TaxTMI Updates e-Newsletter
Aug 28,2020

Scope of supply under Section 7 of the CGST Act - related persons deemed supply without consideration - pure services - Service Classification Code 998339 (project management services for construction projects) - exemption under Notification No. 12/2017 Central Tax (Rate) - Sl. No. 3 - definition of Governmental Authority under Para 2(zf) of Notification No. 12/2017 - de jure ownership of project assets

Scope of supply under Section 7 of the CGST Act - related persons deemed supply without consideration - de jure ownership of project assets - Services rendered by KMRL to the Government of Kerala as executing and operating agency constitute 'supply' under the CGST Act even where no consideration passes. - HELD THAT: - The Authority applied Section 7 and Schedule I to conclude that activities between related persons made in the course or furtherance of business are treated as supply even if without consideration. KMRL, being a joint venture with equal equity participation of the Government of Kerala and Government of India, falls within the Explanation to Section 15(5) (item (iv)) as a related person vis-a -vis the State. The State is the de jure owner of the project assets and KMRL acts as executing/operating agency; accordingly, services rendered by KMRL to the State fall within the definition of 'supply' under the CGST Act whether or not consideration is recorded. [Paras 16, 17]

Services by KMRL to Government of Kerala are a 'supply' under the CGST Act.

Pure services - Service Classification Code 998339 (project management services for construction projects) - The services performed by KMRL in executing and operating the integrated water transport project are classifiable as pure project management services under S.C.C. 998339. - HELD THAT: - The Authority examined the scope and explanatory note of S.C.C. 998339 and found that KMRL assumes overall responsibility for successful completion and management of the construction project on behalf of the State, including organising financing, design, tendering and control functions. The invoices are raised in KMRL's name and the nature of activities aligns with the explanatory note for 998339, thereby establishing the services as pure services (not works contract or composite supply). [Paras 18, 19]

Services rendered by KMRL are pure services falling under Service Classification Code 998339.

Exemption under Notification No. 12/2017 Central Tax (Rate) - Sl. No. 3 - functions entrusted to a Municipality under Article 243W - The pure services rendered by KMRL to the Government of Kerala are exempt from GST under Sl. No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. - HELD THAT: - Sl. No. 3 of Notification No. 12/2017 exempts pure services provided to Governmental authorities by way of activities in relation to functions entrusted to a Municipality under Article 243W. The integrated water transport project falls within urban planning and provision of public amenities (functions in the Twelfth Schedule), and the services have been held to be pure services under S.C.C. 998339. Accordingly, the services rendered by KMRL to the State are covered by the exemption entry and are not liable to GST. [Paras 20, 21]

The services rendered by KMRL to Government of Kerala are exempt from GST under Sl. No. 3 of Notification No. 12/2017.

Definition of Governmental Authority under Para 2(zf) of Notification No. 12/2017 - 90 per cent or more participation by way of equity or control - KMRL falls within the definition of 'Governmental Authority' in Para 2(zf) of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. - HELD THAT: - Para 2(zf) defines 'Governmental Authority' to include bodies established by any Government with 90% or more participation by equity or control to carry out functions entrusted to a Municipality or Panchayat. The Authority noted that KMRL is a government company formed as an SPV, fully held by the Government of India and Government of Kerala, and has been entrusted by government order with execution and operation of the water metro - activities falling within functions entrusted to a Municipality under Article 243W and to a Panchayat under Article 243G. On this basis, the Authority concluded that KMRL meets the definition of Governmental Authority under Para 2(zf). [Paras 22, 23, 24]

KMRL qualifies as a 'Governmental Authority' under Para 2(zf) of Notification No. 12/2017.

Final Conclusion: The Authority holds that (i) services rendered by KMRL to the Government of Kerala constitute 'supply' even where no consideration is recorded; (ii) those services are classifiable as pure project management services under S.C.C. 998339; (iii) such services are exempt from GST by virtue of Sl. No. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017; and (iv) KMRL qualifies as a 'Governmental Authority' under Para 2(zf) of the said notification. Consequently, no GST invoice is required to be raised on the State for transfer of assets on a back-to-back basis and the question of availing ITC does not arise.

Exemption for educational services under Notification No.12/2017 - Definition of "educational institution" for GST exclusion - Commercial training and coaching classification (SAC 9992-999293) - Pure agent exclusion under Rule 33 of the CGST Rules, 2017 - Composite supply treated as principal supply (Section 2(30) and Section 8(a) of CGST Act, 2017) - Exemption for unit accommodation below or equal to Rs. 1,000 per day (Sl. No. 14 of Notification No.12/2017)

Exemption for educational services under Notification No.12/2017 - Definition of "educational institution" for GST exclusion - Whether the applicant's coaching and training services are exempt from GST as ''education'' under the exemption notification. - HELD THAT: - The exemption in Serial No. 66 of Notification No.12/2017 applies only to services provided by an "educational institution" as defined in Para 2(y), which includes institutions providing education as part of a curriculum for obtaining a qualification recognised by law. The applicant is not approved or recognised by the relevant statutory professional institutes or universities to conduct coaching/training as per their prescribed syllabus; consequently it does not fall within the definition of "educational institution" in Para 2(y). Therefore the applicant's services do not qualify for the exemption under the notification. [Paras 10]

The applicant's coaching and training services are not exempt from GST under Notification No.12/2017 because the applicant is not an "educational institution" as defined therein.

Exemption for educational services under Notification No.12/2017 - Definition of "educational institution" for GST exclusion - Whether services based on syllabi of recognised universities (State legislature constituted) are exempt when provided by the applicant. - HELD THAT: - Even where teaching follows syllabi published by universities formed under State Legislatures, the exemption applies only if the provider is an "educational institution" as defined in the notification. The applicant lacks recognition/approval by the universities to provide such courses and hence does not satisfy the definition; the services are therefore not exempt. [Paras 10]

Services provided by the applicant following university syllabi are not exempt under Notification No.12/2017 because the applicant is not an "educational institution" as defined.

Exemption for educational services under Notification No.12/2017 - Definition of "educational institution" for GST exclusion - Whether training based on curricula of foreign/international bodies recognised by Government of India is exempt when provided by the applicant. - HELD THAT: - The exemption requires the supplier to be an "educational institution" as defined in the notification. Recognition of the curriculum or qualification by an external body does not itself bring the applicant within the statutory definition where the applicant is not approved or recognised by the issuing institutes to conduct the courses. The applicant therefore does not qualify for the exemption. [Paras 10]

Training provided by the applicant based on international institute curricula is not exempt under Notification No.12/2017 as the applicant is not an "educational institution" within the definition.

Commercial training and coaching classification (SAC 9992-999293) - What is the Service Accounting Code (SAC) for the applicant's services? - HELD THAT: - Under the Scheme of Classification of Services (Annexure to Notification No.11/2017), the applicant's education/coaching services fall within SAC 9992-999293, which covers commercial training and coaching services, including coaching or tutorial classes, with or without issuance of a certificate. [Paras 11, 12]

The services are classifiable under SAC 9992-999293 (Commercial training and coaching services).

Pure agent exclusion under Rule 33 of the CGST Rules, 2017 - Value of supply and Section 15 of CGST Act, 2017 - Whether amounts collected as examination or other fees on behalf of recognised institutes are taxable in the hands of the applicant. - HELD THAT: - Section 15 treats the entire consideration received as taxable unless excluded. Rule 33 of the CGST Rules permits exclusion of amounts incurred by a supplier as a "pure agent" of the recipient where prescribed conditions are met (contractual appointment as pure agent, no title held, no use for own interest, separate indication in invoice, and receipt only of actual amounts). If the applicant satisfies those conditions when collecting and remitting examination/other fees, the collected amounts can be excluded from the taxable value; otherwise they form part of the consideration liable to GST. [Paras 13, 14]

Amounts collected and remitted as a pure agent, satisfying Rule 33 conditions, are excluded from taxable value; otherwise the collections are includible in the applicant's taxable consideration under Section 15.

Composite supply treated as principal supply (Section 2(30) and Section 8(a) of CGST Act, 2017) - Commercial training and coaching classification (SAC 9992-999293) - Whether hostel facility provided to the applicant's own students gives rise to a separate taxable supply or is part of a composite supply attracting tax as the principal supply. - HELD THAT: - Where coaching/training is provided together with hostel facility and the supplies are naturally bundled with the principal supply being the coaching service, Section 2(30) treats the combination as a composite supply and Section 8(a) requires treating the supply as that of the principal supply. Here the coaching/training is the principal supply; therefore the entire composite supply (including hostel) is to be treated under SAC 9992-999293 and taxed at the rate applicable to the principal supply. [Paras 15, 16, 17]

Hostel facility supplied to the applicant's students is part of a composite supply and taxed as the principal supply (commercial training and coaching under SAC 9992-999293).

Exemption for unit accommodation below or equal to Rs. 1,000 per day (Sl. No. 14 of Notification No.12/2017) - Service classification for hostel accommodation (SAC 9963-996322) - Whether hostel accommodation supplied to outside students at rates below Rs. 1,000 per day is exempt from GST. - HELD THAT: - Accommodation provided to outsiders corresponds to SAC 9963-996322 (room/unit accommodation). Serial No.14 of Notification No.12/2017 exempts services by hotels/guest houses etc. where the value of a unit of accommodation is below or equal to Rs. 1,000 per day. The applicant's hostel accommodation for outside students is below that threshold and thus eligible for the exemption under Sl. No.14. [Paras 18, 19]

Hostel accommodation provided to outside students at rates below Rs. 1,000 per day is exempt under Sl. No.14 of Notification No.12/2017.

GST applicability on sale of goods (text books) - Whether sale of text books by the applicant to students is taxable. - HELD THAT: - Sale of text books constitutes supply of goods and attracts GST as per the rate schedule notified under Notification No.01/2017. The applicant's sale of textbooks to students does not fall within the educational services exemption and therefore is liable to GST under the prescribed rates for supply of printed books. [Paras 20]

Sale of text books by the applicant to students is subject to GST as per Notification No.01/2017.

Final Conclusion: The Authority rules that the applicant's coaching and training services are not exempt as "educational institution" services under Notification No.12/2017 and are classifiable as commercial training and coaching (SAC 9992-999293); amounts collected and remitted as a true "pure agent" may be excluded from taxable value under Rule 33; hostel supplied to the applicant's students forms part of a composite supply taxed as the principal coaching service, whereas hostel accommodation to outside students below Rs. 1,000 per day is exempt under Sl. No.14; and sale of text books is taxable under the notified GST rates.

Disallowance under Section 40(a)(ia) - rigors of Section 40(a)(ia) not attracted if payment made in the next year - TDS not remitted within the due date - application of a binding Supreme Court precedent

Disallowance under Section 40(a)(ia) - rigors of Section 40(a)(ia) not attracted if payment made in the next year - TDS not remitted within the due date - application of a binding Supreme Court precedent - Tribunal was correct in deleting the disallowance made by the Assessing Authority under Section 40(a)(ia) where the payment was made in the next year despite TDS not being remitted within the due date. - HELD THAT: - The revenue contested the Tribunal's deletion of the Section 40(a)(ia) disallowance on the ground that TDS was not remitted within the statutory due date. Counsel for the revenue conceded that the substantial question raised has been decided against the revenue by the Supreme Court in an authoritative decision cited to the Court. In view of that enunciation of law, the Court held that the Tribunal's conclusion-that the rigours of Section 40(a)(ia) do not apply where the amount is paid in the subsequent year despite non-remittance of TDS within the due date-must prevail. The Court therefore answered the substantial question against the revenue and in favour of the assessee, applying the binding precedent.

Substantial question of law answered against the revenue; the Tribunal's deletion of the disallowance under Section 40(a)(ia) is sustained.

Final Conclusion: The appeal is dismissed: the substantial question of law framed is answered against the revenue and in favour of the assessee in view of the controlling Supreme Court precedent.

Disallowance under Section 14A read with Rule 8D - application of Maxopp Investment Ltd. precedent - relevance of investments yielding exempt income for computation under Section 14A - remand for consideration of Special Bench decision in Vireet Investment Pvt. Ltd. post-Maxopp

Disallowance under Section 14A read with Rule 8D - application of Maxopp Investment Ltd. precedent - Reinstatement of disallowance under Section 14A read with Rule 8D despite no exempt income being earned during the year - HELD THAT: - The Court held that the questions relating to reinstatement of the Section 14A disallowance and reliance on Maxopp Investment Ltd. could not be canvassed because the Supreme Court's decision in Maxopp Investment Ltd. governs those questions. Consequently, the first and second substantial questions of law were decided against the assessee, with the effect that the Tribunal's application of the Maxopp precedent to allow the Revenue's appeal stands upheld insofar as those legal questions are concerned. [Paras 4]

Substantial questions of law Nos. 1 and 2 held against the assessee; Maxopp Investment Ltd. covers those questions.

Relevance of investments yielding exempt income for computation under Section 14A - Whether investments that did not yield exempt income in the year should be excluded while computing disallowance under Section 14A - HELD THAT: - The Court noted that the assessee's cross objection alleged that the CIT(A) rightly excluded investments that did not fetch exempt income and that the Tribunal had not considered those grounds. The Court observed that this specific contention - reliance on the Special Bench decision in Vireet Investment Pvt. Ltd. which treats only investments yielding exempt income as relevant - was not specifically considered by the Tribunal in the impugned order and was not placed before the Supreme Court in Maxopp. Given this lacuna, the matter requires further adjudication by the Tribunal. [Paras 5, 6]

Assessee's contention that investments not yielding exempt income should be excluded was not finally decided and requires further consideration by the Tribunal.

Remand for consideration of Special Bench decision in Vireet Investment Pvt. Ltd. post-Maxopp - Effect and applicability of the Special Bench (Vireet Investment Pvt. Ltd.) remand/order after the Supreme Court's decision in Maxopp Investment Ltd. - HELD THAT: - The Court directed that the Tribunal should decide the applicability and effect of the Delhi Special Bench's decision in Vireet Investment Pvt. Ltd. in light of the Supreme Court's Maxopp judgment. The Court observed that the Tribunal in the assessee's subsequent year had remanded the issue by relying on Vireet, but that the interplay between Vireet and Maxopp had not been specifically addressed by the Supreme Court. Therefore, the Court remanded the third substantial question to the Tribunal to consider afresh the effect of Vireet post-Maxopp, permitting both parties to canvass all relevant points. [Paras 13, 14, 15]

Matter remanded to the Tribunal to consider the effect of Vireet Investment Pvt. Ltd. after Maxopp Investment Ltd.; issues left open for fresh consideration.

Final Conclusion: The appeal is partly allowed: substantial questions of law Nos. 1 and 2 are decided against the assessee as covered by Maxopp Investment Ltd., while the third question is remanded to the Tribunal to determine the applicability and effect of the Delhi Special Bench decision in Vireet Investment Pvt. Ltd. in light of the Supreme Court's Maxopp ruling.

Invocation of jurisdiction under Section 263 where condition precedent is absent - retrospective effect of the amendment to Section 40(a)(ia) by the Finance Act, 2010 - disallowance under Section 40(a)(ia) for failure to deduct tax where provision for deduction was made and tax remitted before the due date for filing return

Invocation of jurisdiction under Section 263 where condition precedent is absent - The Tribunal was justified in not cancelling the assessment order under Section 263 where the condition precedent for invoking Section 263 was absent. - HELD THAT: - The High Court recorded that the question was covered by the Apex Court's decision in 404 ITR 654 and followed by a Coordinate Bench; applying that precedent, the Tribunal correctly held that Section 263 could not be invoked in the absence of the statutory condition precedent and therefore declined to cancel the assessment order. The court disposed of the appeal by answering this substantial question in favour of the assessee and against the revenue.

Tribunal's refusal to cancel the assessment under Section 263 was upheld; question answered for the assessee.

Retrospective effect of the amendment to Section 40(a)(ia) by the Finance Act, 2010 - The Tribunal was justified in holding that the amendment to Section 40(a)(ia) effected by the Finance Act, 2010 with effect from 1 April 2010 does not have retrospective effect. - HELD THAT: - Relying on the binding precedent referred to by the parties and followed by the Tribunal, the High Court accepted that the amended provision was not retrospective and therefore the Tribunal's conclusion on non-retrospectivity was correct. The appeal was disposed by answering this question in favour of the assessee.

Tribunal's conclusion that the 2010 amendment to Section 40(a)(ia) is not retrospective is affirmed in favour of the assessee.

Disallowance under Section 40(a)(ia) for failure to deduct tax where provision for deduction was made and tax remitted before the due date for filing return - The Tribunal was justified in its approach concerning disallowance under Section 40(a)(ia) where the assessee failed to deduct tax in the respective months but made provision in March and remitted tax to Government account before the due date for filing the return under Section 139(1). - HELD THAT: - The High Court noted that the issue was covered by the Apex Court decision relied upon by the parties and the Coordinate Bench. Applying that precedent, the Tribunal's view was accepted and the substantial question was answered in favour of the assessee and against the revenue, upholding the Tribunal's treatment of the disallowance issue under Section 40(a)(ia) in the facts as presented.

Tribunal's treatment of disallowance under Section 40(a)(ia) in the stated circumstances is affirmed in favour of the assessee.

Final Conclusion: Appeal disposed of by the High Court by applying the Apex Court precedent (404 ITR 654) and answering the framed substantial questions in favour of the assessee and against the revenue; the Tribunal's conclusions on invocation of Section 263, non-retrospectivity of the 2010 amendment to Section 40(a)(ia), and the disallowance issue under Section 40(a)(ia) were affirmed.

Business purpose of advances and disallowance of interest - Rate difference between related parties and burden of proving excessive purchase price - Invocation of section 40A(2) for purchases at excessive rates - Characterisation of sundry creditors as unsecured loan and interplay with section 41(1) and section 68 - Reconciliation of inter-party account differences and remand for verification

Business purpose of advances and disallowance of interest - Deletion of disallowance of interest on advances of Rs. 4,81,775 - HELD THAT: - The assessee stated that advances to parties (including Om Trading Company) represented amounts recoverable against sales made during the year. The CIT(A) rejected the contention for lack of corroborative evidence, but the Tribunal held that once sales are asserted and not impeached by the assessing authority, the business purpose of the advances stands established and there was no need for additional corroboration. The Tribunal therefore found the disallowance unjustified and deleted the addition. [Paras 4]

Disallowance of interest on advances deleted.

Rate difference between related parties and burden of proving excessive purchase price - Invocation of section 40A(2) for purchases at excessive rates - Deletion of disallowance of Rs. 26,33,125 claimed on account of rate difference with sister concern - HELD THAT: - The assessee admitted booking of rate-difference claimed by the supplier (Mauli Steels Pvt. Ltd.) and explained it as an agreed adjustment for extended credit period on purchases made during 01-10-2010 to 31-03-2011. The AO/CIT(A) alleged diversion of income without producing any material to demonstrate that purchase rates were excessive compared to market or comparable transactions. The Tribunal held that, absent any material showing that the prices were excessive or any comparable benchmark, the authorities could not sustain the addition or reject the commercial explanation; accordingly the disallowance was deleted. [Paras 6, 7]

Addition on account of rate difference deleted.

Characterisation of sundry creditors as unsecured loan and interplay with section 41(1) and section 68 - Deletion of addition of Rs. 69,55,384 relating to amounts shown payable to Bajrang Steels - HELD THAT: - The assessee explained that amounts shown against Bajrang Steels pertained to unsecured loans and that the account was squared up by journal entries in subsequent years; the finding in the file records that it was an unsecured loan was not controverted by the CIT(A). If the amount represented an unsecured loan, addition under section 68 in the year under consideration could not be sustained; if treated as sundry creditors, section 41(1) would apply only if liability had not subsisted. As the liability stood discharged later and the assessment records recognised the nature of the transaction, the Tribunal found the addition unsustainable and directed deletion. [Paras 9]

Addition of Rs. 69,55,384 deleted.

Reconciliation of inter-party account differences and remand for verification - Setting aside of enhancement of disallowance and remand to AO for reconciliation of differences totalling Rs. 17,34,800 - HELD THAT: - Differences between the assessee's creditor balances and the creditors' books were noted by the AO (information obtained under section 133(6)). The Tribunal held that mere difference in closing balances does not automatically justify an addition; enquiry must verify year-specific transactions to determine suppression or overstatement. As necessary reconciliatory details were not on record, the Tribunal set aside the impugned enhancement and remanded the matter to the AO with a direction that the assessee produce proper reconciliations to enable a considered conclusion on sustainability of any addition. [Paras 11]

Enhancement set aside and matter remanded to AO for verification and reconciliation.

Final Conclusion: The appeal is partly allowed: disallowances relating to interest on advances, the rate-difference with the sister concern, and the addition concerning Bajrang Steels are deleted; the enhanced disallowance based on inter-party account differences is set aside and remitted to the Assessing Officer for verification and reconciliation.

Registration under section 12AA - charitable purpose - genuineness of activities - remand for fresh adjudication - principles of natural justice - speaking order

Registration under section 12AA - charitable purpose - Whether the Ld. CIT(Exemption)'s rejection of the application for registration under section 12AA could be sustained without examination of the charitable nature of the Trust's objects. - HELD THAT: - The Tribunal examined the record and observed that the Ld. CIT(Exemption)'s order did not deal with the examination of the objects of the Trust. Although the Ld. CIT(Exemption) recorded concerns about donations and expenditure, he failed to address the charitable nature of the objects on the basis of facts and documents on record. In these circumstances, the Tribunal held that the matter could not be finally adjudicated without a fresh and reasoned consideration of whether the Trust's objects are charitable. Accordingly the Tribunal set aside the order and remitted the issue for fresh adjudication, directing that the Ld. CIT(Exemption) examine the charitable nature of the objects and decide with reasons, applying the principles of natural justice. [Paras 7, 8]

Order of the Ld. CIT(Exemption) set aside and the question of whether the objects are charitable remitted for fresh adjudication with directions to follow principles of natural justice and to pass a speaking order.

Genuineness of activities - remand for fresh adjudication - speaking order - Whether the genuineness of the activities carried out by the Trust was properly considered before refusing registration under section 12AA. - HELD THAT: - The Tribunal noted that the Ld. CIT(Exemption) recorded doubts about the nature of receipts (donations versus sponsorships) and large fluctuations in expenditure, but did not make specific findings after examining the documents and explanations on record. Given that the assessee had not furnished certain details called for, the Tribunal concluded that the Ld. CIT(Exemption) should re-adjudicate the genuineness of activities after permitting the assessee to furnish requisite details and after observing natural justice. The Tribunal directed the Ld. CIT(Exemption) to arrive at a reasoned conclusion on genuineness and to issue a speaking order. [Paras 7, 8]

Genuineness of activities remitted for fresh consideration; assessee directed to furnish details; Ld. CIT(Exemption) to decide on merits and pass a speaking order after following natural justice.

Final Conclusion: Appeal allowed for statistical purposes; the order of the Ld. CIT(Exemption) dated 31.12.2019 is set aside and the matter is restored to his file for fresh adjudication on (i) the charitable nature of the Trust's objects and (ii) the genuineness of its activities, after allowing the assessee to furnish the required details and after observing the principles of natural justice; the Ld. CIT(Exemption) to pass a speaking order.

Registration under section 12AA - charitable nature of objects - genuineness of activities - remand for fresh adjudication - principles of natural justice - speaking order

Registration under section 12AA - charitable nature of objects - genuineness of activities - remand for fresh adjudication - principles of natural justice - speaking order - Application for registration under section 12AA was not finally adjudicated and was remitted to the CIT(Exemption) for fresh consideration of the charitable nature of the objects and genuineness of activities. - HELD THAT: - The Tribunal found that the CIT(Exemption)'s order did not contain findings on the Memorandum/objects of the Trust nor specific conclusions on the genuineness of activities in light of the material on record. The CIT(Exemption) had noted omissions in the assessee's responses (absence of list of corpus donations and non-payment of tax on earmarked funds) but did not examine the objects or activities on merits. Given these lacunae, and because requisite details called for were not furnished by the assessee during the earlier proceedings, the Tribunal directed that the matter be remitted for fresh adjudication. On remand the CIT(Exemption) is to examine (i) whether the objects of the Trust are charitable in nature and (ii) whether the activities carried out are genuine, following the principles of natural justice; the assessee is directed to furnish the requisite details called for earlier; and the CIT(Exemption) is to pass a speaking order addressing these points. [Paras 7, 8, 9]

Order of the CIT(Exemption) rejecting registration is set aside and the matter is remitted to the CIT(Exemption) for fresh adjudication on the charitable nature of objects and genuineness of activities, after giving the assessee opportunity to furnish required details and following principles of natural justice; a speaking order is to be passed.

Final Conclusion: The Tribunal set aside the CIT(Exemption)'s order refusing registration under section 12AA and remitted the matter for fresh consideration of the charitable nature of the Trust's objects and the genuineness of its activities, directing compliance with principles of natural justice, production of requested documents by the assessee, and issuance of a speaking order; appeal allowed for statistical purposes.

Unexplained cash credit - gift between husband and wife - identity and creditworthiness of donor - effect of corresponding bank entries in establishing genuineness of a gift - registration requirement for gift of movable property - addition under section 69 - presumptive taxation under section 44AD - CBDT Circular No.17/2019 low tax effect

Gift between husband and wife - identity and creditworthiness of donor - effect of corresponding bank entries in establishing genuineness of a gift - addition under section 69 - registration requirement for gift of movable property - Deletion of addition made under section 69 treating cash deposits as unexplained cash credit on the ground that amounts were gifts from the husband. - HELD THAT: - The Tribunal accepted the factual finding that the donor (the husband) is a regular income-tax assessee who filed returns for AY 2014-15 and that his bank account showed debit entries on the same dates as the credit entries in the assessee's account. The CIT(A) held that by establishing the identity and creditworthiness of the donor and the contemporaneous debit and credit bank entries, the assessee had discharged the initial burden and the AO failed to demonstrate that the amounts had an origin other than the husband's account. The Tribunal observed that registration of a deed is not a prerequisite to recognize a gift of movable property where delivery/effect of gift is otherwise established, and that non-registration alone could not sustain an addition under section 69 when the source and genuineness were otherwise established. However, in view of the limited tax effect, the revenue appeal was held to be covered by CBDT Circular No.17/2019 and not to be maintainable. [Paras 10, 12]

The addition of Rs. 1,25,00,000 relating to alleged gift from the husband is accepted as genuine and deleted; the revenue appeal was dismissed as not maintainable due to low tax effect.

Presumptive taxation under section 44AD - unexplained cash credit - Deletion of addition in respect of cash deposits of Rs. 6,00,000 treated as trade receipts subsumed under presumptive taxation declared under section 44AD. - HELD THAT: - The CIT(A) found that the cash deposits of Rs. 4,00,000 and Rs. 2,00,000 represented trade receipts which were included while computing the assessee's taxable income under the presumptive taxation scheme (section 44AD) and were declared in the return. The AO did not establish that these receipts were unexplained or outside the scope of the presumptive income returned by the assessee. The Tribunal endorsed the view that such receipts are subsumed in the presumptive computation and therefore cannot be treated as unexplained cash credits. [Paras 11]

The addition of Rs. 6,00,000 as unexplained cash deposits is deleted.

Final Conclusion: The Tribunal upheld the deletion of the additions - Rs. 1,25,00,000 treated as genuine gifts from the husband and Rs. 6,00,000 as trade receipts subsumed under section 44AD - and dismissed the revenue's appeal as not maintainable on account of low tax effect under CBDT Circular No.17/2019.

Fee for technical services - commission payment - Explanation 2 to section 9(1)(vii) - tax deduction at source under section 195 - permanent establishment - disallowance under section 40(a)(i) - DTAA Article 12

Fee for technical services - commission payment - Explanation 2 to section 9(1)(vii) - tax deduction at source under section 195 - permanent establishment - disallowance under section 40(a)(i) - DTAA Article 12 - Payment made to non-resident M/s. Taiyo Enterprises Inc. characterized as commission payment and not as 'fee for technical services', and consequent TDS and disallowance implications - HELD THAT: - Tribunal examined the Memorandum of Understanding and contemporaneous terms which limited the role of the non-resident to introducing a prospective buyer and procuring the order; all technical discussions were to be held directly between the assessee and the prospective buyer and the non-resident's role was confined to liaison/coordination and commission-based introduction. There was no evidence on record that the non-resident rendered managerial, technical or consultancy services of the kind covered by Explanation 2 to section 9(1)(vii). Reliance on coordinate decisions and higher judicial pronouncements led to the conclusion that procurement of orders by a non-resident amounts to agency/commission activity and not consultancy or technical services. Further, TEI had no Permanent Establishment in India and the commission payment was not shown to accrue or be received in India; accordingly it was not chargeable to tax in India and there was no obligation to deduct tax at source under section 195. The additions by the AO and the enhancement by the CIT(A) under section 40(a)(i) were thus held to be founded on conjecture and unsupportable by the record, and were deleted. [Paras 13, 15, 16, 17, 18]

Tribunal held the payment to TEI to be a commission payment and not fee for technical services; there was no requirement to deduct tax under section 195 and the disallowance under section 40(a)(i) is deleted.

Final Conclusion: Appeal allowed: entire disallowance of the commission enhanced by the CIT(A) is deleted and the payment is held to be commission (not fee for technical services), with no TDS obligation in India given absence of PE and absence of managerial/technical/consultancy services.

Revision of audited financial statements under Circular No.1/2003 - allowance of deduction on account of revision of financial accounts - revised return of income under Section 139(5) - artificial and hypothetical income

Revision of audited financial statements under Circular No.1/2003 - allowance of deduction on account of revision of financial accounts - artificial and hypothetical income - Allowing the Assessing Officer to give effect to the assessee's revised audited accounts and accept the consequent reduction in sales (deduction of Rs. 9,00,00,000) arising from cancellation of pre-launch sales. - HELD THAT: - The Tribunal recorded that the assessee had revised its audited financial statements, obtained an audit of the revised statements, and placed relevant documentary evidence before the CIT(A). The Assessing Officer, after remand, did not point to any defect in the revised audited accounts which were prepared in reliance on the Ministry of Finance and Company Affairs' Circular No.1/2003 permitting revision to reflect a true and fair view. The Tribunal accepted the CIT(A)'s conclusion that the entries creating the alleged income were artificial and hypothetical and were subsequently reversed; therefore such amounts could not be taxed. The Tribunal also noted that the assessee had offered income relating to the project in subsequent assessment years, so Revenue was not prejudiced. On these facts the Tribunal held that the Assessing Officer was correctly directed to consider the revised computation and allow the adjustment arising from the revised audited accounts. [Paras 7]

The CIT(A)'s direction to the Assessing Officer to allow the claim on account of revision of financial accounts was upheld and the deduction was to be given effect.

Revised return of income under Section 139(5) - revision of audited financial statements under Circular No.1/2003 - Whether the statutory restriction on revision of return under Section 139(5) precluded the assessee from revising its audited financial statements and obtaining the accounting adjustment claimed. - HELD THAT: - The Tribunal adopted the distinction drawn by the assessee and CIT(A): the assessee revised its audited financial statements and not its filed return of income under Section 139(5). The Court accepted that Circular No.1/2003 deals with revision of audited accounts to reflect a true and fair view and does not equate to a statutory revision of the return under Section 139(5). The Assessing Officer's reliance on Section 139(5) to reject the revised accounts was therefore not sustained, because the adjustment arose from bona fide revision of accounting records approved through corporate procedures and audited documentation rather than from an attempt to revise the return outside the statutory window. [Paras 7]

The bar under Section 139(5) did not preclude acceptance of the revised audited financial statements and the accounting adjustment claimed by the assessee.

Final Conclusion: The Revenue's appeal was dismissed; the CIT(A)'s order directing the Assessing Officer to consider the assessee's revised audited accounts and allow the adjustment was affirmed.

Computation of capital gains on transfer under a joint development agreement - Determination of consideration - land value as on date of JDA versus cost of construction - Application of precedent in CIT v. Ved Prakash Rakhra - Interest under section 234B - Remand for fresh adjudication and right to be heard

Remand for fresh adjudication and right to be heard - Several grounds raised by the assessee (including computation of indexed cost, applicability of capital gains to earlier year, claim under section 54G and interest under section 234B) were not decided by the CIT(A) and are directed to be decided afresh by the CIT(A). - HELD THAT: - The Tribunal found that the Ld. CIT(A) had not adjudicated grounds set out by the assessee (Ground Nos. 4 and 6 and the additional ground seeking deduction under section 54G) and that the question on interest under section 234B was consequential to the determination of income. In the interest of natural justice and having regard to the evidence on record, the Tribunal directed that these issues be returned to the Ld. CIT(A) for decision on merits, with opportunity to the assessee to be heard in accordance with law. [Paras 15, 16, 17]

Grounds raised by the assessee are remanded to the Ld. CIT(A) for fresh adjudication with an opportunity of hearing; the assessee's appeal is allowed for statistical purposes.

Computation of capital gains on transfer under a joint development agreement - Determination of consideration - land value as on date of JDA versus cost of construction - Application of precedent in CIT v. Ved Prakash Rakhra - For computation of capital gains the value of the land as on the date of the JDA (05/10/2005) is to be taken and not the cost of construction claimed by the developer; the revenue's appeal on this point is dismissed. - HELD THAT: - The Tribunal considered the rival contentions and the authorities placed before it. The revenue contended that the consideration for computation of capital gains should be the cost of construction attributable to the assessee's share of constructed area, relying on precedents to that effect. The assessee relied upon the decision of the Karnataka High Court in CIT v. Ved Prakash Rakhra. The Tribunal perused Ved Prakash Rakhra and concluded that it squarely applied to the facts of the present case. On that basis the Tribunal found no merit in the revenue's contention and dismissed the revenue's appeal, thereby upholding the approach adopted by the CIT(A) that the land value as on the date of the JDA is the relevant measure for computing capital gains in the present facts. [Paras 18, 19, 20]

Revenue's appeal is dismissed and the CIT(A)'s conclusion regarding the value to be adopted for capital gains computation is upheld.

Final Conclusion: The Tribunal dismissed the revenue's appeal on the measure of consideration for capital gains, upholding the CIT(A)'s approach in light of Ved Prakash Rakhra, and remitted the assessee's outstanding grounds (including computation issues, claim under section 54G and consequential interest under section 234B) to the CIT(A) for fresh decision after affording the assessee an opportunity of hearing.

Capital expenditure versus revenue expenditure - expenditure on development of software platform - research and feasibility study expenditure - enduring benefit / asset creation - Accounting Standard 26 - treatment of research and development expenditure - nexus of marketing expenditure with capital project

Capital expenditure versus revenue expenditure - expenditure on development of software platform - research and feasibility study expenditure - enduring benefit / asset creation - Accounting Standard 26 - treatment of research and development expenditure - Whether salary and related development expenses incurred for creation of a new software platform are capital in nature or revenue expenditure deductible in the year incurred - HELD THAT: - The Tribunal examined the factual matrix and concluded that the software being developed was never brought into use, was abandoned in a subsequent year due to technological change, and no depreciation was claimed. The question of capitalisation arises only when a completed product or asset has come into existence that confers an enduring benefit. Expenditure incurred during the development/feasibility phase, where an intangible asset cannot be demonstrated to exist and future economic benefits are not probable, is to be treated as revenue in nature. The Tribunal relied on the principles in Accounting Standard-26 which requires research-phase expenditure to be recognised as an expense when incurred and precludes recognising an intangible asset in the research phase. On the facts, the development costs were for preparing feasibility and testing a market offering and were treated as revenue in the books; hence they could not be capitalised as giving enduring benefit to the assessee. [Paras 10, 11]

Salary and development expenses relating to the software platform are revenue expenditure and the additions disallowing such expenses are deleted.

Nexus of marketing expenditure with capital project - capital expenditure versus revenue expenditure - expenditure on development of software platform - Whether marketing expenses incurred to promote the software platform are capital in nature or revenue expenditure - HELD THAT: - The Tribunal found that the assessing officer and CIT(A) did not establish a clear factual nexus between the marketing expenses and any capital project. The marketing outlays were incurred primarily to demonstrate the company's capabilities and to attract potential customers, i.e., to promote business generally. Even if the marketing expenses were assumed to be linked to the platform, the underlying product was never put to use and was abandoned; consequently such expenses remain revenue in nature. The view is reinforced by the fact that the expenditures were not shown as capital work-in-progress in the books. [Paras 12]

Marketing expenses are revenue in nature and the additions disallowing such expenses are deleted.

Final Conclusion: Appeals for assessment years 2015-16 and 2016-17 are allowed; the assessing officer is directed to delete the additions disallowing software development (salary) and marketing expenses.

Bad debts deduction - reversal of income - percentage completion method - valid revised return - veracity of books of accounts - remand for fresh consideration - reframe the assessment de-novo

Bad debts deduction - reversal of income - veracity of books of accounts - Whether the amount debited to 'bad debts' is allowable as deduction because it represents reversal of income recognised and taxed in earlier years, or whether it is a current year bad debt disallowable without further verification. - HELD THAT: - The assessee contends that the debit to bad debts represents a reversal of income earlier recognised under the percentage completion method on advances from customers and thus, if true, should be allowed since the income had already been offered to tax in prior years. The AO and CIT(A) treated the amount as a write off of bad debts and disallowed the claim, noting ledger balances which, in their view, suggested the write off was a device to reduce current taxable income. The Tribunal observed that the factual position on whether the entries are genuine reversals or write offs is not clear from the record of the AO or the CIT(A). It reiterated that book entries are not conclusive and that verification of the authenticity of the claimed reversal is necessary. Consequently the Tribunal did not decide the claim on merits but directed fresh examination of the evidence by the AO so as to determine whether the amount is a reversal of previously taxed income or a non allowable bad debt. [Paras 7]

Matter remanded to the AO for re examination of the claimed bad debt entry in the light of the assessee's evidences and averments; no final adjudication on allowance was made.

Valid revised return - percentage completion method - reframe the assessment de-novo - Whether the assessment computation should reflect the revised return filed by the assessee or the original return, and consequent need for recomputation of tax liability. - HELD THAT: - It was admitted that the AO had taken the revised return on record for assessment purposes but, in computing tax liability, used the total income as returned in the original return. The Tribunal accepted the assessee's contention that the computation ought to start from the income declared in the valid revised return and observed that the defect in computation requires correction. Given the intertwined factual questions regarding the nature of the debited amount and the incorrect computation basis used by the AO, the Tribunal directed that the assessment be reframed de novo after the AO considers the revised return and examines the supporting evidence filed by the assessee. [Paras 7]

Assessment set aside and directed to be reframed de novo by the AO, with computation to be made in accordance with the valid revised return after verifying evidence.

Final Conclusion: Appeal allowed for statistical purposes; the Tribunal set aside the impugned findings and remanded the matters to the AO for de novo framing of assessment and verification of the evidences regarding the nature of the amount debited to bad debts, in respect of Assessment Year 2014 15.

Deduction under section 37(1) as expenditure wholly and exclusively for the purpose of business - Donation versus business expenditure nexus - Memorandum of Understanding and public welfare project as commercial expediency - Chief Minister's Relief Fund/claim of exemption under section 80G and its effect on deductibility

Deduction under section 37(1) as expenditure wholly and exclusively for the purpose of business - Donation versus business expenditure nexus - Memorandum of Understanding and public welfare project as commercial expedency - Whether the amount incurred by the assessee for construction of houses for flood victims under an MOU with the State Government is allowable as business expenditure under section 37(1) or is to be treated as a donation (eligible for exemption under section 80G) and hence not deductible under section 37(1). - HELD THAT: - The Tribunal examined the factual matrix showing that the assessee entered into an MOU with the Government of Karnataka to construct rehabilitation houses for flood victims, received governmental assistance in the form of land and approvals, executed the project and obtained completion certification. The A.O. and CIT(A) treated the payments as donations to the Chief Minister's Relief Fund and hence not deductible under the residuary business-expenditure provision. The Tribunal, however, followed the decision of the Hon'ble Karnataka High Court in Kanhaiyalal Dhuderia , where on similar facts the High Court held that expenditure incurred pursuant to an MOU to construct houses for flood victims, undertaken both as a philanthropic project and with a view to secure goodwill and commercial benefit in the course of business, is relatable to the assessee's business and deductible under section 37(1). The High Court emphasised that such contributions, even if resulting in government patronage, cannot be denied deduction when they are incurred for the purposes of the assessee's business and that the assessing officer must verify nexus and genuineness before allowing the claim. Applying those principles to the present record, which is pari materia with the High Court's facts, the Tribunal concluded that the expenditure was incurred in the realm of business expenditure, satisfying the requisite nexus and commercial expediency, and therefore was allowable under section 37(1). [Paras 8, 9]

Expenditure incurred for construction of houses for flood victims under the MOU is deductible as business expenditure under section 37(1); the additions disallowing the social welfare expenditure are to be deleted.

Final Conclusion: The appeal is allowed: following the Karnataka High Court precedent on identical facts, the Tribunal held the social welfare expenditure for construction of houses to rehabilitate flood victims was deductible under section 37(1) and directed deletion of the disallowance.

Deduction under Section 10AA - treatment of telecommunication expenses in computing export turnover and total turnover - effect of disallowance under Section 14A on taxable business profits and consequent computation of deduction under Section 10AA - binding effect of jurisdictional High Court precedent affirmed by the Supreme Court

Treatment of telecommunication expenses in computing export turnover and total turnover - deduction under Section 10AA - binding effect of jurisdictional High Court precedent affirmed by the Supreme Court - Telecommunication charges excluded from both export turnover and total turnover for computing deduction under Section 10AA. - HELD THAT: - The Appellate Tribunal admitted the assessee's alternative grounds and, applying the law declared by the jurisdictional High Court in CIT v. Tata Elxsi Ltd., which has been upheld by the Supreme Court in CIT v. HCL Technologies Ltd., held that telecommunication expenses are to be excluded not only from export turnover but also from total turnover when computing deduction under Section 10AA. The Tribunal treated the Karnataka High Court decision (and its Supreme Court affirmation) as binding and allowed the additional grounds accordingly, directing that such expenses be excluded in both places for the 10AA computation. [Paras 7]

Additional grounds 2.4 and 2.5 allowed; telecommunication charges excluded from export turnover and total turnover for computing deduction under Section 10AA.

Effect of disallowance under Section 14A on taxable business profits and consequent computation of deduction under Section 10AA - deduction under Section 10AA - Addition made under Section 14A increases business profits and deduction under Section 10AA must be computed on the enhanced profits. - HELD THAT: - Relying on the reasoning of the coordinate Tribunal in GE (India) Exports P. Ltd., the Tribunal accepted the assessee's submission that where an expense is disallowed under Section 14A and added back to business income, the increased business profit is the appropriate base for computing deduction under Section 10AA. Accordingly, the AO was directed to allow deduction under Section 10AA on profits as enhanced by the addition under Section 14A. [Paras 10]

AO directed to compute and allow deduction under Section 10AA on business profits after incorporating the addition made under Section 14A.

Final Conclusion: The appeal is partly allowed: telecommunication expenses are to be excluded from both export turnover and total turnover for computing deduction under Section 10AA, and the AO is directed to grant Section 10AA deduction on business profits after including the addition made under Section 14A.

Levy of interest under section 201(1A) for late deposit of TDS - Date of payment of TDS where payment made by cheque - date of tendering/presentation of cheque vis-a -vis date of realisation/clearing - Binding effect of CBDT Circular No. 261 dated 08.08.1979 on date of payment by cheque - Re-computation of interest and consequential adjustments on revision of date of payment

Levy of interest under section 201(1A) for late deposit of TDS - Date of payment of TDS where payment made by cheque - date of tendering/presentation of cheque vis-a -vis date of realisation/clearing - Whether interest under section 201(1A) is leviable where the assessee tendered cheques for TDS with the authorised bank within the prescribed due date but the cheques were credited to Government account after the due date. - HELD THAT: - The Tribunal examined the factual matrix and precedents and concluded that where the assessee had tendered the cheque to the authorised bank within the stipulated due date, the assessee could not be treated as being in default for any subsequent delay caused by the bank or clearing process. The Tribunal followed coordinate decisions holding that payment by cheque, when tendered within due date and subsequently honoured, relates back to the date of tender/presentation of the cheque and therefore discharges the assessee's obligation to deposit TDS on that date. On this basis the Tribunal directed that the date of tendering of the cheques be treated as the actual date of payment for computing liability under section 201(1A).

Interest under section 201(1A) cannot be sustained where cheques for TDS were tendered to the bank within the due date and were subsequently honoured; the date of tendering/presentation is to be treated as date of payment.

Binding effect of CBDT Circular No. 261 dated 08.08.1979 on date of payment by cheque - Whether CBDT Circular No. 261 dated 08.08.1979, which treats the date of tendering of a cheque as the date of payment of Government dues, remains applicable despite substitution of earlier Treasury Rules by the Central Government Account (Receipts & Payments) Rules, 1983. - HELD THAT: - The Tribunal noted that although the old Treasury Rules were superseded by the 1983 Rules, the CBDT Circular No. 261 was not withdrawn or amended and therefore continues to hold the field. The Circular treats the date on which a cheque is tendered to the Government banker as the date of payment if the cheque is subsequently honoured. The Tribunal accepted and applied the Circular as binding on the revenue in the facts of these appeals, following consistent judicial decisions that have given similar effect to the Circular.

CBDT Circular No. 261 dated 08.08.1979 remains applicable and is to be followed; it supports treating the date of tendering of cheque as the date of payment where the cheque is subsequently honoured.

Re-computation of interest and consequential adjustments on revision of date of payment - What remedial direction is required once the date of payment for TDS is held to be the date of tendering/presentation of cheque? - HELD THAT: - Having held that payment relates back to the date of tendering/presentation of the cheques, the Tribunal directed the TDS-CPC to revise the intimations by treating the tender date as the actual date of payment and to re-compute the interest payable, if any. The Tribunal also directed consequential recomputation of any interest under section 220(2) that arose from the original assessment of interest.

TDS-CPC, Ghaziabad is directed to revise the intimations by taking the date of tender of cheques as the actual date of payment and to re-compute the interest (and consequential interest) payable; appeals are allowed to that extent.

Final Conclusion: The Tribunal allowed the appeals in part: it held that where cheques for TDS were tendered to the authorised bank within the prescribed due date and were subsequently honoured, the date of tender/presentation is to be treated as the date of payment (CBDT Circular No. 261/08.08.1979 being binding), and directed revision of intimations and re-computation of interest accordingly.

Maintainability of writ petition against Customs Cargo Service Provider (CCSP) - definition of Customs Cargo Service Provider under the Handling of Cargo and Customs Areas Regulations, 2009 - obligation of CCSP to implement advisories and orders of Customs and Director General of Shipping - prohibition on charging rent, demurrage or detention charges during period of official detention or applicable waiver - separation of distinct causes of action - cannot combine unrelated dues as precondition for delivery - writ of mandamus directing release of delivery order on payment of outstanding dues pertaining to that bill of lading

Definition of Customs Cargo Service Provider under the Handling of Cargo and Customs Areas Regulations, 2009 - obligation of CCSP to implement advisories and orders of Customs and Director General of Shipping - maintainability of writ petition against Customs Cargo Service Provider (CCSP) - Whether the writ petition is maintainable against the third respondent by treating it as a Customs Cargo Service Provider bound to implement customs/DGS advisories. - HELD THAT: - The Court found that the statutory definition of a CCSP in Regulation 2(1)(b) - covering any person responsible for receipt, storage, delivery, dispatch or otherwise handling of imported and export goods - applies to the third respondent despite their characterization as freight forwarder/delivery agent. Read with Regulation 5(5) (duty to comply with the Act, rules, regulations and orders) and Regulation 6(1)(l) (prohibition on charging rent/demurrage in specified situations), the third respondent falls within the regulatory obligations of a CCSP. Reliance on precedents where CFS and steamer agents were held to be CCSPs and therefore amenable to writ jurisdiction was upheld; the Court emphasised that the ratio decidendi of those authorities (being in rem in nature) governs implementation of statutory obligations irrespective of differing factual matrices. Consequently the petition was maintainable against the third respondent to vindicate implementation of statutory/regulatory directives. [Paras 11, 13, 15]

The third respondent is to be treated as a CCSP for the purposes of implementing customs/DGS advisories and the writ petition is maintainable against it.

Separation of distinct causes of action - cannot combine unrelated dues as precondition for delivery - prohibition on charging rent, demurrage or detention charges during period of official detention or applicable waiver - writ of mandamus directing release of delivery order on payment of outstanding dues pertaining to that bill of lading - Whether the third respondent was justified in withholding issuance of the delivery order for the 1x40' container by insisting on payment/return relating to different bills of lading (2x20' containers). - HELD THAT: - The Court held that the cause of action for the 1x40' container is distinct from the cause of action relating to the 2x20' containers; established principles (A.K. Gupta and Sidramappa) preclude combining separate causes of action as a precondition to obtain relief on one claim. The parties admitted the outstanding dues in respect of the 1x40' container; there was no justification for the third respondent to withhold the delivery order by linking it to unrelated dues. The Court further noted that the third respondent had accepted that applicable waivers during the COVID-19 period applied to the 1x40' container. In the exercise of writ jurisdiction the Court directed the third respondent to release the delivery order for the 1x40' container on receipt of the outstanding admitted amount from the petitioner, while preserving the third respondent's right to pursue claims in relation to the 2x20' containers by appropriate proceedings. [Paras 20, 22, 24]

The third respondent was not justified in withholding the delivery order for the 1x40' container by insisting on settlement of dues under separate bills; a writ of mandamus was issued directing release of the delivery order on payment of the outstanding amount admitted in respect of that bill of lading.

Final Conclusion: Writ Petition allowed; the third respondent is treated as a CCSP and is directed to release the delivery order for the 1x40' container on receipt of the admitted outstanding dues for that consignment, leaving the third respondent free to pursue any separate claims relating to other containers by appropriate proceedings.

Classification of imported goods under the Customs Tariff Note 4 to Chapter 27 (ASTM D86 distillation criterion) - Admissibility and evidentiary weight of chemical laboratory reports - Cross-examination of expert/analytical witnesses and scope of remand - Duty of adjudicating authority to procure and place laboratory records before decision - Remand for de-novo consideration with directions for production of primary test records

Cross-examination of expert/analytical witnesses and scope of remand - Admissibility and evidentiary weight of chemical laboratory reports - Whether the remand direction to permit cross-examination of the Chemical Examiner permitted introduction and cross-examination of the Chemical Assistant Grade I who actually conducted the tests, and whether reliance on his cross examination was permissible. - HELD THAT: - Tribunal's remand directed cross examination of the Chemical Examiner to elicit whether tests were carried out as per ASTM D86. In the remand proceedings the laboratory test report bore signatures of both Shri Dilip Mehta (Assistant Chemical Examiner) and Shri T.K. Myelvalganan (Chemical Assistant Grade I), and evidence showed the Assistant Grade I actually carried out the tests. The Tribunal held that, in these factual circumstances, the direction to permit examination of the 'Chemical Examiner' could not be strictly limited to only one of the signatories where the report was not signed by any person titled solely as 'Chemical Examiner' and the Assistant Grade I's answers were relevant to the method adopted. Accordingly introduction and cross examination of the Chemical Assistant Grade I was within the remit of the remand and his testimony could legitimately be relied upon for assessing whether ASTM D86 was followed. The Court recognised that the evidentiary weight of laboratory reports depends on whether requisite procedures and records are shown to have been followed and that cross examination may expose lacunae in method and recordkeeping; where such lacunae remain unresolved, the reports' probative value is diminished. [Paras 12, 13]

Cross examination of the Chemical Assistant Grade I who actually conducted the tests was permissible on the facts; his testimony could be relied upon to the extent it addressed the testing method and records.

Classification of imported goods under the Customs Tariff Note 4 to Chapter 27 (ASTM D86 distillation criterion) - Duty of adjudicating authority to procure and place laboratory records before decision - Remand for de-novo consideration with directions for production of primary test records - Whether the adjudicating authority's order confirming classification, confiscation, duty and penalties could be sustained in view of deficiencies in the record and cross examination, and what remedial step was required. - HELD THAT: - Cross examination of the Assistant Chemical Examiner (Shri Dilip Mehta) revealed gaps as to whether ASTM D86 procedures (grouping, apparatus, temperature conditioning, recording of losses/residue and log book entries) were followed; the Assistant Grade I asserted ASTM D86 had been used but relied on registers/logs which were not produced. The Tribunal found that neither the appellant nor the Commissioner had ensured production of the laboratory log books and primary records that would substantiate the asserted compliance with ASTM D86. Because the remand was intended to enable eliciting correct facts on method and records, the absence of those records and the incomplete exploration of the primary test data defeated the purpose of the remand and rendered the impugned order unsustainable. Accordingly the Tribunal set aside the order and remanded the matter for fresh adjudication, directing fresh cross examination of the Chemical Assistant Grade I and production of all lab records, registers and equipment details necessary to ascertain the actual readings, apparatus and procedures used in testing so that classification under Note 4 to Chapter 27 (ASTM D86 criterion) could be correctly determined on the basis of complete evidence. [Paras 11, 14, 15]

Impugned order set aside; matter remanded for de novo adjudication after fresh cross examination of the Chemical Assistant Grade I and production of all laboratory records and evidence necessary to establish whether ASTM D86 testing requirements were complied with for classification purposes.

Final Conclusion: The appeals are allowed by way of remand: the Tribunal set aside the adjudicating authority's order and directed fresh de novo adjudication after permitting fresh cross examination of the Chemical Assistant Grade I who conducted the tests and after production of all laboratory records and apparatus details necessary to determine whether ASTM D86 testing requirements under Note 4 to Chapter 27 were complied with for correct classification.

Powers under Section 241(2) and Section 242 for prevention of oppression and mismanagement - powers under Sections 337 and 339 concerning penalty for fraud and business carried on with intent to defraud creditors - non-applicability of Sections 337 and 339 to persons who are heads or employees of other organisations - condonation of delay in filing appeal - principle of natural justice (service and opportunity to be heard)

Powers under Sections 337 and 339 concerning penalty for fraud and business carried on with intent to defraud creditors - non-applicability of Sections 337 and 339 to persons who are heads or employees of other organisations - powers under Section 241(2) and Section 242 for prevention of oppression and mismanagement - Validity of impleading the appellant (an employee/office-bearer of another organisation) as a respondent and ordering attachment/frizzing of his assets under the impugned order. - HELD THAT: - The Tribunal's order impleaded 19 persons, including the appellant (Executive Director of PNB), and ordered freezing of their assets in proceedings arising out of alleged mismanagement and fraud in companies of the Nirav Modi and Gitanjali groups. The Appellate Tribunal considered the judgment of the Hon'ble Supreme Court in the case of Ms. Usha Ananthasubramanian, which held that powers under Section 241(2)/242 and the ancillary provisions in aid (including Sections 337 and 339) relate to mismanagement of the company's own affairs and cannot be used to rope in persons who are heads or employees of other organisations and attach their assets. Applying that principle, the Appellate Tribunal found the appellant was on the same footing as the person whose appeal the Supreme Court allowed and concluded that an employee/head of another organisation cannot be impleaded and have assets attached under the cited provisions. Consequently, the impugned order impleading the appellant and ordering attachment was set aside.

Impugned order impleading the appellant and ordering attachment/frizzing of his assets set aside.

Condonation of delay in filing appeal - principle of natural justice (service and opportunity to be heard) - Maintainability of the appeal in view of alleged delay and the appellant's contention of violation of natural justice before the Tribunal. - HELD THAT: - The Appellate Tribunal had earlier considered and allowed the appellant's application for condonation of delay (41 days) in filing the appeal and declined to revisit that order, finding no ground to reconsider the earlier exercise of discretion. The appellant also contended that the impugned order was passed without service of advance copy and without affording an opportunity of hearing. The Tribunal noted those contentions but decided the appeal on the determinative legal principle derived from the Supreme Court's judgment regarding the non-applicability of Sections 337/339 to persons who are heads or employees of other organisations. The central outcome was reached on that legal ground; the earlier order condoning delay was left undisturbed.

Earlier condonation of delay maintained; natural justice objections noted but the appeal disposed by applying the Supreme Court's principle, with no reopening of the condonation order.

Final Conclusion: The appeal is allowed; the impugned order dated 31.01.2019 impleading the appellant and ordering attachment/frizzing of his assets is set aside in line with the Supreme Court's ruling that Sections 337 and 339 cannot be employed to rope in and attach assets of persons who are heads or employees of other organisations; earlier condonation of delay in filing the appeal is left undisturbed. No costs.

Impleading third parties as proper and necessary parties for effective adjudication - Orders under the Companies Act relating to oppression, mismanagement and liability of persons knowingly party to carrying on business in a prejudicial manner - Restraint on alienation of assets consequent to NCLT directions - Standard for establishing wilful disobedience of an NCLT restraint order - Legitimacy of operation of joint lockers and inter-account transfers after a restraint direction

Legitimacy of operation of joint lockers and inter-account transfers after a restraint direction - Standard for establishing wilful disobedience of an NCLT restraint order - Whether the operation of joint lockers by Mrs. Asha Kiran after the NCLT restraint order and the allegation of wilful disobedience warranted setting aside the NCLT orders or de-sealing of accounts. - HELD THAT: - The Tribunal examined the circumstances of repeated access to joint lockers and noted that multiple entries would be unlikely if the purpose were to alienate assets; the appellants asserted the lockers contained personal 'stree dhan' and jewellery which were disclosed to tax authorities. The Tribunal compared factual matrix with precedent but found the cases distinguishable and observed that access to lockers and alleged transactions alone did not establish that the appellants acted with an ulterior malicious purpose. However, the Tribunal also held that impleading a person does not amount to proof of culpability; their presence as parties enables effective adjudication of claims concerning restraint and alienation arising from the NCLT order. On this basis the appeal was dismissed and no direction was issued to de-seal accounts.

Appeal dismissed; operation of lockers and the appellant's explanation did not justify setting aside the NCLT orders or directing de-sealing; impleading was permissible to enable effective adjudication.

Impleading third parties as proper and necessary parties for effective adjudication - Orders under the Companies Act relating to oppression, mismanagement and liability of persons knowingly party to carrying on business in a prejudicial manner - Restraint on alienation of assets consequent to NCLT directions - Whether transfers made by Mr. Ramesh C. Bawa to his daughter Ms. Aakanksha Bawa and her receipt of such funds rendered her liable or entitled to be relieved from being impleaded in proceedings under the Companies Act. - HELD THAT: - The Tribunal recorded the factual position that the transfers were said to be from liquidation of investments for marriage expenses and that no charge-sheet had been filed against the daughter by SFIO. Noting the Union's contention that funds were routed to entities where the appellant was a director, the Tribunal emphasised that impleading a party is aimed at enabling the tribunal to adjudicate claims effectively and does not equate to a finding of liability. Given the factual distinctions and absence of conclusive criminal charge against the appellant, the Tribunal nonetheless maintained that her presence as a party was appropriate for full adjudication of alleged contraventions and restraint on alienation imposed by the NCLT.

Appeal dismissed; the daughter's explanation did not warrant removal from the proceedings and impleading her as a necessary party was upheld.

Final Conclusion: Both appeals are dismissed. The Tribunal upheld the joinder of the appellants as proper and necessary parties to enable effective adjudication of alleged contraventions and restraint on alienation; dismissal is without costs and does not amount to a finding of proven culpability against the appellants.

Tribunal's power to replace company management - Prejudice to public interest as basis for intervention - Application of Sections 241 and 242 of the Companies Act, 2013 to grant remedial orders - Effect of repeal and savings: availability of relief formerly under Section 388B of the Companies Act, 1956 - Reliance on investigatory report (SFIO) to justify corrective orders

Effect of repeal and savings: availability of relief formerly under Section 388B of the Companies Act, 1956 - Application of Sections 241 and 242 of the Companies Act, 2013 to grant remedial orders - Whether the Tribunal could, notwithstanding repeal of Section 388B of the Companies Act, 1956, pass an order replacing the existing board and permitting government-nominated directors to be appointed. - HELD THAT: - The Court held that the repeal of the old provision did not oust the Tribunal's power to grant relief of a similar nature. Reading the savings in Section 465 of the Companies Act, 2013 together with the Tribunal's powers under Sections 241 and 242 of the Companies Act, 2013, the Tribunal is empowered to make such orders as are necessary to bring to an end matters complained of, including replacement of management where justified. Consequently, reliefs akin to those earlier available under Section 388B of the 1956 Act can be afforded under the 2013 Act's framework to achieve the remedial purpose. [Paras 11, 12]

Tribunal was empowered to pass the impugned order replacing the management despite repeal of Section 388B, by relying on Sections 241 and 242 read with the savings.

Prejudice to public interest as basis for intervention - Reliance on investigatory report (SFIO) to justify corrective orders - Tribunal's power to replace company management - Whether the findings of the SFIO and related material established that the affairs of the company were being conducted in a manner prejudicial to public interest, thereby justifying replacement of the existing management. - HELD THAT: - The SFIO investigation disclosed multiple irregularities: non-filing of statutory returns, alleged misrepresentations to the public, questionable accounting and transactions, and other conduct adverse to creditors, investors and members. The Tribunal found these matters amounted to conduct prejudicial to public interest and stakeholders. The Court accepted that the investigations and attendant criminal proceedings supported the Tribunal's conclusion that replacement of the present management was warranted to protect the company's property, stakeholders and statutory compliance. [Paras 8, 9, 13, 14]

The SFIO findings demonstrated prejudice to public interest and justified the Tribunal's order replacing the management with government-nominated directors.

Reliance on investigatory report (SFIO) to justify corrective orders - Tribunal's power to replace company management - Whether the Tribunal's failure to specify individualized findings about each director's specific role rendered the order invalid or necessitated interference. - HELD THAT: - Although the appellants contended the Tribunal did not record specific roles or findings against each director, the Court observed that the SFIO investigation and consequent criminal action demonstrated irregularities attributable to the directors/management. The Tribunal's order was aimed at protecting stakeholders and company assets in light of the collective findings of mismanagement and fraud; the Court found no grounds for interference with the remedial order on the basis urged by the appellants. [Paras 6, 13, 14]

Absence of granular role-finding against each director did not vitiate the Tribunal's order; no interference warranted.

Final Conclusion: The appeal is dismissed; the Tribunal was entitled to order replacement of the existing management and permit appointment of government-nominated directors under the Companies Act, 2013 framework in view of findings of conduct prejudicial to public interest based on the SFIO investigation. No costs.

Oppression and mismanagement - just and equitable winding up - deadlock in management - vertical split - disposal of company assets for winding up - distribution of sale proceeds proportionate to shareholding - delay and laches as a defence

Oppression and mismanagement - deadlock in management - just and equitable winding up - disposal of company assets for winding up - distribution of sale proceeds proportionate to shareholding - Validity of the Tribunal's order directing winding up of the company and sale of its immovable property on findings of deadlock, oppression and mismanagement. - HELD THAT: - The Tribunal found that the company's business had reached a stage of deadlock, reconciliation attempts had failed, the directors were not willing to work together and the company had ceased its trading activities with its premises let out and rental income as the sole source. The Tribunal recorded that the petitioner had made contributions towards equity and capital and that the immovable property was purchased from funds contributed by him. Given that the company was a small private company with only three shareholders who had at one time all been directors, the Tribunal concluded that it was just and equitable to liquidate the assets and distribute proceeds among members in accordance with their shareholding. The appellate court upheld the Tribunal's determinative reasoning that (a) the factual matrix established deadlock and inability to continue the business, (b) attempts at reconciliation were exhausted, and (c) sale of the immovable property and distribution of proceeds was necessary to implement winding up and to protect members' rights. [Paras 2, 16]

Tribunal's order for winding up the company, sale of the immovable property and distribution of proceeds among shareholders as per their percentage holdings is upheld.

Delay and laches as a defence - oppression and mismanagement - Whether the appellants' contentions regarding lack of jurisdiction, delay and latches, and absence of oppression warranted interference with the Tribunal's order. - HELD THAT: - The appellants contended that the petition should have been dismissed for want of jurisdiction because it arose under different provisions and that the cause of action (2000-2008) attracted delay and laches; they also disputed the existence of oppression. The appellate court examined the record and noted that the petitioner continued to have a 51% shareholding, had made material financial contributions (including towards acquisition of the premises) and that control of company affairs had shifted so that delay was not established as a bar. The Tribunal's findings that records were not maintained, that management had been non-functional and that the petitioner had been oppressed were treated as supported by surrounding circumstances and financial/accounting material. Consequently the appellate court found no merit in the appellants' jurisdictional and delay/laches objections and did not disturb the finding of oppression/mismanagement. [Paras 4, 13, 16]

Appellants' objections on jurisdiction, delay and absence of oppression are rejected; no interference with the Tribunal's findings.

Final Conclusion: The appeal is dismissed; the NCLT/Tribunal order directing winding up of the company, sale of its immovable property and distribution of proceeds among the shareholders in proportion to their shareholding is affirmed.

Investigation under Section 213(b)(ii) - judicial satisfaction for initiation of investigation - mala fide petition and abuse of process - administrative decision in deployment of staff - overtime payments and absence of audit adverse findings

Investigation under Section 213(b)(ii) - judicial satisfaction for initiation of investigation - overtime payments and absence of audit adverse findings - Whether the NCLT was justified in refusing to order an investigation under Section 213(b)(ii) by recording non-satisfaction of circumstances suggesting fraud, misfeasance or misconduct. - HELD THAT: - The statutory trigger for an investigation under Section 213(b)(ii) is the Tribunal's satisfaction that circumstances suggest persons in management have been guilty of fraud, misfeasance or other misconduct. The NCLT considered the pleadings and documentary material and recorded reasons for non-satisfaction: the allegations were broad and founded on the appellant's disgruntlement over overtime paid to a co-employee; overtime and reimbursements were shown to be paid pursuant to company rules and subject to internal/external audits which did not disclose unauthorized payments; inclusion of non-technical hands in maintenance teams was an administrative deployment supervised by AME/Engineer-in-charge; and no audit or contemporaneous complaint supported the appellant's charge of siphoning or wrongful loss. Having reviewed the record, the Appellate Tribunal found that the appellant failed to produce material capable of invoking the NCLT's satisfaction to order an investigation and that the NCLT's reasons for refusing to investigate were not baseless. [Paras 12, 14, 15]

NCLT's refusal to order an investigation under Section 213(b)(ii) was upheld; the appellant failed to establish circumstances warranting investigation.

Mala fide petition and abuse of process - administrative decision in deployment of staff - judicial satisfaction for initiation of investigation - Whether the petition before the NCLT was mala fide and an abuse of process, and whether the NCLT's finding to that effect warranted dismissal with costs. - HELD THAT: - The NCLT found the petition to be motivated by personal vendetta and a disgruntled employee's attempt to challenge administrative deployment and overtime payments, characterising the petition as mala fide and an abuse of process and dismissing it with costs. The Appellate Tribunal reproduced and considered those findings, observing that the appellant's allegations were sweeping, unsupported by audit findings or complaints, and effectively amounted to sitting in judgment over management decisions about team composition and overtime. While the NCLT imposed costs on the petitioner, the Appellate Tribunal accepted that the petition was mala fide/abusive and therefore dismissed the appeal at the stage of admission; it did not order further costs on the appeal. [Paras 8, 9, 10, 15, 16]

The NCLT's finding that the petition was mala fide and an abuse of process is affirmed; the appeal is dismissed at admission (no costs awarded on appeal).

Final Conclusion: The NCLT's order dismissing the petition under Section 213(b)(ii) as mala fide and an abuse of process is upheld for want of material to satisfy the requirement for investigation; the appeal is dismissed at the admission stage and no costs are awarded on the appeal.

Amendment of petition to implead statutory auditors - imputation of oppression and mismanagement against statutory auditors - reliance on investigation report of SFIO as a ground for amendment - non-joinder and unnecessary party doctrine - delay and abuse of process by seeking amendment

Amendment of petition to implead statutory auditors - reliance on investigation report of SFIO as a ground for amendment - delay and abuse of process by seeking amendment - Amendment seeking to change the name of Respondent No.11 to BSR & Co. LLP and to implead BSR and Company as an additional respondent was not permitted. - HELD THAT: - The Tribunal declined the Appellant's Company Application to amend the original petition to alter the name of the auditor and to implead another auditor. The Appellant sought amendment after receiving a reply indicating change of name and relied on the SFIO report to define the auditors' alleged role in fraud and siphoning of funds. The Appellate Tribunal found that the Appellant had knowledge of the relevant facts and that the proposed amendment was sought late, apparently to delay proceedings, particularly when conversion of CCDs and related timelines were in play. Reliance on the pendency of SFIO investigation was held insufficient to justify amendment to add or re name parties where no fresh or satisfactory ground for impleading was made out. The Tribunal also took into account precedent where statutory auditors were deleted as unnecessary parties. On these considerations the request to amend and implead was refused and the appeal against that refusal was dismissed.

Application to amend the petition to change the auditor's name and to implead another auditor refused; appeal dismissed.

Imputation of oppression and mismanagement against statutory auditors - non-joinder and unnecessary party doctrine - Allegations of oppression and mismanagement cannot, without more, justify impleading statutory auditors as necessary parties in a petition under Sections 241-242 of the Companies Act. - HELD THAT: - Respondents contended that acts of oppression and mismanagement cannot be averred against statutory auditors and relied on the Tribunal's earlier decision in Shanta Prasad Chakravarty v. Bochapathar Tea Estate Private Limited, where statutory auditors were deleted as unnecessary parties. The Appellate Tribunal accepted that mere participation of auditors, or reliance on an investigation report indicting auditors, does not automatically convert them into necessary parties in an oppression and mismanagement petition unless specific and compelling grounds are demonstrated. In the present case the Appellant failed to show adequate grounds to treat the auditors as necessary parties, and therefore impleading them was not warranted.

Imputation of oppression and mismanagement against statutory auditors held insufficient to make them necessary parties; impleading auditors not permitted.

Final Conclusion: The appeal is without merit and is dismissed; the Tribunal's refusal to permit amendment to change the auditor's name and to implead an additional auditor is upheld, and the contention that statutory auditors should be parties to the oppression and mismanagement petition is not sustained.

Tribunal's power under Section 252(3) to restore struck off company - Restoration of company struck off for non filing of statutory returns - Pendency of litigation as a justifiable ground for restoration - Duty to place company and stakeholders in pre striking position

Tribunal's power under Section 252(3) to restore struck off company - Pendency of litigation as a justifiable ground for restoration - Restoration of company struck off for non filing of statutory returns - Whether the Tribunal rightly exercised its discretion under Section 252(3) to restore the name of a company struck off under Section 248 for non filing, on the ground that pending litigation justified restoration. - HELD THAT: - Section 252(3) empowers the Tribunal to order restoration of a struck off company if either the company was carrying on business or in operation when its name was struck off or if it is otherwise just that the name be restored. The Tribunal found, and the Appellate Tribunal accepted, that ongoing litigation involving the company, its directors and shareholders amounted to a just ground for restoration. The record shows admitted litigation (including Suit No. 15/2003 and earlier proceedings before the Special Court and execution proceedings) such that striking off would affect continuity of rights and pending proceedings. Precedents where restoration was ordered in similar circumstances were held to support this exercise of discretion. Having regard to the purpose of restoring parties to the position existing prior to striking off, and the presence of contested litigation involving the company and its management, the Tribunal's direction to restore the company did not suffer from legal infirmity and was within the scope of Section 252(3). [Paras 4, 6, 7]

The Tribunal's order restoring the company was upheld as a lawful exercise of discretion under Section 252(3) because pendency of litigation constituted a just ground for restoration.

Final Conclusion: The appeal is dismissed; the Tribunal's order restoring the company to the Register of Companies is upheld and there shall be no order as to costs.

Res judicata and issue estoppel - effect of sanctioned scheme under SICA overriding company law compliances - conversion of unsecured loans into equity pursuant to BIFR/AAIFR sanction - limitation, delay and laches in company petitions - imposition of costs by tribunal

Conversion of unsecured loans into equity pursuant to BIFR/AAIFR sanction - res judicata and issue estoppel - limitation, delay and laches in company petitions - imposition of costs by tribunal - Challenge to the allotment of 25 lakh equity shares (CP No.42/2015) and the imposition of costs - HELD THAT: - The Tribunal held that the allotment challenged in CP No.42/2015 was made pursuant to a Modified Sanctioned Scheme approved by BIFR and upheld by AAIFR, and that the High Court thereafter dismissed the writ challenging the AAIFR order. Given the scheme's direction to convert unsecured loans into equity, the allotment to the lender who advanced the unsecured loan was a natural consequence and alternatives were not shown. The NCLT's conclusion that the matter had attained finality in earlier proceedings and that the petition suffered from delay and laches was affirmed. The appellant did not demonstrate readiness to provide funds or accept allotment when offered. In these circumstances the NCLT's dismissal on grounds of res judicata/estoppel and delay was upheld, and the imposition of costs was not interfered with. [Paras 18, 19]

The impugned order in CP No.42/2015 is upheld; the allotment stands affirmed as made pursuant to the sanctioned scheme and the NCLT's dismissal and cost order are maintained.

Effect of sanctioned scheme under SICA overriding company law compliances - conversion of unsecured loans into equity pursuant to BIFR/AAIFR sanction - res judicata and issue estoppel - limitation, delay and laches in company petitions - Challenge to the allotment of 20 lakh equity shares (CP No.22/2005) - HELD THAT: - The Tribunal found that the allotment of 20 lakh shares was in accordance with the BIFR sanctioned Scheme (SS02) which envisaged conversion of unsecured loans into equity and that the scheme had overriding effect under SICA. The record shows board and EGM proceedings for allotment and that the appellant was offered shares (5 lakh) but declined the offer. Earlier challenges to the conversion under the rehabilitation scheme had been pursued and rejected before BIFR/AAIFR and the High Court. On these factual and legal bases the NCLT's dismissal of CP No.22/2005 was held to be proper and not requiring interference. [Paras 33, 34, 35]

The impugned order in CP No.22/2005 is upheld; the allotment pursuant to the sanctioned scheme is sustained and the NCLT's dismissal is affirmed.

Final Conclusion: Both appeals are dismissed and the impugned NCLT orders are upheld: allotments made pursuant to the BIFR/AAIFR sanctioned schemes are sustained, prior adjudications and delay/laches precluded the company petitions, and the costs order remains undisturbed.

Oppression and mismanagement - validity of board and general meeting resolutions - service of notice and compliance with the Companies Act, 2013 - splitting and transfer of shares and voting rights - appointment of independent administrator and voting by poll - remand for fresh adjudication - removal of veto/signatory requirement

Validity of board and general meeting resolutions - service of notice and compliance with the Companies Act, 2013 - splitting and transfer of shares and voting rights - oppression and mismanagement - Whether the matters concerning the validity of the Board meeting dated 06.06.2014, the Extra-Ordinary General Meeting dated 30.06.2014 and the Annual General Meeting dated 08.08.2015, including allegations of forged minutes, improper notice and splitting/transfer of shares, could be finally adjudicated or required fresh consideration. - HELD THAT: - The Tribunal observed contested factual and procedural contentions regarding service of notice, alleged forgery of minutes, the effect of splitting/transfers of shares on voting rights and the propriety of resolutions authorizing sale of company property. Rather than finally resolving these disputes on the record before it, the Tribunal directed that the matter be revisited by the NCLT. The appellate Tribunal required that a proper Board meeting be convened with due notice, that after Board approval a specific agenda and statement under the statutory provision for circulation to members be placed before an Extra-Ordinary General Meeting, and that all material facts relating to any proposed sale be disclosed and deliberations recorded. The Tribunal also recorded that voting should be conducted by poll (not by show of hands) to ensure correct reflection of share-based voting, and that the NCLT should appoint an Independent Administrator to oversee voting and report back for review. These directions indicate that the substantive disputes are to be re-examined by the NCLT with the specified procedural safeguards rather than being finally adjudicated by the Appellate Tribunal on the existing record.

The issues concerning validity of the meetings, notices, alleged forgery and the consequences of the splitting/transfer of shares are remanded to the NCLT, Hyderabad for fresh consideration in accordance with the directions issued (proper Board meeting, specific agenda under the statute, disclosure of material facts, appointment of an Independent Administrator and voting by poll), and the NCLT is to review the Independent Administrator's report.

Removal of veto/signatory requirement - appointment of independent administrator and voting by poll - Whether the direction in the impugned NCLT order making one of the Appellants a necessary joint signatory to any agreement to sell or registered sale deed of company property should be sustained. - HELD THAT: - The Tribunal found that the NCLT's requirement that one among the two Appellants be a joint signatory to sale agreements or registered sale deeds effectively conferred a veto upon those Appellants over corporate asset dispositions. Having directed a fresh decision-making process (including convening a duly constituted Board meeting, placing the matter before an EOGM with full disclosure and voting by poll under oversight of an Independent Administrator), the Tribunal held that the impugned signatory requirement is not appropriate and removed that requirement so that any sale, if approved after the prescribed process, may be acted upon without the prior joint-signatory constraint.

The requirement that an Appellant be a joint signatory to any agreement to sell or registered sale deed is set aside; the matter of any sale is to be governed by the fresh process directed and, if approved in that process, acted upon accordingly.

Final Conclusion: The appeals are disposed by remitting the substantive disputes about the validity of the impugned meetings, alleged procedural defects and share transfers to the NCLT, Hyderabad for fresh consideration under specified procedural safeguards (proper Board meeting and notice, agenda and statement under the statute, full disclosure to members, voting by poll under an Independent Administrator), and the Tribunal has removed the earlier requirement that an Appellant be a joint signatory to any sale agreement or registered sale deed.

Restoration of company name under Section 252(3) of the Companies Act, 2013 - Carrying on business or in operation (for purpose of restoration) - Validity of striking off from register of companies and consequential relief - Imposition of costs for delayed statutory filings

Carrying on business or in operation (for purpose of restoration) - Restoration of company name under Section 252(3) of the Companies Act, 2013 - Whether the appellant company was carrying on business or in operation at the time its name was struck off and whether its name should be restored to the register of companies. - HELD THAT: - The Tribunal examined the factual material relied upon by the appellant, including Memoranda of Understanding dated 09.04.2015 and 06.05.2015, invoices and filings made after the date of striking off. The Tribunal found that the MOUs and commercial activity demonstrated that the company was engaged in developing business platforms and was operational in a commercial sense, notwithstanding limited business volume and delayed statutory filings. The Tribunal noted that delayed filings had been regularised by payment of additional fees and that ROC records indicated continued recognition of the company (notice dated 03.11.2018). Applying the criterion in Section 252(3) - that the Tribunal may restore the name if satisfied the company was carrying on business or in operation at the time of striking off or that restoration is otherwise just - the Tribunal concluded restoration was warranted. The determinative legal reasoning was that development of IT platforms and execution of MOUs constituted carrying on business or operation for purposes of restoration under Section 252(3). [Paras 16, 17, 18]

The National Company Law Tribunal order was set aside and the Registrar of Companies was directed to restore the name of the appellant company to the register of companies.

Imposition of costs for delayed statutory filings - Whether costs should be imposed on the appellant for delay in filing statutory documents. - HELD THAT: - Although the Tribunal directed restoration, it took into account the appellant's delay in filing statutory returns and the need to discourage non-compliance. The Tribunal therefore imposed a monetary payment by way of costs to be paid to the Pay & Accounts Officer, Ministry of Corporate Affairs, as a condition of restoration. This measure served both as recompense and as a deterrent for failure to file required statutory documents in time. [Paras 19]

The appellant was directed to pay costs of Rs. 1,00,000 by way of bank draft to the Pay & Accounts Officer, Ministry of Corporate Affairs, Chandigarh/New Delhi, for not filing statutory documents as required.

Final Conclusion: The Tribunal allowed the appeal, set aside the NCLT order, directed restoration of the appellant company's name to the register of companies, and conditioned restoration on payment of costs for delayed statutory filings; no other relief was granted.

Appealability of orders under Section 45 of the Arbitration and Conciliation Act, 1996 - Jurisdiction to hear appeals against orders of judicial authorities under arbitration law - Scope of Section 421 of the Companies Act, 2013 - Interpretation of 'court authorised by law' under Section 50 of the Arbitration and Conciliation Act, 1996

Appealability of orders under Section 45 of the Arbitration and Conciliation Act, 1996 - Scope of Section 421 of the Companies Act, 2013 - Jurisdiction to hear appeals against orders of judicial authorities under arbitration law - Whether an order of the National Company Law Tribunal refusing to refer parties to arbitration under Section 45 of the Arbitration and Conciliation Act, 1996 is appealable to the National Company Law Appellate Tribunal under Section 421 of the Companies Act, 2013. - HELD THAT: - The Tribunal held that when the NCLT passes an order under Section 45 of the Arbitration Act it acts in the capacity of a 'judicial authority' under the Arbitration Act and not as a 'Tribunal' under the Companies Act. Prior decision of this Appellate Tribunal in Thota Gurunath Reddy & Ors. was applied to the effect that orders passed by the Tribunal in its capacity as judicial authority under Section 45 are not appealable under Section 421 of the Companies Act, 2013. Reliance on the reasoning in Sumitomo Corporation (Supra) led to the conclusion that appealability under Section 50 of the Arbitration Act is to the 'court authorised by law to hear appeals from such order'; hence, absent any statutory conferral making Section 421 the forum for appeals from orders under Section 45, an appeal to the NCLAT under Section 421 is not maintainable. The Court therefore declined to entertain the appeal but observed that the applicant remains free to approach the appropriate court competent under Section 50 of the Arbitration Act. [Paras 4, 9]

The appeal under Section 421 of the Companies Act, 2013 against the NCLT's refusal to refer to arbitration under Section 45 of the Arbitration and Conciliation Act, 1996 is not maintainable before this Appellate Tribunal; the applicant may seek remedy before the court authorised under Section 50 of the Arbitration Act.

Final Conclusion: Appeal dismissed as not maintainable before the National Company Law Appellate Tribunal; recourse open to the applicant before the court authorised by law under Section 50 of the Arbitration and Conciliation Act, 1996.

Default - Corporate Insolvency Resolution Process under Section 7 - Trust and Retention Account (TRA) and consortium inter-se arrangements - onus of proof of default - inter-creditor conduct and unilateral action by a minority lender - remand for determination of professional fees

Default - Corporate Insolvency Resolution Process under Section 7 - onus of proof of default - Trust and Retention Account (TRA) and consortium inter-se arrangements - inter-creditor conduct and unilateral action by a minority lender - Whether Respondent No.1 had established a legally cognizable default by the Corporate Debtor entitling it to admission of the Section 7 application. - HELD THAT: - The Tribunal found that the Corporate Debtor had placed its collections into the TRA in accordance with the consortium inter-se arrangements and that release of funds was governed by the Punjab National Bank led inter-se agreement read with the TRA Agreement. The stake of Respondent No.1 in the total debt was only a minor portion, and the record (including consortium minutes and an uncontroverted certificate of collections credited to the TRA) showed that amounts were available for release but their disbursement was regulated by the lead bank/consortium mechanism. The onus to prove default lay on the financial creditor; mere existence of a debt due in law was not sufficient where the default arose from inter-creditor disputes and withholding by lenders rather than from failure of the Corporate Debtor to perform. In these circumstances the Tribunal concluded that the default could not be attributed to the Corporate Debtor and that initiation of CIRP at the instance of Respondent No.1 was unwarranted.

The finding of default was negatived; the admission under Section 7 was set aside and the Section 7 application was dismissed.

Remand for determination of professional fees - Whether any incidental matters arising from the set-aside of the impugned order required remand for determination. - HELD THAT: - While declaring the impugned admission and consequent orders (appointment of Interim Resolution Professional, moratorium, freezing of accounts and actions taken thereunder) illegal and setting them aside, the Tribunal directed that the Adjudicating Authority be tasked to fix the fee of the Interim/Resolution Professional and that the Corporate Debtor pay such fee and other costs incurred. That limited matter was therefore remitted for quantification and determination.

Proceedings were remitted to the Adjudicating Authority solely for fixation of the Interim/Resolution Professional's fee and related incidental determinations.

Final Conclusion: The appeal is allowed. The impugned NCLT order admitting the Section 7 petition is set aside; the Section 7 application is dismissed; all consequential orders and actions pursuant to that admission are declared illegal and vacated; the Corporate Debtor is released to function through its board; and the matter is remitted to the Adjudicating Authority only for fixation of the Interim/Resolution Professional's fees and related incidental determinations.

Admission of petition under Section 9 of the I&B Code, 2016 - compliance with Section 8(2)(a) - requirement to raise dispute within ten days of demand notice - validity of board authorisation for operational creditor's petition - pre-existing dispute as bar to initiation of CIRP - grounds for rejection of Section 9 application under Section 9(5)(ii)

Admission of petition under Section 9 of the I&B Code, 2016 - grounds for rejection of Section 9 application under Section 9(5)(ii) - Validity of the Adjudicating Authority's order admitting the Section 9 petition and whether the petition warranted rejection under Section 9(5)(ii). - HELD THAT: - The Tribunal reviewed the Adjudicating Authority's order and submissions on completeness and defects in the Section 9 application. The Adjudicating Authority had dealt with the matters raised, heard parties multiple times and recorded reasons for admitting the petition. The Tribunal found the application to be complete on the record (Annexure A-2) and no ground made out under Section 9(5)(ii) for rejection. The appellate challenge that the impugned order was unreasoned or failed to deal with issues was rejected on an overall reading which showed that material issues were considered before admission.

The admission order under Section 9 is upheld; no ground for rejection under Section 9(5)(ii) was made out.

Validity of board authorisation for operational creditor's petition - Whether the Operational Creditor's petition was invalid for lack of board resolution authorising issuance of the demand notice and filing of the petition. - HELD THAT: - The Operational Creditor, a corporate body, furnished an affidavit explaining that multiple board meetings including the meeting dated 19.04.2018 had been convened and that the prescribed annual return form had limited rows which led to omission of recording all meetings. The Tribunal accepted this explanation and found no substantive basis to reject the application for want of board authorisation on the record before the Adjudicating Authority.

Lack of explicit recording of the board meeting in the annual return did not invalidate the demand notice or petition; the explanation supplied was accepted.

Pre-existing dispute as bar to initiation of CIRP - compliance with Section 8(2)(a) - requirement to raise dispute within ten days of demand notice - Whether a pre-existing dispute regarding quality of coal supply prevented admission of the petition because the Corporate Debtor had raised the dispute. - HELD THAT: - The Corporate Debtor alleged defective supply and relied on a purported confirmation letter and return of cheques; the Operational Creditor produced third party laboratory sampling certificates and alleged forged signatures on the confirmation. The Tribunal noted that no response asserting the dispute was communicated by the Corporate Debtor within ten days of the demand notice as required by Section 8(2)(a), and that the material on record did not establish a pre-existing dispute sufficient to bar admission. The returning of cheques was examined and treated as commercial conduct not amounting to effective notice of a dispute within the statutory time frame.

The contention of a pre-existing dispute was not established so as to defeat the petition; admission was therefore permissible.

Final Conclusion: The appeal is dismissed and the Adjudicating Authority's order admitting the Section 9 petition is affirmed; no costs awarded.

Operational debt - Documentary evidence showing debt is due and payable - Existence of pre existing dispute - Scope of inquiry under Section 9 - Admission of an application under Section 9 - Mobilox test for Section 9

Operational debt - Documentary evidence showing debt is due and payable - Mobilox test for Section 9 - Whether the Application under Section 9 established an operational debt exceeding the statutory threshold and was supported by documentary evidence showing the debt was due and payable. - HELD THAT: - Applying the principles in Mobilox, the Tribunal examined whether an operational debt in excess of the prescribed threshold existed and whether the documentary material annexed to the Section 9 application showed the debt was due and payable. The record (mandate, emails and invoices, and cheques) demonstrated that the appellant rendered services leading to sanction of the loan and that documentary evidence was placed before the Adjudicating Authority. The Tribunal held that the statutory threshold was crossed and the documentary evidence supported that the debt was due and payable, so the application met the requirements for admission under Section 9. [Paras 8, 30, 33]

The Section 9 application established an operational debt exceeding the threshold and was supported by documentary evidence showing the debt was due and payable; the application was fit for admission.

Existence of pre existing dispute - Scope of inquiry under Section 9 - Whether a pre existing dispute existed between the parties prior to receipt of the demand notice and, if so, whether it was a plausible dispute warranting rejection of the Section 9 application. - HELD THAT: - The Tribunal analysed the reply to the Section 8(1) notice and the documents on record. It examined each contention raised by the corporate debtor (non involvement of the appellant, authenticity and delivery of emails and invoice, terms of the mandate, characterization of cheques as security, and alleged non receipt of amounts). On the evidence (mandate, detailed email exchanges, delivery/handing over of cheques, cashbook entries and related communications) the Tribunal found the disputes were raised for the first time in reply to the notice, were unsupported by contemporaneous documentary evidence, and were spurious, hypothetical or illusory rather than a bona fide dispute. The Adjudicating Authority had rejected the application by relying on discrepancies which the corporate debtor itself did not dispute; the Tribunal held those discrepancies did not establish a pre existing dispute that would bar admission under Section 9. [Paras 15, 18, 21, 24, 25]

No pre existing dispute existed on the material before the receipt of the demand notice; the disputes raised in reply were spurious or unsupported and did not justify rejection of the application.

Admission of an application under Section 9 - Scope of inquiry under Section 9 - Whether the Adjudicating Authority erred in rejecting the Section 9 application and what consequential relief should follow. - HELD THAT: - The Tribunal concluded that the Adjudicating Authority applied an impermissibly wide scope of inquiry at the admission stage by relying on documentary discrepancies and by not seeking clarifications from the applicant. Rather than testing whether the Mobilox criteria were met, the Adjudicating Authority treated disputed contentions (not supported by evidence) as sufficient to reject the application. Given the Tribunal's findings that the debt existed, the documentary record was sufficient and no bona fide pre existing dispute existed, the Tribunal set aside the impugned order. The matter was remitted to the Adjudicating Authority with directions to admit the application under Section 9 after issuing notice to the corporate debtor to enable settlement prior to admission. [Paras 29, 31, 32, 34]

The Adjudicating Authority erred in rejecting the application; the impugned order is set aside and the matter is remitted for admission of the Section 9 application after notice to the corporate debtor to allow settlement.

Final Conclusion: The Tribunal allowed the appeal, held that the Section 9 application disclosed an operational debt supported by documentary evidence and that the disputes raised were spurious; it set aside the Adjudicating Authority's rejection and remitted the matter with directions to admit the application under Section 9 after notice to the corporate debtor to permit settlement prior to admission.

Moratorium under IBC - Creation of charge/encumbrance during CIRP - Pre-existing attachment and priority of statutory recovery - Principles of Natural Justice - Section 238 overriding effect - Registration/incorporation of earlier attachment in public records

Moratorium under IBC - Creation of charge/encumbrance during CIRP - Pre-existing attachment and priority of statutory recovery - Principles of Natural Justice - Registration/incorporation of earlier attachment in public records - Whether the Adjudicating Authority erred in cancelling an attachment recorded during the CIRP without considering the Recovery Officer's objections, despite the attachment having been made prior to initiation of CIRP. - HELD THAT: - The Tribunal found that the Adjudicating Authority disposed of MA No. 830/2019 without considering the Reply and objections filed by the Recovery Officer of EPFO and explicitly recorded that the Reply was not available for consideration at the hearing (paras 9-10). The Adjudicating Authority allowed the Resolution Professional's application on the basis that no encumbrance can be created during the Moratorium, and relying on the overriding effect of Section 238 (para 11-12). The Appellate Tribunal, however, noted on the record that the attachment by the Recovery Officer under the EPF & M.A. Act was effected on 04.08.2017 - well before the admission of the Section 7 petition and commencement of CIRP - and that subsequent entry in the sub-registrar's records during the moratorium amounted to mere incorporation of a prior order rather than creation of a new charge (paras 13-16). The Adjudicating Authority failed to take this chronology into account and proceeded in haste without considering the EPFO's objections, thereby breaching principles of natural justice (paras 10, 17). In these circumstances the Tribunal concluded that the Adjudicating Authority had erred in cancelling the encumbrance recorded during CIRP, because the attachment itself pre-dated CIRP and the order recording it in the register was ministerial, not a fresh encumbrance created in violation of the moratorium. [Paras 11, 12, 13, 16, 17]

Appeal allowed; impugned order cancelling the attachment set aside for having been passed without considering the EPFO's objections and without appreciating that the attachment pre-dated the CIRP.

Final Conclusion: The appeal succeeds. The Adjudicating Authority's order cancelling the encumbrance is set aside because it was passed without considering the Recovery Officer's filed objections and failed to recognise that the impugned attachment had been made prior to the initiation of CIRP; no order as to costs.

Supply of Tangible Goods Service (SOTG) - possession and effective control - extended period of limitation - service tax on renting of immovable property - abatement under Notification No. 26/2012 - penalty under Section 77 and 78

Supply of Tangible Goods Service (SOTG) - possession and effective control - Liability to service tax under the head Supply of Tangible Goods Service (SOTG) in respect of movable goods placed with the lessee. - HELD THAT: - The Tribunal found that the movable tangible goods (cutlery, kitchen appliances, bathroom equipment, room gadgets, beddings, decorative items etc.) were handed over to the lessee and that effective control and possession of those goods lay with the lessee. The earlier observation that such goods remained in the constructive possession of the lessor was an apparent mistake. On the facts and pleadings recorded in the Final Order, the lessor retained no effective control or possession and the lessee had the discretion of use. Accordingly, there is no liability to service tax under SOTG in respect of those goods, and paragraph 14 of the Final Order is substituted to record that conclusion. [Paras 6]

No liability to service tax under SOTG as effective possession and control of the tangible movable goods stood transferred to the lessee.

Extended period of limitation - Applicability of the extended period of limitation for the disputed period. - HELD THAT: - The Tribunal noted that the appellant had been registered with the Service Tax Department since 07.02.2008 across relevant categories and that its accounts were audited by the Department till 2011. The period under dispute (August, 2008 to June, 2012) and the appellant's affairs were therefore within the Department's knowledge, and all transactions were recorded in regular books of account. On these facts, suppression, fraud or contumacious conduct necessary to invoke extended limitation was not made out. Consequently, the extended period of limitation is not applicable to the matters in dispute. [Paras 7]

Extended period of limitation does not apply.

Final Conclusion: The rectification application is allowed: the Final Order is modified to hold that no service tax under SOTG is payable as effective control and possession of the tangible movable goods were with the lessee, and the extended period of limitation is not invokable for the disputed period (August, 2008 to June, 2012); the remainder of the Final Order stands accordingly modified.

Net owned fund - certificate of registration - cancellation under Section 45-IA(6)(iv) of the Reserve Bank of India Act, 1934 - proviso to Section 45-IA(6) - deduction of investments and inter-group loans in excess of ten per cent for computing NOF - applicability of RBI Master Circular vis-a -vis statutory definition - directions of the Reserve Bank and compliance timeline prescribed by notification dated 27.03.2015

Net owned fund - deduction of investments and inter-group loans in excess of ten per cent for computing NOF - applicability of RBI Master Circular vis-a -vis statutory definition - Whether the Reserve Bank correctly computed the petitioner's NOF for 2016-17 by deducting investments and loans/advances to group/subsidiary companies in excess of ten per cent of owned fund and whether the Master Circular relied upon by the petitioner applied for that computation. - HELD THAT: - Explanation I to Section 45-IA prescribes NOF as aggregate of paid-up equity and free reserves reduced by specified items and further reduced by investments in shares of subsidiaries/group companies and the book value of debentures, bonds, outstanding loans and advances made to subsidiaries/ group companies to the extent such amounts exceed ten per cent of the owned fund. The petitioner undisputedly had investments and advances to group companies which, in excess of ten per cent of its owned fund, were required to be deducted. The Master Circular invoked by the petitioner, on its plain terms, applies to all-India Financial Institutions (Exim Bank, NABARD, NHB and SIDBI) and does not govern computation of NOF for an NBFC under Section 45-IA. Consequently the statutory definition in Section 45-IA governs the calculation and the RBI's deduction resulting in NOF of Rs.150.33 lakhs for 2016-17 was justified.

RBI's computation of NOF in accordance with Explanation I to Section 45-IA was correct and the Master Circular was not applicable to the petitioner.

Certificate of registration - cancellation under Section 45-IA(6)(iv) of the Reserve Bank of India Act, 1934 - proviso to Section 45-IA(6) - directions of the Reserve Bank and compliance timeline prescribed by notification dated 27.03.2015 - Whether the petitioner was entitled to an opportunity under the proviso to Section 45-IA(6) to make good any shortfall in NOF before cancellation of its Certificate of Registration. - HELD THAT: - Section 45-IA(6) contains several grounds for cancellation and a proviso which requires the Bank to give an opportunity before cancelling for failure under certain clauses. The RBI's cancellation was founded on clause (iv) - failure to comply with directions issued by the Bank - arising from the notification of 27.03.2015 which had prescribed timelines for achieving specified NOF levels. Clause (iv) does not attract the proviso relied upon by the petitioner that mandates an opportunity to rectify where cancellation is under clause (ii) or clause (iii). Moreover, existing NBFCs were already afforded time by the 2015 notification to meet the NOF thresholds and the shortfall in the 2016-17 balance sheet could not be remedied years later; accordingly cancellation under clause (iv) did not require further opportunity to make good the deficiency.

No obligation to grant the opportunity claimed by the petitioner arose; cancellation under Section 45-IA(6)(iv) was permissible and the prior timelines given by RBI were adequate.

Final Conclusion: The petition is dismissed. The Court upheld the RBI's NOF computation in accordance with Section 45-IA and sustained cancellation of the petitioner's Certificate of Registration under Section 45-IA(6)(iv), holding that the Master Circular was inapplicable and that the proviso relied upon did not entitle the petitioner to further opportunity to rectify the deficiency.