TaxTMI Updates e-Newsletter
Jul 21,2020

Summary order. Rectification under section 102: para 5 and para 8.1 of the order dated 02.06.2020 corrected by substituting 'under entry no. 26(ii)' with 'under entry no. 26(iv)'; rest of the order/ruling remains unchanged.

Distinct supply of goods and services - Taxability of separately charged coal handling and distribution services - Rate differentiation between supply of coal as goods and coal handling services - Eligibility for input tax credit under Section 16 of the CGST Act, 2017 - Utilisation of electronic credit ledger for payment of output tax

Taxability of separately charged coal handling and distribution services - Distinct supply of goods and services - Rate differentiation between supply of coal as goods and coal handling services - Coal handling and distribution charges, when expressly supplied to a customer separately from the sale of coal, are taxable at the rate applicable to services and not at the rate applicable to coal as goods. - HELD THAT: - The Authority examined the statutory definition of "supply" and the applicable notifications specifying rates for coal as goods and for other miscellaneous services. Notification No. 1/2017-Central Tax (Rate) classifies coal under the tariff for goods attracting an effective GST of 5% (2.5% CGST + 2.5% SGST). Notification No. 11/2017-Central Tax (Rate) covers other miscellaneous services under Heading 9997 attracting an effective GST of 18% (9% CGST + 9% SGST). Where the applicant renders and invoices coal handling and distribution services separately and the supply of such services is intended to be made expressly to the customer (i.e., they constitute distinct services and not merely ancillary to the supply of goods in the contractual arrangement), those supplies fall within the services heading and attract the 18% rate rather than the 5% rate applicable to coal as goods. The Authority therefore treated the charges for coal handling and distribution, when separately supplied, as taxable at 18%. [Paras 4, 5]

Coal handling and distribution charges separately supplied to a customer are taxable at 18%.

Eligibility for input tax credit under Section 16 of the CGST Act, 2017 - Utilisation of electronic credit ledger for payment of output tax - Input tax credit availed in accordance with the conditions of Section 16 is available to the applicant and may be used to discharge the GST liability arising on supply of coal and on supply of coal handling and distribution services respectively. - HELD THAT: - The Authority reviewed the statutory definition of "input tax" and the eligibility and conditions for claiming input tax credit under Section 16, together with the mechanism for utilisation of credit under Section 49. Subject to the statutory conditions and restrictions (possession of tax invoice/debit note, receipt of goods or services, payment of tax to Government as required and timely filing of returns), a registered person is entitled to claim input tax credit on supplies used or intended to be used in the course or furtherance of business. Further, amounts in the electronic credit ledger may be used for payment of output tax as prescribed. Applying these provisions to the facts, the Authority held that the applicant may continue to avail input tax credit and utilize such credit for discharging the tax liability on supply of coal (taxed at 5%) and on separately supplied coal handling and distribution services (taxed at 18%), subject to compliance with the conditions of Section 16 and related provisions. [Paras 4, 5]

Input tax credit, if availed in compliance with Section 16, is allowable and may be utilized to discharge the GST liabilities on both the supply of coal and the separately supplied coal handling and distribution services.

Final Conclusion: The Authority ruled that (a) coal handling and distribution charges, when invoiced and supplied separately to customers, are taxable at 18%; and (b) the applicant may claim and utilize input tax credit in accordance with Section 16 and the prescribed manner for discharging the GST liabilities on both coal and the separately supplied handling services.

Classification of bus body fabrication as supply of service - job work / treatment or process on goods belonging to another - principal's ownership of inputs and tax incidence - manufacturing services on physical inputs (goods) owned by other - HSN 9988 / SAC 998881 - applicable GST rate 18% as against 28% for complete vehicle - Circular No. 52/26/2018-GST - distinction between building on own chassis and on principal's chassis

Classification of bus body fabrication as supply of service - job work / treatment or process on goods belonging to another - principal's ownership of inputs and tax incidence - HSN 9988 / SAC 998881 - applicable GST rate 18% as against 28% for complete vehicle - Circular No. 52/26/2018-GST - distinction between building on own chassis and on principal's chassis - Whether mounting/fabrication of bus bodies on chassis provided by the customer/principal constitutes a supply of service (job work) taxable at 18% under SAC 998881 and entry for "manufacturing services on physical inputs (goods) owned by other", rather than supply of a complete motor vehicle at 28%. - HELD THAT: - The Authority applied the clarificatory position in Circular No. 52/26/2018-GST which distinguishes two situations: (a) where the body builder constructs a vehicle working on a chassis owned by the builder and supplies the built-up vehicle (taxable as vehicle at 28%); and (b) where the body builder fabricates the body on a chassis provided by the principal and charges fabrication/job-work charges (classifiable as a service). The facts before the Authority show that in the scenarios considered the chassis remains the property of the customer/principal when delivered to the applicant for body fabrication; ownership is not transferred to the body fabricator. That activity therefore falls within the statutory concept of job work or "treatment or process applied to goods of another" and is a supply of service. Consequently the predominant character is service and classification under HSN 9988 / SAC 998881 as "motor vehicle and trailer manufacturing services" or "manufacturing services on physical inputs (goods) owned by other" is appropriate. Applying the circular and the statutory definitions, the taxable event is service provision and not supply of a complete vehicle, attracting the GST rate applicable to such services (18% - 9% CGST and 9% SGST). [Paras 7, 8]

Mounting/fabrication of bus body on chassis provided by the customer/principal is a supply of service (job work) and is taxable at 18% under SAC 998881 / entry for "manufacturing services on physical inputs (goods) owned by other".

Final Conclusion: The Authority rules that where the chassis is provided by the customer/principal and ownership does not transfer to the fabricator, the body fabrication is a service (job work) and taxable at 18% (9% CGST + 9% SGST) under the relevant service classification; the alternative situation where the builder works on chassis owned by the builder and supplies a built-up vehicle remains taxable at 28%.

Allowing use of Input Tax Credit by assessees pending investigation - voluntary deposit and its effect on entitlement to ITC - requirement of following statutory procedure before recovery of tax - provisions relating to provisional attachment and recovery under Section 76 - maintainability of writ for interim relief to utilize electronic credit ledger - service by electronic mode - issuance of notice returnable

Maintainability of writ for interim relief to utilize electronic credit ledger - allowing use of Input Tax Credit by assessees pending investigation - voluntary deposit and its effect on entitlement to ITC - requirement of following statutory procedure before recovery of tax - Petition seeking direction to quash debit entries in the Electronic Credit Ledger and to permit use of claimed Input Tax Credit pending investigation - HELD THAT: - The petitioners sought a writ directing respondents to cancel debit entries and to permit utilization of claimed ITC of Rs. 7.65 crores, relying on the asserted voluntariness of deposit and the need to continue business operations affected by the COVID-19 pandemic. Learned counsel for the petitioners admitted no prior application had been made to respondents and did not dispute that the statutory investigation may continue for a considerable period. The Court recorded the contentions and the existence of statutory provisions governing recovery and liabilities under the relevant enactment, and noted competing submissions that recovery cannot be made without following prescribed procedure and in absence of a taxing event. The Court did not adjudicate the merits of entitlement to relief or the correctness of the debit entries; those contentions remain to be decided after notice and fuller hearing.

Merits of the petition seeking quashing of debits and permission to utilize ITC not decided; matter listed for further consideration after notice.

Service by electronic mode - issuance of notice returnable - Procedural relief of issuance of notice and permission for service by e-mode - HELD THAT: - The Court directed that notice be issued to the respondents and fixed the returnable date. The Court specifically permitted service of the petition and related processes by electronic mode on all respondents, thereby authorising substituted procedural service suitable to the circumstances.

Notice issued returnable on 24.7.2020 and service by electronic mode permitted to all respondents.

Final Conclusion: The High Court issued notice returnable on 24.7.2020 and permitted service by electronic mode; the substantive claims for quashing debit entries and permitting use of ITC were recorded but not adjudicated and will be decided after notice and hearing.

Eligibility for input tax credit - apportionment of credit for banking companies under the option in section 17(4) - procedural compliance under Rule 38 for claiming credit - input tax credit on insurance premium paid to Deposit Insurance and Credit Guarantee Corporation

Apportionment of credit for banking companies under the option in section 17(4) - procedural compliance under Rule 38 for claiming credit - eligibility for input tax credit - Whether the bank is entitled to claim input tax credit of GST paid on DICGC premium by adopting the option available to banking companies under section 17(4) of the GST law and following Rule 38 of the Rules. - HELD THAT: - The Authority noted that the applicant is a banking company which supplies both taxable and exempt services and has been exercising the option under section 17(4) to avail fifty per cent of eligible input tax credit each month. The Authority examined the entitlement provisions for input tax credit and the special option available to banking companies. It observed that Rule 38 prescribes the procedure and conditions for a banking company or financial institution that opts not to comply with section 17(2) and instead avail the monthly fifty per cent credit under section 17(4). The Authority held that where the banking company strictly follows the procedures and conditions set out in Rule 38 of the Rules and the other statutory requirements for claiming input tax credit, it may avail the benefit of the option under section 17(4) instead of applying the apportionment provisions of section 17(2). Applying that legal framework, the Authority accepted that GST paid on the DICGC premium is an inward supply used in the course or furtherance of the bank's business and, subject to compliance with Rule 38 and other statutory conditions, the bank may claim input tax credit in accordance with the section 17(4) option.

If the banking company strictly complies with the procedure and conditions laid down in Rule 38 of the Rules, it is entitled to avail the benefit of the option provided by section 17(4) and claim input tax credit (in accordance with that option) for GST paid on the DICGC premium.

Final Conclusion: Advance ruling: A banking company that follows the procedure and conditions in Rule 38 may, in place of section 17(2), avail the option under section 17(4) and claim input tax credit (subject to the limits and requirements of that option) in respect of GST paid on DICGC premium.

Input tax credit - plant and machinery - foundation and structural support - exclusion of land, building and civil structures from plant and machinery - capitalization under accounting principles - blocked credit for construction of immovable property

Input tax credit - plant and machinery - Whether Input Tax Credit is available on purchase of Water Slides (made of PVC) used in the water park. - HELD THAT: - The Authority held that Water Slides qualify as apparatus, equipment or machinery used for making outward supply of services and therefore fall within the meaning of plant and machinery. Consequently, input tax paid on their purchase is eligible for credit. The conclusion follows the explanation to section 17(6) which treats apparatus/equipment fixed to earth by foundation or structural support as plant and machinery and the authorities cited which apply a functional test to determine whether an asset is plant. [Paras 7]

Input tax credit on purchase of Water Slides is available.

Foundation and structural support - plant and machinery - Whether input tax credit is available on steel and civil structures (support/tower) on which Water Slides are installed and on foundations for machines (e.g., wave generation machines); and whether a machine room (civil structure) is eligible. - HELD THAT: - The Authority interpreted the explanation to section 17(6) to mean that foundations and support structures used to fasten plant or machinery to the earth are part of plant and machinery and thus eligible for ITC where they serve that fastening function. Applying that principle, steel and civil support structures to which slides are affixed, and foundations for wave generation machines, are includible as part of plant and machinery and ITC on inputs used for their construction is available. By contrast, a machine room, being a civil structure erected to house or protect machinery and not serving as a foundation or structural support for fastening the machine to earth, is excluded from plant and machinery and ITC attributable to its construction is not available. [Paras 7]

ITC is available for foundations and support structures that fasten plant/machinery to earth (including foundations for machines) but not for a machine room, which is a civil structure and excluded.

Land and civil structures excluded from plant and machinery - capitalization under accounting principles - Whether input tax credit is available on goods and services used for area development and preparation of land on which Water Slides are placed. - HELD THAT: - The Authority concluded that site formation, area development and preparation of land form part of the cost of land and are conceptually and practically inseparable from land. Since land is specifically excluded from the meaning of plant and machinery, ITC on inputs relatable to land development is not available. The ruling also notes that such expenses are to be capitalized as per accounting principles and ITC is blocked accordingly. [Paras 7]

ITC on area development and land preparation is not available; such costs are capitalized as land and blocked.

Exclusion of land, building and civil structures from plant and machinery - functional test - Whether Input Tax Credit is available on Goods and Services used for construction of Swimming Pools / Wave Pools into which Water Slides run. - HELD THAT: - Applying the explanation to section 17(6) and the functional test, the Authority found Swimming Pools/Wave Pools to be independent civil structures and not foundations or support structures used to fasten plant or machinery to earth. As civil structures they are expressly excluded from the definition of plant and machinery, and therefore ITC on inputs used in their construction is not available, subject to capitalization. [Paras 7]

ITC on construction of Swimming Pools/Wave Pools is not available because they are civil structures excluded from plant and machinery.

Blocked credit for construction of immovable property - exclusion of land, building and civil structures from plant and machinery - Whether input tax credit is available on inward supplies for provision of common building facilities and other immovable property works (transformers, STP, electrical wiring, lifts, AHUs, surveillance, DG sets etc.). - HELD THAT: - The Authority observed that such facilities are integral to the commercial building and form part of the immovable civil structure; they cannot be treated as separate plant where they primarily define or are statutory requirements of the building. Given the specific blocking of ITC for inward supplies used in construction of immovable property except insofar as they relate to plant and machinery, credit on inputs for these building related facilities is not available. [Paras 7, 8]

ITC on inward supplies for construction of immovable property and building integral facilities is not available (blocked).

Final Conclusion: The Authority ruled that ITC is available on Water Slides and on foundations/support structures that fasten plant or machinery to earth (including machine foundations), but ITC is not available for land development, swimming/wave pools, machine rooms and other inputs forming part of immovable civil structures or building integral facilities; blocked credits are to be treated subject to capitalization as applicable.

Input Tax Credit - Blocked credit under Section 17(5)(d) - Plant and machinery (definition and exclusion) - Immovable property - Installation becoming integral part of building

Input Tax Credit - Blocked credit under Section 17(5)(d) - Plant and machinery (definition and exclusion) - Immovable property - Installation becoming integral part of building - Availability of input tax credit on tax paid for lifts procured and installed in the hotel building - HELD THAT: - The Authority examined Section 17(5)(d), which unambiguously denies input tax credit in respect of goods or services received for construction of an immovable property (other than plant and machinery) even when used in the course or furtherance of business. The applicant's contention that the lift is 'plant and machinery' and therefore not covered by the block was considered and rejected. The Authority found that the lifts procured and assembled/installed piece by piece are customized to the building, lose separate identity upon installation, and become an integral part of the building; their installation involves services and assembly at site. The Explanation to Section 17(6) excludes buildings and other civil structures from the definition of plant and machinery, while including foundations and structural supports only insofar as they serve to fasten plant and machinery. On the facts, the lift assimilates into the building and thus falls within the prohibition in Section 17(5)(d). Pre GST decisions cited by the applicant were held inapplicable in view of the statutory clarity under Section 17(5), though an earlier AAR decision on the point was noted as persuasive. Consequently, the claim for input tax credit on the lifts was denied under Section 17(5)(d). [Paras 7, 8]

Input tax credit on lifts procured and installed in the hotel building is not available to the applicant as such lifts become integral to the immovable property and are blocked under Section 17(5)(d) of the CGST Act.

Final Conclusion: The Authority rules that input tax credit on tax paid for lifts procured and installed in the hotel is blocked under Section 17(5)(d) and is not admissible to the applicant; the ruling stands subject to statutory provisions governing advance rulings.

Composite supply - principal supply - works contract (resulting in immovable property) - classification under Chapter/Heading 94 (HSN 9403) - concessional rate for construction services under Heading 9954 - place of supply where goods are assembled or installed

Composite supply - principal supply - place of supply where goods are assembled or installed - Whether the supply, installation and fixing of customized furniture constitutes a composite supply and, if so, what is the principal supply. - HELD THAT: - The Authority held that the contract comprises two or more taxable supplies that are naturally bundled and supplied in conjunction with each other such that the supply of furniture is the dominant or principal supply. Reliance was placed on the definition of "composite supply" and the rule that a composite supply is to be treated as a supply of its principal supply. The installation/assembly component is ancillary to the supply of furniture and does not alter the character of the transaction as a composite supply of goods. The place of supply rule for assembled/installed goods was noted as recognition that installation is linked to supply of goods, but does not convert the transaction into a works contract when the result is not immovable property. [Paras 5, 6, 7]

The contract is a composite supply in which the supply of furniture is the principal supply.

Works contract (resulting in immovable property) - concessional rate for construction services under Heading 9954 - classification under Chapter/Heading 94 (HSN 9403) - Whether the contract is a works contract covered by Heading 9954 (construction services) and eligible for the concessional rate, or whether it should be classified under HSN 9403 and taxed accordingly. - HELD THAT: - The Authority examined the definition of "works contract" which requires that the contract result in immovable property or be for creation/alteration of immovable property. It found that the furniture items were manufactured at the supplier's premises and merely installed/ fixed at the recipient's site, and can be removed without damage; accordingly the transaction does not result in immovable property and does not qualify as a works contract or as "original works" under the construction-services entry. Consequently, the concessional entry for composite works contracts under Heading 9954 is not applicable. The Authority concluded that the goods merit classification under Chapter Head 9403 of the GST Tariff and are liable to GST at the rate applicable to those goods at the time of supply. [Paras 5, 6, 7]

The contract is not a works contract covered by Heading 9954 and the supply is classifiable under HSN 9403; the concessional 12% rate for construction services does not apply.

Final Conclusion: The Advance Ruling concludes that the supply, installation and fixing of the furniture is a composite supply with furniture as the principal supply, not a works contract resulting in immovable property; the transaction is classifiable under HSN 9403 and taxable at the rate applicable to those goods at the time of supply, and is not eligible for the concessional construction-services rate under Heading 9954.

Exemption under Notification No. 12/2017 - entry No. 3 - functions entrusted under Article 243G and Article 243W of the Constitution - pure services - exclusion of works contract and composite supplies - exemption under Notification No. 12/2017 - entry No. 8 - distinction between Government, Local Authority and Government Entity

Exemption under Notification No. 12/2017 - entry No. 3 - pure services - functions entrusted under Article 243G and Article 243W of the Constitution - exclusion of works contract and composite supplies - Whether amounts recovered by the applicant from government departments for research and policy-related studies are exempt from GST under Entry No. 3 of Notification No. 12/2017 CT(R). - HELD THAT: - Entry No. 3 exempts Nil-rated pure services (excluding works contract and composite supplies involving goods) provided to Government or Government Entities where the activity relates to functions entrusted to Panchayats under Article 243G or to Municipalities under Article 243W. The Authority examined the nature of services rendered by the applicant (impact evaluation, research and studies), found them to be pure services not falling within the exclusions for works contracts or composite supplies, and mapped the projects to items in the Eleventh and Twelfth Schedules invoked by Articles 243G and 243W. On that basis the Authority held that those services, when provided to the specified government recipients and when the activity relates to functions in the said Schedules, satisfy the conditions of Entry No. 3 and are exempt from tax. The exemption is, however, conditional and must be satisfied for each contract/assignment on the facts of that work. [Paras 7, 8]

Amounts recovered by the applicant for research and policy-related studies are exempt under Entry No. 3 of Notification No. 12/2017 CT(R) provided all conditions of that entry (pure service, not a works contract/composite supply, provided to the specified government recipients, and relating to functions in Articles 243G/243W schedules) are satisfied for the particular work.

Exemption under Notification No. 12/2017 - entry No. 8 - distinction between Government, Local Authority and Government Entity - Whether services provided by the applicant to other government departments are covered by Entry No. 8 of Notification No. 12/2017 CT(R). - HELD THAT: - Entry No. 8 grants exemption for services provided by the Central Government, State Government, Union territory or local authority to another such government or local authority. The Authority analysed the definition of 'government' under the GST law and noted that the applicant is a society registered under the State Societies Act and does not qualify as Central/State Government or a local authority. Although the applicant may fall within the broader definition of 'Government Entity' under clause (zfa) of the notification, Entry No. 8 expressly contemplates services provided by government or local authority as service providers. Therefore the applicant, not being a Government or local authority, does not fall within Entry No. 8 and its services are not covered by that entry. [Paras 7, 8]

Services provided by the applicant are not covered by Entry No. 8 of Notification No. 12/2017 CT(R) because the applicant does not qualify as Central Government, State Government or a local authority for the purposes of that entry.

Final Conclusion: The Authority ruled that the applicant's research and policy analysis services may be exempt under Entry No. 3 of Notification No. 12/2017 CT(R) if, for each assignment, all conditions of that entry are satisfied (pure service, not a works contract/composite supply, provided to the specified government recipient and relating to functions under Articles 243G/243W). The services are not exempt under Entry No. 8 because the applicant is not a Central/State Government or local authority.

Classification of goods - preparations of a kind used in animal feeding - HS Code 23099090 - exemption under Notification No. 02/2017 CT(Rate) - rectification of advance ruling - Section 102 of the CGST Act, 2017

Rectification of advance ruling - Section 102 of the CGST Act, 2017 - Amendment of the earlier advance ruling to correct errors apparent on the face of the record. - HELD THAT: - The Authority accepted the applicant's submission that certain passages in the original order arose from errors apparent on the face of the record (incorrect factory address/ GSTIN reference and misreading of applicant's submission relating to protein content as pertaining to finished product rather than raw material). Finding that these were patent errors that affected the factual matrix considered, the Authority invoked Section 102 and amended the earlier order. The Authority recorded that the new unit at Plot No.112 (GSTIN 23AABCV1297N3ZY) manufactures only the product sought to be classified and that the amendment was warranted to reflect the correct facts and submissions of the applicant. [Paras 11]

The earlier order dated 02.01.2020 is amended under Section 102 to correct the identified errors and to record the correct facts about the new unit and the applicant's submissions.

Classification of goods - preparations of a kind used in animal feeding - HS Code 23099090 - exemption under Notification No. 02/2017 CT(Rate) - Whether the product 'Preparation of a kind used in Animal Feeding - Bio Processed Meal' is classifiable under HS Code 23099090 and eligible for nil rate of GST under Notification No.02/2017 CT(Rate). - HELD THAT: - Having considered the manufacturing process, the transformation of soybean meal through inoculation, fermentation, drying and milling, and the applicant's categorical declaration that the finished product will be used only for animal feeding, the Authority concluded that the finished product has lost the essential characteristics of the original material and is a preparation of a kind used in animal feeding. The Authority relied on the chapter note to heading 2309 and the explanatory note indicating that products used for animal feeding fall under heading 2309. On the basis of the process description, the changes in physico chemical properties of the meal, and the applicant's uncontested declaration about exclusive animal feed use, the Authority held that the product falls under subheading 23099090. Consequentially, the product is covered by Sr. No. 102 of Notification No.02/2017 CT(Rate) and is exempt from GST for intra state supplies as specified therein. [Paras 11]

The product is classifiable under HS Code 23099090 and entitled to exemption under Notification No.02/2017 CT(Rate) for the specified use as animal feed.

Final Conclusion: The Authority amended its earlier order under Section 102 to correct factual errors and held that the finished product 'Preparation of a kind used in Animal Feeding - Bio Processed Meal' manufactured at the applicant's unit (Plot No.112, GSTIN 23AABCV1297N3ZY) is classifiable under HS Code 23099090 and eligible for exemption under Serial No.102 of Notification No.02/2017 CT(Rate).

Deduction for repairs and maintenance - allocation between income from business and income from house property - Proportionate application of statutory flat rate deduction where property is partly let out - Transfer pricing - determination of arm's length price for cross border manning services - Application of comparable third party data and inclusion of reimbursed expenses in benchmarking - Precedent reliance in assessee's own case - consistency of findings across assessment years - Prematurity of penalty proceedings

Deduction for repairs and maintenance - allocation between income from business and income from house property - Proportionate application of statutory flat rate deduction where property is partly let out - Whether the assessee is entitled to deduct repairs and maintenance claimed for the period when the premises were not let out, having already received a 30% flat deduction for the period of letting under the head 'income from house property'. - HELD THAT: - The Tribunal found that only 100 sq.ft of the assessee's 10,000 sq.ft office premises was let out for five months and rental income of Rs.57,500 was assessed under 'income from house property' with a 30% flat deduction allowed under that head for the period of letting. The regular repairs and maintenance of Rs.12,23,559 claimed by the assessee under 'income from business' were disallowed by the Assessing Officer on the ground that a 30% deduction had already been granted under 'income from house property'. The Tribunal observed that the 30% deduction under Section 38(2) (as applied by the authorities under 'income from house property') was necessarily limited to the period of letting (five months) and that no deduction had been allowed for the remaining seven months during which the assessee used the 100 sq.ft for its own business. Consequently, the assessee was held entitled to a proportionate deduction in respect of repairs and maintenance attributable to the seven month period of own use, and the ground was partly allowed.

Partly allowed - assessee entitled to proportionate deduction for repairs and maintenance for the seven months during which the premises were used for business and not let out.

Transfer pricing - determination of arm's length price for cross border manning services - Application of comparable third party data and inclusion of reimbursed expenses in benchmarking - Precedent reliance in assessee's own case - consistency of findings across assessment years - Whether the transfer pricing adjustment to increase manning services fees to the arm's length price should be sustained where identical issues in the assessee's own earlier and later assessment years were decided in the assessee's favour. - HELD THAT: - The Tribunal noted that facts relating to the manning services transaction in A.Y.2003 04 were identical to those in the assessee's own cases for A.Y.2002 03, 2004 05 and 2005 06, where the Tribunal had examined the TPO's reliance on third party data (from Confidence Shipping Co.) and had held that reimbursed expenses incurred in relation to the tested transaction ought to be considered in determining the effective rate charged. The earlier Tribunal decisions accepted that once reimbursements were taken into account the assessee's effective rate compared favourably with the comparable rate adopted by the TPO and thus negated the need for an upward adjustment. Applying the same reasoning, and noting that the CIT(A) had already granted part relief which the Revenue did not appeal, the Tribunal deleted the remaining transfer pricing adjustment confirmed by the CIT(A).

Allowed - transfer pricing addition on account of manning services deleted, following the Tribunal's decisions in the assessee's own cases on identical facts.

Prematurity of penalty proceedings - Whether penalty proceedings under section 271(1)(c) should be adjudicated at the stage of the present appeal. - HELD THAT: - The Tribunal observed that initiation of penalty proceedings was premature at this stage of the litigation and accordingly declined to adjudicate the penalty ground in the present appeal. The matter was left open for determination at the appropriate stage.

Not adjudicated - initiation of penalty proceedings held to be premature for adjudication in this appeal.

General grounds not requiring specific adjudication - Disposition of general ground raised by the assessee that did not require specific adjudication. - HELD THAT: - The Tribunal recorded that the ground was general in nature and did not necessitate separate examination or specific findings, and accordingly did not consider it further.

No specific adjudication required.

Final Conclusion: The appeal is partly allowed: the assessee is granted proportionate deduction for repairs and maintenance for the period of own use of the premises; the transfer pricing adjustment in respect of manning services is deleted following identical earlier decisions in the assessee's own case; penalty proceedings are held premature for adjudication; one general ground requires no specific adjudication.

Treatment of Technology Upgradation Fund (TUF) subsidy in income computation - inclusion/exclusion of subsidy/interest subsidy in computation of book profit under section 115JB - precedent value of Tribunal's own decision and effect of pending High Court appeal - application of jurisdictional High Court decisions on computation of book profit - disallowance under section 14A read with rule 8D(2)(ii) - availability of interest-free funds as determinative for section 14A and related disallowances - disallowance under section 36(1)(iii) for advances/investments and commercial expediency - allowability of employer contributions to Provident Fund under section 36(1)(va) when paid before due date/grace period

Treatment of Technology Upgradation Fund (TUF) subsidy in income computation - precedent value of Tribunal's own decision and effect of pending High Court appeal - Deletion of addition made by the Assessing Officer in respect of subsidy received under TUF upheld by CIT(A) and sustained by the Tribunal following Tribunal's earlier decisions in assessee's own case. - HELD THAT: - The Tribunal noted that in assessee's own earlier appeals the Tribunal had decided the TUF subsidy issue in favour of the assessee and no contrary decision was produced. The mere fact that the Department had preferred an appeal to the High Court against that Tribunal order did not warrant departing from the Tribunal's previously recorded precedent. The Tribunal therefore respectfully followed its earlier orders in ITA Nos. 1017/Mum/2017 and 7243/Mum/2017 dated 26.07.2019 and 21.05.2018 and upheld the deletion made by the CIT(A). [Paras 4]

Order of the CIT(A) deleting the addition of TUF subsidy is upheld.

Inclusion/exclusion of subsidy/interest subsidy in computation of book profit under section 115JB - application of jurisdictional High Court decisions on computation of book profit - remand for de novo consideration - Whether interest subsidy (TUF) credited to profit and loss account should be excluded while computing book profit under section 115JB was not finally adjudicated and is remitted to the CIT(A) for fresh consideration in light of binding jurisdictional High Court authorities. - HELD THAT: - The Tribunal observed that the ITAT orders relied upon by the assessee did not take into account binding decisions of the jurisdictional High Court which have held that such receipts must be taken into account in computing book profit. The Tribunal referenced several Bombay High Court decisions and noted Supreme Court authority that failure to consider jurisdictional High Court precedent may render a Tribunal decision a mistake apparent on the record. In view of these precedents and the duty of the appellate authority to correct errors, the Tribunal did not decide the issue on merits but remitted the question to the CIT(A) for de novo consideration after taking into account the cited High Court decisions, granting the assessee an opportunity of being heard. [Paras 14]

Matter remitted to the file of the CIT(A) for fresh consideration of the inclusion/exclusion of the interest subsidy in book profit under section 115JB, in light of binding jurisdictional High Court decisions.

Disallowance under section 14A read with rule 8D(2)(ii) - availability of interest-free funds as determinative for section 14A - effect of Supreme Court decision on prior jurisdictional High Court ruling - Deletion of disallowance under section 14A (read with rule 8D(2)(ii)) upheld where the assessee had sufficient interest-free funds to make investments earning exempt income. - HELD THAT: - The Tribunal recorded that the Assessing Officer did not deny that interest-free funds available to the assessee exceeded the investments made, although he had sought a cash flow statement. The Revenue's contention that the Bombay High Court decision relied upon by the CIT(A) was superseded by the Supreme Court's decision in Maxopp Investment Ltd. was held to be misplaced because the Revenue did not identify which portion of the Supreme Court decision purportedly superseded the jurisdictional High Court ruling. Respectfully following the Bombay High Court decision (HDFC Bank) and earlier Tribunal orders in assessee's own case, the Tribunal upheld the CIT(A)'s deletion of the disallowance. [Paras 17]

Order of the CIT(A) deleting the section 14A disallowance is upheld.

Disallowance under section 36(1)(iii) for advances/investments - availability of interest-free funds - Disallowance under section 36(1)(iii) deleted where assessee had sufficient interest-free funds; CIT(A)'s order upheld. - HELD THAT: - The Tribunal found that the disallowance under section 36(1)(iii) was founded on the same facts as the section 14A disallowance and that the Assessing Officer did not dispute the availability of sufficient interest-free funds. The CIT(A) had decided the issue on that basis (relying on the Bombay High Court decision in HDFC Bank). The Tribunal saw no infirmity in that approach and sustained the CIT(A)'s conclusion without requiring a separate finding on commercial expediency. [Paras 19]

Order of the CIT(A) deleting the disallowance under section 36(1)(iii) is upheld.

Allowability of employer contributions to Provident Fund under section 36(1)(va) when paid before due date/grace period - Disallowance under section 36(1)(va) in respect of employees' Provident Fund contribution deleted; CIT(A)'s order upheld. - HELD THAT: - The Tribunal agreed with the assessee that the issue was squarely covered by binding Bombay High Court authority (CIT vs Ghatge Patil Transports Ltd.) and the Supreme Court decisions referred to in the Tribunal's earlier orders, establishing that contributions made before the due date or within the grace period are allowable. On that basis the Tribunal upheld the CIT(A)'s deletion of the disallowance. [Paras 21]

Order of the CIT(A) deleting the disallowance under section 36(1)(va) is upheld.

Final Conclusion: The Revenue appeals are partly allowed inasmuch as the Tribunal upheld the CIT(A)'s deletions of additions/disallowances in respect of the TUF subsidy (following earlier Tribunal orders), section 14A, section 36(1)(iii) and section 36(1)(va) matters for the specified assessment years; the question of inclusion/exclusion of the interest subsidy in book profit under section 115JB is remitted to the CIT(A) for fresh consideration in light of binding jurisdictional High Court decisions, with opportunity to the assessee to be heard. Appeals accordingly partly allowed for statistical purposes.

Advertisement, marketing and promotion (AMP) expenditure - international transaction - transfer pricing adjustment - Bright Line Test (BLT) - arm's length price (ALP) determination - burden on Transfer Pricing Officer to demonstrate arrangement/agreement - refusal to remit pending higher court decision

Advertisement, marketing and promotion (AMP) expenditure - international transaction - burden on Transfer Pricing Officer to demonstrate arrangement/agreement - Tax treatment of AMP expenditure incurred in India - whether it constitutes an international transaction attracting transfer pricing adjustment - HELD THAT: - The Tribunal found that the factual matrix for assessment year 2013-14 is identical to prior years where the same issue was decided in favour of the assessee. The AMP expenditure was incurred in India, paid to unrelated third parties, and was shown to have been incurred to launch/penetrate the market for new products; the assessee claimed to be the primary beneficiary and furnished supporting evidence. The Transfer Pricing Officer did not demonstrate the existence of any arrangement or agreement with the associated enterprises under which the assessee incurred AMP expenditure to promote the AEs' brand. Absent such an arrangement, and given that the expenditure was incurred and paid within India for increasing sales of the assessee's imports, the Tribunal held that the AMP expenditure does not fall within the definition of an international transaction and therefore is not amenable to transfer pricing adjustment. [Paras 7, 8]

AMP expenditure incurred in India by the assessee does not constitute an international transaction; the adjustment on this ground cannot be sustained.

Bright Line Test (BLT) - arm's length price (ALP) determination - Validity of applying the Bright Line Test to determine the arm's length price of AMP expenditure - HELD THAT: - The Tribunal noted that the Transfer Pricing Officer applied the BLT method relying on the Special Bench decision in LG Electronics, but observed that the BLT approach has been disapproved by higher judicial authority (as noted in decisions such as Maruti Suzuki) as not being prescribed by statute. Following consistent Tribunal jurisprudence, the Tribunal held that determination of ALP of AMP expenditure by applying BLT is not valid. Consequently, the TPO lacked jurisdiction to determine ALP of AMP expenditure on that basis where no arrangement/agreement existed between the parties. [Paras 7]

Application of the BLT to compute ALP for AMP expenditure is invalid; the ALP determination made on this basis cannot be sustained.

Refusal to remit pending higher court decision - Whether the matter should be restored to the Assessing Officer pending the outcome of a Special Leave Petition before the Supreme Court - HELD THAT: - The Revenue sought restoration of the issue to the Assessing Officer until the Supreme Court decides an SLP challenging certain High Court decisions on AMP treatment. The Tribunal observed that prevailing legal position, as reflected in binding and consistent authorities considered by the Tribunal and the Commissioner (Appeals), is that AMP expenditure incurred in India does not qualify as an international transaction absent an arrangement. Given that conclusion, no useful purpose would be served by remitting the issue to the Assessing Officer pending the SLP; the Tribunal therefore declined the Department's request for a restoration. [Paras 7]

Request to remit the issue to the Assessing Officer pending the Supreme Court decision refused; no restoration ordered.

Final Conclusion: Following earlier decisions in the assessee's own case and applicable judicial precedents disapproving BLT, the Tribunal upheld the Commissioner (Appeals) order deleting the transfer pricing adjustment to AMP expenditure for AY 2013-14 and dismissed the Revenue's appeal.

Disallowance under section 14A read with Rule 8D - Requirement of AO's recording of satisfaction before making disallowance - Application of Rule 8D(2)(ii) where interest free funds exceed investments - Computation under Rule 8D(2)(iii) limited to investments yielding exempt income - Validity of suo moto disallowance made by assessee - Remand for fresh adjudication of addition to income from capital gains

Disallowance under section 14A read with Rule 8D - Requirement of AO's recording of satisfaction before making disallowance - Application of Rule 8D(2)(ii) where interest free funds exceed investments - Computation under Rule 8D(2)(iii) limited to investments yielding exempt income - Validity of suo moto disallowance made by assessee - Whether the disallowance under section 14A read with Rule 8D could be sustained where the AO did not record satisfaction and where assessee's interest free funds exceeded investments, and whether Rule 8D(2)(iii) computation should be confined to investments yielding exempt income. - HELD THAT: - The Tribunal examined the assessment record and found that the AO did not record the requisite satisfaction that the assessee's suo motu apportionment under section 14A was incorrect, a pre requisite identified by the Hon'ble Supreme Court in Maxopp Investment Ltd. The AO's computation under Rule 8D showed nil directly attributable expenses, an interest disallowance under Rule 8D(2)(ii) and an indirect expense component under Rule 8D(2)(iii). On the facts the assessee's shareholders' funds (interest free funds) both at the beginning and end of the year exceeded the investments; applying the principle in HDFC Bank and Reliance, no disallowance under Rule 8D(2)(ii) was warranted. For Rule 8D(2)(iii) the Tribunal followed the Delhi Special Bench in Vireet Investment Pvt. Ltd. that the average value for computing indirect expense disallowance must be confined to those investments which actually yielded exempt income during the year; on the material the assessee had made a suo motu disallowance and detailed administrative expenses which, after specified deductions, left a figure against which the assessee's own apportionment (approximately 18.61%) had been made. In view of the absence of any recorded satisfaction by the AO and the facts regarding interest free funds and the correct scope of Rule 8D(2)(iii), the Tribunal held the AO's further disallowance unsustainable. [Paras 21, 22, 23, 24, 25]

Disallowance under section 14A read with Rule 8D set aside; grounds 2 and 3 allowed.

Remand for fresh adjudication of addition to income from capital gains - Whether the addition made by the AO to income under the head capital gains was properly adjudicated by the CIT(A), and if not, whether the matter should be restored to the file of the AO for fresh consideration. - HELD THAT: - The Tribunal observed that the AO made an addition under 'income from capital gain' in the assessment order without discussion in the body of the order. Although the assessee raised specific grounds before the CIT(A), the CIT(A) did not adjudicate those grounds. In the interest of justice and considering the absence of adjudication at the appellate stage, the Tribunal restored the issue to the file of the AO with a direction to afford the assessee an opportunity of being heard and to decide the issue afresh on facts and law. [Paras 2, 3, 26, 27]

Issue of addition to capital gains remanded to the AO for fresh adjudication after giving the assessee an opportunity of being heard; ground allowed for statistical purpose.

Final Conclusion: Appeals partly allowed: the additional disallowance under section 14A read with Rule 8D is set aside (grounds 2 and 3 allowed); the AO's addition to income from capital gains is restored to the file of the AO for fresh adjudication after hearing the assessee (ground allowed for statistical purpose); general ground dismissed.

Additions as unexplained cash u/s.69A - reliance on third party reply under section 131 - violation of principles of natural justice - right to be heard and opportunity to reconcile third party records - admission of additional ground for adjudication

Additions as unexplained cash u/s.69A - reliance on third party reply under section 131 - violation of principles of natural justice - right to be heard and opportunity to reconcile third party records - Whether the additions made by the Assessing Officer of processing charges recorded by a third party and alleged cash payments, treated as unexplained income and added u/s.69A, were sustainable without giving the assessee an opportunity to explain or reconcile. - HELD THAT: - The Tribunal found that the AO issued notice u/s.131 to M/s. Utkal Exports and received a detailed reply with annexures showing payments alleged to have been made by the assessee. Before making additions u/s.69A, neither the AO nor the CIT(A) issued any show cause notice or otherwise afforded the assessee an opportunity to explain or reconcile the discrepancies claimed in the third party reply. In these circumstances, treating the amounts as unexplained and making additions without providing the assessee a chance to meet the adverse material amounted to a breach of the principles of natural justice. The Tribunal held that if, after affording a proper opportunity, the assessee fails to explain or reconcile the differential, the authorities may proceed to make appropriate additions; until such opportunity is afforded, the additions cannot stand. Consequently the matter requires fresh examination by the AO after giving a reasonable opportunity of hearing to the assessee. [Paras 9, 10]

Additions set aside for limited re examination; issues remanded to the Assessing Officer to re examine the bills and the third party reply and to re decide after allowing the assessee a reasonable opportunity to be heard.

Admission of additional ground for adjudication - Whether the additional ground filed by the assessee raising lack of opportunity to cross examine the third party and reliance on its documents should be admitted for adjudication. - HELD THAT: - The Tribunal, applying the principles in CIT v. NTPC and noting that the additional ground went to the root of the matter and could be decided on the material on record, admitted the additional ground. The Revenue raised no substantive objection to its admission, and the Tribunal permitted its consideration along with the appeal. [Paras 6]

Additional ground admitted for adjudication.

Final Conclusion: The appeal is allowed for statistical purposes: the additions made u/s.69A based on the third party reply are set aside and remitted to the Assessing Officer for limited re examination after affording the assessee a reasonable opportunity to explain and reconcile; the assessee's additional ground is admitted.

Fees for Technical Services - Tax Deduction at Source - Human intervention test for technical services - Interpretation of Rule 34(5) - pronouncement within 90 days - Force majeure and exclusion of lockdown period for computation of time-limits

Fees for Technical Services - Tax Deduction at Source - Human intervention test for technical services - Interconnection/roaming charges paid by the assessee to other telecom operators are not in the nature of fees for technical services and are not liable to deduction of tax at source under section 194J. - HELD THAT: - The Tribunal held that the appeals were squarely covered by a coordinate-bench decision which, after considering technical expert opinion and precedents, found that the process of interconnection/roaming between participating operators is automatic and does not involve human intervention. On that factual foundation the coordinate bench concluded that the payments for interconnection usage charges (roaming/IUC) do not fall within the ambit of Fees for Technical Services and hence fall outside the TDS requirement under section 194J. The present Bench, the parties and the CIT(A)'s order were found to have considered the same body of decisions and materials and no reason existed to depart from the coordinate-bench view. Accordingly the CIT(A)'s deletion of demands under section 194J was confirmed and the revenue's appeal dismissed. [Paras 3, 5, 10]

Revenue's appeal in respect of AY 2008-09 and AY 2009-10 dismissed; IUC/roaming charges held not to be fees for technical services and not chargeable to TDS under section 194J.

Interpretation of Rule 34(5) - pronouncement within 90 days - Force majeure and exclusion of lockdown period for computation of time-limits - Delay in pronouncement of the orders beyond 90 days was justified by excluding the lockdown period as an extraordinary circumstance under rule 34(5). - HELD THAT: - The Tribunal noted rule 34(5)'s requirement that orders generally be pronounced within 90 days of conclusion of hearing but observed the rule itself uses the term 'ordinarily'. Having regard to the nationwide COVID-19 lockdown, associated restrictions on judicial functioning, and concurrent directions/relief from higher courts and government treating the pandemic as exceptional/force majeure, the Bench held that the lockdown period should be excluded when computing the 90-day limit. In that pragmatic interpretative approach the bench found the delay in pronouncement attributable to extraordinary circumstances and thus permissible; no exercise of refixing for clarifications was required on the facts. [Paras 6, 7, 8, 9, 10]

Pronouncement delay beyond 90 days held excused by exclusion of the lockdown period; no procedural infirmity in the timing of the orders.

Final Conclusion: The Tribunal dismissed the revenue's appeals for AY 2008-09 and 2009-10, confirming that interconnection/roaming charges are not fees for technical services attracting TDS under section 194J, and held that the delay in pronouncement of the orders beyond 90 days was justified by excluding the COVID-19 lockdown period under rule 34(5).

Estimated additions for bogus purchases - profit element embedded in transactions - one-to-one correlation of purchases and sales - application of gross profit rate for estimation - set-off of declared gross profit against estimated profit - exclusion of lockdown period for computation of Rule 34(5) limitation

Estimated additions for bogus purchases - one-to-one correlation of purchases and sales - profit element embedded in transactions - application of gross profit rate for estimation - Estimation of additions in respect of alleged bogus purchases from M/s Ragini Trading & Investments Pvt. Ltd. for AY 2009-10. - HELD THAT: - The Tribunal accepted that the assessee was engaged in trading in low margin commodity with quantitative one to one correlation between purchases and corresponding sales, payments through banking channels and account confirmation from the supplier, but the supplier was not produced and the supplier's books were rejected in its assessment. Having regard to the business model, the evidentiary matrix and judicial precedents, the Tribunal held that the entire purchases could not be added to income and only the profit embedded in such transactions could be taxed. While earlier decisions endorse estimating profit on suspicious purchases (including adoption of a 12.5% rate in some cases with set off of book GP), the Tribunal found 12.5% excessive on the facts of this case. Drawing analogy to a co ordinate bench decision on identical facts for the assessee's son and considering the GP rates reflected by the assessee in preceding and succeeding years, the Tribunal directed the Assessing Officer to estimate additional income at 1% on a net basis of the suspicious/unverified purchases without granting any other benefit. [Paras 5]

Addition against suspicious purchases for AY 2009-10 sustained only to the extent of 1% (net) of such purchases; balance additions deleted and revenue's appeal dismissed while assessee's appeal partly allowed.

Estimated additions for bogus purchases - profit element embedded in transactions - application of gross profit rate for estimation - Estimation of additions in respect of alleged bogus purchases from M/s Ragini Trading & Investments Pvt. Ltd. for AY 2010-11. - HELD THAT: - Facts for AY 2010-11 were held to be pari materia to AY 2009 10. The Tribunal applied the same reasoning and methodology adopted for AY 2009 10, directing the Assessing Officer to compute additional income at 1% (net) of the suspicious/unverified purchases from M/s RTIPL for AY 2010 11 as well. [Paras 6]

Addition against suspicious purchases for AY 2010-11 sustained only to the extent of 1% (net) of such purchases; balance additions deleted and revenue's appeal dismissed while assessee's appeal partly allowed.

Exclusion of lockdown period for computation of Rule 34(5) limitation - Whether the period of nationwide lockdown caused by COVID 19 is to be excluded while computing the 90 day limitation under Rule 34(5) for pronouncement of Tribunal orders. - HELD THAT: - The Tribunal observed that the nationwide lockdown imposed on 24/03/2020 and subsequent restrictions constituted exceptional and extraordinary circumstances, disrupting judicial functioning. Reliance was placed on contemporaneous judicial and governmental measures recognizing the pandemic as a disaster and extending or excluding limitation periods. In view of these realities and precedent of a co ordinate bench, the Tribunal excluded the lockdown period for the purpose of computing the 90 day pronouncement period under Rule 34(5) and proceeded to pronounce the order after offices re opened. [Paras 7]

Lockdown period excluded in computing the limitation under Rule 34(5); delay in pronouncement attributed to exceptional pandemic circumstances and order pronounced thereafter.

Final Conclusion: The Tribunal dismissed the revenue appeals and partly allowed the assessee's appeals by restricting additions arising from alleged bogus purchases by M/s Ragini Trading & Investments Pvt. Ltd. to 1% (net) of such purchases for AY 2009 10 and AY 2010 11; the Tribunal also held that the COVID 19 lockdown period is to be excluded while computing the Rule 34(5) time limit for pronouncement of orders.

Double taxation - matching concept - accrual basis of accounting - allowability of prior period expenses - deduction of depreciation - recognition of income - treatment of costs under applicable accounting standards (Guidance note / Ind AS)

Double taxation - recognition of income - matching concept - Addition of Rs. 2,10,73,800 reflected in Form 26AS and received from M/s. Admass Builders Pvt. Ltd. held to be taxable in AY 2014-15 - HELD THAT: - The assessee had sold the Global Technology Park in an earlier year and offered the gross sale consideration and profit for taxation in AY 2013-14. Amounts debited by the buyer to the assessee's account during the year under various statutory approvals and adjustments were part of the sale consideration already taxed in the earlier year. The ledger and agreement showed that the buyer incurred and adjusted various statutory and project-related payments by debiting the assessee's account; those adjustments were reflected in Form 26AS after deduction of tax at source by the payer. Mere reflection in Form 26AS or the fact that TDS was deducted by the payer does not convert an already taxed earlier-year receipt into taxable income in the subsequent year. In these circumstances, treating the sum as income in AY 2014-15 would amount to double taxation; the addition was therefore unsustainable and directed to be deleted. [Paras 11]

Addition of Rs. 2,10,73,800 is deleted.

Deduction of depreciation - accrual basis of accounting - Disallowance of depreciation of Rs. 7,29,706 on the ground that no business activity was carried out during the year - HELD THAT: - The assessee had gross receipts from lease and miscellaneous income during the year and claimed depreciation on existing business assets (computers, ACs, motor cars, etc.) which were part of the block of assets. The assets were in use for business purposes; the company continued to carry on business activities even though no new project was undertaken. The presence of business receipts and allowance of business expenditure demonstrate ongoing business operations, and therefore depreciation on those assets is allowable. [Paras 15]

Disallowance of depreciation is reversed and the depreciation of Rs. 7,29,706 is to be allowed.

Allowability of prior period expenses - accrual basis of accounting - treatment of costs under applicable accounting standards (Guidance note / Ind AS) - Disallowance of legal and professional expenses of Rs. 1,89,08,562 as prior period / non-allowable expenditures - HELD THAT: - The assessee produced invoices and payment receipts showing that consultancy, legal and professional charges were received, accrued and paid during the year. Under the accrual method of accounting followed by companies, expenses are to be recognised when incurred; the relevant bills related to the project were received and acknowledged in the year under consideration. Guidance note / Ind AS principles recognise that costs relating to past or partially satisfied performance obligations or costs incurred when not chargeable to the customer are to be expensed when incurred. Given that the expenses were incurred and substantiated in the year and were not shown to have arisen or been billed in the earlier year, there was no justification for disallowance, and the AO is directed to delete the disallowance. [Paras 19]

Disallowance of legal and professional expenses of Rs. 1,89,08,562 is deleted and the expenditure is allowed.

Final Conclusion: The appeal is partly allowed: the addition of Rs. 2,10,73,800 and the disallowance of legal and professional expenses of Rs. 1,89,08,562 are deleted, and depreciation of Rs. 7,29,706 is allowed; the assessment is to be revised accordingly.

Exemption under Sections 11 and 12 - proviso to Section 2(15) and definition of charitable purpose - violation of provisions affecting charitable status (including control by another trust and promotion of a particular religion) - application of commercial principles in computing income of a trust - deductibility of provisions for doubtful debts, leave encashment and gratuity if bona fide

Exemption under Sections 11 and 12 - proviso to Section 2(15) and definition of charitable purpose - violation of provisions affecting charitable status (including control by another trust and promotion of a particular religion) - Whether the assessee-trust is entitled to exemption under Sections 11 and 12 for AY 2013-14 and whether its activities are hit by the proviso to Section 2(15) or by alleged breaches under the provisions affecting charitable status. - HELD THAT: - The Tribunal upheld the CIT(A)'s grant of exemption, following coordinate-bench decisions in the assessee's own earlier years and subsequent dismissal of the Revenue's challenges by the High Court. The finding rests on (a) absence of any material to show change in the Association's object or rules since registration under Section 12A, (b) no specific material to substantiate that activities fall outside charitable purposes as per the proviso to Section 2(15), and (c) particular activities such as unrecognized educational courses and hostel facilities being aligned to and incidental to the educational objectives; mere charging of fees or generation of surplus does not negate charitable character so long as surplus is redeployed for charitable purposes. The Tribunal observed that past decisions in the assessee's own case and applicable precedents support treating these activities as charitable and that the proviso to Section 2(15) is not attracted on the facts. Reliance on prior coordinate-bench and High Court orders rendered the Assessing Officer's contrary conclusions on sections affecting charitable status unsustainable. [Paras 5, 11, 13]

Exemption under Sections 11 and 12 allowed for AY 2013-14; activities are not hit by the proviso to Section 2(15) and alleged breaches affecting charitable status were not established.

Application of commercial principles in computing income of a trust - deductibility of provisions for doubtful debts, leave encashment and gratuity if bona fide - Whether provisions made for contingencies (including doubtful debts, leave encashment and gratuity) are allowable deductions in computing the income of the trust for application to charitable purposes. - HELD THAT: - Relying on the decision of the Delhi High Court in NASSCOM, the Tribunal accepted that reasonable and bona fide provisions made for anticipated losses or outgoings are deductible when computing the income available for charitable application. The CIT(A) applied the commercial principles to hold the provisions bona fide and deleted the disallowances made by the Assessing Officer. The Tribunal found no reason to disturb that approach on the facts of the case. [Paras 5, 7, 13]

Disallowances in respect of provisions were deleted; provisions held deductible if reasonably made and bona fide, and income to be computed on commercial principles.

Final Conclusion: The departmental appeal is dismissed: the assessee is entitled to exemption under Sections 11 and 12 for AY 2013-14 (proviso to Section 2(15) not attracted) and the Assessing Officer's disallowances of bona fide provisions are deleted; the CIT(A)'s order is sustained.

Genuineness of expenditure - job work expenses - onus on assessee to prove source and genuineness - use of banking channel and TDS as corroborative evidence - statements recorded under section 131 of the Income tax Act - disallowance as bogus/fictitious - comparative gross profit and ratio of job charges to turnover as indicia of reasonableness

Job work expenses - genuineness of expenditure - use of banking channel and TDS as corroborative evidence - statements recorded under section 131 of the Income tax Act - onus on assessee to prove source and genuineness - Whether the addition of Rs. 10,24,42,002/- made by the Assessing Officer by treating job work charges as bogus should be sustained or deleted. - HELD THAT: - The Tribunal affirmed the view of the Commissioner (Appeals) that the Assessing Officer's disallowance rested on suspicion rather than conclusive evidence. The Tribunal noted that the assessee had placed on record multiple corroborative materials: payments made by account payee cheques after deduction of TDS, bank statements obtained by the AO, income tax returns of the job workers, statements recorded under section 131 confirming that job work was rendered, registrations (including Provident Fund registrations) and, in some cases, labour payment registers and audited books. The AO's observations - that job workers lacked independent machinery, operated from the assessee's premises and that signatures on bank forms and invoices did not match - were held to be insufficient to infer that the transactions were fictitious, particularly in the absence of any evidence that funds were returned to the assessee. The Tribunal also relied on the comparative business metrics (reduction in job charges to turnover and an increase in gross profit margin) and precedent where similar evidence was held sufficient to prove genuineness. On this factual matrix the assessee was held to have discharged its onus of proving the source and genuineness of the expenditure and the addition was accordingly unsustainable. [Paras 6, 10]

The deletion of the addition made by the Assessing Officer in respect of the job work expenses is sustained; the Revenue's appeal is dismissed.

Final Conclusion: The Tribunal declines to interfere with the CIT(A)'s finding that the impugned job work expenses were bona fide and deletes the addition; the Revenue's appeal is dismissed.

Re-opening of assessment beyond four years and the proviso to Section 147 - failure to disclose material facts fully and truly as a condition for valid re-opening - relevance and sufficiency of information received from the Investigation Wing - no fresh tangible material to justify reassessment - addition under cash credits doctrine and burden to prove identity, creditworthiness and genuineness

Re-opening of assessment beyond four years and the proviso to Section 147 - failure to disclose material facts fully and truly as a condition for valid re-opening - relevance and sufficiency of information received from the Investigation Wing - no fresh tangible material to justify reassessment - Validity of re-opening the assessment for AY 2011-12 under section 147 in view of the proviso and the material relied upon by the AO. - HELD THAT: - The assessment originally completed under section 143(3) was re-opened after more than four years; therefore the proviso to section 147 is attracted and re-opening is permissible only if there was failure to disclose material facts fully and truly or if fresh tangible material has come into possession of the AO. The reasons recorded rely on vague, general findings and information from the Investigation Wing describing a network of alleged shell/jama kharchi companies and a transfer of funds, but the transaction with the creditor M/s. Rexnox Trexim Pvt. Ltd. was disclosed in the original assessment proceedings, supported by the assessee's replies to a notice under section 142(1) and by submission of the unsecured loan account showing interest paid and TDS. The AO's specific finding that the assessee failed to disclose the loan is factually incorrect. No fresh tangible material specific to this assessee was placed on record to show nondisclosure or escapement of income; generalised intelligence and inter company inferences without application of mind to the assessee's disclosed documents are insufficient. Consequently the re-opening is unsustainable. [Paras 10, 11, 14, 15]

Re-opening of assessment for AY 2011-12 is invalid and quashed as not meeting the proviso to section 147.

Addition under cash credits doctrine and burden to prove identity, creditworthiness and genuineness - Sustenance of the addition of Rs.10 lakhs as unexplained cash credit under the doctrine of section 68. - HELD THAT: - On the merits, the assessee explained the credit as an unsecured loan received from M/s. Rexnox Trexim Pvt. Ltd., produced the loan account, paid interest and deducted tax at source, and repaid the amount within the same year. Applying the settled principle that where the assessee proves identity, creditworthiness and genuineness of the creditor and the transaction (including repayment and TDS/interest evidence), the addition under section 68 cannot be sustained, the Tribunal finds the explanation satisfactory. The authorities cited support that receipt and repayment by account/payee banking transactions and proof of capacity of the creditor negate the presumption of undisclosed income. Therefore the addition is not maintainable. [Paras 16, 17]

Addition under section 68 is deleted; the cash credit is explained and the addition is bad in law.

Final Conclusion: The reassessment for AY 2011-12 is quashed as the proviso to section 147 is not satisfied and no fresh tangible material was available; on merits the addition under the cash credit provision is deleted. The assessee's appeal is allowed.

TDS under contractual payments (section 194C) - Disallowance for failure to deduct tax (section 40(a)(ia)) - Assessee in default under section 201(1) - Revenue sharing between exhibitor and distributor - Board Circulars on distributor payments

TDS under contractual payments (section 194C) - Disallowance for failure to deduct tax (section 40(a)(ia)) - Revenue sharing between exhibitor and distributor - Board Circulars on distributor payments - Assessee in default under section 201(1) - Whether the payments described as 'Distributor Hire Charges' were liable to TDS as contractual or rent payments and hence liable to disallowance under section 40(a)(ia), and whether the department established assessee's default under section 201(1). - HELD THAT: - The Tribunal examined the nature of payments made by the theatre owning assessee to film distributors and accepted the assessee's case that the amounts represented revenue sharing for exhibition of films rather than payments arising from a contract of carriage or a rental arrangement. The Assessing Officer had proceeded on the premise that the payments were contractual or rental in nature and so attracted deduction of tax at source; however, the AO did not make out facts to establish that the payments were either contract consideration or rent. The assessee relied on earlier orders and Board Circulars, and the Tribunal noted that in prior and subsequent assessments on identical facts the addition was deleted or not made. Because the payments were made by the exhibitor as its share to distributors and not received as rent, they could not be treated as rent; nor, on the material before the AO, could they be characterised as contractual payments liable to TDS. The department also failed to establish that the assessee was an assessee in default under section 201(1). On these bases the Tribunal held the disallowance unsustainable and deleted the addition. [Paras 6]

Addition made under section 40(a)(ia) deleted; appeal allowed.

Final Conclusion: The Tribunal set aside the orders of the lower authorities, held that the payments to film distributors were revenue sharing not liable to TDS as contractual or rent payments, found no case of assessee's default under section 201(1), and allowed the appeal for A.Y.2013-14.

Allowability of interest on delayed statutory dues - compensatory vs penal interest - accrual under mercantile system - depreciation of computer peripherals - definition of computer for depreciation purpose - rate of depreciation at 60% for computers and peripherals

Allowability of interest on delayed statutory dues - compensatory vs penal interest - accrual under mercantile system - Deductibility of interest paid to KSEB for delayed payment of pole rent (amount written off in AY 2007-08). - HELD THAT: - The Tribunal held that the interest liability in question arose and crystallised in the financial year relevant to AY 2007-08 when the dispute with KSEB was finally settled and demand was raised and accepted. The liability was reflected in the accounts as a prior period/extraordinary item in accordance with accounting standards because of the magnitude and nature of the settlement; it was not a mere provision. The payment represented interest computed at a stipulated percentage for delayed remittance of pole rent and, therefore, was compensatory in nature and deductible under the mercantile system of accounting. Reliance was placed on the view that only where a statutory levy is in the nature of a penalty as prescribed by the statute would the expenditure be inadmissible; Supreme Court decisions to that effect (Prakash Cotton Mills vs. CIT , Mahalakshmi Sugar Mills Co. vs. CIT , Lachmandas Mathurdas vs. CIT ) and a Tribunal decision (Lakshdweep Development Corporation Limited ) were noted. For these reasons the CIT(A)'s deletion of the addition was upheld and the Assessing Officer's disallowance was dismissed. [Paras 7, 11]

The disallowance of interest of Rs. 2,37,71,066 was deleted; the interest was held deductible as compensatory and accrued in the relevant year (AY 2007-08).

Depreciation of computer peripherals - definition of computer for depreciation purpose - rate of depreciation at 60% for computers and peripherals - Whether modems qualify for depreciation at the higher rate of 60% applicable to computers for AY 2010-11. - HELD THAT: - The Tribunal followed earlier decisions holding that the definition of 'computer' for depreciation purposes should not be confined to the central processing unit alone but extends to input/output and networking devices that are integral to the functioning of the computer system. Authorities and Tribunal precedents cited in the order recognise devices such as modems, routers and similar peripherals as forming part of the computer system and eligible for the higher rate of depreciation. Applying that principle to the facts, and noting that the Assessing Officer had allowed similar treatment in subsequent years, the Tribunal found no infirmity in the CIT(A)'s direction to allow depreciation at 60% on modems and confirmed the CIT(A)'s order. [Paras 15, 17]

Depreciation on modems allowed at 60%; the CIT(A)'s direction was confirmed for AY 2010-11.

Final Conclusion: Both appeals filed by the Revenue are dismissed; the CIT(A)'s orders deleting the interest disallowance for AY 2007-08 and allowing depreciation on modems at 60% for AY 2010-11 are confirmed.

Contempt of court - refund of IGST - higher drawback versus IGST refund - system-driven withholding of refund - implementation of court directions - leave to approach the Supreme Court

Implementation of court directions - contempt of court - Whether the respondents should be permitted a short period to challenge the Division Bench's order before the contempt petition is proceeded with on merits - HELD THAT: - The Court noted that the Division Bench had earlier held the applicant entitled to claim IGST in respect of exported goods and that the applicant alleges non-compliance of those directions, giving rise to the present contempt proceedings. The respondents asserted that the withholding of IGST refunds is system-driven and that the legal question remains pending at the apex level; they sought time to move the Supreme Court. The Court observed that more than a year had elapsed since the Division Bench's order and that no petition had yet been filed before the Supreme Court. Balancing the department's stated intention to challenge the order with the applicant's right to execution of the directions, the Court allowed a limited, one week period for the respondents to file an appeal to the Supreme Court; the Court made clear that, if no such step is taken within that period, the contempt application and implementation would be proceeded with on merits on the listed date.

Respondents granted one week to approach the Supreme Court; failing which the matter will be taken up on merits.

Refund of IGST - higher drawback versus IGST refund - system-driven withholding of refund - Whether the contention that the department's system prevents sanctioning IGST refunds where higher drawback has been availed excuses continued non-compliance with the Division Bench's directions - HELD THAT: - The Court recorded the department's position that the automated system withholds IGST refunds where exporters have availed higher drawback and that the legal controversy is not yet finally resolved by the Supreme Court. The Court nevertheless observed that in view of the Division Bench's earlier adjudication in favour of the applicant and the lapse of over a year without the department instituting proceedings before the apex forum, indefinite delay could not be permitted. The Court therefore did not accept the passage of time as a sufficient reason to refuse immediate steps towards implementation; instead it afforded a narrowly tailored opportunity to the department to file an appeal, after which the Court will proceed to adjudicate the contempt/implementation issue on merits if no appeal is filed.

System-related constraints and the department's intent to approach the Supreme Court do not justify further delay; a limited period to file an appeal was granted, after which the implementation will be considered on merits.

Final Conclusion: The respondents were given one week to move the Supreme Court against the Division Bench's order; if no appeal is filed within that period, the contempt application alleging non-compliance with the Division Bench's directions relating to IGST refunds will be proceeded with and heard on merits on the listed date.

Liberty to avail remedy of appeal - video conferencing for hearings - physical hearing - administrative impediment to hearing due to vacancy of Technical Member - disposal of review petition

Liberty to avail remedy of appeal - video conferencing for hearings - physical hearing - administrative impediment to hearing due to vacancy of Technical Member - Whether any further action is required in the review petition seeking clarification of the order which granted the petitioner liberty to avail the remedy of appeal. - HELD THAT: - The Registrar General's report, relied upon by the Court, records that CESTAT, Bangalore was not conducting video hearings as members of the Bar were not comfortable with the system and had sought resumption of physical hearings in the first week of July 2020. The report further records that the post of Technical Member in the Bangalore Bench was vacant. The petitioner had already filed the appeal and the only apprehension was the absence of any hearing either physically or by video. In light of these factual administrative constraints recorded by the Registrar General, the Court found no basis to seek further clarification of the liberty previously granted to the petitioner to proceed by appeal or to take additional action in the review petition.

No further course of action is required; the review petition is disposed of in view of the Registrar General's report.

Final Conclusion: The review petition is disposed of: having considered the Registrar General's report about the unavailability of video hearings, the Bar's request for resumption of physical hearings and the administrative vacancy, the Court found no need to disturb or further clarify the liberty already given to the petitioner to pursue the remedy of appeal.

Confiscation for mismatch of BIS certification - Error in embossing I.S./BIS number on imported goods - Reliance on manufacturer's post import clarification - Compulsory BIS certification for import - Penalty under section 112(a) of Customs Act, 1962

Confiscation for mismatch of BIS certification - Error in embossing I.S./BIS number on imported goods - Compulsory BIS certification for import - Whether absolute confiscation of the imported drivers was sustainable where the I.S. number embossed on the drivers did not tally with the BIS certificate produced. - HELD THAT: - The Tribunal examined the BIS registration details and found that the registration comprises an eight digit registration number and a separate Indian Standard (I.S.) product identifier. In the present case the eight digit registration number on the drivers corresponded to the BIS certificate for the drivers, but the I.S. product identifier embossed on the drivers was the I.S. number for the LED panel lights (IS 10322 PART 5/SEC 2) instead of the correct driver I.S. number (IS 15885 PART 2/SEC 13). The manufacturer accepted responsibility and furnished a letter stating that the incorrect I.S. number had been erroneously printed on the drivers. The Tribunal found that the mis embossed I.S. number related to the same product family (the driver being an integral part of the LED panel light) and was an error in marking by the manufacturer rather than endorsement of an entirely different product. On that basis the Tribunal held that confiscation of the drivers for the marking mismatch could not be sustained and set aside the confiscation. [Paras 9, 10, 11, 13]

Confiscation of the drivers set aside as the mismatch in the embossed I.S. number was an error in marking by the manufacturer and not sufficient to sustain absolute confiscation.

Reliance on manufacturer's post import clarification - Penalty under section 112(a) of Customs Act, 1962 - Whether the penalty imposed under section 112(a) should be sustained where the misdescription of BIS details was found to be an error committed by the manufacturer. - HELD THAT: - The Tribunal accepted the manufacturer's contemporaneous clarification that the incorrect I.S. number was erroneously printed on the drivers and noted that the drivers form an integral part of the LED panel lights and could not be used independently. Given the finding that the misdescription was attributable to the manufacturer as an error in embossing, the Tribunal concluded that the penal consequence imposed on the importer under section 112(a) could not be sustained. The penalty was therefore set aside. [Paras 13]

Penalty of Rs. 1,00,000 imposed under section 112(a) set aside as the misdescription was an error by the manufacturer.

Final Conclusion: The appeal is allowed: the confiscation of the drivers is set aside and the penalty under section 112(a) is quashed, the impugned order being modified on the above terms.

Contempt jurisdiction - Non-compliance of court directions - Service of process by electronic mode

Contempt jurisdiction - Non-compliance of court directions - Invocation of contempt jurisdiction for alleged non-compliance with earlier court directions and issuance of notice to respondents - HELD THAT: - The petition invokes the Court's jurisdiction under the Contempt of Courts Act, 1971, complaining of non-compliance with directions recorded in paragraph 36 of the Court's order dated 27.6.2019 in Special Civil Application No. 20126 of 2018. After hearing the applicant's counsel, the Court proceeded to issue notice to the respondents in respect of the contempt petition and fixed the matter for return on the date directed by the Court.

Notice issued to the respondents in the contempt proceedings, returnable on 8.7.2020.

Service of process by electronic mode - Permissibility of direct service of court process through electronic mode in addition to normal modes of service - HELD THAT: - While issuing notice to the respondents, the Court permitted direct service through electronic mode (E-mode) as an additional method of effecting service alongside the normal mode. This direction was given to facilitate service in the contempt proceedings.

Direct service through E-mode is permitted in addition to the normal mode of service.

Final Conclusion: The Court, on hearing the applicant, issued notice in the contempt petition relating to alleged non-compliance of its earlier directions, fixed the matter to be returnable on 8.7.2020, and permitted service of process by electronic mode in addition to ordinary modes of service.

Limitation under Article 137 of the Limitation Act - Application under section 9 of the Insolvency and Bankruptcy Code, 2016 - date of default as triggering event for limitation - acknowledgment of debt - time barred application

Limitation under Article 137 of the Limitation Act - date of default as triggering event for limitation - acknowledgment of debt - Whether the Company Petition filed under section 9 of the Code is barred by limitation. - HELD THAT: - The Tribunal found that the admitted date of default is July 8, 2013 and no subsequent acknowledgment or other circumstance extending limitation was shown. Applying the principle that for applications under the Code article 137 of the Limitation Act governs the period of limitation, the three year period began to run from the date of default. Consequently, limitation expired on July 8, 2016. The petition was filed on July 16, 2018, beyond the three year period. Reliance was placed on recent Supreme Court authorities holding that the date of default, not the date of the Code coming into force, triggers the residuary article and that separate proceedings do not revive or extend limitation unless recognized modes of extension apply. On this basis the petition was held barred by time and dismissed without adjudicating other contentions. [Paras 10, 15, 16]

The petition is time barred by limitation and is dismissed.

Final Conclusion: The section 9 petition was dismissed as time barred: limitation ran from the date of default (July 8, 2013), no acknowledgment extended the period, article 137 of the Limitation Act applies, and the CP filed on July 16, 2018 was beyond the three year limitation period.

Foreclosure charges - banking and other financial services - consideration - value of taxable services - service tax - liquidated damages - breach of contract - in relation to lending

Foreclosure charges - banking and other financial services - consideration - value of taxable services - service tax - liquidated damages - breach of contract - Whether foreclosure charges levied by banks and non-banking financial companies on premature termination of loans are leviable to service tax under "banking and other financial services" - HELD THAT: - The Larger Bench answered the reference in the negative. The Tribunal held that service tax can be levied only on a service for which there is a "consideration" flowing from the service recipient to the service provider and having nexus with the taxable service (see exposition of Section 67 and the inclusive explanation of "consideration") (paras 21-24). Foreclosure charges arise only upon unilateral premature termination by the borrower and operate as compensation for breach of the loan contract - i.e., an agreed measure of damages or liquidated damages intended to protect the lender's expectation interest and to deter early exit (paras 32-39). Such charges do not represent a quid pro quo for a taxable lending service; they are triggered by repudiation and not by provision of a lending service or an ancillary activity "in relation to lending" (paras 34-46). The amendment to include "lending" within the definition of "banking and other financial services" (w.e.f. 10-09-2004) does not convert agreed damages for premature termination into consideration for a taxable service (paras 47-53). Reliance on domestic and foreign authorities underscored the requirement of a direct link between the amount charged and an identifiable service; amounts retained as compensation for cancellation or breach do not constitute consideration for a taxable service (paras 25-28). Applying these principles to the facts, foreclosure charges collected during the period in question are not consideration for lending services and therefore are not includible in the value of taxable services for service tax purposes (paras 21-24, 51-54). [Paras 32, 34, 51, 53, 54]

Foreclosure charges collected by banks and non banking financial companies on premature termination of loans are not leviable to service tax under "banking and other financial services".

Final Conclusion: Reference answered: foreclosure/prepayment charges on premature loan termination do not attract service tax under the definition of "banking and other financial services"; appeal to be placed before the regular Bench for further proceedings.

Availability of alternative remedy - exception to alternative remedy in writ jurisdiction - service tax liability of contractor - no-profit no-loss status of recipient and its effect on taxation of contractor's services - question of fact requiring contract and documentary determination - extension of limitation for filing appeal

Availability of alternative remedy - exception to alternative remedy in writ jurisdiction - question of fact requiring contract and documentary determination - Maintainability of the writ petition in view of the availability of an alternative statutory remedy of appeal. - HELD THAT: - The High Court held that the learned Single Judge correctly dismissed the writ petition because an alternative remedy of appeal was available to the appellant. Although the appellant complained of delay in the court taking up the writ and invoked settled exceptions to the rule of alternative remedy for jurisdictional challenges, the Court found no sufficient cause to entertain the writ. The Court emphasised that the core dispute involved questions of fact to be determined from the contract and documentary material relied upon by the parties, and not a pure jurisdictional short-circuiting that would justify bypassing the statutory appellate remedy. Mere pendency or delay in disposal did not, on the record, disentitle the respondent to the alternative remedy available under the statute. [Paras 6, 7]

Writ petition was properly dismissed on the ground of availability of alternative remedy; appellant should pursue the statutory appeal.

Service tax liability of contractor - no-profit no-loss status of recipient and its effect on taxation of contractor's services - Whether the appellant's construction services for the Tamil Nadu Civil Supplies Corporation attract service tax or are exempted by reason of the Corporation's no-profit no-loss status. - HELD THAT: - On the merits, the Court was not persuaded that the appellant's activities were non-taxable by virtue of the recipient's status. The Court observed that the Tamil Nadu Civil Supplies Corporation, though registered and functioning on a no-profit no-loss basis and receiving subsidies, is a corporate entity engaged in food and civil supplies. That status of the Corporation does not automatically confer exemption upon a contractor who performs construction work for it. The Court characterised the appellant's activity as a commercial contract for profit rather than charitable or non-commercial activity, and held that the Corporation's nature could not be invoked to negate the taxable character of the contractor's services under the provisions relied upon by the appellant. [Paras 10]

The contention that the appellant's services are not liable to service tax owing to the Corporation's no-profit no-loss character is rejected; the services are taxable.

Extension of limitation for filing appeal - availability of alternative remedy - Whether the appellant was afforded relief in the form of extension of limitation to file the statutory appeal. - HELD THAT: - The Court noted that, notwithstanding dismissal of the writ petition, the appellant was permitted to pursue the statutory appeal and was granted the benefit of limitation. The Court did not express a definitive view on the propriety of extending limitation in all circumstances, but recorded that extension had been allowed so that the appellant could seek the appellate remedy rather than relief by way of writ. [Paras 8]

Appellant is permitted to file the statutory appeal with the benefit of limitation.

Final Conclusion: The appeal is dismissed; the Single Judge's order upholding dismissal in view of the alternative remedy is affirmed, the appellant may pursue the statutory appeal with benefit of limitation, and no relief is granted on the contention that the services are non-taxable.

Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 - opportunity of being heard - estimation of amount payable by the designated committee - rectification petition - compliance with Section 127(2) and (3) of the Finance Act, 2019

Opportunity of being heard - estimation of amount payable by the designated committee - Sabka Vishwas Legacy Dispute Resolution Scheme, 2019 - Whether the petitioner was entitled to a personal hearing under the Scheme when the designated committee issued its estimate - HELD THAT: - The Court construed Section 127(2)-(3) of the Finance Act, 2019 to mean that the duty to issue an estimate and thereafter to afford an opportunity of being heard arises only where the amount estimated by the designated committee exceeds the amount declared by the declarant. On comparison of the figures placed before the Court, the amount confirmed in the original order (Ext.P1) exceeded the amount declared under the Scheme (Ext.P3); accordingly there was no statutory requirement to afford a further hearing under Section 127 in the circumstances. The Court therefore held that the rejection of the petitioner's request for personal hearing (Ext.P6) did not offend the Scheme's provisions and that the revenue acted in compliance with Section 127. [Paras 5, 6]

Petitioner's challenge to the refusal of personal hearing (relief No.1) dismissed.

Rectification petition - direction to dispose expeditiously - opportunity of hearing - Whether the rectification petition (Ext.P2) should be directed to be disposed of - HELD THAT: - The Court found the prayer for direction to expedite disposal of the rectification application to be appropriate and benign. While declining the substantive relief sought under the Scheme, the Court directed the first respondent to decide Ext.P2 expeditiously and in accordance with law, affording the petitioner an opportunity of hearing as required in the course of such adjudication. [Paras 7]

Directed the first respondent to dispose of Ext.P2 expeditiously and in accordance with law by affording an opportunity of hearing (relief No.2 disposed of).

Final Conclusion: Writ petition dismissed insofar as challenge to denial of personal hearing; petition allowed in part by directing the first respondent to expeditiously decide the rectification petition (Ext.P2) in accordance with law with an opportunity of hearing.

Principles of natural justice - writ jurisdiction under Article 226 - alternative efficacious remedy - denial of Input Tax Credit - failure to supply material evidence - remand for fresh adjudication

Principles of natural justice - failure to supply material evidence - denial of Input Tax Credit - Impugned reassessment order was passed in breach of principles of natural justice by not supplying the order of cancellation of the supplier's registration and by not considering the petitioner's response, warranting quashing and remand. - HELD THAT: - The Court found that respondent No.2 did not supply the petitioner with the foundational material - namely the order/copy recording cancellation of registration of M/s. Maa Oil Mills - which formed the sole basis for denying the petitioner's claim of Input Tax Credit. The petitioner had filed a detailed reply on 13.03.2020 and produced documents (transport receipts, bills, banking evidence) to substantiate movement and payment for goods. In view of non-supply of the cancellation order and non-consideration of the petitioner's submissions, the impugned assessment dated 24.03.2020 was held to be in breach of the requirements of natural justice. The Court emphasised that the adjudicating authority must independently examine the genuineness of transactions on the strength of materials produced by the petitioner rather than mechanically denying ITC because the supplier's registration was cancelled ab initio. [Paras 6]

Impugned order dated 24.03.2020 quashed and matter remanded for fresh adjudication after supplying requested material and giving the petitioner an opportunity to be heard.

Writ jurisdiction under Article 226 - alternative efficacious remedy - Writ jurisdiction was appropriately exercised notwithstanding the existence of statutory appeal because the remedy under the statute was inadequate in the circumstances of breach of natural justice. - HELD THAT: - Noting that the statutory appeal under Section 73 exists, the Court observed that the appellate authority under the VAT Act does not possess original powers of assessment or further inquiry. Relying on the principle that availability of a statutory remedy is a self-imposed restriction on writ jurisdiction and that such restriction yields where the alternative remedy is illusory or inadequate, the Court held that the petition merited entertain ment because of the blatant denial of basic documents and consequent breach of natural justice. The Court therefore exercised its discretionary writ jurisdiction to quash the assessment and remit the matter for fresh consideration. [Paras 6]

Writ petition entertained and relief granted by quashing the impugned assessment order; statutory appeal was not treated as an adequate remedy in the facts.

Remand for fresh adjudication - failure to supply material evidence - Mandate and procedural directions for reassessment: supply of documents, time for petitioner to produce additional evidence, independent examination on merits, and timeline for completion. - HELD THAT: - On remand the respondent-authority was directed to supply the material sought by the petitioner including the cancellation order of M/s. Maa Oil Mills and related materials. The petitioner was permitted two weeks from receipt of those documents to produce any fresh evidence; the authority must examine genuineness of transactions independently on the strength of materials produced and without being influenced by prior findings. The petitioner undertook not to raise limitation as a defence; the Court indicated an overall objective timeline (six months) for completion of the exercise. The Court did not express any opinion on the merits; the remand was solely for rectifying the breach of natural justice and enabling fresh adjudication on merits. [Paras 7]

Matter remitted to the competent authority with directions to supply documents, allow the petitioner opportunity to adduce evidence, and decide the claim of ITC on merits within the specified timeline.

Final Conclusion: Writ petition partly allowed: the assessment order dated 24.03.2020 is quashed for breach of principles of natural justice and the matter is remanded to the tax authority for fresh adjudication on the petitioner's claim of Input Tax Credit for transactions during 01.04.2014 to 31.03.2015 after supplying requested documents and giving the petitioner an opportunity to be heard; the Court did not adjudicate merits and imposed procedural timelines for re assessment.

Re-opening of assessment after expiry of limitation period - self-assessment completed under Section 21 of the KVAT Act, 2003 - assessment under Section 25A of the KVAT Act, 2003 - time barred assessment - ex parte assessment for non service of notice

Re-opening of assessment after expiry of limitation period - time barred assessment - self-assessment completed under Section 21 of the KVAT Act, 2003 - Validity of completing an assessment under Section 25A for the year 2010-11 after the statutory limitation period had expired, where a self-assessment return for 2010-11 had been filed. - HELD THAT: - The Court held that the assessment completed by the 1st respondent on 30/09/2019 under Section 25A, in respect of the 2010-11 return which had been filed as a self-assessment, was time barred. The petitioner's return for 2010-11 completed self-assessment under Section 21 and the statutory limitation for initiating assessment proceedings had expired (the limitation for the period in question had run out). The High Court found the matter covered by its earlier decision in Philips India Ltd. and the subsequent Division Bench confirmation, which support that assessment proceedings initiated after the expiry of the statutory time limit cannot be sustained. Applying that principle, the attempted re-opening and completion of assessment after the limitation period was without jurisdiction and unsustainable. [Paras 3]

The assessment order dated 30/09/2019 for 2010-11 completed after the limitation period was held to be invalid and without jurisdiction.

Ex parte assessment for non service of notice - assessment under Section 25A of the KVAT Act, 2003 - Validity of the impugned ex parte assessment order in light of the alleged non service of notice on the petitioner. - HELD THAT: - The Court noted that the impugned order was passed ex parte and that the petitioner specifically pleaded non service of the notice alleged to have been issued on 29/06/2019. Having regard to the absence of service and the fact that the assessment was also time barred, the Court concluded that the ex parte order could not stand. The Court therefore quashed the impugned ex parte assessment order. [Paras 3]

The impugned ex parte assessment order was quashed on account of non service of notice and the attendant invalidity.

Final Conclusion: Relying on earlier High Court precedents, the writ petition was allowed: the ex parte assessment order dated 30/09/2019 for the year 2010-11 (completed under Section 25A) was quashed as time barred and invalid, inter alia for non service of the notice.

Purchase tax on return of empty bottles - composite sale of goods - sales return versus repurchase - application of section 16(2A) and section 16(2B) to packing materials - rate determination for purchase tax under section 12(1)(a) read with section 17 - definition of "purchase" as transfer of property in goods - relevance of excise pricing or MRP to VAT liability - validity of Bureau of Investigation report and suo motu revisional order

Purchase tax on return of empty bottles - definition of "purchase" as transfer of property in goods - sales return versus repurchase - Return of empty bottles in the facts of this case amounts to purchase of goods and is taxable under the WB VAT Act, 2003. - HELD THAT: - The Tribunal examined the invoices, accounting treatment and absence of any separate deposit or caution-money accounting and concluded that the price charged was a composite sale inclusive of bottles. On the material before it there was transfer of property in the empty bottles for valuable consideration when empties were returned and paid for. Therefore the transaction fits the statutory definition of "purchase" and is liable to purchase tax. The Tribunal rejected the contention that such returns should be treated as sales returns where (as here) there was no prior separate treatment of bottles as deposits/security, no agreement obliging return and sales tax had already been paid on the composite price. The Tribunal further noted that authorities holding return of whole goods to be deductible from turnover do not assist the petitioner because those cases involved distinct factual and accounting arrangements (e.g., separate deposit accounts, specific agreements and prescribed time-limits) which are absent here. [Paras 22, 23]

Return of empty bottles is a purchase under section 2(34) and chargeable to purchase tax.

Application of section 16(2A) and section 16(2B) to packing materials - rate determination for purchase tax under section 12(1)(a) read with section 17 - Sections 16(2A) and 16(2B) apply only to composite sales where packing materials are sold together with taxable or exempt goods under the stated conditions; where they do not apply, rate is governed by section 16(2) read with section 17 for purchase-tax computation. - HELD THAT: - The Tribunal held that sections 16(2A) and 16(2B) operate when there is a composite sale of goods together with containers or when exempt goods are sold with packing material; these provisions override section 16(2) when they are attracted. In the present case, however, the issue was limited to purchase-tax computation on packing materials (empty bottles) returned separately after a composite sale had been accounted for; the Tribunal concluded that sections 16(2A) and 16(2B) did not apply to such isolated packing-material transactions and therefore the rate applicable for levy under section 12(1)(a) must be determined with reference to section 16(2) and section 17. The Tribunal also observed that country liquor being outside the VAT definition of goods did not automatically render packing materials non-taxable on the facts before it. [Paras 19]

Where sections 16(2A)/(2B) are not attracted, purchase-tax on packing materials is leviable at the rate specified in section 16(2) read with section 17.

Validity of Bureau of Investigation report and suo motu revisional order - relevance of excise pricing or MRP to VAT liability - The Bureau of Investigation report was lawfully considered and the suo motu revisional orders based on it cannot be set aside on the ground that the petitioner is not liable to pay tax on return of bottles as a matter of law. - HELD THAT: - The Tribunal reviewed the Bureau report and the revisional authority's reasoned order and found no legal basis to invalidate them on the ground advanced by the petitioner. It rejected the argument that excise rules or MRP labeling and excise-determined bottle pricing are determinative for VAT liability, noting that excise pricing provisions do not alter the separate charging provisions of the VAT statute. Having concluded as a matter of law that returns of empty bottles are purchases taxable under the VAT Act on the facts before it, the Tribunal held that the revisional orders founded on that view could not be quashed. The Tribunal expressly confined its decision to the legal question of taxability and did not decide other factual issues. [Paras 24, 25, 26]

Report of the Bureau of Investigation and the suo motu revisional orders cannot be set aside on the legal grounds urged by the petitioner; the application is disposed of and interim stay of demand vacated.

Final Conclusion: The Tribunal held that, on the material before it, returns of empty bottles constitute purchase of goods within the WB VAT Act, 2003 and are liable to purchase tax at the rate determined under section 16(2) read with section 17 when sections 16(2A)/(2B) do not apply; consequently the Bureau of Investigation report and the suo motu revisional orders based on that conclusion could not be set aside and the application was dismissed with interim stay of demand vacated.