TaxTMI Updates e-Newsletter
Jul 25,2023

Concessional rate of IGST under Notification No. 41/2017 - Integrated Tax (Rate) - export within 90 days of tax invoice - refund of excess tax paid - compliance with conditions of notification - substantial benefit not to be denied on technical or procedural grounds - mistaken payment of tax does not forfeit entitlement

Concessional rate of IGST under Notification No. 41/2017 - Integrated Tax (Rate) - export within 90 days of tax invoice - compliance with conditions of notification - Entitlement to concessional rate / refund where supplier charged and paid higher IGST but exporter exported within 90 days of tax invoice as required by the notification. - HELD THAT: - The court examined Notification No. 41/2017 and noted that Condition (ii) requires the registered recipient to export the goods within 90 days from the date of issue of the tax invoice. The invoice placed on record bears date 30.06.2019 and the shipping bill shows export on 06.07.2019, which satisfies Condition (ii). The court further observed that the conditions in the notification are to be complied with by the exporter and that fulfillment of the export-within-90-days condition was established on the record. Applying the principle that a mistaken payment of duty on goods otherwise eligible for concession does not convert the goods into dutiable goods, the court concluded that the petitioner was entitled to the benefit of the concessional rate and to a refund of the excess IGST paid. [Paras 11, 12, 14]

The petitioner satisfied the export-within-90-days condition and is entitled to the concessional rate / refund of the excess IGST charged.

Refund of excess tax paid - substantial benefit not to be denied on technical or procedural grounds - mistaken payment of tax does not forfeit entitlement - Whether denial of refund on technical or procedural grounds was sustainable. - HELD THAT: - The court considered the respondent's reliance on alleged non-compliance with other conditions and their rejection of the refund claim on technical grounds. Relying on precedents that an assessee's mistaken payment of duty does not deprive it of entitlement under an exemption/notification and that a claimant may seek benefit at a later stage, the court held that substantial benefit cannot be defeated by technical or procedural defaults when the substantive conditions for concession are met. The impugned order did not record proper findings on each submission and could not justify denial of the refund. [Paras 13, 14, 15, 16]

Denial of the refund on technical/procedural grounds was not sustainable; the impugned order was quashed.

Final Conclusion: The order dated 22.06.2021 is quashed; respondents directed to refund the excess IGST with interest as per law within a reasonable time. Rule made absolute. No order as to costs.

Refund of unutilised input tax credit - zero-rated supply - entitlement to refund under Section 54(3) of the CGST Act - refund formula under Rule 89(4) of the CGST Rules (refund amount as maximum admissible) - technical error in electronic filing not to defeat substantive rights - supplementary refund claim

Supplementary refund claim - technical error in electronic filing not to defeat substantive rights - refund of unutilised input tax credit - entitlement to refund under Section 54(3) of the CGST Act - refund formula under Rule 89(4) of the CGST Rules (refund amount as maximum admissible) - Whether petitioner's supplementary refund applications filed under the category "any other" (to correct an inadvertent arithmetical error) could be rejected merely on the ground that that category was not appropriate on the common portal, notwithstanding the petitioner's substantive entitlement to refund of unutilised ITC for zero-rated supplies. - HELD THAT: - The court accepted that the petitioner was entitled to refund of unutilised input tax credit in respect of zero-rated supplies under the statutory scheme (Section 54(3) of the CGST Act read with Section 16 of the IGST Act) and that the Rule 89(4) formula prescribes the maximum admissible refund. The respondents did not dispute the maximum admissible refund but pointed out that the petitioner itself claimed a lower amount due to an arithmetical error. The petitioner had already obtained refund for the lower amount and, on discovering the error, filed supplementary applications within the statutory period. Because the common portal does not permit a second application under the same pre set category for the same period, the petitioner uploaded the supplementary claims under the portal category "any other". The court treated the choice of the portal category as a technical/ procedural consequence of the portal's limitation and held that such a technicality cannot result in denial of a substantive right once the statutory conditions for refund are satisfied. The court distinguished the scope of the Rule 89(4) formula (which fixes maximum admissible refund) from the procedural difficulty encountered on the portal and relied on precedents that an electronic or procedural lacuna should not defeat substantive entitlements. Although the impugned rejections were quashed, the court permitted the revenue to scrutinize the petitioner's claim on merits in accordance with law and directed that the petitioner be allowed to furnish the claim manually for the left-out amount, to be considered within six weeks. [Paras 11, 14, 15]

Impugned orders rejecting the supplementary refund applications were quashed; petitioner permitted to furnish manually the supplementary refund applications for the left-out amount and respondents directed to scrutinize and decide those applications in accordance with law within six weeks.

Final Conclusion: The writ petition is allowed: the orders rejecting the petitioner's supplementary refund claims (filed to correct an inadvertent arithmetical error and uploaded under "any other" due to portal restriction) are quashed; the petitioner may file the supplementary refund applications manually and the revenue shall examine and decide the claims on merits in accordance with law within six weeks.

Processing of refund claims - Duty Drawback - refund of IGST on zero rated supply - verification period mandated by impugned circular - IEC suspension / red alert - no embargo on processing claims

Processing of refund claims - Duty Drawback - verification period mandated by impugned circular - no embargo on processing claims - IEC suspension / red alert - Fourth respondent directed to process the petitioner's refund claim under the CGST/IGST law and Duty Drawback claim under the Customs Act without further delay. - HELD THAT: - The court recorded that the petitioner filed claims for refund of IGST treating export as zero rated supply and a claim for Duty Drawback. The respondents relied on an impugned circular which prescribes verification to be completed within fourteen working days; the petitioner contended that this timeline was not complied with and that over three years had elapsed. The fourth respondent had earlier caused the petitioner's IEC to be suspended by placing a red alert, but the respondents' counsel informed the court that the regular red alert has since been withdrawn and that presently there is no embargo on processing claims. On that basis, the court disposed the writ petition by directing the fourth respondent to process both the refund and Duty Drawback claims expeditiously and within a specified period of three months, without adjudicating the merits of the claims themselves.

Direction issued to the fourth respondent to process the petitioner's refund and Duty Drawback claims expeditiously within three months; writ petition disposed.

Final Conclusion: Writ petition disposed by directing administrative respondents to process the petitioner's refund (IGST) and Duty Drawback claims as expeditiously as possible and in any event within three months from receipt of this order; no costs.

Bogus accommodation entries in penny stocks - reliance on investigation report without independent corroboration - demat account, contract notes and banking channels as evidentiary proof of genuineness of share transactions - burden of proof - ITAT deleted addition - As per HC [2022 (7) TMI 1439 - ALLAHABAD HIGH COURT] matter is concluded by the concurrent findings of fact. No substantial question of law is involved in the impugned order of the Tribunal.

HElD THAT:- As petitioners very fairly submits that apart from there being a delay of 193 days in filing the special leave petition, the tax effect is made only Rs.1,75,000/-. His submission is placed on record. Hence, the special leave petition stands dismissed.

Pending applications shall stand disposed of.

TP Adjustment - comparable selection - HC [2021 (1) TMI 537 - DELHI HIGH COURT] held in the absence of segmental information provided by the companies in respect of the software services, comparables be deselected - HELD THAT:- This Court is not inclined to interfere with the impugned judgment and order of the High Court.

The special leave petition is dismissed.

Reassessment proceedings - Form 26Q / TDS return error - Form 26AS correction and rectification - setting aside notices and orders - Assessing Officer's discretion to proceed

Reassessment proceedings - Form 26Q / TDS return error - Form 26AS correction and rectification - setting aside notices and orders - Whether reassessment proceedings and impugned notices/orders triggered by an incorrect TDS entry in third party Form 26Q should be set aside where the deductor has rectified the TDS return and the revised Form 26AS no longer reflects the withholding in respect of the assessee. - HELD THAT: - The Court recorded that the reassessment proceedings related to AY 2019-20 were initiated because an incorrect entry in the deductor's Form 26Q showed the petitioner as having received a payment which, in fact, was received by a different entity (SISPL). The deductor (AETL) subsequently carried out revision/rectification of the TDS return and the petitioner downloaded a revised Form 26AS on 24.04.2023 showing that the error had been corrected and no withholding tax in respect of the subject transaction was reflected against the petitioner. In light of the corrected Form 26AS and the absence of any withholding tax claim against the petitioner, the Court accepted the respondents' concession that the relief sought must be granted and concluded that the impugned orders and notices should be set aside. The Court left open the Assessing Officer's power to take further steps in law, if deemed necessary, thereby preserving the AO's discretion for any action warranted after the correction. [Paras 7, 8, 9, 10, 11]

Writ petition allowed; impugned orders and notices set aside; Assessing Officer may take further steps in law only if deemed necessary; petition disposed.

Final Conclusion: The High Court allowed the writ petition for AY 2019-20, set aside the impugned reassessment notices/orders that arose from an incorrect TDS entry after the deductor rectified the TDS return and Form 26AS was corrected, and permitted the Assessing Officer to take further action only if necessary.

Allowability of business expenditure under section 37 of the Act - deduction for bad debts under section 36(1)(vii) of the Act - treatment of mistaken receipt returned pursuant to a court decree

Deduction for bad debts under section 36(1)(vii) of the Act - allowability of business expenditure under section 37 of the Act - Claim for write off of Rs. 4,00,000 paid as advance to Sh. Sanjay Agarwal was not allowable. - HELD THAT: - The claim before the authorities was made exclusively under the provisions of Section 36(1)(vii). The Tribunal observed that Section 36(1)(vii) does not permit the deduction in the circumstances pleaded, and that the assessee did not press a claim before the lower authorities that the amount ought to be allowed as an expenditure under Section 37. There is no material on record to establish the nature of the agreement or to show that the payment was wholly and exclusively for business purposes; further, factual questions (including limitation aspects) arise from the timing of the advance. The Tribunal holds that the assessee cannot, for the first time before the Tribunal, convert the pleaded case into a Section 37 claim merely because Section 37 relief was granted in respect of another, unrelated payment by the CIT(A). Accordingly the write off claim fails. [Paras 7]

Ground no.1 rejected; write off of Rs. 4,00,000 not allowed.

Treatment of mistaken receipt returned pursuant to a court decree - allowability of business expenditure under section 37 of the Act - Repayment to M/s. Hughes Communications Ltd (including interest) arising from a court decree is allowable as business expenditure under Section 37. - HELD THAT: - The Tribunal accepted that the amount initially credited arose from a mistaken receipt and that the subsequent payment was made pursuant to a civil suit settlement and court decree, which included interest. The CIT(A) had allowed the interest portion under Section 37 but treated the principal as a refund of capital; the Tribunal found that principal and interest formed a composite money decree and, if interest was allowable under Section 37, the principal paid pursuant to the decree was also allowable as an expenditure wholly and exclusively for the purposes of business. The Tribunal set aside the disallowance and directed the Assessing Officer to permit the entire amount as a deduction under Section 37. [Paras 8]

Ground no.2 allowed; whole amount payable to Hughes Communications Ltd to be allowed as deduction under Section 37.

Final Conclusion: The appeal is partly allowed: the claim in respect of the Rs. 4,00,000 write off is rejected, while the repayment (principal and interest) made to M/s. Hughes Communications Ltd pursuant to the court decree is held allowable as business expenditure under Section 37 and the Assessing Officer is directed to give effect accordingly.

Bogus expenditure - treatment of accommodation/bogus bills as disallowance - addition limited to profit element in contract receipts - estimation of reasonable profit rate for computation of taxable income - income is charged on income component and not on revenue

Bogus expenditure - addition limited to profit element in contract receipts - estimation of reasonable profit rate for computation of taxable income - income is charged on income component and not on revenue - Validity and quantum of addition on account of subcontract payments treated as bogus expenditure and whether addition can be limited to the profit element in the corresponding contract receipts. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the three subcontractors were not genuine and that the subcontract payments recorded by the assessee were accommodation/bogus bills. However, the Tribunal agreed with the CIT(A) that the addition cannot be made to the full quantum of the bogus subcontract payments because income-tax is leviable on the income component and not on gross revenue. The Tribunal observed that the assessee's total revenue and expenses, if the contract receipts and corresponding bogus subcontract expenses are excluded, reflected a normal business profit rate of 6.51%. Allowing for some additional economy attributable to the bogus bills, the CIT(A) reasonably estimated the taxable profit element at 12% of the contract receipts corresponding to the bogus subcontracting. The Tribunal found this estimate more than generous compared to the assessee's normal profit rate and thus sustained the CIT(A)'s restricted addition rather than the AO's full disallowance. Reliance was noted on the principle endorsed by the Bombay High Court in Pr. CIT v. S.V. Jiwani that only the profit element in contract receipts can be subjected to tax when bogus expenditures are disallowed. [Paras 3]

The addition was correctly limited to 12% of the contract receipts corresponding to the bogus subcontract expenses; the AO's addition of the entire subcontract payments was not sustained.

Final Conclusion: The Tribunal dismissed the revenue's appeal, affirming that the subcontract payments were bogus but upholding the CIT(A)'s estimate of taxable profit at 12% of the related contract receipts rather than disallowance of the entire amounts.

Book profit under section 115JB - exclusion of capital gains from book profit - treatment of capital loss in computation of book profit - capital receipts vs revenue receipts - rule of consistency - finality of earlier assessment/appeals

Book profit under section 115JB - treatment of capital loss in computation of book profit - exclusion of capital gains from book profit - capital receipts vs revenue receipts - rule of consistency - finality of earlier assessment/appeals - Whether loss on sale/cancellation of investments can be excluded from computation of book profit for the purpose of tax under section 115JB for AY 2016-17 - HELD THAT: - The assessee had increased book profits for AY 2016-17 by adding back capital losses aggregating to the amount debited to the profit and loss account, asserting that capital profits had been excluded in earlier years and therefore, by consistency, capital losses should not be allowed to reduce book profit. The Tribunal examined the assessments and appellate orders for earlier years and found that although the assessee had initially offered certain profits to tax under section 115JB, it subsequently withdrew those offers in revised returns; in AY 2013-14 and AY 2014-15 the appellate authority had held capital profits to be excludible and those years were effectively settled in the assessee's favour. However, the course of events showed the assessee itself had modified computations in revised returns and therefore there was no unbroken consistent stand by the revenue that would entitle the assessee to claim symmetry for losses. Applying the settled legal position that capital receipts (capital profits) which do not possess a revenue component are excludible from book profit under section 115JB, the Tribunal held by parity that losses on sale of investments, being capital in nature, cannot be set off to reduce book profit; instead, such losses debited to the profit and loss account must be added back in computing book profit. The Tribunal relied on the principle distinguishing capital and revenue nature of receipts and the scope of section 115JB, and concluded that the lower authorities were right in refusing to exclude the capital loss from book profit computation. [Paras 6, 7, 10, 11]

Loss on sale/cancellation of investments, being capital in nature, cannot be excluded from computation of book profit under section 115JB for AY 2016-17; book profit is to be increased by such losses and the orders of the lower authorities are confirmed.

Final Conclusion: The Tribunal dismissed the assessee's appeal for AY 2016-17, confirming that capital loss on sale/cancellation of investments cannot be excluded from book profits under section 115JB and that the book profit computation must be increased by such losses.

Re-opening of assessment under section 147/148 - Escapement of income - reasons to believe / borrowed belief - Admission and statements recorded under section 132 and their evidentiary value - Onus to verify identity and genuineness of third parties and right to cross-examine - Disallowance of expenditure under section 37(1) - Addition under section 69C as deemed unexplained commission - Work in progress and its effect on profit and tax liability

Re-opening of assessment under section 147/148 - Escapement of income - reasons to believe / borrowed belief - Admission and statements recorded under section 132 and their evidentiary value - Onus to verify identity and genuineness of third parties and right to cross-examine - Validity of reassessment initiated u/s 147/148 in A.Y. 2010-11 - HELD THAT: - The Tribunal concluded that the reassessment was unsustainable. The reopening relied primarily on information and statements obtained from search proceedings and on alleged connections between the assessee's contractor and certain tainted entities. The Bench observed that there was no direct material on record linking the assessee to the four tainted companies, and that the statements relied upon did not specifically implicate the assessee. Where notices issued to the tainted companies were returned unserved and the assessee had asked for opportunity to cross-examine the declarants, the AO ought to have afforded that opportunity before drawing adverse inferences. The Tribunal found that the AO effectively proceeded on a borrowed belief from investigation material without independent corroboration establishing a live nexus that income had escaped assessment in the hands of the assessee; consequently the jurisdictional satisfaction for invoking section 147/148 was not made out. The grounds challenging reopening were allowed. [Paras 8, 9, 10, 11, 12]

Reopening under section 147/148 quashed; reassessment held invalid and allowed in favour of the assessee.

Disallowance of expenditure under section 37(1) - Addition under section 69C as deemed unexplained commission - Work in progress and its effect on profit and tax liability - Sustainability of additions disallowing Rs. 5.81 crores as bogus job-work expenditure and consequential addition under section 69C in A.Y. 2010-11 - HELD THAT: - On the merits the Tribunal held that the disallowance was not justified in the relevant year because the amount in dispute was part of 'work in progress' and, as notional charged and simultaneously carried in closing stock, had no impact on profit or tax liability for A.Y. 2010-11. The Tribunal noted absence of documentary trail or corroborative evidence directly connecting the assessee's payment to the alleged bogus entities, and that the AO's inference was drawn mainly from statements recorded during search without giving the assessee an opportunity to cross-examine. In view of these facts and the concurrent finding that the reassessment itself was improperly invoked, the addition under section 37(1) and the consequential deemed commission under section 69C were found unsustainable and deleted. [Paras 9, 10, 11, 12]

Addition of the disputed job-work expenditure and the consequential addition under section 69C deleted; appeal allowed on merits.

Final Conclusion: The Tribunal allowed the appeal of the assessee for A.Y. 2010-11, holding that the reassessment proceedings under section 147/148 were invalid and that the substantive additions disallowing the job-work expenditure and the consequential addition under section 69C were unsustainable; the appeal is allowed.

Allowability of loss on sale of finance receivables - assignment without recourse - loss incidental to the business of an NBFC / trading loss on sale of delinquent loan portfolio - deduction as bad debts under section 36(1)(vii) read with section 36(2)(i) - reliance on coordinate bench precedent

Allowability of loss on sale of finance receivables - assignment without recourse - loss incidental to the business of an NBFC / trading loss on sale of delinquent loan portfolio - deduction as bad debts under section 36(1)(vii) read with section 36(2)(i) - reliance on coordinate bench precedent - Deletion of the addition of Rs. 15,98,86,715 made by the Assessing Officer on account of claimed loss on sale of finance receivables for AY 2011-12. - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that the assessee, an NBFC, had effected outright sales of certain finance receivables to a third party during the year and that those transactions were completed in the relevant year. The assignments were held to be without recourse on the terms of the assignment agreements, the receipt of sale consideration was evidenced, underlying documents and securities were transferred (or their transfer effected by power of attorney as standard industry practice), and any limited indemnity by the seller related only to breach of representations/warranties. Given that purchase/sale of loan portfolios is an integral, commercially accepted activity of NBFCs, the loss on sale was held to arise in the ordinary course of the assessee's business and to constitute a trading/commercial loss incidental to business, admissible under the taxing scheme. As an alternative limb, the Tribunal accepted the assessee's case that the shortfall represented amounts written off as bad debts and met the conditions for deduction under section 36(1)(vii) read with section 36(2)(i) since the debts arose in the ordinary course of business and were written off in the books. The CIT(A)'s reliance on the coordinate bench ITAT decision in the group company concerning sale of delinquent loan portfolios (followed by the Delhi High Court's non acceptance of Revenue's question of law) was treated as persuasive and no contrary judicial authority was placed by Revenue. The Assessing Officer's bald allegation of collusive or colorable device was not supported by evidence and was rejected. On these bases the disallowance was deleted.

The disallowance of the claimed loss on sale of finance receivables was deleted and the Revenue's appeal dismissed.

Final Conclusion: The Tribunal, following the CIT(A) and a coordinate bench precedent, sustained deletion of the addition relating to loss on sale of finance receivables for AY 2011-12, holding the transactions to be completed sales without recourse and the loss to be allowable as incidental to the NBFC's business (alternatively as bad debts); Revenue's appeal is dismissed.

Unexplained cash credit u/s 68 - identity, genuineness and creditworthiness of the lender - admission of additional evidence under Rule 46A - bank statements and confirmations as proof of flow of funds - group company / inter-corporate deposits - sick industrial company status and BIFR rehabilitation as explanation for non-production of records

Unexplained cash credit u/s 68 - identity, genuineness and creditworthiness of the lender - bank statements and confirmations as proof of flow of funds - group company / inter-corporate deposits - Addition under section 68 in respect of unsecured loan of Rs. 1,68,25,236/- from M/s Shearson Investment & Trading Co. Pvt. Ltd. is not sustainable. - HELD THAT: - The Tribunal found that the assessee furnished ledger accounts, confirmation from the lender, PAN, the lender's income-tax return, annual report and evidences that certain payments were made by the lender to discharge the assessee's statutory dues. The transactions were routed through banking channels and the lender's annual report showed substantial free reserves, establishing its creditworthiness. On this material the identity of the lender, the genuineness of the transaction and the lender's capacity to advance funds were proved, and the CIT(A)'s deletion of the addition in respect of this lender was upheld. [Paras 12]

Addition deleted; loan treated as genuine.

Unexplained cash credit u/s 68 - identity, genuineness and creditworthiness of the lender - group company / trading liability converted into loan - bank statements and confirmations as proof of flow of funds - Addition under section 68 in respect of unsecured loan of Rs. 9,40,701/- from M/s Birla Cotsyan (I) Ltd. is not sustainable. - HELD THAT: - The Tribunal noted that the ledger account in the lender's books showed supplies of carpets and wools and minor expenses incurred on behalf of the assessee which together were converted into a loan. The lender, a group company, furnished confirmation and its annual report reflected sufficient own funds, establishing creditworthiness. These materials proved identity of the lender, the trading origin of the liability and the genuineness of the transaction, so the addition could not be sustained. [Paras 13]

Addition deleted; loan treated as genuine.

Unexplained cash credit u/s 68 - identity, genuineness and creditworthiness of the lender - bank statements and confirmations as proof of flow of funds - sick industrial company status and BIFR rehabilitation as explanation for non-production of records - Addition under section 68 in respect of unsecured loan from M/s Godavari Pvt. Ltd. is not sustainable. - HELD THAT: - The Tribunal accepted that Godavari is a group concern and that board resolutions, requisition for financial assistance, confirmations, ITR, annual report and bank statements were placed on record. The bank statements corroborated ledger entries showing payments through banking channels and the lender's annual report showed substantial free reserves, establishing its capacity to advance funds. The assessee's status as a sick company under BIFR explained earlier non-production of some records. Taken together, identity, genuineness and creditworthiness were proved and the loan could not be treated as unexplained cash credit. [Paras 14]

Addition deleted; loan treated as genuine.

Final Conclusion: The Tribunal allowed the assessee's appeals, held that the unsecured loans from the three specified group companies were genuine and not liable to be treated as unexplained cash credits under section 68, and dismissed the Revenue's appeal.

Amortization of variable licence fee under section 35ABB vis-a -vis allowance as revenue expenditure under section 37(1) - Explanation to section 37(1) - expenditure for an offence or prohibited by law - penalty for breach of licence terms treated as compensatory business expenditure - tax deduction at source on commission under section 194H and disallowance under section 40(a)(ia) - followership of jurisdictional High Court and coordinate Tribunal precedents

Amortization of variable licence fee under section 35ABB vis-a -vis allowance as revenue expenditure under section 37(1) - followership of jurisdictional High Court and coordinate Tribunal precedents - Ld. CIT(A) correctly deleted the disallowance and allowed the licence fee as revenue expenditure. - HELD THAT: - The Assessing Officer had disallowed the licence/spectrum charges and provided for amortization under section 35ABB. The Ld. CIT(A) allowed the expenditure as revenue expenditure by following the decision of the Hon'ble Jurisdictional High Court in the assessee's own case. The Tribunal found no infirmity in following the jurisdictional High Court precedent and accordingly sustained the Ld. CIT(A)'s deletion of the disallowance. [Paras 5]

Revenue's ground challenging the treatment of licence fee as revenue expenditure is dismissed.

Explanation to section 37(1) - expenditure for an offence or prohibited by law - penalty for breach of licence terms treated as compensatory business expenditure - followership of jurisdictional High Court and coordinate Tribunal precedents - Ld. CIT(A) correctly deleted the disallowance of the subscriber verification penalty and allowed it as business expenditure. - HELD THAT: - The amount paid to DOT for deficient subscriber verification was held by the Tribunal (following earlier decisions in the assessee's own case and coordinate authorities) to be a contractual/compensatory payment for breach of licence terms and not an expenditure incurred for an offence or prohibited by law within Explanation to section 37(1). The penalty was imposed as a deterrent measure under the licence and did not entail criminal liability; hence the exception in Explanation 1 did not apply and the deletion by the Ld. CIT(A) was upheld. [Paras 8]

Revenue's ground challenging deletion of the subscriber verification penalty is dismissed.

Tax deduction at source on commission under section 194H and disallowance under section 40(a)(ia) - discounts to distributors characterised as not being commission - followership of jurisdictional High Court and coordinate Tribunal precedents - Ld. CIT(A) correctly deleted the disallowance under section 40(a)(ia) in respect of discounts given to distributors. - HELD THAT: - The Assessing Officer treated the discount (difference between retail price and discounted price of pre-paid kits/SIMs) as commission attracting section 194H, and consequently invoked section 40(a)(ia) for non-deduction of tax. The Tribunal noted that identical issues in the assessee's own earlier years and decisions of various Benches and the Hon'ble Rajasthan/Gauhati High Courts held that such discounts to distributors do not fall within section 194H. Following those coordinate precedents, the Tribunal found no infirmity in the Ld. CIT(A)'s deletion of the disallowance. [Paras 10]

Revenue's ground challenging deletion of the 40(a)(ia) disallowance is dismissed.

Final Conclusion: Both Revenue appeals for Assessment Years 2013-14 and 2014-15 are dismissed; the orders of the Ld. CIT(A) deleting the disallowances on the three contested heads are sustained following jurisdictional High Court and coordinate Tribunal precedents.

Addition under section 69A of the Income Tax Act - unexplained money - Specified Bank Notes (SBNs) and demonetisation window period - ceased legal tender status does not by itself render money unexplained - burden to explain nature and source of cash deposits - estimation of unexplained cash deposits

Addition under section 69A of the Income Tax Act - ceased legal tender status does not by itself render money unexplained - Specified Bank Notes (SBNs) and demonetisation window period - Whether deposits of SBNs during the demonetisation window could be treated as unexplained money and attract addition under section 69A where the assessee offered business-receipt as source - HELD THAT: - The Tribunal found that the assessee, engaged in cash intensive car hire business, offered a bona fide explanation that the SBN deposits represented business receipts. For invocation of section 69A the AO must consider both the nature and source of the money and be dissatisfied with the explanation. The AO in this case accepted the assessee's source explanation in essence but proceeded to make additions solely because SBNs had ceased to be legal tender after 09.11.2016. The Tribunal held that the ceased legal tender status of SBNs alone cannot convert money into 'unexplained money' under section 69A; the provision concerns ownership/nature and the adequacy of the assessee's explanation, not the legal tender character of the currency in isolation. Consequently, the AO's reliance on notifications withdrawing legal tender was not a proper basis, absent rejection of the source explanation. [Paras 6]

Addition cannot be sustained merely on the ground that SBNs ceased to be legal tender; section 69A requires assessment of nature and source and the AO's reasoning on that ground was not correct.

Burden to explain nature and source of cash deposits - estimation of unexplained cash deposits - Extent of relief to be granted where the assessee's explanation of SBN deposits as business receipts was not fully substantiated by documentary analysis - HELD THAT: - Although the Tribunal accepted the assessee's explanation as prima facie plausible given the business nature, it noted absence of requisite evidential analysis (no detailed statement comparing receipts during demonetisation period with prior periods). Because the assessee failed to establish the exact quantum of business receipts, the Tribunal applied a pragmatic remedy: it held that a reasonable portion of deposits during the period can be attributed to business receipts but, lacking precise proof, the remaining portion may be regarded as unexplained. On that basis the Tribunal directed the AO to treat 50% of the cash deposits as explained business receipts and confirm the balance as unexplained money. [Paras 7]

Assessee accorded partial relief; AO directed to allow 50% of the SBN cash deposits as business receipts and confirm the remaining 50% as unexplained.

Final Conclusion: Appeal partly allowed: the Tribunal held that ceased legal tender status of SBNs alone does not justify additions under section 69A where source is plausibly explained, but owing to lack of full evidential proof the Tribunal directed the AO to allow 50% of the SBN cash deposits as business receipts and confirm the remaining 50% as unexplained money.

Overriding effect of section 238 of the Insolvency and Bankruptcy Code, 2016 - Entitlement of claims to be dealt with by the Resolution Professional/Official Liquidator under section 53(1) of the Code - Infructuousness of statutory appeals consequent to insolvency proceedings

Overriding effect of section 238 of the Insolvency and Bankruptcy Code, 2016 - Entitlement of claims to be dealt with by the Resolution Professional/Official Liquidator under section 53(1) of the Code - Effect of insolvency proceedings under the Code on pending income tax appeals and the forum for adjudication of tax claims. - HELD THAT: - The Tribunal applied the principle that section 238 of the Insolvency and Bankruptcy Code, 2016 has an overriding effect over other enactments and therefore governs the treatment of claims arising under other statutes. Relying on the Supreme Court's statement in PCIT v. Monnet Ispat and Energy Ltd., the Tribunal recorded that claims including those of the Income tax Department are to be entertained and adjudicated by the Resolution Professional/Official Liquidator under section 53(1) of the Code. Given that insolvency proceedings had been initiated and a Resolution Professional appointed, the appeals against the income tax assessments were rendered infructuous and not to be pressed by the assessee.

Appeals dismissed as withdrawn/infructuous because insolvency proceedings under the Code prevail and tax claims are to be dealt with by the Resolution Professional/Official Liquidator under section 53(1).

Final Conclusion: The Tribunal, applying the overriding effect of section 238 of the Insolvency and Bankruptcy Code, 2016 and recognising that tax claims fall to be dealt with under section 53(1) by the Resolution Professional/Official Liquidator, accepted the assessee's non pressing of the appeals and dismissed them as withdrawn as having become infructuous.

Levy of anti-dumping duty - Temporal limitation under Rule 18 of the ADD Rules - Exclusion of period during operative interim court orders (actus curiae neminem gravabit) - Duty to consider representations pursuant to court directions - Interpretation of delegated legislation in light of court orders

Temporal limitation under Rule 18 of the ADD Rules - Exclusion of period during operative interim court orders (actus curiae neminem gravabit) - Duty to consider representations pursuant to court directions - Validity of the notification dated 05.04.2021 in view of the timeframe prescribed by sub rule (1) of Rule 18 of the ADD Rules - HELD THAT: - The Court held that the notification dated 05.04.2021 was not void for having been issued after the three month period stated in Rule 18. After the DA issued final findings on 01.09.2020, the Bombay High Court granted an interim order on 13.10.2020 which remained operative and was subsequently vacated by its final judgment dated 06.01.2021 directing the Union of India to consider representations. While Rule 18 prescribes a three month window for the Central Government to impose ADD, the Court read the Rule in the context of its purpose - protection of the domestic industry - and concluded that the period during which valid court orders restrained action must be excluded from the computation of that timeframe. The respondents had acted on the Bombay High Court's directions by receiving and considering representations made on 25.01.2021 and 19.02.2021; exclusion of the period while the interim order operated was therefore appropriate and did not amount to rewriting the Rule. The Court distinguished the J.K. Industries decision on its facts, accepted the applicability of the principle expressed in Indore Development Authority (and allied maxims such as actus curiae neminem gravabit), and found the time taken by the Union between 06.01.2021 and 05.04.2021 to be reasonable. The Court also observed that Dow could have sought vacation or variation of the interim order but did not do so and thereafter availed itself of the High Court's directions, only later raising limitation as a ground. In consequence, the Tribunal was correct in refusing interim relief and in excluding the period during which the court order operated when measuring the Rule 18 timeframe. [Paras 31, 32, 40, 44, 46]

The notification dated 05.04.2021 was within the timeframe, after excluding the period while the interim order of the Bombay High Court was operative, and the Tribunal's refusal of interim relief was not interfered with.

Final Conclusion: The appeal is dismissed; the High Court upholds the Tribunal's interim order refusing stay and concludes that the customs notification dated 05.04.2021 was not void for alleged breach of Rule 18 once the period during which the interim court order operated and the consideration of representations pursuant to the court's directions are excluded from the Rule 18 timeline.

Clearance by Genetic Engineering Appraisal Committee - role of Food Safety and Standards Authority of India as testing authority - affidavit evidence for food safety clearance - custodianship of food safety standards in import clearance - adjournment pending authoritative test report

Clearance by Genetic Engineering Appraisal Committee - The Genetic Engineering Appraisal Committee has not recorded any final conclusion on clearance of the consignments and is dependent on test reports from FSSAI. - HELD THAT: - The Court examined the affidavit of the GEAC and found that it has not reached a final decision under the import policy parameters relied upon by it. The GEAC's position, as reflected in its affidavit, is contingent upon the results of tests to be undertaken by the FSSAI; accordingly, no independent final clearance has been granted by the GEAC in respect of the soybean consignment before the Court. [Paras 2]

GEAC has not given final clearance and remains dependent on FSSAI test reports.

Role of Food Safety and Standards Authority of India as testing authority - affidavit evidence for food safety clearance - custodianship of food safety standards in import clearance - adjournment pending authoritative test report - FSSAI must file a specific affidavit stating whether the soybean consignment would be harmful for human consumption and whether it may be cleared; the matter is adjourned for consideration after such affidavit is filed. - HELD THAT: - The Court reviewed the affidavit filed on behalf of the FSSAI and the laboratory reports on record. While a previous laboratory certificate and an office memorandum indicating FSSAI's permission were placed before the Court, the Bench required an explicit statement on affidavit from FSSAI that the particular soybean consignment would not be harmful to human health if cleared, in light of the FSS Act and rules. The Court observed that Customs and other authorities rely on FSSAI as the competent food safety custodian; therefore a clear affidavit from FSSAI is crucial. The Court directed FSSAI to file the affidavit by the next hearing, permitted service on parties, granted leave to file a rejoinder to that affidavit, and adjourned the matter for hearing on the listed date. [Paras 5, 6, 7, 8, 11]

FSSAI to file a specific affidavit on safety/clearance; matter adjourned for further consideration on receipt of that affidavit and rejoinder.

Final Conclusion: The Court recorded that GEAC has not granted final clearance and directed FSSAI to file a specific affidavit stating whether the soybean consignment is safe for human consumption; the matter is adjourned for hearing on the listed date and permission to file an affidavit in rejoinder is granted.

Debt due and payable by the corporate debtor - assignment of operational debt - willingness of suspended director to pay corporate debt - leave to approach appropriate adjudicating authority for payment/liquidation - interim restraint on constitution of Committee of Creditors - non-admission of assignment by payment

Debt due and payable by the corporate debtor - The findings of the NCLAT that the debt was due and payable by Chandigarh Overseas Private Limited (the corporate debtor) are accepted. - HELD THAT: - The Supreme Court recorded agreement with the determination made by the National Company Law Appellate Tribunal, Principal Bench, New Delhi dated 04.07.2023, regarding the existence of a debt owed by the corporate debtor, Chandigarh Overseas Private Limited. No further adjudication on that determination was undertaken in this order.

The NCLAT's finding that the debt is due and payable by the corporate debtor is affirmed.

Willingness of suspended director to pay corporate debt - assignment of operational debt - leave to approach appropriate adjudicating authority for payment/liquidation - non-admission of assignment by payment - The appellant, a suspended director, is permitted to approach the NCLT to offer payment of the debt notwithstanding the purported assignment; payment made to end litigation shall not be treated as acceptance of the assignment, and questions regarding the assignment and related matters are left open for the NCLT to decide. - HELD THAT: - The appellant stated an unequivocal readiness to pay the debt due to the operational creditor (originally M/s. Kone Elevator India Pvt. Ltd.) which has been asserted to have been assigned to another party. The Court declined to rule on the validity or effect of the alleged assignment and explicitly stated that the appellant's offer to pay is made to terminate litigation and should not be construed as acceptance of the assignment. The Court dismissed the appeal but left it open to the appellant to file an appropriate application before the National Company Law Tribunal, Chandigarh Bench, for consideration of his desire to liquidate and pay the debt; any such application is to be decided in accordance with law, with the Court expressing no opinion on the merits.

The appellant is permitted to move the NCLT to pay the debt; the order dismisses the appeal while leaving all questions regarding assignment and related matters open for the NCLT's determination.

Interim restraint on constitution of Committee of Creditors - An interim direction was recorded restraining the Interim Resolution Professional from constituting the Committee of Creditors for one week. - HELD THAT: - The Interim Resolution Professional informed the Court that for a period of one week from the date of the order he will not issue any order constituting the Committee of Creditors. The Court recorded that statement and accordingly deferred any such constitution for that interim period.

The IRP shall refrain from constituting the Committee of Creditors for one week from the date of this order.

Disposal of pending applications - Pending applications, including those for impleadment or intervention, are disposed of. - HELD THAT: - The Court ordered that any pending application(s), including applications for impleadment or intervention, shall stand disposed of in consequence of the dismissal of the appeal and the directions given.

Pending applications, if any, including impleadment or intervention applications, are disposed of.

Final Conclusion: The appeal is dismissed; the NCLAT's finding that the corporate debtor owes the debt is accepted; the appellant is permitted to approach the NCLT to offer payment without that act being treated as acceptance of the alleged assignment; the IRP will not constitute the Committee of Creditors for one week; pending applications are disposed of; all other questions are left open for the NCLT to decide.

Bail - conditions of bail - flight risk - deposit of passport - judicial interference with bail order

Bail - judicial interference with bail order - The challenge to the grant of bail in the impugned order was not interfered with. - HELD THAT: - Having heard the Solicitor General and perused the petition papers, the Court declined to interfere with the impugned order granting bail. The Court therefore upheld the grant of bail and did not set aside or modify the bail order on the merits in the present petition.

The grant of bail under the impugned order is not interfered with; the petition is disposed of insofar as the challenge to bail is concerned.

Conditions of bail - flight risk - deposit of passport - Whether the condition that the respondent deposit the passport should be incorporated in the bail order was to be directed by this Court or considered afresh by the High Court. - HELD THAT: - The Court observed that the conditions imposed by the impugned order may be insufficient in light of the contention that the respondent is a flight risk, and that the deposit of passport is a relevant condition. Rather than issuing the direction itself, the Court directed that the petitioner may file an appropriate application in the High Court seeking incorporation of the passport-deposit condition. If such application is filed, the High Court is to consider it in accordance with law.

Petitioner permitted to apply to the High Court to seek incorporation of the passport-deposit condition; the High Court to consider such application in accordance with law.

Final Conclusion: Delay in filing condoned; the challenge to the grant of bail is dismissed and the bail order is not interfered with; the petitioner may file an appropriate application in the High Court seeking incorporation of a passport-deposit condition, which the High Court shall consider in accordance with law; petition disposed of.

Summary order. Delay condoned; special leave petition dismissed; pending applications, if any, disposed of.

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - liberal construction of a beneficial scheme - relief to facilitate payment and issuance of final certificate under the scheme - consideration of pandemic/lockdown disruption in procedural compliance - precedential effect of coordinate bench direction

Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - liberal construction of a beneficial scheme - consideration of pandemic/lockdown disruption in procedural compliance - relief to facilitate payment and issuance of final certificate under the scheme - Petitioners who attempted payment under the SVLDR Scheme but whose RTGS payment was reversed on account of a technical glitch and whose operations were disrupted by the pandemic were permitted to make the stipulated payment afresh and to obtain the final certificate under the Scheme. - HELD THAT: - The Court noted that the SVLDR Scheme is a beneficial mechanism intended to reduce litigation and to enable immediate recovery of disputed amounts; accordingly it should be construed liberally. Having regard to the pandemic and resultant lockdown which disrupted business operations and accounting, together with the specific fact that the petitioners' RTGS payment dated 19 March 2020 was reversed due to a technical glitch, the petitioners were entitled to an opportunity to effect the payment so as to give effect to the object of the Scheme. The Court also relied on the decision of a Co-ordinate Bench in a similar matter directing acceptance of payment and issuance of the Scheme certificate. Applying these principles, the Court directed that the petitioners be permitted to make the required payment within a limited time and that on payment the respondents must issue the final certificate under the SVLDR Scheme within a further specified period.

Petitions allowed: each petitioner directed to make the prescribed payment under the SVLDR Scheme within four weeks from upload of the order, and on such payment the respondents directed to issue the final certificate under the Scheme within two weeks of communication of payment.

Final Conclusion: Petitions disposed of by permitting payment under the SVLDR Scheme within four weeks and directing issuance of the final certificate within two weeks of payment; no order as to costs.

Levy of service tax on Business Auxiliary Services - Acceptance of duty liability by the assessee - Penalty under Section 76 and Section 78 of the Finance Act, 1994 - Benefit of Section 80 - reasonable cause for failure to pay

Levy of service tax on Business Auxiliary Services - Acceptance of duty liability by the assessee - Whether the appellants' liability to pay service tax was contested or remains open for adjudication. - HELD THAT: - The Tribunal records that the appellants had accepted the duty liability of Rs.57,407/- and had deposited the tax (together with additional amounts) (recorded). The Tribunal further observed that the central legal question regarding characterization of the CTOs' activities as Business Auxiliary Services is no longer res integra in view of the Tribunal's earlier decision in City Cable (referred to). Consequently, the appeal does not reopen the substantive question of service tax liability, which the appellants have accepted and satisfied by deposit. [Paras 3]

The duty liability was treated as accepted by the appellants and not reopened; the appeal proceeds only on the question of penalties.

Penalty under Section 76 and Section 78 of the Finance Act, 1994 - Benefit of Section 80 - reasonable cause for failure to pay - Whether the penalties imposed under Sections 76 and 78 are sustainable and whether the appellants are entitled to relief under Section 80. - HELD THAT: - The Tribunal examined the imposition of penalties under Section 76 and Section 78 and noted the Punjab & Haryana High Court's decision in Pannu Property Dealers, which recognised that an appellate authority may, in the circumstances, treat penalties under the two provisions as mutually exclusive and decline to levy both. Applying that reasoning, and having regard to the appellants' status as a small operator, the rapid changes in service tax law at the relevant time, the fact that the main cable operator (M/s SIFY) had discharged service tax on amounts collected, and the appellants' conduct in depositing the tax with interest and a 25% penalty, the Tribunal found that there was a reasonable cause for the failure to discharge service tax. The Tribunal held that the statutory protection in Section 80 (no penalty if reasonable cause is proved) is attracted on these facts and that the penalties imposed are therefore not sustainable. [Paras 3, 4, 5, 7]

Penalties imposed under Sections 76 and 78 are set aside; appellant entitled to benefit of Section 80.

Final Conclusion: The appeal is partially allowed: the duty liability was treated as accepted and satisfied by deposit, and the penalties imposed under Sections 76 and 78 have been set aside by applying the reasonable cause protection of Section 80.

Reverse charge mechanism - discharge of tax liability by payment to the Exchequer - prevention of double recovery where tax has already reached the government - personal penalty under Section 78A for abetment of tax evasion

Reverse charge mechanism - discharge of tax liability by payment to the Exchequer - prevention of double recovery where tax has already reached the government - Payment of 75% of service tax by service recipients, while the service provider (a private limited company) had paid the remaining portion, constitutes discharge of the tax liability so as to preclude a fresh demand against the service provider. - HELD THAT: - The Tribunal examined whether payment made partly by service recipients (who paid 75%) and partly by the service provider (who paid the balance) could be treated as full discharge of the service tax liability even though, as a private limited company, the appellant remained the person legally liable to pay the tax. Reliance was placed on the reasoning in Zyeta Interiors (Karnataka High Court) and earlier Tribunal decisions holding that once the entire amount of tax due has reached the Exchequer it would be contrary to principle to permit double recovery by calling upon the same assessee to pay again. Applying that principle, and having found on the material that the whole tax due for the period 2011-12 to 2013-14 had been deposited into Government account (albeit by different payers), the Tribunal held the demand could not be sustained. [Paras 8, 10, 12]

Demand for differential service tax confirmed by the Commissioner set aside insofar as it sought recovery where the tax had already been paid to the Government; the demand could not be sustained.

Personal penalty under Section 78A for abetment of tax evasion - prevention of double recovery where tax has already reached the government - Imposition of personal penalties on the directors under Section 78A could not be sustained where the tax liability had effectively been discharged to the Government. - HELD THAT: - The Commissioner had imposed penalties on the directors for abetment on the premise that the company was liable and had not paid the full tax. The Tribunal, having concluded that the entire tax dues for the relevant period had been deposited into Government accounts (by a combination of recipients and the provider), held that the basis for imposing personal penalties did not survive. In consequence, penalties levied on the directors were set aside. [Paras 13, 14]

Penalties imposed on the directors under Section 78A set aside.

Final Conclusion: The Commissioner's order dated 08.12.2016 confirming demand and imposing penalties is set aside: the confirmed tax demand cannot be sustained because the entire tax due for 2011-12 to 2013-14 had been deposited into Government accounts, and the personal penalties on the directors are also quashed; the appeals are allowed.

Duty liability under Section 4 of the Central Excise Act, 1944 - duty liability under Section 4A of the Central Excise Act, 1944 - remand for fresh adjudication - confirmation of part of impugned order - failure of appellate authorities to consider a pleaded legal issue

Duty liability under Section 4 of the Central Excise Act, 1944 - remand for fresh adjudication - failure of appellate authorities to consider a pleaded legal issue - Whether the demand of duty under Section 4 of the Central Excise Act had been legally considered by the Tribunal and the High Court and the consequent direction required - HELD THAT: - The Court recorded that the orders of the Tribunal and the High Court did not address the plea concerning the illegality of the duty demand under Section 4 of the Excise Act. In view of this omission the Supreme Court set aside the orders of the High Court and the Tribunal only insofar as they relate to the duty liability under Section 4, and restored the appeal(s) to the Tribunal for adjudication of that issue. The Court directed the Tribunal to adjudicate the demand under Section 4 and noted that any request for expedition may be made before the Tribunal by the respondent.

Orders of the High Court and the Tribunal set aside to the extent of the duty liability under Section 4; appeal(s) restored to the Tribunal for fresh adjudication on that issue.

Duty liability under Section 4A of the Central Excise Act, 1944 - confirmation of part of impugned order - Whether the finding of illegality of the demand under Section 4A requires interference - HELD THAT: - The appellant did not challenge the High Court's finding regarding the illegality of the demand under Section 4A as to the specified amount. The Supreme Court accordingly confirmed the impugned judgment insofar as it relates to the duty liability under Section 4A of the Excise Act, leaving that part of the decision undisturbed.

Impugned orders in relation to the duty liability under Section 4A are confirmed.

Final Conclusion: Appeal allowed in part: the parts of the High Court's and Tribunal's orders dealing with duty under Section 4 are set aside and the appeals restored to the Tribunal for adjudication; the finding as to duty under Section 4A is confirmed.

Waiver of interest under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - eligibility for scheme benefit where tax/dues paid in full before 30-6-2019 - interest liability under Section 11AB for belated remittance of excise duty

Waiver of interest under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - eligibility for scheme benefit where tax/dues paid in full before 30-6-2019 - Petitioner entitled to waiver of interest under the Sabka Vishwas Scheme where excise dues for the contested years were paid in full before 30-6-2019 - HELD THAT: - The petition challenged rejection of an application under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 seeking waiver of interest levied under Section 11AB for Financial Years 2005-06 and 2006-07. It was undisputed that the petitioner had paid the entire excise duty for those years before 30-6-2019. In light of the High Court of Madhya Pradesh's order and the Central Government's clarificatory Circular dated 6-10-2022, declarants who filed ST-3 return on or before 30-6-2019 and paid tax dues in full prior to filing the application are eligible for waiver of interest under the Scheme. Applying that clarification to the undisputed facts, the impugned rejection of the petitioner's application was unsustainable. The Court therefore quashed the impugned order and directed acceptance of the petitioner's declaration and issuance of a discharge certificate waiving the interest levied under Section 11AB. [Paras 5, 6]

Impugned order dated 23-12-2019 quashed; respondents directed to accept the petitioner's declaration dated 23-12-2019 and issue a discharge certificate waiving the interest levied under Section 11AB.

Final Conclusion: Writ petition allowed; rejection of the petitioner's application under the Sabka Vishwas Scheme set aside and interest levied under Section 11AB waived by direction to issue a discharge certificate.