TaxTMI Updates e-Newsletter
Sep 16,2020

Classification under Harmonized System of Nomenclature (HSN) - Chapter heading 3926.90 - articles not elsewhere specified or included of plastics - exclusion of Chapter heading 9616 for generic mounts/heads and scent sprays - distinction between parts of general use and parts of appliances - application of Customs Tariff interpretation (rules, chapter and section notes) to GST classification - applicability of GST rates as per notifications issued under the GST law

Classification under Harmonized System of Nomenclature (HSN) - Chapter heading 3926.90 - articles not elsewhere specified or included of plastics - exclusion of Chapter heading 9616 for generic mounts/heads and scent sprays - distinction between parts of general use and parts of appliances - Imported plastic mechanical liquid dispensers are classifiable as "articles, not elsewhere specified or included, of plastics" under Chapter sub-heading 3926.90 (Others). - HELD THAT: - The Authority applied the rules of classification under the Customs Tariff Act, 1975 (HSN) and its chapter and section notes. Chapter 9616 is specific to scent sprays, similar toilet sprays and their mounts/heads and does not cover generic goods; therefore the imported items, being generic plastic dispensers not specifically designed as scent/toilet sprays, do not fall within 9616. Chapter 8424 relates to mechanical appliances for projecting, dispersing or spraying liquids, but its subheading for parts (8424.90) covers parts of appliances of that chapter only; items which are parts of general use (as per Note 2 to Section XV and Chapter 39) are excluded from being treated as parts of 8424 appliances. The imported devices are generic plastic articles (dip tube, spring-loaded piston, actuator) intended to be fitted on various containers and are not parts of a specific appliance of Chapter 8424. On this basis, and given that they are not otherwise provided for in the Tariff, the devices are classifiable under Chapter sub-heading 3926.90 as "others". [Paras 15, 17, 18, 19, 21]

The plastic mechanical liquid dispensers are classifiable under HSN Chapter sub-heading 3926.90 (Others).

Application of Customs Tariff interpretation (rules, chapter and section notes) to GST classification - applicability of GST rates as per notifications issued under the GST law - The GST rate applicable to the goods classified under Chapter sub-heading 3926.90 is 28% (CGST 14% + SGST 14%) till 14.11.2017 and 18% (CGST 9% + SGST 9%) with effect from 15.11.2017. - HELD THAT: - Having determined classification under Chapter 3926.90, the Authority applied the notified GST rate schedules. Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 placed "Other articles of plastics" (HSN 3926) at CGST 14% (thus total 28% including SGST) for the period from 01.07.2017 to 13/14.11.2017. Subsequent amendment by Notification No.41/2017-Central Tax (Rate) dated 14.11.2017 reallocated the entry and omitted the earlier 14% entry in Schedule IV, resulting in an effective rate of CGST 9% (total 18% with SGST) w.e.f. 15.11.2017. The Authority therefore fixed the applicable GST rates for the specified periods in accordance with those notifications. [Paras 20, 21]

GST @ 28% (CGST 14% + SGST 14%) applies till 14.11.2017; GST @ 18% (CGST 9% + SGST 9%) applies w.e.f. 15.11.2017.

Final Conclusion: Imported plastic mechanical liquid dispensers are classifiable under HSN Chapter sub-heading 3926.90 ("others" - articles not elsewhere specified or included of plastics) and attract GST at 28% (CGST 14% + SGST 14%) until 14.11.2017 and at 18% (CGST 9% + SGST 9%) with effect from 15.11.2017.

Classification under the First Schedule to the Customs Tariff Act - Tariff item 6815 - articles of mineral substances (fly ash bricks/blocks) - Schedule-wise GST rate application under Notification No.01/2017 Central Tax (Rate) - Effect of amendment, omission and insertion of notification entries on taxability - Application of General Rules for the interpretation of the First Schedule to the Customs Tariff Act

Classification under the First Schedule to the Customs Tariff Act - Tariff item 68159910 - bricks and tiles of fly ash - Schedule-wise GST rate application under Notification No.01/2017 Central Tax (Rate) - Classification and GST rate applicable to 'Fly Ash Bricks' manufactured by the applicant. - HELD THAT: - The Authority examined the First Schedule to the Customs Tariff Act and found that 'Fly Ash Bricks' fall within Sub heading 6815 and specifically under Tariff item 68159910. Entry No.177 of Schedule II (which originally covered both fly ash bricks and blocks at 12%) was amended to omit the words 'Fly ash bricks' with effect from 15.11.2017, and a separate Schedule I entry (225A) was inserted for 'Fly ash bricks or fly ash aggregate with 90 percent or more fly ash content'. The applicant's product contains 40-60% fly ash and therefore does not fall within entry 225A. Consequently, from 15.11.2017 the product is not specified in Schedules I, II, IV, V or VI and thus falls under Schedule III entry No.453 (goods not otherwise specified), attracting the Schedule III rate. Applying the notification framework and interpretative rules, the Authority concluded the applicable GST rates for the product for the relevant periods. [Paras 8, 12, 14]

Fly Ash Bricks are classifiable under Tariff item 68159910; taxable at 12% GST up to 14.11.2017 and at 18% GST with effect from 15.11.2017.

Classification under the First Schedule to the Customs Tariff Act - Tariff item 68159990 - other fly ash articles (blocks) - Schedule wise GST rate application under Notification No.01/2017 Central Tax (Rate) - Effect of insertion of entry 225B and omission of entry 177 - Classification and GST rate applicable to 'Fly Ash Blocks' manufactured by the applicant. - HELD THAT: - The Authority noted that 'Fly Ash Blocks' are covered under Tariff item 68159990. Entry No.177 of Schedule II (12%) continued to cover fly ash blocks until it was omitted effective 01.01.2019. Concurrently, Notification amendments inserted entry 225B in Schedule I effective 01.01.2019 which expressly includes 'Fly ash blocks'. Applying the notification amendments and the interpretative rules, the Authority determined the GST rates applicable to fly ash blocks for the specified periods. [Paras 8, 13, 14]

Fly Ash Blocks are classifiable under Tariff item 68159990; taxable at 12% GST up to 31.12.2018 and at 5% GST with effect from 01.01.2019.

Final Conclusion: The Authority ruled that the applicant's Fly Ash Bricks are classifiable under Tariff item 68159910 and attract 12% GST up to 14.11.2017 and 18% thereafter from 15.11.2017; Fly Ash Blocks are classifiable under Tariff item 68159990 and attract 12% GST up to 31.12.2018 and 5% thereafter from 01.01.2019.

Exemption under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) - pure service - governmental authority / government entity - activity "in relation to" functions entrusted under Article 243G and Article 243W of the Constitution - taxability under Section 9(1) of the CGST Act, 2017

Pure service - exemption under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) - Whether the service of maintenance of accounts provided by the applicant is a "pure service" falling within Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) and thereby exempt from GST. - HELD THAT: - The Authority examined the three conditions in Entry No. 3: (i) that the supply is a pure service not involving goods, (ii) that it is provided to the Central/State/UT/local authority or a governmental authority/government entity, and (iii) that it is in relation to any function entrusted to a Panchayat under Article 243G or a Municipality under Article 243W. The activity of maintenance of accounts does not involve supply of goods and hence qualifies as a "pure service", satisfying the first condition. However, satisfaction of this condition alone is not sufficient for exemption under the Entry; all three conditions must be met concurrently. The Authority applied the ordinary meaning of "in relation to" and the established judicial approach that the phrase has wide import, but emphasized that there must be a connection between the service rendered and the functions listed under Articles 243G/243W. The applicant did not produce evidence that the accounting services were in relation to any of the functions entrusted to Panchayats or Municipalities; the applicant itself contended that its services were not connected to the core functions such as water supply, construction of dams/canals or other specified municipal/panchayat activities. On that basis the Authority held that the third condition was not satisfied and therefore the service does not fall within Entry No. 3 and is not exempt. [Paras 13, 15, 16, 17, 19]

The maintenance of accounts service is a pure service but is not "in relation to" functions entrusted under Articles 243G/243W and therefore is not covered by Entry No. 3 of Notification No. 12/2017-Central Tax (Rate); it is not exempt.

Governmental authority / government entity - exemption under Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) - Whether Sardar Sarovar Narmada Nigam Ltd. (SSNNL) qualifies as a "governmental authority" or "government entity" for the purposes of Entry No. 3. - HELD THAT: - The Authority considered the definitions of "governmental authority" and "government entity" in the notification and the Explanation to Section 2(16) of the IGST Act. SSNNL is a company established by the Government of Gujarat and the audit report for 2016-17 showed 100% shareholding by the State Government. SSNNL implements the Narmada Project involving irrigation, drinking water supply and power generation-functions that correspond to items in the lists under Articles 243G and 243W. On these facts the Authority concluded that SSNNL is an authority established by the Government with requisite participation and is a "governmental authority" for the purpose of the Entry, thereby satisfying the second condition of Entry No. 3. [Paras 13, 14]

SSNNL qualifies as a "governmental authority"/"government entity" under the notification; the second condition of Entry No. 3 is satisfied.

Final Conclusion: Although SSNNL qualifies as a governmental authority and the accounting services constitute a pure service, the services of auditing/accounting/taxation provided by the applicant are not "in relation to" functions entrusted to Panchayats or Municipalities under Articles 243G/243W; consequently the services are not covered by Entry No. 3 of Notification No. 12/2017-Central Tax (Rate) and are taxable under Section 9(1) of the CGST Act, 2017.

Deemed value of land in composite supply - value of supply for transfer of immovable property - application of Notification No. 11/2017-CT (Rate) as amended - inadmissibility of actual land cost deduction where statute/notification prescribes deeming

Value of supply for transfer of immovable property - application of Notification No. 11/2017-CT (Rate) as amended - Value of supply for sale of residential/commercial property with undivided rights of land - HELD THAT: - The Authority examined the applicant's transactions-sale of constructed residential/commercial property inclusive of land or undivided share of land-and the applicable statutory mechanism for determining taxable value. Paragraph 2 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, as substituted by Notification No. 1/2018-C.T. (Rate) dated 25.01.2018, contains a deeming provision which prescribes that the value of the transfer of land or undivided share of land in such supplies shall be deemed to be one third of the total amount charged for the supply, and that the value of the supply shall be the total amount charged less that deemed land value. Because the Notification itself prescribes the method to arrive at the value of such supplies, the taxable value must be determined in terms of that deeming provision rather than by any other independent computation offered by the applicant. [Paras 12, 13, 14, 15]

The value of supply is to be determined in accordance with the deeming provision of Paragraph 2 of Notification No. 11/2017-CT (Rate) dated 28.06.2017, as amended by Notification No. 1/2018-C.T. (Rate) dated 25.01.2018.

Deemed value of land in composite supply - inadmissibility of actual land cost deduction where statute/notification prescribes deeming - Whether actual cost of land ascertainable by the builder can be deducted instead of the deemed one third prescribed by the Notification - HELD THAT: - The applicant argued that where the land component is distinctly ascertainable and exceeds the one third deemed proportion, the actual land cost should be deducted to arrive at the taxable value. The Authority held that this contention is not legally sustainable because the Notification contains an express deeming rule fixing the land component at one third of the total amount charged for the supply. Consequently, reliance on provisions of the erstwhile Value Added Tax regime (Rule 18(A)(A) of Gujarat VAT Rules, 2006) is inapposite, as VAT law no longer governs determination of GST taxable value. Where the Notification prescribes a specific method, the prescribed deeming provision governs and actual cost cannot be substituted for the deemed proportion. [Paras 10, 11, 12, 14]

Negative - actual cost of land cannot be deducted in place of the deemed one third; the deemed proportion prescribed by the Notification governs.

Final Conclusion: The Authority ruled that the taxable value of supplies involving transfer of land or undivided share of land must be determined by applying the deeming provision in Paragraph 2 of Notification No. 11/2017 CT (Rate) dated 28.06.2017 as amended (land component deemed as one third of total amount), and that the applicant cannot deduct actual land cost in lieu of the deemed one third.

Disallowance under Section 40A(3) - applicability of Rule 6DD - scope of proviso to Section 40A(3) and consideration of business expediency - identifiability of the payee and genuineness of payment

Disallowance under Section 40A(3) - scope of proviso to Section 40A(3) and consideration of business expediency - Sustainability of the disallowance made by the Assessing Officer under Section 40A(3) in respect of cash payments made to the job-worker. - HELD THAT: - The Court held that the determinative question is the assessee's conduct and whether the assessee had a reasonable cause to effect payment in cash so as to attract the proviso to Section 40A(3). The Tribunal's factual conclusion that the assessee was compelled by commercial exigencies-namely, the payee's inability to operate its bank account due to attachment and the need to ensure timely completion and quality of job work-was lawful and warranted interference with the Assessing Officer's addition. The Court reiterated that Section 40A(3) is not absolute: genuine and bona fide business transactions cannot be disallowed merely because payment was not made by account-payee cheque, and consideration of business expediency and other relevant factors is permissible when testing applicability of the proviso. [Paras 9, 10, 11]

The disallowance under Section 40A(3) was not sustainable on the facts; the Tribunal rightly granted relief to the assessee.

Applicability of Rule 6DD - identifiability of the payee and genuineness of payment - Extent to which Rule 6DD and the Supreme Court decision in Attar Singh Gurumukh Singh govern exemption from disallowance under Section 40A(3). - HELD THAT: - The Court accepted the Tribunal's application of Attar Singh Gurumukh Singh: Rule 6DD enumerates illustrative circumstances in which the requirement of payment by account-payee cheque may be relaxed, but those circumstances are not exhaustive. The essential enquiry is whether the assessee can, to the satisfaction of the Assessing Officer, demonstrate circumstances rendering payment by cheque impracticable or causing genuine difficulty to the payee, and whether the payee's identity and the genuineness of the transaction are established. On the facts, the Tribunal found these conditions satisfied and that the assessee's situation fell within the ambit of the proviso and the illustrative scope of Rule 6DD, making the Assessing Officer's contrary conclusion unjustified. [Paras 8, 9]

Rule 6DD is illustrative and the Tribunal correctly applied Attar Singh to hold that the assessee satisfied the conditions negating disallowance.

Final Conclusion: Appeal dismissed; the substantial question of law is answered against the Revenue and in favour of the assessee, the Tribunal's allowance of the claim being upheld.

Slump sale - transfer by way of exchange - transfer (inclusive definition under capital gains law) - estoppel in taxation - scheme of arrangement approved by Company Court - application of Section 50B - substance versus form in taxation

Estoppel in taxation - alternative pleas - Whether the assessee was estopped from advancing the alternate contention that the transfer was not a slump sale. - HELD THAT: - The Court recalled the long standing principle that there is no estoppel in taxation and noted that an assessee may renounce or change the position taken in a return and advance an alternate legal plea so long as the relevant facts are on record. The authorities below wrongly shut out the assessee's contention solely because the assessee had approached Bond Issuing Authorities seeking investment under Section 54EC. The Court held that the assessee's alternate submission-raised during assessment proceedings and influenced by a Tribunal decision-was a question of law open for consideration and not a barred or contrary plea. Reliance on precedents was considered, and it was held that failure to make a claim in the original or revised return does not preclude appellate authorities from examining the claim if material is on record and the claim is tenable in law. [Paras 15, 20, 22, 40, 45]

The contention that the assessee was estopped from raising the alternate plea is rejected; the plea was entertainable and ought to have been adjudicated by the authorities below.

Slump sale - transfer by way of exchange - application of Section 50B - scheme of arrangement approved by Company Court - substance versus form in taxation - Whether the transfer of the non T & D business under the court sanctioned scheme of arrangement qualified as a slump sale attracting Section 50B. - HELD THAT: - Section 50B applies to a 'slump sale' defined as a transfer of one or more undertakings by sale for a lump sum money consideration without values being assigned to individual assets. The Court analysed statutory and other enactment definitions: 'sale' under the Transfer of Property Act and 'exchange' under Section 118 of that Act, and noted that a sale requires transfer of ownership for a money price. The scheme before the Company Court provided for allotment of equity shares (no monetary consideration paid) as consideration, and the scheme and the sanctioning order expressly recorded issue and allotment of shares as consideration. Applying precedents, including Motors and General Stores and Bharat Bijlee, the Court held that where the transfer, as evidenced by the scheme and sanctioning order, is by way of exchange/allotment of shares and not by payment of money, the transaction is not a 'sale' for purposes of Section 2(42C) and hence Section 50B is inapplicable. The Court also distinguished authorities relied upon by Revenue where a monetary consideration was present, and corrected the Tribunal's factual reference to an unrelated valuation report. The joint valuation methods and the scheme's recorded fair value were accepted, and mere use of the word 'consideration' in the scheme did not convert an exchange into a sale. [Paras 31, 34, 36, 42, 48]

The transfer under the sanctioned scheme, being effected by allotment of shares and not by monetary consideration, is not a slump sale; Section 50B does not apply.

Final Conclusion: The appeal is allowed. The assessee was not estopped from raising the alternate plea, and on the facts the court sanctioned transfer by allotment of shares is not a slump sale; consequential application of Section 50B is negatived in favour of the assessee.

Carry forward of unabsorbed additional depreciation - allowability of additional depreciation under Section 32(1)(iia) - application of proviso to depreciation inserted by Finance Act, 2015 - binding effect of Division Bench precedent and approval by the Supreme Court

Carry forward of unabsorbed additional depreciation - allowability of additional depreciation under Section 32(1)(iia) - Assessee entitled to carry forward and claim unabsorbed additional depreciation for the assessment year 2009-2010. - HELD THAT: - The Tribunal and the lower authorities examined whether the balance of additional depreciation not allowed in the year of acquisition (where only 10% was permitted because the asset was used for less than 180 days) could be carried forward and claimed in the subsequent year. Having considered competing High Court decisions, the Division Bench decision in Brakes India (which was ultimately not interfered with by the Supreme Court on SLP) is binding. Applying that precedent, the Court held that the assessee was entitled to carry forward the unabsorbed additional depreciation and claim it for the assessment year 2009-2010. The Court noted earlier conflicting decisions but found itself bound by the Division Bench authority approved by the Supreme Court and followed that ratio.

Appeal dismissed as regards this issue and the assessee's right to carry forward unabsorbed additional depreciation for AY 2009-2010 upheld.

Application of proviso to depreciation inserted by Finance Act, 2015 - retroactive effect of proviso - Insertion of the proviso by Finance Act, 2015 (with effect from 01.04.2016) does not affect the legal position for the assessment year 2009-2010. - HELD THAT: - The revenue contended that the proviso restricting depreciation should preclude carrying forward the balance. The Court observed that the proviso was inserted with effect from 01.04.2016 and therefore does not alter the legal position applicable to the assessment year in issue. The Court declined to give the later legislative insertion retrospective effect to deny the assessee's claim for AY 2009-2010.

The subsequent insertion of the proviso is irrelevant to AY 2009-2010 and does not defeat the assessee's entitlement to carry forward the unabsorbed additional depreciation.

Final Conclusion: The revenue's appeal is dismissed; the assessee is entitled to carry forward and claim the unabsorbed additional depreciation for assessment year 2009-2010, and the proviso inserted by Finance Act, 2015 (effective 01.04.2016) does not affect the entitlement for the year in dispute.

Validity of application under Section 245D(2C) - Summary nature of proceedings under Section 245D(2C) - Scope of inquiry under Section 245D(4) and requirement of adjudication - Requirement of full and true disclosure for admission to Settlement Commission - Prima facie determination versus adjudication on composite contract issue

Validity of application under Section 245D(2C) - Summary nature of proceedings under Section 245D(2C) - Requirement of full and true disclosure for admission to Settlement Commission - Whether the Settlement Commission could declare the applicant's settlement application invalid at the Section 245D(2C) stage on the ground of non-disclosure without undertaking adjudication. - HELD THAT: - The Court held that Section 245D(2C) confers a limited, summary power on the Settlement Commission to declare an application invalid within fifteen days of receipt of the CIT's report, but this power does not permit a final adjudication on issues that require deeper factual and legal enquiry. The provision requires that an opportunity be given to the applicant, and a prima facie opinion may be formed at the (2C) stage; however where the controversy (for example, whether contracts are composite or separate) calls for adjudication, the Commission cannot treat the application as invalid on the basis of a summary assessment. The requirement of "full and true disclosure" is a threshold for admission, but absence of full and true disclosure must be established on a material that legitimately permits a prima facie conclusion; it cannot substitute for the fuller enquiry contemplated by Section 245D(4). Applying these principles to the facts, the Court concluded that the Commission's declaration of invalidity based on the CIT's report and the Commission's view on bifurcation of contracts involved matters necessitating adjudication and hence could not sustain invalidation at the (2C) stage. [Paras 17, 19, 20, 21, 22]

The Commission erred in declaring the application invalid at the Section 245D(2C) stage on issues that require adjudication; such matters must be considered under Section 245D(4).

Scope of inquiry under Section 245D(4) and requirement of adjudication - Prima facie determination versus adjudication on composite contract issue - Whether the matter ought to be allowed to proceed for adjudication under Section 245D(4) and directed back to the Settlement Commission for consideration on merits. - HELD THAT: - The Court observed that Section 245D(4) empowers the Settlement Commission to examine records, the CIT's report and further evidence, and to hear the applicant and the CIT (or their representatives) before passing such order as it deems fit on the matters covered by the application. Given that the question whether the contracts were composite or separate involves factual and legal analysis beyond a prima facie view, the appropriate course was to permit the application to proceed to adjudication under Section 245D(4). The High Court therefore upheld the writ court's interference with the Commission's order and directed the Settlement Commission to proceed in accordance with law and decide the matter after affording opportunity of hearing, leaving the timing to the Commission's discretion. [Paras 20, 21, 22, 24]

The application must be allowed to proceed for adjudication under Section 245D(4); the Settlement Commission is directed to consider and decide the matter on merits after affording opportunity of hearing.

Final Conclusion: The Revenue's appeal is dismissed. The High Court upholds the writ court's interference with the Settlement Commission's order declaring the application invalid at the Section 245D(2C) stage, holding that issues requiring adjudication (notably the composite-contract question and the adequacy of disclosure) must be determined under Section 245D(4); the Settlement Commission is directed to proceed and decide the application on merits after hearing the parties.

Credit for prepaid taxes reflected in Form 26AS - rectification of assessment - refund and interest under Section 244A - processing of refund by Centralized Processing Center - demand under Section 143(1)

Credit for prepaid taxes reflected in Form 26AS - rectification of assessment - processing of refund by Centralized Processing Center - Whether the petitioner is entitled to the credit for prepaid taxes and the consequent refund after rectification and to a direction for prompt processing of the refund by the authorities. - HELD THAT: - The petitioner contended that taxes prepaid, as reflected in Form 26AS, were not taken into account while determining tax liability. The respondents informed the Court that the Assessing Officer has allowed the petitioner's rectification application by an order dated 23rd July, 2020 and has determined a refund, but the matter is pending with the Centralized Processing Center for disbursement. The Court accepted the respondents' undertaking regarding the rectification and the determined refund, notwithstanding the petitioner's note that an outstanding demand under the assessment remains shown on the online portal. In view of the respondents' statement and to give effect to the rectification order, the Court directed the Assessing Officer to pursue the matter with the Centralized Processing Center and ensure that the refund determined by him is credited to the petitioner's account within two weeks.

The Court accepted the respondents' undertaking, directed the Assessing Officer to pursue the refund with the Centralized Processing Center and ensure disbursement within two weeks, and disposed of the writ petition.

Final Conclusion: Writ petition disposed of with a direction to the Assessing Officer to pursue and secure credit of the refund determined on rectification from the Centralized Processing Center within two weeks; the Court accepted the respondents' undertaking and noted the petitioner's portal grievance without staying the direction.

Income from business - income from house property - income from letting with amenities constitutes business income - deduction under Section 80IAB - reliance on precedent and CBDT Circular No.16 of 2017

Income from business - income from house property - income from letting with amenities constitutes business income - reliance on precedent and CBDT Circular No.16 of 2017 - Whether the income of the appellant from the software technology park is assessable as income from business and not under the head income from house property. - HELD THAT: - The Court held that where an undertaking owns, develops and operates an industrial/technology park and lets out premises together with amenities and facilities, the receipts are business income and not income from house property. The Division Bench's reasoning in CIT v. Tidel Park Ltd., the decisions referred therein (including Chennai Properties & Investments Ltd.), and the CBDT Circular No.16 of 2017 treating income from letting out premises with other facilities in an industrial park/SEZ as taxable under the head 'Profits and Gains of Business' govern the issue. Applying those authorities, the Tribunal's conclusion that the income is assessable as income from house property was set aside and the substantial question answered in favour of the assessee. [Paras 4, 5, 6, 7]

Income from the software technology park is to be assessed as income from business and not as income from house property; the Tribunal's contrary finding is set aside.

Deduction under Section 80IAB - reliance on precedent and CBDT Circular No.16 of 2017 - Whether the appellant is entitled to deduction under Section 80IAB notwithstanding the characterisation of the receipts as income from house property by the Tribunal, and whether the matter required remand to the Assessing Officer. - HELD THAT: - The Court answered the substantial questions of law in favour of the assessee, overruling the Tribunal. Having held the receipts to be business income pursuant to relevant precedents and the CBDT circular, the Court concluded the substantial question concerning entitlement under Section 80IAB in favour of the assessee. The appeal was allowed and the substantial questions of law answered for the assessee, thereby obviating the need for the remand ordered by the Tribunal. [Paras 3, 6, 7]

The appellant is entitled to have the matter determined consistently with the characterisation of the receipts as business income, and the Tribunal's remand is set aside with the substantial questions answered in favour of the assessee.

Final Conclusion: The tax case appeal is allowed; the Tribunal's order is set aside and the substantial questions of law are answered in favour of the assessee, holding that the receipts from the software technology park are business income (2008-09) and the matters concerning deduction under Section 80IAB are to be treated accordingly. No costs.

Imposition of penalty for furnishing inaccurate particulars of income - penalty under section 271(1)(c) - requirement of recording satisfaction before initiating penalty proceedings - survey under section 132A and use of seized documents in assessment - reconsideration of penalty on reassessment or reduction in quantum

Penalty under section 271(1)(c) - imposition of penalty for furnishing inaccurate particulars of income - reconsideration of penalty on reassessment or reduction in quantum - requirement of recording satisfaction before initiating penalty proceedings - Whether the levy of penalty by the Assessing Officer and its confirmation by the Commissioner (Appeals) could be sustained without addressing effect of quantum reductions and without examining whether requisite satisfaction for initiating penalty proceedings was recorded - HELD THAT: - The Tribunal found that the Commissioner (Appeals) upheld the penalty by treating the undisclosed entries found during survey and the sustained additions as indicia of concealment and furnished inaccurate particulars. However, the Tribunal recorded that the Commissioner (Appeals) did not deal with consequential aspects arising from earlier appellate orders in the quantum proceedings which reduced the assessed income, nor did he examine the assessee's contention that the Assessing Officer had not recorded the requisite satisfaction for initiating penalty proceedings. Because the quantum basis for the penalty had changed on appeal and because the existence of a recorded satisfaction is a relevant precondition to exercise jurisdiction to levy penalty, these matters required fresh consideration. The Tribunal therefore set aside the confirmation of penalty and remitted the matter to the Commissioner (Appeals) for fresh adjudication after affording the assessee a reasonable opportunity to place on record evidence and submissions, permitting the Commissioner (Appeals) to take into account any steps the assessee takes under the Vivad se Vishwas scheme.

Confirmation of penalty set aside and matter remitted to the Commissioner (Appeals) for fresh consideration on the points of effect of quantum reduction and whether the Assessing Officer had recorded the requisite satisfaction, after giving the assessee opportunity to be heard.

Final Conclusion: The Tribunal set aside the confirmation of penalty under section 271(1)(c) and remitted the matter to the Commissioner (Appeals) to re-examine the levy in light of the reduced quantum and the need for recorded satisfaction before initiating penalty proceedings, directing fresh adjudication after affording the assessee opportunity to file supporting material; the assessee's right to opt for the Vivad se Vishwas scheme was left open.

Presumptive taxation under section 44AD - treatment of undisclosed turnover as business receipts - computation of taxable income at deemed rate of 8% - addition under section 68 / section 69A vis-a -vis presumptive taxation - bank deposits not constituting assessee's books of account - requirement of evidential material beyond suspicion for additions

Presumptive taxation under section 44AD - treatment of undisclosed turnover as business receipts - computation of taxable income at deemed rate of 8% - Whether the difference between turnover shown in Form 26AS and turnover declared by the assessee (Rs. 5,05,050/-) should be treated as business turnover and taxed at the presumptive rate of 8% under section 44AD rather than being added as income in full. - HELD THAT: - The Tribunal found that the undisclosed amount in Form 26AS represented part of the assessee's business turnover and therefore ought to be included in total turnover for the purpose of presumptive taxation. Under section 44AD the taxable income is a deemed percentage (8%) of gross receipts; the scheme contemplates taxation by deeming income on turnover rather than treating undisclosed turnover as actual income in full. Applying this principle, the Tribunal directed the Assessing Officer to compute income at 8% of the undisclosed turnover of Rs. 5,05,050/-, holding that the entire amount could not be treated as income outright. [Paras 7]

Addition reduced: assess undisclosed turnover of Rs. 5,05,050/- as part of turnover and compute income at 8% thereof.

Addition under section 68 / section 69A vis-a -vis presumptive taxation - bank deposits not constituting assessee's books of account - requirement of evidential material beyond suspicion for additions - Whether the addition of Rs. 3,00,000/- (assessed as unexplained deposits) could be sustained under section 68/69A when the assessee's income was assessed under the presumptive scheme of section 44AD. - HELD THAT: - Relying on precedents and reasoning reproduced in the order, the Tribunal held that once an assessee's income is accepted under section 44AD, the presumptive scheme precludes making additions by treating bank credits or deposits as unexplained income merely on suspicion. Section 44AD deems income at a specified percentage of gross receipts and relieves the assessee from maintaining detailed books; asking the assessee to establish expenditure to the extent of the remaining percentage would defeat that scheme. Further, bank statements are not books of the assessee and entries therein cannot, by themselves, be equated to entries in the assessee's books to invoke section 68. Applying these propositions, and noting the absence of concrete material beyond conjecture, the Tribunal deleted the addition of Rs. 3 lakhs. [Paras 8]

Addition of Rs. 3,00,000/- deleted; AO directed to remove the unexplained deposit addition made under section 68/69A in view of assessment under section 44AD.

Final Conclusion: The appeal is partly allowed: the undisclosed turnover of Rs. 5,05,050/- is to be treated as business turnover and taxable at 8% under section 44AD, and the addition of Rs. 3,00,000/- as unexplained deposit is deleted.

Admission of additional evidence by first appellate authority - remand to assessing officer for verification and remand report - verification and cross verification of third party information obtained under section 133(6) - no disallowance under section 14A where no exempt income is earned or receivable - disallowance of interest where advances are made out of interest bearing borrowed funds - consequential levy of interest under sections 234B and 234C

Admission of additional evidence by first appellate authority - remand to assessing officer for verification and remand report - Deletion by CIT(A) of disallowance of R&D expenditure on basis of bills produced first time before CIT(A). - HELD THAT: - The Tribunal found that the CIT(A) allowed the additional bills and deleted the AO's disallowance without calling for a remand report from the AO or making independent verification of the expenditure. In the interest of justice the Tribunal directed that the issue be remitted to the AO to re examine and decide on merits after providing the assessee a reasonable opportunity of being heard. [Paras 6]

Issue remitted to AO for re examination and fresh decision after verification and opportunity to the assessee; ground Nos.1-4 allowed for statistical purposes.

Verification and cross verification of third party information obtained under section 133(6) - remand to assessing officer for verification and remand report - Deletion by CIT(A) of addition on account of under reporting of consignment sales as per confirmation from consignee ABS Mercantile Pvt. Ltd. - HELD THAT: - The AO had made an addition after discrepancies emerged between sales recorded by the assessee and confirmations from the consignee; the CIT(A) deleted the addition relying on a reconciliation without calling for AO's remand report or independent verification. The Tribunal concluded that the correctness of reconciliation, cheques, opening consignment stock and sales to third parties requires verification with the books of account and, if necessary, cross checks with ABS. Both parties agreed to remand. [Paras 9]

Matter remitted to AO for detailed verification and fresh decision after providing reasonable opportunity to the assessee; ground No.5 allowed for statistical purposes.

No disallowance under section 14A where no exempt income is earned or receivable - Sustainability of disallowance under section 14A when assessee earned no exempt income in the relevant year. - HELD THAT: - The Tribunal noted there was no dispute that the assessee did not earn exempt income in the impugned assessment year. Following authority of coordinate benches and the High Court, the Tribunal held that section 14A is not applicable where no exempt income is received or receivable during the relevant year; therefore no disallowance arises. [Paras 11]

Order of CIT(A) deleting the section 14A disallowance upheld; grounds Nos.8-9 of the revenue dismissed.

Disallowance of interest where advances are made out of interest bearing borrowed funds - remand to assessing officer for verification and remand report - Disallowance of interest attributable to interest free advances to group concerns (whether advances were out of interest bearing borrowings or interest free funds). - HELD THAT: - No material was placed on record to establish whether the advances to group concerns were out of interest free funds or out of interest bearing borrowed funds. The Tribunal found factual verification necessary and remitted the issue to the AO to examine the source of advances and decide on merits after giving the assessee opportunity of being heard. [Paras 15]

Issue remitted to AO for factual verification and fresh adjudication; grounds Nos.10-12 treated as allowed for statistical purposes.

Verification and cross verification of third party information obtained under section 133(6) - remand to assessing officer for verification and remand report - Addition on account of difference between payables shown in assessee's books and information received from M/s ABS Mercantile Pvt. Ltd. - HELD THAT: - The AO relied on information obtained under section 133(6) showing a large discrepancy in payables; the assessee produced account copies but supporting evidence for the adjustments was not before lower authorities. The Tribunal held that the ABS accounts require detailed verification and therefore remitted the matter to the AO with directions to make necessary enquiries with ABS and to give opportunity to the assessee. [Paras 20]

Matter remitted to AO for detailed enquiries with ABS and fresh decision; ground No.2 of the assessee treated as allowed for statistical purposes.

Verification and cross verification of third party information obtained under section 133(6) - remand to assessing officer for verification and remand report - Addition on account of excess claim of purchases vis a vis information received from vendors (G. Amphray Labs and SI Group Navi Mumbai). - HELD THAT: - Although reconciliation statements were filed before the CIT(A), the lower authority was not satisfied for want of cross verification. The Tribunal found it unjustified to reject the assessee's claim without verification and remanded the issue to the AO to carry out necessary verifications and cross verifications and decide afresh after giving the assessee an opportunity to be heard. [Paras 23]

Issue remitted to AO for verification and fresh adjudication; ground No.3 of the assessee treated as allowed for statistical purposes.

Veracity and genuineness of international commission payments - remand to assessing officer for verification and remand report - Disallowance of commission expenses paid to an overseas agent where documentary evidence was produced before CIT(A) for the first time. - HELD THAT: - The assessee placed invoices and other evidence before the CIT(A) for the first time; considering the material and the assessee's offer to cooperate, and in absence of objection from the Department, the Tribunal directed remand to the AO to examine correctness and genuineness of the expenditure in the light of the evidence and to decide afresh after providing opportunity to the assessee. [Paras 27]

Issue remitted to AO for examination of genuineness and fresh adjudication; ground No.4 of the assessee allowed for statistical purposes.

Consequential levy of interest under sections 234B and 234C - Claim against levy of interest under sections 234B and 234C as consequential matter. - HELD THAT: - The Tribunal observed that charging of interest under sections 234B and 234C is consequential upon assessment adjustments and directed the AO to act accordingly in the course of giving effect to the assessment. [Paras 28]

Levy of interest under sections 234B and 234C to be determined consequentially by the AO.

Final Conclusion: The Tribunal partly allowed the revenue's appeal and allowed the assessee's appeal for statistical purposes by remitting multiple disputed factual issues (R&D expenditure, consignment sales, interest on advances, payables reconciliation, purchases discrepancies, and commission genuineness) to the assessing officer for verification and fresh adjudication after affording the assessee reasonable opportunity of being heard; the deletion of the section 14A disallowance was upheld and interest under sections 234B/234C to be determined consequentially.

Treatment of interest from partner as income from other sources - netting of interest vis-a -vis CBDT Instruction No.882 - disallowance under section 36(1)(iii) of the Act - valuation of closing stock at cost - inclusion of estimated future expenses in stock valuation - AO's power under proviso to section 145 of the Act - recognition of revenue by real estate developers under AS-9 - transfer of significant risks and rewards for revenue recognition - reimbursement of expenses versus taxable receipt - requirement of auditor authentication in Form 10CCB for section 80IB claims - mandatory levy of interest under sections 234A/234B/234C - set aside for fresh adjudication / verification

Treatment of interest from partner as income from other sources - netting of interest vis-a -vis CBDT Instruction No.882 - disallowance under section 36(1)(iii) of the Act - Whether interest received from a partner on capital overdrawn is to be netted against interest paid and treated as business expenditure or assessable as income from other sources - HELD THAT: - The Tribunal applied CBDT Instruction No.882 and held that while Section 40(b) requires add-back of interest paid to partners (and precludes netting for the purpose of disallowance), the present question was the head of income under which interest received on a partner's capital overdraft should be assessed. Where the firm's borrowed interest-bearing funds were channelled to a partner's non-business capital overdraft, the correlating interest expenditure is disallowable under section 36(1)(iii). Any interest received by the firm from the partner in excess of the firm's actual borrowing cost attributable to the advance (i.e., excess over the rate on borrowed funds) is liable to be assessed as the firm's income from "Other sources". The Tribunal therefore modified the CIT(A)'s conclusion to disallow the correlating interest expenditure under section 36(1)(iii) and to tax only the excess interest received as income from other sources. [Paras 6]

Partly allow; disallow interest expenditure correlating to funds advanced to the partner u/s 36(1)(iii) and assess only the excess interest received from the partner as income from other sources.

Valuation of closing stock at cost - inclusion of estimated future expenses in stock valuation - AO's power under proviso to section 145 of the Act - set aside for fresh adjudication / verification - Whether the assessee could include ad hoc estimated future expenses in computing cost per square metre and thereafter exclude those estimated expenses from closing stock, and whether the AO's revaluation of closing stock was justified - HELD THAT: - The Tribunal found the assessee's method (including an ad hoc estimate of future expenses to compute a cost rate and then excluding that estimate from closing stock) to be unsubstantiated and distorting of true profits. Relying on authorities that permit the AO to reject accounts and apply the proviso to section 145 where accounts do not disclose correct profits, the Tribunal upheld the AO's revaluation of the closing stock at cost (excluding estimated future expenses). Further, since substitution of the method of valuation for closing stock affects the correct computation of trading results, the Tribunal directed that the opening stock valuation be reworked consistently with the method adopted by the AO and restored that issue to the file of the AO for giving effect to this direction. [Paras 10]

Uphold AO's rejection of the assessee's estimated-expense-inclusive method and AO's revaluation of closing stock; set aside to AO to revalue opening stock consistently and give effect accordingly.

Recognition of revenue by real estate developers under AS-9 - transfer of significant risks and rewards for revenue recognition - Whether sales proceeds of specified flats should have been recognised in the immediately preceding year or in the year in which agreements to sell and completion (transfer of risks and rewards) occurred - HELD THAT: - Applying AS-9 and the Guidance Note for real estate developers, the Tribunal found that revenue recognition requires transfer of property or significant risks and rewards and reasonable certainty of consideration. The agreements to sell for the flats in question were executed and construction up to the relevant floor was completed in the year under appeal (A.Y.2009-10). The assessee's accounting that recognised those sales in the earlier year was inconsistent with documentary records (including architect's certification) and with the assessee's own subsequent accounting. Consequently, the Tribunal concurred with the AO and CIT(A) that the revenue should be recognised in A.Y.2009-10. It also directed that tax credit for tax already paid in the earlier year in respect of those transactions be given in A.Y.2009-10. [Paras 13]

Dismiss grounds contesting recognition; hold that revenue from the specified flat sales is to be recognised in A.Y.2009-10 and direct adjustment/credit for tax paid in the earlier year.

Reimbursement of expenses versus taxable receipt - set aside for fresh adjudication / verification - Whether amounts received from M/s Omega Investment & Properties Pvt. Ltd. were reimbursements of labour and other construction expenses (to be reduced from cost of construction) or taxable income from other sources - HELD THAT: - On examining the sub-development agreement, the Tribunal observed clauses obligating the assessee to incur certain construction costs at the developer's cost and to be reimbursed by the developer out of the developer's share. The Tribunal found force in the assessee's claim that the receipts were reimbursements, and noted that earlier and later accounting (including a resolution and accounting in A.Y.2012-13) supported reimbursement treatment. However, because the assessee had not placed complete documentary proof before the AO and the lower authorities had not fully examined the matter, the Tribunal held that the issue required fresh consideration. The AO was directed to verify particulars with the developer, allow the assessee opportunity to produce evidence, and adjudicate afresh. [Paras 16]

Allow grounds for set-aside; remit the issue to the AO for fresh adjudication and verification with directions to afford the assessee an opportunity to substantiate the reimbursement claim.

Deduction under section 80IB - requirement of Form 10CCB - Whether the additions made in assessment qualify for deduction under section 80IB(10) - HELD THAT: - The Tribunal recorded that entitlement to deduction under section 80IB depends on satisfaction of statutory conditions, including auditor authentication in Form 10CCB. Additions made in assessment proceedings were not covered by the mandatory audit certification requirement; accordingly the CIT(A) correctly refused the 80IB claim in respect of those additions. [Paras 17]

Dismiss the claim for deduction under section 80IB(10) in respect of the additions.

Mandatory levy of interest under sections 234A/234B/234C - Whether interest under sections 234A, 234B and 234C is leviable in consequence of the assessment framed under section 143(3) read with section 263 - HELD THAT: - Relying on binding Supreme Court authority that interest under the cited provisions is mandatory where applicable, the Tribunal found no merit in the assessee's objection to levy of interest consequential to the revised assessment and directed the AO to compute the interest while giving effect to the order. [Paras 20]

Dismiss objection; direct AO to compute and levy interest under sections 234A, 234B and 234C as applicable.

Final Conclusion: The appeal is partly allowed. The Tribunal (i) modified treatment of partner interest: disallowing correlating interest u/s 36(1)(iii) and taxing only excess interest as other sources; (ii) upheld AO's revaluation of closing stock and remitted opening stock valuation to AO for recomputation; (iii) held revenue from specified flat sales to belong to A.Y.2009-10 and directed adjustment for tax paid earlier; (iv) set aside the question of receipts from M/s Omega to the AO for fresh verification and adjudication; (v) dismissed claims for deduction under section 80IB(10); and (vi) dismissed objection to levy of interest under sections 234A/234B/234C, directing the AO to compute same.

Reopening under sections 147/148 - reasons recorded for reopening - accommodation entries - information received from Investigation Wing - non-application of mind - failure to supply material and right to cross-examination - disposal of objections before proceeding with assessment - quashing of reassessment proceedings

Reopening under sections 147/148 - reasons recorded for reopening - accommodation entries - information received from Investigation Wing - non-application of mind - Validity of reassessment where reasons recorded relied on incorrect or non-existing facts supplied by the Investigation Wing - HELD THAT: - The Tribunal held that the validity of reassessment must be judged with reference to the reasons recorded. The A.O.'s reasons recorded relied on information from the Investigation Wing that the assessee was beneficiary of accommodation entries of Rs.15 lakhs; subsequently it transpired that the actual entry in the assessee's case was lesser (e.g., Rs.5 lakhs or Rs.10 lakhs) or of different character (loan instead of bogus purchases). The A.O. accepted the Investigation Wing's report without independent verification and recorded reasons based on incorrect facts. That demonstrated lack of application of mind in assuming jurisdiction under sections 147/148. Consequently, reopening founded on such incorrect and non-existing reasons was unjustified and liable to be quashed, and additions founded on the reassessment were deleted. [Paras 8]

Reopening held invalid and quashed; additions deleted.

Failure to supply material and right to cross-examination - disposal of objections before proceeding with assessment - quashing of reassessment proceedings - Effect of not supplying investigation material, denying opportunity for cross-examination, and not disposing objections prior to completing reassessment - HELD THAT: - The Tribunal found that the material relied upon by the A.O. (documents and statements generated during the search in the entry-provider's case) was not supplied to the assessee, and the assessee's request for production of witnesses for cross-examination was not acceded to. Further, objections filed by the assessees against the notice under section 148 were not disposed of by a separate speaking order prior to framing the reassessment; instead they were dealt with in the composite assessment order. Applying established precedent on natural justice and the requirement to dispose objections before proceeding, the Tribunal concluded these procedural failures vitiated the reassessment proceedings. [Paras 8]

Procedural infirmities (non-supply of material, denial of cross-examination, and non-disposal of objections) warranted quashing of reassessment and deletion of additions.

Final Conclusion: The Tribunal set aside the impugned orders, quashed the reassessment proceedings and deleted the additions in respect of AY 2011-2012; all appeals are allowed.

Validity of show cause notice under section 274 read with section 271AAB - Requirement of specificity in penalty notice and principles of natural justice - Quashing of penalty proceedings for defective or vague notice - Applicability and categorisation under clauses (a), (b) and (c) of section 271AAB - Discretionary nature of penalty under section 271AAB

Validity of show cause notice under section 274 read with section 271AAB - Requirement of specificity in penalty notice and principles of natural justice - Quashing of penalty proceedings for defective or vague notice - The penalty proceedings initiated by notices issued under section 274 read with section 271AAB were invalid and the penalty proceedings were quashed for want of a valid, specific show cause notice. - HELD THAT: - The Tribunal examined the notice served to the assessees and found that the body of the notice used a pre-printed/form proforma referring to concealment or furnishing inaccurate particulars (language suited to section 271(1)(c)) without specifying which limb or clause of section 271AAB (clauses (a), (b) or (c)) was invoked. Section 274 requires that an assessee be given a meaningful opportunity to be heard, which in the context of section 271AAB requires the AO to articulate the precise charge and rate of penalty sought to be imposed so that the assessee can meaningfully respond. Relying on coordinate decisions of this Tribunal and the jurisdictional High Court authorities (as discussed in the order), the Tribunal held that a vague or mechanically issued notice which does not convey the specific charge under section 271AAB offends natural justice and is fatally defective; accordingly the penalty proceedings are void ab initio and must be quashed. The Tribunal applied this conclusion to the seven group appeals and set aside the penalties sustained by the CIT(A) which had been founded on the defective notice. [Paras 16, 17, 20]

Penalty proceedings under section 271AAB initiated by the defective notices are quashed and the penalties sustained by the CIT(A) in the seven assessees' appeals are deleted.

Applicability and categorisation under clauses (a), (b) and (c) of section 271AAB - Merits of penalty under section 271AAB - Discretionary nature of penalty under section 271AAB - The merits of the levy and quantum of penalty under section 271AAB were not adjudicated on merit because the penalty proceedings were quashed on the preliminary legal ground; the merits were held to be infructuous. - HELD THAT: - Having quashed the penalty proceedings for defect in the show cause notices, the Tribunal declined to decide the substantive challenges to the quantum and categorisation of penalty under clauses (a)/(b)/(c) of section 271AAB. The order records that adjudicating the merits would be academic once the initiating proceedings have been held void ab initio. Consequently, grounds on merits are treated as infructuous. The Tribunal also observed (in the course of submissions) that section 271AAB is discretionary, but did not decide substantive relief on that basis after quashing the proceedings. [Paras 17, 21]

Merits of the penalty (including its categorisation under clauses (a), (b) or (c) and quantum) are not adjudicated and are held to be infructuous following the quashing of the penalty proceedings.

Effect of quashing on Revenue's appeal - The departmental appeal against the relief granted by the CIT(A) in respect of Smt. Rajrani Mittal (challenging reduction/deletion of penalty) became infructuous after the Tribunal quashed the initiating penalty proceedings. - HELD THAT: - Because the Tribunal set aside the penalty proceedings as void ab initio for defective notices, the Revenue's appeal challenging the CIT(A)'s order in ITA No.879/Ind/2019 no longer called for adjudication and was dismissed as infructuous. [Paras 23, 24]

Revenue appeal dismissed as infructuous in view of the quashing of the penalty proceedings.

Final Conclusion: The Tribunal quashed the penalty proceedings initiated under section 274 read with section 271AAB for the seven assessees (Assessment Years 2015-16 and 2016-17) on the ground that the show cause notices were vague and did not specify the charge or clause under section 271AAB, thereby violating the requirement of a meaningful opportunity to be heard; consequentially all penalties sustained by the CIT(A) in those appeals were deleted and the Revenue's appeal became infructuous.

Assessment framed in the name of a non-existent/amalgamating company - jurisdictional defect arising from framing assessment against an entity that ceased to exist by scheme of amalgamation - nullity of assessment where assessing officer frames proceedings against a dead/merged person - scheme of amalgamation operates to extinguish the amalgamating company with effect from appointed date - reopening and assessment under Section 147/148 and assessment under Section 143(3) when invoked in the name of a non-existent entity - provisions of Section 292B are not available to cure assessments framed against a non-existent entity

Assessment framed in the name of a non-existent/amalgamating company - jurisdictional defect arising from framing assessment against an entity that ceased to exist by scheme of amalgamation - nullity of assessment where assessing officer frames proceedings against a dead/merged person - Whether assessments and reassessment proceedings framed in the name of the amalgamating companies, which had ceased to exist on account of a court approved scheme of amalgamation effective from 01.04.2013, are legally maintainable for AY 2009-10. - HELD THAT: - The Tribunal found on the admitted facts that both appellants had ceased to exist pursuant to orders of the Hon'ble Delhi High Court approving schemes of amalgamation with effect from 01.04.2013. The assessments impugned were framed on 28.12.2016 and 29.12.2016 respectively, i.e., long after the appointed date of amalgamation. Reliance was placed on the ratio in Spice Enfotainment (affirmed by the Supreme Court) and on subsequent decisions including Maruti Suzuki, which hold that framing an assessment in the name of a non existing/amalgamating entity goes to the root of jurisdiction and is not a mere procedural irregularity curable under Section 292B. The Tribunal rejected the Revenue's contention that service or technical defects could validate the proceedings where the legal identity of the assessee no longer existed. Given that the scheme of amalgamation had already extinguished the amalgamating companies and their names were struck off the ROC rolls, the Assessing Officer had no jurisdiction to continue proceedings or to frame assessments in their name; such actions are nullities. The Tribunal therefore quashed the reassessment/assessment orders as unsustainable in law. [Paras 7, 8, 14, 15]

Assessments and reassessments framed in the name of the amalgamating companies for AY 2009-10 are nullities for want of jurisdiction and are quashed.

Final Conclusion: Assessments dated 28.12.2016 and 29.12.2016 framed in the name of M/s. Artsy Infrastructure and Projects Pvt. Ltd. and M/s. ATJ Impex Pvt. Ltd. respectively (for AY 2009-10), after those companies had ceased to exist pursuant to court approved schemes of amalgamation, are quashed as nullities.

Condonation of delay in filing appeals - Scope of interference under revision u/s 263 - Disallowance under Section 14A and computation under Rule 8D(2)(iii) - Computation of disallowance on investments yielding exempt income only - Remedial route where appellate authority declines maintainability

Condonation of delay in filing appeals - Remedial route where appellate authority declines maintainability - Delay in filing the appeal against the order passed under section 263 was condoned and the appeal admitted. - HELD THAT: - The Tribunal examined the sequence of orders - an order under section 263 dated 31.03.2014, a purported assessment order under section 143(3) dated 25.03.2015 said to give effect to the section 263 order, and an appellate order under section 250(6) dated 14.06.2016 in which the Commissioner (Appeals) refused to entertain the assessee's appeal against the section 143(3) order on maintainability grounds. Considering these events holistically and the bonafide reason for initially preferring an appeal to the Commissioner (Appeals) within time, the Tribunal held that the delay in filing the appeal against the section 263 order before the Tribunal was excusable. On that basis the delay of 808 days was condoned and the appeal admitted for adjudication. [Paras 7, 8]

Delay condoned and appeal against the order under section 263 admitted.

Disallowance under Section 14A and computation under Rule 8D(2)(iii) - Computation of disallowance on investments yielding exempt income only - Scope of interference under revision u/s 263 - Disallowance under section 14A computed under Rule 8D(2)(iii) must be restricted to the average value of those investments which yielded exempt income during the year; the disallowance as determined by the PCIT was modified accordingly. - HELD THAT: - On examination of Schedule 4 showing investments, the PCIT had computed disallowance by applying 0.5% on the entire investment corpus. The assessee, however, demonstrated that only a specific investment (in M/s Lakshaya Investment) of Rs. 18,00,000 yielded exempt income in the year. Applying the precedent of the Special Bench of the Income Tax Appellate Tribunal in ACIT v. Vireet Investments Pvt. Ltd., the Tribunal held that for computing the average value of investment under Rule 8D(2)(iii) only those investments which yielded exempt income in the relevant year are to be considered. Consequently, the Tribunal applied the 0.5% rate to the average investment of Rs. 18,00,000 (opening balance nil) and reduced the disallowance to Rs. 45,000, thereby modifying the disallowance determined by the PCIT. [Paras 13, 14]

Disallowance under section 14A/Rule 8D(2)(iii) modified to be computed on investments that yielded exempt income only; disallowance reduced to Rs. 45,000 and appeal allowed.

Final Conclusion: Delay in filing the appeal against the section 263 order was condoned and the appeal admitted; on merit the disallowance under section 14A computed under Rule 8D(2)(iii) was restricted to investments which yielded exempt income, reducing the disallowance to Rs. 45,000 and allowing the assessee's appeal.

Fee under Section 234E - processing of eTDS statement - application of Section 200A(1)(c) to processed eTDS statements - monetary threshold for filing departmental appeals under CBDT Circular No. 3/2018 - exception 10(a) and exception 10(e) to Para 10 of CBDT Circular No. 3/2018 - Central Processing Centre (CPC-TDS) as part of Income Tax Department (not an external enforcement agency) - concurrent jurisdiction of CPC-TDS and Assessing Officer under Section 120 read with Section 124

Monetary threshold for filing departmental appeals under CBDT Circular No. 3/2018 - exception 10(a) and exception 10(e) to Para 10 of CBDT Circular No. 3/2018 - fee under Section 234E - Whether the Department's appeals should be entertained despite low tax effect by invocation of exceptions in Para 10 of CBDT Circular No. 3/2018 (as amended). - HELD THAT: - The Tribunal found that the quantum of fee involved in the appeals was below the monetary threshold for filing departmental appeals and therefore prima facie governed by the low-tax-effect policy in CBDT Circular No. 3/2018 as amended. Exception 10(a) (constitutional validity challenges) was not attracted because the ld. CIT(A) had not held Section 234E to be unconstitutional; he had merely recorded the assessee's submissions and did not pronounce on constitutional validity. Exception 10(e) (additions based on information from external law enforcement agencies) was also not attracted because the TDS statement was filed on TRACES and processed by CPC-TDS, which is administratively and functionally part of the Income Tax Department; CPC-TDS is therefore not an external law enforcement agency as envisaged by the exception. Consequently, none of the enumerated exceptions applied and the appeals were not maintainable on account of low tax effect. The Department's substantive contentions on the validity or applicability of fee under Section 234E were left unopened and not adjudicated on the merits. [Paras 11, 14, 15, 16, 17]

Appeals dismissed for low tax effect as the exceptions in Para 10 of CBDT Circular No. 3/2018 are not attracted; merits left open.

Fee under Section 234E - processing of eTDS statement - application of Section 200A(1)(c) to processed eTDS statements - Whether the levy of fee under Section 234E on processing of the late-filed eTDS statement was upheld on merits. - HELD THAT: - The Tribunal did not decide the substantive legal question on the applicability or correctness of the fee levied under Section 234E. Although the Revenue pressed merits - including that fee under Section 234E is mandatory when a statement is processed with defaults and that judicial precedents uphold constitutional validity - the Tribunal expressly refrained from adjudicating these contentions because the appeals were dismissed on grounds of low tax effect. The Department's arguments on the legality, intra vires nature, or characterization of the fee (whether penalty or otherwise) were therefore left open for future adjudication. [Paras 17, 18]

Substantive merits of the levy under Section 234E not adjudicated; contentions left open.

Final Conclusion: Both departmental appeals in respect of the stated assessment years are dismissed on account of low tax effect under CBDT Circular No. 3/2018 as amended; the Tribunal did not decide the substantive questions on the levy or characterization of the fee under Section 234E and left those contentions open for future consideration.

Drawback recovery - non-realisation of export proceeds under FERA - bank realisation certificate - Rule 16A of the Drawback Rules - RBI Circulars dated 09.09.2000 and 28.01.2002 - remand for factual verification

Drawback recovery - bank realisation certificate - remand for factual verification - Rule 16A of the Drawback Rules - RBI Circulars dated 09.09.2000 and 28.01.2002 - Whether the matter should be remanded to the revisional authority to determine entitlement to relief and whether extension/verification concerning non-realisation of export proceeds could be examined afresh. - HELD THAT: - The Court held that the question whether extension was granted by the Reserve Bank of India or whether the petitioner was otherwise entitled to relief are factual issues fit for determination by the Revisional Authority. The Court observed that factual aspects require verification by the authority itself, relying on the approach in ZAZ and ZAZ Pvt. Ltd. , where a remand for factual verification was directed. The Court further noted that permitting the revisional authority to examine the petitioner's entitlement while keeping in view the governing rules and circulars, including Rule 16A of the Drawback Rules and the RBI Circulars dated 09.09.2000 and 28.01.2002, would not prejudice the Revenue. Consequently, the High Court refrained from adjudicating the merits and remitted the matter for fresh consideration. [Paras 5, 6]

Matter remanded to the third respondent for fresh consideration of the petitioner's entitlement in accordance with law; petitioner permitted to produce the remaining shipping bills and supporting documents.

Final Conclusion: Writ petition disposed by remanding the matter to the revisional authority with liberty to the petitioner to submit remaining shipping bills and supporting certificates; merits left open and to be decided expeditiously in accordance with Rule 16A and the RBI circulars.

Assessment on transaction value under Customs Valuation Rules - speaking order requirement for valuation enhancement - acceptance of enhanced value and estoppel in taxation - provisional assessment and waiver of rights - reliance on contemporaneous import data/NIDB as sole basis for enhancement - routine or uniform loading of declared value

Assessment on transaction value under Customs Valuation Rules - exception to transaction value - speaking order requirement for valuation enhancement - Validity of reassessment/enhancement of declared transaction value where no speaking order giving reasons was recorded - HELD THAT: - The Tribunal held that assessment must ordinarily be on the transaction value and enhancements must be supported by reasons showing that the invoice value does not represent the true transaction value. Where the adjudicating authority enhances or loads declared values without passing a speaking order disclosing grounds for such loading, the enhancement is impermissible. Routine, uniform enhancements applied over a period without comparison with contemporaneous imports (quality, level, time of import etc.) do not satisfy the obligation on the authority to discharge the burden of proof for rejection of declared value. Accordingly, reassessments lacking reasoned speaking orders were set aside.

Assessing officers' enhancements set aside for want of speaking orders and proper application of valuation rules; assessments restored at declared transaction value.

Acceptance of enhanced value and estoppel in taxation - provisional assessment and waiver of rights - Whether the importer's written acceptance of enhanced value precluded them from challenging the enhancement in appeal - HELD THAT: - The Tribunal reaffirmed that there is no estoppel in taxation and acceptance of an enhanced value does not necessarily preclude an importer from challenging the enhancement by way of appeal. The appellate forum may examine whether the alleged acceptance was voluntary or made under compulsion of operational pressures (such as avoidance of demurrage). If the assessing authority has not recorded reasons or has practised routine loading, a purported written acceptance does not validate the reassessment. The Tribunal also noted that the availability of provisional assessment or warehousing under the statute does not convert an alleged coerced acceptance into a voluntary, irrevocable admission.

Importer's appeal could be entertained despite prior written acceptance; the Revenue's contention of estoppel rejected and appeals dismissed.

Reliance on contemporaneous import data/NIDB as sole basis for enhancement - routine or uniform loading of declared value - Competence of relying solely on NIDB/contemporaneous import data or standing circulars/alerts for value enhancement - HELD THAT: - The Tribunal held that NIDB data or internal alerts/circulars cannot be the sole or automatic basis for enhancement of declared value. Enhancement must follow the sequential application of valuation rules and a case-specific comparison; reliance on database figures or departmental standing instructions without individualized reasoning is inconsistent with the statutory scheme. Where enhancement is effected merely on such data or departmental direction and applied routinely, it cannot sustain reassessment.

Enhancements founded solely on NIDB/contemporaneous data or routine departmental practice rejected; reassessments set aside.

Final Conclusion: Revenue's appeals against the Commissioner (Appeals) orders were dismissed for want of merit; reassessments that lacked speaking reasons and rested on routine loading or sole reliance on contemporaneous data/NIDB were set aside and assessments restored at declared transaction values; stay applications disposed of accordingly.

Extension of limitation period by the Supreme Court suo motu order w.e.f. 15.03.2020 - limitation and condonation of delay - benefit of Notification No. 096/2008-Cus (concessional tariff/exemption) - retrospective issuance of certificate of origin under Rule 15(8) of the Duty Free Tariff Preference Scheme for the Least Developed Countries Rules, 2008 - minor discrepancies and acceptance under Rule 18 of the Duty Free Tariff Preference Scheme for the Least Developed Countries Rules, 2008

Extension of limitation period by the Supreme Court suo motu order w.e.f. 15.03.2020 - limitation and condonation of delay - Whether the appeal was barred by limitation and whether dismissal by Commissioner (Appeals) for delay was justified in view of the Supreme Court's suo motu order extending limitation w.e.f. 15.03.2020. - HELD THAT: - The Tribunal found that the Commissioner (Appeals) erred in dismissing the appeal as barred by limitation. The Supreme Court's suo motu order extending the period of limitation w.e.f. 15.03.2020 applied to the proceedings, and the impugned order dated 28.07.2020 conflicted with that direction. Consequently the appeal was admitted for hearing on merits rather than being rejected on the ground of delay. [Paras 5]

Appeal not barred by limitation; impugned order dismissing appeal for delay set aside and appeal admitted for hearing on merits.

Benefit of Notification No. 096/2008-Cus (concessional tariff/exemption) - retrospective issuance of certificate of origin under Rule 15(8) of the Duty Free Tariff Preference Scheme for the Least Developed Countries Rules, 2008 - minor discrepancies and acceptance under Rule 18 of the Duty Free Tariff Preference Scheme for the Least Developed Countries Rules, 2008 - Whether the certificates of origin submitted by the appellant entitled them to concessional tariff/exemption under Notification No. 096/2008-Cus, or whether the revised certificates amounted to retrospective issuance thereby disqualifying the benefit. - HELD THAT: - The Tribunal examined the original and revised certificates of origin and the provisions of the Rules. It held that the revised documents were not retrospective issuances in the sense contemplated by Rule 15(8) but were corrections referring to the original certificate number and date. The discrepancies were minor and did not create a mismatch as to the goods imported or the accompanying commercial documents. Under Rule 18 such minor discrepancies do not ipso facto invalidate a certificate of origin provided the certificate corresponds to the products imported. The Commissioner and Assistant Commissioner erred in treating the rectified certificates as retrospectively issued and rejecting the exemption. [Paras 11]

Certificates of origin held valid; appellant entitled to benefit of exemption/concessional tariff under Notification No. 096/2008-Cus; impugned order set aside and appeal allowed with consequential benefits.

Final Conclusion: The appeal was admitted notwithstanding initial dismissal for delay pursuant to the Supreme Court's extension of limitation; on merits the Tribunal held that the certificate of origin discrepancies were minor, correctly rectified and not retrospective, and directed grant of the benefit of Notification No. 096/2008-Cus, setting aside the impugned order.

Provisional release - prohibited or restricted goods - evidence of smuggling / burden of proof - detention of goods moved within the country - interference with appellate order of Commissioner (Appeals)

Provisional release - prohibited or restricted goods - evidence of smuggling / burden of proof - detention of goods moved within the country - Provisional release of Betel Nuts and Black Pepper permitted as the goods were not prohibited or restricted and there was no evidence of smuggling. - HELD THAT: - The Tribunal examined the record of provisional release ordered by the Commissioner (Appeals) and the revenue's contention that the matter was under investigation and that other seized items (poppy seeds) were restricted. The Tribunal found no material to establish that the Betel Nuts and Black Pepper were smuggled into the country or that they were notified as prohibited or restricted under the Customs Act, 1962. The goods were being transported domestically and were not intercepted at the national border. In the absence of evidence of smuggling or any notification rendering the goods prohibited/restricted, continued detention by the revenue despite the appellate order amounted to overreach. On this basis the Tribunal dismissed the revenue's appeal against the provisional release and directed release of the goods.

Appeal dismissed; provisional release of Betel Nuts and Black Pepper upheld and revenue directed to release the goods.

Interference with appellate order of Commissioner (Appeals) - provisional release - Miscellaneous Application for stay of the appellate order was rejected as infructuous. - HELD THAT: - A misc. application seeking stay of the Commissioner (Appeals) order directing provisional release was considered. Having dismissed the appeal on merits and directed release by a specified date, the Tribunal found that the stay application no longer had any operative effect. Consequently, the application was refused as infructuous.

Miscellaneous Application rejected as infructuous.

Final Conclusion: The revenue's appeal was dismissed for want of evidence that the goods were smuggled or prohibited; the provisional release ordered by the Commissioner (Appeals) was upheld and the revenue was directed to release the Betel Nuts and Black Pepper. The application for stay was refused as infructuous.

Scheme of Merger by Absorption - sanction under Sections 230 to 232 of the Companies Act, 2013 - Appointed Date - dissolution of transferor company without winding up - Official Liquidator's report - compliance with Accounting Standards - set-off of fees paid on authorised capital - protection of creditors' interests - filing of order and scheme with Registrar of Companies and stamping authorities - fair and reasonable

Scheme of Merger by Absorption - sanction under Sections 230 to 232 of the Companies Act, 2013 - fair and reasonable - Sanction of the Scheme of Merger by Absorption of the Transferor Company by the Transferee Company - HELD THAT: - The Tribunal considered the petition for sanction of the Scheme under Sections 230 to 232 and other applicable provisions, observed that no objector appeared and that statutory compliances were placed on record. The Tribunal found on the material before it, including the report of the Official Liquidator, that the scheme appears fair and reasonable and is not violative of law or contrary to public policy, and that all requisite statutory compliances have been fulfilled. On these findings the consolidated Company Petition is made absolute and the Scheme is sanctioned. [Paras 17, 18, 19, 20, 21]

Scheme sanctioned and consolidated petition made absolute.

Appointed Date - Fixation of the Appointed Date for the Scheme - HELD THAT: - The Petitioner Companies stated the Appointed Date as 1st April, 2019 and undertook that the Scheme will be effective from that Appointed Date. The Tribunal accepted these undertakings and fixed the Appointed Date as 1st April, 2019. [Paras 5, 12, 21]

Appointed Date fixed as 1st April, 2019.

Dissolution of transferor company without winding up - Official Liquidator's report - Dissolution of the Transferor Company without winding up - HELD THAT: - The Official Liquidator reported that the affairs of the Transferor Company have been conducted properly and not prejudicially to shareholders' interests. Relying on that report and the other material on record, the Tribunal ordered that the Transferor Company be dissolved without the process of winding up. [Paras 18, 21]

Transferor Company to be dissolved without winding up.

Compliance with Accounting Standards - set-off of fees paid on authorised capital - Acceptance of undertakings given in response to observations of the Regional Director - HELD THAT: - The Regional Director made observations including the need to pass accounting entries to comply with applicable Accounting Standards, to ensure the Scheme specifies the Appointed Date, and to effect set-off of fees paid by the Transferor Company on its authorised capital in accordance with the statutory provision. The Petitioner Companies gave specific undertakings on these points, which the Tribunal accepted. [Paras 11, 12, 13, 16, 17]

Undertakings accepted; petitioners directed to comply with the observations and statutory requirements.

Protection of creditors' interests - Satisfaction as to notice to creditors and protection of creditors' interests - HELD THAT: - The Tribunal recorded that, pursuant to an earlier order, meetings of equity shareholders were dispensed with due to consent affidavits and that notices required to unsecured creditors were issued; no objections from creditors were received. The Petitioners undertook that creditors' interests remain protected and unaffected by the Scheme. The Tribunal accepted these statements. [Paras 14, 16, 17]

Creditors' interests to remain protected; notices sufficiency recorded and accepted.

Filing of order and scheme with Registrar of Companies and stamping authorities - Directions for post-sanction compliances - HELD THAT: - The Tribunal directed the Petitioners to file a certified copy of the Order along with the Scheme electronically in E-form INC-28 with the concerned Registrar of Companies within 30 days, and to file a certified copy with the Superintendent of Stamps for adjudication of stamp duty within 60 days. The Tribunal further directed that all concerned regulatory authorities shall act on receipt of certified copies of the Order and Scheme. [Paras 22, 23, 24]

Petitioners to file certified copies of the Order and Scheme with Registrar and stamping authorities and for regulatory action as directed.

Final Conclusion: The Tribunal sanctioned the Scheme of Merger by Absorption, fixed the Appointed Date as 1st April, 2019, directed dissolution of the Transferor Company without winding up, accepted the undertakings given in response to the Regional Director's observations, recorded the Official Liquidator's favourable report and directed statutory post-sanction filings with the Registrar of Companies and stamping authorities.

Waiver of eligibility under section 244(1) of the Companies Act, 2013 - oppression and mismanagement - exceptional circumstances test for waiver - tribunal's limited role in not deciding merits while forming opinion on waiver - membership and shareholding threshold for locus to apply under section 241

Waiver of eligibility under section 244(1) of the Companies Act, 2013 - oppression and mismanagement - exceptional circumstances test for waiver - membership and shareholding threshold for locus to apply under section 241 - Application for waiver of the eligibility requirements of section 244(1) to enable filing of a petition under section 241, and consequent dismissal of the company petition when waiver is refused. - HELD THAT: - The Tribunal applied the criteria laid down by the NCLAT in Cyrus Investments (paras. 140-147 of that decision as reproduced) to form an opinion whether exceptional circumstances exist for waiver. It recorded that the applicant is a member of the company holding a very small shareholding (85 shares, 0.01%), and proceeded to examine whether the proposed section 241 application pertains to oppression and mismanagement. The petition principally sought value for an asserted 'brand' contribution by the applicant's father and alleged non-receipt of notices for rights/bonus issues; the Tribunal found that these contentions, as pleaded, do not fall within the ambit of oppression and mismanagement. The applicant failed to provide particulars of the alleged rights and bonus issues and there was no evidence of similar complaints by other members. On these materials the Tribunal concluded there were no exceptional circumstances warranting a waiver of the statutory eligibility requirements, and characterised the petition as frivolous. The Tribunal noted that while it must not decide the full merits of a proposed section 241 petition, it is obliged to record reasons showing some exceptional case on the basis of pleadings/evidence to justify waiver; those requirements were not met here. Consequently the waiver application was refused and the company petition dismissed. [Paras 6, 7]

Waiver under the proviso to section 244(1) refused for lack of exceptional circumstances; company petition under section 241 dismissed.

Final Conclusion: The Tribunal refused to waive the eligibility conditions in section 244(1) because the proposed section 241 petition did not, on the pleadings, disclose oppression and mismanagement or exceptional circumstances; accordingly the waiver application and the company petition were dismissed.

Restoration of company name - Striking off under Section 248 of the Companies Act, 2013 - Failure to file statutory financial statements and annual returns - Going concern and continuing business operations as ground for restoration - Application for dormant status under Section 455 - Conditioned restoration - payment of costs and filing of pending documents

Striking off under Section 248 of the Companies Act, 2013 - Failure to file statutory financial statements and annual returns - Going concern and continuing business operations as ground for restoration - Whether the striking off of the company's name was to be set aside and the company's name restored on the basis that the company is a going concern despite non-filing of statutory documents - HELD THAT: - The Tribunal examined the audited financial statements and ancillary documents filed by the petitioner and noted the existence of assets, borrowings, loans and cash balances for the years up to 31 March 2018, demonstrating that the company continued operations. The Registrar had initiated removal proceedings after the company failed to file statutory returns for more than two continuous years and followed the prescribed STK notices and publication regime, with no representations received. Notwithstanding the procedural correctness of the strike-off process, the Bench found that continuation of business activity and the potential for grave hardship to members and creditors justified relief. On this basis the Tribunal concluded that the petitioner had made out a case for restoration of the name, as striking off would cause irreparable loss despite admitted defaults in filing. [Paras 11, 12]

The order striking off the company's name is set aside and the company's name is to be restored.

Restoration of company name - Conditioned restoration - payment of costs and filing of pending documents - Consequences for non-compliance with restoration conditions - Terms on which restoration should be permitted, including costs and compliance with filing of pending financial statements and annual returns - HELD THAT: - The Tribunal exercised its discretion to permit restoration subject to conditions intended to regularise statutory compliance and compensate the public exchequer. Restoration was made conditional upon payment of an identified cost to the specified government account within a limited period, and on the company filing all pending financial statements and annual returns with applicable fees and late fees within a stipulated timeframe. The Tribunal also provided that failure to comply with the filing condition would automatically vacate the restoration order and directed that consequential banking restrictions, if any, be removed upon compliance. [Paras 14]

Restoration is allowed subject to payment of costs and filing of all pending statutory documents within the stipulated period; failure to comply will vacate the order.

Final Conclusion: The petition is allowed: the Tribunal set aside the strike-off and directed restoration of the company's name subject to payment of prescribed costs and filing of all pending financial statements and annual returns within the timelines stated, failing which the restoration will be vacated.

Approval of sale and implementation of resolution-stage transactions under a court supervised resolution framework - recognition and payment priority of resolution process costs akin to insolvency resolution process costs - approval to appropriate and deposit purchase consideration into designated escrow accounts and restrictions on set off against creditor dues - recording of proposal to initiate foreign bankruptcy/insolvency proceedings - taking on record proposal for striking off of an overseas subsidiary

Approval of sale and implementation of resolution-stage transactions under a court supervised resolution framework - approval to appropriate and deposit purchase consideration into designated escrow accounts and restrictions on set off against creditor dues - recognition and payment priority of resolution process costs akin to insolvency resolution process costs - Approval of the sale of Schoolnet and slump sale transfers of ICDI and STAMP to Falafal Technology Private Limited (and related inter company share transfers and documentation) and permission to implement the transaction steps described in the agreements subject to the Resolution Framework. - HELD THAT: - The Tribunal, having considered the Resolution Framework approved by the supervising authority and the sequence of board, CoC and supervisory approvals, found that the sale process for the Education Assets (Schoolnet, ICDI and STAMP) was conducted in accordance with the Resolution Framework and the approvals obtained thereunder. The bench noted the sequence of events: competitive solicitation of bids, consideration and approval by the New Board and the IL&FS CoC, the Conditional LOI and Confirmation Intimation to Falafal, execution of the SPA, ICDI BTA and STAMP BTA, and the supervisory approval of Hon'ble Justice (Retd.) D. K. Jain. The Tribunal also recorded that amounts from the upfront consideration shall be deposited into a designated escrow account and that resolution process costs identified and incurred by the New Board (payable to appointed professionals) are to be deducted and transferred first from such consideration; these costs were treated as akin to insolvency resolution process costs and mandated to be paid ahead of other stakeholder payments. Consequently the prayers seeking approval to effect the sale, to appropriate and maintain funds in escrow/interest bearing accounts, and to permit implementation of the transaction documents were allowed. [Paras 36, 37, 38, 39, 40]

The sale and related transfers as per the SPA, ICDI BTA and STAMP BTA and ancillary reliefs (A to J) were approved and the application disposed of accordingly.

Recording of proposal to initiate foreign bankruptcy/insolvency proceedings - Recording and taking on record of the applicant's proposal to initiate bankruptcy proceedings in Dubai for IIDL and IIDMCC under UAE Federal Decree Law No.9/2016. - HELD THAT: - The Tribunal reviewed the factual background, board resolutions and the approvals granted by the supervisory authority (Hon'ble Justice (Retd.) D. K. Jain) for initiation of bankruptcy proceedings in Dubai. The Regional Director raised no objection. Given the circumstances of defaults, termination of the underlying project, lack of meaningful assets or operations, and the corporate approvals supporting initiation of foreign insolvency, the Bench held that initiation of bankruptcy proceedings in the Dubai courts was the appropriate course and accordingly recorded the proposal. The application for exemption from stamping and notarisation of the affidavit was also granted. [Paras 13, 14, 15, 16]

The proposal to initiate insolvency proceedings in the Dubai courts for IIDL and IIDMCC is taken on record and the exemption from stamping/notarisation is granted.

Taking on record proposal for striking off of an overseas subsidiary - Taking on record the proposal to initiate striking off proceedings in Singapore for IIPL Laos Pte. Ltd. in accordance with Singapore law. - HELD THAT: - The Tribunal examined the materials showing that IIPL Laos had not commenced operations, the relevant board resolutions of ITNL, IIPL and IIPL Laos consenting to striking off, and the supervisory approval by Hon'ble Justice (Retd.) D. K. Jain (subject to RBI clearance for any requisite remittances). With no objection from the Regional Director, and on the basis that striking off under Singapore law was appropriate for an inactive offshore entity, the Bench took the proposal on record and allowed the exemption from stamping and notarisation of the affidavit. [Paras 6, 7, 8]

The proposal for striking off IIPL Laos Pte. Ltd. before ACRA (Singapore) is taken on record and the exemption from stamping/notarisation is granted.

Final Conclusion: The Tribunal approved and recorded the implementation of the resolution stage sale and related transactions for the Education Assets under the sanctioned Resolution Framework (including priority payment of resolution process costs and escrow arrangements), took on record the proposal to initiate bankruptcy proceedings in Dubai for IIDL and IIDMCC, and took on record the proposal to strike off IIPL Laos Pte. Ltd., granting ancillary exemptions from stamping and notarisation where requested.

Restoration of name in the register of companies - striking off under section 248 of the Companies Act, 2013 - restoration application under section 252 of the Companies Act, 2013 - disqualification of directors and removal from master data - conditional restoration and compliance before restoration - registrar's residual power to take action for prior or intervening violations

Restoration of name in the register of companies - restoration application under section 252 of the Companies Act, 2013 - The appeal for restoration of the Company's name in the register of companies is allowed in part and the impugned order striking off the Company's name is set aside. - HELD THAT: - The Tribunal found on the material on record that the Company's failure to file statutory returns was not intentional but due to lack of professional expertise and inadvertence. The promoters and the director demonstrated an intention to carry on the Company's objects and had substantive investment and ongoing business. On this basis the Tribunal concluded that restoration of the Company's name was warranted to prevent financial prejudice and potential cessation of business, and allowed restoration subject to conditions. [Paras 11]

The Company's name is restored in the Registrar's register of companies and the order dated 28.07.2017 striking off the name is set aside.

Disqualification of directors and removal from master data - restoration application under section 252 of the Companies Act, 2013 - The prayer to direct the Ministry of Corporate Affairs to remove the names of the directors from the list of disqualified directors in the master data is refused. - HELD THAT: - Although the Tribunal restored the Company's name, it declined to exercise jurisdiction to order the MCA to remove the directors' names from the disqualified list or to alter master data. The directors were left at liberty to approach the competent authority for such relief, with the Tribunal observing that the appropriate authority may pass orders taking into account the restoration of the Company's name.

Prayer for directing the MCA to remove the directors from the list of disqualified directors is refused; directors may approach the competent authority.

Conditional restoration and compliance before restoration - registrar's residual power to take action for prior or intervening violations - Restoration is made subject to specific conditions and does not preclude the Registrar from taking appropriate action for other violations. - HELD THAT: - The Tribunal imposed conditions: filing all pending financial statements and statutory returns within two months, delivering a certified copy of the order within 30 days, payment of costs, and publication of the order by the Registrar in the Official Gazette before restoration takes effect. The Tribunal expressly preserved the Registrar's authority to take appropriate action against the Company for any other violation prior to or subsequent to the striking-off, and warned that failure to comply with conditions would nullify the order.

Restoration is conditional upon compliance with specified filings, payment of costs and publication; Registrar retains power to take further action for other violations.

Final Conclusion: The appeal is allowed in part: the Tribunal set aside the striking-off order and directed conditional restoration of the Company's name in the Registrar's register; the request to direct the MCA to remove directors from the disqualified list was refused, and the Registrar's authority to pursue other actions is preserved.

Scheme of Arrangement - sanction under sections 230 to 232 of the Companies Act, 2013 - acceptance of Regional Director report and undertakings - appointed date and effective date - compliance with accounting standards on demerger - filing with Registrar of Companies - adjudication of stamp duty - statutory and consequential steps post-sanction

Scheme of Arrangement - sanction under sections 230 to 232 of the Companies Act, 2013 - Sanction of the Scheme of Arrangement between Clover Technologies Pvt. Ltd. and Clover Infotech Pvt. Ltd. - HELD THAT: - The Tribunal considered the petition under sections 230-232 of the Companies Act, 2013, the material on record, and noted there was no opposition. The Scheme, its board approvals and the dispensation of shareholder and creditor meetings (pursuant to the earlier order in CA (CAA) No.4039/MB.I/2019) were recorded. The Tribunal found the Scheme to be fair and reasonable, not in violation of law, and not contrary to public interest. Having observed that requisite statutory compliances were fulfilled, the Tribunal made CP (CAA) 954/MB-I/2020 absolute and ordered sanction of the Scheme. [Paras 6, 8, 12, 13]

CP (CAA) 954/MB-I/2020 is allowed and the Scheme is sanctioned and made binding on the companies and all concerned.

Acceptance of Regional Director report and undertakings - appointed date and effective date - compliance with accounting standards on demerger - Whether the observations in the Regional Director's report required rejection of the Scheme or further action, and whether petitioners' clarifications and undertakings suffice. - HELD THAT: - The Regional Director (Western Region) had raised matters regarding compliance with accounting standards (including AS-14/Ind AS-103 and AS-5/Ind AS-8), the definitions of 'Appointed Date' and 'Effective Date', compliance with a Ministry circular, the convening/dispensation of meetings under section 230, and service of statutory notices. The Petitioners furnished clarifications and gave specific undertakings to comply with applicable accounting standards, the Ministry circular, and to confirm that the Scheme annexed to the petition was identical to that in the company application; they also confirmed service of notices under section 230(5). The Tribunal recorded these explanations and accepted the clarifications and undertakings, treating them as conditions precedent to sanction. [Paras 9, 10, 11]

The Regional Director's observations were addressed; the Petitioners' clarifications and undertakings are accepted by the Tribunal.

Filing with Registrar of Companies - adjudication of stamp duty - statutory and consequential steps post-sanction - Directions to give effect to the sanctioned Scheme and to complete post-sanction statutory formalities. - HELD THAT: - The Tribunal, while sanctioning the Scheme, imposed specific directions as part of the order. These include filing a certified copy of the sanction order and the Scheme with the Registrar of Companies in E form INC 28 within the stipulated time, lodging authenticated copies with the Superintendent of Stamps for stamp duty adjudication, issuing newspaper publications as previously done, complying with the undertakings given, and taking all consequential and statutory steps required under the Act. The Tribunal also made the sanction binding on shareholders, secured and unsecured creditors, employees and all concerned, and left liberty for any interested person to apply for further directions if necessary. [Paras 13]

Petitioners directed to complete specified filings, stamp duty adjudication, publications and other consequential statutory steps; sanction is binding on all concerned.

Final Conclusion: The Tribunal sanctioned the Scheme of Arrangement between Clover Technologies Pvt. Ltd. and Clover Infotech Pvt. Ltd. under sections 230-232 of the Companies Act, 2013, accepted the clarifications and undertakings given in response to the Regional Director's report, and directed the Petitioners to complete prescribed post-sanction filings, stamp duty adjudication, publications and other consequential statutory steps, the sanction being binding on shareholders, creditors, employees and other concerned parties.

Scheme of Amalgamation - Wholly owned subsidiary merger - Dispensation of meetings of shareholders and creditors - Notice and service on creditors and regulatory authorities - Electronic service during lockdown - Assistance to Official Liquidator for scrutiny of accounts - Filing of compliance report in lieu of customary affidavit of service

Scheme of Amalgamation - Wholly owned subsidiary merger - Approval in principle of a scheme of amalgamation of four transferor companies with the transferee company where the transferor companies are wholly owned subsidiaries of the transferee company. - HELD THAT: - The Tribunal recorded that the present proposal is a Scheme of Amalgamation involving Polyplast Agencies (India) Pvt. Ltd., Poly-Resin Agencies (India) Ltd., Resin Distributors Ltd. and Silvassa Polyplast (India) Pvt. Ltd. as transferor companies and Tufropes Private Limited as transferee company. It was noted that the transferor companies are wholly owned subsidiaries of the transferee company and that the scheme has been approved by the boards of all applicant companies. On this foundation the Tribunal proceeded with directions for further procedural observances connected with sanctioning the scheme. [Paras 2, 4, 6]

The Tribunal proceeded to consider and direct steps necessary for sanction of the proposed Scheme of Amalgamation between the wholly owned subsidiary transferor companies and the transferee company.

Dispensation of meetings of shareholders and creditors - Unanimous consent by shareholders - Dispensation of convening meetings of equity shareholders of the transferor companies and of the transferee company, and no meeting of unsecured creditors of the transferor companies. - HELD THAT: - The Tribunal accepted that all equity shareholders of each transferor company had given consent affidavits, and accordingly dispensed with holding meetings of the equity shareholders of the transferor companies. It was recorded that there are no secured creditors of the transferor companies; as the scheme does not involve any compromise with or diminution of liability of unsecured creditors, no meeting of unsecured creditors of the transferor companies is required. For the transferee company, the Bench held that meetings of its equity shareholders and creditors could be dispensed with given that all transferor companies are wholly owned subsidiaries and there would be no issue of shares or change in shareholding or creditor rights. [Paras 7, 8, 9, 11]

Meetings of equity shareholders of the transferor companies and of the transferee company are dispensed with; no meeting of secured creditors is necessary and no meeting of unsecured creditors of the transferor companies is required.

Notice and service on creditors and regulatory authorities - Electronic service during lockdown - Directions for service of notice of the application and the proposed scheme on unsecured creditors and specified regulatory authorities, including electronic service due to COVID-19 lockdown, and provision for representations within thirty days. - HELD THAT: - The Tribunal directed the transferor companies to intimate unsecured creditors by Post/Courier/Email/Hand-delivery of the proposed Scheme, and, in view of the lockdown, permitted notice to creditors by email. It emphasised the applicants' responsibility to ensure every creditor is put on notice to enable informed decisions and gave a thirty-day period for submission of representations. Further, the Tribunal directed service of the application and enclosures upon the concerned Income Tax Authority (with PAN indicated by the applicants), the Regional Director (Western Region), Registrar of Companies and other applicable regulatory authorities with a direction that representations, if any, be filed within thirty days, failing which no objections will be presumed. [Paras 9, 12]

Applicants must serve notices of the application and scheme on unsecured creditors and specified regulatory authorities (including by email during lockdown) and allow thirty days for representations.

Assistance to Official Liquidator for scrutiny of accounts - Appointment of independent professional - Appointment of an independent Chartered Accountant to assist the Official Liquidator in scrutinising the books of the transferor companies for the last five years and fixation of the professional's fees. - HELD THAT: - The Tribunal directed service of a copy of the Scheme upon the Official Liquidator, High Court, Bombay, and appointed M/s. Anand Jain & Associates, Chartered Accountants, to assist the Official Liquidator in scrutinising the transferor companies' books of accounts for the preceding five years. The Tribunal fixed the fees of the appointed Chartered Accountant at the sum stated in the order, and provided that absence of a representation from the Official Liquidator within thirty days would be treated as no objection to the scheme. [Paras 13]

M/s. Anand Jain & Associates is appointed to assist the Official Liquidator in scrutinising accounts for five years and their fees are fixed; absence of representation within thirty days will be deemed assent.

Filing of compliance report in lieu of customary affidavit of service - Filing of a compliance report with the registry in respect of service directions in lieu of the customary affidavit of service due to the lockdown. - HELD THAT: - Recognising constraints posed by the lockdown, the Tribunal dispensed with the customary affidavit of service and directed that the applicant companies shall file a compliance report in the registry proving that directions regarding issue of notices have been complied with. [Paras 14]

Applicants to file a compliance report with the registry, in lieu of the customary affidavit of service, proving compliance with the notice directions.

Final Conclusion: The Tribunal recorded preliminary acceptance of the proposed Scheme of Amalgamation between the wholly owned subsidiary transferor companies and the transferee company, dispensed with specified shareholders' and creditors' meetings where justified, directed service of notices on creditors and regulatory authorities (permitting electronic service during lockdown), appointed a Chartered Accountant to assist the Official Liquidator in scrutiny of accounts, fixed the professional fee, and required filing of a compliance report in lieu of the usual affidavit of service.

Sanction of scheme under sections 230-232 of the Companies Act, 2013 - Scheme of Amalgamation - Appointed Date - revaluation reserves - Accounting Standard AS-10 - Accounting Standards having effect of law under section 133 of the Companies Act, 2013 - objects clause amendment in Memorandum of Association - jurisdiction of Income Tax authorities on tax consequences - Official Liquidator's report on affairs of company

Sanction of scheme under sections 230-232 of the Companies Act, 2013 - Scheme of Amalgamation - Sanction of the Scheme of Amalgamation between Vaid Die Casting Private Limited and Mega Fine Pharma Private Limited. - HELD THAT: - On considering the Scheme, the reports of the Regional Director and Registrar of Companies (and the supplementary reports), the Official Liquidator's report and the affidavited undertakings and compliance by the petitioner companies, the Tribunal found the Scheme to be fair and reasonable and not violative of law or public policy. No objector controverted the petitions. All requisite statutory compliances were found fulfilled and the petitions were made absolute in terms of the prayers. The Tribunal therefore sanctioned the Scheme and ordered dissolution of the Transferor Company on completion of the amalgamation. [Paras 27, 29, 30, 31, 37]

Scheme sanctioned; Company Petitions CP (CAA) Nos. 255/2017 and 256/2017 made absolute; Transferor Company to be dissolved.

Appointed Date - Fixation of the Appointed Date for the Scheme. - HELD THAT: - The Regional Director had queried the Appointed Date; the petitioner companies undertook to maintain the Appointed Date as 1st April 2017. The Tribunal accepted this undertaking and fixed the Appointed Date of the Scheme as 1st April 2017. [Paras 6, 8, 37]

Appointed Date fixed as 1st April 2017.

Revaluation reserves - Accounting Standard AS-10 - Accounting Standards having effect of law under section 133 of the Companies Act, 2013 - Validity of the Transferor Company's accounting treatment of an amount arising from revaluation credited to reserves instead of recognising it as income in the year 2012-13. - HELD THAT: - Registrar of Companies challenged the correctness of crediting the revaluation increment directly to reserves and contended that profit should have been recognised and taxed. The Transferor Company relied on AS-10 (and submitted that AS-10 permits crediting revaluation increments to revaluation reserves) and the Tribunal examined the Accounting Standard provisions and the Chartered Accountants' scrutiny and the Official Liquidator's report. The Tribunal held that the circumstances indicate revaluation had occurred prior to alienation and that para 42 (and related provisions) of AS-10, rather than para 26, was the relevant provision; there was no evidence of mala fide or that the transaction produced distributable profit improperly. The OL's appointed auditors reported no conduct prejudicial to members or public interest. The Tribunal found no reason to doubt the correctness of the transaction or the accounting entries. [Paras 21, 22, 23, 24, 25]

Accounting treatment of the revaluation amount as reflected in reserves is not shown to be improper; no interference with the accounting entries is warranted by this Tribunal.

Objects clause amendment in Memorandum of Association - Objection that the Transferee Company's objects did not enable the amalgamation. - HELD THAT: - Registrar of Companies raised that the main objects of the Transferee Company were pharma-related and might not enable amalgamation with a die-casting company. The Transferee Company undertook to amend its Memorandum of Association to incorporate the Transferor Company's objects in compliance with the Companies Act, 2013. The Tribunal accepted this undertaking and held the objection to be resolved. [Paras 12, 13, 17]

Transferee Company to amend its Memorandum of Association to incorporate requisite objects; objection accordingly disposed of.

Jurisdiction of Income Tax authorities on tax consequences - Whether sanction of the Scheme binds Income Tax authorities or precludes tax assessment relating to the transaction. - HELD THAT: - The Regional Director and RoC observed that tax implications arising from the transaction are subject to final decision by Income Tax authorities. The Tribunal reiterated that sanctioning the Scheme does not preclude the Income Tax Department from independently examining and determining tax liabilities arising from the transaction; the Income Tax authorities remain free to proceed in accordance with law. [Paras 6, 26]

Income Tax authorities remain free to determine tax consequences; sanction of the Scheme does not preclude independent tax scrutiny.

Official Liquidator's report on affairs of company - Whether the affairs of the Transferor Company were conducted in a manner prejudicial to members or public interest. - HELD THAT: - The Official Liquidator filed a report incorporating a Chartered Accountants' scrutiny which concluded that the affairs of the Transferor Company had not been conducted in a manner prejudicial to the interests of members or the public. The Tribunal accepted the OL's report and the auditors' findings, noting no material to doubt the correctness of the transactions or accounting entries. [Paras 23, 24, 25]

Official Liquidator's report accepted; no adverse finding against the Transferor Company's conduct.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between Vaid Die Casting Private Limited and Mega Fine Pharma Private Limited, fixed the Appointed Date as 1st April 2017, accepted the accounting treatment on the material on record, required the Transferee Company to amend its Memorandum of Association to incorporate necessary objects, left tax consequences to the Income Tax authorities, directed statutory compliances (including filing orders and stamp adjudication), imposed specified costs, and ordered dissolution of the Transferor Company on completion of the amalgamation.

Admission of petition under section 7 of the Insolvency & Bankruptcy Code, 2016 - Establishment of default and debt due and payable - Corporate Insolvency Resolution Process (CIRP) initiation - Moratorium under section 14 of the IBC - Appointment of Interim Resolution Professional - Obligations of management and duty to cooperate with the IRP - Public announcement and invitation of claims - Security for CIRP expenses and deposit by Financial Creditor - Communication of order and statutory update of Registrar of Companies

Jurisdiction to admit section 7 petition - Jurisdiction of the Adjudicating Authority to entertain and decide the petition - HELD THAT: - The Corporate Debtor is a private company incorporated with its registered office in Mumbai. The Bench records the registered office within the State of Maharashtra and, on that basis, holds that this Adjudicating Authority has territorial jurisdiction to deal with the petition seeking initiation of CIRP under the IBC. The finding of jurisdiction is based on the corporate domicile as stated in the incorporation and registered office details placed on record. [Paras 2]

The Adjudicating Authority has jurisdiction to hear and decide the petition.

Establishment of default and debt due and payable - Admission of petition under section 7 of the IBC - Whether the Financial Creditor established a debt and default sufficient to admit the section 7 petition - HELD THAT: - The petition and accompanying documents (OCD Agreement, addendum, transfer certificate and bank statements) disclose issuance of Optionally Convertible Debentures, part repayment leaving a principal outstanding, transfer of debt to the Financial Creditor, demand for repayment and non-payment. The Corporate Debtor, through a Board resolution and the Director's oral statement, admitted inability to repay and did not contest the petition. The Adjudicating Authority found the application complete, the debt and default established and that the default exceeded the statutory monetary threshold applicable at the relevant time, warranting admission. [Paras 5, 8, 9, 11]

The petition is admitted as the Financial Creditor has established debt and default.

Initiation of Corporate Insolvency Resolution Process (CIRP) - Effect of Board resolution and non-opposition by Corporate Debtor - Initiation of CIRP against the Corporate Debtor and the legal consequence of the Corporate Debtor's non-opposition - HELD THAT: - Having found default and completeness of the application, and noting the Corporate Debtor's Board resolution which records that restructuring is best achieved under the IBC and expresses no objection to initiation of CIRP, the Adjudicating Authority admitted the petition and ordered initiation of CIRP. The corporate debtor's admission and decision not to file a reply are treated as material in the assessment of admissibility and in directing commencement of insolvency proceedings. [Paras 9, 11, 12]

CIRP is initiated against the Corporate Debtor and the petition is admitted.

Moratorium under section 14 of the IBC - Scope of moratorium - Imposition and scope of moratorium consequent to admission of the section 7 petition - HELD THAT: - Upon admission, the Adjudicating Authority imposed the moratorium as provided by section 14 of the IBC. The order specifies the customary prohibitions: institution or continuation of suits and proceedings against the Corporate Debtor, transfer or alienation of assets by the Corporate Debtor, enforcement of security including under SARFAESI, and recovery of property by lessors where in possession of the Corporate Debtor. The order also reiterates statutory exceptions: continuance of supply of essential goods and services and transactions exempted by central notification in consultation with sectoral regulators. The moratorium period is directed to run from the date of the order until completion of CIRP, approval of a resolution plan or liquidation, as applicable. [Paras 12]

A moratorium under section 14 is imposed with the stated scope and temporal effect.

Appointment and functions of Interim Resolution Professional (IRP) - Appointment of the IRP and the role, duties and fee regulation applicable to the IRP - HELD THAT: - The Financial Creditor proposed a registered insolvency professional and produced the required written communication in Form 2 along with the registration certificate. The Adjudicating Authority appointed the proposed person as the IRP to discharge functions prescribed under the IBC (including sections 15, 17-21). The order records that fees payable to the IRP or future RP shall comply with applicable regulations, circulars and directions of the IBBI, and directs officers and managers of the Corporate Debtor to provide documents and information to the IRP within a week, failing which coercive steps may follow. [Paras 10, 12]

The proposed registered professional is appointed as IRP and vested with statutory functions and duties; fees to be as per IBBI norms.

Public announcement and invitation of claims - Security for CIRP expenses - Obligation to make public announcement, invite claims and deposit for meeting initial CIRP expenses - HELD THAT: - The Adjudicating Authority directed immediate public announcement of CIRP as per section 13 read with the relevant regulations, and ordered the Financial Creditor to deposit a specified sum with the IRP to meet initial expenses of issuing public notice and inviting claims. These expenses are made subject to subsequent approval by the Committee of Creditors. The directions conform to the statutory scheme for commencement of the resolution process and funding of initial administrative costs. [Paras 12]

Public announcement and claims invitation are ordered; Financial Creditor directed to deposit funds for initial CIRP expenses subject to CoC approval.

Communication of order and statutory update of Registrar of Companies - Obligation to communicate the order to parties and update Registrar of Companies' master data - HELD THAT: - Pursuant to statutory requirements, the Registry is directed to communicate the order to the Financial Creditor, Corporate Debtor and IRP by speed post, email and WhatsApp within a stipulated short period. A copy of the order is to be sent to the Registrar of Companies for updating the Corporate Debtor's master data and the ROC is required to send a compliance report to the Registry within seven days of receipt. These directions ensure statutory notifications and public record updating consequential to initiation of CIRP. [Paras 12]

Registry to communicate the order promptly and ROC to update master data and report compliance.

Final Conclusion: The Tribunal admitted the section 7 petition, having found the debt and default established and territorial jurisdiction satisfied; it ordered initiation of CIRP, imposed the statutory moratorium, appointed the proposed registered professional as IRP with duties and fee compliance as per IBBI norms, directed public announcement and deposit for initial CIRP expenses, and mandated communication of the order and updation of Registrar of Companies records.

Operational debt - contractual relationship / contractual nexus - claim raised by invoices in the name of a third party - unenforceability of referral/fee sharing arrangements under Medical Council Regulations - Section 5(21) definition of operational debt - Section 9 of the Insolvency and Bankruptcy Code, 2016

Operational debt - Section 5(21) definition of operational debt - Section 9 of the Insolvency and Bankruptcy Code, 2016 - claim raised by invoices in the name of a third party - Whether the petition under Section 9 based on the amounts claimed in invoices (raised in the name of Arogyam Hospital) constitutes an operational debt and is maintainable against the Corporate Debtor. - HELD THAT: - The Tribunal found that the invoices forming the basis of the claim were not raised against the Corporate Debtor but in the name of Arogyam Hospital (a third party), and that no contractual relationship between the petitioner and the Corporate Debtor was established. Applying the definition of "operational debt" under Section 5(21), the bench held that the petitioner failed to demonstrate a debt payable by the Corporate Debtor arising from provision of goods or services to it. Although certain payments and an advance (deposit) and a returned cheque were noted, the absence of a contractual nexus and the fact that the billing was in the name of the third party prevented the claim from qualifying as an operational debt enforceable under Section 9 of the Code. The Tribunal therefore concluded that the petition was not maintainable on the ground that the claim does not amount to an operational debt against the Corporate Debtor. [Paras 15, 16]

Petition under Section 9 dismissed for want of a contractual nexus and because the claim does not amount to an operational debt against the Corporate Debtor.

Unenforceability of referral/fee sharing arrangements under Medical Council Regulations - contractual relationship / contractual nexus - Whether the claim, to the extent founded on a fee sharing or referral arrangement, is enforceable. - HELD THAT: - The Tribunal recorded that the Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 prohibit rebates, commission or fee sharing in consideration for referring or procuring patients or diagnostic material, and observed that a fee sharing or referral fee, if it formed the basis of the claim, would be void and unenforceable. On the material before it, including the invoices in the name of Arogyam Hospital and the public notice by Arogyam disclaiming liability, the bench held that at best the claim could be characterized as a referral/fee sharing claim which is impermissible under the Medical Council Regulations and therefore not a legally enforceable operational debt against the Corporate Debtor. [Paras 15]

Claim based on a referral or fee sharing arrangement is unenforceable and does not support maintainability of the Section 9 petition.

Final Conclusion: The petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 was dismissed without costs: the petitioner failed to establish a contractual nexus with the Corporate Debtor and the invoices were in the name of a third party, and any fee sharing/referral component would be unenforceable under the Medical Council Regulations, hence the claim did not qualify as an operational debt against the Corporate Debtor.

Prima facie opinion - disposal of complaint under Regulation 7 - communication requirements under Regulation 7 - right to seek review under Regulation 7(5) - show cause notice / disciplinary proceedings under Regulation 11 read with Regulation 12 (Inspection and Investigation Regulations) - participation of complainant in proceedings

Prima facie opinion - disposal of complaint under Regulation 7 - communication requirements under Regulation 7 - right to seek review under Regulation 7(5) - Whether the communication sent to the complainant complied with Regulation 7 and whether the Board had formed a prima facie opinion on the complaint. - HELD THAT: - Regulation 7 requires the Board to form an opinion within forty-five days whether a prima facie case exists and to communicate that opinion to the complainant, and where the opinion is negative the complainant has a right to seek review under sub-regulation (5). A cryptic intimation that "appropriate action is being initiated" does not disclose whether a prima facie opinion in favour of or against the complainant was formed and therefore does not satisfy the mandate of Regulation 7. The respondent filed an affidavit stating that a prima facie case has been found in favour of the complainant and that action under Regulation 7(7) is under consideration. The Court held that future communications must indicate the prima facie opinion as required by the Regulation and directed the Board to expedite its decision under Regulation 7(7) and communicate the same to the petitioner. [Paras 8, 10]

The impugned communication was inadequate; the Board must state whether a prima facie case is found as required by Regulation 7, and in the present case the Board has formed a prima facie opinion in favour of the complainant and is directed to expedite and communicate its decision under Regulation 7(7).

Participation of complainant in proceedings - show cause notice / disciplinary proceedings under Regulation 11 read with Regulation 12 (Inspection and Investigation Regulations) - Whether the complainant has a right to participate in proceedings initiated by the Board on the complaint. - HELD THAT: - The petitioners contended for the right to receive the show cause notice and to participate in any disciplinary proceedings against the professional. The Court did not decide this question on the present hearing but recorded the issue for further consideration, directed listing for hearing on the specific point, and ordered the parties to file written synopses and authorities within specified timelines. [Paras 11, 12, 13]

Question of the complainant's right to participate is remanded for fresh consideration and listed for further hearing with directions for exchange of written synopses.

Final Conclusion: The Board's generic communication was held inadequate for failing to state the prima facie opinion as required by Regulation 7; the Board is directed to expedite and communicate its decision under Regulation 7(7). The separate question of the complainant's right to participate in subsequent proceedings is left for further hearing after exchange of written synopses.

Approval of resolution plan - operational creditors' admitted claim - modification and extension of timeline under an approved resolution plan - exceptional circumstances due to COVID-19 affecting performance of resolution plan - exclusion of lockdown period from timelines under insolvency regulations (Reg. 40C) - judicial directions on extension of limitation and timelines in light of COVID-19

Operational creditors' admitted claim - approval of resolution plan - Prayer to rectify the approved order to reflect a different total liability of operational creditors and to clarify apportionment. - HELD THAT: - The Bench noted that in the order approving the Resolution Plan dated 2 July 2020 (M.A. No. 422/2019) the table at Paragraph 14 recorded the admitted claim of operational creditors as Rs. 54.71 Crores and that the CoC decided to provide Rs. 50,00,000 for payment to operational creditors. The Resolution Professional confirmed that two operational creditors filed and had admitted claims aggregating Rs. 54.71 Crores. The Applicant sought clarification to reflect a higher total liability of Rs. 87,03,60,530, which is not corroborated by the admitted claims recorded in the approval order or by the RP's statement. The prayer for rectification/clarification is therefore inconsistent with the factual record of admitted claims and the approved plan. [Paras 3]

Prayer for rectification to reflect the higher claimed operational creditors' liability is rejected.

Modification and extension of timeline under an approved resolution plan - exceptional circumstances due to COVID-19 affecting performance of resolution plan - exclusion of lockdown period from timelines under insolvency regulations (Reg. 40C) - judicial directions on extension of limitation and timelines in light of COVID-19 - Application for extension of time to arrange funds and complete payments under the approved resolution plan. - HELD THAT: - The Applicant explained delay in disbursement of loan funds by HDFC Bank attributable to the COVID-19 pandemic and related lockdown restrictions, including local lockdowns affecting takeover and business operations. The CoC and RP confirmed that the Applicant has already injected substantial funds and arranged performance guarantee, though some balance remains. The Bench observed the unprecedented nature of the pandemic, noted relevant regulatory and judicial measures (including exclusion of lockdown period under Reg. 40C and appellate directions recognizing COVID-related timeline relief), and accepted that disbursement delays were occasioned by the pandemic. Having considered the factual position and exceptional circumstances, the Bench exercised its discretion to allow a limited extension to enable implementation of the approved plan. [Paras 12]

Prayer for extension of time is allowed; time extended till 26 November 2020 for making payments under the approved Resolution Plan.

Final Conclusion: The application is partially allowed: the request to rectify the approved order concerning the operational creditors' total liability is rejected, and the request for extension of time to arrange funds and effect payments under the approved resolution plan is granted until 26 November 2020.

Ineligibility of resolution applicant under Section 29A - Non-performing asset classification and its effect on eligibility - Rejection of resolution plan for non-compliance with Section 29A - Initiation of liquidation under Section 33 - Consequences of liquidation: cessation of moratorium and vesting of management - Duties and powers of the liquidator under Chapter III of the Code - Inclusion of development land as liquidation asset and cooperation with statutory authorities

Ineligibility of resolution applicant under Section 29A - Non-performing asset classification and its effect on eligibility - Resolution Applicant M/s Ravi Developers was ineligible to be a resolution applicant as its account had been classified as a non-performing asset and therefore the resolution plan was hit by Section 29A. - HELD THAT: - The Tribunal recorded the receipt of communication from a bank that the credit facility availed by the Resolution Applicant had become a non-performing asset and had subsequently been sold to an ARC. Section 29A provides that a person whose account is classified as an NPA is not eligible to submit a resolution plan unless overdue amounts with interest and charges are paid prior to submission. On the material placed before it the Adjudicating Authority found that the Resolution Applicant fell within the disqualification in Section 29A and therefore the Resolution Plan could not be approved.

The resolution plan submitted by M/s Ravi Developers is rejected as barred by Section 29A of the Code.

Initiation of liquidation under Section 33 - Consequences of liquidation: cessation of moratorium and vesting of management - Duties and powers of the liquidator under Chapter III of the Code - Inclusion of development land as liquidation asset and cooperation with statutory authorities - In view of rejection of the resolution plan and absence of any other resolution applicant after the CIRP period, the Corporate Debtor is to be liquidated and consequential directions issued. - HELD THAT: - The Tribunal applied Section 33(1)(b)(i) of the Code which mandates liquidation where a resolution plan is not received or is rejected. Having found the Resolution Applicant ineligible and noting that the CIRP period had expired with no other plan, the Adjudicating Authority ordered liquidation of the Corporate Debtor. The Tribunal appointed the existing Resolution Professional as Liquidator, directed issuance of the public announcement, declared cessation of the moratorium, and vested powers of the Board and KMP in the Liquidator. The Liquidator was directed to exercise duties and powers under the Code and Regulations, to inform and comply with MHADA's request regarding inclusion of the land as a liquidation asset, to notify the Registrar of Companies and IBBI, and to obtain cooperation from personnel connected with the Corporate Debtor.

Liquidation of Guruashish Constructions Private Limited ordered under Chapter III; the Applicant is appointed Liquidator and directed to take all ancillary steps identified in the order.

Final Conclusion: The resolution plan submitted by M/s Ravi Developers is rejected as barred by Section 29A; accordingly, the Adjudicating Authority has ordered liquidation of the Corporate Debtor, appointed the Resolution Professional as Liquidator, and issued consequential directions including cessation of moratorium, public announcement, vesting of management in the Liquidator and compliance with MHADA's request regarding the land.

Existence of prior dispute - rejection of Section 9 petition under I&B Code where notice or record of dispute exists - IBC is not a substitute for a recovery forum - definition and scope of "dispute" under Section 5(6) and Section 8(2)(a) - condonation of delay - sufficient cause required

Existence of prior dispute - rejection of Section 9 petition under I&B Code where notice or record of dispute exists - IBC is not a substitute for a recovery forum - definition and scope of "dispute" under Section 5(6) and Section 8(2)(a) - Whether the petition filed under Section 9 of the I&B Code was liable to be rejected on the ground of a pre-existing dispute between the parties. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that a prior dispute existed regarding whether the full and final settlement dated 07.10.2015 had been effected and whether the corporate debtor was entitled to adjust the retention amount. The email correspondence and the settlement letter were held to furnish a plausible contention of a dispute which was not patently feeble, and therefore the adjudicating authority was entitled to reject the Section 9 application without delving into merits. The Bench relied upon the established principle that the IBC does not supplant ordinary recovery forums and that where notice or record of a dispute exists, the adjudicating authority must reject an insolvency petition under Section 9. Applying the test in Mobilox, the Tribunal concluded that the existence of a real dispute precluded initiation of CIRP and that entitlement to adjust retention money was a question of fact and law for an appropriate forum. [Paras 18, 19, 20, 21]

The rejection of the Section 9 petition by the Adjudicating Authority was sustained on the ground of a pre-existing dispute; initiation of CIRP was not permissible.

Condonation of delay - sufficient cause required - Whether delay in preferring the appeal was excusable and whether condonation of delay should be granted. - HELD THAT: - The Tribunal observed that counsel has a duty to track pronouncement dates and that mere non-receipt of communication of the impugned order is not presumptively sufficient to establish sufficient cause for delay. Nonetheless, having heard the parties on merits, the Tribunal proceeded and held that the delay was impliedly condoned in the present case. The Bench emphasised that condonation is not a matter of right and requires sufficient cause, but declined to interfere as it addressed the appeal on merits. [Paras 21]

Delay was not accepted as a per se valid ground but was impliedly condoned for the purpose of hearing; appeal proceeded and was dismissed on merits.

Final Conclusion: The appeal is dismissed. The Appellate Tribunal found a prima facie prior dispute concerning full-and-final settlement and adjustment of retention money, held that the Adjudicating Authority rightly rejected the Section 9 petition, and (while noting that condonation of delay requires sufficient cause) proceeded to hear the appeal and declined interference with the impugned order.

Operational debt - Default - Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - Moratorium under Section 14 - Appointment of Interim Resolution Professional - Books of account as admission of liability

Operational debt - Books of account as admission of liability - Default - An operational debt in favour of the Petitioner exists and a default has occurred. - HELD THAT: - The Tribunal found that return of the NV products to the corporate debtor's warehouse was admitted and not in dispute. The corporate debtor's own chartered accountant's certificate and its ledger in the books of account recorded the amount payable to the petitioner, thereby constituting an admission of liability. The corporate debtor's contentions about an oral condition making payment contingent on acceptance by the principal supplier were unsupported by any written agreement and were not applicable as the relied email related to different product categories. On these bases the Tribunal concluded that the requirements of existence of 'debt' and 'default' for initiation under the Code were fulfilled. [Paras 12, 13, 14, 16, 17]

The amount recorded in the corporate debtor's books is an admitted operational debt and there is a default.

Admission under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - The Section 9 application is complete, crosses the monetary threshold and merits admission. - HELD THAT: - Having determined existence of an operational debt and default, the Tribunal examined the petition and documents and held the application was filed in the prescribed form, was complete, and the debt exceeded the statutory threshold. Consequently the statutory requirements for admission under Section 9 were satisfied and the petition was liable to be admitted. [Paras 18, 20, 21]

The petition under Section 9 is admitted and CIRP is initiated against the corporate debtor.

Moratorium under Section 14 - Appointment of Interim Resolution Professional - On admission, moratorium is declared and an Interim Resolution Professional is appointed with consequential directions. - HELD THAT: - Upon admission of the Section 9 petition, the Tribunal declared the moratorium as specified under Section 14 of the Code, prohibiting institution or continuation of suits, transfer or encumbrance of assets, enforcement of security, and recovery of property, subject to statutory exceptions. The Tribunal directed immediate public announcement of CIRP and appointed the named registered insolvency professional as Interim Resolution Professional, with directions to comply with Code provisions and to report progress. [Paras 21]

Moratorium declared with the specified prohibitions and Mr. Mahesh Sureka appointed as Interim Resolution Professional to manage the CIRP.

Final Conclusion: The Tribunal admitted the Section 9 petition, held that an admitted operational debt and default existed, initiated the corporate insolvency resolution process, declared the moratorium under the Code and appointed an Interim Resolution Professional with directions for compliance and public announcement.

Applicability of Usurious Loans Act, 1918 to proceedings under the Insolvency & Bankruptcy Code, 2016 - Excessive/usurious interest - Admissibility of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - Effect of settlement between erstwhile and present management on rights of third party creditors - Moratorium and appointment of Interim Resolution Professional under the Code

Applicability of Usurious Loans Act, 1918 to proceedings under the Insolvency & Bankruptcy Code, 2016 - Excessive/usurious interest - The Tribunal rejected the corporate debtor's contention that the interest charged at 24% per annum was usurious and held that the Usurious Loans Act, 1918 did not warrant reduction of the rate in the facts of this case. - HELD THAT: - The Tribunal examined the invoices which provided for interest at 24% on delayed payments and, considering present market conditions, concluded that the rate claimed by the petitioner was not excessive or exorbitant. Reliance placed by the corporate debtor on various precedents and on the Usurious Loans Act, 1918 to seek re opening or reduction of the claimed interest was not accepted. The Bench therefore declined the corporate debtor's plea to apply the Usurious Loans Act to negate or reduce the interest charged and rejected the contention that the claimed interest rendered the petition liable to be dismissed on that ground. [Paras 7]

The request to treat the interest as usurious was rejected and the claim for interest at 24% was held not to be excessive in the circumstances.

Effect of settlement between erstwhile and present management on rights of third party creditors - Admissibility of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - The Tribunal held that the memorandum of settlement between the Sunshine Group and the Vira Group did not absolve the corporate debtor of liability to the petitioner and the Section 9 petition was maintainable. - HELD THAT: - The Tribunal noted that the petitioner was not a party to the settlement between the erstwhile and the present management and that no dispute had been raised by the corporate debtor regarding the existence of the debt or the quality of goods supplied. The corporate debtor's offer to return certain unutilised materials was insufficient to negate the claim. On this basis the Bench found the petition to comply with the requirements of section 9 of the Code and declined to accept the contention that clause 9.5 of the settlement memo discharged the corporate debtor vis a vis the petitioner. [Paras 8]

The settlement between prior and present management did not discharge the corporate debtor of the debt to the petitioner and did not defeat the maintainability of the Section 9 petition.

Admissibility of petition under section 9 of the Insolvency & Bankruptcy Code, 2016 - Moratorium and appointment of Interim Resolution Professional under the Code - The Tribunal admitted the Section 9 petition, ordered initiation of CIRP, declared moratorium and appointed an Interim Resolution Professional. - HELD THAT: - Having been satisfied that the petition complied with the provisions of section 9 of the Code and that there was debt and default as alleged, the Bench admitted the petition. Consequential directions were issued in accordance with the Code: a moratorium was declared prohibiting suits, proceedings and alienation of assets; continuity of essential supplies was protected; and an Interim Resolution Professional was appointed to carry out functions under the Code. The public announcement of the CIRP was directed to be made immediately and the order would operate until completion of the resolution process or other orders under the Code. [Paras 9]

The petition was admitted, moratorium declared and an IRP appointed to proceed with CIRP in accordance with the Code.

Final Conclusion: The Tribunal rejected the corporate debtor's pleas that the interest was usurious and that a prior settlement absolved it of liability, admitted the Section 9 petition under the Code, declared moratorium and appointed an Interim Resolution Professional to conduct the CIRP.

Pre-existing dispute - operational debt - rejection under Section 9(5)(2)(d) - plausible contention requiring further investigation - Mobilox principle

Pre-existing dispute - operational debt - Mobilox principle - rejection under Section 9(5)(2)(d) - Whether the Company Petition under Section 9 of the IBC was liable to be rejected on account of a pre-existing dispute raised by the Corporate Debtor. - HELD THAT: - The Tribunal found that the Corporate Debtor had, by emails dated 26.02.2019, 19.04.2019 and 10.06.2019, raised specific objections about quality of work, lack of joint measurement certification, non-compliance with contractual certification processes and the issuance of RA Bill no. 4 after closure of final bill. Those communications, taken together, amounted to a dispute regarding the Petitioner's claim. Applying the test in Mobilox, the adjudicating authority need not finally adjudicate the merits but must determine whether a plausible contention of dispute exists that is not patently feeble, hypothetical or illusory. The Tribunal concluded that the Corporate Debtor's communications disclosed a real dispute going to the existence and admission of the claimed operational debt, thereby precluding the invocation of the CIRP under Section 9. Consequently the petition could not be entertained and had to be rejected under the proviso to Section 9(5)(2)(d) of the Code. [Paras 7, 8]

Petition dismissed as there was a pre-existing dispute regarding the claimed operational debt, and the application under Section 9 was liable to be rejected.

Final Conclusion: The Company Petition under Section 9 is dismissed on the ground that the Corporate Debtor had raised a plausible pre-existing dispute about the claim; the Tribunal applied the Mobilox test and rejected the petition under the relevant provision.

Corporate Insolvency Resolution Process - operational creditor's claim for default and entitlement to initiate CIRP - duty to intimate pre-existing dispute under Section 8 - admission of application under Section 9 - moratorium upon admission of CIRP

Operational creditor's claim for default and entitlement to initiate CIRP - The Operational Creditor proved supply of goods and a debt due and payable by the Corporate Debtor, entitling initiation of CIRP. - HELD THAT: - The Tribunal found no doubt about supply of goods by the Operational Creditor and receipt by the Corporate Debtor, supported by invoices, e-mails and statement of accounts. Allegations of manipulation of documents and consolidation of invoices were held not to absolve the Corporate Debtor of liability. Ledger accounts maintained by the Operational Creditor also recorded the outstanding balance as at 31.03.2018. On these facts the Tribunal concluded that the operational debt was due and payable. [Paras 11, 12, 20]

Operational Creditor established default and entitlement to file the Section 9 application.

Duty to intimate pre-existing dispute under Section 8 - admission of application under Section 9 - The alleged dispute raised by the Corporate Debtor did not pre-exist the demand notice so as to bar the Section 9 petition. - HELD THAT: - Applying the principle that a corporate debtor must notify the operational creditor of any pre-existing dispute within the statutory framework, the Tribunal examined the correspondence. Many e-mails showed admissions of liability and requests for time to pay. The Corporate Debtor's contention that goods were 'dumped' and quality disputes were either unsupported by contemporaneous written notice prior to the demand notice or were raised belatedly. Reliance was placed on the requirement that a dispute must be a plausible pre-existing contention and not an afterthought; the Tribunal found the Corporate Debtor's defence to be concocted or later-originating and therefore insufficient to defeat the application. [Paras 14, 15, 16, 19]

No pre-existing dispute was shown that would bar admission; the Section 9 application is maintainable.

Admission of application under Section 9 - moratorium upon admission of CIRP - The Tribunal admitted the Section 9 petition, declared moratorium and appointed an interim resolution professional. - HELD THAT: - Satisfied that the application complied with the statutory requirements and that the minimum threshold for operational debt was met even after excluding disputed items, the Tribunal admitted the petition. Consequential reliefs flowing from admission were directed: declaration of moratorium with the specified prohibitions on suits, proceedings and enforcement actions; directions regarding supply of essential goods; public announcement of CIRP; and appointment of an interim resolution professional to carry out functions under the Code. [Paras 21, 22]

Section 9 petition admitted; moratorium declared and an interim resolution professional appointed.

Final Conclusion: The Tribunal admitted the Operational Creditor's Section 9 petition, holding that the debt was due and payable and that the Corporate Debtor's pleaded disputes did not pre-exist the demand so as to bar the petition; a moratorium was declared and an interim resolution professional appointed.

Financial debt - financial creditor - redeemable preference shares - redemption of preference shares excluded from financial debt - redemption conditioned by Section 55 of the Companies Act, 2013 - Section 5(8) of the Insolvency and Bankruptcy Code, 2016

Financial debt - financial creditor - redeemable preference shares - Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - Section 55 of the Companies Act, 2013 - Whether the holder of redeemable preference shares (the applicant) is a "financial creditor" under the IBC because the subscription amount constitutes a "financial debt", thereby entitling the applicant to initiate CIRP under Section 7 of the Code. - HELD THAT: - The Tribunal examined the nature of the transaction recorded under the subscription agreement and the statutory scheme governing redeemable preference shares. The burden lay on the applicant to establish that the amount claimed falls within the definition of "financial debt" under Section 5(8). The Tribunal found that the applicant was admittedly a holder of redeemable preference shares and that what was sought to be enforced on the application was redemption of those shares in terms of the subscription agreement. Redemption of preference shares is regulated by Section 55 of the Companies Act, 2013 and, by its terms, may be effected only in the manner and subject to conditions prescribed (for example, out of profits or out of proceeds of a fresh issue of shares). The Tribunal held that the claim for redemption does not fall within any clause of Section 5(8) and that redemption of preference shares is excluded from the purview of "financial debt"; treating such redemption as a debt would conflict with the Companies Act scheme. The fact that corporate accounts or certain documents may record the investment as a liability was not decisive; the legal character of redeemable preference shares under company law prevents their automatic classification as financial debt for the purpose of initiating CIRP. Consequently the applicant failed to prove it is a "financial creditor" under the Code, and the application under Section 7 was not maintainable. [Paras 37, 38, 39, 41, 42]

Application under Section 7 dismissed for want of maintainability as the holder of redeemable preference shares is not a financial creditor and the claim does not constitute a financial debt under Section 5(8) of the IBC.

Final Conclusion: The petition for initiation of Corporate Insolvency Resolution Process is dismissed as the subscriber of redeemable preference shares is not a financial creditor under the Code and the claimed redemption is not a "financial debt"; order dismissed without costs.

Corporate Insolvency Resolution Process - operational debt and default - service of demand notice in Form No.3 - pre-existing dispute - admission under Section 9(5)(i) of the Insolvency and Bankruptcy Code, 2016 - moratorium under Section 14 - appointment of Interim Resolution Professional

Service of demand notice in Form No.3 - The demand notice in Form No.3 dated 01.10.2018 was properly served on the corporate debtor. - HELD THAT: - The Tribunal examined the postal evidence and the corporate debtor's own reply dated 26.10.2018 and found that the demand notice was sent to the address shown in the master data and that the corporate debtor replied to that notice. On these materials the Tribunal concluded that statutory service of the demand notice was established. [Paras 13, 17]

Demand notice dated 01.10.2018 was properly delivered to the corporate debtor.

Pre-existing dispute - operational debt and default - There was no pre-existing dispute regarding the claimed operational debt and the liability of the corporate debtor stood admitted. - HELD THAT: - The corporate debtor neither filed a disputing reply to the application nor produced evidence of any pre-existing dispute; moreover, counsel for the corporate debtor expressly admitted inability to pay and had accepted the petition could be admitted. The Tribunal applied the standard that a dispute must be plausible and supported by evidence to bar admission and found no such dispute on the record. [Paras 6, 7, 14, 17, 18]

No bona fide dispute exists; the operational debt is undisputed and in default.

Admission under Section 9(5)(i) of the Insolvency and Bankruptcy Code, 2016 - Corporate Insolvency Resolution Process - moratorium under Section 14 - appointment of Interim Resolution Professional - The petition under Section 9 satisfied the conditions for admission and the Tribunal admitted the petition, declared moratorium and appointed an Interim Resolution Professional. - HELD THAT: - The Tribunal found the Form 5 application to be complete and supported by invoices, ledger entries, bank statements, demand notice and affidavit proving service. It held there was unpaid operational debt above the statutory threshold and no record of dispute. On satisfaction of the conditions in Section 9(5)(i), the Tribunal admitted the application for initiation of CIRP, declared the moratorium under Section 14 and directed actions attendant to the moratorium. The credentials of the proposed Interim Resolution Professional were examined and found free of adverse entries, leading to his appointment with directions regarding his powers and duties. [Paras 19, 20, 21, 22, 23]

Petition admitted; moratorium declared; Mr. Vishawjeet Gupta appointed as Interim Resolution Professional with directions.

Final Conclusion: The Tribunal admitted the Section 9 petition as complete and undisputed, held the demand notice was duly served and no pre-existing dispute existed, declared the moratorium under Section 14 and appointed the proposed Interim Resolution Professional to initiate the CIRP.

Default under the Insolvency and Bankruptcy Code - admission under Section 7(5) of the I&B Code - pre-existing dispute defence - effect of interim injunction on initiation of CIRP - completeness of application under Rule 4 / Form 1 - appointment of Interim Resolution Professional - moratorium under Section 14 of the I&B Code

Default under the Insolvency and Bankruptcy Code - pre-existing dispute defence - effect of interim injunction on initiation of CIRP - Default in repayment of financial debt and the relevance of alleged pre-existing disputes or interim orders to the admission of a Section 7 application. - HELD THAT: - The Tribunal found that the financial creditor furnished account statements and certified records in support of default. The pendency of an One Time Settlement proposal, without payment having been made, did not preclude initiation of CIRP. Suits filed by the corporate debtor seeking relief to enforce or revive an OTS do not amount to a declaration that the debtor is not liable; rather they admit liability for the debt and therefore cannot bar admission under Section 7. Interim restraining orders in civil proceedings restraining certain coercive actions by the bank were held not to prevent the Adjudicating Authority from admitting a Section 7 petition where the statutory conditions are otherwise satisfied. The Tribunal relied on the statutory scheme distinguishing financial creditors and the operation of Section 7 and on precedents that a pending suit or interim order does not ipso facto defeat a Section 7 application. [Paras 18, 19, 21, 22, 23]

A default has occurred; the contentions of a pre-existing dispute or interim orders do not bar admission of the Section 7 petition.

Admission under Section 7(5) of the I&B Code - completeness of application under Rule 4 / Form 1 - Whether the application filed under Section 7(2) was complete in the prescribed form and manner. - HELD THAT: - The Tribunal examined the contents of Form 1 and accompanying documents as required by Rule 4 and concluded that the application complied with the statutory and procedural requirements. The application included particulars of the applicant and corporate debtor, particulars of financial debt, records evidencing default, and the proposed Interim Resolution Professional's Form 2. No defect requiring rectification was found. [Paras 24]

The Section 7 application is complete.

Appointment of Interim Resolution Professional - moratorium under Section 14 of the I&B Code - Whether there were any disciplinary proceedings against the proposed Interim Resolution Professional and consequential directions regarding appointment and moratorium. - HELD THAT: - The proposed Interim Resolution Professional submitted Form 2 certifying absence of disciplinary proceedings and eligibility under the relevant regulations. The Tribunal's verification disclosed nothing adverse. Upon admission of the petition, the Tribunal declared the statutory moratorium under Section 14 and appointed the proposed professional as Interim Resolution Professional, directing him to assume management functions, prepare inventory, cause public announcement, constitute the Committee of Creditors and submit periodic progress reports; the moratorium was held effective from the date of the order until completion of CIRP or approval of a resolution plan or liquidation order. [Paras 25, 26, 27, 29, 30]

No disciplinary proceedings existed against the proposed IRP; the IRP is appointed and the moratorium under Section 14 is declared with attendant directions.

Final Conclusion: The Section 7 petition filed by the financial creditor is admitted: the Tribunal found that default had occurred, the application was complete, and the proposed Interim Resolution Professional had no disciplinary bar; accordingly CIRP is initiated, a moratorium under Section 14 is declared, and the proposed Interim Resolution Professional is appointed with specified directions.

Option to neutralise CENVAT credit under rule 6(3) of the CENVAT Credit Rules, 2004 - Mutual exclusivity of alternatives under rule 6 - Non obstante operation of rule 6(3) - Registration and separate factory/plant treatment for CENVAT computation - Retrospective application of substituted statutory provision - Inclusion of value of customer supplied inputs for CENVAT computation

Option to neutralise CENVAT credit under rule 6(3) of the CENVAT Credit Rules, 2004 - Mutual exclusivity of alternatives under rule 6 - Non obstante operation of rule 6(3) - Whether the adjudicating authority could compel neutralization by applying the first alternative computation instead of permitting the assessee to exercise the option under rule 6(3). - HELD THAT: - The Tribunal held that rule 6(1) and 6(2) operate together and are distinct from rule 6(3), which by its non obstante clause operates independently and confers an option on the assessee. It was therefore inappropriate for the adjudicating authority to adopt a computation method merely because it yielded higher revenue in place of the option available to the assessee. The Court directed that the adjudicating authority should permit the appellant to furnish the computation of neutralization preferred by it and decide the matter strictly in accordance with rule 6(3). [Paras 5]

The option under rule 6(3) is a privilege conferred on the assessee and the adjudicating authority should not override it by adopting an alternative computation that produces higher revenue; matter to be reconsidered strictly under rule 6(3).

Registration and separate factory/plant treatment for CENVAT computation - Whether the appellant's several plants should be treated as separate registrations/factories for the purpose of computation under rule 6. - HELD THAT: - The Tribunal rejected the contention that the individual plants ought to be treated as separate registrations/factories for computation purposes. It held that the submission that plants should be deemed separate registrations was not acceptable in law, and accordingly such a contention cannot be sustained without proper legal basis; however, the appellant remains entitled to raise related submissions before the adjudicating authority during fresh consideration. [Paras 6]

The claim that the plants constitute separate registrations is not accepted in law; the adjudicating authority shall nevertheless consider any related submissions afresh.

Retrospective application of substituted statutory provision - Inclusion of value of customer supplied inputs for CENVAT computation - Whether the adjudicating authority erred in not granting fresh consideration on (a) retrospective application of the revised computation methodology and (b) exclusion of certain clearances from the definition of 'exempted goods', including the question of value of customer supplied inputs. - HELD THAT: - The Tribunal observed that these contentions were raised before it and, given the errors in the earlier adjudication (notably in overriding the assessee's option under rule 6(3)), it was appropriate to remit the matters for de novo adjudication. The appellant may urge entitlement to retrospective application of the substituted rule and the contention that certain clearances (to defence organisations/ISRO) do not fall within 'exempted goods'; questions concerning inclusion of value of customer supplied inputs and other issues were left open for consideration by the adjudicating authority in the fresh proceedings. [Paras 6, 7]

The matters relating to retrospective application of the amended rule, exclusion of certain clearances from 'exempted goods', inclusion of value of customer supplied inputs, and all other issues are remitted to the adjudicating authority for fresh decision after giving the appellant an opportunity to file preferred computations and submissions.

Final Conclusion: Impugned orders are set aside and the matters are remanded for de novo adjudication; the adjudicating authority shall permit the appellant to furnish the computation under rule 6(3) and shall reconsider, in the fresh proceedings, the contentions regarding retrospective application of the amended rule, exclusion of certain clearances from 'exempted goods', inclusion of customer supplied inputs' value and all other issues.

Classification of Palm Stearin under Central Excise Tariff - Applicability of exemption notification to goods classifiable under Chapter 15 - Extended period of limitation for demand - Fraud, collusion, wilful misstatement or suppression - ER-1 returns as basis of assessment

Classification of Palm Stearin under Central Excise Tariff - Applicability of exemption notification to goods classifiable under Chapter 15 - ER-1 returns as basis of assessment - Appellant's product (Palm Stearin) is classifiable under CTH 3823 and not under CTH 1511, and therefore is not eligible for the exemption claimed under the notification applicable to Chapter Headings 1507 to 1515. - HELD THAT: - Following the decision of the Hon'ble Apex Court in JOCIL Ltd, the Tribunal held that Palm Stearin merits classification under Central Excise Tariff Heading 3823 and not under Heading 1511. The Tribunal noted the post 2005 tariff insertion creating specific entries for Palm Stearin under Chapter 38 and observed that the earlier CBEC circular of 2002 was rendered irrelevant by the subsequent tariff change and the Apex Court's ruling. Consequently, goods falling under CTH 3823 are outside the scope of the exemption entry limited to goods under Chapter Headings 1507 to 1515. The Tribunal applied this ratio to the appellant's product and disallowed the claimed exemption. [Paras 5]

Classification affirmed as CTH 3823; exemption not applicable.

Extended period of limitation - Fraud, collusion, wilful misstatement or suppression - ER-1 returns as basis of assessment - Demands confirmed by invoking the extended period of limitation are time barred because there is no evidence of fraud, collusion, wilful misstatement or suppression warranting extended limitation. - HELD THAT: - The Tribunal found that the appellant had consistently filed ER 1 returns claiming classification under CTH 1511 and had responded promptly to departmental correspondence (department's letter dated 03.12.2008 and appellant's reply dated 06.01.2009). The revenue remained aware of the appellant's stance but did not issue a show cause notice within the normal limitation period; the subsequent demand invoked the extended period. There was no material to demonstrate fraudulent or collusive conduct, or deliberate suppression or wilful misstatement to evade duty; the misclassification arose from a bona fide but incorrect claim later negated by the Apex Court's decision. In absence of the requisite culpability, extended limitation was held inapplicable and the demands, interest and penalties founded on time barred notices were set aside. [Paras 6]

Extended limitation not attracted; demands (and consequential interest/penalties) time barred and set aside.

Final Conclusion: Appeal allowed: classification held under CTH 3823 (no exemption), but demands raised invoking extended period of limitation quashed for lack of fraud or suppression; impugned order set aside with consequential relief.

Assessing Officer's duty to independently apply mind - Non-adoption of Enforcement Wing/ISIC proposals without independent consideration - Power to deviate from Audit/Inspection proposals - Pre-determination examination of Form-F declarations - Remand for fresh consideration complying with appellate directions

Assessing Officer's duty to independently apply mind - Non-adoption of Enforcement Wing/ISIC proposals without independent consideration - Power to deviate from Audit/Inspection proposals - Assessing Officer could not merely adopt proposals of the Enforcement Wing/ISIC and had to independently consider and record reasons for any deviation; Circular No.3 dated 18.01.2019 empowering such deviation is operative guidance. - HELD THAT: - The Court recognised that an Assessing Officer is a quasi-judicial authority and must apply independent judgment rather than being solely guided by reports or inspection proposals prepared by the Enforcement Wing or ISIC authorities. Prior decisions of this Court establish that an AO cannot be solely guided by Enforcement Wing proposals. The Commissioner of State Tax's Circular No.3 dated 18.01.2019 was noted as expressly empowering Assessing Authorities to finalize assessments while deviating from such proposals, provided reasons are recorded, thereby reinforcing the obligation of independent consideration by the AO. [Paras 2, 3, 4]

The principle that the Assessing Officer must independently apply his mind and may deviate from Enforcement/ISIC proposals (subject to recording reasons) is affirmed and applied.

Pre-determination examination of Form-F declarations - Remand for fresh consideration complying with appellate directions - Assessment made Best of Judgment was quashed because the Assessing Officer failed to comply with the Tribunal's direction to examine each Form-F transaction; matter remitted for fresh consideration in accordance with that direction and after affording personal hearing. - HELD THAT: - The Tribunal in TA.No.16/2011 dated 25.07.2011 had directed the Assessing Officer to examine each transaction recorded in the assessee's Form-F declarations as envisaged by Section 6A(2) of the Central Sales Tax Act. The Court found that the AO disregarded that mandate and proceeded without examining each transaction. For that reason the impugned proceedings (CST No.638587/1994-1995 dated 11.03.2013) were set aside and the matter remitted to the AO for fresh consideration, with instructions to adhere to the Tribunal's directions and to afford the assessee a personal hearing before passing a fresh order within twelve weeks. [Paras 5, 6]

Impugned proceedings quashed and remitted for fresh adjudication in conformity with the Tribunal's directions and after granting personal hearing.

Final Conclusion: Writ petition allowed; impugned assessment order quashed and the matter remitted to the Assessing Officer for fresh consideration in accordance with the Tribunal's directions and the requirement that the AO independently apply his mind (including recording reasons for any deviation from Enforcement/ISIC proposals) and afford personal hearing; compliance to be completed within twelve weeks.