TaxTMI Updates e-Newsletter
Jul 16,2019

Release of seized goods under section 129(1)(a) of the Central Goods and Service Tax Act, 2017 - confiscation proceedings under section 130 of the Central Goods and Service Tax Act, 2017 - interim release of goods and conveyance pending confiscation proceedings - personal bond as security for interim release - consideration of perishability of goods in grant of interim relief - writ jurisdiction under Article 226 of the Constitution of India

Interim release of goods and conveyance pending confiscation proceedings - consideration of perishability of goods in grant of interim relief - release of seized goods under section 129(1)(a) of the Central Goods and Service Tax Act, 2017 - Whether the conveyance and perishable goods should be released pending the confiscation proceedings under the GST law. - HELD THAT: - The Court was concerned only with the limited question of interim release pending ongoing confiscation proceedings under the Act. The betel nut consignment was held to be perishable and had already been lying exposed for a significant period; there was a real risk of deterioration or destruction if not released. Although confiscation proceedings under section 130 were in progress and the final outcome (including appeals) would govern ultimate liability, the perishability of the goods warranted interlocutory relief to prevent loss that would render any eventual relief nugatory. The petitioner's deposit of tax and penalty was noted, but the Court's decision on interim release was driven by preservation of the goods and the need to protect the rights of the parties during pendency of the statutory proceedings.

Conveyance and perishable goods to be released forthwith pending confiscation proceedings, subject to conditions prescribed by the Court.

Personal bond as security for interim release - confiscation proceedings under section 130 of the Central Goods and Service Tax Act, 2017 - On what terms and security the interim release should be granted. - HELD THAT: - The Court imposed a condition of security to protect the revenue and ensure effectiveness of any future confiscation order. Having noted the respondents' calculation of the fine in lieu of confiscation, the Court directed release only upon the execution of a personal bond to the satisfaction of the respondents in the amount determined by them for confiscation. This condition was held to be appropriate given the pending statutory proceedings under section 130, and to balance the interest of the writ applicant in preservation of perishable goods with the respondents' interest in recovery and enforcement of any confiscation order.

Release authorised on the petitioner executing a personal bond in the specified amount to the satisfaction of the respondents, after which respondents shall release the conveyance and goods forthwith, subject to the final outcome of confiscation proceedings.

Final Conclusion: Writ petition disposed by directing interim release of the perishable consignment and conveyance pending confiscation proceedings under the GST law, conditional upon execution of a personal bond to the satisfaction of the respondents; substantive confiscation liability to be determined in the ongoing proceedings.

Addition to income under Section 69C on account of unexplained capitation fee - Burden of proof on assessee to explain source of expenditure - No substantial question of law arising from tribunal order

Addition to income under Section 69C on account of unexplained capitation fee - Burden of proof on assessee to explain source of expenditure - Reliance on statements recorded under Section 131 - Validity of addition of the alleged capitation fee to the assessee's income under Section 69C - HELD THAT: - The Assessing Officer, on finding the assessee's son's name in the capitation-fee receipt list and the absence of a credible explanation for the payment claimed as capitation fee, issued notices and recorded statements including that of the person who undertook the admission process. The father-in-law's statement accounted only for regular fees and did not satisfactorily explain the source of the amount shown as capitation fee. The assessee had not furnished a credible explanation and had not participated in earlier hearings. Applying the principle that the burden lies on the assessee to explain the source of unexplained payments, the AO was entitled to treat the unexplained capitation fee as income of the assessee under Section 69C. The ITAT's dismissal of the assessee's appeal was in consonance with these findings and did not exhibit legal error.

Addition of the alleged capitation fee to the assessee's income under Section 69C sustained; ITAT order affirmed.

Final Conclusion: The appeal is dismissed; the High Court finds no substantial question of law in the ITAT's order and upholds the addition made under Section 69C for AY 2013-14.

Revision under Section 264 - intimation under Section 143(1) regarded as an order for the purposes of Section 264 - prejudice to the assessee from acceptance of return - Protocol to a DTAA forming part of the DTAA - tax on Fees for Technical Services under DTAA inclusive of surcharge and cess

Intimation under Section 143(1) regarded as an order for the purposes of Section 264 - revision under Section 264 - Maintainability of a revision petition under Section 264 of the Income Tax Act against an intimation under Section 143(1). - HELD THAT: - The Court held that where a return has been accepted by the Department by an intimation under Section 143(1) and the assessee subsequently seeks rectification of a mistake in the return, the intimation for the limited purpose of Section 264 partakes the character of an 'order' and a revision petition under Section 264 is maintainable. The Court distinguished the context of re-opening assessments under Sections 147/148 and noted that binding High Court decisions have treated intimation under Section 143(1) as amenable to revision under Section 264; therefore the Commissioner was incorrect in declining jurisdiction on the ground relied upon in the impugned order. [Paras 16, 17]

A revision petition under Section 264 is maintainable against an intimation under Section 143(1).

Prejudice to the assessee from acceptance of return - Protocol to a DTAA forming part of the DTAA - Whether the intimation under Section 143(1) was prejudicial to the petitioner and whether the petitioner was entitled to revision to apply a lower treaty rate (10%) by reason of the Protocol to the DTAA. - HELD THAT: - The Court found that the petitioner had voluntarily paid tax at the higher rate and that such payment, although voluntary, caused prejudice to the petitioner; consequently the ingredients of Section 264 were satisfied. The Court accepted the petitioner's contention that the Protocol to the India Spain DTAA operates as part of the DTAA for the purpose of claiming the concessional rate on Fees for Technical Services, and held that the Commissioner ought not to have declined to follow the jurisdictional High Court's decision in Steria India Limited which recognises the Protocol as forming part of the DTAA. The Court rejected the respondent's reliance on the necessity of a fresh notification where the jurisdictional High Court's decision applied and observed that the Supreme Court's SLP against Steria did not stay the operation of that decision. [Paras 18, 19]

The intimation was prejudicial to the petitioner and revision was permissible to give effect to the lower treaty rate in terms of the Protocol to the DTAA.

Tax on Fees for Technical Services under DTAA inclusive of surcharge and cess - Whether surcharge and cess were required to be separately paid in addition to the DTAA rate. - HELD THAT: - The Court held that the tax rate under the DTAA is final and inclusive of surcharge and cess; there was no requirement to separately pay surcharge and cess once tax at the appropriate treaty rate was applied. The Commissioner erred in treating those additional payments as legitimately payable when the treaty rate applied. [Paras 20, 21]

Surcharge and cess were not separately payable where tax on FTS was charged at the DTAA rate; excess tax paid including surcharge and cess was refundable.

Final Conclusion: The impugned order dismissing the revision under Section 264 was quashed. The respondents were directed to permit rectification of the return to apply tax on Fees for Technical Services at 10% in accordance with the DTAA and its Protocol, and to refund the excess tax paid (including surcharge and cess) with interest within eight weeks.

Capital expenditure versus revenue expenditure - advantage of enduring nature - expenditure facilitating day-to-day running of business - acquisition of property or rights of permanent character - expenditure as part of the process of profit-earning

Capital expenditure versus revenue expenditure - advantage of enduring nature - expenditure facilitating day-to-day running of business - acquisition of property or rights of permanent character - Whether the assessee's contribution towards construction of the Usgao bridge in assessment year 2008-09 is capital expenditure or revenue expenditure. - HELD THAT: - The Court applied the established distinctions between capital and revenue outlays and held that an advantage of enduring nature does not automatically convert an expenditure into capital. Relying on the principle that where expenditure merely facilitates the day-to-day running of the business or enables the profit-earning apparatus to operate more efficiently while leaving the fixed capital of the assessee untouched, the payment is revenue in nature, the Court found the contribution was made to facilitate transportation and to reduce operating costs per ton. The Court held that the assessee did not acquire any property or a right of permanent character the possession of which was a condition of carrying on the trade; rather, it obtained an operational advantage akin to increased efficiency or relaxation of a constraint, which is part of the process of profit-earning. The decision noted and applied the Supreme Court's reasoning that the enduring nature test yields where special circumstances show the payment is in the nature of a revenue expense and treated comparable precedents on contributions for roads and similar infrastructure as supporting revenue treatment . Consequently, the contribution was held to be revenue expenditure despite conferring an enduring benefit, because the fixed capital structure of the assessee remained untouched and no permanent proprietary right was acquired. [Paras 6, 7, 8, 9]

The contribution towards construction of the Usgao bridge is revenue expenditure and not capital expenditure.

Final Conclusion: The Tax Appeal is dismissed; the Tribunal's finding that the contribution made by the assessee for construction of the Usgao bridge is a revenue expenditure is upheld and no substantial question of law arises.

Revision under Section 263 - erroneous order prejudicial to the interest of the revenue - change of opinion - slump sale and application of Section 50B - assignment of values to individual assets - definition of "slump sale" under Section 2(42C)

Revision under Section 263 - erroneous order prejudicial to the interest of the revenue - change of opinion - Validity of the Commissioner's invocation of power under Section 263 to revise the assessment. - HELD THAT: - The Tribunal held, and this Court concurs, that the Commissioner could not invoke Section 263 where the material shows that the Assessing Officer had considered the assessee's explanation and completed the assessment on the basis that values were assigned to individual assets and liabilities. The Commissioner's order under Section 263 did not refer to the reopening, notice, the assessee's replies or the reasons on which the Assessing Officer completed assessment, and thus amounted to a change of opinion rather than correction of an order which is "erroneous" and "prejudicial to the interests of the revenue" as those terms are understood in the authorities (Malabar Industrial Co. Ltd. and Max India Ltd.). An order differing from a view legitimately taken by the Assessing Officer is not vulnerable to revision under Section 263 unless the view taken is unsustainable in law; that threshold was not crossed on the material before the Commissioner. [Paras 5, 11, 12]

The revision under Section 263 was improperly invoked and the Commissioner's order is quashed.

Slump sale and application of Section 50B - assignment of values to individual assets - definition of "slump sale" under Section 2(42C) - Whether the transfer qualified as a "slump sale" attracting Section 50B. - HELD THAT: - The Assessing Officer accepted the assessee's case that the transfer price was based on identification and valuation of individual assets and liabilities (book/Written Down Values), so that the transaction did not satisfy the statutory definition of "slump sale" which requires a lumpsum transfer without values being assigned to individual assets and liabilities under Section 2(42C). The Assessing Officer concluded accordingly and completed the assessment. The Commissioner's attempt to treat the transfer as a slump sale in invoking Section 263 did not engage the statutory test because the factual and accounting basis before the Assessing Officer showed assignment of values to individual assets; therefore Section 50B was not attracted on the material accepted in assessment. [Paras 8, 9, 10]

The transfer did not constitute a "slump sale" for the purposes of Section 50B on the facts accepted in assessment, and Section 50B was not applicable.

Final Conclusion: The Tribunal's order quashing the Commissioner's revision under Section 263 is affirmed; the attempted invocation of Section 263 amounted to a change of opinion and the transaction was not a "slump sale" attracting Section 50B. The revenue's appeal is dismissed.

Independence of penalty proceedings from quantum assessment - right to test explanation and reconciliation in penalty proceedings - limitation bar to miscellaneous petition - remand for fresh consideration on merits - precedential relevance of tribunal decision on identical facts

Independence of penalty proceedings from quantum assessment - right to test explanation and reconciliation in penalty proceedings - precedential relevance of tribunal decision on identical facts - remand for fresh consideration on merits - Whether the Tribunal erred in reversing the Commissioner (Appeals) and sustaining penalty without allowing the assessee an opportunity to reconcile jewelry claimed as disclosed under VDIS and to test the explanation in penalty proceedings. - HELD THAT: - The Court held that quantum assessment and penalty proceedings are independent and that the Tribunal's view-premised on finality of the quantum assessment-was incorrect. The assessee had pleaded that jewelry recovered in search had been declared under VDIS, and that remaining amounts were on inheritance and sridhana; a similar reconciliation had been permitted in the Tribunal's decision in Shanmugapriya. The explanation must be tested on its merits and only if found palpably false or unacceptable should penalty follow. Accordingly the Court disapproved the application by the Tribunal of Mak Data (P) Limited where such an approach precluded testing of explanation, and directed that the matter be remanded to the Assessing Officer to afford the assessee an opportunity to reconcile the quantum of jewelry, to take note of the Shanmugapriya decision, and to pass fresh orders uninfluenced by earlier observations. [Paras 9, 10, 11, 12]

TCA.No.82 of 2019 allowed; Tribunal's order set aside and matter remanded to the Assessing Officer to afford opportunity for reconciliation and fresh decision on merits.

Limitation bar to miscellaneous petition - remand for fresh consideration on merits - Whether the miscellaneous petition dismissed by the Tribunal as barred by limitation requires separate adjudication after the substantive matter has been remanded. - HELD THAT: - The Court observed that since the substantive appeal (TCA.No.82 of 2019) has been allowed and the matter remanded to the Assessing Officer for fresh consideration, no separate adjudication of the Miscellaneous Petition (TCA.No.954 of 2018) is required. The appeal against the order dismissing the miscellaneous petition as time-barred is therefore rendered academic. [Paras 13]

TCA.No.954 of 2018 closed as academic; substantial questions of law left open.

Final Conclusion: The appeal against the Tribunal's confirmation of penalty is allowed; the Tribunal's order is set aside and the matter remanded to the Assessing Officer to permit reconciliation of the jewelry (including consideration of VDIS declarations and the Shanmugapriya decision) and to pass fresh orders on merits; the separate challenge to the dismissal of the miscellaneous petition is closed as academic; substantial questions of law are left open; no costs.

Deduction as revenue expenditure/current repairs - replacement of independent complete machinery - distinction between current repairs and capital expenditure - precedent: Sarangpur Cotton Mfg. Co. Ltd. and Saravana Spg. Mills

Deduction as revenue expenditure/current repairs - distinction between current repairs and capital expenditure - Tribunal's allowance of amounts spent on replacement of machinery as revenue expenditure/current repairs was correct. - HELD THAT: - The High Court examined the Tribunal's allowance of the claimed expenditure under the head of current repairs and applied the legal principle, as crystallised by the Supreme Court in Sarangpur Cotton Mfg. Co. Ltd. (following Saravana Spg. Mills), that replacement of an entire, independent machine does not ordinarily fall within the scope of "current repairs" but is in the nature of capital expenditure. The Court found the facts of the present case identical to those considered by the Supreme Court and, by following that precedent, concluded that the Tribunal's view treating replacement of complete machines as revenue expenditure could not be sustained. The substantial question framed at admission was therefore answered against the assessee and in favour of the Revenue.

Allowance of the replacements as revenue expenditure/current repairs set aside; decision answered in favour of the Revenue.

Replacement of independent complete machinery - precedent: Sarangpur Cotton Mfg. Co. Ltd. and Saravana Spg. Mills - Whether replacement of independent complete machinery can be treated as revenue expenditure. - HELD THAT: - Relying on the authority of the Supreme Court in Sarangpur Cotton (and the reasoning in Saravana Spg. Mills), the High Court held that substitution or replacement of an independent machine, which performs a discrete function within a plant, does not qualify as "current repairs" and should be treated as capital in nature. The court found the present case factually identical to the precedent and therefore answered the substantial question of law against the assessee, directing that such replacements are not allowable as revenue deductions.

Replacement of independent complete machinery cannot be treated as revenue expenditure; answered in favour of the Revenue.

Final Conclusion: Appeals by the Revenue allowed; the substantial questions of law answered in favour of the Revenue and against the assessee by following the Supreme Court decisions holding that replacement of independent complete machines is capital in nature and not deductible as current repairs; no order as to costs.

Deduction/exemption under sections 11 and 12 - charitable purpose as defined in section 2(15) - proviso to section 2(15) - disqualification under section 13(8) - characterisation of housing activities as charitable or commercial - remand to the Assessing Officer for de novo consideration

Deduction/exemption under sections 11 and 12 - charitable purpose as defined in section 2(15) - proviso to section 2(15) - disqualification under section 13(8) - Validity of the Appellate Tribunal's view that the assessee's activities fall within section 2(15) and are thus eligible for exemption under sections 11 and 12, notwithstanding the Revenue's plea that the proviso to section 2(15) and section 13(8) preclude exemption. - HELD THAT: - The Tribunal relied on this Court's decisions concerning AUDA and Gujarat Industrial Development Corporation to equate the activities of the Gujarat Housing Board with those held to fall within section 2(15). The Revenue's submission that sale of residential accommodation to weaker/backward classes results in profit-making commercial activity and thereby attracts the proviso to section 2(15) and disqualification under section 13(8) was considered but, in the view of the Court, addressed by the precedents relied upon by the Tribunal. A coordinate Bench earlier reached a similar conclusion in relation to the Gujarat Housing Board and the issue is noted to be pending before the Supreme Court. Given those authorities and the Tribunal's approach, the proposed question did not constitute a substantial question of law warranting interference with the Tribunal's order. [Paras 3, 4, 5]

Tribunal's view upheld; the question was not a substantial question of law and the appeal is dismissed.

Remand to the Assessing Officer for de novo consideration - Legality and propriety of remitting the matter to the Assessing Officer for fresh consideration. - HELD THAT: - The Tribunal had restored the issue to the Assessing Officer to decide de novo after noting and directing consideration of the earlier decisions of this Court. The High Court observed that the Tribunal's remand was in accordance with the approach taken in the cited authorities and declined to interfere with the remand order; the Assessing Officer was directed to consider the applicability of those decisions to the assessee's activities on the material on record. [Paras 4, 5]

Remand to the Assessing Officer for de novo adjudication sustained; no interference by the High Court.

Final Conclusion: The Tax Appeal is dismissed. The Appellate Tribunal's reliance on this Court's precedents and its remand to the Assessing Officer for de novo consideration of the exemption claim under sections 11 and 12, in light of the decisions referred to, do not raise a substantial question of law warranting interference.

Allowability of commission as business expenditure - genuineness of payments to agents - relevance of books of account and documentary evidence - proof by payment through account-payee cheque and deduction of tax at source - principle that non-response to summons or untraceability alone does not establish bogus transactions

Allowability of commission as business expenditure - genuineness of payments to agents - proof by payment through account-payee cheque and deduction of tax at source - relevance of books of account and documentary evidence - principle that non-response to summons or untraceability alone does not establish bogus transactions - Addition on account of commission paid to M/s. Wise Agencies Pvt. Ltd. held to be not sustainable and deleted. - HELD THAT: - The Tribunal examined the documentary evidence placed on record by the assessee, including the agreement with M/s. Wise Agencies Pvt. Ltd., bank payments by account-payee cheque with TDS deduction and deposit, the company resolution and the Form FTE application to strike off the company (filed prior to assessment). The AO and CIT(A) recorded the transactions as bogus principally because the recipient did not respond to enquiries and was said to be untraceable, but failed to consider or examine the documentary evidence submitted by the assessee. Relying on the legal principle affirmed by the Calcutta High Court in M/s. Inbuilt Merchant Pvt. Ltd. that books of account and accompanying documentary proof (payment by cheque, TDS deduction and deposit, particulars of recipient) cannot be discarded without appropriate reasons and that non-response or inability to trace the agent does not by itself prove non-existence or that payments were imaginary, the Tribunal held that the transactions could not be characterized as bogus. In view of the evidence and the cited precedents, the addition confirmed by the lower authorities was not maintainable. [Paras 7, 8, 10]

Addition on account of commission payments deleted and the appeal allowed.

Final Conclusion: The addition made by the AO and confirmed by the CIT(A) in respect of commission payments to M/s. Wise Agencies Pvt. Ltd. for AY 2010-11 is deleted; the assessee's appeal is allowed.

Admission of belated appeal by condonation of delay for sufficient cause - disallowance under section 14A in respect of expenditure relating to exempt income - application of rule 8D for computation of expenditure in relation to exempt income - proportionate allocation of interest expenditure between interest-bearing and interest-free funds - net interest expenditure for computation of disallowance

Admission of belated appeal by condonation of delay for sufficient cause - Whether the belated appeal in ITA No. 753/Hyd/16 should be admitted by condoning the delay of 190 days. - HELD THAT: - The Tribunal recorded that the assessee filed an affidavit explaining that the delay arose because of illness and medical advice to take complete bed rest for four months, and that there was no deliberate intention to file the appeal belatedly. On this factual basis the Tribunal found that the assessee was prevented by sufficient cause and exercise of discretion to condone delay was justified. [Paras 2]

Delay of 190 days condoned and the belated appeal admitted.

Disallowance under section 14A in respect of expenditure relating to exempt income - application of rule 8D for computation of expenditure in relation to exempt income - proportionate allocation of interest expenditure between interest-bearing and interest-free funds - net interest expenditure for computation of disallowance - Whether interest expenditure should be disallowed under section 14A and, if so, the correct basis for computing the disallowance. - HELD THAT: - The Tribunal examined the assessee's balance sheet and investment pattern and observed that the assessee had substantial borrowed funds which were largely utilized for investment in shares, most notably in one company, and that the investments were treated as share application money rather than loans. The Tribunal agreed with the CIT(A)'s conclusion that funds were mixed and could not be segregated categorically, but rejected a complete disallowance. Applying the principle of proportionate allocation between interest-bearing and interest-free funds, the Tribunal upheld the CIT(A)'s approach of allowing the portion of interest expenditure attributable to proprietary funds and disallowing the portion attributable to borrowed funds. The Tribunal also specified that the net interest expenditure (interest paid minus interest income) is the correct quantum to be considered for the computation. [Paras 10]

Assessee's grounds dismissed; disallowance under section 14A sustained in principle but restricted on a proportionate basis (22% allowed as attributable to own funds and 78% disallowed as attributable to borrowed funds), with computation to be on net interest expenditure.

Final Conclusion: The belated appeal in ITA No. 753/Hyd/16 was admitted by condoning the delay; on merits both appeals were dismissed and the CIT(A)'s proportionate application of section 14A (applying rule 8D principles) - allowing interest expenditure attributable to proprietary funds and disallowing the proportion attributable to borrowed funds, computed on net interest - was upheld.

Revised computation of income - allowability of rates and taxes as revenue expenditure - application of section 14A read with Rule 8D - software expenditure as revenue expense - depreciation on computer peripherals - computation under section 115JB - adjusted book profit clause (f) - disallowance under section 36(1)(va) for belated provident fund contribution - remand for verification

Revised computation of income - Validity of addition made because assessee communicated a revised computation of income without filing a revised return - HELD THAT: - The assessee filed its return on provisional accounts and thereafter finalized audited accounts and communicated a revised computation of income prior to issuance of notice under section 143(2). The Assessing Officer made an addition on the ground that no revised return was filed and that merely communicating a revision could allow the assessee to escape assessment if not selected for scrutiny. The Tribunal held that where the assessee has voluntarily revised income after finalization of accounts and informed the tax authorities before issuance of notice, the Assessing Officer could not both refuse to accept the revised computation and make disallowances/additions based on that revised computation. The First Appellate Authority's deletion of the addition was held to be just and proper and not warranting interference. [Paras 6]

Addition deleted; appeal dismissed in favour of the assessee.

Allowability of rates and taxes as revenue expenditure - Whether payments of land revenue and education cess constitute allowable revenue expenditure (rates and taxes) - HELD THAT: - The ledger reflected recurring payments of land revenue and education cess paid to revenue authorities; such payments do not create or enhance fixed assets or confer enduring advantage and therefore are revenue in nature. The First Appellate Authority had followed consistency with earlier years and accepted the claim under the head rates and taxes and section 43B where applicable. Revenue failed to controvert the consistent treatment. [Paras 9]

Addition deleted; claimed rates and taxes allowed as revenue expenditure.

Application of section 14A read with Rule 8D - Legitimacy of disallowance under section 14A r.w. rule 8D in respect of expenses relatable to exempt dividend income - HELD THAT: - The assessee received dividend income claimed as exempt and had already made a suo moto disallowance. The Assessing Officer applied section 14A read with Rule 8D to compute an additional disallowance. The First Appellate Authority relied on the jurisdictional High Court decision in PCIT v. Shreno Ltd. and deleted the addition. The Tribunal found the assessee's facts and legal position squarely covered by that High Court authority, observing that application of Rule 8D is not automatic and that the Tribunal's reliance on the precedent to delete the Assessing Officer's disallowance was justified. [Paras 13]

Addition under section 14A r.w. Rule 8D deleted; relief to assessee upheld.

Software expenditure as revenue expense - Whether payment for application software (payroll system) is revenue expenditure or capital expenditure attracting depreciation - HELD THAT: - The assessee purchased application software and claimed the amount as revenue expenditure. The Assessing Officer treated it as an intangible asset and allowed partial depreciation, disallowing the balance. The First Appellate Authority followed precedents holding that such application software payments, though giving enduring benefit, do not amount to acquisition of capital asset and are revenue in nature. The Revenue did not successfully controvert these authorities. [Paras 16]

Addition deleted; software expense treated as revenue expenditure and allowed.

Depreciation on computer peripherals - Whether printers, scanners and similar devices qualify for higher rate of depreciation as integral computer peripherals - HELD THAT: - The assessee contended that printers and scanners are essential parts of a computer system and eligible for higher depreciation rate claimed. The First Appellate Authority relied on tribunal and High Court precedents treating such output devices as computer peripherals eligible for higher depreciation. The Tribunal accepted that precedent and found no infirmity in deletion of the Assessing Officer's addition. [Paras 20]

Addition deleted; depreciation at higher rate allowed on peripherals.

Computation under section 115JB - adjusted book profit clause (f) - Treatment of disallowance under section 14A/Rule 8D while computing adjusted book profits under section 115JB - HELD THAT: - For A.Y. 2011-12 the Assessing Officer had directed that the suo moto disallowance of Rs.1,00,000 be considered while computing book profit under section 115JB; for A.Y. 2012-13 the Assessing Officer applied section 14A read with Rule 8D in computing MAT adjustments. The Tribunal referred to the Special Bench decision in Vireet Investment (P.) Ltd., which held that computation under clause (f) to Explanation 1 of section 115JB(2) is to be made without resort to section 14A read with Rule 8D. Applying that principle the Tribunal quashed application of Rule 8D for computing adjusted book profit under section 115JB and deleted the MAT addition. [Paras 22, 34]

Direction to consider the assessee's suo moto disallowance while computing book profit was upheld for A.Y. 2011-12; for MAT computation the disallowance under section 14A/Rule 8D cannot be imported into clause (f) of Explanation 1 to section 115JB(2) and the MAT addition was deleted.

Disallowance under section 36(1)(va) for belated provident fund contribution - Disallowance of employer's deduction for employees' provident fund contribution which were credited after the due date - HELD THAT: - The Assessing Officer disallowed amounts where employee contributions were remitted/credited after the statutory due date relying upon the jurisdictional High Court precedent in CIT v. GSRTC and the statutory scheme under section 36(1)(va). The assessee sought relief relying on other High Court decisions but, where the jurisdictional High Court held against the assessee, the Tribunal confirmed the disallowance. [Paras 25, 37]

Disallowance confirmed; issue remitted to law in consonance with jurisdictional High Court precedent for the amounts found to be belated.

Remand for verification - Remand to Assessing Officer to verify claim that provident fund payments were made within five day grace period - HELD THAT: - The assessee claimed that certain employee provident fund payments were made within the statutory grace period and relied on a jurisdictional High Court decision supportive of that contention. The Tribunal found that the assessee should be permitted to place evidence before the Assessing Officer and therefore set aside the issue for verification and fresh adjudication after affording opportunity of hearing. [Paras 25]

Matter remitted to the Assessing Officer for verification and fresh decision after giving the assessee opportunity to produce evidence.

Interest income mismatch - verification of bookkeeping and TDS records - Confirming additions for interest income where TDS entries in Form 26AS/ATS were not reflected in assessee's books and no supporting documentary explanation was provided - HELD THAT: - Assessing Officer found mismatches between TDS records and books for specified parties. The assessee failed to place documentary evidence to show that the amounts were booked in its profit and loss account despite TDS being deducted. In absence of satisfactory evidence, the Tribunal confirmed the additions made by the authorities for the specified items. [Paras 27]

Additions confirmed; assessee's ground dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for A.Y. 2011-12 and allowed several of the assessee's grounds by deleting additions: those concerning the revised computation of income, rates and taxes, section 14A disallowance (Rule 8D), software expenses, and depreciation on peripherals. The Tribunal directed that the assessee's suo moto disallowance be considered in computing book profit under section 115JB and held that Rule 8D cannot be imported into clause (f) of Explanation 1 to section 115JB(2) for MAT computation. The Tribunal confirmed additions relating to unexplained interest income and certain belated PF contributions, but remitted one PF timing claim to the Assessing Officer for verification after giving the assessee an opportunity to produce evidence.

Penalty under section 271(1)(c) - concealment of particulars of income - furnishing inaccurate particulars of income - Explanation 1 to section 271(1)(c) - deeming fiction - claim of deduction under section 80IA(4) - condonation of delay in filing appeal

Penalty under section 271(1)(c) - claim of deduction under section 80IA(4) - concealment of particulars of income - furnishing inaccurate particulars of income - Explanation 1 to section 271(1)(c) - deeming fiction - Whether penalty under section 271(1)(c) was rightly imposed for claiming deduction under section 80IA(4) when approval from CBDT was pending - HELD THAT: - The Tribunal examined whether the assessee had deliberately concealed income or furnished inaccurate particulars so as to attract section 271(1)(c). The court noted that the assessee had applied to the CBDT for notification and contemporaneously claimed the deduction while the approval was pending. The Tribunal analysed the deeming fiction in Explanation 1 to section 271(1)(c) and observed that it operates only where the assessee fails to offer an explanation, offers an explanation found false, or is unable to substantiate the explanation and prove its bona fides and full disclosure. On the facts the assessee had disclosed that the approval was pending and pursued the matter with the CBDT; the rejection by the CBDT occurred subsequently and was itself challenged in court. The Tribunal concluded that the claim was made in anticipation of sanction and that there was no deliberate withholding of information or furnishing of inaccurate particulars warranting penalty. Applying these legal principles, the Tribunal held that penalty was not justified and deleted the penalties for the three assessment years. [Paras 9, 10]

Penalty under section 271(1)(c) deleted for A.Y. 2008-09, 2009-10 and 2010-11

Condonation of delay in filing appeal - Whether the Tribunal should condone 10 days' delay in filing the appeal for Asstt.Year 2008-09 - HELD THAT: - The assessee explained the delay by reference to non-availability of the chief accountant due to a social-cum-religious function and office closure for vacation, and filed affidavit explaining the circumstances. Having considered the explanation and submissions, the Tribunal held that the assessee was prevented by sufficient reasons from presenting the appeal within time and exercised its discretion to condone the 10-day delay. [Paras 4]

Delay of 10 days in filing the appeal for A.Y. 2008-09 condoned

Final Conclusion: The Tribunal condoned the short delay in filing the appeal for A.Y. 2008-09 and on the merits allowed the appeals, deleting the penalties imposed under section 271(1)(c) for A.Y. 2008-09, 2009-10 and 2010-11.

Penalty for delay in furnishing TDS statements under section 272A(2)(k) - Reasonable cause defence under section 273B - Judicial exercise of discretion in imposing penalty

Penalty for delay in furnishing TDS statements under section 272A(2)(k) - Reasonable cause defence under section 273B - Judicial exercise of discretion in imposing penalty - Whether penalty under section 272A(2)(k) could be sustained for delayed filing of quarterly Form 26Q when the assessee's accountant was seriously ill and whether the delay amounted to absence of reasonable cause under section 273B - HELD THAT: - The Tribunal examined the Assessing Officer's imposition of penalty for delays of 515, 423 and 303 days in filing quarterly TDS returns for F.Y. 2010-11. While noting the legislative strictness of clause (k) of section 272A(2) and the subsequent post-2012 statutory regime, the Tribunal applied the established principle that imposition of penalty remains a discretionary judicial act to be exercised on consideration of all relevant circumstances. The assessee advanced that the accountant was bed-ridden for an extended period and produced documentary evidence to that effect; the Tribunal recorded that the Assessing Officer had not afforded a reasonable opportunity to explain the delay but on appeal the assessee furnished supporting material. Applying the reasonable cause test under section 273B and the discretionary approach endorsed by the Supreme Court in Hindustan Steel Ltd., the Tribunal found that the illness of the accountant, coupled with the inability to secure a suitable replacement, constituted circumstances beyond the control of the assessee and amounted to a sufficient and reasonable cause. On this basis the discretionary power to impose penalty was negatived and the penalty was deleted.

Penalty under section 272A(2)(k) deleted as the delay in filing Form 26Q was held to be for sufficient and reasonable cause under section 273B and imposition of penalty was not warranted in the exercise of judicial discretion.

Final Conclusion: The appeal is allowed: the penalty of Rs. 55,719/- imposed for late filing of quarterly TDS statements for F.Y. 2010-11 (Assessment Year 2011-12) is deleted on the ground that the assessee established reasonable cause and the Tribunal exercised its discretion against levying the penalty.

Disallowance under section 184(5) - assessment under section 144 (best-judgement assessment) - failure to comply with notice under section 142(1) - reopening under section 147 triggered by escaped income - assessment invoked under section 145(3) for non satisfaction with accounts

Disallowance under section 184(5) - assessment under section 144 (best-judgement assessment) - failure to comply with notice under section 142(1) - assessment invoked under section 145(3) for non satisfaction with accounts - Whether disallowance of amounts paid as interest and remuneration to partners under section 184(5) is sustainable where assessment is framed under section 147 read with section 144. - HELD THAT: - The Court held that section 184(5) operates where assessment is framed pursuant to failures contemplated by section 144; it is not automatically engaged merely because an assessment is ultimately completed under section 144. Where section 144 is invoked because the Assessing Officer is not satisfied about correctness or completeness of accounts under section 145(3), the disabling provision of section 184(5) does not apply. Conversely, where framing under section 144 results from the assessee's failure to comply with notices under section 142(1) (clause (b) of section 144(1)), section 184(5) is attracted. On the facts, the assessee partly complied with an earlier notice dated 10.10.2014 but wholly failed to comply with the subsequent notice dated 5.2.2015; the AO therefore rightly framed the assessment under section 144 and applied section 184(5) to deny deductions for interest and remuneration to partners. The Tribunal distinguished the precedent relied upon by the assessee on the ground that in that case there was only part non compliance, whereas here there was complete non compliance to the later notice, justifying the section 184(5) disallowance. [Paras 10, 11, 12, 13, 14]

The disallowance under section 184(5) of the Act in respect of interest and salary paid to partners is sustained and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2009-2010, upholding the Assessing Officer's framing of assessment under section 147 r.w.s.144 and the consequent disallowance of partner interest and remuneration under section 184(5).

Speculative transaction - trading in derivatives - Section 43(5)(d) of the Income-tax Act - non-speculative treatment of derivatives - eligible transaction - screen based electronic trading - registered stockbroker - time stamped contract note - recognised stock exchange

Speculative transaction - Section 43(5)(d) of the Income-tax Act - non-speculative treatment of derivatives - screen based electronic trading - registered stockbroker - time stamped contract note - recognised stock exchange - Loss on trading in derivatives held not to be speculative as conditions of Section 43(5)(d) were satisfied. - HELD THAT: - The Assessing Officer treated the derivative trading loss as speculative, observing absence of supporting evidence. The CIT(A) examined the material on record and found that the assessee had produced during assessment proceedings documentary evidence showing transactions were carried out electronically on a screen based system through a registered stockbroker, supported by time-stamped contract notes and records of trading on a recognised stock exchange, thereby satisfying the conditions of clause (d) of Section 43(5). The Tribunal concurred with the CIT(A)'s factual findings and reasoning. Given the concurrent findings by the two revenue fora that the prescribed conditions were fulfilled, the High Court declined to interfere with those factual conclusions.

Concurrent factual findings that the derivative transactions met the conditions of Section 43(5)(d) are upheld and the disallowance is deleted.

Final Conclusion: The Revenue's appeal is dismissed; the Tribunal's affirmation of the CIT(A)'s finding that the derivative trading loss was not speculative under Section 43(5)(d) is maintained.

Speculative loss - derivative transactions excluded from speculative business under proviso (d) to Section 43(5) - Explanation to Section 73 - restriction on set off of speculative losses - set off of business losses against nonspeculative business income - disallowance under Section 14A - Rule 8D - allocation of expenditure to exempt income - reasonableness principle in applying Section 14A/Rule 8D

Speculative loss - derivative transactions excluded from speculative business under proviso (d) to Section 43(5) - Explanation to Section 73 - restriction on set off of speculative losses - set off of business losses against nonspeculative business income - Loss arising from derivative (F&O) transactions held not to be speculative for purposes of Explanation to Section 73 and therefore allowable to be set off as nonspecial business loss. - HELD THAT: - The Tribunal concluded that derivative transactions falling within the scope of proviso (d) to Section 43(5) are expressly excluded from being treated as speculative business. Once such transactions are deemed normal business activity, application of the Explanation to Section 73 to deny set off is legally incorrect. The Tribunal relied on the reasoning of the Calcutta High Court in Asian Financial Services and distinguished decisions treating derivatives as akin to share transactions, observing that legislature has treated derivatives differently; having reached this determinative legal conclusion in favour of the assessee, the Tribunal found it unnecessary to examine alternate contentions. [Paras 9]

Tribunal's allowance of set off of derivative losses as nonspeculative business loss upheld.

Disallowance under Section 14A - Rule 8D - allocation of expenditure to exempt income - reasonableness principle in applying Section 14A/Rule 8D - Addition made under Section 14A read with Rule 8D was deleted on the basis that the assessee's suo motu disallowance and the relative proportions of taxable turnover and exempt income made the AO's disallowance prima facie unjustified. - HELD THAT: - The Tribunal noted that Rule 8D does not operate automatically and that Section 14A/Rule 8D are subject to a reasonableness assessment. Having compared the assessee's total expenditure and its taxable turnover with the small amount of tax-exempt income, the Tribunal found it implausible that a large portion of expense was attributable solely to exempt income. Therefore the Tribunal treated the assessee's own disallowance as prima facie sufficient and set aside the addition made by the AO under Section 14A. [Paras 13]

Tribunal's deletion of the Section 14A/Rule 8D addition upheld.

Final Conclusion: The High Court found no substantial question of law and dismissed the Revenue's appeal, upholding the Tribunal's decision on both (i) allowing set off of derivative losses as nonspeculative business loss and (ii) deleting the Section 14A/Rule 8D disallowance.

Principles of natural justice - service of show cause notice - service by registered post or approved courier - affixation on notice board as substituted service - personal hearing - remand for fresh adjudication after valid service - prejudice caused by non service

Principles of natural justice - service of show cause notice - service by registered post or approved courier - affixation on notice board as substituted service - personal hearing - Validity of the impugned adjudication order where the Revenue could not establish service of the Show Cause Notice or service of any notice of personal hearing. - HELD THAT: - The statutory regime requires that a show cause notice must, if possible, be served by tender or by sending it by registered post or by an approved courier; affixation on the customs house notice board is permissible only where service by those primary modes cannot be effected. The Revenue failed to produce the original file or satisfactory evidence that the Show Cause Notice dated 9th February 2017 was served by registered post or approved courier, and did not establish service of any notice of personal hearing. In the absence of proof of attempted or actual service by the modes specified, invocation of affixation on the notice board as substituted service was impermissible. Passing the impugned order without valid service of the notice and without serving notice of personal hearing amounted to breach of elementary principles of natural justice and caused prejudice to the petitioner. Accordingly the impugned order is legally flawed and cannot stand; the appropriate relief is to set aside the order and remit the matter for fresh adjudication after valid service and after affording the petitioner an opportunity to file a reply and a personal hearing. [Paras 6, 7, 8, 9, 10]

Impugned order set aside; Show Cause Notice restored for fresh adjudication after valid service and after granting personal hearing.

Final Conclusion: Writ petition allowed: the Commissioner's order dated 23rd/24th July 2018 is set aside for breach of natural justice; the Show Cause Notice dated 9th February 2017 is restored for fresh adjudication only after valid service and after affording the petitioner a personal hearing.

Provisional assessment under Section 18 - seizure under Section 110 - provisional release under Section 110A - supersession of earlier order by subsequent seizure - right to hearing before provisional release - adjudication after issuance of show-cause notice

Provisional assessment under Section 18 - seizure under Section 110 - supersession of earlier order by subsequent seizure - Nature and validity of the communication dated 4th December, 2018 releasing the export shipment on provisional basis and its status after seizure dated 15th April, 2019. - HELD THAT: - The court held that the communication dated 4th December, 2018 was an order of provisional assessment of the shipping bill under Section 18 and not an order passed under Section 110A. The subsequent seizure of the goods by order dated 15th April, 2019 under Section 110 of the Act superseded and effectively abandoned the earlier provisional assessment. In view of that supersession, the earlier provisional assessment order no longer subsisted and was required to be set aside. [Paras 3]

The order dated 4th December, 2018 allowing provisional assessment of the shipping bill is set aside as superseded by the seizure order dated 15th April, 2019.

Provisional release under Section 110A - right to hearing before provisional release - adjudication after issuance of show-cause notice - protection of Revenue's interest - Whether and on what terms the Commissioner of Customs should consider provisional release of the seized goods pending investigation and adjudication. - HELD THAT: - The court accepted the Revenue's submission that investigations were ongoing and a show-cause notice might take time. To balance the petitioner's interest and protection of the Revenue, the court directed that the Commissioner of Customs (Adjudicating Authority) would consider the petitioner's request for provisional release under Section 110A after affording the petitioner a hearing on the terms and conditions of such provisional release, pending issuance of show-cause notice and adjudication. The petitioner undertook to attend any such hearing and make submissions. The Revenue further undertook to pass the order on provisional release within a specified short timeframe. [Paras 4, 6]

The Commissioner of Customs shall consider the petitioner's request for provisional release under Section 110A after hearing the petitioner and shall pass the order within three weeks from the date of the hearing, subject to terms and conditions as may be imposed.

Final Conclusion: The petition is disposed of: the provisional assessment order dated 4th December, 2018 is set aside as superseded by the seizure dated 15th April, 2019; the Commissioner is directed to consider any application for provisional release under Section 110A after hearing the petitioner and to pass a reasoned order within three weeks.

Certificate of origin - rules of origin - preferential tariff benefit - dispute settlement under treaty - jurisdiction to adjudicate show-cause notice - administrative communications not binding on adjudicating authority

Certificate of origin - dispute settlement under treaty - jurisdiction to adjudicate show-cause notice - Whether the existence of a dispute between Governments under the AIFTA (Article 24) or communications by the CBIC preclude the Customs adjudicating authority from issuing/continuing adjudication on a show-cause notice challenging entitlement to preferential duty on the basis of a certificate of origin. - HELD THAT: - The court held that the treaty mechanism for inter-governmental resolution of origin disputes under Article 24 does not operate to oust the jurisdiction of the domestic Customs adjudicating authority to examine a claim of preferential treatment based on a certificate of origin. Communications or a prima facie view taken by the Central Board of Indirect Taxes and Customs or other administrative action vis-a -vis the exporting country may give rise to apprehension but do not bind the adjudicating authority. The petitioner's objection that the certificate issued by the competent authority in the exporting country is conclusive was rejected as a bar to adjudication; allegations of misstatement, suppression or fraud raised in the show-cause notice are matters open for inquiry and determination by the Commissioner after granting the petitioner a hearing. The court emphasized that the adjudicating authority must consider the petitioner's submissions afresh and fairly and is not to be controlled by CBIC's prior communications. [Paras 8, 9]

The challenge to the show-cause notice was rejected and the petition dismissed, leaving the adjudication of the show-cause notice to the Customs authority to decide after hearing the petitioner.

Final Conclusion: The writ petition seeking quashing of the show-cause notice was dismissed; the Customs adjudicating authority is to decide the merits of the show-cause notice after hearing the petitioner, unaffected by prior communications or views expressed by the CBIC or by unresolved inter-governmental dispute under the AIFTA.

Corporate Insolvency Resolution Process - Operational Creditor - consent of the Central Government - winding up - overriding effect of the Insolvency and Bankruptcy Code - continuing cause of action - limitation - Article 137, Part II, Third Division, Schedule of the Limitation Act, 1963

Corporate Insolvency Resolution Process - Operational Creditor - consent of the Central Government - winding up - overriding effect of the Insolvency and Bankruptcy Code - Whether an application under Section 9 of the I&B Code against a tea company whose management has been taken over under the Tea Act, 1953 requires the consent of the Central Government in terms of Section 16G(1)(c) of the Tea Act. - HELD THAT: - The Court examined the scope of Section 16G(1)(c) of the Tea Act, 1953 which restrains proceedings for winding up of a company taken over by persons authorised by the Central Government except with the consent of the Central Government. Section 9 of the I&B Code authorises an operational creditor to initiate the Corporate Insolvency Resolution Process (CIRP) where there is debt and default. The Court held that CIRP under the I&B Code is designed for revival and reorganisation and is not equivalent to a winding up proceeding; liquidation is a last resort under the Code. Consequently, Section 9 occupies a different field than Section 16G(1)(c) and there is no conflict that would render Section 9 inapplicable; therefore the filing of a Section 9 application does not require Central Government consent under Section 16G(1)(c) of the Tea Act. The Adjudicating Authority's conclusion to the contrary was erroneous and has been set aside. [Paras 16, 17, 18]

An application under Section 9 of the I&B Code may be filed against a tea company under management taken over under the Tea Act without prior consent of the Central Government under Section 16G(1)(c); the Adjudicating Authority's order is set aside.

Limitation - Article 137, Part II, Third Division, Schedule of the Limitation Act, 1963 - continuing cause of action - Limitation for filing the Section 9 application and whether the claim is time-barred was not finally decided by this Bench and is to be considered by the Adjudicating Authority. - HELD THAT: - The Court observed that the question of limitation is a mixed question of fact and law and was not raised before the Adjudicating Authority; therefore it declined to decide the issue on merits. The Bench noted that Article 137 of Part II of the Third Division of the Schedule to the Limitation Act, 1963 (three years from accrual where no other period is provided) is applicable to Section 9 applications and that the I&B Code came into force on 1 December 2016. The respondent remains at liberty to raise the limitation defence before the Adjudicating Authority, and the operational creditor may rely on principles such as a continuing cause of action to counter that defence. [Paras 19, 20, 21, 22]

The issue of limitation is left open and remitted to the Adjudicating Authority for decision after notice and hearing; the Adjudicating Authority shall consider any defence of limitation and the operational creditor may contend continuing cause of action.

Final Conclusion: The impugned order of the Adjudicating Authority is set aside; the matter is remitted to the Adjudicating Authority, Kolkata Bench, for consideration of the Section 9 application in accordance with law after notice and hearing; appeal allowed, no costs.

Operational Debt and Default - Pre-existing Dispute - Admission under Section 9 of I&B Code - Moratorium under Section 14 of I&B Code - Appointment of Interim Resolution Professional - Public Announcement of Corporate Insolvency Resolution Process - Service of Notice and Non-appearance of Corporate Debtor

Operational Debt and Default - Pre-existing Dispute - Service of Notice and Non-appearance of Corporate Debtor - Whether there was a valid operational debt in default and no pre-existing dispute such as to bar admission of the Section 9 petition. - HELD THAT: - The Bench found that the Operational Creditor had supplied goods evidenced by pre-printed invoices and ledger entries and had proved non-payment by production of bank statements and a bank certificate. A demand notice under the Code was issued and went unanswered by the Corporate Debtor. The Corporate Debtor made partial payments earlier but an outstanding amount remained unpaid and no dispute was raised or pleaded by the Corporate Debtor in response to the demand notice or the petition. Service of notice was effected and the Corporate Debtor did not appear or file objections. On these facts the Bench concluded there was a clear default and no pre-existing dispute on the record. [Paras 4, 6, 7, 8, 9]

Default established; no pre-existing dispute; petition complete on merits for the purpose of admission.

Admission under Section 9 of I&B Code - Moratorium under Section 14 of I&B Code - Appointment of Interim Resolution Professional - Public Announcement of Corporate Insolvency Resolution Process - Whether the petition should be admitted and consequential reliefs (moratorium, appointment of IRP, and public announcement) should be ordered. - HELD THAT: - Having recorded that the application complied with the statutory requirements and that operational debt remained unpaid with no dispute on record, the Tribunal admitted the petition under Section 9. Consequentially, the Bench declared the moratorium under Section 14 with the statutory prohibitions on suits, transfer of assets, enforcement of security and recovery of leased property, directed immediate public announcement of the corporate insolvency resolution process, and appointed an Interim Resolution Professional to carry out functions under the Code. Directions regarding continuity of supply of essential goods and compliance with applicable regulations for IRP fees were also recorded. [Paras 11]

Petition admitted under Section 9; moratorium declared under Section 14; Interim Resolution Professional appointed and public announcement directed.

Final Conclusion: The Tribunal admitted the Section 9 petition on the finding of operational debt in default and absence of any pre-existing dispute on the record, declared the moratorium under Section 14, directed public announcement of the insolvency process and appointed an Interim Resolution Professional to manage the corporate insolvency resolution process.

Shareholders' voting rights - Deed of Pledge of Securities - initiation of corporate insolvency resolution process by corporate applicant under Section 10(3)(c) - effect of an Event of Default on voting rights

Shareholders' voting rights - Deed of Pledge of Securities - initiation of corporate insolvency resolution process by corporate applicant under Section 10(3)(c) - Whether the Deed of Pledge dated 28th March, 2013 deprived the shareholders of the corporate debtor of the requisite right to approve the special resolution required under Section 10(3)(c) for filing an application to initiate the corporate insolvency resolution process. - HELD THAT: - The Deed of Pledge expressly provides that, upon the occurrence of an Event of Default, the pledgor's voting rights in respect of the securities shall cease and that the Security Agent is authorised to attend meetings and exercise voting rights. However, the Deed does not transfer ownership of the shares to the Financial Creditor nor extinguish the status of the pledgor as a shareholder. Clause (c) of Section 10(3) mandates that the corporate applicant furnish the special resolution of the shareholders approving the filing. The tribunal observed that suspension of voting rights on occurrence of an Event of Default under the Deed does not operate to supplant or override the statutory requirement in Section 10(3)(c) that the shareholders' special resolution accompany the application. Consequently, the contractual limitation on voting imposed by the Deed does not per se deprive shareholders of the right to decide whether to approve or disapprove initiation of the corporate insolvency resolution process under Section 10, and the Adjudicating Authority's admission of the application and appointment of the resolution professional did not call for interference on this ground.

Held that the Deed of Pledge does not deprive the shareholders of the right to approve or disapprove filing under Section 10(3)(c); appeal dismissed.

Final Conclusion: The tribunal dismissed the appeal, holding that although the Deed of Pledge suspends voting rights on an Event of Default, it does not extinguish shareholder status or negate the statutory requirement that the special resolution of shareholders under Section 10(3)(c) be furnished; no interference with the Adjudicating Authority's order was warranted.

Show cause notice - remission of duty - destruction of goods - Rule 21 of Central Excise Rules, 2002 - reconsideration on remand - ad interim relief

Show cause notice - remission of duty - reconsideration on remand - ad interim relief - Validity of the showcause notice issued after the tribunal remanded the remission application to the Adjudicating Authority and grant of interim relief pending further proceedings. - HELD THAT: - The Tribunal had quashed the Commissioner's order rejecting the remission application and remanded the matter to the Adjudicating Authority for reconsideration in accordance with law, observing that the goods, packed under the impugned brand and subject to a judicial injunction, were unfit for marketing and prima facie covered by Rule 21 of the Central Excise Rules, 2002. Instead of reconsidering the remission application as directed by the Tribunal, the department issued the present showcause notice calling for demand of duty, appropriation of reversed cenvat credit and recovery of interest. The High Court did not adjudicate the merits of the remission claim or the correctness of the showcause notice; it directed issuance of notice to the respondents and granted ad interim relief in terms of the order (Para 8(B)) while keeping the matter for further hearing on the returnable date fixed.

Notice to respondents issued returnable on 31/07/2019 and ad interim order granted in terms of Para 8(B); substantive challenge to the showcause notice not decided on merits.

Final Conclusion: The Tribunal's order remitting the remission application for reconsideration was noted; the High Court has not finally ruled on the legality of the showcause notice but has issued notice to the respondents, granted ad interim relief as recorded, and posted the matter for further hearing.

Condonation of delay - maintainability of appeal - monetary limit for filing appeals - withdrawal of appeal

Condonation of delay - Applications for condonation of delay in refiling and filing the appeals were allowed. - HELD THAT: - Two interlocutory applications for condonation of delay were considered. CM 26310-CII/2018 sought condonation of 32 days' delay in refiling the appeal and, for the reasons stated in that application, was allowed. CM 26311-CII/2018 sought condonation of 1 day in filing the appeal; the court treated the delay as insignificant and allowed the application, condoning the delay of one day.

Both applications for condonation of delay were allowed and the respective delays were condoned.

Maintainability of appeal - monetary limit for filing appeals - withdrawal of appeal - Appeal not maintainable before the High Court in view of Ministry of Finance instructions dated 11.7.2018 and was dismissed as withdrawn at the appellant's instance, with the substantial questions of law left open. - HELD THAT: - At hearing, learned counsel for the appellant admitted that, pursuant to the instructions dated 11.7.2018 issued by the Ministry of Finance, Department of Revenue, CBIC (Judicial Cell), the instant appeal is not maintainable before the Court because the monetary limit is below Rs. 50,00,000/-. In light of that admission and the instruction, counsel prayed for withdrawal of the appeal. The court allowed the prayer and dismissed the appeal as withdrawn, expressly leaving the substantive questions of law raised in the appeal open for future consideration.

The appeal was dismissed as withdrawn on account of admitted non maintainability under the Ministry's instructions; the substantive legal questions remain open.

Final Conclusion: Interlocutory applications for condonation of delay were allowed; however, the main appeal was held not maintainable by admission of counsel in view of the Ministry of Finance instructions dated 11.7.2018 and was dismissed as withdrawn, with the substantial questions of law left open.

CENVAT credit on transit insurance - admissibility of input service for repair, renovation and modernization of factory premises - exclusion of motor vehicle services where the vehicle is not a capital good - definition of input service under the CENVAT Credit Rules, 2004

CENVAT credit on transit insurance - definition of input service under the CENVAT Credit Rules, 2004 - Tax paid on transit (marine) insurance for export of goods is admissible as CENVAT credit. - HELD THAT: - The Tribunal relied on its consistent precedents and the inclusive definition of 'input service' in the CENVAT Credit Rules, 2004, noting that the definition is not confined to services only up to the place of removal except for storage-related services. The Commissioner (Appeals) had denied credit on the ground that such insurance related to services beyond the place of removal, but the Tribunal observed that transit insurance for export falls within admissible input services as earlier held in the Tribunal's decisions and in the appellant's prior order by the same Bench. Distinctions drawn by the Commissioner (Appeals) between various insurances were examined and the established view that tax paid on transit insurance for export is creditable was applied. [Paras 5]

Credit for tax paid on transit insurance for export of goods is allowed.

Admissibility of input service for repair, renovation and modernization of factory premises - definition of input service under the CENVAT Credit Rules, 2004 - Tax paid on services relating to repair, renovation and modernization of factory premises is admissible as input service CENVAT credit. - HELD THAT: - The Commissioner (Appeals) treated the works as construction/works contract excluded from input services. The Tribunal examined the invoices relied upon (including those from interior designers) and found the works constituted repair, renovation and waterproofing rather than civil construction or laying of foundations. The Tribunal referred to consistent precedents holding modernization, renovation and repair of factory premises to be admissible input services and applied that reasoning to conclude the impugned expenditures qualify for credit. [Paras 5]

Credit for tax paid on repair, renovation and modernization of factory premises is allowed.

Exclusion of motor vehicle services where the vehicle is not a capital good - definition of input service under the CENVAT Credit Rules, 2004 - CENVAT credit on motor car services is admissible where the motor vehicle is a capital good belonging to the assessee. - HELD THAT: - The Commissioner (Appeals) denied credit relying on the exclusion in sub-clause (BA) of Rule 2(l). The Tribunal observed that the sub-clause permits credit where the motor vehicle is capital goods. The record, including the Order-in-Original and undisputed assertions, established that the vehicle was owned by the company and used for business, i.e., a capital good. On this factual foundation and the correct interpretation of the exclusion, denial of credit was found to be erroneous. [Paras 6]

Credit for tax paid on motor car services is allowed as the vehicles are capital goods of the appellant.

Final Conclusion: The appeals are allowed; the order of the Commissioner of Central Tax (Appeals), Raigad dated 21.02.2018 is set aside and CENVAT credits for the impugned periods are allowed as per the Tribunal's findings.