TaxTMI Updates e-Newsletter
Sep 17,2020

Classification of goods as bran versus cattle feed - interpretation of entries in Notification No.1/2017-Central Tax (Rate) - applicability of exemption under Notification No.2/2017-Central Tax (Rate) - tariff item 23021010 - use-based classification and form of clearance

Classification of goods as bran versus cattle feed - applicability of exemption under Notification No.2/2017-Central Tax (Rate) - Maize Bran is not a 'cattle feed' eligible for nil rate under Sr.No.102 of Notification No.2/2017-Central Tax (Rate). - HELD THAT: - The Authority examined the nature, commercial description and use of Maize Bran and the wording of the relevant notifications. Dictionary meaning and the applicant's own submissions show Maize Bran is a by-product and a supplement/ingredient used to enhance or complete cattle feed rather than a finished cattle feed itself. The sample invoice produced by the applicant showed supply of Maize Bran to a manufacturer who used it as an input for producing cattle feed, supporting the conclusion that Maize Bran is an ingredient/input. The Chapter and sub-heading structure of the Customs Tariff was considered and Maize Bran is specifically identified under sub-heading 23021010. On these facts and legal construction, the product does not fall within the description of goods exempted as 'Aquatic feed ... poultry feed and cattle feed' in Sr.No.102 of Notification No.2/2017 and therefore is not entitled to nil rate under that entry. [Paras 11, 12, 13, 14]

Maize Bran does not qualify as 'cattle feed' for the purposes of Sr.No.102 of Notification No.2/2017 and is not entitled to nil rate thereunder.

Interpretation of entries in Notification No.1/2017-Central Tax (Rate) - tariff item 23021010 - use-based classification and form of clearance - Maize Bran is classifiable as 'Bran' under Entry Sr.No.103A of Notification No.1/2017-Central Tax (Rate) and is taxable at the rate specified thereunder. - HELD THAT: - Having found that Maize Bran is covered by the tariff description at sub-heading 23021010 and is a 'bran' product supplied in the form produced (including dry/wet/CSL mixed forms), the Authority applied the notification entries. Entry Sr.No.103A of Notification No.1/2017 (as inserted by Corrigendum) covers Bran and similar residues under chapter 2302 and specifies the rate applicable to those goods. There is no ambiguity in classification on the record before the Authority, and the applicant's own evidence (invoice showing classification under 23021010 and supply to a feed manufacturer) corroborates classification as 'Bran'. Reliance on pre-GST returns and cited authorities was considered but found not to alter the classification under the notifications relied upon. [Paras 11, 13, 14, 15, 16]

Maize Bran is covered by Entry Sr.No.103A of Notification No.1/2017-Central Tax (Rate) and is taxable at the rate prescribed therein.

Final Conclusion: The Advance Ruling holds that Maize Bran manufactured and supplied by the applicant is classifiable as 'Bran' under tariff item 23021010 and Entry Sr.No.103A of Notification No.1/2017-Central Tax (Rate) and is not eligible for nil rate under Sr.No.102 of Notification No.2/2017; accordingly GST at the rate specified in Sr.No.103A is chargeable.

Licensing services for the right to use minerals including its exploration and evaluation - Leasing or rental services treated as supply of service - Service classification under Heading 9973 / SAC 997337 - Residuary rate entry for Heading 9973 and its applicability - Clarificatory amendment to rate notification held retrospective - GST rate applicable to licensing of mineral rights: 18%

Licensing services for the right to use minerals including its exploration and evaluation - Service classification under Heading 9973 / SAC 997337 - Leasing or rental services treated as supply of service - Activity of granting right to extract and use minerals under lease/license is classifiable as licensing service under SAC 997337 (Heading 9973). - HELD THAT: - The Authority examined the lease/licence arrangement under the definition of 'supply' and Schedule II which treats lease, tenancy, easement and licence to occupy land as supply of service. The grant of mining rights by the Government to the applicant, with consideration in the form of deed rent/royalty computed on extracted mineral, is a licence to extract and use minerals. The Annexure to Notification No.11/2017-C.T. (Rate) identifies 'Licensing services for the right to use minerals including its exploration and evaluation' under Group 99733 and SAC 997337. The Authority therefore held that the impugned activity is properly classifiable under Heading 9973 as licensing services for the right to use minerals including its exploration and evaluation. [Paras 15, 16, 18, 19, 23]

The applicant's activity is classifiable under Heading 9973, sub heading/SAC 997337 as licensing services for the right to use minerals including its exploration and evaluation.

Residuary rate entry for Heading 9973 and its applicability - Clarificatory amendment to rate notification held retrospective - GST rate applicable to licensing of mineral rights: 18% - GST rate on the licence/royalty for extraction and use of minerals is 18% (9% CGST + 9% SGST). - HELD THAT: - The Authority analysed Serial No.17 of Notification No.11/2017-C.T. (Rate) and its subsequent amendments, and the recommendations and minutes of the 31st GST Council which led to insertion of entries intended to clarify rates for 'right to use' intellectual property and similar products. It concluded that the licensing service for minerals falls within the residuary description which, after clarification by Notification No.27/2018-C.T. (Rate) dated 31-12-2018 (a clarificatory notification), is covered by the entry prescribing an 18% rate for such residuary leasing/rental services. Relying on the Supreme Court authority that clarificatory notifications have retrospective effect to clarify implicit positions, the Authority held that the clarificatory amendment applies from July 2017 and that the impugned service attracts 18% GST (9% CGST + 9% SGST). The Authority rejected reliance on earlier AAR precedents that applied the 'same rate as on like goods' approach in circumstances now clarified by amendment. [Paras 19, 21, 23]

The royalty/deed rent paid for the grant of mining/licence rights is taxable at 18% GST (9% CGST + 9% SGST), with effect from July, 2017 onwards.

Final Conclusion: The grant of mining/licence rights to extract and use minerals is a service classifiable under Heading 9973 (SAC 997337) and, following the clarificatory amendment to the rate notification, the same attracts GST at 18% (9% CGST + 9% SGST) from July 2017 onwards.

Classification of goods under the First Schedule to the Customs Tariff Act - tariff item 84248100 (mechanical appliances for projecting, dispersing or spraying liquids or powders) - tariff item 73218990 (stoves and similar non-electric domestic appliances) - applicability of GST rates under Notification No.01/2017-Central Tax (Rate) - effect of subsequent amendments on rate classification - exclusion from exemption Notification No.02/2017-Central Tax (Rate)

Classification of goods under the First Schedule to the Customs Tariff Act - tariff item 84248100 (mechanical appliances for projecting, dispersing or spraying liquids or powders) - applicability of GST rates under Notification No.01/2017-Central Tax (Rate) - effect of subsequent amendments on rate classification - Sprayer pumps (manually operated) manufactured and supplied by the applicant are classifiable under Tariff item No.84248100 and the applicable GST rate changed from 18% to 12% with effect from 25.01.2018. - HELD THAT: - On examination of the product description, use and tariff schedule, sprayer pumps used for agricultural spraying fall within Sub-heading 8424 and specifically under tariff item 84248100 as agricultural or horticultural appliances. Entry No.325 of Schedule-III of Notification No.01/2017 initially covered mechanical appliances of chapter 8424 attracting 18% GST. Subsequent amendments inserted exclusions and, by Notification No.06/2018 effective 25.01.2018, introduced Entry No.195B in Schedule-II for "mechanical sprayers", thereby moving such goods to a different schedule attracting 12% GST. Consequently, the product is taxable at 18% up to 24.01.2018 and at 12% from 25.01.2018 in accordance with the notifications as amended. [Paras 9, 10, 11, 12, 16]

Sprayer pumps (manually operated) are classifiable under Tariff item No.84248100; GST rate 18% up to 24.01.2018 and 12% with effect from 25.01.2018.

Classification of goods under the First Schedule to the Customs Tariff Act - tariff item 73218990 (stoves and similar non-electric domestic appliances) - applicability of GST rates under Notification No.01/2017-Central Tax (Rate) - Stoves manufactured and supplied by the applicant are classifiable under Tariff item No.73218990 and attract GST at 12%. - HELD THAT: - The applicant's stoves, used with solid fuel (wood) and described in the product literature, fall within Chapter 7321 as non-electric domestic stoves. Tariff item 73218990 captures such appliances for solid fuel. Entry No.183 of Schedule-II to Notification No.01/2017-Central Tax (Rate) covers kerosene burners, kerosene stoves and wood burning stoves of iron or steel and prescribes a 12% GST rate. Accordingly, the stoves supplied by the applicant are classifiable under 73218990 and taxable at 12%. [Paras 13, 14, 16]

Stoves are classifiable under Tariff item No.73218990 and liable to 12% GST.

Exclusion from exemption Notification No.02/2017-Central Tax (Rate) - applicability of exemption notifications - The products supplied by the applicant are not covered by any entry in the exemption Notification No.02/2017-Central Tax (Rate) and therefore are not exempt. - HELD THAT: - The authority examined the exemption Notification No.02/2017 and found no entry that includes the applicant's sprayer pumps or stoves. The mere agricultural use of the sprayer pumps does not bring them within the exemption entries examined. Therefore, no exemption applies and the applicable GST rates as determined by classification remain payable. [Paras 15, 16]

Neither the sprayer pumps nor the stoves qualify for exemption under Notification No.02/2017; they remain taxable as classified.

Final Conclusion: Advance ruling: (i) Manually operated sprayer pumps are classifiable under tariff item 84248100 and taxable at 18% up to 24.01.2018 and at 12% from 25.01.2018; (ii) Stoves are classifiable under tariff item 73218990 and taxable at 12%; (iii) Neither product is covered by the exemption Notification No.02/2017.

Classification of goods - biofertiliser - cultures of micro-organisms (excluding yeasts) - animal or vegetable fertilisers - interpretation of Customs Tariff schedules - applicability of GST rates

Biofertiliser - cultures of micro-organisms (excluding yeasts) - Whether the products RhizoMyx and Rhizomyco supplied by the applicant are biofertilisers. - HELD THAT: - Having compared the product composition, mode of application and stated effects with ordinary and authoritative definitions, the Authority found that the products contain living mycorrhizal fungi which, when applied to seed, plant surfaces or soil, colonize the rhizosphere or plant interior and promote nutrient availability and plant growth. The brochures and usage instructions demonstrate that the critical input is cultured microorganisms packaged for field application and that the products effectuate the functions attributed to biofertilisers (nutrient uptake enhancement, root system augmentation and related benefits). On this basis the Authority concluded that RhizoMyx and Rhizomyco are biofertilisers. [Paras 10]

RhizoMyx and Rhizomyco are biofertilisers.

Classification of goods - animal or vegetable fertilisers - interpretation of Customs Tariff schedules - applicability of GST rates - Whether those biofertilisers are classifiable under Sub-heading 3101 (animal or vegetable/organic fertilisers) or under Sub-heading 3002 (including cultures of micro-organisms). - HELD THAT: - The Authority analysed the scope of Sub-heading 3101 and the ordinary meanings of animal, vegetable and organic fertilisers, noting that such fertilizers are derived from animal or vegetable matter (compost, manure etc.) and act by directly improving soil fertility. By contrast, biofertilisers consist of living microorganisms produced by culturing and packed in carrier material for application; their distinct nature and mode of action set them apart from the products envisaged by 3101. The Authority then examined Sub-heading 3002 and observed that it expressly includes 'cultures of micro-organisms (excluding yeasts)' at tariff item 30029030. Given that biofertilisers are produced by culturing micro-organisms, the Authority held that the applicant's products fall within tariff item 30029030 and therefore within Sub-heading 3002. Applying the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, the Authority treated the goods as covered by Entry No.61 of Schedule-II. [Paras 13, 15, 16]

The biofertilisers are not covered by Sub-heading 3101 but are classifiable under Tariff item 30029030 (Sub-heading 3002) and thus fall within Entry No.61 of Schedule-II of the Notification.

Final Conclusion: The products RhizoMyx and Rhizomyco are biofertilisers and are classifiable under Tariff item 30029030 (Sub-heading 3002), covered by Entry No.61 of Schedule-II of Notification No.01/2017-Central Tax (Rate); the applicable GST rate is 12% (6% CGST + 6% SGST).

Classification by essential character / principal function - General Rules for the Interpretation of the First Schedule (Rule 2 and Rule 3) - compound optical microscope / surgical microscope - instruments and appliances used in medical, surgical, dental or veterinary sciences - application of Section and Chapter Notes (Notes 3 and 4 to Section XVI) - tariff classification under the First Schedule to the Customs Tariff Act, 1975 - rate of tax under the GST notification (schedule-wise applicability)

Compound optical microscope / surgical microscope - classification by essential character / principal function - General Rules for the Interpretation of the First Schedule (Rule 2 and Rule 3) - Whether the Micromanipulator system is classifiable under sub-heading 9011 (compound optical microscopes) or under sub-heading 9018 (instruments and appliances used in medical sciences). - HELD THAT: - The Authority examined the nature and functioning of the micromanipulator and the relevant Explanatory Notes. A micromanipulator is a device that operates only in conjunction with a microscope and is therefore dependent on the microscope to perform its intended function. The Explanatory Notes to heading 90.11 describe compound optical microscopes and include surgical microscopes used by surgeons when operating on very small portions of the body. Applying Rule 2 (incomplete or unfinished articles classified with the finished article if they have the essential character) and Rule 3 (preference to the most specific heading) of the General Rules for Interpretation, the micromanipulator, being essentially a device integrated with and dependent on a microscope and performing a function analogous to surgical microscopy, falls within the more specific description of heading 9011 rather than the general entry in 9018. The Authority further noted that the list of instruments in the Explanatory Notes to 9018 does not specifically include micromanipulators and that the nature of the micromanipulator aligns it with microscopes (specifically surgical microscopes) covered by 9011. Thus, the determinative legal reasoning applied Rule 2 and Rule 3 and the Harmonized System explanatory notes to allocate the micromanipulator to heading 9011. [Paras 21, 22, 23]

Micromanipulator system is classifiable under sub-heading 9011 (compound optical microscopes), being essentially a surgical/compound optical microscope by reason of its dependence on and integration with the microscope and its essential character.

Tariff classification under the First Schedule to the Customs Tariff Act, 1975 - rate of tax under the GST notification (schedule-wise applicability) - The specific tariff item within 9011 under which the Micromanipulator system is classifiable and the applicable GST rate(s) with effect from/to relevant dates. - HELD THAT: - Having concluded that the micromanipulator system is a compound optical / surgical microscope, the Authority identified the applicable tariff item as falling under sub-heading 9011 and, more specifically, as a surgical/other compound optical microscope (tariff item within 9011). The Authority then examined Notification No. 01/2017 Central Tax (Rate) and its amendment. The product was covered under Entry No. 184 of Schedule IV of the notification up to 14.11.2017, and from 15.11.2017 onwards the entry for compound optical microscopes appears as Entry No. 411F in Schedule III. Consequently the GST rate applicable was determined according to those schedules and effective dates. [Paras 22, 23, 24]

The Micromanipulator system is covered under tariff item 9011 (compound optical microscopes) and is therefore covered by Entry No.184 of Schedule IV of Notification No.01/2017 Central Tax (Rate) up to 14.11.2017 and by Entry No.411F of Schedule III w.e.f. 15.11.2017; the rate of GST is 28% (14% SGST + 14% CGST) up to 14.11.2017 and 18% (9% SGST + 9% CGST) from 15.11.2017.

Final Conclusion: The Advance Ruling holds that M/s. Shivani Scientific Industries Pvt. Ltd.'s Micromanipulator system is classifiable under Tariff item 9011 (compound optical / surgical microscopes). It was covered by Entry No.184 of Schedule IV of Notification No.01/2017 Central Tax (Rate) up to 14.11.2017 (GST 28%) and by Entry No.411F of Schedule III w.e.f. 15.11.2017 (GST 18%).

Value of taxable supply - consideration - incidental expenses - pure agent - Rule 33 of the CGST Rules, 2017 - Section 15 of the CGST Act, 2017 - Section 2(31) (definition of consideration)

Consideration - value of taxable supply - Section 15 of the CGST Act, 2017 - Section 2(31) (definition of consideration) - Whether amounts recovered as reimbursement for Aviation Turbine Fuel (ATF) procured by the applicant on behalf of the customer are required to be included in the value of services provided by the applicant under GST. - HELD THAT: - The Authority examined the statutory definition of 'consideration' in Section 2(31) and the valuation provisions in Section 15 of the CGST Act, 2017. Section 2(31) includes any payment made in respect of the supply of goods or services by the recipient, and Section 15(1) adopts the transaction value as the value of a supply where parties are unrelated. Section 15(2)(c) expressly includes any amount charged for anything done by the supplier in respect of the supply at or before delivery of services. The Authority found that the applicant fills ATF in the aircraft prior to supply of charter services and charges the amount to the customer by way of reimbursement; such amounts therefore fall within 'consideration' and form part of the transaction value. Reliance on pre-GST jurisprudence cited by the applicant was distinguished because the CGST Act contains specific definitional and valuation provisions that encompass such payments. Consequently, reimbursements for ATF obtained and charged to the customer constitute part of the value of the taxable supply and are liable to GST. [Paras 12, 13]

Amounts recovered as reimbursement for ATF procured by the applicant on behalf of the customer are includible in the value of services provided and subject to GST.

Pure agent - Rule 33 of the CGST Rules, 2017 - incidental expenses - Whether the applicant qualifies as a 'pure agent' so as to exclude the reimbursed ATF costs from the value of supply under Rule 33 of the CGST Rules, 2017. - HELD THAT: - Rule 33 excludes expenditures incurred by a supplier as a 'pure agent' of the recipient provided prescribed conditions and explanatory criteria are satisfied. The Authority tested the applicant's case against the conditions and explanation to Rule 33: (i) authorization by the recipient to make payment to a third party and documentary proof that reimbursements are at actual without markup - the contract clauses show authorization but the applicant did not produce documentary evidence to prove reimbursements were strictly at actual; (ii) separate indication of such payments in the invoice - the applicant issued separate debit notes and did not indicate these payments separately on the invoices for the supply, thus not meeting the invoicing requirement; (iii) supplies procured as a pure agent must be in addition to services supplied on own account - here ATF is integral to enabling flight and hence part of the main service rather than an addition; (iv) explanatory conditions (no title, no use for own interest, receipt of only actual amount) were not satisfied on the materials produced, including absence of evidence that title is not held, that fuel is not used for the supplier's own interest, and that only actual amounts were received. On these independent grounds, the applicant failed to satisfy Rule 33 and the explanatory conditions; therefore, it cannot be treated as a 'pure agent' for excluding ATF reimbursements from the value of supply. [Paras 14, 15, 16]

The applicant does not qualify as a 'pure agent' under Rule 33; the conditions for exclusion of the reimbursed ATF amounts from the taxable value are not satisfied.

Final Conclusion: The Authority rules that amounts recovered as reimbursement (at actual) by M/s. Global Vectra Helicorp Ltd. from its customer for ATF procured on the customer's behalf are includible in the value of the charter/rental services and liable to GST; the applicant does not qualify as a 'pure agent' under Rule 33 to exclude such reimbursements.

Transitional credit - Form GST TRAN-1 - liberty to apply to GST Council through Standing Counsel - recommendation of GST Council to the Commissioner for grant of transitional credit - challenge to validity of Rule 117 - not res integra

Transitional credit - Form GST TRAN-1 - liberty to apply to GST Council through Standing Counsel - recommendation of GST Council to the Commissioner for grant of transitional credit - Petitioners permitted to seek filing/recognition of Form GST TRAN-1 and availment of transitional CENVAT credit by applying to the GST Council through the Standing Counsel for onward recommendation to the Commissioner. - HELD THAT: - The Court disposed of the petitions by following the decision in Obelisk Composite Technology LLP (supra) and granted petitioners liberty to make an application before the GST Council through Standing Counsel, who is requested to hand the application to the jurisdictional officer for forwarding to the GST Council. The GST Council is to consider the application with requisite particulars and evidence and, if the petitioners' assertions are found correct, to issue a recommendation to the Commissioner so as to enable the petitioners to obtain the benefit of CENVAT credit in terms of the transitional provisions. The direction is procedural: it does not itself adjudicate the substantive entitlement but provides the route and relief by way of consideration and recommendation within the extended period previously announced by the Union of India.

Liberty granted to apply to the GST Council through Standing Counsel for recommendation to the Commissioner to enable credit of transitional CENVAT via Form GST TRAN-1; petitions disposed accordingly.

Challenge to validity of Rule 117 - not res integra - Constitutional challenge to Rule 117 of the CGST Rules is not entertained as the question is not res integra. - HELD THAT: - Relying on earlier Division Bench decisions, including Obelisk Composite Technology LLP and precedents cited therein, the Court recorded that the constitutional challenge to Rule 117 is no longer an open question for this Court to decide. Consequently, the petitioners' prayer seeking to strike down or read down Rule 117 was rejected and not entertained as part of these petitions.

Challenge to constitutional validity of Rule 117 dismissed as not res integra; Court declined to entertain that prayer.

Final Conclusion: The writ petitions are disposed by following the Division Bench decision in Obelisk Composite Technology LLP (supra); petitioners are granted liberty to apply to the GST Council through Standing Counsel for recommendation to the Commissioner to enable transitional CENVAT credit via Form GST TRAN-1, while the constitutional challenge to Rule 117 is not entertained as the issue is not res integra.

Provisional attachment to protect revenue - Power under Section 83 to provisionally attach property including bank accounts - Pendency of proceedings under Sections 62/63/64/67/73/74 as a condition precedent - Effect of cessation of the triggering proceedings on continuance of attachment - Requirement of formation of opinion by Commissioner for protecting Government revenue

Provisional attachment to protect revenue - Power under Section 83 to provisionally attach property including bank accounts - Pendency of proceedings under Sections 62/63/64/67/73/74 as a condition precedent - Effect of cessation of the triggering proceedings on continuance of attachment - Validity of provisional attachment under Section 83 where proceedings under Section 67 had concluded and no proceedings under Sections 63 or 74 (or other Sections specified in Section 83) were pending. - HELD THAT: - Section 83 empowers the Commissioner to provisionally attach property, including bank accounts, only during the pendency of proceedings under any of the specified provisions (Sections 62, 63, 64, 67, 73 or 74). The Court held that pendency of proceedings is a sine qua non for exercise and continuation of powers under Section 83. Where the proceedings which gave rise to the provisional attachment (here, proceedings under Section 67) have been concluded and no other proceedings under the Sections enumerated in Section 83 have been initiated, the statutory condition enabling provisional attachment does not subsist. The Court accepted the petitioner's submission and the reasoning in the cited Gujarat High Court authority that, in absence of any pending proceedings under the listed provisions, an order of provisional attachment under Section 83 is without authority of law. Applying these principles to the facts, since the Section 67 proceedings were over and no proceedings under Section 63 or 74 (or any other provision mentioned in Section 83) had been initiated, the impugned provisional attachment could not lawfully continue and had to be set aside. The Court accordingly directed release of the provisionally attached bank account on receipt of certified copy of its order.

Impugned orders of provisional attachment set aside; respondents directed to release the petitioner's bank account forthwith on receipt of certified copy of this order.

Final Conclusion: The provisional attachment made under Section 83 was unlawful once the proceedings under Section 67 had concluded and no other specified proceedings were pending; the attachment is quashed and the bank account must be released on production of certified copy.

Rejection of books of account - AO adopted G.P. Rate @15% instead of 14.52% as disclosed - enhanced the addition by estimating the G.P. @23.01%, after considering the past history by ITAT - HELD THAT:- No merit in the review petition and the same stands dismissed.

Interest under Section 244A on delayed refund - interest on delayed refund forming part of the amount due - compensation by way of interest versus statutory interest - appeal to High Court where Board's order/notification challenged notwithstanding monetary limit

Interest under Section 244A on delayed refund - interest on delayed refund forming part of the amount due - compensation by way of interest versus statutory interest - Whether the ITAT was justified in directing payment of simple interest as compensation on delayed payment of excess tax/refund. - HELD THAT: - The Court applied the ratio in Commissioner of Income Tax v. HEG Ltd and held that the words "any amount" in the refund context include the interest component, so that interest on the delayed refund becomes part of the principal amount due. Consequently, interest on delayed refund (i.e. interest on the interest component arising from delayed payment) is encompassed within the statutory entitlement under Section 244A and the ITAT's direction to pay simple interest as compensation on the delayed payment was not found to be contrary to that principle. The Court noted the authority relied upon by the revenue but concluded that under the settled precedent the interest component partakes the character of the amount due and therefore the relief granted by the ITAT was sustainable. [Paras 8, 9]

ITAT's direction to pay interest as compensation on the delayed refund is upheld; the interest on delayed refund is part of the amount due under Section 244A.

Appeal to High Court where Board's order/notification challenged notwithstanding monetary limit - Whether the ITAT erred in holding that the remedy was an appeal to the High Court (rather than disposal under Section 254(2) by the ITAT's Miscellaneous Application). - HELD THAT: - The Court observed the Board's notifications prescribing monetary limits for preferring appeals to the High Court and the carved out exceptions where adverse judgments on certain categories should nevertheless be contested. It found that no exception applied in the present case and that there was no maintainable basis for the revenue's Miscellaneous Application before the ITAT to succeed. The Court also noted consistency with its earlier decision in Pr. Commissioner of Income Tax v. M/s Ambuja Darla Kashlog Mangoo Transport Cooperative Society and declined to take a different view. [Paras 10, 11, 12]

ITAT's dismissal of the Miscellaneous Application and its position regarding the proper remedy are sustained; no ground made out for entertaining the Department's challenge before the ITAT under Section 254(2).

Final Conclusion: Appeal dismissed. The High Court upheld the ITAT's order directing payment of interest on delayed refunds as constituting part of the amount due under Section 244A and found no merit in the Revenue's challenge or in its Miscellaneous Application; liberty to seek appropriate remedy reserved.

Disallowance under Section 14A read with Rule 8D - restriction of disallowance to the extent of exempt income - mandate of Section 14A - AO's satisfaction and application of the prescribed method - apportionment of expenditure between taxable and non-taxable income

Disallowance under Section 14A read with Rule 8D - restriction of disallowance to the extent of exempt income - The Tribunal and High Court upheld restriction of the Section 14A disallowance to the extent of exempt income declared by the assessee. - HELD THAT: - The Court found that the Tribunal correctly affirmed the CIT(A)'s limitation of the disallowance to the amount of exempt income. The Tribunal had noted inability of Revenue to controvert earlier high court authority and applied that reasoning to restrict the disallowance. On that basis the substantial question of law framed in the Revenue's appeal was answered against the Revenue and in favour of the assessee.

The restriction of disallowance under Section 14A read with Rule 8D to the extent of exempt income is upheld and the Revenue's appeal is dismissed on this ground.

Mandate of Section 14A - AO's satisfaction and application of the prescribed method - apportionment of expenditure between taxable and non-taxable income - The AO must first form an objective satisfaction, having regard to the assessee's accounts, before applying the prescribed method under Section 14A(2)/Rule for determining expenditure relatable to exempt income. - HELD THAT: - The Court endorsed the principle that Section 14A's object is to exclude expenditure attributable to income not forming part of total income and that the Assessing Officer's jurisdiction to apply the rule prescribed method arises only where he is not satisfied with the assessee's claim. The satisfaction must be reached on an objective basis after examining the accounts; only then may the AO resort to the prescribed method to compute disallowance. This procedural and substantive approach was held to have been correctly followed by the Tribunal in affirming the CIT(A).

The procedural requirement that the AO form objective satisfaction from the accounts before invoking the prescribed method under Section 14A is affirmed and applied in the assessee's favour.

Final Conclusion: The Revenue's appeal is dismissed; the substantial question of law is answered against the Revenue, upholding the Tribunal's restriction of the Section 14A disallowance to the extent of exempt income and affirming the requirement that the AO must first be objectively satisfied from the accounts before applying the prescribed method.

Open remand - remand vitiated by qualification - power of Assessing Officer to re-examine factual and legal issues on remand - opportunity of hearing to insolvency resolution professional

Remand vitiated by qualification - open remand - The Tribunal's observations qualifying its remand were set aside and the remand was ordered to be made open. - HELD THAT: - The Court examined the impugned order, particularly paragraph 11, and found that once the Tribunal chose to remit the matter to the Assessing Officer it should not have qualified that remand, especially where questions of law were raised by both parties. The Tribunal also failed to give independent reasons for applying the principle from Beach Miners Co. Pvt. Ltd. to the assessee's case. Consequently, the Court interfered with and set aside the qualifying observations and directed that the remand be open so as not to curtail the Assessing Officer's powers. [Paras 12, 13]

Tribunal's qualifying observations in paragraph 11 set aside and remand converted into an open remand.

Power of Assessing Officer to re-examine factual and legal issues on remand - opportunity of hearing to insolvency resolution professional - The Assessing Officer was directed to consider all issues afresh, factual and legal, after affording an opportunity of hearing to the IRP or his counsel. - HELD THAT: - The Court remanded the matter for fresh consideration by the Assessing Officer, expressly instructing that the AO may consider all issues raised by either Revenue or assessee without limitation and decide the matter on merits in accordance with law. The remand is to be preceded by affording an opportunity of hearing to the Insolvency Resolution Professional representing the assessee, who is requested to present submissions in the interest of shareholders. [Paras 4, 13]

Matter remanded to the Assessing Officer for fresh adjudication on merits after hearing the IRP or his counsel; substantial question of law left open.

Final Conclusion: Tax case appeal allowed; the Tribunal's qualifying observations are set aside and the matter is remanded as an open remand to the Assessing Officer to decide all issues afresh on merits after affording the IRP or his counsel an opportunity of hearing; substantial question of law left open; no costs.

Addition on account of unexplained cash - search and seizure proceedings - onus to explain cash found - merging cash of distinct entities - deductibility of interest on delayed TDS under section 37(1) - business expenditure

Addition on account of unexplained cash - onus to explain cash found - merging cash of distinct entities - Validity of addition of Rs. 3,51,470 made by treating cash found at premises of a sister concern as belonging to the assessee - HELD THAT: - The Tribunal found that the assessee's cash book reconciled the cash found from premises actually belonging to the assessee and that a substantial portion of the cash treated by the AO as belonging to the assessee was physically found at premises of a separate sister concern (M/s The Cargo). The assessee produced the impounding record, statements recorded during search (including that of the manager of the sister concern) and an explanation allocating the cash found at the sister concern among that concern, a temple and partners. The AO had merged cash positions of two independent entities to compute alleged excess cash; the Tribunal held that once the premises and the cash do not belong to the assessee and the assessee has discharged its primary onus by explaining source of cash, the department cannot fasten liability on the assessee by treating cash from a different premises as the assessee's. The Tribunal also relied on a coordinate-bench decision where similar treatment of cash found at premises of a sister concern was not sustained. On these grounds the addition was held unsustainable and deleted.

Addition of Rs. 3,51,470 deleted; Ground No. 1 allowed.

Deductibility of interest on delayed TDS under section 37(1) - business expenditure - Allowability as business expenditure of interest of Rs. 18,315 paid for delayed deposit of TDS - HELD THAT: - The Tribunal examined the authorities relied upon and distinguished decisions concerning interest on arrears of sales tax. It accepted the view that interest arising from delayed payment of statutory tax deductions is an outlay on account of default in statutory liability and is not incurred wholly and exclusively for the purposes of business. Relying on precedent where interest on delayed TDS was held non-deductible, the Tribunal concluded that such interest cannot be allowed as a business expenditure under section 37(1). Consequently there was no infirmity in the orders of the authorities sustaining the disallowance.

Disallowance of interest on delayed TDS of Rs. 18,315 upheld; Ground No. 2 dismissed.

Final Conclusion: The appeal is partly allowed: the addition for unexplained cash (Rs. 3,51,470) is deleted, while the disallowance of interest on delayed deposit of TDS (Rs. 18,315) is confirmed; no order as to costs.

Validity of reopening of assessment on change of opinion - Admissibility of grounds of appeal not arising from reasons recorded for reassessment - Duty of appellate tribunal to record independent reasons when disagreeing with lower appellate authority - Computation and allowance of deduction under Section 80M - Remand for fresh consideration where order is non-speaking

Validity of reopening of assessment on change of opinion - Admissibility of grounds of appeal not arising from reasons recorded for reassessment - Duty of appellate tribunal to record independent reasons when disagreeing with lower appellate authority - Remand for fresh consideration where order is non-speaking - Tribunal's dismissal of the assessee's challenge to reopening of assessment for want of nexus with the reasons recorded was set aside and remanded for fresh consideration. - HELD THAT: - The High Court found that the Tribunal merely concluded that the ground relating to reopening "does not arise out of the reasons recorded" without giving independent reasons or explaining why the assessee's grounds could not be entertained. A tribunal disagreeing with the lower appellate authority must record reasons for such disagreement and address the substantive grounds raised by the assessee. The impugned order is non speaking in this respect; therefore the matter cannot be left on the terse conclusion recorded by the Tribunal. In consequence, the Court remanded the issue to the Tribunal for fresh adjudication in accordance with law so that the Tribunal may consider the grounds advanced by the assessee and record appropriate reasons for its conclusions. [Paras 6, 7]

The Tribunal's order insofar as it dismissed the ground challenging reopening is set aside and remanded to the Tribunal for fresh consideration with reasons.

Computation and allowance of deduction under Section 80M - Admissibility of grounds of appeal not arising from reasons recorded for reassessment - Duty of appellate tribunal to record independent reasons when disagreeing with lower appellate authority - Remand for fresh consideration where order is non-speaking - Tribunal's dismissal of the assessee's challenge to the disallowance applied in computing deduction under Section 80M was set aside and remanded for fresh consideration. - HELD THAT: - The Court observed that the Tribunal affirmed the CIT(A)'s conclusion that the plea on computation under Section 80M "does not arise out of the order of reassessment" but did so without independent reasoning and without confronting the assessee's submissions. The Tribunal's brief statements-rejecting the grounds solely on the stated non arising premise-are insufficient because a tribunal must explain why the assessee's claimed entitlement to a larger deduction cannot be accepted. Given the absence of such reasoned adjudication, the Court remanded the issue to the Tribunal to examine the computation, the assessee's contentions (including the pleaded absence of expenditure and apportionment), and to record lucid reasons for its decision. [Paras 6, 7]

The Tribunal's order insofar as it dismissed the Section 80M ground is set aside and remanded to the Tribunal for fresh consideration with reasons.

Final Conclusion: The tax case appeal is allowed; the impugned Tribunal order dated 30.08.2011 is set aside insofar as it dismissed the two specified grounds and the matters are remanded to the Tribunal for fresh consideration in accordance with law; the substantial questions of law are left open; no costs.

Comparability - functional comparability - transactional net margin method (TNMM) - arm's length price - transfer pricing adjustments - extrapolation of audited figures - remand for fresh consideration - deduction under section 10A - interest incidental to business - scope of section 40(a)(ii) regarding cess

Comparability - functional comparability - TNMM - arm's length price - Exclusion of M/s TCS E-Serve Ltd and TCS E-Serve International Ltd from the final set of comparables - HELD THAT: - The Tribunal accepted the view that although these entities perform software testing, verification and related activities, their large brand association with the Tata group, absence of segmental data and their economic upscale could materially affect profitability and therefore render them unsuitable as comparables for the assessee under Rule 10B factors applied to TNMM. The Tribunal followed the jurisdictional High Court precedents which uphold exclusion of high-brand-value, economically upscaled entities where such features are likely to materially distort comparability and profits, and directed exclusion of these two companies from the final comparable set. [Paras 16, 18]

TCS E-Serve Ltd and TCS E-Serve International Ltd excluded from comparables

Extrapolation of audited figures - comparability - arm's length price - Inclusion of R Systems International Ltd by adjusting its audit results to the assessee's financial year - HELD THAT: - R Systems was originally rejected due to a different accounting year. The Tribunal held that where audited results are available, the TPO can extrapolate audited quarterly figures to align with the assessee's year ending March. As R Systems is functionally similar, the Tribunal directed the TPO to adjust and include R Systems in the final set of comparables. [Paras 19]

R Systems International Ltd to be included as a comparable after extrapolation of audited figures

Comparability - turnover filter - remand for fresh consideration - Whether CG VAK Software and Exports Ltd should be included as a comparable - HELD THAT: - Although CG VAK was functionally similar, it had been rejected for not passing the turnover filter. The assessee contended that entity-wide turnover and segment reporting under AS-17 indicated it passes the turnover threshold and noted prior acceptance by the TPO for AY 2009-10. The Tribunal did not decide on inclusion on merits but directed the TPO to re-examine the company's financials, assess whether it passes the turnover filter and decide inclusion afresh. [Paras 20]

Matter remanded to the TPO for fresh examination of CG VAK's financials and turnover-filter eligibility

Comparability - functional comparability - arm's length price - Exclusion of Accentia Technology Pvt Ltd and Infosys BPO Ltd from the final set of comparables (revenue's challenge) - HELD THAT: - Regarding Accentia Technology, the Tribunal found the merger with Accentia Info Serve Pvt. Ltd. to be an extraordinary corporate event likely to affect profitability and turnover, justifying exclusion. As to Infosys BPO, the Tribunal agreed that it is a giant entity with substantial intangibles and economic upscale likely to distort comparability; following jurisdictional authority and earlier decisions, the Tribunal declined to interfere with the CIT(A)'s exclusion of Infosys BPO. [Paras 34, 35]

Accentia Technology and Infosys BPO excluded from the final comparable set

Deduction under section 10A - revised return - tax assessment computation - Allowability of deduction under section 10A in respect of additional receipts disclosed in a revised return and claimed during assessment proceedings - HELD THAT: - The assessee raised additional invoices after closure of accounts and filed a revised return; during assessment it claimed deduction under section 10A on those additional receipts. The Tribunal observed that although books could not be revised post audit, the assessee produced Chartered Accountant certificates supporting the claim. Having allowed the deduction under section 10A at first appellate stage (against which Revenue appealed), the Tribunal directed the Assessing Officer to allow deduction under section 10A on the additional receipts disclosed in the revised return. [Paras 22, 23, 26]

Deduction under section 10A allowed on additional receipts claimed in the revised return

Interest incidental to business - deduction under section 10A - Allowability of interest income on fixed deposits and miscellaneous income under section 10A - HELD THAT: - The Assessing Officer disallowed interest and miscellaneous income for section 10A. Relying on High Court precedents, the Tribunal held that interest earned on fixed deposits can be integral to the export business where such funds are tied to business facilities (e.g., lien for bank guarantees) and directed the AO to allow the interest income under section 10A. No particulars were furnished for miscellaneous income; the Tribunal was unable to establish nexus with business and therefore denied the miscellaneous income deduction. [Paras 27, 28, 30]

Interest income on fixed deposits allowed under section 10A; miscellaneous income claim denied for lack of particulars

Scope of section 40(a)(ii) regarding cess - statutory interpretation of taxing provisions - Deductibility of cess for computing business profits (not hit by section 40(a)(ii)) - HELD THAT: - Although raised as an additional ground, the Tribunal admitted it and followed the Bombay High Court (Sesa Goa) reasoning that Section 40(a)(ii) refers to 'any rate or tax levied' on profits and gains and does not expressly cover 'cess'. The Tribunal held that in a taxing statute deductions must be governed by clear legislative language and, absent an express provision excluding cess, deduction for cess is allowable. Accordingly, the additional ground was allowed and deduction for cess directed. [Paras 41, 43, 44]

Deduction for cess allowed; section 40(a)(ii) does not bar deduction of cess

Final Conclusion: For A.Y 2010- 11 the Tribunal directed exclusion of TCS E-Serve Ltd and TCS E-Serve International Ltd and upheld exclusion of Accentia Technology and Infosys BPO from the comparable set; directed inclusion of R Systems International Ltd after extrapolation of audited figures; remanded CG VAK Software for fresh examination by the TPO on turnover-filter eligibility; allowed the assessee's deduction under section 10A for additional receipts and permitted interest on fixed deposits under section 10A while denying unspecified miscellaneous income; and allowed deduction for cess, dismissing the revenue's appeals on the challenged grounds.

Exemption under section 54 (exemption on sale of residential house) - exemption under section 54F (exemption on transfer of capital asset other than house property) - exemption under section 54EC (investment in specified bonds within six months) - revision under section 263 (jurisdiction to revise assessments as erroneous and prejudicial)

Exemption under section 54 (exemption on sale of residential house) - exemption under section 54F (exemption on transfer of capital asset other than house property) - Assessee entitled to exemption under section 54 and not limited to section 54F where the transaction effected transfer of the residential house along with land. - HELD THAT: - The Tribunal examined the Development Agreement and record placed before the Assessing Officer and found that the agreement expressly referred to transfer of the land together with the bungalow 'Jagdish' and made it the developer's responsibility to demolish the existing bungalow. The Assessing Officer had recorded and accepted details of the sale and granted exemption under section 54. The CIT's view that only development rights were transferred was not supported by any independent evidence and the Revenue could not point to any clause showing transfer of development rights alone. The factual finding that possession and all rights in the house property were transferred led the Tribunal to hold that the transaction was of a residential house and the exemption under section 54 was correctly claimed and allowed. [Paras 5]

Exemption under section 54 is allowable as the transfer included the residential house and appurtenances; the assessee succeeds on this issue.

Exemption under section 54EC (investment in specified bonds within six months) - condition precedent of investment within six months - revision under section 263 (jurisdiction to revise assessments as erroneous and prejudicial) - Assessee not entitled to exemption under section 54EC for the amount invested beyond the prescribed six month period; the Assessing Officer's acceptance without verification was erroneous and prejudicial to revenue. - HELD THAT: - The Tribunal noted that the allotment date for the NHAI bonds of the disputed amount fell beyond the six month statutory period from the date of transfer. The assessee conceded delay and offered explanations which the CIT found unconvincing, particularly since part of the investment in identical bonds had been made within time. The Assessing Officer had not examined or recorded any reasoning on the timing of the investment and had simply allowed the claim. The Tribunal agreed with the CIT that the AO's unexamined acceptance was an error prejudicial to the revenue and sustained the disallowance of the exemption insofar as the investment was not made within the statutory time limit. [Paras 7, 8]

Exemption under section 54EC is not allowable for the investment made beyond the stipulated six month period; the CIT's exercise of revision under section 263 in this regard is sustained.

Final Conclusion: Appeal partly allowed: the assessee's claim for exemption under section 54 is upheld on the finding that the residential house was transferred; the claim under section 54EC for the amount invested after the statutory six month period is disallowed and the CIT's revision on that ground is sustained.

Condonation of delay for ill-health as sufficient cause - requirement of contemporaneous medical evidence or affidavit to establish sufficient cause - scope of powers under section 254(2) limited to rectification of apparent mistakes on record - inadmissibility of belated evidence or affidavit in proceedings under section 254(2) - prohibition on reviving dismissed appeals merely to obtain eligibility for Vivad Se Vishwas Scheme

Condonation of delay for ill-health as sufficient cause - requirement of contemporaneous medical evidence or affidavit to establish sufficient cause - Whether the Tribunal erred in refusing to condone a delay of 546 days in filing appeals on account of the assessee's ill-health. - HELD THAT: - The Bench considered the Supreme Court's ruling that ill-health can constitute sufficient cause for condoning delay but proceeded to examine the material on record. The assessee had filed only a one line application earlier and, at the time of disposal, there was no medical report from a registered practitioner or a hospital nor an affidavit supporting the claim of ill-health. The Court held that the Supreme Court's decision does not permit acceptance of an unsubstantiated assertion of illness; the explanation must be supported by an affidavit and/or medical evidence. Given the absence of such supporting material and the inordinate delay of 546 days together with apparent lack of diligence by the assessee (as noted by the lower authority), the Tribunal acted within its discretion in refusing condonation. [Paras 4, 5]

Condonation of delay was rightly refused; the appeals remain dismissed as barred by limitation.

Scope of powers under section 254(2) limited to rectification of apparent mistakes on record - inadmissibility of belated evidence or affidavit in proceedings under section 254(2) - Whether the affidavit filed subsequently by the assessee could be entertained in proceedings under section 254(2) to recall the Tribunal's order. - HELD THAT: - The Tribunal examined the scope of its powers under section 254(2) and found them confined to correcting mistakes apparent from the record at the time the impugned order was passed. Accepting a belated affidavit that seeks to re open facts and explanations already considered (and rejected) goes beyond that limited scope. Consequently, the affidavit filed after the order could not be admitted in these section 254(2) proceedings to recall the earlier dismissal. [Paras 4, 5]

The belated affidavit cannot be considered under section 254(2); no apparent mistake is shown to justify recalling the order.

Prohibition on reviving dismissed appeals merely to obtain eligibility for Vivad Se Vishwas Scheme - Whether the Tribunal should recall its order to enable the assessee to become eligible for the Vivad Se Vishwas Scheme by reviving dismissed appeals. - HELD THAT: - The Tribunal noted the assessee's expressed intention to opt for the Vivad Se Vishwas Scheme, which requires that the appeal be pending before the Tribunal on a specified date. The Bench observed that allowing miscellaneous applications to recall a finally dismissed appeal for the sole purpose of rendering the appeal pending for scheme eligibility would make the Tribunal a party to the assessee's settlement strategy and is impermissible. If aggrieved, the assessee may approach the appropriate appellate forum, but the Tribunal will not recall its order outside the limited ambit of section 254(2) merely to facilitate participation in the scheme. [Paras 6]

Miscellaneous applications seeking revival of the dismissed appeals to secure eligibility for the Vivad Se Vishwas Scheme are not maintainable and are dismissed.

Final Conclusion: The miscellaneous petitions seeking recall of the Tribunal's order and condonation of delay are dismissed: the Tribunal correctly refused condonation in absence of contemporaneous medical evidence or affidavit, the belated affidavit cannot be entertained under section 254(2), and the appeals will not be revived merely to enable eligibility for the Vivad Se Vishwas Scheme.

Notional interest on receivables - recharacterisation of receivables as unsecured loan - application of CUP as 6 month LIBOR plus markup - working capital adjustment versus interest imputation - comparability and entity level margin as a check against transfer pricing adjustment - foreign tax credit remand for verification - manual/mandatory consequences of interest under provisions for defaults in advance tax

Notional interest on receivables - recharacterisation of receivables as unsecured loan - working capital adjustment versus interest imputation - comparability and entity level margin as a check against transfer pricing adjustment - Whether an adjustment on account of arm's length interest on overdue trade receivables from associated enterprises could be made for AY 2013-14. - HELD THAT: - The Tribunal held that the TPO/DRP/AO erred in treating continued outstanding receivables as a separate international transaction and recharacterising delay in realisation as an unsecured loan for the purpose of imputing interest. Relying on earlier decisions of the Tribunal in the assessee's own cases and the pronouncements of the Delhi High Court, the Tribunal emphasised that inclusion of the term 'receivables' in the Explanation to Section 92B does not automatically characterise every receivable as an international transaction without a contextual inquiry and analysis over a period to discern a pattern. The Tribunal noted that where the assessee is debt free, where no borrowing cost is incurred, where there is no differentiation in treatment between associated and non associated parties (similar delays existed with unrelated parties and no interest was charged), and where the entity level margin of the taxpayer is higher than comparables, a standalone notional interest adjustment would distort the picture and is impermissible. The Tribunal therefore concluded that working capital effects and overall pricing must be considered and that mere delay in payment cannot, by itself, justify recharacterisation and a notional interest addition. [Paras 11, 12, 13]

Adjustment on account of notional interest on receivables from associated enterprises deleted; grounds 2.1 to 2.11 allowed.

Foreign tax credit remand for verification - Whether foreign tax credit claimed by the assessee should be allowed while computing tax liability for AY 2013-14. - HELD THAT: - The Tribunal found it appropriate to restore the issue of foreign tax credit to the file of the Assessing Officer for verification and decision in accordance with law. The AO was directed to give the assessee a reasonable opportunity of being heard and to verify and allow the foreign tax credit if supported by facts and law. [Paras 15]

Issue remanded to the Assessing Officer with directions to verify and decide the claim of foreign tax credit in accordance with law.

Manual/mandatory consequences of interest under provisions for defaults in advance tax - Whether interest under the provisions for defaults in advance tax (Sections 234B and 234C) should be levied. - HELD THAT: - The Tribunal treated levy of interest under the relevant provisions as consequential in nature, noting that such interest is mandatory once the tax liability is determined. No independent interference with the levy of interest was warranted in the circumstances of the case. [Paras 16]

Levy of interest under Sections 234B and 234C upheld (dismissed as grounds of appeal).

Final Conclusion: The appeal is partly allowed: the transfer pricing adjustment in respect of notional interest on receivables is deleted; the claim for foreign tax credit is remanded to the Assessing Officer for verification and decision; and the levy of interest under Sections 234B and 234C is left intact as consequential/mandatory.

Turnover in respect of speculative/derivative transactions - computation of turnover by aggregate of positive and negative differences - penalty under section 271A for non maintenance of books - applicability of tax audit under section 44AB to speculative transactions - Guidance Note on Tax Audit issued by the Institute of Chartered Accountants of India - reasonable cause defence under section 273B

Turnover in respect of speculative/derivative transactions - computation of turnover by aggregate of positive and negative differences - penalty under section 271A for non maintenance of books - Guidance Note on Tax Audit issued by the Institute of Chartered Accountants of India - reasonable cause defence under section 273B - Whether penalty under section 271A for non maintenance of books is leviable where turnover from derivative/speculative transactions is computed on the basis of aggregate of positive and negative differences and, on that basis, the turnover is below the threshold for requiring audit. - HELD THAT: - The Tribunal followed its consistent view that, for non delivery based speculative/derivative transactions, turnover must be determined by taking the aggregate of both positive and negative differences arising on settlement of contracts, in accordance with the Guidance Note on Tax Audit issued by the Institute of Chartered Accountants of India. Applying that method to the assessee's particulars, the turnover falls below the threshold relevant to audit/maintenance obligations. Further, because the question of how turnover is to be computed in respect of derivative/speculative transactions is a debatable issue, the assessee's bonafide explanation constitutes a reasonable cause under the provisions permitting relief from penalty. On these conclusions, the penalty under section 271A for failure to maintain books could not be sustained.

Penalty under section 271A is deleted and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2015-16, holding that turnover from derivative/speculative transactions is to be computed by aggregating positive and negative differences (per ICAI Guidance Note); on that basis turnover was below the audit threshold and, being a debatable point giving reasonable cause, the penalty under section 271A was deleted.

Registration under section 12AA - registration under section 80G - Rule 17A of the Income tax Rules - amended provision requiring self certified/self attested copies - power of the Commissioner to call for documents for satisfaction of genuineness - pre amended Rule 17A versus amended Rule 17A - technical non compliance not to defeat substantive compliance - remand for fresh examination

Rule 17A of the Income tax Rules - amended provision requiring self certified/self attested copies - registration under section 12AA - power of the Commissioner to call for documents for satisfaction of genuineness - pre amended Rule 17A versus amended Rule 17A - technical non compliance not to defeat substantive compliance - Validity of refusal to grant registration under section 12AA on ground of non production of original instrument where application was filed after substitution of Rule 17A - HELD THAT: - The Tribunal examined the pre amended and amended texts of Rule 17A and held that the amended Rule 17A (effective 19 02 2018), applicable to the assessee's application filed on 12 01 2019, requires submission of self certified/self attested copies of the instrument/document evidencing creation of the trust and does not mandate production of originals. While the Commissioner has power to call for documents to satisfy himself as to genuineness of activities, the insistence on originals in the facts of this case was contrary to the governing amended rule. The assessee had placed on record notarised/self attested copies and had produced the original instrument during the process; further documentary evidence of existence and activities (including audited statements and activity statement for FY 2018 19) was on record. In these circumstances the Tribunal found that refusal to register on the sole ground of non production of original was misplaced and amounted to applying a requirement not contemplated by the amended rule. However, rather than deciding entitlement finally on merits, the Tribunal directed restoration of the matter to the CIT(Exemptions) for fresh examination in light of the correct statutory position. [Paras 2]

Assessee's application for registration under section 12AA cannot be refused solely for non production of originals where amended Rule 17A permits self certified copies; matter restored to the CIT(Exemptions) for fresh consideration.

Registration under section 80G - registration under section 12AA - remand for fresh examination - Whether the 80G approval can be denied independently where registration under section 12AA has been denied on the same flawed basis - HELD THAT: - The Tribunal noted that the denial of approval under section 80G was consequential upon the CIT(Exemptions)'s refusal to register the assessee under section 12AA. Since the issue as to registration under section 12AA was restored for fresh examination in light of the amended Rule 17A, the question of grant of approval under section 80G cannot be finally adjudicated independently at this stage. The Tribunal therefore restored the section 80G matter to the CIT(Exemptions) for reconsideration concomitantly with the section 12AA examination. [Paras 3]

Appeal against denial of approval under section 80G is restored to the CIT(Exemptions) for fresh consideration consequential to reconsideration of registration under section 12AA.

Final Conclusion: Both appeals are allowed for statistical purposes and the matters are restored to the file of the CIT(Exemptions) for fresh consideration: the section 12AA application must be reconsidered applying the amended Rule 17A (self certified copies sufficient), and the section 80G approval reconsidered consequentially; no order as to costs.

Registration under section 12AA - approval under section 80G - Rule 17A of the Income tax Rules - self certified / self attested copy - production of original instrument - power of the Commissioner to call for documents for verification

Registration under section 12AA - Rule 17A of the Income tax Rules - self certified / self attested copy - production of original instrument - Validity of the ld. CIT(Exemption)'s refusal to grant registration under section 12AA on the ground of non production of original instrument - HELD THAT: - The Tribunal examined both the pre amendment and amended forms of Rule 17A. The application for registration was filed on 12 01 2019, after the substitution of Rule 17A effective 19 02 2018. The amended Rule 17A requires filing of self certified copies (including self certified copy of the instrument/registration) and does not mandate production of the original document at the stage of application. The ld. CIT(Exemption) had rejected the application insisting on production/verification with originals; that insistence was held to be contrary to the amended rule and beyond the scope of the requirements applicable to the assessee's application. The Tribunal noted that notarized/self attested copies and other documents (including production of the original on one occasion) were on record and that there was no adverse finding on the substantive merits. In view of the misapplication of Rule 17A, the Tribunal set aside the CIT(E) order and restored the matter to the file of the ld. CIT(Exemption) for fresh examination in accordance with the amended Rule 17A and law.

Order rejecting registration under section 12AA set aside; matter restored to ld. CIT(Exemption) for fresh consideration under the amended Rule 17A (self certified copies sufficient).

Approval under section 80G - registration under section 12AA - power of the Commissioner to call for documents for verification - Whether the denial of approval under section 80G could stand independently of the section 12AA registration decision - HELD THAT: - The Tribunal recorded that the ld. CIT(Exemption)'s refusal to grant approval under section 80G was consequential upon the denial of registration under section 12AA. Given the Tribunal's conclusion that the 12AA rejection was based on an incorrect application of Rule 17A and having restored that issue for fresh examination, the question of 80G approval could not be finally adjudicated. Consequently, the 80G appeal was also restored to the file of the ld. CIT(Exemption) for fresh consideration in light of the outcome on registration.

Appeal against refusal of approval under section 80G restored to ld. CIT(Exemption) for fresh consideration consequential to the remand on section 12AA registration.

Final Conclusion: Both appeals allowed for statistical purposes: the Tribunal held that the amended Rule 17A (requiring self certified copies) applied to the assessee's application, set aside the CIT(Exemption)'s orders that refused registration under section 12AA and approval under section 80G, and restored both matters to the file of the ld. CIT(Exemption) for fresh examination in accordance with law; no order as to costs.

Scope of property under Explanation (d) to section 56(2)(vii) - application of section 56(2)(vii)(b)(ii) to immovable property not held as a capital asset - treatment of family agricultural receipts as source of investment - standard for accepting agricultural income and allowable margin as available savings for investment

Scope of property under Explanation (d) to section 56(2)(vii) - application of section 56(2)(vii)(b)(ii) to immovable property not held as a capital asset - Whether the provisions of section 56(2)(vii)(b)(ii) are attracted to agricultural land not held as a capital asset - HELD THAT: - The Tribunal construed the plain language of clause (vii)(b)(ii) together with Explanation (d) which defines "property" as specified capital assets (including immovable property being land or building or both). On that basis the Tribunal held that the statutory scheme limits section 56(2)(vii) to properties that are capital assets as enumerated in the Explanation, and does not extend to immovable property that is not a capital asset. Applying section 2(14) to the facts, the agricultural land in question (situated beyond municipal limits and used as agricultural land) did not qualify as a capital asset and therefore fell outside the definition of "property" for section 56(2)(vii). Relying also on a coordinate Bench decision under identical circumstances, the Tribunal concluded that the addition made under section 56(2)(vii)(b)(ii) could not be sustained and directed its deletion. [Paras 2]

Addition under section 56(2)(vii)(b)(ii) made on account of difference between stamp duty value and purchase price of agricultural land deleted.

Treatment of family agricultural receipts as source of investment - standard for accepting agricultural income and allowable margin as available savings for investment - Whether the assessee has satisfactorily demonstrated the source of investment in the agricultural land from agricultural income and savings of the family - HELD THAT: - The Tribunal examined the ledger and krishi mandi receipts placed on record and the assessee's explanation of additional unrecorded receipts from sale of vegetables and lehsun. It found that the Commissioner (Appeals) had omitted several receipt items and had applied an 80% expense ratio which the Tribunal considered unreasonable given the family's direct involvement in cultivation. Holding that a 60% retention of sale receipts as a reasonable estimate of income was justified on the facts, the Tribunal computed agricultural income on that basis (60% of recorded receipts) and accepted the assessee's claim of additional savings from lehsun and vegetable sales across four years. On this factual basis the Tribunal concluded that the source of investment was sufficiently explained and directed deletion of the unexplained investment addition. [Paras 3]

Addition treated as unexplained investment deleted as the source of investment from agricultural income and savings was held to be satisfactorily proved.

Final Conclusion: The appeal is allowed: the addition under section 56(2)(vii)(b)(ii) relating to difference between stamp duty value and purchase price of agricultural land is deleted as section 56(2)(vii) applies only to specified capital assets; further, the addition treating a portion of the investment as unexplained is deleted on findings that agricultural receipts and reasonable estimates of savings adequately explain the source of investment. No order as to costs.

Deduction under section 80P(2)(a)(i) - principles of mutuality - income arising from transactions with members - nature of business akin to co-operative bank - examination of memorandum of association and byelaws - requirement of certificate from Reserve Bank of India regarding banking licence

Deduction under section 80P(2)(a)(i) - principles of mutuality - income arising from transactions with members - requirement of certificate from Reserve Bank of India regarding banking licence - examination of memorandum of association and byelaws - Whether the claim of deduction under section 80P(2)(a)(i) is sustainable on the facts of the assessee and if the principles of mutuality are satisfied. - HELD THAT: - The Tribunal found that the question whether the assessee satisfies the test of mutuality and whether the income claimed as exempt arises from transactions with members requires fresh factual and documentary verification. The Tribunal directed that the issue be set aside to the Assessing Officer for reconsideration. In particular, the Assessing Officer is to examine whether the society's business is akin to that of a co-operative bank by obtaining from the assessee a certificate from the Reserve Bank of India that the society does not possess a banking licence and that its business is not banking. The Tribunal further directed scrutiny of the society's memorandum of association, articles, byelaws and member-categories to ascertain the nature and conditions of membership, the source of funds and participation in surplus, since deduction under section 80P(2)(a)(i) is available only in respect of income arising from dealings with members and only if such income is in the nature of banking or providing credit facilities to members. The assessee is to be given opportunity to produce evidence and be heard before the Assessing Officer decides the issue afresh. These directions follow the principle that the nature of the income and the application of mutuality must be factually established before allowing the deduction. [Paras 8]

Issue remanded to the Assessing Officer for fresh consideration with directions to obtain RBI certificate and examine the memorandum, byelaws and membership details; grounds allowed for statistical purposes.

Final Conclusion: Appeal allowed for statistical purposes by setting aside the question of deduction under section 80P(2)(a)(i) to the Assessing Officer for fresh adjudication with specified directions regarding verification of mutuality, nature of income and production of RBI certificate.

Quashing of criminal proceedings under inherent powers of the High Court (Section 482 Cr.P.C.) - Prima facie test for quashing prosecution - Admissibility and evidentiary value of statements under Section 108 of the Customs Act - Distinction between occurrence report by customs officers and First Information Report - Applicability of Sections 25 and 26 of the Evidence Act to statements recorded by customs officers

Quashing of criminal proceedings under inherent powers of the High Court (Section 482 Cr.P.C.) - Prima facie test for quashing prosecution - Whether the petition under Section 482 Cr.P.C. to quash the proceedings in O.R. No.12/2013 should be allowed at the threshold. - HELD THAT: - The Court applied the settled prima facie standard for quashing at the initial stage and considered whether the uncontroverted allegations establish no offence or make conviction highly unlikely. The record showed multiple inculpatory materials including confession-statements of co-accused and several contemporaneous statements implicating the petitioner. The Court held it would be premature to quash the proceedings at this stage because the admissibility and weight of those materials require adjudication at trial and special features relied on by the petitioner did not render conviction clearly implausible. In view of these considerations, interference under Section 482 was refused. [Paras 11, 14, 16]

Petition under Section 482 Cr.P.C. dismissed; proceedings in O.R. No.12/2013 not quashed.

Admissibility and evidentiary value of statements under Section 108 of the Customs Act - Distinction between occurrence report by customs officers and First Information Report - Applicability of Sections 25 and 26 of the Evidence Act to statements recorded by customs officers - Whether statements recorded under Section 108 of the Customs Act and occurrence reports by customs officers are inadmissible or otherwise disentitle the prosecution from proceeding. - HELD THAT: - The Court recognised that customs officers are revenue officers and that an occurrence report by them is not the same as a police First Information Report; the procedural provisions of the Cr.P.C. do not strictly apply to Customs Act inquiries. Nevertheless, the Court held that inculpatory statements recorded under Section 108 of the Customs Act are admissions not automatically excluded by Sections 25 and 26 of the Evidence Act, and that the question whether co-accused statements can be used against the petitioner is for the trial court to decide. Retracted confessions remain admissions whose evidentiary value must be assessed at trial rather than by summary quashing. [Paras 12, 15, 16]

Statements under Section 108 Customs Act are not per se inadmissible under Sections 25/26 Evidence Act; their use and weight are matters for trial.

Final Conclusion: The petition under Section 482 Cr.P.C. to quash the criminal proceedings in O.R. No.12/2013 is dismissed. The High Court declined to exercise inherent jurisdiction at the threshold because the admissibility and weight of statements and other materials implicating the petitioner require determination by the trial court.

Provisional attachment of bank accounts under section 110(5) of the Customs Act - Temporal non-retroactivity of statutory provisions - Expiry of period of provisional attachment - Protection of revenue versus legality of continued attachment

Provisional attachment of bank accounts under section 110(5) of the Customs Act - Temporal non-retroactivity of statutory provisions - Section 110(5) of the Customs Act, as inserted w.e.f. 01.08.2019, is not applicable to a bank account frozen on 07.12.2018. - HELD THAT: - The Court observed that sub section (5) of section 110 was inserted by the Finance (No.2) Act, 2019 with effect from 01.08.2019. The freezing of the petitioner's bank account occurred on 07.12.2018, i.e., prior to the insertion of that provision. Therefore, prima facie the statutory power in section 110(5) could not be invoked retrospectively to validate an attachment made before the provision came into force. In view of this temporal mismatch, the respondents could not rely upon section 110(5) as the legal basis for continuing the freeze on the petitioner's account. [Paras 7, 8]

Section 110(5) could not be applied to validate the freezing effected on 07.12.2018.

Expiry of period of provisional attachment - Protection of revenue versus legality of continued attachment - Continuation of the freeze was unlawful because the permissible period of provisional attachment under section 110(5) (initial six months and any permitted six month extension) had long expired. - HELD THAT: - The Court noted that even if section 110(5) were to be treated as applicable, the initial period of provisional attachment under that provision cannot exceed six months and may be extended for a further period not exceeding six months. The attachment in the petitioner's case had been in place far beyond those stipulated periods. Continuing the freeze beyond the statutory period (and beyond any permitted extension) would be oppressive and without legal sanction. Given that the statutory time limits had elapsed, there was no lawful basis to maintain the bank account freeze. [Paras 8, 9]

The continued freezing of the petitioner's bank account was without sanction of law and oppressive, and the account must be unfrozen forthwith.

Final Conclusion: Writ petition allowed; respondents directed to immediately unfreeze the petitioner's bank account (Current Account No.37846915300) and the petition is disposed of without costs.

Strict interpretation of exemption notification - retrospective effect of amending notification - refund of duty paid subject to successful challenge to assessment - classification under Customs Tariff Heading - burden of proof on the assessee to show applicability of exemption

Classification under Customs Tariff Heading - strict interpretation of exemption notification - Whether imported commercial butane/propane classified under Chapter sub headings 2711.12/2711.13 were entitled to the exemption available to goods described as Liquefied Petroleum Gases under the notifications in force prior to 02.05.2005. - HELD THAT: - The Tribunal examined the scope of the amending notifications in force prior to 2.5.2005 and held that those notifications expressly referred only to Liquefied Petroleum Gases falling under sub heading 2711.19. Applying the principle that exemption notifications are to be construed strictly and that the assessee bears the burden of proving applicability, the Tribunal found no basis to extend those notifications to imports expressly assessed and entered under sub headings 2711.12/2711.13. The earlier decisions relied upon by the appellant were distinguished on facts, since the relevant amending entries before 2.5.2005 did not include the additional sub headings later inserted by Notification No. 37/05-Cus dated 2.5.2005. Consequently, the exemption could not be applied to clearances of commercial butane/propane assessed under different tariff sub headings for the period in question. [Paras 8, 11, 12, 13, 14]

The exemption notifications in force prior to 02.05.2005 did not cover the importer's goods as classified at import and therefore could not be invoked to grant refund for the said period.

Refund of duty paid subject to successful challenge to assessment - burden of proof on the assessee to show applicability of exemption - Whether the appellant could claim refund of customs duty paid without first successfully challenging the original assessments of the Bills of Entry under which duty was paid. - HELD THAT: - Relying on settled precedent and principles cited in the judgment, the Tribunal reiterated that a claim for refund of duty paid cannot be entertained where the importer has not challenged the assessment under which the duty was paid. The Bills of Entry assessed and accepted by the assessing officer constitute an assessment which must be contested by appropriate proceedings if the importer seeks to alter the classification or liability. The Tribunal applied this principle to hold that the appellant's route of seeking refund without first overturning the assessments was contrary to law and not maintainable. [Paras 5, 13]

Refund cannot be allowed where the importer has not successfully challenged the assessment of the relevant Bills of Entry; the refund claim was accordingly not maintainable on this ground.

Retrospective effect of amending notification - strict interpretation of exemption notification - Whether Notification No. 37/05 Cus dated 02.05.2005 can be given retrospective effect so as to make earlier imports eligible for the exemption. - HELD THAT: - The Tribunal accepted the Revenue's contention that an amending notification cannot be construed to have retrospective effect in the absence of explicit language conferring such retrospective operation. Reference was made to statutory provisions and authority that an amendment shall not affect obligations or liabilities incurred under the earlier notification. In this factual matrix, Notification No. 37/05 Cus introduced wider tariff sub headings only w.e.f. 02.05.2005 and did not expressly provide for retrospective operation; hence it could not undo liabilities already incurred by the importer prior to that date. [Paras 6, 11, 13]

Notification No. 37/05 Cus dated 02.05.2005 cannot be given retrospective effect to cover imports made before that date; therefore it does not entitle the appellant to refund for the earlier period.

Final Conclusion: The Tribunal upheld the rejection of the refund claim. Applying the rule of strict interpretation of exemption notifications, the requirement that refunds premised on changed classification be preceded by successful challenge to the assessment, and the principle that the amending notification of 02.05.2005 is not retrospective, the appeal was dismissed and the refund claim denied.

Binding nature of DGFT clarifications on Customs - interpretation of Foreign Trade Policy - scope of SFIS benefit for import of vehicles - effect of non-action by licensing authority on entitlement - binding effect of appellate direction on adjudicating authorities

Binding nature of DGFT clarifications on Customs - interpretation of Foreign Trade Policy - Clarifications issued by the Directorate General of Foreign Trade that golf carts do not fall within the restricted category of 'vehicles' under para 3.6.4.5 of the Foreign Trade Policy are binding on Customs authorities. - HELD THAT: - The Tribunal examined earlier judicial pronouncements and the statutory scheme under which DGFT frames and clarifies the Foreign Trade Policy. It held that interpretation of provisions of the Foreign Trade Policy and consequential clarifications issued by DGFT govern the entitlement to SFIS benefits and are binding on Customs, which only implements the policy. In the present case DGFT had issued clarifications to the effect that golf carts do not fall within the restricted definition of 'vehicles' for the purposes of SFIS; therefore Customs was bound to accept that position rather than adopt an independent contrary view. [Paras 6]

DGFT clarifications that golf carts are not 'vehicles' for SFIS purposes are binding on Customs; the Customs authorities' contrary conclusion was incorrect.

Scope of SFIS benefit for import of vehicles - effect of non-action by licensing authority on entitlement - Where the licensing authority (DGFT) has not disavowed or taken action against an importer for availing SFIS benefit, Customs cannot refuse the exemption on the ground that the import falls within the restricted category. - HELD THAT: - The Tribunal noted that DGFT, as the licensing authority, had not challenged the appellant's claim to SFIS benefit nor taken any steps to withdraw or deny the licence benefit. Given DGFT's clarifications and absence of action by the licensing authority, Customs could not independently deny the exemption. The court treated non-action by DGFT together with its clarifications as authoritative for determining entitlement to the duty-credit scrip usage. [Paras 6]

In the absence of any adverse action by DGFT, Customs could not refuse SFIS exemption to the appellant on the ground that the imports were vehicles.

Binding effect of appellate direction on adjudicating authorities - An adjudicating authority and a subsequent appellate authority cannot disregard and go beyond a specific direction issued by the Commissioner (Appeals) in an earlier round of litigation when the department did not challenge that earlier appellate order. - HELD THAT: - The Tribunal observed that in the first round the Commissioner (Appeals) had set aside the adjudicating authority's order and directed it to decide afresh in accordance with DGFT guidelines. The department did not appeal that direction. The subsequent adjudicating and appellate authorities nevertheless rejected the DGFT guidelines and proceeded contrary to the earlier direction. The Tribunal held that, absent any departmental challenge to the earlier appellate order, the authorities could not ignore or circumvent that direction and reach the same adverse conclusion. [Paras 6, 7]

The adjudicating authority and Commissioner (Appeals) erred in disregarding the earlier appellate direction; they could not go beyond the prior direction which remained unchallenged.

Final Conclusion: The appeal is allowed; the impugned order is set aside and the appellant is entitled to relief in accordance with DGFT clarifications that golf carts do not fall within the restricted category of vehicles for SFIS purposes, with consequential relief, if any.

Restoration of name of struck off company - Strike off for non-filing of statutory returns - Publication of notice in Form STK-5 and Official Gazette - Restoration subject to filing of pending statutory documents and payment of costs - Registrar of Companies' power to take further action for other violations

Restoration of name of struck off company - Strike off for non-filing of statutory returns - Restoration of the company's name on the Register of Companies despite its failure to file annual returns since Financial Year 2011-12. - HELD THAT: - The Tribunal noted that the company had not filed statutory returns since 2011-12, which prompted the ROC to strike off the name after complying with the statutory procedure. The Tribunal found that the company nevertheless continued to have assets and liabilities, including immovable property whose disposal required revival. Balancing the absence of a plausible explanation for non-filing against the existence of assets that warrant revival, the Tribunal exercised its power under the Companies Act to restore the company's name from the date of striking off.

The company's name is restored on the Register of Companies as if it had not been struck off.

Publication of notice in Form STK-5 and Official Gazette - The contention that notice under the strike-off provision was not served was rejected where Form STK-5 containing the company's name had been published in the newspaper and Official Gazette. - HELD THAT: - Although the applicant claimed non-service of the notice under the relevant provision, the Tribunal observed that the notice in Form STK-5 was published both in the newspaper and the Official Gazette as required. On that basis, the claim of non-service did not preclude the ROC's strike-off action and did not operate to bar restoration in light of the other facts.

The claim of non-service of notice was not accepted because publication in Form STK-5 and the Official Gazette had occurred.

Restoration subject to filing of pending statutory documents and payment of costs - Restoration is conditional upon filing all pending statutory documents and payment of costs for each year of default within stipulated time. - HELD THAT: - Given non-compliance with filing obligations without a plausible explanation, the Tribunal imposed conditions to regularize the company's statutory position. The company is directed to file all pending annual accounts and annual returns for the years in default with prescribed fees/additional fee/fine within 45 days of restoration. The Tribunal also imposed a specified cost for each year of default to be paid online within 30 days as a condition precedent to restoration taking full effect.

Restoration granted subject to filing of pending documents and payment of costs and fees within the timelines ordered.

Registrar of Companies' power to take further action for other violations - The order restoring the company's name is confined to violations that led to the strike-off and does not preclude the ROC from initiating appropriate action for any other violations/offences. - HELD THAT: - The Tribunal expressly limited the effect of its restoration order to the grounds that resulted in striking off and clarified that ROC remains free to take lawful action for any other alleged violations committed by the company prior to or during the strike-off period. This preserves ROC's statutory powers to investigate or prosecute separate breaches notwithstanding restoration.

Restoration does not bar the ROC from taking appropriate action in accordance with law for other violations.

Final Conclusion: The Tribunal allowed the application for restoration of the company's name as if it had not been struck off, subject to the filing of all pending statutory documents, payment of prescribed fees and costs within the timelines directed, and without prejudice to the ROC's power to take action for any other violations.

Composite Scheme of Merger and Amalgamation - dispensation of meetings - convening meetings of shareholders and creditors - quorum and voting by proxy - appointment of Chairperson and Scrutinizer - notice and advertisement requirements - compliance with sub section (5) of Section 230 and Rule 8 of the Companies (CAA) Rules, 2016 - filing of report of meetings in Form CAA 4 and affidavit of compliance

Dispensation of meetings - Composite Scheme of Merger and Amalgamation - Requirement to convene meeting of secured creditors of the Transferor Companies No. 1 and 2 dispensed with. - HELD THAT: - The Tribunal examined the applicants' statement and the certificate of the Chartered Accountant asserting that Transferor Company Nos. 1 and 2 have no secured creditors. On that basis the Tribunal directed that there is no need to convene meetings of secured creditors for those two transferor companies and dispensed with the requirement accordingly. [Paras 14]

Meeting of secured creditors of Transferor Company Nos. 1 and 2 dispensed with.

Convening meetings of shareholders and creditors - Composite Scheme of Merger and Amalgamation - Meetings of shareholders and unsecured creditors of all three applicant companies, and meeting of the secured creditor of the Transferee Company, to be convened under Tribunal supervision on specified dates. - HELD THAT: - Having considered the joint application under the Companies Act seeking sanction of the scheme, the Tribunal ordered that meetings be convened for the shareholders and unsecured creditors of Applicant Nos. 1, 2 and 3 and, where required, the secured creditor of the Transferee Company, to consider and, if thought fit, approve the proposed scheme with or without modifications. Specific dates, times and venues (including video conferencing option) were fixed for these meetings to enable consideration of the Composite Scheme of Merger and Amalgamation. [Paras 15, 16, 17]

Meetings of shareholders and unsecured creditors of all applicants and of the secured creditor of the Transferee Company to be convened as directed.

Notice and advertisement requirements - compliance with sub section (5) of Section 230 and Rule 8 of the Companies (CAA) Rules, 2016 - Directions on advertisement, dispatch of notices, explanatory statements and availability of scheme to concerned persons. - HELD THAT: - The Tribunal directed publication of an advertisement in specified newspapers at least one month before the meetings indicating particulars and availability of the Scheme and explanatory statement, and directed that notices in Form No. CAA 2 along with the Scheme, the statement required under Sections 230/232 read with Section 102 and Rule 6, and proxy form be sent to shareholders and creditors by registered post/courier/e mail/hand delivery in accordance with the Companies (CAA) Rules, 2016. The Tribunal also directed that notices required under sub section (5) of Section 230 and Rule 8 be sent forthwith to the Regional Director, Registrar of Companies, Income tax authorities and the Official Liquidator, allowing them 30 days to make representations. [Paras 18, 19, 31]

Advertisement and dispatch of notices to concerned persons and statutory authorities to be carried out in the manner and within the time prescribed.

Quorum and voting by proxy - appointment of Chairperson and Scrutinizer - filing of report of meetings in Form CAA 4 and affidavit of compliance - Rules for quorum, proxies, appointment of Chairperson and Scrutinizer, and requirements for filing compliance and meeting result reports were prescribed. - HELD THAT: - The Tribunal fixed the quorum for shareholders and unsecured creditors' meetings at 25% of total value and allowed valid proxies and authorised representatives to be counted for quorum and voting; where quorum was lacking, meetings were to be adjourned for half an hour and then those present deemed quorum. For the Transferee Company's secured creditor meeting the quorum was fixed at one. The Tribunal appointed a Chairperson and a Scrutinizer for the meetings, empowered the Chairperson to conduct meetings and decide procedural questions, and directed filing an affidavit at least seven days before the meetings reporting compliance with issuance of notices and advertisements, as well as filing the meeting result in Form CAA 4 within seven working days of conclusion, duly verified by affidavit. [Paras 26, 27, 28, 29, 30]

Quorum, voting by proxy, appointments, and filing requirements prescribed and to be complied with as directed.

Composite Scheme of Merger and Amalgamation - dispensation of meetings - The joint application seeking directions to convene meetings and related reliefs was allowed and disposed of with the specified directions. - HELD THAT: - After recording the factual and procedural averments, the Tribunal granted the reliefs sought to the extent of directing convening of meetings, dispensing with meetings where unnecessary, prescribing procedural steps for notice, advertisement, quorum, appointment of functionaries and filing of compliance and results. The application was allowed and disposed of subject to those directions. [Paras 32]

CA(CAA) No. 45 of 2020 allowed and disposed of with directions as recorded.

Final Conclusion: The Tribunal granted the joint application under the Companies Act by directing convenance of shareholders' and creditors' meetings (and dispensing with meetings of secured creditors of the two transferor companies where none exist), prescribed notice, advertisement, quorum, proxy and procedural requirements, appointed the Chairperson and Scrutinizer, required statutory notices to authorities and filing of compliance and meeting results, and allowed CA(CAA) No. 45 of 2020 accordingly.

Effect of acknowledgement in writing under Section 18 of the Limitation Act - Applicability of Article 137 of the Limitation Act to applications under Section 7 of the IBC - Revival of limitation by debit/balance confirmation letters - Admissibility of Section 7 application where default is established - Authority of authorised representative to file Section 7 application

Condonation of delay - The Tribunal condoned the delay of six days in curing registry defects and in filing the appeal. - HELD THAT: - The Appellant sought condonation of a six-day delay in curing defects and in preferring the present appeal on the ground that documents/affidavits needed for finalisation could not be obtained within the specified time. The Tribunal recorded subjective satisfaction with the explanation furnished and, in furtherance of substantial cause of justice, allowed the application for condonation and disposed of I.A. No. 612/2020. [Paras 1]

Delay of six days is condoned and IA No. 612/2020 is disposed of.

Effect of acknowledgement in writing under Section 18 of the Limitation Act - Revival of limitation by debit/balance confirmation letters - Applicability of Article 137 of the Limitation Act to applications under Section 7 of the IBC - Admissibility of Section 7 application where default is established - Whether the Section 7 application filed by the financial creditor was time barred, and if so, whether acknowledgements/revival/balance confirmation letters revived limitation. - HELD THAT: - The Adjudicating Authority had admitted the Section 7 application after finding default. The Appellant challenged admissibility on limitation grounds, pointing out that the date of default stated in the application was 01.01.2016 and the Section 7 petition was filed on 01.04.2019. The Tribunal examined the documents placed before the Adjudicating Authority and noted that the Section 7 application (Form I) itself contained references in Part V to multiple balance confirmations and revival letters, including a balance confirmation dated 31.03.2017 and revival/confirmation documents of earlier dates. Applying Section 18 of the Limitation Act, the Tribunal held that an acknowledgement in writing signed before expiration of the prescribed period operates to create a fresh period of limitation computed from the date of such acknowledgement. The Tribunal found the confirmation/revival letters to be legally valid acknowledgements in writing, signed by the corporate debtor or its authorised signatory, which extended the limitation period and thereby made the Section 7 application filed on 01.04.2019 within time. The Tribunal referred to binding principles on limitation and acknowledgement, observed that the ingredients of Section 18 are applicable to both suits and applications, and concluded that the debit confirmation letters interrupted prescription and gave rise to a fresh limitation period. [Paras 21, 31, 36, 37, 38]

The debit/balance confirmation and revival letters amounted to acknowledgements under Section 18 and revived the limitation; the Section 7 application was within time and its admission by the Adjudicating Authority was valid. The appeal on limitation grounds is dismissed.

Authority of authorised representative to file Section 7 application - Whether the Section 7 application suffered legal infirmity for want of authority of the person who signed and filed it on behalf of the bank. - HELD THAT: - The Tribunal noted that the Section 7 application was signed by the bank's Chief Manager at its Asset Recovery Management Branch pursuant to a Power of Attorney dated 16.08.1999 and a board authorisation letter dated 04.08.2018 appointing an authorised representative under the IBC. Having examined the material, the Tribunal concluded that the application filed on behalf of the financial creditor was duly authorised and free from legal infirmity. The Tribunal observed that authority of an authorised representative cannot be defeated on the ground that the power of attorney did not expressly empower him to file the petition under the code, relying on the stated practice and precedents. [Paras 22]

The Section 7 application was filed by a duly authorised representative and is free from legal infirmity on that ground.

Final Conclusion: The application for condonation of delay is allowed. On merits, the Tribunal finds that the balance confirmations and revival letters constituted acknowledgements in writing under Section 18 of the Limitation Act and revived the limitation, so that the Section 7 petition was within time; the Adjudicating Authority's admission of CP No. (IB) 257/7/NCLT/AHM/2019 is upheld. The appeal is dismissed and all connected interlocutory applications are closed; no order as to costs.

Interests of all stakeholders under the Insolvency and Bankruptcy Code, 2016 - responsibility of the successful Resolution Applicant for employees on the rolls at the time of approval of the Resolution Plan - jurisdiction of the Adjudicating Authority to direct payment of pending salaries and statutory dues after approval of Resolution Plan - enforcement of employees' claims against the corporate debtor post-resolution - obligation to issue Service Certificate and Relieving Letter - payment of statutory dues including Provident Fund and gratuity

Jurisdiction of the Adjudicating Authority to direct payment of pending salaries and statutory dues after approval of Resolution Plan - responsibility of the successful Resolution Applicant for employees on the rolls at the time of approval of the Resolution Plan - interests of all stakeholders under the Insolvency and Bankruptcy Code, 2016 - Whether the Tribunal has jurisdiction to direct the Resolution Applicant/new management to clear pending salaries, statutory dues and to issue Service Certificates/Relieving Letters to employees who resigned after approval of the Resolution Plan and whether the Resolution Applicant is liable for such obligations. - HELD THAT: - The Tribunal examined the scheme and preamble of the I&B Code and the cited Supreme Court exposition that the Code aims to balance the interests of all stakeholders, including workers, so that workers are paid and stakeholders' interests are protected. The applicants were employees of the corporate debtor when the Resolution Plan was approved on 21.01.2019 and resigned thereafter on 28.02.2019 with one month notice. The Tribunal rejected the contention that these are ordinary employee-employer disputes beyond its jurisdiction, and also rejected the plea that finality of CIRP and the Supreme Court order ousted any remedy, because the employees were on the rolls at the time of approval and thus form part of the stakeholders protected by the Code. Relying on the objective of the Code to protect stakeholders and to ensure compliance with the Resolution Plan, the Tribunal held that the successful Resolution Applicant/new management cannot avoid responsibility for pending salaries, statutory dues and issuance of employment documents in respect of such employees, and that the Adjudicating Authority may direct appropriate reliefs to safeguard stakeholder interests. [Paras 6, 7, 8, 9]

The Tribunal held that it has jurisdiction and directed the Resolution Applicant/new management to clear pending salaries for February 2019 and one month notice pay (March 2019), to pay statutory dues including Provident Fund and gratuity accrued to eligible resigned employees, and to issue Service Certificates and Relieving Letters.

Final Conclusion: Application allowed; the Resolution Applicant/new management is directed to clear specified pending salaries and statutory dues for the resigned employees and to issue Service Certificate and Relieving Letter within one month, and the IA is disposed of.

Admission of debt in pleadings - reliance on prior counter-affidavit as admission - estoppel - admissibility of documents filed in earlier withdrawn petition - NCLT's power to admit a section 7 petition on documentary and affidavit evidence - appellate interference with admission orders

Admission of debt in pleadings - reliance on prior counter-affidavit as admission - estoppel - Whether the NCLT was justified in admitting the section 7 petition on the basis of documentary evidence, a supplementary affidavit and the corporate debtor's prior counter-affidavit which contained an admission of outstanding debt. - HELD THAT: - The NCLT, after perusal of the documents, the supplementary affidavit dated 03.08.2018 and the counter-affidavit filed by the corporate debtor in the earlier proceeding, concluded that a loan amount remained outstanding and that a further disbursement of Rs. 18,86,00,000 made on 13.04.2016 constituted an independent transaction. The Supreme Court held that the corporate debtor's earlier counter-affidavit contained an unqualified admission of indebtedness which could be relied upon and that principles akin to estoppel applied to preclude the corporate debtor from taking a contrary stand. The Court observed that the NCLT legitimately exercised its power to admit the petition on the material placed before it, including the admitted particulars in the prior counter-affidavit and the supplementary affidavit, and that such material could not be characterised as irrelevant or inadmissible merely because it had been filed in an earlier proceeding. [Paras 5, 7]

NCLT was justified in admitting the section 7 petition on the basis of the documentary evidence, the supplementary affidavit and the corporate debtor's prior counter-affidavit which contained an admission of debt; estoppel principles prevented the corporate debtor from adopting a contrary stance.

Admissibility of documents filed in earlier withdrawn petition - appellate interference with admission orders - Whether the NCLAT was right to set aside the NCLT order on the grounds that documents from an earlier withdrawn petition could not be relied upon and that there was no evidence of any further disbursement. - HELD THAT: - The NCLAT recorded that documents rejected by the adjudicating authority or filed in an earlier petition dismissed as withdrawn could not form the basis for admission and further held there was no evidence of the alleged further disbursement. The Supreme Court found these conclusions to be incorrect. It held that the material relied upon by the NCLT included an active supplementary affidavit and the corporate debtor's own counter-affidavit (which contained a clear admission), and that the NCLAT erred in treating that admitted material as a mere 'document' from a withdrawn petition or as otherwise inadmissible. Consequently, the appellate court's interference with the admission order was misplaced. [Paras 6, 7, 8]

NCLAT erred in setting aside the NCLT order; its characterisation of the relied-upon material as inadmissible or irrelevant was incorrect and appellate interference was not justified.

Final Conclusion: The NCLAT order setting aside the NCLT's admission is set aside and the NCLT order is restored; insolvency resolution proceedings are to continue from the stage at which they were interrupted and the appeals are disposed of accordingly.

Initiation of Corporate Insolvency Resolution Process - default - appointment of Interim Resolution Professional - eligibility of Resolution Professional - moratorium - loss of substratum

Initiation of Corporate Insolvency Resolution Process - default - The petition under Section 10 of the IBC, 2016 for initiation of CIRP was maintainable and was admitted on the ground of proved default. - HELD THAT: - The Adjudicating Authority examined the petition, the ledger of creditors (financial and operational), the profit and loss accounts and balance sheet and noted continuing losses and liabilities exceeding assets. On the material placed, including the list of financial and operational creditors and financial statements showing losses and liabilities in excess of assets, the Authority was satisfied that the Corporate Debtor had committed a default and had lost its ability to pay debts. Applying the settled principle that once debt and default are proved to the satisfaction of the Adjudicating Authority the application must be admitted, the petition under Section 10 was held complete and fit for admission. [Paras 5, 8, 9]

C.P. (IB) No. 96/BB/2020 under Section 10 of the IBC, 2016 is admitted and CIRP is initiated against the Corporate Applicant.

Appointment of Interim Resolution Professional - eligibility of Resolution Professional - A proposed Resolution Professional who had filed written consent and declared no disciplinary proceedings pending was eligible and was appointed as Interim Resolution Professional. - HELD THAT: - The petitioner proposed a qualified resolution professional and produced her written consent in Form 2, wherein she declared eligibility and absence of disciplinary proceedings. The Authority applied Section 10(4) requirement that no disciplinary proceedings be pending against the proposed RP and, being satisfied on the record, appointed the proposed professional as Interim Resolution Professional to carry out CIRP in accordance with the Code and Rules. [Paras 7, 9]

Ms. Tanuja Jalan is appointed as Interim Resolution Professional to conduct the CIRP.

Moratorium - On admission of the petition, the statutory moratorium as specified in the Code was declared with the stated exceptions. - HELD THAT: - Following admission of the Section 10 petition and in exercise of powers under the Code, the Adjudicating Authority declared the moratorium prohibiting institution or continuation of suits or proceedings against the Corporate Debtor, transfer or disposal of assets, enforcement of security, recovery of property occupied by the Corporate Debtor and termination of supply of essential goods or services during the CIRP, subject to the exceptions noted in the order and to proceedings pending before the High Court and Supreme Court. [Paras 9]

A moratorium in the terms stated in the order is declared with effect from the date of the order until completion of the CIRP, with specified exceptions.

Loss of substratum - The Corporate Debtor had lost its substratum and capacity to run its business or pay debts, supporting initiation of CIRP. - HELD THAT: - On consideration of the financial statements showing losses for successive years and a balance sheet where liabilities exceeded assets, together with the petitioner's averments about the unfavourable business environment and inability to repay creditors, the Tribunal found that the Company had suffered erosion of its commercial viability (loss of substratum) and therefore could not meet its debt obligations, which reinforced the satisfaction reached to admit the petition. [Paras 5, 8]

The finding of loss of substratum and inability to pay debts is recorded and forms a basis for admission of the petition.

Final Conclusion: The Company Petition under Section 10 is admitted; CIRP is initiated against Synew Steel Private Limited, Ms. Tanuja Jalan is appointed as Interim Resolution Professional, and the statutory moratorium is declared until completion of the CIRP, subject to the exceptions noted in the order.

Validity of authorised representative's vote under Section 25A(3A) of the Insolvency and Bankruptcy Code - Treatment of class vote as 100% where authorised representative records more than 50% of the voting share of the financial creditors he represents - Replacement of Interim Resolution Professional by a Resolution Professional pursuant to a Committee of Creditors' resolution - Maintainability and locus of associations to challenge Committee of Creditors' decisions - Effect of subsequent claimants on previously taken Committee of Creditors' decisions - Requirement to seek CoC remedy (33% voting threshold) for replacement of a resolution professional

Validity of authorised representative's vote under Section 25A(3A) of the Insolvency and Bankruptcy Code - Treatment of class vote as 100% where authorised representative records more than 50% of the voting share of the financial creditors he represents - Replacement of Interim Resolution Professional by a Resolution Professional pursuant to a Committee of Creditors' resolution - Whether the Committee of Creditors' resolution to replace the Interim Resolution Professional with a proposed Resolution Professional was validly passed by treating the authorised representative's vote as 100% under Section 25A(3A), and whether the appointment of Mr. Ganga Ram Agarwal as RP should be made. - HELD THAT: - The Bench examined the factual position that, in the second CoC meeting, the class of homebuyers represented by the authorised representative had more than 50% of the voting share of the homebuyer class in favour of replacement. The IRP conceded that the resolution was proposed and voted as stated. Applying Section 25A(3A) of the Code, the Bench held that where the authorised representative casts his vote in accordance with a decision taken by more than fifty per cent of the voting share of the financial creditors he represents who have cast their vote, that vote is to be treated as the authorised representative's vote on behalf of all such financial creditors. Reliance was placed on the ratio in Pioneer Urban Land and Infrastructure Ltd. (para. 55) to the extent that sub section (3A) allows the authorised representative's vote to be treated as representing the class where the >50% threshold among those who voted is met. Applying that principle to the admitted voting figures, the Bench concluded that the requisite support existed, the resolution in the CoC exceeded the required threshold, and no further inquiry was necessary. The application for replacement was therefore allowed and Mr. Ganga Ram Agarwal was appointed as Resolution Professional in place of the Interim Resolution Professional. [Paras 4, 6, 7, 8, 9]

The CoC resolution replacing the IRP with Mr. Ganga Ram Agarwal is valid under Section 25A(3A) and the appointment of Mr. Ganga Ram Agarwal as Resolution Professional is allowed.

Maintainability and locus of associations to challenge Committee of Creditors' decisions - Effect of subsequent claimants on previously taken Committee of Creditors' decisions - Requirement to seek CoC remedy (33% voting threshold) for replacement of a resolution professional - Whether the objections raised by Pal Allottee Welfare Association (including alleged lack of vakalatnama, alleged misconduct of the proposed RP, and alleged conflict) could invalidate the CoC's approval and warrant recalling the appointment. - HELD THAT: - The Bench noted that the association failed to demonstrate that it possessed valid authorisation (vakalatnama) from the homebuyers it purported to represent and that there was no challenge by the IRP to the figures of admitted claims or the voting totals used by the authorised representative. The Bench further observed that subsequent claims filed after the CoC meeting could not be used to invalidate a decision already taken by the CoC. Allegations of wrongdoing against the proposed RP, if substantiated and material, should be pursued before the CoC and, if necessary, a replacement moved with the prescribed voting strength (33% of CoC voting share) rather than by collateral litigation which had stalled CIRP progress for months. Given these deficiencies and the delay caused, the application challenging the appointment was dismissed as misconceived. [Paras 12, 13, 14, 15, 16]

The objections by the Pal Allottee Welfare Association are dismissed; the challenge does not invalidate the CoC's decision and the application is dismissed as misconceived.

Final Conclusion: The Tribunal allowed the application to replace the Interim Resolution Professional and appointed Mr. Ganga Ram Agarwal as Resolution Professional, holding that the authorised representative's >50% vote is to be treated as 100% for the class under Section 25A(3A); separate challenges by an association were dismissed for lack of locus, for being based on subsequent claims, and for not pursuing CoC remedies.

Extension of Corporate Insolvency Resolution Process - tolling of limitation due to COVID-19 - operation of orders under Article 142 and Article 141 - special provision relating to time-line under Insolvency Regulations - continuation of CIRP under regulatory direction until lifting of lockdown

Extension of Corporate Insolvency Resolution Process - tolling of limitation due to COVID-19 - special provision relating to time-line under Insolvency Regulations - Application for extension of time for completion of the Corporate Insolvency Resolution Process of M/s. Sargam Builders Pvt. Ltd. - HELD THAT: - The Tribunal considered the Suo Motu order of the Supreme Court extending limitation periods w.e.f. 15 March 2020 and the Insolvency and Bankruptcy Board of India notification dated 29.03.2020 containing the special provision (regulation 40C) that lockdown period shall not be counted for timelines in CIRP. Having regard to those orders, the Resolution Professional's averments and the COC resolution seeking extension in view of the period lost due to stays and the COVID-19 lockdown, the Tribunal extended the CIRP time-limit up to 29.03.2020, and directed that thereafter the special provision in the notification dated 29.03.2020 (regulation 40C) shall apply until the Government of India issues a notification lifting the lockdown. The Tribunal thus allowed the MA filed under the relevant provisions to the extent indicated, applying the Supreme Court order and the IBBI amendment to the CIRP timeline in this matter. [Paras 6, 7, 8, 9]

MA/68/KOB/2020 allowed; time limit for CIRP extended until 29.03.2020 and thereafter regulation 40C of the IBBI notification dated 29.03.2020 shall apply until the lockdown is lifted.

Final Conclusion: The Tribunal allowed the Resolution Professional's application and extended the CIRP time-limit until 29.03.2020; thereafter the special timeline provision issued by the IBBI on 29.03.2020 will govern the CIRP period until the Government lifts the lockdown.

Distribution of proceeds from liquidation assets - liquidator's power to distribute working capital and profits - application of Regulation 42(2) and section 53 - validity of salary deductions by Stakeholders' Consulting Committee - remedy under Regulation 43 for return of wrongly distributed amounts

Liquidator's power to distribute working capital and profits - application of Regulation 42(2) and section 53 - distribution of proceeds from liquidation assets - Legality of distribution by the liquidator of working capital and profits to stakeholders before liquidation and realization of liquidation proceeds. - HELD THAT: - The Tribunal found that Regulation 42(2) and Section 53 contemplate distribution of the "proceeds from realization" of liquidation assets and that the distribution process envisaged in Chapter VII of the Liquidation Regulations follows realization of assets. The liquidator failed to demonstrate any statutory power to distribute working capital and profits retained for running the corporate debtor as a going concern prior to liquidation of assets or completion of realization. The order dated 14.01.2020 did not authorise interim distribution from working capital; it contemplated use of funds to keep the corporate debtor running as a going concern and distribution under Section 53 after appropriate realization. No authority was shown to treat working capital or operating profit as distributable proceeds under Regulation 42(2). Consequently, distribution of working capital and profits to financial creditors before liquidation and realization was held contrary to the Code and Regulations. [Paras 16, 18, 20, 21]

Distribution of working capital and profit to stakeholders prior to liquidation and realization of liquidation proceeds is not in conformity with the Code and Regulations and is impermissible.

Validity of salary deductions by Stakeholders' Consulting Committee - Ministry of Home Affairs Circular - Whether the deductions of 20% to 40% from employees' salaries for April 2020 were valid and binding. - HELD THAT: - The Tribunal held that the unilateral decision of the Stakeholders' Consulting Committee to deduct salaries was arbitrary and not shown to be the result of consent of the majority of employees. The corporate debtor's factory was operating and earning profit during the period in question, and the Committee's decision, including conditional promises to reverse deductions only upon recovery from government dues, did not make the deductions lawful. The deductions were found to be in violation of the applicable Government circular and thus not binding on the employees. [Paras 19, 20, 21]

The pay cut imposed for April 2020 was arbitrary, violated the Government circular, and is not binding; the deducted amounts must be repaid with applicable bank interest.

Remedy under Regulation 43 for return of wrongly distributed amounts - interest-bearing account pending return - Relief to be granted in consequence of unlawful distribution and unlawful salary deductions. - HELD THAT: - The Tribunal applied Regulation 43 as the remedial provision whereby stakeholders found not entitled to distributed monies are bound to return them. Considering the particular facts (the corporate debtor continuing operations and available working capital), the Tribunal directed that amounts received by financial creditors be preserved in an interest-bearing account of the corporate debtor rather than ordering immediate refund, leaving them returnable as may be required under Regulation 43. Separately, the liquidator was held liable to restore the deducted portion of employees' salaries and to pay applicable bank interest until payment. [Paras 20, 21]

Amounts disbursed to financial creditors shall be kept in an interest-bearing account of the corporate debtor and are returnable under Regulation 43 if required; the liquidator must repay deducted salaries with applicable bank interest.

Final Conclusion: Application allowed: distribution of working capital and profits to stakeholders prior to liquidation/realization is contrary to the Code and Regulations; salary deductions for April 2020 were arbitrary and must be repaid with bank interest; funds disbursed to financial creditors to be preserved in an interest bearing account of the corporate debtor and are subject to return in accordance with Regulation 43.

Exclusion of lockdown period from timelines - extension of limitation - non counting of lockdown period for insolvency timelines - effect of IBBI Regulation 40C - effect of IBBI Regulation 47A - implementation of approved resolution plan timelines

Exclusion of lockdown period from timelines - implementation of approved resolution plan timelines - extension of limitation - Whether the period of nationwide lockdown consequent to COVID 19 is to be excluded from the timelines for compliance under the approved resolution plan and related orders of the Tribunal. - HELD THAT: - The Tribunal noted the orders of the Supreme Court extending periods of limitation and the Appellate Tribunal's direction to exclude the lockdown period for computation of the resolution process timelines, together with the IBBI's insertion of Regulation 40C (relating to corporate insolvency resolution process timelines) and Regulation 47A (relating to liquidation timelines). The facts concerning inability to complete escrow/account and custodian arrangements and to make scheduled payments during the lockdown were not disputed by the respondents. In view of these legal pronouncements and regulations and the undisputed factual position that critical steps could not be completed due to the lockdown, the Tribunal held that the entire lockdown period shall be excluded from the compliances required to be made under its earlier order dated 13.03.2020 in CA No. 893/2019 and in relation to the corporate insolvency resolution process. [Paras 6, 7, 10]

The period of national lockdown is excluded from the timelines for compliance under the approved resolution plan and related Tribunal order; IA No. 185/2020 is disposed of.

Final Conclusion: The application is disposed of: the Tribunal directed that the entire period of lockdown caused by COVID 19 shall be excluded for the purpose of computing the timelines for compliances under the approved resolution plan and the Tribunal's earlier order, in light of the Supreme Court and Appellate Tribunal directions and the IBBI regulations.

Appellate power to reappreciate evidence - conscious possession - presumption under Section 54 of the NDPS Act - Section 50 of the NDPS Act as applicable only to personal search - chain of custody / seals and tampering - sentence modification / proportionality

Appellate power to reappreciate evidence - conscious possession - Section 50 of the NDPS Act as applicable only to personal search - chain of custody / seals and tampering - presumption under Section 54 of the NDPS Act - Validity of High Court's interference with trial court's acquittal and conviction of the appellant for offence under Section 20 of the NDPS Act. - HELD THAT: - The High Court was entitled to reappreciate the evidence on which the trial court's acquittal rested and to substitute its own conclusion where the trial court's view was not a possible view in light of the record. The trial court's findings of non-compliance with Section 50 were misplaced because that provision applies to personal searches; hence non-compliance could not sustain acquittal. The absence of independent civilian witnesses was not fatal where the incident occurred late at night at a dhaba away from the village and the persons present were servants or closely connected to the accused. The seized charas was found in a gunny bag at the dhaba counter on premises belonging to the accused's wife and the accused was present at the counter; these facts, together with the accused's answers and failure to call stated defence witnesses, support a finding of conscious and exclusive possession. Concerns about tampering were addressed by signatures appended by the magistrate on the samples and bulk parcels and by the absence of any suggestion of tampering to the prosecution witnesses. In view of the totality of evidence and the statutory presumption under Section 54 (not discharged by the accused), the High Court rightly set aside the acquittal and convicted the appellant. [Paras 10, 11, 12]

High Court rightly interfered with the trial court's acquittal and correctly convicted the appellant for the offence under Section 20 of the NDPS Act.

Sentence modification / proportionality - Whether the sentence imposed by the High Court required modification. - HELD THAT: - Although conviction was upheld, the Court found the sentence of 15 years' rigorous imprisonment with a fine to be excessive in the peculiar facts of the case - the offence having occurred in 2001 and the appellant's age and asserted status as a temple priest. Applying principles of proportionality, the Court reduced the period of rigorous imprisonment while maintaining the conviction and the fine imposed by the High Court. [Paras 13]

Sentence modified: term of imprisonment reduced from 15 years to 10 years, conviction and fine otherwise maintained.

Final Conclusion: Conviction under Section 20 of the NDPS Act affirmed on reappreciation of evidence; sentence reduced from 15 years to 10 years' rigorous imprisonment while the fine imposed by the High Court is maintained; appeal partly allowed only to the extent of sentence modification.

Entitlement to interest on matured fixed deposits - Interest on overdue deposits payable at savings bank rate - Withholding of funds on account of intra-trustee dispute - Doctrine of estoppel for failure to claim relief earlier - Unjust enrichment

Entitlement to interest on matured fixed deposits - Interest on overdue deposits payable at savings bank rate - Whether the petitioner was entitled to interest at the original FD rate of 9% for the period from 30-01-2013 to 13-03-2015 instead of the savings bank rate paid by the bank. - HELD THAT: - The Court found that the bank's circular governing overdue deposits required payment of interest at the savings bank rate where the depositor did not opt to renew the matured fixed deposit. The petitioner did not request renewal of the FDs after maturity but sought transfer of funds; accordingly, the second respondent correctly treated the deposits as overdue and paid interest at the savings bank rate. The earlier writ order did not seek or direct payment of interest at the higher FD rate for the intervening period, and the bank paid interest in accordance with its applicable policy. [Paras 6, 10]

Petitioner not entitled to interest at 9% for the period after maturity; interest at savings bank rate as paid by the bank was appropriate.

Withholding of funds on account of intra-trustee dispute - Whether the bank's withholding of the matured FD proceeds prior to the court's direction was improper or deliberate. - HELD THAT: - The Court accepted the bank's explanation that, following the death of the founder trustee, competing communications and litigation between trustees led the bank to withhold the matured amounts until it received clear directions. The withholding was held to be in the factual context of unresolved disputes among trustees and not deliberately wrongful; after the Court's earlier order the bank transferred the funds and paid interest as per its policy. [Paras 7, 10]

Withholding of funds by the bank was justified by the intra-trustee dispute and not unlawful.

Doctrine of estoppel for failure to claim relief earlier - Unjust enrichment - Whether the petitioner is estopped from claiming higher interest now for the same cause of action and whether the bank was unjustly enriched. - HELD THAT: - The Court observed that the petitioner could have claimed interest in the earlier writ petition but did not do so; having failed to claim the relief earlier, the petitioner is estopped from re-litigating the same cause of action in a subsequent petition. Further, since the bank paid interest at the applicable savings bank rate, it cannot be said to have been unjustly enriched by withholding the amounts. [Paras 9, 11]

Petitioner estopped from claiming the relief now; unjust enrichment not established against the bank.

Final Conclusion: Writ petition dismissed: petitioner not entitled to interest at the FD rate for the post-maturity period, the bank's payment of interest at the savings bank rate and its temporary withholding of funds were justified, and the petitioner is estopped from pressing the omitted claim; no costs.