TaxTMI Updates e-Newsletter
Aug 24,2022

Pure services - Waste treatment and disposal services - Classification of services under SAC 9994 - Exemption under Notification No.12/2017-Central Tax (Rate) - Serial No.3 - Services provided to a local authority - Function entrusted to a Municipality under Article 243W/Twelfth Schedule - Local authority as defined in Section 2(69) of the CGST Act

Classification of services under SAC 9994 - Waste treatment and disposal services - Classification of the activity of maintaining micro-compost centres and processing wet waste provided by Greater Chennai Corporation - HELD THAT: - The activity undertaken by the applicant involves deployment of personnel to operate and maintain Micro Compost Centres and to process wet waste supplied by the Greater Chennai Corporation, with GCC providing infrastructure, inputs and receiving the by product manure. The Scheme of Classification of Services (Annexure to Notification No.11/2017-C.T.(Rate)) places 'Sewage and waste collection, treatment and disposal and other environmental protection services' under SAC 9994. Although the applicant contended for classification under Group 99942 (waste collection services), the factual matrix shows the activity is processing/treatment of waste rather than mere collection. On that basis the Authority held the service falls within Group 99943 - waste treatment and disposal services - and is therefore classifiable under Heading 9994 as waste treatment and disposal services. [Paras 7, 8]

The activity is classifiable under SAC 9994 and, more specifically, under Group 99943 (waste treatment and disposal services).

Pure services - Exemption under Notification No.12/2017-Central Tax (Rate) - Serial No.3 - Services provided to a local authority - Function entrusted to a Municipality under Article 243W/Twelfth Schedule - Whether the services rendered to Greater Chennai Corporation are exempt under Serial No.3 of Notification No.12/2017-Central Tax (Rate) - HELD THAT: - The exemption at Serial No.3 requires (i) the supply to be a pure service falling under Chapter 99, (ii) supply to Central/State/Union territory or local authority, and (iii) if to a local authority, the service must relate to a function entrusted to a Panchayat or Municipality under Articles 243G/243W and the Twelfth Schedule. The Authority found the applicant's activity to be a pure service (processing of wet waste) under Service Heading 9994. Greater Chennai Corporation qualifies as a 'local authority' within Section 2(69) of the CGST Act, and solid waste management is an entry (Sl.No.6) in the Twelfth Schedule and thus a function entrusted to municipalities under Article 243W. Distinguishing the cited Sumeet Facilities Ltd. ruling on its facts, the Authority concluded that all three conditions are satisfied and the activity is eligible for exemption under Serial No.3 of Notification No.12/2017-Central Tax (Rate). [Paras 9, 10, 11]

The services supplied to Greater Chennai Corporation for maintaining micro compost centres and processing wet waste are pure services to a local authority in relation to a municipal function and are exempt under Serial No.3 of Notification No.12/2017-Central Tax (Rate).

Final Conclusion: The Authority ruled that the applicant's activity is classifiable under SAC 9994 (Group 99943 - waste treatment and disposal services) and that the work order from Greater Chennai Corporation for maintaining micro compost centres and processing wet waste is exempt from GST under Serial No.3 of Notification No.12/2017-Central Tax (Rate).

Composite supply - health care services - principal supply - inpatient services - exemption under Notification No.12/2017-C.T.(Rate) - supply of medicines and consumables to out patients as independent supply - implants fitted by surgical procedure as part of health care composite supply - prosthetics and mobility aids as independent taxable supplies

Composite supply - health care services - inpatient services - exemption under Notification No.12/2017-C.T.(Rate) - Supply of medicines, drugs and other surgical goods to in patients during their admission where billed together is a composite supply of in patient health care services and is eligible for exemption as per the notification subject to post amendment room charge condition. - HELD THAT: - The hospital provides a bundled package to in patients that includes bed/ICU/room, nursing care, diagnostics and treatment with medicines and consumables supplied on the directions of medical doctors and billed together. Those goods are naturally bundled and supplied in conjunction with the health care service, which is the principal supply; therefore medicines and consumables supplied to in patients during admission form part of a composite supply of in patient health care. The exemption in Sl. No. 74 of Notification No.12/2017 CT(rate) applies to such composite in patient services up to 17.07.2022. With effect from 18.07.2022 the exemption is subject to the condition that room charges (other than ICU/CCU/ICCU/NICU) do not exceed Rs.5,000 per day; if exceeded, a 5% tax rate applies as provided in the amended entries. [Paras 8, 11, 12]

Medicines and consumables supplied to in patients during admission constitute a composite supply with in patient health care as principal supply and are exempt under the notification subject to the room charge condition effective 18.07.2022.

Composite supply - health care services - supply of medicines and consumables to out patients as independent supply - Supply of medicines, drugs and other surgical goods to out patients from the hospital pharmacy is not a composite supply with health care services and is taxable as an independent supply. - HELD THAT: - Out patients receive consultation and a prescription, but are not constrained to purchase medicines from the hospital pharmacy; pharmacy bills are raised separately from consultation charges. The consultation and supply of medicines are not naturally bundled or inextricably linked as in the in patient context. Consequently, dispensing of medicines to out patients (or others purchasing from the outpatient pharmacy) constitutes an independent supply of goods liable to GST and is not covered by the in patient health care exemption. [Paras 9, 11, 12]

Medicines and consumables supplied to out patients are separate taxable supplies and do not qualify for the health care composite supply exemption.

Implants fitted by surgical procedure as part of health care composite supply - prosthetics and mobility aids as independent taxable supplies - Implants implanted in the body during surgical treatment of in patients form part of the composite health care supply and are exempt; prosthetics and mobility aids are generally independent supplies and taxable. - HELD THAT: - Implants such as stents and pacemakers that are surgically fitted in the course of in patient treatment are integral to the treatment and are naturally bundled with the hospital's health care service, making them part of the composite supply eligible for exemption. By contrast, prosthetics and mobility aids (wheelchairs, crutches, walkers) are capable of being bought and sold separately, often supplied at the patient's discretion and not inextricably linked to the in patient stay; these are therefore independent supplies subject to GST. [Paras 10, 11, 12]

Implants implanted during in patient surgical treatment are part of the composite exempt health care supply; prosthetics and mobility aids are independent taxable supplies.

Final Conclusion: The Authority ruled that (i) medicines and consumables supplied to in patients as part of a consolidated bill constitute a composite in patient health care supply and are exempt under Sl. No. 74 of Notification No.12/2017 CT(rate) subject to the post amendment room charge condition effective 18.07.2022; (ii) medicines supplied to out patients are independent taxable supplies; and (iii) implants surgically fitted for in patients are part of the exempt composite supply while prosthetics and mobility aids are taxable independent supplies.

Input Tax Credit - Eligibility under Section 16 - Ineligibility under Section 17(5)(d) - Renting of Immovable Property Services - Construction of immovable property - Advance Ruling admissibility under Section 97(2)

Input Tax Credit - Eligibility under Section 16 - Renting of Immovable Property Services - Ineligibility under Section 17(5)(d) - Whether input tax credit is admissible in respect of GST paid on upfront lease premium paid for long term lease of covered space used as extended corporate office. - HELD THAT: - The Authority examined Section 16 and Section 17(5)(d) in the context of the allotment and payment made to Chennai Port Trust for covered space to be used as an extended corporate office. Section 16 entitles a registered person to take credit of input tax charged on supplies of goods or services used in the course or furtherance of business, subject to conditions. Section 17(5)(d) denies credit where goods or services are received for construction of immovable property on own account (other than plant and machinery). The lease allotment and supporting documents show a grant of right to use existing built space against payment of lease rentals collected upfront; there is no material to indicate any construction, renovation or capitalisation attributable to the lessee. The upfront payment therefore represents lease rentals for the renting of immovable property and not consideration for construction of immovable property on the applicant's own account. Consequently the bar in Section 17(5)(d) is not attracted and the tax paid on the upfront lease premium is eligible as input tax credit, subject to fulfillment of the conditions and restrictions in Section 16.

Input tax credit on the tax paid for the upfront lease premium is available to the applicant subject to compliance with Section 16 and other applicable provisions.

Advance Ruling admissibility under Section 97(2) - Whether the question on the manner of availing the input tax credit (if eligible) is admissible for determination by this Authority. - HELD THAT: - The Authority determined that the question concerning the procedural manner of availing input tax credit falls outside the scope of matters admissible under Section 97(2) for advance ruling by this Authority. Accordingly, the first part (eligibility) was admitted and decided, while the second part relating to the procedural manner of availing credit was not admitted for consideration by this Authority.

The question on the manner in which input tax credit can be availed is not admitted/answered by this Authority.

Final Conclusion: The tax paid on the upfront lease premium for the long term lease of covered space used as an extended corporate office is eligible for input tax credit subject to compliance with Section 16; the procedural question on how to avail the credit is not admitted for determination by this Authority.

Supply - Consideration - Distinct persons (separate registrations of same legal entity) - Transfer of right to carry out integration, testing, installation and marketing of software - Supply of services - Schedule I - supply between related or distinct persons

Supply - Consideration - Distinct persons (separate registrations of same legal entity) - Schedule I - supply between related or distinct persons - The transfer of right to do integration testing, installation and marketing of software from the Tamil Nadu cost centre to the Karnataka cost centre is leviable to GST despite being between cost centres of the same legal entity. - HELD THAT: - The authority examined whether the transaction falls within the statutory concept of 'supply' and concluded it does. Supply under the Act requires a transfer of goods or services for a consideration in the course or furtherance of business. The transfer of right to carry out integration, testing, installation and marketing is supported by a monetary consideration evidenced by inter-cost-centre invoices; such monetary value satisfies the statutory definition of 'consideration'. Further, the two cost centres hold separate GST registrations and hence qualify as distinct persons under Section 25. Schedule I treats supply between related or distinct persons, when made in the course or furtherance of business, as supply even if made without consideration. Here, the activity is in furtherance of business - the software when installed enhances vehicle performance and is separately sold to end users - and therefore the transfer of right between distinct registrations is a taxable supply subject to GST. [Paras 7, 9, 10]

The transfer of right by the applicant to the Karnataka cost centre is a supply and is leviable to GST.

Supply of services - Transfer of right to carry out integration, testing, installation and marketing of software - The identified supply (transfer of right) is a supply of services and not of goods. - HELD THAT: - The authority analysed the nature of the transaction and the movement of underlying goods and software. Vehicles (goods) are manufactured and moved by the Tamil Nadu cost centre to distribution centres, while the performance-upgrade software is developed and marketed by the Karnataka cost centre and sold separately to end users. The applicant's act is limited to granting the Karnataka cost centre the right to perform integration, testing, installation and to market the software on the vehicles; the transaction does not transfer any tangible goods by the applicant. Consequently, the supply consists of agreeing to permit the Karnataka cost centre to perform certain activities (integration, installation and marketing) and is therefore a service. [Paras 8, 9, 10]

The supply is a service.

Final Conclusion: The Authority ruled that the inter-cost-centre transfer of the right to carry out integration, testing, installation and marketing of the performance-upgrade software is a taxable supply (being between distinct GST registrations) and that such supply is in the nature of services.

Anticipatory bail - cognizable and non-bailable offence - economic offences - circular trading - wrongful availment of Input Tax Credit by issuance of fake invoices - necessity of custody for further investigation - risk of tampering with evidence - power to authorise arrest under Section 69 of the CGST Act, 2017

Anticipatory bail - wrongful availment of Input Tax Credit by issuance of fake invoices - cognizable and non-bailable offence - necessity of custody for further investigation - risk of tampering with evidence - Application for anticipatory bail by the applicant accused was rejected. - HELD THAT: - The court found prima facie material that the applicant's company was involved in issuing and circulating fake invoices to wrongfully avail and pass on Input Tax Credit without actual movement of goods, implicating offences under the CGST Act that are cognizable and non-bailable. The investigation by the Anti-Evasion wing disclosed substantial transactions and alleged tax evasion for the period F.Y. 2017-18 to F.Y. 2020-21, including apparent fake inward supplies and cancelled GST registration of a supplier, and admissions from co-conspirators indicating awareness of illegal transactions. Given the alleged economic nature of the offence, the quantum and the conspiratorial scheme, the court relied on the necessity of physical custody for effective interrogation and the prevention of evidence tampering, noting the Commissioner's power to authorise arrest under Section 69 of the CGST Act, 2017. The court observed that the enquiry is ongoing, material such as movement bills and EV bills are absent from the applicant's filings, and two associated entities are under investigation with one person already arrested. Having regard to these factors and precedents treating large-scale economic offences as requiring a different approach in bail considerations, the applicant was held not to have made out a case for anticipatory bail. [Paras 17, 23, 27, 29, 30]

Anticipatory bail application rejected; custody considered necessary for further investigation.

Final Conclusion: Anticipatory bail application dismissed and concerned police station to be informed.

Allowability of deduction for employees' contribution to PF/ESI under Section 36(1)(va) where payment is made after statutory due date but before due date of filing return - interaction of Section 36(1)(va) with Section 43B and the temporal effect of the Finance Act, 2021 explanation - prima facie adjustment during processing under Section 143(1)(a)(iv) - binding effect of decisions of the jurisdictional High Court on appellate authorities in the State of Rajasthan

Allowability of deduction for employees' contribution to PF/ESI under Section 36(1)(va) where payment is made after statutory due date but before due date of filing return - interaction of Section 36(1)(va) with Section 43B - prospective effect of the Finance Act, 2021 explanation - binding precedents of the Rajasthan High Court - Whether employees' contribution to PF/ESI paid after the statutory due date under the respective enactments but before the due date of filing the return of income is allowable as a deduction under Section 36(1)(va) (read with Section 43B) for the impugned assessment year. - HELD THAT: - The Tribunal found that the employees' contribution to ESI and PF in the present case were deposited by the assessee before the due date for filing the return under Section 139(1). Applying the consistent line of decisions of the jurisdictional Hon'ble Rajasthan High Court (and following earlier Tribunal decisions applying those ratios), the Tribunal held that such payments, though made after the statutory due dates under the relevant welfare enactments, cannot be disallowed under Section 43B read with Section 36(1)(va) when they are paid on or before the due date for filing the return under Section 139(1). The Revenue's reliance on the amendment (explanation) introduced by the Finance Act, 2021 was addressed: the Tribunal observed that the explanatory memorandum expressly states that the amendment takes effect from 1 April 2021 and applies to assessment year 2021-22 and subsequent years; therefore the amended provision could not be applied to the impugned assessment year. In view of the binding precedents of the jurisdictional High Court and the prospective application of the 2021 amendment, the prima facie disallowance made during processing could not be sustained. [Paras 5, 6, 7]

The addition of the employees' contribution towards ESI and PF made by CPC during processing is deleted and the deduction is allowed.

Consequential nature of interest charged under Sections 234A, 234B and 234C - Whether the grounds relating to imposition of interest under Sections 234A, 234B and 234C require separate adjudication. - HELD THAT: - The Tribunal held that the challenge to interest under Sections 234A, 234B and 234C was consequential upon the primary addition. Since the primary addition stood deleted, the interest issue did not require independent adjudication in the present appeal. [Paras 8]

The interest-related grounds need no adjudication as they are consequential.

Final Conclusion: Following the binding decisions of the jurisdictional High Court and holding that the 2021 amendment applies prospectively from 1 April 2021, the Tribunal deleted the addition made by CPC for delayed deposit of employees' PF/ESI paid before the due date of filing the return and allowed the appeal; interest issues were treated as consequential.

Deemed intimation under Section 143(1) - refund entitlement incorporated in return - refunds under Section 237 - interest on delayed refund under Section 244A - processing of time barred returns and ITBA/CPC instructions - unjust enrichment

Deemed intimation under Section 143(1) - processing of time barred returns and ITBA/CPC instructions - Failure of the Assessing Officer to process a return within the prescribed or extended time results in the return being treated as a deemed intimation under Section 143(1). - HELD THAT: - The Court held that where a return has been filed with due verification and tax paid as declared, and the Assessing Officer fails to process the return within the statutory (or extended) time limit for reasons not attributable to the assessee, the return as filed must be treated as a 'deemed intimation' and an order under Section 143(1) will be deemed to have arisen. The reasoning notes that the taxpayer's entitlement to have the return processed cannot be frustrated by technical or administrative failures of CPC/ITBA or by expiry of internal processing windows, and that the statutory scheme contemplates receipt of intimation but does not permit penalising the assessee for departmental inaction. The Court addressed the departmental instructions regarding processing of time barred ITRs but emphasised that administrative constraints cannot defeat the statutory consequence of a deemed intimation where the department has failed to act. [Paras 6, 7, 8, 9]

Return filed and not processed within time is to be treated as a deemed intimation under Section 143(1).

Refund entitlement incorporated in return - refunds under Section 237 - interest on delayed refund under Section 244A - Assessee is entitled to the refund shown in the return (without a separate claim) and to interest on delayed refund; the department must refund the excess tax paid. - HELD THAT: - The Court observed that a claim for refund is deemed to be incorporated in the return filed under Section 139 and that the separate concept of 'refund' is governed by Chapter XIX (specifically Section 237). Once the department fails to process the return within time, the right to refund arises by operation of law. The petitioner is therefore entitled to a refund of the excess tax declared in the return together with interest under Section 244A for the period of delay, and the departmental reliance on internal processing cut offs cannot deny this statutory entitlement. [Paras 10, 11, 12, 16]

Respondents must refund the excess tax (deemed claimed in the return) along with interest; no separate refund application required.

Deemed intimation under Section 143(1) - The Supreme Court decision in Rajesh Jhaveri Stock Brokers (distinguishing intimation and assessment) is inapplicable to the present facts. - HELD THAT: - The Court explained that Rajesh Jhaveri deals with reassessment and the distinction between intimation under Section 143(1) and assessment under Section 143(3). That precedent does not govern the present situation where the departmental failure to process the return within time gives rise to a deemed intimation and consequent refund entitlement; therefore Rajesh Jhaveri could not be relied upon to deny relief. [Paras 13]

Rajesh Jhaveri is not applicable to deny the refund in this case.

Unjust enrichment - Denying the refund on the present facts would result in unjust enrichment of the State and is legally impermissible. - HELD THAT: - The Court relied on the principle that it would be unjust to allow the State to retain a benefit (taxes paid in excess) due to its own inaction. Citing the restitutionary principle, the Court held that once unjust enrichment is established (or would result from denial), restitution in the form of refund is required. The Court also observed that interest would continue to accrue at the expense of the taxpayer if refund is withheld. [Paras 14]

Refund must be granted to avoid unjust enrichment; interest will accrue if refund is not promptly paid.

Final Conclusion: Writ petition allowed; respondents directed to refund the excess tax paid as shown in the return for AY 2015-16 together with interest within four weeks of this order; petition disposed of.

Reopening of assessment - Section 148A(c) - consideration of assessee's reply - Section 148A(d) - formation of belief and issuance of notice - Assessee and its constituent unit treated as same taxable entity - Quashing for breach of statutory mandate

Section 148A(c) - consideration of assessee's reply - Reopening of assessment - Assessee and its constituent unit treated as same taxable entity - Impugned order under Section 148A(d) was passed without properly considering the detailed reply furnished by the petitioner that all financial transactions of the Citizen Model School had been accounted for in the petitioner-society's return. - HELD THAT: - The Court found that the statutory mandate of Section 148A(c) required the authority to consider the reply filed by the assessee before recording a conclusion under Section 148A(d). The impugned order noted that the School was run by the petitioner-society yet proceeded to hold that income had escaped assessment because no return was filed by the School, without addressing the petitioner-society's contention and documentary assertion that all transactions of the School were included in the Society's return. The Court relied on the principle that a constituent institution which is assessed as part of the society is not necessarily a separate assessable entity merely by virtue of having a PAN or separate bank transactions, and that when the foundational factual premise for issuing a notice is shown to be incorrect on the face of the record, the assumption of jurisdiction is vitiated. The failure to consider the detailed reply amounted to a breach of the statutory mandate and rendered the impugned order unsustainable on the face of the record. [Paras 10, 11, 12, 13]

Impugned order under Section 148A(d) is set aside for non-compliance with Section 148A(c).

Section 148A(d) - formation of belief and issuance of notice - Quashing for breach of statutory mandate - Remand for fresh consideration - Whether the matter should be remanded to the Assessing Officer for fresh consideration after setting aside the impugned order. - HELD THAT: - Having set aside the order for failure to comply with the statutory requirement to consider the assessee's reply, the Court directed that the matter be remitted to the Assessing Officer to pass a fresh order under Section 148A(d) in accordance with law. The remand is for reconsideration in light of the petitioner-society's detailed reply that the School's transactions were included in the Society's return; the Court imposed a time-bound direction to decide the matter within eight weeks. [Paras 14]

Matter remanded to the Assessing Officer to pass a fresh order under Section 148A(d) in accordance with law within eight weeks.

Final Conclusion: The order under Section 148A(d) and the consequential notice under Section 148 for AY 2018-19 are set aside for non-compliance with Section 148A(c); the Assessing Officer is directed to reconsider and pass a fresh order under Section 148A(d) in accordance with law within eight weeks.

Revision under Section 263 of the Income Tax Act - Erroneous and prejudicial to the interest of the revenue - Lack of inquiry versus inadequacy of inquiry - Possible view taken by Assessing Officer - Prospective effect of Explanation 2 to Section 263 - Capitalisation of borrowing costs and allowability of interest under business expenditure

Prospective effect of Explanation 2 to Section 263 - Lack of inquiry versus inadequacy of inquiry - Whether Explanation 2 to Section 263 (inserted w.e.f. 01/06/2015) could be applied to validate exercise of revisional jurisdiction in respect of assessment order for assessment year 2006-07. - HELD THAT: - The Court examined the statutory position of Section 263 as it stood prior to insertion of Explanation 2 and held that Explanation 2, which deems an order to be erroneous if the AO's order is passed without making inquiries or verification which should have been made (or allowing relief without inquiry), is prospective in operation from 1st June, 2015. The show cause notice in this matter was issued on 18th March, 2011, therefore Explanation 2 was not on the statute book at the relevant time. Prior to Explanation 2, revision under Section 263 could be invoked where there was no inquiry as required by law, but mere inadequacy of inquiry - i.e., the Assessing Officer having made inquiries which the Commissioner considered insufficient - did not by itself empower the Commissioner to revise the assessment. Consequently, Explanation 2 could not be invoked to uphold the revisional action in respect of AY 2006-07. [Paras 14, 15, 16, 31, 32]

Explanation 2 is prospective and inapplicable to AY 2006-07; inadequacy of inquiry prior to insertion of Explanation 2 does not by itself justify exercise of jurisdiction under Section 263.

Revision under Section 263 of the Income Tax Act - Possible view taken by Assessing Officer - Lack of inquiry versus inadequacy of inquiry - Whether the Commissioner was justified in treating the assessment order of the Assessing Officer as erroneous and prejudicial to the interest of revenue on the ground that the Assessing Officer had not made proper enquiries before allowing (a) write off of interest receivable under One Time Settlement and (b) interest expenditure for the Dindoshi project. - HELD THAT: - The Court accepted the Tribunal's factual findings that the Assessing Officer had issued queries under Section 142(1), the assessee had replied with particulars concerning the OTS write off and the interest on the Dindoshi site, and the Assessing Officer considered those replies before passing the assessment order. Those findings, unchallenged and not shown to be perverse, establish that inquiry was in fact made. Where the Assessing Officer has made inquiries and taken a view in favour of the assessee, the Commissioner cannot substitute his view merely because he prefers a different conclusion; revision under Section 263 is permissible only where the view taken by the Assessing Officer is unsustainable in law or where there was no inquiry. The Court relied on binding and persuasive precedents that a possible or plausible view taken by the AO does not make the order erroneous and prejudicial to revenue, and that inadequate inquiry (as distinct from no inquiry) does not justify exercising revisional powers prior to Explanation 2. [Paras 23, 24, 30, 32, 33]

The Commissioner was not justified in invoking Section 263 as the Assessing Officer had made inquiries and taken a possible view; the Tribunal's setting aside of the revisional order was upheld.

Final Conclusion: The appeal is dismissed. The Tribunal's order setting aside the Commissioner's revision under Section 263 in respect of the AY 2006-07 assessment is upheld: Explanation 2 to Section 263 is prospective and inapplicable, and the Assessing Officer had made inquiries and taken a possible view which could not be disturbed by revision.

Revenue expenditure - Premium on redemption of debentures - Crystallization of liability - Contingent liability - Deduction in the year liability arises (debitum in praesenti solvendum in futuro) - Genuineness of transaction - Proportionate allowance over period of debentures

Revenue expenditure - Premium on redemption of debentures - Proportionate allowance over period of debentures - Deduction of premium on redemption of debentures is allowable as revenue expenditure and the CIT(A)'s order restoring such deduction spread over the debenture period is to be restored. - HELD THAT: - The Court accepted the undisputed position that debentures were issued and TDS was deducted. It noted the well settled principle that where a business liability has definitely arisen in the accounting year the deduction should be allowed even if quantification and discharge occur later, provided the incurring of liability is certain and capable of reasonable estimation. The CIT(A) had applied this principle and quantified the premium spread over the relevant years; the ITAT's contrary conclusion was not supported by cogent material. Following precedent and the textual terms of the agreements, the premium payable on redemption was held to be revenue expenditure and appropriately allowable proportionately during the period of the debentures. [Paras 12, 13, 14, 15]

CIT(A)'s allowance of the premium as revenue expenditure spread over the debenture period is restored.

Crystallization of liability - Contingent liability - Deduction in the year liability arises (debitum in praesenti solvendum in futuro) - The ITAT's finding that the liability to pay the premium had not crystallized and was a contingent liability was unsustainable. - HELD THAT: - On the terms of the original agreement and subsequent addenda, the investor had a right that could require redemption on the specified date; the company therefore incurred a present liability though payment might occur in the future. The Court concluded the ITAT's characterisation of the claim as a 'contingent' or 'make believe' liability lacked cogent supporting material and disregarded the accepted legal test that certainty of incurring, with reasonable capacity for estimation, negates contingency. [Paras 11, 12, 13]

The liability was not merely contingent; the finding that it had not crystallized is set aside.

Genuineness of transaction - The ITAT's adverse finding that the transaction was a 'make believe' arrangement is untenable for want of cogent reasons or supporting material. - HELD THAT: - The Court observed that issuance of debentures and deduction of TDS were not disputed, and that the ITAT's adverse characterization was unsupported by material on record. In absence of cogent evidence undermining the transaction's genuineness, the adverse finding was held to be untenable and consequently set aside. [Paras 11, 12]

The finding that the transaction was a 'make believe' story is rejected.

Final Conclusion: Appeal allowed; substantial questions of law decided in favour of the assessee and against the Revenue; ITAT order set aside and the CIT(A)'s order restored.

Opportunity of personal hearing - remand for fresh consideration - speaking order - emergence from corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 - set aside demand notices - objections under section 148 - time-bound disposal

Opportunity of personal hearing - emergence from corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016 - set aside demand notices - remand for fresh consideration - The orders dated 19th January, 2022 passed under section 270A and 30th April, 2021 passed under section 144 r/w 144B for A.Y. 2018-19 and the corresponding demand notices were set aside and remanded to the Assessing Officer for fresh consideration after affording personal hearing. - HELD THAT: - The Court found that the impugned orders were passed without affording the petitioner an opportunity of personal hearing and without considering the legal effect of the petitioner having emerged from the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. For these deficiencies, the orders and the demand notices were set aside. The matters were remitted to the Assessing Officer with directions to give the petitioner at least seven working days' advance notice of a personal hearing, to furnish along with that notice a list of judgments the Assessing Officer intends to rely upon, and thereafter to pass a fresh final order after hearing the petitioner.

Impugned orders and demand notices set aside; matters remanded for fresh consideration after personal hearing with specified procedural directions.

Objections under section 148 - opportunity of personal hearing - speaking order - time-bound disposal - Notices issued under section 148 for A.Y. 2013-14 to A.Y. 2017-2018: the Assessing Officer must first deal with the petitioner's objections dated 10th December, 2021, afford personal hearing and comply with procedural timelines and reasons. - HELD THAT: - The Court directed that the Assessing Officer shall consider and dispose of the petitioner's objections dated 10th December, 2021 before proceeding with assessment proceedings. The petitioner must be given at least seven working days' advance notice of any personal hearing and be supplied with any list of judgments the Assessing Officer proposes to rely upon. If the objections are rejected, the assessment proceedings shall not commence earlier than four weeks after service of the order disposing of the objections. Any order passed by the Assessing Officer in this process must be a speaking order dealing with each submission, and the reassessment-related actions directed by this Court are to be completed within six weeks from the date this Order is uploaded.

Assessing Officer to entertain and decide objections first, afford personal hearing with advance notice and list of authorities, issue speaking orders, and comply with the prescribed time schedule.

Final Conclusion: The High Court set aside the disputed penalty and reassessment orders and the demand notices for A.Y. 2018-19 for failure to afford personal hearing and to consider the petitioner's post-IBC status, remitted those matters for fresh consideration with specified procedural safeguards; directed the Assessing Officer to first dispose of the petitioner's objections in respect of notices under section 148 for A.Y. 2013-14 to A.Y. 2017-2018 after affording personal hearing and to pass speaking orders within a time-bound period; all contentions on merits kept open.

Reopening of assessment under Section 148 of the Income Tax Act - GKN Driveshafts procedure for recording and considering reasons for reopening - principles of natural justice - opportunity to reply to show cause notice before passing final assessment - remand for reconsideration with liberty to file fresh reply - collateral challenge and appellate remedy before Commissioner of Income Tax (Appeals)

GKN Driveshafts procedure for recording and considering reasons for reopening - reopening of assessment under Section 148 of the Income Tax Act - Whether the rejection of objections to the reasons for reopening could be examined in these writ petitions at this stage. - HELD THAT: - The Court observed that reasons for reopening were disclosed, objections were filed by the assessee and those objections were considered and rejected by order dated 19.03.2022. The Court held that the correctness of that rejection (and thereby the jurisdictional question of invoking Section 147/148) could not be gone into in these writ petitions at this stage since the matter of consideration and rejection has been recorded and any repercussion on the assessment orders can be assailed collaterally by appropriate appellate remedies. Thus the procedural compliance with the GKN approach was not found to be a basis for entertaining the present writ petitions on merits. [Paras 12, 13]

The Court declined to adjudicate the validity of the rejection of objections or the jurisdiction to invoke Section 147/148 in the writ petitions and indicated those contentions are to be pursued collaterally or on appeal.

Principles of natural justice - opportunity to reply to show cause notice before passing final assessment - Whether the assessment orders dated 28.03.2022 violated principles of natural justice by denying a fair opportunity to the assessee to reply to the show cause notices. - HELD THAT: - After the rejection of objections on 19.03.2022, final Show Cause Notices were issued on 24.03.2022 allowing only till 27.03.2022 to reply, and the assessments were completed on 28.03.2022. The Court noted that the assessee had pending writ petitions challenging the rejection and had requested deferment to file replies; that request was not acceded to and, in view of the short period afforded, the Court found that a fair opportunity was not given. Applying the principles of natural justice, the Court held the assessment orders were vitiated for lack of adequate opportunity to be heard. [Paras 14, 15]

The assessment orders dated 28.03.2022 were held to be in violation of principles of natural justice and liable to be set aside.

Remand for reconsideration with liberty to file fresh reply - Appropriate remedy and course of action after setting aside the assessment orders. - HELD THAT: - The Court set aside the assessment orders dated 28.03.2022 and remitted the matters to the Revenue for fresh consideration. The assessee was permitted, within two weeks of receipt of the order, to treat the Show Cause Notices dated 24.03.2022 as fresh notices and to file replies with further documents or inputs to the satisfaction of the Revenue. The Revenue was directed to proceed afresh and pass final orders after considering such replies. Other reliefs sought by the assessee were rejected. [Paras 15]

Matters remitted to the Revenue for reconsideration with liberty to the assessee to file fresh replies within two weeks; impugned assessment orders quashed, other prayers rejected.

Final Conclusion: The Court set aside the assessment orders dated 28.03.2022 for Assessment Years 2015-16 and 2016-17 as violative of natural justice for not affording a fair opportunity to reply, remitted the matters to the Revenue for fresh consideration permitting the assessee to file replies within two weeks, and declined to decide the validity of the earlier rejection of objections or the jurisdictional issue in these writ petitions, leaving those contentions to be pursued collaterally or on appeal.

Principles of natural justice - notice under Section 148 and compliance with Section 148A of the Income tax Act - requirement of minimum seven days' notice under Section 148 - mode of filing replies via e governance vis a vis registered post - remand for fresh issuance of notice under Section 148B

Principles of natural justice - mode of filing replies via e governance vis a vis registered post - Whether the order passed under Section 148A was vitiated for failing to consider the petitioner's registered post communication and thereby violating principles of natural justice. - HELD THAT: - The Court found that the petitioner received the notice by registered post on 24.03.2022 and sent a request by registered post on 25.03.2022 seeking two weeks' time, which was acknowledged by the Assessing Officer on 26.03.2022. Despite this, the Assessing Officer recorded that no reply was filed and proceeded to pass the order under Section 148A on 31.03.2022. The Revenue's contention that only replies filed through the Department's e portal could be acted upon was rejected insofar as it resulted in ignoring an otherwise duly delivered and acknowledged communication sent by registered post. The Court held that disregarding such communication solely because it was not sent via e governance would amount to a breach of natural justice and that the registered post request merited consideration before invoking Section 148A. [Paras 12, 13]

Impugned order under Section 148A quashed for violation of principles of natural justice; registered post communication ought to have been considered.

Requirement of minimum seven days' notice under Section 148 - notice under Section 148 and compliance with Section 148A of the Income tax Act - Whether the notice dated 17.03.2022 complied with the statutory minimum notice period contemplated under Section 148. - HELD THAT: - The Court noted that sub section (b) of Section 148 contemplates giving not less than seven days from the date the notice is issued. The impugned notice dated 17.03.2022 provided time only up to 21.03.2022, which did not satisfy the minimum seven day requirement. For that reason, the consequential proceedings premised on that notice were found to be vitiated. [Paras 14, 15]

Notice did not meet the statutory minimum seven day period and consequent proceedings are vitiated.

Remand for fresh issuance of notice under Section 148B - notice under Section 148 and compliance with Section 148A of the Income tax Act - Remedy to be afforded in consequence of the procedural defects identified in the impugned orders. - HELD THAT: - In view of the defects-failure to consider the acknowledged registered post communication and insufficiency of the notice period-the Court set aside the impugned orders and remitted the matter to the respondent to redo the exercise. The respondent was permitted to issue a fresh notice under Section 148B, but must give not less than seven days to the petitioner to respond; on receipt, the petitioner is to file their reply within the stipulated time. The Court observed that, as a practice, replies should preferably be filed via e governance, but a prior registered post communication that is otherwise delivered and acknowledged cannot be ignored. [Paras 16]

Matters remitted; impugned orders set aside and respondent may issue fresh notice under Section 148B with not less than seven days for response.

Final Conclusion: Impugned orders under Section 148A and consequential notice under Section 148 quashed for breach of natural justice and for failing to give the statutory minimum seven day notice; matters remitted to the Revenue to issue fresh proceedings under Section 148B with at least seven days for the assessee to respond, the assessee being expected, as far as practicable, to use e governance for filing replies.

Burden under Section 68 to prove identity, creditworthiness and genuineness of cash credits - addition on account of unexplained cash credit - remand for fresh verification and quantification to the Assessing Officer - requirement of reasoned discussion when deleting additions - opportunity of hearing before reassessment or re-examination

Burden under Section 68 to prove identity, creditworthiness and genuineness of cash credits - addition on account of unexplained cash credit - requirement of reasoned discussion when deleting additions - remand for fresh verification and quantification to the Assessing Officer - Addition made under Section 68 in respect of cash deposits was set aside and remanded to the Assessing Officer for fresh examination of identity, creditworthiness and genuineness of the receipts. - HELD THAT: - The Assessing Officer made an addition on account of unexplained cash credits where the assessee had deposited substantial cash into bank accounts and had not produced documentary proof before the Assessing Officer to establish the source. The Commissioner (Appeals) deleted the addition, relying on the assessee's submissions and on the asserted creditworthiness of a related company, but did not discuss or record any reasoned finding as to the genuineness of the transactions. The Tribunal observed that the statutory burden under Section 68 rests on the assessee to establish identity, creditworthiness and genuineness to the satisfaction of the Assessing Officer. In the absence of documentary proof explaining accumulated opening balances and the flow of large cash sums, and because the CIT(A)'s order did not address genuineness despite material deficiencies, the Tribunal found the approach of the CIT(A) to be erroneous. The matter was therefore remitted to the Assessing Officer with directions that the assessee must produce creditable evidence establishing the creditworthiness and genuineness of the transactions, explain reasons for transfer of large cash amounts from the company to the promoter and to other parties, and relate cash receipts to date-wise cash deposits; the Assessing Officer is to give the assessee opportunity of hearing and proceed in accordance with law. [Paras 10, 11, 12, 13, 14]

The deletion by the CIT(A) is set aside and the issue of addition under Section 68 is remitted to the Assessing Officer for fresh verification and adjudication in accordance with the directions given by the Tribunal; the appeals are disposed of accordingly for statistical purpose.

Final Conclusion: The Tribunal set aside the CIT(A)'s deletion of additions made under Section 68 and remitted the matter to the Assessing Officer to allow the assessee to prove identity, creditworthiness and genuineness with creditable evidence, to relate receipts date-wise to deposits, and to give opportunity of hearing; the appeals are allowed for statistical purposes.

Deductibility of finance cost - Nexus between borrowing and application of funds - Restructuring of borrowings and reclassification of receivables - Business nexus of promotional and advertising expenses - Allowability of revenue expenditure - Claim of depreciation - Documentary proof for asset purchase

Deductibility of finance cost - Nexus between borrowing and application of funds - Restructuring of borrowings and reclassification of receivables - Deletion of addition of Rs.4,05,22,204/- disallowing finance cost apportioned to long term advances. - HELD THAT: - The Tribunal accepted the assessee's explanation, supported by audited financial statements and auditor's disclosures, that working capital cash credit facilities were restructured into term loans and FITL and that trade receivables recorded in the preceding year were reclassified as long term loans and advances in the year under consideration. On the material placed before it, including the chart of long term borrowing utilization and disclosures in notes to accounts, the Tribunal found that no new advances were made out of the long term borrowings and that the AO's conclusion disallowing interest for alleged fresh advances was not justified. Consequently the addition under challenge was directed to be deleted. [Paras 7, 8]

Addition of Rs.4,05,22,204/- out of finance cost deleted.

Business nexus of promotional and advertising expenses - Allowability of revenue expenditure - Allowability of sales promotion and advertisement expenses remitted to AO for fresh consideration and verification. - HELD THAT: - The Tribunal noted that the assessee had not, despite opportunities, produced documentary evidence sufficient to demonstrate the nexus between the claimed expenses and the business or how those expenses resulted in additional business or exports. Rather than decide against the assessee on the record before it, the Tribunal exercised its discretion to remit the issue to the assessing officer with directions to afford the assessee a reasonable opportunity to produce supporting documents and to reassess the allowability of the expenses in accordance with law upon verification. [Paras 9]

Matter remitted to the AO for fresh verification and adjudication of the claim for sales promotion and advertisement expenses.

Claim of depreciation - Documentary proof for asset purchase - Allowability of depreciation on motor cars remitted to AO for verification of purchase documents. - HELD THAT: - The assessee produced purchase invoice for one motor car but failed to furnish bills or documentary evidence for other cars included in additions to fixed assets, although the audited financial statements reflected the additions. The Tribunal held that in the interest of justice the assessee should be given an opportunity to produce the required documents and the AO should verify the submissions and determine the allowability of depreciation in accordance with law. [Paras 10]

Issue remitted to the AO for verification of documents and fresh adjudication regarding depreciation claimed on motor cars.

Final Conclusion: Appeal partly allowed: addition disallowing finance cost of Rs.4,05,22,204/- deleted; claims relating to sales promotion expenses and depreciation on motor cars remitted to the assessing officer for fresh consideration upon production and verification of relevant supporting documents.

Receipt of intra-group services - arm's length price determination - transaction-level aggregation versus entity-level aggregation - benefit test for business expenditure - remand for fresh ALP determination - prematurity of penalty proceedings - mandatory interest under sections 234B and 234C

Receipt of intra-group services - transactional documentary evidence - The assessee proved receipt of intra-group management and market support services from its associated enterprise. - HELD THAT: - On review of the remand report, the documents placed on record and additional evidences filed before the Tribunal (including email correspondence and service allocation documents), the Tribunal found that the assessee had established receipt of certain intra-group services from Raygroup SAS. The TPO/DRP had earlier held that some categories of services were not proven; on perusal the Tribunal concluded that the assessee had in fact proved receipt of such services and the TPO's negative finding was not sustainable. [Paras 4, 8]

The Tribunal held that the intra-group services were received by the assessee.

Benefit test for business expenditure - The TPO's application of a 'benefit' test as a precondition for allowing deduction for business expenditure was rejected. - HELD THAT: - The Tribunal observed that whether a distinct measurable benefit 'arose' is not an essential criterion for claiming deduction as business expenditure; receipt of services suffices to claim the deduction. The TPO's requirement that the assessee demonstrate benefit from the services was held to be legally incorrect and consequently could not be approved. [Paras 9]

The Tribunal disapproved the benefit test applied by the TPO and held it unsustainable.

Transaction-level aggregation versus entity-level aggregation - arm's length price determination - Segregation of the intra-group management services transaction from other transactions and processing at transaction level for ALP determination was upheld; however, the ALP was to be determined afresh. - HELD THAT: - The Tribunal agreed with the TPO that the intra-group services transaction was not interlinked with other international transactions and therefore could legitimately be segregated and examined on a transaction-by-transaction basis rather than at the entity level. Having accepted that the services were received, the Tribunal found the TPO's NIL-ALP conclusion-based on the earlier finding of non-receipt-cannot stand. Consequently, the matter of determining the arm's length price of the intra-group services was remitted to the AO/TPO for fresh determination in accordance with law after giving the assessee an opportunity of hearing. [Paras 6, 10]

The Tribunal upheld transaction-level segregation and set aside the NIL-ALP finding, directing fresh determination of ALP.

Prematurity of penalty proceedings - Challenge to initiation of penalty proceedings under section 274 read with section 271(1)(c) was held premature and dismissed. - HELD THAT: - The Tribunal concluded that initiation of penalty proceedings at that stage was premature and therefore did not adjudicate the penalty merits, dismissing the ground as premature. [Paras 11]

The ground challenging initiation of penalty proceedings was dismissed as premature.

Mandatory interest under sections 234B and 234C - Objection to charging interest under sections 234B and 234C was rejected as the charges are mandatory and consequential. - HELD THAT: - The Tribunal observed that charging of interest under the specified provisions is mandatory and flows consequentially from the assessment, and therefore the assessee's ground attacking such interest could not be sustained. [Paras 12]

The ground contesting interest under sections 234B and 234C was dismissed.

Final Conclusion: The appeal was partly allowed: the Tribunal held that the assessee proved receipt of intra-group services and rejected the benefit test; it upheld segregation of the services transaction for ALP determination but set aside the NIL-ALP finding and remitted the matter to the AO/TPO for fresh determination after opportunity to be heard; challenges to penalty initiation were dismissed as premature and objections to mandatory interest were rejected.

Unexplained cash credits - Section 69A - treatment of deposits as unexplained income - Assessment under section 144 r.w.s. 144(1)(b) - Validity of belated return - Remand for verification and opportunity of hearing - Burden of production where assessee fails to respond to notices

Unexplained cash credits - Section 69A - treatment of deposits as unexplained income - Assessment under section 144 r.w.s. 144(1)(b) - Remand for verification and opportunity of hearing - Whether the additions made by treating demonetized currency deposits as unexplained income and estimating business turnover under section 144 r.w.s. 144(1)(b) were sustainable - HELD THAT: - The Assessing Officer treated deposits of demonetized currency as unexplained and made additions under section 69A, and estimated business turnover and income under section 144 r.w.s. 144(1)(b), after treating the assessees' belated return as invalid. The Tribunal noted that the assessee had not filed a regular return under section 139 nor furnished required explanations and documents in response to statutory notices and to the CIT(A). Given the absence of requisite material from the assessee, the Tribunal did not decide the merits of the additions on record but directed that the assessee shall furnish complete details before the Assessing Officer. The Assessing Officer is to verify the details so filed and decide the matter afresh in accordance with law after affording the assessee a reasonable opportunity of being heard. The Tribunal therefore remitted the controversy for fresh adjudication rather than confirming or setting aside the additions on merits. [Paras 5, 6]

Matter remanded to the Assessing Officer for fresh verification of the deposits and redecision after giving the assessee an opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal has remitted the assessment to the Assessing Officer for fresh consideration of the treatment of demonetized currency deposits and related additions, directing the assessee to furnish details and the Assessing Officer to verify the same and decide afresh after providing a reasonable opportunity of hearing; appeal allowed for statistical purposes.

Taxability of amounts paid by purchaser to tenants for vacation of tenancy - treatment of on money / undisclosed consideration in computation of long term capital gains - adoption of fair market value under section 50C and role of DVO valuation - onus on revenue to prove receipt of unaccounted consideration - remand for verification of claim of exemption under section 54 / section 54F

Taxability of amounts paid by purchaser to tenants for vacation of tenancy - treatment of on money / undisclosed consideration in computation of long term capital gains - onus on revenue to prove receipt of unaccounted consideration - Whether the lump sum payments made by the purchaser to vacate tenants could be taxed as income (capital gain) in the hands of the sellers/owners of the capital asset. - HELD THAT: - The Tribunal examined the statement of the purchaser and noted that the purchaser admitted to having paid a lump sum to vacate tenants and that nowhere in that statement was it stated that the sum was paid to or through the sellers. The purchaser's statement indicated dealings between purchaser and tenants to clear encumbrances and did not show transfer of that amount to the owners. Absent specific evidence linking the payments to receipt by the assessees (such as unaccounted bank deposits or other material evidence), the Department cannot treat such payments as income of the owners. On these facts the Tribunal held that amounts paid by the buyer to tenants for vacation of tenancy should not be taxed in the hands of the owners of the capital asset. [Paras 5]

Amount paid by purchaser to vacate tenants is not taxable in the hands of the owner; the addition confirmed by lower authorities on this count is set aside.

Adoption of fair market value under section 50C and role of DVO valuation - treatment of guideline value adopted for stamp duty purposes as FMV - Whether the Assessing Officer could adopt a market value other than the value under section 50C or a DVO valuation for computation of capital gains, and what value should be adopted in the facts of these cases. - HELD THAT: - The Tribunal observed that an Assessing Officer must either adopt the value under section 50C or obtain a valuation from the DVO before adopting a value other than the registered (stamp duty) value. There was no search/seizure at the assessees' premises and no direct evidence that the assessees received the alleged on money. In absence of requisite evidence and without DVO reference, the AO could not adopt the higher market value asserted by the revenue. The Tribunal directed that the guideline value as adopted by the SRO for stamp duty purposes be treated as the FMV under section 50C for computing capital gains in these matters and directed recomputation accordingly. [Paras 6]

Assessment order adopting the higher value is set aside; Assessing Officer directed to adopt the guideline (stamp duty) value of Rs..1,52,65,558/- as FMV under section 50C and recompute capital gains.

Remand for verification of exemption claim under section 54 / section 54F - Whether the assessees were entitled to deduction/exemption under section 54 (and related provisions) for investment in a residential property and whether the claim required fresh verification. - HELD THAT: - The assessees claimed exemption by purchase of a residential house but had not produced requisite documents such as cost of construction details, plan approvals and supporting certifications before the AO or on appeal. The Tribunal accepted the appellants' offer to furnish complete particulars and found it appropriate to remit the matter to the Assessing Officer for de novo consideration so that the claimed exemption can be examined on the production and verification of supporting documents in accordance with law. [Paras 7]

The claim under section 54 / related provisions is remitted to the Assessing Officer for fresh consideration upon factual verification of the documents to be furnished by the assessees.

Final Conclusion: Appeals allowed for statistical purposes: additions confirmed by lower authorities insofar as they treated purchaser paid amounts to tenants as income of the sellers are set aside; AO directed to adopt the guideline (stamp duty) value as FMV under section 50C and recompute capital gains; claim of exemption under section 54 / allied provisions remitted to the Assessing Officer for fresh consideration on production of supporting documents.

Revision under section 263 of the Act - applicability of section 50C - guide line value as indicator for stamp duty - requirement to record that assessment is erroneous and prejudicial to revenue - scope of jurisdiction of the Commissioner under section 263 - valuation report of an approved valuer

Guide line value as indicator for stamp duty - applicability of section 50C - revision under section 263 of the Act - Whether the Principal Commissioner was justified in setting aside the assessment under section 263 solely because the stamp authority's guideline value exceeded the sale consideration declared in the registered sale deed. - HELD THAT: - The Tribunal held that a higher guideline value adopted by the stamp valuation authority is only an indicator fixed for stamp duty purposes and, by itself, cannot render an assessing officer's order erroneous and prejudicial to revenue so as to justify revision under section 263. The Tribunal followed the decision of the Hon'ble Madras High Court in Smt. Padmavathi, which held that guideline value being higher than sale consideration cannot be the sole reason for invoking revision. In the present case the assessee had declared sale consideration in the registered deed and furnished an approved valuer's report; the PCIT's sole ground for setting aside the assessment was the discrepancy with the guideline value and a direction to verify the buyer's address. That, the Tribunal found, does not demonstrate that the assessment is erroneous in the sense contemplated by section 263 and therefore the revision order was unsustainable. [Paras 5]

Revision order setting aside the assessment on the ground that guideline value exceeded sale consideration was quashed.

Scope of jurisdiction of the Commissioner under section 263 - requirement to record that assessment is erroneous and prejudicial to revenue - valuation report of an approved valuer - Whether the PCIT properly applied mind and recorded requisite reasons showing that the assessment was erroneous and prejudicial to the interests of revenue before exercising jurisdiction under section 263. - HELD THAT: - The Tribunal found that the PCIT did not record any specific finding as to how the assessing officer's order was erroneous or prejudicial to revenue; the order merely directed verification of facts (including alleged wrong address in the sale deed) without explaining the basis on which the assessment was to be treated as erroneous. Further, the PCIT ignored the approved valuer's report, photographs and survey plan placed before the AO and accepted by him. Citing the settled principle that the Commissioner must state the grounds for his satisfaction under section 263 and cannot proceed on mere assumption, the Tribunal held that there was no valid exercise of jurisdiction in the revision order. [Paras 6, 7, 8]

Revision order was quashed for lack of recorded satisfaction and for having ignored the valuer's report; PCIT could not interfere with the assessment under section 263 on the basis stated.

Final Conclusion: The revision order passed by the Principal Commissioner under section 263 was quashed and the assessee's appeal allowed, since a higher stamp guideline value alone did not make the assessment erroneous and prejudicial to revenue and the PCIT failed to record requisite reasons or properly consider the approved valuer's report.

Applicability of Section 14A where no exempt income is earned - Disallowance under Section 14A limited to the amount of exempt income - Correlation between exempt income and expenditure under Rule 8D(1) - CBDT circular cannot override Section 14A and Rule 8D - Non-retrospective operation of Explanation to Section 14A (Finance Act, 2022)

Applicability of Section 14A where no exempt income is earned - Correlation between exempt income and expenditure under Rule 8D(1) - Disallowance under Section 14A limited to the amount of exempt income - CBDT circular cannot override Section 14A and Rule 8D - Section 14A (read with Rule 8D) is not invocable for making a disallowance where the assessee has not earned any exempt income in the relevant previous year; consequential deletion of the addition made under Section 14A r.w. Rule 8D. - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that Section 14A and Rule 8D operate with reference to exempt income actually earned or receivable in the relevant year, and therefore no disallowance can be made where no exempt income was earned. The Tribunal relied on binding and persuasive judicial decisions which interpreted the expression 'such previous year' in Rule 8D(1) as requiring a correlation between exempt income and the expenditure sought to be disallowed, and which held that the CBDT circular could not override the statutory scheme embodied in Section 14A and Rule 8D. The Tribunal observed that earlier judicial pronouncements also limited any disallowance under Section 14A to the amount of exempt income and noted that the Explanation inserted by Finance Act, 2022 cannot be treated as retrospective; accordingly, the law prior to that Explanation governs the assessment year in question. Applying these principles to the facts of the case (no exempt income in AY 2015-16), the Tribunal found no infirmity in the CIT(A)'s deletion of the disallowance. [Paras 4, 5]

The addition under Section 14A r.w. Rule 8D was deleted as Section 14A could not be invoked in the absence of exempt income for AY 2015-16.

Final Conclusion: In appeal by Revenue against the CIT(A)'s deletion of the Section 14A disallowance for AY 2015-16, the Tribunal dismissed the appeal and upheld the CIT(A)'s order deleting the addition, holding that Section 14A/Rule 8D cannot be applied where no exempt income was earned in the relevant year.

Summary order. Notice issued; matter listed in the last week of July, 2022; counter affidavit to be filed.

Service of order - limitation for filing appeal - concurrent findings of fact - appellate delay - scope of interference by the Supreme Court in concurrent findings

Service of order - concurrent findings of fact - scope of interference by the Supreme Court in concurrent findings - Findings that the order-in-original was served and signed by the petitioner in 2011 were upheld and not open to interference. - HELD THAT: - The Court recorded that both the First Appellate Authority and the CESTAT had recorded concurrent findings that the order-in-original was served and signed by the petitioner in 2011. The petitioner's contrary plea that service occurred in 2013 was not accepted or established before either forum. In light of these concurrent factual findings, the Supreme Court found no reason to intervene with the High Court's order which upheld those findings. [Paras 2, 4]

Concurrent factual findings that service occurred in 2011 are sustained and the petitioner's claim of service in 2013 is rejected; no interference warranted.

Limitation for filing appeal - appellate delay - scope of interference by the Supreme Court in concurrent findings - The appeal before the First Appellate Authority was held to be barred by limitation. - HELD THAT: - The Court noted the finding that the appeal filed before the First Appellate Authority was beyond the prescribed period of limitation. That conclusion, recorded by the appellate fora and accepted by the High Court, was not displaced. Given the finding on service and the undisputed chronology as found by the lower authorities, the delay rendered the appeal time barred and furnished an independent basis for dismissal. [Paras 3]

The First Appellate Authority's conclusion that the appeal was time barred is upheld and forms a ground for denying relief.

Final Conclusion: The special leave petition is dismissed; the High Court's upholding of the concurrent findings on service (2011) and the conclusion that the appeal was barred by limitation is left undisturbed; no interference by this Court.

Pre-deposit requirement under Section 129E/129A of the Customs Act - Rule 20 of the Customs, Excise and Service Tax Appellate Tribunal Rules, 1982 - restoration of appeal - delay and laches - discretion to restore despite subsequent deposit - precedential value of orders limited to their peculiar facts

Rule 20 of the Customs, Excise and Service Tax Appellate Tribunal Rules, 1982 - pre-deposit requirement under Section 129E/129A of the Customs Act - Maintainability of an application under Rule 20 where the appellant (or its counsel) appeared and the appeal was dismissed on merits for non-compliance with the statutory pre-deposit requirement. - HELD THAT: - Rule 20 applies only where an appeal is dismissed for default because the appellant did not appear when the appeal was called and the appellant later satisfies the Tribunal that there was sufficient cause for non-appearance. In the present case the learned counsel for the appellant appeared on the date fixed, addressed submissions and the appeal was dismissed on the ground of non-compliance with the statutory pre-deposit requirement under the amended provision of Section 129E/129A. Since the dismissal was consequent upon consideration of submissions and non-compliance of the statutory requirement rather than dismissal for default in non-appearance, Rule 20 is not the appropriate provision for restoration. The application under Rule 20 is therefore not maintainable in these circumstances. [Paras 11, 12, 13, 16, 17]

Rule 20 was held inapplicable and cannot be invoked to restore an appeal dismissed after the appellant (through counsel) appeared and the appeal was decided on the merits for failure to comply with the statutory pre-deposit requirement.

Restoration of appeal - delay and laches - discretion to restore despite subsequent deposit - precedential value of orders limited to their peculiar facts - Whether the appeal should be restored despite the appellant depositing the statutory amount years after dismissal, having pursued and exhausted remedies before the High Court and Supreme Court, and filing the restoration application after long delay. - HELD THAT: - Although no fixed time limit is prescribed for seeking restoration, the applicant must act with vigilance and apply at the earliest reasonable opportunity, explaining any delay. The Tribunal observed that the appellant had persistently advanced the incorrect legal contention before the Tribunal, High Court and Supreme Court, but after final rejections at higher forums delayed for years before depositing the statutory amount and seeking restoration. Reliance on an exceptional Supreme Court decision directing restoration in peculiar facts was noted, but that decision expressly disclaimed precedential effect and could not be treated as a general rule. In the circumstances the appellant failed to provide a satisfactory explanation for the prolonged delay (over five years after the Supreme Court dismissal and two years after depositing the amount) and the application was filed only after an inordinate lapse of time; consequently the equities did not favour restoration. [Paras 18, 19, 20, 21, 22]

Application for restoration was rejected as barred by inordinate and unexplained delay; discretionary restoration was refused despite subsequent deposit of the statutory amount.

Final Conclusion: The application for recall and restoration of the appeal was held not maintainable under Rule 20 and, alternatively, was refused on discretionary grounds for inordinate and unexplained delay after the matter had been finally dismissed by higher courts; the restoration application is therefore rejected.

Benefit of exemption notification already allowed cannot be subsequently denied without cogent evidence - recovery of differential duty under section 28 of the Customs Act, 1962 - onus of proof on the importer to establish admissibility of claimed exemption - requirement of specific reasons and evidence before disallowing a previously granted tariff concession - acceptance by the competent authority precluding the Revenue from taking a contrary stand in other similar cases

Benefit of exemption notification already allowed cannot be subsequently denied without cogent evidence - requirement of specific reasons and evidence before disallowing a previously granted tariff concession - acceptance by the competent authority precluding the Revenue from taking a contrary stand in other similar cases - Whether the demand of differential customs duty confirmed by the Principal Commissioner could be sustained where identical appellate orders allowing higher abatement had been accepted by the competent authority in other similar matters. - HELD THAT: - The Tribunal examined the departmental practice and specific appellate outcomes in identical matters and found that the Commissioner (Appeals) had allowed similar claims for higher abatement and that those appellate orders were accepted by the competent authority. The adjudicating authority's rejection of the higher abatement rested on a blanket approach that excluded wide categories of imported toys without production of samples, test reports or other cogent evidence and without specifying reasons in the show cause notice for each consignment. The Commissioner (Appeals) had held that once the Department had allowed the claim at assessment and the goods were cleared after examination and on production of test certificates, the Department must produce cogent evidence to displace that allowance; a cryptic, non speaking show cause or a blanket denial is not sustainable. The Tribunal applied the principle that where the Revenue has accepted the legal position in earlier proceedings and the decision has become final by acceptance, it is precluded from taking a contrary stand in other similar cases. On this basis the Tribunal held that the Principal Commissioner's order confirming differential duty was not maintainable. [Paras 14, 17]

The order of the Principal Commissioner confirming differential duty is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, setting aside the Principal Commissioner's order confirming differential customs duty, on the ground that the Department had accepted identical appellate orders allowing the higher abatement and the adjudication denying benefit lacked cogent, specific evidence and reasons.

Wrongful withholding of property under Section 630 of the Companies Act - bonafide dispute as to title - summary nature of proceedings under Section 630 - abuse of process and quashing under Section 482 of Cr.P.C. - requirement of application of mind in a magistrate's summoning order

Wrongful withholding of property under Section 630 of the Companies Act - summary nature of proceedings under Section 630 - bonafide dispute as to title - Whether proceedings under Section 630 of the Companies Act could be sustained where a bonafide dispute as to title and entitlement to the property exists between the parties. - HELD THAT: - The Court held that Section 630 is a summary procedure and cannot be used to determine competing claims of title; questions of title or implied licence are matters for a civil court. Section 630 may be invoked only where there is no bonafide dispute regarding the company's right to the property. Where a genuine dispute as to entitlement exists and is the subject of pending civil proceedings, invoking the summary criminal process to decide possession would amount to using criminal law as a substitute for civil remedies. Applying these principles to the facts, the Court found multiple pending civil proceedings and a binding family settlement (MoU) bearing directly on entitlement; therefore a bonafide dispute as to title existed and criminal proceedings under Section 630 were not maintainable in the circumstances. [Paras 16, 20, 21, 24, 25]

Proceedings under Section 630 could not be sustained because there existed a bonafide dispute as to the title and entitlement to the property which ought to be adjudicated by civil courts.

Requirement of application of mind in a magistrate's summoning order - abuse of process and quashing under Section 482 of Cr.P.C. - Whether the impugned order of summoning the petitioner reflected application of judicial mind and was legally sustainable, or whether the summoning order was vitiated and the criminal proceedings an abuse of process requiring quashing under Section 482 Cr.P.C. - HELD THAT: - The Court reiterated that a magistrate issuing summons must examine the nature of allegations and supporting evidence and apply judicial mind; mere mechanical recording of a complainant's testimony without considering material facts and pending civil litigation is impermissible. The impugned summoning order failed to consider the existence and effect of the MoU and the pendency of multiple civil suits and orders of status quo that were disclosed in the complaint. Given the summary nature of Section 630 proceedings and the grave consequences of criminal process, the High Court must act where criminal jurisdiction is being used to settle civil disputes. On the facts, the Court found a palpable error in the magistrate's order and concluded that invoking criminal process in these circumstances would be an abuse of the process of law. [Paras 3, 22, 26, 27]

The summoning order was vitiated by non-application of mind and the criminal proceedings were an abuse of process; the impugned summoning order and complaint were quashed under Section 482 Cr.P.C.

Final Conclusion: The High Court quashed the summoning order dated 19.10.2012, complaint case No.215/01/2011 and all proceedings arising therefrom under Section 630 of the Companies Act, holding that a bonafide dispute as to title and non-application of mind by the Magistrate rendered the criminal proceedings unsustainable and an abuse of process.

Compounding of offences under Section 621A - Prohibition to obtain more than one Director Identification Number - Penalty under Section 266G - Concurrent compounding powers of Company Law Board and criminal court - Non-obstante clause and legislative intent

Prohibition to obtain more than one Director Identification Number - Penalty under Section 266G - Compounding of offences under Section 621A - Validity of compounding by the Board of the offence of obtaining multiple DINs under Section 266C read with Section 621A having regard to the penalty prescribed in Section 266G - HELD THAT: - The Court examined the nature of the offence under Section 266C and the penal consequences prescribed by Section 266G, observing that the prescribed punishment is by way of fine (with additional daily fine for continuing contravention) and does not mandatorily entail imprisonment. Section 621A permits composition of offences that are not punishable with imprisonment only or with imprisonment and also with fine. Applying this statutory scheme and the reasoning in V.L.S. Finance Limited, the Court held that an offence punishable with fine (or with fine or imprisonment) falls within the category capable of being compounded under Section 621A. Consequently, compounding the contravention of Section 266C by the Board was permissible and not in contravention of Section 266G. [Paras 13, 14, 15]

Compounding of the offence under Section 266C read with Section 621A is permissible and does not contravene Section 266G.

Compounding of offences under Section 621A - Concurrent compounding powers of Company Law Board and criminal court - Non-obstante clause and legislative intent - Whether prior permission of the criminal court is required before the Board compounds an offence after institution of prosecution - HELD THAT: - Relying on the non-obstante opening of Section 621A and the exposition in V.L.S. Finance Limited, the Court interpreted Section 621A as conferring independent compounding power on the Company Law Board (or analogous authority) which can be exercised either before or after institution of prosecution. The legislature deliberately did not include a requirement of prior permission of the criminal court for composition by the Board; to read such a requirement into the provision would amount to adding words to the statute. The Court therefore concluded that the Board need not obtain prior permission of the criminal court to compound the offence under Section 621A. [Paras 16, 17]

No prior permission of the criminal court is required for the Board to compound the offence under Section 621A.

Final Conclusion: The company appeal is dismissed and the Board's order dated 22/05/2015 compounding the offence under Section 266C read with Section 621A is confirmed; the compounding is without prejudice to the pending criminal case under Sections 177, 420 and 416 IPC.

Restoration of company name - struck off register - discretion under Section 252(3) of the Companies Act, 2013 - failure to file annual returns and financial statements - interest of stakeholders - conditional restoration subject to filing outstanding documents and payment of fees and costs

Restoration of company name - discretion under Section 252(3) of the Companies Act, 2013 - failure to file annual returns and financial statements - interest of stakeholders - conditional restoration subject to filing outstanding documents and payment of fees and costs - Whether the Company's name, having been struck off for non filing of statutory returns, should be restored to the Register of Companies. - HELD THAT: - The Tribunal examined whether the statutory grounds under Section 252 were satisfied to exercise its remedial discretion to restore a struck off company's name. While the Registrar's records showed non filing of annual returns and balance sheets leading to strike off, the appellant produced balance sheets reflecting current liabilities and capital work in progress and a colonizer registration certificate indicating ongoing business activity. The Tribunal found that, although the evidence was not exhaustive, the material placed on record was sufficient to conclude that it would be just and in the interest of stakeholders to grant restoration. The exercise of discretion was therefore conditioned upon compliance with statutory formalities: filing all outstanding financial statements and returns with proper filing fees and additional fees as required by law, payment of any late fees or other leviable charges, and payment of a cost directed to the Prime Minister's Relief Fund. Upon completion of these formalities, the company's name would stand restored to the Registrar's Register. [Paras 6, 7]

The appeal is allowed; the company's name is ordered to be restored subject to filing all outstanding documents with requisite fees and payment of costs as directed.

Final Conclusion: Appeal allowed. Company's name to be restored to the Register of Companies subject to filing all outstanding statutory documents with applicable fees and charges, payment of directed costs, and compliance with formalities; appellant to furnish a copy of this order to the ROC within 30 days.

Financial debt - operational debt - time value of money - commercial effect of a borrowing - principal-agent relationship - force majeure - date of default

Financial debt - time value of money - commercial effect of a borrowing - operational debt - Whether the interest bearing advances made by PEC Ltd. to Phulchand Exports Pvt. Ltd. qualify as a "financial debt" under the IBC. - HELD THAT: - The Tribunal examined the Associate Supplier Agreement and the Foreign Contract and found the advances were made to facilitate procurement, shipment and export of specified cargo under the foreign contract and were tied to realisation from the buyer payable to PEC Ltd. Payment was to be received by PEC from the foreign buyer and, after deductions (including PEC's trading margin and amounts paid on the Associate Supplier's advice), the balance would be paid to the Associate Supplier. There was no repayment schedule obliging the Associate Supplier to repay the advances independent of the export realisation, nor any clear event of repayment default (save contingencies covered by force majeure). Applying the statutory definitions and the principles in Swiss Ribbons and Anuj Jain, the Tribunal held that to qualify as a "financial debt" an advance must have the commercial effect of a borrowing that aids the corporate debtor's financial viability; by contrast the advances here were operational in character-made for performance of a specific commercial supply contract-and did not assume the role of financing the corporate debtor's ongoing viability. Consequently the advances do not qualify as "financial debt" under the IBC. [Paras 21, 24, 25]

The amount advanced by PEC Ltd. does not constitute a "financial debt" under the IBC; it is not covered as financial debt and is of an operational character.

Date of default - principal-agent relationship - force majeure - Whether the claimed advance was in default and, if so, whether a date of default was properly pleaded in the Section 7 application. - HELD THAT: - The Tribunal noted that Part IV of the Section 7 application did not expressly state a date of default. The contractual scheme showed payment from the foreign buyer to PEC was the trigger for any payment to the Associate Supplier and there was no independent repayment obligation or schedule in the Associate Supplier Agreement. Further, the contemplated shipment did not occur because the consignment was confiscated and the foreign contract contained a force majeure clause affecting performance and payment. In view of the absence of a contractual repayment obligation and the lack of an expressly pleaded date of default, the question of default remained unresolved and, having held that the claim is not a financial debt, the Tribunal did not find it necessary to adjudicate further on repayment/default. [Paras 22, 23, 25]

No clear date of default was established in the Section 7 pleadings; in any event, having held the claim not to be a financial debt, the Tribunal declined to decide the issue of repayment/default.

Final Conclusion: The Section 7 petition was rightly dismissed: the advances made by PEC Ltd. to Phulchand Exports Pvt. Ltd. do not qualify as "financial debt" under the IBC (being advances for performance of a supply contract and lacking the commercial effect of borrowing), and accordingly admission under Section 7 was not warranted; questions of repayment and default were not adjudicated as they became unnecessary once classification failed.

Limitation - Section 7 of the Insolvency and Bankruptcy Code, 2016 - date of default - fresh cause of action arising from decree or Recovery Certificate - acknowledgement of debt in balance sheet extending limitation - financial debt

Limitation - Section 7 of the Insolvency and Bankruptcy Code, 2016 - fresh cause of action arising from decree or Recovery Certificate - acknowledgement of debt in balance sheet extending limitation - Whether the Section 7 application filed by the Financial Creditor was within the period of limitation - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in Dena Bank (now Bank of Baroda) to hold that a decree of the DRT and the issuance of a Recovery Certificate give rise to a fresh cause of action allowing a financial creditor to initiate proceedings under Section 7 within three years from the date of the decree/Recovery Certificate; therefore the Section 7 petition filed on 17.10.2019 was within three years of the DRT decree dated 22.10.2016. The Tribunal rejected the appellant's contention that the date of NPA (31.03.2013) or a notional 90-day period thereafter should be treated as the operative date of default for limitation purposes, relying on settled authorities that the relevant date is the date of default and that a decree/Recovery Certificate can reset limitation. Further, the Tribunal accepted that entries in the audited financial statements and the auditor's report amounted to acknowledgements of debt which, under the law, extend the period of limitation; accordingly, the acknowledgement in the balance sheet for the year ending 31.03.2017 strengthened the position that the Section 7 petition was not time-barred. Having regard to these conclusions, the appeal was dismissed. [Paras 7, 8, 9, 11, 13]

The Section 7 application was within the period of limitation and the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the Adjudicating Authority's admission of the Section 7 application, holding that the DRT decree/Recovery Certificate and acknowledgements in the corporate debtor's financial statements rendered the petition timely under the law.

Moratorium under the Insolvency and Bankruptcy Code, 2016 - compliance of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 despite CIRP - liability of transferee-establishment under Section 17B of the EPF & MP Act - recovery by EPFO by attachment/lien under the EPF & MP Act - requirement that a resolution plan must not contravene existing law (Section 30(2)(e) of the IBC)

Recovery by EPFO by attachment/lien under the EPF & MP Act - moratorium under the Insolvency and Bankruptcy Code, 2016 - Whether the lien marked by Kotak Mahindra Bank pursuant to EPFO's attachment order for recovery of EPF dues could be directed to be lifted or stayed in view of the moratorium under the IBC. - HELD THAT: - The Tribunal examined the EPFO demand/attachment dated 02.07.2019 and the subsequent correspondence. Records show an enquiry under the EPF Act concluded and an attachment under the EPF Act was effected by notice to the bank which marked a lien on the corporate debtor's account. Although a moratorium under the IBC was in place after initiation of CIRP, the Tribunal held that the EPFO's demands and steps for recovery effected in accordance with the EPF Act cannot be set aside by the Resolution Professional in these proceedings. The Resolution Professional's request to lift the bank's lien and to stay EPFO proceedings was refused because the recovery steps under the EPF statute had been lawfully initiated and are exigible against the corporate debtor, and the Resolution Professional must pursue available remedies under the EPF Act (including appellate remedies) rather than seek to override those statutory recovery measures before this Tribunal. [Paras 9, 13]

Application for direction to lift the bank's lien and to restrain EPFO proceedings dismissed; lien not directed to be lifted.

Liability of transferee-establishment under Section 17B of the EPF & MP Act - requirement that a resolution plan must not contravene existing law (Section 30(2)(e) of the IBC) - compliance of the Employees Provident Funds and Miscellaneous Provisions Act, 1952 despite CIRP - Whether the Resolution Professional is obliged to ensure compliance with the EPF Act (including liability under Section 17B) and whether EPF dues fall outside the ambit of assets usable in CIRP or resolution planning. - HELD THAT: - Relying on precedent of higher fora and statutory scheme, the Tribunal noted that EPF dues are matters of compliance of the law and that Section 17B places liability on the transferee/new establishment for dues up to the date of transfer. Further, a resolution plan must not contravene existing law; accordingly the RP/SRA must ensure statutory obligations under the EPF Act are addressed in the CIRP process. The Tribunal observed that EPF dues and the procedure for their recovery under the EPF Act are distinct statutory remedies and that the RP cannot displace those remedies by invoking the IBC moratorium. The RP was directed to comply with the provisions of the EPF Act and to avail of the appellate mechanisms provided therein to redress any grievance. [Paras 11, 12]

RP must ensure compliance with EPF Act obligations (including Section 17B liability where applicable) and cannot override EPFO's statutory recovery; issues to be pursued under the EPF Act and its appellate provisions.

Final Conclusion: IA No. 298/2020 dismissed: directions to lift the bank's lien and to restrain EPFO proceedings refused; Resolution Professional directed to comply with the EPF & MP Act, 1952 (including applicable liabilities under Section 17B) and to pursue remedies under the EPF Act.

Admission of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 - limitation as applied to arrears of rent and continuing defaults - effect of arbitration clause on initiation of CIRP - operational debt includes service and maintenance charges - possession and month-to-month liability after expiry of agreement - appointment of interim resolution professional and moratorium

Limitation as applied to arrears of rent and continuing defaults - Portion of the claim for arrears was time-barred while arrears for three years preceding the petition were maintainable. - HELD THAT: - The Tribunal held that the claim for arrears of monthly charges accrues each month when rent/service charges fall due and that Article 52 of the Limitation Act governs arrears of rent. The petition filed on September 14, 2021 could therefore seek arrears only for three years prior to filing. Consequently, claims prior to September 14, 2018 are barred by limitation, while dues from September 2018 to March 2021 remain admissible. [Paras 5]

Claims prior to September 14, 2018 are barred by limitation; dues from September 2018 to March 2021 are not time-barred.

Effect of arbitration clause on initiation of CIRP - Invocation of the arbitration clause did not preclude admission because arbitration was not commenced. - HELD THAT: - The Tribunal found that the corporate debtor's reliance on alleged arbitration was unsupported: the operational creditor's e-mail invoking arbitration was rejected by the corporate debtor on August 31, 2020 and no arbitration proceedings were shown to have commenced. The corporate debtor also failed to notify any pending arbitration in its replies as required. On these facts the Tribunal concluded that arbitration did not operate as a bar to the section 9 petition. [Paras 6, 8]

Arbitration was not in progress; the arbitration clause did not prevent admission of the section 9 petition.

Operational debt includes service and maintenance charges - Service charges and maintenance dues constitute operational debt and the proved amount satisfies the monetary threshold for filing under section 9. - HELD THAT: - Although there is divergence in precedents on whether rent of immovable property is an operational debt, the Tribunal treated the claimed dues as comprising rent, service charges and maintenance. It computed arrears for the admissible period (September 2018 to March 2021) and concluded that even if rent were excluded, the arrears of service charges and maintenance alone exceed the threshold under section 4 of the Code. The Tribunal relied on the principle that a petition may be admitted if the proved default meets the threshold even if the total claimed amount is not fully proved. [Paras 7, 9]

Service and maintenance charges are operational debt and the proved default meets the statutory threshold for admission.

Possession and month-to-month liability after expiry of agreement - The corporate debtor remained in possession after expiry/termination and thus continued to be liable for monthly charges. - HELD THAT: - The Tribunal observed that the corporate debtor admitted possession in its communications and had refused to vacate the premises despite termination attempts. The corporate debtor continued to enjoy the premises and benefit from possession for several years without payment. On these facts the Tribunal concluded that the corporate debtor continued to incur liability (effectively as a month-to-month occupant) and could not avoid liability by pleading termination or non-admissibility. [Paras 8, 9]

Corporate debtor's continued possession established ongoing liability for monthly licence/service charges.

Admission of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional and moratorium - The section 9 petition was admitted; an interim resolution professional was appointed and moratorium was declared. - HELD THAT: - Applying the conclusions on limitation, arbitration and operational debt, the Tribunal found default and operational debt established for the admissible period and admitted the petition under section 9. The Tribunal appointed an interim resolution professional (whose registration and absence of pending disciplinary proceedings were recorded), directed a public announcement, mandated deposit for IRP expenses, and declared the statutory moratorium with the usual prohibitions and consequences. [Paras 9, 10, 11]

Petition under section 9 admitted; IRP appointed and moratorium imposed with directions for public announcement, deposit and cooperation from suspended management.

Final Conclusion: The Tribunal admitted the section 9 petition for initiation of CIRP against the corporate debtor, holding that dues from September 2018 to March 2021 are not time-barred, that arbitration had not been commenced so it did not bar admission, that service and maintenance charges constitute operational debt meeting the statutory threshold, that the corporate debtor remained in possession and liable for monthly charges, and accordingly appointed an interim resolution professional and declared the moratorium.

Explanation to definition of exempted service and its retrospective effect - trading as an exempted service - distinction between availment of CENVAT credit and utilisation of CENVAT credit - obligation to follow reversal/option procedure under Rule 6(3A) and Rule 6 of the Cenvat Credit Rules

Explanation to definition of exempted service and its retrospective effect - trading as an exempted service - Whether the Explanation inserted to rule 2(e) of the Cenvat Credit Rules w.e.f. 01.04.2011 operates retrospectively so as to treat trading as an exempted service for periods prior to 01.04.2011. - HELD THAT: - The Tribunal examined the scope and effect of the Explanation added to rule 2(e) w.e.f. 01.04.2011 and applied the principles laid down by the Supreme Court that an Explanation which widens or introduces a substantive provision is presumed prospective unless a contrary legislative intent is manifest. Prior decisions of the Tribunal were considered and followed in holding that the 01.04.2011 amendment introduced a substantive change so as to treat trading as an exempted service only from that effective date. Consequently, trading could not be treated as an exempted service for periods before 01.04.2011. [Paras 18, 22]

The Explanation is prospective; trading was not an exempted service prior to 01.04.2011 and cannot be treated as such for the relevant earlier periods.

Distinction between availment of CENVAT credit and utilisation of CENVAT credit - Rule 6(3)(c) - restriction on utilisation vs availment - Whether the demand under Rule 6(3)(c) for April 2006 to March 2008 (excess utilisation beyond 20%) is sustainable. - HELD THAT: - The Tribunal held that for the period April 2006 to March 2008 there was no restriction on the availment of credit but only on its utilisation. Applying this distinction and relying on relevant precedent, the Tribunal found that the confirmed demand computed as excess utilisation under Rule 6(3)(c) could not be sustained. [Paras 23]

The demand confirmed for April 2006 to March 2008 under Rule 6(3)(c) is not sustainable and is set aside.

Obligation to follow reversal/option procedure under Rule 6(3A) and Rule 6 - option to pay percentage of trading turnover cannot be thrust upon assessee - Whether the demand under Rule 6(3)(i)/(3A) for April 2008 to March 2011 (payment at 6%/8% of trading turnover) is sustainable when the assessee did not exercise the option under Rule 6. - HELD THAT: - The Tribunal held that the statutory option to follow the month wise provisional reversal and end of year final calculation under Rule 6(3A) is not a remedy that can be imposed retrospectively on an assessee who did not choose it; cited authorities support that the option of paying 6%/8% of trading turnover cannot be unilaterally thrust upon the assessee. In the circumstances the demand computed on that basis for April 2008 to March 2011 could not be sustained. [Paras 24]

The demand for April 2008 to March 2011 based on imposition of the Rule 6(3A)/Rule 6 option is unsustainable and is set aside.

Final Conclusion: The impugned order dated 28.03.2013 is set aside in entirety; the confirmed demands for the periods April 2006 to March 2008 and April 2008 to March 2011 are not sustainable and the appeal is allowed.

Retrospective exemption and refund claim limitation under section 102(1) of the Finance Act - Unjust enrichment doctrine in refund claims - Statutory limitation overriding general limitation under section 11B principles - Refund of service tax paid for the period 01.04.2015 to 29.02.2016

Retrospective exemption and refund claim limitation under section 102(1) of the Finance Act - Refund of service tax paid for the period 01.04.2015 to 29.02.2016 - Whether the appellant's refund claim was filed within the statutory period prescribed by section 102(1) of the Finance Act - HELD THAT: - Section 102(1), introduced by the Finance Bill 2016, granted retrospective exemption for construction services for the period 01.04.2015 to 29.02.2016 and expressly prescribed that refund of service tax paid for that period must be filed within six months from the date of enactment (14.05.2016). The appellant filed the refund claim on 05.10.2017, after initial return for defects and subsequent re-submission on 22.01.2018. The tribunal held that the statutory six-month limitation laid down in section 102(1) is determinative and mandatory for claims arising under that provision. Pre-existing general limitation rules (such as the one-year period under section 11B of the Central Excise Act relied upon by the appellant) cannot override the specific time-bar prescribed by section 102(1). Decisions cited by the appellant involving mistaken payments where exemption already existed were distinguished on facts because, in the present case, tax was payable at the relevant time and exemption was granted only by the retrospective statutory provision coupled with a specific six-month filing condition. The claim was therefore held to be time-barred. [Paras 15, 16, 17]

The refund claim was barred by the six-month limitation prescribed in section 102(1) and thus not maintainable.

Unjust enrichment doctrine in refund claims - Whether the appellant was entitled to refund notwithstanding the plea of unjust enrichment raised by the Department - HELD THAT: - The tribunal recorded that once the refund claim is held to be barred by time under the specific statutory provision, the question of unjust enrichment did not arise for adjudication. Although the appellant contended that the tax incidence was not passed on (pointing to adjustments made by the CPWD against subsequent bills) and relied on authorities regarding recovery where tax was collected without authority, the tribunal declined to examine unjust enrichment because the primary ground of time-bar was dispositive. Consequently the merits of the unjust enrichment contention were not considered for allowing the refund. [Paras 18]

Having found the refund claim time-barred, the question of unjust enrichment was held not to arise and was not entertained to grant relief.

Final Conclusion: The appeal is dismissed: the refund claim for the period 01.04.2015 to 29.02.2016 was filed after the six-month period prescribed by section 102(1) and is time-barred; having so found, the tribunal did not permit consideration of unjust enrichment and upheld dismissal of the appeal.

Extended period of limitation - Business Auxiliary Service - Show Cause Notice issuance where tax on component already paid - Imposition of penalty for contravention of service tax provisions - Waiver of penalty under Section 80 of the Finance Act, 1994

Imposition of penalty for contravention of service tax provisions - Waiver of penalty under Section 80 of the Finance Act, 1994 - Validity of imposition of penalties by the First Appellate Authority upon allowing the Department's appeal - HELD THAT: - The Tribunal found that, on the material placed before it and in view of the relevant precedent relied upon by the appellant, the proceedings ought to have been concluded prior to issuance of the Show Cause Notice and that the basis for imposing penalties was therefore defective. The adjudicating authority had earlier refrained from imposing penalty by applying the provision permitting waiver; the First Appellate Authority nevertheless imposed penalties on departmental appeal. On consideration of the appellant's submissions and the Tribunal's view of the law and facts, the imposition of penalties was set aside. [Paras 5]

Penalties imposed pursuant to the Department's appeal are set aside.

Extended period of limitation - Show Cause Notice issuance where tax on component already paid - Business Auxiliary Service - Whether the service tax demand confirmed in the Order in Original should be interfered with by the Tribunal - HELD THAT: - The Tribunal noted that the adjudication confirmed the service tax demand and appropriated amounts already paid by the appellant; interest computation was addressed separately. The appellant demonstrated that part of the commission income, representing volume based commission from downstream distributors, had been taxed and paid before issuance of the Show Cause Notice and that relevant precedent supported concluding proceedings without further penal consequences. The Tribunal declined to interfere with the substantive service tax demand confirmed in the Order in Original but held that the penalty consequences should not stand. [Paras 5]

Service tax as confirmed in the adjudication is not interfered with.

Final Conclusion: Appeal allowed in part: the penalties imposed by the First Appellate Authority are set aside, while the service tax demand in the Order in Original is upheld; consequential relief to follow as per law.

Intermediary - business support services - place of provision of service - export of services - refund of un-utilised Cenvat credit under Rule 5 - sub-contracting not intermediary

Intermediary - business support services - place of provision of service - export of services - Whether the services provided by the appellant to M/s. HLX, USA are intermediary services or business support services and whether the place of provision is outside India making them eligible as exported services for refund of un-utilised Cenvat credit - HELD THAT: - The Tribunal examined the statutory definition of "intermediary" under the Place of Provision of Services Rules, 2012 and held that an "intermediary" necessarily arranges or facilitates a main supply between two or more persons and therefore requires involvement of at least three parties. A service supplied on principal-to-principal basis by a supplier who provides the main service on his account cannot be an intermediary service. The agreement and material on record show the appellant performed backend support, maintenance and account-creation services on HLX systems as an independent contractor, received pre-agreed consideration in convertible foreign exchange, and did not act as a liaison or agent between HLX and HLX's clients. The Tribunal found no evidence that the appellant arranged or facilitated a main supply between HLX and its clients; the lower authorities' reliance on absence of third-party agreements and on website material was impermissible without confronting the appellant and did not discharge the departmental burden of proof. Applying Rule 3 of the Place of Provision of Services Rules (location of service recipient) and Rule 6A of the Service Tax Rules, 1994, the Tribunal concluded that the place of provision is outside India (recipient in USA) and the services qualify as export of services. Consequently, denial of refund on the ground of intermediary was unsustainable. [Paras 5, 6, 7]

The services are business support services provided on principal-to-principal basis, not intermediary services; their place of provision is outside India and they qualify as export of services, making the appellant entitled to refund proceedings under Rule 5.

Refund of un-utilised Cenvat credit under Rule 5 - remand for quantification - Whether the refund claims should be remitted for computation and disposal and the scope of further proceedings - HELD THAT: - The Tribunal held that Rule 5 provides the mechanism for determining admissible refund of accumulated Cenvat credit for exported goods or services and is not itself a demand proceeding to deny credit. As the Revenue had not initiated separate demand proceedings disputing export character, the Tribunal declined to deny refund in the Rule 5 proceeding on that basis. The Tribunal, while allowing the appeals on the substantive question, remanded the matters to the original adjudicating authority for calculation of the refund admissible on the basis of documents already submitted by the appellant. The adjudicating authority was directed to give the appellant proper opportunity of hearing and to dispose of the refund claims within three months from receipt of the order. [Paras 7, 8]

Appeals allowed on merits and remitted to the original adjudicating authority for computation and disposal of the refund claims in accordance with law, after affording opportunity to the appellant.

Final Conclusion: The Tribunal set aside the orders denying refund, held the impugned services to be exported business support services (not intermediary services) with place of provision outside India, allowed the appeals and remanded the matters to the original authority for computation and disposal of the refund claims within three months after giving the appellant an opportunity to be heard.

Interpretative Rule 2(a) of the Schedule to the Central Excise Tariff - Primacy of Heading and Section/Chapter Notes under Rule 1 - Section Note 2 to Section XVI - classification of parts - Classification of assemblies/sub-assemblies as parts versus complete goods - Inapplicability of Rule 2(a) where components are not removed together - Penalty liability of responsible officers when duty demand unsustainable

Interpretative Rule 2(a) of the Schedule to the Central Excise Tariff - Section Note 2 to Section XVI - classification of parts - Primacy of Heading and Section/Chapter Notes under Rule 1 - Whether the sub-assemblies/parts cleared by the appellant could be classified as complete CTVs under Rule 2(a) and charged to duty as complete sets instead of being classifiable as parts under Heading 85.29 by virtue of Section Note 2 to Section XVI. - HELD THAT: - The Tribunal held that Rule 2(a) applies only where all components forming the complete article are removed/presented together at the same point of time; consignments cleared at different times cannot be clubbed to invoke Rule 2(a). The factual finding that no single consignment from the appellant contained all critical parts of a CTV (picture tubes and populated PCBs were not supplied together) meant Rule 2(a) was not applicable. Separately, even if Rule 2(a) were considered, Rule 1 gives primacy to the terms of the headings and any relevant Section or Chapter Notes; Section Note 2 to Section XVI mandates that parts of goods included in Chapter 84 or 85 are in all cases to be classified in their respective headings. The sub-assemblies here were correctly classifiable as parts under Heading 85.29, so resort to Rule 2(a) was not permissible to alter that classification. The Tribunal further distinguished Salora International on facts, noting that there the goods had been assembled, tested and then disassembled before despatch, which is not the position here. [Paras 16, 20, 22, 26, 28]

Rule 2(a) could not be invoked; the goods are classifiable as parts under Heading 85.29 in view of Section Note 2 to Section XVI and the primacy of Rule 1; the duty demand premised on classification as complete CTVs is unsustainable.

Penalty liability of responsible officers when duty demand unsustainable - Whether penalties could be sustained against the appellant's officers once the duty demand was held unsustainable. - HELD THAT: - Because the Tribunal set aside the duty demand (finding the classification demand unsustainable), the consequential imposition of penalties on the appellant and on the two officers could not be sustained. The order recorded that absent a sustainable demand, penalties premised on that demand must also fall. [Paras 30, 31]

Penalties imposed on the appellant and on S.N. Rai and Atul Tandon are set aside as the underlying duty demand is not sustainable.

Final Conclusion: The Commissioner's order dated 21.03.2016 confirming differential duty and imposing penalties is set aside; Excise Appeals No. 70677, 70678 and 70679 of 2016 are allowed.

Remand - remission of central excise duty for goods destroyed by fire - scope of remand and jurisdiction of adjudicating authority - verification of insurance settlement - CENVAT credit reversal - unavoidable accident/short circuit

Remand - scope of remand and jurisdiction of adjudicating authority - Whether the adjudicating authority exceeded the terms of the remand by re deciding issues beyond verification of the actual amount settled by the insurance company. - HELD THAT: - The Tribunal had remanded the matter to the original authority solely to ascertain, upon verification of documents, the actual amount settled by the insurance company. Despite that limited remit, the Commissioner proceeded to examine and decide broader issues including entitlement to remission on semi finished goods and reversal of CENVAT credit. The Tribunal found that such wider re examination went beyond the terms of the remand and thus was beyond the jurisdiction conferred by the remand order. The Commissioner's undertaking of broader adjudication on matters already addressed by the Tribunal was therefore impermissible. [Paras 10, 15]

The Commissioner exceeded the terms of the remand by deciding issues beyond verification of the insurance settlement; those excess findings cannot be sustained.

Remission of central excise duty for goods destroyed by fire - verification of insurance settlement - unavoidable accident/short circuit - Entitlement of the appellant to remission of duty on semi finished goods destroyed in the fire. - HELD THAT: - The Tribunal had earlier held that the fire caused by a short circuit is an unavoidable accident and that duty cannot be fastened on semi finished goods not removed from the factory; it remitted the question of the insurance settlement amount to the authority. On remand the Commissioner nevertheless denied remission on semi finished goods. The Tribunal in the present order records that the Commissioner's denial is contrary to the Tribunal's earlier decision and that the Commissioner had gone beyond the remit. Consequently, the Tribunal set aside the part of the Commissioner's order denying remission on semi finished goods and found the appellant entitled to remission to the quantified extent determined on remand. [Paras 9, 15, 16]

The denial of remission on semi finished goods is set aside; the appellant is entitled to remission of duty on semi finished goods destroyed in the fire to the extent of Rs.35,60,087/-.

CENVAT credit reversal - remand - Whether the reversal of CENVAT credit by the appellant was unwarranted (as adjudicated by the Commissioner on remand). - HELD THAT: - The Commissioner on remand observed that the reversal of CENVAT credit amounting to Rs.41,01,620 was correct. The present order does not disturb that conclusion; the Tribunal's decision and the appeal dispose only the aspect relating to remission on semi finished goods which had been wrongly re adjudicated by the Commissioner. The remaining parts of the Commissioner's order, including the finding on CENVAT credit reversal, were not challenged by the appellant in this appeal. [Paras 13, 17]

The Commissioner's finding that the reversal of CENVAT credit was correct is left intact and was not disturbed in the appeal.

Final Conclusion: The Tribunal holds that the Commissioner exceeded the limited remand by re deciding issues beyond verification of the insurance settlement; the portion of the Commissioner's order denying remission of duty on semi finished goods destroyed in the fire is set aside and the appellant is held entitled to remission to the extent of Rs.35,60,087/-, while the other parts of the order not challenged remain unaffected.

Criminal liability under section 138 of the Negotiable Instruments Act - leave of the Company Court under section 446 of the Companies Act - automatic winding up upon consent terms - effect of winding up on enforceability of debt and prosecution under section 138 - procedural irregularity in issuance of process

Leave of the Company Court under section 446 of the Companies Act - criminal liability under section 138 of the Negotiable Instruments Act - Whether leave of the Company Court under section 446 is a pre requisite to institute or proceed with a criminal complaint under section 138 of the Negotiable Instruments Act where the accused is a company in liquidation. - HELD THAT: - The Court examined precedent and concluded that the expression 'suit or other proceedings' in section 446(1) of the Companies Act does not extend to criminal complaints under section 138 NI Act. Prior decisions of this Court and the Supreme Court distinguish civil proceedings bearing on winding up from criminal prosecutions for dishonour of cheques, and the authorities relied upon support that leave under section 446 is not peremptory for instituting or continuing a section 138 prosecution against a company or its directors. Consequently, the contention that lack of permission under section 446 renders the complaints untenable was rejected. [Paras 18, 23, 24, 25]

Leave under section 446 is not a precondition to proceed with complaints under section 138; the contention based on absence of such leave is not tenable.

Automatic winding up upon consent terms - effect of winding up on enforceability of debt and prosecution under section 138 - Whether the automatic winding up of the company by operation of consent terms (on default) ousts the maintainability of complaints under section 138 and mandates quashing of the criminal proceedings as an abuse of process. - HELD THAT: - The Court held that the question cannot be answered in the abstract and must depend on the facts. While recognising decisions that a winding up order or statutory restraints may, in appropriate circumstances, affect the institution or continuation of criminal proceedings, the Court relied on Supreme Court precedents emphasising that enforceability of a debt and completion of the offence under section 138 turn on the factual matrix (drawing, presentation, dishonour and failure to make payment within the statutory time). An automatic winding up clause in consent terms cannot be equated with a judicial winding up order passed on merits; permitting the applicants' contention would enable a party to evade liability by taking advantage of its own default. Given the stage of trial and the conduct of the parties, the Court declined to exercise inherent jurisdiction to quash the complaints but expressly left open the defence based on consequences of winding up for determination by the trial Court. [Paras 43, 45, 46, 47, 49]

Applications to quash on the ground of automatic winding up are rejected; the defence of effect of winding up is left open for determination by the learned Magistrate.

Procedural irregularity in issuance of process - Whether a procedural irregularity occurred because process was ordered to be issued before recording the verification statement of the complainant in one of the matters. - HELD THAT: - The Court examined the record and the Roznama and found that the alleged irregularity was not borne out by the record. The verification statement was recorded on 23rd March, 2016 and process was ordered on the same day; the apparent discrepancy arose from an inadvertent mistake in recording the date of the order. Accordingly, there was no clear non application of mind or procedural infirmity warranting interference. [Paras 9, 10]

No procedural irregularity is established; the purported issuance of process prior to verification was an apparent recording error and does not invalidate the process.

Final Conclusion: The applications under section 482 to quash the complaints are dismissed. The Court held that leave under section 446 is not necessary for section 138 prosecutions, found no procedural infirmity in issuance of process, and declined to quash prosecutions on the ground of automatic winding up while preserving the accused's defence on the effect of winding up for adjudication by the trial Court.