Subros Educational Society did not find merit in a similar Revenue contention, thereby implicitly affirming the principle applied by the High Court. Having regard to the binding precedential position relied upon by the assessee and not being shown any contrary law that displaces that position, the Tribunal affirmed the CIT(A)'s order allowing the carried forward deficit to be adjusted in computing assessable income for 2013-14. [Paras 5, 6, 7]

CIT(A)'s order set aside the Assessing Officer's disallowance and allowed adjustment of the carried forward deficit in computing the assessable income for AY 2013-14.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and affirmed the CIT(A)'s order allowing the carry forward adjustment of the earlier years' deficit against the income of the assessment year 2013-14, following the jurisprudence of the Delhi High Court and the implicit affirmation by the Supreme Court.

Assessee's right to challenge jurisdiction under section 147/148 - Reassessment-reasons recorded-requirement of independent enquiry - Prima facie material for reopening - Borrowed satisfaction - Territorial jurisdiction of assessing officer - Typographical error in notice-not vitiating - Approval requirement for notice after four years (section 151(1)) - Claim of deduction under section 54 vs. section 54F-proof of construction

Reassessment-reasons recorded-requirement of independent enquiry - Prima facie material for reopening - Borrowed satisfaction - Validity of reassessment notice under section 148 insofar as AO's reasons for belief under section 147 (existence of escapement of income) where return had been filed and relevant material was available - HELD THAT: - The Tribunal examined the reasons recorded by the AO and the contemporaneous material. The reasons stated reliance on information from DIT(I&CI) that the assessee sold a plot and that the assessee had not filed return for AY 2008-09. Record showed a registered sale deed (27.08.2007) with PAN quoted and that the assessee had filed his return on 25.07.2008 disclosing long-term capital gains including the impugned transaction. The AO did not undertake the basic verification available from the sale deed and departmental systems to ascertain whether a return had been filed or whether the transaction was reflected therein, relying instead on the external information. The Tribunal held that where the AO possessed the sale deed and could have checked the filing status (PAN), failure to carry out such preliminary enquiry and to link the material to form a reasoned belief amounted to non-application of mind (borrowed satisfaction) and vitiated the reasons for reopening. Consequently the notice under section 148 was set aside. [Paras 15, 16, 17, 18, 23]

Notice issued under section 148 set aside for want of valid reasons and non-application of mind; reassessment proceedings quashed on this ground.

Territorial jurisdiction of assessing officer - Whether ITO Ward 2(2) had territorial jurisdiction to proceed when the assessee's return was filed with ITO Ward 6(4) - HELD THAT: - The Tribunal declined to adjudicate the territorial-jurisdiction contention. Although the assessee challenged that jurisdiction lay with ITO Ward 6(4), the Tribunal observed that the assessee had participated in reassessment proceedings without raising the objection before completion and admitted the ground as a legal point but left the specific question of transfer/competence open for further deliberation. No determination on merits of territorial competence was made since the notice was set aside on other grounds. [Paras 19, 20]

Left open and not adjudicated; issue not finally decided by the Tribunal.

Typographical error in notice-not vitiating - Validity of notice where initial notice recorded an incorrect forename but other particulars were correct and were rectified during proceedings - HELD THAT: - The Tribunal noted that the first name in the notice had been wrongly recorded (typographical error) while surname, father's name and address were correct, and the error was rectified during the proceedings with subsequent notices and the final order in the correct name. The Tribunal accepted the Revenue's contention that this was a technical/typographical error which did not render the notice invalid where other identifying particulars were accurate and the assessee participated. [Paras 9, 21]

Typographical error did not render the notice invalid; no separate vitiation on this ground.

Approval requirement for notice after four years (section 151(1)) - Validity of notice issued after four years without requisite authority's approval - HELD THAT: - The Tribunal observed that the notice under section 148 was issued after the four year period and that such a notice requires approval from the specified higher authority under the statute. The notice in the present case was issued with approval only from Addl. CIT, Range 2 Jaipur, which did not conform to the prescribed approving authority for notices beyond four years. This defect in requisite approval contributed to vitiation of the notice. [Paras 22, 23]

Notice is vitiated for want of requisite approval where issued after four years and cannot be sustained.

Claim of deduction under section 54 vs. section 54F-proof of construction - Whether the sold asset was a plot with superstructure (house) so as to permit deduction under section 54; alternatively, whether evidence supported cost of construction and section 54 claim - HELD THAT: - On the merits the Tribunal agreed with the AO that the sale deeds described sale of plots and did not mention any superstructure. The assessee's supporting material (tenant affidavit, electricity and water bills) were insufficient to discharge the onus of proving existence of a constructed house at the time of sale or to corroborate source and payments of construction cost; no buyer confirmation, photographs or construction bills were produced. The AO's factual conclusion that only plots were sold and that section 54 relief was not allowable was upheld. However, since the notice under section 148 was set aside, no consequential directions were required for readjustment under section 54F. [Paras 24, 26, 27]

AO's finding that only plots were sold and denial of deduction under section 54 sustained on merits, but consequential relief was rendered academic as reassessment proceedings were quashed.

Final Conclusion: The Tribunal set aside the notice issued under section 148 and quashed the reassessment proceedings for AY 2008-09 on account of defective reasons and non-application of mind (and for want of requisite approval where issued after four years). The objection to territorial jurisdiction was left open. The Tribunal held that the typographical error in the notice did not vitiate it. On the merits, the AO's conclusion that only plots were sold (and denial of section 54 relief) was upheld, but became academic in view of the quashing of proceedings; appeal allowed on jurisdictional/notice grounds.

Deduction for Voluntary Retirement Scheme expenditure - capital expenditure versus revenue expenditure - non-retroactivity of statutory amortisation (section 35DDA) - binding effect of precedential Tribunal and High Court decisions

Deduction for Voluntary Retirement Scheme expenditure - capital expenditure versus revenue expenditure - non-retroactivity of statutory amortisation (section 35DDA) - binding effect of precedential Tribunal and High Court decisions - Whether the payment made under the Voluntary Retirement Scheme by the assessee for employees of its Calcutta unit is allowable as a deduction in the assessment year 1998-99 or is to be treated as capital expenditure. - HELD THAT: - The Tribunal found that the expenditure of Rs. 2.86 crore paid towards VRS was undisputedly incurred in the relevant year. The same controversy for the immediately succeeding assessment year had earlier been decided by the Tribunal in favour of the assessee (ITA No.4667/M/2005) and the Revenue's appeal against that Tribunal order was dismissed by the Hon'ble Bombay High Court. Section 35DDA, introduced by the Finance Act, 2001, prescribes amortisation for VRS payments but was inserted after the assessment year under consideration and therefore does not apply retrospectively to AY 1998-99. The Departmental Representative conceded that the facts are similar to the year already adjudicated in the assessee's favour. Applying the precedent and noting the inapplicability of section 35DDA to the year in question, the Tribunal reversed the findings of the Assessing Officer and the CIT(A) and allowed the deduction in the year under consideration. [Paras 4, 5, 6]

Deduction for the VRS payments is allowable in Assessment Year 1998-99; the assessments below are reversed and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal of the assessee and directed that the VRS payments made in AY 1998-99 be allowed as a deduction, holding that section 35DDA (enacted in 2001) is not applicable to the year under consideration and that prior favourable decisions in the assessee's case and their confirmation by the High Court govern the outcome.

Deduction under Section 80P(2)(d) - Deduction under Section 80P(2)(a)(i) - Interest on surplus funds - business income versus income from other sources - Mutuality and status of nominal members - Remand for fresh adjudication in light of authoritative precedents

Deduction under Section 80P(2)(d) - Interest on surplus funds - business income versus income from other sources - Remand for fresh adjudication in light of authoritative precedents - Whether interest earned on deposits (including interest on fixed deposits with co-operative banks) is assessable as business income eligible for deduction under Section 80P(2)(d) or is income from other sources, and whether the matter requires fresh consideration in light of higher court decisions. - HELD THAT: - The Tribunal observed that the question whether interest earned on investments of surplus funds is taxable as business income (and thus eligible for deductions under Section 80P) or is assessable under the head 'Income from Other Sources' has been the subject of conflicting authorities. Having considered a coordinate-bench decision and the competing Supreme Court and High Court precedents (including Totgars Co-operative Sale Society and the Tumkur Merchants decisions), the Tribunal found the facts of the present case to be similar to those earlier considered and held that the issue should be restored to the file of the CIT(Appeals) for fresh adjudication. The CIT(A) is directed to re-examine the nature and source of the funds, consider the assessee's submissions and documents, apply the relevant precedents, and pass a speaking order after giving the assessee adequate opportunity of hearing. [Paras 7]

Disputed issue remanded to the CIT(A) for fresh adjudication in the light of the cited authorities; assessee to be given opportunity of hearing.

Deduction under Section 80P(2)(a)(i) - Mutuality and status of nominal members - Remand for fresh adjudication in light of authoritative precedents - Whether the presence of nominal members (Nama Matra Sadasyaru) and acceptance of deposits from such members breaks the principle of mutuality and disentitles the society to deduction under Section 80P(2)(a)(i), and whether the matter requires fresh consideration under the Karnataka State Co-operative Societies Act. - HELD THAT: - The Tribunal noted that the Assessing Officer and CIT(A) denied deduction under Section 80P(2)(a)(i) on the ground that nominal members do not share profits or voting rights and therefore the identity of members was not established. Having regard to coordinate-bench findings and relevant High Court decisions addressing the definition and legal effect of 'nominal members' under state cooperative statutes, the Tribunal concluded that the issue requires fresh examination. The matter was set aside to the CIT(A) to consider afresh the four categories of membership, the legal status of nominal members under the Karnataka State Co-operative Societies Act, and whether deposits/transactions with such members amount to dealings with non-members or public banking business, directing the CIT(A) to pass a speaking order after affording the assessee adequate opportunity to produce documents and be heard. [Paras 8]

Disputed issue remanded to the CIT(A) for fresh adjudication on the status of nominal members and entitlement to deduction; assessee to be afforded opportunity of hearing and to cooperate in submitting information.

Final Conclusion: Delay in filing the appeal was condoned; the Tribunal has remanded both contested issues (treatment of interest on deposits vis-a -vis Section 80P(2)(d) and entitlement under Section 80P(2)(a)(i) in relation to nominal members) to the CIT(A) for fresh adjudication in the light of authoritative decisions, and the appeal is treated as allowed for statistical purposes.

Royalty - business receipts - permanent establishment - installation permanent establishment - dependent agent permanent establishment - attribution of profits - arm's length price - TDS credit - remand for verification

Royalty - business receipts - Revenue earned from supply of software to customers in India is not taxable as royalty under the Indo US DTAA and constitutes business receipts assessable as business income subject to existence of business connection/PE in India. - HELD THAT: - The Tribunal followed earlier coordinate bench and Delhi High Court precedents which held that consideration for supply of software (including where separately licensed) is for a copyrighted article or product and does not amount to transfer of rights in respect of copyright giving rise to royalty under the applicable treaty. The receipts were, therefore, held to be business receipts to be taxed as business income, subject to the assessee having a business connection or permanent establishment in India. The tribunal noted no change in the factual matrix from earlier years and respectfully followed the findings upheld by the Hon'ble High Court. [Paras 12]

Ground No.2 allowed; software receipts held not to be royalty but business receipts, subject to business connection/PE.

Permanent establishment - installation permanent establishment - dependent agent permanent establishment - attribution of profits - arm's length price - remand for verification - Existence of any form of permanent establishment (fixed place, installation PE or dependent agent PE) in India was not finally adjudicated and the questions of attribution of income and arm's length remuneration were remitted to the Assessing Officer for fresh examination following verification of PE related facts. - HELD THAT: - Relying on the coordinate bench decision, the Tribunal recorded that the presence or absence of a fixed place PE could not be conclusively determined on the record and that installation PE was not established on the facts considered. As to dependent agent PE, the coordinate bench had set aside the issue due to lack of sufficient information and directed factual verification. Given that the coordinate bench's findings on these procedural insufficiencies were not challenged before the Delhi High Court and have attained finality, the Tribunal directed the Assessing Officer to decide the PE issue afresh in accordance with those directions and thereafter to adjudicate attribution of profits and arm's length pricing. Consequently, Grounds Nos.3 to 6 were treated as allowed for statistical purposes and remit was ordered for proper verification and consideration by the AO. [Paras 14, 15, 16, 17]

Issue of PE, and consequential issues of attribution and ALP, remitted to the Assessing Officer for verification and fresh consideration in line with the coordinate bench's directions.

TDS credit - Claim for credit of tax deducted at source was to be allowed as per law. - HELD THAT: - The Tribunal directed the Assessing Officer to grant credit for TDS in accordance with the provisions of law, without elaborating further, thus instructing the revenue authority to pass consequential relief in favour of the assessee where warranted. [Paras 18]

Assessing Officer directed to give TDS credit as per law.

Penalty proceedings - Initiation of penalty proceedings was premature and therefore dismissed. - HELD THAT: - The Tribunal observed that penalty proceedings could not be validly initiated at the stage then before it and accordingly dismissed the objection to initiation of penalty proceedings as premature. [Paras 18]

Penalty proceedings dismissed as premature.

Final Conclusion: Both appeals (ITA Nos. 7698/DEL/2017 and 8276/DEL/2018) are allowed in part: software receipts held not to be royalty but business receipts subject to business connection/PE; issues concerning PE, attribution and arm's length pricing remitted to the Assessing Officer for verification and fresh decision; TDS credit to be given as per law; penalty proceedings dismissed as premature.

Deduction of tax at source on interest under section 194A - deemed credit by credit to "interest payable" or "suspense" account - jurisdiction of Assessing Officer arising from transfer orders under section 127 - concurrent versus divisional jurisdiction in TDS matters - penalty for failure to deduct tax at source under section 271C

Deduction of tax at source on interest under section 194A - deemed credit by credit to "interest payable" or "suspense" account - Whether the assessee was obliged to deduct tax at source on the consolidated interest provision credited to an interest payable account for the Assessment Year 1996-97. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the statutory test under section 194A turns on the interest relatable to each individual payee: tax becomes deductible only if the aggregate interest credited or paid to an individual payee in the financial year exceeds the threshold. The explanation deeming credit to an "interest payable" or "suspense" account as credit to the payee does not operate to impose a TDS obligation where, on facts, the interest relatable to each individual depositor did not exceed the threshold. The AO's approach of treating a consolidated credit exceeding the threshold as creating a blanket TDS liability was held to be incorrect. The Tribunal found no dispute that no individual depositor's interest in the year exceeded the threshold and noted the assessee deducted tax where individual liabilities exceeded the threshold; on that basis the CIT(A)'s factual and legal conclusion that the assessee was not an assessee in default was affirmed. [Paras 21, 22, 23]

Assessee was not required to deduct tax at source for the year where interest relatable to each individual depositor did not exceed the statutory threshold; the demand under section 201(1) and interest under section 201(1A) were rightly quashed on merits.

Jurisdiction of Assessing Officer arising from transfer orders under section 127 - concurrent versus divisional jurisdiction in TDS matters - Whether the Assistant Commissioner, Central Circle-1, Lucknow had jurisdiction to pass orders under sections 201(1) and 201(1A) in relation to the assessee for Assessment Year 1996-97. - HELD THAT: - The Tribunal accepted the CIT(A)'s analysis of the Commissioner's notifications and successive orders under section 127 transferring TDS functions to the ITO (TDS) Ward 2, Lucknow. The explanation to section 127 and the specific transfer orders showed that proceedings and powers under Chapter XVIIB (TDS provisions) in respect of the relevant assessee-group were vested in the ITO (TDS) and were not transferred to the Central Circle officer who framed the impugned order. The Tribunal observed that where the Commissioner had conferred TDS jurisdiction on the ITO (TDS) for the relevant cases, the Central Circle officer had no jurisdiction to initiate or decide proceedings under sections 201(1)/201(1A). The Tribunal also noted consistent practice and instances where ITO (TDS) had handled similar years/cases, reinforcing that TDS jurisdiction remained with the TDS officer. Consequently the CIT(A)'s conclusion that the AO's order was without jurisdiction was affirmed. [Paras 24, 26, 27, 28]

The Assistant Commissioner, Central Circle-1, Lucknow lacked jurisdiction to pass the orders under sections 201(1) and 201(1A); the orders were therefore quashed for want of jurisdiction.

Penalty for failure to deduct tax at source under section 271C - Whether the penalty under section 271C levied on the basis of the AO's order could be sustained. - HELD THAT: - Because the substantive demand under sections 201(1) and 201(1A) was quashed both on merits (no TDS liability in respect of individual depositors) and for want of jurisdiction of the officer who passed the demand, the Tribunal agreed with the CIT(A) that the penalty proceedings founded on that demand could not survive. The Tribunal accepted that the penalty was initiated on an order which was not passed by the competent jurisdictional authority and that, on merits, no default had been established. [Paras 28]

Penalty under section 271C was rightly cancelled by the CIT(A) and cannot be sustained.

Final Conclusion: Both appeals filed by the revenue are dismissed. The CIT(A)'s order quashing the demand under sections 201(1)/201(1A) on merits and for want of jurisdiction, and cancelling the penalty under section 271C, is affirmed; the assessee's cross objections supportive of the CIT(A)'s order are allowed.

Allowability of provisions for costs on completed contracts - provision for expected loss / cost overruns on incomplete contracts - revenue recognition under the Percentage of Completion Method vis-a -vis progress billings - software maintenance charges: revenue expenditure v. capital expenditure - mandatory interest liability under section 234B - interpretation and application of Rule 34(5) of the Income tax Appellate Tribunal Rules in light of pandemic lockdowns

Allowability of provisions for costs on completed contracts - Accounting Standard 1 and Accounting Standard 7 compliance - recurring issue and precedent in assessee's own case - Whether the assessee's provision for costs on completed contracts of Rs. 3,67,61,993/- is allowable in computation of income for A.Y. 2007-08. - HELD THAT: - The Tribunal examined whether the provisions were for identified, ascertained liabilities and whether the estimates were made on a reasonable/technical basis consistent with applicable accounting standards. The assessee demonstrated project wise estimations prepared as part of its regular accounting practice, technical assessment by project teams, and that substantial portions of provisions were actually incurred in subsequent years or written back and offered to tax. The Tribunal noted prior inconsistent outcomes in earlier years but relied on the most recent order in the assessee's own case (A.Y. 2006 07) which allowed such provisions where project wise details and technical bases were placed on record. The Tribunal held that AS 1 and AS 7 permit making provisions for known liabilities even where amounts are estimates and that mere subsequent reversal is not a ground for disallowance where the provision was made on a scientific/consistent basis and reversals are accounted for in later years.

Set aside the CIT(A)'s disallowance and allow the provision for costs on completed contracts.

Provision for expected loss / cost overruns on incomplete contracts - Accounting Standard 7 (recognition of expected contract loss) - consistency with prior year Tribunal order - Whether the provision for cost overruns on incomplete contracts of Rs. 62,62,342/- is allowable for A.Y. 2007-08. - HELD THAT: - The assessee explained that expected contract losses were estimated project wise by comparing estimated total contract cost with contract revenue and that AS 7 mandates immediate recognition of expected loss on a contract. The assessee produced project wise workings and the Tribunal relied on the immediately preceding year's decision in the assessee's own case (A.Y. 2006 07) which allowed similar provisions where substantial amounts were subsequently incurred or offered to tax and where the method of accounting was consistent. The Tribunal found no material change in accounting method or absence of supporting estimations for the year under appeal and followed the prior favorable precedent.

Set aside the CIT(A)'s disallowance and delete the addition relating to cost overruns on incomplete contracts.

Revenue recognition under the Percentage of Completion Method vis-a -vis progress billings - proper application of AS 7 in determining stage of completion - consistency of accounting method and absence of revenue leakage - Whether the A.O. was justified in adding Rs. 22,19,88,173/- by treating excess progress billings over revenue recognized under POC as taxable income for A.Y. 2007-08. - HELD THAT: - The assessee followed POC as mandated by AS 7 (w.e.f. 01.04.2003), determining percentage completion by ratio of costs incurred to total expected costs and recognising revenue accordingly. Progress billings reflect invoicing/payment terms and do not necessarily equate to revenue recognition under POC; excess billings are reflected as advances (liability). The Tribunal, following its recent decision in the assessee's own case for A.Y. 2006 07, held that consistent application of the POC method, supported by cost workings, and absence of any established revenue leakage, precludes substituting billings for the assessee's accounting method; mere fact that progress billings exceed recognised revenue is not a basis to overturn a consistent accounting practice.

Set aside the addition and vacate the A.O.'s treatment of excess progress billings as income.

Software maintenance charges: revenue expenditure v. capital expenditure - annual maintenance charges revenue nature - precedent in assessee's own case - Whether computer software charges of Rs. 1,09,77,210/- are revenue in nature (allowable) or capitalized (and disallowed) for A.Y. 2007-08. - HELD THAT: - The assessee characterised the payments as annual maintenance, upgrades and rectifications which are periodic in nature. The Tribunal relied on its earlier order in the assessee's own case (A.Y. 2006 07) and observed that where expenditure is in the nature of annual maintenance, it is revenue in nature. There was no independent finding by the CIT(A) and the Tribunal followed the precedent which held the expenses to be revenue and therefore allowable, reversing the AO's recharacterisation and any consequential depreciation allowance.

Set aside the disallowance; treat the software maintenance charges as revenue expenditure and withdraw consequential depreciation allowed earlier.

Mandatory interest under section 234B - apportionment/recomputation on appellate effect - Whether interest under section 234B should be recomputed consequent to the appellate adjustments made by the Tribunal. - HELD THAT: - The Tribunal noted that levy of interest under section 234B is mandatory and directed the Assessing Officer to recompute the interest obligation after giving effect to the appellate order that altered taxable income. The Tribunal referred to settled law that such interest must be worked out in the light of the revised taxable income.

Direct the AO to recompute interest under section 234B after giving effect to this order.

Interpretation and application of Rule 34(5) of the Income tax Appellate Tribunal Rules - exclusion of lockdown period for pronouncement of orders - extraordinary circumstances doctrine in time limits - Whether the delay in pronouncing the Tribunal's order beyond 90 days was permissible on account of the COVID 19 lockdown and whether the lockdown period should be excluded for computing the 90 day limit under Rule 34(5). - HELD THAT: - The Tribunal considered precedent of a coordinate Bench which excluded the lockdown period from computation of the 90 day pronouncement limit under Rule 34(5), recognising the COVID 19 lockdown as an extraordinary circumstance and referring to broader judicial and executive orders treating the pandemic and related restrictions as necessitating extension of time limits. Applying that reasoning, the Tribunal concluded the delay was justified by extraordinary circumstances and the lockdown period is to be excluded for the purpose of the 90 day rule.

Delay in pronouncement is excused by extraordinary circumstances; the lockdown period is excluded for computing the 90 day limit under Rule 34(5).

Final Conclusion: The appeal for A.Y. 2007 08 is allowed in part: the disallowances relating to provisions for costs on completed contracts, provisions for cost overruns on incomplete contracts, the addition by treating excess progress billings as income under POC, and the recharacterisation of software maintenance charges as capital expenditure are set aside; the Assessing Officer is directed to recompute interest under section 234B in accordance with the appellate adjustments; the Tribunal's delay in pronouncement is held justified by exclusion of the pandemic lockdown period under Rule 34(5).

Deeming provision under section 56(2)(vii)(b) - Definition of "property" as capital asset in Explanation to section 56(2)(vii) - Interpretation of "immovable property" vis-a -vis "capital asset" - Reference to Valuation Officer under section 50C for disputed stamp duty value

Deeming provision under section 56(2)(vii)(b) - Definition of "property" as capital asset in Explanation to section 56(2)(vii) - Interpretation of "immovable property" vis-a -vis "capital asset" - Whether the deeming charge under section 56(2)(vii)(b) applies to immovable agricultural land which is not a capital asset - HELD THAT: - The Tribunal construed section 56(2)(vii)(b) together with the Explanation thereto and held that the term "property" in the Explanation is expressly defined as the specified capital assets of the assessee (including immovable property being land or building or both). Accordingly, where an immovable property is not a capital asset within the meaning of the definition, the deeming provisions of section 56(2)(vii)(b) cannot be invoked to tax the difference between stamp duty value and consideration as income from other sources. The Tribunal accepted the assessee's contention that the agricultural land purchased must be examined against the definition of capital asset in section 2(14) and that agricultural land excluded by that definition would not fall within the scope of section 56(2)(vii)(b). [Paras 19, 20]

If the agricultural land does not qualify as a capital asset, the addition under section 56(2)(vii)(b) cannot be sustained and the assessee is entitled to relief.

Reference to Valuation Officer under section 50C for disputed stamp duty value - Deeming provision under section 56(2)(vii)(b) - Procedure to be followed where the agricultural land is found to be a capital asset and the stamp duty value is disputed by the assessee - HELD THAT: - The Tribunal observed that where the Assessing Officer determines that the acquired agricultural land does fall within the definition of capital asset, the provisions of section 56(2)(vii)(b) would then become applicable. In that eventuality, because the assessee had objected to the stamp duty (DLC) valuation during assessment, the Assessing Officer is required to refer the valuation dispute to the Valuation Officer in terms of the mechanism applicable under section 50C and related provisions so as to determine the fair market value before computing any tax under section 56(2)(vii)(b). The Tribunal found that the AO had not considered the assessee's objection to the DLC value and accordingly directed further action. [Paras 21, 22]

If the AO finds the land to be a capital asset, he must refer the disputed stamp duty valuation to the Valuation Officer and decide the matter afresh after giving the assessee a reasonable opportunity.

Final Conclusion: The Tribunal set aside the matter to the Assessing Officer for the limited purposes of first determining whether the two plots of agricultural land qualify as capital assets; if not, the addition under section 56(2)(vii)(b) shall be disallowed, and if so, the AO shall refer the disputed stamp duty valuation to the Valuation Officer and decide the issue afresh after affording opportunity to the assessee; appeal allowed for statistical purposes.

Disallowance under section 14A - Rule 8D(2)(ii) - interest component - Rule 8D(2)(iii) - allocation of other expenses to exempt-earning investments - Computation of disallowance guided by investment value that actually fetched exempt income - Remand for recomputation

Disallowance under section 14A - Rule 8D(2)(ii) - interest component - Deletion of the disallowance computed under Rule 8D(2)(ii) in respect of interest where the investments were made out of the assessee's own funds. - HELD THAT: - The Tribunal accepted the assessee's unchallenged case-also accepted by the AO and the CIT(A)-that the share investments were made entirely out of her own funds. Applying Rule 8D(2)(ii) to levy a notional interest disallowance is therefore not sustainable in the facts of this case. The Tribunal directed the Assessing Officer to delete the disallowance relating to interest computed under Rule 8D(2)(ii). [Paras 3]

Disallowance computed under Rule 8D(2)(ii) in respect of interest deleted.

Rule 8D(2)(iii) - allocation of other expenses to exempt-earning investments - Computation of disallowance guided by investment value that actually fetched exempt income - Remand for recomputation - Recomputation of disallowance under Rule 8D(2)(iii) by taking into account only the value of those investments which actually yielded exempt dividend income during the year. - HELD THAT: - The Tribunal held that other expenses attributable to exempt income must be worked out with reference only to the value of investments which actually fetched exempt dividend income during the year, and not by reference to the entire investment portfolio. This conclusion was supported by the decision of the Hon'ble Kolkata High Court in REI Agro Ltd. The matter was remitted to the AO with a direction to recompute the disallowance under Rule 8D(2)(iii) accordingly. [Paras 3]

Disallowance under Rule 8D(2)(iii) to be recomputed by the AO taking into consideration only the value of investments that actually fetched exempt dividend income; matter remitted for computation.

Final Conclusion: The assessee's appeal is partly allowed: the interest-based disallowance under Rule 8D(2)(ii) is deleted, and the disallowance under Rule 8D(2)(iii) is remitted to the AO for recomputation confined to investments that actually produced exempt dividend income.

Refund of pre-deposit and security in accordance with law - time bound decision on refund claim - de freezing of bank account - release of seized goods subject to pending criminal proceedings and Code of Criminal Procedure - liberty to apply to trial court for release of property

Refund of pre-deposit and security in accordance with law - time bound decision on refund claim - Claim for refund of amounts deposited by the petitioners was to be decided by the respondent authorities in accordance with law within a stipulated time. - HELD THAT: - The respondents conceded that letters had been issued requesting certain documents. The petitioners undertook to produce the requisite documents. The Court directed the concerned respondent authorities to decide the petitioners' refund claims in accordance with law within four weeks from receipt of the order; if the petitioners fail to supply the demanded documents, the respondents shall nevertheless decide the claims in accordance with law. The direction imposes a time bound mandate for administrative decision without expressing a substantive finding on entitlement, leaving the decision to the statutory process and documentary compliance. [Paras 6, 7]

Respondents directed to decide the refund claims in accordance with law within four weeks of receipt of the order.

De freezing of bank account - Grievance regarding the de freezing of the petitioner's bank account did not survive as respondents had written to the bank for de freezing. - HELD THAT: - Counsel for respondents informed the Court that a communication had already been sent to the concerned bank for de freezing the account. On that basis the Court held that the challenge to the freezing of the account no longer subsisted and required no further intervention by the Court. [Paras 8]

Challenge to the freezing of the current account is rendered infructuous; respondents have already written to the bank for de freezing.

Release of seized goods subject to pending criminal proceedings and Code of Criminal Procedure - liberty to apply to trial court for release of property - Application for release of goods seized after search was not decided by this Court and petitioners were granted liberty to approach the trial court under the Code of Criminal Procedure for release; respondents will have no objection if the trial court orders release. - HELD THAT: - The goods had been seized earlier and remained in the custody of the petitioner's manager; an FIR is pending and criminal proceedings are pending in the trial court. The Court declined to order immediate release, instead granting the petitioners liberty to present a proper application under the Code of Criminal Procedure with averments and annexures; the trial court is to decide that application in accordance with law, rules and evidence on record. The Court recorded that, should the trial court allow release, the respondents have no objection to releasing the goods in accordance with law. [Paras 9, 10]

Liberty granted to petitioners to apply to the trial court under the Code of Criminal Procedure for release of seized goods; respondents will not object if the trial court permits release.

Final Conclusion: Writ petition allowed insofar as respondents are directed to decide the refund claims within four weeks; the challenge to the frozen bank account is rendered infructuous as respondents have communicated with the bank; release of seized goods is left to the trial court under criminal procedure, with liberty to the petitioners to move that Court and with respondents' undertaking of no objection if release is ordered.

Resignation of director takes effect from date notice received by company - disqualification under Section 164(2) of the Companies Act, 2013 - proviso to Section 168(2) - director liable for offences committed during tenure despite resignation - interim injunction restraining enforcement of DIN disqualification

Resignation of director takes effect from date notice received by company - proviso to Section 168(2) - director liable for offences committed during tenure despite resignation - Effectiveness of the petitioner's resignation dated 18th March, 2016 and its legal consequences under Section 168(2) of the Companies Act, 2013. - HELD THAT: - The Court accepted the petitioner's case that the resignation letter dated 18th March, 2016 operated immediately on that date because Section 168(2) provides that a director's resignation takes effect from the date on which the notice of resignation is received by the company or the date specified in the notice. The Court held that the subsequent communication from the company rejecting or refusing to accept the resignation did not prevent the resignation from taking effect. The proviso to Section 168(2), which preserves liability for offences committed during the tenure even after resignation, was noted but did not negate the immediate effectiveness of the resignation dated 18th March, 2016. The factual finding that the petitioner resigned on 18th March, 2016 and that he was not informed of any basis for disqualification led the Court to treat the resignation as effective from that date.

The resignation dated 18th March, 2016 took immediate effect on that date and the petitioner ceased to be a director from that date for the purpose of disqualification under Section 164(2).

Disqualification under Section 164(2) of the Companies Act, 2013 - interim injunction restraining enforcement of DIN disqualification - Whether the respondents may give effect to the impugned DIN status/disqualification of the petitioner which post-dates the effective resignation. - HELD THAT: - The Court observed that the impugned DIN status indicating disqualification was undated but, on the pleadings, fell between January and March 2020. Given the Court's conclusion that the petitioner's resignation was effective on 18th March, 2016 and noting that the petitioner had not been informed of the reasons for disqualification, the Court held that the petitioner was entitled to protection against the respondents acting on the impugned DIN status. The Court relied on analogous reasoning in a Division Bench order of the Delhi High Court where a resignation preceding disqualification led to quashing of the disqualification. In view of these findings, the Court granted injunctive relief preventing respondents from giving effect to the disqualification/DIN status or acting pursuant thereto.

Respondents are restrained from giving effect to the petitioner's disqualification/DIN status or acting in terms thereof; interlocutory relief granted.

Final Conclusion: Writ petition disposed by granting an injunction restraining the respondents from giving effect to the impugned DIN disqualification of the petitioner, the Court holding that the petitioner's resignation dated 18th March, 2016 took immediate effect and thus the disqualification could not be acted upon pending further proceedings; certified copies to be made available on compliance.

Remand for fresh consideration - equal treatment under an amnesty scheme - opportunity of hearing - implementation of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - designated committee's adjudicatory power under the scheme

Remand for fresh consideration - equal treatment under an amnesty scheme - opportunity of hearing - Validity of rejection of the petitioner's SVLDRS declaration (ARN LD2112190002384 dated 21.12.2019) and direction on further proceedings - HELD THAT: - The court set aside the impugned rejection of the petitioner's declaration under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and remanded the matter to the competent authorities for reconsideration. The petitioner had filed two declarations under the Scheme in respect of Oct'14 to Mar'15 and April'2015 to September'2016; one declaration had been accepted after personal hearing while the other was rejected by the Designated Committee as an "Incorrect Declaration with respect to pre-deposit." Having regard to a Coordinate Bench order in WP (C) No. 2149/2020 and the petitioners' contention of inconsistent treatment, the court directed the authorities to reconsider the rejected application in terms of the Scheme and the rules framed thereunder and, if necessary, permit the petitioner to file a fresh declaration. The court required the authorities to pass appropriate orders on the declaration within two months from receipt of the certified copy of the order, thereby restoring the petitioner's right to be heard and ensuring reconsideration consistent with the Scheme.

Impugned rejection set aside; matter remanded to authorities to reconsider the declaration (ARN LD2112190002384) in terms of the Scheme and rules, with liberty to file a fresh declaration and a direction to decide within two months.

Final Conclusion: The writ petition is disposed of by setting aside the rejection dated 21.12.2019 and remanding the declaration for fresh consideration in accordance with the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and the rules framed thereunder; the authorities are directed to decide the matter within two months from receipt of certified copy.

Sale or rendition of service - principal-to-principal sale - agency or sales-promotion service - chargeability of distributor's margin to service tax - double taxation - Business Auxiliary Service

Sale or rendition of service - principal-to-principal sale - Business Auxiliary Service - double taxation - Distributor's margin on resale of BSNL cellular products is not exigible to service tax as Business Auxiliary Service where transactions are sales on principal-to-principal basis and BSNL has already discharged service tax. - HELD THAT: - The Tribunal found that the contractual and commercial relationship between the appellant and BSNL was that of buyer and seller and involved resale of cellular products purchased at wholesale rates and sold at retail rates. Applying the reasoning in the cited decisions, the transactions do not constitute agency or sales-promotion services but are pure trading activity between principals. Since BSNL had discharged service tax on the cellular products (the basic price inclusive of the distributor's margin), treating the distributor's margin as chargeable to service tax under Business Auxiliary Service would result in double taxation. On this basis the adjudication and appellate orders holding the distributor's margin taxable were set aside.

Impugned orders set aside and appeals allowed; demanded service tax on distributor's margin quashed for the stated periods.

Final Conclusion: The Tribunal allowed the appeals, holding that resale of BSNL cellular products by the distributor on principal-to-principal basis is a sale (not a taxable service) and that imposing service tax on the distributor's margin where BSNL has already paid service tax would amount to double taxation; the impugned orders were set aside for the periods July, 2003 to November, 2004 and December, 2004 to July, 2005.

Remand for fresh consideration - rectification of declaration under an amnesty scheme - Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - incorrect declaration - supervisory writ jurisdiction to remit for fresh decision

Remand for fresh consideration - rectification of declaration under an amnesty scheme - incorrect declaration - Impugned orders rejecting the petitioner's declarations under the Sabka Vishwas Scheme were set aside and the matter remanded to the authorities for fresh consideration of the declaration filed on 14.01.2020 (ARN LD1401200000978). - HELD THAT: - The Court, recording the parties' concordant submission and having regard to a coordinate Bench's earlier order which remanded a similar matter, set aside the orders dated 07.12.2019 and 14.01.2020 that had rejected the petitioner's submissions as 'Incorrect Declaration' and on the ground that an earlier application had been disposed of. The matter is remitted to the competent authorities to reconsider the declaration filed on 14.01.2020 in accordance with the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 and the rules framed thereunder. The Court directed that if the authorities require a fresh declaration, the petitioner shall be permitted to file one, and mandated that the authorities pass appropriate orders on the declaration/application within two months from receipt of the certified copy of the order.

Impugned orders set aside; matter remanded for fresh consideration of ARN LD1401200000978 with liberty to file a fresh declaration if required and direction to decide within two months.

Final Conclusion: The writ petition is disposed of by setting aside the impugned orders and remitting the petitioner's declaration filed on 14.01.2020 for fresh consideration under the Sabka Vishwas Scheme, with liberty to file a fresh declaration if needed and a direction to decide the matter within two months.

Cenvat credit - admissibility of credit based on receipt of goods - proof of receipt by production of transport documents and bank payments - defective investigation and procedural fairness - benefit of doubt - role of DGCEI investigation in denial of credit

Cenvat credit - admissibility of credit based on receipt of goods - proof of receipt by production of transport documents and bank payments - Cenvat credit was allowable to the appellants on the basis that they had received the goods against invoices and evidenced payment, despite the Department's contention that only cenvatable invoices were received. - HELD THAT: - The Tribunal found on the record that the appellants produced invoices issued by M/s. Unnati Alloys Pvt. Ltd., made payments by account payee cheque and asserted receipt of goods transported through identified carriers. In the case of one similar recipient (M/s. Cosmo Zincox Industries) the vehicles mentioned in the GRs were shown to be capable of transportation, supporting receipt. Applying these factual findings, the Tribunal concluded that the appellants had received goods for use in manufacture and were therefore entitled to the Cenvat credit claimed. The appellate order denying credit on the ground that only invoices were received was set aside and credit was allowed. [Paras 3, 5, 6]

Cenvat credit allowed to the appellants as they had received the goods and discharged evidentiary burden by production of invoices, payment proof and transport particulars; impugned order denying credit set aside.

Defective investigation and procedural fairness - role of DGCEI investigation in denial of credit - benefit of doubt - The denial of credit was vitiated by defects in the investigative process and, on that basis, benefit of doubt was given to the appellants. - HELD THAT: - The Tribunal observed that the DGCEI's investigation implicated the appellants based on statements attributed to Shri Amit Gupta, but Shri Amit Gupta was neither made a party to the show cause notices nor was he cross-examined. Further, the transporters implicated were not examined or made parties to the proceedings. These lacunae rendered the investigation and the consequent adjudication improper. In view of these procedural defects and the appellants' supporting material, the Tribunal applied the principle of benefit of doubt in favour of the appellants and held that show cause notices against them were not required. [Paras 3, 5]

Findings based on the DGCEI investigation were held to be unreliable due to procedural defects; benefit of doubt awarded to appellants and the show cause notices held unnecessary.

Final Conclusion: The appeals are allowed; the impugned order denying Cenvat credit is set aside and credit is granted to the appellants, with consequential relief as applicable.

Power to withhold issuance of Declaration Form 'C' under Rule 5(4)(ii) of the Central Sales Tax (Delhi) Rules - requirement of an opportunity of hearing before withholding statutory declarations - necessity of a reasoned order to withhold statutory forms - access to and procurement of Forms C and F under Sections 6 and 6A of the Central Sales Tax Act, 1956 - withholding of statutory forms for default in payment or pending assessment

Power to withhold issuance of Declaration Form 'C' under Rule 5(4)(ii) of the Central Sales Tax (Delhi) Rules - requirement of an opportunity of hearing before withholding statutory declarations - necessity of a reasoned order to withhold statutory forms - Whether the Commissioner is empowered to withhold issuance of Declaration Form C and on what procedural conditions such power can be exercised. - HELD THAT: - The Court held that Rule 5(4)(ii) confers upon the Commissioner the authority to withhold issuance of Declaration Form 'C' where the applicant has defaulted in payment of tax, penalty or related orders, but such withholding can be exercised only after the applicant is afforded an opportunity of being heard and the Commissioner records reasons in writing. The determinative legal principle is that administrative power to withhold a statutory declaration is permissible only when exercised in accordance with the procedural safeguards expressly prescribed by the rule: hearing and a reasoned order. [Paras 10]

Rule 5(4)(ii) authorises withholding of Form C but only after affording a hearing and recording reasons in writing.

Access to and procurement of Forms C and F under Sections 6 and 6A of the Central Sales Tax Act, 1956 - withholding of statutory forms for default in payment or pending assessment - necessity of a reasoned order to withhold statutory forms - Whether the respondent could lawfully block the portal and withhold access to Forms C and F in the petitioner's case in the absence of any order under Rule 5(4)(ii). - HELD THAT: - Applying the rule's procedural requirements to the facts, the Court observed that no order has been passed under Rule 5(4)(ii) in the petitioner's case. Although a notice under the DVAT Act had been issued, the statutory precondition for withholding-namely a reasoned order after hearing-was not satisfied. Consequently, the Commissioner had no basis to withhold issuance of Form C or to keep the portal blocked. The Court therefore directed immediate unblocking to enable procurement of Forms C and F under Sections 6 and 6A of the CST Act. [Paras 12, 13]

In the absence of a reasoned order passed after affording a hearing under Rule 5(4)(ii), the portal must be unblocked and the petitioner allowed access to Form C and Form F.

Final Conclusion: Writ petition allowed; direction issued to the Commissioner, Delhi VAT, to unblock the portal forthwith and enable the petitioner to access and procure Forms C and F under Sections 6 and 6A of the CST Act, the withholding power under Rule 5(4)(ii) being exercisable only after a hearing and a reasoned order.