TaxTMI Updates e-Newsletter
Aug 29,2022

Transition of accumulated CENVAT credit by filing Form GST TRAN-1/TRAN-2 - Regularisation of transitional credit by revised TRAN-1 filing - Treatment of credit in Electronic Credit Ledger upon regularisation - Prohibition on adjudication pending availment of transitional remedy - Obligation to rectify duplicate credit entries in Electronic Credit Ledger

Transition of accumulated CENVAT credit by filing Form GST TRAN-1/TRAN-2 - Regularisation of transitional credit by revised TRAN-1 filing - Directions issued to open common portal for TRAN-1/TRAN-2 for a limited period and permit filing of revised TRAN-1 to regularise earlier transition and distribution of CENVAT credit by ISD. - HELD THAT: - The Court, following the approach adopted by the Hon'ble Supreme Court in Union of India v. Filco Trade Centre Pvt. Ltd., directed respondents to open the common portal for filing TRAN-1 and TRAN-2 for two months w.e.f. 01.09.2022 to 31.10.2022 to enable eligible taxpayers to file or revise TRAN forms. The petitioner and its recipient units were permitted to file revised declarations electronically or manually (where electronic filing is not possible) to regularise the earlier transition and distribution of CENVAT credit effected by the ISD registration. The relief is procedural and remedial in nature and is intended to cure nascent-stage technical and procedural ambiguities in migration to GST; it does not permit any fresh or additional claim of transitional credit beyond regularising the earlier distributed amounts.

Portal to be opened for TRAN-1/TRAN-2 for two months and petitioner's recipient units may file revised TRAN-1 to regularise earlier transition and distribution of CENVAT credit.

Treatment of credit in Electronic Credit Ledger upon regularisation - Obligation to rectify duplicate credit entries in Electronic Credit Ledger - Consequences of successful regularisation and safeguards against duplicate credit reflection were determined. - HELD THAT: - The Court held that once a recipient unit files the revised declaration and the credit is reflected in its Electronic Credit Ledger, that credit shall be treated as having been validly taken on the date it was originally taken. The petitioner undertook that if the credit is reflected again in the recipient units' Electronic Credit Ledger, those units shall make debit entries to the extent such credit has already been claimed earlier, thereby preventing duplication. Further, upon regularisation by revised TRAN-1, the credit balance shown in the ISD's Electronic Credit Ledger shall be deemed to have lapsed or been deleted. These directions are procedural adjustments to ensure correct ledger positions without permitting fresh claims.

Regularised credits are to be treated as valid from their original date of availing; duplicate entries, if any, must be debited and ISD ledger balance shall be deemed lapsed/deleted upon regularisation.

Prohibition on adjudication pending availment of transitional remedy - Stay on adjudication of show-cause notices concerning the transition and distribution of CENVAT credit until the prescribed portal filing and verification process is completed. - HELD THAT: - The Court directed that respondents and the concerned authorities shall not proceed with adjudication of the show-cause notices issued to the petitioner and its units in respect of transition and distribution of CENVAT credit while the facility for filing/revision of TRAN forms is provided and the resulting claims are processed. This restraint follows from the remedial regime sanctioned by the Supreme Court in Filco Trade and is intended to allow taxpayers to avail the prescribed transitional remedy and for authorities to verify claims thereafter.

Authorities shall not proceed to adjudicate the show-cause notices relating to transition and distribution of CENVAT credit pending the prescribed filing and verification process.

Final Conclusion: The writ petition is disposed by directing respondents to open the common portal for TRAN-1/TRAN-2 for the two-month period specified by the Court, permitting revised filing to regularise earlier transition and distribution of CENVAT credit by the ISD, treating regularised credits as valid from their original date while preventing duplicate availment, deeming the ISD ledger balance lapsed upon regularisation, and restraining adjudication of related show-cause notices until the prescribed process is completed.

Transitional credit under TRAN-1 - transition of Input Service Distributor credit into Electronic Credit Ledger - curative filing window for TRAN-1/TRAN-2 - administrative verification of transitional credit claims - issuance of departmental clarification by CBIC

Transition of Input Service Distributor credit into Electronic Credit Ledger - transitional credit under TRAN-1 - Petitioners entitled to avail the limited filing window to transition ISD credit into the Electronic Credit Ledger by filing or revising TRAN-1 at their units/offices - HELD THAT: - The Court, following the approach adopted by the Supreme Court in Union of India v. Filco Trade Centre Pvt. Ltd. (order of 22 July 2022), directed that petitioners' units/offices registered under the CGST/State Acts may use the curative portal window to file or revise TRAN-1 between 01.09.2022 and 31.10.2022 to transition ISD credit. The filing is to be effected by the transferee units/offices and shall be based on manual ISD invoices issued or to be issued by the ISD petitioner, subject to the aggregate claim not exceeding the ISD credit actually available with the ISD. The direction is remedial to overcome procedural and technical difficulties which prevented earlier distribution/recognition on the portal, and permits transition notwithstanding prior inability to distribute the ISD credit before 01.07.2017.

Allowed the petitioners to file or revise TRAN-1 during the specified window to transition ISD credit into the Electronic Credit Ledger, subject to availability of ISD credit and supporting ISD invoices.

Issuance of departmental clarification by CBIC - CBIC directed to consider issuing a clarification on distribution and reporting of ISD credit to address practical difficulties - HELD THAT: - Recognising recurring procedural problems faced by taxpayers in relation to distribution and reporting of ISD credit, the Court directed the Central Board of Indirect Taxes and Customs to deliberate and issue an appropriate clarification, preferably within 21 days of upload of this order. The request is framed to align administrative guidance with the approach adopted by the Supreme Court in Filco Trade and to assist field formations and taxpayers in scrutinising and processing transitional credit claims.

CBIC to consider and, after due deliberation, issue a clarification on ISD credit distribution/reporting preferably within 21 days.

Administrative verification of transitional credit claims - curative filing window for TRAN-1/TRAN-2 - Officers given a 90 day period after the filing window to verify transitional credit claims and pass appropriate orders after granting reasonable opportunity - HELD THAT: - In line with the supervisory directions in Filco Trade, the Court directed that the concerned officers shall be afforded 90 days following the curative filing window to examine the veracity of claims for transitional credit, conduct necessary scrutiny on merits and pass orders after providing appropriate opportunities of hearing to the parties. This measure balances the remedial relief granted to taxpayers with the departmental mandate to verify eligibility and authenticity of transitional credits before allowing reflection in the Electronic Credit Ledger.

Concerned officers to verify claims and pass appropriate orders within 90 days after the filing window, after granting reasonable opportunity to parties.

Final Conclusion: Petitions disposed by permitting petitioners to avail the limited TRAN-1/TRAN-1 revision window (01.09.2022-31.10.2022) to transition ISD credit into the Electronic Credit Ledger subject to available ISD credit and supporting ISD invoices; CBIC directed to issue a clarification preferably within 21 days; and departmental officers granted 90 days after the window to verify claims and pass orders after affording reasonable opportunity.

Disallowance of debit from electronic credit ledger under Rule 86A - reasons to believe - grounds for denial of input tax credit - requirement of application of mind and speaking order - extraordinary power requiring circumspection - obligation to furnish reasons and allow objections - CBIC Circular guidance on Rule 86A

Disallowance of debit from electronic credit ledger under Rule 86A - grounds for denial of input tax credit - CBIC Circular guidance on Rule 86A - extraordinary power requiring circumspection - Scope and pre-conditions for exercising power under Rule 86A to disallow debit of electronic credit ledger. - HELD THAT: - Rule 86A permits the Commissioner or an officer authorised by him, not below the rank of Assistant Commissioner, to prohibit debit of an amount from the electronic credit ledger only where he has "reasons to believe" that input tax credit has been fraudulently availed or is ineligible, and such belief must be founded on one or more specific grounds enumerated in sub rule (1) of Rule 86A. The officer must form an opinion after proper application of mind, considering all relevant facts including the nature of the prima facie fraudulent or ineligible credit, whether the matter falls within the specified grounds, and whether restriction of debit is necessary to protect revenue. The CBIC Circular reiterates that this extraordinary power must not be exercised mechanically but only after careful, objective evaluation based on material evidence and with utmost circumspection. [Paras 2]

Power under Rule 86A is subject to the statutory grounds and must be exercised only after application of mind and in accordance with the cautionary guidance in the CBIC Circular.

Reasons to believe - obligation to furnish reasons and allow objections - requirement of application of mind and speaking order - Obligation of the assessing authority to furnish the recorded "reasons to believe" to the registered person and to afford opportunity to object, with disposal by a speaking order. - HELD THAT: - The court observed that no copy of the "reasons to believe" was provided to the petitioner nor annexed by the respondents, and it was not clear whether any such reasons had been recorded in writing. The officer concerned is bound to furnish the reasons to the assessee; on receipt the assessee is entitled to file objections; and the officer must consider those objections and dispose of them by passing a speaking order. In the exercise of Rule 86A powers, procedural fairness requires communication of the reasons and an opportunity to be heard before continuing or finalising any restraint on the electronic credit ledger. [Paras 3, 4]

Respondent No.5 must furnish the reasons to believe to the petitioner and proceed only after considering any objections by passing a reasoned speaking order; respondent was directed to provide the reasons by 26th August, 2022 and the matter listed further.

Final Conclusion: The court held that Rule 86A can be invoked only on specified grounds after application of mind and following the cautionary principles in the CBIC Circular; the authority must furnish the written "reasons to believe" to the assessee, afford opportunity to file objections and dispose them by a speaking order, and directed production of the reasons and further proceedings accordingly.

Cenvat credit - transitional credit - section 142(3) of the CGST Act, 2017 - carry forward of accrued credit to electronic credit ledger - remand for fresh consideration - opportunity of hearing

Cenvat credit - transitional credit - section 142(3) of the CGST Act, 2017 - Whether the writ court's direction to remit the assessee's refund claim for reconsideration should be sustained or modified and what the appropriate relief and directions are under the transitional provisions. - HELD THAT: - The Court recorded the admitted position that the assessee was entitled to cenvat credit under the pre GST regime but had paid the service tax belatedly (after the commencement of the GST regime) and therefore could not avail that credit in the ST 3 return or during the prescribed transitional window. The learned Judge in the writ proceedings set aside the rejection of the refund claim and remitted the matter to the respondents to be considered under section 142(3) of the CGST Act, 2017, indicating that the claim could be considered for permitting the assessee to carry forward the accrued credit to the electronic credit ledger. This Court held that the remand itself was not impermissible but required modification: instead of directing refund, the authority is to consider the assessee's application under section 142(3) on merits, based on available materials, and after affording the assessee an opportunity of hearing. The appellate Court thereby limited the relief to reconsideration and a decision within a fixed timeframe, without directing a specific substantive outcome, leaving the adjudicatory determination to the competent authority under the statutory transitional mechanism.

The High Court's remand is modified: the appellant authority is directed to consider and dispose of the assessee's application under section 142(3) of the CGST Act, 2017, on merits and after hearing, within six weeks from receipt of this judgment; the writ appeal is disposed accordingly.

Final Conclusion: The writ court's order remitting the refund claim for reconsideration is upheld in substance but modified: the Revenue is directed to decide the assessee's application under section 142(3) of the CGST Act, 2017, on merits and after affording an opportunity of hearing, within six weeks; the appeal is disposed of with no costs.

Debiting bank accounts without account-holder's consent or notice - High-handedness and abuse of power by tax authorities - Direction to deposit seized amounts into court - Affidavit by the officer explaining authority for debiting bank account - Contempt proceedings for non-compliance

Debiting bank accounts without account-holder's consent or notice - High-handedness and abuse of power by tax authorities - The court recorded prima facie that respondents' debiting of the petitioner's bank account without the account holder's instruction or subsequent notice amounted to high handedness and an abuse of power. - HELD THAT: - The Court observed that respondents caused Rs. 62,32,400 to be debited from the petitioner's Axis Bank account and transferred to the authorities by RTGS despite no instruction from the account holder to the bank. The Court emphasised that authorities must not take money from a person's account without permission and must inform the account holder when such debits occur. On the facts placed before it, the Court described the conduct as high handedness and gross abuse of power and noted the pattern of taxpayers being aggrieved when accounts are frozen or debited without notice. These findings were recorded prima facie and formed the basis for the remedial and procedural directions that followed. [Paras 4]

The Court held, prima facie, that the unauthorised debit and failure to inform constituted high handedness and abuse of power.

Direction to deposit seized amounts into court - Contempt proceedings for non-compliance - Respondent No. 2 was directed to deposit the entire amount debited from the petitioner's account with the Registrar (Judicial I) of the Court by a specified date, failing which contempt proceedings may follow. - HELD THAT: - Having noted the unauthorised debit and absence of communication to the petitioner, the Court ordered immediate remedial relief by directing respondent No. 2 to deposit the entire sum with the Court by 28.07.2022. The order included an explicit warning that failure to comply would invite contempt proceedings against respondent No. 2. This direction was intended to protect the petitioner's rights pending further explanation and ensures that the disputed funds are available for restoration if warranted. [Paras 5]

Respondent No. 2 must deposit the entire amount with the Registrar by the date stated, subject to contempt for non compliance.

Affidavit by the officer explaining authority for debiting bank account - The officer who authorised or instructed the bank to debit the petitioner's account was ordered to file a personal affidavit explaining the legal authority and reasons for the debit and for not informing the petitioner. - HELD THAT: - The Court required the concerned officer to file a personal affidavit setting out under what authority he caused the petitioner's funds to be removed or directed the bank to debit the account, and why the petitioner was not informed despite instructions being given to the bank. The Court put the officer on notice that, if unsatisfied with the explanation, it may consider taking action against him. The affidavit was directed to be filed and served by 25.07.2022, with any rejoinder by the petitioner to be filed by 29.07.2022. This direction amounts to ordering a fresh explanation and verification of the legality and propriety of the respondents' actions rather than adjudicating the officer's liability on the merits at this stage. [Paras 7]

The concerned officer shall file a personal affidavit explaining the authority and reasons for the debit and non communication to the petitioner, for the Court's further consideration.

Final Conclusion: The Court found, prima facie, that debiting the petitioner's bank account without his instruction or notice was an abuse of power; it directed respondent No. 2 to deposit the disputed amount with the Registrar by the specified date (failing which contempt may follow) and ordered the responsible officer to file a personal affidavit explaining the authority and reasons for the debit for the Court's further consideration.

Deduction for bad debts under Section 36(1)(vii) - Conditions under Section 36(2) - Requirement of write off in the accounts - Provision for bad and doubtful debts excluded from write off - Assessee's burden to prove entitlement to deduction - Scope of Section 37 - expenditure wholly and exclusively for business - Distinction between capital and revenue expenditure

Deduction for bad debts under Section 36(1)(vii) - Conditions under Section 36(2) - Requirement of write off in the accounts - Provision for bad and doubtful debts excluded from write off - Assessee's burden to prove entitlement to deduction - Whether the assessee was entitled to deduct Rs. 10 crores as a bad debt under Section 36(1)(vii) read with Section 36(2) of the Income tax Act for AY 2009-2010? - HELD THAT: - The Court reiterated that clause (vii) permits deduction only for amounts "written off as irrecoverable in the accounts" of the assessee and that such write off expressly excludes any mere provision for bad and doubtful debts. Section 36(2) further conditions the allowance on either the debt having been taken into account in computing income in the relevant or an earlier year, or on the money representing lending in the ordinary course of banking or money lending. The assessee bears the onus of satisfying the Assessing Officer that these ingredients are met. Applied to the present facts, the accounts did not evidence a proper write off in the previous year, nor were there documents establishing the payment terms, nature of the advance, duration, or interest terms that would characterise the advance as a business debt or loan; the claim was also consistent with an advance for acquisition of immovable property and thus potentially capital in nature. Reliance on earlier precedents was examined and the Court held Southern Technologies [2010 (1) TMI 5 - SUPREME COURT] (and the three Judge Catholic Syrian Bank exposition [2012 (2) TMI 262 - SUPREME COURT]) decisive on the conditions and burden. Consequently the write off claim failed on the statutory conditions and evidentiary shortfall. [Paras 17, 18, 19]

The claim of Rs. 10 crores as a bad and doubtful debt under Section 36(1)(vii) read with Section 36(2) is not allowable.

Scope of Section 37 - expenditure wholly and exclusively for business - Distinction between capital and revenue expenditure - Provision for bad and doubtful debts excluded from write off - Whether the expenditure could alternatively be allowed as an allowable business expenditure under Section 37(1)? - HELD THAT: - Section 37 permits deduction for expenditure not falling under Sections 30 to 36 and not being capital in nature if laid out wholly and exclusively for business. However, where an item falls within Sections 30 to 36 but is excluded from allowance by an Explanation (as with provisions for bad and doubtful debts excluded from write off), Section 37 cannot be invoked to claim the same item. Applying the test of revenue or capital character, and having found that the assessee failed to establish the requisite facts to treat the advance as a revenue business outgoing rather than capital, the Court held that Section 37 could not rescue a claim which in substance was governed by Sections 30-36 and excluded by the Explanation; Southern Technologies was followed on this principle. [Paras 20, 23, 24]

The alternative plea under Section 37 is not available to the assessee in the circumstances; the expenditure is not allowable under Section 37.

Final Conclusion: The appeals are allowed. The orders of the ITAT and the Bombay High Court are set aside; the assessee's claim of deduction of Rs. 10 crores as a bad debt and as an alternative under Section 37 is disallowed.

Procedure under Section 148A (enquiry, opportunity to be heard and decision) - Section 148A(a) enquiry versus Section 148A(b) show cause notice - disclosure of material relied upon and opportunity to be heard - third party information and limits on disclosure - requirement of prior approval by specified authority - reopening of assessment and jurisdictional satisfaction - remand for fresh enquiry and consequential directions - principles of natural justice

Section 148A(a) enquiry versus Section 148A(b) show cause notice - procedure under Section 148A (enquiry, opportunity to be heard and decision) - Notices dated 21.03.2022 and 30.03.2022, though drafted as Section 148A(b) show cause notices, were in substance questionnaires calling for an enquiry under Section 148A(a) and must be treated as such. - HELD THAT: - The annexure to the notices called for extensive details, explanations and documentary material from the assessee (bank statements, nature of receipts, identity and creditworthiness of transacting parties and clarification on utilisation), which is characteristic of a Clause (a) enquiry rather than a Clause (b) show cause notice. Reading the annexure as a whole shows the assessing officer intended to elicit information and then conduct an enquiry under Section 148A(a) before deciding on issuance of a notice under Section 148. The misclassification of the notices as issued under Clause (b) therefore amounts to a fundamental procedural error vitiating the proceedings. [Paras 13, 20, 21]

The notices dated 21.03.2022 and 30.03.2022 are to be treated as notices under Clause (a) of Section 148A and not Clause (b).

Disclosure of material relied upon and opportunity to be heard - principles of natural justice - third party information and limits on disclosure - requirement of prior approval by specified authority - Assessing officer violated principles of natural justice by failing to furnish to the assessee the materials/information relied upon and by proceeding to pass the order under Clause (d) of Section 148A without giving effective opportunity to reply; consequential non compliance with Supreme Court directions and CBDT Instruction. - HELD THAT: - The assessee repeatedly requested verbatim copies of information, copies of adverse material/statements, materials gathered under any enquiry conducted under Section 148A(a), opportunity to cross examine adverse witnesses and a copy of the specified authority's approval. The assessing officer neither supplied the requested materials nor furnished reasons for non disclosure before passing the Clause (d) order. Post Ashish Agarwal, the assessing officer is obliged to provide the materials relied upon (subject to narrow third party exceptions) and to consider the assessee's reply; the CBDT Instruction No.1/2022 reiterates these safeguards. The impugned order proceeded on information privy only to the assessing officer and therefore amounted to gross procedural unfairness warranting interference and remand for fresh consideration. [Paras 11, 14, 21]

The order under Clause (d) of Section 148A dated 12.04.2022 is set aside for violation of natural justice and for non compliance with the procedural safeguards; the matter is remanded for fresh enquiry with directions to furnish the requested information and afford opportunity to reply.

Reopening of assessment and jurisdictional satisfaction - notice under Section 148 not enforceable pending compliance - The notice issued under Section 148 dated 12.04.2022 cannot be enforced in light of the set aside Clause (d) order and the procedural defects found. - HELD THAT: - Having set aside the Clause (d) order for procedural infirmity and remanded the matter for fresh enquiry under Section 148A(a), the consequent notice under Section 148, which flowed from that order, cannot be given effect to until the assessing officer conducts the enquiry and proceeds in accordance with law after providing materials and hearing the assessee as directed by this Court. [Paras 22]

Notice under Section 148 dated 12.04.2022 shall not be enforced pending compliance with the directions on remand.

Final Conclusion: The appeal is allowed. The order dated 12.04.2022 under Clause (d) of Section 148A is set aside and the matter is remanded to the assessing officer who must treat the earlier notices as Section 148A(a) enquiries, furnish the information sought by the assessee within 15 days, grant the assessee 10 days to reply, thereafter conduct the enquiry under Section 148A(a) and proceed in accordance with law; the notice under Section 148 dated 12.04.2022 is directed to be unenforceable pending compliance with these directions.

Satisfaction of the Assessing Officer - fair market value of shares under Section 56(2)(viib) - Rule 11UA valuation methodology - revisional jurisdiction under Section 263 - requirement to record reasons in assessment under Section 143(3) - assessment order erroneous and prejudicial to the interest of revenue

Satisfaction of the Assessing Officer - fair market value of shares under Section 56(2)(viib) - Rule 11UA valuation methodology - revisional jurisdiction under Section 263 - requirement to record reasons in assessment under Section 143(3) - Whether the Principal Commissioner was justified in invoking jurisdiction under Section 263 on the ground that the Assessing Officer failed to record satisfaction as required under Section 56(2)(viib) and Rule 11UA before accepting the assessee's valuation of shares. - HELD THAT: - Clause (viib) of Section 56(2) permits adoption of the value substantiated by the company only if it is to the "satisfaction of the Assessing Officer"; alternatively the value may be determined by the prescribed method (Rule 11UA), and the higher of the two must be adopted. Satisfaction of the Assessing Officer is a statutory requirement and cannot be presumed or inferred; it must be manifest on the face of the assessment proceedings or order. The Assessing Officer's duty, once the assessee furnishes a valuation certificate and supporting materials, is to examine whether the computation complies with Rule 11UA and to record reasons showing how he was satisfied with the valuation adopted. Mere issuance of queries, receipt of documents and a departmental note not part of the signed assessment cannot substitute for a recorded satisfaction or brief reasons in the assessment order under Section 143(3). Where the assessment order contains no recorded satisfaction or reasons addressing the valuation under Section 56(2)(viib) and Rule 11UA, the assessment may be held to be erroneous and prejudicial to the revenue and amenable to revision under Section 263. Applying these principles, the Tribunal erred in reversing the Principal Commissioner's exercise of jurisdiction because the assessment order did not record the Assessing Officer's satisfaction in terms of the statutory mandate and the departmental note could not be treated as compliance with the requirement to record reasons. [Paras 13, 16, 17, 18, 19]

The Principal Commissioner validly invoked Section 263; the Tribunal's order was set aside, the Principal Commissioner's order restored and the Assessing Officer directed to pass a reasoned and speaking order recording his satisfaction (or otherwise) after affording opportunity of hearing within sixty days.

Final Conclusion: Revenue's appeal allowed; Tribunal's order set aside, Principal Commissioner's revision restored and Assessing Officer directed to examine valuation under Rule 11UA/Section 56(2)(viib) and pass a reasoned speaking order after hearing within sixty days.

Disallowance under Section 14A read with Rule 8D - Nexus between borrowed funds and exempt-income bearing investments - Availability of own funds as negative inference to disallowance - Appellate review: perversity standard for findings of fact

Disallowance under Section 14A read with Rule 8D - Nexus between borrowed funds and exempt-income bearing investments - Availability of own funds as negative inference to disallowance - Appellate review: perversity standard for findings of fact - The disallowance of interest under Section 14A read with Rule 8D was not justified because the assessing officer failed to establish that borrowed funds were utilized for making the investments. - HELD THAT: - The Tribunal had recorded a factual finding that the assessing officer did not establish that party (borrowed) funds were used for acquiring shares and that the assessee had own funds available, thereby negating the basis for disallowance under Section 14A read with Rule 8D. The Division Bench declined to admit the revenue's appeal on this point, observing that the Tribunal's conclusion is a finding of fact which does not suffer from perversity. The Court therefore upheld the Tribunal's factual determination that there was no demonstrable nexus between the loans and the investments which would warrant prorata disallowance under Rule 8D.

Tribunal's finding that disallowance under Section 14A/Rule 8D was not warranted upheld; revenue's appeal dismissed.

Final Conclusion: The appeal by the revenue was dismissed; the Tribunal's factual finding that the assessing officer failed to prove that borrowed funds were used for investment was upheld, and no disallowance under Section 14A read with Rule 8D was sustained.

Liability of legal representatives under Section 159 - Meaning of "legal representative" as per Section 2(11) CPC - Appeal against orders of Tax Recovery Officer under Rule 86 of the Second Schedule - Interim stay pending appeal under Rule 86(3) of the Second Schedule

Liability of legal representatives under Section 159 - Meaning of "legal representative" as per Section 2(11) CPC - Petitioners are legal representatives for purposes of the Income-tax Act and thereby liable to the extent of the estate in respect of the deceased assessee's liabilities. - HELD THAT: - The Court examined Section 159, which renders the legal representatives liable to pay sums which the deceased would have been liable to pay, and Section 2(11) of the CPC as incorporated by Section 2(29) defining "legal representative" to include a person who intermeddles with the estate. On the material on record, the petitioners are beneficiaries under the Will and have been shown to intermeddle with the estate; accordingly, prima facie they fall within the statutory definition of legal representatives and are amenable to attachment proceedings to secure recovery of tax arrears attributable to the deceased's share of the property. The Court, however, framed this conclusion in the context that factual questions as to the exact extent of the deceased's share and the rents attributable thereto require appreciation and are matters to be canvassed before the appropriate appellate forum or authority. [Paras 7, 8, 12]

Petitioners are, prima facie, legal representatives within the meaning of the Act and CPC and hence liable for enforcement measures to secure tax demands, subject to factual determination of share and attributable rents.

Appeal against orders of Tax Recovery Officer under Rule 86 of the Second Schedule - The impugned TRO order of attachment is amenable to appeal under Rule 86 of the Second Schedule and the petitioners must be relegated to that statutory remedy. - HELD THAT: - The Court considered Rule 86 which provides for appeals from original orders passed by the Tax Recovery Officer and observed that an order of attachment in the present facts falls within the scope of an order from which an appeal lies. The revenue accepted that the impugned order is amenable to appeal under Rule 86. Given that the petitioners' contentions require appreciation of factual matters including extent of property and rental income attributable to the deceased, the Court directed that the petitioners should avail the appeal and, if necessary, a stay application before the Principal Chief Commissioner/Chief Commissioner/Principal Commissioner/Commissioner in terms of Rule 86(1) and (3). [Paras 13, 14, 15]

Petitioners are directed to pursue appeals under Rule 86 of the Second Schedule; the impugned TRO order is appealable under that rule.

Interim stay pending appeal under Rule 86(3) of the Second Schedule - Interim relief is to be regulated by the appellate authority and limited interim protection from the High Court is confined to a short period. - HELD THAT: - While relegating the petitioners to the statutory remedy of appeal, the Court permitted them to file stay petitions under Rule 86(3) and directed the appellate authority to entertain and dispose of such stay petitions within two weeks from receipt after hearing the petitioners. The Court maintained the interim protection that the petitioners were enjoying in these writ petitions for a period of four weeks from the date of the order or until disposal of the stay petitions, whichever is earlier, thereby balancing the petitioners' need for interim relief with the statutory appellate process. [Paras 16]

Appellate authority to decide stay petitions within two weeks; High Court's interim protection continued for four weeks or until disposal of the stay petitions, whichever is earlier.

Final Conclusion: Writ petitions disposed by relegating petitioners to file appeals under Rule 86 of the Second Schedule against the TRO's order; appellate authority directed to hear and dispose stay petitions within two weeks, with the High Court's interim protection continuing for four weeks or until disposal of the stay petitions.

Income from Business or Profession v. Income from House Property - Object clause and nature of activities as determinative factor - Test of a businessman's point of view to determine letting as business - Section 263 - erroneous order prejudicial to the interest of Revenue

Income from Business or Profession v. Income from House Property - Object clause and nature of activities as determinative factor - Test of a businessman's point of view to determine letting as business - Whether the rental income of the assessee for Assessment Year 2014-15 is taxable as business income or as income from house property. - HELD THAT: - The Court accepted the factual finding that the assessee had been letting out properties from the time of acquisition and had consistently treated such receipts as business income. The Tribunal examined Clauses 3 and 19 of the Memorandum of Association and found that leasing was authorised and carried on as an ancillary/regular activity by the company. Applying the established tests-including the requirement to view the matter from a businessman's standpoint as explained in the precedents relied upon by the Tribunal-the Court held that where letting of properties constitutes the assessee's business (or is an authorised and consistent commercial activity), the receipts are to be treated as business income and not as income from house property. The Court found the Tribunal's application of these principles to the facts to be correct and in accordance with the binding judicial precedents considered by it. [Paras 10, 11, 12, 13, 16]

Rental income for AY 2014-15 is business income and not income from house property; the Tribunal's conclusion on this point is upheld.

Section 263 - erroneous order prejudicial to the interest of Revenue - Two views possible and sustainability of Assessing Officer's view - Whether the Principal Commissioner of Income Tax was justified in invoking revisionary powers under Section 263 to set aside the assessment treating rental income as business income. - HELD THAT: - The Court examined the scope of Section 263 in the light of the Tribunal's reasoning that the Assessing Officer's approach was a tenable view based on enquiries made and materials on record. The Tribunal relied on the legal principle that an order is not 'erroneous' and 'prejudicial' where the Assessing Officer has adopted one of two permissible views and that such a view is sustainable in law. Having found that the Assessing Officer had made inquiries and a plausible assessment treating the receipts as business income, the Court found no justification to interfere with the Tribunal's conclusion that revision under Section 263 was not warranted. [Paras 5, 6, 11, 16, 18]

The Pr. CIT's exercise of revisionary powers under Section 263 was not sustained; the Tribunal's setting aside of the revision is affirmed.

Final Conclusion: The appeal is dismissed. The High Court declines to interfere with the Income Tax Appellate Tribunal's finding that the assessee's rental receipts for AY 2014-15 are business income and that the revision under Section 263 was not justified; the Tribunal's order is restored.

Adjustments under section 143(1) - additions by intimation under section 143(1) on debatable or controversial issues - invocation of retrospective statutory amendment by way of section 143(1) adjustment - Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B (Finance Act, 2021) - prospective v. retrospective effect - payments of employees' contribution to PF/ESI deposited after statutory due date but before due date of filing return under section 139(1)

Adjustments under section 143(1) - payments of employees' contribution to PF/ESI deposited after statutory due date but before due date of filing return under section 139(1) - Validity of additions made by way of adjustment/intimation under section 143(1) in respect of late deposit of employees' PF/ESI contributions which were, however, paid before the due date of filing return under section 139(1). - HELD THAT: - The Tribunal found that where the employees' contributions to PF/ESI were deposited after the date prescribed under the relevant PF/ESI laws but before the due date for filing the return under section 139(1), the question whether such delayed payments give rise to income is a debatable and controversial issue. Citing authorities and precedents, the Bench held that making adjustments by way of intimation under section 143(1) on such debatable and controversial questions is beyond the scope of section 143(1). On that basis the Tribunal concluded that the intimations/adjustments under section 143(1) which added back the said amounts were unfair, unjust and bad in law and directed deletion of those additions in the appeals before it (except in the one case where the CIT(A) had allowed the appeal and was accordingly upheld).

Intimations/adjustments under section 143(1) that add back late deposited but pre ITR filing PF/ESI employee contributions are invalid where they rest on a debatable or controversial legal question; the additions deleted and assessing officers directed to remove them.

Invocation of retrospective statutory amendment by way of section 143(1) adjustment - Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B (Finance Act, 2021) - Whether a retrospective amendment to the Income tax Act can be invoked to sustain additions made by way of adjustment/intimation under section 143(1). - HELD THAT: - The Tribunal observed that retrospective amendments cannot be invoked to justify additions effected by way of adjustment under section 143(1). It relied on settled precedents that prohibit using retrospective statutory changes to support summary adjustments in section 143(1) intimations. Even assuming Revenue's contention that the 2021 amendments apply retrospectively, the Tribunal held that reliance on such a retrospective view to make adjustments under section 143(1) was impermissible and thus the intimations based on that premise were unsustainable.

Additions via section 143(1) intimations premised on retrospective effect of statutory amendments are beyond the scope of section 143(1) and cannot be sustained.

Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B (Finance Act, 2021) - prospective v. retrospective effect - Determination of whether the Finance Act, 2021 amendments (Explanation 2 to section 36(1)(va) and Explanation 5 to section 43B) are prospective or retrospective. - HELD THAT: - The Tribunal recorded that the question of whether the 2021 amendments operate prospectively from AY 2021 22 or retrospectively is debatable and controversial, and that several Tribunal benches had taken the view that the amendments are prospective. However, the Bench expressly refrained from deciding this question, explaining that in light of its primary conclusion - that section 143(1) adjustments on debatable or retrospective grounds are impermissible - the prospectivity/retrospectivity question became academic for the disposal of these appeals and was not adjudicated.

Left undecided as academic; the Tribunal did not express a view on whether the 2021 amendments are prospective or retrospective.

Final Conclusion: For the assessment years before AY 2021 22 in these consolidated matters the Tribunal set aside the appellate orders upholding section 143(1) intimations and directed deletion of the additions made by way of adjustments in respect of employees' PF/ESI contributions deposited after statutory due dates but before the due date of filing under section 139(1). The question whether the Finance Act, 2021 amendments are prospective or retrospective was left undecided as academic.

Penalty under section 271(1)(c) for furnishing inaccurate particulars - bonafide and inadvertent error vis-a -vis concealment of income - disallowance of personal expenses of directors - revised computation filed during assessment - ad hoc estimation of personal use of motor car

Penalty under section 271(1)(c) for furnishing inaccurate particulars - bonafide and inadvertent error vis-a -vis concealment of income - revised computation filed during assessment - Whether penalty under section 271(1)(c) can be sustained where the assessee made a bona fide inadvertent computational omission, furnished particulars in audited accounts and filed a revised computation during assessment. - HELD THAT: - The Tribunal accepted the factual position that the assessee had disclosed the claimed expenses in its audited financial statements and had suo motu disallowed substantial portions of director-related personal expenses in the original return, but inadvertently omitted 1/6th of motor car expenses which was later offered by filing a revised computation during assessment proceedings. The addition appealed against was based on an ad hoc 1/6th estimation of personal use of cars. Applying the principle in Price Waterhouse Coopers (P.) Ltd. v. CIT, the Tribunal held that a bona fide and inadvertent human error, accompanied by disclosure in tax audit reports and corrected during assessment, does not amount to furnishing inaccurate particulars or concealment of income. Given these specific facts - disclosure in accounts, submission of details when called for, filing of revised computation during assessment and that both returned and assessed positions were losses - the imposition of penalty under section 271(1)(c) was not justified and was to be cancelled.

Penalty levied under section 271(1)(c) of the Income Tax Act is set aside and cancelled on the ground that the omission was a bona fide inadvertent error corrected by revised computation during assessment and did not constitute furnishing inaccurate particulars or concealment.

Final Conclusion: The appeal is allowed: the Tribunal cancels the penalty of Rs.51,993/- imposed under section 271(1)(c) for Assessment Year 2016-17, holding the omission to be a bona fide inadvertent error corrected during assessment and not constituting concealment or inaccurate particulars.

Interest as part of cost of acquisition for capital gains - interaction between deduction under section 24(b) and computation under section 48 - Explanation 8 to section 43 inapplicable to interest on housing loan for capital gains purpose - exemption under section 54 for investment in residential house including appurtenant land (farmhouse)

Interest as part of cost of acquisition for capital gains - interaction between deduction under section 24(b) and computation under section 48 - Explanation 8 to section 43 inapplicable to interest on housing loan for capital gains purpose - Allowability of interest incurred on borrowed funds as part of indexed cost of acquisition in computing long term capital gain - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of the AO's disallowance and held that interest paid on borrowed capital used to acquire the residential property qualifies as expenditure forming part of the actual cost of the asset while computing capital gains. The decision reasons that deduction under section 24(b) (relating to income from house property) and computation under section 48 (cost of acquisition for capital gains) operate under different heads and do not exclude each other; consequently claiming deduction under one head does not preclude recognizing the interest as cost for capital gains computation. The Tribunal rejected the AO's reliance on earlier Mumbai Bench authority and on Explanation 8 to section 43, observing that the Explanation pertains to definitions relevant to business income and is not applicable to the present facts. The Tribunal followed earlier decisions of other benches which treated interest incurred for acquisition from borrowed funds as forming part of the cost for capital gains purposes and, on that basis, sustained the CIT(A)'s allowance. [Paras 8]

Order of the CIT(A) deleting the disallowance of interest as part of indexed cost of acquisition is upheld and the AO's disallowance is rejected.

Exemption under section 54 for investment in residential house including appurtenant land (farmhouse) - Allowability of exemption under section 54 where the new residential house with appurtenant land (referred to as farmhouse) was constructed on agricultural land - HELD THAT: - The Tribunal agreed with the CIT(A) that the assessee's investment was in a residential house along with land appurtenant thereto and that the Income tax Act does not impose a size limitation on appurtenant land for the purpose of section 54. The AO's sole basis for denial- that the property was on agricultural land and included ancillary structures-was held insufficient to deny the exemption. The Tribunal relied upon precedent reasoning that exemption under section 54/54F is available for construction/acquisition of a residential house and does not exclude appurtenant land on which parts remain undeveloped; accordingly the CIT(A) correctly deleted the addition. [Paras 9]

CIT(A)'s allowance of exemption under section 54 in respect of the investment in the residential house and appurtenant land is sustained and the AO's disallowance is rejected.

Final Conclusion: Both grounds of the Revenue's appeal are rejected; the Tribunal dismisses the appeal and upholds the CIT(A)'s deletion of the disallowance of interest from indexed cost of acquisition and the grant of exemption under section 54.

Revision under section 263 - erroneous and prejudicial to the interest of Revenue - deduction under section 80P(2)(a)(i) - interest income assessable as business or under other sources - examination of cash deposits and specified bank notes during demonetisation - genuineness and creditworthiness of creditors - remand for fresh assessment

Revision under section 263 - erroneous and prejudicial to the interest of Revenue - Whether the Principal Commissioner of Income Tax was justified in setting aside the assessment order as erroneous and prejudicial to the interest of Revenue under section 263. - HELD THAT: - The Tribunal examined the PCIT's conclusion that the assessment order passed u/s 143(3) was erroneous and prejudicial to Revenue for failure to examine cash deposits and interest income. The Tribunal found that the Assessing Officer had neither examined the source of cash deposits made during the demonetisation period nor considered the taxation character of the interest income in accordance with binding decisions relied upon by the PCIT. For these reasons the Tribunal upheld the PCIT's exercise of jurisdiction under section 263, subject to modification deleting an adverse observation that would preclude a fair opportunity to the assessee. The Tribunal therefore confirmed setting aside the assessment for fresh scrutiny by the AO, with directions to conduct inquiries and afford the assessee opportunity to produce evidence and explanations. [Paras 9, 11, 12]

PCIT's order under section 263 setting aside the assessment was upheld, with modification; the assessment order is set aside for fresh assessment in accordance with law.

Deduction under section 80P(2)(a)(i) - interest income assessable as business or under other sources - Whether the interest income on investments with co-operative banks was rightly assessed as income from other sources and the deduction under section 80P(2)(a)(i) was disallowable. - HELD THAT: - The Tribunal accepted the PCIT's reliance on the jurisdictional High Court precedent that the Assessing Officer should have examined the taxation character of interest income and not simply allow deduction under section 80P. However, the Tribunal also recognised the assessee's alternative submission that interest arising from investments mandated by the Karnataka Co-operative Societies Act and Rules may have a business nexus and thus qualify for deduction under section 80P(2)(a)(i). The Tribunal held that this alternative contention merits fresh examination by the AO and directed the AO to examine the factual and legal nexus between the investments and the business of providing credit while giving the assessee an opportunity to produce supporting material. [Paras 9, 10]

PCIT was correct in directing re-examination of the taxation character of the interest income; the question whether the interest qualifies as business income for section 80P purposes is remanded to the AO for fresh consideration.

Examination of cash deposits and specified bank notes during demonetisation - genuineness and creditworthiness of creditors - remand for fresh assessment - Whether the Assessing Officer had erred in not enquiring into the source and genuineness of cash deposits (including SBNs) during the demonetisation period and whether the PCIT's adverse observation on the assessee's failure to furnish explanation should stand. - HELD THAT: - The Tribunal agreed that the assessment order lacked discussion on the genuineness and source of cash deposits made during the demonetisation period, justifying further inquiry. However, the Tribunal deleted the PCIT's specific adverse observation (paragraph 19 of the impugned order) which recorded that the assessee failed to furnish satisfactory explanation, because that observation would impede a fair opportunity to the assessee in the remand proceedings. The Tribunal directed the AO to examine the creditworthiness of the creditors and the genuineness of the transactions, conduct necessary inquiries in accordance with law and CBDT guidelines, and afford the assessee an opportunity to furnish evidence and explanations. [Paras 11]

The adverse finding that the assessee failed to furnish satisfactory explanation is deleted; the matter of cash deposits and SBNs is remanded to the AO for fresh examination and appropriate decision after giving opportunity to the assessee.

Final Conclusion: The Tribunal dismissed the appeal; the PCIT's order under section 263 was upheld with modification (deletion of the adverse observation regarding failure to furnish explanation) and the assessment is set aside for fresh assessment by the AO to examine the cash deposits/SBNs and the character of interest income (including the section 80P claim) after affording the assessee a fair opportunity.

Unexplained cash credit under section 69A - onus on assessee to prove source of cash credit - genuineness of transaction - verification of sale deed as source of cash

Unexplained cash credit under section 69A - onus on assessee to prove source of cash credit - genuineness of transaction - verification of sale deed as source of cash - Deletion of addition of Rs.17,10,000 made as unexplained cash credit under Section 69A. - HELD THAT: - The Tribunal examined the material on record and the reasoning of the AO and CIT(A) sustaining the addition under Section 69A. The revenue had treated cash deposits totalling Rs.17,10,000 as unexplained cash credits. The lower authorities held that the assessee failed to discharge the onus to prove identity, genuineness and creditworthiness of the source, relying on established principles that the assessee must satisfactorily explain cash credits. The Tribunal found, however, that the assessee had produced sale deeds evidencing sale of agricultural land and had consistently maintained that the deposits derived from the sale consideration and from repayment of an advance to a relative. Neither the AO nor the CIT(A) undertook any verification of the sale-deed source or conducted enquiries to rebut the assessee's claim, and no material was placed on record to negativate the asserted source. In these circumstances the Tribunal concluded that the addition could not be sustained and directed deletion of the impugned addition. [Paras 10, 11]

Impugned addition under Section 69A deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the addition of Rs.17,10,000 made as unexplained cash credit under Section 69A for Financial Year 2009-10/Assessment Year 2010-11, and directed the Assessing Officer to delete the addition after noting that the authorities below had not verified the sale-deed as the source of deposits.

Interest paid by Indian branch to overseas head office - representative assessee / agent treatment of branch - transfer pricing adjustment - arm's length price (ALP) - Comparable Uncontrolled Price (CUP) method - de novo benchmarking - back-to-back counter bank guarantee - depreciation under section 32 - benchmarking using USD depo rates

Interest paid by Indian branch to overseas head office - representative assessee / agent treatment of branch - Taxability in India of interest received by the overseas head office from the Indian branch - HELD THAT: - The Tribunal, relying on earlier coordinate-bench and Special Bench precedents in the assessee's own case, accepted that interest paid by the Indian branch to the overseas head office is not chargeable to tax in India and that consequent provisions such as withholding under section 195 and disallowance under section 40(a)(i) would not be attracted. No contrary change in facts or law for the years under consideration was shown by the Revenue; accordingly the CIT(A)'s allowance was upheld. [Paras 9]

The addition treating interest received by the head office as taxable in India is rejected and the CIT(A)'s order allowing relief is upheld.

Depreciation under section 32 - Allowability of depreciation claimed in the assessment year in respect of assets added in earlier assessment years - HELD THAT: - Depreciation for assets added in earlier assessment years is a year-to-year deduction and depends on the orders passed in those earlier years. The record showed that the AO in earlier years had given effect to the CIT(A)'s directions and granted depreciation; therefore the CIT(A)'s direction to allow depreciation in the year under appeal was sustained as there was no infirmity in treating the earlier orders as determinative. [Paras 13]

The CIT(A)'s allowance of depreciation is upheld and the disallowance by the AO is set aside.

Back-to-back counter bank guarantee - Comparable Uncontrolled Price (CUP) method - arm's length price (ALP) - transfer pricing adjustment - de novo benchmarking - Correct approach to determination of ALP for guarantee commissions where guarantees are purportedly secured by back-to-back counter guarantees from overseas associated enterprises - HELD THAT: - The TPO applied a CUP benchmark (rates of another bank) and made an adjustment, while the CIT(A) applied an ad hoc 10% uplift on the assessee's charged rate. The Tribunal found that the record before the TPO did not contain requisite documentation to test the assessee's claim that the Indian branch bore no credit risk due to back-to-back counter guarantees nor did it show how the chosen CUP was comparable after FAR analysis and any Rule 10B(1)(a) adjustments. The ad hoc 10% uplift by the CIT(A) was not a principled ALP determination. In these circumstances the Tribunal remanded the issue to the TPO for fresh, de novo benchmarking, permitting the assessee to produce documents and alternative benchmarking and directing the TPO to call for further details if necessary. [Paras 19]

Transfer pricing adjustment in respect of guarantee commissions is set aside for de novo benchmarking by the TPO; matter remanded for fresh consideration.

Benchmarking using USD depo rates - LIBOR vs USD depo rates - de novo benchmarking - arm's length price (ALP) - transfer pricing adjustment - Appropriate benchmark for interest rates on inter-branch/associated enterprise lendings and borrowings - HELD THAT: - The assessee had used intra-day USD deposit (depo) rates for benchmarking, asserting fluctuations and negotiated rates during the day; the TPO applied LIBOR and made adjustments. The Tribunal observed that the TPO had not correctly appreciated the assessee's benchmarking and that there were no adverse findings against use of USD depo rates. Accordingly the Tribunal remanded the issue to the TPO to undertake de novo benchmarking applying USD depo rates, with a direction that if the tested rates fall within the intraday high-low of USD depo rates on the relevant day the transaction should be treated as at arm's length. [Paras 25]

Transfer pricing adjustments on interbank placements are remitted to the TPO for de novo benchmarking using USD depo rates; matter remanded for fresh consideration.

Final Conclusion: For AYs 2010-11 and 2011-12 the Tribunal (i) dismissed the Revenue's challenges to the CIT(A)'s relief on taxability of interest to the head office and upheld allowance of depreciation; (ii) remitted the transfer-pricing issues - both guarantee commission and inter-branch interest benchmarking - to the TPO for de novo benchmarking and verification; appeals are allowed or partly allowed for statistical purposes as recorded.

Validity of notice under section 153C - Recording of satisfaction note under section 153C - Requirement to record satisfaction even where Assessing Officer is same for searched person and other person - Applicability of CBDT Circular No. 24/2015 to section 153C - Setting aside assessments for non compliance of mandatory pre condition

Recording of satisfaction note under section 153C - Validity of notice under section 153C - Requirement to record satisfaction even where Assessing Officer is same for searched person and other person - Applicability of CBDT Circular No. 24/2015 to section 153C - Whether notices and consequent assessments issued under section 153C are valid where the Assessing Officer did not record a satisfaction note prior to issuing notice. - HELD THAT: - The Tribunal found on the material on record, including the letter from DCIT (para 7), that no satisfaction note was recorded by the Assessing Officer prior to issuing notice under section 153C. The Tribunal observed that the requirement to record satisfaction is mandatory and applies even where the Assessing Officer for the searched person and the other person is the same, as clarified by CBDT Circular No. 24/2015 and consistent with judicial precedents. Reliance placed by Revenue on a decision where a satisfaction note had been recorded was distinguished on that factual basis. In the absence of any satisfaction note produced before the Tribunal and in light of the departmental admission that no such satisfaction was recorded (order sheet notings), the pre condition in section 153C stood unfulfilled. Consequently, the assessments framed under section 153C/153A were vitiated and liable to be set aside for the assessment years under consideration. [Paras 7, 8, 9]

The orders passed under section 153C for the impugned assessment years are set aside as the Assessing Officer did not record the mandatory satisfaction before issuing notice; assessments for AY 2009-10, AY 2011-12, AY 2012-13 and AY 2013-14 are quashed and other grounds are rendered infructuous.

Final Conclusion: All appeals are allowed; the assessments framed under section 153C for AY 2009-10, AY 2011-12, AY 2012-13 and AY 2013-14 are set aside because the Assessing Officer did not record the mandatory satisfaction prior to issuing notices, and the remaining grounds were not adjudicated as infructuous.

Revisional jurisdiction under section 263 of the Income Tax Act - reopening of assessment under section 147 of the Income Tax Act - assessment completed under section 143(3) r.w.s. 147 - erroneous and prejudicial to the interests of the revenue - no scope to exercise section 263 on issues not forming part of reassessment/reasons for reopening - limitation and time-bar for exercise of revisional jurisdiction

Revisional jurisdiction under section 263 of the Income Tax Act - no scope to exercise section 263 on issues not forming part of reassessment/reasons for reopening - erroneous and prejudicial to the interests of the revenue - limitation and time-bar for exercise of revisional jurisdiction - Validity of the Principal Commissioner of Income Tax's exercise of revisional jurisdiction under section 263 to direct inquiry into share capital and share premium which were not the subject matter of the reassessment under section 147. - HELD THAT: - The Tribunal examined whether the order of the Assessing Officer dated 21.12.2017 (passed under section 143(3) r.w.s. 147) was erroneous and prejudicial to the revenue such as to permit exercise of revisional power under section 263. The reasons recorded for reopening under section 147 relate to unaccounted payments, loans, advances and other undisclosed transactions and do not refer to share capital or share premium. The Principal CIT invoked section 263 to direct fresh inquiry into the genuineness and creditworthiness of shareholders and fund flow in relation to share capital/share premium. Relying on settled precedents, the Tribunal held that section 263 cannot be used to revise matters which were not the subject of the reassessment (i.e., subsequent events or new material not before the AO at the time of reassessment), and that the revisional power is limited to orders which are shown to be erroneous and prejudicial on the basis of the materials before the AO. The Tribunal further noted authorities holding that limitation and time bar prevent exercise of section 263 in respect of issues concluded earlier by way of intimation/assessment when revisional proceedings are initiated after lapse of the prescribed period. Applying these principles, the Tribunal found that the Principal CIT had selected an item (share capital and premium) which was not part of the reasons for reopening and therefore could not validly be the subject of revision under section 263; consequently the AO's reassessment order could not be characterised as erroneous or prejudicial for that reason. [Paras 14, 17, 18]

The order passed by the Principal Commissioner of Income Tax under section 263 directing inquiry into share capital and share premium is quashed; the appeals are allowed.

Final Conclusion: The Tribunal quashed the PCIT's order under section 263 as beyond jurisdiction and time barred insofar as it sought to revisit share capital/share premium which were not part of the reassessment reasons; both appeals for AY 2010 11 and AY 2011 12 are allowed.

Weighted deduction under section 35(2AB) for scientific research expenditure - treatment of sales realisation/dossier receipts in computing eligible R&D expenditure - distinction between assets acquired and products/dossiers emanating from R&D work - capital versus revenue treatment of professional/consultancy fees - remand for verification and segregation of incomes for computation of R&D deduction

Weighted deduction under section 35(2AB) for scientific research expenditure - treatment of sales realisation/dossier receipts in computing eligible R&D expenditure - distinction between assets acquired and products/dossiers emanating from R&D work - remand for verification and segregation of incomes for computation of R&D deduction - Assessee's enhanced claim of deduction under section 35(2AB) and whether income from sales/receipts should be reduced from R&D expenditure for computing the deduction - HELD THAT: - The Tribunal reviewed the Karnataka High Court decision in CIT v. Micro Lab Ltd. and DSIR guideline 5(vii), observing that only sales realisation arising from assets acquired in the R&D process must be set off against R&D expenditure certified under section 35(2AB). Receipts from sale of products or dossier/know how that are reflected as business receipts in the profit and loss account need not be reduced from R&D expenditure for the purpose of the section. The Tribunal found the assessee's recorded R&D receipts to include amounts that may be of different characters (contract research income, product sales, and dossier/knowhow receipts) and held that segregation is necessary. Consequently, the matter was not finally quantified on merits: the Assessing Officer was directed to verify and exclude only those incomes which fall into the category of dossier/knowhow etc., and not to exclude incomes that represent product/assets sales or contract research receipts, thereby remitting the computation/verification to the Assessing Officer. [Paras 13, 14, 15, 16, 17]

Assessee's ground on enhanced claim under section 35(2AB) allowed for statistical purpose and remitted to the Assessing Officer for verification and segregation of R&D related incomes before final computation.

Capital versus revenue treatment of professional/consultancy fees - precedent and consistency in assessee's own earlier assessment years - Allowability as revenue expenditure of professional fees paid to Asian Patent Bureau and Dr. Dilip Snavordekar - HELD THAT: - The Tribunal examined earlier ITAT findings in the assessee's own cases for earlier assessment years which had deleted additions in respect of payments to Asian Patent Bureau and Dr. Dilip Snavordekar. Finding the facts in the present year to be identical, and noting absence of contrary material from the revenue, the Tribunal followed those precedents and concluded that the payments were allowable as business expenditure rather than capital expenditure. [Paras 18, 19, 20, 21]

Additions in respect of payments to Asian Patent Bureau and to Dr. Dilip Snavordekar are allowed (deletions in favour of the assessee upheld).

Capital versus revenue treatment of professional/consultancy fees - verification of genuineness and business purpose - Treatment of professional fees paid to John A. Macrerie - HELD THAT: - Noting that the Coordinate Bench in an earlier year had remitted the issue and that the consultancy payments are made for business purposes, the Tribunal directed the Assessing Officer to verify the genuineness of the claim and, if the payments are found to be similar to other consultancy charges already allowed in the assessee's case, to allow them. This was treated as a remand for factual verification rather than a final adjudication on merits. [Paras 22]

Ground allowed for statistical purpose and remitted to the Assessing Officer for verification of genuineness and, if appropriate, allowance of the expense.

Final Conclusion: The appeal is partly allowed: the claim under section 35(2AB) is remitted to the Assessing Officer for verification and segregation of R&D related receipts (only dossier/knowhow receipts to be excluded, not product/assets or contract research receipts); additions disallowing payments to Asian Patent Bureau and Dr. Dilip Snavordekar are deleted in favour of the assessee; the claim relating to John A. Macrerie is remitted to the Assessing Officer for verification and acceptance if found akin to other allowed consultancy charges.

Pre-deposit as condition for stay of recovery under Circular No.984/08/2014-CX - Stay of recovery on pre-deposit - Encashment of bank guarantee during pendency of appeal - Provisional release security - Remittance of encashed amount pending disposal of appeal

Encashment of bank guarantee during pendency of appeal - Stay of recovery on pre-deposit - Pre-deposit as condition for stay of recovery under Circular No.984/08/2014-CX - Whether the respondents were entitled to encash the bank guarantees furnished by the petitioner where the petitioner had filed an appeal accompanied by the prescribed pre-deposit and had not availed provisional release of the goods. - HELD THAT: - The court accepted the petitioner's contention that Circular No.984/08/2014-CX operates to prevent coercive recovery of the balance amount claimed by the revenue once the stipulated pre-deposit is made and a copy of the appeal memo is filed. Paragraph 4.2 of the circular was applied: where proof of payment of the stipulated pre-deposit and the copy of the appeal are shown to authorities, no coercive measures for recovery of the balance shall be taken during the pendency of the appeal. The record disclosed that although the bank guarantees were invoked and encashed, the petitioner had not sought provisional release of the goods and had filed the appeal with the requisite pre-deposit; consequently the stay against coercive recovery was operative. In view of these facts and the respondents' concession that recovery cannot be made while the appeal is pending, the encashment of the bank guarantees was inconsistent with the stay and the amounts so realised must be remitted to the petitioner, subject to the respondents' right to recover the demand if the petitioner ultimately fails in the appeal or in subsequent proceedings before a superior forum. [Paras 9, 10, 11, 13, 14]

The impugned order dated 16.07.2021 quashed; respondents directed to remit the amounts realised on encashment of the bank guarantees to the petitioner within three weeks, with liberty to recover the demand in the event the petitioner fails in the appeal or other proceedings.

Final Conclusion: Writ petition allowed: impugned order set aside; amounts realised by encashment of the three bank guarantees to be remitted to the petitioner within three weeks; respondents retain the right to recover the demand if the petitioner ultimately fails in the appeal or subsequent proceedings.

Speaking order - principles of natural justice - personal hearing - finalization of Bills of Entry - clearance for home consumption - import permit under Insecticides Act, 1968

Finalization of Bills of Entry - speaking order - principles of natural justice - personal hearing - Proper officer directed to finalise Bills of Entry Nos.4114491, 4116732 and 4116397 dated 18.07.2019 by passing a speaking order after considering the petitioner's submissions and after complying with the principles of natural justice, including a personal hearing with at least seven working days' notice. - HELD THAT: - The Court, while not expressing any view on the merits, directed that the proper officer shall finalise the three specified Bills of Entry by issuing a reasoned (speaking) order. The officer must take into account the submissions advanced by the petitioner and afford a personal hearing; the petitioner must be given at least seven working days' advance notice of that hearing. The order must be passed after compliance with the principles of natural justice and within six weeks from the date of the judgment. The Court expressly left the petitioner's rights and contentions open and refrained from any adjudication on substantive merits. [Paras 8, 9]

Bills of Entry to be finalised by passing a speaking order after affording a personal hearing and complying with natural justice within six weeks; rights and contentions left open.

Import permit under Insecticides Act, 1968 - clearance for home consumption - The question whether an import permit under the Insecticides Act, 1968 is required for import and clearance for home consumption of 'Thiourea 99% min' was not decided on merits and is left to the proper officer to consider in the course of finalising the Bills of Entry. - HELD THAT: - The petitioner contended that 'Thiourea 99% min' has non-insecticidal uses and relied on earlier administrative and tribunal orders to argue that no import permit is required. The Court did not resolve this substantive controversy; instead it directed the proper officer to consider these contentions and any administrative instructions or letters relied upon by the petitioner while passing the speaking order. The Court therefore remitted the factual and legal determination on the need for an import permit to the proper officer for fresh consideration in accordance with law. [Paras 5, 6, 7, 8]

Requirement of import permit under the Insecticides Act, 1968 is left undecided and remitted to the proper officer for fresh consideration while finalising the Bills of Entry.

Final Conclusion: Writ petition disposed; proper officer directed to decide the three Bills of Entry by passing a speaking order after affording a personal hearing and complying with natural justice within six weeks; the court refrained from any view on merits and left the question of requirement of an import permit under the Insecticides Act, 1968 to be considered by the proper officer; no order as to costs.

Penalty under Section 112(a) and Section 114AA of the Customs Act, 1962 - reliance on statements of co-noticees - requirement of corroborative evidence for imposition of penalty - confiscation liability as relevant factor for penal action - evidentiary significance of delay in detection

Penalty under Section 112(a) and Section 114AA of the Customs Act, 1962 - reliance on statements of co-noticees - requirement of corroborative evidence for imposition of penalty - confiscation liability as relevant factor for penal action - evidentiary significance of delay in detection - Whether the penalties imposed on the appellants under Sections 112(a) and 114AA were sustainable. - HELD THAT: - The Tribunal found that the penalties were imposed and confirmed primarily on the basis of statements of co-noticees without any independent or corroborative material. Such reliance is directly at odds with the principle articulated by the Madras High Court that penalties cannot be sustained solely on co-noticee statements in the absence of corroboration. The record showed no finding that the appellants were beneficial owners of the goods or that any act or omission by them rendered the goods liable for confiscation; the Revenue did not establish a causal link between the appellants' conduct and confiscation. Further, the Preventive Officer became aware of the alleged illegal removal only after a substantial delay, undermining the probative value of the investigative chronology and leaving unexplained how the limited factual assertions (such as provision of certain documents) connected to the illegal removal. On these grounds the material relied upon by the lower authorities was held insufficient to justify the imposition of the statutory penalties.

Penalties under Sections 112(a) and 114AA quashed; impugned order set aside and appeals allowed.

Final Conclusion: The Tribunal set aside the penalties imposed on the appellants under Sections 112(a) and 114AA of the Customs Act, 1962, holding that the Revenue failed to produce corroborative evidence and did not establish that the appellants' acts rendered the goods liable for confiscation; the appeals were allowed.

Dismissal for non-prosecution - Rule 20 of CESTAT (Procedure) Rules, 1982 - adjournment culture and refusal of repeated adjournments - prematurity of appeal where lower appellate remedy not finally disposed - time-bar in filing appeals

Dismissal for non-prosecution - Rule 20 of CESTAT (Procedure) Rules, 1982 - adjournment culture and refusal of repeated adjournments - Appeal dismissed for non-prosecution under Rule 20 of CESTAT (Procedure) Rules, 1982. - HELD THAT: - The Bench had on 30.07.2021 recorded that a last opportunity would be granted and subsequently the matter was listed on multiple dates with notices uploaded on the Tribunal website in accordance with Public Notice No.3/2019 and related Circular. The appellant failed to appear at hearings and did not provide an email for e-notice; the Registry issued physical notice and the case was repeatedly adjourned. Applying the principle emphasised by the Apex Court condemning routine adjournments, the Tribunal concluded that continued absence and non-compliance warranted dismissal under Rule 20. The determinative finding is that sufficient notice was provided and the appellant's non-appearance justified summary dismissal for non-prosecution. [Paras 1]

Appeal dismissed for non-prosecution under Rule 20.

Prematurity of appeal where lower appellate remedy not finally disposed - time-bar in filing appeals - Appeal also dismissed on merits as premature because the appeal before the Commissioner (Appeals) had not been finally disposed and appeared time-barred. - HELD THAT: - The Tribunal examined the record and correspondence from the Commissioner (Appeals) which indicated that the Commissioner (Appeals) had not finally disposed of the appeal and that the original Order-in-Original dated 04.05.1990 was communicated earlier, with the appeal to the Commissioner (Appeals) filed after a long delay. Since the statutory appeal before the Commissioner (Appeals) remained undetermined, the Tribunal found the present appeal before it premature. Additionally, the Commissioner (Appeals) had observed apparent delay in filing the appeal which, on the material before the Tribunal, made the appeal liable to be rejected as time-barred. On these grounds the Tribunal dismissed the appeal on merits. [Paras 2, 3]

Appeal dismissed on merits as premature and liable to be time-barred.

Final Conclusion: The appeal is dismissed: principally for non-prosecution under Rule 20 of the CESTAT (Procedure) Rules, 1982, and additionally on merits as premature because the statutory appeal before the Commissioner (Appeals) was not finally disposed and appeared to be time-barred.

Entitlement to interest on pre-deposit - period for payment of interest on refund - rate of interest on delayed refund - Section 129EE of the Customs Act - application of precedent decisions on interest (including Sandvik Asia Ltd.)

Entitlement to interest on pre-deposit - Section 129EE of the Customs Act - Appellant's entitlement to interest on the pre-deposit made during dispute, upon success in appeal. - HELD THAT: - The Tribunal held that upon successful appeal setting aside the demand, the amount deposited by the appellant for provisional release qualifies for refund with interest. The Court applied Section 129EE of the Customs Act and followed precedent decisions of this Tribunal (and higher courts) which recognise that amounts deposited in contest of liability become refundable with interest when the appellant succeeds. The Tribunal rejected the view that interest should be confined to a later period and concluded that the appellant is entitled to interest on the deposited amount.

Appellant is entitled to interest on the pre-deposit refunded upon success in appeal.

Period for payment of interest on refund - Period from which interest is payable on the refunded pre-deposit. - HELD THAT: - Relying on the established practice and statutory provision applied (Section 129EE), the Tribunal held that interest runs from the date immediately after deposit until the date of actual refund. Applying those principles to the facts, interest was held payable from 23.09.2015 (the day following the deposit dated 22.09.2015) up to the date on which refund was granted, namely 11.03.2021.

Interest is payable for the period 23.09.2015 to 11.03.2021.

Rate of interest on delayed refund - application of precedent decisions on interest (including Sandvik Asia Ltd.) - Rate at which interest is to be paid on the refund of the pre-deposit. - HELD THAT: - The Tribunal determined the appropriate rate by reference to authoritative precedent. Following the reasoning in Sandvik Asia Ltd. and related decisions relied upon, the Tribunal held that interest on delayed refund should be allowed at 12% per annum. The Tribunal considered competing contentions about the notified rate and pending challenges to similar grants of interest, but adopted the 12% rate as the applicable precedent.

Interest is payable at the rate of 12% per annum.

Final Conclusion: Appeal allowed: refund of the pre-deposit carries interest from 23.09.2015 till 11.03.2021 at 12% per annum in terms of Section 129EE and the precedents relied upon.

Significant beneficial ownership - locus standi of company secretary - key managerial personnel - officer who is in default - duty to ensure statutory compliance - power to represent before regulators and quasi judicial authorities

Locus standi of company secretary - key managerial personnel - officer who is in default - power to represent before regulators and quasi judicial authorities - duty to ensure statutory compliance - Whether the company secretary had locus standi to file Company Petition No. 75(CHE) of 2021 and whether the petition was maintainable. - HELD THAT: - The Tribunal analysed the statutory role and responsibilities of the company secretary under the Companies Act, 2013 and the relevant rules. The definitions in sections 2(51) and 2(60) establish the company secretary as key managerial personnel and potentially an officer who is in default; section 205(1)(c) together with rule 10(4) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, cast duties on the company secretary to report on and ensure compliance and to represent the company before regulators in discharge of those duties. The Tribunal observed that the scheme of section 90 (relating to significant beneficial ownership) requires the company to seek information and that the company secretary, as the statutory compliance officer, is mandated to ensure such compliance. Having regard to these statutory provisions and the company secretary's obligations to protect corporate governance and ensure compliance, the Tribunal held that the company secretary has authority to represent the company before quasi judicial authorities such as the National Company Law Tribunal and therefore has locus standi to file the petition impugned. The Tribunal further noted that the company secretary had acted diligently and promptly to ensure compliance by moving the Tribunal. The interlocutory application seeking dismissal for want of maintainability was therefore rejected. [Paras 18, 19, 20, 21, 22]

The company secretary had locus standi to file the petition; the application challenging maintainability is dismissed.

Final Conclusion: I.A. No. 2 of 2021 is dismissed. The main petition C.P. No. 75(CHE)/2021 shall proceed and is listed for final hearing on August 25, 2022, with liberty to file written submissions within one month.

Assets held in trust - explanation to Section 18(1)(f) - non-obstante clause - operational debt - moratorium - crystallisation of debt on commencement of CIRP

Assets held in trust - explanation to Section 18(1)(f) - Whether the amounts collected by the Corporate Debtor on behalf of the Carrier/IATA constituted assets held in trust excluded from the IRP's custody under the explanation to Section 18(1)(f) of the Code. - HELD THAT: - The Tribunal held that no trust in favour of the Carrier/IATA came into existence. Clause 7.2 of the Agreement, which refers to monies 'held by the Agent in trust for the Carrier', did not, on the facts, create a segregated trust fund because there was no separate trust account, no demarcation or segregation of receipts, and no documentary evidence of steps taken to create a trust. The absence of prior action by the Carrier/IATA to recover the claimed assets before commencement of CIRP weighed against the existence of a trust. Clause 7.2 was construed as imposing an obligation of accountability on the Agent rather than constituting a trust arrangement that removes the monies from the ambit of Section 18(1)(f). [Paras 8, 9, 13]

No trust was created; the explanation to Section 18(1)(f) is not attracted and the sums do not qualify as assets held in trust excluded from IRP custody.

Non-obstante clause - crystallisation of debt on commencement of CIRP - Whether Clause 7.4 of the Passenger Sales Agency Agreement operates notwithstanding Clause 7.2 and crystallises the Carrier's claim as an immediately due and payable debt on commencement of insolvency proceedings. - HELD THAT: - The Tribunal held that Clause 7.4 is a non-obstante provision which becomes operative when the Agent is subject to bankruptcy/CIRP and thereby overrides the normal remittance procedure under Clause 7.2. Because CIRP commenced prior to the Relevant dates, Clause 7.4 rendered the amounts due and payable to the Carrier as on commencement of CIRP, converting the asserted trust monies into a debt obligation of the Corporate Debtor. The Agreement defines 'Carrier' as individual IATA members and not IATA itself, and the contractual machinery demonstrates that Clause 7.4 was intended to crystallise liabilities upon insolvency-related events. [Paras 7, 9, 13]

Clause 7.4 operates notwithstanding Clause 7.2 and crystallises the claim as a debt payable on commencement of CIRP.

Operational debt - moratorium - Whether the claim of IFFCO Tokio (by subrogation to IATA) is an operational debt and whether payment during moratorium would be prohibited. - HELD THAT: - The Tribunal concluded that the Corporate Debtor provided services of sale of air transportation and ancillary services and was remunerated for those services; the liability therefore falls within the definition of 'debt' and in particular 'operational debt'. In view of Section 14 moratorium, any payment of the sums in dispute during the CIRP would offend the prohibition on transferring or disposing of assets or legal/beneficial interests and would prejudice secured financial creditors who have security over cash and bank balances. Consequently, the claim is to be treated as an operational creditor's claim to be filed and adjudicated under the CIRP framework, and immediate payment during moratorium is barred. [Paras 10, 12, 13]

The claim is an operational debt; payment during moratorium is prohibited and the claim falls to be dealt with in the CIRP as an operational creditor's claim.

Final Conclusion: The appeal is dismissed. The Tribunal found that no trust in favour of the Carrier/IATA was proved; Clause 7.4 crystallises the liability as a debt on commencement of CIRP and overrides Clause 7.2; the claim constitutes an operational debt and payment during moratorium is barred, accordingly the impugned order dismissing the MA was upheld.

Imposition of costs for misconceived/frivolous litigation - power to impose costs under NCLT Rules - pre-bid qualification and eligibility in liquidation auction - liquidator's duty to maximise asset value

Imposition of costs for misconceived/frivolous litigation - power to impose costs under NCLT Rules - pre-bid qualification and eligibility in liquidation auction - liquidator's duty to maximise asset value - Whether the Adjudicating Authority was justified in imposing costs on the appellant for pursuing misconceived litigation challenging eligibility criteria in the liquidation auction, and whether the quantum of costs imposed required interference. - HELD THAT: - The Tribunal found that the appellant sought to participate in the auction but thereafter contended that the pre-bid qualification would not bind bidders, a contention which, if accepted, would undermine the liquidator's efforts to maximise asset value and would cause delay by permitting indiscriminate participation. The record showed that the liquidator had re-sent communications, confirmed the appellant's eligibility for one property, and accommodated the appellant's request to bid for that one property. Having participated, the appellant's later challenge to the eligibility criteria without having previously assailed the condition in an appropriate forum was held to be misconceived. The Adjudicating Authority had recorded that the appellant's application was taken up on the last date for bidding, consumed substantial time, and amounted to frivolous litigation. While the Tribunal agreed with the Adjudicating Authority's characterisation of the litigation as frivolous and warranted a cost, it exercised appellate discretion to reduce the quantum of the cost imposed in the interests of justice, modifying the cost from the amount imposed by the Adjudicating Authority to a lesser sum and directing payment within a specified time. [Paras 5, 6, 7, 8]

The Adjudicating Authority was justified in treating the appellant's challenge as misconceived/frivolous and in imposing costs, but the quantum of costs was reduced by the Tribunal which modified the amount payable and directed payment within one week.

Final Conclusion: Appeal partly allowed: the Tribunal upheld the characterization of the appellant's litigation as misconceived and justified imposition of costs, but in the interest of justice reduced the cost imposed by the Adjudicating Authority to a lower sum and directed its payment within one week.

Limitation under the Insolvency and Bankruptcy Code - Effect of acknowledgment in writing under the Limitation Act - Computation of date of default for operational debt - Condonation of delay under Section 5 of the Limitation Act

Effect of acknowledgment in writing under the Limitation Act - Computation of date of default for operational debt - Limitation under the Insolvency and Bankruptcy Code - Whether the Section 9 application was barred by limitation by reference to the date of default and whether any email or ledger entries amounted to a written acknowledgment extending limitation. - HELD THAT: - The Tribunal examined the invoices, correspondence and ledger entries and applied Section 18 of the Limitation Act. Although the operational creditor sent an email on 1.6.2016 and recorded a debit note in its ledger, there was no written acknowledgment of liability signed by the corporate debtor before expiry of the three-year period. In the absence of such an acknowledgment, the date of default must be computed from the date of last payment. The Tribunal found the date of last payment to be 4.9.2015 and held that the three-year limitation expired prior to the filing of the Section 9 petition on 4.12.2018. Consequently the petition was time-barred and rightly dismissed by the Adjudicating Authority. [Paras 13, 19]

The Section 9 application was time-barred as no valid written acknowledgment by the corporate debtor extended the limitation; the petition was correctly dismissed as barred by limitation.

Condonation of delay under Section 5 of the Limitation Act - Limitation under the Insolvency and Bankruptcy Code - Whether the Adjudicating Authority was required to afford an opportunity to apply for condonation of delay under Section 5 of the Limitation Act when the Section 9 petition was found barred by limitation. - HELD THAT: - The Tribunal noted established authorities that condonation under Section 5 is not available as a matter of right and must be sought by a party by filing the appropriate application. The appellant had not filed any application under Section 5 nor sought permission to do so before the Adjudicating Authority. In those circumstances, there was no obligation on the Adjudicating Authority to grant an opportunity or to condone delay suo motu, and dismissal on limitation grounds was appropriate. [Paras 20, 21]

No fault in the Adjudicating Authority for not granting condonation where no application under Section 5 was filed; dismissal on limitation grounds was proper.

Final Conclusion: The appeal is dismissed. The Section 9 petition was held to be barred by limitation because there was no written acknowledgment by the corporate debtor to revive limitation and the appellant did not apply for condonation of delay under Section 5 of the Limitation Act.

Realisation of security interest under Section 52 of the Code - relinquishment of security interest to the liquidation estate - identification and verification of secured assets - distribution of sale proceeds under Section 53 of the Code - estoppel from claiming proceeds after distribution - joint charge and collective relinquishment where individual financing is indiscernible - proof of security interest by records of an information utility or RoC

Realisation of security interest under Section 52 of the Code - relinquishment of security interest to the liquidation estate - distribution of sale proceeds under Section 53 of the Code - estoppel from claiming proceeds after distribution - Whether the appellant was entitled to realize its claimed security interest from proceeds of vehicles sold during CIRP and liquidation, or whether those proceeds lawfully formed part of the liquidation estate and were distributable under Section 53 - HELD THAT: - The Tribunal found that the appellant neither identified the specific assets it claimed to a liquidator prior to liquidation nor realized its security interest in accordance with Section 52. The proof of claim in Form D was filed after the liquidation order and the appellant submitted the list of vehicles only after liquidation had been initiated. The CoC had authorised sale of the vehicles during CIRP, the proceeds were collected and distributed among secured financial creditors proportionately, and the appellant received its share after providing an undertaking. Given these facts, the Tribunal held that the appellant is estopped from later claiming any part of assets already sold and distributed, and that the Adjudicating Authority correctly held that the sale proceeds ought to be distributed as provided in Section 53. The determinative reasoning emphasizes timing of identification/realisation, the prior collective decision to sell, and receipt of distribution by the appellant as grounds for denying subsequent recovery over sold assets. [Paras 11, 13]

Appeal dismissed on the ground that the sale proceeds formed part of the liquidation estate and were correctly distributed under Section 53; the appellant is estopped from claiming further rights over assets already sold and distributed.

Identification and verification of secured assets - proof of security interest by records of an information utility or RoC - joint charge and collective relinquishment where individual financing is indiscernible - Whether the appellant had, or could establish, a specific identifiable security interest in particular vehicles so as to separately realise those assets, and the legal effect of indistinguishable inventory financing by multiple creditors - HELD THAT: - The Tribunal accepted the liquidator's finding that the corporate debtor's books did not permit clear identification of which creditor financed which specific vehicles and that multiple financiers had overlapping inventory financing. Section 52 requires a secured creditor who opts to realise its security interest to identify the asset and, before realisation, have that interest verified (for example by information utility records or other Board-specified means). Because the appellant did not establish specific identification or verification of the vehicles prior to liquidation, and the sale proceeds were already pooled and distributed, the creditors were treated as having a collective charge in respect of the indistinguishable inventory and as having effectively relinquished specific claims over particular vehicles. [Paras 11, 12]

Appellant's claim failed for lack of prior identification and verification of specific secured assets; where financing of inventory is indiscernible, proceeds are treated as collectively relinquished and distributable.

Final Conclusion: Appeal dismissed. The Adjudicating Authority rightly held that where specific secured assets were not identified and verified prior to liquidation and the proceeds have been distributed, the appellant cannot claim further rights over assets already sold; distribution under Section 53 was correctly ordered.

Operational debt - rejection of section 9 application for pre-existing dispute - pre-existing dispute must be real and not spurious - plausible contention requiring further investigation - continuing service as whole-time director entitling remuneration - admission of section 9 application and consequential remand to Adjudicating Authority

Rejection of section 9 application for pre-existing dispute - pre-existing dispute must be real and not spurious - plausible contention requiring further investigation - Whether the writ petition filed by the appellant constituted a pre-existing dispute barring admission of the Section 9 application. - HELD THAT: - The Tribunal applied the Mobilox principle that a pre-existing dispute must be real and not spurious and that the adjudicating authority need only determine whether a plausible contention exists which requires further investigation. The High Court order in WP(C) 4407/2019 recorded that the appellant remained a Director on the date of hearing and dismissed the writ as premature; it did not record any substantive dispute between the parties. The Adjudicating Authority erred in inferring the existence of a dispute merely because the writ petition had been filed. The Tribunal held that the material on record did not disclose a real pre-existing dispute that would require rejection of the Section 9 application under the Mobilox test. [Paras 13, 14, 16]

No pre-existing dispute was established; the Adjudicating Authority erred in rejecting the Section 9 application on that ground.

Continuing service as whole-time director entitling remuneration - operational debt - Whether the appellant was entitled to remuneration for the period 1.4.2019 to 20.5.2019 as an operational debt in default. - HELD THAT: - The record shows the appellant was appointed WTD effective 29.9.2015 (Form MR-1) and continued to act as WTD until removal by resolution dated 20.5.2019. Payments made in March 2019 related to termination of his CFO employment; they did not cover emoluments for services rendered as WTD from 1.4.2019 to 20.5.2019. The Articles of Association and Form MR-1 indicate entitlement to remuneration. Applying these facts, the Tribunal concluded the sums due for that period constitute operational debt in default payable by the corporate debtor. [Paras 10, 11, 15, 16]

The appellant is entitled to payment for the period 1.4.2019 to 20.5.2019, which is an operational debt in default.

Admission of section 9 application and consequential remand to Adjudicating Authority - Whether the impugned order dismissing the Section 9 petition should be set aside and the petition admitted. - HELD THAT: - Having found no real pre-existing dispute and having held that an operational debt was in default, the Tribunal concluded the Adjudicating Authority's dismissal was erroneous. The Tribunal set aside the impugned order, directed admission of the Section 9 application and remitted the matter to the Adjudicating Authority to pass necessary orders consequent to admission. [Paras 16, 17]

Impugned order set aside; Section 9 application admitted and matter remitted to the Adjudicating Authority for necessary orders.

Final Conclusion: The Tribunal held that no real pre-existing dispute barred the Section 9 petition, that amounts due to the appellant for services as whole-time director from 1.4.2019 to 20.5.2019 constitute an operational debt in default, set aside the Adjudicating Authority's dismissal, ordered admission of the Section 9 application and remitted the matter to the Adjudicating Authority for further orders.

Rights and duties of authorized representative - Regulation 16-A(9) - procedural fairness - majority decision binding within class - Section 31(1) approval of resolution plan - material irregularity vitiating process - time bound object of the IBC

Regulation 16-A(9) - Rights and duties of authorized representative - procedural fairness - Whether the Authorized Representative's failure to convene the advertised meeting to seek preliminary views and instead collecting votes by e mail amounted to such a procedural irregularity as to vitiate the CIRP process. - HELD THAT: - The Tribunal found that the Authorized Representative had kept homebuyers informed of the CoC agenda and had communicated the intention to seek preliminary views, but ultimately solicited votes by e mail. Regulation 16 A(9) uses the term 'may' for holding a meeting to seek preliminary views and therefore does not make convening such a meeting obligatory. Given the constrained 12 day timeframe directed by the Adjudicating Authority to complete reconsideration, the Tribunal held that the procedure adopted was reasonably substantial and there was no wilful breach that caused a miscarriage of justice. The Tribunal therefore declined to characterise the conduct as a fatal procedural irregularity. [Paras 18, 19, 20]

The deviation from holding the scheduled meeting did not, on the facts, amount to a material irregularity vitiating the process.

Majority decision binding within class - material irregularity vitiating process - Section 31(1) approval of resolution plan - time bound object of the IBC - Whether the procedural deviations alleged by minority homebuyers warranted setting aside the CoC approval and the Adjudicating Authority's approval of the revised resolution plan under Section 31(1). - HELD THAT: - The Tribunal noted that the amended resolution plan was approved by 98.58% of the CoC and that within the class of homebuyers the amended plan had 89.80% support. Applying the principle that where an authorized representative casts a vote in accordance with the decision of more than 50% of the voting share of the financial creditors he represents, the decision is binding on the class, the Tribunal held that dissenting minority homebuyers could not establish a nexus between the alleged procedural omission and any prejudice affecting the outcome. The Tribunal emphasised the IBC's object of time bound resolution and observed that remanding the plan for procedural deviations raised by a thin minority would frustrate that objective. Case law holding that a class decision binds individual members was held applicable on these facts. In view of the overwhelming CoC support and absence of demonstrated prejudice, the Tribunal found no ground to interfere with the Adjudicating Authority's approval. [Paras 20, 22, 23, 24, 25]

Alleged procedural deviations did not justify setting aside the CoC approval or the Adjudicating Authority's approval under Section 31(1); the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal, upholding the Adjudicating Authority's approval of the revised resolution plan: the procedural deviations identified were not of such a nature as to vitiate the CIRP or cause prejudice to the minority homebuyers, and the overwhelming majority support for the plan and the need for time bound resolution under the IBC warranted no interference.

Event of default - Admissibility of Section 7 application - Moratorium on repayment of interest - Repayment and maturity of loan - Liability for additional loan received - Binding nature of undertaking

Event of default - Admissibility of Section 7 application - Moratorium on repayment of interest - Liability for additional loan received - Whether default had occurred in respect of the Principal, Additional and Further Loans and whether the Adjudicating Authority rightly admitted the Section 7 application. - HELD THAT: - The loan agreement dated 28.05.2021 set out separate schedules for Principal Loan (Schedule-1) and Additional Loan (Schedule-2). Schedule-1 provided a six-month moratorium for repayment of interest and specified that failure to pay interest for two consecutive quarters would trigger an event of default; Schedule-2 similarly provided that failure to pay interest for two consecutive quarters would trigger an event of default and did not incorporate any moratorium comparable to Schedule-1. The disbursement of the Additional Loan in eleven instalments is an admitted fact on record and the corresponding bank statements show receipt and subsequent transfers; receipt was expressly acknowledged by the Corporate Debtor. On the material before the Adjudicating Authority the interest obligations in respect of the Additional Loan (and further loan) stood in default by 27.11.2021, and even if the Principal Loan were viewed separately the admitted receipt and the contractual terms rendered the Financial Creditor entitled to treat defaults as having occurred. The Adjudicating Authority considered these facts and contractual provisions and found debt and default, and the Appellate Tribunal found no error in that conclusion. The Tribunal also rejected the contention that the Corporate Debtor could unilaterally extend the moratorium period, noting such extension was at the lender's discretion. Accordingly the Section 7 application was correctly admitted. [Paras 13, 14]

Default in respect of the Additional Loan (and Further Loan) occurred by 27.11.2021 and the Adjudicating Authority rightly admitted the Section 7 application; the finding of debt and default is sustained.

Binding nature of undertaking - Whether the Appellant's affidavit of undertaking to pay the claimed amount affected the maintainability or outcome of the appeal. - HELD THAT: - On the first listing the Appellant indicated an intention to settle the claimed amount and filed an affidavit undertaking payment of the entire claim by a specified date. That undertaking was relied upon by the Respondent before the Tribunal. The Appellate Tribunal observed the undertaking and the affidavit but proceeded to examine the merits on record; it held that irrespective of the undertaking the admitted receipt of monies and the contractual terms established debt and default. The Tribunal therefore treated the undertaking as immaterial to negating default and dismissed the appeal on merits. [Paras 15, 16]

The affidavit of undertaking did not negate the admitted debt and default; it did not prevent dismissal of the appeal and cannot be used to avoid the finding of default.

Final Conclusion: The appeal is dismissed. The Adjudicating Authority correctly found debt and default and properly admitted the Section 7 application; the Appellant's subsequent undertaking to pay did not negate the admitted defaults or alter the outcome.

Existence of financial debt and default - conversion of loan into equity - admissibility and sufficiency of documentary evidence in a Section 7 petition - summary jurisdiction of the Adjudicating Authority under the Code

Existence of financial debt and default - conversion of loan into equity - Whether a debt and default subsists for the purposes of initiating Corporate Insolvency Resolution Process where the loan advanced by the financial creditor was admitted in the books of the corporate debtor and subsequently converted into equity shares - HELD THAT: - The Tribunal examined the documents filed with the Section 7 petition and found no separate loan agreement or prior approval evidencing a commercial debt distinct from transactions between director/shareholder and the company. The Board minutes and the audited balance sheet record admission of an unsecured loan from directors and a board resolution to convert such loans into equity, and the conversion was effected on 16 September 2019. The financial creditor had received the AGM agenda by email and did not raise contemporaneous objection to the proposed conversion; subsequently he communicated objection only by letter. Given these records, the Tribunal held that the loan had been converted into equity and thus ceased to subsist as a debt. The Tribunal further noted the limited, summary role of the Adjudicating Authority in a Section 7 petition, which is to ascertain existence of debt and default on the basis of the pleadings and annexed documents; on that basis it concluded there was no continuing debt or default to sustain the petition. [Paras 23, 24, 25, 26, 27]

The petition under Section 7 is not maintainable because the loan advanced was converted into equity and no debt and default subsists.

Final Conclusion: The Company Petition under Section 7 is dismissed as the recorded conversion of the loan into equity extinguished the debt relied upon; the applicant remains at liberty to pursue other remedies available under law.

Voluntary liquidation - Declaration of solvency - Public announcement and invitation of claims - Liquidator's duties, final report and distribution of assets - Compliance with Section 59 of the Insolvency and Bankruptcy Code, 2016 - Dissolution by Adjudicating Authority under Section 59(8)

Voluntary liquidation - Declaration of solvency - Public announcement and invitation of claims - Liquidator's duties, final report and distribution of assets - Dissolution by Adjudicating Authority under Section 59(8) - Application for dissolution of the company on completion of voluntary liquidation proceedings under Section 59 of the Code was allowed and the corporate person was ordered to be dissolved. - HELD THAT: - The Tribunal found that the board of directors had resolved to liquidate the company as it had not commenced business since incorporation and that the requisite declarations by the directors (declaration of solvency) and supporting documents including audited financial statements were filed. The liquidator made the statutory public announcements inviting claims, notified IBBI and the Registrar of Companies, opened a liquidation bank account, realized liquid assets and distributed proceeds to stakeholders, filed the preliminary and final reports and obtained a No Objection Certificate from the Income Tax Department. No claims or objections were received and the Registrar of Companies' report did not disclose any pending inquiry or adverse action; alleged non-filing for FY 2018-19 was addressed by filing E-form GNL-2. On this basis the Adjudicating Authority concluded that the voluntary liquidation process under Section 59 and the applicable IBBI Regulations had been complied with and the affairs of the corporate person had been completely wound up, warranting dissolution under Section 59(8). [Paras 11, 12, 13, 14, 15]

The corporate person M/s Huawei Telecom Services (India) Pvt. Ltd. shall stand dissolved with effect from 22.08.2022; the liquidator and registry were directed to communicate the order to the Registrar of Companies and IBBI within the prescribed period.

Final Conclusion: The Tribunal allowed the company petition under Section 59 of the Code, holding that the voluntary liquidation process and statutory formalities were complied with, and ordered dissolution of M/s Huawei Telecom Services (India) Pvt. Ltd., with directions to send the order to the Registrar of Companies and the IBBI.

Delay and reasonable time for initiation of statutory proceedings - preservation of banking records under the Banking Companies (Period of Preservation of Records) Rules, 1985 -

Delay and reasonable time for initiation of statutory proceedings - setting aside show cause notices where delay renders proceedings unfair and unreasonable - Show cause notices issued in 2002 for transactions of 1992-1993 were not tenable in law on account of inordinate delay and were set aside. - HELD THAT: - The Court held that where a statute does not prescribe a specific limitation period, proceedings must be initiated within a reasonable time, the length of which depends on the facts and nature of the power. Applying this principle to the facts, the alleged transactions occurred in 1992-1993 while show cause notices were issued in 2002, almost a decade later and immediately prior to the sunset of FERA. The Court found that initiation of proceedings after such a long lapse was unfair and unreasonable and therefore liable to be set aside. Reliance was placed on earlier decisions treating exercise of statutory powers without prescribed limitation as requiring prompt exercise within a reasonable time, and the Court concluded that the notices and consequential proceedings must be quashed on this short ground. [Paras 19, 20, 21, 22, 23]

Show cause notices and proceedings issued in 2002 in respect of transactions of 1992-1993 were set aside on the ground of inordinate delay and unreasonableness.

Preservation of banking records under the Banking Companies (Period of Preservation of Records) Rules, 1985 - unfairness arising from initiation of proceedings after expiry of prescribed record-retention period - Proceedings were also liable to be set aside because the Banks were required to preserve relevant records only for five or eight years and no RBI direction extending preservation had been shown. - HELD THAT: - The Court examined Rules 2, 3 and 4 of the Banking Companies (Period of Preservation of Records) Rules, 1985, noting that specified categories of records must be preserved for five or eight years and that only an RBI order under Rule 4 (with reference to subsection (1) of section 35A) can extend preservation. As no such RBI direction extending preservation of records in respect of the impugned transactions was placed on record, the Court found that permitting show cause notices and proceedings in relation to transactions occurring well beyond the eight-year preservation period would be unfair and unreasonable. This ground independently supported setting aside the proceedings. [Paras 24, 25, 26, 27]

Proceedings relating to transactions beyond the eight-year record-preservation period were set aside for unfairness in the absence of any RBI direction extending record retention.

Final Conclusion: The Court dismissed the appeals challenging the High Court orders and upheld the setting aside of the show cause notices and consequential proceedings: the notices issued in 2002 in respect of transactions of 1992-1993 were quashed as barred by inordinate delay and because relevant bank records were not required to be preserved beyond the statutory retention period.

Voluntary disclosure under SVLDR Scheme - eligibility where enquiry or audit is initiated after the cut off date - quashing of administrative order and remand for fresh decision - right to personal hearing before adjudicatory decision - power to reopen declaration if material particulars are false within one year

Voluntary disclosure under SVLDR Scheme - eligibility where enquiry or audit is initiated after the cut off date - Application under the SVLDR Scheme could not be rejected on the ground that an enquiry/audit was initiated where that enquiry/audit was commenced after the scheme's cut off date of 30.06.2019. - HELD THAT: - The Court applied the principle that the scheme excludes persons who had been subjected to enquiry, investigation or audit on or before the cut off date. An enquiry or audit initiated after 30.06.2019 does not render a declarant ineligible for the voluntary disclosure category. The respondents' reliance on a notice issued post the cut off date to deny scheme benefits was held to be contrary to the scheme's objective and the authority of precedents addressing identical factual matrices. Consequently, rejection of the petitioner's declaration solely because a notice for audit was issued after 30.06.2019 was held to be erroneous.

The impugned rejection of the petitioner's SVLDR application on the ground of an enquiry initiated after 30.06.2019 was quashed.

Quashing of administrative order and remand for fresh decision - right to personal hearing before adjudicatory decision - The petitioner's declaration forms were to be restored and remanded to the authority for fresh consideration treating them as valid voluntary disclosure declarations, with an opportunity for personal hearing and requirement of a reasoned order within a specified time. - HELD THAT: - In view of the illegality in rejecting the declarations, the Court set aside the impugned order and directed restoration of the declaration forms to file. The authority was directed to treat the declarations as valid for the voluntary disclosure category, afford the petitioner a personal hearing on seven days' clear notice, and thereafter pass a reasoned order in accordance with law within eight weeks from receipt of an authenticated copy of the judgment. Communication of the decision to the petitioner was ordered within one week of passing the order.

Declarations restored and remitted for fresh decision with mandated personal hearing and a reasoned order within the stipulated timeframe.

Power to reopen declaration if material particulars are false within one year - The respondents retain the power to take action under the relevant provision of the Scheme if material particulars in the declaration are found to be false, subject to the one year limitation specified by the Court. - HELD THAT: - While granting relief to the petitioner by remanding for fresh adjudication, the Court clarified that the respondents are not precluded from subsequently acting under the Scheme's provision permitting action where declarations contain false material particulars. Such action is permissible if discovered within one year of issuance of the discharge certificate, thereby preserving the authority's statutory corrective jurisdiction.

Court preserved respondents' power to take action against false declarations within one year of issuance of the discharge certificate.

Final Conclusion: Writ petition allowed: the order rejecting the SVLDR declarations was quashed; declarations restored and remitted for fresh decision treating them as voluntary disclosures, with a seven day notice personal hearing and a reasoned order within eight weeks; respondents retain power to act against false declarations within one year.

Cenvat credit admissibility - Centralised registration and payment of service tax - Requirement of ISD invoice for distribution of credit - Reverse charge mechanism - Proof of credit availed / burden of establishment

Cenvat credit admissibility - Proof of credit availed / burden of establishment - Whether the demand for alleged utilisation of cenvat credit of Rs. 20,72,909/- against the appellant is sustainable. - HELD THAT: - The records submitted by the appellant consistently show that the service tax of Rs. 20,72,909/- was a cumulative payment on behalf of five units and that the appellant (unit V) had actually availed cenvat credit only of Rs. 1,24,129/-. There is no evidence on record at any stage that the appellant had taken credit of Rs. 20,72,909/-. The show cause notice and subsequent orders proceeded on the basis that the entire paid amount had been availed by the appellant, but the authorities failed to verify the documentary record already on file. Since the department did not discharge the burden of establishing that the appellant availed the larger credit, the foundational premise for the demand is absent and the demand cannot be sustained.

Demand of Rs. 20,72,909/- (and consequential interest and penalty) is set aside as not sustainable.

Requirement of ISD invoice for distribution of credit - Centralised registration and payment of service tax - Whether the cenvat credit of Rs. 1,24,129/- availed by the appellant is admissible despite payment of service tax by the centrally registered Unit No. II and absence of an ISD invoice from Unit No. II. - HELD THAT: - The adjudicating authority and first appellate authority denied the credit on the ground that Unit No. II (centralised registration) should have issued an ISD invoice. The Tribunal found that the invoice of the service provider was in the name of the appellant unit (unit V) and the service was received by that unit. The requirement of issuance of an ISD invoice by the centrally registered unit arises when invoices are in the name of the Head Office or where distribution by ISD is necessary. Where the invoice is in the name of the recipient unit, no ISD invoice is required for that unit to avail credit. Accordingly, the appellant correctly availed the cenvat credit of Rs. 1,24,129/-.

Cenvat credit of Rs. 1,24,129/- is admissible and was correctly availed by the appellant.

Final Conclusion: The appeal is allowed: the cenvat credit of Rs. 1,24,129/- is confirmed as admissible and the demand, interest and penalty based on alleged utilisation of Rs. 20,72,909/- are set aside.

Eligibility of input service prior to 01.04.2011 - exclusion of certain services from input service after 01.04.2011 - refund under Rule 5 of the CENVAT Credit Rules, 2004 and Notification No. 05/2006-C.E.(N.T.) dated 14.03.2006 - one-to-one correlation between input services and output services not required for refund - treatment of credit taken subsequent to last date of export - computation of eligible refund - whether net credit or total credit to be taken - inclusion of unbilled revenue in total turnover for refund computation - requirement of evidence - invoices, Service Tax charged and Chartered Accountant certificate - effect of settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 on refund claims - requirement of realization documents (FIRCs) for establishing export turnover

Eligibility of input service prior to 01.04.2011 - exclusion of certain services from input service after 01.04.2011 - Whether services availed by the appellant qualify as input services for refund purposes for periods prior to and after 01.04.2011. - HELD THAT: - The Tribunal found that prior to 01.04.2011 the definition of "input service" had a wide ambit including 'activities relating to business', and accordingly services availed prior to 01.04.2011 which were used for business activities fall within the definition and rejection of refund on that ground cannot be sustained. By contrast, after 01.04.2011 the definition was amended to exclude certain services primarily for personal use of employees; accordingly services such as Outdoor Catering, Rent a Cab, certain Insurance/health related services, Sodexo passes and printing of employee awards are not eligible after 01.04.2011. Further, Pre employment Health Checkup was held ineligible after 01.04.2011 because such services are availed before a person becomes employee; Travel Agent services claimed after 01.04.2011 were held ineligible for want of evidence showing the travels were for business; Business Support Services claimed after 01.04.2011 could not be allowed where bundled services included ineligible employee related items and no breakup was furnished. [Paras 7]

Services availed prior to 01.04.2011 are eligible as input services where used for business; specified services are excluded after 01.04.2011 and particular heads (Pre employment health checkup, Travel Agent, Business Support where bundled with employee benefits) are not eligible post amendment.

One-to-one correlation between input services and output services not required for refund - treatment of credit taken subsequent to last date of export - Whether refund can be denied because credit was availed subsequent to the last date of export and whether one to one correlation between input and output services is necessary. - HELD THAT: - The Tribunal held that neither Rule 5 nor the Notification requires a one to one correlation between an input service and an output service for claiming refund, and that rejection of refund solely because credit was taken after the last date of export was unjustified. The Tribunal observed that credits taken after the last date of export, if not held ineligible for that refund period, ought to be considered for computation in subsequent periods and that the factual aspects and computations require re verification by the Adjudicating Authority. [Paras 8]

Rejection of refund on the ground of credit taken after last date of export is not justified and requires re examination by the Original Authority.

Inclusion of unbilled revenue in total turnover for refund computation - Whether unbilled revenue as on the cut off date should be included in total turnover for computation of eligible refund. - HELD THAT: - The Tribunal observed that the appellant claims unbilled revenue as on 31.12.2010 ought to have been recognised as revenue for computing total turnover and that the matter needs to be re looked by the Adjudicating Authority. The factual determination of whether such unbilled revenue was properly includible in the total turnover for refund computation was left for verification. [Paras 9]

Computation involving unbilled revenue requires reconsideration by the Original Authority.

Computation of eligible refund - whether net credit or total credit to be taken - Whether the refund formula must be applied on net credit (credit after utilisation) or on total credit taken during the period. - HELD THAT: - The Tribunal noted that the authorities below applied the formula on net credit whereas precedents support taking total credit taken on input services during the period (without deducting credit utilised for domestic service tax liability) and held that this aspect is to be re examined by the Adjudicating Authority in light of existing decisions. [Paras 10]

Issue of net versus total credit for refund computation is to be reconsidered by the Original Authority.

Requirement of realization documents (FIRCs) for establishing export turnover - Whether export turnover may be restricted to realizations evidenced by FIRCs and whether such restriction applied by the authorities was correct. - HELD THAT: - The Tribunal stated that refund is eligible only in respect of FIRCs produced to prove realization of export proceeds, but taking into account the appellant's contention regarding potential wrong computation, the Tribunal directed verification and reconsideration of this aspect by the Adjudicating Authority. [Paras 11]

While FIRCs are material to establishing realized export turnover, computation and restriction applied require re verification by the Original Authority.

Requirement of evidence - invoices, Service Tax charged and Chartered Accountant certificate - Whether refunds rejected for non production of invoices, for absence of Service Tax charged in suppliers' invoices, or for non production of Chartered Accountant certificate / Service Tax registration mention, were correctly dealt with. - HELD THAT: - The Tribunal upheld that where invoices were not produced or excess credit was apparently taken the appellant is not eligible for refund. Similarly, where Service Tax was not charged by the service provider in invoices, refund cannot be granted if the appellant has not paid Service Tax. Conversely, where rejection was for non mention of Service Tax registration or non production of Chartered Accountant certificate but the appellant can furnish sufficient evidence of payment of Service Tax, such amounts should be reconsidered by the Original Authority. [Paras 12, 13, 14]

Rejections for non production of invoices, excess credit taken and where service provider did not charge Service Tax are to be upheld; rejections for missing registration/CA certificate to be reconsidered if evidence of Service Tax payment is furnished.

Effect of settlement under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 on refund claims - Whether amounts settled under the Sabka Vishwas Scheme can be claimed back as refund in parallel refund proceedings. - HELD THAT: - The Tribunal accepted that filing under the Scheme is not an admission of guilt but held that settlement under the Scheme brings finality to the confirmed demand; amounts that were part of the dues settled under the Scheme cannot be claimed as refund. However, the Tribunal directed that amounts not forming part of the dues settled (the balance) must be considered for refund by the Original Authority. The overlapping periods and computation are to be re examined. [Paras 15, 16]

Amount(s) confirmed and settled under the Sabka Vishwas Scheme cannot be refunded; remaining balance not covered by settlement to be considered in remand proceedings.

Remand for re processing of refund claims - Whether the matters require remand to the Original Authority for re consideration and re processing of refund claims. - HELD THAT: - Having identified multiple issues requiring factual verification, computation corrections and reassessment in light of legal positions (eligibility pre/post 01.04.2011, credits taken after last date of export, unbilled revenue, proper application of refund formula, FIRCs, documentary evidence, and effect of Scheme settlement), the Tribunal held that the refund claims must be re processed by the Original Authority with directions to consider the views expressed in the order and to verify facts and computations accordingly. [Paras 17, 18, 19]

Impugned orders set aside and matters remanded to the Original Authority for re processing in terms of the Tribunal's directions; appeals allowed by way of remand.

Final Conclusion: The Tribunal held that services used for business prior to 01.04.2011 qualify as input services, while certain employee oriented services are excluded after 01.04.2011 (with specific heads-Pre employment health checkup, Travel Agent, bundled Business Support-disallowed post amendment). Rejection of refund solely because credit was taken after the last date of export was found unsustainable. Several computation and evidentiary aspects (unbilled revenue, application of net versus total credit, treatment of realizations/FIRCs, and verification of documentary proof) require factual re examination. Amounts where invoices were not produced, excess credit taken, or Service Tax not charged are not refundable; amounts confirmed and settled under the Sabka Vishwas Scheme cannot be claimed back, but the balance not covered by settlement is to be considered. The impugned orders are set aside and the matters are remanded to the Original Authority for re processing in accordance with the Tribunal's directions; appeals are allowed by way of remand.

Export of service - business auxiliary service - refund / rebate claim - credit to Consumer Welfare Fund - application of tribunal precedent - pendency of appeals in higher forum without stay

Export of service - business auxiliary service - refund / rebate claim - credit to Consumer Welfare Fund - application of tribunal precedent - Market research and market survey services performed in India for a foreign principal qualify as export of service and the refund/rebate claim is payable to the respondent instead of being credited to the Consumer Welfare Fund. - HELD THAT: - The Tribunal had earlier remanded the matter for fresh adjudication in light of five earlier decisions of the Tribunal holding similar activities to be export of service. On remand the adjudicating authority applied those decisions, held that the services qualified as export, found the refund claim to be within the statutory time-limit and directed payment of the refund instead of credit to the Consumer Welfare Fund. The Commissioner (Appeals) upheld that order. The present Bench found that, having been directed by the Tribunal in the earlier order to decide afresh in the light of those Tribunal precedents, the adjudicating authority and the Commissioner (Appeals) were justified in applying the Tribunal decisions and in allowing the refund rather than directing credit to the Consumer Welfare Fund. [Paras 3, 8, 9]

The contention that the services did not qualify as export was rejected; the refund claim stands allowed and not to be credited to the Consumer Welfare Fund.

Pendency of appeals in higher forum without stay - application of tribunal precedent - Mere pendency of appeals against the relied-upon Tribunal decisions in higher courts, in the absence of any stay, does not preclude the adjudicating authority or the appellate authority from deciding the matter by applying those Tribunal precedents. - HELD THAT: - The Department urged that because the five Tribunal decisions relied upon were under challenge before higher judicial fora, the Commissioner (Appeals) should not have decided the appeal. The Bench observed that the Tribunal's earlier direction to decide afresh in the light of those decisions was not challenged by the Department and that pendency of appeals in higher courts, without any stay, does not operate as a bar to applying existing Tribunal precedents. Accordingly, the Commissioner (Appeals) was justified in deciding the appeal on that basis. [Paras 6, 7, 8]

The plea that pendency of appeals in higher fora should have prevented decision was rejected; absence of stay permits application of the Tribunal precedents.

Final Conclusion: The departmental appeal is dismissed; the order allowing the refund (rebate) on the basis that the services qualify as export is upheld and the appeal for restraint on account of pending higher court challenges is rejected in the absence of any stay.

Extended period of limitation - show cause notice - failure to consider departmental records and assessee's reply - reconciliation of turnovers between ST-3 returns and Form 26AS - pre-deposit requirement under Section 35F

Extended period of limitation - show cause notice - Validity of the show cause notice issued invoking the extended period of limitation - HELD THAT: - The Tribunal found that the show cause notice dated 23.09.2019 invoked the extended period despite the Department's own records showing ST-3 returns for the relevant half-years filed on 11.11.2014 and 25.07.2015. The adjudicating authority proceeded mechanically and alleged non-filing of returns although the assessee had filed returns and paid admitted taxes. The Tribunal noted that the assessee had also submitted a reply by email with copies of ST-3 returns which the Dy. Commissioner failed to consider. Given the availability of departmental records and the assessee's reply proving disclosure and payment of admitted tax, the extended period was held not invokable as there was no failure to disclose taxable turnover or to deposit admitted taxes; differences between ST-3 (accrual basis) and Form 26AS (receipt basis) were noted as explainable and requiring reconciliation. [Paras 3, 4, 5, 9]

Show cause notice invoking the extended period of limitation was not validly issued and the impugned order based thereon was set aside.

Failure to consider departmental records and assessee's reply - Whether the adjudicating authority considered the assessee's ST-3 returns and reply before passing the ex parte order - HELD THAT: - The Tribunal recorded that the order-in-original observed non-appearance and absence of written submissions by the assessee, but the record shows the assessee had filed a written reply by email with annexed ST-3 returns. The Dy. Commissioner did not refer to or consider those returns in the adjudication and proceeded ex parte to confirm demand and impose penalties. This failure to take into account available records and the assessee's submissions was material and vitiated the adjudication. [Paras 4, 5, 9]

Adjudication was vitiated by failure to consider the assessee's filed returns and reply; the ex parte order was set aside.

Pre-deposit requirement under Section 35F - Validity of dismissal of the appeal by Commissioner (Appeals) for want of pre-deposit - HELD THAT: - The Tribunal noted that the appeal memo before the Commissioner (Appeals) erroneously stated 'Nil' in the column for amounts deposited, although the appellant had in fact deposited admitted taxes as per the ST-3 returns and the quantum deposited exceeded the statutory 7.5% pre-deposit requirement. On this basis the Tribunal held that dismissal for want of pre-deposit was improper. [Paras 6, 7, 9]

Dismissal of the appeal by the Commissioner (Appeals) for want of pre-deposit was incorrect and thus improper.

Reconciliation of turnovers between ST-3 returns and Form 26AS - Further appraisal required to reconcile differences between turnover as per ST-3 returns and Form 26AS and consequent tax liability, if any - HELD THAT: - While the Tribunal set aside the impugned orders, it observed that differences may exist because ST-3 returns are prepared on an accrual basis whereas Form 26AS reflects receipts. The Tribunal directed the appellant to file a reconciliation statement before the Adjudicating Authority reconciling turnover figures between ST-3 returns and Form 26AS. The Tribunal left open the limited question of any additional tax payable, which, if found, must be deposited in accordance with rules. [Paras 9, 10]

Matter remanded for reconciliation of turnovers and limited appraisal; any additional tax found payable to be deposited as per rules.

Final Conclusion: The appeal is allowed; the ex parte order confirming demand and penalties and the Commissioner (Appeals)'s dismissal for want of pre-deposit are set aside. The appellant is directed to file a reconciliation between ST-3 returns and Form 26AS for further appraisal, and to deposit any tax found payable in accordance with rules.

Commercial and Industrial Construction service - Leviability of service tax depends on whether construction is used or to be used for commerce or industry - APMC activities providing market infrastructure for public/charitable purposes not taxable as commercial construction - Distinction between Business Support Service and Business Auxiliary Service in relation to statutory market fee

Commercial and Industrial Construction service - APMC activities providing market infrastructure for public/charitable purposes not taxable as commercial construction - Leviability of service tax depends on whether construction is used or to be used for commerce or industry - Construction of Market Yard for APMC is not liable to service tax under Commercial and Industrial Construction service. - HELD THAT: - The Tribunal accepted that the works were for construction of a market yard for an Agricultural Produce Market Committee (APMC). Prior decisions of the Tribunal were followed, which hold that APMCs are statutory bodies constituted for public/charitable purposes and that activities undertaken from market fees to provide and maintain market infrastructure benefit all users rather than constituting outsourced business support service to licensees. The levity of service tax on construction depends on whether the building or civil structure is used, or to be used, for commerce or industry; constructions for institutions established solely for charitable or public purposes are non commercial and not taxable. Applying these principles, the Tribunal concluded that construction of the market yard is not commercial in nature and therefore falls outside the Commercial and Industrial Construction service taxable ambit.

Impugned order set aside and appeal allowed; construction of the market yard for APMC held not taxable under Commercial and Industrial Construction service.

Final Conclusion: The Tribunal allowed the appeal and held that construction of the APMC market yard is not covered by the Commercial and Industrial Construction service and therefore is not liable to service tax.

Summary order. Appeals disposed of in terms of this Court's judgment in Commissioner of Central Excise and Customs, Surat v. Sun Pharmaceuticals Inds. Ltd., 2015 (326) E.L.T. 3 (S.C.); pending interlocutory application disposed of.

Jurisdiction of adjudicating authority - delegation of adjudicatory powers under Central Excise Act and Rules - condonation of delay in filing cross-objection - remand for fresh consideration

Jurisdiction of adjudicating authority - delegation of adjudicatory powers under Central Excise Act and Rules - remand for fresh consideration - Whether the original order of adjudication was passed without jurisdiction by Shri C.M. Mehra in his capacity as Commissioner of Central Excise & Service Tax, Siliguri, and the appropriate forum for deciding that question. - HELD THAT: - The Court observed that the Customs, Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata, had earlier recorded a prima facie view that Shri C.M. Mehra may have lacked jurisdiction to act as Commissioner of Central Excise & Service Tax, Siliguri, and that the impugned order prima facie appeared to have been passed without necessary jurisdiction. The respondent had sought to include this specific ground in the appellate proceedings, but the learned Tribunal's impugned judgment did not consider that ground. Given the direct relevance of the jurisdictional question to the determination of the pending tax appeal, the High Court concluded that the matter required adjudication by the Tribunal itself. The Court therefore disposed of the cross-objection and directed the Tribunal to decide the jurisdictional issue after giving adequate opportunity of hearing to both parties within a specified timeframe, leaving the main Tax Appeal pending for further consideration after the Tribunal's decision.

Cross-objection disposed; the jurisdictional question as to whether Shri C.M. Mehra had authority to pass the original adjudication is remanded to the Customs, Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata, to be decided after hearing the parties preferably within three months, but not later than four months from communication of a certified copy of this order.

Condonation of delay in filing cross-objection - Validity of the application for condonation of delay in filing the respondent's cross-objection. - HELD THAT: - The Court recorded that, upon considering the submissions and the application for condonation of delay, it had allowed the application and condoned the delay in filing the cross-objection, thereby bringing the cross-objection on record in terms of the earlier order dated 04th August, 2022.

Delay in filing the cross-objection was condoned and the cross-objection was taken on record; the cross-objection is disposed of by remanding the jurisdictional issue to the Tribunal for fresh decision.

Final Conclusion: The High Court kept Tax Appeal No. 01 of 2019 pending and disposed of the respondent's cross-objection by directing the Customs, Excise and Service Tax Appellate Tribunal, East Regional Bench, Kolkata, to decide the specific jurisdictional challenge to the original adjudication after giving both parties an opportunity of hearing, preferably within three months but not later than four months; thereafter the Tax Appeal will be taken up for further consideration.

Doctrine of unjust enrichment - refund of amount deposited during investigation - treatment in books of account irrelevant for unjust enrichment - time-bar not to apply where amount was deposited during investigation

Doctrine of unjust enrichment - refund of amount deposited during investigation - treatment in books of account irrelevant for unjust enrichment - Whether the bar of unjust enrichment prevents refund of an amount deposited during investigation and whether it was necessary for the appellant to show the deposited amount as a receivable in its books of account to negate unjust enrichment. - HELD THAT: - The Tribunal examined the Commissioner (Appeals)'s conclusion that payment of the refunded amount into the Consumer Welfare Fund was justified because the appellant had not produced evidence that the deposited amount was shown as 'receivable from government' or similar in its accounts. The Tribunal relied on precedent distinguishing cases where the burden was passed to consumers from those where amounts were deposited during investigation, noting that deposits made in the course of investigation are not to be treated as discharged tax liabilities and therefore the limitation bar and unjust enrichment doctrine operate differently. The Tribunal accepted the view in the jurisdictional decisions cited that the fact of deposit during investigation makes the bar of unjust enrichment inapplicable and that the Tribunal or High Court need not examine how the amount was treated in the assessee's profit and loss account; showing the amount as an expense does not establish the presumption that the burden was passed to consumers. On this basis the Tribunal held that the Commissioner (Appeals)'s requirement that the amount be shown as a receivable in the appellant's books to negate unjust enrichment was erroneous and unsustainable, and that the refund directed by the Commissioner (Appeals) should be paid to the appellant rather than to the Welfare Fund. [Paras 3, 4, 6, 7]

Findings of the Commissioner (Appeals) requiring proof that the deposited amount was shown as a receivable in the appellant's books to negate unjust enrichment are erroneous; the bar of unjust enrichment does not apply to amounts deposited during investigation and the refund must be paid to the appellant.

Final Conclusion: Appeal allowed; the order directing deposit of the sanctioned refund into the Consumer Welfare Fund is modified and the refund is to be paid to the appellant with applicable interest, if any, within two months from receipt of the order.

Area-based exemption under Notification No. 50/2003-CE - cut-off date 31.03.2010 - CBEC Circular dated 22.12.2010 - CBEC instruction dated 09.05.2016 - installation of new plant and machinery versus setting up of a new industrial unit - bonafides in diversification/expansion - binding nature of Board circulars on adjudicating authorities

Area-based exemption under Notification No. 50/2003-CE - cut-off date 31.03.2010 - CBEC Circular dated 22.12.2010 - installation of new plant and machinery versus setting up of a new industrial unit - bonafides in diversification/expansion - Entitlement of the appellant to claim exemption under the area-based Notification No.50/2003-CE in respect of products added after 31.03.2010 where fresh plant and machinery were installed - HELD THAT: - The Notification requires that goods be specified in the Tariff schedules, not appear in Annexure-I, and be cleared from a unit located in the specified areas; these prerequisites were satisfied and the unit commenced commercial production before the cut-off date. The CBEC Circular dated 22.12.2010 clarifies that the notification does not place a bar on addition/modification of plant and machinery or on production of new products by an eligible unit after the cut-off date during the ten-year exemption period, and therefore an eligible unit remains entitled to exemption on such additions for the residual period. The subsequent Board instruction dated 09.05.2016 does not nullify the 2010 clarification but cautions against allowing changes which in substance amount to setting up a new unit in the guise of diversification; it requires recording of reasons and higher approvals where bona fides are in doubt. Applying these principles, the adjudicating authority's conclusion that a separate new unit was set up was not supported on the record: the appellant continued manufacture of originally declared products, there was no finding of separate manpower or finances for the new products, and the mere fact that new investment and production volumes were large does not, without more, convert diversification into the establishment of a new unit. Consequently the bar in the 2016 instruction applies only where there is a genuine new unit cloaked as diversification, which was not established on the facts here. The Tribunal therefore held the Commissioner's denial of exemption unsustainable and set aside the order. The Tribunal noted decisions of the Tribunal applying the 2010 Circular (including a decision presently subject to appeal before the Supreme Court) but distinguished adverse precedents on the facts. [Paras 24, 28, 29, 31, 32]

The appellant is entitled to the benefit of the exemption under Notification No.50/2003-CE in respect of the new products manufactured after 31.03.2010; the impugned order is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the appellant-being an eligible unit which commenced production before the cut-off date-remained entitled to excise exemption on products added subsequently (even where fresh machinery was installed), since the 2010 CBEC circular permits such additions and the 2016 instruction only bars cases where a genuine new unit is covertly set up; the Commissioner's order denying exemption was set aside.

Entitlement to refund of excess input tax credit - refund audit and verification of pre-bifurcation ITC - requirement of production of purchase invoices for refund - adjustment of refund claim against tax arrears - refund under APVAT Act and procedural compliance

Entitlement to refund of excess input tax credit - adjustment of refund claim against tax arrears - refund under APVAT Act and procedural compliance - Petitioner is entitled to a cash refund of the excess input tax credit quantified in the refund audit proceedings. - HELD THAT: - The Court found that the refund audit proceedings (AO No.140748 dated 20.12.2018) quantified excess ITC of the petitioner and showed a net payable to the department as 'NIL', indicating the petitioner's entitlement to the cash refund. The respondents did not dispute the quantification but raised technical objections related to pre-bifurcation verification and adjustment procedures. The Court observed that such technicalities cannot defeat a clear entitlement and recorded that the amount is due to the petitioner. The endorsement and subsequent notices reflecting adjustment against arrears were considered, but the determinative finding is that the excess credit stands allowed and is payable subject to procedural compliance. [Paras 4, 7]

Petitioner entitled to cash refund of the excess ITC as quantified in the refund audit.

Refund audit and verification of pre-bifurcation ITC - requirement of production of purchase invoices for refund - refund under APVAT Act and procedural compliance - Authorities were directed to permit processing and payment of the refund upon production of requisite invoices and to complete payment within a specified timeframe. - HELD THAT: - Recognising that the respondents' objection rested on the need for cross-verification of purchase transactions (particularly those accruing pre-bifurcation) and on alleged non-production of original invoices, the Court ordered a limited procedural course: the petitioner was directed to submit original purchase invoices or copies (if originals already submitted) within ten days, and upon receipt the authorities were to process the application and pay the refund in accordance with law. The Court imposed a timetable, preferring that payment be made as early as possible and, preferably, within three months after processing. This direction does not constitute an adjudication that further substantive audit is unnecessary; rather it mandates prompt procedural action to effect the already-acknowledged entitlement. [Paras 6, 9]

Petitioner to submit invoices within ten days; authorities to process and pay the refund in accordance with law, preferably within three months.

Final Conclusion: Writ petition disposed by directing the petitioner to produce invoices within ten days and directing the respondents to process and pay the quantified refund in accordance with law, preferably within three months; no order as to costs.

Absence of proof of service - condonation of delay - service under Rule 62 of the DVAT Rules - remand for adjudication on merits - setting aside of costs

Absence of proof of service - condonation of delay - service under Rule 62 of the DVAT Rules - remand for adjudication on merits - Whether the Tribunal was justified in dismissing the appeal as barred by limitation when there was no material on record to establish service of the order impugned. - HELD THAT: - The High Court found that the Tribunal dismissed the appeal solely on the ground of limitation, relying on affidavits which focused on the conduct of the appellant's CA but did not establish that service of the order had in fact been effected. The Court observed that when the appellant specifically averred non-receipt of the order, it was incumbent on the respondent to place on record material proving delivery. An RTI response placed on record indicated that no dispatch details or evidence of service were available in the relevant ward. In view of the absence of material to show service in terms of the prescribed mode, the Tribunal's dismissal for delay was not sustainable. The Court therefore set aside the impugned orders and remanded the appeal to the Tribunal for hearing and disposal on merits.

Impugned orders dismissing the appeal as barred by limitation were set aside and the matter remanded to the Tribunal to be heard on merits.

Setting aside of costs - Whether the direction in the Tribunal's review order requiring the appellant to pay costs should be maintained. - HELD THAT: - The High Court vacated the direction in the order dated 23.05.2022 requiring payment of costs, as part of its disposal of the impugned orders. Having set aside the Tribunal's orders and remitted the matter for adjudication on merits, the Court expressly annulled the costs direction contained in the review order.

The costs direction in the Tribunal's review order was set aside.

Final Conclusion: The impugned Tribunal orders dated 28.12.2021 and 23.05.2022 were set aside and the appeal remitted to the Tribunal for adjudication on merits; the direction to pay costs in the review order was also quashed.