TaxTMI Updates e-Newsletter
Jul 28,2021

Violation of principles of natural justice - ex parte order - non-speaking order - quashing of administrative orders - remand for fresh adjudication on merits - deposit as condition precedent for hearing of appeal - stay on coercive action during pendency - de-freezing of bank accounts attached in tax proceedings - direction to pass speaking order

Impleadment of necessary party - Union of India impleaded as Party Respondent No. 4. - HELD THAT: - The Court took on record circulars drawn to its attention and directed that the Union of India be impleaded as an additional party respondent. Registry was directed to make the necessary corrections in the records and the newly impleaded respondents entered appearance. This procedural direction was recorded and implemented by the Court.

Union of India impleaded as Party Respondent No. 4 and appearances recorded.

Violation of principles of natural justice - ex parte order - non-speaking order - quashing of administrative orders - Impugned orders dated 07.03.2020 and 13.02.2021 and the summary in Form GST DRC-07 set aside for want of fair hearing and absence of reasons. - HELD THAT: - The Court found that the order passed by the Assessing Authority and the appellate order were ex parte in nature and failed to afford the petitioner sufficient time and a fair opportunity to represent its case. The impugned orders did not furnish decipherable reasons explaining how the amount was determined. On these short but determinative grounds - breach of the principles of natural justice and the non-speaking character of the orders - the Court concluded that the orders were bad in law and therefore liable to be quashed and set aside.

Impugned orders dated 07.03.2020, the Form GST DRC-07 summary and the appellate order dated 13.02.2021 quashed and set aside.

Remand for fresh adjudication on merits - deposit as condition precedent for hearing of appeal - stay on coercive action during pendency - de-freezing of bank accounts attached in tax proceedings - direction to pass speaking order - Matter remanded to the Assessing Authority to decide afresh on merits after affording opportunity of hearing, subject to specified interim conditions and directions. - HELD THAT: - The Court remanded the matter to the Assessing Authority for fresh adjudication on merits, expressly leaving all issues open. Interim protective directions were issued: the petitioner stated that ten per cent of the total amount (condition precedent for hearing) has been deposited and undertook to additionally deposit ten per cent of the demand within four weeks if not already deposited; if deposit exceeds the final demand, excess to be refunded within two months of the assessing officer's order. The Court ordered de-freezing/de-attaching of the petitioner's bank account(s) immediately insofar as they relate to the present proceedings, restrained coercive steps during pendency, directed the petitioner to cooperate and appear (including by digital mode), and required the Assessing Authority to decide the case expeditiously (preferably within two months from appearance), afford adequate opportunity to place records, and pass a speaking order with reasons. Liberty was reserved to the parties to challenge the fresh order and to avail other remedies.

Proceedings remanded to the Assessing Authority for fresh decision on merits with interim deposits and protective directions; no coercive action to be taken; speaking order to be passed after hearing.

Final Conclusion: Writ petition disposed by quashing the ex parte, non-speaking impugned orders for breach of natural justice; Union of India impleaded; matter remanded to the Assessing Authority for fresh adjudication on merits with directions for deposits, immediate de-freezing of bank accounts (if attached), prohibition of coercive action during pendency, and requirement to pass a speaking order after affording opportunity of hearing.

Violation of principles of natural justice - ex parte order - quashing and remand for fresh adjudication - deposit as precondition for hearing - de-freezing of bank accounts - no coercive action during pendency - merits left open for fresh decision

Violation of principles of natural justice - ex parte order - Impugned appellate order and adjudication order were liable to be quashed on account of ex parte proceedings and failure to afford adequate opportunity and reasoned findings. - HELD THAT: - Court found that both the appellate order dated 18.03.2021 and the adjudication order dated 30.01.2021 were ex parte in character and did not record sufficient reasons nor afford the petitioner adequate time to represent its case. The absence of a fair opportunity to be heard and lack of decipherable reasons rendered the orders legally unsustainable. On this short ground the Court exercised jurisdiction to interfere notwithstanding the availability of statutory remedies and set aside the impugned orders.

Impugned appellate and adjudication orders quashed and set aside for violation of principles of natural justice and being ex parte without sufficient reasons.

Quashing and remand for fresh adjudication - merits left open for fresh decision - Matter remanded to the Assessing Officer for fresh adjudication with liberty to the parties and without expressing any opinion on merits. - HELD THAT: - Having quashed the orders on procedural grounds, the Court remitted the matter to the Assessing Officer to decide afresh on merits after affording adequate opportunity to the petitioner and other concerned parties to place on record necessary documents and materials. The Court expressly refrained from expressing any view on the substantive questions urged before it and left all merits open for determination by the Assessing Officer and, if necessary, further forums in accordance with law.

Matter remanded for fresh adjudication; merits left open.

Deposit as precondition for hearing - de-freezing of bank accounts - Interim financial and procedural directions to facilitate fresh adjudication were issued, including deposits and de-freezing of accounts. - HELD THAT: - The Court recorded that the petitioner asserted deposit of 10% of the total amount as prerequisite for hearing. The Court directed that if such deposit has not been made it shall be done within seven days from the date accounts become operational, and further directed the petitioner to additionally deposit ten per cent of the demand before the Assessing Officer within seven days. Deposits were ordered to be without prejudice to parties' rights and excess, if any, to be refunded. The Court also directed immediate de-freezing/de-attaching of the petitioner's bank account(s), if attached in reference to the proceedings subject to the petition, to enable participation in the fresh proceedings.

Petitioner to ensure specified deposits within prescribed timelines; bank accounts to be de-frozen immediately; deposits subject to later adjustment.

No coercive action during pendency - Respondents restrained from taking coercive steps during pendency of fresh proceedings. - HELD THAT: - The Revenue counsel stated no objection to remand and accepted that no coercive steps shall be taken during pendency. The Court recorded and accepted that no coercive measures shall be taken against the petitioner in respect of the disputed demand while the matter is being re-adjudicated, and directed the parties to cooperate with the Assessing Officer and to comply with the directions issued for expeditious disposal.

No coercive steps to be taken against the petitioner during the pendency of proceedings.

Final Conclusion: Impugned appellate and adjudication orders quashed for procedural infirmity (ex parte proceedings and lack of reasons); matter remanded to the Assessing Officer for fresh adjudication after affording adequate opportunity, with interim directions regarding deposits, de-freezing of bank accounts and prohibition of coercive action; merits expressly left open and liberty reserved to the parties to pursue available remedies.

Faceless assessment procedure - Section 144B(7) procedure under Faceless Assessment - Non est assessment under Section 144B(9) - Principles of natural justice - Remand for fresh adjudication to issue draft assessment and afford hearing

Faceless assessment procedure - Section 144B(7) procedure under Faceless Assessment - Principles of natural justice - Non est assessment under Section 144B(9) - Validity of the assessment order passed by the National Faceless Assessment Centre without issuance of a prior show-cause notice, draft assessment order and an opportunity of hearing to the assessee. - HELD THAT: - The Court held that an assessment completed by the National Faceless Assessment Centre must comply with the procedure prescribed for faceless assessment and cannot follow an earlier regime. Section 144B(7) requires issuance of a prior show-cause notice and a draft assessment order and provides for the assessee's right to request a personal hearing; Section 144B(9) renders assessments not made in accordance with that procedure non est. In the present case no prior show-cause notice, no draft assessment order and no hearing were afforded before passing the impugned order, resulting in a violation of the mandatory faceless-assessment procedure and of the principles of natural justice. The Court further observed that where proceedings have been conducted in breach of natural justice, availability of an alternative statutory remedy does not preclude maintainability of writ jurisdiction. [Paras 5, 6, 7, 8]

Impugned assessment order is invalid for non-compliance with the faceless-assessment procedure and for violation of principles of natural justice.

Remand for fresh adjudication to issue draft assessment and afford hearing - Faceless assessment procedure - Relief to be granted in consequence of the invalid assessment order. - HELD THAT: - In consequence of the finding of procedural and natural-justice infirmity, the Court set aside the assessment order and notice of demand and remanded the matter to the Assessing Officer. The Assessing Officer is directed to issue a draft assessment order, grant an opportunity of hearing to the petitioner by way of video conferencing, and thereafter pass a reasoned order in accordance with law and the faceless-assessment procedures laid down under Section 144B. [Paras 9]

Assessment order and notice of demand set aside; matter remitted to Assessing Officer to follow Section 144B procedure, issue draft order, afford video-conference hearing and thereafter pass a reasoned order.

Final Conclusion: The assessment order dated 09.04.2021 and the accompanying notice of demand for AY 2018-19 are set aside for failure to comply with the mandatory faceless-assessment procedure and principles of natural justice; the matter is remanded to the Assessing Officer to issue a draft assessment order, afford a hearing by video conferencing and thereafter pass a reasoned order in accordance with law.

Reopening of assessment after four years - failure to disclose fully and truly all material facts - proviso to section 147 - statutory protection against reassessment - third proviso to section 147 - scope and effect - change of opinion - consistency of treatment across assessment years

Reopening of assessment after four years - failure to disclose fully and truly all material facts - proviso to section 147 - statutory protection against reassessment - change of opinion - Whether reassessment proceedings under section 147 read with section 148 were maintainable more than four years from the end of the relevant assessment year where the assessee had filed a return and an assessment under section 143(3) had been made and there was no allegation of failure to disclose material facts. - HELD THAT: - The Tribunal and this Court accepted the factual finding that the assessee had filed a return under section 139, the Assessing Officer had conducted scrutiny and passed an assessment order under section 143(3), and the reopening notice under section 148 was issued after the four year period from the end of the relevant assessment year. The statutory proviso to section 147 affords protection against reassessment after four years unless income escaped assessment by reason of the assessee's failure to make a return or to disclose fully and truly all material facts. Revenue failed to identify any undisclosed material fact or to allege that the assessee had not disclosed necessary facts; the Assessing Officer merely took a different view on the nature of the expenditure (a change of opinion). Where there is no failure to disclose material facts, reopening beyond the four year period is impermissible. The Court endorsed the Tribunal's reliance on precedents holding that absence of suppressed or undisclosed material facts defeats reassessment under the proviso and that mere change of opinion does not justify reopening. [Paras 5, 9]

Reassessment proceedings under section 147/148 were not maintainable as the proviso to section 147 applied and Revenue failed to show any failure by the assessee to disclose fully and truly all material facts; the reopening was therefore quashed.

Third proviso to section 147 - scope and effect - statutory protection against reassessment - Whether the third proviso to section 147 extends or enlarges the four year period within which the Revenue may initiate reassessment proceedings. - HELD THAT: - The Court interpreted the third proviso and concluded that it does not extend or enlarge the temporal limitation imposed by the first proviso. The third proviso merely permits assessment or reassessment of income not involved in, or not the subject matter of, any appeal, reference or revision; it does not operate to reset or prolong the four year period for initiating proceedings under section 147. Consequently, the appellant's submission that the four year period commences from final adjudication of an appeal was rejected as inconsistent with the statutory scheme. [Paras 10]

The third proviso does not extend the four year limitation for initiation of proceedings under section 147 and therefore does not render the reassessment notice timely.

Final Conclusion: The appeal is dismissed. The reassessment and assessment order for AY 2004-05 were quashed because reopening beyond the four year period was barred by the proviso to section 147 in the absence of any failure by the assessee to disclose fully and truly all material facts; the third proviso to section 147 does not extend the four year limitation.

Capital gains - capital asset - transfer - revision under Section 264 of the Income Tax Act - appeal under Section 246A of the Income Tax Act - mode of computation of capital gains - definition of capital asset under Section 2(14) of the Income Tax Act - definition of transfer under Section 2(47) of the Income Tax Act

Revision under Section 264 of the Income Tax Act - appeal under Section 246A of the Income Tax Act - Validity of the assessees' choice to prefer revision under Section 264 instead of filing an appeal under Section 246A - HELD THAT: - The Court held that an assessee aggrieved by an assessment order has an option to either prefer an appeal under Section 246A or to seek revision under Section 264. The Single Judge's observation that the assessees had 'bypassed' the remedy under Section 246A by filing a revision was incorrect. Exercising the statutory option to file a revision did not render the revisional remedy impermissible, and the assessees were within their rights to invoke Section 264. [Paras 5, 6]

Observations that the assessees wrongly chose revision over appeal are unsustainable; choice to file revision under Section 264 is valid.

Capital gains - capital asset - definition of capital asset under Section 2(14) of the Income Tax Act - definition of transfer under Section 2(47) of the Income Tax Act - mode of computation of capital gains - Whether the Assessing Officer and the revisional Authority applied the statutory tests to determine if the lands were capital assets and whether a transfer attracting capital gains had occurred - HELD THAT: - The Court found that the Assessing Officer's order did not apply the parameters of Section 2(14)(iii) to determine whether the subject lands fell within the exception to agricultural land being excluded from 'capital asset'. Similarly, the requirement of a 'transfer' as defined under Section 2(47) was not properly applied before invoking Chapter IV provisions and Section 48 computation. The revisional Authority's order was merely extracted by the Single Judge without independent consideration of whether the lands were capital assets and whether a transfer (within the statutory definition) had taken place. Because the statutory tests were not applied, the matter requires fresh consideration in light of those provisions. [Paras 11, 13, 14]

Orders of the Assessing Officer and revisional Authority set aside; matter remitted for reconsideration applying the tests in Section 2(14) and Section 2(47) and determining applicability of Chapter IV in accordance with law.

Final Conclusion: The Single Judge's order is set aside. The appeal is allowed: observations faulting the assessees for preferring revision over appeal are rejected; the assessment and revisional orders are set aside and the matter is remitted to the Assessing Officer for fresh consideration on whether the lands are capital assets and whether a transfer, as defined, occurred, after issuing notice and within the stipulated time. Parties to bear their own costs.

Reassessment under Section 147 - intimation under Section 143(1) not an order of assessment - effacement of original assessment upon reassessment - inapplicability of Sun Engineering ratio where no original assessment - remand for fresh adjudication of claims in reassessment proceedings

Reassessment under Section 147 - intimation under Section 143(1) not an order of assessment - inapplicability of Sun Engineering ratio where no original assessment - Whether the Tribunal was correct in applying Sun Engineering and treating concluded original-assessment issues as non-agitable in reassessment proceedings where there was no original assessment order but only an intimation under Section 143(1). - HELD THAT: - The Court held that an intimation under Section 143(1) cannot be treated as an order of assessment, having regard to the Explanation to Section 143 as deleted and the Supreme Court's decision in Rajesh Jhaveri. In the present case no order under Section 143(3) was passed; only an intimation under Section 143(1) existed. Accordingly, proceedings initiated under Section 148/147 constituted the first assessment and were to be conducted de novo. The ratio in Sun Engineering, which precludes reagitation of matters decided in a concluded original assessment, does not apply where there is no original assessment order that has attained finality. Even if an intimation were treated as an order, the principles in V. Jagan Mohan Rao and related authorities support that a validly reopened assessment effaces the earlier assessment and permits fresh consideration. For these reasons the Tribunal's reliance on Sun Engineering to deny the assessee's claim was misplaced and the substantial questions framed (Nos. 1 and 2) are answered in favour of the assessee. [Paras 6, 9, 11]

First and second substantial questions of law answered in the negative and in favour of the assessee; Sun Engineering ratio held inapplicable to the facts where only an intimation under Section 143(1) existed and reassessment under Section 147 is to be treated as a fresh assessment.

Remand for fresh adjudication of claims in reassessment proceedings - allowability of loss on sale of securities under reassessment - Whether the assessee's additional claim of loss on sale of government securities should be allowed in the reassessment proceedings or requires fresh adjudication. - HELD THAT: - The Court observed that because there was no original assessment and the reassessment proceeds operate as a fresh assessment, the Assessing Officer must consider afresh the claims made by the assessee, including the additional claim of loss on sale of securities. The Tribunal's refusal to entertain that claim on the ground that it was not raised in an original concluded assessment was therefore untenable. The Court declined to express any opinion on the merits of the claim and remitted the matter to the Assessing Officer for adjudication in accordance with law. [Paras 11]

Claims regarding the additional loss on sale of securities remitted to the Assessing Officer for fresh adjudication; orders below quashed to that extent.

Final Conclusion: The appeals are allowed in part: the Tribunal's application of Sun Engineering was held inapplicable where only an intimation under Section 143(1) existed and reassessment under Section 147 is to be treated as a fresh assessment; the matter is remitted to the Assessing Officer to adjudicate the assessee's claims, including the loss on sale of securities, afresh in accordance with law.

Reopening of assessment - scope of Section 147 and Explanation 2(c) regarding escapement of income - failure to disclose fully and truly all material facts - change of opinion doctrine - reliance on tangible/new material not adjudicated in original assessment - judicial review confined to validity of reasons and process, not substitution of departmental view on sufficiency

Reopening of assessment - scope of Section 147 and Explanation 2(c) regarding escapement of income - failure to disclose fully and truly all material facts - Validity of reopening the assessment for AY 2011-12 by issuing notice under Section 148/147 on the ground of escapement of income. - HELD THAT: - The Court held that the Assessing Officer recorded reasons indicating that income chargeable to tax had escaped assessment on account of excess deduction/incorrect claim in relation to retention money and a discrepancy in profit figures. The reasons noted that the issue of retention money was not adjudicated in the original assessment and that there was a finding of failure on the part of the assessee to disclose material facts. In view of Explanation 2(c) to Section 147, such escapement falls within the statutory ambit permitting reassessment. The Assessing Officer applied his mind, relied on tangible material such as audited balance sheet and computations, obtained necessary approvals and issued the notice; accordingly, the reassessment initiation was held valid. [Paras 13, 15, 18]

Reopening of assessment under Section 148/147 was valid as income had escaped assessment and failure to disclose material facts was recorded.

Change of opinion doctrine - reliance on tangible/new material not adjudicated in original assessment - Whether the reassessment constitutes an impermissible change of opinion by the Assessing Officer. - HELD THAT: - The Court distinguished a mere change of opinion from reopening based on new or unadjudicated material. It found that in the original assessment no opinion had been formed on the issues relied upon for reopening - notably the treatment and reconciliation of retention money and the profit discrepancy - and therefore the reassessment could not be characterized as a change of opinion. The existence of material not considered or adjudicated earlier justified invoking Section 147 and the Assessing Officer's action was not a reopening merely reflecting a different view on a matter previously decided. [Paras 19, 21, 23]

Reopening does not amount to change of opinion because the issues were not adjudicated in the original assessment and new/unadjudicated material was relied upon.

Judicial review confined to validity of reasons and process, not substitution of departmental view on sufficiency - reliance on tangible/new material not adjudicated in original assessment - Extent of High Court's power in writ proceedings to examine sufficiency of reasons for reopening. - HELD THAT: - The Court reaffirmed that while it may scrutinise whether the Assessing Officer complied with the required process and whether reasons are recorded, it will not substitute its own view on the sufficiency of the materials or re-appreciate the departmental decision on merits. If the Court is satisfied that the issues relied upon for reopening were not adjudicated earlier and that reasons have been recorded pointing to new or unadjudicated material, the Department must be permitted to proceed with reassessment; the High Court will not go into the adequacy of the material in detail in writ jurisdiction. [Paras 24, 25]

High Court's role is limited to examining validity of the reasons and process; it will not reassess sufficiency of departmental material in writ proceedings.

Final Conclusion: The writ petition was dismissed. The Court held the reassessment under Section 147/148 in respect of AY 2011-12 to be valid since escapement of income was recorded based on tangible/new material not adjudicated earlier; the reopening was not a mere change of opinion and the High Court would not substitute its view on sufficiency of reasons in writ proceedings.

Assessment under section 153A - Search and seizure proceedings - Incriminating material - Void ab initio of assessment framed under section 153A in absence of incriminating material - Pending proceedings on the date of search - Return filed under section 153A

Assessment under section 153A - Incriminating material - Pending proceedings on the date of search - Void ab initio of assessment framed under section 153A in absence of incriminating material - Validity of assessments framed under section 153A for AY 2009-10 and AY 2010-11 where no incriminating material was found and no proceedings were pending on the date of search. - HELD THAT: - The Tribunal applied the principle in the decision of the Hon'ble Delhi High Court in CIT v. Kabul Chawla and held that where search and seizure operations yield no incriminating material and there were no pending assessment proceedings as on the date of search, assessments purportedly framed under section 153A cannot be sustained. The facts show that for AY 2009-10 and AY 2010-11 the returns relevant to the due dates for issuance of notices under section 143(3) were filed prior to the search date and the returns filed under section 153A were filed after the search; accordingly, no proceedings were pending as on the date of search. As the assessment orders do not record any reliance on incriminating material to justify additions, the Tribunal concluded that the assessments under section 153A are void ab initio and cannot survive.

Assessments for AY 2009-10 and AY 2010-11 framed under section 153A are void ab initio in the absence of incriminating material and where no proceedings were pending on the date of search; appeals allowed.

Final Conclusion: Both appeals are allowed and the assessments framed under section 153A for AY 2009-10 and AY 2010-11 are held void ab initio for want of incriminating material and because no proceedings were pending on the date of search.

Reassessment u/s.147 - formation of belief and scope - Explanation 3 to section 147 - power to tax other income discovered during reassessment - failure of reasons recorded for reopening - jurisdiction of the Assessing Officer in reassessment proceedings - quashing of reassessment when the foundational reasons fail

Reassessment u/s.147 - formation of belief and scope - Explanation 3 to section 147 - power to tax other income discovered during reassessment - failure of reasons recorded for reopening - jurisdiction of the Assessing Officer in reassessment proceedings - Validity of reassessment where reason recorded for reopening (loan to wife) was accepted by the AO but additions were made on a different basis (sale of land) not reflected in the reasons. - HELD THAT: - The Tribunal examined the scope of reassessment and the effect of Explanation 3 in the context of the reasons recorded by the AO. It held that the essential basis for reopening is the AO's recorded belief and that Explanation 3 permits assessment of other issues only if they come to the AO's notice in the course of proceedings after lawful entry via the original reason. On the facts the AO's reason for reopening related to non-disclosure of a loan to the assessee's wife; during reassessment the AO accepted the assessee's explanation regarding that loan and made no addition on that basis but proceeded to assess profit on sale of lands on a different theory not mentioned in the reasons. Applying the authorities and the statutory scheme, the Tribunal concluded that where the foundational reasons for reopening fail, the AO loses jurisdiction to make additions on other matters discovered subsequently in reassessment; accordingly the reassessment was quashed. [Paras 11, 12, 13]

Reassessment quashed because the reasons recorded for reopening failed and the AO therefore lacked jurisdiction to assess other income not covered by those reasons.

Other grounds dismissed as infructuous - Consequences for the remaining grounds challenging classification of income where reassessment has been quashed. - HELD THAT: - Since the Tribunal quashed the reassessment order, all other appellate grounds contesting the addition treating sale proceeds as business income became academic. The Tribunal therefore declined to decide those substantive contentions and dismissed them as infructuous. [Paras 14]

Other grounds challenging the addition are dismissed as infructuous in view of quashing of the reassessment.

Final Conclusion: The appeal is allowed: the reassessment is quashed for lack of jurisdiction because the reasons for reopening failed, and consequentially the other grounds attacking the addition on sale of land are dismissed as infructuous.

Allowance of depreciation for charitable trusts - carry forward and set off of excess application of income by charitable trusts - non-retroactivity of amendment to section 11(6) - application of commercial principles for computation of income of trusts

Allowance of depreciation for charitable trusts - application of commercial principles for computation of income of trusts - Depreciation claimed under the Act on assets whose cost had earlier been claimed as application of income to charitable purposes is to be allowed while computing the income of the trust for AY 2014-15. - HELD THAT: - The Tribunal declined to follow its earlier order in the assessee's own case for AY 2009-10 because that decision was rendered per incuriam by failing to consider binding High Court and Supreme Court precedents. The Tribunal applied the Jurisdictional High Court decision in DIT v. Medical Trust of the Seventh Day Adventist and the Supreme Court decision in CIT v. Rajasthan and Gujarati Charitable Foundation to hold that trusts compute income on commercial principles and are entitled to normal allowances including depreciation under the Act even where the cost of the asset was earlier treated as application of income to charitable purposes. The Tribunal observed that the amendment to the statutory provision effected w.e.f. AY 2015-16 could not be applied retrospectively to AY 2014-15 and therefore did not affect the assessee's entitlement to depreciation for the year under appeal. On these grounds the assessing officer's and CIT(A)'s disallowance of depreciation was held to be erroneous.

AO and CIT(A) were in error; depreciation as claimed is to be allowed.

Carry forward and set off of excess application of income by charitable trusts - non-retroactivity of amendment to section 11(6) - Excess application of income for charitable purposes in earlier years may be carried forward and set off against income of the trust in subsequent years for AY 2014-15. - HELD THAT: - Relying on the decisions of the Jurisdictional High Court and the Supreme Court, the Tribunal held that there is judicial recognition of the entitlement of charitable institutions to carry forward and set off excess application of income. The Tribunal rejected the assessing officer's and CIT(A)'s view that no such carry forward exists for trusts, noting that the legislative amendment to section 11(6) introduced w.e.f. AY 2015-16 could not be given retrospective effect to defeat vested rights of the assessee for AY 2014-15. Consequently, the Tribunal directed the assessing officer to allow the carry forward and set off claimed by the trust.

AO and CIT(A) were in error; carry forward and set off of excess application is to be allowed.

Final Conclusion: The appeal is allowed: the orders of the assessing officer and the CIT(A) are set aside and the AO is directed to allow depreciation claimed by the trust and to permit carry forward and set off of excess application of income for AY 2014-15.

Penalty under section 271(1)(c) - Validity of notice under section 274 - Concealment of particulars of income - Furnishing inaccurate particulars of income - Principles of natural justice in penalty proceedings - Effect of quantum decision on levy of penalty

Penalty under section 271(1)(c) - Validity of notice under section 274 - Concealment of particulars of income - Furnishing inaccurate particulars of income - Principles of natural justice in penalty proceedings - The notice issued under section 274 did not specify whether penalty proceedings under section 271(1)(c) were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income, and whether that defect vitiated the penalty. - HELD THAT: - The Tribunal found as an undisputed fact that the notice failed to state the specific limb of section 271(1)(c) on which penalty proceedings were initiated (paragraph 9). Relying on the decisions of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory and Commissioner of Income Tax v. SSA's Emerald Meadows, and the Delhi High Court decision in PCIT v. Sahara India Life Insurance Co. Ltd., the Tribunal held that initiation of penalty proceedings must specify the ground so that the assessee can meet the case made out against it. Where proceedings are initiated on one ground, imposing penalty on a different ground offends principles of natural justice; subsequent discovery of facts cannot validate an order which, when passed, was not sustain able. Applying these precedents, the Tribunal concluded that the defect in the notice under section 274 vitiated the Assessing Officer's jurisdiction to levy penalty under section 271(1)(c) (paragraphs 9-14). [Paras 9, 14]

Notice defective for not specifying the limb of section 271(1)(c); penalty vitiated and to be deleted.

Effect of quantum decision on levy of penalty - Penalty under section 271(1)(c) - Whether the penalty could be sustained in view of the Tribunal's disposal of the quantum appeal which deleted major additions and remanded one addition for fresh consideration. - HELD THAT: - The Tribunal examined its own order in the quantum appeal for AY 2010-11 and observed that major additions had been deleted and the issue relating to the addition claimed under section 80GGB was remanded to the Assessing Officer (paragraph 15). Given that the quantum of income on which the penalty was partly predicated stood reduced by the Tribunal and a significant addition was remanded, the Tribunal held that the penalty could not be sustained at this stage. This reasoning was applied as an independent ground for deleting the penalty in addition to the defect in the notice. [Paras 15]

Penalty cannot be sustained in view of the Tribunal's allowance of major quantum additions and remand of a material issue; penalty deleted.

Final Conclusion: The appeal is allowed: the notice under section 274 was defective for failing to specify which limb of section 271(1)(c) was invoked, vitiating the penalty; additionally, the Tribunal's favorable disposal of major quantum additions and remand of a material issue precludes sustaining the penalty-the penalty is deleted.

Identity of creditors - creditworthiness of lender - genuineness of transactions - inter-company / inter-banking flow of funds - attraction of section 68 of the Income tax Act regarding unexplained loans

Identity of creditors - creditworthiness of lender - genuineness of transactions - attraction of section 68 of the Income tax Act regarding unexplained loans - Whether the unsecured loans shown in the books, advanced by the directors and routed through related group concerns, were explained so as to negate the applicability of section 68. - HELD THAT: - The Tribunal found on the admitted material that the creditors were directors of the assessee and long standing taxpayers whose returns and bank particulars were available to the Department. The accounts and ledger entries demonstrated an inter banking account and circulation of funds among the group concerns (Modern Overseas Pvt. Ltd., Modsal Frozen Foods Pvt. Ltd. and Modern Enterprises) without any adverse remarks in earlier years. The assessee discharged obligations to a group concern and received loans from its director; the amounts were reflected in the books at both ends. The Tribunal held that mere movement of funds through group entities or temporary cash deposits prior to cheque issuance did not by itself establish taint or unexplained cash credits. Creditworthiness was held to be broader than the income of the relevant year and could be established by assets, investments and the demonstrated flow of accounted funds inter se the group. Viewing the material holistically, the identity, capacity and genuineness of the transactions were satisfactorily explained and there was no basis to treat the amounts as unexplained under section 68. [Paras 8, 9, 10, 11, 12]

The identity, creditworthiness and genuineness of the unsecured loans were held to be sufficiently established and the additions under section 68 were deleted.

Final Conclusion: Appeal allowed; additions disallowed and Assessing Officer directed to delete the additions made in respect of the unsecured loans.

Commercial expediency - allowability of interest as business expenditure under section 36(1)(iii) and section 37(1) - nexus between expenditure and purpose of business - deductibility of expenditure under section 57(iii) as relating to income from other sources

Commercial expediency - allowability of interest as business expenditure under section 36(1)(iii) and section 37(1) - nexus between expenditure and purpose of business - Interest expense of Rs. 1,35,25,521/- incurred on loans taken from M/s. OIPL is allowable as business expenditure under section 36(1)(iii)/section 37(1) on the ground of commercial expediency. - HELD THAT: - The Tribunal examined the commercial relationship between the parties, the purpose for which the assessee borrowed funds and the contemporaneous lending of idle funds to M/s. ABW Infrastructure at the same rate of interest. Applying the settled test of commercial expediency, the Tribunal held that expenditure must be judged from the viewpoint of a prudent businessman and that the Revenue cannot substitute its view for that of management once a nexus between the expenditure and the purpose of business is established. The assessee's business reasons - holding and developing land, pending approvals for change of land use, expansion plans, board resolutions authorising utilisation of funds for various business purposes, and strategic intent in creating business relationships by advancing interest-bearing loan to a third-party developer - satisfy the commercial expediency test. The Tribunal relied on authoritative precedent establishing that amounts advanced to third parties may qualify as borrowed capital used for business purposes if advanced as a measure of commercial expediency, and found no material to show the loan was used for personal purposes. On these facts the disallowance by the authorities below was held unwarranted and the interest expense was allowed under section 36(1)(iii)/37(1). [Paras 15, 16, 18, 19, 20]

Disallowance of interest expense of Rs. 1,35,25,521/- is deleted and the interest is allowable as business expenditure under section 36(1)(iii)/section 37(1) being incurred for commercial expediency.

Deductibility of expenditure under section 57(iii) as relating to income from other sources - In the alternative, the interest expense is deductible under section 57(iii) as an expense incurred in relation to interest income offered to tax. - HELD THAT: - The Tribunal noted that the assessee earned interest income from M/s. ABW Infrastructure which was offered to tax as income from other sources and that the assessee incurred the interest expense in relation to earning that income by borrowing from M/s. OIPL and redeploying the funds. Given that the interest-bearing loan was advanced to earn taxable interest and there is no finding of personal use, the Tribunal held that the expenditure qualifies as deductible under section 57(iii) against the interest income, as an alternative basis for allowance. [Paras 19]

Interest expense is alternatively allowable under section 57(iii) as expenditure incurred in relation to the interest income offered to tax.

Final Conclusion: The appeal is allowed; the Tribunal set aside the disallowance and directed the Assessing Officer to delete the disallowance of interest expense of Rs. 1,35,25,521/-, holding it allowable under section 36(1)(iii)/37(1) and, alternatively, under section 57(iii).

Deduction under section 80HHB for foreign projects - Requirement of separate books versus maintenance of separate accounts - Revenue expenditure: entrance and membership fees - Deduction under section 35 for in house R&D based on prescribed authority/DSIR approval - Accounting treatment of packing materials, loose tools and consumables; consistency of method - Exclusion of excise duty and sales tax from turnover for computation of Chapter VI A deduction - Interaction between deductions under section 80IA/80IB and computation under section 80HHC - Netting of interest (net v gross) under explanation (baa) to section 80HHC - Allowability of write off of advances (revenue loss v promoter/ capital advance) - Application of section 14A to disallow interest attributable to exempt income - Allocation of head office expenses for computing profits of industrial undertaking under section 80IA - Classification of repairs and maintenance on leasehold premises; remand for verification - Deduction under section 80O/80 O/80 0 for fees for designs and drawings (proof of supply/use offshore)

Deduction under section 80HHB for foreign projects - Requirement of separate books versus maintenance of separate accounts - Whether deduction under section 80HHB can be allowed where separate books of account for foreign projects were not maintained but separate accounts and Form No.10CCAH audit certificates were furnished. - HELD THAT: - The Tribunal followed earlier decisions in the assessee's own case and held that absence of separate physical books of account did not preclude deduction under section 80HHB where separate accounts in respect of each foreign project were maintained and requisite audit certificates were furnished. The Tribunal applied its prior findings on identical facts and concluded that the benefit of section 80HHB cannot be denied solely because separate books were not maintained. [Paras 3, 4]

Revenue's ground contesting allowance under section 80HHB on account of no separate books is dismissed.

Revenue expenditure: entrance and membership fees - Whether entrance fees and corporate membership subscription paid to clubs are revenue deductible expenditure. - HELD THAT: - The Tribunal applied settled principle and earlier authorities that entrance and corporate membership fees, where for business purposes and facilitating business operations, are revenue in nature. When membership is in a director's name, the assessee must prove business purpose. On the facts and earlier decisions in the assessee's case, the Tribunal found no basis to disallow the expenditure. [Paras 6]

Revenue's ground disallowing entrance and subscription fees is dismissed.

Deduction under section 35 for in house R&D based on prescribed authority/DSIR approval - Whether the Assessing Officer could deny weighted deduction under section 35 where the assessee's in house R&D units had approval/renewal by the prescribed authority (DSIR). - HELD THAT: - The Tribunal noted that questions as to whether activities constitute scientific research are for the prescribed authority and that judicial and High Court precedent prohibit the AO from substituting its assessment for the authority's certificate. In view of DSIR approval/renewal and relevant High Court authority, the Tribunal found no merit in Revenue's challenge to the CIT(A)'s allowance of the claim. [Paras 9, 11]

Revenue's challenge to allowance of R&D deduction under section 35 is dismissed.

Accounting treatment of packing materials, loose tools and consumables; consistency of method - Whether the AO was justified in estimating and disallowing closing stock value of packing materials and consumables where the assessee consistently wrote off such purchases without year end inventory. - HELD THAT: - The Tribunal followed its earlier decisions on identical facts that where the assessee has consistently followed a method accepted in past years and there is no allegation that purchases were not genuine, the AO should not disturb the books by making additions. Reliance was placed on earlier Tribunal rulings which upheld the method of writing off such items on consistent accounting practice. [Paras 13, 15]

Addition made by AO on account of closing stock of packing materials/consumables is deleted; Revenue's ground dismissed.

Exclusion of excise duty and sales tax from turnover for computation of Chapter VI A deduction - Whether sales tax and central excise duty collected should be included in 'total turnover' for computing deduction under section 80HHC/80HHE, in view of section 145A. - HELD THAT: - The Tribunal applied the Supreme Court's decision in CIT v. Lakshmi Machine Works and held that sales tax and excise duty collected should not be included as part of total turnover for computing the specified deduction. The Tribunal treated the Supreme Court precedent as settling the question and dismissed Revenue's contention. [Paras 17]

Revenue's grounds seeking inclusion of excise duty and sales tax in turnover for 80HHC/80HHE are dismissed.

Interaction between deductions under section 80IA/80IB and computation under section 80HHC - Whether profits on which deduction under section 80IA/80IB has been allowed (or could be said to exist) must be excluded from computation of deduction under section 80HHC even where the export divisions claiming 80HHC had not claimed 80IA for the same profits. - HELD THAT: - The Tribunal recorded that the CIT(A) had found, and Revenue did not dispute, that none of the export divisions claiming 80HHC had also claimed deduction under section 80IA on the same profits. Section 80IA(9) bars double allowance only where deduction under section 80IA has been claimed and allowed. Thus, in the factual matrix where 80IA deduction was not claimed for those export divisions, the prohibition was inapplicable and the CIT(A)'s relief was sustained. [Paras 19, 21]

Revenue's ground based on interaction of sections 80IA/80IB with 80HHC is dismissed.

Netting of interest (net v gross) under explanation (baa) to section 80HHC - Whether 90% exclusion under explanation (baa) applies to gross interest receipts or only to net interest income (gross interest less interest expense) for computing profits under section 80HHC. - HELD THAT: - The Tribunal recognised the jurisprudence endorsing the netting principle subject to proof of nexus between interest paid and interest received. Following applicable High Court and Supreme Court decisions and the assessee's earlier orders, it held that only net interest should be excluded under explanation (baa) where the assessee establishes nexus between interest earned and interest paid. [Paras 23, 25, 26]

Revenue's ground that AO should exclude 90% of gross interest is dismissed; only net interest (subject to nexus) is to be excluded.

Allowability of write off of advances (revenue loss v promoter/ capital advance) - Whether write off of (a) customs duty receivable under EPCG scheme and (b) advances to subsidiary National Switchgear Ltd (NSL) are allowable as revenue deduction. - HELD THAT: - (a) The Tribunal accepted the assessee's explanation that the customs duty concession became irrecoverable due to non fulfillment of export obligation and relevant changes in scheme, and that the amount was shown as receivable and thereafter written off. The Tribunal held this amounted to a business loss in the normal course and allowed the write off. (b) As to advances to NSL, the Tribunal accepted the CIT(A)'s factual finding that advances were made as a promoter to meet routine expenses (including during liquidation), not as business advances or for purchases, and therefore lacked business necessity or commercial expediency to qualify as revenue expenditure; alternative claim as capital loss had no statutory basis. The Tribunal found the advances were promoter advances and affirmed their disallowance. [Paras 33, 35, 36, 40, 41]

Customs duty write off of Rs. 8,69,160 is allowed (disallowance set aside); write offs to NSL are disallowed (CIT(A) decision affirmed).

Application of section 14A to disallow interest attributable to exempt income - Whether disallowance under section 14A is called for where own funds of the assessee substantially exceed investments yielding exempt income. - HELD THAT: - On the facts the Tribunal found own funds far in excess of the investments in both years. Following the Karnataka High Court precedent in Micro Labs Ltd., the Tribunal held that no disallowance under section 14A was warranted where investments were not made out of interest bearing funds and own funds sufficed. [Paras 41, 43]

Disallowance under section 14A confirmed by AO/CIT(A) is deleted; the AO is directed to remove the section 14A disallowance for both years.

Classification of repairs and maintenance on leasehold premises; remand for verification - Whether repairs and maintenance claimed on leasehold premises are revenue in nature or capital, and the proper relief (revenue deduction or depreciation). - HELD THAT: - The Tribunal noted the coordinate bench's prior detailed ruling for AY 2000 01 which allowed certain interior and related items as revenue and others as capital with depreciation. Because the assessee did not furnish the required break up of the expenditures for the years in issue, the Tribunal could not decide on the record and remanded the matter to the AO with directions to follow the approach and findings recorded in the earlier assessment year decision, allowing revenue treatment for items of the nature listed there and capital treatment/depreciation for others. [Paras 44, 45, 47, 48]

Issue restored to AO for verification and computation in accordance with Tribunal's earlier directions; CIT(A) order set aside on this point.

Computation of profits for deduction under section 80HHC (scope of explanation (baa)) - Which items of 'other income' fall within explanation (baa) to section 80HHC and are to be excluded (90%) when computing 'profits of business' for the deduction. - HELD THAT: - Following earlier Tribunal decisions in the assessee's own case, the Tribunal analysed the composite items of other income and directed treatment: net rent (after related expenses), insurance claims, compensation in lieu of notice and commission income may be excluded subject to nexus/verification; duty drawback is not to be treated under explanation (baa) as it is addressed by the proviso to section 80HHC; profit on sale of fixed assets should be verified as having already been excluded in computing business profits; R&D income not shown to be integral to business is within explanation (baa); interest items are expressly excluded by explanation (baa). The Tribunal directed AO to follow these rulings and its earlier orders when recomputing deduction. [Paras 50, 51, 52, 53, 54]

AO directed to compute deduction under section 80HHC in accordance with Tribunal's analysis and prior decisions; items specifically identified to be excluded or included as set out by the Tribunal.

Deduction under section 80HHE: scope and remedy before CIT(A) - Whether the assessee's ground contesting exclusion of certain 'other income' under explanation (baa) in computing deduction under section 80HHE was properly before the Tribunal. - HELD THAT: - The Tribunal observed that the CIT(A)'s order on section 80HHE dealt only with exclusion of excise duty and sales tax from total turnover and did not address the other income items raised by the assessee. Because the assessee's ground did not arise from the CIT(A)'s findings, the Tribunal rejected the ground as not emanating from the appellate order. [Paras 55, 56]

Assessee's grounds on 80HHE regarding other income are rejected as not arising from CIT(A)'s order.

Allocation of head office expenses for computing profits of industrial undertaking under section 80IA - Whether head office/common expenses should be allocated to industrial undertakings when computing profits eligible for deduction under section 80IA. - HELD THAT: - The Tribunal followed its earlier consistent holdings and those of coordinate benches that profits eligible for deduction under section 80IA must be computed in accordance with sections 28-43, which requires adjustment of all expenses attributable to the business, including direct and indirect head office expenses. Allocation by a reasonable basis (e.g., turnover) was upheld to arrive at net profits of the undertaking. The Tribunal therefore rejected the assessee's contention. [Paras 57]

Allocation of head office expenses for 80IA computation upheld; assessee's ground dismissed.

Deduction under section 80O/80 O/80 0 for fees for designs and drawings (proof of supply/use offshore) - Whether the assessee's claim for deduction under section 80O/80 0 for fees received for supply of engineering designs/drawings outside India is allowable on the available evidence. - HELD THAT: - The Tribunal applied its prior orders in the assessee's own case where invoices and alleged supplies were examined; in those facts the Tribunal found lack of documentary proof of supply/use offshore (no agreement, absence of designs on record) and sustained denial. The present facts were held to be identical to earlier years and therefore the Tribunal followed the prior conclusions that the claim could not be allowed on the material produced. [Paras 58, 59, 60]

Assessee's claim for deduction under section 80O/80 0 is rejected following prior Tribunal findings.

Final Conclusion: The Tribunal dismissed the Revenue's appeals for Assessment Years 2002 03 and 2003 04 in respect of the contested grounds (including denial of section 80HHB, club fees disallowance, R&D deduction, valuation of consumables, exclusion of excise/sales tax from turnover, interplay of 80IA with 80HHC, and gross v net interest netting). In the assessee's appeals the Tribunal partly allowed relief: it directed deletion of the disallowance of the customs duty receivable write off and deletion of section 14A disallowances, remanded the repairs and maintenance classification to the AO for verification, directed computation of 80HHC deductions in accordance with earlier decisions, and affirmed disallowance of advances to the subsidiary, allocation of head office expenses for section 80IA, and rejection of the section 80O/80 0 claim; both Revenue appeals were dismissed and the assessee's appeals were otherwise partly allowed in accordance with the Tribunal's directions.

Permanent Establishment - Dependent agent permanent establishment - Business profits under DTAA (Article 7) - Explanation 2 to section 9(1) - business connection - Long-term capital loss - computation under sections 48 and 49 - Colourable device / sham transaction scrutiny - Valuation under Rule 11UA limited to section 56(2) purposes

Permanent Establishment - Dependent agent permanent establishment - Business profits under DTAA (Article 7) - Explanation 2 to section 9(1) - business connection - Whether the activities of Swiss Reinsurance Services Pvt. Ltd. (SRSIPL) amounted to a permanent establishment of the non-resident assessee in India so as to tax the re insurance business profits in India under the India Switzerland DTAA. - HELD THAT: - The Tribunal had earlier, in the assessee's own appeals for earlier assessment years, after analysing the service agreement and associated facts, held that SRSIPL did not constitute a dependent agent or other permanent establishment and that the assessee had no business connection in India for the relevant years. The DRP, though aware of those Tribunal decisions, upheld the assessing officer's contrary view only because revenue had filed appeals against the earlier orders, keeping the issue alive. The Tribunal in the present appeal declined to accept the DRP's reasoning and, respectfully following its prior consistent decisions in the assessee's own cases, held that SRSIPL is not a PE of the assessee. Consequently, profits from re insurance business collected from Indian insurers cannot be brought to tax in India under Article 7 of the India Switzerland DTAA. The addition made by the assessing officer was therefore deleted. [Paras 8]

Held that SRSIPL does not constitute a permanent establishment of the assessee in India; re insurance profits are not taxable in India under Article 7 of the India Switzerland DTAA and the addition is deleted.

Long-term capital loss - computation under sections 48 and 49 - Colourable device / sham transaction scrutiny - Valuation under Rule 11UA limited to section 56(2) purposes - Whether the long term capital loss claimed by the assessee on sale of shares of an Indian company (TTK) was an artificial loss and therefore liable to be disallowed. - HELD THAT: - The assessing officer characterised the loss as artificial, relying on events surrounding acquisition and sale, alleged links between the purchaser and the assessee, timing of transactions, regulatory filings and subsequent utilisation of the loss in a later year. The assessee produced documentary evidence showing acquisition under the FDI route with regulatory approvals, board approvals, and independent valuation reports (including DCF valuation), and explained the commercial rationale for subscribing at a premium to support a loss making company. The Tribunal found the assessing officer's conclusions to be based on conjecture, surmise and irrelevant material; noted absence of any counter valuation by the revenue; observed that FEMA/IRDA approvals and the valuer's DCF valuation supported the transaction; and agreed that Rule 11UA applies only for purposes of section 56(2) and was inapposite. Applying the statutory computation provisions, the Tribunal held that the sale resulted in a genuine long term capital loss which must be computed under sections 48 and 49 and is allowable, with carry forward entitlement. Allegations of colourable device, relatedness or ulterior commercial motive were not sustained on the record. [Paras 21, 22]

Held that the long term capital loss on sale of TTK shares is genuine and allowable; disallowance by the assessing officer is set aside and the loss may be carried forward in accordance with law.

Final Conclusion: Appeal allowed: (i) the re insurance profits were not taxable in India because SRSIPL is not a permanent establishment of the assessee under the India Switzerland DTAA; and (ii) the long term capital loss on sale of TTK shares is genuine and allowable, with entitlement to carry forward, accordingly the impugned additions and disallowance are deleted.

Service of notice - change of address - ex parte disposal - remand for fresh consideration - opportunity of hearing - best judgment assessment under section 144 - additions in respect of unexplained share capital and loans and unexplained cash deposits (applications of section 68 and section 69)

Service of notice - change of address - ex parte disposal - opportunity of hearing - remand for fresh consideration - Validity of the CIT(A)'s ex parte dismissal of the assessee's appeal on account of non-appearance and service at the old address, and whether the matter should be restored for fresh adjudication. - HELD THAT: - The Tribunal noted that although the CIT(A) had dismissed the appeal for non-appearance observing that notices were sent to the assessee's earlier address and that no adjournment or submissions were filed, the assessee had subsequently placed on record a change of address and a written request by an Interim Resolution Professional in insolvency proceedings. In view of the reasonable cause shown for non-appearance before the CIT(A) and in the interest of justice, the Tribunal held that the assessee should be afforded an opportunity to explain its affairs before the appellate authority. Consequently, the Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A) for fresh consideration; the CIT(A) was directed to serve notice at the correct address and to afford both the assessee and the Assessing Officer adequate opportunity of being heard. The Tribunal therefore remanded the appeal for fresh adjudication rather than deciding the substantive additions on merits itself. [Paras 4]

CIT(A)'s ex parte order set aside and matter restored to CIT(A) for fresh hearing after service of notice; parties to be given opportunity to be heard; grounds allowed for statistical purposes.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes by setting aside the CIT(A)'s ex parte dismissal and remanding the matter to the CIT(A) for fresh adjudication with directions to serve notice at the correct address and grant both parties an opportunity of hearing.

Allowability of interest as business expenditure - capitalization of interest to cost of projects / work-in-progress - business expediency of interest-free advances to related concerns - remand for verification of cash flow statement and source of funds - claim of depreciation on assets forming part of let-out property - standard deduction from rental income in assessing depreciation claim

Allowability of interest as business expenditure - business expediency of interest-free advances to related concerns - capitalization of interest to cost of projects / work-in-progress - remand for verification of cash flow statement and source of funds - Whether the interest expense claimed by the assessee is allowable or should be disallowed/capitalized, and whether further verification is required of funds advanced to related concerns. - HELD THAT: - The Tribunal examined the assessed accounts, submissions and the appellate order and found that while the Assessing Officer treated the interest as capital in nature on account of interest-free advances to sister concerns and alternatively capitalized interest to the cost of land/projects, the assessee had produced material indicating availability of its own funds and use of borrowed funds for business purposes. In the interest of justice the Tribunal directed a pragmatic verification by the Assessing Officer of the assessee's cash flow statement for the relevant period to ascertain funds available on the date of advances to the sister concern, noting that such verification would determine whether the interest relates to business exigency or requires capitalization. The Tribunal therefore remanded the matter to the Assessing Officer for fresh scrutiny and directed that the Assessing Officer take a pragmatic approach in accordance with law. The Tribunal treated this ground as allowed for statistical purposes pending the AO's verification. [Paras 5]

Grounds relating to disallowance/capitalization of interest are remanded to the Assessing Officer for verification of cash flow statements; the ground is allowed for statistical purposes.

Claim of depreciation on assets forming part of let-out property - standard deduction from rental income in assessing depreciation claim - Whether depreciation claimed on electrical installations and furniture & fixtures forming part of the let-out property is allowable in addition to the standard deduction from rental income. - HELD THAT: - The Tribunal noted that the items on which depreciation was claimed formed an integral, inalienable part of the rented premises for which the Assessing Officer had allowed the standard 30% deduction from rental income. The Tribunal applied the condition of use required for claiming depreciation and observed that the assets were not used for the assessee's business in a manner that would permit an additional depreciation claim apart from the standard deduction allowed under the rental provisions. On this basis the Tribunal declined to accept the assessee's contention that depreciation should be allowed separately. [Paras 6]

Claim for depreciation on the said assets is dismissed; the disallowance is sustained.

Final Conclusion: The appeal is partly allowed for statistical purposes by remanding the question of allowability/capitalization of interest to the Assessing Officer for verification of the assessee's cash flow and source of funds; the claim for depreciation on assets forming part of the let-out property is dismissed and the disallowance is sustained.

Summary order. Appeal dismissed; Supreme Court declined to interfere with the order of the Custom, Excise and Service Tax Appellate Tribunal dated 24 February 2020 in Customs Appeal No. 11356 of 2016-DB. Pending application, if any, disposed of.

Academic mootness - Custom House Agent License - Revocation and expiry of licence - Fresh application for licence to be considered on merits - Right to statutory appeal under Regulation 9(4) of the Custom House Agent Licensing Regulations, 2004

Academic mootness - Revocation and expiry of licence - The challenge to the 2002 CHA License was rendered academic by expiry of the licence in June, 2007 and the appeal was accordingly not entertained on merits. - HELD THAT: - The Department conceded that the controversy concerning the CHA License issued in 2002 had become academic because the CHA License would have expired by efflux of time in June, 2007. In view of this concession and the temporal expiry of the licence, the Court declined to decide the substantive issues raised in the appeal and treated the appeal as not requiring further adjudication on merits. [Paras 1]

Appeal treated as academic and not decided on merits.

Fresh application for licence to be considered on merits - Custom House Agent License - Right to statutory appeal under Regulation 9(4) of the Custom House Agent Licensing Regulations, 2004 - Liberty was granted to the appellant to make a fresh application for grant of CHA License and directions given as to consideration and remedy if rejected. - HELD THAT: - The Court disposed of the appeal by permitting the appellant to apply afresh for a CHA License and directed that such application shall be considered by the Competent Authority in accordance with law and on its merits without being influenced by the earlier revocation order relating to the expired licence. The Court further recorded that, if the fresh application is rejected, the appellant may avail the statutory appellate remedy provided under Regulation 9(4) of the Custom House Agent Licensing Regulations, 2004. [Paras 2, 3]

Liberty to file fresh application; Competent Authority to consider on merits; statutory appeal under Regulation 9(4) available if application is rejected.

Final Conclusion: The appeal was disposed of as academic due to expiry of the 2002 CHA License; the appellant permitted to seek a fresh CHA Licence to be considered on merits by the Competent Authority and to pursue the statutory appeal under Regulation 9(4) if the fresh application is rejected.

Merchandise Exports from India Scheme (MEIS) - Ineligible categories under MEIS - Duty Credit scrip entitlement - Registration and Telegraphic Release Advice (TRA) - Section 9(4) FTDR Act - cancellation procedure - Supplies from DTA to FTWZ/SEZ - Judicial review of administrative registration - Maintainability of writ against non-cancellation order

Registration and Telegraphic Release Advice (TRA) - Section 9(4) FTDR Act - cancellation procedure - Judicial review of administrative registration - Legality of respondents' rejection of registration of MEIS scrips and refusal to issue TRA without invoking the statutory cancellation procedure. - HELD THAT: - The Court held that issuance of scrips by R3 presupposed due scrutiny under the Handbook of Procedures and that Section 9(4) of the FTDR Act prescribes a specific procedure for suspension or cancellation of licences/scrips which had not been invoked. In the absence of any cancellation order under the statutory procedure, the categorical presumption was that R3 considered the scrips valid. Consequently, R2/R3 had no authority to reject registration or refuse to issue TRA by effectively reviewing R3's earlier issuance without following the cancellation process required by law. The impugned refusal was therefore contrary to law and set aside. [Paras 14, 15, 16, 25]

The impugned rejection of registration/TRA was quashed and the respondents were directed to proceed in accordance with law.

Merchandise Exports from India Scheme (MEIS) - Ineligible categories under MEIS - Supplies from DTA to FTWZ/SEZ - Duty Credit scrip entitlement - Whether the exports in question fell within the ineligible categories under para 3.06 of the Foreign Trade Policy, specifically exports 'made by units in FTWZ' or supplies from DTA to SEZ/FTWZ that would disentitle the petitioner from MEIS benefit. - HELD THAT: - On the material before the Court, including the purchase orders, invoices, shipping bills and Bank Realisation Certificate, the petitioner executed the export documents, received payment in US dollars from the ultimate purchaser, and used the FTWZ only as a warehousing/dispatch facility. The Court accepted the petitioner's commercial characterisation that DHL (the FTWZ) merely stored and facilitated shipment while the petitioner remained the exporter effecting exports to destinations decided by UTEXAM/ultimate buyer. Therefore clause (vii) (exports made by units in FTWZ) did not apply to deny entitlement, and the transactions were not within the ineligible categories envisaged by para 3.06. [Paras 20, 21, 22, 23, 25]

The petitioner's exports were not caught by the ineligible categories in para 3.06 and the exclusion urged by respondents was rejected.

Maintainability of writ against non-cancellation order - Judicial review of administrative registration - Whether the Writ Petitions were maintainable in view of contention that the impugned order was amenable to statutory appeal. - HELD THAT: - The Court found no statutory redress provided against the impugned order of non-registration (as distinct from an order cancelling a scrip under the FTDR Act). Since the statutory appeal provision relied upon applied to cancellation orders and no analogous appeal remedy was available against the order refusing registration/TRA, the writ petitions were maintainable. The respondents' objection on maintainability was therefore rejected. [Paras 24, 25]

Writ petitions were maintainable and properly entertained by the Court.

Registration and Telegraphic Release Advice (TRA) - Duty Credit scrip entitlement - Relief to be granted consequential to quashing of the impugned rejection. - HELD THAT: - Having set aside the impugned refusal, the Court directed R3 to re-validate the three scrips and to extend their validity for the duration of the pendency of these writ petitions, and directed immediate issuance of TRAs. The Court specified a timeline of four weeks for completion of the directed exercise. [Paras 25, 26]

R3 directed to re-validate the scrips, extend their validity for the pendency of the petitions and issue TRAs within four weeks.

Final Conclusion: The writ petitions were allowed: the impugned refusal to register MEIS scrips and to issue TRAs was set aside; the respondents' contention that the transactions fell within para 3.06 ineligible categories was rejected; the petitions were held maintainable; and R3 was directed to re-validate the three scrips and issue TRAs within four weeks, extending scrip validity for the pendency of the petitions.

Refund of excess customs duty - date of notification and e-publication - interpretation of Section 25(4) vis-a -vis Section 25(1) and (2A) - requirement to follow statutory refund procedure - reassessment under Section 149 - refund claim under Section 27 - unjust enrichment - application of Mafatlal principle to refund claims

Refund of excess customs duty - date of notification and e-publication - requirement to follow statutory refund procedure - application of Mafatlal principle to refund claims - Petitioner is not entitled to a writ of mandamus directing immediate refund; statutory refund procedure must be followed and the claim examined in accordance with settled law. - HELD THAT: - The Court found that the notification raising the duty was uploaded on the official website on 6-3-2018 and that the rate applicable prior to that e-publication governs assessment of the Bill of Entry dated 1-3-2018. However, the relief of a direct mandamus for refund cannot be granted in the present petition. The Court relied on the principle that refund claims must be processed under the statutory scheme and the Supreme Court's exposition in Mafatlal Industries that refund claims arising in such contexts are to be filed, considered and disposed of under the relevant refund provisions and examined for unjust enrichment. Consequently, the petitioner must pursue the statutory remedy rather than obtain immediate writ relief directing refund. [Paras 10, 13, 16, 17, 19]

Writ for immediate refund refused; petitioner must follow statutory refund process and cannot obtain direct mandamus.

Reassessment under Section 149 - refund claim under Section 27 - unjust enrichment - application of Mafatlal principle to refund claims - Respondents are directed to pass reassessment under Section 149 and the petitioner is directed to file a refund claim under Section 27, which the respondents shall examine (including the question of unjust enrichment) in accordance with settled law; timeframe for filing the refund application was fixed and administrative timelines noted. - HELD THAT: - The Court ordered that respondents must pass a reassessment order as required by Section 149 of the Customs Act and that the petitioner is to file a refund application under Section 27 within one month of receipt of the order. The Court emphasised that the refund claim must be considered in accordance with the principles laid down by the Supreme Court in Mafatlal Industries, including scrutiny for unjust enrichment. The Court also observed that the earlier Division Bench order (W.P. No. 21207 of 2018) contains directions for refund and that respondents may seek extension of time from that Bench; if no extension is obtained, respondents must effect refund within a reasonable time after compliance with the reassessment and refund procedures. [Paras 19, 20, 21, 22, 23]

Reassessment and statutory refund process directed; petitioner to file refund claim within one month; respondents to consider refund claim per Mafatlal and refund within reasonable time if no extension is obtained.

Final Conclusion: Writ petition partly allowed to the extent that directions are given for reassessment and for the petitioner to file a refund claim; direct mandamus for immediate refund is declined and the statutory refund procedure (including examination for unjust enrichment) shall be followed; petitioner to file the refund application within one month.

Anticipatory bail under Section 438 of the Code of Criminal Procedure - distinction between bailable and non bailable offences for maintainability of anticipatory bail - power of Customs officers under Section 108 of the Customs Act to record statements and statutory arrest powers - prohibition on magisterial intervention in exercise of statutory powers by Customs officers - reliance on precedents concerning admissibility and purpose of statements recorded under Section 108 - consideration of medical illness under the proviso to Section 437 of the Code of Criminal Procedure upon arrest

Anticipatory bail under Section 438 of the Code of Criminal Procedure - distinction between bailable and non bailable offences for maintainability of anticipatory bail - Whether the petition for anticipatory bail was maintainable where the alleged offence falls within the bailable category under the Customs Act. - HELD THAT: - The Court found that if the allegation against the applicant is confined to an offence punishable under Section 135(1)(b) of the Customs Act, which by virtue of the amendments falls within the category of bailable offences (referred to in the judgment as within Section 104(7) of the Customs Act), an application for anticipatory bail under Section 438 Cr.P.C. is not sustainable. The Court accepted that where only a bailable offence is involved the remedy of anticipatory bail is inappropriate and the statutory scheme contemplates grant of bail in the ordinary course upon arrest rather than pre arrest relief under Section 438. [Paras 6]

Application for anticipatory bail was not maintainable insofar as the alleged offence is a bailable offence; hence the anticipatory bail petition must be dismissed on that ground.

Power of Customs officers under Section 108 of the Customs Act to record statements and statutory arrest powers - prohibition on magisterial intervention in exercise of statutory powers by Customs officers - reliance on precedents concerning admissibility and purpose of statements recorded under Section 108 - Whether the High Court could entertain the anticipatory bail application in view of the statutory power of Customs officers to record statements under Section 108 and to effect arrest, as explained in precedent. - HELD THAT: - Relying on the Supreme Court decisions cited in the judgment, including Padam Narain Aggarwal and Romesh Chandra Mehta , and the subsequent Kerala High Court decisions applying them, the Court observed that the power to arrest under the Customs Act is statutory and Section 108 does not contemplate magisterial intervention. Statements recorded under Section 108 are meant to elicit truth for the purposes of the Customs inquiry and are distinct from police statements under the Code. In that factual and legal matrix the High Court was precluded from entertaining the anticipatory bail application as a means to preclude the statutory process; accordingly the Court declined to grant relief. The Court, however, noted that in the event of actual arrest the appropriate forum is at liberty to consider any plea based on the applicant's medical condition under the proviso to Section 437 Cr.P.C. [Paras 4, 5, 6]

The High Court will not interfere with the statutory exercise of powers by Customs officers under Section 108; the anticipatory bail application is therefore dismissed, with liberty to raise medical condition arguments on arrest under the proviso to Section 437 Cr.P.C.

Final Conclusion: The application for anticipatory (pre arrest) bail is dismissed. The Court held that anticipatory bail is not maintainable if only a bailable offence under the Customs Act is involved and, in any event, the High Court will not interfere with the statutory powers of Customs officers under Section 108; the applicant remains free to seek appropriate relief (including reliance on ill health under the proviso to Section 437 Cr.P.C.) if arrested.

Re-importation and benefit under re-import exemption - exemption for "parts of aircraft" - classification versus notification interpretation - demand under Section 28 of the Customs Act, 1962 - self-assessment and finality of bills of entry - invocation of extended period of limitation - penalty under Section 114AA of the Customs Act, 1962 - confiscation liability where goods already cleared

Re-importation and benefit under re-import exemption - re-import exemption Notification No. 94/1996-Cus. - Whether the impugned goods amounted to re-imports and were eligible for exemption under Notification No.94/1996-Cus. - HELD THAT: - The Tribunal examined the export and subsequent movement of the engines and stands and the documentary record. The appellants' case that goods merely transshipped via Germany without entering that country's customs area and were always intended for re-import to Bengaluru was rejected on facts. The adjudicating authority and the Tribunal found that the appellants failed to follow the procedure required to establish bona fides for re-import relief - specifically, they did not declare intention to re import or obtain required examination/verification at export so as to entitle them to Notification No.94/1996-Cus. The Tribunal held that the appellants could not treat the re-import claim as an afterthought and therefore were not eligible for the re import exemption. [Paras 15]

Re-import claim under Notification No.94/1996-Cus. disallowed; goods not eligible for re-import exemption.

Exemption for "parts of aircraft" - classification versus notification interpretation - Whether the imported aircraft engines and engine stands qualify as "parts of aircraft" for exemption under Notification No.21/2002-Cus. (Sl. No. 346D) and Notification No.12/2012-Cus. (Sl. No. 454). - HELD THAT: - The Tribunal considered competing contentions: appellants' reliance on the plain meaning of "parts of aircraft", on an Explanation under a different notification condition, and on a Board Circular clarifying eligibility; and the Revenue's reliance on Section Note 2(e) to Section XVII and HSN Explanatory Notes which exclude machines/engines of Chapters 84xx from being treated as parts for classification purposes. The Tribunal accepted the Revenue's analysis that the notifications in question exempt "parts of aircraft" but do not, on their face, include aircraft engines unless specifically so stated; legislative and notification history shows that "aircraft engines" have been treated separately when intended to be exempt. The Explanation relied on by appellants (under condition 71 for a different entry) could not be read across to extend Entry 454, and the Board Circular was not held to have retrospective effect. Consequently the Tribunal affirmed the adjudicating authority's conclusion that the engines and engine stands were not eligible for the cited exemptions. [Paras 16, 17]

Claim for exemption as "parts of aircraft" under the cited notifications rejected; exemption not available to the imported engines and stands on the facts and law considered.

Demand under Section 28 of the Customs Act, 1962 - self-assessment and finality of bills of entry - Whether a demand under Section 28 could be issued without first having the assessment under the Bills of Entry challenged under Section 128. - HELD THAT: - Appellants relied on the Supreme Court's observations in ITC Ltd. concerning modification of self-assessment orders in refund proceedings. The Tribunal distinguished that authority: the Apex Court's discussion related to refund proceedings and did not hold that a demand under Section 28 is impermissible unless the assessment is previously challenged under Section 128. Having examined statutory provisions, the Tribunal concluded that a demand under Section 28 can be issued in the factual matrix and that the adjudicating authority was entitled to issue the demand despite the earlier self-assessment and clearance. [Paras 18]

Demand under Section 28 sustained; self-assessment did not bar issuance of demand in these proceedings.

Invocation of extended period of limitation - mis-declaration and RMS-facilitated self-assessment - Whether invocation of the extended period of limitation was justified by the departmental finding of mis-declaration. - HELD THAT: - The Tribunal reviewed the circumstances of clearance under RMS, self-assessment by the appellants, and the sequence of declarations made at export and import. While appellants contended bona fide classification and absence of intent to evade duty, the Tribunal accepted the adjudicating authority's finding that inconsistent declarations and lack of timely disclosure of re-import intention amounted to mis declaration warranting invocation of the extended period. The self assessment regime places greater onus on importers to make accurate declarations; where documentation and conduct indicated wrongful availment of exemption, extended limitation was held properly invoked. [Paras 19]

Extended period of limitation correctly invoked; demand not time barred.

Penalty under Section 114AA of the Customs Act, 1962 - confiscation liability where goods already cleared - Whether penalties and confiscation were correctly imposed. - HELD THAT: - The Tribunal accepted that interest and penalties generally follow if duty is rightly held payable. However, on the facts the Tribunal found merit in appellants' submission that Section 114AA (penalty for forging export documents) was not attracted because the case did not involve export by forging documents and the import documents were not forged. The adjudicating authority had held goods liable for confiscation but had not actually ordered confiscation or imposed fine in lieu; the Tribunal observed that mere expression of liability without confiscation was inconsequential and need not be disturbed. Consequently, the Tribunal set aside the penalty under Section 114AA but upheld other penalties and the levy of interest as consequential to the sustained demand. [Paras 20]

Penalty under Section 114AA set aside; other penalties and interest upheld; mere holding of liability for confiscation left undisturbed (no actual confiscation ordered).

Final Conclusion: The appeal is partly allowed: the Tribunal rejects the appellants' claims of re-import exemption and of entitlement to exemption as "parts of aircraft", upholds the demand under Section 28 and the invocation of extended limitation, upholds interest and penalties except that the penalty under Section 114AA is set aside; the finding of mere liability for confiscation (without confiscation) is left undisturbed.

Reactivation of Director Identification Number (DIN) - management dispute marking and its effect on registration/recording of company documents - power of Registrar of Companies to withhold approval/registration/recording and public availability of documents pending settlement of management dispute - recall of court order for non-impleadment of affected party - operation and effect of Master Circular dated February 10, 2012

Reactivation of Director Identification Number (DIN) - operation and effect of Master Circular dated February 10, 2012 - Whether the deactivation of the writ petitioner's DIN was liable to be set aside and the DIN re-activated. - HELD THAT: - The court found that the writ petitioner had complied with the statutory requirements applicable to directors by filing annual reports and financial statements and that the deactivation of the DIN was therefore de hors the law. The writ petition successfully established that the petitioner was not responsible for non-approval of the documents which had caused the DIN deactivation. Consequently the portion of the earlier order reinstating the writ petitioner's DIN was justified and retained: the DIN is set aside as deactivated and re-activated so the petitioner may discharge duties as director, subject to other legal constraints arising from the management dispute marking. [Paras 12, 14, 17, 19]

The deactivation of the writ petitioner's DIN is set aside and the DIN is re-activated, permitting the petitioner to discharge duties as director while complying with statutory filing requirements.

Management dispute marking and its effect on registration/recording of company documents - power of Registrar of Companies to withhold approval/registration/recording and public availability of documents pending settlement of management dispute - operation and effect of Master Circular dated February 10, 2012 - Whether the order of the Registrar of Companies dated June 24, 2016 withholding approval/registration/recording and public availability of documents pending settlement of a management dispute was rightly set aside by the earlier order. - HELD THAT: - Clause 3 of the Master Circular dated February 10, 2012 independently empowers the ROC, upon marking a company as having a management dispute, to withhold approval/registration/recording of documents filed by the company or contesting directors and to prevent their availability in the public registry until the dispute is settled. That marking in respect of the company (Tirupathi Properties & Investment Private Limited) subsists independently of the re-activation of the writ petitioner's DIN. The writ petition did not challenge the marking itself and therefore did not furnish a cause of action to set aside the ROC's June 24, 2016 order. The portion of the earlier order that set aside the ROC's direction went beyond the scope of the petition and was contrary to the Circular; it was therefore recalled and set aside, restoring the ROC's power under Clause 3 to withhold approval/registration/recording and public availability until the management dispute is removed. [Paras 9, 11, 13, 14, 18]

The part of the earlier order setting aside the ROC's June 24, 2016 direction is recalled; the ROC's power to withhold approval/registration/recording and public availability of documents while the company remains marked as having a management dispute continues in force.

Recall of court order for non-impleadment of affected party - Whether recall of the earlier order was warranted because the applicant was not impleaded and could not represent its interests when that order was passed. - HELD THAT: - The court accepted that the review applicant had not been impleaded in the writ petition and thus had no opportunity to point out that the earlier order had set aside the ROC's June 24, 2016 direction beyond the scope of the petition. For that reason the portion of the order which improperly set aside the ROC's direction required recall. The application for recall (CAN 2 of 2021) was allowed to the limited extent necessary to modify the earlier order and to reinstate the ROC's power under the Circular. [Paras 2, 15, 16]

CAN 2 of 2021 is allowed to recall and set aside the portion of the earlier order that had set aside the ROC's June 24, 2016 direction; recall was justified by non-impleadment of the affected party.

Final Conclusion: The recall application is allowed in part: the writ petitioner's DIN is re-activated so she may perform her duties as director after statutory filings, but the ROC's June 24, 2016 direction under the Master Circular, withholding approval/registration/recording and public availability of documents while the company remains marked as having a management dispute, remains in force; the earlier order is modified accordingly and there will be no order as to costs.

Sanction of Scheme of Amalgamation - Statutory compliance under sections 230-232 - Appointed Date - Pooling of interests method - Auditor's certificate under the proviso to section 232(3) - Fractional shares and buy-back - Clubbing of authorised capital and fee payable

Sanction of Scheme of Amalgamation - Statutory compliance under sections 230-232 - Sanction of the Scheme of Amalgamation between Silversand Distributors Limited (Transferor) and Prarthana Sales Private Limited (Transferee). - HELD THAT: - Having considered the petition, annexed Scheme, consents of equity shareholders and creditors, notices served to statutory authorities, joint publication, affidavits filed (including those of the Regional Director) and the rejoinders filed by the petitioners, the Tribunal found no impediment to sanction. The petitioners gave undertakings and the Official Liquidator reported no prejudice to members or public interest. On this basis, and on fulfilment of requisite statutory compliances under the Companies Act, 2013 and the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, the Scheme is sanctioned and made binding from the appointed date. [Paras 12, 13]

Scheme sanctioned; operative directions issued including transfer of assets and liabilities, dissolution of transferor from appointed date and consequential filings.

Appointed Date - Validity of the Appointed Date fixed as 01.04.2017 for the purposes of the Scheme. - HELD THAT: - The Regional Director queried the antiquity of the appointed date and sought identification/quantification of assets and liabilities as on that date. Petitioners replied citing the Ministry of Corporate Affairs circular clarifying that an appointed date may be a calendar date or tied to an event and provided net positions and changes between 01.04.2017 and 01.04.2019. The Tribunal, having considered the rejoinders and the circular relied upon, did not find the appointed date to be a bar to sanction and sanctioned the Scheme with effect from 01.04.2017. [Paras 9, 12, 13]

Appointed Date of 01.04.2017 accepted for sanctioning the Scheme.

Pooling of interests method - Auditor's certificate under the proviso to section 232(3) - Accounting treatment and certificate as to conformity with accounting standards. - HELD THAT: - The Regional Director objected to the scheme's clauses on accounting treatment and noted that the certificate was initially from a practicing CA who was not the transferee company's statutory auditor. Petitioners amended clauses 12.3 and 12.4 to state adjustment in reserves and to address differences in accounting policies, and subsequently placed a certificate from the company's statutory auditor on record. On consideration of these amendments and the statutory auditor's certificate, the Tribunal found no remaining objection on accounting treatment and conformity with applicable accounting standards. [Paras 9, 10, 12, 13]

Accounting treatment to follow pooling of interests as amended; statutory auditor's certificate supplied and accepted.

Fractional shares and buy-back - Legality of clause providing cash settlement for fractional share entitlements and whether it amounts to buy back requiring compliance with buy back provisions. - HELD THAT: - The Regional Director contended that cashing out fractional entitlements may tantamount to buy back under section 68. Petitioners explained clause 11.2 deals only with fractions not amounting to even one share and undertook to settle fractional entitlements in cash, alternatively to round off fractional entitlements to the next whole number. Having regard to the petitioners' undertaking, the explanations in rejoinders and the Tribunal's overall satisfaction with statutory compliances, the Tribunal proceeded to sanction the Scheme and required the petitioners to abide by undertakings. [Paras 9, 10, 12, 13]

Clause 11.2 accepted as to settlement of fractional entitlements by cash/rounding off in accordance with undertakings; not treated as impediment to sanction.

Clubbing of authorised capital and fee payable - Requirement to demonstrate adjustment of fees on clubbing of authorised capital and whether additional fee is payable. - HELD THAT: - The Regional Director sought a verified statement showing clubbing of authorised capital and adjustment of fees already paid, to ascertain any further fee liability. Petitioners placed on record receipts and a statement showing clubbing of authorised capital in rejoinder. The Tribunal, after considering the submissions and documents, found no impediment to sanctioning the Scheme subject to compliance with the undertakings given by the petitioners. [Paras 9, 10, 12, 13]

Statement on clubbing of authorised capital and fee receipts accepted; no bar to sanction.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between the Transferor and Transferee Companies, effective from 01.04.2017, directing transfer of assets, rights and liabilities to the Transferee, dissolution of the Transferor without winding up from the appointed date, compliance with undertakings, and prescribed filings (including schedule of assets) within specified timelines.

Composite Scheme of Arrangement - Demerger - Amalgamation - Transfer and vesting of assets and liabilities - Appointed Date - Allotment of shares - Filing of schedule of assets - Compliance with Accounting Standards - Payment of stamp duty - Undertakings to Regulatory Authorities

Composite Scheme of Arrangement - Demerger - Amalgamation - Sanction of the Composite Scheme of Arrangement comprising demerger of the NON CURRENT INVESTMENT - SHARE DIVISION of MULTIPLEX VYAPAAR PRIVATE LIMITED into ARGENTIUM INTERNATIONAL PRIVATE LIMITED and amalgamation of VARSHA TRADECOM PRIVATE LIMITED with ARGENTIUM INTERNATIONAL PRIVATE LIMITED. - HELD THAT: - The Tribunal considered the board approvals, statutory auditor certificate on accounting treatment, valuation report, reports of the Chairperson of meetings, the Official Liquidator's report (no complaints and no indication of conduct prejudicial to members or public interest) and the Regional Director's observations. Meetings of shareholders/creditors were dispensed with or directed as appropriate and held in virtual mode where required. The Tribunal recorded compliance with statutory formalities, noted the affidavits of consent and the meeting reports, and found the Scheme to be bona fide and in the interest of all concerned. On these foundations the Tribunal allowed the petition and sanctioned the Scheme to be binding from the Appointed Date.

The Composite Scheme of Arrangement is sanctioned and shall be binding on the companies, their shareholders and all concerned with effect from 1st April, 2019.

Transfer and vesting of assets and liabilities - Demerger - Transfer and vesting of the NON CURRENT INVESTMENT - SHARE DIVISION of MULTIPLEX VYAPAAR PRIVATE LIMITED into ARGENTIUM INTERNATIONAL PRIVATE LIMITED pursuant to the demerger. - HELD THAT: - Pursuant to sanction of the Scheme and in exercise of powers under the Act and the Companies (Compromises, Arrangements and Amalgamation) Rules, the Tribunal directed that all properties, rights, interests, liabilities and duties relating to the specified division of the Demerged Company be transferred to and vested in the Resulting Company without further act or deed, subject to existing charges; and that pending proceedings in relation to that division shall be continued by or against the Resulting Company.

All properties, rights, interests, liabilities and proceedings of the specified division of the Demerged Company shall stand transferred to and vest in ARGENTIUM INTERNATIONAL PRIVATE LIMITED.

Transfer and vesting of assets and liabilities - Amalgamation - Transfer and vesting of all properties, rights, interests, liabilities and pending proceedings of VARSHA TRADECOM PRIVATE LIMITED into ARGENTIUM INTERNATIONAL PRIVATE LIMITED pursuant to the amalgamation. - HELD THAT: - Following sanction, the Tribunal directed that all estate, interest, liabilities and duties of the Transferor Company be transferred to and vested in the Transferee Company without further act or deed, subject to existing charges, and that all pending suits or appeals by or against the Transferor Company shall be continued by or against the Transferee Company.

All assets, rights, liabilities and pending proceedings of the Transferor Company shall stand transferred to and vest in ARGENTIUM INTERNATIONAL PRIVATE LIMITED.

Allotment of shares - Increase of authorised share capital - Issuance and allotment of shares by ARGENTIUM INTERNATIONAL PRIVATE LIMITED to shareholders of the Demerged and Transferor Companies under the Scheme, and power to increase authorised share capital if necessary. - HELD THAT: - The Tribunal ordered that the Resulting Company cum Transferee Company shall issue and allot shares to the shareholders of the Demerged and Transferor Companies as envisaged in the Scheme and may, if necessary, increase its authorised share capital to give effect to such allotment.

ARGENTIUM INTERNATIONAL PRIVATE LIMITED shall issue and allot shares in terms of the Scheme and may increase authorised share capital if required.

Filing of schedule of assets - Registrar of Companies filings - Filing obligations: submission of schedule of assets and delivery of certified copies of the sanction order to the Registrar of Companies within specified timeframes. - HELD THAT: - The Tribunal directed that the schedule of assets in respect of the demerged division and the Transferor Company be filed by the Resulting Company cum Transferee Company within 60 days from the date of the order, and that the companies shall within 30 days after obtaining the certified copy of the order cause certified copies to be delivered to the Registrar of Companies, West Bengal for registration respectively. The registry was also directed to append legible printouts of the scheme and schedules to the certified copy after verification.

Schedule of assets to be filed within 60 days; certified copies of the order to be filed with the Registrar of Companies within 30 days.

Appointed Date - Undertakings to Regulatory Authorities - Compliance with Accounting Standards - Payment of stamp duty - Regional Director's observations addressed and undertakings accepted concerning the Appointed Date justification, compliance with statutory requirements, adjustment of fees on clubbing of authorised capital, payment of applicable stamp duty, and compliance with accounting standards. - HELD THAT: - The Tribunal considered the RD's request for justification of the Appointed Date being antecedent to filing. Petitioners explained that board resolutions and the registered valuer's report used Appointed Date 1st April 2019 and that filing was delayed due to COVID-19 related operational issues; the Tribunal accepted these explanations. The Transferee Company gave undertakings to comply with section 232(3)(i) regarding adjustment of fees on clubbing of authorised capital, to pay stamp duty on transfer of immovable properties, and to comply with applicable accounting standards and necessary accounting entries. The Tribunal recorded that statutory notices were served and meeting reports placed on record.

The RD's observations were answered; the Tribunal accepted the petitioners' explanations and recorded the specified undertakings which the Transferee/Resulting Company must comply with.

Final Conclusion: The National Company Law Tribunal, Kolkata Bench sanctioned the Composite Scheme of Arrangement (demerger and amalgamation) and directed transfer and vesting of the specified assets, liabilities and proceedings to ARGENTIUM INTERNATIONAL PRIVATE LIMITED with effect from 1st April, 2019; ordered allotment of shares and requisite filings (schedule of assets within 60 days and certified copies to ROC within 30 days); and recorded undertakings by the Transferee/Resulting Company regarding adjustment of fees, payment of stamp duty and compliance with accounting standards.

Dispensing with meetings of shareholders and creditors - consent by shareholders and creditors by affidavit - no requirement of meeting where creditors are nil - service of notice under Section 230(5) of the Companies Act, 2013 - Form No. CAA3 and Rule 8(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - filing affidavit proving service and publication

Dispensing with meetings of shareholders and creditors - consent by shareholders and creditors by affidavit - Meetings of equity shareholders of all Applicant companies and certain classes of creditors are dispensed with where requisite consents by affidavit have been filed. - HELD THAT: - The Tribunal examined the affidavits filed by the Applicants and found that all equity shareholders of the Applicant companies had given their consent to the Scheme by way of affidavits. It further found that 100% in value of Secured Creditors of Applicant No. 1, and specified high percentages in value of Unsecured Creditors of Applicant Nos. 1, 2, 3, 4 and 6 (97.57%, 100%, 99.73%, 99.34% and 98.86% respectively) had given their consent by affidavit. In view of these consents, the Tribunal ordered that meetings of the equity shareholders and the identified classes of creditors for considering the Scheme be dispensed with. [Paras 12]

Meetings dispensed for equity shareholders of all Applicants and for the specified classes of secured and unsecured creditors of Applicants as recorded.

No requirement of meeting where creditors are nil - No meetings are required for classes of creditors shown as NIL in the auditors' certificate. - HELD THAT: - The Tribunal accepted the auditors' certificate verifying that there were no Secured Creditors of Applicant Nos. 2 to 6 and no Unsecured Creditors of Applicant No. 5. Consequently, it held that there was no requirement to convene meetings of those creditor classes in connection with the Scheme. [Paras 10, 12]

No meetings required to be held for creditor classes verified as NIL.

Service of notice under Section 230(5) of the Companies Act, 2013 - Form No. CAA3 and Rule 8(2) of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Directions for service of notices and accompanying documents under Section 230(5) are required to be complied with, using Form No. CAA3 with necessary variations. - HELD THAT: - The Tribunal directed that notice under Section 230(5), along with the Scheme and statement, be served on the Regional Director (Eastern Region), the Registrar of Companies, the Official Liquidator, High Court Calcutta and the Income Tax Department having jurisdiction. Service is to be effected by hand delivery, post or email within two weeks of receipt of the order. The notice must specify that any representation be filed within 30 days of receipt and be sent in Form No. CAA3 pursuant to Section 230(5) read with Rule 8(2), with necessary variations prescribed by the Tribunal. [Paras 13]

Notice and accompanying documents to be served as directed, requiring any representations to be filed within 30 days; Form No. CAA3 to be used with necessary variations.

Filing affidavit proving service and publication - Applicants must file an affidavit proving service of notices and publication, and compliance with directions, before the meeting(s). - HELD THAT: - The Tribunal ordered the Applicants to file an affidavit establishing service of notices of meeting(s), publication of the advertisement and compliance with the directions contained in the order. This affidavit is to be filed at least one week before the meeting(s) (notwithstanding that for many classes meetings were dispensed with) to enable the Tribunal to record compliance. [Paras 14]

Applicants to file affidavit proving service and publication and compliance at least one week before the meeting(s).

Disposal of first stage application under Sections 230 and 232 - The first stage application under Sections 230(1) read with 232(1) is allowed and disposed of in terms of the Tribunal's directions. - HELD THAT: - Having considered the documents and submissions, and having directed dispensation of specified meetings and compliance with service and filing requirements, the Tribunal disposed of the company application CA (CAA) No. 60/KB/2021. [Paras 12, 15]

The application CA (CAA) No. 60/KB/2021 is allowed and disposed of subject to the directions contained in the order.

Final Conclusion: The Tribunal allowed the first-stage application under Sections 230(1) and 232(1) of the Companies Act, 2013: it dispensed with meetings of the equity shareholders and specified creditor classes where requisite consents by affidavit were on record, recorded no requirement to convene meetings for creditor classes shown as NIL, directed service of statutory notices under Section 230(5) in Form No. CAA3 with prescribed timelines for representations, required filing of an affidavit proving service and publication, and disposed of CA (CAA) No. 60/KB/2021 accordingly.

Restoration of company struck off - carrying on business / going concern - Section 252(3) of the Companies Act, 2013 - ROC satisfaction and compliance before restoration - conditions for restoration including filing of statutory documents and payment of costs

Restoration of company struck off - carrying on business / going concern - Section 252(3) of the Companies Act, 2013 - Whether the company was carrying on business or in operation at the time of striking off and whether its name should be restored under Section 252(3). - HELD THAT: - The Tribunal examined the material on record including audited financial statements up to 31.03.2019 and the Registrar's report. Noting the existence of financial statements showing total assets and the Applicant's averment that non-filing was due to oversight, the Tribunal held that the company was in existence and constituted a going concern. Applying the statutory test in Section 252(3), the Tribunal was satisfied that restoration was justified and that equitable relief should be granted to place the company as nearly as may be in the position it would have occupied but for the strike off. [Paras 7]

The company's name is to be restored in the Register of Companies and the Tribunal ordered restoration under Section 252(3).

ROC satisfaction and compliance before restoration - conditions for restoration including filing of statutory documents and payment of costs - What conditions and ancillary directions should attend the restoration order and the role of the Registrar of Companies in effecting restoration. - HELD THAT: - The Tribunal directed restorative steps subject to specified conditions: the company must submit justification and supporting documents regarding its business, file all pending income tax returns, and file all statutory documents with prescribed fees/additional fee/fine within the stipulated time. The Registrar of Companies was directed to verify satisfactory compliance of observations in its report before restoring the name, to change the company's status from 'Strike off' to 'Active', to intimate bankers to defreeze accounts, and to publish the order in the Official Gazette after compliance. The Tribunal also imposed a costs payment to be made online and required personal oversight by the company's representatives. The order was confined to violations leading to strike off and did not preclude ROC from taking lawful action for any other violations. [Paras 8]

Restoration ordered subject to the Tribunal's enumerated conditions and directions, and ROC directed to satisfy itself about compliance before effecting restoration.

Final Conclusion: The Tribunal allowed the application and directed restoration of the company's name under Section 252(3) as the company was held to be a going concern, while imposing conditions requiring submission of supporting documents, filing of pending returns and statutory records, payment of costs, and satisfactory verification by the Registrar of Companies before formal restoration.

Corporate Insolvency Resolution Process - admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - moratorium under the Insolvency and Bankruptcy Code - appointment of Interim Resolution Professional - public announcement and call for claims - proof of default by admission and supporting documents

Proof of default by admission and supporting documents - admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - The Financial Creditor has established the existence of debt and default sufficient to admit the Section 7 petition. - HELD THAT: - The Tribunal found that the Financial Creditor produced the account statement showing disbursement and outstanding balance, notices and reminders recalling the loan, and a confirmation of account signed and sealed by the Corporate Debtor acknowledging the outstanding amount as on 1.4.2019. The Corporate Debtor's affidavit denied liability but the admission in the signed confirmation and documentary evidence of disbursement and recall established the admitted default. On that basis the Tribunal concluded that the requirements for admission of the Section 7 application were satisfied and the petition deserved to be admitted. [Paras 4, 5, 8, 9, 11]

Section 7 petition admitted as the Financial Creditor proved disbursement, admitted outstanding debt and default.

Moratorium under the Insolvency and Bankruptcy Code - public announcement and call for claims - appointment of Interim Resolution Professional - Reliefs and directions consequent to admission: declaration of moratorium, requirement of public announcement and claims, and appointment of an Interim Resolution Professional were ordered. - HELD THAT: - Following admission, the Tribunal declared the moratorium and directed public announcement and calling for claims in accordance with the Code. The Tribunal accepted the proposed Insolvency Resolution Professional's Form-2 and appointed him as Interim Resolution Professional subject to his written consent within one week. Directions were issued for convening the Committee of Creditors, identification of prospective resolution applicants within the statutory timeline, deposit by the Financial Creditor towards IRP costs, communication of the order to concerned parties, and listing for progress reporting. These measures implement the statutory consequences of admission under the Code. [Paras 10, 11, 12]

Moratorium declared; public announcement and claim process ordered; Mr. Kailash Kumar Rathi appointed as Interim Resolution Professional with ancillary directions for CoC constitution, deposit of funds, communication and listing.

Final Conclusion: The Tribunal admitted the Section 7 application, initiated the Corporate Insolvency Resolution Process against the Corporate Debtor, declared the moratorium, directed public announcement and claims, appointed an Interim Resolution Professional and issued ancillary directions including deposit by the Financial Creditor and convening of the Committee of Creditors.

Collation of claims - duty of the Resolution Professional under section 18 - operational creditor - service by entrustment of movable property - proforma invoice versus tax invoice - acceptance of claim and basic rent - effect of approval of resolution plan on undecided claims

Collation of claims - duty of the Resolution Professional under section 18 - acceptance of claim and basic rent - service by entrustment of movable property - Whether the Resolution Professional was obliged to collate and admit at least the basic rent component of the applicant's claim for hired materials which remained in the custody of the corporate debtor. - HELD THAT: - The Court found that the RP's duty under section 18 is to accept and collate claims and not to adjudicate them. The materials supplied were on monthly hire and remained technically in the custody of the corporate debtor while physically at the project site. Given that the basic rent related to that hire and the RP's file showed only a one-time supply with recurring hire charges, the RP ought to have factored in the basic rent when collating the claim. While the RP could legitimately withhold tax treatment pending proper tax invoices, nothing prevented him from admitting the basic rent component on the basis of the work order and collating the claim with a rider regarding the tax element. [Paras 4]

The RP was directed to re-collate the applicant's claim and include at least the basic rent component in the list of operational creditors for payment pursuant to the resolution process.

Proforma invoice versus tax invoice - collation of claims - Whether the RP was justified in disallowing the cost of materials component and the tax component where supporting proof and signed tax invoices were not furnished. - HELD THAT: - The Tribunal accepted that where invoices were unsigned or were only proforma invoices, the RP was correct in not admitting the tax component because proper tax invoices were not produced. Similarly, where no proof was provided to substantiate the valuation of materials supplied, the RP was justified in not accepting the cost of materials component of the claim. Thus, the RP's rejection of those parts of the claim was sustained. [Paras 4]

The RP's disallowance of the cost-of-materials claim and the tax component was upheld for lack of adequate proof and unsigned/proforma invoices.

Effect of approval of resolution plan on undecided claims - operational creditor - Whether approval of the Resolution Plan extinguishes undecided claims which the operational creditor had pursued with the RP and brought before the Adjudicating Authority for directions prior to plan approval. - HELD THAT: - The Tribunal held that approval of a resolution plan cannot be allowed to prejudice a litigant who has diligently pursued its claim with the RP and sought the Adjudicating Authority's intervention to direct reconsideration before approval. Where an applicant has applied for directions to the RP to reconsider and reverify its claim prior to the plan's approval, such claims are not automatically extinguished by the plan if the court is required to and does direct reconsideration. [Paras 4]

Undecided claims pursued with the RP and brought before the Adjudicating Authority for direction are not automatically extinguished by approval of the Resolution Plan; the RP was directed to collate afresh as ordered.

Final Conclusion: The application succeeds in part: the Tribunal directed the Resolution Professional to re-collate the applicant's claim and include the basic rent component in the list of operational creditors for payment, upheld the RP's rejection of the cost-of-materials and tax components for lack of proper invoices and proof, and held that approval of the resolution plan does not extinguish such diligently pursued undecided claims where the Adjudicating Authority directs reconsideration.

Insolvency and Bankruptcy Code, 2016 as overriding statute - liquidation process and public announcement/claim submission - effect of non-filing of claim by creditor in liquidation - municipal property tax liability post-sale - application of Transfer of Property Act obligations in sale under liquidation - grant of trade licence/enlistment and mutation post-sale

Liquidation process and public announcement/claim submission - effect of non-filing of claim by creditor in liquidation - Whether a municipality which did not submit a claim in the liquidation process can demand pre-sale municipal dues from the purchaser and refuse licences or mutation on that ground. - HELD THAT: - The Tribunal found that the Code provides a self-contained procedure in liquidation whereby stakeholders are called upon to submit claims to the liquidator who then consolidates, verifies and adjudicates them. In the present case the liquidator made the requisite public announcement but the municipality did not submit its claim. The municipality cannot bypass the statutory liquidation mechanism and, by refusing to consider licence or mutation applications, hold up the purchaser to enforce alleged pre-sale dues which were not presented in the liquidation process. This conclusion rests on the operation of the liquidation regime and the consequences of non-filing of claims by a creditor during that process. [Paras 9, 10]

Respondent municipality, having not filed a claim in liquidation, cannot demand pre-sale municipal dues from the purchaser or refuse licences/mutation on that basis.

Insolvency and Bankruptcy Code, 2016 as overriding statute - application of Transfer of Property Act obligations in sale under liquidation - municipal property tax liability post-sale - Whether provisions of the Transfer of Property Act, West Bengal Municipal Act or Audit and Accounts Rules can be invoked to override the Code and render the purchaser liable for municipal taxes accrued prior to sale. - HELD THAT: - The Tribunal held that section 238 of the Code gives it overriding effect over inconsistent laws. Consequently, reliance placed by the respondents on the Transfer of Property Act, the West Bengal Municipal Act and the Audit and Accounts Rules was misplaced to the extent that those provisions were pressed to affect the liquidation-sale and to impose liability on the purchaser for pre-sale municipal dues. Having regard to the Code's primacy and the statutory liquidation mechanism, the purchaser is not liable to pay tax dues which accrued prior to the date of sale. [Paras 11, 12]

Statutory provisions cited by the respondents cannot be used to override the Code; the purchaser is not liable for municipal tax dues prior to the date of sale.

Grant of trade licence/enlistment and mutation post-sale - effect of non-filing of claim by creditor in liquidation - Whether the municipality must consider the purchaser's applications for grant of trade licence/enlistment certificate and for mutation notwithstanding its claim of outstanding pre-sale dues. - HELD THAT: - On the basis that the municipality failed to submit its claim in the liquidation process and in view of the Code's overriding effect, the Tribunal directed the respondents to consider the purchaser's applications for licence/enlistment and for mutation on their merits without being influenced by the outstanding dues alleged to relate to the period prior to sale. The demand notice issued after sale was held not sustainable in law and the municipal authorities were enjoined from treating the dues as grounds to refuse or indefinitely delay consideration of statutory permissions. [Paras 12]

Respondents are directed to consider the purchaser's licence/enlistment and mutation applications on merits without being affected by alleged pre-sale dues; the demand notice is not sustainable.

Final Conclusion: I.A.(IB) No. 264/KB/2021 is disposed of: the demand notice dated 01.02.2021 is quashed insofar as it seeks pre-sale municipal dues from the purchaser; the purchaser is not liable for tax dues prior to the date of sale; and the municipal respondents are directed to consider the purchaser's applications for licence/enlistment and mutation on their merits without being influenced by those alleged dues.

Acknowledgement of debt by entries in balance sheet amounting to acknowledgement under section 18 of the Limitation Act, 1963 - validity of power of attorney authorising initiation and prosecution of CIRP - existence of default exceeding the minimum threshold for initiation of corporate insolvency resolution process - admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 and appointment of Interim Resolution Professional with consequential moratorium

Validity of power of attorney authorising initiation and prosecution of CIRP - The power of attorney executed in favour of the applicant bank was valid and authorises the applicant to file and prosecute the Section 7 application. - HELD THAT: - The Tribunal examined clauses of the power of attorney and the record of authorisation. It found that the power of attorney expressly authorised the applicant to initiate and prosecute insolvency proceedings on behalf of the bank and that there was no revocation of that authority on the record. Consequently, the objection that the applicant was not authorised to file the present petition was rejected as unfounded. [Paras 5]

Objection regarding lack of valid power of attorney is overruled; the applicant was authorised to file the Section 7 application.

Acknowledgement of debt by entries in balance sheet amounting to acknowledgement under section 18 of the Limitation Act, 1963 - Entries in the corporate debtor's balance sheet and auditor's reports were held to constitute acknowledgement of liability, thereby extending the period of limitation for the claim. - HELD THAT: - On perusal of the balance sheets and auditors' reports for the years indicated, the Tribunal accepted that the corporate debtor had acknowledged its liabilities. The Tribunal relied on the recent Supreme Court precedent cited in the record, which held that entries in the balance sheet of a corporate debtor amount to an acknowledgement under section 18 of the Limitation Act, 1963 and would extend the limitation period. In light of this, the plea that the petition was barred by limitation was negatived and did not preclude admission of the Section 7 application. [Paras 4, 5]

Limitation plea rejected because the corporate debtor's balance-sheet entries constituted acknowledgement of debt and extended the period of limitation.

Existence of default exceeding the minimum threshold for initiation of corporate insolvency resolution process - The Tribunal found that the default had occurred and that the amount due exceeded the statutory threshold for initiating CIRP under the Code. - HELD THAT: - Having examined the loan history, classification of the account as NPA, and the asserted outstanding liability, the Tribunal was satisfied that a default, as defined under the Code, had taken place. It specifically noted that the claimed outstanding amount met the threshold requirement prescribed under the Code for a financial creditor to initiate insolvency proceedings. [Paras 2, 5]

Default established and the claimed debt exceeds the threshold for initiation of CIRP.

Admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 and appointment of Interim Resolution Professional with consequential moratorium - The Section 7 application was admitted; an Interim Resolution Professional was appointed and the moratorium under the Code was declared effective from the date of the order. - HELD THAT: - Concluding that the application satisfied the statutory requirements-valid authorisation of the applicant, existence of default, and no disqualifying material regarding the proposed IRP-the Tribunal admitted the petition under Section 7. The Tribunal appointed the proposed IRP whose consent was on record and there was no material of any disciplinary proceedings against him. Consequential directions were issued for the moratorium, duties and powers of the IRP, public announcement and claims submission, protection and preservation of assets, and interim fees to the IRP. [Paras 6, 7]

Petition under Section 7 admitted; IRP appointed and moratorium imposed; CIRP commenced from date of order.

Final Conclusion: The Section 7 petition filed by the financial creditor is allowed: the objection as to want of authority was rejected, the limitation plea was negatived on the basis of balance-sheet acknowledgement, default and threshold requirements were held to be satisfied, the corporate debtor was admitted into CIRP, an IRP was appointed and the moratorium declared effective from the date of the order.

Doctrine of clean slate - Binding effect of approved resolution plan - Extinguishment of pre-approval statutory dues - Retrospective declaratory effect of 2019 amendment to IBC clarifying inclusion of statutory dues as operational debt - Tribunal jurisdiction to enforce implementation of an approved resolution plan

Doctrine of clean slate - Retrospective declaratory effect of 2019 amendment to IBC clarifying inclusion of statutory dues as operational debt - Extinguishment of pre-approval statutory dues - All liabilities of the Corporate Debtor prior to the CIRP and prior to approval of the Resolution Plan stand extinguished and are not enforceable if not provided in the approved Resolution Plan. - HELD THAT: - The Tribunal applied the decision in Ghanshyam Mishra and Sons Pvt. Ltd. v. Edelweiss ARC, holding that once a Resolution Plan is approved by the Adjudicating Authority the plan is binding on the corporate debtor and all creditors, including statutory authorities. The 2019 amendment was treated as declaratory/clarificatory and retrospective; statutory dues payable to government authorities are within the definition of operational debt and, if not part of the approved plan, stand extinguished. On that basis the Tribunal declared that liabilities prior to CIRP and approval of the plan are extinguished.

Declared that pre-approval liabilities of the Corporate Debtor are extinguished and not enforceable if not included in the approved Resolution Plan.

Binding effect of approved resolution plan - Extinguishment of pre-approval statutory dues - The impugned demands dated 4th September, 2020 in respect of the tax periods stated are quashed insofar as they seek to recover statutory dues prior to the approval/transfer, subject to the outcome of the pending Civil Appeal before the Supreme Court. - HELD THAT: - Applying the principle that claims not part of the approved Resolution Plan stand extinguished, the Tribunal found the demands raised on 4th September, 2020 to be inconsistent with the binding effect of the approved plan. However, the Tribunal made the declaration and allowed relief subject to the final outcome of the Department's pending Civil Appeal (Diary No. 21809/2019) before the Hon'ble Supreme Court, and directed that the parties shall comply with any directions the Supreme Court may issue.

The demands dated 4th September, 2020 for the specified pre-approval periods are quashed in light of the approved Resolution Plan, subject to the result of the pending Supreme Court appeal.

Tribunal jurisdiction to enforce implementation of an approved resolution plan - Binding effect of approved resolution plan - The Adjudicating Authority (Tribunal) has jurisdiction to entertain the present application to secure implementation of the approved Resolution Plan and to grant the reliefs sought in aid of that implementation. - HELD THAT: - Relying on the scheme of the IBC as interpreted in the cited Supreme Court authority and on the liberty previously granted by the Tribunal, the Bench held that it had jurisdiction under the Code to entertain an application by the Successful Resolution Applicant/Resolution Professional to ensure implementation of the approved plan, including seeking declarations and consequential reliefs necessary for implementation.

Tribunal possesses jurisdiction to decide the application aimed at enforcing and facilitating implementation of the approved Resolution Plan.

Final Conclusion: The Miscellaneous Application is allowed: the Tribunal declared that liabilities of the Corporate Debtor prior to CIRP and prior to approval of the Resolution Plan stand extinguished if not provided for in the approved plan; the impugned demands dated 4th September, 2020 for the stated pre-approval periods are quashed insofar as they seek recovery of such extinguished liabilities; the order is issued subject to the final outcome of the Department's pending Civil Appeal before the Hon'ble Supreme Court, and the parties must abide by any directions the Supreme Court may make.

Characterisation of transporter services as Goods Transport Agency (GTA) - equivalence of carting Challan to consignment note - liability to service tax under the definition of GTA

Equivalence of carting Challan to consignment note - carting Challan issued by the Forest Department is not equivalent to a consignment note - HELD THAT: - The Tribunal examined the nature and legal effect of the carting Challan relied upon by the Revenue and found that the carting Challan functions solely as an internal control document of the Forest Department. The features of a consignment note - being a negotiable instrument issued by the transporter and creating an obligation on the transporter to deliver goods to the bonafide holder of title as specified in the consignment note - are absent in the carting Challan. On that basis the Tribunal concluded that the carting Challan cannot be equated with a consignment note. [Paras 6]

Carting Challan is not equivalent to a consignment note

Characterisation of transporter services as Goods Transport Agency (GTA) - liability to service tax under the definition of GTA - services rendered by the appellant are not taxable as GTA services - HELD THAT: - Applying the finding that the carting Challan is not a consignment note, the Tribunal held that the appellant did not render services falling within the statutory definition of a Goods Transport Agency. The Commissioner (Appeals) had upheld the demand on the view that the carting Challan operated as a consignment note and that the transporter bore responsibilities akin to a GTA; the Tribunal rejected that foundational premise and, consequently, found no liability for service tax under the GTA definition. The Tribunal therefore set aside the confirmation of demand, penalty and related orders insofar as they treated the appellant's services as GTA services. [Paras 6, 7]

Appellant's services do not qualify as GTA and are not liable to service tax as such

Final Conclusion: Appeal allowed; impugned order set aside and appellant granted consequential benefits in accordance with law.

Entitlement to abatement of 76% on construction service despite availing Cenvat credit on input service - Effect of reversal of Cenvat credit on entitlement to exemption - Classification of service as works contract versus commercial or industrial construction service - Precedential effect of High Court order on identical issues

Entitlement to abatement of 76% on construction service despite availing Cenvat credit on input service - Effect of reversal of Cenvat credit on entitlement to exemption - Precedential effect of High Court order on identical issues - Whether the appellant was entitled to the benefit of abatement/exemption of 76% under the Notifications despite having availed Cenvat credit on input service (GTA), and whether the demand raised denying the abatement was sustainable in view of the High Court's order in the appellant's earlier period. - HELD THAT: - The Tribunal recorded that the department denied the abatement of 76% on the ground that the appellant had availed Cenvat credit in respect of an input service (GTA) and accordingly raised a differential duty demand. The same controversy for an earlier period in the appellant's own case had been before this Tribunal, which earlier directed entitlement to the Notification subject to reversal of Cenvat credit. That Tribunal order was challenged before the High Court which, by order dated 12.03.2020, set aside the Tribunal's order and the show-cause notice on the ground that the service in question fell within works contract service while the demand had been raised under commercial or industrial construction service. The Tribunal found that the High Court's ratio on the identical issue and facts is squarely applicable to the present period (the only difference being the period), and accordingly applied the High Court's decision to set aside the demand and the impugned order in the present appeal. [Paras 4]

Following the Gujarat High Court's order dated 12.03.2020 on the identical issue, the Tribunal set aside the differential duty demand and the impugned order and allowed the appeal.

Final Conclusion: The Tribunal allowed the appeal and set aside the demand and impugned order, applying the ratio of the Gujarat High Court's order of 12.03.2020 on the same issue; no separate remand was directed.

Manpower Recruitment or Supply Agency service - employer-employee relationship - reverse charge liability for services provided from outside India - method of disbursement of salaries not determinative of taxability - penalty and interest when primary demand is unsustainable

Manpower Recruitment or Supply Agency service - employer-employee relationship - method of disbursement of salaries not determinative of taxability - Whether the amounts paid in respect of employees deputed from the foreign group company attract service tax as 'Manpower Recruitment or Supply Agency' services. - HELD THAT: - The adjudicating authority's demand treating the deputed personnel as supply of manpower was examined in light of judicial precedents and the factual matrix. The Tribunal decisions relied upon establish that where expatriate or seconded personnel continue to be treated as employees (demonstrated by employer-employee incidents such as treatment of payments as salary and deduction of tax at source and issuance of Form No.16), and no consideration over and above reimbursement of salary/costs is paid to the foreign group company, the transaction does not constitute a taxable manpower supply under the Manpower Recruitment or Supply Agency category. The method of payment or reimbursement to a foreign group company does not by itself convert an employment relationship into a manpower-supply service. On the facts, the appellant treated payments as salary and produced Form No.16 showing employment treatment; therefore the element of a taxable supply under clause (k) of Section 65(105) did not exist. Following the cited authorities, the demand was held unsustainable. [Paras 5, 6, 7]

Demand of service tax confirmed in the impugned order on account of alleged manpower supply is set aside.

Penalty and interest when primary demand is unsustainable - Whether interest and penalties confirmed in the impugned order are payable where the primary demand for service tax is held unsustainable. - HELD THAT: - Since the primary demand for service tax on the deputed employees was held legally unsustainable, the imposition and recovery of interest and penalties flowing from that demand could not be sustained. The reasoning follows the principle that interest and penalties predicated on an invalid demand fall away when the foundational tax liability is set aside. [Paras 7, 8]

Interest and penalties confirmed in the impugned order are not warranted and the related recoveries are set aside.

Final Conclusion: Following authority and the factual finding of an employer-employee relationship, the appeal is allowed; the original demand of service tax (and consequent interest and penalties) in respect of the deputed employees for the period Apri1,2015 to June, 2017 is set aside.

Principles of natural justice - adjudication procedure under Section 33A(1) and Section 37C of the Central Excise Act, 1944 - opportunity of hearing / remand for fresh adjudication - payment of costs as condition for relief - service tax liability on procurement of land and on unperformed agreements

Principles of natural justice - adjudication procedure under Section 33A(1) and Section 37C of the Central Excise Act, 1944 - opportunity of hearing / remand for fresh adjudication - payment of costs as condition for relief - Challenge to the impugned order on grounds of non-compliance with adjudication procedure and violation of principles of natural justice disposed by directing a final opportunity of hearing and conditional remand to the adjudicating authority. - HELD THAT: - The petition alleged that the adjudicatory process under the cited provisions and the requirements of natural justice were not followed before confirming the demand. The Court noted the Revenue's position that summons were issued and that the petitioner had not been available at the given address, and that the petitioner's auditor had later appeared and made a statement. Observing that the demand was high-pitched and that subsequent notices had not been served or the petitioner/authorised representative heard before confirmation, the Court did not decide the merits. Instead, in the interest of justice it granted a last and final opportunity to the petitioner to appear before the adjudicating authority on the specified dates, subject to payment of costs to the specified Bar Association relief fund within a week. The Court thereby remitted the matter for fresh consideration after hearing, conditioned on compliance with the direction for costs and personal appearance. [Paras 5, 6]

Petition disposed by granting a final opportunity to the petitioner to appear before the respondent on the specified dates and by remanding the matter for fresh adjudication, subject to payment of costs.

Service tax liability on procurement of land and on unperformed agreements - opportunity of hearing / remand for fresh adjudication - Substantive contention that service tax is not leviable on procurement of land and that no tax can be demanded on an unperformed agreement was not adjudicated on merits and was remitted to the adjudicating authority for fresh decision after hearing. - HELD THAT: - The petitioner contended that service tax could not be imposed on procurement of land and that mere existence of an agreement which was not performed could not sustain a demand. The Court recorded these contentions but, given the procedural circumstances and the absence of prior hearing, refrained from expressing any view on the substantive tax liability. The matter was remitted to the adjudicating authority to decide the substantive questions on merits after affording the petitioner the directed opportunity of personal hearing and after taking such evidence or documents as may be produced. [Paras 3, 5]

Substantive issues as to service tax liability on land procurement and on unperformed agreements remitted to the respondent for fresh consideration and decision after hearing the petitioner.

Final Conclusion: The writ petition is disposed of by granting the petitioner a last and final opportunity to appear before the adjudicating authority on the specified dates; the adjudicating authority is directed to hear and decide the matter afresh on merits after such hearing, the opportunity being subject to the petitioner paying the ordered costs to the specified relief fund within the stipulated time.

Condonation of delay - inordinate delay - prejudice to the Revenue - exercise of writ jurisdiction despite alternate statutory remedy under Section 35G - substantial question of law

Condonation of delay - inordinate delay - prejudice to the Revenue - The correctness of the Tribunal's dismissal of the petitioner's application for condonation of delay of 107 days and the consequent dismissal of the appeals as barred by limitation. - HELD THAT: - The Tribunal held that the explanation for delay was insufficient and dismissed the condonation applications, observing that resignation of an official did not prevent the company from filing the appeal in time. The High Court examined the matter and concluded that a delay of 107 days was not inordinate such as to justify denial of the petitioner's right to have the orders of the Commissioner adjudicated on merits. The Court found the Tribunal's short dismissal inadequate in the circumstances and, weighing the competing consideration that condonation should not be refused unless undue prejudice to the Revenue is shown, directed that the impugned orders be set aside and the appeals be numbered and decided on merits in accordance with law. [Paras 3, 7, 8]

Impugned orders dismissing the condonation applications and appeals as barred by limitation set aside; appeals to be numbered and disposed of on merits.

Exercise of writ jurisdiction despite alternate statutory remedy under Section 35G - substantial question of law - Whether the availability of an alternate statutory remedy under Section 35G of the Central Excise Act, 1944 precluded exercise of writ jurisdiction by the High Court in these petitions. - HELD THAT: - The respondents contended that the petitioner had an alternate remedy by way of appeal or Civil Miscellaneous Appeal and therefore the writ petitions were liable to be dismissed. The Court reviewed the scope of Section 35G and observed that jurisdiction thereunder can be invoked only where a substantial question of law arises. On that basis the Court held that the mere availability of an appeal under Section 35G did not automatically bar the exercise of writ jurisdiction in the present facts, and the contention that the petitions should be dismissed on that ground could not be countenanced. [Paras 5, 7]

Alternate remedy under Section 35G did not by itself preclude exercise of writ jurisdiction in these petitions.

Final Conclusion: The writ petitions were allowed: the Tribunal's orders refusing condonation of delay and dismissing the appeals as barred by limitation were set aside; the Tribunal is directed to number the appeals and dispose of them on merits in accordance with law; no order as to costs.

Show cause notice - adjudication on merits - opportunity of personal hearing - interpretation of "the person chargeable with the duty" - substantial question of law left open - power to adjudicate

Show cause notice - adjudication on merits - opportunity of personal hearing - power to adjudicate - substantial question of law left open - Direction to the Commissioner to adjudicate the Show Cause Notices dated 24-7-2007 after affording a reasonable opportunity to the assessees; substantial question of law left open for future consideration. - HELD THAT: - The Tribunal's earlier order has been given effect to and the Department issued fresh Show Cause Notices dated 24-7-2007 to the companies. In view of the lapse of time and the issuance of these fresh notices, the Court declined to decide the substantial question of law framed on interpretation of the phrase "the person chargeable with the duty" in Section 11A, observing that adjudication on the renewed notices is the appropriate course. The Court directed the Commissioner of Central Excise, Tiruchirapalli, to proceed to adjudicate the Show Cause Notices dated 24-7-2007, after affording the assessees a reasonable opportunity to be heard, which shall include an opportunity of personal hearing, and to take a decision on the merits and in accordance with law. Because the Court is issuing this direction for fresh adjudication, it left the substantial question of law open for consideration as and when required. [Paras 6, 7]

The Commissioner of Central Excise, Tiruchirapalli, is directed to adjudicate the Show Cause Notices dated 24-7-2007 after affording reasonable opportunity including personal hearing and to decide the matter on merits and in accordance with law; the substantial question of law is left open.

Final Conclusion: The appeals are disposed of by directing the Commissioner to adjudicate the Show Cause Notices dated 24-7-2007 after affording the assessees a reasonable opportunity, including personal hearing, and to decide the matter on merits and in accordance with law; the substantial question of law is left open. No costs.

Efficacious alternative remedy - Article 226 of the Constitution - Section 74(1) of the DVAT Act - bar on appeal - Section 79(1)(j) of the DVAT Act - liberty to file objection/appeal and disposal by reasoned order

Efficacious alternative remedy - Section 74(1) of the DVAT Act - Article 226 of the Constitution - Maintainability of the writ petition in view of the availability of statutory remedy under the DVAT Act - HELD THAT: - The Court held that the petition did not call for interference under Article 226 because the petitioner had an efficacious alternative remedy under Section 74(1) of the DVAT Act by way of objection/appeal. The petitioner failed to demonstrate any patent illegality, such as violation of principles of natural justice or fundamental rights, in the impugned order which would necessitate exercise of extraordinary writ jurisdiction. Consequently, the statutory remedy must be exhausted before invoking the writ jurisdiction. [Paras 12]

Writ petition dismissed for want of maintainability; petitioner directed to pursue remedy under Section 74(1) of the DVAT Act.

Bar on appeal - Section 79(1)(j) of the DVAT Act - Whether objections/appeal are barred by Section 79(1)(j) on the ground that the impugned order was passed 'giving effect to' this Court's earlier order - HELD THAT: - The Court analysed the earlier writ disposal (WP(C) 11040/2019) and found that it only directed respondents to decide the claim in accordance with law and did not decide the matter on merits. Therefore, the impugned order could not be characterised as an assessment issued to give effect to an order of this Court. As a result, Section 79(1)(j) does not operate to bar objections or appeal against the impugned order in the present case. [Paras 13]

Section 79(1)(j) does not bar the petitioner from filing objections/appeal against the impugned order.

Liberty to file objection/appeal - reasoned order - Relief and procedural directions in light of dismissal of the writ petition - HELD THAT: - While declining to adjudicate the merits, the Court granted the petitioner procedural relief to ensure effective remedy. The petitioner was given liberty to file the statutory objection/appeal within two weeks. The respondents were directed that any such objection/appeal filed within the stipulated period shall be disposed of on merits by a reasoned order in accordance with law within eight weeks. The Court expressly refrained from expressing any opinion on the substantive merits of the controversy, leaving all contentions open before the appropriate forum. [Paras 15]

Petitioner granted liberty to file objection/appeal within two weeks; respondents directed to decide the same by a reasoned order within eight weeks.

Final Conclusion: Writ petition dismissed for non exhaustion of the statutory remedy; Section 79(1)(j) held inapplicable as the earlier order did not decide the matter on merits; petitioner given two weeks' time to file objection/appeal and respondents directed to decide it by a reasoned order within eight weeks, without the High Court expressing any view on the merits.

Classification of goods under an industrial input notification - application of Central Excise tariff description by way of Explanation to State notification - binding effect of Central Excise Chapter/Heading classification on State VAT/Sales tax authorities - General Rules of Interpretation - Rule 3(b) (ingredient/essential character test)

Classification of goods under an industrial input notification - application of Central Excise tariff description by way of Explanation to State notification - Powder coating material sold by the assessee is classifiable under Chapter Heading No.3907 and thus falls within Entry No.133 of the State notification dated 30.04.2005 as an 'industrial input'. - HELD THAT: - The State notification's Entry No.133 reproduces the description of the Central Excise Chapter Heading No.3907. Explanation III to the notification directs that where the description against the heading or sub heading is the same as in the Central Excise Tariff, all commodities covered by that tariff heading under the Central Excise Act are covered by the notification. The court found that the product in question is primarily composed of epoxy resins or polyester resins falling within CTH 3907 and that additional constituents are additives. Applying the General Rules of Interpretation, specifically Rule 3(b), the product must be classified according to its essential character as epoxy or polyester resin. Consequently, the product is covered by Entry No.133 of the notification and qualifies as an industrial input for the purposes of the Act. [Paras 7]

Declared that the powder coating material is covered by Entry No.133 of the notification (CTH 3907) and is an industrial input.

Binding effect of Central Excise Chapter/Heading classification on State VAT/Sales tax authorities - General Rules of Interpretation - Rule 3(b) (ingredient/essential character test) - State authorities cannot reclassify a commodity differently from its Central Excise Chapter/Heading classification where the notification adopts the same tariff description; classification must follow the Central Excise description and the essential character test under Rule 3(b). - HELD THAT: - The court reiterated that classification under a particular Chapter Tariff Head of the Central Excise Act is not open for determination afresh by State VAT/sales tax authorities when the State notification adopts the same description. Given that the notification and the Central Excise Tariff correspond, and that the product's essential character is epoxy or polyester resin, the State's attempt to treat the goods as unclassified/residual for higher taxation was impermissible. The tribunal's contrary conclusion was therefore held to be legally erroneous. [Paras 7, 8]

Held that the tribunal and departmental orders upholding reclassification were erroneous and not sustainable.

Final Conclusion: The tribunal's and departmental orders holding the powder coating material outside Entry No.133 are set aside; the product is classified under CTH 3907 and covered by Entry No.133 of the notification dated 30.04.2005 as an industrial input, and the petition is allowed.

Criminal liability of non-executive directors - validity of non-CTS-2010 cheque - dishonour under Section 138 of the Negotiable Instruments Act - role of Reserve Bank circular in cheque validity - limitation as a triable question of fact - dispensation of personal appearance during trial

Criminal liability of non-executive directors - acting directors liability - Whether petitioners 3 and 4, who are alleged to be non-executive directors, could be proceeded against under the complaint. - HELD THAT: - The complaint merely alleges that petitioners 3 and 4 are directors and asserts joint and several liability, but does not place any tangible material to show their active involvement in day-to-day affairs or in the business transactions between the 1st petitioner company and the respondent. There is no documentary or specific averment in the complaint to demonstrate that petitioners 3 and 4 were working directors involved in the relevant transactions. In absence of such material, implicating them on mere averment is unsustainable and cannot be permitted at the stage of consideration under Section 482 Cr.P.C. [Paras 13]

Proceedings quashed insofar as petitioners 3 and 4.

Validity of non-CTS-2010 cheque - dishonour under Section 138 of the Negotiable Instruments Act - role of Reserve Bank circular in cheque validity - Whether the cheque (allegedly non-CTS-2010) is invalid and therefore not actionable under Section 138, and whether the return reason negates a case under Section 138. - HELD THAT: - The question of the cheque's nature and validity cannot be determined on the present petition. The Reserve Bank of India circular gave residual validity up to 31.7.2013 subject to review, but no material is placed before this Court showing the ultimate position taken by the RBI or distinguishing features on the cheque itself. The bank's return memo records only 'Refer to Drawer' and does not unequivocally state the reason as insufficiency of funds or non-CTS-2010 status. Determination of whether the cheque is CTS-2010 or non-CTS-2010 and whether the return attracts Section 138 requires evidence from banking channels, oral and documentary proof and consideration of RBI circulars, all of which are matters for trial. It would be premature to decide the validity of the cheque or to quash proceedings on that ground at this stage. [Paras 16, 17, 18, 19, 20]

Issue left open for trial; prima facie case not closed and complaint against petitioners 1 and 2 to proceed.

Limitation as a triable question of fact - question of fact triable issues - Whether the complaint is barred by limitation on the ground that the cheque was issued in 2010 but presented in 2015. - HELD THAT: - The contention that the cheque was issued in 2010 and presented only in 2015 raising a limitation bar is a question of fact which must be established by oral and documentary evidence. The respondent's case pleads issuance of the cheque on 20.7.2015. As the question involves factual dispute about when the cheque was issued and presented, the Court is not inclined to decide it on a Section 482 petition and it must be dealt with at trial. [Paras 7, 14]

Limitation plea not entertained at this stage; to be decided at trial.

Dispensation of personal appearance during trial - procedural directions for trial - Whether the 2nd petitioner's personal appearance can be dispensed with during the trial except for specified stages. - HELD THAT: - In light of the factual matrix and to facilitate early completion of trial, the Court directed cooperation with the trial court and, as a procedural measure, dispensed with the personal appearance of the 2nd petitioner except for service of the record under Section 207 Cr.P.C., framing of charges, examination under Section 313 Cr.P.C. and on the day of pronouncement of judgment. The trial court retains discretion to call the 2nd petitioner if his presence becomes necessary. [Paras 21]

2nd petitioner's appearance dispensed with except for specified stages; trial to proceed with cooperation.

Final Conclusion: Criminal petition allowed in part: proceedings quashed against petitioners 3 and 4. Petition dismissed insofar as petitioners 1 and 2; issues relating to cheque validity and limitation are left for trial. 2nd petitioner's personal appearance is dispensed with except at limited stages; parties directed to cooperate for early completion of trial.

Limitation - acknowledgement of debt by issuance of post-dated cheques - computation of fresh limitation period from payment under Section 19 of the Limitation Act - pronote as evidence of debt

Limitation - computation of fresh limitation period from payment under Section 19 of the Limitation Act - acknowledgement of debt by issuance of post-dated cheques - The suit for recovery founded on the promissory note is not barred by limitation. - HELD THAT: - The defendant admitted receipt of the entrusted sum and admission of signature on the pronote, and also issued four post-dated cheques in respect of the debt. The court treated issuance of the cheques and the subsequent part payment recorded before the Lok Adalat as operative acknowledgements sufficient to bring Section 19 of the Limitation Act into play. Under that provision, payment made on account restarts the period of limitation from the date of such payment. The last installment was paid and recorded on 21.09.2012; the suit was filed on 03.09.2015, which falls within the fresh limitation period computed from that payment. The Trial Court's finding that the suit was filed in time was accordingly upheld. [Paras 16, 17]

Suit not barred by limitation; decree for recovery sustained.

Pronote as evidence of debt - acknowledgement of debt by issuance of post-dated cheques - The liability of the defendant on the pronote and the entitlement of the plaintiff to decree for the unpaid principal was upheld. - HELD THAT: - On his cross-examination the defendant admitted that he received Rs. 10,00,000 for investment, executed the pronote dated 28.03.2007 and issued four post-dated cheques towards repayment. The Trial Court accepted the plaintiff's oral and documentary evidence (pronote and cheques) and decreed recovery of the unpaid principal with interest at the rate awarded by the Trial Court. The High Court found no infirmity in that conclusion and sustained the decree directing payment of the principal sum with interest at 9% per annum. [Paras 11, 15, 17]

Findings that the pronote and cheques established the defendant's liability and that the plaintiff was entitled to recovery were affirmed.

Final Conclusion: The High Court dismissed the appeal, holding that the suit was within time by reason of acknowledgment/payment under Section 19 and affirming the trial court's decree for recovery of the unpaid principal with interest at 9% per annum.

Condonation of delay - taking cognizance - limitation - application of mind - extension of limitation during lockdown pursuant to suo moto writ

Condonation of delay - taking cognizance - limitation - application of mind - extension of limitation during lockdown pursuant to suo moto writ - Validity of the order condoning delay and taking cognizance in complaint under Section 138 of the Negotiable Instruments Act - HELD THAT: - The Court found that the trial Court, while referring to the averments, the sworn statement and documents and the Apex Court's suo moto order extending limitation during lockdown, did not demonstrate consideration of the sequence of material dates (cheque dishonour endorsement, service of legal notices and filing of complaint) before condoning the delay and taking cognizance. It is a settled requirement that a court must apply its mind to such dates and the cause of action when deciding an application for condonation of delay. Because the impugned order does not record such application of mind or specify when the cause of action arose, the High Court set aside the order and remanded the matter for fresh consideration in the light of the Apex Court's order extending limitation during lockdown. On remand the trial Court is directed to consider afresh the application for condonation and may either condone the delay and take cognizance or reject the complaint, but must assign specific reasons; the respondent is permitted to file a better affidavit in support of the condonation application and the accused may raise limitation or other defences before the trial Court. [Paras 15, 16]

Impugned order set aside; matter remanded to the trial Court for fresh consideration of the condonation application and cognizance in accordance with the reasons recorded.

Final Conclusion: The petition is allowed. The order dated 04.12.2020 taking cognizance after condoning delay is set aside and the trial Court is directed to reconsider the condonation application and either take cognizance or reject the complaint after recording specific reasons; the respondent may file a better affidavit and both parties are directed to appear before the trial Court.