TaxTMI Updates e-Newsletter
Aug 21,2017

Summary order. The special leave petition is dismissed on the ground of delay.

Tax the right person - attribution of income to true owner despite family leases - inclusion of rental income where leases are bogus - double taxation and remedy by appropriate proceedings

Tax the right person - attribution of income to true owner despite family leases - inclusion of rental income where leases are bogus - Whether rental income received by sub-lessees could be assessed in the hands of the appellant when leases to family members were a device to show lesser income. - HELD THAT: - The authorities below recorded a clear finding of fact that the appellant had effected a device by executing nominal leases in favour of his wife, son and daughter in law and that those family members sub let the property at much higher rents. Applying the principle that the Assessing Authority must "tax the right person", and relying on the finding that the income in fact belonged to the appellant, the Court upheld the inclusion of the rental income in the hands of the appellant. Such findings of fact are not interfered with on appeal and it was permissible for the Income Tax Authorities to assess the income at the hands of the appellant as the true owner of the income. [Paras 4]

The assessment of the rental income in the hands of the appellant was upheld as permissible since the income in fact belonged to him despite family leases.

Double taxation and remedy by appropriate proceedings - Whether assessment of the same income at the hands of the family members led to double taxation and what remedy is available. - HELD THAT: - The Court noted that the Income Tax Authorities had also assessed the same income in the hands of the wife, son and daughter in law, whom the department itself regarded as the "wrong person". This results in double taxation on the same income. The Court observed that it remains open to those family members to seek appropriate redressal against taxation at their hands in the proper proceedings. [Paras 5]

Double taxation was recognised, and the family members were held entitled to seek relief in appropriate proceedings.

Final Conclusion: Leave granted; the findings that the leases were a device and the rental income belonged to the appellant were upheld and the appeals are disposed of. The Court recognised double taxation at the hands of family members and left it open to them to obtain redress by appropriate proceedings.

Full and true disclosure - income not disclosed before the Assessing Officer - settlement application under Section 245C(1) of the Income tax Act - proceeding of the Income Tax Settlement Commission under Section 245D(1) - withdrawal of previously claimed deductions resulting in income being offered to tax - scope of 'disclosure' in settlement proceedings

Full and true disclosure - income not disclosed before the Assessing Officer - withdrawal of previously claimed deductions resulting in income being offered to tax - Whether the Income Tax Settlement Commission was justified in declining to proceed with the petitioner's settlement application on the ground that no fresh income or source not earlier disclosed before the Assessing Officer was being offered to tax. - HELD THAT: - The Court held that Section 245C(1) requires an applicant to make a full and true disclosure of income which has not been disclosed before the Assessing Officer and the manner in which it was earned, but this does not compel the applicant to demonstrate a new source of income. An amount that was earlier claimed as a deduction in the return, and which the applicant withdraws before the Settlement Commission so that that amount is offered to tax, qualifies as income "not disclosed" before the AO for the purposes of settlement proceedings. The ITSC's approach treating only newly discovered sources of income as fulfilling Section 245C(1) was thus erroneous. The Court observed that the petitioner's Statement of Facts offered to withdraw certain deductions (ARO-related depreciation, unearned revenue, legal expenses, finance charges for bank guarantees and other inadvertent claims) and that such withdrawal suffices to meet the statutory disclosure requirement. The Court noted precedents to the same effect cited in the impugned order: Director of Income Tax (International Taxation) v. Income Tax Settlement Commission and CIT v. Vysya Bank Limited , and applied that principle to set aside the ITSC's refusal to proceed. [Paras 7, 9, 10, 11, 12]

The ITSC's order declining to proceed was set aside and the petitioner's settlement application was restored to the file to be proceeded with under Section 245D(1).

Final Conclusion: The writ petition is allowed: the ITSC's order dated 4 November 2016 is set aside and the petitioner's settlement application for AYs 2012-13 to 2016-17 is restored to the ITSC file for further proceedings under Section 245D(1).

Allowability of bad debts only if written off in books of account - treatment of stock write off/provision in computation of cost of goods sold and gross profit - alleged suppression of gross profit by addition on estimated GP rate - factual determination not amounting to substantial question of law

Allowability of bad debts only if written off in books of account - remand for verification of records - Whether the claim for bad debts could be disallowed for want of being written off in the books and whether a question arises for consideration in law. - HELD THAT: - The AO in the remand report had stated that bad debts are allowable only if written off in the books of account. The Revenue contended that the lower authorities did not examine whether the debts were actually written off. The assessee produced schedules forming part of the balance sheet showing that the debts were written off in the books. On production of those accounting records, the Court declined to frame any question on this issue and took the documents on record. The disposition shows the matter was resolved on production of book entries and did not give rise to an unresolved legal question requiring adjudication. [Paras 3, 4]

Claim for bad debts upheld as reflected in the books; no question framed and no further legal issue on allowability.

Treatment of stock write off/provision in computation of cost of goods sold and gross profit - alleged suppression of gross profit by addition on estimated GP rate - factual determination not amounting to substantial question of law - Whether an addition for suppression of gross profit was warranted in view of provision for stock written off and reconciliation of physical stock with accounts. - HELD THAT: - The CIT(A) noted that the lower gross profit arose due to provision for stock written off and found that the provision formed part of cost of sales which was already added back by the assessee in computing income. When the differential was adjusted, the gross profit rate increased above the AO's estimated rate. Given that the assessee had already offered the relevant amount to tax, the CIT(A) concluded no further addition was necessary. The High Court observed that this conclusion depended on factual reconciliation and accounting treatment and therefore did not raise any substantial question of law. [Paras 5, 6]

No further addition for suppression of gross profit; the matter is a factual determination and does not raise a substantial question of law.

Final Conclusion: Revenue's appeal dismissed; the disputed issues were resolved on the basis of accounting records and factual reconciliation, and no substantial question of law arises; no order as to costs.

Acquittal and scope of interference on appeal - Compliance with Oath Act, 1969 for recorded statements - Sanction to prosecute for offence under Section 181 IPC - Mens rea and voluntariness of statement - Due application of mind in institution of criminal complaint - Subsequent administrative/tribunal outcome as corroborative of absence of concealment

Acquittal and scope of interference on appeal - Compliance with Oath Act, 1969 for recorded statements - Sanction to prosecute for offence under Section 181 IPC - Mens rea and voluntariness of statement - Due application of mind in institution of criminal complaint - Subsequent administrative/tribunal outcome as corroborative of absence of concealment - Whether special leave to appeal should be granted against the trial Court's order of acquittal of the accused in complaint under Section 181 IPC - HELD THAT: - The High Court examined the trial Court's reasons and found no illegality or infirmity warranting interference. The trial Court held that the requirements of the Oath Act, 1969 were not complied with because the accused's statement was recorded in parts with breaks and the oath was not administered after every break; on that basis the Court concluded the offence was not proved. The trial Court also recorded that the sanction to prosecute under the provision relied upon was not properly proved. Further, the trial Court accepted evidence that the accused was hypertensive and in a nervous state during the recording of statement, which undermined any finding of deliberate falsehood and mens rea to attract criminal liability. The trial Court additionally found no material to show that the complainant had applied its mind sufficiently to justify prosecution. The High Court noted that a subsequent order of the Income Tax Appellate Tribunal deleting the addition supported the conclusion that there was no concealment of income. Applying the settled principle that an acquittal should not be upset unless the conclusions of the trial Court are unreasonable, perverse or unsustainable on the evidence, the High Court found the trial Court's conclusions to be the product of due application of mind and not open to interference.

Special leave to appeal refused; the trial Court's order of acquittal is maintained.

Final Conclusion: The application for special leave to appeal is dismissed; the High Court declines to interfere with the well reasoned acquittal by the trial Court for the stated deficiencies in oath administration, inadequacy of sanction proof, absence of mens rea and due application of mind, corroborated by the Tribunal's subsequent deletion of the tax addition.

Power of Assessing Officer to give effect to DRP directions without introducing new variations - binding nature of DRP directions and prohibition on fresh additions in the final assessment - scheme of section 144C as a self-contained code limiting Assessing Officer's jurisdiction - priority of set-off of losses vis-a -vis allowance of deduction under section 10A - requirement of opportunity of hearing where enhancement beyond draft order is proposed

Power of Assessing Officer to give effect to DRP directions without introducing new variations - binding nature of DRP directions and prohibition on fresh additions in the final assessment - priority of set-off of losses vis-a -vis allowance of deduction under section 10A - scheme of section 144C as a self-contained code limiting Assessing Officer's jurisdiction - Whether the Assessing Officer exceeded jurisdiction by disallowing deduction under section 10A on the ground of prior aggregation/set off of losses not proposed in the draft assessment or directed by the DRP. - HELD THAT: - The Court examined the special assessment scheme under s.144C and its sequential structure whereby the draft assessment sets out the proposed variations, the assessee may accept or file objections with the DRP, and the DRP issues directions which are binding on the Assessing Officer. The Court emphasised that s.144C(13) confines the Assessing Officer's role in the final assessment to giving effect to the DRP's directions without granting any further opportunity of hearing to the assessee. Expansion of issues in the final order beyond those proposed in the draft assessment or those enhanced by the DRP would defeat the statutory scheme and prejudice the assessee because no further hearing is to be afforded. The Court rejected the Revenue's contention that dealing with s.10A in another context in the draft order authorised the Assessing Officer to decide any ancillary aspect (such as priority of set off of losses) at the final stage; such a proposition was held overly broad and inconsistent with the limits imposed by s.144C. Drawing the distinction between the erstwhile s.144B and s.144C, the Court observed that s.144C contains an express provision (sub section (13)) restricting the Assessing Officer's independent action after DRP directions, a limitation not mirrored in s.144B. Applying these principles to the facts, the Court upheld the Tribunal's finding that the Assessing Officer's introduction of an aggregation/set off of losses prior to allowing the section 10A deduction was not contemplated in the draft order nor directed by the DRP and therefore was beyond his jurisdiction under s.144C(13). [Paras 16, 17, 18, 20, 21]

The Assessing Officer's variation in the final assessment disallowing the section 10A deduction by setting off brought forward losses-an adjustment not proposed in the draft assessment nor directed by the DRP-was held to be beyond his jurisdiction under the scheme of s.144C; the Tribunal's order in favour of the assessee is sustained and the departmental appeal is dismissed.

Final Conclusion: The Tax Case Appeal is dismissed. The questions of law are answered in favour of the assessee: the Assessing Officer could not, in the final assessment made in purported compliance with DRP directions under s.144C, introduce a fresh variation (priority of set off of losses) not contained in the draft order or directed by the DRP.

Characterisation of non compete fee as capital receipt or revenue receipt - colourable device / sham transaction and piercing the veil - restrictive covenant / non competition agreement - intangible asset - business or commercial rights eligible for depreciation under Section 32(1)(ii) - looking at the transaction as a whole (look at) versus piercing the veil (look through)

Characterisation of non compete fee as capital receipt or revenue receipt - colourable device / sham transaction and piercing the veil - restrictive covenant / non competition agreement - Taxability and true character of the sum of Rs. 75 lakhs received by the individual as non compete fee - HELD THAT: - The court examined the agreements and surrounding facts and concluded that the non compete payment was an illusion in the factual matrix of this case. Although a succession agreement and a separate artist agreement were executed, the assessee continued to retain effective control of the business as proprietrix and thereafter as a director with substantial shareholding; services remained available to third parties subject to the company's consent and a 5% remittance clause. The court applied the principle of piercing the veil articulated in K. Ramasamy v. CIT to hold that, given the continuity of control and identity of benefit, the transaction was colourable and the burden of proving genuineness was not discharged by the assessee. While noting authorities that require viewing the transaction as a whole, the court found the March-April 2000 agreements to be standalone incidents and not part of a bona fide reorganisation that would render the receipt capital. On these findings the substantial questions relating to the non compete fee were answered for the Revenue and against the assessee. [Paras 19, 21, 24, 26]

The non compete fee is not to be treated as a capital receipt in the facts of this case; the Revenue's appeal on this point is allowed.

Intangible asset - business or commercial rights eligible for depreciation under Section 32(1)(ii) - Whether brand equity valued at Rs. 75 lakhs is an intangible asset eligible for depreciation under Section 32(1)(ii) - HELD THAT: - The court held that the brand equity transferred to the company falls within the class of 'business or commercial rights of similar nature' envisaged by Section 32(1)(ii). The department's counsel conceded that the brand equity constituted such an intangible right, and the court noted supporting decisions recognising brand value as an intangible asset eligible for depreciation. On that basis the claim for depreciation on brand equity (and related non compete fee as an intangible right for the company) was upheld in favour of the assessee. [Paras 27, 29, 30]

Brand equity qualifies as an intangible asset under Section 32(1)(ii) and is eligible for depreciation; the Revenue's appeal on this point is dismissed.

Final Conclusion: The appeal by the Revenue in TC(A) No.1365 of 2007 is allowed insofar as the non compete fee received by the individual is held not to be a capital receipt; the appeal in TC(A) No.1175 of 2008 is dismissed, the company's claim that brand equity is an intangible asset eligible for depreciation being upheld. No order as to costs in either appeal.

Disallowance under Section 14A read with Rule 8D - computation of disallowance under Rule 8D - presumption that investments are from interest-free funds when such funds suffice - linking investment to source of funds

Disallowance under Section 14A read with Rule 8D - presumption that investments are from interest-free funds when such funds suffice - linking investment to source of funds - Whether the Tribunal erred in deleting the disallowance under Section 14A read with Rule 8D by treating the investment as covered by interest-free funds available with the assessee - HELD THAT: - The Tribunal found on the facts that the assessee's interest-free funds exceeded the amount of investment and therefore held that the investment could be presumed to have been made out of interest-free funds. Applying the ratio of this Court in Commissioner of Income Tax vs. Reliance Utilities and Power Ltd., the Tribunal concluded that no disallowance under Section 14A read with Rule 8D was warranted. The High Court agreed that the Tribunal correctly applied the precedent and that no separate exercise of linking interest expenditure to specific investments was required where interest-free funds were sufficient to cover the investments; accordingly the Tribunal's deletion of the disallowance was not in error. [Paras 4, 5]

Tribunal correctly deleted the disallowance; no error in applying the Reliance Utilities and Power Ltd. precedent.

Final Conclusion: No substantial question of law arises; appeal dismissed and the Tribunal's order deleting the Section 14A/Rule 8D disallowance is upheld.

Disallowance of expenditure attributable to exempt dividend income under Section 14A and computation under Rule 8D(2)(ii) and Rule 8D(2)(iii) - Application of Rule 8D where investments are made out of interest free own funds and assessee has net interest income - Disallowance under Section 36(1)(iii) for diversion of interest bearing borrowed funds into non productive investments - Consequences of availability of interest free surplus funds for characterisation of investments

Disallowance of expenditure attributable to exempt dividend income under Section 14A and computation under Rule 8D(2)(ii) and Rule 8D(2)(iii) - Application of Rule 8D where investments are made out of interest free own funds and assessee has net interest income - Whether disallowance under Rule 8D(2)(ii) was called for and whether disallowance could be restricted to 0.5% of total investments under Rule 8D(2)(iii). - HELD THAT: - The CIT(A) examined earlier findings for identical facts in earlier assessment years and concluded that investments were made out of the assessee's own interest free funds and not from borrowed funds; further, the assessee had substantial interest income giving rise to net interest income. On that basis the CIT(A) held that Rule 8D(2)(ii) was not applicable and restricted any disallowance to 0.5% of total investments under Rule 8D(2)(iii). The Tribunal found no material produced by Revenue to overturn those factual and legal conclusions, accepted the CIT(A)'s reasoning that borrowed funds were not used for the investments and that net interest income excluded the applicability of Rule 8D(2)(ii), and dismissed Revenue's ground attacking deletion of the addition. [Paras 3, 11, 12]

Confirmed the CIT(A)'s deletion of disallowance under Rule 8D(2)(ii) and restriction (as applied) to 0.5% of investments under Rule 8D(2)(iii).

Disallowance under Section 36(1)(iii) for diversion of interest bearing borrowed funds into non productive investments - Consequences of availability of interest free surplus funds for characterisation of investments - Whether interest paid on unsecured loans could be disallowed under Section 36(1)(iii) on the ground that borrowed funds were diverted into investment in another company. - HELD THAT: - The Assessing Officer treated unsecured loans as diverted into investment and disallowed interest. The CIT(A) found, and the Tribunal agreed, that the assessee had large interest free surplus funds and in the year under consideration earned substantial interest income resulting in net interest income; therefore the investment in the other company was inferentially made out of interest free funds and not out of the unsecured loans. Revenue produced no evidence to controvert the availability of surplus interest free funds. On these facts the Tribunal upheld the CIT(A)'s deletion of the disallowance under Section 36(1)(iii). [Paras 4, 5]

Confirmed deletion of the disallowance of interest under Section 36(1)(iii).

Final Conclusion: The appeal filed by the Revenue is dismissed; the orders of the CIT(A) deleting the additions under Rule 8D/Section 14A and under Section 36(1)(iii) for A.Y. 2010-11 are upheld.

Verification of creditors by test-check and remand proceedings - additions treated as unexplained credits under section 68 - disallowance of business expenditure for want of bills and vouchers under ordinary business principles (section 37 approach) - disallowance of payments exceeding prescribed limit under section 40A(3) - restoration of assessing officer's findings where appellate adjustment is self-contradictory

Verification of creditors by test-check and remand proceedings - additions treated as unexplained credits under section 68 - Deletion by CIT(A) of additions made by AO in respect of outstanding creditors (stone/GSB/hire charges) amounting to Rs. 92,19,029/- - HELD THAT: - The CIT(A) directed remand under the appellate power to have the AO examine and record statements of selected creditors. The AO filed a remand report with statements of nine creditors (eleven including earlier two), which confirmed transactions, identity documents and account particulars; the AO did not adversely comment on genuineness. The Tribunal held that, on this test-check verification, the assessee discharged the onus and the majority of the outstanding credits were verifiable; only amounts attributable to creditors who either failed to confirm or did not appear remained unexplained. The Tribunal therefore affirmed the CIT(A)'s deletion of the balance addition and confirmed a limited disallowance of the unverified amount. [Paras 5]

CIT(A)'s deletion of Rs. 92,19,029/- (leaving Rs. 1,98,458/- as unexplained) affirmed; Revenue's ground dismissed.

Disallowance of business expenditure for want of bills and vouchers under ordinary business principles (section 37 approach) - restoration of assessing officer's findings where appellate adjustment is self-contradictory - Restriction by CIT(A) of disallowance in respect of stone expenses to Rs. 1 lakh (out of larger disallowance) - HELD THAT: - The Tribunal observed that the CIT(A) accepted absence of bills and vouchers yet simultaneously restricted the disallowance on an ad hoc basis, which the Tribunal regarded as self-contradictory. In the absence of supporting bills or vouchers and given AO's specific findings, the Tribunal set aside the CIT(A)'s restrictive approach and restored the AO's disallowance on this issue. [Paras 6]

CIT(A)'s restriction to Rs. 1 lakh set aside; AO's disallowance restored. Ground allowed for Revenue.

Disallowance of business expenditure for want of bills and vouchers under ordinary business principles (section 37 approach) - Restriction by CIT(A) of disallowance out of labour expenses - HELD THAT: - The Tribunal noted that CIT(A) admitted improper record-keeping but reduced the AO's disallowance on an ad hoc basis. The AO's disallowance (5% of labour expenses) was held to be justified on the facts and the Tribunal restored the AO's finding, setting aside the CIT(A)'s reduction. [Paras 7]

CIT(A)'s restriction set aside; AO's disallowance restored. Ground allowed for Revenue.

Disallowance of business expenditure for want of bills and vouchers under ordinary business principles (section 37 approach) - Deletion by CIT(A) of addition in respect of sand expenses amounting to Rs. 3,05,455/- - HELD THAT: - CIT(A)'s decision on sand expenses followed the approach taken on stone expenses (ground no. 2). Because the Tribunal has restored the AO's finding on ground no. 2, it dismissed the Revenue's challenge to CIT(A)'s deletion of sand-expense addition for the same reasoning, thereby upholding the CIT(A)'s treatment as per the linkage with ground no.1/2. [Paras 8]

Revenue's ground dismissed; CIT(A)'s deletion sustained for the reasons linked to ground no. 1/2.

Disallowance of business expenditure for want of bills and vouchers under ordinary business principles (section 37 approach) - Deletion by CIT(A) of addition in respect of hire charges and crane loader expenses amounting to Rs. 76,978/- - HELD THAT: - CIT(A) deleted the addition on the basis that the AO had not pointed to any specific instance of fabrication and the expenditure appeared to be incurred on an ad hoc basis. The Tribunal found no infirmity in CIT(A)'s conclusion and affirmed the deletion. [Paras 9]

CIT(A)'s deletion affirmed; Revenue's ground dismissed.

Verification of creditors by test-check and remand proceedings - Deletion in part and confirmation in part of disallowance relating to JCB (Hot Mix Plant) expenses (AO addition partly confirmed, balance deleted) - HELD THAT: - CIT(A) recorded that one creditor initially denied transactions and later failed to appear; that portion was treated as unverified and the related addition was confirmed. For the remaining disputed amount, CIT(A) deleted the addition. The Revenue did not controvert the factual finding and the Tribunal found no reason to interfere with the factual conclusions reached by CIT(A). [Paras 10]

CIT(A)'s allocation (confirmation of unverified portion and deletion of balance) affirmed; Revenue's ground dismissed.

Disallowance of payments exceeding prescribed limit under section 40A(3) - Deletion by CIT(A) of addition made under section 40A(3) in respect of cash payment alleged to Shri Satya Narayan Nagar - HELD THAT: - CIT(A) relied on a revised statement of the payee retracting earlier testimony of cash receipts exceeding the statutory limit; the AO did not produce contrary material on remand. On these facts the Tribunal found no basis to overturn CIT(A)'s acceptance of the revised statement and affirmed the deletion of the addition under section 40A(3). [Paras 11]

CIT(A)'s deletion affirmed; Revenue's ground dismissed.

Final Conclusion: The Tribunal affirmed the CIT(A)'s deletions in respect of most additions after remand verification of creditors and on appraisal of testimony; however, it set aside CIT(A)'s ad hoc restrictions on stone and labour expenses and restored the AO's disallowances on those points. Overall the Revenue's appeal was partly allowed and partly dismissed.

Exemption under Section 80P(2)(a)(i) - co-operative society engaged in providing credit facilities to its members - distinction between co-operative credit society and co-operative bank; banking business versus providing credit facilities - exclusion under Section 80P(4) - co-operative bank not eligible for Section 80P benefits - exemption under Section 80P(2)(d) - interest on deposits with co-operative societies/banks - application of the principle of mutuality to interest income

Exemption under Section 80P(2)(a)(i) - co-operative society engaged in providing credit facilities to its members - distinction between co-operative credit society and co-operative bank; banking business versus providing credit facilities - exclusion under Section 80P(4) - co-operative bank not eligible for Section 80P benefits - Whether the assessee, being a co-operative credit society engaged in taking deposits from members and advancing loans to members, is eligible for exemption under Section 80P(2)(a)(i) and not excluded under Section 80P(4). - HELD THAT: - The Tribunal accepted the factual characterisation of the assessee as a co-operative credit society that provides credit facilities to its members and observed there was no finding or material to show that the society held a banking licence or was a co-operative bank in law. The Assessing Officer's approach of treating the society as a co-operative bank merely because its activities resembled banking was held to be a misnomer; Section 80P(4) cannot be invoked unless the society is established to be a co-operative bank in the eyes of law. Applying these principles, the CIT(A)'s conclusion that the assessee was entitled to exemption under Section 80P(2)(a)(i) was sustained and the Assessing Officer's denial of the exemption was reversed. [Paras 8]

The Revenue's disallowance under Section 80P(4) is rejected and the assessee is entitled to exemption under Section 80P(2)(a)(i).

Exemption under Section 80P(2)(d) - interest on deposits with co-operative societies/banks - application of the principle of mutuality to interest income - Whether interest earned by the assessee on deposits with other co-operative banks is eligible for exemption under Section 80P(2)(d) (and subsumed within Section 80P(2)(a)(i)). - HELD THAT: - The Tribunal found the plain wording of Section 80P(2)(d) covers interest received on deposits with other co-operative banks. The decision relied upon by the Ahmedabad Bench, which concerned interest from a commercial bank (State Bank of India), was distinguished on facts. Reliance was also placed on the Karnataka High Court authority that the term "co-operative society" can include a co-operative bank for the purpose of Section 80P(2)(d). On that basis the Tribunal directed that the interest on deposits with other co-operative banks be treated as exempt under Section 80P(2)(d) (and thereby allowable within the assessee's claim), setting aside the CIT(A)'s contrary conclusion. [Paras 9]

Interest on deposits with other co-operative banks is eligible for exemption under Section 80P(2)(d); the Assessing Officer is directed to allow the claim.

Final Conclusion: The Revenue appeal is dismissed and the assessee's appeal is allowed: the assessee is entitled to exemption under Section 80P(2)(a)(i) as a co-operative credit society and the interest on deposits with other co-operative banks is exempt under Section 80P(2)(d).

Application of tonnage tax regime and apportionment of common expenses - operation of second proviso to section 153A(1)(a) where original assessment had not abated - requirement of incriminating material from search to reopen issues which were finally adjudicated - binding effect of High Court precedent pending Special Leave Petition

Application of tonnage tax regime and apportionment of common expenses - requirement of incriminating material from search to reopen issues which were finally adjudicated - Deletion of additions made under assessment completed u/s 153A r.w.s. 143(3) arising from reassessment of apportionment of common expenses between tonnage and non-tonnage businesses. - HELD THAT: - The Tribunal accepted the factual finding that original assessments for the three years had been completed before the search and were not pending as on the date of search, and that the impugned additions were not founded on any incriminating material discovered during the search. Applying the ratio of the Bombay High Court in All Cargo Global Logistics Ltd., the Tribunal held that where an assessment has not abated, issues finally adjudicated in the original assessment cannot be reopened in proceedings under section 153A unless incriminating material emanating from the search justifies fresh additions. On the facts, the Assessing Officer's re-apportionment of common expenses on revenue basis and the consequential additions were therefore found to be unjustified and liable to be deleted for A.Y.2006-07, A.Y.2007-08 and A.Y.2008-09. [Paras 6, 9, 10]

The additions on account of re-apportionment of common expenses were deleted for each of the three assessment years.

Binding effect of High Court precedent pending Special Leave Petition - Whether the Revenue's contention that the Bombay High Court decision is not final because an SLP is pending detracts from the binding effect of that High Court ruling in the present appeals. - HELD THAT: - The Tribunal observed that the Revenue did not dispute the factual findings that the additions were not based on incriminating material. The Revenue's argument rested solely on the pendency of an SLP against the Bombay High Court decision relied upon by the CIT(A). The Tribunal held that the pendency of an SLP does not negate the subsisting binding nature of a High Court ruling for the jurisdiction; consequently, the High Court ratio as applied by the CIT(A) remained binding and was rightly followed to delete the additions. [Paras 11]

The plea based on pendency of SLP was rejected and did not affect the applicability of the Bombay High Court decision relied upon.

Precedential value of Tribunal's own earlier order in assessee's case - Effect of the Mumbai Bench Tribunal's earlier decision in the assessee's own case approving the system of allocation of expenses. - HELD THAT: - The CIT(A) had also relied on an earlier common order of the ITAT, Mumbai Bench (assessee's own matter) which approved the assessee's method of allocating common expenses. The Revenue did not challenge this aspect before the Tribunal; in these circumstances the earlier Tribunal decision lent additional support to deleting the additions. The present appeals therefore stood unsustainable on this ground as well. [Paras 10, 12]

The Tribunal's earlier order approving the assessee's allocation method, being unchallenged, supported deletion of the additions.

Final Conclusion: The Revenue's appeals are dismissed; the CIT(A)'s deletion of the additions made by the Assessing Officer in respect of apportionment of common expenses for A.Y.2006-07, A.Y.2007-08 and A.Y.2008-09 is affirmed.

Exemption under section 11 - application of section 13(1)(c) r.w.s. 13(2)(a) - application of section 13(2)(d) - acceptance of customary hospitality as expenditure for charitable purpose - remand for verification of evidence

Application of section 13(1)(c) r.w.s. 13(2)(a) - remand for verification of evidence - Validity of unsecured advance/loan shown as paid to the founder trustee and whether provisions of section 13(1)(c) r.w.s. 13(2)(a) are attracted - HELD THAT: - The assessment recorded that the society advanced Rs.8,15,000 to the founder trustee, with Rs.3,15,056 outstanding as on 31.03.2011, and the assessee's explanation before the AO was that the amount represented an advance for purchase of buses. The CIT(A) accepted documents produced before it (purchase agreement, committee resolution, payment evidence) and held the loan was for a genuine purpose, not attracting section 13(1)(c) r.w.s. 13(2)(a). The Tribunal found that the material relied on by the CIT(A) was not placed before the AO, the CIT(A) did not call for a remand report nor verify essential facts (such as whether buses were first or second hand or independent verification from the seller), and the paper book produced before the Tribunal lacked required certification. In the interest of justice and because the genuineness of the advance was not examined by the AO, the Tribunal set aside the CIT(A)'s finding and remitted the matter to the file of the Assessing Officer for fresh adjudication on merits and verification of the advance and related documents. [Paras 5]

Order of the CIT(A) on the unsecured advance is set aside and the issue is remitted to the Assessing Officer for fresh consideration and verification.

Exemption under section 11 - application of section 13(2)(d) - acceptance of customary hospitality as expenditure for charitable purpose - Whether free meals (73 meal coupons) provided to specified persons attract section 13(2)(d) and justify denial of exemption under section 11 - HELD THAT: - The AO treated 73 free meals provided to specified persons as personal benefit attracting section 13(2)(d) and denied exemption. The CIT(A) found the society is located in a remote area with no hotels, that meals were provided on customary grounds to officers and guests visiting for inspections and verifications, that the coupons were signed on the reverse side, and that the number (73 out of 3,236 meals or 2.26%) was small. The Tribunal found the CIT(A)'s explanation reasonable, observed no basis to treat those meals as personal consumption by specified persons unrelated to the society's objects, and declined to interfere with the CIT(A)'s acceptance of the expenditure as genuine for running the society. [Paras 6]

Revenue's appeal on denial of exemption in respect of 73 meal coupons is dismissed; exemption under section 11 stands allowed for that item.

Final Conclusion: The revenue appeal is partly allowed for statistical purposes: the CIT(A)'s acceptance of the meals expenditure is upheld and the challenge thereto is dismissed, whereas the CIT(A)'s acceptance of the unsecured advance is set aside and remitted to the Assessing Officer for fresh verification and decision on merits.

Estimation of income in absence of books - deduction of bund area / water spread for pisciculture income estimation - application of CBDT circular on water spread and bunds - disallowance under section 40A(3) in estimated assessment - substitutionary effect of estimated assessment (estimate takes into account deductions under ss.30 to 43D) - principles of natural justice in use of departmental information

Deduction of bund area / water spread for pisciculture income estimation - application of CBDT circular on water spread and bunds - estimation of income in absence of books - principles of natural justice in use of departmental information - Estimation of income per acre and the permissibility of excluding bund area (taking 70% as water spread) for assessment years 2006-07 to 2011-12. - HELD THAT: - The assessing officer estimated income per acre relying on information said to have been obtained from the Fisheries Department and applied a per-acre estimate without excluding bunds. The AO did not disclose the details of the Fisheries Department information to the assessee; reliance on such undisclosed material against the assessee was held to violate principles of natural justice and therefore could not be sustained. The CBDT circular treating bund area as 30% and water spread as 70% was held to remain applicable as a grading of area (the percentage water spread) though the specific per-acre monetary estimate of 1993 was not treated as sacrosanct for 2006-07 onwards. In the absence of books of account and of any evidence from either party disproving the figure adopted by the CIT(A), the Tribunal found the CIT(A)'s estimate - income computed at Rs.13,300 per acre of water spread (i.e., 70% of the AO's per-acre figure) - to be reasonable and upheld the CIT(A)'s direction to exclude bund area and estimate income on 70% water spread for the years in issue. [Paras 6]

Uphold the CIT(A)'s direction to exclude bunds and estimate income at Rs.13,300 per acre of water spread (70% of acreage); revenue's challenge on this ground dismissed.

Disallowance under section 40A(3) in estimated assessment - substitutionary effect of estimated assessment (estimate takes into account deductions under ss.30 to 43D) - estimation of income in absence of books - Validity of additions under section 40A(3) in respect of cash purchases of feed for assessment years 2007-08 to 2011-12 where income was assessed by estimation. - HELD THAT: - The AO made additions under section 40A(3) on the basis of seized account copies showing cash payments allegedly exceeding the limit. The Tribunal noted there was no evidence that the expenditure was debited to the assessee's profit and loss account, and the assessee did not maintain books. More fundamentally, the Tribunal applied the settled principle that where income is estimated in substitution of computation under sections 30 to 43D, that estimate is intended to take into account the relevant deductions and disallowances; consequently separate additions under section 40A(3) cannot generally be made after an estimate. The Tribunal followed jurisdictional High Court authority to this effect and, in the absence of evidence establishing that the payments were debited in the assessee's books, held that the revenue had not sustained the burden to make the disallowance. [Paras 11, 12]

Confirm deletion of the additions under section 40A(3); revenue's appeals on this ground dismissed.

Final Conclusion: The Tribunal dismissed the revenue appeals: the CIT(A)'s estimate of income at Rs.13,300 per acre of water spread (after excluding bunds) for AYs 2006-07 to 2011-12 was upheld, and the additions under section 40A(3) for AYs 2007-08 to 2011-12 were deleted as not sustainable in an assessment made by estimation.

Estimation of income in absence of books - net profit estimation at 5% of purchases in IMFL trade - rejection of books of account - addition on account of unexplained investment / unexplained cash credits - proof of identity, creditworthiness and genuineness of creditors - admission of additional evidence

Estimation of income in absence of books - net profit estimation at 5% of purchases in IMFL trade - rejection of books of account - Estimation of net profit in the assessee's IMFL trade - HELD THAT: - The Tribunal examined the assessing officer's estimation of net profit at 20% on sales and the CIT(A)'s restriction to 10%, and considered coordinate-bench decisions holding that, in similar IMFL trade circumstances, net profit should be estimated at 5% of purchases net of deductions. The Tribunal found the A.O.'s reliance on a High Court decision concerning arrack dealers inapt on facts and accepted the ratio of the coordinate bench directing estimation at 5% of purchases. No contrary decision was placed on record by the revenue to justify a different rate. Accordingly the matter was remitted to the A.O. with a direction to estimate profit at 5% of purchases net of all deductions. [Paras 9]

Set aside the CIT(A)'s order and direct the A.O. to estimate net profit at 5% of total purchases net of all deductions.

Addition on account of unexplained investment / unexplained cash credits - proof of identity, creditworthiness and genuineness of creditors - admission of additional evidence - Validity of addition of unexplained investment of Rs. 32,31,704 and admissibility of belated confirmations - HELD THAT: - The A.O. treated a portion of opening-day investment as unexplained and added it to income; the CIT(A) confirmed the addition. The assessee sought to place 43 confirmations on record before the Tribunal, explaining non-filing earlier as beyond his control. The Tribunal found the explanations for non-submission before the A.O. and CIT(A) unconvincing and afterthoughts, noting opportunities were afforded and that the assessee had not furnished names/addresses to establish identity, creditworthiness or genuineness of creditors during assessment proceedings. Reliance was placed on precedent that an A.O. may invoke provisions relating to unexplained credits even where income is estimated. Accordingly the application for additional evidence was rejected and the addition upheld. [Paras 10]

Reject application for admission of additional evidence; uphold the addition of the unexplained investment.

Addition on account of unexplained investment / unexplained cash credits - proof of identity, creditworthiness and genuineness of creditors - Validity of addition of Rs. 5,00,000 alleged to be loans from named persons - HELD THAT: - The A.O. added Rs. 5 lakhs received from two persons as unexplained where the assessee failed to produce confirmations, addresses, PANs or evidence of creditworthiness despite claiming payment by pay order/banker's cheque. The Tribunal found no infirmity in the authorities' conclusions in the absence of supporting particulars and evidence and therefore sustained the addition. [Paras 13]

Uphold the addition of Rs. 5,00,000 as unexplained income.

Final Conclusion: The appeal is partly allowed: the estimation of net profit in the IMFL business is to be reworked by the A.O. at 5% of purchases net of deductions; additions for unexplained investment and unexplained receipts are upheld and the petition to admit belated confirmations is rejected.

Seizure of imported goods - provisional release of seized goods - writ of certiorari - mandamus for provisional release - infructuousness of writ upon subsequent adjudication - availability of alternate remedy by appeal against adjudication

Infructuousness of writ upon subsequent adjudication - availability of alternate remedy by appeal against adjudication - seizure of imported goods - provisional release of seized goods - Whether the writ petition seeking quashing of seizure and mandamus for provisional release survived after the adjudication order was passed. - HELD THAT: - The Court recorded that an adjudication order dated 20th July, 2017 had been passed by the Joint Commissioner rejecting the declared assessable value of the imported goods covered by the bill of entry dated 3rd May, 2017, reassessing customs duty liability and directing recovery of interest and penalty. In view of that adjudication, the primary reliefs sought in the writ petition - quashing of the seizure and mandamus for provisional release - had become infructuous. The Court observed that contentions raised in the petition, including the legality of the seizure, and other grounds available to the petitioner are matters which can be raised in the statutory appeal against the adjudication order, and therefore need not be examined in the writ proceedings.

The writ petition was disposed of as the main prayers no longer survived in light of the adjudication order; the petitioner was left to raise its grounds, including the legality of the seizure, in the appeal against that adjudication.

Final Conclusion: The petition was disposed of because the adjudication order rendered the main reliefs sought infructuous; the petitioner may pursue its remedies by way of appeal against the adjudication order.

Invalidity of amendment of a lapsed subordinate notification - Power to extend anti-dumping duty under Section 9A(5) of the Customs Tariff Act - Sunset review of anti-dumping duty - Doctrine of unjust enrichment

Invalidity of amendment of a lapsed subordinate notification - Power to extend anti-dumping duty under Section 9A(5) of the Customs Tariff Act - Sunset review of anti-dumping duty - Validity of Notification No.37 of 2015 which amended Notification No.76 of 2010 after the latter had lapsed on 25.7.2015. - HELD THAT: - The court applied the ratio of the Supreme Court in Union of India v. M/s. Kumho Petrochemicals Co., which held that once an earlier notification imposing anti-dumping duty has expired at the end of its five year life, there is no subsisting notification which can be amended and the Central Government has no power to issue an amendment after expiry. The facts in the present petition-initiation of sunset review on 22.7.2015, and issuance of Notification No.37 of 2015 on 6.8.2015 amending Notification No.76 of 2010 which had lapsed on 25.7.2015-are materially identical to the situation considered by the Supreme Court. Applying that principle, the High Court held that amendment of a non existent (lapsed) notification is without legal authority and therefore liable to be quashed. [Paras 5, 6]

Impugned Notification No.37 of 2015 dated 6.8.2015 is quashed and set aside.

Doctrine of unjust enrichment - Refund of anti-dumping duty paid after expiry of notification - Whether petitioners are entitled to refund of anti-dumping duty paid after 25.7.2015 and the applicability of the doctrine of unjust enrichment to such refunds. - HELD THAT: - The court declined to grant an immediate direction for unconditional refund. It observed that the question whether the doctrine of unjust enrichment applies to anti dumping duty collected under Section 9A of the Customs Tariff Act requires consideration in accordance with law and noted the coordinate bench decision in Commissioner of Customs (Imports), Mumbai v. Kanakia Constructions Pvt. Ltd., which restored the issue for fresh consideration by the Tribunal. The Court read the Delhi High Court and Supreme Court observations to mean that entitlement to refund, even where an amending notification is set aside, remains subject to the legal requirement of demonstrating that unjust enrichment is not attracted. Consequently, the matter of entitlement to refund was left to be determined in accordance with law. [Paras 7, 8, 9, 11]

Petitioners may be granted refund of anti-dumping duty paid after 25.7.2015 if they establish entitlement in accordance with law; respondent directed to refund if so entitled after due compliance with legal requirements.

Final Conclusion: The petition is allowed: Notification No.37 of 2015 (6.8.2015) amending Notification No.76 of 2010 is quashed; any refund of anti dumping duty paid after 25.7.2015 is not granted automatically but must be granted by the respondent if the petitioners establish entitlement in accordance with law.

Refund of wrongly collected customs duty - exemption notification - finality of assessment / bill of entry - non-filing of appeal against assessment not a bar to refund - lawful collection of duty - no substantial question of law

Refund of wrongly collected customs duty - exemption notification - non-filing of appeal against assessment not a bar to refund - finality of assessment / bill of entry - The respondent/importer was entitled to refund of customs duty paid on import where the officer assessed duty notwithstanding an applicable exemption notification and the refund could not be refused merely because the bills of entry were not challenged. - HELD THAT: - The assessee imported consignments but did not claim an available exemption; the assessing officer nevertheless proceeded to assess and collect duty despite the prevailing exemption notification. The Court applied the principle that where duty has been paid in the absence of an assessment lis and where the collection could not lawfully have been made in the first place, the refund claim cannot be rejected solely on the ground that no appeal was filed against the bills of entry which had attained finality. The Appellate Commissioner and the Tribunal had allowed the refund on that basis, and the High Court found the Tribunal's order to be unexceptionable, noting that the duty could not validly have been collected and that existing precedent supported refund in such circumstances. [Paras 2, 3]

Refund claim allowed; refusal of refund on the sole ground of non-challenge to bills of entry rejected.

Final Conclusion: The appeal is dismissed; the Tribunal's affirmation of the Appellate Commissioner's allowance of the refund stands and no substantial question of law is made out.

Interpretation of "bag type filter arrangements" in a notification - eligibility for exemption under Notification No. 21/2002-Cus. - requirement of importation of specified components as condition precedent to exemption

Interpretation of "bag type filter arrangements" in a notification - requirement of importation of specified components as condition precedent to exemption - eligibility for exemption under Notification No. 21/2002-Cus. - Whether the respondents were entitled to exemption under Notification No. 21/2002 despite importing only filter bags and procuring the filter housing locally, i.e., whether import of filter bags alone satisfies the description 'bag type filter arrangements'. - HELD THAT: - The Tribunal concurred with the Commissioner (Appeals) that the sole controversy was the meaning of the phrase 'bag type filter arrangements' as used in Sl. No. 230, List 18 of Notification No. 21/2002 and whether non-import of the housing component defeats the claim for exemption. The appellate authority examined the catalogue and the function and use of the imported filter bags in the hot mix plant and held that the notification refers to the bag filter arrangement in substance and does not mandate importation of the housing component as a separate prerequisite. Since the goods were imported for road construction and their character and function as bag filters were not disputed, denial of exemption on the narrow ground that the housing was procured locally would frustrate the purpose of the notification. The Tribunal found no reason to differ from that conclusion and upheld the Commissioner (Appeals)'s interpretation and satisfaction that the conditions of the notification were met.

The respondents are eligible for the exemption under Notification No. 21/2002 even though the housing for the bag filters was procured locally; import of the filter bags satisfied the description 'bag type filter arrangements'.

Final Conclusion: The impugned order of the Commissioner (Appeals) allowing benefit of Notification No. 21/2002 to the respondents is upheld; the departmental appeal is dismissed.

Oppression and mismanagement - alteration of the Memorandum of Association - increase in authorised share capital - issue and allotment of shares by way of dilution - special resolution requirement for alteration of memorandum - offer of further shares to existing shareholders (pre-emptive/rights issue principle) - notice of general and board meetings - inadmissibility of Certificate of Posting as proof of service - restitutionary relief: cancellation of allotments and reinstatement of shareholding - specific performance of Memorandum of Understanding

Oppression and mismanagement - issue and allotment of shares by way of dilution - alteration of the Memorandum of Association - Acts of convening meetings to increase authorised capital, altering the memorandum and articles, and allotting fresh shares amounted to oppression and mismanagement against the petitioner. - HELD THAT: - The Tribunal found that the petitioners, who effectively held the controlling block prior to the impugned acts, were reduced to a minority by the subsequent issue and allotment of shares. The Court applied established authority that an issue of shares which disturbs the existing majority will be scrutinised and will amount to oppression unless shown to be unavoidable, bona fide and necessary for the survival of the company. The impugned alterations to the memorandum and the allotments were not established to be an unavoidable emergency measure taken in the interest of the company; instead the process by which the authorised and issued capital were increased and fresh shares allotted resulted in dilution of the petitioner's effective shareholding and disturbed the existing balance of power. Having regard to these facts and authorities, the Tribunal concluded that the conduct complained of constituted oppression and mismanagement.

Findings of oppression and mismanagement sustained; the impugned increase in authorised capital, alteration of the memorandum and the allotments are set aside.

Notice of general and board meetings - inadmissibility of Certificate of Posting as proof of service - Notices of the meetings convened for effecting the alterations and allotments were not properly served on the petitioner. - HELD THAT: - The Tribunal rejected the respondents' reliance on Certificates of Posting as sufficient proof of service, noting that such certificates are not admissible to establish authenticity of posting and that no other credible evidence of service was produced. The impugned notices were alleged to have been sent on the same day as the meetings and in circumstances that rendered service implausible. Because notice of meetings is mandatory before passing resolutions affecting share capital and the memorandum, and no reliable proof of proper service was shown, the meetings and the resolutions passed in their course were held to be invalid.

Notices were not properly served; resolutions passed in the absence of valid notice are invalid.

Restitutionary relief: cancellation of allotments and reinstatement of shareholding - specific performance of Memorandum of Understanding - Appropriate relief is cancellation of the impugned allotments and related resolutions, reinstatement of the petitioner's pre-dilution shareholding, refund of amounts paid by allottee parties, and enforcement of the MoU by effecting the share transfer to Libra with payment as agreed. - HELD THAT: - Having held the impugned meetings, alterations and allotments invalid for want of proper notice and for constituting oppression, the Tribunal ordered restoration of the pre-alteration status quo. The allotments of 1,20,000 and 90,000 shares in favour of the respective allottees were to be cancelled and the consideration refunded by the company. The petitioner's shareholding was directed to be reinstated to its pre-increase level. Because the petitioner had entered into a binding Memorandum of Understanding to sell its shares to Libra, the Tribunal directed the petitioner to execute transfer formalities in favour of Libra and directed Libra to pay the balance consideration due under the MoU, the balance to be adjusted by amounts already paid. Parties were to adhere to other terms of the MoU.

Impugned allotments cancelled and consideration ordered refunded; petitioner's shareholding reinstated; petitioner to transfer shares to Libra and Libra to pay balance under the MoU; other terms of the MoU to be complied with.

Final Conclusion: Petition allowed: Tribunal held that the increase in authorised capital, alteration of the memorandum and articles, appointments and subsequent allotments were carried out without proper notice and amounted to oppression and mismanagement; the impugned resolutions and allotments are cancelled, the petitioner's pre-dilution shareholding is reinstated, the allottee-payments are to be refunded, and the petitioner must effect the agreed sale to Libra with Libra paying the balance under the MoU.

Intervention by financial creditor - pendency of winding up petition and initiation of corporate insolvency process - no bar to initiation of proceedings under the Insolvency Code pending winding up unless winding up order and liquidator appointed - preference of the Insolvency and Bankruptcy Code over inconsistent provisions of the Companies Act - notice to other financial creditors under Section 7 and Adjudication Rules - operation of moratorium on admission under Section 14 and overriding effect of Section 238

Intervention by financial creditor - Application by Industrial And Commercial Bank of China Limited to intervene in CP No.(IB) 48/2017 - HELD THAT: - The Tribunal rejected the Applicant's request to intervene on the date of pronouncement. The Applicant, though a financial creditor and a party to winding up proceedings elsewhere, was not shown to have any legal entitlement to intervene in the Section 7 petition at this stage. The provisions governing initiation of insolvency proceedings under the Code do not contemplate notice to or mandatory hearing of other financial creditors before admission under Section 7; the corporate debtor was notified and heard. Even if the Applicant seeks winding up, initiation of the insolvency resolution process will not prejudice its rights because, upon admission, it may present its claim to the Interim Resolution Professional and participate in the Committee of Creditors, and if the Section 7 petition is not admitted the Applicant may continue proceedings in the High Court. For these reasons the application for intervention and the alternative reliefs were dismissed. [Paras 21, 22]

Application to intervene dismissed and other reliefs refused.

Pendency of winding up petition and initiation of corporate insolvency process - no bar to initiation of proceedings under the Insolvency Code pending winding up unless winding up order and liquidator appointed - Whether pendency of a winding up petition before a High Court precludes initiation or continuation of proceedings under Section 7 of the Insolvency Code - HELD THAT: - The Tribunal held that mere pendency of a winding up petition before the High Court does not bar initiation or continuation of corporate insolvency proceedings under the Code. Only where a winding up order has been passed and an Official/Liquidator appointed would the pendency operate as a bar. In the present matter the winding up petition in the High Court had not been admitted, no winding up order existed and no liquidator had been appointed; accordingly the pendency of that petition did not preclude the Adjudicating Authority from exercising jurisdiction under the Code. [Paras 14, 15]

Pendency of unadmitted winding up petition is not a bar to Section 7 proceedings.

Preference of the Insolvency and Bankruptcy Code over Companies Act - operation of moratorium on admission under Section 14 and overriding effect of Section 238 - Whether orders under the Insolvency Code will conflict with winding up proceedings and which law prevails in case of inconsistency - HELD THAT: - The Tribunal noted that upon admission under Section 7 a moratorium under Section 14 would stay other proceedings, and that Section 238 gives the Code overriding effect over inconsistent provisions of other laws, including the Companies Act. The decision of other NCLT benches and the NCLAT were placed before the Tribunal to underscore that the Code prevails in cases of inconsistency; consequently potential conflict of orders was not a valid ground to restrain the Adjudicating Authority from exercising jurisdiction when no winding up order or liquidator existed. [Paras 16, 17, 18]

Potential conflict does not preclude adjudication under the Code; Section 14 moratorium and Section 238's overriding effect mitigate conflict.

Notice to other financial creditors under Section 7 and Adjudication Rules - Whether Section 7 or Rule 4 of the Adjudication Rules requires notice to other financial creditors before admission - HELD THAT: - The Tribunal found that neither Section 7 of the Code nor Rule 4 of the Adjudication Rules contemplates notice to other financial creditors; only the corporate debtor is to be served. Accordingly, the Applicant's contention that it was entitled to prior notice or to be heard before admission was without merit. The Applicant's rights are preserved by the Code's post-admission mechanisms (representation before the Interim Resolution Professional and membership of the Committee of Creditors) and by continuing remedies in winding up proceedings if the Section 7 petition is not admitted. [Paras 21]

No statutory requirement to give notice to other financial creditors prior to admission under Section 7.

Intervention by financial creditor - Companies (Transfer of Pending Proceedings) Rules, 2016 - Effect of Companies (Transfer of Pending Proceedings) Rules, 2016 on pending winding up petitions with notices served - HELD THAT: - The Tribunal accepted that where notices have been served in a winding up petition, the Companies (Transfer of Pending Proceedings) Rules, 2016 require that the petition remain to be disposed of by the High Court. However, this factual position did not translate into a legal bar against the Adjudicating Authority exercising jurisdiction on an independent Section 7 petition when no winding up order or liquidator had been appointed. [Paras 10, 11]

Notices served in winding up petition mean the petition remains in High Court, but that does not legally preclude Section 7 proceedings before the Adjudicating Authority absent a winding up order and liquidator.

Final Conclusion: The Application by Industrial And Commercial Bank of China Limited for intervention and alternative reliefs in CP No.(IB) 48/2017 is dismissed. The Adjudicating Authority is entitled to proceed with the Section 7 petition; pendency of an unadmitted winding up petition before the High Court does not bar initiation or continuation of insolvency proceedings, no prior notice to other financial creditors is required under Section 7 or Rule 4, and the Code's moratorium and overriding provisions address potential conflict of orders.

Reverse charge liability of Goods Transport Agency - willful suppression - extended period of limitation - penalty for willful suppression under the Finance Act, 1994 - failure to register and declare freight in returns - input service credit not a defence to invocation of extended period

Reverse charge liability of Goods Transport Agency - failure to register and declare freight in returns - extended period of limitation - Whether the extended period of limitation for recovery of service tax on freight paid under reverse charge in respect of Goods Transport Agency was rightly invoked for the period 01.01.2005 to 31.03.2008. - HELD THAT: - The Tribunal found that reverse charge on Goods Transport Agency was introduced by Notification No. 36/2004 dated 31.12.2004 and that the appellants, though registered for construction services, did not register for GTA, did not disclose freight in their half-yearly returns and did not deposit service tax from 01.01.2005 to 31.03.2008. The prolonged omission over more than three years, despite public controversy and awareness regarding the levy, amounted to conscious non-compliance rather than inadvertence. The facts therefore established the circumstances permitting invocation of the proviso to Section 73(1) (extended period) since the Department proved willful suppression of particulars necessary for assessment. [Paras 6, 7]

Extended period of limitation was correctly invoked for the period 01.01.2005 to 31.03.2008.

Willful suppression - penalty for willful suppression under the Finance Act, 1994 - Whether penalty under the Finance Act, 1994 was rightly imposed for the failure to discharge GTA reverse charge liability. - HELD THAT: - Given the Tribunal's finding of deliberate non-registration, non-declaration of freight in returns and non-payment of tax over an extended period, the conduct of the appellants exhibited the requisite suppression to attract penal consequences. The adjudicating authority's imposition of penalty and the Commissioner (Appeals) upholding it were sustained as consistent with the finding of willful suppression. [Paras 7]

Penalty imposed by the adjudicating authority was rightly upheld.

Input service credit not a defence to invocation of extended period - Whether the appellants' defences of bona fide ignorance of a newly introduced service and of revenue neutrality (entitlement to input credit) excuse non-compliance and preclude invocation of the extended period. - HELD THAT: - The Tribunal rejected the plea of ignorance given the appellants' registration in a related service, the extended duration of non-compliance and contemporaneous public debate on the levy. Further, entitlement to claim input service credit is a separate substantive right and does not constitute a defence to allegations of suppression of particulars for the purpose of invoking the extended period; revenue neutrality does not negate willful suppression. [Paras 6]

Pleas of bona fide ignorance and revenue neutrality were rejected and do not preclude invocation of the extended period.

Final Conclusion: The appeal is dismissed: the extended period was correctly invoked for 01.01.2005 to 31.03.2008 upon findings of willful suppression, the penalties were rightly imposed and the appellants' defences of ignorance and revenue neutrality were rejected.

Deemed sale - transfer of right to use - Article 366(29A)(d) - definition of Service under Section 65B(44) - declared service under Section 66E - business support service - reverse charge mechanism - penalty under Section 78 - delayed payment versus tax evasion

Deemed sale - transfer of right to use - Article 366(29A)(d) - definition of Service under Section 65B(44) - declared service under Section 66E - business support service - reverse charge mechanism - Classification of dry-leases of helicopters from overseas lessors-whether transactions are taxable services or deemed sale involving transfer of right to use - HELD THAT: - The Tribunal examined the lease agreements and recorded the Commissioner's finding that legal right of possession and effective control over the helicopters is with the lessee. Applying authoritative principles on what constitutes transfer of right to use, the Tribunal held that the dry leases involved transfer of right to use and therefore constitute a "deemed sale" within Article 366(29A)(d) and Section 5(2)/Section 2(g) of the CST Act. Consequentially, such transactions fall outside the definition of "service" under Section 65B(44) and are not covered as "declared service" under Section 66E; they therefore cannot be subjected to service tax either in the pre-1.7.2012 regime (where deemed sale was outside taxable services) or under the negative-list regime w.e.f. 1.7.2012. The Tribunal rejected the classification of the leases as "infrastructure support"/business support service on the grounds that (i) aircraft/helicopters are tangible goods and not infrastructural systems as envisaged by the term "infrastructure", and (ii) business support service denotes ancillary outsourced activities, not the core business activity of providing transport via leased aircraft. The Commissioner's contrary classification was held to be legally unsustainable. [Paras 18, 21, 24]

Leases of helicopters from the overseas lessors involve transfer of right to use and are therefore deemed sale; the impugned classification as taxable service is set aside and the related service-tax demands are quashed.

Penalty under Section 78 - delayed payment versus tax evasion - mens rea for tax evasion - Sustainability of penalty under Section 78 for alleged evasion of service tax for January-July 2011 - HELD THAT: - The Tribunal analysed the SCN table and payments made by the appellant: the shortfalls for five months were subsequently paid by the appellant within periods varying from 15 to 45 days and interest under Section 75 was also paid. For imposition of penalty under Section 78 the statutory ingredients (fraud, collusion, wilful mis-statement, suppression of fact or contravention with intent to evade tax) must be established. The facts showed only delayed payment of tax which was voluntarily paid with interest; there was no evidence of fraud, collusion, wilful mis-statement, suppression or intent to evade. The Commissioner had invoked proviso to Section 73(1) and imposed penalty as if there was evasion, but the Tribunal found no basis for treating the short payments as evasion. [Paras 25, 26, 27]

Penalty imposed under Section 78 for the January-July 2011 short payments is not sustainable and is set aside.

Final Conclusion: Appeal allowed. The impugned order classifying the helicopter leases as taxable services, confirming service-tax demands for 2008-09 to 31/3/2015 with interest, and imposing penalties (including the Section 78 penalty for January-July 2011) is set aside; the Revenue's cross-objection is disposed of accordingly.

Refund of CENVAT credit for exported services - eligibility under Rule 5 of CENVAT Credit Rules, 2004 - Rule 2(e) of CENVAT Credit Rules, 2004 - exempted service - Rule 6(1) of CENVAT Credit Rules, 2004 - denial of credit for inputs used in exempted services - destination-based character of service tax and promotion of exports

Refund of CENVAT credit for exported services - eligibility under Rule 5 of CENVAT Credit Rules, 2004 - Rule 2(e) of CENVAT Credit Rules, 2004 - exempted service - Rule 6(1) of CENVAT Credit Rules, 2004 - denial of credit for inputs used in exempted services - destination-based character of service tax and promotion of exports - Entitlement of the appellant (a 100% EOU/STPI unit) to refund of unutilized CENVAT credit paid on input services for software development exported during 04/2006 to 03/2007 under Notification No.5/2006-CE(NT) read with Rule 5 of CCR, 2004, despite software exports being treated as exempted/non-taxable under Rule 2(e) of CCR, 2004. - HELD THAT: - The Tribunal found that the issue is covered by earlier decisions of coordinate benches and High Courts which permit refund of CENVAT credit on input services used in export of software, even though software export was not a taxable service for the relevant period. The reasoning accepted that Rule 5 of CCR, 2004 allows refund of unutilized CENVAT credit in relation to exports and does not make exemption status per se the determinative bar. Reliance was placed on the ratio in KPIT Cummins Infosystems Ltd. and other cited precedents holding that, in view of the EXIM policy and the destination-based character of service tax, exports should not carry an Indian tax burden and therefore input service tax credit attributable to exported (exempted/non-taxable) services is refundable subject to satisfaction of conditions in Notification No.5/2006-CE(NT). The Tribunal rejected the department's reliance on Rule 2(e) and Rule 6(1) as a ground for denying refund in the facts of this case, and directed that the refund claim be allowed after verification of compliance with the notification and other conditions.

Impugned order set aside; appeal allowed and refund claim to be granted subject to verification of conditions prescribed in Notification No.5/2006-CE(NT) dated 14/03/2006.

Final Conclusion: The appeal is allowed; the Commissioner(A)'s order rejecting the refund claim is set aside and the appellant is entitled to refund of the unutilized CENVAT credit for the period 04/2006 to 03/2007, subject to departmental verification of compliance with the conditions of the notification.

CENVAT credit - input service - business auxiliary service - commercial expediency - club membership not relatable to business operations - precedent reliance on similar fact decisions

CENVAT credit - input service - club membership not relatable to business operations - commercial expediency - Availing of CENVAT credit on service tax paid for Karnataka Golf Association membership for the appellant's business operations. - HELD THAT: - The Tribunal affirmed the conclusion of the Commissioner (Appeals) that the golf club membership fee was not an input service connected to the appellant's business of crushing/screening/stacking/sizing/sorting and wagon loading of iron ore at Hospet. The appellant's contention that the enrollment fee constituted commercial expediency and was used to promote business was not supported by evidence showing any nexus between the Bangalore club membership and the activities performed for the client at Hospet. The Commissioner (A)'s reasoning-that membership was for golf activities in Bangalore and the bill was only for membership (not for events, advertising or business promotion), and thus had no connection with the present service provided-was accepted. The Tribunal also noted reliance on an earlier decision in the same Tribunal holding that golf club membership is not related to the assessee's business and therefore not admissible as CENVAT credit. On these grounds the impugned order rejecting the claim of input service credit was upheld. [Paras 5, 6]

The claim for CENVAT credit on the golf club membership fee was held inadmissible and the appeal dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Commissioner (A)'s order rejecting CENVAT credit on the Karnataka Golf Association membership fee for the period ending 31.3.2007, holding that the membership was not an input service connected to the appellant's business operations.

Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - entitlement to cenvat credit for services integral to business activities - requirement of reasons by adjudicating authority when denying input service - application of binding Tribunal and High Court precedents on input service

Definition of input service under Rule 2(l) of the Cenvat Credit Rules, 2004 - entitlement to cenvat credit for services integral to business activities - application of binding Tribunal and High Court precedents on input service - Entitlement of the appellant to cenvat credit of service tax paid on various services (repair and maintenance of traffic signal at Kariad, advertising and decoration services in connection with Annual Day celebration, audit fee for golf course, advertising charges) excluding the Security Agency Service. - HELD THAT: - The Tribunal examined whether the services for which service tax was paid qualify as 'input service' within the wide interpretation of Rule 2(l) of the Cenvat Credit Rules, 2004. The Commissioner (Appeals) rejected the claim without giving reasons as to why those services did not fall within the definition. Reliance was placed on earlier Tribunal and High Court decisions which give a broad scope to 'input service', holding that activities relating to the business of the assessee fall within that definition. Applying that ratio, the Tribunal found the services in question to be integral to the appellant's airport business and therefore within the definition of 'input service'. The Security Agency Service was not pressed by the appellant and therefore was excluded from relief.

Allowed in part - cenvat credit granted in respect of the listed services except the Security Agency Service; impugned order denying those credits set aside.

Final Conclusion: The appeal is allowed in part: the Tribunal sets aside the impugned order insofar as it denied cenvat credit for the specified services (repair/maintenance of traffic signal, Annual Day related advertising and decoration, audit/golf course related service, and related advertising), holding them to be input services under Rule 2(l); the claim in respect of the Security Agency Service is not allowed.

Cenvat credit - input service - service tax on telephone services - telephone charges as part of taxable value of airport services

Cenvat credit - input service - service tax on telephone services - Validity of denial of cenvat credit claimed on service tax paid on telephone bills (DOT charges) for the periods in dispute - HELD THAT: - The Tribunal, after hearing the parties and considering precedent, concluded that telephone services fall within the definition of input service and that the appellant was entitled to avail cenvat credit of the service tax paid on telephone charges. The adjudicating authorities' denial was found to be contrary to binding decisions of the Tribunal and High Court cited by the appellant. The Tribunal also noted that for subsequent periods the Commissioner (Appeals) had allowed similar cenvat credit claims, reinforcing the conclusion that the impugned orders were unsustainable in law. On that basis the impugned orders rejecting the cenvat credit were set aside and the appeals allowed.

Impugned orders denying cenvat credit on telephone service tax are set aside and the appeals are allowed; appellant entitled to the cenvat credit claimed.

Final Conclusion: All three appeals are allowed; the orders denying cenvat credit on service tax paid on telephone charges are set aside and the appellant is held entitled to avail the credit for the periods under challenge.

Classification of goods - classification under Tariff Item No. 14049050 - residual entry classification as others - commercial parlance test - precedent of a coordinate Bench

Classification of goods - classification under Tariff Item No. 14049050 - classification under Tariff Item No. 13021990 - commercial parlance test - other evidence - Goods manufactured by the respondent are classifiable under Tariff Item No. 14049050 and not under Tariff Item No. 13021990. - HELD THAT: - The Tribunal considered the entries in the Tariff, the commercial parlance in which the product is known, and other relevant evidence taken on record by the lower authorities. The Original Authority held the goods to fall under Tariff Item No. 14049050 and dropped the demand; the Commissioner (Appeals) upheld that conclusion after addressing classification, commercial parlance and other evidence. This Bench noted that a Division Bench decision in an identical matter concerning M/s Indian Wood Products Co. Ltd. (Final Order No. 70009/2017-EX[DB] dated 04/01/2017, heard 15/12/2016) had already held identical goods to be classifiable under Tariff Item No.14049050. Given the identical nature of the issue and that the appellant is a party to the earlier decision, the Tribunal followed the prior decision of the coordinate Bench and upheld the classification under Tariff Item No.14049050, rejecting the contention that the goods should be treated as vegetable sap under the residual entry.

The appeal filed by Revenue is dismissed; the respondents are held to have their goods classifiable under Tariff Item No.14049050 and are entitled to consequential relief as per law.

Final Conclusion: The Tribunal dismissed Revenue's appeal, upholding the classification of the respondent's product under Tariff Item No.14049050 and following the earlier Division Bench decision in the identical matter; consequential relief to the respondent granted as per law.

Jurisdiction of assessing authority - delegation of powers to Value Added Tax Authorities - validity of assessment notices issued without jurisdiction - requirement to record reasons in assessment orders

Jurisdiction of assessing authority - validity of assessment notices issued without jurisdiction - Whether AVATO Ward-72 had jurisdiction to issue notices of assessment, interest and penalty dated 15th May, 2017 for the 1st and 2nd quarters of 2015-16. - HELD THAT: - The Court examined the scheme of the DVAT Act including the delegation of powers to the Commissioner and Value Added Tax Authorities and the established principle that an assessment notice under Section 32 can only be issued by the VATO who exercises jurisdiction over the taxable person on the relevant date. The order dated 15th March, 2017 did not decide or endorse jurisdiction of AVATO Ward-72; it only directed that the concerned VATO should first pass orders for the 1st and 2nd quarters and that the OHA would thereafter decide objections. The VAT department's contention that the March order confirmed Ward-72's jurisdiction is not borne out by the record. The petitioner's business premises fell within Ward-69 according to the departmental circular and was in the department's knowledge since the January 2016 survey; hence Ward-72 lacked jurisdiction to pass the impugned orders. The Court additionally noted that the question of jurisdiction is fundamental when tax and penalty are imposed and ought to have been determined before proceeding with assessment. [Paras 13, 15, 17, 18]

AVATO Ward-72 lacked jurisdiction to issue the assessment notices dated 15th May, 2017 for the 1st and 2nd quarters of 2015-16; those notices are invalid.

Delegation of powers to Value Added Tax Authorities - prior adjudication/remand for consideration - Whether the impugned orders should be quashed and whether fresh proceedings may be initiated by the correctly constituted authority. - HELD THAT: - Having found the notices issued by Ward-72 to be without jurisdiction, the Court set aside the impugned orders dated 15th May, 2017 in respect of the 1st and 2nd quarters of 2015-16. The Court clarified that it has not gone into the merits of the assessment. To avoid prejudice to the department's right of assessment, the Court permitted the respondent to issue fresh notices by the 'concerned VATO' who in fact exercises jurisdiction over the petitioner, directing that any such notices be issued within four weeks and decided in accordance with law. [Paras 19]

Impugned orders dated 15th May, 2017 for the 1st and 2nd quarters of 2015-16 are set aside; respondent may issue fresh notices by the concerned VATO within four weeks which shall be decided according to law.

Final Conclusion: Writ petition allowed; assessment notices, interest and penalty orders dated 15th May, 2017 for the 1st and 2nd quarters of 2015-16 issued by AVATO Ward-72 are quashed for want of jurisdiction; respondent permitted to issue fresh notices through the VATO who exercises jurisdiction within four weeks; Court did not examine merits.

Liability of directors of a private company in liquidation under the Central Sales Tax Act - Recovery of sales tax from a person who ceased to be director prior to winding up - Requirement of winding up/liquidation for invoking director's liability - Non-applicability of directoral liability provisions where company not in liquidation

Liability of directors of a private company in liquidation under the Central Sales Tax Act - Recovery of sales tax from a person who ceased to be director prior to winding up - Whether recovery proceedings for sales tax arrears could be validly initiated against the petitioner who had resigned as director prior to any winding up or liquidation of the company. - HELD THAT: - The Court applied the established principle that the statutory liability of directors to answer for company sales-tax arrears arises only in the specific circumstances contemplated by the relevant provision dealing with directors of private companies in liquidation. The provision requires that the company be wound up and that the tax assessed on the company cannot be recovered in the liquidation; only then can persons who were directors during the period for which the tax is due be made jointly and severally liable unless they prove lack of gross neglect, misfeasance or breach of duty. The petitioner resigned from directorship before the impugned recovery proceedings and it is undisputed that the company has not been wound up and remains dormant. On that basis the impugned proceedings were found to be without jurisdiction and authority of law. [Paras 5, 7, 10]

Proceedings against the petitioner were without jurisdiction and the impugned recovery notice was set aside.

Final Conclusion: Writ petition allowed; impugned revenue-recovery notice quashed as the statutory regime imposing liability on directors applies only when the company is in liquidation/winding up and the petitioner had ceased to be director prior to any such event.

Limitation for reassessment under the PVAT Act - finality of assessment - binding effect of an Advance Ruling/Clarification on third parties - effect of Section 77(3) and (4) of the PVAT Act on assessing proceedings

Limitation for reassessment under the PVAT Act - finality of assessment - Impugned pre-assessment notices dated 28.02.2017 are time barred under Section 30(2) of the PVAT Act in respect of assessment years 2008-09, 2009-10 and 2010-11. - HELD THAT: - Section 30(2) fixes an outer limit of five years from the expiry of the year to which the return relates for re-assessment where turnover has been assessed at a lower rate. The Court held that the relevant date for computing limitation under Section 30(2) is the year to which the return relates and not any subsequent date. Allowing the date of an Advance Ruling to reset the limitation period would negate the finality that Section 30(2) confers on assessments and render that provision otiose. Applying this principle, the Court found the notices issued on 28.02.2017 to be beyond the five-year period for the stated assessment years and therefore barred by limitation. [Paras 11, 13, 14]

Pre-assessment notices quashed as barred by limitation under Section 30(2) in respect of AYs 2008-09, 2009-10 and 2010-11.

Effect of Section 77(3) and (4) of the PVAT Act on assessing proceedings - binding effect of an Advance Ruling/Clarification on third parties - An Advance Ruling or clarification obtained by other dealers does not permit the assessing officer to extend the period for reopening assessments of a dealer beyond the statutory five year limit under Section 30(2). - HELD THAT: - Section 77(3) prevents an officer from deciding an issue while an application under Section 77 by an applicant is pending; Section 77(4) binds the applicant and binds officers subordinate to the Commissioner in respect of the goods or transaction for which clarification was sought. The Court interpreted the terms "an application" and "an applicant" in Section 77(3) as referring to the dealer who has approached the Authority. It rejected the Revenue's contention that a clarification granted to third parties could be used to compute limitation from the date of that ruling and thereby reopen prior final assessments. Allowing such an interpretation would conflict with Section 30(2)'s protective time bar and undermine the finality of assessments. The Court therefore held that the Authority's clarification cannot be invoked to extend or revive the time for reassessment against other dealers beyond five years. [Paras 11, 12, 13]

Clarification issued to third parties under Section 77 cannot be used to postpone or extend the limitation prescribed by Section 30(2) so as to permit reopening of assessments beyond the five year period.

Final Conclusion: Writ petitions allowed; pre-assessment notices dated 28.02.2017 quashed as time barred under Section 30(2) of the PVAT Act for assessment years 2008-09, 2009-10 and 2010-11; connected petitions closed; no costs.

Possession of contraband - search and seizure under Section 41(2) of the NDPS Act - presumption under Sections 35 and 54 of the NDPS Act - reliability of departmental (DRI) witnesses - standard of proof: beyond reasonable doubt and preponderance of probability

Possession of contraband - standard of proof: beyond reasonable doubt and preponderance of probability - Whether the accused-appellant was in illegal possession of the seized commercial quantity of Ganja and guilty under Section 20(ii)(c) of the NDPS Act. - HELD THAT: - The Court examined the totality of evidence and found that recovery of sealed packets of cannabis from a house in Nagayapam, Jamunamukh, was not disputed and that the accused was a resident of the same village. Defence did not impugn the foundational facts necessary to attract the statutory presumptions nor produce evidence to show that the searched house was a different property owned by someone else. Applying the settled tests for reasonable doubt, the cumulative circumstances left no reasonable doubt that the house belonged to the accused and that he was in possession of the seized contraband. Accordingly, the conviction under Section 20(ii)(c) was upheld. [Paras 31, 32, 33, 34, 35]

Conviction for illegal possession of commercial quantity of Ganja under Section 20(ii)(c) of the NDPS Act is affirmed.

Search and seizure under Section 41(2) of the NDPS Act - reliability of departmental (DRI) witnesses - Whether the raid and seizure under the authority of officers acting on information under Section 41(2) were lawful and whether the prosecution could rely on DRI officers' testimony without production of the information record. - HELD THAT: - The Court held that Section 41(2) empowers gazetted officers to act on personal knowledge or information taken in writing and to proceed to search and arrest, and that production of the record of the information is not statutorily required unless called for by the accused. The defence never called for such records nor disputed the recovery itself. The Court further accepted that the testimony of departmental investigating officers (DRI) is admissible and may be relied upon if found reliable; there is no rule of automatic distrust. Given the prosecution evidence and absence of impeachment sufficient to render witnesses unreliable, the search and seizure were treated as within statutory power and valid. [Paras 24, 25, 26, 27, 28]

Raid and seizure conducted under Section 41(2) were lawful and the court could act upon the DRI officers' testimony; absence of production of the information record was not fatal in the facts of the case.

Final Conclusion: The High Court dismissed the appeal, affirmed the conviction and sentence under Section 20(ii)(c) of the NDPS Act, holding that the search conducted under Section 41(2) was lawful, the DRI evidence was reliable on the record, and the prosecution discharged its burden so that no reasonable doubt remained as to possession.