TaxTMI Updates e-Newsletter
Jul 11,2020

Urban planning including town planning - Planning of land-use and construction of buildings - Functions entrusted to a Municipality under Article 243W (Twelfth Schedule) - Pure services provided to a local authority - Exemption under Notification No. 12/2017 - Entry No. 3 (pure services to Government or local authority in relation to functions entrusted under Article 243W)

Urban planning including town planning - Planning of land-use and construction of buildings - Functions entrusted to a Municipality under Article 243W (Twelfth Schedule) - Services provided by the applicant fall within Clause 1 and Clause 2 of the Twelfth Schedule (Article 243W) as functions entrusted to a municipality - HELD THAT: - The Authority examined the applicant's mapping, property identification, customised property surveys, property tax assessment and document-management activities. Those activities were found to assist Municipal Corporations and Councils in town and urban planning and in planning of land-use and construction of buildings. On that basis the Authority concluded that the applicant's services are in relation to the functions listed at Clauses 1 and 2 of the Twelfth Schedule (Article 243W) and thus constitute activities entrusted to a municipality. [Paras 5]

Answered in the affirmative

Pure services provided to a local authority - Exemption under Notification No. 12/2017 - Entry No. 3 - Supply of services (no supply of goods) - Applicant's supplies qualify as exempt under Entry No. 3 of Notification No. 12/2017 as pure services provided to a local authority in relation to functions entrusted to a municipality - HELD THAT: - The Authority found that the applicant renders pure services without supply of goods to Municipal Corporations and Councils. Given that those services relate to functions entrusted to municipalities under Article 243W and that Notification No. 12/2017 extends exemption to pure services provided to the Central/State/Union Territory or local authority in relation to such functions, the applicant's services fall within the scope of Entry No. 3 of the Notification and are exempt from GST. [Paras 5]

Answered in the affirmative

Final Conclusion: The Advance Ruling holds that the applicant's mapping and related services constitute activities falling under Clauses 1 and 2 of the Twelfth Schedule (Article 243W) and, being pure services supplied to Municipal Corporations and Councils in relation to those functions, are exempt under Entry No. 3 of Notification No. 12/2017.

Advance ruling - jurisdiction of the Authority for Advance Ruling - scope of Section 95 and Section 97(2) of the CGST Act - maintainability of application for advance ruling - third party questions not permissible in advance ruling - questions outside the matters specified in Section 97(2)

Third party questions not permissible in advance ruling - scope of Section 95 of the CGST Act - Whether the applicant's question as to whether its dealers are required to reverse input tax credit proportionate to reduction in value of supply is answerable by the Authority. - HELD THAT: - The Authority examined the ambit of advance ruling under Chapter XVII and the definition and scope provided by Section 95. The question posed relates to the entitlements and obligations of the applicant's dealers (third parties) and not to the supply or proposed supply by the applicant itself. Section 95 limits the Authority to giving rulings in relation to matters concerning the applicant's own supplies. Consequently, a question pertaining to whether dealers must reverse input tax credit falls outside the Authority's purview and cannot be entertained in an advance ruling application filed by the supplier. [Paras 5]

Question not answerable by the Authority as it pertains to dealers (third parties) and is outside the scope of Section 95; not maintainable.

Questions outside the matters specified in Section 97(2) - maintainability of application for advance ruling - Whether the applicant can issue commercial credit notes to its dealers for post sale discounts without charging GST is a matter on which the Authority can grant an advance ruling. - HELD THAT: - The Authority considered the list of matters for which an advance ruling may be sought as set out in Section 97(2), which includes classification, applicability of notifications, determination of time and value of supply, admissibility of input tax credit, determination of liability to pay tax, registration questions and whether an activity amounts to a supply. The applicant's question seeks to permit a procedural practice (issuing commercial credit notes without charging GST) and does not fall within any of the specific categories enumerated in Section 97(2). Therefore the question is not one on which this Authority can pronounce an advance ruling and is beyond its jurisdiction under the GST Act. [Paras 5]

Question is outside the matters specified in Section 97(2) and thus the Authority has no jurisdiction to answer it; not maintainable.

Final Conclusion: The application for advance ruling is rejected as not maintainable: the first question concerns third party dealers and falls outside the Authority's jurisdiction under Section 95, and the second question is procedural and does not fall within the categories of matters eligible for advance ruling under Section 97(2).

Advance ruling - time of supply - transitional provisions - upward revision of price (Section 142(2)(a)) - services completed pre-GST not taxable under GST (Section 142(11)(b)) - maintainability of application under Section 95

Advance ruling - maintainability of application under Section 95 - time of supply - transitional provisions - Liability to pay GST in respect of Tax Invoice No. 001 dated 25/06/2018 (R.A. Bill No. 22) for work completed prior to the appointed day. - HELD THAT: - The Authority found that the civil and interior work was completed on 31/01/2016 (pre-GST) and the invoice dated 25/06/2018 relates to amounts payable under the original contract. Section 142(2)(a) applies only where there is an upward revision of price in pursuance of a contract entered into prior to the appointed day; here the billed amount is not an upward revision but payment in pursuance of the original contract. Time of supply provisions do not convert the activity into a supply 'being undertaken or proposed to be undertaken' after the appointed day. Consequently the activity for which RA Bill No.22 was raised does not fall within matters on which an advance ruling may be given under Section 95, and the question is non-maintainable before this Authority. [Paras 5]

The question is non-maintainable.

Advance ruling - time of supply - maintainability of application under Section 95 - Rate of GST applicable if the Authority were to hold GST liability in respect of Tax Invoice No. 001 dated 25/06/2018. - HELD THAT: - As the Authority has held the primary question of liability to be non-maintainable because the invoice pertains to pre-GST completed services and not to any upward revision in contract value, the question on the rate is not taken up for consideration and is not answered. [Paras 5]

The question is non-maintainable.

Transitional provisions - upward revision of price (Section 142(2)(a)) - services completed pre-GST not taxable under GST (Section 142(11)(b)) - maintainability of application under Section 95 - Liability to pay GST on proposed reimbursement of Rs. 1,92,50,247/- for operational site expenses and rectification of water damages. - HELD THAT: - The Authority concluded that the additional claim relates to services rendered and completed during the pre-GST/service tax regime and, on the materials and submissions, does not represent an upward revision of the original contract value. The amount was an independent claim for services performed pre-GST, disputed by ONGC and later accepted by the O.E.C.; it therefore does not constitute a supply 'being undertaken or proposed to be undertaken' after the appointed day for the purposes of advance ruling jurisdiction under Section 95. Accordingly the question falls outside the remit of this Authority. [Paras 5]

The question is non-maintainable.

Transitional provisions - rate of tax - maintainability of application under Section 95 - Rate of GST applicable on the proposed reimbursement of Rs. 1,92,50,247/- if GST were held payable. - HELD THAT: - Having held that the question of liability itself is non-maintainable because the amounts relate to services completed before the appointed day and are not upward revisions of the contract value, the Authority did not consider or decide the applicable rate of tax and therefore does not answer this question. [Paras 5]

The question is non-maintainable.

Final Conclusion: All four questions raised by the applicant are non-maintainable before this Authority: the amounts claimed relate to services completed prior to the appointed day and the invoices do not represent upward revision of contract price within the meaning of the transitional provisions; accordingly the Authority declines to answer the questions on liability and applicable rate.

Addition u/s 14A r/w Rule 8D - Tribunal held that no investment is made by the assessee in shares and securities (Mutual funds) out of interest bearing funds - no substantial question of law as held by HC [2016 (12) TMI 1828 - BOMBAY HIGH COURT] - HELD THAT:- Revenue, Ministry of Finance vide F. No. 390/Misc./116/2017-JC dated 22-8-2019, seeks permission to withdraw this Special Leave Petition along with pending applications therein due to low tax effect.

Permission granted, subject to just exceptions. The special leave petition and pending applications dismissed as withdrawn, leaving question of law open.

Refund of excess TDS - TRACES portal functionality - manual refund procedure through CPC-TDS - non-refund contravening Section 200A and Rule 31A(3A)

Refund of excess TDS - TRACES portal functionality - manual refund procedure through CPC-TDS - non-refund contravening Section 200A and Rule 31A(3A) - Remedy for petitioner's inability to obtain refund of excess TDS due to TRACES portal showing 'Maximum Refund Allowed' as nil and availability of an alternative procedure for refund. - HELD THAT: - The Court recorded that the TRACES portal did not show the excessive TDS amount under the 'Maximum Refund Allowed' field, while it appeared under 'Remaining Available Balance', preventing the petitioner from placing an online refund claim. The respondents placed on record a temporary, established procedure by CPC-TDS whereby the deductor approaches the jurisdictional TDS Assessing Officer, who forwards the grievance to CPC-TDS; CPC-TDS advises the deductor to select the option "Refund due to Appeal effect" to generate an online refund request (even with zero amount) producing a request number; the jurisdictional Assessing Officer confirms the request number to CPC-TDS, enhances the refund amount from zero to the challan-available amount and uploads supporting documents, and upon approval by the competent authority the refund is processed online. The Court directed the petitioner to follow this procedure forthwith and provided a conditional time-bound mandate: if the petitioner follows the procedure within two days, the respondents must decide the petitioner's request within four weeks thereafter. The Court did not order systemic changes to the TRACES portal in this order but implemented the available temporary remedy and directed adjudication within the specified timeline. [Paras 5, 6]

Petitioner to follow the CPC-TDS temporary manual refund procedure immediately; if followed within two days, respondents to decide the refund request within four weeks; writ petition disposed accordingly.

Final Conclusion: Writ petition disposed of by directing petitioner to follow the recorded CPC-TDS temporary manual procedure for refund of excess TDS and, upon compliance within two days, directing the respondents to decide the refund request within four weeks; no order was made for systemic portal changes in this judgment.

Disallowance under Section 14A - expenditure in relation to exempt income - reasonableness of estimation of disallowance - substantial question of law under Section 260A

Disallowance under Section 14A - reasonableness of estimation of disallowance - expenditure in relation to exempt income - Validity of the Tribunal's determination that Rs. Two Lakhs was a just and reasonable disallowance under Section 14A. - HELD THAT: - The Tribunal found that the assessee had an investment portfolio of Rs.50.86 crores, investments were from own non-interest-bearing funds, and that some amount must have been spent in managing the portfolio; while the CIT(A) had estimated Rs.10 lakhs as disallowance, the Tribunal reduced the disallowance to Rs.2 lakhs as just and reasonable in the facts of the case. The High Court examined the Tribunal's reasoning recorded in paragraph 6 and held there was no perversity in the conclusion. The Court observed that the extent of disallowance under Section 14A depends upon the income earned, expenditure in earning such income and the extent of exemption claimed; having considered the material and the Tribunal's assessment, the court found no substantial question of law warranting interference under Section 260A. [Paras 5, 6]

Tribunal's reduction of disallowance to Rs. Two Lakhs under Section 14A upheld; no substantial question of law arises and the Revenue's appeal is dismissed.

Final Conclusion: The High Court declined to entertain the appeal under Section 260A, upholding the Tribunal's conclusion that Rs. Two Lakhs was a just and reasonable disallowance under Section 14A and dismissing the Revenue's appeal.

Validity of High Court sanctioned scheme of amalgamation - Effect of amalgamation on carry forward losses and set off - Applicability of General Anti Avoidance Rule and piercing the corporate veil - Computation of period of holding for capital gains - meaning of "held" vs "owned" - Determination of annual value of let out property under Section 23 - Disallowance under Section 14A and Rule 8D - Deductibility of premium on redemption of Foreign Currency Convertible Bonds on a pro rata basis - Set off of unabsorbed depreciation from earlier assessment years

Validity of High Court sanctioned scheme of amalgamation - Effect of amalgamation on carry forward losses and set off - Scheme of amalgamation sanctioned by the High Court is binding and carry forward losses of the transferor company vest in the transferee for set off. - HELD THAT: - The Tribunal held that the scheme of amalgamation, having been sanctioned by the High Court with appointed date 1.4.2010, is binding on revenue and the parties; the scheme expressly treats post appointed date income and losses of the transferor as those of the transferee. The revenue did not file an appeal under the Companies Act against the sanction and had the opportunity to object before the High Court; doctrines of res judicata, acquiescence and estoppel preclude reopening the scheme in these proceedings. Consequently the accumulated losses of the transferor belong to the amalgamated company and are available for set off under the relevant income tax provisions, and the Assessing Officer was directed to allow such set off (both for normal tax and MAT) in accordance with the sanctioned scheme and the High Court order. [Paras 11, 13]

The High Court sanctioned amalgamation must be given effect to; the carry forward losses of Gupta & Syal Ltd. vest in JCT Ltd. and set off is to be allowed.

Applicability of General Anti Avoidance Rule and piercing the corporate veil - Invocation of GAAR and piercing the corporate veil by the CIT(A) in respect of a High Court approved amalgamation for the impugned year was not permissible; the CIT(A)'s finding that the merger was a colourable device was rejected. - HELD THAT: - The Tribunal observed that GAAR provisions were not applicable to the assessment year in question and that the CIT(A) could not disregard the High Court's sanction by invoking future GAAR provisions or by mechanically piercing the corporate veil. The CIT(A)'s conclusion that the merger was a sham lacked factual and legal foundation in light of the court approved scheme and the absence of any challenge to it by revenue under the Companies Act; accordingly the CIT(A)'s approach was set aside. [Paras 12]

The CIT(A)'s invocation of GAAR and piercing the veil to treat the amalgamation as a colourable device is disapproved.

Computation of period of holding for capital gains - meaning of "held" vs "owned" - For purposes of classification as short term or long term capital asset, the relevant statutory test is the period the asset was "held" by the assessee (not the date of change of title), and on the facts the asset qualified as long term. - HELD THAT: - Relying on Section 2(42A) (definition of short term capital asset) and precedents, the Tribunal endorsed the view that the expression 'held by the assessee' governs the holding period computation. The leasehold rights were held by the transferor since 1966 and, on the scheme's appointed date, such holding continued; conversion of leasehold to freehold in 2010 by payment of conversion charges did not reset the holding period so as to make the gain short term. The Assessing Officer's approach of treating ownership change on conversion as the relevant date was therefore rejected. [Paras 22, 23]

Capital gain on the sale is to be computed as long term capital gain by reckoning holding from the year 1966.

Determination of annual value of let out property under Section 23 - Where the property is actually let out, the gross annual value must be reckoned on the actual rent received; the Assessing Officer's arbitrary multiple of actual rent was not sustainable. - HELD THAT: - The Tribunal applied authority holding that Section 23(1)(a) operates as a deeming provision for vacant property and that in the case of genuinely let out property the actual rent received is the appropriate annual value. The Assessing Officer's computation of annual value by multiplying the present token rent by 15 was found to be an impermissible imputation of notional income; following precedent, the addition was deleted. [Paras 15, 18]

The gross annual value is to be taken as the actual rent received; the addition made by the AO is deleted.

Disallowance under Section 14A and Rule 8D - Disallowance under Section 14A was restricted to the amount computed under clause (iii) of Rule 8D after deleting the clause (ii) computation where no borrowed funds attributable to investments were shown. - HELD THAT: - On perusal of the balance sheet and investment schedule, the Tribunal agreed with the CIT(A)'s finding that surplus/unborrowed funds financed the investments and that interest expenses were directly related to the business; hence the presumption of expenditure attributable to exempt income under Rule 8D(ii) did not apply. The Tribunal upheld the limited disallowance computed under Rule 8D(iii) as reasonable, consistent with case law on attribution of interest to investments. [Paras 24, 25]

Disallowance under Section 14A is limited to the Rule 8D(iii) amount; deletion of the Rule 8D(ii) component is upheld.

Deductibility of premium on redemption of Foreign Currency Convertible Bonds on a pro rata basis - Premium payable on redemption of FCCBs is deductible on a pro rata basis over the life of the bonds. - HELD THAT: - Following Tribunal and judicial precedents, the Tribunal accepted that premium on FCCBs is not a contingent liability and accrues over time; it treated such premium as akin to interest/borrowing cost deductible under Section 37(1) on a time proportionate basis. The CIT(A)'s allowance of the premium over the bond period was therefore affirmed. [Paras 26, 28]

Deduction for redemption premium on FCCBs is allowable on a pro rata (time proportionate) basis.

Set off of unabsorbed depreciation from earlier assessment years - Set off of unabsorbed depreciation for earlier assessment years (A.Y. 1996 97 and A.Y. 1997 98) in favour of the assessee was upheld. - HELD THAT: - The Tribunal followed its earlier decision in the assessee's own case and sustained the CIT(A)'s acceptance of set off of unabsorbed depreciation from the specified earlier years. The Revenue's ground challenging that set off was dismissed consistent with the prior adjudication. [Paras 31]

The CIT(A)'s allowance of set off of unabsorbed depreciation for A.Y. 1996 97 and A.Y. 1997 98 is upheld.

Final Conclusion: The Tribunal allowed the assessee's appeal and dismissed the revenue's appeal for AY 2011 12: the High Court sanctioned amalgamation must be respected and carry forward losses of the transferor are available for set off (including for MAT); GAAR and piercing veil reasoning invoked by the CIT(A) was rejected; the capital gain is long term by reference to when the asset was 'held'; the house property addition was deleted; Section 14A disallowance was restricted as upheld; premium on FCCBs is allowable pro rata; and earlier years' unabsorbed depreciation set off was sustained. The Assessing Officer is directed to give effect to these conclusions.

Addition as unexplained cash credit under section 68 of the Income-tax Act - restriction of addition to peak credit in undisclosed bank accounts - application of disclosed gross profit rate to undisclosed receipts - treatment of undisclosed bank deposits as business receipts from grocery trade

Addition as unexplained cash credit under section 68 of the Income-tax Act - restriction of addition to peak credit in undisclosed bank accounts - application of disclosed gross profit rate to undisclosed receipts - treatment of undisclosed bank deposits as business receipts from grocery trade - Whether the entire deposits in two undisclosed bank accounts could be treated as unexplained cash credit and added to the assessee's income, or the addition should be limited to combined peak credit and trading profit computed at the disclosed gross profit rate. - HELD THAT: - The Tribunal found that two undisclosed bank accounts showed regular deposits and withdrawals and there was no material before the AO to show utilization of withdrawals for purposes other than the assessee's grocery business. The Tribunal accepted the assessee's position that the undisclosed deposits arose from business receipts of the grocery trade and noted the disclosed gross profit rate of 8.81% for the regular business. Applying the principles in earlier decisions relied upon by the parties, the Tribunal held that the Assessing Officer was not justified in adding the entire deposits as unexplained income. Instead, the Tribunal directed that (i) the combined peak credit of the two undisclosed bank accounts be treated as the element of undisclosed investment and added to income, and (ii) the trading profit attributable to the undisclosed receipts be computed by applying the disclosed gross profit rate of 8.81% to the total deposits. On that basis the Tribunal sustained combined peak credit of the two accounts and the gross profit element, and deleted the remaining addition made by the AO/CIT(A). [Paras 10, 11]

Addition reduced: sustained combined peak credit of the two undisclosed bank accounts and sustained trading profit computed at disclosed GP rate (8.81%) on total deposits; entire deposits were not charged as unexplained income.

Final Conclusion: Appeal partly allowed: the Tribunal restricted the addition made under section 68 to the combined peak credit of the two undisclosed bank accounts and to trading profit computed at the disclosed gross profit rate, deleting the balance of the addition.

Deduction under Section 80P(2)(a)(i) of the Income-tax Act - operation of Section 80P(4) and enquiry by Assessing Officer into eligibility - preclusive effect of registration certificate of primary agricultural credit society - each assessment year to be considered separately

Deduction under Section 80P(2)(a)(i) of the Income-tax Act - operation of Section 80P(4) and enquiry by Assessing Officer into eligibility - preclusive effect of registration certificate of primary agricultural credit society - each assessment year to be considered separately - Whether the denial of deduction under Section 80P(2)(a)(i) by the Assessing Officer and confirmed by the CIT(A) was justified, and what procedure should be followed to determine eligibility in light of conflicting High Court decisions. - HELD THAT: - The Tribunal noted the conflict between earlier Division Bench authority which treated the Registrar's classification as conclusively establishing eligibility and the Full Bench decision in The Mavilayi Service Co-operative Bank Ltd. v. CIT which held that, after insertion of sub-section (4) of Section 80P, the Assessing Officer must inquire into the factual activities of the society to determine entitlement. Applying the Larger Bench's dictum, the Tribunal found that in the present cases the Assessing Officers had concluded that agricultural credit was only minuscule but had not undertaken a sufficiently detailed examination of the purpose of individual loan disbursements or the extent of disbursements to non-members. The Tribunal held that loan extracts and audit narration alone were not conclusive and that the Assessing Officer must examine each disbursement to ascertain whether it was for agricultural purposes and whether loans were made to non-members, treating each assessment year separately. Consequently the Tribunal restored the issue to the Assessing Officer for fresh examination in conformity with the Full Bench ruling, directing cooperation by the assessees and cautioning against unnecessary adjournments. [Paras 7]

Matter remitted to the Assessing Officer to examine, year wise and loan wise, the nature and purpose of disbursements and any lending to non members and to decide entitlement to deduction under Section 80P(2)(a)(i) in accordance with the Full Bench judgment in Mavilayi; appeals allowed for statistical purposes and stay applications dismissed as infructuous.

Final Conclusion: The Tribunal set aside the confirmation of disallowance for adjudicatory reconsideration: the issue of entitlement to deduction under Section 80P(2)(a)(i) is remitted to the Assessing Officer for fresh, year wise factual enquiry into the nature and recipients of loan disbursements in accordance with the Full Bench decision in Mavilayi; the appeals are allowed for statistical purposes and the stay applications are dismissed as infructuous.

Exemption under section 54 for long-term capital gains on sale of residential house - Investment of capital gains from multiple residential houses in a single new residential house - Qualification of asset as residential house for section 54 - Timing requirement for purchase/construction to claim section 54 exemption

Exemption under section 54 for long-term capital gains on sale of residential house - Investment of capital gains from multiple residential houses in a single new residential house - Qualification of asset as residential house for section 54 - Whether the assessee is entitled to exemption under section 54 in respect of capital gains arising from sale of two residential flats (converted into one residential unit) where the sale proceeds were invested in one residential flat within the prescribed period. - HELD THAT: - The Tribunal found on the facts that the assessee had modified two separate flats into one residential unit, sold both flats by two separate registered sale deeds and purchased another residential flat within the prescribed time. Relying on earlier decisions of the Mumbai Bench of the Tribunal, the Court accepted the principle that section 54 does not restrict the number of residential houses sold; the statutory requirement is that capital gain arising from sale of a residential house be invested in a residential house within the prescribed period. The Tribunal noted that while there is an inbuilt restriction that gain from sale of one residential house should not be split to invest in more than one new house, there is no bar on aggregating gains from sale of more than one residential house and investing them in a single new residential house, provided other conditions of section 54 (including timing) are satisfied. Applying that principle to the admitted facts - two flats treated as one residential house for use, sale by separate deeds, and timely purchase of the new flat - the Tribunal held that the Assessing Officer's view requiring a one-to-one correspondence between each sold property and a purchased property was not correct and directed that exemption under section 54 be allowed after verification of compliance with the time limits. [Paras 7, 8]

Addition made by AO on account of denial of exemption under section 54 is set aside and the capital gains exemption under section 54 is allowed in respect of the sales, subject to verification of compliance with the prescribed time limits.

Final Conclusion: Appeal partly allowed; the addition disallowing exemption under section 54 has been deleted and the assessee's claim for exemption is allowed subject to verification of compliance with timing conditions.

Accrual of income - Business income versus capital receipt - Part performance under section 53A and definition of transfer under section 2(47)(v) - Estimation of income by appellate authority - Disallowance under section 40A(3) - Exclusion of lockdown period in computation of time under Rule 34(5) for pronouncement of orders

Business income versus capital receipt - Part performance under section 53A and definition of transfer under section 2(47)(v) - Whether the transfer of development rights amounted to a transfer of a capital asset under Sec.2(47)(v)/section 53A or constituted business income - HELD THAT: - The Tribunal upheld the conclusion that the development rights were held as business assets and the income earned from the joint venture was assessable as business income. The Appellate Tribunal agreed with the CIT(A) that Sec.2(47)(v) and the part-performance concept under section 53A (which operate in the definition of 'transfer' for capital assets) were not applicable because the assessee assessed the receipts as business income and the rights in question were business assets. The Tribunal relied on the terms of the joint venture agreement, the nature of the assessee's activities (civil contractor performing phased obligations) and the fact that receipts were treated and offered to tax in the hands of the assessee as business receipts in different years. On that basis the AO's characterisation of the entire consideration as a capital transfer was held incorrect. [Paras 3, 4]

The transaction is taxable as business income; Sec.2(47)(v)/section 53A do not apply for treating the receipt as a capital transfer.

Accrual of income - Estimation of income by appellate authority - Whether the entire agreed consideration accrued to the assessee in AY 2009-10 or only part thereof, and quantum to be taxed for that year - HELD THAT: - On examining the Joint Venture Agreement clauses and contemporaneous facts, the Tribunal agreed with the CIT(A)'s finding that only the initial stage payment became due and accrued on execution, while the balance consideration was conditional on performance of obligations (obtaining LOI/LOA, vacating slum dwellers, other specified acts) and therefore did not vest as an enforceable right in the assessee in the assessment year. The Tribunal also noted that substantial payments were in fact received and offered to tax in subsequent years, consistent with the conditional and phased nature of the consideration. Having accepted that only part consideration accrued in the relevant year, the Tribunal upheld the CIT(A)'s approach of estimating income from the amount actually accrued/received for that year. [Paras 3, 4]

Only the part-payment receivable on execution accrued in AY 2009-10; the balance was conditional and did not accrue in that year.

Estimation of income by appellate authority - Disallowance under section 40A(3) - Whether the CIT(A)'s estimate of income at 10% of the amount received in the year was justified and whether disallowance under section 40A(3) would still be warranted after such estimation - HELD THAT: - The Tribunal accepted the CIT(A)'s exercise of estimating the assessee's income at 10% of the gross receipts actually received in the year (10% of the initial payment) as a fair and pragmatic measure in the light of the nature of the contract, the phased performance obligations and the material on record (including payments received over subsequent years). The Tribunal observed that the assessee's account particulars and the replies from the joint-venture partner supported the phased receipts and the performance-linked payment structure. Once the Appellate Authority arrived at a just estimate of income for the year, the Tribunal held that no separate disallowance under section 40A(3) needed to be sustained in addition to that estimated assessment, and therefore confirmed the CIT(A)'s direction to restrict the addition to the estimated income and to delete the balance addition and not to uphold further 40A(3) disallowance. [Paras 4]

CIT(A)'s estimate of income at 10% of the gross receipts for the year is sustained; no additional disallowance under section 40A(3) to be imposed once income is so estimated.

Exclusion of lockdown period in computation of time under Rule 34(5) for pronouncement of orders - Whether the delay in pronouncement of the Tribunal's order beyond the 90-day period under Rule 34(5) is justified by exclusion of the COVID-19 lockdown period - HELD THAT: - The Tribunal recorded exceptional circumstances occasioned by the COVID-19 pandemic and the nationwide lockdown, referred to contemporaneous judicial directions and notifications, and applied a pragmatic interpretation of Rule 34(5) by excluding the lockdown period from the computation of the 90-day limit for pronouncement of orders. Relying on co-ordinate bench reasoning and relevant high court and supreme court orders recognizing disruption caused by the pandemic, the Tribunal held that the lockdown period is extraordinary and may be excluded when computing the time limit under Rule 34(5). [Paras 5]

Delay in pronouncement is justified by excluding the lockdown period for computing the Rule 34(5) time-limit.

Final Conclusion: The revenue's appeal is dismissed. The Tribunal confirms that the development-rights receipts were business income, only the initial part-payment accrued in AY 2009-10, the CIT(A)'s estimate of income at 10% of the gross receipt for that year is sustained and no further disallowance under section 40A(3) is warranted; the Tribunal's delay in pronouncement is justified by excluding the COVID-19 lockdown period under Rule 34(5).

Income from business - Income from other sources - head of income - intention to revive business - contract manufacturing - residuary head - precedential value of earlier decisions

Income from business - Income from other sources - intention to revive business - contract manufacturing - residuary head - Whether lease rent received by the assessee for A.Y. 2014-2015 is taxable as income from business or as income from other sources. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the lease rent is taxable as business income. The finding rests on the factual character of the arrangement with Apollo: the assessee continued to operate the plant under joint-operation/lease agreements, incurred and (under the agreements) bore responsibilities for employees, repair and maintenance, power, insurance and other operating costs which were reimbursed by Apollo, and carried on systematic production activity (contract manufacturing) for Apollo. The Assessing Officer himself allowed several expenditures as business expenses in the year under consideration, which the Tribunal treated as indicative that the receipts arose in the course of a business activity. The Tribunal also applied the settled principle that section 56 is a residuary head and is resorted to only if no specific head applies. Subsequent Supreme Court decisions (including Chennai Properties and Rayala Corporation) showing that rental receipts may be business income where letting forms or amounts to a business activity were held to support the conclusion. The Tribunal further observed that earlier contrary coordinate-bench decisions for other years were distinguishable on facts and that precedential value does not preclude examining the factual matrix afresh for each assessment year. Applying these legal principles to the contract terms and contemporaneous conduct of the assessee, the Tribunal concluded that the receipts are inextricably linked to the assessee's business operations and therefore taxable under the head "Profits and gains of business or profession." [Paras 7, 8]

The CIT(A) was justified in directing that the lease rent for A.Y. 2014-2015 be assessed as income from business.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal affirms the CIT(A)'s direction to assess the lease rent for A.Y. 2014-2015 under the head "Profits and gains of business or profession."

Deduction under section 80IB - integral part of manufacturing process - manufacturing through job work/outsourcing - control and supervision in job work - proportionate disallowance of job work from turnover for 80IB

Deduction under section 80IB - manufacturing through job work/outsourcing - integral part of manufacturing process - control and supervision in job work - proportionate disallowance of job work from turnover for 80IB - Whether income relating to job work outsourced to third parties (stitching) is eligible for full deduction under section 80IB where such job work is an integral part of the assessee's manufacturing process and carried out under the assessee's supervision. - HELD THAT: - The Assessing Officer recomputed the deduction under section 80IB by excluding job work (estimated at 25% of gross total income) on the view that profit relating to articles manufactured through job work is not eligible. The CIT(A) found that stitching done by third parties constituted an integral part of the assessee's manufacture of footwear and was carried out under the assessee's supervision, and therefore the entire manufacturing process, including the job work component, qualified for deduction under section 80IB. The Tribunal, on facts, upheld the CIT(A)'s conclusion. The Tribunal observed that the authorities relied upon by Revenue were distinguishable: the Allahabad High Court decision concerned absence of employer-employee relationship for purposes of different provisions and was factually inapposite; the Bombay High Court decision turned on complete absence of control by the assessee over the job worker, which is not the situation here. The Tribunal also relied on a Delhi Tribunal decision holding that where conditions of section 80IB(2) are satisfied, full deduction must be granted. Applying these factual distinctions and legal principles, the Tribunal concluded that proportionate disallowance of the job work component was unwarranted and that the assessee satisfied the conditions for full deduction under section 80IB. [Paras 7, 8]

The CIT(A)'s order allowing deduction under section 80IB in respect of income relating to job work was upheld; the Assessing Officer's proportionate disallowance was set aside.

Final Conclusion: Appeal dismissed. The Tribunal upholds the CIT(A)'s finding that, for AY 2004-2005, the job work (stitching) being an integral part of the assessee's manufacturing carried out under its supervision qualifies for full deduction under section 80IB; the Assessing Officer's proportionate exclusion of job work from turnover is unwarranted.

Rectification under section 154 - mistake apparent on record - claim of deduction under section 54B - interpretation of the word "assessee" and inclusion of HUF - change of opinion not permissible under section 154 - prospective amendment versus retrospective/curative application

Rectification under section 154 - mistake apparent on record - change of opinion not permissible under section 154 - claim of deduction under section 54B - Validity of AO's exercise of rectification powers under section 154 to withdraw deduction previously allowed under section 54B - HELD THAT: - The Tribunal held that the Assessing Officer had applied his mind in the original scrutiny assessment under section 143(3) when allowing the deduction under section 54B and that subsequently withdrawing that allowance by invoking rectification under section 154 was not justified. The court examined the wording of section 54B as applicable to assessment year 2012-13 and found the provision loosely worded such that the question whether an 'HUF' was covered by the pre-amendment wording was a debatable issue requiring extended argument. Because the power of rectification under section 154 is confined to correcting an obvious and patent mistake apparent on the record and cannot be used to revisit debatable questions or effect a change of opinion, the AO's action to recall the allowance by treating the original order as containing a mistake apparent was impermissible. The Tribunal relied upon the settled proposition, as cited in earlier decisions including Commissioner Of Income-Tax vs Ramesh Electric And Trading Co. and T. S. Balaram, ITO v. Volkart Brothers, that rectification is not available where the matter admits of two opinions or requires lengthy reasoning; therefore the rectification could not stand. [Paras 8, 9, 10, 11]

The rectification order passed by the AO under section 154 and confirmed by the CIT(A) was set aside and the original assessment order dated 17.3.2015 under section 143(3) restoring the allowance under section 54B was reinstated.

Interpretation of the word "assessee" and inclusion of HUF - prospective amendment versus retrospective/curative application - claim of deduction under section 54B - Whether the amendment by Finance Act, 2012 (w.e.f. 1.4.2013) adding HUF to category covered by section 54B operates retrospectively so as to validate the deduction for assessment year 2012-13 - HELD THAT: - The Tribunal observed that the amended section expressly qualified the term 'assessee' with 'being an individual' and then separately included 'HUF' as a category in the amended text effective from 1.4.2013. The Tribunal noted that the amendment related to the 'user' of the land and that, in the pre-amendment text, the meaning of 'assessee' as including or excluding an HUF was a debatable question. Given this debatable character and the express prospective date of the amendment, the Tribunal declined to treat the Finance Act, 2012 amendment as a clarificatory step that could be applied retrospectively for the assessment year 2012-13. That said, the Tribunal's primary holding was that, irrespective of the prospective nature of the amendment, the AO could not have re-opened the settled allowance by resort to section 154 since the issue was not a mistake apparent on the face of the record. [Paras 9, 11]

The amendment in Finance Act, 2012 being prospectively effective from 1.4.2013 did not justify use of section 154 to withdraw the earlier allowance for assessment year 2012-13; the question whether pre-amendment wording covered an HUF was debatable and did not constitute a mistake apparent.

Final Conclusion: The Tribunal allowed the appeal, set aside the rectification order passed by the Assessing Officer under section 154 and the confirmatory order of the CIT(A), and restored the original assessment order dated 17.3.2015 under section 143(3), thereby preserving the deduction claimed under section 54B for assessment year 2012-13.

Rejection of books of account under section 145(3) of the Income-tax Act - estimation of profits where books are rejected - use of contemporaneous third party comparable data for estimation - requirement of stock register and verifiable sale vouchers for verification of trading results - acceptability of non maintenance plea in retail sales in absence of alternative linkage between purchases and sales

Rejection of books of account under section 145(3) of the Income-tax Act - requirement of stock register and verifiable sale vouchers for verification of trading results - Validity of the Assessing Officer's rejection of the assessee's books of account under section 145(3). - HELD THAT: - The Tribunal found that during assessment the assessee admitted non maintenance of day to day stock register, stock register by product type, sales vouchers and proper expense vouchers. The AO noted that many expenses were recorded on self made vouchers and sales vouchers were not fully vouched, so linkage between purchases and sales could not be established. The Tribunal observed that, even though purchases from government agencies are verifiable, determination of profits requires verification of sales and records showing quantities, prices and linkage between purchases and disposals. The plea that retail sales make issuance of sale bills impracticable does not excuse absence of a stock register or other records showing the movement and pricing of stock; first year of operation does not absolve the assessee of record keeping obligations. In these circumstances the Tribunal held the AO was entitled to invoke section 145(3) and reject the books as not reliable. [Paras 7]

Rejection of books of account under section 145(3) was upheld and the ground of appeal challenging that rejection was dismissed.

Estimation of profits where books are rejected - use of contemporaneous third party comparable data for estimation - Whether the trading addition confirmed by the CIT(A) (reduction to the specified amount) should be interfered with by the Tribunal. - HELD THAT: - Once books were held rejected, the AO was required to estimate gross profit. The Tribunal recognised that, in absence of prior history of the assessee, estimation must rest on contemporaneous third party comparables. The comparables relied upon by the assessee related to A.Y. 2014 15 and A.Y. 2016 17 and therefore were not strictly contemporaneous to A.Y. 2015 16. The Tribunal noted that the CIT(A) had already reduced the AO's addition and that the Revenue did not challenge that reduction. In view of absence of contemporaneous data and the fact that the CIT(A)'s reduction stood unappealed by Revenue, the Tribunal declined to interfere with the CIT(A)'s adjustment. [Paras 8]

The Tribunal declined to disturb the CIT(A)'s reduced trading addition and dismissed the assessee's ground of appeal against the confirmed addition.

Final Conclusion: The Tribunal upheld the Assessing Officer's rejection of the assessee's books of account under section 145(3) for want of verifiable stock and sales records and, having regard to the absence of contemporaneous comparable data and the CIT(A)'s reduction of the addition (which Revenue did not challenge), declined to interfere with the reduced trading addition; the appeal is dismissed.

Turnover for speculative transactions - Guidance Note on Tax Audit under Section 44AB - applicability of section 44AB - penalty under section 271B - reasonable and bona fide explanation under section 273B

Turnover for speculative transactions - Guidance Note on Tax Audit under Section 44AB - applicability of section 44AB - penalty under section 271B - reasonable and bona fide explanation under section 273B - Determination of turnover in respect of non-delivery based speculative derivative transactions and consequent applicability of penalty under section 271B for AY 2010-11. - HELD THAT: - The Tribunal held that for non-delivery based speculative transactions the appropriate measure of turnover is the aggregate of positive and negative differences arising on settlement of contracts, as explained in the Guidance Note on Tax Audit under Section 44AB issued by the ICAI. The Assessing Officer had treated the gross contract values as turnover (resulting in a figure exceeding the audit threshold), whereas the particulars produced by the assessee showed net positive and negative differences totaling a much lower amount. The Tribunal referred to its earlier decisions on identical facts, which applied the Guidance Note and treated the turnover as the sum of both favourable and unfavourable differences for speculative transactions, and observed that where turnover computed in accordance with that Guidance Note is below the threshold under section 44AB the requirement of tax audit does not arise. Further, even if the turnover determination is a debatable issue, the assessee's computation in conformity with the Guidance Note constitutes a reasonable and bona fide explanation under section 273B, militating against levy of penalty under section 271B. Applying these principles to the facts, the Tribunal concluded that the turnover for the year did not exceed the limit under section 44AB and therefore the penalty under section 271B could not be sustained.

Turnover in respect of the assessee's non-delivery based speculative derivative transactions is to be determined by taking the aggregate of positive and negative differences per the ICAI Guidance Note; on that basis (and as a reasonable bonafide explanation) the tax-audit threshold under section 44AB is not reached and the penalty under section 271B for AY 2010-11 is deleted.

Final Conclusion: Assessee's appeal allowed: penalty imposed under section 271B for assessment year 2010-11 deleted on the ground that turnover of speculative transactions is to be computed as aggregate of positive and negative differences in terms of the ICAI Guidance Note and, in any event, the assessee's computation constituted a reasonable and bona fide explanation.

Disallowance under Section 14A - satisfaction requirement under Section 14A(2) - application of Rule 8D(2)(iii) - rectification proceedings under Section 154 - principles of natural justice

Disallowance under Section 14A - satisfaction requirement under Section 14A(2) - application of Rule 8D(2)(iii) - Whether the Assessing Officer was obliged to apply the computation method in Rule 8D(2)(iii) as a mandatory consequence of rejecting the assessee's suo-moto apportioned disallowance under Section 14A. - HELD THAT: - The Tribunal examined the scheme of Section 14A and the legislative history of sub-section (2), and concluded that Rule 8D(2) is a prescribed method that the AO may resort to only when it is impossible to arrive at a just quantification of expenditure relatable to exempt income by any reasonable and proper parameters in the accounts. The AO must examine the assessee's claim in the light of books of account and record a satisfaction if he finds the claim incorrect; however, even upon rejecting the assessee's apportionment the AO is not bound to mechanically invoke Rule 8D(2)(iii). Rule 8D is intended as a last resort; the mandatory tenor of the word "shall" in Section 14A(2) must be read in the context and understood as permitting the AO to determine disallowance on any reasonable basis where appropriate, with recourse to Rule 8D only when other methods are infeasible. The Tribunal therefore held that invocation of Rule 8D is not automatic or the sole permissible route for quantification once the assessee's claim is rejected. [Paras 14]

Rule 8D(2)(iii) is not mandatory in all cases; the AO may determine the Section 14A disallowance on any reasonable basis after examining the accounts, resorting to Rule 8D only as a last resort.

Rectification proceedings under Section 154 - principles of natural justice - disallowance under Section 14A - Whether the Assessing Officer's rectification order under Section 154 increasing the Section 14A disallowance (by applying Rule 8D) was appropriate and sustainable. - HELD THAT: - On facts the Tribunal found the matter to be debatable because the assessee had made a suo-moto disallowance in its return and furnished a basis for the apportionment. The Tribunal held that when the question involves a debatable determination of the quantum of disallowance under Section 14A and the AO proposes to alter the assessment by way of rectification, such proceedings under Section 154 were not appropriate. The AO passed the rectification order without affording adequate opportunity to the assessee and proceeded to compute the disallowance by applying Rule 8D(2)(iii) as if mandatory. Given the debatable nature of the issue, the Tribunal quashed the Section 154 order and allowed the appeal. [Paras 15]

The rectification order under Section 154 was inappropriate in the facts and the proceedings were quashed; the increase in disallowance made by the AO under Section 154 is set aside.

Final Conclusion: The Tribunal held that Rule 8D is a method of last resort and not mandatorily applicable whenever the assessee's suo-moto Section 14A apportionment is rejected; further, the AO's rectification under Section 154 (increasing the Section 14A disallowance by applying Rule 8D without proper opportunity and on a debatable issue) was inappropriate and is quashed, and the appeal is allowed.

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - defective penalty notice - application of mind requirement in penalty proceedings - quash of penalty for non-specification of limb

Penalty under section 271(1)(c) for concealment or furnishing inaccurate particulars - defective penalty notice - application of mind requirement in penalty proceedings - Validity of penalty levied where assessing officer did not specify whether penalty was initiated for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found on a review of the assessment order and the notice issued under section 274 read with section 271 that the Assessing Officer initiated penalty proceedings without specifying the particular limb-concealment or furnishing inaccurate particulars-on which penalty was being levied. The notice and the assessment order did not strike out irrelevant limbs nor indicate which limb applied to the disallowances, and the Assessing Officer's penalty order addressed concealment by filing inaccurate particulars without having formed a clear view in the initiating documents. On this totality the Tribunal concluded that the penalty proceedings proceeded without application of mind by the Assessing Officer and were therefore vitiated. The Tribunal held that the appellate authority (Ld. CIT(A)) failed to analyse these defects but that the defects warranted quashing of the penalty order. The penalty order was accordingly quashed. [Paras 8, 9, 10]

Penalty levied under section 271(1)(c) quashed for lack of specification of the limb and absence of application of mind; appeal by revenue dismissed on this ground.

Consequential dismissal of cross-objection as infructuous - Effect of quashing the penalty on the assessee's cross-objection supporting the CIT(A) order. - HELD THAT: - Because the Tribunal quashed the penalty order in favour of the assessee, the cross-objection filed by the assessee in support of the CIT(A)'s order became infructuous. The Tribunal recorded that no separate adjudication of the cross-objection was required once the revenue's appeal was dismissed. [Paras 11]

Cross-objection dismissed as infructuous.

Final Conclusion: The appeal filed by the revenue is dismissed and the penalty order under section 271(1)(c) is quashed for being initiated and imposed without specification of the applicable limb and without application of mind; the assessee's cross-objection is dismissed as infructuous.

Application under section 7 of the Insolvency & Bankruptcy Code, 2016 - Financial creditor's burden to produce a financial contract - Requirement of proof of default - Summary nature of section 7 proceedings and limitation on taking oral evidence - Rule 4 of the IBBI (Application by financial creditor) and Regulation 8 of the IBBI (Claims by financial creditors)

Financial creditor's burden to produce a financial contract - Requirement of proof of default - Summary nature of section 7 proceedings - Regulation 8 of the IBBI (Claims by financial creditors) - Maintainability of a section 7 application where the financial creditor did not place a financial contract or requisite documents proving the terms of the debt and default. - HELD THAT: - The Tribunal examined Rule 4 of the AAA Rules and Regulation 8 of the IBBI Regulations and held that a financial creditor instituting a proceeding under section 7 must place on record the 'financial contract' or equivalent documentary evidence demonstrating the terms of the financial debt (tenure, interest, repayment terms) and proof of amounts disbursed and default. In the absence of any financial contract or agreement, the Tribunal cannot ascertain the tenure or interest liability or determine default, particularly because section 7 proceedings are summary in nature and the Tribunal is not entitled to call for or admit oral evidence to establish the existence or terms of an alleged oral loan. The Tribunal relied on the principle affirmed in Prayag Polytech (P.) Ltd. v. Good Marketing and Sales (P.) Ltd. that the primary onus to demonstrate the details of the financial contract and default lies on the applicant. Applying these requirements to the present record, where no financial contract was produced and the claim rested on alleged oral understanding and disputed documents, the Tribunal found the application not maintainable for want of requisite documentary proof of the debt and default. [Paras 16, 17, 18, 19, 20]

The section 7 application is dismissed for want of a financial contract and requisite proof of default; dismissal is without costs.

Final Conclusion: The Tribunal dismissed the insolvency petition filed under section 7 of the IBC, 2016 because the financial creditor failed to place a financial contract or adequate documentary evidence to establish the terms of the debt and occurrence of default; the dismissal was ordered without costs.

Admission of insolvency petition under section 9 of the IBC - existence of default and acknowledgment of debt - pre existing dispute and its effect on maintainability of section 9 application - compliance with statutory requirements for filing under section 9 (Demand Notice, Form 3 and affidavit) - appointment of Interim Resolution Professional and operation of moratorium - validity of board resolution for authorisation of representative

Validity of board resolution for authorisation of representative - Validity of the Board resolution dated 20-1-2020 to nominate a new authorised representative of the Operational Creditor. - HELD THAT: - The Tribunal examined the Miscellaneous Application challenging the competency of the resolution appointing Mr. Abhilash Pulavarthy as authorised representative. Having reviewed the record, the Tribunal found the resolution produced in MA No. 14/KOB/2020 to be satisfactory for the purposes of this proceeding and allowed the MA, thereby accepting the applicant's change of authorised signatory for prosecuting the application. [Paras 19]

MA No. 14/KOB/2020 allowed and the Board resolution dated 20-1-2020 recognised for authorisation purposes.

Existence of default and acknowledgment of debt - pre existing dispute and its effect on maintainability of section 9 application - Whether a pre existing dispute barred admission and whether default stood established. - HELD THAT: - The Tribunal found the Corporate Debtor had repeatedly acknowledged the outstanding liability in documentary communications (annexures A4 and A8) and had repeatedly sought time for payment but did not pay. The Tribunal observed no documentary evidence of a dispute on product specification prior to filing of the reply; the defence of defective supply was held to be raised belatedly and was rejected as frivolous. On the material on record the Tribunal concluded that the Corporate Debtor was in default of a debt due and payable. [Paras 20, 22]

No pre existing dispute of sufficient merit found; default established and admission is not barred.

Compliance with statutory requirements for filing under section 9 (Demand Notice, Form 3 and affidavit) - Whether the Operational Creditor had complied with the procedural requirements for filing a section 9 application. - HELD THAT: - The Tribunal noted production of the Demand Notice in Form 3 dated 29-9-2018 with postal acknowledgment, and an affidavit in compliance with section 9(3)(b) averring no notice of dispute had been received. The application was held to be complete in the prescribed form and met the requirements of section 9 and the Rules, enabling consideration on merits. [Paras 21, 23]

The section 9 application was complete and procedurally in order.

Admission of insolvency petition under section 9 of the IBC - appointment of Interim Resolution Professional and operation of moratorium - Whether the section 9 petition should be admitted and consequential reliefs (moratorium, IRP appointment, public announcement) ordered. - HELD THAT: - Applying the findings that the Operational Creditor qualified as such, the debt was due and payable, there was no valid pre existing dispute, and the petition complied with filing requirements, the Tribunal concluded that default exceeded the statutory monetary threshold and that admission was warranted. Consequential orders were passed: admission of the petition, declaration of moratorium under section 14, appointment of an Interim Resolution Professional to exercise the powers and duties prescribed under the Code, direction for public announcement and other procedural steps attendant to initiation of CIRP. [Paras 23, 24]

Petition under section 9 admitted; moratorium imposed; Ms. Baiju P. appointed as Interim Resolution Professional; directions issued for CIRP implementation.

Final Conclusion: The Tribunal allowed the Miscellaneous Application regarding authorisation, found no pre existing dispute and that the Corporate Debtor was in default, held the section 9 filing to be complete, admitted the petition under section 9 of the IBC, imposed the moratorium, appointed an Interim Resolution Professional and directed the statutory steps for commencement of CIRP.

Initiation of Corporate Insolvency Resolution Process under Section 7 - classification as financial creditor and existence of financial debt - binding effect of consent terms and consequence of breach - summary satisfaction of default and completeness of FORM-1 for admission under Section 7 - appointment of Interim Resolution Professional - moratorium under Section 14

Classification as financial creditor and existence of financial debt - Applicant is a financial creditor and the claim arises from a financial debt under the Wholesale Finance (Credit) Agreement. - HELD THAT: - The Tribunal found that the applicant advanced finance to the corporate debtor for purchase of approved inventories pursuant to the Wholesale Finance (Credit) Agreement dated 19-3-2014, a document which the corporate debtor did not dispute. The respondent did not contend that the claim related to supply of goods or services, nor was there any assignment of an operational debt to the applicant. On these facts the money advanced qualified as financial debt and the applicant accordingly qualified as a financial creditor, making the claim amenable to proceedings under the Code. [Paras 26, 27]

Claim held to be financial debt and applicant held to be a financial creditor.

Binding effect of consent terms and consequence of breach - Consent terms executed between the parties extinguished prior disputes, and respondent's failure to comply with the settlement obligations resulted in breach and liability. - HELD THAT: - The Tribunal recorded that the parties had executed consent terms on 20-7-2018 which, as a matter of law, resolved disputes existing prior to that date. The consent terms required the parties to negotiate a payment plan or one time settlement by a stipulated date and provided that failure to settle would result in admission of the petition. The respondent failed to engage in negotiations, failed to provide the requisite payment plan and thus did not meet the obligations under the consent terms; consequently the respondent was held to be in breach and liable for the admitted outstanding dues. [Paras 10, 18, 19, 21, 23]

Consent terms treated as having resolved prior disputes; respondent's non-compliance constituted breach and liability for outstanding dues.

Summary satisfaction of default and completeness of FORM-1 for admission under Section 7 - The application complied with Section 7 requirements, FORM-1 was complete and default had occurred, entitling the financial creditor to admission of the petition. - HELD THAT: - The Tribunal examined the material filed with the application and concluded that the applicant had furnished the particulars, documents and evidence of default as required by Section 7(3)(a) and that the Form 1 was complete. The Tribunal emphasised that the Adjudicating Authority's role is a summary satisfaction as to occurrence of default; having found that the corporate debtor availed credit facilities and committed default, the statutory threshold for admission under Section 7(5)(a) was met. [Paras 28, 31, 32]

Section 7 requirements satisfied; default established and the application was fit for admission.

Appointment of Interim Resolution Professional - moratorium under Section 14 - On admission, an Interim Resolution Professional was appointed and moratorium was declared with the statutory prohibitions specified. - HELD THAT: - Having admitted the application, the Tribunal appointed the proposed Interim Resolution Professional who had submitted Form 2, made requisite disclosures and declared that no disciplinary proceedings were pending. The order directed immediate public announcement by the IRP and prescribed deposit towards resolution process expenses. The Tribunal also declared the moratorium under Section 14 and delineated the prohibitions (institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property in possession), while noting statutory exceptions and amendments. [Paras 34, 35, 36, 37, 38]

Interim Resolution Professional appointed; public announcement directed; moratorium under Section 14 declared and costs directed to be deposited.

Final Conclusion: The Tribunal admitted the Section 7 application; held that the applicant is a financial creditor holding a financial debt, that the consent terms had resolved prior disputes but were breached by the corporate debtor, and that default had occurred. The petition was admitted, an Interim Resolution Professional was appointed, public announcement directed, funds for resolution process ordered, and moratorium under the Code declared.

Approval of resolution plan - commercial wisdom of the committee of creditors - feasibility and viability of the resolution plan - compliance with Section 30 of the Insolvency and Bankruptcy Code, 2016 - Regulations 37 and 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - cessation of moratorium - binding effect of approved resolution plan - penalties under Chapter VII of the IBC, 2016 - submission of CIRP records to the Insolvency and Bankruptcy Board of India

Approval of resolution plan - commercial wisdom of the committee of creditors - feasibility and viability of the resolution plan - compliance with Section 30 of the Insolvency and Bankruptcy Code, 2016 - Regulations 37 and 38 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - Final approval of the Resolution Plan submitted by M/s Sabrang Steel Pvt. Ltd. for Langlai Tea and Industries Ltd. - HELD THAT: - The Adjudicating Authority examined the Resolution Plan in the light of Section 30 and the duties of the Resolution Professional under Section 30(2)-(6) and the relevant regulations. The Committee of Creditors, applying its commercial wisdom, considered the comparative realizations under resolution and liquidation, the feasibility of implementation, sources of funds and safeguards for stakeholders, and recorded that the Resolution Applicant was not ineligible under Section 29A. The plan provided implementation timelines, sources of funds, provisions for employee contracts and monitoring, and mechanisms for supervision and payment of CIRP costs and creditors. On that basis the Adjudicating Authority held that the plan conforms with the purposes and objects of the IBC, meets the requirements of Section 30 and Regulations 37 and 38, and is viable and safeguards stakeholder interests, and therefore is fit for approval. [Paras 12, 15, 17]

The Resolution Plan of M/s Sabrang Steel Pvt. Ltd. is approved.

Cessation of moratorium - binding effect of approved resolution plan - penalties under Chapter VII of the IBC, 2016 - submission of CIRP records to the Insolvency and Bankruptcy Board of India - Consequences of approval: operation of the plan, cessation of moratorium and enforcement steps. - HELD THAT: - Following approval, the Adjudicating Authority ordered immediate commencement of the approved plan and declared that the moratorium under Section 14 shall cease to have effect. All relevant parties are bound by the terms of the approved plan and directed to extend cooperation to the successful Resolution Applicant; failure to comply may attract punishment under Chapter VII of the IBC. The Resolution Professional was directed to forward all records relating to the CIRP and the approved plan to the Insolvency and Bankruptcy Board of India for recording in its database. The Court also clarified that approval of the plan does not automatically waive or abate other legal proceedings which remain subject to the jurisdiction of the respective competent authorities. [Paras 19]

The approved Resolution Plan shall come into immediate effect; the moratorium ceases; the plan is binding on relevant parties; records to be forwarded to the IBBI; non-compliance may invite penalties under Chapter VII.

Final Conclusion: The National Company Law Tribunal, Guwahati Bench, approved the Resolution Plan of M/s Sabrang Steel Pvt. Ltd. for Langlai Tea and Industries Ltd. as conforming with Section 30 and relevant regulations, directed immediate implementation with cessation of the moratorium, declared the plan binding on concerned parties subject to statutory remedies of competent authorities, mandated submission of CIRP records to the IBBI, and warned of penalties under Chapter VII for non-compliance.

Initiation of Corporate Insolvency Resolution Process - contradictory demand notice (notice under section 9 while petition under section 7) - nature of financial debt and status as financial creditor - requirement of an undisputed debt in summary insolvency proceedings - discretion under section 7(5) to admit or refuse CIRP - abuse of insolvency process / invocation of Code as a recovery mechanism

Contradictory demand notice (notice under section 9 while petition under section 7) - abuse of insolvency process / invocation of Code as a recovery mechanism - Application filed under section 7 was defective and liable to be dismissed because the petitioner had served a demand notice treating the claim as an operational debt under section 9, creating a contradiction. - HELD THAT: - The Tribunal found on the record that the Petitioner, while instituting the present petition as a Financial Creditor under section 7, had earlier issued a demand notice dated 26.09.2018 under Rule 5 treating the claim as an unpaid operational debt under section 9. This internal contradiction rendered the application defective. The Bench observed that if the demand notice was issued under an incorrect provision, the statutory precondition for establishing a default under the Code could not be said to have been complied with. Reliance was placed on analogous decisions where prima facie contradictions between the nature of the notice and the petition led to dismissal. Given this defect the petition was liable to be dismissed without admission. [Paras 7]

Petition dismissed as defective on account of the contradictory demand notice.

Nature of financial debt and status as financial creditor - actions of director and unilateral adoption of resolutions - Amounts advanced by the petitioner while she was a director did not, on the material before the Tribunal, constitute an enforceable financial debt such as would qualify her as a Financial Creditor under the Code. - HELD THAT: - The Tribunal noted that the advances (made in December 2016 and January 2017) were given at a time when the Petitioner exercized control as a Director and had initiated and effected the payments. There was no contemporaneous agreement or contract establishing indebtedness on the part of the company in a manner enforceable under the Code; the relevant board communications were unilateral or recorded after the fact. The Bench held that a mere reflection of borrowings in the balance sheet does not automatically convert such transfers into a financial debt under the definition in the Code. Applying the principle in Dr. BVS Lakshmi v. Geometrix Laser Solution Pvt. Ltd., the Tribunal concluded that, on the present record, the amounts did not acquire the character of an enforceable financial debt and the Petitioner could not be treated as a Financial Creditor for the purpose of initiating CIRP. [Paras 8, 9]

Amounts not held to be established as a financial debt enforceable under the Code; petitioner not entitled to proceed as Financial Creditor on that basis.

Requirement of an undisputed debt in summary insolvency proceedings - delay and existence of pre existing disputes - The claimed debt and its quantum were disputed prior to the demand notice and therefore did not meet the requirement of an undisputed debt necessary for summary initiation of CIRP. - HELD THAT: - The Tribunal recorded that substantial disputes had arisen prior to the demand notice, including results of a financial due diligence commissioned by investors which raised allegations of misrepresentation, misappropriation and fabrication of documents, and that payments had been routed to an entity alleged to have been dissolved. The demand notice was issued more than a year after the amounts became due and after disputes had crystallised. In view of the summary nature of section 7 proceedings, the existence of a clear, undisputed debt is a precondition; where disputes on liability and amount exist prior to the notice, summary initiation is inappropriate. The Tribunal also referred to the principle that the Code is not a substitute for ordinary recovery remedies. [Paras 10, 11]

Claim held to be disputed and not suitable for summary adjudication in CIRP proceedings.

Discretion under section 7(5) to admit or refuse CIRP - socio economic consequences of admitting CIRP against a solvent company - Even assuming some debt, the Tribunal exercised its discretion under section 7(5) to refuse initiation of CIRP because the Corporate Debtor is solvent and admission would cause disproportionate socio economic prejudice. - HELD THAT: - The Bench observed that section 7(5) employs the term 'may', permitting the Adjudicating Authority to weigh the consequences of admitting a CIRP. On the material placed before it the Respondent was shown to be a largely solvent, export oriented company with substantial assets, foreign investment and ongoing business, whose temporary cashflow difficulties were expected to be resolved. Initiating CIRP in such circumstances would have serious adverse effects on employees, stakeholders and ongoing operations. Consequently, the Tribunal concluded that it would not be justifiable to subject the Corporate Debtor to CIRP in the present facts, and dismissed the petition exercising the statutory discretion. [Paras 12, 13]

Tribunal declined to order CIRP in exercise of discretion under section 7(5).

Final Conclusion: The petition under section 7 was dismissed: it was procedurally defective due to a contradictory demand notice, the alleged advances were not shown to be an enforceable financial debt free from dispute, and, in any event, the Tribunal declined to initiate CIRP in the exercise of its discretion given the Corporate Debtor's solvency and the disproportionate consequences of admission.

Duplicate claims in insolvency proceedings - simultaneous Section 7 applications - admission of CIRP - joint venture exception

Duplicate claims in insolvency proceedings - simultaneous Section 7 applications - admission of CIRP - joint venture exception - Whether a second application under Section 7 by the same financial creditor against the corporate guarantor can be admitted when an application under Section 7 by that creditor against the principal borrower based on the same claim has already been admitted and CIRP is ongoing. - HELD THAT: - The Tribunal applied the principle laid down by the NCLAT in Dr. Vishnu Kumar Agarwal v. M/s Piramal Enterprises Ltd that, although the IBC does not bar filing simultaneous Section 7 applications against a principal borrower and its corporate guarantor, once an application for the same set of claims is admitted against one corporate debtor and CIRP is initiated, a second Section 7 application by the same financial creditor for the identical claim cannot be admitted against the other corporate debtor. The NCLAT further recognised a limited exception where multiple corporate debtors can be treated jointly only if they together constitute a joint venture company; in that situation a combined claim may be maintainable. Applying these principles, the Tribunal found that the principal borrower and the corporate guarantor in this matter are distinct companies with independent memoranda/articles and independent project permissions, and were not demonstrably a combined joint venture company. The admitted CP(IB) No.616/7/HDB/2018 relates to the same transaction, claim and default as the present petition; therefore admitting a second Section 7 petition for the same claim would amount to pursuing duplicate proceedings. For these reasons the Tribunal held that the present petition could not be admitted. [Paras 10, 11, 12, 13, 14]

The application under Section 7 filed against the corporate guarantor for the same set of claims and default as an already admitted Section 7 petition against the principal borrower is not admitted; the petition is rejected.

Final Conclusion: The petition under Section 7 against the corporate guarantor is rejected as it advances the same claim and default for which a Section 7 petition against the principal borrower has already been admitted and CIRP is in progress, and the limited joint-venture exception is not attracted.

Exemption for clearance of waste, scrap and used packing material to DTA - eligibility under condition 4(c) of Notification No.52/2003-Cus and condition 8(ii) of Notification No.22/2003-CE - distinction between unusable packing material and reusable scrap - consequences of successful claim of exemption: exclusion of duty, interest and penalty

Exemption for clearance of waste, scrap and used packing material to DTA - eligibility under condition 4(c) of Notification No.52/2003-Cus and condition 8(ii) of Notification No.22/2003-CE - distinction between unusable packing material and reusable scrap - Whether the appellant was entitled to claim exemption for clearance of specified waste and scrap into DTA under the cited notifications without payment of duty. - HELD THAT: - Adverting to the show cause notices and admitted facts, the cleared items comprised waste and scrap of HDPE drums, MS & GI, polymer, paper, BOPP tapes and other non-usable scraps. The Tribunal examined the language of Notification No.52/2003-Cus cl.4(c) and Notification No.22/2003-CE cl.8(ii), both allowing clearance of used packing material such as cardboard boxes and polyethylene bags of a kind unsuitable for repeated use without payment of duty. The material cleared by the appellant was recorded and adjudicated as waste and scrap and thereby fell within the class of items contemplated by the exemption clauses. The contention that the scrap was reusable and thus excluded from the notifications was considered and rejected on the facts: the items were non-usable scraps. The Tribunal also noted that an earlier decision of the Tribunal in Sun Pharmaceuticals (allowing exemption for empty drums usable by buyer) did not militate against the appellant's case and, if anything, the present facts were on stronger footing. Applying the notifications to the admitted facts, the Tribunal concluded that the exemption applied and duty was not payable. [Paras 9, 10, 11]

The appellant was rightly entitled to the benefit of Notification No.52/2003-Cus cl.4(c) and Notification No.22/2003-CE cl.8(ii) for the cleared waste and scrap; no duty was payable.

Consequences of successful claim of exemption: exclusion of duty, interest and penalty - Whether demand of duty, interest and penalties raised against the appellant should be sustained where the exemption claim succeeds. - HELD THAT: - Having held that the cleared items qualified for exemption under the cited notifications and that no duty was payable, the Tribunal addressed the ancillary consequences flowing from that conclusion. Since the substantive demand was unsustainable, the imposition of interest and penalties premised on that demand also lacked foundation. The Tribunal therefore set aside the demand, interest and the penalties imposed in the impugned orders. [Paras 11, 12]

The demand of duty with interest and the penalties imposed are set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the appeals: the cleared items qualifed as waste/scrap or used packing material within the exemption clauses of Notification No.52/2003-Cus cl.4(c) and Notification No.22/2003-CE cl.8(ii), consequently no duty was payable and the demand, interest and penalties were set aside.