TaxTMI Updates e-Newsletter
Jul 15,2020

Classification of supply as interstate supply or intrastate supply - deemed place of supply where goods are delivered on the direction of a third person - place of supply under the IGST Act (deemed receipt by the third person) - advance ruling jurisdiction under Section 97(2) of the CGST Act - taxability of supply in the course of interstate trade or commerce

Classification of supply as interstate supply or intrastate supply - deemed place of supply where goods are delivered on the direction of a third person - place of supply under the IGST Act (deemed receipt by the third person) - Supply made by the applicant from Goa on behalf of a third person located outside Goa, where goods are delivered in Goa on the direction of that third person, is to be classified for tax purposes. - HELD THAT: - The Authority examined whether the questions raised fell within the scope of advance ruling and proceeded to decide the classification issue that was squarely within its jurisdiction. For classification as interstate or intrastate supply two factors are determinative: location of the supplier and the place of supply. Where goods are delivered by the supplier to a recipient or any other person on the direction of a third person, the third person is deemed to have received the goods and the place of supply is the principal place of business of that third person. Applying this rule, although the supplier is located in Goa and delivery occurs in Goa, the place of supply is the principal place of business of the third person located outside Goa; therefore the transaction is not an intrastate supply within Goa but a supply in the course of interstate trade or commerce.

The supply is to be treated as a supply of goods in the course of interstate trade or commerce and taxed accordingly.

Final Conclusion: Advance ruling issued limited to classification: the transaction is an interstate supply (taxable as supply in the course of interstate trade or commerce) because, on delivery on the direction of a third person located outside Goa, the place of supply is that third person's principal place of business outside Goa.

Appeal under Section 112 of the Central Goods and Services Tax Act, 2017 - remedy under Article 226 of the Constitution - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - extension of limitation for filing appeal due to non-constitution of Appellate Tribunal

Appeal under Section 112 of the Central Goods and Services Tax Act, 2017 - Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 - Availability of the statutory appellate remedy where the Appellate Tribunal has not been constituted and the effect of the Ninth Removal of Difficulties Order on the limitation for filing the appeal. - HELD THAT: - The Court noted that the impugned order is appealable under the provision governing appeals from orders passed under Section 129(3). Recognising that the Tribunal and its Benches had not been constituted, the Court accepted the position advanced by the State that the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 applies to such situations and treats the three months' limitation period as commencing from the date on which the President or State President of the Appellate Tribunal, after constitution under Section 109, enters office. In view of this statutory instrument, the Court held that the petitioner may await constitution of the Tribunal and thereafter avail the statutory appellate remedy within the extended period prescribed by the Removal of Difficulties Order.

The petitioner is directed to avail the remedy of filing appeal before the Appellate Tribunal in accordance with the Ninth Removal of Difficulties Order, 2019; no writ relief granted in lieu of the statutory appeal.

Remedy under Article 226 of the Constitution - Whether extraordinary writ relief should be granted by bypassing the statutory appeal in the circumstances of non-constitution of the Tribunal and release of seized goods. - HELD THAT: - The petitioner had sought relief under Article 226 bypassing the statutory appeal on the ground that the Tribunal was not constituted. The petitioner and the State conceded that the Ninth Removal of Difficulties Order governs the limitation issue, and learned counsel for the petitioner admitted that the seized goods had been released. Given availability of the statutory remedy with extended limitation and absence of present prejudice to the petitioner because the goods were released, the Court declined to substitute the appellate remedy with writ relief.

Writ petition disposed of by permitting the petitioner to invoke the statutory appeal remedy when the Tribunal is constituted; no immediate extraordinary relief granted.

Final Conclusion: The petition is disposed of by directing that the petitioner may file an appeal before the Appellate Tribunal in terms of the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019; no writ relief was granted as the statutory remedy remains available and the seized goods have been released.

Passing on the benefit of input tax credit - anti-profiteering obligation under Section 171 of the CGST Act, 2017 - commensurate reduction in prices as the sole mode of passing benefit - computation of profiteering by comparison of pre GST and post GST ITC/turnover ratios - investigation and further inquiry under Rule 133(4) and Rule 133(5) of the CGST Rules, 2017 - penalty liability under Section 171(3A) of the CGST Act, 2017

Passing on the benefit of input tax credit - anti-profiteering obligation under Section 171 of the CGST Act, 2017 - commensurate reduction in prices as the sole mode of passing benefit - Whether the respondent availed additional input tax credit after introduction of GST and was obliged to pass that benefit to flat buyers by way of commensurate reduction in prices. - HELD THAT: - The Authority accepted the DGAP's comparison of pre GST and post GST CENVAT/ITC to turnover ratios. The DGAP found the respondent's ratio of ITC to turnover increased from 1.55% (pre GST) to 7.32% (post GST), yielding an incremental ITC benefit of 5.77% of turnover. In law Section 171(1) requires that any benefit of ITC or reduction in tax rate must be passed on to recipients by way of commensurate reduction in prices; no other modality of passing the benefit is permitted. The respondent's contentions that increased input service tax rates, allocation between goods and services ITC, marketing/commission or future contingencies could be set off against the obligation were rejected: Section 171 prescribes quantification and passing of benefit at the relevant point in time, and the DGAP's holistic ITC/turnover methodology (based on returns and ITC registers furnished by the respondent) was held appropriate and relied upon. The Authority therefore concluded that additional ITC accrued to the respondent and that it was not fully passed on to the buyers during the investigation period. [Paras 27, 28, 40, 41, 46]

The respondent availed additional ITC post GST (5.77% of turnover) and was obliged under Section 171(1) to pass that benefit to flat buyers by way of commensurate reduction in prices; the respondent had not fully done so.

Computation of profiteering by comparison of pre GST and post GST ITC/turnover ratios - quantification of amount to be returned to affected recipients - What is the quantum of profiteering in respect of the project and the amount due to the applicant and other identified buyers for the period 01.07.2017 to 31.03.2019. - HELD THAT: - Applying the adopted methodology, the DGAP computed the incremental ITC benefit and recalibrated base prices. The DGAP arrived at an aggregate profiteered amount of Rs. 19,72,09,203 (inclusive of 12% GST) in respect of 2,349 home buyers for the investigation period. For the applicant specifically the DGAP computed a profiteered benefit due of Rs. 1,41,139 (inclusive of GST) and verified that the respondent had already passed certain ITC benefits aggregating Rs. 28,22,65,749. The Authority accepted the DGAP's verification of credit notes and reconciliations, found a shortfall of benefit to be passed on amounting to Rs. 1,04,77,604 in respect of 908 residential units (which includes Rs. 53,813 shortfall to the applicant), and held that excess benefits passed to some buyers could not be set off against amounts due to others but may be adjusted only against future benefits for those excess recipients. [Paras 32, 39, 41, 46, 47]

The profiteered amount for the period 01.07.2017 to 31.03.2019 is determined as Rs. 19,72,09,203 (inclusive of 12% GST); the respondent must refund the identified shortfall of benefit - Rs. 1,04,23,791 to other identified buyers and Rs. 53,813 to the applicant - with interest at 18% per annum from the dates of collection until payment, within three months.

Investigation and further inquiry under Rule 133(4) and Rule 133(5) of the CGST Rules, 2017 - suo moto/ex officio investigation into other projects - Whether further investigation should be directed into the respondent's other projects and whether the DGAP should compute benefit accruing after 31.03.2019 for the same project. - HELD THAT: - The Authority noted the respondent's own admissions that it had multiple projects and that ITC benefits had been claimed/passed in respect of several other projects. Given those admissions and Rule 133(5) (permitting the Authority to direct further inquiry where there are reasons to believe contravention exists beyond the reported scope), the Authority directed the DGAP to investigate the respondent's other projects where benefit of ITC may be required to be passed on and to submit reports thereon. Separately, because the current investigation covered till 31.03.2019 only, the DGAP was directed to further investigate and compute benefit to be passed on by the respondent w.e.f. 01.04.2019 till 30.06.2020 or till issue of completion certificate, whichever earlier. [Paras 48, 50, 51]

DGAP ordered to investigate other projects of the respondent and to compute and report additional ITC benefit for the period 01.04.2019 to 30.06.2020 (or earlier on completion), as directed.

Penalty liability under Section 171(3A) of the CGST Act, 2017 - show cause notice for imposition of penalty - Whether the respondent is apparently liable for penalty for contravention of anti profiteering provisions and what procedural step should follow. - HELD THAT: - Having concluded that the respondent contravened Section 171(1) by not passing on the benefit of additional ITC to buyers, the Authority held that such conduct constitutes an offence under Section 171(3A) of the CGST Act, 2017. The Authority therefore directed issuance of a show cause notice to the respondent to explain why penalty under Section 171(3A) read with Rule 133(3)(d) should not be imposed. [Paras 49]

A show cause notice be issued to the respondent to explain why penalty under Section 171(3A) read with Rule 133(3)(d) of the CGST Rules, 2017 should not be imposed.

Final Conclusion: The Authority held that the respondent availed an incremental ITC benefit of 5.77% post GST which was not fully passed on to flat buyers for the period 01.07.2017 to 31.03.2019; profiteering of Rs. 19,72,09,203 (inclusive of 12% GST) is determined, identified shortfalls (Rs. 1,04,23,791 to other buyers and Rs. 53,813 to the applicant) must be refunded with 18% interest within three months, DGAP is directed to investigate further periods and other projects, and a show cause notice for penalty under Section 171(3A) is to be issued to the respondent.

Classification of goods - Harmonized System Nomenclature heading 3808 - Taxability under GST - Essential commodity classification not determinative of GST exemption - Interpretation of tax rate notifications

Classification of goods - Harmonized System Nomenclature heading 3808 - Taxability under GST - Interpretation of tax rate notifications - Alcohol-based hand sanitizers manufactured by the applicant are classifiable under HSN heading 3808 and taxable at the rate applicable to that heading as per the entries in the notified schedule. - HELD THAT: - The Authority examined the product description, the applicant's claim that the product falls under HSN 30049087 (medicaments) and the concerned officer's observations that general alcohol-based hand sanitizers, used for maintaining hygiene and not possessing curative or prophylactic attributes, do not fall within medicaments intended for therapeutic or prophylactic use. Having regard to end use and composition, the Authority concluded that the applicant's hand sanitizers are alcohol-based disinfectant-type products properly falling within heading 3808 (disinfectants and similar products) and therefore attract the rate specified for that heading in the notified schedule. The Authority rejected classificatory reliance on the medicament tariff item in the absence of curative or preventive ingredients or therapeutic/prophylactic use.

Hand sanitizers manufactured by the applicant are classifiable under HSN 3808 and taxable at the rate applicable to that heading as per the notified schedule.

Essential commodity classification not determinative of GST exemption - Interpretation of tax rate notifications - Notification or administrative classification of hand sanitizers as an essential commodity does not, by itself, exempt them from GST; exemption depends on inclusion in the notified exemption list. - HELD THAT: - The Authority noted that the Ministry of Consumer Affairs classified hand sanitizers as essential under the Essential Commodities Act, 1955, but held that such classification does not automatically operate as a GST exemption. Exemptions from GST are governed by the relevant exemption notifications (identified in the ruling as the appropriate notification under the Central Tax (Rate) framework). Therefore, mere designation as an essential commodity is not the criterion for GST exemption; the product must be expressly covered by the exemption notification to be exempted.

Classification as an essential commodity does not by itself exempt the goods from GST; exemption requires coverage under the appropriate GST exemption notification.

Final Conclusion: The Authority ruled that the applicant's alcohol-based hand sanitizers are classifiable under HSN heading 3808 and taxable at the rate applicable to that heading in the notified schedule; further, designation as an essential commodity does not automatically confer GST exemption, which depends on express inclusion in the exemption notification.

Revision under Section 263 - income from house property - income from business - income from other sources - no enquiry or inadequate enquiry as a ground for revision - requirement of erroneous decision prejudicial to Revenue (Malabar test)

Revision under Section 263 - income from house property - income from business - income from other sources - no enquiry or inadequate enquiry as a ground for revision - requirement of erroneous decision prejudicial to Revenue (Malabar test) - Whether the Principal Commissioner of Income Tax was justified in invoking revisional jurisdiction under Section 263 to direct reassessment of receipts from holiday homes by classifying receipts from owned properties as income from house property and others as income from other sources. - HELD THAT: - The Tribunal found that the Assessing Officer had in fact examined the receipts from holiday homes and had assessed such receipts as business income during the assessment proceedings, contrary to the PCIT's assertion of no enquiry. The record showed the AO carried out enquiries and altered the head of income to business. Further, an earlier appellate decision in the assessee's favour and a co ordinate Tribunal decision indicate the classification is a debatable question of fact and law. Applying the principle in Malabar Industrial Co. Ltd., revisional jurisdiction under Section 263 can be exercised only where there is both an erroneous view and resulting prejudice to the Revenue; mere existence of an arguable alternative view does not satisfy this test. Since the AO adopted one of the possible views after examination and the matter was debatable, the PCIT's conclusion that the assessment was erroneous and prejudicial was not sustainable. Therefore the direction for fresh assessment was unwarranted and was set aside. [Paras 5, 6]

PCIT's revision order set aside; Assessing Officer's assessment dated 03.06.2016 restored and the assessee's appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2014-15, holding that the exercise of revisional jurisdiction under Section 263 was not justified as the Assessing Officer had examined the issue and taken a possible view; the PCIT's directions were quashed and the original assessment restored.

Limitation for initiation of proceedings under Section 201(3)(ii) for failure to deduct and remit tax at source - attribution of interest under provisions relating to TDS default under Section 201(1A) read with Section 195 - restoration of appeal after recall of order declining appeal on account of tax-effect threshold prescribed by CBDT circulars - applicability of subsequent CBDT circulars to revive appeals previously held non-maintainable for lower tax effect - exclusion of prescribed period for pronouncement due to COVID-19 lockdown

Restoration of appeal after recall of order declining appeal on account of tax-effect threshold prescribed by CBDT circulars - applicability of subsequent CBDT circulars to revive appeals previously held non-maintainable for lower tax effect - Revenue's miscellaneous application to recall the Tribunal's earlier order declining the appeal for involving tax effect below the prescribed threshold was allowed and the appeal was restored. - HELD THAT: - The Revenue's MA sought recall of the Tribunal's order declining ITA 914/Kol/2017 on the ground that the case was exceptional (audit objection) and because Board circulars prescribing the tax-effect threshold had been recalled/modified. The Tribunal accepted the factual position that its earlier invocation of the Board's Circular prescribing a lower threshold had itself been recalled by a subsequent order accepting a MA, and accordingly allowed the Revenue's MA and restored the main appeal to its original number for adjudication on merits.

MA No. 227/Kol/2019 allowed; main appeal ITA 914/Kol/2017 restored.

Limitation for initiation of proceedings under Section 201(3)(ii) for failure to deduct and remit tax at source - attribution of interest under provisions relating to TDS default under Section 201(1A) read with Section 195 - The CIT(A)'s determination that proceedings under Section 201(1A) read with Section 195 were time-barred under Section 201(3)(ii) was reversed and the Assessing Officer's order was restored. - HELD THAT: - The Assessing Officer's order dated 10.06.2009 imposed interest for failure to pay TDS on royalty payments. The CIT(A) applied Section 201(3)(ii) to hold the proceedings barred by limitation since the default was in FY 2002-03 and notice was issued beyond six years. The Tribunal found that the statutory limitation in Section 201(3)(ii) applies to Indian residents and that the assessee is not an Indian resident; therefore the CIT(A)'s time bar conclusion was legally incorrect. On that basis the Tribunal reversed the CIT(A)'s order and restored the Assessing Officer's order.

CIT(A)'s holding that the proceedings were time barred reversed; AO order dated 10.06.2009 restored; Revenue's appeal allowed.

Exclusion of prescribed period for pronouncement due to COVID-19 lockdown - The period between hearing and pronouncement exceeding ninety days was excluded on account of the COVID-19 pandemic and lockdown. - HELD THAT: - Although the order was pronounced after ninety days of hearing, the Tribunal excluded the intervening period in view of the extraordinary situation arising from the COVID-19 pandemic and lockdown, relying on the coordinate Bench decision cited in the order. The Tribunal therefore treated the delayed pronouncement as excusable for that reason.

Delay in pronouncement beyond ninety days excluded on account of COVID-19; reliance placed on a coordinate Bench decision.

Final Conclusion: The Revenue's MA to recall the earlier order declining the appeal was allowed and ITA 914/Kol/2017 was restored; on merits the Tribunal reversed the CIT(A)'s finding of limitation under Section 201(3)(ii) because the assessee is not an Indian resident, restored the Assessing Officer's order dated 10.06.2009 imposing interest, and allowed the Revenue's appeal; the delay in pronouncement beyond ninety days was excluded due to the COVID 19 lockdown.

Reopening of assessment under section 147 for escapement of income based on "tangible material" - change of opinion principle in reassessment - eligibility for deduction under section 80IB(10) with Explanation (ii) requiring local authority completion/occupation certificate - definition of "built-up area" and inclusion of projections and balconies under section 80IB(14)(a) - doctrine of substantial compliance in tax exemption provisions - pro rata deduction for eligible residential units within a composite housing project

Reopening of assessment under section 147 for escapement of income based on "tangible material" - change of opinion principle in reassessment - Validity of reopening the concluded assessment for A.Y. 2011-12 under section 147 - HELD THAT: - The Tribunal examined whether the Assessing Officer (A.O.) had bona fide 'reasons to believe' that income had escaped assessment so as to justify reopening within four years. The A.O. had allowed the deduction under section 80IB(10) in the original assessment but subsequently received communications and verification in assessment proceedings for the next year indicating (i) that the local authority (MCGM) had not issued Building Completion Certificate/Occupation Certificate due to non-compliance with IOD conditions, and (ii) that built-up area of certain units exceeded prescribed limits. The Tribunal held that such information constituted "fresh tangible material" with a live link to formation of belief and was not a mere change of opinion of the successor A.O.; therefore reassessment under section 147 was within jurisdiction. The requirement of proving non-disclosure was not material because reopening was within four years. Reliance on precedents was considered and distinguished where facts differed. [Paras 16, 17, 18, 19]

Assumption of jurisdiction and reopening under section 147 for A.Y. 2011-12 upheld; assessee's grounds challenging validity of reopening dismissed.

Eligibility for deduction under section 80IB(10) with Explanation (ii) requiring local authority completion/occupation certificate - doctrine of substantial compliance in tax exemption provisions - Whether the assessee was entitled to deduction under section 80IB(10) when no completion/occupation certificate was issued by the local authority and project conditions per approved plan were not satisfied (A.Y. 2011-12) - HELD THAT: - The Tribunal construed section 80IB(10) together with Explanation (ii) which declares that the date of completion is the date on which the completion certificate is issued by the local authority. The Tribunal found that MCGM had not issued the completion/occupation certificate because the assessee had not complied with IOD conditions (notably failing to construct/hand over the 18.30 m D.P. road as per approved plan). The Tribunal held that strict compliance of conditions material to entitlement is required; substantial compliance doctrine cannot be invoked where non-compliance affects the core statutory condition. Consequently, CIT(A)'s allowance on merits was set aside insofar as it held the assessee eligible despite absence of completion certificate and non-completion as per approved plan. [Paras 22, 27, 28, 32, 33]

CIT(A)'s conclusion that the assessee satisfied section 80IB(10)(a)(iii) is set aside; revenue's grounds on non-issuance of completion certificate and non-completion as per IOD sustained (appeal partly allowed on these points).

Definition of "built-up area" and inclusion of projections and balconies under section 80IB(14)(a) - pro rata deduction for eligible residential units within a composite housing project - Whether 'dry balcony' / projections form part of "built-up area" and consequences for deduction under section 80IB(10); entitlement to pro rata deduction for eligible units - HELD THAT: - The Tribunal analysed section 80IB(14)(a) defining "built-up area" as inner measurements at floor level including projections and balconies. It observed that the factual question-whether the 30 sq.ft. 'dry balcony' was a usable area de facto enjoyed exclusively by flat purchasers (and thus included in built-up area) or a service/common projection (and thus excluded)-was not determinable from the record. The Tribunal noted: (i) statutory definition post-2005 was aimed at preventing understatement by excluding projections; (ii) conflicting material existed (architect's certificate, brochures/Index II, inspector's field report). Because the factual position (exclusive enjoyment or common/service area) would determine inclusion, the Tribunal restored the matter to the A.O. for fresh adjudication and quantification. Separately, the Tribunal ruled that within a composite project deduction can be claimed pro rata for units that satisfy the statutory criteria. [Paras 35, 36, 37, 38, 47]

Matter remitted to Assessing Officer for fresh factual verification and computation as to (a) whether the 'dry balcony' is part of built-up area for each unit and (b) consequent pro rata allowance/disallowance of section 80IB(10) for eligible and ineligible units.

Pro rata deduction for eligible residential units within a composite housing project - Whether deduction under section 80IB(10) may be allowed proportionately for units within the same project that meet conditions - HELD THAT: - The Tribunal considered authorities and concluded that where a composite housing project contains eligible and ineligible units, deduction under section 80IB(10) can be claimed in respect of eligible residential units and be disallowed for ineligible ones; a proportional/quantified approach is appropriate. The CIT(A)'s approach to disallow only those specific units exceeding prescribed built-up area was recognised as generally acceptable, subject to correct determination of built-up area. [Paras 39, 47, 53]

Pro rata deduction for eligible units accepted; revenue ground challenging proportional allowance dismissed in respect of principle but subject to factual verification of eligibility per unit.

High gross profit as indicia of ineligibility under section 80IB(10) - Whether a high gross profit percentage alone justifies denial of deduction under section 80IB(10) - HELD THAT: - The A.O. noted high gross profit rates but did not establish improper arrangements or related-party transactions that would bring profits within prohibition under section 80IB(10). The Tribunal concurred with CIT(A) that gross profit rate by itself is not decisive; absence of evidence of manipulative arrangements or other statutory non-compliances means high GP alone cannot be the sole reason to deny deduction. [Paras 40, 54, 64]

Revenue's ground based solely on high gross profit dismissed; high GP not sufficient to deny section 80IB(10) without supporting evidence of contravention.

Final Conclusion: The Tribunal upheld reassessment under section 147 for A.Y. 2011-12 on the basis of fresh tangible material. On merits, the Tribunal set aside CIT(A)'s allowance to the assessee insofar as entitlement under section 80IB(10) depended on issuance of local authority completion/occupation certificate and on compliance with IOD/approved-plan conditions, finding those statutory conditions not satisfied. The question whether specific projections (the "dry balcony") form part of "built-up area" is remitted to the Assessing Officer for fresh factual verification and quantification; pro rata allowance for units meeting statutory criteria is permissible. Claims based solely on high gross profit were rejected as insufficient to deny exemption.

Depreciation on intangible assets - Ownership requirement for claiming depreciation - Capitalization of software development costs - Content Management Software (CMS) as proprietary software - Revenue expenditure alternative under section 37(1)

Depreciation on intangible assets - Ownership requirement for claiming depreciation - Content Management Software (CMS) as proprietary software - Capitalization of software development costs - Revenue expenditure alternative under section 37(1) - Allowability of depreciation claimed on CMS software capitalized in assessee's books. - HELD THAT: - The Tribunal found on the materials and unchallenged submissions that the assessee developed and owned the bespoke Content Management Software (CMS), had capitalized the development cost in its books and used the software for its business (including updating and managing statutory content published by the assessee) as well as for performing webmaster services for the Income Tax Department. The Revenue did not controvert ownership or the incurrence of expenditure, and no material was placed to show that title had passed to the Department. The claim of depreciation in a subsequent year remained undisputed. On this basis the Tribunal concluded that the conditions for claiming depreciation on the intangible asset were satisfied and that the Assessing Officer was not justified in denying depreciation. [Paras 8]

Depreciation claim on the CMS software allowed; alternate claim under section 37(1) rendered academic and not adjudicated.

Final Conclusion: Appeal allowed: depreciation on the proprietary CMS software capitalized in the assessee's books is to be allowed; alternate plea for revenue deduction was not decided as academic.

Deductibility of interest on borrowed capital for purpose of business under section 36(1)(iii) - Investment in subsidiary shares constituting business activity - Holding company advancing/placing funds in subsidiaries - interest allowable where subsidiary activity aligns with assessee's business - Distinction between loans/advances and share investments for interest deduction

Deductibility of interest on borrowed capital for purpose of business under section 36(1)(iii) - Investment in subsidiary shares constituting business activity - Holding company advancing/placing funds in subsidiaries - interest allowable where subsidiary activity aligns with assessee's business - Whether interest paid on borrowed funds used to subscribe to share capital of subsidiary and group companies is deductible under section 36(1)(iii) for A.Y. 2012-13. - HELD THAT: - The Tribunal examined the assessee's objects, the nature of the subsidiaries (engaged in the same business of generation, transmission and supply of electricity) and the factual finding that borrowed funds were invested in subsidiaries and group companies. Relying on the principle in SA Builders that where it is obvious a holding company has a deep interest in its subsidiary and advances borrowed money which is used for business purposes, interest on such borrowed loans is ordinarily deductible, the Tribunal found the present facts to be on stronger footing because the assessee invested in shares (not merely advanced interest-free loans) and the investments were in furtherance of the assessee's main objects as per its Memorandum of Association. The Tribunal distinguished cases relied upon by the Revenue as involving different facts (advances or loans not shown to be used for the assessee's business or assets not put to use), and noted that those decisions were not applicable. Applying the SA Builders rationale to the material facts and noting the absence of diversion of funds, the Tribunal concluded that the interest related to borrowed capital used for business purposes and therefore was allowable under section 36(1)(iii). [Paras 13, 14, 15, 16, 19]

The disallowance of interest of Rs. 82,51,230/- was set aside and the interest was held allowable under section 36(1)(iii).

Final Conclusion: Appeal allowed: interest on borrowed funds invested in subsidiary and group companies held to be incurred for the purpose of business and deductible under section 36(1)(iii) for A.Y. 2012-13; Assessing Officer directed to delete the addition.

Section 263 revisional jurisdiction - Section 50C deemed consideration - Verification of cost of acquisition/improvement - Section 24(b) deduction and prohibition on double deduction - Remand for verification and recomputation

Section 263 revisional jurisdiction - Section 50C deemed consideration - Validity of the Pr. CIT setting aside the assessment under section 263 insofar as the applicability of section 50C was concerned - HELD THAT: - The Tribunal upheld the Pr. CIT's exercise of revisional jurisdiction under section 263 in respect of the question whether the value adopted by the stamp valuation authority should be treated as the deemed full value under section 50C. The assessee's reliance on a subsequently executed deed of correction stating a ready reckoner value did not amount to material showing that the stamp valuation authority's adopted value had been revised. The revisional authority's direction that the A.O verify whether the stamp valuation authority's valuation had been revised, and if not, refer the matter to the DVO under section 50C(2), was held to be proper. The Tribunal modified the direction only to record that refund enquiry need not be made from the assessee where stamp duty was paid by the purchaser, and directed verification of whether the authority's valuation had in fact been revised; if not, the A.O was to refer to the DVO. [Paras 5, 6]

Pr. CIT rightly set aside the assessment insofar as applicability of section 50C was concerned and the A.O is directed to verify the stamp-valuation position and refer to the DVO if required.

Verification of cost of acquisition/improvement - Remand for verification and recomputation - Whether the Pr. CIT rightly directed the A.O to verify the assessee's claim of indexed cost of acquisition/improvement (including interest and repairs) and to disallow amounts earlier allowed if already allowed under other heads - HELD THAT: - The Tribunal agreed with the revisional authority that the assessment was prejudicial to the revenue insofar as the A.O had not adequately verified the large claim for indexed cost of acquisition/improvement. The revisional authority legitimately directed the A.O to examine whether amounts included in the indexed cost had been claimed and allowed earlier under other heads (such as business income or income from house property) and, if so, to disallow them in computing capital gains for the year under consideration. The inconsistent approach of the A.O in partly sustaining and partly excluding interest expenses was noted, and remand for thorough verification and recomputation was upheld. [Paras 5]

Pr. CIT correctly set aside the assessment on this ground; matter remanded to the A.O for verification, recomputation and consequential action.

Section 24(b) deduction and prohibition on double deduction - No double benefit / prohibition on claiming same expenditure twice - Whether the CIT(A) was correct in disallowing interest paid (already claimed under section 24(b)) as part of cost of acquisition for computation of capital gains - HELD THAT: - The Tribunal affirmed the view of the CIT(A) that interest which had been allowed as a deduction under section 24(b) while computing income from house property in earlier years could not be allowed again as part of the cost of acquisition/improvement for computing capital gains on sale. Allowing both would amount to double deduction, which is impermissible under the scheme of the Act. The Tribunal relied on the established legal principle that an amount once allowed under one head cannot be duplicated under another head for the same assessee. [Paras 14]

Disallowance of the interest portion by the CIT(A) is upheld; the assessee cannot claim the interest again as part of cost of acquisition.

Verification of cost of acquisition/improvement - Remand for verification and recomputation - Whether the repairs and maintenance expense claimed as cost of improvement should have been accepted by the appellate authority - HELD THAT: - The Tribunal found that the lower authorities had not adequately examined the factual particulars and documentary evidence relating to the repairs and maintenance claimed as cost of improvement. Although the CIT(A) rejected the claim for lack of factual particulars, the Tribunal noted that invoices and bills were on record and that the statutory test under section 55(2) requires examination of whether an expenditure of a capital nature was incurred in making additions or alterations after the asset became the assessee's property, excluding expenditure already deductible under other heads. In fairness, the Tribunal directed that the issue be restored to the A.O for fresh verification and afforded the assessee an opportunity to produce documentary evidence. [Paras 15, 17]

Ground relating to repairs and maintenance is remitted to the A.O for fresh verification; the appeal on this point is allowed for statistical purposes and the A.O shall re-examine the claim on evidence.

Final Conclusion: The appeal against the Pr. CIT's order under section 263 is dismissed (Pr. CIT was justified in setting aside the assessment on the points of applicability of section 50C and inadequate verification of cost of acquisition/improvement); the CIT(A)'s disallowance of interest (claimed earlier under section 24(b)) as part of cost of acquisition is upheld; the claim for repairs and maintenance as cost of improvement is remanded to the A.O for fresh verification and recomputation. Overall outcome: one appeal dismissed and the other partly allowed for statistical purposes.

Validity of second notice under section 148 when proceedings on earlier section 148 notice are pending - Effect of return filed in response to a notice under section 148 - bar on issuance of fresh notice - Jurisdiction to issue fresh reopening notice during pending reassessment proceedings - Quashing of reassessment framed pursuant to invalid notice

Validity of second notice under section 148 when proceedings on earlier section 148 notice are pending - Effect of return filed in response to a notice under section 148 - bar on issuance of fresh notice - Quashing of reassessment framed pursuant to invalid notice - Second notice under section 148 issued while reassessment proceedings pursuant to a prior section 148 notice (to which the assessee had filed a return) were still pending is invalid and the reassessment framed thereunder is void. - HELD THAT: - The Tribunal held that section 148 does not empower the AO to issue a fresh notice while proceedings on a prior notice under section 148 are pending and have not been finally disposed of. Where an assessee files a return in response to a first notice under section 148, that return must be dealt with before any further notice under section 148 is issued; until the return is disposed of by assessment or reassessment, issuance of a subsequent section 148 notice is without jurisdiction. The Tribunal applied and followed the ratios of the decisions cited in the order, including the reasoning in S. Raman Chettiar and the decisions of the Madras, Calcutta and Allahabad High Courts which hold that returns filed in compliance with an earlier reopening notice are to be treated as returns and bar the issue of a fresh reopening notice until disposal of those returns. On the facts, the AO issued the second section 148 notice dated 19.03.2013 while the return filed in response to the first notice of 19.10.2011 remained pending (the reassessment pursuant to the first notice was finalized only on 25.03.2013). Consequently, the second notice and the reassessment order dated 29.03.2014 made thereunder were held to be invalid and liable to be quashed. [Paras 7, 8, 9, 10]

The second notice under section 148 issued on 19.03.2013 and the consequential reassessment order dated 29.03.2014 are quashed as issued without jurisdiction.

Final Conclusion: The revenue appeal is dismissed as academic and the assessee's cross objection is allowed; the reassessment proceedings founded on the second section 148 notice are quashed.

Reopening assessment under section 147/148 - Reason to believe for reopening - Burden under section 68 - unexplained cash credit - Accommodation entries / entry operators - Identity, creditworthiness and genuineness test - Requirement to specify nature of credited amount (share capital/loan/expense)

Reopening assessment under section 147/148 - Reason to believe for reopening - Accommodation entries / entry operators - Validity of reopening assessment proceedings under section 147/148 for A.Y. 2009-10 - HELD THAT: - The Tribunal examined the material relied on by the Assessing Officer, including information from the Investigation Wing and seized diaries purporting to record accommodation entries. While the AO recorded a belief that income had escaped assessment, the Tribunal found that several factual premises underpinning that belief were incorrect when compared with the assessee's records - in particular, the actual sources and recipients of amounts credited (share applicants and amounts) as disclosed by the assessee. The Tribunal concluded that the reasons recorded by the AO attributing the assessee's share capital increase to entry providers were proved incorrect on the record. For these reasons the Tribunal allowed the appeal on the ground relating to reopening, holding that the AO's recorded belief and consequential action under section 147/148 could not be sustained on the material before it. [Paras 16, 17, 18, 19]

Reopening under section 147/148 held unsustainable on the record; appeal allowed on this ground.

Burden under section 68 - unexplained cash credit - Identity, creditworthiness and genuineness test - Requirement to specify nature of credited amount (share capital/loan/expense) - Sustenance of addition of Rs. 14,00,000 made under section 68 as unexplained cash credit - HELD THAT: - The Tribunal scrutinised the assessment order and the appellate findings. The AO based the addition on seized diary entries showing credits of Rs. 7,00,000 to the assessee from two companies and extended the addition to Rs. 14,00,000 without specifying whether the amounts were share capital, loans or otherwise and without demonstrating that the credited sums were recorded in the assessee's books under the challenged head. The Tribunal found that the assessee had disclosed the actual share applicants (five family-related entities) and their identity and existence was not in dispute. The Tribunal further observed that one set of entries in the seized material related to another company (M/s Jindal Dal Mills Pvt. Ltd.) and that the AO had failed to inquire into or establish the genuineness of receipts by the person who allegedly purchased shares, or to allocate the correct tax consequences to the proper person. For these reasons the Tribunal held that the addition under section 68 was made on incorrect premises, without requisite examination of identity/creditworthiness/genuineness and without specifying the nature of the credits, and therefore allowed the appeal on this ground. [Paras 16, 17, 18, 19]

Addition under section 68 of Rs. 14,00,000 quashed; appeal allowed.

Final Conclusion: The appeal is allowed: the Tribunal set aside the reopening under section 147/148 and quashed the addition made under section 68 for A.Y. 2009-10, holding that the AO's reasons were factually incorrect and the requirements to establish unexplained credits were not satisfied.

Withdrawal or settlement during Corporate Insolvency Resolution Process - proceeding in rem - inherent powers under Rule 11 of the NCLT/NCLAT Rules - settlement prior to constitution of Committee of Creditors - protection of interests of other financial creditors

Withdrawal or settlement during Corporate Insolvency Resolution Process - inherent powers under Rule 11 of the NCLT/NCLAT Rules - settlement prior to constitution of Committee of Creditors - protection of interests of other financial creditors - Whether the Appellate Tribunal should exercise its inherent powers under Rule 11 to take on record a post admission Settlement and allow exit from the Corporate Insolvency Resolution Process on the ground that a settlement had been arrived at prior to constitution of the Committee of Creditors. - HELD THAT: - The Tribunal applied the principle that CIRP proceedings are proceedings in rem and that withdrawal or settlement affecting the collective proceeding requires consultation with the body overseeing the resolution process; where a Committee of Creditors is not yet constituted, the NCLT/NCLAT may, in exercise of inherent powers under Rule 11, permit or refuse withdrawal/settlement after hearing all concerned parties (paragraphs 6-7). On the facts, there was no evidence that a comprehensive settlement with the corporate debtor had been produced or brought to the Adjudicating Authority before admission or before constitution of the Committee of Creditors; the contention of a prior settlement was not disclosed in proceedings and appeared to be a belated ploy (paragraphs 8-9). Multiple other applications by other allottees (financial creditors) in respect of the same project were pending and the settlement relied upon was not all encompassing; allowing exit would prejudice the legitimate interests of other stakeholders and the admitted claimants whose claims were before the Committee (paragraphs 10-11). Given the lack of supporting evidence and the potential to defeat other creditors' rights, the circumstances did not warrant the exercise of Rule 11 powers to grant exit from CIRP on the basis advanced by the appellant. [Paras 7, 8, 9, 10, 11]

The Tribunal declined to exercise its inherent powers under Rule 11 to permit exit from the Corporate Insolvency Resolution Process on the basis of the alleged settlement; the appeal is dismissed.

Final Conclusion: The appeal is dismissed for lack of merit; no exercise of inherent powers under Rule 11 of the NCLT/NCLAT Rules is warranted on the basis of the asserted settlement, which was not proved and would prejudice other financial creditors.

Service of demand notice - pre-existing dispute - completeness of Section 9 application - admission under Section 9(5)(i) of the Insolvency and Bankruptcy Code, 2016 - plausible contention requiring further investigation - declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - appointment of Interim Resolution Professional

Service of demand notice - Demand notice in Form No.3 dated 11-9-2018 was properly served on the corporate debtor. - HELD THAT: - The Tribunal examined the address used (master data) and the postal evidence placed on record. The demand notice, dispatched on 11-9-2018, was delivered to the corporate debtor as reflected in the postal/tracking receipts on the record. No reply was received from the corporate debtor to the statutory notice. On this basis the Tribunal found that the statutory requirement of delivery of the notice to the corporate debtor was satisfied. [Paras 11, 15]

The demand notice was properly delivered to the corporate debtor.

Pre-existing dispute - plausible contention requiring further investigation - There was no pre-existing dispute or notice of dispute by the corporate debtor which would render the Section 9 application liable to be rejected. - HELD THAT: - The operational creditor filed an affidavit stating no reply to the demand notice and that no dispute or notice of dispute exists between the parties. The corporate debtor did not appear or place any contrary material before the Tribunal. Applying the test endorsed in Mobilox (that the adjudicating authority need only see whether a plausible dispute exists and not probe merits), the Tribunal concluded that no bona fide or plausible dispute was shown on the record to bar admission of the application. [Paras 6, 12, 15]

No notice of dispute or record of a pre-existing dispute was proved; the Section 9 application is not barred on that ground.

Completeness of Section 9 application - admission under Section 9(5)(i) of the Insolvency and Bankruptcy Code, 2016 - The application under Section 9 was complete, default and amount due were established, and the petition was admitted under Section 9(5)(i). - HELD THAT: - The Tribunal reviewed Form 5 and the accompanying documents including invoices, computation of dues, dishonoured cheques, communications admitting liability and interest, and the statutory affidavit as required by Section 9(3)(b). The operational creditor proved the existence of an operational debt in default exceeding the statutory threshold and satisfied the conditions set out in Section 9(5)(i). Consequently, the Tribunal was satisfied to admit the petition for initiation of the Corporate Insolvency Resolution Process. [Paras 15, 16, 17]

The Section 9 application was admitted and CIRP was initiated against the corporate debtor.

Declaration of moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - A moratorium under Section 14(1) was declared from the date of the order until completion of the CIRP or further orders. - HELD THAT: - On admission of the Section 9 petition and initiation of CIRP, the Tribunal recorded and declared the statutory moratorium, restraining institution or continuation of suits or proceedings, transfer or disposal of assets, actions to enforce security interests and recovery of property in possession of the corporate debtor, subject to the statutory exceptions. The duration of the moratorium was fixed to run till completion of CIRP or until approval of a resolution plan or liquidation order. [Paras 17, 18, 20]

Moratorium declared in terms of Section 14 with effect from the date of the order.

Appointment of Interim Resolution Professional - Mr. Rajiv Bhambri was appointed as Interim Resolution Professional with directions as required under the Code. - HELD THAT: - The operational creditor proposed an IRP and furnished his consent in Form 2. The Tribunal's due diligence (via the Law Research Associate) disclosed no adverse record or disciplinary proceedings. Pursuant to Sections 16(5) and 17 and other relevant provisions of the Code, the Tribunal appointed the proposed IRP, suspended the board's powers, vested management with the IRP, directed inventory and claims procedures, public announcement, constitution of the Committee of Creditors within statutory timelines, and ordered regular progress reporting to the Tribunal. [Paras 7, 21, 22]

Proposed Interim Resolution Professional appointed and directed to perform duties and report as mandated by the Code.

Final Conclusion: The Tribunal admitted the Section 9 petition, initiated the Corporate Insolvency Resolution Process against U.I. Beverages Pvt. Ltd., declared a moratorium under Section 14 and appointed the proposed Interim Resolution Professional with consequential directions to manage the CIRP.

Financial debt - financial creditor - Franchise Agreement read as a whole - operational transaction - written financial contract requirement under the AAA Rules, 2016 - Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - definition of financial debt - maintainability of a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016

Financial debt - financial creditor - Franchise Agreement read as a whole - written financial contract requirement under the AAA Rules, 2016 - Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - definition of financial debt - Whether the amount claimed by the petitioner under the Franchise Agreement constitutes a 'financial debt' and whether the petitioner is a 'financial creditor' so as to maintain a petition under Section 7 of the IBC, 2016. - HELD THAT: - The Tribunal examined the Franchise Agreement in its entirety and held that the primary object of the agreement was the Franchisee's exploitation of the Franchisor's trade name and the establishment and operation of a franchised store for the Franchisee's benefit. The clauses relied upon by the petitioner (including the ROI provisions and Schedule-1) could not be read in isolation; the Agreement as a whole shows the Franchisee's investment was to be utilized for the store and ancillary purposes (clause 7), and the Franchisor's operational control provisions (clause 9.1) are protective measures to preserve the trade name and uniformity of stores rather than evidence of a financial facility. The Tribunal further noted that the AAA Rules, 2016 require a written financial contract specifying tenure, interest or compensation for a claim to qualify as a financial debt, and by no stretch could the Franchise Agreement be treated as such a financial contract. On the accounting material relied upon by the respondent, the petitioner itself had not treated the receipts as financial income in its books, which weighed against characterization as a financial debt. For these reasons the claim did not satisfy the conditions of Section 5(8) of the IBC, 2016 and the petitioner could not be treated as a financial creditor entitled to proceed under Section 7. [Paras 32, 34, 35, 36, 37]

The amount claimed is not a 'financial debt' and the petitioner is not a 'financial creditor'; the petition under Section 7 is not maintainable and is dismissed without cost.

Final Conclusion: Reading the Franchise Agreement as a whole and applying the AAA Rules, 2016 and the definition in Section 5(8) of the IBC, 2016, the Tribunal concluded the claimed amount is not a financial debt and the petitioner is not a financial creditor; the Section 7 petition is dismissed without cost.

Jurisdictional limits of the Adjudicating Authority in CIRP matters - role and power of the Committee of Creditors and primacy of commercial wisdom - decision to liquidate under section 33(2) - creditors' right to decide liquidation prior to information memorandum - definition and applicability of "going concern" in CIRP - validity of assignment of debt and entitlement of assignees to membership and voting rights in CoC - preparation, contents and significance of the Information Memorandum - maintainability of workers' interlocutory application under section 60(5)(c) - consequences of liquidation and priority of workmen's dues

Jurisdictional limits of the Adjudicating Authority in CIRP matters - Authority's jurisdiction to adjudicate ownership of disputed land and to implead Government of Jharkhand - HELD THAT: - The Adjudicating Authority examined whether the Tribunal had jurisdiction to decide the ownership/nature of the lease/vesting of land at Jamshedpur and to implead the Government. Having regard to the scope of CIRP (which is confined to insolvency resolution or liquidation), the Authority held that the question of ownership/nature of the agreement between Tata Steel Ltd. and the Government did not fall within its jurisdiction. The Tribunal relied on the demarcation of powers in relevant precedent and observed that the land was a leased asset not belonging to the corporate debtor and that the dispute over vesting was not within the remit of CIRP proceedings. Consequently, the prayer to implead the Government and adjudicate the ownership was rejected. [Paras 6, 7, 9, 11]

Prayer to implead the Government and to adjudicate ownership of the Jamshedpur land is rejected for want of jurisdiction.

Definition and applicability of "going concern" in CIRP - Whether the corporate debtor was a going concern at the commencement of CIRP - HELD THAT: - The Tribunal considered legal, accounting and administrative formulations of 'going concern' and applied them to the corporate debtor's long history of closure, obsolete plant and absence of audited accounts since 1999. Reviewing the factual matrix including prior BIFR findings and prolonged litigation, it concluded that the corporate debtor was not a going concern and, in practical terms, had become a 'gone concern'. The finding noted that while revival to a going concern is theoretically possible if CoC provides resources, on the facts no such realistic prospect existed. [Paras 42, 48, 49, 51, 54]

Corporate debtor is not a going concern and cannot, in present circumstances, be maintained or run as a going concern in CIRP.

Decision to liquidate under section 33(2) - creditors' right to decide liquidation prior to information memorandum - role and power of the Committee of Creditors and primacy of commercial wisdom - preparation, contents and significance of the Information Memorandum - Validity of the Committee of Creditors' decision to liquidate the corporate debtor and the process adopted by the Resolution Professional - HELD THAT: - The Tribunal analysed statutory scheme, legislative amendment (explanation to section 33(2)), regulatory provisions and policy materials to conclude that CoC has the statutory right to decide liquidation at any time after constitution and before confirmation of a resolution plan, including before preparation of the information memorandum. The commercial wisdom of CoC is given primacy subject to compliance with law. Having examined the CoC meetings, voting results, efforts made to prepare information memorandum and the factual impossibility of meaningful resolution (including lack of records, expired sub-lease and obsolete assets), the Tribunal found no procedural lacunae or non-compliance by the RP that would vitiate the CoC decision. The Tribunal therefore held that the resolution to liquidate, approved by the requisite voting share, was valid and sustainable. [Paras 57, 60, 61, 62, 74]

CoC's decision to liquidate is valid; the Tribunal approves the liquidation and directs commencement of liquidation proceedings.

Validity of assignment of debt and entitlement of assignees to membership and voting rights in CoC - Challenge to the validity of assignments and entitlement of assignees (Kamala Mills Ltd., Fasqua Investment Pvt. Ltd., Pegasus ARP) to be members of CoC with voting rights - HELD THAT: - The Tribunal reviewed prior orders, the conduct of parties and statutory provisions. It observed that no aggrieved party had invoked the Eighth Schedule remedy within the prescribed period and that assignments pre-dated the Factoring Regulation Act 2011. The Tribunal held SARFAESI and Factoring Regulation Act do not bar such assignments in IBC proceedings; assignees fall within the definition of financial creditors under section 5(7) and are therefore properly members of CoC. Reliance on RBI circulars was held inapposite as those govern bank-to-bank/NPA transactions and do not negate assignments to non-banks in the present factual matrix. On both maintainability and merits the challenges to assignments and the composition of CoC were rejected. [Paras 67, 68, 69, 70]

Challenges to the validity of assignments and to assignees' membership and voting rights in CoC are rejected.

Maintainability of workers' interlocutory application under section 60(5)(c) - consequences of liquidation and priority of workmen's dues - Maintainability of applications filed by workmen and whether workmen could be appointed as Resolution Professional or have standing to press revival proposals - HELD THAT: - The Tribunal held that the workers' interlocutory application under section 60(5)(c) is maintainable as an interlocutory challenge and in the interests of workers generally. However, statutory framework does not permit workers to be appointed as Resolution Professional and their request to act as RP was rejected. The workers' revival proposal was also dismissed for lack of concreteness and because historical conduct did not support realistic prospects of revival. The Tribunal noted that workmen's dues would have statutory protection in liquidation under section 53 and that the liquidator must consider workers' interests as a priority during liquidation. [Paras 63, 73]

Workers' application is maintainable but workers cannot be appointed as RP; their revival proposal is not accepted; workers' dues to be given priority in liquidation.

Investigation of possible misconduct by de facto managers and duty of the Resolution Professional to report - Requirement for the RP to examine alleged misappropriation/rental extraction by persons alleged to be de facto management and to report if sections 43/45/66 of IBC apply - HELD THAT: - The Tribunal observed allegations that certain persons (additional directors or de facto managers) may have misapplied funds or occupied managerial position without entitlement. While the Tribunal did not decide merits of those allegations, it directed the Resolution Professional to examine the transactions and to report where provisions of the Code (including sections 43, 45 and 66) are found applicable, thereby leaving factual investigation and any consequential proceedings to the RP and appropriate authorities. [Paras 72]

RP to investigate alleged transactions and report findings where provisions of the Code (sections 43/45/66) are attracted; no final adjudication on culpability made by Tribunal.

Final Conclusion: The Tribunal held that it lacked jurisdiction to adjudicate the ownership dispute over the Jamshedpur land or to implead the Government; found the corporate debtor was not a going concern; upheld the Committee of Creditors' valid decision to liquidate (in accordance with section 33(2) as amended) and approved liquidation; rejected challenges to the validity of debt assignments and composition of the CoC; held workers' interlocutory application maintainable but refused appointment of workers as RP and found their revival proposal not sufficiently concrete; directed the RP to investigate alleged misconduct and appointed the Liquidator to proceed with liquidation observing that workers' interests and statutory priorities must be protected.

Insolvency Resolution Process Costs - duty of an insolvency professional under section 208(2) of the Code - IBBI Circular dated 12-06-2018 on fees and other expenses for CIRP - direct nexus test for inclusion in IRPC - independence of the resolution professional and prohibition on abdication to CoC - confidentiality of the Information Memorandum - remedial powers: suspension and directions for reimbursement

Insolvency Resolution Process Costs - IBBI Circular dated 12-06-2018 on fees and other expenses for CIRP - direct nexus test for inclusion in IRPC - duty of an insolvency professional under section 208(2) of the Code - Inclusion of the CoC's legal counsel fees (SAM) in IRPC was contrary to the Code, Regulations and IBBI circular and therefore impermissible. - HELD THAT: - The term "insolvency resolution process costs" as defined in section 5(13) read with Regulation 31 requires costs to be directly related to CIRP. The IBBI Circular dated 12-6-2018 explicitly excludes expenses incurred by a member of the CoC or a professional engaged by the CoC from IRPC. The RP included fees paid to the CoC's legal counsel in IRPC despite this clear position and continued payments even after the Circular, thereby failing his duty to exercise reasonable care and diligence and to avoid imposing undue financial burden on the corporate debtor. A request to CoC members for reimbursement after the contravention was noted does not cure the prior violation. [Paras 3, 4]

The inclusion of SAM's fees in IRPC was a contravention and the RP was directed to secure reimbursement of the amount charged to IRPC.

Insolvency Resolution Process Costs - independence of the resolution professional and prohibition on abdication to CoC - IBBI Circular dated 12-06-2018 on fees and other expenses for CIRP - duty of an insolvency professional under section 208(2) of the Code - Cost of the second forensic audit (Kroll), procured on the direction/decision of the CoC, ought not to have been charged to IRPC and the RP must secure reimbursement. - HELD THAT: - The minutes of the CoC show the decision to appoint Kroll for an expanded forensic audit was taken and the CoC authorised the RP to finalise engagement. Where the CoC directs or decides upon appointment for its own purposes, such costs lack the required direct nexus to CIRP and fall within exclusions clarified by the IBBI Circular. The RP's reliance on CoC instruction and subsequent belated request for refund after the IA's observation demonstrate abdication of independent decision-making required under the Code. Consequently the fee for the second forensic audit was improperly charged to IRPC. [Paras 3, 4]

The RP has contravened the Code and was directed to secure reimbursement of the second forensic audit fees charged to IRPC.

Independence of the resolution professional and prohibition on abdication to CoC - conflict of interest disclosure - Code of Conduct obligations under the IP Regulations - Appointment of Kroll/Duff & Phelps did not establish a disqualifying conflict of interest on the facts; no contravention found in this regard. - HELD THAT: - Although Duff & Phelps had acquired Kroll's business and the RP had an association with a restructuring practice, the CoC discussed and recorded the potential conflict and the need for a "Chinese wall"; the RP had disclosed his association in the 2nd CoC presentation and the CoC addressed the issue. The record shows competitive bidding and CoC approval; on these facts the DC found no evidence of impermissible conflict or undue benefit to the RP's interests and therefore no liability for conflict of interest in the appointment. [Paras 3]

No contravention found on conflict of interest grounds in the appointment of Kroll/Duff & Phelps.

Valuation independence - Regulation 35(2) and confidentiality undertakings - No evidence was found that the RP or the CoC interfered with the valuation exercise or liquidation values; therefore no contravention of Regulation 35 was established. - HELD THAT: - Although valuers revised liquidation values following queries on methodology and assumptions, the record contains no evidence that the RP or CoC directed changes to the valuation figures. Valuers relied on available information as permitted by valuation standards and the draft analyses were not shared with CoC until after submission of resolution plans, consistent with Regulation 35(2). Absent corroborative evidence of interference, the DC could not hold the RP liable. [Paras 3]

No contravention in relation to valuation exercise; the RP is not liable under Regulation 35 on the material before the DC.

Duty to minimise IRPC and exercise reasonable care in incurring expenses - competitive appointment and CoC ratification - Appointments of various professionals (ASA law firm, senior advocates, surveyors, Sumant Batra) and related fees were satisfactorily justified and do not constitute a contravention for exorbitant or arbitrary spending on the facts of the case. - HELD THAT: - The RP demonstrated that appointments were made through competitive processes, were ratified by the CoC where required, and in some instances resulted in cost savings or addressed specific, material operational discrepancies (e.g., measurements). The CoC minutes evidence approvals and the RP's justifications show the expenses were incurred for identified CIRP needs. Given the explanations and documentary record, the DC concluded these outlays were not arbitrary or excessive to an extent warranting disciplinary action. [Paras 3]

No contravention established in respect of the appointment of the professionals and the fees paid.

Role of process advisor vis-a -vis RP - absence of explicit statutory prohibition on Process Advisor participation - The involvement of the Process Advisor (SBI Caps) in communications and in opening of resolution plans did not amount to a contravention in the absence of any specific provision or circular forbidding such involvement. - HELD THAT: - The RP's engagement of a process advisor followed competitive selection and CoC ratification. Although core functions of the RP cannot be outsourced, the Code and Regulations do not unambiguously delimit the process advisor's participation in plan opening and related communications. The RP clarified that no NCLT direction compelled inclusion of the advisor; both RP and legal counsels agreed the methodology. In absence of a clear regulatory prohibition or evidence that the RP abdicated his responsibilities, no contravention could be made out. [Paras 3]

No contravention found regarding the involvement of the Process Advisor.

Confidentiality of the Information Memorandum - duty of an insolvency professional under section 208(2) of the Code - Regulation 36B (non-retrospective application) - The RP improperly shared the Information Memorandum with DPS Ghaziabad prior to Form G and before determining eligibility; this breached duties of confidentiality and objective conduct although Regulation 36B did not apply retrospectively to the CIRP. - HELD THAT: - The IM contains sensitive information and its dissemination is governed by section 29(2) and Regulation 36B (procedure). The RP shared the IM with Mr. Pathak on 10-7-2018 before Form G (18-7-2018) and before conducting due diligence to assess eligibility; DPS had only submitted an EoI and had not paid VDR fees. Even though Regulation 36B was inserted with effect from 3-7-2018, it applies to CIRPs commencing on or after that date and is therefore not applicable to this CIRP which commenced on 25-4-2018. Nonetheless, the RP's conduct violated his duties under section 208(2)(a) and the Code of Conduct obligations to maintain confidentiality, act with objectivity and exercise reasonable care. [Paras 3, 4]

Sharing the IM with DPS Ghaziabad prior to public invitation and eligibility verification was a breach of the RP's duties and amounted to a contravention.

Final Conclusion: The Disciplinary Committee concluded that the RP committed specific contraventions by: (i) charging the CoC's legal counsel fees to IRPC and (ii) charging the cost of the second forensic audit to IRPC, and by (iii) improperly sharing the Information Memorandum with a third party prior to Form G and eligibility verification. No contraventions were established in respect of alleged conflict of interest in the appointment of Kroll/Duff & Phelps, interference with valuation, appointment of other professionals and fees, or involvement of the process advisor. Consequentially, the DC ordered suspension of the RP's registration for six months and directed him to secure reimbursement of the amounts charged to IRPC for the lender's legal counsel and the second forensic audit; the order takes effect after 30 days.

Rectification of mistake apparent on record - typographical error - scope of Tribunal's power to recall or rectify its order under Section 129B(1) of the Central Excise Act, 1944 - error apparent on record - requirement of being obvious and self evident - rectification does not amount to review - points raised in appeal but not considered - calculation error requiring verification of records - benefit of composition scheme and consequential relief - cum tax benefit not raised in grounds of appeal

Typographical error - rectification of mistake apparent on record - Typographical error in paragraph 8 of the Tribunal's final order corrected to reflect that the demand for shifting of overhead cables/wires is set aside. - HELD THAT: - The impugned paragraph 8 stated both that the demand was wrongly confirmed and also that "the order to that extent is upheld", creating a self contradiction. The Tribunal held that once an activity is not taxable, any order confirming tax liability is an error; the presence of the word "upheld" was a typographical mistake. The correct reading is that "the order to that extent is hereby set aside." The error was obvious on the face of the order and required correction without further deliberation. [Paras 5]

Typographical correction ordered: para 8 to read that the order to that extent is set aside.

Scope of Tribunal's power to recall or rectify its order under Section 129B(1) of the Central Excise Act, 1944 - error apparent on record - requirement of being obvious and self evident - rectification does not amount to review - Clarification of the test for rectification: only obvious, self evident, and palpable mistakes that do not require extended reasoning are rectifiable. - HELD THAT: - Relying on precedents, the Tribunal explained that it may correct mistakes apparent on its record under its jurisdiction, but such mistakes must be obvious and self evident so that their discovery does not entail a long process of reasoning. Omissions where a point was argued but not considered can be rectified if the omission is manifest. Conversely, matters requiring fresh verification or long drawn examination do not qualify for rectification and correcting them would amount to review. [Paras 6, 7]

Scope of rectification confined to palpable, self evident errors; broader reconsideration or verification is not permitted in rectification proceedings.

Benefit of composition scheme and consequential relief - points raised in appeal but not considered - No rectification ordered to grant composition scheme benefits because the Tribunal had found that the rate paid by the appellant indicated non availment of the composition scheme. - HELD THAT: - The Tribunal reviewed the final order and held that it had specifically found that the duty rate paid by the appellant indicated that the appellant had not availed the composition scheme; therefore there was no basis to direct consequential benefits. That finding precluded any rectification to grant composition relief. [Paras 8]

Request for consequential benefit under composition scheme rejected.

Calculation error requiring verification of records - error apparent on record - requirement of being obvious and self evident - Alleged calculation error not susceptible to rectification because it requires detailed verification and is not an error apparent on the face of the record. - HELD THAT: - The appellant's contention of a calculation mistake would necessitate examination and verification of records, a process not permitted in rectification proceedings. Since the alleged mistake is not self evident or obvious from the order itself, it does not qualify as an error apparent on record and cannot be corrected in the present remedy. [Paras 9]

Application to rectify calculation error rejected.

Cum tax benefit not raised in grounds of appeal - points raised in appeal but not considered - Claim of cum tax benefit cannot be rectified because it was not raised in the grounds of appeal; omission to consider it is not sustainable as a rectifiable error. - HELD THAT: - The Tribunal observed that the plea for cum tax benefit was not included in the grounds of appeal. An allegation that the Tribunal failed to consider a submission which was not formally part of the grounds cannot be the basis for rectification. As such, the contention is outside the permissible scope of correction under the rectification procedure. [Paras 9]

Request concerning cum tax benefit dismissed as not within scope of rectification.

Rectification of mistake apparent on record - Overall disposition: application partly allowed to correct the typographical error; all other requests for rectification denied. - HELD THAT: - Applying the explained test, the Tribunal permitted only the correction that was obvious on the face of the order (para 8). All other grievances required either verification of records, raised new matters not in the grounds, or did not amount to an obvious omission, and therefore could not be entertained in a rectification application. [Paras 10, 11]

Application partly allowed (typographical correction granted); remaining requests rejected.

Final Conclusion: The application for rectification is partly allowed: the typographical error in paragraph 8 is corrected to state that the order in respect of shifting of overhead cables/wires is set aside; all other alleged mistakes (composition scheme consequential relief, calculation error, cum tax benefit and related contentions) are rejected as being outside the scope of rectification since they are not errors apparent on the face of the record or were not raised in the grounds of appeal.

Condonation of delay - limitation for filing appeal before Commissioner (Appeals) - sufficient cause - statutory mandate restricting condonation to three months - effect of death of sole proprietor on appellate proceedings

Condonation of delay - limitation for filing appeal before Commissioner (Appeals) - statutory mandate restricting condonation to three months - sufficient cause - Whether the Commissioner (Appeals) and this Tribunal were in error in refusing to condone the delay of three months and ten days in filing the appeal. - HELD THAT: - The Tribunal found that the appeal against Order-in-Original 17/ST-2013 (acknowledged received on 23.06.2014) was filed on 02.12.2014, thereby incurring a delay of 3 months and 10 days beyond the prescribed period. The Commissioner (Appeals) refused condonation of that delay and the Tribunal upheld that refusal. The Tribunal applied the statutory scheme embodied in Section 35 of the Central Excise Act and followed the reasoning in Singh Enterprises (as cited in the order) to hold that the explanation for delay must amount to sufficient cause and that there was no infirmity in treating the appeal as barred by limitation. Having considered the materials and precedent relied upon, the Tribunal concluded that refusal to condone the delay was proper and that the impugned order was not vitiated for lack of consideration on merits. [Paras 4]

Refusal to condone delay of 3 months and 10 days was upheld; no infirmity found in the limitation-based dismissal.

Effect of death of sole proprietor on appellate proceedings - condonation of delay - sufficient cause - Whether the death of the sole proprietor during the pendency of proceedings before the Commissioner (Appeals) constituted a sufficient cause to excuse the delay and required dropping or reconsideration of the appeal. - HELD THAT: - The appellant contended that the proprietor's death (with notice given to the Commissioner (Appeals) and death certificate on record) was not considered and therefore the final order required rectification. The Tribunal examined authorities recognizing that no demand can be confirmed against a dead person, but observed that in the present case the Commissioner (Appeals) did not confirm any demand; the order was predicated on limitation. The Tribunal held that the proprietor's death did not, on the material before it, constitute a sufficient explanation to excuse the delay in filing the appeal. Consequently, the death did not alter the limitation-based conclusion or warrant reopening the order. [Paras 4, 5]

Death of the proprietor did not constitute a sufficient cause to excuse the delay; omission to condone delay remains valid and the contention to recall the final order is rejected.

Final Conclusion: Both applications for rectification of the final order were dismissed; the Tribunal found no infirmity in the limitation-based refusal to condone delay and held that the proprietor's death did not supply a sufficient cause to alter that conclusion.

Rectification of mistake apparent on the record - condonation of delay in filing rectification application - suo moto limitation on Tribunal's power of rectification - inherent/ancillary power to recall or correct orders to do justice - precedential effect of subsequent Supreme Court decisions overruling or superseding earlier non-speaking orders

Rectification of mistake apparent on the record - Typographical error in paragraph 7 of the Tribunal's final order correcting the amount set aside. - HELD THAT: - The Tribunal found that paragraph 7 of its Final Order contained a typographical error stating a lesser figure than was intended. The appellant had obtained the Final Order allowing the appeal and setting aside the full demand, but the operative sentence erroneously recorded a smaller amount. The Revenue's representative conceded the existence of a typographical error. Having considered the materials and the appellant's explanation and request, the Tribunal held that the figure in paragraph 7 is to be read and corrected to the proper amount stated in the Final Order and allowed the rectification application to correct the record accordingly. [Paras 2, 3, 11]

Paragraph 7 of the Final Order is rectified and the amount stated therein shall read as Rs. 4,10,40,683/-, the Rectification of Mistake application is allowed and consequential benefits follow.

Condonation of delay in filing rectification application - suo moto limitation on Tribunal's power of rectification - inherent/ancillary power to recall or correct orders to do justice - precedential effect of subsequent Supreme Court decisions overruling or superseding earlier non-speaking orders - Whether delay in filing the rectification application beyond the six month period is liable to be condoned and whether the Tribunal has power to entertain such an application filed by an aggrieved party. - HELD THAT: - The Tribunal examined the limitation provisions applicable to suo moto rectification by the Tribunal and rectification on application by a party, and the relevant Supreme Court and High Court authorities. It noted that the six month/limited period operates as the timeframe for the Tribunal's suo moto exercise of rectification, whereas an aggrieved party may file an application for rectification beyond that period provided reasons for delay are shown. The Tribunal relied on later Supreme Court authority and subsequent High Court pronouncements recognising the Tribunal's inherent/ancillary power to correct its orders to do justice and held that earlier Larger Bench authority relied upon by the Revenue was not binding in view of the subsequent Supreme Court decisions and their reasoning. Applying these principles, and having found that the appellant reasonably explained the delay and that injustice would result if relief were not granted, the Tribunal exercised its discretion to condone the delay and allowed the rectification application. [Paras 7, 10, 11]

Delay in filing the rectification application is condoned; the Tribunal has jurisdiction to entertain the application filed by the aggrieved party beyond the six month suo moto period where delay is reasonably explained, and the condonation and rectification applications are allowed.

Final Conclusion: The Tribunal allowed the rectification application and condoned the delay: the typographical error in paragraph 7 of the Final Order is corrected to reflect the full amount set aside, and the appellant is entitled to consequential benefits in accordance with law.

SSI exemption - clubbing of clearances - separate legal entity of private limited companies - aggregate value of clearances - financial flow back - applicability of Board's Circular regarding separate exemption limits

Clubbing of clearances - SSI exemption - separate legal entity of private limited companies - financial flow back - Whether the clearances of M/s. Noble Chlorochem Pvt. Ltd. (NCPL) could be clubbed with M/s. Noble Alchem Pvt. Ltd. (NAPL) for denial of SSI exemption and demand of duty. - HELD THAT: - The Tribunal accepted the settled proposition in Board circulars and earlier Tribunal decisions that private limited companies are separate legal entities and, ordinarily, each company is entitled to a separate SSI exemption limit. Having examined the facts recorded by the adjudicating authority, the Tribunal noted that both companies were separately registered, manufactured different products, maintained separate electricity connections, distinct raw material stores, independent work forces, separate bank accounts and accountants, and submitted statutory declarations periodically. The Department failed to establish any meaningful financial flow back, diversion of profits or other special financial interdependence; instances of inter-company payments were accounted for and money lent was repaid. In the absence of evidence of manipulation, sharing of profits or that one unit was a sham or dummy, ordinary commercial transactions and some common directors do not justify clubbing. Applying the notification conditions regarding aggregate value of clearances and the Board's clarification that limited companies are distinct for exemption limits, the Tribunal held that clubbing was not sustainable. It further observed that if clubbing were to be justified, the demand should have been raised on the main entity, not on NCPL; since that was not done the demand against NCPL cannot stand. [Paras 14, 16, 17, 18]

Clearances of NCPL cannot be clubbed with NAPL; NCPL is entitled to benefit of Notification No.8/2003-CE dated 1.3.2003 and the duty demand against NCPL is not sustainable.

Final Conclusion: The impugned order denying SSI exemption to M/s. Noble Chlorochem Pvt. Ltd. by clubbing its clearances with M/s. Noble Alchem Pvt. Ltd. is set aside; NCPL is entitled to the exemption under Notification No.8/2003-CE and the appeals are allowed with consequential relief.

Interest on delayed refund - pre-deposit under Section 35F of the Central Excise Act - implementation of appellate order - contempt for non-compliance of tribunal order - unjust enrichment

Interest on delayed refund - pre-deposit under Section 35F of the Central Excise Act - unjust enrichment - Entitlement to interest on the refund already sanctioned and the correctness of the Assistant Commissioner's rejection of the claim for interest. - HELD THAT: - This Tribunal had earlier held that the appellant was entitled to interest on the refund sanctioned, treating the amount deposited under protest as a pre-deposit under Section 35F of the Central Excise Act upon filing the appeal, and directed payment of interest from the date of filing the appeal until the date of grant of refund. The Assistant Commissioner rejected the claim for interest, observing that Section 35F is not applicable prior to the Finance (No.2) Act, 2014 and thereby refusing to implement the Tribunal's direction. The Tribunal found that the point of unjust enrichment did not apply as the refund had already been sanctioned as deposited under protest. Having noted that the department did not appeal the Tribunal's order, the Assistant Commissioner was bound to implement the Tribunal's direction; his refusal to do so constituted interference with the process of justice delivery and was legally incorrect. [Paras 2]

The Tribunal reaffirmed its earlier entitlement ruling and concluded that the Assistant Commissioner's rejection of interest was not in accordance with the Tribunal's final order and therefore incorrect.

Implementation of appellate order - contempt for non-compliance of tribunal order - Appropriate remedial direction for failure to implement the Tribunal's final order and initiation of proceedings against the Assistant Commissioner. - HELD THAT: - The Tribunal held that an officer charged with implementing its order was obliged either to comply or to file an appeal/stay application before a higher forum; by refusing to implement the Tribunal's final order and deciding the matter himself, the Assistant Commissioner committed insubordination. The Tribunal therefore directed that the Assistant Commissioner show cause why contempt proceedings should not be initiated and ordered him to comply with the final order or file a compliance report by the specified date. The Registry was directed to serve notice on the Assistant Commissioner and copy the Commissioner. [Paras 4, 5, 7]

The Assistant Commissioner was directed to show cause for his non-compliance and given a final opportunity to implement the Tribunal's order or file a compliance report by the stated date; notice to be issued for the show-cause and copies sent to the Commissioner.

Final Conclusion: The Tribunal reiterated that the appellant is entitled to interest on the sanctioned refund as previously directed, found the Assistant Commissioner's refusal to implement that direction improper, directed issuance of a show-cause notice for possible contempt, and granted a final opportunity for compliance or to file a compliance report by the specified date.

Expunction of judicial observations - malice-in-fact - malice-in-law - imposition of personal costs - judicial restraint in making adverse personal observations

Expunction of judicial observations - malice-in-fact - malice-in-law - judicial restraint in making adverse personal observations - Whether the Single Judge was justified in recording observations that the assessing officer's order was whimsical and suffered from malice-in-fact and malice-in-law, and whether those observations should be allowed to stand. - HELD THAT: - The Supreme Court found that the learned Single Judge had no reasonable justification for concluding that the petitioner had passed a whimsical order or that it suffered from malice in fact or in law. Those adverse observations were unnecessary to decide the merits of the reassessment dispute and impugned the petitioner personally although her conduct was not in question. Even assuming the assessing order was erroneous, that did not warrant the High Court's characterisation or the formulation of findings of malice. Consequently, the Court directed that the observations in paragraph 7 of the Single Judge's order dated 24 September 2018 be expunged. [Paras 5, 6, 7]

Observations in paragraph 7 of the Single Judge's order holding the petitioner's order to be whimsical and affected by malice are expunged.

Imposition of personal costs - expunction of judicial observations - Whether the direction to recover costs from the personal resources of the petitioner should be maintained. - HELD THAT: - The Court held that there was no justification for directing that costs be recovered from the personal resources of the petitioner. The imposition of personal costs flowed from the unnecessary adverse observations which the Court has expunged. Accordingly, the direction in paragraph 8 of the Single Judge's order for recovery of costs from the petitioner's personal resources was set aside. Further, insofar as the Division Bench confirmed these aspects of the Single Judge's order, those confirmations shall not operate against the petitioner. [Paras 6, 7]

Direction in paragraph 8 for recovery of costs from the petitioner's personal resources is set aside, and the Division Bench's confirmations of these aspects shall not operate against the petitioner.

Final Conclusion: The Special Leave Petition is disposed of by expunging the Single Judge's adverse observations of malice and setting aside the direction to recover costs from the petitioner personally; nothing in this order expresses any view on the correctness of the Single Judge's quashing of the reassessment.