TaxTMI Updates e-Newsletter
Aug 19,2020

Release of IGST - refund of duty drawback - mandamus for decision - decision in accordance with law, rules, regulations and Government policies - liberty to challenge administrative order

Release of IGST - mandamus for decision - decision in accordance with law, rules, regulations and Government policies - Direction to respondents to decide the question of release or otherwise of IGST along with interest payable to the petitioner. - HELD THAT: - The petitioner alleged inaction by the respondent authorities in releasing IGST due to it. The Court did not adjudicate the substantive entitlement on merits but observed the grievance of inaction and directed the concerned authorities to examine and decide the petitioner's claim for release of IGST and any interest thereon strictly in accordance with applicable law, rules, regulations and Government policies. The Court prescribed an expedited timeline of preferably three weeks to conclude the decision. The Court left open the petitioner's right to challenge the decision rendered by the respondents after they decide the matter. [Paras 2, 4, 5]

Respondents directed to decide the petitioner's claim for release of IGST with interest in accordance with law within preferably three weeks; petitioner given liberty to challenge the outcome.

Refund of duty drawback - mandamus for decision - decision in accordance with law, rules, regulations and Government policies - Direction to respondents to decide the question of release or otherwise of duty drawback due to the petitioner. - HELD THAT: - The petitioner also complained of non-release of duty drawback. The Court again did not resolve entitlement on merits but directed the appropriate authorities to consider and decide the petitioner's claim for duty drawback in accordance with the applicable legal and policy framework within the same expedited timeframe. The procedural direction was given to remedy the inaction and to enable the petitioner to pursue further reliefs, including challenging the decision, if dissatisfied. [Paras 2, 4, 5]

Respondents directed to decide the petitioner's claim for duty drawback in accordance with law within preferably three weeks; petitioner afforded liberty to challenge the decision.

Final Conclusion: Writ petition disposed of by issuing a mandate to the respondent authorities to decide, within preferably three weeks, the petitioner's claims for release of IGST (with interest) and duty drawback in accordance with law, rules, regulations and Government policies; petitioner granted liberty to challenge the decision thereafter.

Release of IGST - duty drawback - writ of mandamus for decision - remand for fresh consideration - administrative decision within fixed time

Release of IGST - duty drawback - writ of mandamus for decision - administrative decision within fixed time - Directing respondents to decide, in accordance with law, whether to release the IGST (with interest) and the duty drawback claimed by the petitioner. - HELD THAT: - The Court noted the petitioner's grievance about respondents' inaction in releasing the IGST and the duty drawback due. The petitioner did not press the other reliefs claimed. Rather than adjudicating the merits, the Court directed the concerned respondent authorities to determine the question of release or otherwise of the IGST (along with interest) and of the duty drawback in accordance with applicable law, rules, regulations and Government policies. The authorities were required to decide the matter expeditiously and preferably within three weeks. The Court left open the petitioner's right to challenge the order that the respondents may pass thereafter, together with any other grievances raised in the writ petition. [Paras 4, 5]

Writ petition disposed by directing the respondent authorities to decide, within three weeks, the release or otherwise of the claimed IGST (with interest) and duty drawback in accordance with law; petitioner free to challenge the decision thereafter.

Final Conclusion: The writ petition was disposed of by directing the relevant authorities to decide, as early as possible and preferably within three weeks, whether to release the claimed IGST (with interest) and duty drawback in accordance with law, leaving the petitioner free to challenge the resultant order; other prayers were not pressed.

Anticipatory bail under Section 438 Cr.P.C. in cases registered under the Goods and Services Tax Act - Statements recorded under Section 70 of the GST Act and their probative value - Weight of statements during the lifetime or availability of the author under Section 136 of the GST Act - Non-cooperation with investigation as a factor in bail jurisprudence - Custodial interrogation, protection against coercion and assurance of cooperation - Economic offences and gravity of allegation as relevant in bail consideration - Conditions ordinarily attached to anticipatory bail (appearance, periodic reporting, surrender of passport, surety)

Anticipatory bail under Section 438 Cr.P.C. in cases registered under the Goods and Services Tax Act - Conditions ordinarily attached to anticipatory bail (appearance, periodic reporting, surrender of passport, surety) - Grant of anticipatory bail to the petitioner subject to conditions - HELD THAT: - After considering the nature and gravity of allegations, the confidential evidence on record and the rival contentions, the Court, without expressing any view on the merits, found the case for granting pre-arrest relief to the petitioner to be made out. The Court directed that in the event of arrest or surrender within one month the petitioner be released on bail on furnishing a personal bond and a solvent surety, and imposed conditions including cooperation with investigation, monthly appearances before officers until filing of the charge-sheet, surrender of passport and prohibition on leaving the country without prior permission. The order follows the Court's discretion to grant anticipatory bail while attaching specific conditions to secure investigation and attendance and to guard against tampering with evidence or witness inducement. [Paras 17, 18]

Petition allowed; anticipatory bail granted subject to personal bond, solvent surety and conditions of cooperation, periodic appearance and surrender/restriction of passport.

Anticipatory bail under Section 438 Cr.P.C. in cases registered under the Goods and Services Tax Act - Statements recorded under Section 70 of the GST Act and their probative value - Weight of statements during the lifetime or availability of the author under Section 136 of the GST Act - Applicability of Section 438 Cr.P.C. to offences under the GST Act is not finally decided by this Court - HELD THAT: - The Court observed that the question whether provisions of Section 438 Cr.P.C. apply to cases registered under the GST Act remains open and is under consideration by the Hon'ble Supreme Court. While earlier authorities were referred to by both sides, the Court did not resolve the legal issue and proceeded to exercise its discretionary power to grant anticipatory bail in the particular facts of this case without adjudicating the broader question of statutory applicability. [Paras 11, 12, 15, 16]

Left open for final determination by the Hon'ble Supreme Court; this Court did not decide the statutory question and granted relief on facts and exercise of discretion.

Final Conclusion: Anticipatory bail granted to the petitioner on furnishing prescribed bond and surety, subject to conditions of cooperation, periodic appearance and surrender/restriction of passport; the wider legal question of applicability of Section 438 Cr.P.C. to offences under the GST Act remains undecided by this Court and is left to the Supreme Court.

Anti profiteering for not passing on benefit of input tax credit - liability for not passing on benefit under Section 171(1) of the CGST Act - penalty for issuing incorrect or false invoice under Section 122(1)(i) - no retrospective application of penalty introduced by insertion of Section 171(3A)

Anti profiteering for not passing on benefit of input tax credit - liability for not passing on benefit under Section 171(1) of the CGST Act - Respondent failed to pass on the benefit of additional input tax credit to buyers for the period 01.07.2017 to 31.08.2018 and thereby violated the anti profiteering obligation under Section 171(1). - HELD THAT: - The Authority examined the DGAP report and the Respondent's own submissions and payment proofs. The Respondent admitted that the additional ITC accrued and that the benefit was passed to buyers only in February 2019 after initiation of proceedings. The Authority therefore concluded that the Respondent had not passed the benefit monthly as required while availing ITC and had thus contravened Section 171(1) for the period 01.07.2017 to 31.08.2018. The earlier determination of the profiteered amount for that period was affirmed by the Authority on the basis of the DGAP report and admissions of the Respondent. [Paras 2, 12]

Violation of Section 171(1) established for the period 01.07.2017 to 31.08.2018; profiteering determined as per the DGAP report and earlier order.

Penalty for issuing incorrect or false invoice under Section 122(1)(i) - Whether penalty under Section 122(1)(i) can be imposed for the Respondent's failure to pass on ITC benefits. - HELD THAT: - Section 122(1)(i) penalises supply without invoice or issuance of an incorrect or false invoice and provides for penalties tied to tax evasion, short deduction/collection, irregular input tax availing/passing or fraudulent refund claims. The Authority analysed the scope of Section 122(1)(i) and observed that non passing of the benefit of tax reduction or ITC (the profiteered amount) is not a tax imposed under the CGST Act and therefore does not fall within the penal triggers enumerated in Section 122(1)(i) or its proviso. Consequently, the show cause notice issued under Section 122(1)(i) for the failure to pass on ITC was not sustainable. [Paras 14]

Penalty under Section 122(1)(i) cannot be imposed for failure to pass on ITC benefits under Section 171(1). The notice issued under Section 122(1)(i) is withdrawn.

No retrospective application of penalty introduced by insertion of Section 171(3A) - Whether the penalty provision later inserted as Section 171(3A) (Finance Act, 2019) can be applied retrospectively to profiteering committed during 01.07.2017 to 31.08.2018. - HELD THAT: - The Authority noted that Section 171(3A), prescribing a penalty equivalent to ten per cent of the amount profiteered, was inserted by Section 112 of the Finance Act, 2019 and came into force w.e.f. 01.01.2020. There was no penalty under Section 171(3A) in existence at the time of the contravention (01.07.2017 to 31.08.2018). The Authority held that the newly introduced penal provision could not be applied retrospectively to conduct that occurred prior to its commencement. [Paras 15, 16]

Penalty under Section 171(3A) is not leviable retrospectively for profiteering during 01.07.2017 to 31.08.2018.

Final Conclusion: The Authority confirmed that the Respondent had contravened Section 171(1) by not passing on ITC benefits for 01.07.2017 to 31.08.2018, but held that neither Section 122(1)(i) nor the subsequently inserted Section 171(3A) could furnish a basis for imposing penalty for that pre amendment period; the penalty proceedings initiated under Section 122(1)(i) are withdrawn and the penalty proceedings are dropped.

Condonation of delay - sufficient cause under the Limitation Act - substantial justice - revision under Section 263 - appeal restoration and hearing on merits

Condonation of delay - sufficient cause under the Limitation Act - substantial justice - Whether the delay of 154 days in filing the appeal before the Tribunal ought to be condoned. - HELD THAT: - The Court examined the appellant's explanation that he was under a bona fide but erroneous impression that only the consequential order of the Assessing Officer required challenge and that he approached counsel only after receipt of the consequential order. The Tribunal's view that the appellant should have consulted counsel immediately upon receipt of the Revisional Authority's order was held to be unreasonable given that the appellant is an individual who may not be legally proficient. Applying the liberal construction of "sufficient cause" and the principle of advancing substantial justice as articulated in N. Balakrishnan v. M. Krishnamurthy, the Court found the explanation did not smack of mala fides or constitute dilatory strategy. The Court noted that while costs may be imposed where delay is condoned, the primary obligation is to adjudicate disputes on merits where a bona fide explanation exists. [Paras 21, 23, 24, 27]

The delay of 154 days in filing the appeal is condoned and the Tribunal ought to have allowed the application for condonation.

Revision under Section 263 - appeal restoration and hearing on merits - Disposition of the appeal following condonation of delay. - HELD THAT: - The Revisional Authority's order under Section 263 had set aside the Assessing Officer's order and remitted the matter for fresh assessment. Having held that the delay in preferring the appeal to the Tribunal should have been condoned, the High Court set aside the Tribunal's dismissal for delay, allowed the application for condonation and restored the appeal to the file of the Tribunal for adjudication on merits. The Tribunal is directed to hear and decide the appeal in accordance with law. [Paras 28]

The Tribunal's order dismissing the appeal for delay is set aside; the appeal is restored to the Tribunal's file for hearing and decision on merits.

Final Conclusion: The appeal is allowed; the Tribunal's order dated 25-10-2019 dismissing I.T.A.No.98/Hyd/2016 for Assessment Year 2011-12 is set aside, the delay in filing the appeal is condoned, the appeal is restored to the Tribunal for hearing on merits, and no costs are awarded.

Exemption under Section 10A - violation of Section 10A(2)(ii) - splitting up and reconstruction of business - exclusion of telecommunication and foreign currency expenses from total turnover - substantial question of law - precedent in assessee's own case / issue estoppel

Exemption under Section 10A - violation of Section 10A(2)(ii) - splitting up and reconstruction of business - precedent in assessee's own case / issue estoppel - Entitlement to exemption under Section 10A despite allegations that the STPI unit was not a new unit but formed by splitting up and reconstruction of existing business with common products, customers and employees. - HELD THAT: - The Court held that the substantial question regarding entitlement to Section 10A exemption, submitted by the revenue, had already been the subject of a prior adjudication in T.C.A.Nos.241 and 647 of 2008 dated 04.06.2019 in the assessee's favour. Although the Assessing Officer made an independent decision for the assessment year 2009-10, the High Court examined the earlier judgment and concluded that the earlier decision involved a fact-finding exercise on the same controversy. Consequently, the present substantial question is squarely covered by that earlier decision and must be answered against the revenue. [Paras 6]

The question of entitlement to Section 10A exemption is decided against the revenue, following the earlier decision in the assessee's own case.

Exclusion of telecommunication and foreign currency expenses from total turnover - accounting principle - substantial question of law - precedent in assessee's own case / issue estoppel - Whether telecommunication and foreign currency expenses could be excluded from total turnover for computing eligible profit under Section 10A. - HELD THAT: - The Court found that this substantial question was also covered by the prior judgment in T.C.A.Nos.241 and 647 of 2008 dated 04.06.2019 decided in the assessee's favour. Given that the earlier decision involved fact finding and resolution of the same legal contention, the earlier precedent binds the present matter. The High Court therefore rejected the revenue's contention that the Tribunal's exclusion was perverse or contrary to accounting principles, answering the question against the revenue. [Paras 6]

The exclusion of telecommunication and foreign currency expenses from total turnover for Section 10A computation is upheld in favour of the assessee, and the substantial question is answered against the revenue.

Final Conclusion: The tax case appeal is dismissed. Both substantial questions of law raised by the revenue are answered against the revenue as they are squarely covered by the earlier decision in the assessee's own case (T.C.A.Nos.241 and 647 of 2008 dated 04.06.2019). No costs.

Allowability of interest under section 36(1)(iii) - treatment of borrowing costs for inventory - applicability of Accounting Standards vis-a -vis statute - section 14A and requirement of exempt income - Rule 46A - admission of fresh plea before appellate authority

Allowability of interest under section 36(1)(iii) - treatment of borrowing costs for inventory - applicability of Accounting Standards vis-a -vis statute - Interest expense incurred on borrowings used for acquisition of lands held as inventory is allowable under section 36(1)(iii) and ancillary borrowing costs are revenue in nature and allowable. - HELD THAT: - The Tribunal found as an undisputed factual position that borrowed funds were used to acquire land held as inventory. It held that Accounting Standards (AS 2/AS 16) govern accounting treatment but cannot override the statutory provisions; where there is a conflict the Act prevails. Relying on tribunal precedent in DLF Ltd. and authorities such as India Cements and Lokhandwala, the Tribunal accepted that interest attributable to borrowings used for inventory is allowable under section 36(1)(iii), and ancillary costs (brokerage, processing, registration, stamp duty etc.) are revenue expenses allowable per India Cements. The AO's addition was therefore reversed and the CIT(A)'s deletion of disallowance was sustained in both years since facts were similar. [Paras 5, 6]

Allow interest and ancillary borrowing costs as deductible under section 36(1)(iii); the CIT(A)'s deletion of the disallowance is upheld.

Rule 46A - admission of fresh plea before appellate authority - The CIT(A) did not violate Rule 46A by deciding a plea not raised before the AO because the same details and evidence were on record before the AO. - HELD THAT: - Revenue contended that the CIT(A) permitted a fresh plea in breach of Rule 46A. The Tribunal accepted the assessee's submission and record references showing that the particulars relied upon before the CIT(A) had been placed before the AO (paper book pages cited). On that basis the Tribunal concluded there was no violation of Rule 46A and declined to fault the CIT(A) on this ground. [Paras 4, 5]

Revenue's contention of Rule 46A breach is rejected; no interference with CIT(A)'s order on this ground.

Section 14A and requirement of exempt income - Disallowance under section 14A was not warranted as there was no exempt income in the relevant years. - HELD THAT: - The Tribunal examined the profit and loss and note to accounts showing 'other income' comprised interest on fixed deposits and concluded there was no exempt income in AY 2013 14 (and facts were same for AY 2014 15). Applying the decision of the Delhi High Court in Chemiinvest, the Tribunal held section 14A cannot be invoked in the absence of exempt income and therefore sustained the CIT(A)'s deletion of the section 14A disallowance. [Paras 7]

Deletion of disallowance under section 14A is sustained as section 14A is not triggered in the absence of exempt income.

Final Conclusion: Both appeals filed by the revenue for A. Y. 2013 - 14 and A. Y. 2014 - 15 are dismissed; the CIT(A)'s deletions of the interest disallowance and the section 14A disallowance are upheld and the alleged Rule 46A breach is rejected.

Fair market value for unquoted shares - Choice of valuation method under Rule 11UA(2) - Discounted Cash Flow (DCF) method - Net Asset Value (NAV) method - Application of section 56(2)(viib) - Onus of proof on the assessee for valuation projections

Discounted Cash Flow (DCF) method - Choice of valuation method under Rule 11UA(2) - Application of section 56(2)(viib) - Onus of proof on the assessee for valuation projections - Whether the Assessing Officer could reject the DCF valuation submitted by the assessee and adopt NAV method for determining fair market value for the purposes of section 56(2)(viib), and the consequences of such rejection. - HELD THAT: - The Tribunal held that Rule 11UA(2) gives the assessee an option to determine fair market value of unquoted shares either under the NAV formula or by valuation using the DCF method; once the assessee has opted for DCF, the AO cannot substitute a different method (such as NAV). The AO is, however, entitled to scrutinise the DCF valuation report and, if not satisfied, must record reasons and may determine a fresh valuation either by conducting his own DCF-based computation or by obtaining a valuation from an independent valuer and confronting it to the assessee. In scrutinising the valuation report the AO must confine himself to facts and data available on the valuation date and cannot use actual future results (which were not available at the valuation date) to impugn the projections; the primary onus to demonstrate the correctness of the DCF valuation - including the reliability of cash flow projections, discounting factor and terminal value - rests on the assessee and must be supported by empirical data, industry norms or other relevant material. Applying these principles, the Tribunal set aside the CIT(A) order and restored the matter to the AO for fresh decision in accordance with the directions above, permitting reconsideration on DCF basis only after affording the assessee opportunity of hearing. [Paras 9, 21, 22, 23]

Order of the CIT(A) set aside; matter remitted to the AO to re examine the DCF valuation (without changing the method) and decide afresh after recording reasons, considering only facts available on the valuation date and giving the assessee opportunity to substantiate projections.

Final Conclusion: Appeal allowed for statistical purposes; the Tribunal directs restoration of the valuation issue to the file of the Assessing Officer for fresh adjudication following the principles that (i) the assessee's choice of DCF must be respected, (ii) the AO may scrutinise or obtain a fresh DCF based valuation but cannot change the method, and (iii) the assessee carries the primary onus to justify the projections and inputs used in the DCF.

Apparent mistake in tribunal order - admission of additional grounds in miscellaneous petition - production of lease agreements as burden of party - treatment of lease transactions as sham where no outflow of funds - remand/restoration for verification of lease agreements - disallowance of depreciation in absence of proof of ownership

Admission of additional grounds in miscellaneous petition - Additional grounds filed after the statutory period for filing miscellaneous petition under section 254(2) were not admitted. - HELD THAT: - The assessee filed additional grounds on 30.07.2020 after the time allowed for filing miscellaneous petitions under section 254(2) of the Income-tax Act had expired. The Bench recorded that these additional grounds were therefore not admitted and were not considered for disposal of the MPs. The Tribunal proceeded to determine the MPs without taking those belated grounds into account. [Paras 1]

Additional grounds filed after the prescribed period are not admitted and were not considered.

Production of lease agreements as burden of party - treatment of lease transactions as sham where no outflow of funds - remand/restoration for verification of lease agreements - disallowance of depreciation in absence of proof of ownership - The miscellaneous petitions alleging apparent mistakes in the Tribunal's finding were dismissed because the Tribunal's decision rested on non-production of lease agreements and the assessee did not challenge that foundational finding. - HELD THAT: - The impugned combined Tribunal order (para 5) expressly records that no lease agreement was made available before the Tribunal. The AO had discussed clauses of certain lease agreements and relied on a prior Tribunal finding that similar transactions were hire-purchase camouflaged as leases where there was no outflow of funds. Because the Tribunal's decision in the appeals turned on the absence of lease agreements on record, the Bench found that the substantive arguments and authorities advanced in the MPs and written submissions did not bear on the determinative basis of the decision. The assessee did not contend that the Tribunal's factual finding of non-production was mistaken. Consequently, the Bench held the MPs to be without merit and declined to interfere or order recall/remand on the asserted grounds. [Paras 3, 7]

All four miscellaneous petitions are dismissed as meritless because the Tribunal legitimately relied on the absence of lease agreements and the MPs did not challenge that basis.

Final Conclusion: The Bench refused to admit belated additional grounds and dismissed all four miscellaneous petitions, holding that the Tribunal's decision-based on non-production of lease agreements and prior findings that similar transactions were sham-was not shown to be vitiated by any apparent mistake.

Rectification of apparent mistake under section 254(2) of the Income-tax Act - recall of tribunal order - tribunal's consideration of documentary evidence and paper book procedure - recall of order for non-appearance under Rules 24 and 25 of the Tribunal Rules, 1963 - adjournment when not ready for hearing

Rectification of apparent mistake under section 254(2) of the Income-tax Act - tribunal's consideration of documentary evidence and paper book procedure - Whether the tribunal order could be recalled or rectified under section 254(2) on the ground that documentary evidence in the paper book was not before the tribunal at the time of hearing leading to dismissal of the appeal. - HELD THAT: - The tribunal may rectify an apparent mistake under rectification of apparent mistake under section 254(2) of the Income-tax Act only where recall is essential to correct an apparent mistake such as non decision of one or more grounds or failure to consider facts or judgments which were on record and explicitly brought to the tribunal's attention. Documents placed in a paper book but not filed before, or not specifically drawn to, the tribunal during hearing are not part of the tribunal's record for purposes of decision. The Tribunal Rules permit recall under recall of order for non-appearance under Rules 24 and 25 of the Tribunal Rules, 1963 where a party could not appear and shows reasonable cause; those provisions are inapplicable where the party (or its authorised representative) was present at the hearing. If an appellant is not ready for hearing, the appropriate remedy is to seek adjournment; absence of such a request precludes reliance upon subsequent non filing of documents as an apparent mistake. Applying these principles, the tribunal found no apparent mistake: the paper book relied upon by the assessee was not filed before or at the hearing and the authorised representative did appear at the hearing, so the conditions for recall or rectification were not satisfied. The petition therefore fails. [Paras 3]

M. P. dismissed as there is no apparent mistake warranting recall or rectification; documents not filed or placed before the tribunal at hearing cannot be treated as having formed part of the record.

Final Conclusion: The application to recall or rectify the tribunal's order was dismissed for lack of merit: the assessee's documentary evidence was not before the tribunal at hearing, the authorised representative appeared, Rules 24/25 were not attracted, and no apparent mistake under section 254(2) was made out.

Exemption under Section 11 - definition of "charitable purpose" - first proviso to Section 2(15) - application of Section 13(8) - turnkey commercial contract / agent-principal relationship - absence of formal and systematic education

Exemption under Section 11 - definition of "charitable purpose" - first proviso to Section 2(15) - turnkey commercial contract / agent-principal relationship - absence of formal and systematic education - Whether the assessee's activities of executing the RBI museum/financial literacy centre project on a turnkey basis attracted the proviso to Section 2(15) read with Section 13(8) and thereby disentitled it from exemption under Section 11. - HELD THAT: - The Tribunal found on the record that the assessee became a successful bidder in an open tender and was selected by RBI to execute the museum project on a turnkey basis, with the terms of the financial bid not finally adopted by RBI and RBI funding the project. The agreement and correspondence indicate that the assessee undertook execution of works dictated by RBI in return for payment and was deputed by RBI as a contractor/agent to perform the project. The Memorandum of Association contains objects permitting commercial dealings, profit-making undertakings and contracting, which the Tribunal regarded as indicative of profit-oriented intent. The Tribunal held that the activity carried out in the year under consideration did not involve the discharge of any formal and systematic educational function by the assessee itself but consisted of executing a contract for consideration, and therefore fell within the last limb of the first proviso to Section 2(15) as an activity in the nature of trade, commerce or business. The Tribunal distinguished the Coordinate Bench authorities relied upon by the assessee on their factual matrices, observing those cases involved activities incidental to accepted primary charitable objects rather than execution of a funded turnkey contract as here. Applying these findings, the Tribunal concluded that the assessee's claim to exemption under Section 11 was rightly denied by the authorities below. [Paras 9]

The Tribunal upheld the denial of exemption under Section 11, holding the turnkey execution of the RBI project to be commercial activity covered by the first proviso to Section 2(15) read with Section 13(8), and dismissed the appeal.

Final Conclusion: All three appeals for Assessment Years 2013-14, 2014-15 and 2015-16 were dismissed; the Tribunal affirmed that the assessee's turnkey contract work for RBI amounted to commercial activity falling under the proviso to Section 2(15) and was not entitled to exemption under Section 11.

Deduction under Section 80P(2)(a)(i) of the Income-tax Act - Meaning of 'carrying on the business of banking' and 'providing credit facilities to members' - Application of Chapter VI A deduction on profits enhanced by specific disallowances - CBDT Circular No.37/2016 - clarification on deduction on enhanced profits

Deduction under Section 80P(2)(a)(i) of the Income-tax Act - Meaning of 'carrying on the business of banking' - Providing credit facilities to members - Assessee's eligibility for deduction under Section 80P(2)(a)(i) for the assessment years in question - HELD THAT: - The Tribunal accepted the CIT(A)'s factual and legal conclusion that the society is not a 'primary co-operative bank' within the meaning of Part V of the Banking Regulation Act, 1949 because it does not satisfy the first cumulative condition of engaging in the business of banking (i.e., accepting deposits from the public at large) and does not hold an RBI banking licence. The society's bye laws restrict acceptance of deposits and lending to members only, and there is no finding or evidence that it accepts deposits or lends to the public generally. In consequence, the society falls within the scope of a co operative society carrying on the business of providing credit facilities to its members and is therefore eligible for the deduction envisaged by Section 80P(2)(a)(i). [Paras 11, 12, 13, 16]

Assessee held eligible for deduction under Section 80P(2)(a)(i) for the relevant assessment years.

Application of Chapter VI A deduction on profits enhanced by specific disallowances - CBDT Circular No.37/2016 - clarification on deduction on enhanced profits - Whether additions/disallowances made by the Assessing Officer (provision for bad and doubtful debts and provision for gratuity) preclude allowance of the Chapter VI A deduction (Section 80P) on the profits as enhanced by such disallowances - HELD THAT: - The Tribunal observed that the additions disallowed by the AO (provision for bad and doubtful debts and provision for gratuity) are specific disallowances related to the business activity against which the Chapter VI A deduction under Section 80P was claimed. The Tribunal applied the clarificatory position recorded in CBDT Circular No.37/2016, which accepts that where disallowances are related to the business activity, the Chapter VI A deduction is to be allowed on the profits as enhanced by such disallowance. Relying on the Circular and consistent tribunal precedent, the Tribunal held that the enhanced profits (after AO's disallowances) do not defeat the assessee's entitlement to deduction under Section 80P and allowed the appeals on this ground. [Paras 17, 18, 19]

Deductions under Chapter VI A (including Section 80P) are to be allowed on profits enhanced by the specific disallowances made by the AO; the additions are therefore not a bar to the assessee's Section 80P deduction.

Final Conclusion: The Tribunal allowed the appeals for AYs 2009-2010 and 2010-2011, holding that the assessee is eligible for deduction under Section 80P(2)(a)(i) and that Chapter VI A deduction is admissible on profits as enhanced by the specific disallowances, having regard to CBDT Circular No.37/2016.

Deduction under section 54F - ownership of residential property - admission of additional evidence - remand for fresh consideration

Deduction under section 54F - ownership of residential property - admission of additional evidence - remand for fresh consideration - Disallowance of deduction claimed under section 54F was not finally adjudicated and the matter was remanded for fresh consideration. - HELD THAT: - The Assessing Officer denied the claim of deduction under section 54F on four stated grounds, the principal one being that the assessee owned another flat at Ahmedabad as reflected in the balance sheet as at 31.03.2013. The CIT(A) confirmed the disallowance but did so solely on the first ground, accepting the inference from the balance sheet entry that the assessee had two residential properties. The assessee subsequently sought to adduce additional evidence to show that the Ahmedabad booking did not result in final allotment and therefore did not constitute ownership of a residential house at the material time. Because the lower authority did not consider the other grounds recorded by the AO and did not examine the additional evidence now produced, the Tribunal set aside the order and remanded the matter to the CIT(A) with directions to admit and consider the additional evidence and to decide all grounds on the merits after giving the assessee an opportunity of hearing.

Remitted to the CIT(A) to admit and consider the additional evidence and to decide all grounds on the merits after affording an opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The tribunal set aside the CIT(A)'s order confirming denial of deduction under section 54F and remitted the matter to the CIT(A) for fresh consideration of the additional evidence and all grounds raised by the Assessing Officer; appeal allowed for statistical purposes.

Registration under section 12AA - genuineness of objects and proposed activities - refusal of registration for absence of past activities - proposed activities as part of 'activities' for registration - irrelevance of subscription quantum alone for denial of registration

Registration under section 12AA - genuineness of objects and proposed activities - refusal of registration for absence of past activities - Validity of the CIT(E)'s refusal to grant registration under section 12AA on the ground that no activities had been carried out by the society. - HELD THAT: - The Tribunal held that section 12AA requires the Commissioner to be satisfied about the genuineness of the trust's objects and the genuineness of its activities, and that the term 'activities' for the purpose of registration includes proposed activities. Relying on the observations in Ananda Social & Educational Trust v. CIT (Supreme Court), the Tribunal found that the CIT(E) erred in treating absence of past activities as a ground to refuse registration. The CIT(E) had not recorded any adverse finding that the society's objects were not charitable or that any activities carried out were not in accordance with its objects. Therefore the CIT(E) enlarged the scope of his mandate by holding that registration could not be granted merely because activities had not yet been undertaken, which is not tenable where proposed activities are in issue.

The refusal to grant registration solely because the society had not carried out activities was set aside and held to be invalid.

Irrelevance of subscription quantum alone for denial of registration - registration under section 12AA - Whether the CIT(E) could refuse registration on the basis that the subscription fees prescribed in the society rules were 'too high'. - HELD THAT: - The Tribunal held that the mere quantum of subscription or membership fee, absent any corroborating finding that the fees rendered the activities non-charitable or that the society's activities were not genuine, is not a valid ground to refuse registration under section 12AA. The CIT(E)'s observation on the amount of subscription was held to be irrelevant to the statutory test of genuineness of objects and proposed activities for registration.

Denial of registration on the sole ground of subscription amounts was held unjustified.

Final Conclusion: The order of the CIT(E) rejecting the application for registration under section 12AA was set aside: the Tribunal found the reasons recorded by the CIT(E) to be invalid and directed the CIT(E) to grant registration to the society.

Exemption under section 54F of the Income tax Act, 1961 - transfer within the meaning of section 2(47)(vi) of the Income tax Act - registered transfer deed relates back to date of agreement for the purposes of transfer - ownership for the proviso to section 54F - effect of joint or fractional ownership - deposit in Capital Gains Account Scheme and subsequent investment as compliance with section 54F

Transfer within the meaning of section 2(47)(vi) of the Income tax Act - registered transfer deed relates back to date of agreement for the purposes of transfer - Validity and date of transfer of assessee's 50% share in the Malibu Town property pursuant to Agreement to Sell dated 01.11.2013 and subsequent registered transfer deed. - HELD THAT: - The Tribunal found that the assessee entered into a genuine Agreement to Sell on 01.11.2013 transferring his 50% share in the Malibu Town property to his son, which was later culminated in a registered transfer deed dated 27.06.2018. Applying the inclusive definition of "transfer" in section 2(47)(vi) read with section 269UA, and having regard to the law that a registered document operates from the time it would have commenced to operate if no registration had been required, the registered deed operates with retrospective effect to the date of the Agreement. The Tribunal recorded that material indicia - the agreement, part consideration, subsequent registration, and offer of rental income by the transferee - supported the genuineness of the transaction; the authorities below had not produced evidence sufficient to show the agreement was not acted upon. Minor procedural irregularities (e.g., timing of credit of cheque, maintenance entries) did not negate the substance of the transfer. On these findings the conditions of section 54F as to not owning more than one residential house on the date of transfer were satisfied insofar as the Malibu Town share was treated as transferred on 01.11.2013. [Paras 8]

The transfer effected by Agreement to Sell dated 01.11.2013 (fortified by the registered deed) is a valid transfer within section 2(47)(vi); the registered deed is to be treated as operating from the date of the Agreement and, therefore, the assessee did not own that residential property on the date of transfer of the original asset for the purposes of section 54F.

Ownership for the proviso to section 54F - effect of joint or fractional ownership - exemption under section 54F of the Income tax Act, 1961 - Whether a 50% co ownership of a residential property disqualifies an assessee from claiming exemption under the proviso to section 54F. - HELD THAT: - The Tribunal held alternatively that even if the transfer were not treated as having taken effect before the date of the capital asset sale, the assessee's 50% co ownership of the Malibu Town residential unit did not amount to "own[ing] more than one residential house" within the proviso to section 54F. The Tribunal adopted the view that the word "own" in the proviso must be given its literal meaning and does not, by itself, encompass partial or fractional ownership so as to disqualify an assessee; thus a co owner with a fractional share cannot be equated with an exclusive owner for the purpose of the disqualification. On that basis and having regard to precedents and the facts (50% share), the assessee would still satisfy the eligibility requirement of section 54F. [Paras 8]

A 50% joint/fractional ownership in the second residential property does not, by itself, disqualify the assessee from claiming exemption under section 54F; accordingly the assessee remains eligible for the deduction.

Final Conclusion: The Tribunal set aside the orders of the lower authorities, held that the transfer to the son pursuant to the 01.11.2013 Agreement (subsequently registered) was a valid transfer within section 2(47)(vi) and/or that a 50% co ownership does not disqualify the assessee under the proviso to section 54F, and directed the Assessing Officer to allow the exemption under section 54F; other contentions (e.g., commercial use) were left undecided as academic.

Validity of reassessment notice issued during subsistence of earlier reassessment proceedings - Reopening assessment beyond four years and proviso to section 147 - Failure to disclose fully and truly all material facts as condition for time barred reopening - Sanction by Commissioner under section 151 of the Income tax Act requiring application of mind

Validity of reassessment notice issued during subsistence of earlier reassessment proceedings - Second notice under section 148 issued during pendency of earlier reassessment proceedings is invalid. - HELD THAT: - The Tribunal examined the chronology and found that after issuance of the first notice under section 148 on 02/07/2008 no reassessment order was passed and those proceedings remained pending when a second notice was issued on 29/03/2011. Reliance on High Court precedents established that once reassessment proceedings initiated by a notice under section 148 are pending, no further notice under section 148 can be validly issued. Applying that principle to the undisputed facts, the second notice issued during the subsistence of earlier reassessment proceedings was contrary to law and accordingly invalidates the subsequent proceedings arising therefrom. [Paras 6, 7]

Second notice dated 29/03/2011 issued under section 148 is invalid and the proceedings arising therefrom are vitiated.

Reopening assessment beyond four years and proviso to section 147 - Failure to disclose fully and truly all material facts as condition for time barred reopening - Reassessment initiated after expiry of four years is unsustainable where reasons do not show failure by the assessee to disclose fully and truly all material facts necessary for assessment. - HELD THAT: - The Tribunal noted that the second reassessment was initiated after the four year period had expired. The proviso to section 147 permits reopening beyond four years only in specified circumstances, including failure to disclose material facts. The reasons recorded for reopening do not indicate such a failure; they do not disclose which material fact was withheld or how income escaped assessment for A.Y. 2004 05. Citing authoritative decisions, the Tribunal held that vague or non specific reasons cannot be supplemented and do not satisfy the statutory safeguard against arbitrary reopening. Accordingly, the reassessment did not meet the proviso's conditions and is liable to be quashed. [Paras 8, 9, 10]

Reopening beyond four years is unsustainable as the recorded reasons do not show failure to disclose material facts; reassessment is quashed on this ground.

Sanction by Commissioner under section 151 of the Income tax Act requiring application of mind - Permission granted by the Commissioner to initiate reassessment was mechanical and without application of mind, rendering the notice invalid. - HELD THAT: - The Assessing Officer's communication to the Commissioner recorded that earlier reassessment proceedings were time barred and advised that reopening could not be done; despite this the Commissioner accorded sanction on 25/03/2011 without recording satisfaction or addressing the Assessing Officer's observations. Precedents require that sanctioning authority examine whether the statutory conditions for reopening exist and apply independent mind before granting approval. In the present facts the Commissioner did not do so and the sanction therefore suffers from non application of mind, vitiating the subsequent notice and proceedings. [Paras 11, 12, 13]

CIT's approval for reopening was given mechanically without application of mind and is therefore invalid; consequent proceedings are vitiated.

Final Conclusion: The reassessment proceedings arising from notice dated 29/03/2011 are quashed as suffering from multiple legal defects (invalid issuance during subsistence of earlier reassessment, failure to satisfy proviso to section 147 for time barred reopening, and mechanical sanction by the Commissioner). Grounds 1-5 of the appeal are allowed and the remaining grounds on merits are rendered academic.

Allowability of interest expenditure against interest income - nexus between expenditure and income - deduction under section 57(iii) of the Income Tax Act - deduction under section 37(1) of the Income Tax Act - classification of interest income as business income

Allowability of interest expenditure against interest income - nexus between expenditure and income - deduction under section 57(iii) of the Income Tax Act - Whether the assessee was entitled to deduct interest paid against interest received under the head 'Income from Other Sources' as falling within section 57(iii). - HELD THAT: - The Tribunal examined the particulars of interest received and interest paid and held that netting of interest income and interest expenditure is necessary for correct determination of taxable income. Having considered the accounts and list of parties, the Tribunal found that contrary to the view of the lower authorities there was sufficient connection between funds borrowed and funds lent so as to permit deduction of the interest expenditure against the interest receipts. On this factual basis the Tribunal concluded that the assessee established the requisite nexus and allowed the deduction under section 57(iii). [Paras 7]

Deduction of the interest paid is allowable against the interest received under section 57(iii).

Classification of interest income as business income - deduction under section 37(1) of the Income Tax Act - Whether, if the interest income is treated as business income, the interest paid is allowable as business expenditure under section 37(1). - HELD THAT: - The Tribunal dealt with the alternate finding of the authorities that the assessee's activity of lending constituted a business. It held that even on that premise the interest paid to earn the interest receipts would qualify as an expenditure incurred wholly and exclusively for the purpose of business and thus be allowable under section 37(1), subject to the assessee discharging the onus of proof. Having allowed the expenditure in principle, the Tribunal refrained from finally deciding the question of the proper head under which the income should be taxed and limited itself to holding that the expenditure is allowable in either characterization. [Paras 8, 9]

If interest income is treated as business income, the interest paid is allowable as a business deduction under section 37(1); in any event the expenditure is allowable in principle.

Final Conclusion: The appeal is allowed: the interest expenditure claimed is allowable-either as deduction under section 57(iii) against income from other sources or, alternatively, as a business expenditure under section 37(1) if the interest income is treated as business income; the Tribunal declines to adjudicate finally on the head under which the income is taxable.

Exemption under section 54F - construction of a residential house vs acquisition of a residential house - interpretation of the expression "a residential house" - retrospective/clarificatory amendment - liberal construction of tax exemptions - disallowance of business expenses without supporting evidence

Exemption under section 54F - interpretation of the expression "a residential house" - construction of a residential house vs acquisition of a residential house - Whether the assessee could claim exemption under section 54F in respect of investments made in two distinct residential properties situated at different locations. - HELD THAT: - The Tribunal examined precedent authorities construing the phrase "a residential house" liberally to include multiple units or adjacent flats treated as a single residential house. It noted, however, that those authorities concerned properties which were physically part of the same building or complex (adjacent/stacked units or divisible parts of the same structure). The Tribunal observed an amendment narrowing the language to "one residential house" effective from 01.04.2015 and rejected the Revenue's contention that the amendment was merely clarificatory and therefore retrospective. Applying the statutory text, the legislative change and the facts of the case, the Tribunal held that investments in two geographically separate and distinctly identifiable properties cannot be treated as constituting "a residential house" for the purposes of section 54F. The Tribunal therefore allowed exemption in respect of the investment in the Ansal property and amounts placed in the capital gains account scheme/bonds, and held that the amount invested in construction of the Jungpura property (a separate location) did not qualify for exemption and was exigible to tax as capital gains. [Paras 10, 11, 16, 17, 18]

Exemption under section 54F allowed in respect of investment in the Ansal property and amounts in the capital gains account; investment in construction at Jungpura (separately located) is not eligible and is taxable as capital gains.

Disallowance of business expenses without supporting evidence - burden on Assessing Officer to prove payments are bogus - Whether 50% of salary expenses paid to employees could be disallowed by the Assessing Officer. - HELD THAT: - The Assessing Officer disallowed half of the salary expense on the basis of receipt amounts. The Tribunal found no material on record to demonstrate that the salary payments were bogus or unsupported. Absent evidence impugning the genuineness of the payments, the Tribunal held that such salary expenditure could not be disallowed. [Paras 19]

The disallowance of 50% of salary expenses is deleted.

Final Conclusion: The appeal is partly allowed: exemption under section 54F is restricted to the Ansal investment and amounts deposited in the capital gains account; the construction expenditure at Jungpura is taxable as capital gains. The Assessing Officer's disallowance of 50% of salary expenses is deleted.

Reopening of assessment - reason to believe - reassessment under section 147 - fresh tangible material - estimation of income from bogus purchases - taxation of profit element of accommodation entries - restriction of addition to profit element - applicability of precedents for estimating gross profit

Reopening of assessment - reason to believe - fresh tangible material - reassessment under section 147 - Validity of reopening assessment and issue of notice under section 148 resulting from information received from DGIT (Investigation) and Sales Tax Department. - HELD THAT: - The Tribunal examined whether the Assessing Officer had 'reason to believe' that income had escaped assessment so as to validly initiate reassessment proceedings. The Assessing Officer relied on information from the DGIT (Investigation), which in turn received material from the Sales Tax Department indicating that the assessee had taken accommodation entries from certain hawala dealers. The Tribunal held that such information constituted fresh tangible material on which a reasonable person could form a prima facie belief of escapement of income. At the initiation stage the requirement is 'reason to believe' and not a judicially established fact of escapement; therefore the Assessing Officer had cause or justification to invoke section 147 and issue notice under section 148. The Tribunal found no merit in the assessee's challenge to reopening and rejected those grounds. [Paras 5]

Reopening of assessment upheld; notice under section 148 held valid.

Estimation of income from bogus purchases - taxation of profit element of accommodation entries - restriction of addition to profit element - applicability of precedents for estimating gross profit - Correctness and quantum of addition made by estimating profit @12.5% on alleged bogus purchases recorded as accommodation entries. - HELD THAT: - Both the Assessing Officer and the CIT(A) had treated purchases from specified parties as accommodation entries and, following precedent and investigational material, estimated and added 12.5% as gross profit on the total alleged bogus purchases. The assessee produced basic evidence (books, stock details, bank statements) but did not conclusively substantiate genuine purchases to the satisfaction of the AO; conversely, the AO did not complete independent enquiries to a logical conclusion and relied primarily on information from investigative and Sales Tax authorities. Considering prior decisions which tax only the profit element embedded in such purchases and noting that the rate of 12.5% was not supported by case-specific evidence and appeared high given the nature of the assessee's business, the Tribunal exercised its discretion to determine a reasonable estimate. Having regard to the facts and consistent coordinate decisions permitting a range of 10%-15% in appropriate cases, the Tribunal concluded that 12.5% was on the higher side for the present facts and directed that the addition be restricted to 5% of the alleged bogus purchases. [Paras 6, 7, 8]

Addition confirmed in principle as limited to profit element, but reduced from 12.5% to 5% of the alleged bogus purchases; appeal partly allowed on this ground.

Final Conclusion: Reopening of assessment for AY 2010-11 upheld as based on fresh tangible material and valid 'reason to believe'; the addition for alleged bogus purchases is to be confined to the profit element and, on the facts of the case, reduced from 12.5% to 5% of the purchases, resulting in the appeal being partly allowed.

Merchandise Export from India Scheme (MEIS) - amendment of shipping bills - inadvertent mistake in declaration - procedural defect v. substantive eligibility - Section 149 of the Customs Act - amendment of documents - transmission to Director General of Foreign Trade (DGFT) - duty credit scrips

Merchandise Export from India Scheme (MEIS) - inadvertent mistake in declaration - procedural defect v. substantive eligibility - transmission to Director General of Foreign Trade (DGFT) - Whether the exporter is entitled to claim MEIS benefits despite the shipping bills containing 'N' in the reward-transmission column where the shipping bills otherwise record the intention to claim MEIS and the incorrect entry was an inadvertent mistake. - HELD THAT: - The CESTAT found, on the materials produced, that the respondent had in fact declared the intention to claim MEIS in the shipping bills and that the only lapse was marking 'N' instead of 'Y' in the reward column. The Tribunal treated the mistake as a procedural defect and allowed the MEIS claim. This Court, following earlier decisions of the High Court in similar circumstances where an identical inadvertent error was apparent on the face of the shipping bill, agreed with the Tribunal's conclusion. Having examined Annexure 1, the Court accepted that the declaration of intent was made and that the incorrect marking was inadvertent; accordingly the Tribunal's allowance of the MEIS claim was not interfered with. The Court emphasised that such cases turn on the material on record showing intent and the nature of the mistake rather than on a rigid formulaic denial. [Paras 3, 5]

The Tribunal's finding that the respondent was entitled to MEIS benefit despite the inadvertent 'N' entry is upheld.

Section 149 of the Customs Act - amendment of documents - amendment of shipping bills - Whether amendment of shipping bills to correct the reward-transmission entry is permissible and the statutory constraint under Section 149 applies. - HELD THAT: - The Court reproduced Section 149 and observed that amendments to shipping bills are permissible only in accordance with the proviso to that provision, which requires documentary evidence existing at the time of export when goods have been exported. The Court made clear that judicial permission to allow amendment in a given case does not create a general right to amendment; amendments must conform to the conditions laid down in Section 149. In the present case the appellant did not contest existence of the conditions required by Section 149, and therefore there was no basis to deny amendment here. The Court thus applied Section 149 as a limiting principle while upholding the Tribunal's order. [Paras 6, 7, 8]

Amendment of the shipping bills is subject to the conditions in Section 149; in the present case, absence of any challenge to those conditions meant amendment could not be denied.

Final Conclusion: The appeal is dismissed. The CESTAT's order allowing the respondent to claim MEIS benefits (despite an inadvertent 'N' entry) is maintained, subject to compliance with the amendment conditions in Section 149 of the Customs Act; no costs.

Extension of period under proviso to Section 110(2) of the Customs Act, 1962 - requirement of opportunity of hearing before extension - reasons to be recorded in writing - effect of amendment by Finance Act, 2018 on proviso to Section 110(2) - effect of Ordinance No.2 of 2020 on statutory time-limits - recording of reasons by administrative authority to avoid arbitrariness

Extension of period under proviso to Section 110(2) of the Customs Act, 1962 - requirement of opportunity of hearing before extension - effect of amendment by Finance Act, 2018 on proviso to Section 110(2) - Whether, after the 2018 amendment to the proviso to Section 110(2), the Principal Commissioner/Commissioner may extend the six month period without affording an opportunity of hearing to the person from whom goods were seized. - HELD THAT: - The Court contrasted the unamended proviso, which authorised extension "on sufficient cause being shown" (construed by earlier decisions to require consideration of material and an opportunity to be heard), with the amended proviso (post Finance Act, 2018) which empowers the Principal Commissioner/Commissioner to extend the period "for reasons to be recorded in writing" and to inform the person concerned before the expiry of the specified period. The Court held that the earlier line of authority (including I.J. Rao and decisions applying the unamended proviso) dealt with a different statutory test and thus their ratio cannot be mechanically applied to the amended provision. The determinative requirement under the amended proviso is the recording of reasons in writing and informing the person before expiry; the judgments construing the unamended phrase "on sufficient cause being shown" do not impose an independent, mandatory requirement of a pre extension hearing under the amended text. The Court also relied on the broader administrative law principle (from S.N. Mukherjee) that recording reasons serves to ensure fairness and guard against arbitrariness, but confined the statutory requirement to what the amended proviso prescribes. [Paras 11]

The amended proviso to Section 110(2) requires reasons to be recorded in writing and informing the person before expiry; it does not import the earlier, unamended requirement of a mandatory pre extension hearing as a separate statutory precondition.

Effect of Ordinance No.2 of 2020 on statutory time-limits - recording of reasons by administrative authority to avoid arbitrariness - extension of period under proviso to Section 110(2) of the Customs Act, 1962 - Whether the extension granted in this case complied with the amended proviso (including being made before expiry) and whether the subsequent communication delay prejudiced the petitioners, having regard to Ordinance No.2 of 2020. - HELD THAT: - The Court examined the chronology of seizure (16.10.2019) and the six month period (expiring 15.04.2020), the order of extension said to have been passed on 11.03.2020, and the Central Government's Ordinance/notification promulgated in the COVID 19 period extending certain statutory time limits. Having considered those materials, the Court found that, on the record before it, the extension was made in conformity with the amended proviso (with reasons recorded) and that the Ordinance operated to extend relevant timelines so that the petitioners' rights were not prejudiced by the fact that formal communication reached them later. The Court rejected the contention that late communication alone vitiated the extension where the extension order itself preceded expiry and reasons were recorded. [Paras 11, 13]

The extension as effected was valid in law; in the factual matrix (including the Ordinance extending time limits) the petitioners were not prejudiced by the timing of communication and the writ petition failed.

Final Conclusion: The writ petition is dismissed. The Court held that, in light of the 2018 amendment to the proviso to Section 110(2) and the contemporaneous Ordinance extending statutory timelines, the extension of the six month period was legally valid where reasons were recorded in writing and the extension was effected before expiry; prior case law construing the unamended proviso does not mandate a separate pre extension hearing under the amended provision.

Perjury - application under Section 340 Cr.PC - sub judice - preclusion of High Court proceedings by a superior court's consent order directing adjudication before CLB/NCLT - jurisdiction to entertain criminal proceedings touching upon matters pending before NCLT

Application under Section 340 Cr.PC - perjury - sub judice - jurisdiction to entertain criminal proceedings touching upon matters pending before NCLT - Maintainability of the petition under Section 340 Cr.PC in the High Court given that the central controversy (authenticity of the AGM minutes of 30.09.2006 and related company matters) is pending adjudication before the NCLT. - HELD THAT: - The petition alleging perjury and reliance on forged minutes directly and indirectly concerns the genuineness of the AGM minutes dated 30.09.2006, which the Supreme Court directed should be adjudicated by the Company Law Board/NCLT. The parties before the Supreme Court had agreed that the CLB/NCLT would decide the company petition and the application under Section 340 Cr.PC, and the Supreme Court's consent order expressly directed that the High Court need not proceed further with the Criminal Miscellaneous (Co.) petition. In light of that order and the ongoing proceedings before the NCLT, the High Court concluded that it is not proper to entertain the present petition and that adjudication by the forum chosen by the Supreme Court must be permitted to run its course. The Court therefore declined to proceed with the Section 340 petition and dismissed it on maintainability grounds, without expressing any view on the merits of the alleged perjury. [Paras 21, 22, 23, 24, 25]

Petition under Section 340 Cr.PC dismissed as not maintainable in the High Court because the matters alleged are sub judice before the NCLT per the Supreme Court's order; no view expressed on merits.

Preclusion of High Court proceedings by a superior court's consent order directing adjudication before CLB/NCLT - remand for adjudication before NCLT - Consequences of the Supreme Court's consent order and the forum for further adjudication of disputes between the parties, including the Section 340 Cr.PC application. - HELD THAT: - The Supreme Court's consent order directed the CLB (now NCLT) to decide Company Petition No.114 of 2007 within a stipulated time and specified that the High Court need not proceed with related criminal applications including the Section 340 petition. The High Court observed that the parties themselves had proposed that the company petition and related issues (including alleged forgery of AGM minutes and the Section 340 application) be decided by the CLB/NCLT. Consequently, the High Court held that those issues are to be adjudicated by the NCLT and indicated that, if any of the issues raised in the present petition survive after conclusion of NCLT proceedings, the petitioner remains free to approach the High Court in accordance with law. [Paras 17, 22, 23]

The genuineness of the AGM minutes and the application under Section 340 Cr.PC are to be adjudicated by the NCLT as directed by the Supreme Court; the High Court will not proceed while those matters remain pending before the NCLT.

Final Conclusion: The petition seeking prosecution under Section 340 Cr.PC is dismissed as the disputes concerning the AGM minutes and related company matters are sub judice before the NCLT pursuant to the Supreme Court's consent order; the High Court refrains from expressing any view on the merits and the petitioner may, if necessary, approach the NCLT and thereafter the High Court in accordance with law.

Jurisdiction of Debt Recovery Tribunal under Section 17 of the SARFAESI Act - overriding bar on ordinary courts by Section 34 of the SARFAESI Act - limitation for foreclosure proceedings under Article 63(a) of the Limitation Act - status of secured creditor as being outside the winding up and right to enforce security - maintainability of appeals by erstwhile directors in liquidation proceedings

Jurisdiction of Debt Recovery Tribunal under Section 17 of the SARFAESI Act - overriding bar on ordinary courts by Section 34 of the SARFAESI Act - status of secured creditor as being outside the winding up and right to enforce security - Whether a challenge to enforcement proceedings initiated under the SARFAESI Act can be entertained by the Company Court or this Court in appeal, or must be raised before the DRT under Section 17 of the SARFAESI Act. - HELD THAT: - The Court held that proceedings under the SARFAESI Act constitute a separate code and that challenges to steps taken by a secured creditor under the SARFAESI Act are required to be made under Section 17 before the Debt Recovery Tribunal. The SARFAESI regime, having overriding effect, bars ordinary courts from adjudicating matters within the DRT's jurisdiction; even the Official Liquidator, as borrower, must avail the remedy under Section 17. The Court noted the established position that a secured creditor stands outside winding up and is entitled to realize its security, subject to the statutory safeguards for workmen's dues contained in the Companies Act, which the SARFAESI Act itself harmonizes with; accordingly the Company Court's role is limited to ensuring compliance with Sections 529/529A when possession from the Official Liquidator is sought for sale by the secured creditor. The consequence is that the present appeal, which seeks to litigate the bar of limitation to SARFAESI steps, is not maintainable before this Court and the appellant must approach the DRT. [Paras 16, 17, 18, 19, 20]

Challenge to SARFAESI proceedings must be raised before the DRT under Section 17; the Company Court/this Court cannot entertain the said challenge in appeal.

Limitation for foreclosure proceedings under Article 63(a) of the Limitation Act - limitation for suits enforcing payment secured by mortgage under Article 62 of the Limitation Act - Which Article of the Limitation Act (Article 62 or Article 63(a)) is prima facie applicable to enforcement proceedings under the SARFAESI Act where the underlying debt was secured by mortgage/charge. - HELD THAT: - The Court observed that Article 62, which governs suits to enforce payment of money, is not apposite to proceedings under the SARFAESI Act, which are akin to foreclosure of mortgage; prima facie Article 63(a), providing a longer period for actions founded on a charge or mortgage, applies rather than Article 62. The Court, however, declined to finally determine the limitation point on merits so as not to prejudice any remedy the appellant may pursue before the DRT, restricting itself to the prima facie view that Article 63(a) is the relevant provision. [Paras 11, 20]

Prima facie Article 63(a) and not Article 62 of the Limitation Act would apply to the kind of enforcement proceeding under consideration; the Court did not finally decide the limitation question and left it to be addressed before the DRT.

Maintainability of appeals by erstwhile directors in liquidation proceedings - Whether the appeal filed by the appellant in his stated capacity is maintainable. - HELD THAT: - The Court recorded that an appeal by an erstwhile director (described by the appellant as ex-director), even if asserting shareholding, is not maintainable to challenge the Company Court's order in liquidation proceedings. The bench relied on precedent and noted that appeals by erstwhile directors in insolvency/liquidation are impermissible. On this ground, together with lack of jurisdiction to entertain the SARFAESI challenge, no merit was found in the appeal. [Paras 21, 22, 24]

The appeal is not maintainable insofar as it is prosecuted by the appellant in the capacity of an ex-director; appeal dismissed.

Final Conclusion: The appeal is dismissed: challenges to SARFAESI enforcement must be prosecuted before the DRT under Section 17 (Section 34 bars ordinary courts), the Court expressed a prima facie view that Article 63(a) of the Limitation Act is applicable (but did not decide the limitation point finally), and the appeal is also not maintainable as prosecuted by an erstwhile director.

Limitation and condonation under Section 61 of the Insolvency and Bankruptcy Code - requirement of certified copy for filing appeals - no power to extend limitation beyond the additional fifteen days in proviso to Section 61 - performance guarantee not being a security interest under the IBC - moratorium under Section 14 not applicable to a surety in a contract of guarantee - interim relief against invocation of bank/performance guarantee

Limitation and condonation under Section 61 of the Insolvency and Bankruptcy Code - requirement of certified copy for filing appeals - no power to extend limitation beyond the additional fifteen days in proviso to Section 61 - Maintainability of the appeal in view of delay and absence of application for condonation of delay - HELD THAT: - The Appellate Tribunal held that appeals under Section 61 must be filed within thirty days and that the proviso permits condonation for an additional period not exceeding fifteen days only upon satisfaction of sufficient cause. The appellant did not file any application for condonation nor adduce evidence to substantiate the asserted non-availability of the certified/free copy; the claim of delay caused by non-issuance or late upload of unsigned/corrected orders was unsupported by affidavit or proof. Rule 22 NCLAT Rules requiring a certified copy was also noted. Reliance on Mobilox Innovations and the Tribunal's earlier decision was applied to conclude that the Tribunal lacks jurisdiction to extend beyond the combined 45-day period and cannot grant an automatic extension without an application showing sufficient cause. [Paras 3, 5, 7, 9, 11]

Appeal is not maintainable and is barred by limitation for want of any application or evidence for condonation of delay.

Performance guarantee not being a security interest under the IBC - moratorium under Section 14 not applicable to a surety in a contract of guarantee - interim relief against invocation of bank/performance guarantee - Whether interim relief should have been granted to restrain invocation of a performance bank guarantee furnished by bankers on behalf of the corporate debtor - HELD THAT: - The Tribunal examined the definition of security interest in the Code and noted the express proviso excluding a performance guarantee from the definition. It further observed that Section 14(3) expressly exempts a surety in a contract of guarantee from the moratorium's bar under Section 14(1). On that basis the Adjudicating Authority's decision declining to interfere with invocation of the performance guarantee (given in respect of another contract) was found to be legally correct. Consequently, even on merits interference with the impugned order refusing interim relief was not warranted. [Paras 12, 13, 14, 15]

No interference with the Adjudicating Authority's refusal to grant interim relief against invocation of the performance bank guarantee; impugned order affirmed on merits.

Final Conclusion: The appeal is dismissed: it is barred by limitation for want of an application and evidence for condonation of delay; on the merits the decision refusing interim relief against invocation of the performance guarantee is correct and requires no interference.

Resolution Plan approval under Section 31 I&B Code - Commercial wisdom of Committee of Creditors - Limitation for appeal under Section 61 I&B Code - Overriding effect of SEZ Act - Assessment of duties and penalties on exit under Rule 74 of SEZ Rules - Crystallisation of debt versus contingent assessment

Limitation for appeal under Section 61 I&B Code - Whether the appeal was barred by limitation under Section 61 of the I&B Code. - HELD THAT: - Section 61(1)-(2) prescribes a special period of 30 days for appeals to this Appellate Tribunal against orders under Part II of the I&B Code, extendable in exceptional cases by not more than 15 days (outer limit 45 days). For persons not party to the NCLT proceedings, the limitation period is to be reckoned from the date of knowledge of the order. In this case the impugned order was communicated to the Appellant by correspondence dated 29th November, 2019, so knowledge must be imputed from that date. Computation from 29th November, 2019 shows the appeal was filed well beyond the 45-day outer limit; consequently this Tribunal lacks jurisdiction to entertain the appeal and it is time-barred. The Appellant's contention of later knowledge is not accepted in view of documentary communication. [Paras 7, 8]

Appeal dismissed as hopelessly time-barred under Section 61 of the I&B Code.

Resolution Plan approval under Section 31 I&B Code - Commercial wisdom of Committee of Creditors - Overriding effect of SEZ Act - Assessment of duties and penalties on exit under Rule 74 of SEZ Rules - Crystallisation of debt versus contingent assessment - Whether the concession in the approved Resolution Plan (allocation for de notification/exit from SEZ) conflicted with the SEZ Act/Rules or unlawfully usurped the Development Commissioner's jurisdiction. - HELD THAT: - The SEZ Act contains an overriding provision; Rule 74 prescribes that duties and any penalty on exit from SEZ are to be assessed by the Development Commissioner at the time of exit. The approved Resolution Plan allocated an estimated sum for de notification based on internal assessment; the Plan expressly treated this figure as an estimate and recognised that the exact dues are to be quantified by the Development Commissioner under Rule 74. The I&B Code gives primacy to an approved Resolution Plan that meets Section 30(2) requirements and the commercial wisdom of the Committee of Creditors is to be respected unless the plan is in conflict with law. Here, no final quantification of duties was attempted by the Adjudicating Authority and the Plan did not crystallise or absolve the statutory assessment; it merely earmarked funds as an estimate to meet future assessment by the competent authority. Accordingly, there is no demonstrable conflict with the SEZ Act/Rules nor usurpation of the Development Commissioner's statutory role. [Paras 11, 13, 14, 15]

Concession in the Resolution Plan (allocation for de notification) does not contravene the SEZ Act/Rules and does not usurp the Development Commissioner's jurisdiction; the allocated sum is an estimate subject to assessment under Rule 74.

Resolution Plan approval under Section 31 I&B Code - Whether the Appellant could raise afresh a claim that had been rejected during the insolvency resolution process. - HELD THAT: - The Appellant's claim was rejected during the resolution process and the Appellant did not assail that rejection before the Adjudicating Authority. Parties who participated in the resolution process and had their claims adjudicated cannot seek to re open those determinations for the first time in an appeal against approval of the Resolution Plan. The Tribunal rejects the Appellant's attempt to raise the previously rejected claim at this stage. [Paras 16]

Appellant is not entitled to raise for the first time in this appeal the claim rejected during the resolution process; that contention is repelled.

Final Conclusion: The appeal is dismissed. It is time barred under Section 61 of the I&B Code and, on merits, the challenged concessions in the approved Resolution Plan do not offend the SEZ Act/Rules or usurp the Development Commissioner's statutory role; a previously rejected claim cannot be re raised in this appeal. No order as to costs.

Operational Debt - Resolution Plan binding on all stakeholders - Fresh slate doctrine for a successful resolution applicant - Failure to file claim during CIRP bars post-implementation claim - Power under Section 60(5) of the I&B Code to seek directions against a Resolution Professional

Operational Debt - Failure to file claim during CIRP bars post-implementation claim - Resolution Plan binding on all stakeholders - Fresh slate doctrine for a successful resolution applicant - Whether statutory dues claimed by the Excise & Taxation Officer, relating to pre-insolvency years, could be admitted or enforced against the successful resolution applicant after approval and implementation of the Resolution Plan despite the claim not having been filed during CIRP. - HELD THAT: - The Tribunal held that statutory dues such as VAT/Excise constitute Operational Debt and fall within the Resolution Plan's purview. The I&B Code requires that all pre-commencement debts be submitted and dealt with during CIRP so that a successful resolution applicant takes the corporate debtor on a "fresh slate". Reliance on the reasoning in the Essar Steel decision establishes that a resolution applicant cannot be saddled with "undecided" claims after the Resolution Plan has been approved and implemented. The approved Resolution Plan in the present case expressly provides that operational creditors shall have no rights against the acquiring company for amounts owed prior to the Effective Date and that pre-Effective Date proceedings shall be of no legal consequence insofar as the company is concerned. The Appellant failed to properly submit its proof of claim within the CIRP timeline; its later attempts and invocation of Section 60(5) could not uproot the binding effect of the approved plan. Given that contingent or unfiled claims were accounted for (given nil value) in the Resolution Plan and that the liquidation value of the Appellant's claim would in any event have been nil, permitting the late claim would defeat the statutory scheme and the purpose of the resolution process. [Paras 9, 10, 15, 17, 18]

The impugned order was upheld: the Appellant's belated claim could not be entertained against the acquiring company after approval and implementation of the Resolution Plan, and no interference with the Adjudicating Authority's order was warranted.

Final Conclusion: Appeal dismissed. The Tribunal affirms that statutory dues constituted operational debt but, having not been timely filed during CIRP and having been dealt with (including as nil) in the approved Resolution Plan, the Appellant cannot enforce those dues against the successful resolution applicant once the plan is approved and implemented.

Applicability of the Limitation Act to applications under Section 7 of the IBC - Article 137 of the Limitation Act (residuary period for applications) - date of accrual of right to apply - date of default - Section 18 Limitation Act - acknowledgment in writing - irrelevance of date of commencement of the IBC as trigger for limitation - inapplicability of Articles relating to suits for immovable property to Section 7 applications

Applicability of the Limitation Act to applications under Section 7 of the IBC - Article 137 of the Limitation Act (residuary period for applications) - date of accrual of right to apply - date of default - Whether the Section 7 application is within limitation - HELD THAT: - The Court held that the Limitation Act applies to Section 7 applications and that Article 137 (Part II of Third Division - residuary 'other applications') governs limitation for such applications. The right to apply accrues on the date of default; where default occurred more than three years prior to filing, the Section 7 application is time barred unless delay is condoned under the Limitation Act. Applying these principles to the admitted averment in the Section 7 application that the date of default was 08.07.2011 and the application was filed in March 2018, the Court found the application barred by limitation and liable to be rejected. [Paras 23, 24, 30, 31, 38]

The Section 7 application is barred by limitation and is rejected.

Section 18 Limitation Act - acknowledgment in writing - effect of pleaded acknowledgments on limitation - Whether Section 18 (acknowledgment) operated to extend limitation in this case - HELD THAT: - The Court observed that Section 18 can extend limitation where an acknowledgment in writing is pleaded and proved, but emphasised that such facts must be pleaded in the application and supported by evidence. In this case the Section 7 application expressly stated the date of default as 08.07.2011 and contained no pleading or evidence of any written acknowledgment or fresh date of default. Consequently the respondents could not invoke Section 18 to revive or extend limitation and the Court declined to permit after the fact reliance on acknowledgment not pleaded in the application. [Paras 32, 33, 34]

Section 18 does not assist the respondent because no acknowledgement was pleaded or relied upon in the Section 7 application.

Irrelevance of date of commencement of the IBC as trigger for limitation - inapplicability of Articles relating to suits for immovable property to Section 7 applications - Validity of NCLAT's alternate reasons that the right to apply accrued on 01.12.2016 or that mortgage limitation (12 years) applies - HELD THAT: - The Court disapproved NCLAT's reasoning that the right to apply arose only on commencement of the Code (01.12.2016) and that Articles applicable to suits on immovable property (e.g., Article 61/62) govern a Section 7 application. The Court reiterated that neither the Code nor the Limitation Act supports treating the date of the Code's commencement as the trigger, and that applications under Section 7 are not applications to enforce mortgage rights; Article 137, not mortgage related Articles, applies. The Appellate Tribunal's reliance on those alternate grounds was held to be legally unsound. [Paras 10, 35, 36, 37]

NCLAT's reasons that limitation began on 01.12.2016 or that mortgage suit limitation applies are rejected as contrary to law.

Final Conclusion: The appeal is allowed. The orders admitting the Section 7 application are set aside and the Section 7 application is rejected as barred by limitation; all proceedings flowing from its admission, including appointment of IRP and the moratorium, are annulled. Nothing decided herein affects other pending proceedings on their merits.

Withdrawal of resolution plan - Res judicata - Committee of Creditors' majority decision - Adjudicating Authority's jurisdiction under the Insolvency and Bankruptcy Code - Section 30(2)(d) - obligation to ensure implementation and supervision of resolution plan - Section 32A - immunity of a resolution applicant from pre CIRP offences - Actus curiae neminem gravabit - Outer time limit for CIRP and exceptional extension beyond 330 days

Res judicata - Constructive res judicata - Whether the application to withdraw the approved resolution plan was barred by res judicata/constructive res judicata - HELD THAT: - The Tribunal held that the reliefs sought in the subsequent withdrawal application were matters which could and ought to have been raised earlier and that the earlier dismissal operated as a final decision inter se the parties. The Tribunal analysed principles of res judicata and constructive res judicata, noting that an interlocutory or earlier dismissal operates as a bar when the relief is claimed and not granted, and that omitted claims cannot be asserted in a later proceeding. Applying these principles to the facts, the Tribunal concluded that the 1st respondent had omitted to seek withdrawal and refund in earlier proceedings and that the dismissal of CA No.1252(PB)/2019 attained finality and bound the parties; consequently CA No.1816(PB)/2019 was barred by res judicata/constructive res judicata. [Paras 76, 81, 82, 84, 86]

The Tribunal held that the withdrawal application was barred by res judicata/constructive res judicata.

Withdrawal of resolution plan - Committee of Creditors' majority decision - Adjudicating Authority's jurisdiction under the Insolvency and Bankruptcy Code - Section 30(2)(d) - obligation to ensure implementation and supervision of resolution plan - Whether the Adjudicating Authority was competent to permit withdrawal of an approved resolution plan and whether allowing withdrawal defeated the CoC's majority decision - HELD THAT: - The Tribunal held that once a resolution plan is approved by the Committee of Creditors, the Adjudicating Authority cannot permit withdrawal of that approved plan outside the statutory grounds prescribed in Section 30(2) of the Code. The Tribunal emphasised the statutory scheme: a resolution plan must satisfy the requirements of Section 30(2), be approved by the CoC, and then be submitted to the Adjudicating Authority for approval under Section 31; the Adjudicating Authority's role is limited to judicial scrutiny under Section 34. The NCLT had no jurisdiction to override or permit the successful resolution applicant to withdraw an approved plan merely because of delay or changed commercial considerations, and it cannot encroach on the majority decision of the CoC except on the statutory grounds. Accordingly, the impugned order allowing withdrawal and directing the RP and CoC to seek further resolution within an extended period was unsustainable. [Paras 94, 95, 96, 99]

The Tribunal held that the Adjudicating Authority lacked jurisdiction to allow the withdrawal of the approved resolution plan and set aside the impugned order permitting withdrawal.

Outer time limit for CIRP and exceptional extension beyond 330 days - Actus curiae neminem gravabit - Section 32A - immunity of a resolution applicant from pre CIRP offences - Whether delay in the CIRP, pending investigations (SFIO/CBI) or erosion of commercial substratum justified permitting withdrawal of the approved plan - HELD THAT: - The Tribunal observed that delay occasioned by the fact that orders were reserved by the Adjudicating Authority cannot be taken advantage of by a litigant because of the principle actus curiae neminem gravabit. The Tribunal noted the availability of exceptional extensions of the outer time limit in appropriate cases but held that mere pendency of investigations or commercial deterioration did not authorize the NCLT to permit withdrawal of a plan approved by the CoC. The Tribunal also noted that Section 32A confers immunity to a resolution applicant regarding pre CIRP offences, diminishing the force of the respondent's contention that investigations made implementation impossible. On these bases the Tribunal rejected delay and investigations as lawful grounds to permit withdrawal. [Paras 96, 97, 98]

The Tribunal held that delay and the existence of investigations did not justify permitting withdrawal of the approved resolution plan.

Final Conclusion: The appeal succeeds. The National Company Law Appellate Tribunal set aside the Adjudicating Authority's order dated 02.01.2020 allowing withdrawal of the approved resolution plan and holding that res judicata did not apply; the NCLAT held the withdrawal application was barred by res judicata, the NCLT lacked jurisdiction to permit withdrawal outside statutory grounds, and delay or pending investigations did not justify withdrawal. CA No. 1816(PB)/2019 is dismissed and the impugned order is set aside.

Time-barred debt - accrual of right to sue on occurrence of default - acknowledgement of liability under Section 18 of the Limitation Act - applicability of the Limitation Act to proceedings under Section 7 of the IBC - mandatory duty to examine limitation under Section 3 of the Limitation Act

Time-barred debt - accrual of right to sue on occurrence of default - applicability of the Limitation Act to proceedings under Section 7 of the IBC - Whether the Section 7 insolvency application was barred by limitation. - HELD THAT: - The Tribunal found that the Financial Creditor itself recorded the date of default as 31st December 2007 in Form-1 and admitted that consequence of default made all interest due and payable forthwith. Applying the principle that the right to sue accrues when default occurs, and following the Supreme Court's decisions that debts which are time-barred cannot form the basis for initiating CIRP under Sections 7 and 8 of the Code, the Tribunal concluded that the application filed on 26th February 2019 was barred by Article 137 of the Limitation Act. Having regard to the admitted dates and the law in B.K. Educational and related precedents, the Section 7 petition could not be maintained as the claimed debt had become time-barred. [Paras 12, 18, 26]

The Section 7 application was time-barred and the impugned admission order was set aside.

Acknowledgement of liability under Section 18 of the Limitation Act - accrual of right to sue on occurrence of default - Whether the Memorandum of Agreement executed on 18th April 2017 revived or renewed the limitation period for the debt. - HELD THAT: - The Tribunal examined the contention that the 2017 Memorandum constituted an acknowledgement in writing which would restart limitation. It observed the chronology: default first occurred in December 2007 and the alleged written acknowledgement was executed after a long lapse (18th April 2017). The Tribunal held that, on the facts, a fresh period of limitation did not accrue w.e.f. 18th April 2017 so as to revive the time-barred claim. The conclusion follows from the application of Section 18 of the Limitation Act principles to the admitted factual matrix and the authorities cited, which require that an acknowledgement operate only where it is made within the prescribed period. [Paras 19, 20, 21]

The 18th April 2017 Memorandum did not revive the limitation period and did not cure the bar.

Mandatory duty to examine limitation under Section 3 of the Limitation Act - Whether the plea of limitation can be considered at the appellate stage though it was not raised before the Adjudicating Authority. - HELD THAT: - Relying on the mandatory language of Section 3 of the Limitation Act and Tribunal precedents, the Bench held that limitation is a jurisdictional bar that the Appellate Tribunal must examine even if the defence was not pleaded below. The Tribunal therefore considered the limitation issue on merits and found the admission under Section 7 to be unsustainable on that ground. [Paras 14, 15, 25]

Limitation can be considered at the appellate stage and was held to bar the Section 7 petition.

Final Conclusion: The appeal is allowed; the Adjudicating Authority's order admitting the Section 7 petition is set aside as the claim was time-barred. The Adjudicating Authority is directed to pass appropriate orders regarding CIRP costs and the Corporate Debtor shall be governed by its Board of Directors.

Time barred debt under the Limitation Act - acknowledgement of liability and fresh period of limitation under Section 18 of the Limitation Act - effect of part payment on computation of limitation under Section 19 of the Limitation Act - mandatory obligation to examine limitation under Section 3 of the Limitation Act - admissibility of an application under Section 9 of the I&B Code in presence of a time barred claim - duty of Adjudicating Authority to consider statutory requirements of Section 9(3)(b) and 9(3)(c)

Time barred debt under the Limitation Act - admissibility of an application under Section 9 of the I&B Code in presence of a time barred claim - mandatory obligation to examine limitation under Section 3 of the Limitation Act - The Section 9 application was barred by limitation and the Adjudicating Authority erred in admitting the petition without deciding the limitation issue. - HELD THAT: - The admitted cause of action arose from non payment of an invoice dated 13th December 2011, the first date of default being 12th January 2012. Under the Limitation Act the right to sue accrues when default occurs and Article 137 prescribes the three year period; therefore the claim became time barred well before the Section 9 application was filed. Section 3 of the Limitation Act mandates that applications filed after the prescribed period are to be dismissed and obliges the Tribunal/Adjudicating Authority to examine limitation. The Adjudicating Authority admitted the petition without considering limitation and without applying the statutory test; that admission was therefore erroneous and unsustainable. [Paras 11, 17, 18, 23, 24]

Admission under Section 9 was set aside because the claim was barred by limitation and the Adjudicating Authority failed to discharge its obligation to examine limitation.

Acknowledgement of liability and fresh period of limitation under Section 18 of the Limitation Act - The balance confirmation dated 01st April 2017 did not revive or extend the period of limitation under Section 18 of the Limitation Act. - HELD THAT: - Section 18 sustains a fresh period of limitation only where the acknowledgement is made in writing before the prescribed period expires. The acknowledgement in this case is dated 01st April 2017 whereas the three year limitation from the date of first default had already expired; consequently the post limitation acknowledgement cannot operate to restart limitation and cannot validate a time barred claim. [Paras 12, 13, 14]

The 01st April 2017 balance confirmation does not confer any benefit under Section 18 and cannot cure the time bar.

Effect of part payment on computation of limitation under Section 19 of the Limitation Act - The alleged part payment on 30th May 2015 did not operate to compute a fresh period of limitation under Section 19 because it was made after the prescribed period had expired. - HELD THAT: - Section 19 provides that a fresh period of limitation is computed from the date of payment where such payment is made before the expiration of the prescribed period. The last payment relied upon by the Operational Creditor is stated to have been made on 30th May 2015, which, on the facts found, occurred after the limitation period had already run. Thus that payment cannot reset the limitation clock and does not save the barred claim. [Paras 20, 21, 22]

Part payment made after expiry of limitation does not extend or restart the limitation period; the claim remains time barred.

Final Conclusion: The admission of the Section 9 petition was set aside because the claim was time barred; post limitation acknowledgement and part payments did not revive limitation; the Adjudicating Authority ought to have considered Sections 9(3)(b)/(c) and the Limitation Act before admitting the petition. The matter is remitted for consequential orders including directions as to CIRP costs and governance of the corporate debtor by its Board.

Anticipatory bail under Section 438 Cr.P.C. - Concurrent jurisdiction of High Court and Court of Session to entertain Section 438 Cr.P.C. applications - Burden of proof under Section 24 of the Prevention of Money Laundering Act lies after framing of charge - Section 45 of the Prevention of Money Laundering Act does not apply to pre arrest/anticipatory bail proceedings - Requirement of custodial interrogation and its justification - Conditions and cooperation obligation incident to grant of anticipatory bail

Concurrent jurisdiction of High Court and Court of Session to entertain Section 438 Cr.P.C. applications - Maintainability of anticipatory bail applications filed directly before the High Court. - HELD THAT: - The Court held that both the High Court and the Sessions Court have concurrent jurisdiction to entertain applications under Section 438 Cr.P.C. and that an application may be filed directly before the High Court without first approaching the Court of Session. Reliance was placed on prior decisions of this Court and allied precedent to record that no person can be restrained from moving the High Court directly under Section 438 Cr.P.C.; accordingly the applications were held maintainable. [Paras 8, 16]

The anticipatory bail applications filed directly before the High Court are maintainable.

Burden of proof under Section 24 of the Prevention of Money Laundering Act lies after framing of charge - When the burden under Section 24 of PMLA shifts to the accused. - HELD THAT: - The Court examined the amended text of Section 24 and the introductory speech of the Minister to the Amendment Bill, concluding that the burden envisaged by Section 24 shifts to the accused only after framing of a charge. While acknowledging the prosecution's submission about the statutory burden, the Court accepted the legislative intent explanation that the term 'charged' contemplates a charge framed under the Code and therefore the presumption operates after charge is framed, not at the stage of mere investigation or pre charge proceedings. [Paras 9, 10, 11, 16]

Section 24's burden of proof will apply after framing of charge; it does not automatically shift at the pre charge/anticipatory bail stage.

Section 45 of the Prevention of Money Laundering Act does not apply to pre arrest/anticipatory bail proceedings - Applicability of the twin condition bail test under Section 45 PMLA to anticipatory bail under Section 438 Cr.P.C. - HELD THAT: - Relying on the Supreme Court's analysis in Nikesh Tarachand Shah, the Court held that Section 45(1) - which prescribes conditions for grant of bail to an accused arrested under PMLA - is not applicable to pre arrest/anticipatory bail proceedings under Section 438 Cr.P.C. The Court noted the anomalous and arbitrary results that would follow if Section 45 were to be applied to pre arrest bail, and observed that anticipatory bail remains available subject to the settled principles governing Section 438. [Paras 12, 13, 16]

Section 45 PMLA does not apply to applications for anticipatory bail under Section 438 Cr.P.C.

Requirement of custodial interrogation and its justification - Anticipatory bail under Section 438 Cr.P.C. - Whether custodial interrogation of the applicants was necessary and whether anticipatory bail should be granted. - HELD THAT: - The Court considered the stage and material of the investigation: the predicate case related to 2014-2015, the trial had progressed with many witnesses examined and no recovery from the applicants, departmental proceedings were absent, summons were issued after delay, and the Directorate's case rested largely on statements of two witnesses and data from a pen drive seized from a third person. The applicants had cooperated, given detailed statements and undergone interrogation. The prosecution did not convincingly demonstrate why custodial custody was required to further the investigation or prevent tampering. In light of these factors and applying the principles in Siddharam Mhetre and Sushila Aggarwal regarding discretionary grant of anticipatory bail, the Court found exceptional facts warranting anticipatory bail. [Paras 16, 17, 18]

Custodial interrogation was not shown to be necessary; anticipatory bail was granted to the applicants subject to conditions.

Conditions and cooperation obligation incident to grant of anticipatory bail - Terms to be imposed with the grant of anticipatory bail. - HELD THAT: - The Court exercised its discretion to impose conditions ordinarily permissible under Section 438 read with Section 437, tailored to the facts: furnishing of personal bond with solvent sureties, cooperation with investigation, prohibition on inducement/threat/promise to witnesses, obligation not to prejudice a fair and expeditious trial, and requirement to attend trial dates. These conditions were imposed as reasonable safeguards to balance liberty with the needs of investigation and trial. [Paras 17, 18]

Anticipatory bail is subject to specified bond, sureties and conditions of cooperation, non interference with witnesses and attendance at trial.

Final Conclusion: The High Court held the anticipatory bail applications maintainable and, applying settled principles on anticipatory bail and PMLA provisions, observed that Section 24's presumption operates after framing of charge and Section 45 does not inhibit pre arrest bail; finding custodial interrogation unnecessary on the material then before it, the Court granted anticipatory bail to the applicants on specified bonds and conditions, with directions to cooperate in the investigation and to appear for trial.

Quantified - admission in audit/enquiry as quantification of duty - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - binding nature of departmental circulars - natural justice and opportunity of hearing - remand to the Designated Committee for fresh decision

Quantified - admission in audit/enquiry as quantification of duty - eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Declaration under SVLDRS, 2019 held eligible where the duty liability was admitted to the audit team on or before 30th June, 2019, even if formal written audit memo was dated after that date. - HELD THAT: - The Court accepted the petitioner's case that the audit was concluded and the duty liability was determined and admitted orally to the audit team on 28th June, 2019. The Court relied on respondents' own averment that on 28.06.2019 the Audit Team concluded the audit and quantified and communicated the tax amount through computation sheets, and on the Audit Memo which records that the authorised signatory verbally agreed to the objections and to pay the tax liabilities. Applying the Scheme and the explanatory circulars, the Court held that such admission and communication before 30th June, 2019 amounted to the duty being "quantified" for eligibility purposes under the SVLDRS, 2019. The Court therefore concluded that the petitioner was not ineligible under the proviso which bars persons whose audit demands were not quantified on or before 30th June, 2019. [Paras 14, 15, 16, 17, 18]

Petitioner's duty liability was treated as quantified on or before 30th June, 2019 and the petitioner was eligible to file a declaration under SVLDRS, 2019.

Binding nature of departmental circulars - quantified - Circulars issued by the Central Board of Indirect Taxes and Customs expanding the meaning of "quantified" are binding and may be relied upon to determine eligibility under the Scheme. - HELD THAT: - The Court held that para 2(v) of the Board's Circular dated 12th December, 2019 and paras 4(a) and 10(g) of the Circular dated 27th August, 2019 reasonably extended the statutory concept of "quantified" to include cases where tax dues were quantified or admitted by the assessee on or before 30.6.2019. The Court noted precedents that departmental circulars are binding on the department and cannot be challenged by the department if inconsistent with the statute, and therefore treated the explanatory circulars and FAQs as operative for determining eligibility under the SVLDRS, 2019. [Paras 11, 12, 18]

The explanatory circulars and FAQs expanding the understanding of "quantified" are binding and support treating an admission before 30th June, 2019 as quantification for Scheme eligibility.

Natural justice and opportunity of hearing - remand to the Designated Committee for fresh decision - Rejection order quashed for want of natural justice; matter remanded to the Designated Committee to decide the petitioner's application afresh after giving an opportunity of hearing. - HELD THAT: - The Court found that the rejection dated 17th January, 2020 proceeded without affording the petitioner an opportunity to be heard and thus violated principles of natural justice. Although Section 127 of the Finance Act prescribes procedure for issuing estimates and affording hearing in certain circumstances, the Court directed that in light of its findings on eligibility and binding circulars, the Designated Committee should reconsider the petitioner's application and pass a reasoned order after giving the petitioner an opportunity of hearing. Timelines were fixed for listing before and for decision by the Designated Committee. [Paras 7, 19]

The rejection order is quashed and the matter is remanded to the Designated Committee for reconsideration after hearing the petitioner; a reasoned order to be passed within the time directed.

Final Conclusion: The writ petition succeeds: the Court held that an admission of duty to the audit team on or before 30th June, 2019 amounts to the duty being "quantified" for SVLDRS eligibility, upheld the binding effect of the Board's explanatory circulars, quashed the rejection order, and remitted the matter to the Designated Committee to decide afresh after giving the petitioner an opportunity of hearing within the timelines directed.

Transfer of property in goods - sale of software marketed on a media as goods - inclusion of charges necessary to make goods operational in transaction value - distinction between sale component and post sale service (customization/consultancy/AMC) - remand for fresh fact finding due to lack of application of mind by appellate authorities

Sale of software marketed on a media as goods - inclusion of charges necessary to make goods operational in transaction value - Whether consultancy/customization charges forming part of the transaction are includible in the taxable turnover as part of the sale value of the software sold on a media. - HELD THAT: - The Court examined precedents which hold that intellectual property when incorporated on a medium (CD/diskette) and marketed is 'goods' and that amounts indispensable to make imported goods usable (such as licence or technical know how) are includible in valuation. Applying the legal principles in Associated Cement Companies Ltd., ESSAR Gujarat Ltd. and Tata Consultancy Services, the Court reasoned that if the customization is imperative for the software to be operational for the purchaser, those customization/consultancy components would form part of the sale (value of goods) and be taxable as turnover. Conversely, customization that is genuinely post sale service (occasioned after an effective sale and not necessary to render the goods usable at delivery) would not be includible. The Court found that the appellate authorities did not apply their minds to the facts and documents to determine which category the transactions fell into and therefore refrained from making a final factual adjudication. [Paras 7, 8, 10, 13, 14]

Legal principles stated but matter of factual classification (whether customization is integral to the sale) remanded to the Tribunal for fresh consideration and adjudication on the documents and invoices produced.

Distinction between sale component and post sale service (customization/consultancy/AMC) - taxability of annual maintenance contract - Whether amounts received as annual maintenance contract (AMC) are taxable as part of sale turnover of the software. - HELD THAT: - The Court held that AMC would be taxable as part of sale turnover only if there is a sale of goods such that the AMC amounts form part of the sale consideration; however, where AMC relates to repair, maintenance or modifications occasioned after the sale and does not involve transfer of property in goods, it would constitute a service and not be includible in the sale value. Because the appellate authorities failed to examine the invoices and documentary record to determine whether a sale had occurred and whether AMC related to post sale services, the Court declined to decide the factual question and directed fresh fact finding by the statutory fora. [Paras 13, 14]

Question of taxability of AMC left for determination by the Tribunal after fresh consideration of facts; AMC not held taxable as a matter of law absent a finding of inclusion in the sale.

Remand for fresh fact finding due to lack of application of mind by appellate authorities - Whether the orders of the first appellate authority and the Tribunal require interference for absence of application of mind and inadequate consideration of factual materials. - HELD THAT: - The Court found that both appellate fora did not meaningfully apply their minds to the central factual question (whether customization/consultancy and AMC formed part of the sale value) and either relied on inapposite precedent (works contract jurisprudence) or failed to engage with the invoices and documents. Given the statutory scheme which entrusts original and appellate authorities with fact finding, and in view of the elapsed time, the Court directed that the Tribunal examine the documents produced by the parties and decide the factual questions in accordance with the legal principles identified in its judgment. [Paras 3, 4, 14]

Revisions allowed to the extent of setting aside the appellate orders for want of application of mind; matter remanded to the Tribunal for fresh adjudication of facts and issuance of a reasoned decision.

Final Conclusion: The Court stated the governing legal principles (software on media is capable of being 'goods' and charges indispensable to make goods operational may be included in transaction value) but, finding that the appellate authorities failed to apply their minds to the documentary record, set aside the impugned appellate orders and remanded the matters relating to inclusion of consultancy/customization charges and AMC in taxable turnover to the Tribunal for fresh consideration; parties to bear their respective costs.

Binding precedent of a higher appellate authority - judicial discipline of subordinate quasi judicial authorities to follow appellate orders - violation of principles of natural justice for non consideration of submissions - remand for de novo consideration with duty to pass a speaking order - no adjudication on merits where precedent governs procedure

Binding precedent of a higher appellate authority - judicial discipline of subordinate quasi judicial authorities to follow appellate orders - Whether the Assessing Authority was bound to follow the Appellate Authority's orders in the Petitioner's own case for Assessment Years 2013-14 and 2014-15 when deciding Assessment Year 2015-16. - HELD THAT: - The Court held that departmental/quasi judicial authorities are bound by the decisions of higher appellate authorities in the hierarchical adjudicatory structure and must follow such appellate orders unless they have been set aside or stayed by a competent forum. The Appellate Orders for Assessment Years 2013-14 and 2014-15 in the Petitioner's own case were neither modified nor stayed and addressed identical transactions. The Assessing Authority for Assessment Year 2015-16 failed to refer to, consider or distinguish those Appellate Orders despite specific submissions drawing them to its attention. That omission breached the principle of judicial discipline and rendered the Impugned Order unsustainable. [Paras 12, 13, 14, 15, 16]

Impugned order set aside because the Assessing Authority was bound to consider and follow the Appellate Authority's Orders and did not do so.

Violation of principles of natural justice for non consideration of submissions - speaking order requirement - Whether the Impugned Order violated principles of natural justice by failing to record or deal with the Petitioner's submissions regarding earlier appellate decisions. - HELD THAT: - The Court found that although a personal hearing had been granted, the Impugned Order contained no reference to the Petitioner's submissions dated 3rd February, 2020 or to the Appellate Orders for A.Y. 2013-14 and 2014-15, nor did it attempt to distinguish them. The absence of any reasoning in respect of those material submissions rendered the order non speaking on this crucial aspect and amounted to a breach of natural justice, justifying setting aside the order. [Paras 8, 9, 13, 14]

Impugned Order quashed for failure to consider and record submissions and for being non speaking on the binding appellate orders.

Remand for de novo consideration with duty to pass a speaking order - Relief to be granted and the remedial direction following quashing of the Impugned Order. - HELD THAT: - Given the Assessing Authority's failure to consider and apply binding appellate orders, the Court did not decide the substantive question whether the sales were in the course of import. Instead, the Court set aside the Assessment Order and notice of demand for A.Y. 2015-16 and remanded the matter to the Deputy Commissioner of State Tax for de novo consideration in accordance with law. On remand the authority is directed to hear the Petitioner, consider its submissions (including the Appellate Orders for A.Y. 2013-14 and 2014-15), and pass a reasoned speaking order while observing judicial discipline. The Court expressly refrained from relegating the Petitioner to the appellate remedy because of the special facts that the assessing authority ignored prior appellate orders without satisfactory reasons. [Paras 17, 18, 19]

Assessment order dated 20th March, 2020 and notice of demand set aside; matter remanded for fresh consideration and issuance of a speaking order in accordance with law.

No adjudication on merits where precedent governs procedure - Whether the Court would decide the substantive question of taxability of the sales under MVAT/CST in this petition. - HELD THAT: - The Court abstained from expressing any view on the substantive merits-i.e., whether the transactions constituted sales in the course of import-stating that it would not examine or express an opinion on those merits at this stage. The decision was confined to the procedural and legal infirmity arising from non observance of binding appellate orders and failure to record reasons; substantive questions were left open for adjudication on remand. [Paras 17]

No observation or decision on the substantive taxability issue; merits left open for fresh adjudication.

Final Conclusion: The Assessment Order dated 20th March, 2020 and the accompanying notice of demand for Assessment Year 2015-16 are set aside. The matter is remanded to the Deputy Commissioner of State Tax for de novo consideration after hearing the Petitioner and passing a reasoned speaking order, having regard to the Appellate Orders in Assessment Years 2013-14 and 2014-15 and the principles of judicial discipline; no decision is expressed on the substantive taxability.

Retrospective application of statutory amendment - Application of Section 3(4)(b) of TNVAT Act (retrospective effect) - Presumptive tax scheme versus regular assessment - Reversal of Input Tax Credit - Assessment revised on prospective basis and remand for fresh consideration - Doctrine of consistency in departmental decisions

Application of Section 3(4)(b) of TNVAT Act (retrospective effect) - Presumptive tax scheme versus regular assessment - Reversal of Input Tax Credit - Validity of the revised assessment levying tax at the higher rate on the entire turnover and reversing Input Tax Credit by treating the 2011 amendment as prospective rather than retrospective - HELD THAT: - The Court examined earlier Madras High Court decisions which held that the 2011 amendment to sub section (4) of Section 3 was intended to 'rectify' an anomaly arising from the 2006 amendment and therefore carried retrospective effect. Having regard to the Statement of Objects and Reasons and the principle of consistency (the revenue not having challenged the relevant earlier decision), the Court observed that giving purely prospective effect to the amendment (from 01.04.2012) may be incorrect. In view of these findings, the impugned assessment order treating the amendment as prospective and levying tax on the entire turnover with reversal of ITC could not be sustained without reconsideration. The Court therefore set aside the impugned order and remitted the matter to the assessing authority for fresh consideration on merits, applying the reasoning in this order and after affording the petitioner an opportunity of hearing. [Paras 4, 5]

Impugned assessment order set aside and the matter remanded to the respondent for fresh consideration and adjudication in accordance with the findings in this order, after giving the petitioner an opportunity of hearing.

Final Conclusion: The writ petition is allowed to the extent that the impugned order dated 25.05.2012 (TIN No.33514680061/2009-2010) is set aside and the matter is remanded to the respondent for fresh consideration and disposal within 12 weeks after affording the petitioner a hearing.