TaxTMI Updates e-Newsletter
Sep 14,2020

Summary order. Notice issued to respondents; respondent No.1 accepted notice; notice directed to be issued to unserved respondents by all modes; matter listed on 23rd September, 2020; order to be uploaded and emailed to counsel.

Penalty under section 271D and 271E - Provisions of section 269SS and section 269T - Reasonable cause under section 273B - Initiation of penalty proceedings and recording of satisfaction by assessing officer - Limitation under section 275(1)(c)

Reasonable cause under section 273B - Penalty under section 271D and 271E - Provisions of section 269SS and section 269T - Whether penalty under section 271D and 271E could be sustained where the assessee established a bona fide belief that the transactions did not attract sections 269SS/269T and thus had reasonable cause under section 273B. - HELD THAT: - The Tribunal examined the factual material and submissions including the assessee's explanation that credits in members' running accounts represented account balances and not deposits or loans within the statutory meaning, the society's bye laws, the practice in earlier and later years (no adverse action or audit qualification), and the assessee's operation in a rural area with largely illiterate members. The assessing officer had no reply from the assessee before the Additional Commissioner at the penalty stage, and the CIT(A) rejected the reasonable cause plea. On review, the Tribunal found the assessee's belief to be bona fide and supported by the conduct and history of the society's transactions and by the absence of prior or subsequent adverse treatment by revenue or auditors. The Tribunal considered authorities on the principles that penalty is a discretionary, quasi criminal consequence and that it should not ordinarily be imposed where there is a bona fide or venial error. Applying these principles, the Tribunal concluded that the facts constituted a reasonable cause within section 273B and that imposition of penalty under sections 271D and 271E was not warranted. [Paras 30, 31]

Considering the bona fide nature of the transactions and the existence of reasonable cause under section 273B, the penalties levied under sections 271D and 271E are cancelled and the appeals are allowed.

Final Conclusion: Penalties under sections 271D and 271E, imposed for alleged contraventions of sections 269SS and 269T, are set aside on the finding that the assessee had a bona fide belief and reasonable cause under section 273B; both appeals are allowed.

Reassessment under Section 147/148 - reason to believe - borrowed satisfaction - application of mind - separability of regular assessment and block assessment - telescoping relief

Reason to believe - borrowed satisfaction - application of mind - Validity of the reasons recorded for reopening-whether the Assessing Officer applied independent mind or merely acted on borrowed satisfaction of the Investigation Wing. - HELD THAT: - The Tribunal examined the reasons reproduced in the record and the material relied upon. It held that the Assessing Officer analysed the report of the Investigation Wing, reproduced particulars of the entries (amounts, dates, bank details, instrument numbers) and observed that no scrutiny assessment under section 143(3) had been completed for the year. Applying the precedents cited, including the principle that at the initiation stage the AO need only have relevant material to form 'reason to believe' (not conclusive proof), the Tribunal found a live link between the investigative material and the belief recorded. The Tribunal rejected the contention of clerical factual errors and distinguished cases cited by the assessee where incorrect fact-recording vitiated reopening. It concluded that the satisfaction was not merely borrowed and that the AO applied his mind before issuing notice. [Paras 7]

Reasons to believe were valid; the Assessing Officer applied independent mind and the reopening was not vitiated by borrowed satisfaction.

Reassessment under Section 147/148 - separability of regular assessment and block assessment - Whether a notice under section 148 reopening a regular assessment could be issued after completion of a block assessment under Chapter XIV-B (section 158BC). - HELD THAT: - The Tribunal considered authorities holding that sections 147/148 do not apply to reopen block assessments and that Chapter XIV-B provides a special, self-contained scheme. However, in the present case the AO had reopened the regular assessment (not the block assessment). The Tribunal held that regular assessment and block assessment are distinct proceedings and may run in parallel; therefore, the bar on reopening block assessments does not preclude issuance of a notice to reopen a regular assessment based on fresh information. The Tribunal rejected the reliance on precedents concerning reopening of block assessments as distinguishable on facts. [Paras 7]

Notice under section 148 in respect of the regular assessment was permissible notwithstanding prior completion of block assessment; the objection was dismissed.

Telescoping relief - application of mind - On the merits, whether the addition in reassessment for accommodation entries was barred because commission on those entries had already been assessed in the block assessment (i.e., whether telescoping relief was available). - HELD THAT: - The assessee contended that commission income at a specified rate had been assessed in the block assessment and therefore the alleged accommodation entries should not have been added again. The Tribunal required the assessee to demonstrate that the specific entries from R.K. Agarwal & Co. were included in the block assessment. The assessee failed to produce documentary evidence or summon the parties to discharge the onus of showing that only commission income was earned and that the entries were already considered. The Tribunal observed that, absent such proof, the possibility of treating the amounts as unexplained cash credits under the regular provisions could not be ruled out. Accordingly, the addition made in reassessment was sustained. [Paras 8, 9]

Telescoping/credit with respect to the block assessment not allowed; addition in reassessment upheld for want of proof by the assessee.

Final Conclusion: The appeal is dismissed: the Tribunal upheld the validity of the reopening (finding reasons and application of mind adequate), held that reopening the regular assessment was permissible despite an earlier block assessment, and sustained the addition on merits because the assessee failed to prove that the specific entries were already assessed in the block proceedings.

Revocable transfer - application of Sections 61 to 63 regarding revocable transfer - association of persons (AOP) - validity of trust under Indian Trust Act - determinate (non-discretionary) trust - diversion of income at source by overriding title - write-back of impairment provision not taxable unless earlier deduction claimed

Validity of trust under Indian Trust Act - Whether the assessee is a valid trust and not a colourable device - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the assessee constituted a valid trust. The appellate forum relied on provisions of the Indian Trust Act (noting that a settlor may be a beneficiary and that any person competent to contract may create a trust), and observed that the trust deed and RBI-prescribed processes exhibited all necessary ingredients of a trust. The A.O.'s finding that the trust was a fac ade because contributors were also beneficiaries was held to be contrary to the statutory position and unsustainable; if the trust were void, there would be no basis to treat it as an AOP. Consequently the CIT(A)'s acceptance of the trust's validity was affirmed.

The assessee is a valid trust; the A.O.'s finding of a colourable device is rejected.

Application of Sections 61 to 63 regarding revocable transfer - revocable transfer - Whether the contributions to the trust are revocable and hence income is taxable in the hands of the contributors under Sections 61-63 - HELD THAT: - The Tribunal agreed with the CIT(A) that the trust deed expressly provides for revocation of contributions (subject to conditions including consent threshold and notice). On a plain reading of Sections 61 and 63, a transfer is revocable if it contains provisions for re-transfer or gives the transferor a right to reassume power; there is no requirement that the power of revocation be unconditional. The conditional mechanism in the deed (requiring specified consent) does not convert the transfer into an irrevocable one. Reliance was placed on precedents recognising that conditional revocability still amounts to a revocable transfer. Therefore the income arising from the trust's activities is to be taxed in the hands of the security receipt holders (contributors), not the trust.

Contributions are revocable transfers; Sections 61-63 apply and income is taxable in the hands of the contributors (SR holders).

Association of persons (AOP) - Whether the trust is an Association of Persons (AOP) - HELD THAT: - Having considered the facts and documentary record, the Tribunal concurred with the CIT(A) that there was no material to show beneficiaries had agreed to a common objective or concerted action to earn income jointly. The beneficiaries invested separately pursuant to offer documents and had no control over the trustee's management. Although the statutory definition of AOP had been broadened by amendment, the A.O. failed to demonstrate a concerted arrangement or common action; consequently the A.O.'s treatment of the trust as an AOP was unsupported and was vacated.

The trust is not an AOP; the A.O.'s classification as an AOP is set aside.

Determinate (non-discretionary) trust - Whether the trust is an indeterminate/discretionary trust or a determinate trust - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the trust deed and the minutes of the formation meeting identified the beneficiaries and their respective shares at inception and that the proceeds were distributed according to those shares. There was no unfettered discretion conferred on the trustee to allocate income annually nor any mechanism making beneficiary shares indeterminate. Accordingly, the trust was held to be determinate (non-discretionary).

The trust is a determinate (non-discretionary) trust; it is not an indeterminate/discretionary trust.

Diversion of income at source by overriding title - Whether amounts realized by the trust are taxable in the hands of the trust or diverted to the SR holders by overriding title - HELD THAT: - Applying the principle that a receipt is not necessarily income of the entity through which it flows, the Tribunal agreed with the CIT(A) that the realized amounts were always intended to be passed to the SR holders in proportion to their interest under the trust deed and offer documents. The fact that realization flowed through the trust's books did not impart character of income to the trust where money was held for transmission to beneficiaries; the principle of diversion of income at source by overriding title applied, and receivables of NPAs thus constituted income of the SR holders rather than the trust.

Realizations are to be treated as income of the SR holders by virtue of diversion at source; not taxable as income of the trust.

Write-back of impairment provision not taxable unless earlier deduction claimed - Whether the write-back of impairment provision constitutes taxable income of the trust - HELD THAT: - The Tribunal endorsed the CIT(A)'s conclusion that the reversal of impairment provision was a mere book entry without any corresponding receipt or cash benefit and would be taxable only if the original provision had been claimed as a deduction in earlier years. The record showed no claim of such deduction (no carry forward of losses), so the write-back did not partake the character of taxable income. The A.O. had not furnished reasons to treat the write-back as income.

The write-back of the impairment provision is not taxable in the hands of the trust.

Final Conclusion: The Tribunal upheld the CIT(A)'s findings: the assessee is a valid, determinate, revocable trust; Sections 61-63 apply so income is taxable in the hands of the contributors (SR holders); the trust is not an AOP; and the write-back of impairment provision is not taxable. The revenue's appeal is dismissed.

Reopening of assessment framed under section 147/148 - mandatory notice under section 143(2) in reassessment proceedings - deemed service under Section 292BB - quashing reassessment for absence of notice

Mandatory notice under section 143(2) in reassessment proceedings - reopening of assessment framed under section 147/148 - deemed service under Section 292BB - quashing reassessment for absence of notice - Validity of the reassessment framed under sections 147/148 where notice under section 143(2) was issued prior to filing of return in response to notice under section 148. - HELD THAT: - The Tribunal admitted the additional ground challenging the reassessment and examined the sequence of notices. The record shows that notice under section 143(2) was issued on 11.08.2014 while the return in response to the section 148 notice was filed on 21.08.2014. The Tribunal held that issuance of a valid notice under section 143(2) is a mandatory requirement in the facts of this case and that the assessment framed on the basis of the defective notice is not sustainable. The Tribunal applied the principles discussed in the judgment of the Hon'ble Supreme Court in Laxman Das Khandelwal, noting that section 292BB can cure infirmities in service only where a notice has in fact emanated from the department; it does not cure complete absence of notice. The Tribunal also relied on the view in Alpine Electronics Asia Pte. Ltd. recognizing the mandatory nature of serving section 143(2) notices in reassessment proceedings after the relevant cutoff. Having regard to these authorities and the factual chronology, the Tribunal concluded that no valid section 143(2) notice was on record prior to the filing of the return and therefore the reassessment cannot be sustained. [Paras 7]

The reassessment framed under sections 147/148 is quashed for want of a valid notice under section 143(2).

Final Conclusion: The appeal is allowed and the reassessment completed under sections 147/148 for AY 2007-08 is cancelled.

Allowability of mark-to-market foreign exchange loss - speculative transaction doctrine - admissibility of claim not made in original return - depreciation on goodwill arising from slump sale/business transfer - remand for verification and computation of goodwill - precedential application of coordinatebench decisions

Allowability of mark-to-market foreign exchange loss - speculative transaction doctrine - precedential application of coordinatebench decisions - Deletion of disallowance of mark-to-market foreign exchange loss booked on reinstatement of forward contracts - HELD THAT: - The Tribunal, following its decision in the assessee's own case for other assessment years, held that the mark-to-market loss on reinstatement of forward exchange contracts could not be treated as a notional/speculative loss and the disallowance made by the AO was to be deleted. The Bench noted that the issue had been earlier decided in favour of the assessee by a coordinate Bench (reproduced at para 6) and that no contrary binding decision was placed before it. On parity of facts, the Tribunal respectfully followed the coordinate-bench reasoning and directed deletion of the disallowance made by the AO for the year under appeal (paras 6-7). [Paras 6, 7]

Grounds 1-3 relating to deletion of mark-to-market foreign exchange loss are dismissed (i.e. Revenue's appeal on this point rejected) and the disallowance is deleted.

Depreciation on goodwill arising from slump sale/business transfer - admissibility of claim not made in original return - remand for verification and computation of goodwill - Allowability of depreciation on goodwill claimed during assessment proceedings and directions for quantification - HELD THAT: - The Tribunal upheld the view of the CIT(A) that the claim for depreciation on goodwill, though raised during assessment and not in the original return, could be considered in accordance with law. Relying on precedent and the impugned order, the first appellate authority had set aside the issue to the AO to verify factual aspects and work out the appropriate amount of goodwill and depreciation. The Tribunal found no reason to interfere with that well-reasoned direction and therefore sustained the remand to the AO for verification and computation after affording the assessee opportunity to produce necessary evidence (paras 6, 7.1, 7.1.1-7.1.2). [Paras 6, 7]

Grounds 4-6 are dismissed (i.e. Revenue's challenge rejected); the CIT(A)'s order setting aside the issue to the AO to compute and verify the amount of goodwill/depreciation is upheld.

Final Conclusion: The Revenue's appeal for A.Y. 2011-12 is dismissed: the disallowance of mark-to-market foreign exchange loss is deleted and the CIT(A)'s remand to the AO to verify and compute depreciation on goodwill is upheld; no other points were argued or require adjudication.

Penalty under section 271(1)(c) - concealment of income - furnishing of inaccurate particulars of income - difference of opinion - notice must specify which limb of Section 271(1)(c) - deletion of additions by appellate authority / appeal effect - special audit under section 142(2A) - rule 27 of the ITAT Rules

Penalty under section 271(1)(c) - deletion of additions by appellate authority / appeal effect - difference of opinion - Sustainability of penalty where the additions/disallowances on which penalty was levied have been deleted by the coordinate bench and/or deleted by the assessing officer on appeal effect. - HELD THAT: - The Tribunal held that penalty cannot survive in respect of additions which have subsequently been deleted by the coordinate bench or by the assessing officer on giving appeal effect. Where the substantive additions no longer subsist, there is no basis for levying penalty under section 271(1)(c). The parties agreed that several additions earlier relied upon for imposing penalty were deleted by judicial orders and by the assessing officer on verification, and the Tribunal recorded that those deletions remove the foundation for penalty. The conclusion follows that deletion of the additions amounts to removal of the factual basis for the penalty and, accordingly, the penalty in respect of those additions was not sustainable. [Paras 11, 12, 13]

Penalty cancelled insofar as it related to additions/deletions that were deleted by the coordinate bench or by the assessing officer on giving appeal effect.

Penalty under section 271(1)(c) - notice must specify which limb of Section 271(1)(c) - rule 27 of the ITAT Rules - Validity of penalty proceedings where the penalty notice did not indicate which limb of section 271(1)(c) (concealment or furnishing inaccurate particulars) was invoked. - HELD THAT: - Relying on the approach declared by the jurisdictional High Court (as applied in the judgment), the Tribunal held that a penalty notice that fails to specify which of the twin limbs of section 271(1)(c) is attracted is vulnerable. The assessing officer's notice in this case did not strike off either limb and did not identify the specific charge; in view of the authorities relied upon and the rule 27 contention, the Tribunal found infirmity in sustaining penalty on that procedural ground. The Tribunal applied this reasoning in upholding the deletion of penalty where the notice was general and non-specific as to the limb relied upon. [Paras 14, 17, 18, 19]

Penalty cannot be sustained where the initiating notice did not specify which limb of section 271(1)(c) was invoked; this ground supports cancellation of the penalty.

Penalty under section 271(1)(c) - brokerage / Amex building - difference of opinion - Whether penalty was leviable in respect of disallowance of brokerage paid for AMEX building. - HELD THAT: - On the facts the Tribunal accepted the CIT(A)'s findings that the brokerage expenditure was disclosed in the return and in the books (Schedule 19), supporting vouchers and explanations were on record, and there was no withholding of particulars. The assessee had a bona fide belief in the allowability of the expenditure and had disclosed it; mere disallowance does not translate into concealment or furnishing of inaccurate particulars. The departmental representative did not controvert these findings; further, the penalty notice's failure to specify the limb of section 271(1)(c) compounded the infirmity. Consequently the Tribunal found no reason to disturb the deletion of penalty as to this disallowance. [Paras 16, 17]

Penalty deleted in respect of the brokerage disallowance.

Penalty under section 271(1)(c) - withdrawal of deduction under section 24 - difference of opinion - Whether penalty was leviable in respect of disallowance of the 30% deduction under section 24 on rental receipts remitted to a trust. - HELD THAT: - The Tribunal recorded that rental income from the school was reported by the assessee, TDS was reflected in the assessee's records, and remittance to the charitable trust was demonstrated. The disallowance of the statutory deduction under section 24(a) was therefore a matter of differing legal view rather than concealment or inaccurate particulars. In addition, the penalty notice's failure to indicate the specific limb of section 271(1)(c) reinforced that penalty could not be sustained. The Tribunal found the CIT(A)'s deletion of penalty on this disallowance to be justified. [Paras 18]

Penalty deleted in respect of the withdrawal of the section 24 deduction.

Penalty under section 271(1)(c) - provisions for gratuity / section 43B - difference of opinion - Whether penalty was leviable in respect of disallowance of provision for gratuity. - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the disputed amount was reflected in work-in-progress and not claimed as a deduction in the profit and loss account or in the return; the assessee's treatment was a bona fide view and the disallowance arose from a difference of opinion. The departmental representative offered no persuasive basis for penalty; it was also doubtful whether section 43B applied to the item not claimed as deduction. Relying additionally on the non-specificity of the penalty notice as to the twin limbs of section 271(1)(c), the Tribunal affirmed deletion of the penalty in respect of the gratuity provision. [Paras 19]

Penalty deleted in respect of the disallowance of provision for gratuity.

Final Conclusion: The Tribunal upheld the CIT(A)'s order deleting the penalty imposed under section 271(1)(c) for assessment year 2006 - 07. Penalty could not be sustained in respect of additions subsequently deleted by appellate orders or by appeal-effect verification, where disallowances represented bona fide differences of opinion and where the penalty notice failed to specify which limb of section 271(1)(c) was invoked; the assessing officer's appeal is dismissed.

Exemption under section 194A(3)(v) of the Income-tax Act - disallowance under section 40(a)(ia) of the Income-tax Act - deduction of tax at source on interest payable by a co-operative society - membership of a co-operative society - quashing of CBDT Circular No.9/2002 - role of bye-laws in determining entitlement to section 194A(3)(v) exemption

Exemption under section 194A(3)(v) of the Income-tax Act - disallowance under section 40(a)(ia) of the Income-tax Act - membership of a co-operative society - role of bye-laws in determining entitlement to section 194A(3)(v) exemption - quashing of CBDT Circular No.9/2002 - Whether the disallowance under section 40(a)(ia) for failure to deduct tax at source on interest paid to certain depositors (HUFs and unregistered firms) was justified where those depositors were admitted as Members of the co-operative bank. - HELD THAT: - Section 194A(1) requires deduction of tax at source by a person (other than an individual or HUF) paying interest to a resident, subject to exceptions in subsection (3). Clause (v) of section 194A(3) exempts interest credited or paid by a co-operative society to a member thereof. The CBDT Circular No.9/2002 attempted to restrict the exemption to members admitted in accordance with bye-laws and to those who had subscribed to shares, but that Circular was quashed by the jurisdictional High Court in Jalgaon District Central Cooperative Bank Ltd. The Tribunal noted that the statutory language of section 194A(3)(v) contains no adjectival limitation on the term "member" and, in the absence of a valid binding administrative restriction, the exemption applies to interest paid to any depositor who is a Member of the co-operative bank. The authorities below disallowed interest under section 40(a)(ia) solely on the basis that certain HUFs and unregistered firms did not fall within the definition of "Person" in the bye-laws and therefore could not be "Members"; however, the assessee had produced records showing that those entities were admitted as Members by application and board resolution. Given the quashing of the Circular and the plain language of section 194A(3)(v), payment of interest to persons admitted as Members does not require TDS under section 194A, irrespective of the characterization in bye-laws, and consequently the disallowance under section 40(a)(ia) was not warranted. [Paras 6, 7, 8, 9, 11]

The disallowance made under section 40(a)(ia) is set aside because interest paid to the depositors who were admitted as Members of the co-operative bank is exempt from TDS under section 194A(3)(v).

Final Conclusion: The appeal is allowed; the impugned disallowance is set aside and the order of the authorities below is modified to the extent that no disallowance is to be made for interest paid to depositors who were admitted members of the co-operative bank for Assessment Year 2013-14.

Exemption under section 11 and its denial for application of income - treatment of excess salary as application of income to persons specified in Section 13(3) - reasonableness test for remuneration paid to specified persons - remand for verification of actual rendering of services and qualifications - binding effect of coordinate-bench ITAT decision in absence of stay by High Court - taxation of disallowed application at maximum marginal rate

Exemption under section 11 and its denial for application of income - treatment of excess salary as application of income to persons specified in Section 13(3) - binding effect of coordinate-bench ITAT decision in absence of stay by High Court - Whether the CIT(A) erred in allowing exemption under section 11 despite alleged undue benefit by way of excess salary to persons specified in section 13(3). - HELD THAT: - The Tribunal examined the AO's finding that salary payments to five specified persons had increased significantly and that the AO had disallowed exemption under section 11 treating the excess as benefit to persons under section 13. The Bench applied the earlier coordinate-bench ITAT decision in the assessee's own case for A.Y. 2014-15 which held that where salaries are paid to persons referred in section 13(3), only the excess over what may be reasonably paid for the services rendered is to be treated as application of income for their benefit; denial of section 11 in entirety is not warranted merely because some payments may be excessive. The Revenue's reliance on filing a further appeal to the High Court was rejected because no stay of the ITAT order was shown; absent a stay the decision of the coordinate bench governs. On this basis the Revenue grounds challenging CIT(A)'s allowance of exemption were dismissed. [Paras 2]

Revenue grounds 1 to 3 dismissed; CIT(A)'s allowance of exemption under section 11 upheld in principle insofar as it followed the coordinate-bench ITAT decision and no High Court stay was shown.

Exemption under section 11 and its denial for application of income - treatment of capital expenditure as application of income where exemption is available - Whether the CIT(A) erred in allowing the claim of capital expenditure as application of income where the assessee claims exemption under section 11. - HELD THAT: - The Tribunal noted that, having held (in line with the ITAT coordinate bench) that the assessee is entitled to exemption under section 11, the claim for capital expenditure qualifies as application of income and therefore should be allowed in computing application of income. No new facts were shown to displace the CIT(A)'s conclusion. Consequently the Tribunal found no reason to interfere with the allowance of capital expenditure as directed by the CIT(A). [Paras 3]

Revenue Ground No. 4 dismissed; CIT(A)'s direction to allow capital expenditure as application of income sustained.

Reasonableness test for remuneration paid to specified persons - remand for verification of actual rendering of services and qualifications - treatment of excess salary as application of income to persons specified in Section 13(3) - Whether the disallowance of Rs. 11,02,000 for alleged excess salary to specified persons in A.Y.2015-16 was correctly confirmed by the CIT(A). - HELD THAT: - Relying on the ITAT's earlier directions in the assessee's own case for A.Y.2014-15, the Tribunal accepted that salary payments to three persons (Hema Choudhary, Deepak Rastogi and Meghna Singhal) had been accepted as reasonable by the AO in set-aside proceedings and thus the disallowance as to those three persons was deleted. As to two persons (Dr. Pankaj Garg and Smt. Vidushi Garg), the Tribunal remitted the matter to the AO for fresh adjudication and verification of relevant facts, including proof of services rendered and applicable rules governing qualification and appointment, to determine reasonableness of remuneration. The assessee's appeal was therefore partly allowed for statistical purposes. [Paras 4]

Assessee's appeal partly allowed: disallowance deleted for three specified persons; matter remanded to AO for fresh adjudication in respect of two specified persons.

Binding effect of coordinate-bench ITAT decision in absence of stay by High Court - application of conclusions mutatis mutandis to similar assessment years - Whether the Tribunal's conclusions in respect of A.Y.2015-16 apply to the appeals for A.Y.2016-17 filed by both Revenue and assessee. - HELD THAT: - The Bench observed that the issues and facts for A.Y.2016-17 are similar to those for A.Y.2015-16. Applying the reasoning and outcomes for A.Y.2015-16 mutatis mutandis, the Tribunal dismissed the Revenue's appeal for A.Y.2016-17 and partly allowed the assessee's appeal for A.Y.2016-17 for statistical purposes in the same manner as for A.Y.2015-16. [Paras 5, 6]

Revenue appeal for A.Y.2016-17 dismissed; assessee appeal for A.Y.2016-17 partly allowed for statistical purposes, applying the A.Y.2015-16 decision mutatis mutandis.

Final Conclusion: The Tribunal dismissed the Revenue appeals and partly allowed the assessee appeals for statistical purposes. CIT(A)'s allowance of exemption under section 11 (subject to disallowance only to the extent of any excess remuneration found unreasonable) and direction to treat capital expenditure as application of income were sustained; certain disallowances for specific persons were deleted while remuneration for two specified persons was remanded to the AO for fresh verification of services and qualifications. No order as to costs.

Reopening of assessment under section 147: requirement of 'reason to believe' and tangible material - change of opinion as a bar to reassessment - application of mind by the Assessing Officer - failure to disclose fully and truly all material facts and proviso to section 147 - attraction of section 195 only if payments are chargeable to tax in India

Reopening of assessment under section 147: requirement of 'reason to believe' and tangible material - change of opinion as a bar to reassessment - application of mind by the Assessing Officer - failure to disclose fully and truly all material facts and proviso to section 147 - Validity of reassessment initiated under section 147/148 where AO had considered the same materials during original assessment and thereafter formed a different opinion - HELD THAT: - The Tribunal found that the reasons recorded for reopening show no fresh tangible material coming to the AO's knowledge after completion of the original assessment. The AO had during the original scrutiny specifically considered the impugned foreign-currency payments, recorded the assessee's explanations verbatim and, after applying his mind, made other disallowances but not the present one. The subsequent initiation of reassessment was therefore a re-examination of the same material and amounted to a mere change of opinion. Reliance was placed on the principle that section 147 permits reopening only where the AO has a 'reason to believe' founded on tangible material and not merely to review his earlier conclusion; additionally, the proviso to section 147 requires failure to disclose material facts to be shown where applicable. On the facts, no failure to disclose was found and no new material was invoked to justify reopening; consequently the reassessment proceedings were quashed as legally invalid. [Paras 13, 14, 18, 19, 20]

Reassessment proceedings quashed as initiated on mere change of opinion without fresh tangible material or non-disclosure of material facts.

Attraction of section 195 only if payments are chargeable to tax in India - disallowance under section 40(a)(i) in relation to payments to non-residents - Whether, on merits, the impugned foreign-currency payments attracted withholding under section 195 and consequent disallowance under section 40(a)(i) - HELD THAT: - The Tribunal noted the first appellate authority's finding that the impugned payments were made to foreign companies and did not have the element of income chargeable to tax in India; accordingly, the requirement to withhold under section 195 did not arise. The CIT(A) relied on binding authority and departmental instructions that section 195 applies only where the payment is chargeable to tax in India, and referenced earlier Tribunal decisions deleting similar disallowances in the assessee's cases. Having found no fresh material and that on merits the payments did not attract withholding tax, the appellate authority upheld deletion of the disallowance. The Tribunal concurred with these conclusions on merits while also observing that the reopening itself was invalid. [Paras 14]

On merits, disallowance under section 40(a)(i) was not sustainable because the payments to foreign companies were not chargeable to tax in India and did not attract section 195 withholding.

Final Conclusion: The reassessment initiated for AY 2011-12 was quashed: reopening was invalid as based on mere change of opinion without fresh tangible material or failure of disclosure, and in any event the disallowance sought under section 40(a)(i) was unsustainable since the impugned foreign payments were not chargeable to tax in India.

Charge of tax under section 164(2) - proviso to section 164(2) - forfeiture of exemption under section 13(1)(c) and section 13(1)(d) - maximum marginal rate (MMR) applicable only to the non-exempt part of relevant income - denial of exemption under sections 11 and 12 - verification of expenses and disallowance for lack of proper bills and vouchers

Proviso to section 164(2) - forfeiture of exemption under section 13(1)(c) and section 13(1)(d) - maximum marginal rate (MMR) applicable only to the non-exempt part of relevant income - denial of exemption under sections 11 and 12 - Whether contravention of section 13(1)(c) or 13(1)(d) results in denial of exemption under sections 11 and 12 for the entire surplus or only the relevant part of income is taxable at MMR under section 164(2) proviso. - HELD THAT: - The Tribunal examined the proviso to section 164(2) and relevant precedents and held that where whole or any part of the relevant income is not exempt under section 11 or 12 by virtue of clause (c) or (d) of section 13(1), tax at the maximum marginal rate is leviable only on the relevant income or part of the relevant income so forfeited. The Tribunal accepted the factual findings of the CIT(A) (unchallenged by Revenue) that the disallowance on salaries was deleted and that the notional interest addition was to be adjusted against application of income; accordingly there was no basis to charge the entire surplus to tax at MMR. Reliance was placed on authoritative decisions which construe section 164(2) proviso to confine MMR to the non-exempt portion rather than depriving the trust of exemption on its entire income. No contrary facts were shown to justify interference with the CIT(A)'s conclusions. The departmental grounds contesting denial in toto were therefore rejected and the CIT(A)'s approach sustained. [Paras 2]

Contravention of section 13(1)(c) or 13(1)(d) does not attract MMR on the entire surplus; tax at MMR applies only to the relevant part of income not exempt under sections 11/12, and Revenue's appeals on these grounds are dismissed.

Verification of expenses and disallowance for lack of proper bills and vouchers - reasonable restriction of disallowance to a small percentage where supporting vouchers and affidavits produced - Whether the AO was justified in disallowing 20% of travelling, staff, staff welfare, social welfare and student welfare expenses for incomplete 'kachha' bills, or whether the disallowance should be restricted. - HELD THAT: - On the record the assessee had furnished ledger accounts, vouchers and affidavits of temporary staff and the CIT(A), after considering those documents and the factual circumstances (including inability to produce some employee documents due to operations at multiple schools), found the AO's blanket 20% disallowance excessive and restricted it to 5%. The Tribunal found no infirmity in the CIT(A)'s factual appraisal and verification-based adjustment and declined to interfere with the exercise of discretion by the first appellate authority. [Paras 3]

The disallowance is properly restricted to 5% by the CIT(A); Revenue's challenge is dismissed.

Final Conclusion: For AYs 2013-14, 2014-15 and 2015-16 the Tribunal dismisses the Revenue appeals: (i) the proviso to section 164(2) limits the application of MMR to only the non-exempt portion of relevant income forfeited by contravention of section 13(1)(c)/(d), and (ii) the CIT(A)'s restriction of expense disallowance to 5% is upheld; all departmental grounds are dismissed.

Transfer pricing adjustment - Arm's length price - Comparability analysis - Exclusion of comparables - Functional analysis (FAR) - Captive service provider - Brand and intangible value affecting comparability

Comparability analysis - Exclusion of comparables - Functional analysis (FAR) - Brand and intangible value affecting comparability - Captive service provider - Exclusion of Infosys BPO Ltd. and TCS e-Serve Ltd. from the final list of comparables for determining ALP of the assessee's ITES transactions - HELD THAT: - The Tribunal examined the assessee's functional profile and FAR which characterised the assessee as a captive contract service provider undertaking limited functions, owning only routine tangible assets and bearing minimal business risks, while all non-routine/intangible assets and major risks were retained by the AE. Applying the comparability principles, the Tribunal accepted that Infosys BPO Ltd. carries significant brand/intangible value, incurs brand-related and selling/marketing expenditures and had an extraordinary event (an acquisition) in the relevant year, factors that render it functionally and commercially dissimilar to a captive low risk service provider. Similarly, TCS e-Serve Ltd. was found to be engaged in higher end KPO/analytics services, integrated within a group strategy and lacking segmental reporting, making it functionally dissimilar and not comparable to the assessee's low end BPO/captive services. The Tribunal respectfully followed co ordinate bench precedents that excluded these entities on analogous grounds and directed their exclusion from the comparable set. Other grounds and comparables not actively argued were dismissed. The result reduced the comparable set and led to partial allowance of the appeal.

Infosys BPO Ltd. and TCS e-Serve Ltd. are to be excluded from the list of comparables; Ground 5.3 is partly allowed and the appeal is partly allowed.

Final Conclusion: The Tribunal partly allowed the appeal by directing exclusion of Infosys BPO Ltd. and TCS e Serve Ltd. from the comparable set for the ITES segment, following functional/FAR analysis and co ordinate bench precedents; other unargued grounds were dismissed.

Mistake apparent on record - section 254(2) - principles of natural justice - liberty to move the Tribunal - section 268A monetary limits - Board Circular 3/2018 clause 10(c) - revenue audit objection accepted by the Department - personal satisfaction of the Assessing Officer - strict construction of tax delegations

Mistake apparent on record - section 254(2) - liberty to move the Tribunal - principles of natural justice - Admissibility of Revenue's applications under section 254(2) to recall appeals dismissed as withdrawn/not pressed where the impugned order granted liberty to move the Tribunal and where appellants were not afforded proper opportunity of hearing. - HELD THAT: - The Tribunal held that the impugned summary dismissal en masse, without adequate notice and without affording proper opportunity to the Revenue, and where the impugned order itself granted liberty to move the Tribunal, amounted to a situation where the Revenue's applications under section 254(2) were admissible. Given the short shrift in hearing and the express caveat in para 7 of the impugned order preserving a remedy where an appeal may be excepted from section 268A, the strict restrictive ambit of s.254(2) need not be applied so as to bar consideration of the Revenue's objection; the applications could therefore be entertained to restore status ante and hear the appeals on merits, subject to verification of applicability of the Board circulars. The Tribunal recognised that the onus to show non-applicability of the circular lay on the Revenue, but that the authorization memo on record and the procedural defects in hearing justified permitting the Revenue to seek recall for adjudication on merits. [Paras 3]

Revenue's applications are admissible and may be entertained to recall the appeals for hearing on merits.

Revenue audit objection accepted by the Department - personal satisfaction of the Assessing Officer - Board Circular 3/2018 clause 10(c) - Validity on merits of MA No. 3/Jab/2020 (revenue appeal relating to reassessment where audit objection was pointed out) - whether the reassessment proceeded on an audit objection accepted by the Department so as to fall within clause 10(c). - HELD THAT: - On examining the LAR and the assessee's reply, the Tribunal found that the audit objection related to an apparent short-accounting of commission reconciled by reference to TDS certificates. The Assessing Officer accepted the assessee's explanation and was not personally satisfied that income had escaped assessment; the reassessment proceeded only because the audit party persisted. Clause 10(c) applies where a revenue audit objection has been accepted by the Department. The Tribunal held that absence of the AO's personal satisfaction meant the reassessment did not survive; Larsen & Toubro (as discussed) supports that reassessment cannot stand if not founded on the AO's personal satisfaction. Accordingly, MA No.3 failed on merits. [Paras 4]

MA No. 3/Jab/2020 is dismissed.

Recall of appeals for hearing on merits - section 268A monetary limits - Board Circular 3/2018 clause 10(c) - Whether MA Nos. 4 & 5/Jab/2020 should be allowed and the corresponding appeals restored for being heard on merits. - HELD THAT: - No specific objection was pressed by the assessees in these two matters beyond the general objections considered and rejected by the Tribunal. In view of the admissibility of the Revenue's applications (see issue on admissibility) and the absence of convincing justification to maintain in limine dismissal, the Tribunal directed restoration of these appeals for adjudication on merits. The corresponding Cross Objections, if any, would also stand revived. [Paras 5]

MA Nos. 4 & 5/Jab/2020 are allowed and the appeals (and corresponding COs, if any) are restored for hearing on merits.

Strict construction of tax delegations - Board Circular 3/2018 clause 10(c) - revenue audit objection accepted by the Department - Whether MA Nos. 6 & 7/Jab/2020 succeed where there was no audit objection in the HUFs' own records but reassessments arose from information in related cases - whether clause 10(c) can be construed to cover such cases. - HELD THAT: - The Tribunal applied principles of strict construction in relation to delegations under the tax statute. Clause 10(c) of Circular 3/2018 is an exception that applies where a revenue audit objection has been accepted by the Department in the relevant case. The Tribunal rejected a purposive expansion that would import coverage to related or consequential assessments where no audit objection was made in the HUFs' own cases. Absent an audit objection accepted in the particular assessee's case, clause 10(c) cannot be stretched to include such matters; equitable considerations do not permit broadening the clear words of the circular. Consequently, the Revenue's contention that reassessments in the HUF cases were saved by the related audit objection failed. [Paras 6]

MA Nos. 6 & 7/Jab/2020 are dismissed.

Final Conclusion: The Tribunal held the Revenue's applications to recall appeals were admissible given the procedural defects and express liberty in the impugned order; on merits MA Nos. 4 & 5/Jab/2020 were allowed and the appeals restored, while MA Nos. 3, 6 and 7/Jab/2020 were dismissed for lack of entitlement under clause 10(c) of Board Circular No. 3/2018 (notice/reassessment in MA No.3 lacked AO's personal satisfaction; the HUF matters in MAs 6-7 lacked an audit objection in those cases).

Disallowance under Section 14A - computation under Rule 8D of the Income Tax Rules - suo moto disallowance by the assessee - applicability/prospective operation of Rule 8D - penalty under Section 271(1)(c) - application of Section 43A to foreign exchange loss

Disallowance under Section 14A - computation under Rule 8D of the Income Tax Rules - suo moto disallowance by the assessee - applicability/prospective operation of Rule 8D - Validity and quantum of disallowance under Section 14A for A.Y. 2007-08 and whether the Assessing Officer was entitled to substitute the assessee's suo moto estimate by applying Rule 8D. - HELD THAT: - The Tribunal examined the assessee's working, the history of identical methodology accepted in earlier years and the material placed before the AO. The AO applied Rule 8D to compute a larger disallowance but did not record any satisfaction on the record as to why the assessee's suo moto allocation was not plausible nor did he appropriately exclude interest attributable to the assessee's lending business. The Tribunal observed that Rule 8D (and its clause applied by the AO) could not be mechanically invoked without addressing the assessee's explanations and that, on the material, the assessee's suo moto disallowance was reasonable and supported by earlier acceptances. Consequently the Tribunal set aside the CIT(A)'s contrary conclusion, directed acceptance of the assessee's suo moto disallowance of Rs. 67,48,50,222/- and held that the AO had failed to justify computation under Rule 8D for the year under consideration. [Paras 9, 10]

Assessee's suo moto disallowance under Section 14A accepted; AO to accept disallowance of Rs. 67,48,50,222/- and findings applying Rule 8D set aside.

Penalty under Section 271(1)(c) - Levy of penalty under Section 271(1)(c) for the year where the quantum issue related to disallowance under Section 14A. - HELD THAT: - The Tribunal found that penalty proceedings were founded on the quantum adjustments and there was no finding by the AO that the assessee had concealed or furnished inaccurate particulars of income. Given the Tribunal's acceptance of the assessee's suo moto disallowance on merits, and absence of any recorded dishonest or inaccurate conduct, the statutory requirement for imposing penalty under Section 271(1)(c) was not satisfied. [Paras 11]

Penalty under Section 271(1)(c) set aside; appeal allowed.

Application of Section 43A to foreign exchange loss - Whether addition under Section 43A was correctly made in respect of foreign exchange loss claimed by the assessee. - HELD THAT: - The Tribunal noted that Section 43A applies when capital assets are acquired from a country outside India. Revenue did not establish that any capital asset was so acquired in the relevant years. The assessee had already accounted for notional losses in earlier years to comply with accounting standard AS-11, and an additional disallowance would amount to double disallowance. On the record, the CIT(A)'s deletion of the addition under Section 43A was upheld. [Paras 15]

Addition under Section 43A deleted; Revenue's ground dismissed.

Final Conclusion: For A.Y. 2007-08 the Tribunal allowed the assessee's appeals: the suo moto disallowance under Section 14A (Rs. 67,48,50,222/-) was directed to be accepted and the penalty under Section 271(1)(c) was vacated; the Revenue's appeal was dismissed including the challenge under Section 43A.

Arm's Length Price - Transaction Net Margin Method (TNMM) - Operating Profit/Total Cost as profit level indicator - Comparability and Related Party Transaction (RPT) filter - Turnover as a criterion for selection of comparables - Working capital adjustment in transfer pricing - Deduction under section 10A - Nature of lease fit-outs - capital v. revenue - Proof of contribution to approved gratuity fund and deduction under section 43B - Remand for de novo verification

Arm's Length Price - Transaction Net Margin Method (TNMM) - Operating Profit/Total Cost as profit level indicator - Working capital adjustment in transfer pricing - Determination of ALP for international transaction of software development services using TNMM and OP/TC as PLI, including selection of comparables and working capital adjustment. - HELD THAT: - The Tribunal accepted TNMM as the Most Appropriate Method and Operating Profit/Total Cost as the PLI for the assessee. It recorded the TPO's selection process which produced an arithmetic mean PLI and a limited working-capital adjustment resulting in a computed ALP and consequent adjustment to the assessee's income. The Tribunal upheld the DRP directions insofar as they relate to the comparability exercise, directed exclusion of KALS Information Systems Ltd. on functional comparability grounds following earlier coordinate Bench authority, and directed the AO/TPO to compute ALP in accordance with the Tribunal's directions after affording the assessee an opportunity of being heard. The Tribunal also clarified that the DRP did not mandate a specific risk adjustment percentage but left the percentage to be decided by the AO with guidance from relevant precedents. [Paras 9, 10, 11, 19, 20]

ALP to be recomputed by the AO/TPO in accordance with the Tribunal's directions: TNMM and OP/TC upheld, KALS excluded as non-comparable, working-capital adjustment to be applied as directed, and ALP to be reworked after affording hearing.

Turnover as a criterion for selection of comparables - Comparability and Related Party Transaction (RPT) filter - Validity of excluding comparables on the basis of high turnover and the appropriate threshold for RPT filter. - HELD THAT: - The Tribunal, following its earlier detailed reasoning and relevant High Court authority, held that excluding companies with substantially higher turnover than the assessee is permissible in the comparability exercise; accordingly the DRP's exclusion of companies having turnover more than Rs. 200 crores was upheld. On RPT filter, the Tribunal rejected the DRP's adoption of a nil RPT threshold and directed the TPO to apply an RPT filter of 15% (with the established practice that when sample sizes are small the threshold may be fixed at 25%), and to re-examine comparability of the remaining companies accordingly. The Tribunal observed that the DRP had not directed a 1% risk adjustment but only left the risk-adjustment percentage to be decided by the AO. [Paras 13, 14, 16, 17]

Exclusion of high-turnover comparables upheld; RPT filter fixed at 15% (subject to 25% in limited-sample cases); matter remitted to TPO/AO to apply these filters and redetermine comparability.

Deduction under section 10A - Exclusion of telecommunication expenses, insurance charges and foreign exchange loss from both export turnover and total turnover for computation of deduction under section 10A. - HELD THAT: - The Tribunal noted the jurisdictional High Court's decision in CIT v. Tata Elxsi Ltd holding that such charges should be excluded from both numerator and denominator when computing deduction under section 10A, and recorded that the Supreme Court has upheld that approach in the cited HCL Technologies decision. In view of that binding precedent, the Tribunal found no infirmity in the AO's order and declined to interfere on this point. [Paras 12]

DRP/AO's treatment in line with the High Court and Supreme Court authority is sustained; no interference with exclusion of those charges from both export turnover and total turnover for section 10A.

Nature of lease fit-outs - capital v. revenue - Remand for de novo verification - Whether lease rental payments for fit-outs are capital or revenue expenditure. - HELD THAT: - The Tribunal observed that the lease agreement on record did not disclose the nature or breakup of the fit-outs provided, making it impossible to determine whether the payments were capital or revenue in nature. Given the absence of necessary factual detail, the Tribunal set aside the AO's order and remanded the issue to the AO for de novo consideration, directing the AO to ascertain the nature of the fit-outs and the cost adjustment arrangement between the assessee and the lessor. [Paras 25]

Issue remanded to the AO for fresh enquiry and determination of whether fit-out payments are capital or revenue in nature, with directions to ascertain details and afford opportunity of hearing.

Proof of contribution to approved gratuity fund and deduction under section 43B - Remand for de novo verification - Allowability of deduction for contribution to an approved gratuity fund subject to proof of payment. - HELD THAT: - The assessee pleaded that documentary evidence of contribution was filed during assessment proceedings. The DRP directed verification of the record but the AO in the final order again treated the claim as unsupported. The Tribunal found that the assessee pointed to ledger extracts, bank statements and receipts on the paper book and that the AO had not given the assessee an opportunity to rely on that record in the final order. Consequently the Tribunal set aside the AO's decision and remitted the matter to the AO to verify the claimed evidence and, if necessary, afford the assessee an opportunity to produce additional proof. If verified, the AO is to allow the deduction under law. [Paras 29]

Matter remitted to the AO for verification of proof of gratuity payment; allow deduction if evidence on record or produced is satisfactory, otherwise permit assessee opportunity to produce evidence.

Deduction under section 10A - Remand for de novo verification - Correction of errors in computation of export turnover and business income for computing deduction under section 10A. - HELD THAT: - Both parties agreed that alleged double reduction of foreign exchange loss and incorrect business income figures required factual verification. The Tribunal directed that the computation errors be referred back to the AO for rectification after verifying the assessee's submissions and records. [Paras 31]

Computation errors under section 10A set aside and remitted to the AO for rectification and verification; AO to consider assessee's contentions and correct computation accordingly.

Nature of lease fit-outs - capital v. revenue - Remand for de novo verification - Identical lease rental/fit-out issue in AY 2012-13 consequent on the remand made for AY 2010-11. - HELD THAT: - The Tribunal observed that the ground in the appeal relating to AY 2012-13 is identical to the remanded issue in AY 2010-11. Following its directions for AY 2010-11, the Tribunal set aside and remitted the matter to the AO for fresh consideration in accordance with those directions. The appellate result for statistical purposes was recorded. [Paras 35, 36]

AY 2012-13 appeal treated as allowed for statistical purposes and the lease/fit-out issue remitted to the AO for fresh consideration in line with directions given for AY 2010-11.

Final Conclusion: In summary: the Tribunal partly allowed the cross appeals. It upheld the use of TNMM and OP/TC as PLI and directed recomputation of ALP with specified comparability adjustments (KALS excluded; high-turnover comparables excluded), fixed RPT filter at 15% for comparability purposes, and left working-capital and risk-adjustment matters to be applied as directed. The Tribunal sustained the treatment under section 10A in accordance with binding High Court and Supreme Court authority. Several factual and computation issues (nature of fit-outs, proof of gratuity contribution, and rectification of section 10A computation) were set aside and remitted to the AO for de novo verification and decision. The appeal for AY 2012-13 was allowed for statistical purposes with the lease-related issue remanded as directed.

Assessment under section 153A - abatement and merger of pending proceedings - allowance of expenditure in the year of crystallisation - entertainment of claim in abated (pending) assessment merged with 153A proceedings - requirement of reasons in appellate order under section 250(6) - remand for fresh consideration due to non-speaking appellate order

Requirement of reasons in appellate order under section 250(6) - remand for fresh consideration due to non-speaking appellate order - Whether the order of the ld. CIT(Appeals) was deficient for want of reasons and required remand. - HELD THAT: - The Tribunal found that the ld. CIT(Appeals) allowed a substantial claim without providing cogent reasons as required by sub section 6 of section 250. Although the appellate conclusion - that the claim could be entertained because proceedings were pending and had merged with 153A proceedings, and that interest crystallised in the year under consideration - was a permissible view, the ld. CIT(Appeals) failed to advert to material facts bearing on the quantum and nature of the liability (including the reduction of the CCESC interest by the Delhi High Court and the adjustments of amounts paid). For these reasons the Tribunal held that the appellate order did not satisfy the statutory mandate to state points for determination, the decision thereon and reasons, and consequently set aside the impugned order on this limited ground and remitted the matter to the ld. CIT(Appeals) for a well reasoned decision after giving the assessee opportunity of being heard. [Paras 7]

Impugned order of ld. CIT(Appeals) set aside for non application of mind and want of reasons; matter remitted to ld. CIT(Appeals) for fresh, reasoned disposal after hearing.

Assessment under section 153A - abatement and merger of pending proceedings - entertainment of claim in abated (pending) assessment merged with 153A proceedings - allowance of expenditure in the year of crystallisation - Whether the claim for deduction of interest on excise duty pertaining to earlier years should be entertained/allowed in A.Y. 2013-14 or another year, and whether the quantum claimed was correctly treated. - HELD THAT: - The Tribunal observed that the claim could legitimately be entertained in the year under consideration because the regular assessment proceedings for A.Y. 2013 14 had been pending and subsequently merged with the 153A proceedings; thus the claim was not necessarily a fresh post search claim. The Tribunal noted the ld. CIT(Appeals) accepted that interest expenditure crystallised in A.Y. 2013 14 but failed to consider relevant material affecting the quantum - specifically, the reduction of interest by the Delhi High Court and amounts already paid - and therefore did not finally adjudicate the correctness and quantum of allowance. In view of these lacunae the Tribunal did not decide the merits on quantum or final year of allowance but remitted the matter to ld. CIT(Appeals) to decide afresh, with directions to apply mind to the material facts and to pass a reasoned order. [Paras 7, 8]

Issue remitted to ld. CIT(Appeals) for fresh adjudication on whether and to what extent the interest on excise duty is allowable in A.Y. 2013 14 (and consequent quantum), after considering relevant facts and giving opportunity of hearing.

Final Conclusion: The Tribunal set aside the ld. CIT(Appeals) order for want of reasons as required by section 250(6) and remitted the limited issue concerning allowance and quantum of interest on excise duty (in relation to the merged 153A proceedings and the year of crystallisation) to the ld. CIT(Appeals) for a fresh, reasoned decision after affording the assessee an opportunity of being heard; the Revenue appeal is treated as allowed for statistical purposes.

Amendment of plaint under Order VI Rule 17 CPC - benami transaction - exception under Section 2(9)(A)(iv) of the Prohibition of Benami Transactions Act, 1988 - jurisdiction to transfer to Adjudicating Authority under the Prohibition of Benami Transactions Act, 1988 - trial court exceeding scope in interlocutory application by venturing into merits

Amendment of plaint under Order VI Rule 17 CPC - trial court exceeding scope in interlocutory application by venturing into merits - Extent of the Trial Court's power in deciding an application to amend the plaint under Order VI Rule 17 CPC and whether the impugned order improperly went into merits. - HELD THAT: - The High Court found that the Trial Court, when dealing with I.A.No.913/2017, entered into the merits of the claim (specifically whether the petitioner was eligible for the statutory exception from being a benami transaction) instead of confining itself to the limited inquiry appropriate under Order VI Rule 17 CPC. The Court held that at the interlocutory stage the Trial Court ought to have considered only whether the proposed amendments were permissible under Order VI Rule 17, and not adjudicated the substantive entitlement to the exception under the Prohibition of Benami Transactions Act. Because the Trial Court effectively determined substantive eligibility on the merits at the amendment stage, its conclusion dismissing the amendment application was unsustainable and required reconsideration. [Paras 9, 11]

Ext.P7 is set aside and the interlocutory application for amendment (I.A.No.913/2017) is to be reconsidered by the Trial Court, which must confine its assessment to the proper scope of Order VI Rule 17 CPC while affording parties opportunity to be heard.

Exception under Section 2(9)(A)(iv) of the Prohibition of Benami Transactions Act, 1988 - jurisdiction to transfer to Adjudicating Authority under the Prohibition of Benami Transactions Act, 1988 - Whether the contention that the suit falls within the Act and ought to be transferred to the Adjudicating Authority affects the Trial Court's consideration of the amendment application. - HELD THAT: - The Court observed that the respondents contended the suit involved a benami transaction and therefore was liable to be transferred to the Adjudicating Authority under the Act. The High Court held that this contention does not negate the need to reconsider the amendment application; if transfer is ultimately warranted, the Adjudicating Authority would still have to consider the claims on merits. The Trial Court had not adverted to the transfer contention when dismissing the amendment application. Accordingly, the Trial Court must, upon reconsideration of the amendment application, also advert to the submission that the suit may require transfer under the Act and decide in accordance with law. [Paras 10, 11]

The Trial Court is directed, while reconsidering the amendment application, to consider the respondents' contention regarding transfer to the Adjudicating Authority under the Act and decide appropriately; remand for fresh consideration rather than a final determination on transfer or on the substantive exception.

Final Conclusion: Original Petition allowed; Ext.P7 set aside and the Trial Court directed to reconsider I.A.No.913/2017 after affording both parties opportunity and after addressing the contention concerning transfer to the Adjudicating Authority, with a final decision to be rendered expeditiously (within one month from production of a certified copy of this judgment).

Provisional release of seized goods under section 110-A - Seizure under section 110 and liability to confiscation under section 111 - Discretion of the adjudicating authority to impose bond, security and conditions - Treatment of goods classified as prohibited imports in relation to provisional release - Protecting revenue interest pending adjudication by conditions of release (bond and bank guarantee)

Provisional release of seized goods under section 110-A - Discretion of the adjudicating authority to impose bond, security and conditions - Treatment of goods classified as prohibited imports in relation to provisional release - Protecting revenue interest pending adjudication by conditions of release (bond and bank guarantee) - Whether the petitioner is entitled to provisional release of the seized imported vehicle and on what conditions such release should be ordered. - HELD THAT: - The Court held that section 110-A confers on the owner a right to seek provisional release of goods seized under section 110 while simultaneously vesting a discretionary power in the adjudicating authority to release such goods on taking a bond with such security and conditions as may be required. There is no textual limitation in section 110-A excluding goods categorized as "prohibited" from the scope of provisional release; the words "goods, documents and things seized" are of general import and do not admit a restrictive qualification. The vehicle remained under seizure and no adjudication or confiscation order had been passed; petitioner had deposited the declared customs duty. Relying on the Court's earlier decision in Ashish Puravankara (where provisional release of an imported car was ordered subject to security and conditions) the Court found that merely because the respondents considered the vehicle to be a prohibited or second-hand import, or because an appeal had been filed before CESTAT, respondents could not refuse to exercise the statutory discretion to consider provisional release. To protect the revenue pending final adjudication, the Court exercised its power to direct provisional release subject to conditions tailored to secure the revenue interest: execution of a bond for the assessable value, furnishing of a bank guarantee from a nationalized bank for 50% of the assessable value, and a prohibition on creating any third-party rights until adjudication attains finality. Compliance with these conditions was made a precondition to handing over the vehicle and original documents within two weeks. [Paras 12, 13, 14, 15, 16]

Provisional release of the imported RHD Ford Mustang GT Coupe is directed subject to petitioner executing a bond for the assessable value, furnishing a bank guarantee from a nationalized bank for 50% of the assessable value, refraining from creating any third party rights until adjudication is final, and, upon compliance, respondents shall release the vehicle and original documents within two weeks.

Final Conclusion: Writ petition disposed by directing provisional release of the seized imported vehicle on compliance with the specified bond and bank guarantee conditions, with a restraint against creation of third party rights until final adjudication; liberty to proceed with adjudication and appeals is preserved.

Aiding and abetting - penalty under Section 112(a) of the Customs Act - requirement of collusion or abnormal gain for imposition of penalty - mechanical imposition of penalty - employee acting under instructions - absence of personal liability - mis-declaration and smuggling

Aiding and abetting - penalty under Section 112(a) of the Customs Act - employee acting under instructions - absence of personal liability - mechanical imposition of penalty - Whether penalty under Section 112(a) could be sustained against the appellant, an employee of the CHA, for alleged collusion in mis-declaration and smuggling. - HELD THAT: - The Tribunal examined the evidence concerning the appellant's role in clearance of the impugned consignment and the statements recorded. It found that the appellant was an employee of the CHA who acted on instructions from seniors and received CHA charges as part of his employment; there was no material establishing that he obtained any abnormal personal gain or that he colluded with the importer to facilitate smuggling. The Tribunal concluded that the record did not demonstrate the necessary element of aiding and abetting or collusion required to sustain a penalty under Section 112(a). Further, the imposition of penalty in the order-in-original was characterized as mechanical and lacking application of mind as to the appellant's personal culpability. In view of these findings, the penalty imposed on the appellant could not be sustained and had to be set aside. [Paras 15]

Penalty under Section 112(a) imposed on the appellant is set aside for failure to establish aiding and abetting or abnormal personal gain; the appeal is allowed with consequential relief.

Final Conclusion: The Tribunal allowed the appeal and set aside the penalty imposed on the appellant under Section 112(a) of the Customs Act, concluding that there was no evidence of collusion or aiding and abetting by the appellant and that the penalty was imposed mechanically; the appellant is entitled to consequential benefits in accordance with law.

Exemption notification - appropriate rate of duty - 100% Export Oriented Unit (EOU) scheme - duty on waste cleared to Domestic Tariff Area (DTA) - strict interpretation of exemption notifications - binding effect of Supreme Court decisions over Board circulars - reference to President for constitution of larger Bench

Exemption notification - 100% Export Oriented Unit (EOU) scheme - duty on waste cleared to Domestic Tariff Area (DTA) - appropriate rate of duty - Entitlement of the EOU to benefit of exemption notifications in respect of clearance of cotton waste to the DTA on payment of duty at nil rate. - HELD THAT: - The Tribunal found that the appellant was a duly authorized 100% EOU which procured inputs without payment of duty under the exemption notifications and cleared cotton waste to the DTA in accordance with the EXIM Policy and with necessary permissions. The bench analysed the scheme of the EOU notifications, observing that waste and rejects arising out of manufacture are treated akin to approved finished goods and that the scheme contemplates clearance to the domestic market subject to prescribed procedure, ceilings and payment of appropriate duty. Having considered precedents and the policy imperatives behind the exemption scheme, the Tribunal concluded that the offshoots of the approved manufacturing process (such as cotton waste) embody value already subsumed in the manufacture and that the scheme was not intended to impose a levy on such waste in a manner that would deny the intended benefits to EOUs. Applying these principles, the Tribunal set aside the demand adjudicated by the Commissioner and allowed the appeal, holding that the appellant was entitled to the relief claimed in the factual and procedural matrix of this case. [Paras 4]

Impugned order set aside and appeal allowed; demand confirmed by the Commissioner rejected insofar as it sought recovery from the appellant.

Appropriate rate of duty - exemption notification - strict interpretation of exemption notifications - reference to President for constitution of larger Bench - Reference to a Larger Bench on the question whether the phrase 'appropriate rate of duty' in the relevant exemption notifications covers clearances where the finished goods are cleared on payment of duty at nil rate, and whether the CESTAT Mumbai decision in Technocraft Industries was correct. - HELD THAT: - Although the Tribunal allowed the appeal on the facts before it, the bench recorded its inability to concur with the reasoning of the Mumbai Coordinate Bench in Technocraft Industries on the construction of the phrase 'appropriate rate of duty' and having examined binding Supreme Court authority (including Dhiren Chemical Industries and subsequent pronouncements emphasizing strict interpretation of exemption notifications and the limited scope of Board circulars), held that the broader question raised required authoritative determination by a Larger Bench. For these reasons the matter was referred to the President of the Tribunal to place the following questions before a Larger Bench: (a) whether 'appropriate rate of duty' in the cited notifications covers cases where finished goods are cleared on payment of duty at nil rate; and (b) whether the CESTAT Mumbai decision in Technocraft Industries correctly held that the exemption notifications apply when finished goods are cleared at a nil rate. [Paras 4, 5]

Matter referred to the President for being placed before a Larger Bench of the Tribunal with the two specified questions for consideration.

Final Conclusion: The Tribunal allowed the appeal and set aside the impugned adjudication insofar as it sought recovery from the appellant, and, contemporaneously, referred specific questions on the scope of the phrase 'appropriate rate of duty' and the correctness of the CESTAT Mumbai decision in Technocraft Industries to the President for constitution of a Larger Bench for authoritative consideration.

Restoration of company struck off - Just and equitable ground for restoration - Failure to file annual returns and balance sheets as ground for striking off - Consequences of strike off and effect of restoration - Obligation to file outstanding statutory documents and pay prescribed fees and costs - Power of Tribunal under Section 252 of the Companies Act, 2013

Restoration of company struck off - Just and equitable ground for restoration - Failure to file annual returns and balance sheets as ground for striking off - Obligation to file outstanding statutory documents and pay prescribed fees and costs - Whether the name of Awadh Risk Management Private Limited, struck off by the Registrar of Companies, should be restored in the Register of Companies - HELD THAT: - The Tribunal found that although the Registrar of Companies followed the statutory procedure in striking off the company for non-filing of annual returns and balance sheets, the appellant produced audited financial statements, income-tax filings and demonstrated the existence of movable and immovable assets and ongoing activity. The failure to make statutory filings was attributed to inadvertence and adverse circumstances and, in the circumstances, would render refusal of restoration excessive. Applying the power exercisable under Section 252 of the Companies Act, 2013, the Tribunal concluded that it is just and equitable to direct restoration of the company's name in the Register. Restoration is ordered subject to compliance conditions: filing of all outstanding statutory documents and payment of prescribed fees/additional fees/fines as decided by the RoC within thirty days of restoration; payment of costs of revival by online payment as directed; delivery of a certified copy of the order to the RoC to enable publication in the Official Gazette; publication of a notice in a leading district newspaper after RoC approval of the draft; and payment of expenses of Gazette publication by the appellant. The Tribunal observed that pending income-tax demands can be discharged once the company is restored. [Paras 12, 13, 14, 15, 16]

The Tribunal allowed the appeal and directed the Registrar of Companies to restore the company in the Register as if it had not been struck off, subject to the specified conditions of filing outstanding documents, payment of fees/fines and costs, and publication of the restoration order and notice.

Final Conclusion: Appeal allowed; the company's name is ordered to be restored in the Register of Companies as if not struck off, subject to filing of outstanding statutory documents, payment of prescribed fees/fines and the directed costs and publication requirements.

Restoration under Section 252 of the Companies Act, 2013 - just and equitable - strike off and restoration of company name - opportunity to take remedial measures for non-compliance - filing of outstanding statutory documents - payment of fees, additional fees, fines and costs for revival - publication in the Official Gazette and newspaper notice on restoration

Restoration under Section 252 of the Companies Act, 2013 - just and equitable - opportunity to take remedial measures for non-compliance - Whether the name of Rabia Textiles Private Limited should be restored to the Register of Companies despite its having been struck off for non-filing of statutory returns. - HELD THAT: - The Tribunal found that although the company had not filed annual returns and balance sheets with the Registrar of Companies, the failure was attributable to various commercial and financial reasons and the company had demonstrated ongoing activity by producing audited financial statements and evidence of assets. Applying the statutory test under Section 252, the Bench concluded that it would be just and equitable to restore the company's name because the company is a living entity entitled to an opportunity to remedy the non-compliance and because refusal of restoration solely on the ground of failure to file annual returns would be excessive in the circumstances. The Tribunal expressly considered the Registrar's compliance with procedure for striking off but determined that restoration was appropriate in the interest of the company, its shareholders and creditors. [Paras 8, 9, 10, 11]

The Tribunal ordered restoration of the company's name in the Register of Companies, directing the ROC to restore the status as if the name had not been struck off.

Filing of outstanding statutory documents - payment of fees, additional fees, fines and costs for revival - publication in the Official Gazette and newspaper notice on restoration - What conditions and consequential steps are to be imposed upon restoration of the company's name. - HELD THAT: - The Tribunal conditioned restoration on compliance with specified remedial steps. The company was directed to file all outstanding statutory documents and to pay prescribed fees, additional fees and fines as decided by the ROC within thirty days of restoration. The Tribunal also imposed a cost to the ROC of Rs. 50,000 for revival payable online and required the appellant to deliver a certified copy of the order to the ROC, after which the ROC was to publish the order in the Official Gazette. Additionally, the appellant must publish a notice in a leading district newspaper after securing ROC approval of the draft notice, and the ROC was directed to verify and approve the draft and to cause publication in the Gazette at the appellant's expense. [Paras 13, 14, 15, 16, 17]

Restoration granted subject to filing of outstanding statutory documents with prescribed fees/fines, payment of costs, delivery of certified order to ROC, and publication in Official Gazette and newspaper as directed.

Final Conclusion: The appeal succeeds: the Tribunal ordered restoration of Rabia Textiles Private Limited's name in the Register of Companies as if it had not been struck off, subject to the appellant's compliance with filing outstanding statutory documents, payment of prescribed fees/fines and costs, and required publications as detailed in the order.

Restoration of company name - Just and equitable ground for restoration - Striking off under Registrar's powers - Opportunity to take remedial measures - Filing of statutory documents and payment of prescribed fees - Publication in Official Gazette and newspaper - Costs for revival

Restoration of company name - Just and equitable ground for restoration - Striking off under Registrar's powers - Whether the name of M/s Vishwa Printers & Packagers Private Limited should be restored to the Register of Companies. - HELD THAT: - The Tribunal examined Section 252 of the Companies Act, 2013 and the facts placed on record, including audited financial statements, income-tax filings for the stated years and the absence of pending tax demands. Although the Registrar proceeded under the power to strike off by following the procedure under Section 248 and the removal rules, the Bench found that restoration is justified where it is "just and equitable" and where the company demonstrates assets and ongoing activity requiring restoration. The Tribunal observed that striking off without affording effective opportunity to take remedial measures, or as a sole punishment for failure to file annual returns, would be excessive in the circumstances. Relying on these considerations, the Tribunal concluded that restoration would be in the interest of the company, its shareholders and creditors and directed that the ROC restore the company's name. [Paras 8, 9, 10, 11]

The Tribunal ordered restoration of the company's name on the Register of Companies and directed the ROC to restore the company's status as if it had not been struck off.

Filing of statutory documents and payment of prescribed fees - Publication in Official Gazette and newspaper - Costs for revival - Opportunity to take remedial measures - Terms and conditions subject to which the restoration is to be implemented. - HELD THAT: - The Tribunal specified procedural and financial conditions for restoration. The appellant was directed to file all outstanding statutory documents (financial statements and annual returns) and to pay prescribed fees, additional fees or fines as determined by the ROC within thirty days of restoration. The restoration was made subject to payment of the cost fixed by the Tribunal and to publication formalities: delivery of a certified copy of the order to the ROC, ROC's publication of the order in the Official Gazette after compliance, and the appellant's publication of a notice in a leading local newspaper after ROC approval of the draft. The ROC was directed to verify and approve the draft notice and to publish the restoration in the Official Gazette at the appellant's expense. [Paras 12, 13, 14, 15, 16]

Restoration granted subject to the appellant filing outstanding documents, payment of fees and costs, and undertaking the required Gazette and newspaper publications as directed.

Final Conclusion: The NCLT allowed the appeal and ordered restoration of the company's name under Section 252 on just and equitable grounds, subject to filing of outstanding statutory records, payment of prescribed fees and costs, and completion of directed publication formalities.

Restoration of company name - just and equitable - strike off for non-compliance with statutory filings - opportunity to take remedial measures - consequential actions on restoration - costs and publication requirements for revival - power under Section 252 of the Companies Act, 2013

Restoration of company name - just and equitable - strike off for non-compliance with statutory filings - opportunity to take remedial measures - Restoration of the name of M/s. Rafey Builders Private Limited struck off by the Registrar of Companies. - HELD THAT: - The Tribunal considered the material placed by the appellant, including audited financial statements, income-tax returns and the existence of movable and immovable assets, and found that the company has been active and has assets warranting revival. Although the Registrar of Companies had followed the procedural requirements for striking off under the removal rules and no reply was received to the show cause notice, the bench held that striking off is a stringent step and, in the circumstances, merely failing to file annual returns does not make restoration unjust or inequitable. The Tribunal emphasised that restoration should be allowed where it is in the interest of the company, its shareholders and creditors and where the appellant is given an opportunity to take remedial measures. Applying Section 252 of the Companies Act, 2013, the Tribunal ordered restoration and imposed conditions: filing of outstanding statutory documents with prescribed fees/additional fee/fine, payment of costs, and compliance with publication and Gazette notification requirements, with RoC to take consequential actions on restoration.

Allowed; the Registrar of Companies is directed to restore the company's name and take consequential actions, subject to filing of outstanding documents, payment of prescribed fees and costs, and compliance with publication and Gazette formalities.

Final Conclusion: The appeal is allowed: the Tribunal directs restoration of the appellant company's name under Section 252 as just and equitable, subject to filing outstanding statutory records, payment of fees and costs, and compliance with publication and Gazette notification requirements.

Voluntary revision of financial statements under Section 131 - Compliance with Section 129 and Section 134 - Application procedure under Rule 77 of the NCLT Rules, 2016 - Treatment of interest on NPA accounts as per RBI Prudential Norms - Non-necessity of bank as party to Section 131 petition - Taxation consequences and revenue protection in light of revised statements

Voluntary revision of financial statements under Section 131 - Application procedure under Rule 77 of the NCLT Rules, 2016 - Petitioner entitled to seek revision of financial statements for the three specified financial years under Section 131 read with Rule 77. - HELD THAT: - Section 131, notified with effect from 01.06.2016, permits directors to prepare revised financial statements in respect of any of the three preceding financial years. The Tribunal held that this statutory language clearly encompasses the three prior years upon notification and therefore the petition for revision covering financial years 2015-16, 2016-17 and 2017-18 is maintainable. The petition was examined against the requirements of Rule 77 and the Tribunal found that the petitioner had complied with the pre-conditions prescribed therein, including filing within the time specified from the Board decision and furnishing requisite particulars and supporting documents. The finding addresses the ROC's contention that years prior to 2016-17 are not amendable under Section 131 and rejects that contention as untenable. [Paras 17, 19]

Petition allowed to seek revision of financial statements for 2015-16, 2016-17 and 2017-18 under Section 131 read with Rule 77.

Treatment of interest on NPA accounts as per RBI Prudential Norms - Compliance with Section 129 and Section 134 - Accounting treatment relied upon by petitioner (incorrectly reflected interest on NPA in bank account) justified revision of financial statements to reflect correct position under accounting standards. - HELD THAT: - The petitioner produced the RBI Master Circular on prudential norms and the bank statement and OTS to demonstrate that interest on the account became notional on classification as NPA and ought not to have been shown on accrual in the borrowing head. The Tribunal accepted that the bank had not followed the RBI circular and that the management had inadvertently matched and adopted incorrect bank figures in the financial statements, resulting in non-compliance with Section 129. Given these proved anomalies and the petitioner's compliance with Section 131/Rule 77, revision of the audited financial statements and Board's report to conform with accounting standards and statutory requirements was warranted. [Paras 4, 5, 6, 17, 19]

Revision permitted so that financial statements and Board's report for the stated years reflect the correct accounting treatment of the NPA and related interest.

Non-necessity of bank as party to Section 131 petition - Compounding not a pre-condition to seeking revision under Section 131 - Bank is not an indispensable party to the petition and the petitioners are not required to seek compounding before invoking Section 131. - HELD THAT: - The ROC's submission that the petitioner had admitted contravention of Section 129 and therefore should have pursued compounding, and that the bank must be made a party, was considered and rejected. Section 131 itself provides for voluntary revision where financial statements do not comply with Section 129 or 134, and the petitioner had produced documentary proof (including the OTS) which was not disputed by respondents. On that basis the Tribunal found the ROC's contentions unsustainable and declined to treat the bank as a necessary party to the revision petition. [Paras 20]

Contentions that compounding is a pre-condition or that the bank is a necessary party are rejected.

Taxation consequences and revenue protection in light of revised statements - Income Tax Department's objection that revision would adversely affect revenue is not a bar to allowing revision; revenue protection is preserved by permitting taxation authorities to take action under law. - HELD THAT: - The Income Tax Department had raised objections that revision would affect assessments and revenue. The Tribunal noted that the petitioner's filed income tax returns indicated the relevant interest amounts were treated as accrued and added back for computation of assessable income, and therefore there was no revenue impact from the department's perspective. Even so, the Tribunal made it clear that the order permitting revision does not preclude tax authorities from seeking information or documents, or from taking lawful steps in assessment proceedings arising from the revised financial statements, and that the petitioner remains liable to pay any taxes or charges lawfully found payable. [Paras 10, 17, 22]

Revision allowed despite Income Tax Department's objections; tax authorities retain the right to examine and take appropriate action in accordance with law.

Final Conclusion: The petition under Section 131 read with Rule 77 is allowed: the company may revise its audited financial statements and Board's report for financial years 2015-16, 2016-17 and 2017-18 to reflect proper accounting treatment in accordance with accounting standards and statutory requirements; the ROC's and Income Tax Department's objections are rejected subject to the authorities' lawful rights to seek information and claim any taxes or charges arising from the revised statements.

Sanction of Scheme of Amalgamation under Sections 230-232 - Dispensation of meetings of shareholders and creditors - Compliance with statutory publication and service requirements - Undertaking to discharge tax liabilities crystallizing on final adjudication - Transfer of assets, rights, liabilities and employees by virtue of amalgamation - Dissolution of transferor company without winding up - Continuation of pending proceedings by or against the transferee - Registration of certified copy of order with Registrar of Companies and consolidation of files - Accounting treatment in conformity with notified Accounting Standards - No-objection reports of Official Liquidator and Regional Director subject to compliance

Sanction of Scheme of Amalgamation under Sections 230-232 - Sanction of the Scheme of Amalgamation between the Transferor and the Transferee companies - HELD THAT: - The Tribunal, after considering the joint petition, the affidavits filed in compliance with first and second motion orders, the report of the Official Liquidator and the representation of the Regional Director (Northern Region), concluded there was no impediment to sanctioning the Scheme. The Tribunal noted consent accorded by members and creditors and the absence of objections arising from statutory notices and newspaper publications, and accordingly accorded sanction to the Scheme under Sections 230 to 232 of the Companies Act, 2013. [Paras 7, 8, 13, 14, 15]

Scheme sanctioned under Sections 230-232.

Dispensation of meetings of shareholders and creditors - Compliance with statutory publication and service requirements - Validity of dispensation of convening meetings and compliance with publication and service directions - HELD THAT: - The Tribunal recorded that a First Motion application had sought and obtained dispensation of meetings of equity shareholders, secured and unsecured creditors by order dated December 18, 2019. For the Second Motion, the petitioners carried out newspaper publication and service of notices on Regional Director, Registrar of Companies, Official Liquidator and Income-Tax authorities as directed, and filed affidavits affirming such compliance. The Tribunal accepted these compliances in support of sanctioning the Scheme. [Paras 4, 5, 6]

Dispensation and subsequent publication/service requirements were noted as complied with and accepted.

No-objection reports of Official Liquidator and Regional Director subject to compliance - Registration of certified copy of order with Registrar of Companies and consolidation of files - Effect of Official Liquidator and Regional Director reports and related statutory compliance - HELD THAT: - The Official Liquidator reported no complaints against the Scheme and the Regional Director raised no objection, observing that annual returns and balance sheets were filed and no prosecutions were pending. The Regional Director drew attention to fee implications on revised authorised share capital; the Transferee filed an affidavit undertaking to comply with the requirement and pay any applicable fee. On these bases the Tribunal treated the observations as satisfied and proceeded to sanction subject to statutory compliance and subsequent filing of a certified copy of the order with the Registrar of Companies for consolidation of files. [Paras 7, 8]

Reports accepted; observation regarding fee met by undertaking; petitioners directed to comply with statutory filings and RoC registration.

Undertaking to discharge tax liabilities crystallizing on final adjudication - Treatment of Income-Tax demands and the Transferee's undertaking in relation to outstanding tax liabilities - HELD THAT: - The Tribunal noted Income-Tax Department reports of outstanding demands in respect of the Transferor and Transferee companies for specified assessment years. The Transferee company filed an affidavit detailing the status of those demands and gave an express undertaking to discharge any final tax liability of either petitioner company that may crystallize on final adjudication by the relevant authority. The Tribunal recorded this undertaking and proceeded with sanction, while clarifying that the order does not exempt payment of taxes or other charges under law. [Paras 9, 10, 18]

Income-tax demands noted; Transferee's undertaking to discharge any final tax liabilities accepted; sanction not to be construed as exemption from taxes or duties.

Accounting treatment in conformity with notified Accounting Standards - Conformity of the accounting treatment proposed in the Scheme with applicable Accounting Standards - HELD THAT: - Certificates from statutory auditors of the petitioner companies were placed on record certifying that the accounting treatment proposed in the Scheme conforms with Accounting Standards notified under Section 133 of the Companies Act, 2013. The Tribunal accepted these certificates as supporting the Scheme's accounting treatment. [Paras 11]

Accounting treatment certified as in conformity with notified Accounting Standards and accepted.

Transfer of assets, rights, liabilities and employees by virtue of amalgamation - Dissolution of transferor company without winding up - Continuation of pending proceedings by or against the transferee - Operative consequences of the sanctioned Scheme including vesting of assets and liabilities, employee transfer, dissolution of the Transferor and continuation of proceedings - HELD THAT: - The Tribunal ordered that upon the Scheme taking effect the Transferor Company shall stand dissolved without winding up; all property, rights and interests of the Transferor shall vest in the Transferee without further act or deed; liabilities and duties shall transfer to the Transferee; all pending proceedings by or against the Transferor shall continue by or against the Transferee; and employees in service immediately prior to the Effective Date shall become employees of the Transferee on terms not less favourable than those subsisting. The petitioners were directed to deliver a certified copy of the order to the Registrar of Companies within thirty days for registration and consolidation of files, and liberty was reserved for interested persons to apply for directions. [Paras 15, 16, 17, 19]

Ordered vesting of assets and liabilities in the Transferee, transfer of employees, dissolution of Transferor without winding up, continuation of proceedings, RoC filing and liberty to apply preserved.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation under Sections 230-232 of the Companies Act, 2013 after recording compliance with procedural directions, accepting no-objection reports and statutory auditor certificates, and subject to the petitioners' statutory obligations; consequential directions for vesting of assets and liabilities, transfer of employees, dissolution of the Transferor, continuation of proceedings and RoC registration were given, and the Transferee's undertaking to discharge any final tax liabilities was recorded.

Annual general meeting - Mandatory obligation to hold annual general meeting - Power of Tribunal to call annual general meeting - Quorum - one member present in person or by proxy deemed to constitute meeting - Supervision by Regional Director and police facilitation to ensure peace and harmony

Annual general meeting - Mandatory obligation to hold annual general meeting - Power of Tribunal to call annual general meeting - Direction to convene and hold the annual general meeting of respondent No.1-company in view of default in holding the AGM. - HELD THAT: - The petition under Section 97 was filed to compel respondent No.1-company to hold its annual general meeting which was required to be held within six months from the close of the financial year. The Tribunal noted that respondent directors did not dispute the statutory obligation to hold the AGM within the prescribed period and that a preliminary challenge to the petitioner's representative had been dismissed. Given the default in holding the AGM and the Tribunal's statutory power to call or direct the calling of an AGM and give ancillary directions, the Tribunal found it appropriate to exercise its powers under Section 97 to ensure the company's mandatory compliance and protect the company's interests. The Tribunal accordingly directed that the AGM be convened and held within 30 days during business hours at the registered office, subject to compliance with the Articles of Association and the Companies Act, 2013, and recorded ancillary directions including deeming one member present in person or by proxy to constitute the quorum and measures for maintenance of peace and supervision by the Regional Director and local police. [Paras 6, 7, 10, 11]

The Tribunal allowed the company petition and directed respondent Nos.1 to 3 to convene, hold and conduct the annual general meeting within 30 days with ancillary directions including quorum and supervisory arrangements.

Final Conclusion: The petition under Section 97 is allowed; the Tribunal directed the respondent company and its directors to convene and conduct the annual general meeting within 30 days, with specified ancillary directions to ensure lawful and peaceful conduct of the meeting.

Invocation of pledge of dematerialised shares - beneficial ownership under Regulation 58 of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 - effect of transfer of pledged shares on discharge of debt - application under Section 7 of the Insolvency and Bankruptcy Code filed pursuant to RBI circular dated 12.02.2018 - pledge governed by Section 176 of the Indian Contract Act vis-a -vis the Depositories Act and SEBI Regulations - maintainability of a Section 7 insolvency petition despite invocation and transfer of pledged shares to trustee

Application under Section 7 of the Insolvency and Bankruptcy Code filed pursuant to RBI circular dated 12.02.2018 - Application under Section 7 was not filed pursuant to the RBI Circular dated 12.02.2018 and the petition was therefore maintainable. - HELD THAT: - The Tribunal analysed the timelines and documentary record relating to NPA declaration, internal approval and filing dates. The NPA was declared on 28.10.2017, internal approval for filing was sought on 04.08.2018 and the insolvency application was filed on 23.01.2019. The RBI Circular required filing within 15 days after the expiry of 180 days from the reference date, which in this case would have required filing on or before 12.08.2018. The impugned Section 7 petition contains no averment that it was filed pursuant to the RBI Circular. In view of these facts the Tribunal held there was no ground to presume the petition was filed pursuant to the RBI Circular and therefore the objection based on the Circular did not make the petition non maintainable. [Paras 16, 17, 31]

The Section 7 application was not filed pursuant to the RBI Circular dated 12.02.2018 and remains maintainable.

Invocation of pledge of dematerialised shares - beneficial ownership under Regulation 58 of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 - effect of transfer of pledged shares on discharge of debt - pledge governed by Section 176 of the Indian Contract Act vis-a -vis the Depositories Act and SEBI Regulations - maintainability of a Section 7 insolvency petition despite invocation and transfer of pledged shares to trustee - Invocation and transfer of pledged dematerialised shares to the trustee made the trustee the beneficial owner under Regulation 58, but did not discharge the debtor's liability nor prevent the financial creditor from maintaining a Section 7 petition. - HELD THAT: - The Tribunal accepted that on transfer of dematerialised shares into the depository account of the trustee, the trustee became the beneficial owner in terms of Regulation 58 of the SEBI (Depositories and Participants) Regulations and the precedents relied upon. However, the transfer effected pursuant to invocation was to the account of SBI CAP Trustee Company Ltd. (the trustee), not to the Financial Creditor itself, and the Share Pledge Agreement (clause 2.6.2 and clause 6.1) and the invocation notice made clear that invocation was without prejudice to lenders' rights and remedies under the finance documents. The Tribunal noted subsequent events - acknowledgements of debt, settlement proposals and other steps by the corporate debtor - which showed that the debt remained extant and in default despite the invocation and transfer. The Tribunal further recognised the distinction between beneficial ownership in the trustee's records and extinguishment of the underlying indebtedness; invocation/transfer in dematerialised form does not ipso facto extinguish the debt nor strip the financier of its status as financial creditor for the purpose of initiating insolvency proceedings. Applying these conclusions to the facts, the Tribunal held that invocation and transfer to the trustee did not discharge the corporate debtor's liability or bar the Financial Creditor from filing under Section 7. [Paras 26, 29, 30]

Although the trustee became beneficial owner of the invoked dematerialised shares, the invocation did not discharge the debt or preclude the Financial Creditor from maintaining the Section 7 petition; the Adjudicating Authority rightly admitted the insolvency application.

Final Conclusion: The Tribunal dismissed the appeals; the admission of the Section 7 application was upheld - the petition was not filed pursuant to the RBI Circular and invocation/transfer of pledged dematerialised shares to the trustee did not discharge the corporate debtor's liability or bar the Financial Creditor from initiating insolvency proceedings.

Rights of pledge during corporate insolvency resolution process - possession and control of assets by resolution professional - moratorium under the Insolvency and Bankruptcy Code - treatment of pre-CIRP dues and surcharge in post-CIRP bills - payment of post-CIRP electricity arrears in instalments

Rights of pledge during corporate insolvency resolution process - possession and control of assets by resolution professional - moratorium under the Insolvency and Bankruptcy Code - Whether the applicant (MSTC) is entitled to inspect, remove and sell goods pledged with it that are lying within the corporate debtor's premises during the CIRP - HELD THAT: - The Tribunal found that upon commencement of CIRP the Resolution Professional is the authority to take possession of the corporate debtor's movable and immovable property and to administer claims. The applicant's entitlement to possession or to hold an auction-sale of goods lying in the corporate debtor's premises could not be sustained after admission of CIRP; the applicant has already submitted its claim and must have it dealt with by the RP along with other operational creditors. Consequently the reliefs sought for inspection, removal and conducting auction of the pledged goods were without merit and liable to be dismissed. [Paras 17, 18]

I.A. (IB) No. 611/KB/2020 dismissed; applicant's claim to be adjudicated by the Resolution Professional along with other operational creditors

Treatment of pre-CIRP dues and surcharge in post-CIRP bills - payment of post-CIRP electricity arrears in instalments - moratorium under the Insolvency and Bankruptcy Code - Reliefs to be granted on the Resolution Professional's application seeking injunction against disconnection of electricity supply at the corporate debtor's plant and treatment of electricity dues falling before and after commencement of CIRP - HELD THAT: - The Tribunal held that waiver of charges could not be permitted for the company undergoing CIRP, but that surcharges or amounts attributable to pre-CIRP period cannot be carried forward into bills for the post-CIRP period without proper bifurcation. Balancing the need to preserve the corporate debtor as a going concern and the distribution company's rights, the Tribunal directed payment of arrears attributable to the post CIRP period in three equal monthly instalments, regular payment of current consumption bills, and that in case of default the entire outstanding would become immediately payable. The Tribunal disposed of the application by issuing these directions and rejected any blanket exemption from charges. [Paras 27, 28, 29]

I.A. (IB) No. 620/KB/2020 disposed with directions: post CIRP arrears payable in three monthly instalments, current consumption bills to be paid regularly, and default to trigger immediate payment of the balance

Final Conclusion: The application by MSTC for inspection, removal and auction of pledged goods was dismissed as the Resolution Professional has control over the corporate debtor's assets and the applicant's claim must be dealt with by the RP; the RP's application to restrain disconnection was allowed subject to directions-post CIRP electricity arrears to be paid in three monthly instalments, current bills paid regularly, and pre CIRP surcharges cannot be carried into post CIRP bills without proper bifurcation.

Pre-existing dispute - operational debt - Section 9 of the Insolvency and Bankruptcy Code, 2016 - demand notice - spurious, hypothetical or illusory dispute

Pre-existing dispute - demand notice - spurious, hypothetical or illusory dispute - Existence and consequence of a pre-existing dispute between the parties prior to service of the statutory demand notice. - HELD THAT: - The Tribunal found that a dispute between the operational creditor and the corporate debtor had arisen well before the Demand Notice dated 29.03.2019. Correspondence, legal notices (including the operational creditor's legal notice dated 09.10.2018 and the corporate debtor's reply dated 23.10.2018), complaints to the Economic Offences Wing and communications between the parties indicate that the controversy was alive prior to the Demand Notice. The Tribunal held that the dispute was not a patently feeble, spurious, hypothetical or illusory contention warranting rejection; given the volume and complexity of business dealings and the documentary material and communications on record, the pre-existing dispute barred admission of the petition under Section 9. On this basis the Tribunal concluded that the petition could not be admitted for initiation of CIRP. [Paras 24, 25, 26]

The petition under Section 9 is dismissed because a bona fide pre-existing dispute existed prior to the Demand Notice.

Operational debt - advance payment - Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the sums paid by the operational creditor constituted an 'advance' outside the scope of operational debt, and its impact on maintainability under Section 9. - HELD THAT: - The Tribunal observed that payments were made for uploading or loading gift cards which were to be activated and delivered; in the strict sense the money was not an 'advance' in a manner that would take it outside the ambit of operational debt. Nevertheless, the Tribunal noted that this issue was rendered academic because the existence of a pre existing dispute precluded admission of the petition. Thus, while the Tribunal expressed difficulty in treating the payments purely as an 'advance' not falling within operational debt, it dismissed the petition on the separate and determinative ground of pre-existing dispute. [Paras 25]

The characterisation of the payments did not alter the outcome: even if the sum was not a conventional 'advance', the petition is rejected on account of the prior dispute.

Final Conclusion: The petition filed under Section 9 of the IBC is dismissed; the Tribunal refused to admit the application for initiation of corporate insolvency resolution process because a bona fide pre-existing dispute between the parties existed prior to the statutory Demand Notice, and that finding was determinative of the matter.

Treatment of assenting versus dissenting financial creditor - priority of distribution to dissenting financial creditors under Section 30(2)(b) read with Regulation 38(1)(b) - approval of resolution plan by adjudicating authority under Section 31(1) - continuance of proceedings under Section 66 and special transaction audit - employee claims and inclusion as CIRP cost in the resolution plan

Treatment of assenting versus dissenting financial creditor - Whether the applicant SIDBI, who abstained from voting, was incorrectly treated as an assenting creditor and whether relief is required on that ground. - HELD THAT: - The Tribunal noted that the CoC approved the Resolution Plan prior to the amendment to Section 30(2)(b). An addendum dated 09.10.2019 was filed to address payment to dissenting creditors pursuant to the amendment, and therein SIDBI was inadvertently shown as an assenting creditor. On being pointed out, the Resolution Applicant agreed to pay the differential amount payable to SIDBI. The applicant did not dispute the willingness of the Resolution Applicant to make the payment. Given this correction and the Resolution Applicant's undertaking to pay the differential due to SIDBI, no further relief was required on this ground. [Paras 7, 8]

IA No.195/2020: grievance on being treated as assenting creditor resolved by agreement to pay the differential amount; no further order required on this ground; IA dismissed.

Priority of distribution to dissenting financial creditors under Section 30(2)(b) read with Regulation 38(1)(b) - approval of resolution plan by adjudicating authority under Section 31(1) - Whether the Resolution Plan fails to accord priority in distribution to dissenting financial creditors as required by Section 30(2)(b) read with Regulation 38(1)(b), and whether such objection can be adjudicated in the present IAs. - HELD THAT: - The Tribunal held that compliance of the Resolution Plan with the requirements of Section 30(2) is to be examined by the Adjudicating Authority in CA No.389/2019 under Section 31(1) when deciding whether to approve the plan. A financial creditor, whether assenting or dissenting, cannot challenge the Plan's fitness under Section 30(2) before this authority outside the Section 31(1) approval process. Therefore the contention on priority of distribution is not to be decided in the instant IAs but is a matter for consideration in CA No.389/2019 when the plan is under approval proceedings. [Paras 9]

Question of whether the Plan accords required priority to dissenting creditors is reserved for consideration in CA No.389/2019 under Section 31(1); no relief in these IAs.

Challenge to resolution plan before adjudicating authority under Section 31(1) - Disposition of IA No.199/2020 (Exim Bank) and IA No.200/2020 (Central Bank of India) which raised identical grounds to IA No.195/2020. - HELD THAT: - Both IAs raised the same contention regarding priority to dissenting creditors. Applying the same reasoning as in IA No.195/2020, the Tribunal held that such contentions fall to be considered when the adjudicating authority evaluates the Resolution Plan under Section 31(1) in CA No.389/2019. There was therefore no merit in these interlocutory applications seeking interim relief. [Paras 11, 12, 13, 14]

IA No.199/2020 and IA No.200/2020 dismissed.

Continuance of proceedings under Section 66 and special transaction audit - CA No.493/2019 and IA No.196/2020 filed by PEC Limited alleging fraudulent removal of pledged stock and seeking non-pronouncement of order in CA No.389/2019. - HELD THAT: - The Tribunal observed that the issues raised in CA No.493/2019 are already the subject matter of CA No.74/2019 (filed under Section 25(2)(j) read with Sections 43-51 and 66 and Regulation 5) which will continue and be decided in accordance with law even after approval or rejection of the Resolution Plan. Since CA No.493/2019 seeks relief identical to CA No.74/2019, and IA No.196/2020 sought to defer pronouncement in CA No.389/2019 pending adjudication of the same issues, the interlocutory relief was not maintainable. [Paras 21, 22]

CA No.493/2019 and IA No.196/2020 dismissed; CA No.74/2019 to continue and decide the allegations under Sections 43-51 and 66.

Employee claims and inclusion as CIRP cost in the resolution plan - CA No.1194/2019 by an employee seeking payment of salary arrears and/or inclusion of his claim in the Resolution Plan as CIRP cost. - HELD THAT: - The Tribunal noted the applicant's claim had been filed and admitted in Form D for a specified amount and that factory operations ceased on 21.09.2018. The Resolution Professional stated that interim finance and payments were made only for employees essential to the CIRP and that the applicant was not a working employee during the CIRP period; the Resolution Plan provided a sum for workmen and employee dues which would govern admitted claims. The applicant failed to produce evidence that he worked during the CIRP period or that the corporate debtor operated thereafter. In view of these findings, the applicant's claim for immediate payment or special inclusion as CIRP cost was not sustained. [Paras 25, 26, 27, 28, 29]

CA No.1194/2019 dismissed.

Approval of resolution plan by adjudicating authority under Section 31(1) - IA No.194/2020 filed by the Resolution Applicant seeking disposal of CA No.389/2019. - HELD THAT: - CA No.389/2019 (seeking approval of the Resolution Plan) had been heard and orders reserved. Since interlocutory applications pressing not to pronounce the order have been dismissed, the Tribunal held that CA No.389/2019 will be decided in accordance with law and no further directions from IA No.194/2020 were necessary. [Paras 30, 31]

IA No.194/2020 disposed of; CA No.389/2019 to be decided on merits.

Final Conclusion: The Tribunal dismissed IA Nos.195/2020, 199/2020, 200/2020, 196/2020, CA Nos.493/2019 and 1194/2019; IA No.194/2020 disposed of. The applicant SIDBI's complaint about being treated as assenting was addressed by the Resolution Applicant's undertaking to pay the differential amount; substantive objections about the Plan's compliance with Section 30(2)(b) and related priorities are to be considered by the Adjudicating Authority while deciding CA No.389/2019. Allegations concerning fraudulent removal of pledged stock will proceed in CA No.74/2019 under the relevant provisions and be adjudicated in due course.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Management of affairs by Interim Resolution Professional under Section 17 of the Insolvency and Bankruptcy Code, 2016 - Transactions in violation of the moratorium - Liability for contravention of moratorium under Section 74 of the Insolvency and Bankruptcy Code, 2016 - Refund and interest as remedial relief for prohibited transactions during CIRP

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Transactions in violation of the moratorium - Payments/transactions effected after commencement of CIRP (moratorium date) in favour of directors, consultants and suppliers cannot be sustained even if they relate to services or supplies rendered prior to admission. - HELD THAT: - The Adjudicating Authority found that the corporate insolvency petition was admitted on 27.07.2018 and the moratorium was in force from that date. Although the payments related to services or supplies rendered before admission, they were made after initiation of CIRP and therefore fall within the prohibition of the moratorium. The Tribunal applied the settled principle that actions in violation of Section 14 are not maintainable once the moratorium is in place and declared the subject transactions cannot be allowed to be sustained. [Paras 7, 12]

The payments made after commencement of CIRP are in violation of the moratorium and cannot be sustained.

Management of affairs by Interim Resolution Professional under Section 17 of the Insolvency and Bankruptcy Code, 2016 - Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Suspended directors cannot claim ignorance of the admission of the corporate insolvency petition and, from the date of appointment of the Interim Resolution Professional, the powers of the board stand suspended. - HELD THAT: - The Tribunal observed that the corporate debtor opposed admission of the petition and was represented by counsel appointed by the board (including the suspended directors), so the directors cannot contend lack of knowledge of admission. Further, on initiation of CIRP and appointment of the Interim Resolution Professional, the management powers vest in the IRP and the powers of the board are suspended, precluding unilateral transactions by suspended directors. [Paras 7, 8]

The suspended directors cannot claim ignorance of the admission and their powers were suspended upon appointment of the Interim Resolution Professional.

Liability for contravention of moratorium under Section 74 of the Insolvency and Bankruptcy Code, 2016 - Refund and interest as remedial relief for prohibited transactions during CIRP - Persons receiving payments in contravention of the moratorium are liable under Section 74 and are directed to refund the amounts to the corporate debtor, failing which interest and further steps under Section 74 may follow. - HELD THAT: - Having held the transactions to be in violation of the moratorium, the Tribunal concluded that the recipients are liable to be proceeded against under the penal provision for contravention. Exercising a lenient remedy, the Tribunal directed refund of the amounts to the corporate debtor within the specified period, and provided that failure to refund would attract 12% per annum interest from the date of transaction until actual refund, with the Resolution Professional authorised to take appropriate steps under the statutory provision. [Paras 12, 13]

Respondents who received the payments are directed to refund the money to the corporate debtor and, in default, to pay interest and be liable to proceedings under Section 74.

Final Conclusion: The application is allowed: transactions made after commencement of CIRP are held to violate the moratorium and the recipients are directed to refund the amounts to the corporate debtor within the prescribed time; in default they shall pay 12% p.a. interest from the date of transaction and face appropriate action under Section 74 of the Code.

Proportionate refund of accumulated CENVAT credit - calculation under Rule 5 of the CENVAT Credit Rules, 2004 - export turnover and total turnover computation - treatment of export invoices for which payment has not been received - value of all other services (domestic turnover)

Calculation under Rule 5 of the CENVAT Credit Rules, 2004 - export turnover and total turnover computation - treatment of export invoices for which payment has not been received - value of all other services (domestic turnover) - Whether, for a service provider rendering 100% exports and claiming refund under Rule 5, export invoice values for which payment has not been received in the relevant period are includible in the denominator (total turnover) of the refund formula. - HELD THAT: - The Tribunal examined the formula in Rule 5 as applicable for the period and noted that refund is to be calculated proportionately by taking export turnover of services in the numerator and total turnover in the denominator. The definition of "export turnover of services" in the numerator expressly uses payments received during the relevant period (and related adjustments), while "total turnover" incorporates the export turnover so determined plus the value of all other services. Where the assessee renders only export services, the "value of all other services" is nil. Therefore, both numerator and denominator must adopt the export turnover computed as payments received in the relevant period; there is no provision in the formula to add, in the denominator, export invoice values for which payment has not been received. Inclusion of unpaid export invoice values in the denominator would, as a practical matter, frustrate the refund entitlement because subsequent-period refunds would be computed against net CENVAT credit of those later periods, which is not the intent of the statutory formula. Applying this construction, the amount of export turnover to be reckoned for both numerator and denominator is the value for which payment was received in the relevant period, and the contested portion of the refund is therefore admissible. [Paras 7, 8, 9]

The refund claim of the assessee for the balance amount is admissible; the appeal is allowed and the denied refund is to be granted with consequential relief.

Final Conclusion: The Tribunal allowed the appeal and directed grant of the withheld portion of the refund, holding that for a pure exporter the export turnover to be used in Rule 5 is the value for which payment was received in the relevant period and unpaid export invoices cannot be added to total turnover.

Refund under Section 11B - unjust enrichment - passing on of tax to service recipients

Refund under Section 11B - unjust enrichment - passing on of tax to service recipients - Whether the appellant's claim for refund under Section 11B is admissible despite having passed on the tax element to its members. - HELD THAT: - The Tribunal affirmed the rejection of the refund claim on the ground of unjust enrichment. The undisputed factual finding is that the appellant collected the tax (service tax on membership subscriptions) from its members and admitted that the duty element had been passed on and would be repaid if refund were obtained. Because the appellant did not dispute that the tax burden was shifted to service recipients, it failed the primary condition for refund under refund under Section 11B. The Tribunal further noted that the decisions relied upon by the appellant involved different factual matrices where the tax was not shown to have been collected from recipients; those authorities therefore were inapplicable. In these circumstances the lower authorities rightly concluded that allowing the refund would result in unjust enrichment of the appellant, and the Tribunal found no reason to interfere with that conclusion. [Paras 3, 4, 5]

The rejection of the refund claim under Section 11B was upheld as rightly barred by the principle of unjust enrichment where the tax element was passed on to service recipients; the appeal is dismissed.

Final Conclusion: The Tribunal dismissed the appeal and upheld the denial of the refund claim under Section 11B on the ground of unjust enrichment because the appellant had passed on the tax to its members and thereby could not claim refund.

Definition of 'club or association' excluding bodies established or constituted by or under any law - incorporated clubs or associations not taxable under service tax from 2005 onwards - doctrine of mutuality/neutrality in members' clubs - service tax liability under the negative-list regime and definition of 'service' - Explanation 3 to section 65B(44) - distinction between unincorporated associations and incorporated bodies

Definition of 'club or association' excluding bodies established or constituted by or under any law - incorporated clubs or associations not taxable under service tax from 2005 onwards - Explanation 3 to section 65B(44) - distinction between unincorporated associations and incorporated bodies - Whether service tax is leviable on receipts of the respondent society (incorporated under the Societies Registration Act) for the periods concerned - HELD THAT: - The Tribunal applied the decision of the Supreme Court in Calcutta Club Ltd. and subsequent reasoning to conclude that the statutory phrase 'body of persons' in the definition of 'club or association' does not encompass bodies corporate or other entities 'established or constituted by or under any law'. Companies and societies registered under statute are therefore excluded from the service tax net insofar as members' club or association services are concerned. The Tribunal further noted that post-2012 changes, including Explanation 3 to section 65B(44) and the negative-list regime, do not alter this statutory exclusion for incorporated members' clubs because Explanation 3 uses the expression 'body of persons' in continuity with the pre-2012 scheme. Given that the respondent is an incorporated society, even if receipts were characterised as arising from 'club or association' services, they cannot be subjected to service tax for the periods adjudicated. Consequently, the Tribunal found it unnecessary to adjudicate the Department's other contentions on specific heads of receipts. [Paras 17, 19, 21]

Appeal dismissed on the ground that the respondent is an incorporated society and therefore not liable to service tax on members' club or association receipts for the periods in dispute.

Final Conclusion: The appeal filed by the Department is dismissed: the respondent, being an incorporated society registered under the Societies Registration Act, is not liable to service tax on receipts characterised as members' club or association services for April 2007 to March 2012 and April 2012 to March 2013, and it was unnecessary to decide the Department's alternative contentions.

Definition of "service" under Section 65B(44) - reverse charge liability - exception for services provided by an employee to the employer - no estoppel against statute - strict construction of exemption or exclusionary clause - interest under Section 75 - penalty under Sections 76 and 77 - reference to Larger Bench

Definition of "service" under Section 65B(44) - reverse charge liability - exception for services provided by an employee to the employer - Whether service tax is payable by the appellant under reverse charge on amounts routed through the foreign parent company for expatriate personnel for the period 01.04.2015 to 30.06.2017 - HELD THAT: - The Tribunal applied the post-1.7.2012 legal framework, noting that Section 65B(44) defines "service" broadly as any activity for consideration and excludes only services provided by an employee to his employer in the course of employment. The factual matrix and documentary record (international assignment letters, cost reimbursement agreements and annexures) established that the expatriates remained employees of the foreign parent, were deputed for fixed assignments, had remuneration components fixed by the parent and certain entitlements governed by the parent, and could be terminated by the parent. The Tribunal held that these facts did not attract the exclusion for services provided by an employee to the employer because the activity was undertaken pursuant to arrangements between distinct contracting parties and the foreign company was the effective service-provider under the contracts. The Tribunal rejected the appellant's reliance on earlier pre-1.7.2012 decisions regarding "manpower supply" because the scheme of taxation changed from category-based levy to a general levy on services post-amendment; hence those precedents were inapplicable. The Tribunal further held that deduction of TDS by the appellant on amounts paid in India did not convert the relationship into an employer-employee relationship for the purpose of the exclusion and that deductions under FEMA/Income tax rules do not conclusively determine service tax liability. Consequently, the demand for service tax under reverse charge was upheld. [Paras 4]

Demand of service tax under reverse charge for the period 01.04.2015 to 30.06.2017 is upheld.

Interest under Section 75 - Whether interest on the confirmed service tax demand is payable - HELD THAT: - Having upheld the tax demand, the Tribunal applied settled principles that interest under Section 75 is for delay in payment of tax from the date it became due. As the appellant failed to discharge the service tax liability by the due date, the levy of interest as ordered by the Commissioner follows necessarily and was sustained. [Paras 4]

Interest under Section 75 on the confirmed demand is sustained.

Penalty under Sections 76 and 77 - Whether penalties imposed under Sections 76 and 77 are sustainable - HELD THAT: - The Tribunal examined the nature of penalties under Sections 76 and 77 and relevant precedents. Section 77 penalties are civil and may be imposed for recorded infractions; Section 76 penalises failure to pay tax by the person liable. Since the appellant failed to pay the service tax as required and there were recorded defaults in complying with statutory provisions, the Tribunal found no ground to fault the imposition of penalties under both provisions and held them to be justified. [Paras 4]

Penalties under Sections 76 and 77 are upheld.

No estoppel against statute - Whether the appellant is precluded by issue estoppel from reopening the liability for the later period - HELD THAT: - The Tribunal rejected the plea of issue estoppel, reiterating the settled principle that there can be no estoppel against a statute and that prior administrative acceptances do not bind the revenue where the legal position is governed by statute. The Tribunal also observed that the ingredients necessary for applying the doctrine of issue estoppel (as elucidated by Supreme Court decisions) were not present in the case at hand. [Paras 4]

Issue estoppel does not bar reopening the question for the period in issue.

Reference to Larger Bench - Reference of the question regarding taxability of expatriate salary payments post 1.7.2012 to a Larger Bench - HELD THAT: - There is a recorded difference in opinion between the members of the Tribunal: one member upheld the demand and penalties; the other member considered that decisions of co ordinate Benches (notably Delhi Bench decisions) ought to be followed and that a contrary view required reference to a Larger Bench. In consequence the matter was directed to be placed before the President of the Tribunal for constitution of a Larger Bench to resolve whether, on the facts and in law, payment of expatriate salaries routed through a foreign parent is taxable under reverse charge post 1.7.2012. [Paras 8, 10]

Matter referred to the President for constitution of a Larger Bench to determine the stated question.

Final Conclusion: The appeals are dismissed: the Tribunal upheld the service tax demands raised for 01.04.2015 to 30.06.2017, together with interest under Section 75 and penalties under Sections 76 and 77. A difference of opinion between members has resulted in a reference to the President for constitution of a Larger Bench to decide the broader question of taxability of expatriate salary payments routed through foreign parent companies post 1.7.2012.

Cenvat credit - inputs - capital goods - accessory to capital goods - user test - Rule 2(k) - definition of inputs under Cenvat Credit Rules - prospective effect of amendment to Rule 2(k) - penalty not imposable without allegation of fraud or suppression

Cenvat credit - inputs - accessory to capital goods - Rule 2(k) - definition of inputs under Cenvat Credit Rules - user test - Admissibility of cenvat credit on MS plates used both as temporary platforms and subsequently as inputs in fabrication of final products. - HELD THAT: - The Tribunal found that the MS plates were used within the factory of production both as temporary steel platforms for fabrication and ultimately as input material in manufacture of the appellant's finished machinery. Applying the definition of "inputs" under Rule 2(k) of the Cenvat Credit Rules, which covers goods used in the factory by the manufacturer of the final product, and having regard to the user test as applied in earlier precedents, the Tribunal held that such MS plates qualify for cenvat credit. The Tribunal accepted that the platforms were necessary for the use and operation of capital goods (lathe, welding machines) and that the plates thus also functioned as accessories to capital goods in practice; but the decisive finding was that the goods were used in relation to manufacture in the factory and therefore eligible for credit under Rule 2(k). [Paras 20, 21]

Cenvat credit on the MS plates is admissible and the appeal is allowed on this ground; the impugned order-in-appeal disallowing credit is set aside and the order-in-original is restored.

Penalty not imposable without allegation of fraud or suppression - prospective effect of amendment to Rule 2(k) - Validity of the demand of interest and imposition of penalty arising from disallowance of cenvat credit, and applicability of the post 2009 amendment to Rule 2(k) to the relevant period. - HELD THAT: - The Tribunal observed that there was no finding, allegation or material on record of fraud, suppression or deliberate mis-statement by the appellant. Given that the MS plates were held to be eligible for credit under Rule 2(k) for the relevant period, the demand of cenvat credit, interest and the penalty imposed by the Commissioner (Appeals) could not be sustained. The Tribunal also noted the line of decisions treating the amendment to Explanation to Rule 2(k) introduced w.e.f. 7.7.2009 as not applicable retrospectively and in any event held the credit admissible for the period in question. Consequently the imposition of penalty and recovery directed in the impugned order could not stand. [Paras 20, 21]

The demand of credit, interest and the penalty imposed in the impugned order-in-appeal are set aside as unsustainable; the order-in-original which dropped the demand is restored.

Final Conclusion: The appeal is allowed: the Tribunal restores the order-in-original which had dropped the demand, holding that cenvat credit on the MS plates used as temporary platforms and subsequently as inputs is admissible under Rule 2(k), and that the interest and penalty imposed by the Commissioner (Appeals) cannot be sustained in absence of fraud or suppression.

Association of persons - indeterminate or unknown individual shares - purpose test (business or profit motive) for association of persons in tax statutes - Section 21AA of the Wealth Tax Act - anti evasion provision - determinacy of members' shares on relevant valuation/liquidation date

Association of persons - purpose test (business or profit motive) for association of persons in tax statutes - Section 21AA of the Wealth Tax Act - anti evasion provision - Whether Section 21AA of the Wealth Tax Act applies to the Bangalore Club - HELD THAT: - The Court interpreted Section 21AA in light of its object and earlier authorities holding that, in taxation statutes, an "association of persons" denotes persons banding together for a common business or commercial purpose to produce income or profit. Section 21AA was enacted to plug tax evasion by associations that do not define members' shares so as to avoid addition to individual members' wealth. Consequently, merely being an unincorporated body or a members' club does not satisfy the purpose test; a social club whose members join to enjoy facilities and not to carry on business or earn profits does not fall within the scope of Section 21AA. The Court relied on the established presumption that Parliament, when using an expression with settled judicial meaning, is taken to have adopted that meaning absent a contrary indication, and it applied the relevant authorities construing "association of persons" in tax law. On the facts, Bangalore Club is a social members' club and not an association formed for business or profit; therefore Section 21AA is not attracted. [Paras 13, 14, 26, 28, 31]

Section 21AA does not apply to the Bangalore Club because it is a social club and not an association formed with a business or profit making object.

Indeterminate or unknown individual shares - determinacy of members' shares on relevant valuation/liquidation date - Whether the members' shares in the Bangalore Club's assets are indeterminate or unknown so as to attract Section 21AA - HELD THAT: - Section 21AA applies only where individual shares of members in the association's income or assets are indeterminate or unknown. The Court examined Rule 35 which provides that on winding up any surplus after discharge of liabilities shall be divided equally among members. Applying the principle that determinacy is to be judged with reference to the relevant date (here, the date of liquidation), the Rule yields a fixed list of members and an ascertainable equal share per member on that date. Further, subsection (2) of Section 21AA refers to "any business or profession carried on" by an association, underscoring that the provision targets commercial associations; a social club carrying no business cannot be brought within subsection (2). Thus, even if the Bangalore Club were treated as an association, the existence of an express rule for distribution on liquidation makes members' shares determinate and Section 21AA inapplicable. [Paras 31, 32, 34, 35]

Members' shares are determinate (ascertainable on liquidation as per Rule 35), so Section 21AA is not attracted.

Section 21AA of the Wealth Tax Act - anti evasion provision - judicial construction of taxing expressions - Whether the High Court's reliance on CWT v. Chikmagalur Club and its conclusion taxing such clubs under Section 21AA was correct - HELD THAT: - The Court held that the Chikmagalur Club decision overlooked and omitted crucial paragraphs of Ellis Bridge Gymkhana and failed to engage with the earlier line of authorities (beginning with Indira Balkrishna) construing "association of persons" in tax statutes as implying a business or profit purpose. Section 21AA was not intended to expand the class of taxable persons generally but to prevent evasion by certain associations with indeterminate member shares. Chikmagalur Club's approach was therefore incorrect and is overruled; the High Court judgment resting solely on that decision was unsustainable. [Paras 29, 30]

Chikmagalur Club was wrongly decided and is overruled; the High Court's reliance on it is set aside.

Final Conclusion: The High Court's judgment and its review were set aside. The appeals were allowed: Section 21AA of the Wealth Tax Act does not apply to the Bangalore Club because it is a social club (not formed for business/profit) and, in any event, members' shares are determinate on liquidation under Rule 35; accordingly, the club is not liable to assessment under Section 21AA for the assessment years in question.