TaxTMI Updates e-Newsletter
Sep 03,2020

Conditional bail - unreasonable and onerous bail condition - recovery of revenue by way of bail condition - protection of revenue by statutory remedies - presumption of innocence and Article 21 liberty - non-cognizable and bailable offences under the GST legislation - power to arrest and sanction for prosecution under the Act

Conditional bail - recovery of revenue by way of bail condition - protection of revenue by statutory remedies - presumption of innocence and Article 21 liberty - Validity of the condition in the bail order directing the petitioner to pay Rs. 1,94,78,017/- along with interest as a prerequisite for bail. - HELD THAT: - The Court held that the condition directing payment of the alleged tax liability as a condition for grant of bail was onerous, unreasonable and amounted to using the bail order for effecting recovery, which prejudges the accused's liability. The Court noted that the Act contains specific statutory remedies (notice, interest, penalty, provisional attachment and other recovery mechanisms) to protect the revenue and to effect recovery, and that those statutory modes are available to the State. Having regard to the presumption of innocence, the settled principle that bail is the rule and jail the exception, and that deprivation of liberty under Article 21 requires justification, the Court found that the payment condition violated the petitioner's right to liberty and could not be sustained. The fact that investigation/enquiry had been completed and a complaint filed did not justify imposing a recovery condition in the bail order where alternative statutory remedies exist and no material was shown to justify detention to prevent tampering or absconsion.

Condition requiring payment of Rs. 1,94,78,017/- along with interest as a prerequisite for bail set aside.

Unreasonable and onerous bail condition - non-cognizable and bailable offences under the GST legislation - presumption of innocence and Article 21 liberty - Appropriateness of the bail bond amount and other bail conditions imposed by the Trial Court. - HELD THAT: - The Court observed that the Trial Court had treated the offence as falling within bailable/non-cognizable parameters for the particular liability found (i.e., making the accused entitled to bail), yet imposed onerous financial conditions which effectively continued the petitioner's incarceration. Relying on settled principles that insist on care in exercising discretionary bail jurisdiction and on authorities disapproving of converting bail into a means of recovery, the Court found the financial conditions excessive. In modification of the impugned order, the Court reduced the personal/financial securities: bail bonds fixed at Rs. 50,00,000 with one surety were reduced and replaced by bonds of Rs. 25,00,000 to be secured by immovable property to the satisfaction of the Ilaqa/Duty Magistrate, while other non-financial conditions in the bail order were left undisturbed.

Bail bonds reduced to Rs. 25,00,000 to be secured by immovable property; other conditions of the bail order to remain in force.

Final Conclusion: Petition allowed: the condition directing payment of the alleged tax liability as a condition for bail set aside; bail bond requirement modified to bonds of Rs. 25,00,000 in the form of immoveable property to the satisfaction of the Ilaqa/Duty Magistrate, Panipat; remaining conditions of the bail order to continue.

Remand for re-examination of evidence - admission and consideration of evidence on remand - disallowance under Section 40(a)(ia) of the Income tax Act - assessee in default under Chapter XVII B - retrospective clarification by amendment to Section 40(a)(ia)

Remand for re-examination of evidence - admission and consideration of evidence on remand - disallowance under Section 40(a)(ia) of the Income tax Act - Whether the matter should be remitted for fresh consideration by the Commissioner of Income Tax (Appeals) so that the assessee may adduce and have its evidence re-examined in relation to disputed payments and resultant disallowance under Section 40(a)(ia). - HELD THAT: - The assessee had produced an agreement and an affidavit in relation to payment to T. Shivakumar and had asserted that payments to Abdul Rahim and Srinivas were for disbursement of wages and reimbursement of handling charges. The Commissioner of Income Tax (Appeals) had refused to accept the evidence; the Tribunal had remitted the matter for re-examination. Having considered the record and submissions, the High Court held that remand was imperative. The Court directed that the assessee shall be at liberty to adduce evidence regarding payments to Abdul Rahim and Srinivas before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) is to consider the evidence and, if appropriate, may call for a remand report from the Assessing Officer and thereafter decide the matter afresh in accordance with law. The Tribunal's order is modified to this extent. The Court expressly did not answer the substantial questions of law framed earlier, leaving the factual adjudication on evidence and consequential application of Section 40(a)(ia) to the Commissioner of Income Tax (Appeals) on remand. [Paras 5]

Remand directed: assessee permitted to adduce evidence before the Commissioner of Income Tax (Appeals); Commissioner of Income Tax (Appeals) to consider evidence and may obtain remand report from Assessing Officer and decide afresh; Tribunal's order modified accordingly.

Final Conclusion: The appeal is disposed of by directing remand to the Commissioner of Income Tax (Appeals) for fresh consideration of the evidence relating to disputed payments and any consequential disallowance under Section 40(a)(ia), with liberty to the assessee to adduce evidence and with power to the Commissioner of Income Tax (Appeals) to call for a remand report; the substantial questions of law were left unanswered.

Failure of duty - denial of justice - judicial administration of tribunals - posting of permanent members - exemplary costs for obstructing tribunal functioning

Failure of duty - denial of justice - posting of permanent members - judicial administration of tribunals - exemplary costs for obstructing tribunal functioning - Whether the non-functioning of the Income Tax Appellate Tribunal, Allahabad, due to non-posting of permanent members amounts to a failure of duty causing denial of justice and warrants a direction to the respondents to explain the situation and face possible exemplary costs. - HELD THAT: - The Court, on the material placed before it, observes that the Allahabad Bench of the Income Tax Appellate Tribunal has sat only sporadically (specific recent sittings recorded) and, in the last year, functioned for eleven days. The petitioner, a statutory development authority, has pending appeals before the Tribunal in respect of specified assessment years and faces ongoing recovery of substantial demands while its appeals remain unheard. The respondents, despite a prior direction to obtain and place clear instructions, have not satisfactorily explained why permanent members have not been posted or why the Bench is not functioning regularly. Prima facie, this conduct indicates a failure of duty by the authorities responsible for tribunal administration and results in denial of justice to appellants and congestion of writ litigation before the High Court. In these circumstances the Court considers it just to require the responsible respondents to show cause by affidavit why permanent members have not been posted at the Allahabad Bench and why exemplary costs should not be imposed for obstructing normal functioning of the Tribunal. The Court therefore issues a limited mandatory direction for explanation and reserve determination on costs for further hearing.

Respondents nos.1 and 5 are directed to file affidavits showing cause as to why permanent members have not been posted at the Allahabad Income Tax Appellate Tribunal and why exemplary costs should not be imposed; matter listed for further hearing.

Final Conclusion: Prima facie failure of duty found in the irregular functioning of the Income Tax Appellate Tribunal, Allahabad; respondents directed to file affidavits explaining non-posting of permanent members and to show cause regarding imposition of exemplary costs, with the matter posted for further hearing.

Agricultural income - income derived from saplings or seedlings grown in a nursery deemed to be agricultural income - precedent in assessee's own case - depreciation adjustment consequent to classification of income as agricultural - taxability of foreign exchange fluctuation gain - classification of foreign exchange gain into capital expenditure, revenue creditors, revenue debtors and year-end revaluation

Agricultural income - income derived from saplings or seedlings grown in a nursery deemed to be agricultural income - precedent in assessee's own case - Income of Rs. 5,66,86,518 was held to be agricultural income and not business income. - HELD THAT: - The Tribunal noted that an identical question was previously decided in the assessee's favour for earlier assessment years. Applying Explanation 3 to the definition of agricultural income, which treats income from saplings or seedlings grown in a nursery as agricultural income, and having regard to CBDT guidance, the Tribunal found the facts of the year under consideration to be mutatis mutandis similar to those earlier years. Respectfully following the earlier Tribunal orders placed on record, the Tribunal sustained the CIT(A)'s conclusion that the amount claimed is agricultural income and not taxable as business income. [Paras 4]

Allowed in favour of the assessee; the disputed amount is agricultural income.

Depreciation adjustment consequent to classification of income as agricultural - Disallowance of differential depreciation by the AO was vacated and no addition was sustained. - HELD THAT: - The AO's disallowance of differential depreciation was founded on treating the income as business income. Having held that the operations generate agricultural income, the basis for that disallowance disappeared. Consequently, the Tribunal held that the full depreciation claimed (as per the Companies Act figure) ought to reduce computation of agricultural income and there could be no addition on account of the earlier disallowance for the year under consideration. [Paras 6]

No addition on account of depreciation; depreciation allowed in consequence of classification as agricultural income.

Taxability of foreign exchange fluctuation gain - classification of foreign exchange gain into capital expenditure, revenue creditors, revenue debtors and year-end revaluation - Taxability of the assessed foreign exchange fluctuation gain was not finally adjudicated and was remanded to the AO for consideration in accordance with the Tribunal's earlier approach. - HELD THAT: - The Tribunal observed that in the assessee's earlier year the foreign exchange fluctuation gain was bifurcated into four categories (capital expenditure, revenue creditors, revenue debtors, and year-end revaluation) and that differing tax treatments were applied to those categories. For the year before the Tribunal, the assessee had placed a similar classification on record, but neither the AO nor the CIT(A) examined that classification. Therefore the Tribunal set aside the impugned order on this point and directed the AO to consider taxability of the foreign exchange fluctuation gain under the four heads in accordance with the approach adopted by the Tribunal in the earlier assessment year. [Paras 10]

Matter remanded to the AO for fresh consideration of taxability of the foreign exchange fluctuation gain under the four specified categories.

Final Conclusion: The Revenue appeal is dismissed; the assessee's cross-objection is partly allowed for statistical purposes. The classification of the principal amount as agricultural income is sustained, consequential depreciation disallowance is negated, and the question of taxability of foreign exchange fluctuation gain is remitted to the Assessing Officer for consideration in accordance with the Tribunal's earlier approach.

Fees for professional or technical services - fees for technical services - fees for professional services - tax deduction at source under section 194J - tax deduction at source under section 194C - collection, transportation and disposal of waste as contract work - distinction between a facility and a technical service

Fees for technical services - fees for professional services - tax deduction at source under section 194J - tax deduction at source under section 194C - distinction between a facility and a technical service - collection, transportation and disposal of waste as contract work - Whether payments made to M/s Hoswin Incinerator Private Limited for collection and disposal of hospital waste are taxable as fees for professional/technical services attracting TDS at 10% under section 194J, or are payments for contract work attracting TDS at 2% under section 194C. - HELD THAT: - The Tribunal held that the payments were for collection, transportation and disposal of waste - a standardized facility provided to multiple hospitals - and not for rendering of specialized, exclusive or customized managerial, technical or consultancy services. Applying the facility-versus-service test explained by the Supreme Court in CIT v. Kotak Securities Ltd. and subsequent authorities, the Tribunal emphasised that mere use of technical equipment by the service provider does not convert the payment into fees for technical services; section 194J applies only where technology, technical knowledge or specialized human services are made available to the payer. The Tribunal found that no technical consultancy, managerial advice or transfer of skill/knowledge was rendered to the appellant, and that the service provider operated a common waste-treatment facility serving many hospitals on a uniform basis. The decision of the Coordinate Bench in ITO v. Gujarat Fluorochemicals Ltd. , and other Tribunal and High Court precedents relied upon in the order, were followed to conclude that collection, transportation and disposal of waste fall within contract work covered by section 194C and not within fees for professional or technical services under section 194J. On that basis, the Tribunal set aside the assessing officer's characterization under section 194J and directed deletion of the demand and interest arising from the alleged short-deduction under section 194J.

Payments to M/s Hoswin Incinerator Private Limited are covered by section 194C (contract for collection, transportation and disposal of waste) and not by section 194J; the additions and interest determined for short-deduction under section 194J are deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the payments for collection and disposal of hospital waste are contract payments attracting TDS under section 194C (2%) and not fees for professional/technical services under section 194J (10%); the assessed demand and interest under section 201/201(1A) were deleted.

Minimum Alternate Tax (MAT) credit - carry forward and set-off of MAT credit - order passed under section 154 of the Income-tax Act - appeal effect - remand for computation of credit

Minimum Alternate Tax (MAT) credit - order passed under section 154 of the Income-tax Act - appeal effect - remand for computation of credit - Whether the Commissioner (Appeals) was justified in confirming the Assessing Officer's order under section 154 without directing computation of MAT credit for earlier years by giving effect to appellate orders. - HELD THAT: - The Assessing Officer, by an order under section 154, adjusted the MAT credit resulting in a reduction of the credit claimed by the assessee for the year under consideration. The assessee contended that higher MAT credit is allowable based on favourable orders of the Tribunal and the CIT(A) in respect of earlier years, and sought a direction to the AO to give appeal effect to those orders and recompute the available MAT credit. The CIT(A) confirmed the AO's action without addressing the question of giving effect to the appellate orders or independently determining the availability of MAT credit for A.Ys. 2006-07 and 2007-08. The Tribunal held that unless appeal effect is given, the availability and quantum of MAT credit cannot be ascertained; consequently the matter requires fresh consideration by the AO after giving effect to the orders of the ITAT and CIT(A). In view of this, the Tribunal remanded the matter to the AO with a direction to compute the MAT credit available in earlier years by giving effect to the appellate orders, leaving the quantification to the assessing authority on reconsideration.

Matter remanded to the Assessing Officer to compute the MAT credit available for earlier years by giving effect to the orders of the ITAT and the CIT(A); the assessee's ground is allowed for statistical purposes.

Final Conclusion: The appeal is allowed for statistical purposes and the case is remanded to the Assessing Officer with a direction to give appeal effect to the appellate orders and recompute the MAT credit available in the earlier assessment years for appropriate carry forward and set-off in A.Y. 2011-12.

Validity and acceptance of family partition deed - ownership for computation of capital gains - availability of exemptions under Section 54B and Section 54F - entertainment of fresh claim in first appeal - chargeability of consideration received for extinguishment of rights as capital gain

Validity and acceptance of family partition deed - ownership for computation of capital gains - availability of exemptions under Section 54B and Section 54F - entertainment of fresh claim in first appeal - chargeability of consideration received for extinguishment of rights as capital gain - Effect of the Partition deed dated 11-08-2011 on the assessee's ownership at the time of sale dated 21-10-2011 and the consequent availability of exemption under Sections 54B and 54F and computation of capital gain. - HELD THAT: - The Tribunal recorded that the sale deed executed on 21-10-2011 described the assessee as an "Approver" and that the translated Partition deed dated 11-08-2011 had been placed on record. The CIT(A) accepted the Partition deed and held that the land was transferred in the names of the sons prior to the sale, recording that the assessee had no ownership on the date of transfer and therefore could not claim the exemptions under Section 54F or Section 54B. The Tribunal held that the assessee was entitled to raise the Partition deed for the first time in the appeal proceedings and that the CIT(A) was within jurisdiction to entertain and accept that claim. In the absence of any cross-appeal by the Revenue against the CIT(A)'s finding on the genuineness of the Partition deed, that factual finding attained finality and could not be assailed in the assessee's appeal. Consequently, where the assessee was found not to be the owner of the property at the time of sale, exemptions under Sections 54B and 54F were correctly disallowed and no capital gain could be computed in respect of the sale of that property in the assessee's hands. The assessee, however, did not dispute the chargeability of the amount received by way of extinguishment of his right; the Tribunal directed the AO to compute capital gain in respect of the extinguishment consideration (treated as full value of consideration for that extinguishment) as reflected in the assessee's submissions. [Paras 4, 5, 7, 10]

CIT(A)'s acceptance of the Partition deed is sustained; exemptions under Sections 54B and 54F are not available since the assessee was not owner at the time of sale; AO to compute capital gain only on the extinguishment consideration of Rs. 21.50 lakh.

Validity and acceptance of family partition deed - ownership for computation of capital gains - availability of exemptions under Section 54B and Section 54F - entertainment of fresh claim in first appeal - chargeability of consideration received for extinguishment of rights as capital gain - Whether, in the case of the co-assessee, the Partition deed precluded ownership at the time of sale and the resulting effect on exemptions and computation of capital gain, and the taxable treatment of extinguishment consideration. - HELD THAT: - Facts and findings being mutatis mutandis similar to the first assessee, the Tribunal applied the same principles: the CIT(A) accepted the Partition deed as having come into effect before the date of sale and recorded that the assessee was not the owner on the date of transfer; that finding was not challenged by the Revenue. The Tribunal held that the assessee was entitled to raise the claim in the first appeal and that, in consequence of non-ownership on the date of sale, exemptions under Sections 54B and 54F could not be claimed and capital gain arising from sale of the property could not be computed in the assessee's hands. The amount received by the assessee as extinguishment of rights was, however, not disputed as taxable; the Tribunal directed the AO to compute capital gain taking the extinguishment consideration as the full value of consideration for the assessee's share. [Paras 7, 8]

CIT(A)'s acceptance of the Partition deed is sustained; exemptions under Sections 54B and 54F are not available; AO to compute capital gain on the extinguishment consideration of Rs. 17.48 lakh.

Final Conclusion: Both appeals are partly allowed: the Tribunal upholds the CIT(A)'s finding that the Partition deed established absence of ownership at the time of sale (precluding exemptions under Sections 54B and 54F), and directs the AO to compute capital gains only on the amounts received by the assessees as extinguishment of their rights.

Capital Gains - date of transfer - exemption under section 54F - Capital Gains Account Scheme

Capital Gains - date of transfer - exemption under section 54F - Capital Gains Account Scheme - Whether the capital gain arising on transfer of inherited agricultural land on 26-08-2011 is assessable in A.Y. 2012-13 and whether the assessee is entitled to exemption under section 54F. - HELD THAT: - The Tribunal found that the original asset was transferred on 26-08-2011, which is the decisive event giving rise to capital gain and fixes the year of assessment as A.Y. 2012-13. The statutory conditions for claiming exemption under section 54F require that the assessee purchase a residential house within one year before or within two years after the date of transfer, or construct a house within three years, or deposit the sale proceeds in the Capital Gains Account Scheme within the prescribed period. The assessee neither purchased nor constructed a residential house within the stipulated periods. Although major portions of the sale consideration were realized in April and July 2012 (with cheques dated earlier), the investments into the Capital Gains Account Scheme were made only from 31-12-2012 onwards, beyond the prescribed time. The assessee also admitted non-utilisation of the sale proceeds for purchasing or constructing a house. On these facts, the Tribunal held that the conditions of section 54F were not satisfied and the claimed exemption must be denied. Consequently, the capital gain is to be assessed in A.Y. 2012-13. [Paras 4, 7, 8]

Capital gain arose on 26-08-2011 and is assessable in A.Y. 2012-13; exemption under section 54F is not available and is denied.

Final Conclusion: The appeal is dismissed; the assessment of long term capital gain in A.Y. 2012-13 is upheld and the claim of exemption under section 54F is rejected.

Voluntary transfer pricing adjustment - deduction under section 10AA - arm's length price pursuant to Advance Pricing Agreement (APA) - proviso to section 92C(4) - denial of deduction where income is enhanced by Assessing Officer/TPO - profits of the business of the undertaking for computation of deduction under section 10AA

Voluntary transfer pricing adjustment - deduction under section 10AA - profits of the business of the undertaking for computation of deduction under section 10AA - ALP adjustment made voluntarily pursuant to APA is eligible for deduction under section 10AA as part of "profits of the business of the undertaking". - HELD THAT: - The Tribunal held that the ALP adjustment computed and offered to tax by the assessee pursuant to the APA constitutes a voluntary transfer pricing adjustment and falls within the expression "profits of the business of the undertaking" used in section 10AA(1) read with section 10AA(7). Section 10AA(7) provides a formula for computing profits derived from exports as a proportion of the profits of the undertaking; the phrase "profits of the business of the undertaking" is wide enough to include incremental income arising from ALP adjustments. The Tribunal relied on appellate precedents (including jurisdictional High Court and tribunal decisions cited in the order) recognising that the expression in sections 10A/10B/10AA covers ancillary or incremental income, and accordingly held the voluntary ALP adjustment eligible for deduction under section 10AA. [Paras 13, 14, 16, 23]

Allowed the assessee's claim for deduction under section 10AA in respect of the voluntary ALP adjustment pursuant to the APA for the Gurgaon SEZ unit.

Proviso to section 92C(4) - denial of deduction where income is enhanced by Assessing Officer/TPO - arm's length price pursuant to Advance Pricing Agreement (APA) - voluntary transfer pricing adjustment - The proviso to section 92C(4) barring deduction under section 10AA does not apply to voluntary ALP adjustments made by the taxpayer pursuant to an APA. - HELD THAT: - The Tribunal distinguished adjustments made by the Assessing Officer or TPO under section 92C(3)/92CA (which are expressly caught by the proviso to section 92C(4)) from voluntary adjustments made by the assessee pursuant to an APA and declared in a modified return. The proviso prevents allowance of deductions in respect of income increased by the AO's determination, but does not extend to voluntary ALP adjustments accepted by the assessee and filed under the APA mechanism. The Tribunal also noted consistent findings in earlier orders (including the assessee's own earlier years and other tribunal decisions) that incremental income pursuant to APA/voluntary TP adjustments is not hit by the proviso and therefore deduction under section 10AA is maintainable. [Paras 17, 18, 21, 22, 23]

Held that the proviso to section 92C(4) does not operate to deny section 10AA deduction in respect of voluntary ALP adjustments pursuant to an APA.

Final Conclusion: The revenue's appeal is dismissed: the Tribunal upheld the CIT(A)'s allowance of deduction under section 10AA for the voluntary ALP adjustment made pursuant to the APA for the Gurgaon SEZ unit and held that the proviso to section 92C(4) does not bar such a claim.

Deduction under Section 80P(2)(a)(i) for profits and gains attributable to carrying on banking or providing credit facilities to members - deduction under Section 80P(2)(d) for interest or dividend derived from investments with another co-operative society - interest on deposits characterised as income from other sources - conflicting precedents requiring remand for fresh factual and legal consideration

Deduction under Section 80P(2)(a)(i) for profits and gains attributable to carrying on banking or providing credit facilities to members - deduction under Section 80P(2)(d) for interest or dividend derived from investments with another co-operative society - interest on deposits characterised as income from other sources - conflicting precedents requiring remand for fresh factual and legal consideration - Whether the interest income of Rs. 76,17,450 earned on deposits with co-operative banks is eligible for deduction under Section 80P(2)(a)(i) or Section 80P(2)(d) and the course of adjudication required in view of conflicting authorities. - HELD THAT: - The Tribunal noted that the assessee is a credit co-operative society and received interest from several co-operative banks. There are conflicting judicial pronouncements - including the Supreme Court decision in Totgars Co-operative Sale Society Ltd. and divergent Karnataka High Court decisions (including Tumukur Merchants and later DB decisions) - on whether interest on deposits retains the character of income from "other sources" and whether such interest can be claimed as deductible under Section 80P(2)(a)(i) or under Section 80P(2)(d) where investments are with co-operative banks. In view of these contrary authorities and following the Tribunal's earlier order in The Jayanagar Co-operative Society Ltd., the Tribunal held that the question requires fresh consideration by the Assessing Officer after examining the facts in the light of the cited judgments and after affording the assessee an opportunity of being heard. The Tribunal therefore did not decide the entitlement to deduction on merits but remitted the matter for fresh adjudication by the AO as directed. [Paras 10, 12, 13]

The question of allowance of deduction under Section 80P(2)(a)(i) and Section 80P(2)(d) in respect of the interest income is remanded to the Assessing Officer for fresh consideration in the light of the relevant authorities, with opportunity to the assessee; appeal treated as allowed for statistical purposes.

Final Conclusion: The Tribunal did not adjudicate the substantive entitlement to deduction; instead, owing to conflicting precedents, it remanded the issue to the Assessing Officer for fresh consideration in the light of the cited authorities and afforded hearing to the assessee, and the appeal is disposed of as allowed for statistical purposes.

Condonation of delay - assessment framed in the name of a deceased person - substitution of legal representatives in assessment proceedings - void ab initio - continuation of proceedings against legal representative

Condonation of delay - Delay in filing the appeal was condoned. - HELD THAT: - The Tribunal considered the affidavit of the assessee's nephew, the correspondence requesting a certified copy of the appellate order and the fact that the assessee had died during the reassessment proceedings. The nephew had taken steps before the lower authorities (including the letter of 23.06.2017 enclosing the death certificate) and only received the certified copy on 10.11.2017, leading to the 566 day delay. The Tribunal found the explanation genuine, found no negligence on the part of the legal heir in pursuing the matter, and held that, in the interests of justice, the delay should be condoned. [Paras 4]

Delay of 566 days is condoned and the appeal is admitted.

Assessment framed in the name of a deceased person - substitution of legal representatives in assessment proceedings - void ab initio - continuation of proceedings against legal representative - Assessment and appellate proceedings finalized in the name of the deceased assessee are void and liable to be quashed where the fact of death was brought to the Revenue's notice but legal representatives were not put on record. - HELD THAT: - The Tribunal examined the material showing that the assessee's death had been brought to the notice of the Assessing Officer and the Commissioner (photocopy of the death certificate was on record), yet both authorities proceeded to finalize the assessment and dismiss the appeal in the name of the deceased. Relying on the settled principle that assessment can only be made against a living person and that proceedings after death must be continued against or taken against the legal representative (the statutory scheme creating a legal fiction for legal representatives applies only where proceedings were initiated in the lifetime or are properly brought against representatives), the Tribunal held that continuation and finalization of proceedings against a dead person without bringing legal heirs on record is unlawful. Following the Coordinated Bench precedent applied to identical facts, the Tribunal concluded the impugned proceedings are nullities and must be quashed. [Paras 8]

Impugned assessment and appellate finalization against the deceased are quashed; appeal allowed.

Final Conclusion: Delay in filing the appeal is condoned; since the authorities below finalized assessment and appeal against the deceased without substituting or bringing legal representatives on record, those proceedings are void ab initio and are quashed, and the assessee's appeal is allowed for Assessment Year 2006-07.

Arm's length price - reimbursement of expenses - transfer pricing adjustment - cost-to-cost reimbursement - comparable uncontrolled price (CUP) method - transactional net margin method (TNMM) - back-to-back third party invoices as CUP evidence - business expenditure wholly and exclusively for business - wholesale disallowance by TPO not authorised

Arm's length price - reimbursement of expenses - cost-to-cost reimbursement - comparable uncontrolled price (CUP) method - back-to-back third party invoices as CUP evidence - business expenditure wholly and exclusively for business - wholesale disallowance by TPO not authorised - Whether the transfer pricing adjustment to determine the ALP of reimbursements for testing/firewall charges paid to associated enterprises should be sustained or deleted. - HELD THAT: - The Tribunal examined the nature of the international transaction - reimbursement by the assessee of testing charges paid by its associated enterprises to a third party on a cost-to-cost basis to ensure quality of exported motors. The authorities below had applied the CUP method and treated the payments as non-arm's-length, valuing them at Nil on the view that no unrelated party would incur such payments (characterising them as duplicative of warranty or unnecessary). The Tribunal, following the coordinate-bench decisions in the assessee's own earlier years and the reasoning of the Hon'ble Delhi High Court in EKL Appliances Ltd., held that a wholesale disallowance of such an expenditure by the TPO is not authorised. The Tribunal accepted that (i) the testing was undertaken to prevent product defects arising during transit and to protect the manufacturer's brand and product liability exposure, (ii) the payments were effected on a cost-to-cost basis without any mark-up and were evidenced by back-to-back third party invoices, and (iii) the TPO had not identified comparables to justify benchmarking the reimbursements at Nil. On these bases the Tribunal found the assessee's contention plausible and concluded that the TPO/AO erred in disallowing the expenditure wholesale; the transfer pricing adjustment was therefore deleted and the appellate authorities directed to give effect to that deletion. [Paras 15, 16]

The transfer pricing adjustment in respect of reimbursement of testing/firewall charges to the associated enterprises is deleted; the appeal is allowed on this ground.

Final Conclusion: The Tribunal, following coordinate-bench precedent and relevant authority, deleted the transfer pricing adjustment relating to reimbursement of testing charges and partly allowed the appeal for AY 2010-11.

Royalty - copyrighted article versus copyright rights - use or right to use - Explanation to section 9(1)(vi) of the Act - DTAA beneficial provisions and treaty override of domestic law - penalty proceedings under section 271(1)(c)

Royalty - copyrighted article versus copyright rights - use or right to use - Explanation to section 9(1)(vi) of the Act - DTAA beneficial provisions and treaty override of domestic law - Whether consideration received on sale/licensing of software to Indian customers is taxable as 'royalty' under the Income-tax Act and Article 12(3) of the India-Singapore DTAA. - HELD THAT: - The Tribunal held that the receipts on sale/licence of standard application software in the factual matrix were payments for a copyrighted article and not for a copyright right or for the use or right to use the copyright. Applying the reasoning of the Delhi High Court in DIT v. Infrasoft Ltd. and related authorities, the Tribunal observed that the licences were non exclusive, non transferable and restricted in scope (permitting only internal use and limited copying for archival/backup), and therefore did not confer on the licensee any of the exclusive copyright rights that would characterise a transfer of a copyright. The Tribunal further noted that the definition of 'Royalty' in the DTAA was narrower than the amended domestic Explanation to section 9(1)(vi), and because the treaty definition had not been amended and is more beneficial to the assessee, the DTAA governs. Consequently the amended domestic definition could not be extended to the DTAA; the receipts were not 'royalty' under the treaty or domestic law and thus not taxable as such in the hands of the non resident assessee. [Paras 14]

Receipts on sale/licensing of the software are not 'royalty' under the Act or the India-Singapore DTAA and are not taxable as royalty in the hands of the assessee; Ground No.1 allowed.

DTAA beneficial provisions and treaty override of domestic law - tax treatment of surcharge and cess under DTAA - Whether surcharge and education cesses were rightly levied on the tax rate adopted under the DTAA. - HELD THAT: - The Tribunal treated this as an alternate plea which falls away on acceptance of the primary contention that the receipts are not taxable as royalty. Since taxability itself is negated by the decision on the main issue, the alternate contention regarding levy of surcharge and cess does not survive for separate adjudication. [Paras 15]

Alternate plea on levy of surcharge and cess does not survive and is not adjudicated on merits.

Penalty proceedings under section 271(1)(c) - Validity of initiation of penalty proceedings under section 271(1)(c) of the Act at this stage. - HELD THAT: - The Tribunal observed that initiation of penalty proceedings was premature at the present stage of assessment and appeal and therefore could not be sustained at this point. No final adjudication on penalty merits was undertaken. [Paras 16]

Penalty initiation under section 271(1)(c) dismissed as premature.

Final Conclusion: The appeal is allowed: the Tribunal held that the amounts received on sale/licensing of software were for a copyrighted article and not 'royalty' under the Act or the India-Singapore DTAA, the alternate plea on surcharge/cess does not survive, and the initiation of penalty proceedings was premature.

Mercantile system of accounting and accrual basis of recognition - accrual basis taxation and reconciliation with Form 26AS - provision for obsolescence and utilisation of earlier provisions - duplication of deduction/claim previously allowed in an earlier assessment year - tripartite agreement and accrual of liability on contract formation - initiation of penalty proceedings under section 271(1)(c) - grant of TDS credit - remand for fresh verification and opportunity of hearing

Mercantile system of accounting and accrual basis of recognition - duplication of deduction/claim previously allowed in an earlier assessment year - tripartite agreement and accrual of liability on contract formation - Disallowance of the claim of Rs. 33.92 crore paid to Vista Information Systems Ltd upheld for AY 2013-14 on the ground that the liability accrued in the earlier year. - HELD THAT: - The Tribunal examined the agreements between the parties (including the agreement dated 30.12.2011 and the tripartite arrangement dated 02.05.2012) and the assessee's audited financial statements which recorded the provision/extraordinary item for the liability in the year ended 31.3.2012. The contractual terms show that the appellant's liability crystallised pursuant to the agreement of 30.12.2011 (and extensions permitted thereby) and the liability was therefore reflected in the financial statements for the year relevant to AY 2012-13. The accounts were maintained on accrual (mercantile) basis and the financial statements were not shown to be incorrect; the manner of payment later does not alter accrual. Since the same expenditure/claim had been allowed in the assessment for the earlier year, the Tribunal agreed with the revenue that the claim could not be again admitted in AY 2013-14 and confirmed the disallowance. [Paras 28]

Ground dismissed; addition of the expenditure confirmed for AY 2013-14 as pertaining to an earlier year.

Provision for obsolescence and utilisation of earlier provisions - usage of provision - remand for fresh verification and opportunity of hearing - Claim of deduction of Rs. 25,851,322 on account of utilisation of provision for obsolescence was not finally adjudicated and is remanded to the AO for verification and fresh decision after giving opportunity to the assessee. - HELD THAT: - The Tribunal found that the assessing officer had disallowed the deduction because the assessee failed to demonstrate that the utilised provision had earlier been offered to tax; the CIT(A) upheld that conclusion. On scrutiny, material and computations for the year in which the provision was created/offered to tax (including the computation for AY 2011-12) were not placed before the AO, and certain factual statements in the AO's order (regarding use of the provision) appeared incorrect. Given the absence of adequate evidence and misappreciation of the accounts/notes, the Tribunal set aside the issue and directed the AO to examine afresh whether the claimed utilisation represents amounts earlier offered to tax, affording the assessee proper opportunity to substantiate its claim and deciding the matter on merits. [Paras 36]

Ground allowed for limited purpose of remand; matter restored to AO for fresh adjudication after giving opportunity of hearing.

Accrual basis taxation and reconciliation with Form 26AS - reconciliation with Form 26AS - remand for fresh verification and opportunity of hearing - Addition of Rs. 8,208,537 on account of differential interest income set aside and remitted to the AO for detailed reconciliation with Form 26AS and fresh decision after hearing the assessee. - HELD THAT: - The Tribunal noted inconsistencies in the explanations and two different reconciliation letters filed by the assessee during assessment proceedings. Because the record did not clearly establish the exact amounts credited to the books in the subject year vis-a -vis amounts appearing in Form 26AS, the Tribunal directed that the AO should examine the matter afresh, reconcile the interest as per books with Form 26AS, and give the assessee an opportunity to produce supporting evidence; the principle that interest is taxable in the year of accrual was affirmed but factual determination as to accrual and reconciliation required remand. [Paras 41]

Ground allowed for limited purpose of remand; AO to verify reconciliations and decide afresh after hearing the assessee.

Grant of TDS credit - Claim for credit of TDS in respect of Rs. 27,349,580 was not pressed before the Tribunal as credit had been granted. - HELD THAT: - The appeal on this ground was not pursued because the credit claimed by the assessee had already been allowed; the Tribunal recorded that the ground is dismissed as not pressed. [Paras 42]

Ground dismissed as not pressed (credit already granted).

Initiation of penalty proceedings under section 271(1)(c) - prematurity of penalty initiation - Challenge to initiation of penalty proceedings under section 271(1)(c) held premature and dismissed. - HELD THAT: - No substantive arguments were advanced and the Tribunal observed that initiation of penalty proceedings does not by itself aggrieve the assessee since a full hearing is to be afforded before any penalty is levied; consequently the ground was dismissed as premature. [Paras 43]

Ground dismissed as premature.

Final Conclusion: Appeal partly allowed. The disallowance of the Rs. 33.92 crore claim to the assessee for AY 2013-14 is confirmed. Two factual issues-the utilisation of the provision for obsolescence and the reconciliation of differential interest income with Form 26AS-are set aside and remitted to the assessing officer for fresh consideration after giving the assessee proper opportunity of hearing. The TDS-credit ground is not pressed (credit granted) and the challenge to penalty initiation is dismissed as premature.

Treatment of foreign exchange gain/loss on capital assets under section 43A - allowability of corporate social responsibility expenditure as business expenditure under section 37 - retrospective application of Explanation 2 to section 37 - composition fee: compensatory payment vs penal payment for deduction under section 37 - distinction between capital and revenue expenditure in repairs and replacements (current repairs vs acquisition/enhancement of capital asset) - allowability of signages/boards at dealer premises as revenue expenditure where no ownership by assessee - allowability of expenditure on sales-tools/fixtures supplied under dealer agreements as business expenditure - characterisation of royalty and technical know-how payments: running royalty revenue in nature; lumpsum/model fees capital or revenue - application of precedents distinguishing setting-up payments from recurring payments - admission of additional legal ground where question is one of law and facts are on record

Treatment of foreign exchange gain/loss on capital assets under section 43A - Whether the foreign exchange gain of Rs. 53,05,919 relating to Capital Work in Progress could be set off against foreign exchange loss on acquisition of fixed assets and thereby not be disallowed in computation of income. - HELD THAT: - The Tribunal found that the assessee had disclosed foreign exchange loss on acquisition of fixed assets and had adjusted against it a foreign exchange gain of Rs. 53,05,919 arising on CWIP. In view of section 43A, foreign exchange loss/gain relating to capital assets is to be adjusted to cost of the relevant assets (and not treated as revenue). The net amount of foreign exchange loss of approximately Rs. 1.63 crores had been offered to tax; no further disallowance was warranted. The Tribunal further noted that the DRP had directed the A.O. to examine documents and that the assessee had filed reconciliation and evidence; ultimately the netting-off was consistent with the statutory treatment of capital asset exchange differences under section 43A. [Paras 8]

Allowed the grounds challenging disallowance; the foreign exchange gain of Rs. 53,05,919 is to be adjusted against capital loss under section 43A and not disallowed.

Allowability of corporate social responsibility expenditure as business expenditure under section 37 - retrospective application of Explanation 2 to section 37 - Whether CSR expenditures debited in the books are allowable as business expenditure, and whether Explanation 2 to section 37(1) (w.e.f. 01.04.2015) applies retrospectively to the assessment year under consideration. - HELD THAT: - The Tribunal examined particulars of the CSR outlays (grants to schools for employee welfare, renovation/maintenance of training centre, tools for training lab, publicity with company name/logo etc.). It found that most items were incurred to promote and efficiently carry out the assessee's business and satisfied the "wholly and exclusively" test for business expenditure. The donation to a charitable organisation (Brahma Kumaris) was identified as charitable in nature and not allowable as business expenditure but may be considered under section 80G. On the question of Explanation 2 to section 37(1), the Tribunal followed earlier Tribunal precedents holding the Explanation to be prospective and therefore not applicable to the assessment year under consideration. With that approach, except for a small sum specifically disallowed (noted by the Tribunal), the CSR expenses were held allowable as revenue expenditure. [Paras 13, 14]

Grounds partly allowed; CSR expenditures largely allowed as business deduction, donation to charity not allowed as business expenditure, and Explanation 2 to section 37(1) not applied retrospectively.

Composition fee: compensatory payment vs penal payment for deduction under section 37 - Whether the composition fee paid to regularize building deviations is penal (and therefore disallowable) or compensatory/allowable as business expenditure. - HELD THAT: - After examining the nature of the composition fee and authorities, the Tribunal held that the fee was for regularization within permissible limits and operated as a compensatory payment - not a penalty to avoid criminal liability or to compound an offence. Applying the test in Prakash Cotton Mills and relevant High Court authority, the Tribunal concluded that the composition fee is compensatory and deductible as business expenditure under section 37(1). [Paras 16, 17, 18]

Allowed the ground; the composition fee is deductible as business expenditure.

Distinction between capital and revenue expenditure in repairs and replacements (current repairs vs acquisition/enhancement of capital asset) - Whether amounts debited as repair and maintenance/replacement of existing assets are revenue in nature or capital. - HELD THAT: - Relying on the Supreme Court's decision in Saravana Spinning Mills and on the details of expenditure filed by the assessee, the Tribunal held that expenditures that constitute current repairs or replacement of parts of existing plant and machinery are revenue in nature and allowable (section 31(1)/section 37). However, items that constituted acquisition of new capital articles (specifically certain chairs/furnishing) were capital in nature and required capitalization. The Tribunal quantified the capitalizable portion as indicated in the record and directed the A.O. to allow repair expenditure otherwise in full. [Paras 22]

Ground partly allowed; repair and maintenance expenditures allowed as revenue, but certain furnishing (chairs) to be capitalized.

Allowability of signages/boards at dealer premises as revenue expenditure where no ownership by assessee - Whether expenditure on signages at dealers' premises is capital (enduring benefit) or revenue expenditure. - HELD THAT: - The Tribunal noted that the signages were fixed at dealer premises and did not amount to ownership by the assessee; reliance was placed on relevant High Court authority distinguishing such facts. Given the absence of acquisition of a capital asset by the assessee and that the signages served as advertising/recurring promotion, the expenditure satisfies the test for revenue deduction. The Tribunal observed that the claim was not allowed 'entirely' but should be allowed to the extent appropriate on the facts. [Paras 26]

Partly allowed; signages expenditure to be allowed as revenue expenditure to the appropriate extent, not treated as capital in the assessee's hands.

Allowability of expenditure on sales-tools/fixtures supplied under dealer agreements as business expenditure - Whether sales tools/fixtures expenses (50% paid by the assessee under agreements with dealers and third-party manufacturers) are deductible as business expenditure. - HELD THAT: - On examining the dealership agreement clauses (including obligations regarding premises, equipment and company support/subsidy) and the contractual mechanism (assessee paying 50% advance to manufacturers, balance by dealers post-inspection), the Tribunal concluded that these sales tools were manufactured to the assessee's specifications to maintain uniform presentation and promote the brand. They were recurring in nature and incurred wholly and exclusively for business. The Tribunal distinguished precedents cited by the A.O. on different facts and allowed the expenditure as business deduction under section 37(1). [Paras 35, 36]

Allowed; sales-tools/fixtures expenses held deductible as revenue expenditure.

Characterisation of royalty and technical know-how payments: running royalty revenue in nature; lumpsum/model fees capital or revenue - application of precedents distinguishing setting-up payments from recurring payments - admission of additional legal ground where question is one of law and facts are on record - Whether recurring royalty payments and lumpsum technical know how/model fees paid to the foreign parent are capital or revenue in nature and whether an additional legal ground converting lumpsum payment to revenue should be admitted. - HELD THAT: - The Tribunal reviewed the contracts and facts: running (recurring) royalty paid yearly had been treated as revenue in prior years. The A.O. sought to disallow 25% of royalty as capital relying on earlier Supreme Court authority on payments made at the time of setting up manufacturing. The Tribunal applied the line of authority distinguishing payments made for establishment of manufacturing facility (capital) from recurring payments for ongoing manufacture/use (revenue). It directed the A.O. to allow the running royalty in entirety. An additional ground seeking to treat the lumpsum/model fee (previously capitalized) as revenue was admitted because it raised a point of law and material facts were on record; relying on the Jurisdictional High Court's decision in CIT v. Hero Honda Motors Ltd. and related Tribunal/High Court precedents (and noting dismissal of SLP), the Tribunal allowed the additional ground and accepted that the taxpayer could treat the relevant payments as revenue in the circumstances. [Paras 46, 47, 48, 49]

Allowed; running royalty to be allowed as business expenditure in full, and the additional legal ground admitting treatment of lumpsum/model fee as revenue was admitted and allowed on the cited precedent basis.

Final Conclusion: The appeal is allowed. The Tribunal set aside the impugned disallowances: the foreign exchange gain on CWIP is to be adjusted under section 43A; most CSR expenses (except identified charitable donation and a small disallowance) are allowed and Explanation 2 to section 37(1) was not applied retrospectively; the composition fee for building regularisation is deductible as compensatory business expenditure; repair and maintenance expenditures are allowable save for specific items of furnishing to be capitalised; signages at dealer premises and sales tools/fixtures are allowable as revenue expenditure to the appropriate extent; running royalty is allowed in full and the admitted additional ground permitting revenue treatment of lumpsum/model fees is allowed on the cited jurisprudence.

Defective penalty notice - initiation of penalty - penalty under section 271(1)(c) - opportunity of hearing - dismissal for non prosecution - remand for fresh consideration

Defective penalty notice - initiation of penalty - penalty under section 271(1)(c) - opportunity of hearing - remand for fresh consideration - Whether the validity of initiation of penalty and the penalty levied under section 271(1)(c), including the contention that the penalty notice did not specify the charge and that no proper opportunity was afforded, was finally adjudicated by the CIT(A) or required fresh consideration. - HELD THAT: - The Tribunal found that although the assessee remained non-cooperative before the CIT(A) (resulting in dismissal for non prosecution), the specific contentions raised by the assessee - notably that the penalty initiation/notice was fatally defective for not specifying the charge and that the provisions of section 271(1)(c) were not applicable - had not been decided on merits by the CIT(A). The Tribunal observed that these grounds were important and required thorough consideration. In view of the omission to decide those points, and notwithstanding the procedural defaults recorded by the CIT(A), the matter was fit to be remitted for fresh adjudication. The Tribunal directed that the CIT(A) decide the disputed issues afresh, after giving full opportunity to the assessee and recorded the date for appearance before the CIT(A). [Paras 5, 6]

Issues concerning the validity of initiation of penalty and the penalty under section 271(1)(c) were set aside and remanded to the CIT(A) for fresh decision after affording the assessee full opportunity; appeal allowed for statistical purposes and assessee directed to appear before the CIT(A) on 28.10.2020.

Final Conclusion: The Tribunal set aside the appellate decision and remanded the disputed penalty issues to the CIT(A) for fresh consideration after giving the assessee full opportunity to be heard; the appeal is allowed for statistical purposes.

Refund of customs duty - anti-dumping duty (ADD) - payment under protest - limitation under Section 27 of the Customs Act, 1962 - consequential relief on adjudication - finality of Order-in-Original - non-speaking order - interest on refunds

Refund of customs duty - anti-dumping duty (ADD) - payment under protest - limitation under Section 27 of the Customs Act, 1962 - finality of Order-in-Original - non-speaking order - Validity of rejection of the petitioner's refund claim on grounds of limitation and non-payment 'under protest' in the face of a final Order-in-Original holding ADD not leviable - HELD THAT: - The petitioner consistently maintained that the imported goods did not attract ADD and, pursuant to this Court's direction, paid 50% of the ADD and furnished a bond for release of goods. The Deputy Commissioner of Customs thereafter passed a speaking Order-in-Original dated 19.10.2015 holding that ADD was not leviable and granting consequential relief; that order was not challenged and has become final. The Assistant Commissioner of Customs rejected the refund claim on the grounds that it was time-barred under Section 27 and that payment was not proved to have been made 'under protest'. The Court held that, in view of the final Order-in-Original which found ADD not leviable pursuant to the Court's earlier directions, the rejection on limitation and protest grounds could not be sustained. Further, the impugned order was cryptic and non-speaking and failed to take into account the higher authority's adjudication and this Court's directions; reasons asserted in a counter affidavit cannot substitute for adequate reasoning in the impugned order. Consequently, the rejection was set aside and the petitioner was held entitled to refund of the duty collected. [Paras 9, 11, 12, 14]

The rejection of the refund claim on the grounds of limitation and non-payment 'under protest' is unsustainable and is set aside.

Refund of customs duty - interest on refunds - consequential relief on adjudication - Remedial relief to be granted following the finding that ADD was not leviable - HELD THAT: - Having held that the Order-in-Original concluding that ADD was not leviable is final and that the rejection of the refund was unjustified, the Court directed disbursement of the amount deposited by the petitioner pursuant to the Court's earlier order. The Court further directed payment of interest at the stated rate from the date of the Order-in-Original until actual payment, and specified a reasonable time for disbursement. [Paras 15]

Respondent directed to disburse the deposited amount to the petitioner with interest at 6% p.a. from 19.10.2015 until actual payment, to be made within four weeks of receipt of this order.

Final Conclusion: Writ petition allowed: the impugned order rejecting the refund is set aside; the deposited amount is to be refunded with interest as directed and the respondents to comply within the time ordered.

Bail - prima facie satisfaction in support of the charge - reasonable apprehension of tempering of witnesses - conditions of bail - compliance with court directions during COVID-19 regarding sureties and personal bonds

Bail - prima facie satisfaction in support of the charge - reasonable apprehension of tempering of witnesses - conditions of bail - Applicants Pintu Verma @ Mukesh Verma and Deepu Verma entitled to be released on bail in Case Crime No. Nil of 2019 (Case No. 895 of 2019) under Section 135 of the Customs Act - HELD THAT: - Having considered the nature of the accusation, the severity of punishment on conviction and the nature of supporting evidence, and noting reasonable apprehension of tempering of witnesses together with the Court's prima facie satisfaction in support of the charge, the Court nevertheless held that the applicants are entitled to bail. The Court directed release on furnishing personal bonds with two sureties each to the satisfaction of the trial court, subject to enumerated conditions aimed at preventing abuse of liberty: (i) undertaking not to seek adjournments when witnesses are present; (ii) requirement of presence on each date fixed either personally or through counsel, with consequences under Section 229-A IPC for absence without sufficient cause; (iii) consequences under Section 174-A IPC if proclamation under Section 82 Cr.P.C. is issued and applicants fail to appear; (iv) mandatory personal presence for opening of the case, framing of charge and recording of statement under Section 313 Cr.P.C., with deliberate absence being treated as abuse of bail; and (v-vii) requirements for filing, self-attestation and verification of a computer-generated copy of this order from the High Court website. The Court expressly refrained from expressing any opinion on the merits of the case.

Bail granted to the applicants on furnishing personal bonds with two sureties each, subject to specified conditions aimed at securing attendance and preventing misuse of liberty.

Compliance with court directions during COVID-19 regarding sureties and personal bonds - Applicability of High Court's COVID-19 directions for facilitation of release where sureties are difficult to arrange - HELD THAT: - The Court directed compliance with its earlier order dated 6.4.2020 in Public Interest Litigation No. 564 of 2020, permitting accused-applicants whose bail was allowed on or after 15th March, 2020 but who could not be released due to non-availability of sureties because of lockdown, to be released on executing personal bond to the satisfaction of the jail authorities, subject to furnishing the required sureties within one month of actual release. Those directions are to be followed in the present case in view of the extraordinary situation created by the pandemic and attendant difficulties in arranging sureties.

The High Court's COVID-19 directions of 6.4.2020 shall be complied with in facilitating release where applicable.

Final Conclusion: The High Court allowed the applicants' bail applications, directing their release on personal bonds with two sureties each subject to enumerated conditions to ensure attendance and prevent misuse of liberty, and ordered compliance with the Court's COVID-19 directions regarding temporary relaxation for furnishing sureties.

Power to alter share capital under section 61(1)(b) of the Companies Act, 2013 - Consolidation and division of shares into a larger denomination - Approval of consolidation where shares are unlisted and not marketable - Objections by absent minority shareholders to a duly passed special resolution - Role of valuation and fairness in share consolidation schemes

Power to alter share capital under section 61(1)(b) of the Companies Act, 2013 - Consolidation and division of shares into a larger denomination - Consolidation of equity shares by increasing the face value from Rs. 10 to Rs. 5,000 can be approved under section 61(1)(b) of the Companies Act, 2013. - HELD THAT: - The articles of association (article 9) empowered the company to consolidate its shares and a special resolution was validly passed by the members after following the prescribed procedure. Section 61(1)(b) expressly permits a company, if so authorised by its articles, to consolidate and divide share capital into larger denominations; a consolidation which does not change voting percentages may take effect subject to Tribunal approval. The Tribunal found that the petitioner complied with the process of law, produced a valuation, and that consolidation was thus permissible under section 61(1)(b). [Paras 16, 22, 23]

Consolidation approved as permissible under section 61(1)(b).

Objections by absent shareholders - Valuation and marketability in consolidation - Fairness and disclosure to shareholders - Objections by two shareholders who did not attend the extraordinary general meeting are not tenable and do not vitiate the consolidation scheme. - HELD THAT: - The objectors, despite receiving notice, failed to participate in the meeting and did not produce a contrary valuation or evidence showing mala fide conduct. The Tribunal noted the company's submissions that the shares are unlisted and largely non-marketable, that many public shareholders sought exit, and that a valuer employed asset-based and other approaches to arrive at the offer price. On this basis the Tribunal held that the objections-challenging valuation, alleged inadequate disclosure and alleged targeting of minority shareholders-did not establish that the scheme was unfair or outside the ambit of section 61, and were therefore not tenable. [Paras 20, 24, 25]

Objections overruled; scheme not shown to be unfair or legally impermissible.

Final Conclusion: The Tribunal allowed the petition and approved consolidation of equity shares by increasing the face value from Rs. 10 to Rs. 5,000, resulting in the paid-up share capital rising from Rs. 44,29,480 to Rs. 44,30,000, and permitted consequential changes in the company records and with the Ministry of Corporate Affairs.

Limitation under Article 137 of the Limitation Act, 1963 for proceedings under Section 7 of the I&B Code, 2016 - Effect of part payment/acknowledgement on computation of limitation - Application of Section 5 of the Limitation Act for condonation of delay - Operation of Section 238A of the I&B Code: application of the Limitation Act to NPA cases

Limitation under Article 137 of the Limitation Act, 1963 for proceedings under Section 7 of the I&B Code, 2016 - Effect of part payment/acknowledgement on computation of limitation - Application of Section 5 of the Limitation Act for condonation of delay - Whether the Section 7 application admitted by the Adjudicating Authority was barred by limitation and whether subsequent part payment on 19.02.2016 shifted the date of default for computing the three year limitation period. - HELD THAT: - The Tribunal held that the limitation period for filing an application under Section 7 is three years as provided by Article 137 of the Limitation Act, 1963, to be computed from the date of default/NPA. Reliance was placed on recent Supreme Court pronouncements affirming that the date of default is the date of declaration of the account as NPA and does not shift by reason of subsequent events. The Respondent Bank's contention that part payment on 19.02.2016 re commenced a fresh three year period (by operation of Section 19 of the Limitation Act) was rejected for the facts and law applied by the Tribunal in this case. The Tribunal reiterated that extension of limitation is available only by invoking Section 5 of the Limitation Act where sufficient grounds for condonation of delay are made out. In view of these legal principles and authorities, the Section 7 petition filed on 31.12.2018 was held to be time barred because the account had been declared NPA on 30.09.2015 and the limitation did not shift as argued by the Bank. [Paras 10, 11, 12, 13]

The appeal is allowed; the impugned order admitting the Section 7 petition is set aside as barred by limitation, all consequential CIRP actions are declared illegal and set aside, and the Adjudicating Authority is directed to close the CIRP and fix and recover IRP/RP fees and costs.

Final Conclusion: The Appellate Tribunal allowed the appeal, held the Section 7 application time barred as the three year limitation runs from the date of NPA and does not shift by the part payment relied upon, set aside the Adjudicating Authority's admission order and all consequential CIRP actions, directed closure of the CIRP and payment of IRP/RP fees and costs.

Pre-existing dispute under Section 9 of the Insolvency & Bankruptcy Code, 2016 - notice of dispute - Mobilox test for existence of dispute - summary jurisdiction of the adjudicating authority - demurrage and detention charges as disputed operational claim

Pre-existing dispute under Section 9 of the Insolvency & Bankruptcy Code, 2016 - notice of dispute - Mobilox test for existence of dispute - demurrage and detention charges as disputed operational claim - The Adjudicating Authority rightly rejected the Section 9 application on the ground that a pre-existing dispute had been raised by the Corporate Debtor before issuance of the demand notice. - HELD THAT: - The Corporate Debtor had raised objection by email dated 09th March 2018, which pre-dated the demand notice of 05th September 2018; the communication indicated disagreement over the invoices and the basis on which detentions/demurrage were levied. The claimed demurrage and detention charges were not a crystallised debt and their determination required examination of facts (including the period for which charges were levied), which goes beyond the limited/summary jurisdiction of the Adjudicating Authority under the Code. Applying the test laid down in Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd., a defence that constitutes a plausible contention and is not spurious, hypothetical or illusory amounts to a notice of dispute entitling the Adjudicating Authority to reject the Section 9 application. The email raised a factual and admissible dispute as contemplated by Mobilox and therefore the adjudicating authority correctly declined to admit the insolvency petition.

Application under Section 9 was rightly rejected by the Adjudicating Authority for existence of a pre-existing dispute raised prior to the demand notice.

Final Conclusion: The appeal is dismissed; the order of the Adjudicating Authority rejecting the Section 9 application on account of a pre-existing dispute is upheld.

Apprehension of bias - ineligibility or disqualification for appointment as Interim Resolution Professional or Resolution Professional - independence and impartiality of the Resolution Professional - powers of the Adjudicating Authority to replace an Insolvency Resolution Professional independent of the Committee of Creditors - perception based test for bias - past employment/pension of a proposed Resolution Professional as a ground for removal

Powers of the Adjudicating Authority to replace an Insolvency Resolution Professional independent of the Committee of Creditors - apprehension of bias - Validity of the Adjudicating Authority's order directing replacement of the Interim Resolution Professional without concurrence of the Committee of Creditors. - HELD THAT: - The Adjudicating Authority was entitled to direct substitution of the Interim Resolution Professional where the Corporate Debtor had a reasonable apprehension that the Interim Resolution Professional would not act fairly due to past association with the Financial Creditor. The Tribunal accepted the test of perceived bias as relevant and applied the perception based approach (looking to the mind of the party alleging bias) as explained in Ranjit Thakur. Where such apprehension is reasonably founded on factual aspects (here, long prior employment and an instance of admitted deviation), the Adjudicating Authority may act independently of the Committee of Creditors to protect the fairness and integrity of the insolvency process. The Appellate Tribunal found no infirmity in the impugned order removing the Interim Resolution Professional on that basis and upheld the Adjudicating Authority's exercise of power.

The Adjudicating Authority validly directed replacement of the Interim Resolution Professional without the Committee of Creditors' concurrence because a reasonable apprehension of bias, arising from past association and conduct, justified the action.

Ineligibility or disqualification for appointment as Interim Resolution Professional or Resolution Professional - past employment/pension of a proposed Resolution Professional as a ground for removal - independence and impartiality of the Resolution Professional - Whether past long standing employment or pensionary relationship with the Financial Creditor per se disqualifies a person from being an Interim Resolution Professional or Resolution Professional. - HELD THAT: - The Tribunal reiterated that past employment or pensionary receipt by itself does not automatically disqualify a person from appointment as Interim Resolution Professional or Resolution Professional unless it establishes that the person is an interested person (for example, currently on the payroll) or there are disciplinary proceedings. However, long past association and pensionary ties may give rise to a reasonable apprehension of bias in the mind of the Corporate Debtor. In the present case the factual finding-admitted past services spanning decades and an instance of deviation admitted by the Appellant-rendered the apprehension reasonable, thereby justifying substitution. The Tribunal relied on its earlier reasoning in State Bank of India vs. M/s. Metenere Ltd. and applied the perception based test for bias.

Past employment or pension alone is not an automatic disqualification; yet where it produces a reasonable and well founded apprehension of lack of impartiality, replacement of the Resolution Professional is justified.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's order directing substitution of the Interim Resolution Professional is upheld as a valid exercise of power in light of a reasonable apprehension of bias stemming from the Resolution Professional's long past association with the Financial Creditor and an instance of admitted deviation.

Maintainability of applications under Insolvency and Bankruptcy Code - locus standi of third parties to challenge transactions - jurisdiction of Adjudicating Authority in liquidation proceedings - scope of liquidation proceedings - summary nature of IBC proceedings - availability of civil and criminal remedies to aggrieved parties

Maintainability of applications under Insolvency and Bankruptcy Code - locus standi of third parties to challenge transactions - jurisdiction of Adjudicating Authority in liquidation proceedings - Whether the Interlocutory Applications filed by the appellant concerning alleged fraudulent acts relating to an SPV and certain properties are maintainable before the Adjudicating Authority in the liquidation proceedings of the Corporate Debtor. - HELD THAT: - The Adjudicating Authority found that the properties and transactions challenged in the Applications belong to an entity described as the SPV and not to the Corporate Debtor, and that the Applicants are strangers to the transactions sought to be impugned. It recorded that mortgages and charges on the lands were created by their owners in favour of identified lenders and that the matters raised did not fall within its jurisdiction under the IB Code. The Adjudicating Authority therefore held the Applications to be not maintainable for want of locus standi and jurisdiction and disposed them without adjudicating the merits. The Appellate Tribunal agreed with these findings, observing that the Corporate Debtor is under liquidation and that liquidation proceedings are time bound and summary in nature; inquiries into transactions of another entity (the SPV) are not relevant to those proceedings. The Tribunal noted that the IBC does not provide for third parties who are not privy to transactions to maintain such Applications before the Adjudicating Authority. Consequently, there was no reason to interfere with the Adjudicating Authority's conclusion that the Applications were not maintainable and were rightly dismissed. [Paras 11, 12, 14, 15, 16]

Applications dismissed as not maintainable for want of locus standi and for falling outside the purview of the IB Code; appellate interference refused.

Scope of liquidation proceedings - summary nature of IBC proceedings - availability of civil and criminal remedies to aggrieved parties - Whether the Adjudicating Authority ought to have directed forensic investigation or otherwise decided the merits of alleged fraud in the liquidation process, or whether the appellants should be directed to pursue alternative fora. - HELD THAT: - The Adjudicating Authority expressly recorded that it disposed of the Applications for want of jurisdiction and locus standi and did not pass any comment on the merits or demerits of the allegations. It further observed that the Applicants had access to other fora (IBBI, SFIO, police, TNRERA) and that they could initiate appropriate criminal or civil proceedings before competent authorities. The Appellate Tribunal endorsed this approach, noting that allowing such inquiries into third party or SPV transactions within the time bound, summary liquidation process would make the IBC unworkable. The Tribunal therefore held that it was unnecessary and inappropriate to direct forensic investigation or to decide the substantive fraud allegations in the liquidation proceedings, and that alternative remedies remained open to the appellants. [Paras 11, 15, 16]

No direction for forensic audit or adjudication on merits in liquidation; appellants may pursue civil/criminal remedies before appropriate authorities.

Final Conclusion: The Adjudicating Authority's order dismissing the Interlocutory Applications as not maintainable for want of locus standi and for falling outside the scope of liquidation proceedings is affirmed; the appeal is dismissed at the admission stage, and the appellants remain free to seek appropriate reliefs in other competent fora.

Limited grounds of appeal under Section 61(3) of the Insolvency & Bankruptcy Code, 2016 - Binding effect of an approved resolution plan - Scope of adjudicating authority's approval under Section 31 of the I&B Code - Claims and liabilities to be determined during the resolution process

Limited grounds of appeal under Section 61(3) of the Insolvency & Bankruptcy Code, 2016 - Scope of adjudicating authority's approval under Section 31 of the I&B Code - Binding effect of an approved resolution plan - Whether the successful resolution applicant can challenge the Adjudicating Authority's observations in paras 23-25 of the impugned order as a permissible ground of appeal under Section 61(3) of the I&B Code. - HELD THAT: - The Tribunal examined the statutory scope of appeals against orders approving resolution plans and reiterated that Section 61(3) prescribes limited, specific grounds on which an approved resolution plan may be challenged. The complaint by the successful resolution applicant challenged the Adjudicating Authority's observations declining to grant certain reliefs and concessions and emphasising compliance with applicable laws. The Tribunal observed that the Adjudicating Authority did not alter the terms of the approved resolution plan or grant a general waiver of statutory liabilities; it only (a) refused the requested concessions and (b) noted that the applicant could approach relevant regulatory authorities for such reliefs. Reliance was placed on the Supreme Court's reasoning that a successful resolution applicant must not be left facing "undecided" claims after approval and that the jurisdiction of NCLT/NCLAT is circumscribed to the specific grounds in Section 61(3), not to re-open commercial decisions or act as a court of equity. Applying these principles, the Tribunal held that the challenge to the Adjudicating Authority's observations was beyond the limited grounds available under Section 61(3) and therefore not maintainable.

The appeal is not maintainable under Section 61(3) of the I&B Code and is dismissed.

Final Conclusion: The appeal filed by the successful resolution applicant against the Adjudicating Authority's order is dismissed as not maintainable under the limited grounds of Section 61(3); the Adjudicating Authority did not modify the approved resolution plan's terms or grant a general waiver of liabilities but declined the concessions and noted that regulatory reliefs may be sought separately.

Financial creditor - secured financial creditor - pledge of shares - financial debt - guarantee and indemnity - finality of rejection of claim / res judicata - jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code - approval of resolution plan

Finality of rejection of claim / res judicata - jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code - Whether Appellants could maintain I.A. No. 62 of 2020 under Section 60(5) of the I&B Code after their claim as financial creditor was rejected in 2017 and not challenged. - HELD THAT: - The Tribunal held that the Appellants' claim in the purported capacity of a secured financial creditor had been rejected in 2017 and that decision was never impugned. Having allowed the rejection to stand unchallenged for about three years, the Appellants could not revive the same contention by filing I.A. No. 62 of 2020 under Section 60(5). The Appellants' explanation that they did not challenge the 2017 rejection because they relied on protections under an earlier resolution plan was held to be unreasonable and not a lawful excuse for delay. Consequently, the earlier decision rejecting the claim was treated as final and barred the subsequent prayer. [Paras 2, 4]

I.A. No. 62 of 2020 was not maintainable because the Appellants' claim had been rejected in 2017 and that rejection was not challenged; the explanation for delay was rejected.

Secured financial creditor - pledge of shares - financial debt - guarantee and indemnity - approval of resolution plan - Whether creation of a pledge of shares by the Corporate Debtor in favour of Appellant No.1 rendered the Appellants financial creditors of the Corporate Debtor. - HELD THAT: - The Tribunal found that the Appellants had not advanced money to the Corporate Debtor and that the pledge of shares related to monies lent to third parties (WLD and BRASSCO). The essential elements of a financial debt-advance of money and repayment with interest-were absent as between the Appellants and the Corporate Debtor. Creation of a pledge of shares by the Corporate Debtor, in these circumstances, did not amount to a guarantee or indemnity that would convert the Appellants into financial creditors of the Corporate Debtor. Accordingly, the pledge alone could not confer the status of secured financial creditor on the Appellants, nor did it override the treatment of claims adopted in the insolvency process culminating in approval of the resolution plan. [Paras 4]

The pledge of shares did not make the Appellants financial creditors of the Corporate Debtor; they were not entitled to be treated as secured financial creditors.

Final Conclusion: The appeal is dismissed. The Tribunal upheld the Adjudicating Authority's rejection of I.A. No. 62 of 2020: the Appellants' earlier rejection as claimants in 2017, unchallenged thereafter, barred the present application, and the pledge of shares did not render the Appellants financial creditors of the Corporate Debtor.

Customs duty on inputs used in production - exemption notification for 100% EOUs - EXIM Policy DTA sales conditions and positive net foreign exchange requirement - prospective application of amendment notification - Section 12 of the Customs Act, 1962 as the charging provision - Section 28 of the Customs Act, 1962 - extended period for wilful suppression - strict construction of exemption clauses - clarificatory versus remedial amendment and retrospective effect

Customs duty on inputs used in production - exemption notification for 100% EOUs - EXIM Policy DTA sales conditions and positive net foreign exchange requirement - Section 12 of the Customs Act, 1962 as the charging provision - strict construction of exemption clauses - Section 28 of the Customs Act, 1962 - extended period for wilful suppression - Levy of customs duty in respect of DTA clearances by an EOU producing non-excisable goods and invocation of extended limitation for wilful suppression - HELD THAT: - The notification granting duty-free import to 100% EOUs permits DTA sales only in accordance with EXIM Policy subject to prescribed conditions (including positive net foreign exchange entitlement). Where DTA clearances are made in contravention of those conditions the exemption under the notification is unavailable and the goods become liable to duty as if imported. For non-excisable goods paragraph 3 of the notification prescribes recovery by reference to customs duty on the inputs used in production; Section 12 of the Customs Act is the charging provision for imported goods and the notification, issued under delegated power, operates as 'any other law' prescribing the rate. The show cause was directed to quantify customs duty by treating the DTA clearances as deemed imports only for assessing the duty on imported inputs, not to tax domestically grown flowers per se. The appellant failed to discharge the burden of showing that imported inputs were not used and the show cause alleged wilful suppression; on the material the invocation of extended period under Section 28 was justified. Consequently, the authorities and CESTAT correctly sustained the demand and penalties. [Paras 16, 18, 20, 22, 34]

Customs duty on inputs used in production of non-excisable goods cleared to DTA in breach of EXIM Policy is maintainable under the Customs Act; extended limitation under Section 28 was rightly invoked.

Prospective application of amendment notification - clarificatory versus remedial amendment and retrospective effect - strict construction of exemption clauses - Whether Notification No. 56/01Cus dated 18.5.2001 amending the method of charging duty on inputs applies retrospectively or prospectively - HELD THAT: - The amendment substituted the charging provision so that duty on non-excisable goods cleared to DTA would be calculated by reference to customs duty on inputs actually obtained under the notification. The language of the amendment does not expressly provide retrospective operation. Principles of construction require that fiscal or substantive changes operate prospectively unless clearly intended otherwise or the amendment is demonstrably declaratory/clarificatory of an earlier, ambiguous provision. The pre-amendment regime deliberately equated the duty on non-excisable DTA clearances to the customs duty chargeable on the finished articles (a policy choice), and the amendment removed that policy by a conscious change to the charging mechanism; the change was not merely a clarification of an obvious drafting error. Established authorities require that where there is no ambiguity or error in the prior provision and the amendment effects a substantive change, it must be applied prospectively. Accordingly the amendment could not be given retrospective effect to undo liabilities which had already accrued prior to 18.5.2001. [Paras 24, 26, 28, 31]

Notification No. 56/01Cus (18.05.2001) is prospective in operation; it does not retrospectively alter or undo duty liabilities that had arisen under the earlier formulation.

Final Conclusion: The appeals fail. CESTAT's confirmation of customs duty (assessed by reference to imported inputs) and related interest/penalty for the DTA clearances in breach of EXIM Policy is upheld; the 2001 amendment is prospective and does not affect liabilities already accrued. The appeal is dismissed.

Infructuousness of petition due to change of law - Discrimination in conferment of statutory benefits - Administrative remedy - requirement to agitate grievance first before appropriate authority - Liberty to approach statutory authorities and thereafter judicial forums - Expectation of expeditious disposal of representation

Infructuousness of petition due to change of law - Discrimination in conferment of statutory benefits - Administrative remedy - requirement to agitate grievance first before appropriate authority - Liberty to approach statutory authorities and thereafter judicial forums - Expectation of expeditious disposal of representation - Petition rendered infructuous by change in law but petitioner may agitate alleged discrimination by first approaching the appropriate authority and subsequently the appropriate forum; liberty granted with expectation of expeditious consideration. - HELD THAT: - Learned counsel conceded that changes in law have rendered the substantive prayers of the petition infructuous. The Court observed that the petitioner alleges discriminatory treatment because other industrial units received exemption benefits while the petitioner did not. Rather than adjudicating the merits, the Court held that such grievance should first be presented to the relevant respondent authority and, if necessary, pursued before the appropriate judicial forum in accordance with law. The Court therefore refused to decide the substantive constitutional and statutory contentions raised in the petition and instead granted procedural relief by permitting the petitioner to seek redress administratively and judicially. The Court directed that when the petitioner or similarly situated persons approach the respondent authorities complaining of discrimination in conferment of benefits under the statute or policy, those authorities should consider and decide the representations in accordance with law, expeditiously and preferably within three months.

Petition disposed of as infructuous in view of change of law; liberty granted to the petitioner to approach the appropriate authority and thereafter the appropriate forum, with a direction that respondent authorities consider such representations expeditiously and preferably within three months.

Final Conclusion: The petition is disposed of as infructuous due to change in law; the petitioner is granted liberty to agitate the alleged discrimination before the appropriate statutory authority and thereafter before the appropriate forum, and the respondent authorities are expected to decide such representations expeditiously, preferably within three months.

Assessing Officer's duty to independently apply mind - Prohibition on adopting Enforcement Wing/ISIC proposals as conclusive - Administrative circular empowering deviation from Enforcement/ISIC proposals - Remand for fresh assessment and opportunity to file objections

Assessing Officer's duty to independently apply mind - Prohibition on adopting Enforcement Wing/ISIC proposals as conclusive - Whether an assessment proceeding initiated on the basis of Audit Reports/Inspection Proposals from the Enforcement Wing/ISIC can be sustained where the Assessing Officer has merely adopted those proposals without independent application of mind. - HELD THAT: - The Court held that an Assessing Officer, being a quasi judicial authority, cannot be solely guided by proposals or reports of the Enforcement Wing/ISIC and must independently consider and apply his mind to the assessment. Earlier decisions of this Court were relied upon to support the principle that blind adoption of proposals by higher enforcement authorities is impermissible. In light of that ratio, an assessment proceeding founded on such unexamined adoption cannot stand and requires reconsideration by the Assessing Officer exercising independent judgment. [Paras 2, 3]

Proceeding based on mere adoption of Enforcement/ISIC proposals set aside; Assessing Officer directed to independently consider the matter.

Administrative circular empowering deviation from Enforcement/ISIC proposals - Remand for fresh assessment and opportunity to file objections - Appropriate remedial direction where assessment is based on Enforcement/ISIC proposals and application of the Commissioner of State Tax Circular No.3 dated 18.01.2019. - HELD THAT: - The Court applied Circular No.3 dated 18.01.2019, which permits Assessing Authorities to deviate from Enforcement/ISIC proposals and to finalize assessments without seeking prior approval, provided reasons are recorded. Consequentially, the impugned proceedings founded on Enforcement/ISIC proposals were set aside and the matter remanded to the Assessing Officer. The Assessee was granted liberty to file objections with supporting documents within 30 days of receipt of the order; on receipt the Assessing Officer must afford opportunity of personal hearing (including by video conferencing if necessary) and endeavor to conclude reassessment independently within 12 weeks. If no objections are filed within 30 days, the Assessing Officer may commence proceedings after that period. [Paras 4, 5]

Matter remanded to Assessing Officer for fresh independent assessment in accordance with Circular No.3/18.01.2019, with liberty to the Assessee to file objections and specified timelines for hearing and conclusion.

Final Conclusion: Writ petition allowed: impugned assessment proceedings founded on Enforcement/ISIC proposals set aside and remanded for fresh independent consideration by the Assessing Officer in accordance with Commissioner's Circular No.3/18.01.2019, with liberty to the Assessee to file objections and specified timelines for completion.

Availability of concessional rate under C-Form for inter-state purchases - issuance of C-Forms under the Central Sales Tax Act, 1956 read with the Central Sales Tax (Registration and Turnover) Rules, 1957 - application of Division Bench precedent directing non-restriction of C-Form use - quashing of administrative circular restricting C-Form usage - online downloading of C-Form declarations

Availability of concessional rate under C-Form for inter-state purchases - issuance of C-Forms under the Central Sales Tax Act, 1956 read with the Central Sales Tax (Registration and Turnover) Rules, 1957 - online downloading of C-Form declarations - Entitlement of the petitioner to obtain C-Forms for purchases of High Speed Diesel from out-of-State suppliers and to be permitted to download such declaration online. - HELD THAT: - The petitioner sought direction for issuance of C-Forms for purchase of High Speed Diesel from suppliers in other States. The writ court found that this grievance is squarely covered by an earlier order in W.P.Nos.19458 of 2018 etc. batch, and that the Division Bench had directed that assessees and registered dealers shall not be restricted from using C-Forms for inter-State purchases of specified commodities and shall be permitted to download such declarations online. Applying that precedent to the petitioner's case, the Court accepted that the petitioner is entitled to the issuance of C-Forms and online facility for declaration download as directed by the Division Bench. [Paras 3, 5, 6]

Writ petition allowed insofar as directing issuance of C-Forms and permitting online downloading of such declarations for the petitioner.

Application of Division Bench precedent directing non-restriction of C-Form use - quashing of administrative circular restricting C-Form usage - Effect of the Division Bench order on the validity of the Commissioner's circular and consequential notices/proceedings. - HELD THAT: - The Division Bench, by order dated 09.03.2020 in W.A.Nos.3403 of 2019 etc. batch, had quashed the Commissioner's circular dated 31.05.2018 which restricted use of C-Forms and set aside consequential notices and proceedings initiated against assessees across the State. The High Court applied that ruling, noting that the Division Bench had restrained the State and Revenue Authorities from imposing such restrictions and had directed relief statewide. In view of that binding decision, the writ court found no impediment to granting the petitioner the relief prayed for and allowed the petition without costs. [Paras 4, 5, 6]

The administrative circular restricting C-Form use and consequential notices/proceedings stand quashed/set aside as applied to the petitioner; petition allowed.

Final Conclusion: The writ petition is allowed: the petitioner is entitled to issuance of C-Forms for inter-State purchase of High Speed Diesel and to online downloading of such declarations, and the impugned administrative restriction and consequential proceedings stand quashed/applied in the petitioner's favour; no costs.

Works contract versus sale - application of Constitution Bench parameters in Kone Elevator (India) Pvt. Ltd. - remittal for fresh examination of contracts and documentary evidence - scope of judicial review under Article 226 in revenue matters - rectification under Section 84 of the Tamil Nadu Value Added Tax Act, 2006 - statutory appeal and limitation condonation for exercise of appellate jurisdiction

Scope of judicial review under Article 226 in revenue matters - works contract versus sale - Whether the writ petition under Article 226 was maintainable to re appreciate the records and set aside the assessing authority's conclusion that the transactions constituted a sale. - HELD THAT: - The Court held that the characterisation of the transaction (works contract or sale) requires examination of the contracts and other documentary materials to ascertain the intention and terms between the parties. That exercise is fact centric and lies within the remit of the assessing and appellate authorities. In the absence of relevant supporting materials produced before the Authority, the petitioner could not seek de novo re appreciation in writ jurisdiction. No error of law was pointed out that would justify interference under Article 226; the proper remedy is statutory appeal. The Court therefore declined to re adjudicate merits in the writ petition while expressing no view on the substantive correctness of the assessment. [Paras 8, 10, 11, 12]

Writ petition dismissed insofar as it sought merits re appraisal; petitioner directed to pursue statutory appeal.

Application of Constitution Bench parameters in Kone Elevator (India) Pvt. Ltd. - remittal for fresh examination of contracts and documentary evidence - Whether the assessing authority erred in applying the minority view of the Constitution Bench decision in concluding the transactions were sale, and whether such reliance warranted quashing the assessment in writ jurisdiction. - HELD THAT: - The Court observed that the Constitution Bench in Kone Elevator laid down parameters to be applied to the contract and factual matrix; application of those parameters requires scrutiny of the specific contracts and allied documents. The petitioner challenged the Authority's reliance on a particular paragraph (minority view) but failed to place contracts or other evidence before the Authority to show misapplication of law. Mere assertion that the majority view ought to have been applied is insufficient; the correctness of the Authority's conclusion is a matter for appellate consideration where evidence can be tested. Thus no legal error warranting writ interference was demonstrated. [Paras 6, 8, 9, 10, 12]

No interference with the assessment on the ground of alleged reliance on minority view; factual and legal questions to be examined in appeal applying the Constitution Bench parameters to the contracts and documents.

Statutory appeal and limitation condonation for exercise of appellate jurisdiction - Whether the petitioner should be permitted to file an appeal despite delay and what interim or directional relief the Court should grant. - HELD THAT: - While declining to intervene under Article 226, the Court directed that the petitioner be permitted to file a statutory appeal within four weeks from the date of the order; the first Appellate Authority was directed to entertain the appeal without reference to limitation but subject to other statutory conditions. The appellate authority was directed to examine the contracts and relevant documents and decide the appeal in accordance with law applying the Constitution Bench guidelines. [Paras 13]

Petitioner granted leave to file appeal within four weeks; Appellate Authority to entertain despite limitation and decide on merits after examining contracts and applying relevant legal principles.

Final Conclusion: The writ petition challenging the rectification order was declined; the High Court refrained from re adjudicating the factual characterisation of the transactions and directed the petitioner to pursue statutory appeal (permitted to be filed within four weeks), with the Appellate Authority to examine contracts and other documents and decide the matter applying the Constitution Bench parameters in Kone Elevator (India) Pvt. Ltd.