TaxTMI Updates e-Newsletter
Sep 28,2020

Treatment of writ petition as a representation for administrative disposal - direction to pass a reasoned order after affording opportunity of hearing - maintenance of status quo pending adjudication of representation - Input Tax Credit block arising from mismatch between GSTR-3B and GSTR-2A - application of Rule 86A of the CGST Rules, 2017 - scheme of Rule 71 of the CGST Rules, 2017 and rectification by supplier

Treatment of writ petition as a representation for administrative disposal - direction to pass a reasoned order after affording opportunity of hearing - The writ petition is to be treated as a representation to respondent no.1 and decided by a reasoned order after hearing. - HELD THAT: - The Court accepted the respondents' concession to treat the petition as a representation and directed respondent no.1 to decide the representation by a reasoned order within four weeks in accordance with law after giving the petitioner and/or its authorized representative an opportunity of hearing. The direction requires the officer to consider the matters raised in the petition and record reasons for the decision so that the petitioner's contentions are addressed through administrative adjudication rather than by summary judicial intervention. [Paras 9]

Petition treated as a representation; respondent no.1 to decide it by a reasoned order within four weeks after affording hearing.

Maintenance of status quo pending adjudication of representation - Status quo to be maintained with regard to the impugned notice until the representation is decided. - HELD THAT: - As an interim protective measure, the Court directed that the parties maintain status quo in relation to the impugned notice dated 28th January, 2020 until respondent no.1 disposes of the representation. This preserves the position of the parties and prevents execution or alteration of the impugned action while administrative consideration and a reasoned decision are pending. [Paras 10]

Status quo to be maintained until disposal of the representation.

Input Tax Credit block arising from mismatch between GSTR-3B and GSTR-2A - application of Rule 86A of the CGST Rules, 2017 - scheme of Rule 71 of the CGST Rules, 2017 and rectification by supplier - The Court did not decide the merits of the credit block under Rule 86A or the alleged non-observance of the scheme of Rule 71; these matters are left to respondent no.1 for fresh consideration and decision. - HELD THAT: - Although the petitioner challenged the input tax credit block on grounds that the supplier had wrongly classified sales as to an unregistered person and could rectify the error under the GSTR regime, the Court refrained from adjudicating these substantive contentions. Instead, by treating the petition as a representation and directing a reasoned order after hearing, the Court remitted the factual and legal determination - including whether conditions for invoking Rule 86A were satisfied or whether Rule 71 required a rectification window for the supplier - to the competent authority. The remand contemplates a fresh administrative decision on the merits following opportunity to the petitioner to be heard. [Paras 9]

Merits of the input tax credit block and related compliance with Rules 86A and 71 are remitted to respondent no.1 for fresh consideration and decision after hearing.

Final Conclusion: The writ petition is treated as a representation; respondent no.1 is directed to decide it by a reasoned order within four weeks after affording hearing, status quo is to be maintained meanwhile, and the substantive questions concerning the Input Tax Credit block and applicability of Rules 86A and 71 are remitted to the authority for fresh consideration.

Maintainability of writ where statutory appellate forum not constituted - conditional interim stay under Section 112(8) of the U.P. Goods and Services Tax Act, 2017 - stay of recovery on deposit of specified percentage - pre-deposit and security furnished as condition for filing appeal

Maintainability of writ where statutory appellate forum not constituted - Petition entertained in writ jurisdiction because the Appellate Tribunal under the U.P. Goods and Services Tax Act, 2017 has not been constituted and no alternative remedy is available. - HELD THAT: - The Court accepted the petitioner's submission that, in the absence of a constituted Appellate Tribunal under the U.P. Goods and Services Tax Act, 2017, the statutory remedy of first appeal is not practically available. On that basis the petition was entertained in writ jurisdiction as the petitioner had no effective alternative remedy. The Court thereby proceeded to exercise its writ jurisdiction to consider the challenge to the tax and penalty imposed.

Writ petition entertained on maintainability grounds owing to absence of the Appellate Tribunal.

Conditional interim stay under Section 112(8) of the U.P. Goods and Services Tax Act, 2017 - stay of recovery on deposit of specified percentage - pre-deposit and security furnished as condition for filing appeal - Interim relief granted on condition that the petitioner deposits 20% of the remaining disputed tax within three weeks; recovery proceedings in respect of the balance are stayed until disposal of the petition. - HELD THAT: - The Court noted that the petitioner had already deposited 10% of the disputed tax as a pre-condition for filing the first appeal and had furnished security for the remainder. The petitioner expressed willingness to deposit an additional 20% of the remaining disputed tax in compliance with the requirements of Section 112(8) of the Act. In view of these facts the Court directed the petitioner to deposit 20% of the remaining disputed tax within three weeks and ordered that, upon such deposit, recovery proceedings for the balance amount shall remain stayed until the petition is disposed of. The Court also directed the Revenue to file a counter-affidavit within three weeks and listed the matter for further hearing.

Petitioner to deposit 20% of the remaining disputed tax within three weeks; recovery stayed till disposal of the petition on that condition; counter-affidavit directed and matter listed for hearing.

Final Conclusion: The High Court entertained the writ petition for want of an effective appellate forum, directed the petitioner to deposit 20% of the remaining disputed tax within three weeks in terms of Section 112(8) and ordered a stay of recovery of the balance until disposal of the petition; the Revenue was directed to file a counter-affidavit and the matter was listed for hearing.

Presumption of innocence - bail is the rule and jail the exception - conditions for grant of bail - tampering with evidence and witnesses - re-arrest after grant of bail and requirement for cancellation - statutory examination under Section 70 of the CGST Act is not custodial interrogation

Presumption of innocence - bail is the rule and jail the exception - conditions for grant of bail - tampering with evidence and witnesses - re-arrest after grant of bail and requirement for cancellation - Application for bail under Section 437 CrPC by accused Parag Garg granted subject to conditions. - HELD THAT: - The court applied settled principles that personal liberty is precious, the presumption of innocence obtains, and grant of bail is the norm unless concrete grounds justify detention. The accused was earlier admitted to bail and the fresh arrest arose from ongoing further investigation rather than a distinct new case; re-arrest without seeking cancellation of the earlier bail was improper unless overwhelming circumstances existed to justify cancellation. The prosecution did not file a complaint nor show that complaint filing was imminent; the investigation remained ongoing. The accused has prima facie secured substantial amounts towards the alleged liability (the court accepted the accused's statement that around 40-44% of the alleged tax evasion amount was secured and the department did not dispute those calculations), and there was no material placed to demonstrate that, if enlarged on bail subject to reasonable conditions, the accused would tamper with evidence or abscond. In these circumstances and having regard to the balance between individual liberty and larger societal interest, the court concluded that bail should be granted with conditions to ensure attendance and to prevent tampering with evidence or influencing witnesses. [Paras 42, 43, 44, 46, 47]

Accused Parag Garg admitted to bail on furnishing bond of Rs.1 lakh with one surety of like amount, subject to conditions including joining investigation on summons, not leaving the country without court permission, and not tampering with evidence or witnesses.

Statutory examination under Section 70 of the CGST Act is not custodial interrogation - The department's examination of the accused under Section 70 CGST Act does not amount to custodial interrogation for purposes of opposing bail. - HELD THAT: - Section 70 empowers the proper officer to summon persons and conduct inquiries akin to a civil-court proceeding; such examination is treated as part of "judicial proceedings" under relevant Penal Code provisions and is not intended to be custodial interrogation. The court rejected the contention that the Section 70 examination justified continued custodial detention of the accused. [Paras 41]

A Section 70 CGST Act examination is not custodial interrogation and cannot be relied upon as a ground to refuse bail.

Final Conclusion: Bail application allowed: accused Parag Garg released on bail subject to conditions (bond and surety, cooperation with investigation, prohibition on leaving the country without court permission and on tampering with evidence or witnesses); the court emphasised that re-arrest after grant of bail requires prior cancellation and that statutory examination under Section 70 CGST Act is not custodial interrogation.

Exemption from personal appearance / filing of documents subject to conditions - interim restraint on coercive action - continuation of prior interim order

Exemption from personal appearance / filing of documents subject to conditions - Petitioners permitted to seek exemption from usual filing/personal appearance requirements subject to specified conditions. - HELD THAT: - The Court allowed the petitioners' applications for exemption, imposing the condition that a duly sworn/attested affidavit must be filed within 72 hours from the date of resumption of the Court's regular functioning. An additional exemption application was allowed subject to all just exceptions. The relief granted is conditional and time-bound, placing an affirmative obligation on the petitioners to file the required affidavit when the Court resumes regular sittings. [Paras 2, 4]

Exemptions allowed subject to the stated conditions and exceptions; affidavit to be filed within 72 hours of resumption of regular functioning.

Interim restraint on coercive action - continuation of prior interim order - Continuation of the earlier interim protection and prohibition on coercive steps against the petitioners until the next listed date. - HELD THAT: - In continuation of its order dated 14.08.2020, the Court directed that no coercive steps shall be taken against the petitioners until the next hearing on 30.09.2020. The Court recorded that compliance with the earlier order dated 14.08.2020 is to be ensured within the fixed time frame by the petitioners' counsel. The order preserves the interim status quo and conditions compliance upon observance of prior directions. [Paras 7, 8]

No coercive action to be taken against the petitioners till 30.09.2020; earlier interim order continued subject to compliance within the prescribed time.

Final Conclusion: The Court allowed the petitioners' applications for exemption from filing/personal appearance subject to conditions (including filing a sworn affidavit within 72 hours of resumption) and continued the earlier interim protection by prohibiting coercive steps against the petitioners until 30.09.2020, while directing compliance with the prior order within the prescribed time.

Availability of alternate remedy - maintainability of writ petition challenging assessment where factual dispute exists - appellate hierarchy under the Income Tax Act - re-appreciation of facts by the Appellate Authority - notice under Section 148 of the Income Tax Act

Availability of alternate remedy - maintainability of writ petition challenging assessment where factual dispute exists - appellate hierarchy under the Income Tax Act - The writ petition challenging the assessment order was not maintainable before the High Court in view of the availability of an effective alternate remedy by way of appeal. - HELD THAT: - The Court affirmed the Single Judge's conclusion that the Income Tax Act provides a hierarchical scheme of remedies and that the assessee could not bypass the statutory appellate process. The disputed question concerned factual allegations (service of notice) with legal limits, and such factual disputes are properly re-appreciated by the Appellate Authority which can call for records and decide afresh. Consequently, relief in a writ petition at the threshold was inappropriate where an effective appeal lies under the Act. The Court therefore confirmed dismissal of the writ petition on the ground of alternative remedy and declined to express any opinion on the merits of the assessment proceedings. [Paras 6, 9, 10, 11]

Writ appeal dismissed; Single Judge's order dismissing the writ petition for want of alternative remedy is confirmed and the assessee directed to pursue the statutory appeal.

Notice under Section 148 of the Income Tax Act - re-appreciation of facts by the Appellate Authority - The factual controversy regarding service of the notice under Section 148 was not decided on merits by this Court and is to be considered by the Appellate Authority on appeal. - HELD THAT: - The Court recorded that the appellant alleged non-service of the Section 148 notice and pointed to lack of departmental responses and RTI replies, but refrained from adjudicating the factual question. Instead, the Court directed the appellant to file an appeal before the Commissioner of Income Tax (Appeals), noting that the Appellate Authority is competent to re-appreciate facts, examine records and decide the question of service and validity of proceedings. The Court further instructed that the appeal be entertained without reference to limitation and be decided on merits and in accordance with law. [Paras 7, 10, 11]

The question of service of the Section 148 notice is remitted to the Commissioner of Income Tax (Appeals) for fresh consideration on merits; the appeal is to be admitted without regard to limitation and decided in accordance with law.

Final Conclusion: Writ appeal dismissed and the Single Judge's order confirmed; appellant directed to file appeal before the Commissioner of Income Tax (Appeals) within 30 days of receipt of this judgment, the appeal to be entertained without reference to limitation and decided on merits; no costs.

Withholding of refund - invocation of section 241A for withholding refunds pending assessment - speaking order requirement - opportunity of hearing before withholding refund - remand for de novo consideration - application of Mapel Logistics guidelines

Withholding of refund - invocation of section 241A for withholding refunds pending assessment - speaking order requirement - opportunity of hearing before withholding refund - remand for de novo consideration - application of Mapel Logistics guidelines - Order approving withholding of refund for Assessment Year 2018-19 under section 241A remitted to the Assessing Officer for fresh speaking order after affording an opportunity of hearing and permitting additional affidavit. - HELD THAT: - The court observed that the Assessing Officer proposed withholding the petitioner's refund for AY 2018-19 on the same day that a Coordinate Bench had directed refund; the Principal Commissioner thereafter approved withholding under section 241A. Applying the guidelines in Mapel Logistics and having regard to the prior order, the High Court concluded that the matter required fresh consideration by the Assessing Officer. The petition is therefore remitted for a fresh, speaking order to be passed after affording the petitioner an opportunity of being heard. The petitioner is also permitted to place on record the additional affidavit dated 01.06.2020 before the Assessing Officer. The fresh consideration must be undertaken in accordance with law within six weeks from the date of the order. [Paras 6, 7]

The withholding approval is set aside and the matter is remitted to the Assessing Officer to pass a fresh speaking order after hearing the petitioner and permitting the additional affidavit within six weeks.

Final Conclusion: Writ petition allowed; direction to remand the matter to the Assessing Officer for fresh speaking order in accordance with Mapel Logistics, after affording hearing and permitting the petitioner to file the additional affidavit within six weeks; petition disposed of.

Applicability of Section 14A read with Rule 8D in the absence of exempt income - Disallowance of expenditure under Section 14A only when expenditure is proved to be in relation to earning exempt income - Characterisation of foreign exchange derivative losses as business loss and not speculative transaction under Section 43(5) - Speculative transaction defined under Section 43(5) - settlement otherwise than by actual delivery

Applicability of Section 14A read with Rule 8D in the absence of exempt income - Disallowance of expenditure under Section 14A only when expenditure is proved to be in relation to earning exempt income - Whether disallowance under Section 14A read with Rule 8D could be made when no exempt income was received or proved during the year. - HELD THAT: - The Court accepted the assessee's case that investments in growth funds were made and no tax free income was received in the relevant year and that no expenditure was proved to have been incurred for earning exempt income. Section 14A permits disallowance only to the extent expenditure is shown to have been incurred in relation to earning exempt income; it cannot be applied in vacuum by assuming expenditure. The Assessing Officer ought to have recorded findings under sub section (1) of Section 14A before proceeding to apply the mechanism under Rule 8D. The Tribunal rightly followed the Division Bench and other precedent holding that Section 14A read with Rule 8D is not applicable in the absence of exempt income and set aside the disallowance. [Paras 17, 18]

Disallowance under Section 14A read with Rule 8D could not be sustained in the absence of any proved exempt income or expenditure incurred for earning exempt income; the Tribunal's decision in favour of the assessee is upheld.

Characterisation of foreign exchange derivative losses as business loss and not speculative transaction under Section 43(5) - Speculative transaction defined under Section 43(5) - settlement otherwise than by actual delivery - Whether loss on cancellation of forward foreign exchange contracts amounted to speculative loss under Section 43(5) or was an allowable business loss. - HELD THAT: - On the facts the assessee, an exporter, entered into forward contracts as incidental hedging in the ordinary course of its export business. The Tribunal, following its earlier decision in the assessee's own case and consistent authorities, found that the contracts were not speculative within the meaning of Section 43(5) because the assessee was not a dealer in foreign exchange and the hedging transactions were incidental to its business; where export contracts failed, resulting losses were business losses. Precedents dealing with trading in securities or derivatives by specialist dealers were distinguishable. The Tribunal's conclusion that the exchange fluctuation loss was an allowable business loss was rightly accepted. [Paras 19, 26, 29]

Losses on cancellation of forward foreign exchange contracts were business losses incidental to export activity and not speculative transactions under Section 43(5); the Tribunal's allowance is sustained.

Final Conclusion: The Revenue's appeal is dismissed; the substantial questions of law are answered against the Revenue and in favour of the assessee, upholding the Tribunal's findings on both the Section 14A disallowance and the characterisation of foreign exchange losses as business losses.

Valuation of unquoted shares under Rule 11UA - Section 56(2)(viib) - Discounted Cash Flow (DCF) method - Net Asset Value (NAV) method - Assessee's option to choose a permitted valuation method - Abuse of valuation method to defraud the revenue - Remand for fresh consideration of fair market value

Section 56(2)(viib) - Valuation of unquoted shares under Rule 11UA - Assessee's option to choose a permitted valuation method - Abuse of valuation method to defraud the revenue - Whether provisions of Section 56(2)(viib) could be invoked to treat the share premium as income where the assessee adopted DCF valuation under Rule 11UA. - HELD THAT: - The Court accepted the view of the CIT(A) and the Tribunal that the assessee had adopted a valuation method expressly contemplated by Rule 11UA and that mere disagreement by the Assessing Officer with the choice of DCF did not, without material, permit invocation of Section 56(2)(viib). The authorities below found that the Assessing Officer failed to establish any abuse, fabrication or intention to defraud the revenue in choosing the DCF method; absent such material, the option available to the assessee to adopt an accepted method is absolute. On the facts the difference between projected and actual sales over the relevant years was marginal and did not demonstrate misuse of the valuation mechanism. The Court rejected the Revenue's submission that the mere magnitude of divergence or the AO's preference for the NAV method justified invoking Section 56(2)(viib). [Paras 8, 10, 11, 13]

Section 56(2)(viib) was not attracted; the assessee's adoption of the DCF valuation under Rule 11UA could not be set aside in the absence of material showing abuse or intention to defraud.

Discounted Cash Flow (DCF) method - Net Asset Value (NAV) method - Remand for fresh consideration of fair market value - Whether the DCF valuation adopted by the assessee was invalid because projected revenues did not reflect true market value and whether the matter should be remanded for reassessment of fair market value. - HELD THAT: - The Court noted the Tribunal's finding that projected revenues are inherently estimates and that the Assessing Officer's rejection of the DCF method rested on variations in projections which were, on the whole, marginal (10%, 4%, 8% and 18% for successive years) and did not demonstrate fabrication. The Assessing Officer had not pointed to a flaw in the mechanics of the DCF calculation, but had preferred the NAV approach; that preference alone did not warrant discarding a permissible method. The Revenue's reliance on a Division Bench remand in another case was inapposite because that remand proceeded on a specific concession and could not be treated as a precedent mandating remand here. Consequently, no fresh remand was directed. [Paras 7, 8, 11, 12, 13]

The DCF valuation was not held invalid on the facts and no remand for fresh determination of fair market value was justified.

Final Conclusion: The Revenue's appeal is dismissed; there is no substantial question of law for consideration and the orders of the CIT(A) and the Tribunal upholding the assessee's DCF valuation under Rule 11UA and declining to invoke Section 56(2)(viib) are affirmed.

Dismissal of departmental appeal on ground of low tax effect - Exception for cases with revenue audit objection under Clause 10(c) of CBDT Circular No.3 of 2018 - Remand for fresh consideration to the Tribunal - Reopening of assessment by notice under Section 148 - Claim of deduction under Section 10A

Dismissal of departmental appeal on ground of low tax effect - Exception for cases with revenue audit objection under Clause 10(c) of CBDT Circular No.3 of 2018 - Remand for fresh consideration to the Tribunal - Tribunal erred in dismissing the Revenue's appeal on the sole ground of low tax effect where an audit objection accepted by the department brings the case within the exception in Clause 10(c) of CBDT Circular No.3 of 2018. - HELD THAT: - The Court examined the papers and found an audit objection had been raised and accepted by the department; such circumstances fall within the exception carved out by Clause 10(c) of CBDT Circular No.3 of 2018 (and continued in the subsequent 2019 circular), which permits the Revenue to pursue appeals notwithstanding the low tax effect threshold. In consequence, the Tribunal's summary dismissal on the basis of low tax effect was not sustainable. The Court held that where the exception applies the matter cannot be foreclosed by the monetary threshold and therefore set aside the Tribunal's order and remitted the matter to the Tribunal for fresh consideration on merits. [Paras 3, 4]

Order of the Tribunal dismissing the Revenue's appeal for low tax effect set aside; matter remitted to the Tribunal for fresh consideration because the case falls within the Clause 10(c) exception.

Claim of deduction under Section 10A - Reopening of assessment by notice under Section 148 - Whether the last fact-finding authority should nonetheless dispose of the matter on merits in cases where revenue audit objections have been accepted. - HELD THAT: - The Court referred to earlier Division Bench authority dealing with an identical substantial question and observed that the legal position on this aspect is no longer res integra. Having considered the parties' submissions and the precedent, the Court concluded that the second substantial question is to be answered in favour of the respondent assessee, following the earlier decision cited. The Court therefore resolved that, on this legal point, the assessee's position prevails. [Paras 9, 10]

Second substantial question answered in favour of the respondent; the Court adhered to the prior Division Bench ruling and did not require disposal on merits in the Revenue's favour on that ground.

Final Conclusion: The Tribunal's dismissal of the Revenue's appeal on the ground of low tax effect was set aside because the case falls within the Clause 10(c) exception in CBDT Circular No.3 of 2018; the matter is remitted to the Tribunal for fresh consideration. The second substantial question was answered in favour of the respondent, following existing Division Bench authority.

Deduction under Section 10A of the Income Tax Act - Newly established undertaking independent of existing undertakings - Entitlement to tax incentive determined by concurrent findings of fact - Scope of interference under Section 260A - perversity test

Deduction under Section 10A of the Income Tax Act - Newly established undertaking independent of existing undertakings - Assessee entitled to deduction under Section 10A for Assessment Year 2007-08 as the STPI undertaking constituted a newly established undertaking independent of existing undertakings. - HELD THAT: - The court applied established precedent that a 'newly established undertaking' for Section 10A purposes means an undertaking of the assessee independent and separate from the undertakings already possessed and that it is not necessary that the new activity produce a different commodity. The Tribunal and the Commissioner (Appeals) found on concurrent facts that the assessee was engaged in on site software development with programs delivered at clients' work sites in South Korea and therefore did not require full fledged infrastructure in India. On that factual foundation the impugned authorities held the STPI unit to be an independent undertaking and admissible to the deduction. The High Court found these concurrent factual findings to be unassailed and not perverse, and therefore sustained the entitlement to deduction under Section 10A as correctly allowed by the lower authorities. [Paras 5]

Claim for deduction under Section 10A allowed; the STPI undertaking is a newly established undertaking independent of existing undertakings.

Entitlement to tax incentive determined by concurrent findings of fact - Scope of interference under Section 260A - perversity test - High Court will not interfere with concurrent findings of fact recorded by the Tribunal and Commissioner (Appeals) unless those findings are shown to be perverse; no such perversity was established by the revenue. - HELD THAT: - Relying on settled authorities, the court reiterated that the Tribunal is the primary fact finding body and conclusions of fact can be disturbed by the High Court under Section 260A only if they are perverse, based on no evidence, or reached by wrong inference from proved facts. The revenue did not plead or place material to demonstrate perversity of the concurrent findings concerning the nature and independence of the undertaking. Consequently, the High Court declined to reappraise the factual conclusion reached below and held that no substantial question of law arises for consideration. [Paras 6, 7]

No interference with concurrent findings of fact; appeal dismissed for want of a substantial question of law shown to arise.

Final Conclusion: Concurrent factual findings that the assessee's STPI undertaking constituted a newly established, independent undertaking entitled to deduction under Section 10A for Assessment Year 2007-08 were held not to be perverse; the revenue failed to demonstrate any substantial question of law and the appeal is dismissed.

Carry forward and set off of accumulated loss and unabsorbed depreciation in amalgamation - mandatory compliance with conditions for set off under Section 72A(2) - effect of non obstante clause in subsection mandating compliance - remand for factual adjudication where tribunal failed to examine mandatory conditions

Mandatory compliance with conditions for set off under Section 72A(2) - effect of non obstante clause in subsection mandating compliance - Whether the amalgamated company satisfied the mandatory conditions in Section 72A(2) so as to be entitled to set off the accumulated losses of the amalgamating company. - HELD THAT: - The Court observed that Section 72A(2) commences with a non obstante clause and therefore compliance with the conditions enumerated therein is mandatory for claiming set off of accumulated loss and unabsorbed depreciation on amalgamation. The Tribunal had recorded that the amalgamation took effect from the appointed day but did not advert to or satisfy itself on whether the statutory conditions in Section 72A(2) were complied with. Because the determination of compliance with those conditions involves factual inquiry (including consideration of prescribed conditions to ensure revival of business or genuineness of business purpose), the matter could not be resolved on the record before the Court. The Court accordingly found that the Tribunal's failure to examine the mandatory statutory conditions required remand for fresh adjudication on facts. No substantial question of law was answered since the factual inquiry remained open.

Tribunal's order set aside and matter remitted to the Tribunal for fresh factual adjudication of compliance with the mandatory conditions of Section 72A(2).

Final Conclusion: The Income Tax Appellate Tribunal's order is quashed and the matter is remitted to the Tribunal to decide afresh whether the amalgamated company satisfied the mandatory conditions of Section 72A(2) (including prescribed requirements) to entitle it to set off the accumulated losses; the substantial questions framed were not answered and the appeal is disposed of accordingly.

Reopening of assessment under Section 147 - first proviso to Section 147 - failure to disclose fully and truly all material facts - change of opinion - CBDT instructions and departmental procedure

Reopening of assessment under Section 147 - first proviso to Section 147 - failure to disclose fully and truly all material facts - change of opinion - CBDT instructions and departmental procedure - Validity of reopening the assessment beyond four years and whether the notice under Section 147 satisfied the condition in the first proviso that income had escaped assessment by reason of failure to disclose fully and truly all material facts. - HELD THAT: - The Tribunal's quashing of the reassessment was upheld. The Court examined the materials on record and noted that during the original scrutiny assessment under Section 143(3) the assessee had produced books, party wise details of service charges and TDS credit was recorded by the Assessing Officer as per NSDL. The Assessing Officer's subsequent reopening relied on a perceived difference between amounts in the profit and loss account and amounts per TDS certificates; however that very discrepancy had been noted earlier and the earlier assessment recorded TDS credit per NSDL. The Commissioner (Appeals) relied on CBDT instructions to justify reopening, but the Court held that departmental instructions do not substitute the statutory requirement: reopening beyond four years must be founded on the opinion that income has escaped assessment because the assessee failed to disclose material facts. In the present facts there was no fresh tangible material discovered after completion of the original assessment and the reopening amounted to a change of opinion, not a permissible reopening under the first proviso to Section 147. Accordingly the reassessment was invalid. [Paras 4, 5, 7, 8]

Reopening of the assessment beyond four years was a change of opinion and the notice under Section 147 did not satisfy the first proviso; the Tribunal's order quashing the reassessment is affirmed.

Final Conclusion: The Revenue's appeal is dismissed; the reassessment under Section 147 was quashed for failure to meet the statutory requirement in the first proviso and the Substantial Questions of Law are answered against the Revenue.

Reopening of assessment - Power to reopen under Section 147 and notice under Section 148 - Reasons to believe - Material to show escapement of income - Full and true disclosure - Change of opinion - Speculative loss - Interpretation of 'or' in statutory clauses

Reopening of assessment - Power to reopen under Section 147 and notice under Section 148 - Reasons to believe - Material to show escapement of income - Validity of reopening the assessment (timing and sufficiency of reasons/material) for AY 2009-10 - HELD THAT: - The Court found that the notice under Section 148 was issued on 30.03.2014, which was within the four-year period for AY 2009-10. However, statutory power to reopen requires that the Assessing Officer have reasons to believe, supported by material, that income chargeable to tax has escaped assessment. On the facts the material on which reassessment was sought was already available to the Assessing Officer at the time of the original scrutiny assessment, and two of the three specified grounds for reopening were either accepted in favour of the assessee or dropped; the third ground drew only partial disallowance which the assessee accepted. The Court held that, in these circumstances, the reassessment amounted to an attempt to review the earlier assessment and was impermissible absent fresh material establishing escapement of income. [Paras 11, 14, 17]

Reopening was within time but invalid on merits for lack of fresh material and amounted to a prohibited change of opinion.

Full and true disclosure - Change of opinion - Material to show escapement of income - Whether the assessee had fully and truly disclosed all material at original assessment so as to preclude reopening - HELD THAT: - The Tribunal and the High Court examined the scrutiny assessment record and the detailed explanations furnished by the assessee (including statements and a 'Hedging' note) which addressed the nature of the transactions and the applicability of provisions such as Section 194H. The Court agreed with the Tribunal that no fresh material had surfaced and that the assessee had fully and truly disclosed relevant material at the time of the original assessment. Consequently, the Assessing Officer's attempt to reopen on the same material constituted a change of opinion, which is not a valid basis for reassessment. [Paras 9, 13, 14]

Assessment could not be reopened because the assessee had fully and truly disclosed the material at the original assessment and reassessment would be a change of opinion.

Speculative loss - Interpretation of 'or' in statutory clauses - Material to show escapement of income - Whether the loss claimed by the assessee was a speculative loss and whether clauses in the relevant statutory provision should be read conjunctively - HELD THAT: - The Assessing Officer treated the loss as speculative by reading the disjunctive 'or' in the statutory clauses as conjunctive and by applying an interpretation from an unrelated provision and decision. The Court held that each clause in Section 43(5) deals with distinct types of transactions and there was no basis to read 'or' as 'and'. The Assessing Officer in fact accepted that the assessee's transactions fell under clause (a) and was otherwise convinced on the nature of the transactions, and neither the CIT(A) nor the Tribunal found fresh material to recharacterise the loss as speculative. The Court concluded that the AO's interpretation was untenable and that treating the matter as speculative on that basis was impermissible. [Paras 6, 7, 8, 17]

The loss was not to be treated as speculative; the AO's conjunctive reading of disjunctive clauses was legally incorrect.

Final Conclusion: The Tax Case Appeals are dismissed. The Tribunal's order upholding the invalidity of reassessment was affirmed: the reassessment, though issued within time, lacked fresh material and amounted to a change of opinion, the assessee had fully and truly disclosed material at the original assessment, and the Assessing Officer's interpretation treating the loss as speculative was unsustainable.

Validity of show cause notice under section 274 - Penalty under section 271(1)(c) - Requirement to specify whether charge is concealment of particulars of income or furnishing inaccurate particulars - Effect of defective show cause notice on subsequent penalty proceedings - Rule that where two views exist the view favourable to the assessee is to be followed

Validity of show cause notice under section 274 - Penalty under section 271(1)(c) - Requirement to specify whether charge is concealment of particulars of income or furnishing inaccurate particulars - Effect of defective show cause notice on subsequent penalty proceedings - Rule that where two views exist the view favourable to the assessee is to be followed - Imposition of penalty under section 271(1)(c) was unsustainable because the show cause notice under section 274 did not specify whether the proceedings were for concealment of particulars of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal held that the show cause notice reproduced the standard proforma without striking out the inapplicable portion and therefore failed to specify the particular charge under section 271(1)(c). Following the coordinate bench decision in CIT vs. SSA's Emerald Meadows (and the Karnataka High Court's reasoning in Manjunatha Cotton and Ginning Factory) and having regard to the dismissal of the Revenue's SLP, the Tribunal treated the defective notice as vitiating the penalty proceedings. The Tribunal considered contrary authorities cited by the Department but observed that there are two conflicting views in different jurisdictions; applying the settled principle that where two views exist the view favourable to the assessee should be followed, it adopted the Karnataka line of decisions and precedent of the coordinate Bench which held that such a defective notice cannot sustain a penalty. Consequently, all subsequent proceedings based on the defective notice were held bad in law and the penalty deleted. [Paras 3, 4, 5]

Penalty levied under section 271(1)(c) and confirmed by the CIT(A) is cancelled; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal for AY 2006 07, holding that the show cause notice under section 274 was defective for not specifying the charge (concealment or furnishing inaccurate particulars) and, following the view favourable to the assessee, set aside the penalty imposed under section 271(1)(c).

Exemption under section 54F - joint development agreement - treatment of multiple flats as a residential house - pari materia between sections 54 and 54F - amendment restricting exemption to one residential unit - non applicability to earlier assessment years

Exemption under section 54F - joint development agreement - treatment of multiple flats as a residential house - pari materia between sections 54 and 54F - Entitlement to exemption under section 54F in respect of multiple flats received under a joint development agreement - HELD THAT: - Tribunal applied the ratio of the jurisdictional High Court decision in Commissioner of Income Tax v. K.G. Rukminiyamma to the present facts and concluded that where an owner enters a joint development agreement and receives multiple flats which are situated in a residential building, those flats together constitute "a residential house" for purposes of the exemption. The Tribunal accepted the view in the Bangalore ITAT (B.J. Badrinath) that the principle laid down in Rukminiyamma is equally applicable to section 54F because sections 54 and 54F are pari materia. The appellant's factual position - transfer of land under a JDA and receipt of flats in lieu - was held to be on all fours with the precedent relied upon, and the Tribunal noted that claims by co-owners in respect of similar relief had been allowed and that the revenue did not controvert that assertion. [Paras 6, 7]

Assessee entitled to exemption under section 54F in respect of all the flats received under the joint development agreement

Amendment restricting exemption to one residential unit - non applicability to earlier assessment years - Whether the post 2014 amendment restricting exemption to one residential unit applies to the assessment year before the amendment - HELD THAT: - The Tribunal noted that the Finance (No.2) Act, 2014 amendment limiting the claim of deduction to one residential unit operates w.e.f. 1.4.2015 (from AY 2015-16) and therefore does not apply to assessment year 2009-10 which is the subject of adjudication. Consequently, the restriction introduced by the amendment could not be invoked against the assessee for AY 2009-10. [Paras 8]

The 2014 amendment is not applicable to AY 2009-10

Final Conclusion: Appeal partly allowed: exemption under section 54F granted in respect of all flats received under the joint development agreement for AY 2009-10; the 2014 amendment limiting exemption to one residential unit does not apply to the assessment year in question.

Power under section 263 to revise assessment - Deduction under Section 80P(2)(d) - Interest and dividend from Co-operative Banks not eligible under Section 80P(2)(d) - Non-application of mind by Assessing Officer - Claim under Chapter VI-A

Claim under Chapter VI-A - Non-application of mind by Assessing Officer - Whether the Assessing Officer made a specific claim for deduction under Section 80P(2)(d) and applied his mind before allowing the deduction, such that the assessment order could be sustained. - HELD THAT: - The material on record shows that though the assessee furnished details of tax-free income in response to the questionnaire and to notice under section 142(1), it did not make a specific claim under Section 80P(2)(d) before the AO nor specifically claim 80P(2)(d) in the return. The AO's assessment order contains no discussion or reference to an examination of a specific Section 80P(2)(d) claim. The Tribunal accepts the Pr. CIT's conclusion that the AO allowed the deduction on incorrect assumptions without proper application of mind or adequate enquiry into the nature of the income, which is a ground for invoking the revisional power under section 263. [Paras 8, 11]

The AO did not apply his mind to a specific claim under Section 80P(2)(d); the assessment is therefore erroneous for lack of proper enquiry.

Deduction under Section 80P(2)(d) - Interest and dividend from Co-operative Banks not eligible under Section 80P(2)(d) - Whether interest and dividend earned by the assessee from Co-operative Banks are eligible for deduction under Section 80P(2)(d). - HELD THAT: - Having examined the legal position and authorities relied upon, the Tribunal concurs with the view expressed in the quoted High Court decision that Co-operative Banks, although having the corporate form of a co-operative society, carry on banking business governed by the Banking Regulation Act and are excluded from the beneficial ambit of Section 80P(2)(d). The assessee's interest and dividend arose from deposits with Co-operative Banks and not from investments with co-operative societies within the intendment of clause (d). Consequently the AO's allowance of deduction under Section 80P(2)(d) on those receipts was legally incorrect. [Paras 9, 10, 11]

Interest and dividend from Co-operative Banks do not qualify for deduction under Section 80P(2)(d); the allowance was legally incorrect.

Final Conclusion: The Tribunal upholds the Pr. CIT's exercise of power under section 263, finds the assessment order erroneous and prejudicial to the interests of revenue for lack of proper enquiry and for wrongly allowing deduction under Section 80P(2)(d) in respect of receipts from Co-operative Banks; the assessee's appeal is dismissed.

Treatment of derivatives transactions as non-speculative/eligible transaction under the proviso to section 43(5) - carry forward and set off of business losses - turnover for tax-audit threshold in respect of derivatives for section 44AB - unexplained cash credit: burden of proving identity, creditworthiness and genuineness under section 68 - allowance of short-term capital loss supported by contract notes and screen-based trading through a registered broker - admission of evidence at appellate stage and compliance with Rule 46/46A of the Income Tax Rules

Treatment of derivatives transactions as non-speculative/eligible transaction under the proviso to section 43(5) - carry forward and set off of business losses - Whether losses from commodity and derivatives trading could be treated as business loss (non-speculative) and be carried forward and set off. - HELD THAT: - The Tribunal upheld the finding of the first appellate authority that the assessee's trading in commodity and derivatives was executed through registered brokers on the National Stock Exchange by screen-based trading and thus fell within the definition of an "eligible transaction" under the proviso and Explanation to section 43(5), read with the Notification recognizing NSE. That factual finding was not challenged by Revenue and therefore attained finality. The Tribunal further accepted the CIT(A)'s conclusion that the trading was not speculative and the losses were business losses eligible for carry forward and set off. The Tribunal also rejected the AO's contention that the return was belated because the assessee's turnover for derivative transactions (taking favourable and unfavourable differences) exceeded the threshold for tax audit under section 44AB for AY 2012-13, making audit (and the later date of filing under section 139(4)) applicable; the threshold for AY 2012-13 was Rs. 60 lakhs and not Rs. 1 crore. On these bases the Tribunal found no infirmity in the CIT(A)'s allowance of the losses as business loss and dismissed Revenue's challenge on this ground. [Paras 6, 7, 8, 9]

Assessee's losses from commodity and derivatives trading are business losses (not speculative) and are eligible to be carried forward and set off; Revenue's ground is dismissed.

Unexplained cash credit: burden of proving identity, creditworthiness and genuineness under section 68 - Whether the unsecured loan of the assessee from Shri G.R. Poddar could be treated as unexplained cash credit and added under section 68. - HELD THAT: - The CIT(A) found, on facts accepted by the AO, that the assessee proved identity of the lender by filing a copy of the lender's passport and bank confirmations and that the loans were routed through the lender's bank accounts. The appellate authority also noted that in the next assessment year the AO had accepted the identity, creditworthiness and genuineness of loans from the same lender. The Tribunal agreed that, having regard to these facts and the acceptance in subsequent scrutiny proceedings, there was no reason to doubt the genuineness of the loan in the year under consideration. Consequently, the addition under section 68 was correctly deleted by the CIT(A). [Paras 10, 11, 12]

Addition under section 68 was rightly deleted; Revenue's ground is dismissed.

Allowance of short-term capital loss supported by contract notes and screen-based trading through a registered broker - Whether the assessee's claimed short-term capital loss should be disallowed for want of supporting evidence. - HELD THAT: - The CIT(A) recorded that the assessee filed complete details including ledger entries and voluminous contract notes (on CD), showing that transactions were executed through a registered broker electronically on the NSE's screen-based trading system, supported by time-stamped contract notes, deliveries effected through depository accounts and payments via banking channels. The AO had not sought further particulars and had simply disbelieved the claim. The Tribunal found no infirmity in the CIT(A)'s conclusion to accept the documentary evidence and allow the short-term capital loss. [Paras 13, 14, 15]

Short-term capital loss is allowable as claimed; Revenue's ground is dismissed.

Admission of evidence at appellate stage and compliance with Rule 46/46A of the Income Tax Rules - Whether the CIT(A) erred in admitting fresh evidence at the appellate stage in violation of Rule 46/46A. - HELD THAT: - Revenue alleged that the CIT(A) admitted fresh evidence (paper book) without seeking a remand report from the AO. On inquiry, the Departmental Representative could not point out any document that was produced for the first time before the CIT(A), and the AO's assessment order itself acknowledged production of those documents. The Tribunal therefore concluded that no fresh evidence was adduced for the first time at the appellate stage and that the CIT(A) did not violate the Rules in this regard. [Paras 4]

No violation of Rule 46/46A; Revenue's ground is dismissed.

Final Conclusion: The appeal filed by the Revenue is dismissed in entirety; the CIT(A)'s order allowing carry forward of business losses, deleting the addition under section 68, allowing short-term capital loss, and admitting the evidential material stands confirmed.

Application of Section 43CA - valuation report of Departmental Valuation Officer - obligation to follow DVO report - consideration of assessee's registered valuer report - disallowance under Section 14A read with Rule 8D - disallowance cannot exceed exempt income

Application of Section 43CA - valuation report of Departmental Valuation Officer - consideration of assessee's registered valuer report - obligation to follow DVO report - Validity of addition made by treating sale consideration as lower of DVO valuation and stamp duty value under Section 43CA when assessee furnished a registered valuer's report and raised objections only before the Assessing Officer. - HELD THAT: - The Tribunal found that the matter was duly referred to the DVO who, after inspection and considering documents including the assessee's registered valuer report, communicated a preliminary estimate and afforded the assessee an opportunity to raise objections. The assessee chose not to object to the preliminary estimate but filed objections only after the final DVO report was issued. The AO acted on the DVO's final valuation and issued a show-cause; the AO then made the addition by applying Section 43CA. The Tribunal held that where an assessment matter is referred to the DVO and the DVO furnishes a report, the AO is bound to follow the technical opinion of the DVO and does not have discretion to substitute his own valuation merely because the assessee subsequently objects before the AO. The Tribunal examined the decisions relied upon by the assessee and found them inapplicable to displace the binding effect of the DVO's report given the assessee's failure to avail the opportunity to object during the preliminary stage before the DVO. [Paras 6]

Addition under Section 43CA confirmed; ground of appeal dismissed.

Disallowance under Section 14A read with Rule 8D - disallowance cannot exceed exempt income - Whether the disallowance computed under Section 14A read with Rule 8D can exceed the exempt dividend income earned by the assessee. - HELD THAT: - The Tribunal applied the settled legal proposition that any disallowance under Section 14A read with Rule 8D must be restricted to the extent of exempt income attributable to the investments. On facts, the assessee's exempt income amounted to a nominal sum while the AO had made a substantially larger disallowance. Following precedent and the principle that disallowance cannot exceed the exempt income, the Tribunal directed deletion of the portion of the addition in excess of the exempt income and confined the disallowance to the amount of dividend income claimed exempt. [Paras 9]

Disallowance under Section 14A/Rule 8D restricted to the exempt income of Rs. 5,635; remainder deleted; ground partly allowed.

Final Conclusion: Appeal dismissed insofar as addition under Section 43CA was confirmed; appeal partly allowed insofar as disallowance under Section 14A/Rule 8D is restricted to the exempt dividend income and the excess is deleted.

Rendition of services - transfer pricing - comparability and TNMM - segregation of transactions for transfer pricing - pass through costs - no mark up - proximate cause test for section 14A - recognition of revenue under Accounting Standard (AS) 9 - accrual and reasonable certainty - production versus manufacture - mining as production - additional depreciation - carry forward proviso and prospective application - book profit computation under MAT - limited jurisdiction of AO - provision for diminution versus actual write off - impact on book profit - reserve versus provision - Debenture Redemption Reserve as appropriation

Limitation of assessment - final assessment under 143(3) r.w.s. 144C(13) - Validity of assessment order challenged as barred by limitation - HELD THAT: - The coordinate bench precedent in Religare Capital Markets Ltd was followed and it was held that a final assessment framed under section 143(3) read with section 144C(13) is not governed by section 153 limitation provisions. The assessee's limitation challenge was therefore rejected following the co ordinate bench's finding. [Paras 4]

Ground challenging assessment as time barred dismissed.

Rendition of services - transfer pricing - comparability and TNMM - Arm's length nature of management and consultancy charges and sufficiency of evidence for rendition of services - HELD THAT: - The Tribunal held that the determinative question is whether the associated enterprise actually rendered services; the onus lies on the assessee to demonstrate rendition, although day to day evidence need not be produced and demonstration at critical milestones may suffice. Mere sample emails were held insufficient and stronger evidence (including electronic records) was required. Accordingly the matter was restored to the Assessing Officer/TPO for fresh examination in light of evidence to be furnished by the assessee. This issue is treated as allowed for statistical purposes. [Paras 19, 20]

Issue remanded to Assessing Officer/TPO for fresh adjudication and verification of evidence of rendition of services.

Segregation of transactions for transfer pricing - Whether management consultancy fee had to be aggregated with other intra group services for TNMM benchmarking - HELD THAT: - On the facts the Tribunal found the management consultancy transaction was not closely linked with the appellant's other business support/representative services; the lower authorities were correct to treat it as a separate class of transaction and not apply an aggregate TNMM. The factual segregation adopted by the TPO was sustained. [Paras 21]

Segregation of management consultancy fee as a separate transaction upheld.

Pass through costs - no mark up - OECD and UN TP guidance on pass through costs - Transfer pricing adjustment on reimbursements (SAP maintenance and other pass through costs) - HELD THAT: - The Tribunal examined the nature of the reimbursements and concluded they were pass through costs: primary third party expenses incurred by the assessee and allocated on cost to cost basis without value addition. Applying OECD and UN guidance, no mark up was warranted. The TPO's TNMM based upward adjustment was therefore deleted. [Paras 29, 30, 31, 32, 33]

TP adjustment on SAP and other cost reimbursements deleted.

Proximate cause test for section 14A - Disallowance under section 14A read with Rule 8D in respect of exempt dividend income - HELD THAT: - The Tribunal applied the proximate cause test as enunciated by the jurisdictional decisions and held that (i) the investments were funded out of own funds (own funds exceeded investments) and (ii) earlier tribunal decisions in the assessee's own case on identical facts applied. The DRP could not sustain the large Rule 8D disallowance merely because an appeal was pending in a higher forum. The disallowance made by the AO under section 14A/Rule 8D was directed to be deleted. [Paras 42, 43, 44, 45]

Disallowance under section 14A r.w. Rule 8D deleted.

Production versus manufacture - mining as production - Claim for additional depreciation under section 32(1)(iia) in respect of mining/processing assets - HELD THAT: - Relying on binding authority of the Supreme Court in Sesa Goa Ltd, the Tribunal held that extraction and processing of iron ore constitutes 'production' for purposes of the relevant provisions and the assessee was entitled to additional depreciation. The Assessing Officer was directed to allow the claim. [Paras 55, 56]

Claim for additional depreciation under section 32(1)(iia) allowed.

Additional depreciation - carry forward proviso and prospective application - Claim for carry forward/allowance of the balance 50% additional depreciation from prior year - HELD THAT: - The Tribunal examined the 2015 amendment (Finance Act 2015) which permits allowance of the balance 50% in the succeeding year and noted the amendment's stated effective date is 1.4.2016. The Tribunal declined to adjudicate on retrospective effect and held that, on plain language, the amendment did not apply to the year under consideration; therefore the carry forward claim was not allowable for that year. [Paras 69, 70, 71, 72]

Claim for balance 50% additional depreciation disallowed for the year under consideration.

Production versus manufacture - mining as production - electricity as goods - additional depreciation - Deduction under section 32AC for new assets in mining and power divisions - HELD THAT: - For mining assets, the Tribunal followed its earlier conclusion (and Supreme Court authority) that extraction/processing is 'production' and allowed the section 32AC claim. For power generation, the Tribunal noted authority holding electricity is 'goods' and that generation qualifies for additional allowances; it directed the Assessing Officer to allow the claim under section 32AC. [Paras 78, 79, 80, 81]

Deduction under section 32AC allowed.

Recognition of revenue under Accounting Standard (AS) 9 - accrual and reasonable certainty - Addition on account of alleged out of books receivables identified from impounded emails - HELD THAT: - The Tribunal examined email exchanges and observed they reflected internal tracking of contingent/premature claims. Many claimed items (insurance, bank refunds, drawback, tariff matters, PAT) are verifiable from third parties. Neither the AO nor the assessee had undertaken or produced necessary verifications/evidence. On the basis of these 'half baked' facts the Tribunal could not sustain the additions and therefore restored the matter to the Assessing Officer with directions to verify each claim, consider only receivables pertaining to the appellant, and allow the assessee to produce supporting evidence. The ground was treated as allowed for statistical purposes. [Paras 92, 93, 94, 95, 96]

Addition remanded to Assessing Officer for verification; matter restored for fresh inquiry.

CSR expenditure - Explanation 2 to section 37(1) - Deductibility of Corporate Social Responsibility expenditure under section 37(1) - HELD THAT: - Although amendments to section 37 were prospective, the Tribunal examined the detailed payments and found they were donations/charitable payments (payments to churches, schools, summits, police stations, etc.) and did not qualify as CSR expenditure for business purposes. The assessee failed to justify the nature of payments as CSR in the commercial sense; consequently the disallowance was confirmed. [Paras 103, 104, 105, 106]

CSR expenditure disallowance of Rs. 50.37 lakhs confirmed.

Capital receipt v. revenue receipt - liquidated damages for delay - Taxability of liquidated damages received from suppliers (capital v. revenue) - HELD THAT: - The Assessing Officer had treated liquidated damages as revenue. The Tribunal reviewed agreements (some dealing with supply, transfer of technology, design, installation) and observed that damages related to intangible/capital assets and that intangible assets are capital goods carrying depreciation. Therefore the liquidated damages were capital receipts and the Assessing Officer was directed to delete the addition. [Paras 110, 114]

Addition on account of liquidated damages deleted.

Set off of brought forward losses - entitlement pending earlier assessments - Claim for set off of brought forward business losses and unabsorbed depreciation - HELD THAT: - The Tribunal held that even if earlier assessment orders are under appeal, the assessee is entitled to set off in the current year as per assessed figures of previous years. The Assessing Officer was directed to allow set off as per assessed figures. [Paras 116, 119]

Brought forward losses and unabsorbed depreciation to be allowed as per assessed figures.

Book profit computation under MAT - limited AO power - provision for diminution versus actual write off - impact on book profit - Computation of book profit under section 115JB - treatment of various additions and deductions (including provision for bad and doubtful debts) - HELD THAT: - Applying the Supreme Court's authority (Apollo Tyres) and subsequent decisions, the Tribunal held the AO's power to alter book profit is limited to items in the Explanation to section 115JB. (i) The earlier disallowance under section 14A was deleted and thus does not figure in book profit. (ii) The alleged out of books receivables were remanded to the AO and therefore not finalized for MAT computation. (iii) As to provision for bad and doubtful debts, the Tribunal found that the amounts had been written off against debtors (i.e., actual write off/netting) so they did not retain the character of a provision for unascertained liability; relying on precedent, no addition under clause (c)/(i) was warranted and the Assessing Officer was directed to delete the adjustment. Other book profit items (CSR donation) were to be reassessed consistent with the Apollo Tyres ratio. Several factual items (reversal of tax provisions) were restored to the AO for verification. [Paras 150, 151, 152, 156, 159]

Book profit computation modified: section 14A adjustment deleted; provision for bad and doubtful debts not to be added back where actually written off; several factual items remanded to AO for verification; MAT computation to be revised accordingly.

Reserve versus provision - Debenture Redemption Reserve as appropriation - Whether transfer to Debenture Redemption Reserve constitutes a provision (ascertained liability) or an appropriation of profit - HELD THAT: - The Tribunal applied the Delhi High Court's reasoning in SREI Infrastructure: reserves (including statutorily required DRR) are appropriations of profit and not provisions debited to Profit & Loss; a provision is a charge against profit and is debited. Thus the amount transferred to DRR is an appropriation and not an ascertained liability to be treated as a deductible charge for computing book profit. The revenue view as per the jurisdictional High Court was applied. [Paras 159, 160, 161, 162, 163]

Transfer to Debenture Redemption Reserve treated as appropriation; Assessing Officer's contrary treatment sustained.

Deduction under section 80GGB - verification of eligibility - Claim of deduction under section 80GGB for political contributions - HELD THAT: - The assessee had added back the contribution in computation and sought allowance; the Tribunal directed the Assessing Officer to allow the deduction if the assessee is eligible after necessary verification. The matter therefore requires verification by the Assessing Officer under the statutory scheme. [Paras 164, 165]

Claim under section 80GGB directed to be allowed if eligibility is established on verification by the Assessing Officer.

Final Conclusion: The appeal is allowed in part. Key holdings: limitation challenge dismissed; management consultancy TP issue remanded for evidentiary verification while segregation as a separate transaction is sustained; reimbursements treated as pass through costs - TP adjustment deleted; section 14A/Rule 8D disallowance deleted; additional depreciation (section 32(1)(iia)) and deduction under section 32AC allowed; carry forward of the 50% additional depreciation not allowable for the year under consideration; out of books receivables and certain MAT items remanded to the Assessing Officer for verification; CSR disallowance upheld; liquidated damages held to be capital receipts and deleted; brought forward losses to be allowed as per assessed figures; book profit computation to be revised consistent with these directions; debenture redemption reserve held to be appropriation; deduction under section 80GGB to be allowed subject to verification.

Exemption from cost recovery charges - performance benchmark - simultaneous satisfaction of benchmarking criteria - interpretation of exemption circulars - strict construction of tax/exemption concessions

Exemption from cost recovery charges - performance benchmark - simultaneous satisfaction of benchmarking criteria - interpretation of exemption circulars - Whether the benchmark criteria in the Exemption Circular (number of TEUs handled and number of BoE/SB processed) must be satisfied simultaneously as a condition for waiver of CRC, or whether satisfaction of one criterion suffices. - HELD THAT: - The Exemption Circular sets out separate benchmarks for containers handled (TEUs) and customs documents processed (BoE/SB). A plain reading of the Circular, read with the DGHRD letter and the 2009 Regulation, shows that the benchmarks are intended to be applied cumulatively. The absence of the disjunctive conjunction 'or', the express reduction provision in clause (iv), and contemporaneous file notings and subgroup recommendations all indicate that both parameters were prescribed to evaluate distinct dimensions of workload and must be met together. Statistical ratios between TEUs and BoE/SB cannot be used to render one benchmark meaningless; the benchmarks measure different aspects of performance (volume of goods v. volume of documentation) and may not correlate. The Court further applied the established principle that exemption provisions are to be construed strictly in favour of the revenue when ambiguity pertains to tax exemptions. On these grounds the petitioner's contention that satisfaction of the TEU benchmark alone entitles it to waiver was rejected. [Paras 32, 33, 34, 36, 37]

The benchmarks in Clauses 1(ii) and 1(iii) of the Exemption Circular are cumulative and must be satisfied simultaneously for entitlement to waiver of CRC; they are not alternative criteria.

Exemption from cost recovery charges - strict construction of tax/exemption concessions - Whether the petitioner met the prescribed benchmarks and was therefore entitled to waiver of the CRC demands raised for its CFS. - HELD THAT: - On the facts recorded in the impugned communications, the petitioner satisfied the TEU benchmark but failed to meet the BoE/SB processing benchmark for the relevant assessment years relied upon by the Revenue. Applying the Court's conclusion that both benchmarks are required, the petitioner did not fulfil the cumulative threshold necessary for exemption. The Court also noted there was no evidence of arbitrary or selective application of the benchmarks by the authority. [Paras 28, 32, 33, 37, 38]

The petitioner did not satisfy all conditions for exemption; the demands for CRC stand and the writ petition is without merit on the surviving challenge.

Final Conclusion: Held that the Exemption Circular's performance benchmarks (TEUs and BoE/SB) are cumulative and must be simultaneously satisfied; the petitioner fulfilled only one benchmark and therefore is not entitled to waiver of cost recovery charges. The petition is dismissed and the interim protection vacated.

Disbursement of realisations under Section 530 of the Companies Act, 1956 - verification and re verification of creditors' claims by an appointed Chartered Accountant under Section 530 - distribution of liquidation balance among secured creditors, workers, preferential and unsecured creditors - mode and timeline for payment by the Official Liquidator (IMPS/RTGS/NEFT)

Verification and re verification of creditors' claims by an appointed Chartered Accountant under Section 530 - disbursement of realisations under Section 530 of the Companies Act, 1956 - Approval of the verification report dated 24.01.2020 and the re verification dated 18.02.2020 and order to disburse amounts as recommended therein - HELD THAT: - The Official Liquidator appointed M/s. Talati & Talati to verify claims and forwarded the verification report dated 24.01.2020 and a re verification dated 18.02.2020 (in respect of IDBI and SBI claims) to the parties for objections. Objections from IDBI were addressed by the reverification. The Official Liquidator reported a balance available for distribution and sought directions for disbursement in terms of the verification/reverification reports. All advocates appearing accepted the recommendations by consensus and the Court, after perusing the reports, approved the claims as processed in those reports and directed the Official Liquidator to disburse the amounts accordingly. [Paras 10, 11, 12, 13, 14]

The verification report dated 24.01.2020 and the re verification dated 18.02.2020 are accepted and the Official Liquidator is directed to disburse the amounts shown in the reports to the respective claimants.

Distribution of liquidation balance among secured creditors, workers, preferential and unsecured creditors - mode and timeline for payment by the Official Liquidator (IMPS/RTGS/NEFT) - Directions as to manner and timelines for payment to workers, secured and unsecured creditors and verification of workers' bank details - HELD THAT: - The Court directed the Official Liquidator to deposit the claim amounts into the respective bank accounts of workers by IMPS/RTGS/NEFT after verifying each worker's details. The Textile Labour Association was directed to provide bank account details, preferably within four weeks. Payments to secured and unsecured creditors were directed to be made within two weeks from receipt of the order after receiving account details from their advocates. These directions follow the Court's acceptance of the verification/reverification and the parties' consensus on disbursement. [Paras 15, 16, 17]

The Official Liquidator shall verify worker details and pay workers directly to their bank accounts by IMPS/RTGS/NEFT; secured and unsecured creditors' amounts shall be paid into their bank accounts within two weeks on provision of account details.

Consensual approval of Official Liquidator's report and Chartered Accountant's recommendations - Adoption of the Official Liquidator's prayer for directions on disbursement following consensus of all advocates - HELD THAT: - All counsel agreed by consensus to the disbursement as set out in paragraph 18 of the Official Liquidator's report dated 13.03.2020. The Court therefore perused the accountant's reports and granted the directions sought. Given the parties' consensus and the Court's examination of the reports, the request for disbursement was allowed as prayed. [Paras 12, 13, 18]

The Official Liquidator's prayer for directions to disburse as per the verification/reverification reports is granted and the company applications are disposed of in that regard.

Final Conclusion: The Court accepted the Chartered Accountant's verification and re verification reports, granted the Official Liquidator's prayer for disbursement, directed payment of the verified claims to respective bank accounts by IMPS/RTGS/NEFT within the timelines ordered, and disposed of the company applications accordingly.

Sanction of Scheme of Arrangement - Appointed Date to govern effectiveness of scheme under Section 232(6) of the Companies Act, 2013 - Compliance with applicable accounting standards including AS-14 (IND AS-103) and AS-5 (IND AS-8) - Service of notices to affected authorities under Section 230(5) - Filing of certified order and scheme with Registrar of Companies in Form INC-28 - Adjudication of stamp duty by Superintendent of Stamps - Acceptance of undertakings and satisfactory report of Regional Director

Sanction of Scheme of Arrangement - fairness and legality of the scheme - Sanction of the Scheme of Arrangement between the Demerged Company and the Resulting Company - HELD THAT: - The Tribunal considered the petition, the report of the Regional Director, the affidavits of compliance filed by the petitioners and the absence of any objector. The Tribunal found that the scheme appears fair and reasonable, not violative of law and not contrary to public policy. The undertakings and clarifications furnished by the petitioner companies were accepted. Having satisfied statutory requirements, the Tribunal made the company petition absolute and sanctioned the Scheme. [Paras 11, 12, 13]

The Scheme is sanctioned; the petition is made absolute.

Appointed Date to govern effectiveness of scheme under Section 232(6) of the Companies Act, 2013 - Applicability of the Appointed Date and the effective date of the Scheme - HELD THAT: - The Regional Director had raised an observation about the appointed date and its consistency with Section 232(6). The Tribunal directed that the provisions of Section 232(6) shall be applicable to the Scheme, i.e., the Scheme shall be effective from the Appointed Date as indicated in the Scheme. The Appointed Date was accordingly fixed after accepting the petitioners' undertakings and RD's supplementary report. [Paras 9, 10, 14]

The Scheme shall be effective from the Appointed Date fixed as 1st April 2019, and Section 232(6) is applicable.

Compliance with applicable accounting standards including AS-14 (IND AS-103) and AS-5 (IND AS-8) - Acceptance of undertakings and satisfactory report of Regional Director - Sufficiency of petitioners' responses to Regional Director's observations including accounting and other compliances - HELD THAT: - The Regional Director's report raised several points (paras IV(a) to (g)). The petitioners filed an affidavit in reply giving specific undertakings to comply with applicable accounting standards, to follow the MCA circular, to confirm no discrepancy in the filed scheme, to serve notices to authorities and to address complaints and prosecutions as required. The RD filed a supplementary report finding the petitioners' responses satisfactory except initial lack of clarity on the Section 232(6) point; thereafter the Tribunal directed applicability of Section 232(6) and accepted the undertakings. The Tribunal recorded that the clarifications are accepted and the RD's outstanding concerns were addressed. [Paras 7, 8, 9, 10, 11]

The petitioners' undertakings and clarifications are accepted; the RD's report is satisfactory in respect of the matters raised after the directed compliance.

Filing of certified order and scheme with Registrar of Companies in Form INC-28 - Adjudication of stamp duty by Superintendent of Stamps - Service of notices to affected authorities under Section 230(5) - Post-sanction procedural directions concerning filing, stamping and action by regulatory authorities - HELD THAT: - The Tribunal directed the petitioner companies to file a certified copy of the order and the Scheme with the concerned Registrar of Companies electronically in Form INC-28 within thirty days, and to lodge a certified copy with the Superintendent of Stamps for adjudication within sixty working days. The Tribunal also directed that all concerned regulatory authorities act on a certified copy of the order and the Scheme, and preserved liberty for any interested person to apply for further directions. [Paras 15, 16, 17, 18]

Petitioners to file certified order and scheme with ROC in Form INC-28 and to lodge certified copy with Superintendent of Stamps; regulatory authorities to act on certified copies.

Final Conclusion: The Tribunal sanctioned the Scheme of Arrangement between Repro Books Limited and Repro India Limited, accepted the petitioners' undertakings and the Regional Director's supplementary report, directed that the Scheme be effective from the Appointed Date of 1st April 2019 under Section 232(6), and issued consequential directions for filing with the Registrar of Companies and adjudication of stamp duty.

Intervention in company scheme proceedings under section 230 framework - Applicability of a compromise/arrangement scheme to Operational Creditors versus Financial Creditors - Locus to object at application stage versus at final hearing - Protection of pre-existing rights and court orders against a proposed scheme - Requirement to amend a filed scheme to remove provisions affecting excluded classes of creditors - Validity of Resolution Plans under RBI guidance vis-a -vis a company scheme - Conduct of creditors' meetings by physical or audio visual means and preservation of unedited footage - Appointment, powers and remuneration of Chairperson and Scrutiniser for creditors' meetings - Computation of time-limit for convening meetings from a revised date

Applicability of a compromise/arrangement scheme to Operational Creditors versus Financial Creditors - Requirement to amend a filed scheme to remove provisions affecting excluded classes of creditors - The filed Scheme shall apply only to Operational Creditors and not to Financial Creditors; the Company must remove clauses that cast a shadow on Financial Creditors and circulate a revised Scheme. - HELD THAT: - The Tribunal accepted the Respondent Company's affidavit clarifying that the Scheme is meant only for arrangement with Operational Creditors and will not affect Financial Creditors. To remove any confusion as to applicability, the Respondent Company was directed to identify and delete clauses in the Scheme that impact Financial Creditors and to circulate the revised Scheme to stakeholders to enable objections. The Tribunal emphasised that any references in the filed Scheme suggesting applicability to Financial Creditors would have to be excised so that the Scheme operates exclusively vis-a -vis Operational Creditors, and that objections to the revised Scheme will be considered at the final hearing stage. [Paras 2]

Scheme confined to Operational Creditors; revise and circulate Scheme removing references affecting Financial Creditors.

Intervention in company scheme proceedings under section 230 framework - Locus to object at application stage versus at final hearing - Protection of pre-existing rights and court orders against a proposed scheme - The Applicant Bank's application to intervene was dealt with by directing that objections (including locus) be considered at the final hearing; the Bank's existing rights and orders remain unaffected by the Scheme. - HELD THAT: - The Tribunal recorded that objections to the Scheme, including questions of locus standi, are not to be finally adjudicated at the stage when directions are being given for holding meetings and should be reserved for the final hearing on sanction of the Scheme. In relation to the Applicant Bank, the Tribunal expressly declared that its rights, remedies and interests arising from any court order, bilateral arrangement or undertaking shall remain wholly unaffected by the Scheme. The Tribunal thereby allowed the procedural intervention to the extent of preserving the Bank's position and directing consideration of objections at the final stage rather than at the meetings-direction stage. [Paras 2]

Objections, including locus, to be considered at final hearing; Applicant Bank's pre-existing rights remain unaffected.

Validity of Resolution Plans under RBI guidance vis-a -vis a company scheme - Applicability of scheme to Operational Creditors versus Financial Creditors - Financial Creditors remain free to consider any Resolution Plan under the RBI circular independently of the present Scheme. - HELD THAT: - The Tribunal clarified that any resolution plan considered by Financial Creditors under the RBI circular dated 07.06.2019 will be untrammelled and uninfluenced by anything stated in this Order because the present Scheme applies only to Operational Creditors. Consequently, Financial Creditors' processes under RBI guidance are to be treated as separate and de hors the present Scheme. [Paras 2]

Financial Creditors' consideration of RBI resolution plans is unaffected and remains independent of the Scheme.

Recall of order and propriety of obtaining tribunal orders without notice to an intervenor - The application seeking recall of the order dated 12.06.2020 was disposed of; interim orders were vacated and the Tribunal reproached the authorised representative for failing to notify the pendency but declined to impose costs. - HELD THAT: - The Tribunal examined emails and affidavits and concluded that the authorised representative had seen and replied to communications about the pending intervention application yet failed to inform the Bench on the hearing date. The conduct was held to amount to obtaining orders 'behind the back' of the Applicant Bank; however, having regard to the representative's inexperience, the Tribunal refrained from imposing costs, limited itself to criticism and disposed of the recall application, vacating interim relief previously granted. [Paras 3]

IA for recall disposed; interim orders vacated; admonition to authorised representative; no costs imposed.

Conduct of creditors' meetings by physical or audio visual means and preservation of unedited footage - Appointment, powers and remuneration of Chairperson and Scrutiniser for creditors' meetings - Computation of time-limit for convening meetings from a revised date - Meetings of Operational Creditors to be conducted within specified parameters (physical within Mumbai local limits or via audiovisual means with preservation of unedited footage); time-limit of sixty days to run from 27.07.2020; Chairperson and Scrutiniser were appointed with specified powers and fees; other procedural directions for notice, publication and voting were given. - HELD THAT: - The Tribunal directed that meetings referred to in its earlier order be confined to Operational Creditors and prescribed that the sixty day period to conduct meetings shall be computed from 27.07.2020. If held physically, they must be within Mumbai local limits; if held by audio visual means the unedited raw footage must be preserved and submitted with an affidavit. The Tribunal made it the Company's duty to ensure preservation of footage and warned of serious consequences for failure. It appointed a named Chairperson with powers under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and fixed remuneration, and also appointed a named Scrutiniser with a fixed fee. Directions were given concerning notice publication, application of section 103 mutatis mutandis, proxy voting, valuation of creditors' claims for voting, reporting results to the Tribunal, and service on regulatory bodies. [Paras 4]

Detailed directions issued for conduct of Operational Creditors' meetings, preservation of audiovisual record, appointment and remuneration of Chairperson and Scrutiniser, notice and publication requirements, and computation of the meeting period from 27.07.2020.

Final Conclusion: The Tribunal directed that the Scheme shall apply only to Operational Creditors and not to Financial Creditors, required amendment and circulation of a revised Scheme, preserved the Applicant Bank's pre-existing rights, disposed of the recall application with admonition to the authorised representative, vacated interim orders, and issued detailed procedural directions (including a revised time-limit, meeting modalities, preservation of unedited footage, and appointments of Chairperson and Scrutiniser) for convening the Operational Creditors' meetings.

Sanction of scheme of amalgamation under sections 230 to 232 read with section 234 of the Companies Act, 2013 - Appointed Date of a scheme and its operative effect - Compliance with accounting standards including Ind AS-103 and Ind AS-8 in schemes of arrangement - Obligations under FEMA and Reserve Bank of India in cross border mergers - Filing of orders and scheme with Registrar of Companies in E Form INC 28 - Adjudication of stamp duty on sanctioned schemes - Stock exchange filings and SEBI compliance for listed transferee companies

Sanction of scheme of amalgamation under sections 230 to 232 read with section 234 of the Companies Act, 2013 - Sanction of the Composite Scheme of Amalgamation and Plan of Merger between the named transferor and transferee companies. - HELD THAT: - The Tribunal considered the petition, the material on record including the affidavits of compliance, the reports of the Regional Director and the Official Liquidator, and the submissions of learned counsel for the petitioner companies. The Tribunal found that the Scheme annexed to the petition appears to be fair and reasonable, not violative of law and not contrary to public policy. The Tribunal recorded that requisite statutory compliances had been fulfilled and accepted the undertakings given by the petitioners. Consequently, the Scheme as annexed to CP (CAA) No.931/MB.II/2020 was sanctioned and the company petition was made absolute as prayed. [Paras 12, 13, 14, 15]

The Composite Scheme is sanctioned and CP (CAA) No.931/MB.II/2020 is made absolute in terms of the prayer clauses.

Appointed Date of a scheme and its operative effect - Fixing of the Appointed Date of the sanctioned Scheme. - HELD THAT: - The petitioners had proposed the Appointed Date as the opening hours of 1st March 2020 and confirmed that the Scheme will take effect from that Appointed Date in accordance with section 232(6) of the Companies Act, 2013. The Tribunal fixed the Appointed Date of the Scheme as the opening hours of 1st March 2020. [Paras 11, 21]

Appointed Date fixed as opening hours of 1st March 2020 and the Scheme shall take effect from that date.

Compliance with accounting standards including Ind AS-103 and Ind AS-8 in schemes of arrangement - Stock exchange filings and SEBI compliance for listed transferee companies - Acceptance of clarifications and undertakings regarding accounting treatment and stock exchange/SEBI related compliance. - HELD THAT: - The Regional Director had observed that accounting entries necessary under applicable Accounting Standards (including Ind AS 103 and Ind AS 8) must be passed and queried stock exchange approvals/filings. The petitioners filed an affidavit undertaking to pass requisite accounting entries in accordance with applicable accounting standards and to comply with applicable SEBI and stock exchange requirements, while noting that approvals from overseas exchanges were not required as per the stated law and circular. The Tribunal accepted these clarifications and undertakings. [Paras 10, 11, 12]

Clarifications on accounting treatment and stock exchange/SEBI compliance accepted; petitioners' undertakings recorded and accepted.

Obligations under FEMA and Reserve Bank of India in cross border mergers - Requirement to comply with FEMA/RBI and obtain any necessary approvals for the foreign transferor and cross border aspects. - HELD THAT: - The Regional Director and ROC observations highlighted the need for compliance with FEMA/Reserve Bank of India guidelines and that the foreign transferor (a Delaware corporation) must obtain approvals under applicable foreign law. The petitioners stated that they will obtain necessary approvals and will comply with FEMA/RBI and other applicable requirements; the petitioners also placed on record that prior RBI approval under the Cross Border Merger Regulations had been submitted to the Regional Director. The Tribunal accepted these statements and undertakings. [Paras 10, 11, 12]

Petitioners to comply with FEMA/RBI requirements and obtain/record necessary foreign and RBI approvals; undertaking accepted.

Filing of orders and scheme with Registrar of Companies in E Form INC 28 - Adjudication of stamp duty on sanctioned schemes - Directives for post-sanction compliance including filing with Registrar, adjudication of stamp duty and circulation to regulatory authorities. - HELD THAT: - The Tribunal directed the petitioner companies to file a copy of the Order and the Scheme with the concerned Registrar of Companies electronically in E Form INC 28 within thirty days of certified copy issuance. The petitioners were also directed to lodge a certified copy of the Order and Scheme with the Superintendent of Stamps for adjudication of stamp duty within sixty days, and regulatory authorities were directed to act on certified copies of the Order and Scheme. The Tribunal left liberty for interested persons or authorities to approach the Tribunal for further directions if necessary. [Paras 16, 17, 18, 19, 20]

Petitioners directed to file E Form INC 28, to seek stamp duty adjudication, and regulatory authorities to act on certified copies; liberty granted to parties to apply for further directions.

Final Conclusion: The Tribunal sanctioned the Composite Scheme of Amalgamation as filed, fixed the Appointed Date as opening hours of 1st March 2020, accepted the petitioners' clarifications and undertakings on accounting, regulatory and foreign law/FEMA/RBI compliance, and directed specified post sanction filings including E Form INC 28 and stamp duty adjudication; regulatory authorities and interested persons retain liberty to approach the Tribunal for further directions.

Sanction of scheme of merger under sections 230 to 232 of the Companies Act, 2013 - Appointed date and effectiveness of scheme - Dissolution of transferor companies without winding up - Acceptance of undertakings and compliance with statutory and accounting requirements - Filing and administrative directions following sanction

Sanction of scheme of merger under sections 230 to 232 of the Companies Act, 2013 - Scheme not prejudicial to interest of shareholders and public - Sanction of the Scheme of Merger by Absorption of six Transferor Companies with the Transferee Company - HELD THAT: - The Tribunal examined the petition, the report of the Regional Director and the report of the Official Liquidator, and found that the Scheme appears fair and reasonable, not violative of law or public policy and that requisite statutory compliances have been fulfilled. The clarifications and undertakings furnished by the petitioner companies in response to observations of the Regional Director were accepted. No objector appeared to contest the Scheme. On this basis the Tribunal made the company petition absolute and sanctioned the Scheme of Merger by Absorption under sections 230 to 232 and other applicable provisions of the Companies Act, 2013. [Paras 18, 19, 20, 21, 22]

The Scheme of Merger by Absorption is sanctioned and the company petition is made absolute.

Appointed date and effectiveness of scheme - Determination of the Appointed Date from which the Scheme is effective - HELD THAT: - The petitioner companies represented that the Appointed Date is 1st April 2019 and undertook that the Scheme will be deemed effective from that Appointed Date. The Tribunal accepted this representation and the undertaking given by the petitioners, and therefore fixed the Appointed Date as 1st April 2019 for the Scheme. [Paras 11, 18, 22]

Appointed Date of the Scheme is 1st April 2019 and the Scheme is deemed effective from that date.

Dissolution of transferor companies without winding up - Directions for filing certified copies and related administrative steps - Dissolution of the Transferor Companies without winding up and post-sanction filing and compliance directions - HELD THAT: - The Official Liquidator reported that the affairs of the Transferor Companies were conducted properly and not prejudicial to shareholders, and recommended dissolution without winding up. The Tribunal accepted that report. The Tribunal directed the petitioners to file certified copies of the order and the Scheme with the Registrar of Companies in E-form INC-28 within 30 days, to lodge a certified copy with the Superintendent of Stamps within 60 days for adjudication of stamp duty, and directed that concerned regulatory authorities may act on certified copies of the order and Scheme. The Tribunal also left liberty to any interested person to apply for further directions. [Paras 22, 23, 24, 25, 26]

Transferor Companies to be dissolved without winding up; petitioners to comply with filing and stamping directions and regulatory authorities to act on certified copies.

Acceptance of undertakings and compliance with statutory and accounting requirements - Response to observations of the Regional Director and Official Liquidator - Acceptance of petitioners' undertakings addressing the Regional Director's observations and compliance with accounting and statutory requirements - HELD THAT: - The Regional Director had made observations concerning accounting entries, the Appointed Date, convening of meetings, affidavit of sameness of Scheme, service of notices to authorities, change in memorandum and articles and protection of creditors' interests. The petitioners furnished specific undertakings addressing each observation, including compliance with applicable accounting standards, confirmation of the Appointed Date, affidavit that the Scheme as filed is identical, proof of service to authorities and creditors, and undertaking to comply with provisions relating to change in authorised share capital and fee. The Tribunal accepted these undertakings and the petitioners' statement that no objections were received from creditors. [Paras 14, 15, 16, 17, 18]

Undertakings and clarifications given by the petitioners in response to the Regional Director's observations are accepted and petitioners to comply with statutory and accounting requirements.

Final Conclusion: The Tribunal sanctioned the Scheme of Merger by Absorption, fixed the Appointed Date as 1st April 2019, directed dissolution of the Transferor Companies without winding up, accepted the petitioners' undertakings addressing the Regional Director's observations and ordered specified filings and compliance steps to be completed within the time periods directed.

Scheme of Amalgamation - Convening of shareholders' meetings by video conferencing - Dispensation of meetings of Unsecured Creditors - Service of notice to regulatory authorities and tax authorities - Appointment of Chairperson and Scrutiniser for shareholders' meetings - Preservation of unedited raw footage of virtual meetings - Publication and notice requirements for convening meetings - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Appointment of chartered accountants for notice to Official Liquidator

Convening of shareholders' meetings by video conferencing - Preservation of unedited raw footage of virtual meetings - Direction to convene meetings of equity shareholders of the Applicant Companies through video conferencing on specified dates and to preserve unedited raw footage of such meetings. - HELD THAT: - The Tribunal ordered that meetings of the equity shareholders of each Applicant Company shall be convened by video conferencing or other audio-visual means on the dates and times specified in the order, to be conducted in accordance with the applicable MCA circular. Recognising Covid-19 constraints, the Tribunal permitted audio-visual meetings where physical meetings are not possible and directed that the unedited raw footage of such meetings be preserved by the Applicant Companies and produced on demand for verification. The arrangements and conduct of these meetings are to be made by the respective Applicant Companies in conformity with the prescribed procedures. [Paras 7, 8, 9, 10, 11]

Meetings of equity shareholders to be convened via video conferencing on the specified dates, with preservation of unedited raw footage.

Publication and notice requirements for convening meetings - Compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Directions as to issue, contents, service and publication of notices convening the shareholders' meetings and related documentation, and filing of compliance report. - HELD THAT: - The Tribunal directed that at least thirty clear days prior to the meetings, notices together with the Scheme, the Explanatory Statement required under section 230 and the prescribed Form of Proxy shall be sent to equity shareholders by registered post/courier/speed post/hand delivery or to their registered e-mail addresses, and copies made available at the registered offices. The Applicant Companies were ordered to publish the convening notices in specified newspapers and to host notice of filing on their websites. The Chairpersons were directed to file an affidavit seven days before the meetings confirming compliance with issuance, advertisement and hosting requirements, and to report the results within thirty days after the meetings by affidavit as per the Rules. The Applicant Companies were permitted to file compliance reports with the registry in lieu of customary affidavits of service due to lockdown conditions. [Paras 14, 25, 26, 31, 32]

Notices, explanatory statements and proxy forms to be issued and published as directed; compliance to be reported by affidavit or compliance report as ordered.

Appointment of Chairperson and Scrutiniser for shareholders' meetings - Appointment of specified Chairpersons and a Practising Company Secretary as Scrutiniser with authority and remuneration for conducting the shareholders' meetings. - HELD THAT: - The Tribunal appointed Mr. Pawan Khandelwal as Chairperson (with a named alternate) for the shareholders' meetings of each Applicant Company. It also appointed Ms. Aditi Vohra, Practising Company Secretary, as Scrutiniser for each meeting and fixed her remuneration. The Chairperson was vested with powers under the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 to conduct the meeting, decide procedural questions, consider amendments proposed at the meeting, and to ascertain the decision of the meeting including by poll. The Chairperson was also directed to determine in case of disputed entries in company books the value and number of shares for meeting purposes, and to file the required compliance affidavits. [Paras 20, 21, 24, 25, 26]

Specified Chairpersons and Scrutiniser appointed with the powers and reporting obligations as directed; disputed share entries to be determined by the Chairperson.

Dispensation of meetings of Unsecured Creditors - Service of notice to unsecured creditors and opportunity to object - Dispensation of meetings of Unsecured Creditors of the Applicant Companies, subject to issuance of notices to those creditors allowing submission of objections. - HELD THAT: - On the applicants' submission that the Scheme involves only shareholders and does not diminish creditors' liabilities, the Tribunal dispensed with convening meetings of Unsecured Creditors. The Tribunal nonetheless directed that notices be sent to each Unsecured Creditor of the Applicant Companies informing them of the Scheme and allowing them thirty days from receipt to submit objections to the Tribunal; objections must also be served on the respective Applicant Company. The Tribunal emphasised the duty of the Applicant Companies to ensure all creditors are put on notice, and that any objection received shall be considered at final disposal of the petition. [Paras 27, 28]

Meetings of Unsecured Creditors dispensed with, but notices to creditors must be issued and objections, if any, considered at final disposal.

Service of notice to regulatory authorities and tax authorities - Appointment of chartered accountants for notice to Official Liquidator - Direction to serve notices to the Regional Director, Registrar of Companies and Income Tax Authority, and to serve notice upon the Official Liquidator through appointment of chartered accountants; presumption of no objection if no response in thirty days. - HELD THAT: - Pursuant to statutory procedure, the Tribunal directed that notices be served on (1) the Central Government through the Regional Director (Western Region), (2) Registrar of Companies, Maharashtra, Mumbai, and (3) the Income Tax Authority within whose jurisdiction the Applicant Companies are assessed, clearly indicating the PAN of the concerned company. The Transferor Companies were additionally directed to serve notice upon the Official Liquidator, High Court, Bombay. For this purpose the Tribunal appointed M/s H.K. Dedhia & Co., Chartered Accountants on a consolidated remuneration, to be borne jointly by the Transferor Companies. The Tribunal provided that if no response is received from these authorities within thirty days of receipt of notice, it will be presumed they have no objection to the Scheme, as per the Rules. [Paras 29, 30]

Notices to statutory and tax authorities and Official Liquidator to be served as directed; appointed chartered accountants to effect service; absence of response within thirty days to be treated as no objection.

Proxy voting and quorum for shareholders' meetings - Rules on proxy voting, authorised representatives, and the quorum for the shareholders' meetings. - HELD THAT: - The Tribunal permitted voting by proxy and by authorised representatives of body corporates subject to filing of prescribed proxy/authorisation not later than forty-eight hours before the meeting, in accordance with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. It also directed that the quorum for the meetings shall be as prescribed under section 103 of the Companies Act, 2013. The Chairperson is empowered to resolve disputed entries relating to share value and number for meeting purposes. [Paras 22, 23, 24]

Proxy voting and authorised representative voting permitted with timely filing; quorum to follow section 103; Chairperson to decide disputed share entries.

Final Conclusion: The Tribunal directed convening of shareholders' meetings by video conferencing with specified Chairpersons and Scrutiniser, ordered issuance and publication of notices and related compliance filings, dispensed with meetings of Unsecured Creditors while requiring notice and an opportunity to object, directed service of statutory notices (including to the Income Tax Authority and Official Liquidator) with a presumption of no objection after thirty days, appointed chartered accountants to effect service upon the Official Liquidator, and imposed requirements for preservation of virtual meeting footage and reporting of meeting results.

Liquidator's entitlement to payment of CIRP and liquidation costs - Committee of Creditors' obligation to reimburse CIRP expenses proportionate to voting share - disputed inclusion of a creditor in the Committee of Creditors and its impact on liability to contribute - deposit in an interest-bearing account pending adjudication of disputed liability - power of the Adjudicating Authority under Section 60(5) of the Insolvency and Bankruptcy Code to issue interim directions

Liquidator's entitlement to payment of CIRP and liquidation costs - Committee of Creditors' obligation to reimburse CIRP expenses proportionate to voting share - power of the Adjudicating Authority under Section 60(5) of the Insolvency and Bankruptcy Code to issue interim directions - Direction to CoC members to discharge outstanding CIRP and liquidation costs and the manner of payment. - HELD THAT: - The liquidator filed an interlocutory application for directions to the CoC members to pay outstanding CIRP and liquidation costs which, according to the liquidator, remained unpaid despite demands. The Tribunal noted that some CoC members had already undertaken to reimburse CIRP expenses in proportion to voting share and recorded the submission by certain respondents that upon verification of records and satisfaction of outstanding balances by the liquidator, payments would be made within 15 days. Although the liquidator had not first convened a Stakeholders Constitution Committee meeting, the Adjudicating Authority did not dismiss the application on that ground. Instead, after recording the parties' positions and the admitted outstanding sums, the Tribunal recorded the assurance regarding payment by respondents 1, 3 and 5 and directed compliance with that assurance within the time specified. The Tribunal therefore exercised its supervisory power under the Code to secure payment and continuity of the liquidation process by directing that verification and payment be effected as recorded. [Paras 4, 6, 9, 12]

The Tribunal recorded the respondents' undertaking to pay verified outstanding amounts and directed compliance with that undertaking within the prescribed time; the application was not dismissed for failure to convene an SCC meeting.

Disputed inclusion of a creditor in the Committee of Creditors and its impact on liability to contribute - deposit in an interest-bearing account pending adjudication of disputed liability - Whether the disputed creditor (IFCI) can be compelled to pay its share of CIRP/liquidation costs pending the adjudication of its status as a financial creditor. - HELD THAT: - The minutes of the Fourth CoC meeting and subsequent proceedings revealed an express and pending dispute about whether IFCI, a holder of convertible debentures, constitutes a "financial creditor" for purposes of inclusion in the CoC. The Tribunal declined to finally determine that question in this interlocutory application. Recognising the legitimate dispute and the risk of prejudice to either party, the Tribunal directed an interim mechanism: IFCI is not compelled to directly transfer funds to the liquidator but is ordered to deposit the amount corresponding to its determined voting-share contribution into an interest-bearing account of the corporate debtor in the name of the liquidator within 15 days. The deposited funds are to remain until the pending applications regarding IFCI's inclusion in the CoC are disposed of; if IFCI is ultimately held to be a financial creditor its deposited amount (with interest) may be utilised for CIRP/liquidation costs, otherwise it must be refunded with accrued interest. This preserves the status quo and protects the interests of both parties pending final adjudication. [Paras 10, 11, 12]

IFCI is ordered to deposit its prospective contribution into an interest-bearing account in the name of the liquidator within 15 days; the deposit to be released for CIRP/liquidation costs if IFCI is held to be a financial creditor, or refunded (with interest) if not. The question of IFCI's status is left for determination in the pending applications.

Final Conclusion: The interlocutory application was disposed of by directing verification and payment by certain CoC members as recorded and by ordering IFCI to deposit its prospective share in an interest-bearing account pending resolution of the dispute over its inclusion in the CoC; the substantive question of IFCI's status as a financial creditor was left for determination in the pending proceedings.

Effective service of demand notice - Financial debt under Section 5(8) of the Insolvency and Bankruptcy Code - Debt as contribution/quasi-capital by promoters - Misuse of position and unlawful collusion - Punishment under Section 72 of the Code

Effective service of demand notice - Misuse of position and unlawful collusion - Whether the demand notice was effectively served on the corporate debtor and whether the manner of service demonstrated collusion or misuse of position by the petitioner. - HELD THAT: - The Tribunal found that the demand notice dated 21.08.2017 was sent by the petitioner and was replied to by the petitioner's son and power of attorney holder on behalf of the corporate debtor, both of whom were directors of the company. The notice was therefore issued, received and replied to among the petitioner and his son themselves, without the knowledge of the other directors. The Bench concluded that this sequence of events showed unlawful collusion and misuse of the petitioner's position and that there was no effective service of the demand notice on the corporate debtor in the manner required for proceedings under the Code. [Paras 17, 18, 19]

Demand notice was not effectively served; the conduct evidenced unlawful collusion and misuse of position by the petitioner.

Financial debt under Section 5(8) of the Insolvency and Bankruptcy Code - Debt as contribution/quasi-capital by promoters - Whether the claimed amount of Rs. 47,16,667/- qualified as a financial debt under Section 5(8) (and as 'debt' under Section 3(11)) of the Code. - HELD THAT: - The Tribunal observed there were no written terms for repayment, no interest chargeable, no due date of payment and no entry of interest in the company's books indicating the time value of money. In the absence of time value of money or a due date, the amount did not satisfy the characteristics of a 'financial debt' as contemplated by Section 5(8). On the material, the Bench accepted the corporate debtor's contention that the funds were promoter/shareholder contributions or quasi-capital advanced to run a family business, rather than a repayable financial debt. [Paras 20, 21, 22]

The claimed amount does not qualify as a financial debt under the Code and is to be regarded as contribution/quasi-capital by promoters.

Punishment under Section 72 of the Code - Whether further punishment should be imposed on the petitioner under Section 72 of the Code in view of alleged fraudulent or malicious initiation of proceedings. - HELD THAT: - The corporate debtor filed an interlocutory application seeking punishment under Section 72 alleging fraudulent and malicious initiation of the proceedings. Although the Tribunal found misconduct in the manner of service of the demand notice and noted other allegations, it did not consider further punishment under Section 72 to be merited in the circumstances of this case. [Paras 23, 24]

No further punishment under Section 72 of the Code is warranted.

Final Conclusion: The petition under the Code is dismissed: the demand notice was ineffectively served and the claimed amount does not constitute a financial debt but promoter/shareholder contribution; no punishment under Section 72 is imposed.

Financial debt - Default - Admission of application under Section 7 of the Insolvency and Bankruptcy Code - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional - Public announcement of the Corporate Insolvency Resolution Process

Financial debt - Default - Existence of a financial debt and occurrence of default by the corporate debtor - HELD THAT: - The Bench found on the basis of the petition, appended sanction letters, security documents and the statement of account that financial assistance was granted and disbursed to the corporate debtor and that the account had become a Non-Performing Asset. The account statement showed the outstanding principal and uncharged/penal interest claimed by the petitioner, and the corporate debtor accepted that the account had become NPA. Applying the definitions in the Code, the debt qualifies as a financial debt and the facts constitute a default for the purpose of triggering the insolvency process. [Paras 1, 4, 7]

The petition discloses a financial debt and an admitted/defaulted liability of the corporate debtor.

Admission of application under Section 7 of the Insolvency and Bankruptcy Code - Moratorium under Section 14 of the Insolvency and Bankruptcy Code - Appointment of Interim Resolution Professional - Public announcement of the Corporate Insolvency Resolution Process - Whether the Section 7 petition is admissible and the consequential orders to be passed - HELD THAT: - Satisfied that the application complied with the requirements of Section 7 and the Rules (including evidence of default), and having regard to the settled principle that once the adjudicating authority is satisfied that a default has occurred the application must be admitted, the Bench admitted the petition. Consequential directions were issued: declaration of moratorium with the statutory prohibitions on suits, proceedings and enforcement actions; requirement that supplies of essential goods/services not be interrupted; direction for public announcement of the CIRP; and appointment of an Interim Resolution Professional to carry out functions under the Code. [Paras 8, 9]

Petition admitted; moratorium declared; public announcement directed; Mr. Rakesh Kumar Tulsyan appointed as Interim Resolution Professional and registry directed to communicate the order.

Final Conclusion: The Tribunal admitted the Section 7 petition filed by Bank of India against Wadhwa Buildcon LLP on the finding of a financial debt and default, declared moratorium, directed public announcement of the CIRP and appointed an Interim Resolution Professional.

Condition precedent - assured return scheme - financial debt - default under the Insolvency and Bankruptcy Code, 2016 - maintainability of a petition under Section 7

Condition precedent - assured return scheme - financial debt - default under the Insolvency and Bankruptcy Code, 2016 - maintainability of a petition under Section 7 - Whether the amounts claimed by the financial creditors constitute a debt in default for the purposes of Section 7 of the IBC, 2016 where payment of assured returns is made subject to execution of a Unit-Buyer's Agreement. - HELD THAT: - The Tribunal examined the MOU clause which expressly conditions payment of the assured return upon execution of the Unit-Buyer's Agreement in the company's standard format. The financial creditors failed to produce any executed Unit-Buyer's Agreement signed by both parties. In these circumstances the Tribunal found that the contractual condition precedent for accrual of the assured-return obligation was unfulfilled; consequently the claimed sum had not become a 'debt' payable by the corporate debtor and there was no 'default' as envisaged by Sections 2(11) and 2(12) of the Code. Reliance on earlier voluntary payments by the corporate debtor up to December 2017 was treated as insufficient to cure the absence of the condition precedent or to convert the disputed obligation into a debt due under the Code. The alternative contentions that the assured-return scheme could be unilaterally withdrawn or that prior payments must be refunded were considered but the determinative finding was non-fulfilment of the contractual precondition to liability.

The petition under Section 7 is not maintainable as the claimed assured-return obligation had not become due; the petition is dismissed.

Final Conclusion: The petition filed under Section 7 of the IBC, 2016 was dismissed because the assured-return payments claimed by the financial creditors did not constitute a debt in default-the condition precedent of an executed Unit-Buyer's Agreement was not satisfied and no default under the Code was established.

Failure of CIRP on non-receipt of approved resolution plan within statutory period - liquidation under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - discretion under Section 30(4) of the Code to accept or reject a resolution plan - commercial decision of Committee of Creditors not open to judicial review - appointment of liquidator and liquidation process under Chapter III of Part II - cessation and fresh commencement of moratorium under Section 33(5) - liquidator's duties under Section 35(1) of the Code

Failure of CIRP on non-receipt of approved resolution plan within statutory period - liquidation under Section 33(1)(a) of the Insolvency and Bankruptcy Code, 2016 - Liquidation of the corporate debtor was to be ordered because no resolution plan was approved by the Committee of Creditors within the statutory CIRP period. - HELD THAT: - The Adjudicating Authority applied Section 33(1)(a) of the Code where, before the expiry of the maximum period permitted for completion of CIRP under Section 12, no resolution plan had been received under Section 30(6). The Tribunal found that the statutory insolvency resolution period had elapsed and there was no approved or viable resolution plan; adherence to the Code's clear language required an order of liquidation. The Tribunal observed that even after liquidation is ordered, the liquidator retains power to sell the business as a going concern, but that fact does not relieve the Adjudicating Authority of the obligation to order liquidation where the statutory preconditions of Section 33(1)(a) are satisfied. [Paras 16, 17, 18]

Application allowed and corporate debtor ordered to be liquidated in terms of the Code.

Discretion under Section 30(4) of the Code to accept or reject a resolution plan - commercial decision of Committee of Creditors not open to judicial review - The Committee of Creditors' decision not to approve a resolution plan is a commercial decision within its discretion and is not amenable to judicial interference. - HELD THAT: - The Tribunal noted that Section 30(4) uses the word 'may', reflecting that the CoC has a discretion to accept or reject a resolution plan even where the plan may be otherwise correct. The minutes of the CoC showed that the resolution plan could not be approved with the required majority. The Tribunal found no infirmity in the reasoned decision of the CoC and held that commercial decisions of the CoC are not susceptible to judicial review in this context; consequently the absence of an approved plan justified liquidation under the Code. [Paras 14, 15]

CoC's rejection of resolution plan upheld; not open to judicial review and supports liquidation order.

Appointment of liquidator and liquidation process under Chapter III of Part II - cessation and fresh commencement of moratorium under Section 33(5) - liquidator's duties under Section 35(1) of the Code - Appointment of the liquidator and directions for conduct of the liquidation process, including public announcement, communication to ROC and IBBI, cessation of earlier moratorium and commencement of liquidation moratorium, and liquidator's duties, were ordered. - HELD THAT: - Pursuant to the liquidation order, the Tribunal appointed the named liquidator and directed him to issue the public announcement and to proceed with liquidation in accordance with Chapter III of Part II and applicable regulations. The Registry was directed to inform the Registrar of Companies and the Insolvency and Bankruptcy Board of India. The earlier moratorium under Section 14 was directed to cease and a fresh moratorium under Section 33(5) was to commence. The liquidator was further directed to investigate the corporate debtor's financial affairs as required by Section 35(1), pursue pending applications and recoveries, and submit a preliminary report within the regulatory timeframe. [Paras 19]

Specific directions issued for appointment of liquidator and conduct of liquidation in accordance with the Code and regulations; I.A. disposed accordingly.

Final Conclusion: The Tribunal allowed the application under Section 33(1)(a) of the Code, ordered liquidation of M/s. Beta Infratech Private Limited for absence of an approved resolution plan within the statutory CIRP period, upheld the CoC's commercial decision not to approve a plan, appointed a liquidator and issued directions for the liquidation process in accordance with the Code and relevant regulations.

Initiation of liquidation under Section 33(2) of the IBC, 2016 - commercial decision of the Committee of Creditors to liquidate - appointment of liquidator - ineligibility of a resolution applicant under Section 29A on account of being declared a wilful defaulter - MSME exemption under Section 240-A permitting promoters to be considered notwithstanding Section 29A - Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 - 90 days for completion of a scheme under the Companies Act, 2013

Commercial decision of the Committee of Creditors to liquidate - initiation of liquidation under Section 33(2) of the IBC, 2016 - Validity of the CoC's resolution to initiate liquidation and whether the Tribunal should interfere with that decision - HELD THAT: - The Tribunal recorded that the CoC, after inviting Expressions of Interest and granting extensions, found that prospective resolution applicants had failed to submit viable plans and that there was no continuing viable business or fixed assets of value. The CoC unanimously resolved in its 6th meeting not to extend time and to initiate liquidation, and directed the Resolution Professional to approach the Tribunal under Section 33(2). The Tribunal noted absence of pending applications under relevant provisions (including allegations of fraudulent or preferential transactions) that would preclude liquidation and found no basis to interfere with the commercial determination of the CoC to liquidate the corporate debtor. [Paras 5, 6, 11]

The CoC's decision to liquidate is upheld and the application for liquidation under Section 33(2) is allowed; the intervention challenging the decision is dismissed.

Appointment of liquidator - Whether the Resolution Professional should be appointed as Liquidator and on what terms - HELD THAT: - The Tribunal noted that the CoC had approved the Resolution Professional to act as Liquidator and that the proposed Liquidator had furnished written consent. The Tribunal appointed Mr. Ravindranath Narayana Rao as Liquidator and specified directions requiring strict compliance with the IBC, attendant rules and liquidation regulations, public announcement, investigation of the corporate debtor's financial affairs, communications to statutory authorities, commencement of fresh moratorium under Section 33(5), and filing of the preliminary report within the regulatory time-frame. [Paras 12]

The Resolution Professional is appointed as Liquidator subject to the stated terms and directions.

MSME exemption under Section 240-A permitting promoters to be considered notwithstanding Section 29A - Regulation 2B of the IBBI (Liquidation Process) Regulations, 2016 - 90 days for completion of a scheme under the Companies Act, 2013 - ineligibility of a resolution applicant under Section 29A on account of being declared a wilful defaulter - Effect of MSME-related exemptions and liquidation-stage procedures on the promoter-director's ability to offer a revival scheme or be considered despite a wilful defaulter declaration - HELD THAT: - The Tribunal observed that Section 240-A excludes certain clauses from applying to resolution applicants in respect of CIRPs of MSMEs, and that Regulation 2B contemplates a 90-day period after commencement of liquidation for completion of a scheme of compromise or arrangement under the Companies Act. Accordingly, even where promoters or directors have been declared wilful defaulters, MSME promoters retain the opportunity to submit a scheme under Section 230 or otherwise seek to take over the company as a going concern during the period envisaged by the liquidation regulations. Nevertheless, the Tribunal held that these statutory avenues did not furnish a ground to set aside the CoC's decision in the present record. [Paras 9, 10, 11]

MSME promoters retain available statutory remedies (including schemes under Section 230 within the period contemplated by Regulation 2B), but that circumstance does not warrant upsetting the CoC's resolution to liquidate in this case; the intervening application is dismissed.

Final Conclusion: The Tribunal affirmed the Committee of Creditors' commercial determination to liquidate the corporate debtor, dismissed the promoter-director's intervention challenging the rejection of his Expression of Interest, and appointed the Resolution Professional as Liquidator with specified directions to carry out the liquidation process.

Pre-existing dispute in respect of operational debt - Maintainability of Section 9 application under the Insolvency and Bankruptcy Code, 2016 - Effect of High Court transfer order on limitation - Real dispute doctrine (Mobilox principle)

Effect of High Court transfer order on limitation - Maintainability of Section 9 application under the Insolvency and Bankruptcy Code, 2016 - Limitation plea in respect of the Section 9 application - HELD THAT: - The Adjudicating Authority held that the Operational Creditor approached the Tribunal pursuant to an order of the High Court directing transmission of the earlier winding up petition to the NCLT. The series of events were treated as continuous and the approach before the Adjudicating Authority by virtue of the High Court's order brought the application within limitation. Accordingly the plea of limitation was addressed and rejected as a bar to maintainability. [Paras 8]

Limitation plea not sustained; the Section 9 application is within limitation by reason of the High Court transfer order.

Pre-existing dispute in respect of operational debt - Real dispute doctrine (Mobilox principle) - Existence of a pre-existing dispute between the parties in relation to the claimed invoices - HELD THAT: - On review of the record the Tribunal noted emails exchanged in 2010, the counter affidavit and counterclaim filed in the civil suit, and the Corporate Debtor's reply to the Form 3 demand notice. Those materials demonstrated complaints regarding delay, absorption of detention charges and an asserted counterclaim, which the Authority treated as indicia of a real, pre existing dispute. Applying the principle that the IBC cannot be invoked where a real dispute exists (as explained in Mobilox and followed by the Tribunal), the Authority concluded that a bona fide dispute existed prior to the Section 9 notice. [Paras 9, 10, 11, 13]

A real pre-existing dispute was held to exist; therefore the Section 9 application could not be admitted.

Final Conclusion: The Company Petition under Section 9 was rejected on the ground of a pre-existing real dispute; the plea of limitation was not allowed to defeat maintainability by reason of the High Court transfer order. No costs were ordered.

Application of definition of financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - status of financial creditor under Section 5(7) of the Insolvency and Bankruptcy Code, 2016 - consideration for the time value of money - TDS deduction not constituting admission of liability - requirement of board resolution for inter-corporate loans and borrowing powers of the Board

Application of definition of financial debt under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 - status of financial creditor under Section 5(7) of the Insolvency and Bankruptcy Code, 2016 - consideration for the time value of money - TDS deduction not constituting admission of liability - requirement of board resolution for inter-corporate loans and borrowing powers of the Board - Whether the amounts advanced by the petitioner qualify as a financial debt and whether the petitioner is a financial creditor entitled to initiate proceedings under Section 7 of the IBC; whether requisite corporate authorisations/board resolutions and contractual terms exist to establish such financial debt. - HELD THAT: - The Tribunal examined the definitions of "debt", "claim", "financial debt" and "financial creditor" and the material placed by the petitioner. Although payments were made by RTGS and TDS on alleged interest was deducted and reflected in Form 26AS, there is no written loan agreement specifying the agreed rate of interest or other contractual terms evidencing a borrowing "disbursed against the consideration for the time value of money". Reliance on TDS certificates was rejected for the limited purpose of establishing admission of liability, the Tribunal noting that deduction of TDS does not itself convert a transaction into a financial debt. Further, the petitioner failed to produce board resolutions of either company authorising the loan or its receipt as required by the statutory regime governing corporate loans and board powers. On the basis of the foregoing, the Tribunal found that the claim does not fall within any clause of Section 5(8) and therefore the petitioner cannot be treated as a financial creditor under Section 5(7). [Paras 7, 9, 10, 12, 13]

The petition under Section 7 is not maintainable because the amounts advanced do not qualify as a financial debt and the petitioner is not a financial creditor; the Section 7 application is dismissed.

Final Conclusion: The Tribunal dismissed the Section 7 petition: advances shown by the petitioner were not held to be financial debt under Section 5(8) and the petitioner was not held to be a financial creditor under Section 5(7), in the absence of contractual terms, agreed rate of interest and requisite board resolutions.

Restoration/reconnection of electricity during CIRP - electricity as an essential service under Section 14(2) of the Insolvency and Bankruptcy Code, 2016 - making the corporate debtor a going concern in CIRP - interim finance and dry run/trial production for maximization of asset value - direction to utility to permit limited reconnection subject to conditions

Restoration/reconnection of electricity during CIRP - direction to utility to permit limited reconnection subject to conditions - electricity as an essential service under Section 14(2) of the Insolvency and Bankruptcy Code, 2016 - Direction to the electricity supplier for limited reconnection of supply to the corporate debtor whose supply had been disconnected prior to commencement of CIRP. - HELD THAT: - The Tribunal recognised that the electricity connection had been disconnected well before the CIRP commenced and that the respondent contended Section 14(2) IBC may not apply to pre-CIRP disconnections. Taking into account the CoC's view that limited operation (dry run and trial production) may materially assist in maximising the resolution value and the respondent's willingness to permit reconnection without prejudice to its contentions, the Tribunal directed a limited, conditional reconnection. The reconnection is for a fixed period of three weeks, to commence on a date to be intimated in advance, and is subject to payment of reconnection and consumption charges by the IRP and presence of the respondent's representative during operations. The order balances the respondent's recovery concerns with the objective of enabling verification of the viability of machinery to aid resolution, while not deciding the broader applicability of Section 14(2) to pre-CIRP disconnections. [Paras 12, 14, 15]

Reconnection allowed for three weeks on conditions: IRP to intimate start date in consultation with CoC at least one week in advance, remit reconnection and consumption charges, permit TANGEDCO representative to be present.

Making the corporate debtor a going concern in CIRP - interim finance and dry run/trial production for maximization of asset value - Whether the corporate debtor must be restored to a going concern as part of the CIRP. - HELD THAT: - The Tribunal noted that the corporate debtor had ceased operations well before the CIRP commencement and therefore declined the submission that the company must be made a going concern during the CIRP. Nonetheless, it accepted a limited, pragmatic measure - allowing dry run and trial production for a short period - as a proportionate means to assess and possibly maximise asset value for stakeholders, especially given expressions of willingness by certain CoC members to provide interim finance conditional on such testing. [Paras 14, 15]

The corporate debtor will not be declared or restored as a going concern during CIRP; limited operational testing (dry run and trial production) is permitted for the narrow purpose of asset valuation and potential resolution.

Final Conclusion: Application disposed: limited reconnection of electricity ordered for three weeks subject to advance intimation, payment of reconnection and consumption charges by the IRP, and presence of the utility's representative; the corporate debtor was not ordered to be made a going concern during CIRP, but limited testing was permitted to assist maximisation of value.

Maximization of value - liquidator's duty to conduct sale in accordance with Regulations - section 60(5) powers of Adjudicating Authority in liquidation - setting aside auction for inadequate consideration - Regulation 33(3) collusion and reporting to Adjudicating Authority - Schedule I requirement of multiple rounds of auction - Regulation 39 time bound realisation and maximisation

Maximization of value - Schedule I requirement of multiple rounds of auction - Regulation 39 time bound realisation and maximisation - section 60(5) powers of Adjudicating Authority in liquidation - setting aside auction for inadequate consideration - Validity of the e auction conducted on 11th June 2019 and whether the auction could be set aside and the applicant permitted to be declared successful bidder - HELD THAT: - The Tribunal examined the liquidation scheme and the liquidator's obligations under IBC and the Liquidation Process Regulations. It held that the Adjudicating Authority has residuary powers under section 60(5) to examine questions arising in liquidation where no specific mechanism exists, and that decisions of a liquidator can be reviewed if they are not consonant with the Code's objectives, notably maximization of value. The Tribunal found that the auction involved a single round with only one bidder at reserve price and that the liquidator did not record any reason for not conducting multiple rounds as contemplated by Schedule I or for taking steps to maximise realisation as required by Regulation 39. The process was therefore held to exhibit an irregularity in the form of failure to endeavour maximisation of value and an unjustified deviation from the sale procedure (including relaxation of payment terms). While ordinarily an auction should not be reopened except for fraud or material irregularity, the Code adds the distinct ground of inadequate consideration relative to the objective of maximisation of value, permitting interference. The Tribunal further observed that an interested party prepared to pay a higher price and satisfying due diligence and eligibility cannot be rendered remediless. Applying these principles to the facts, the Tribunal accepted the applicant's higher bid and deposited earnest money, finding the new offer materially more beneficial to stakeholders and time value considerations, and therefore set aside the earlier e auction and declared the applicant successful subject to conditions for payment and forfeiture in case of default. [Paras 13, 15, 16, 17, 18]

The earlier e auction of 11th June 2019 is cancelled and set aside; the applicant's proposal is accepted and the applicant is to deposit the balance amount within six weeks, failing which the deposited amount shall be forfeited.

Final Conclusion: The Tribunal allowed the application, set aside the earlier e auction for failure to pursue maximization of value and procedure prescribed in the Regulations, and accepted the higher bid of the applicant subject to deposit conditions and forfeiture clause.

Liquidation on failure of resolution process under the Insolvency and Bankruptcy Code - inadmissibility of belated resolution plans after completion of the corporate insolvency resolution process - disqualification of applicants under Section 29A - CIRP expiry rendering the resolution professional and Committee of Creditors functus officio - appointment of liquidator and commencement of liquidation process - cessation of earlier moratorium and commencement of fresh moratorium on liquidation

Liquidation on failure of resolution process under the Insolvency and Bankruptcy Code - Order for liquidation of the corporate debtor was required on failure of the resolution process and expiry of the CIRP period. - HELD THAT: - The Tribunal found that no viable or approved resolution plan existed on completion of the statutory CIRP period and that the Committee of Creditors had rejected the only plan before it. In the absence of any approved resolution plan and upon expiry of the insolvency resolution timeline, the adjudicating authority was bound to give effect to the statutory mandate and order liquidation of the corporate debtor. The Tribunal relied on the scheme of the Code requiring liquidation where no resolution plan is received or approved within the stipulated period and concluded that no alternative remained but to order liquidation. [Paras 16, 17, 18, 19]

Application under Section 33(1) was allowed and the corporate debtor ordered to be liquidated.

Inadmissibility of belated resolution plans after completion of the corporate insolvency resolution process - CIRP expiry rendering the resolution professional and Committee of Creditors functus officio - Applications filed by prospective resolution applicants after completion of the CIRP period to place resolution plans before the Adjudicating Authority were not maintainable and could not be entertained. - HELD THAT: - The Tribunal held that the applicants failed to participate in the prescribed EOI process during the CIRP and only approached the Adjudicating Authority after the CIRP had expired (more than 700 days). The proper course was to submit plans to the Resolution Professional for consideration by the Committee of Creditors within the CIRP timeline. After expiry of the statutory period the RP and CoC had become functus officio and the Adjudicating Authority was not empowered to permit belated filing of plans before it, which would prolong or nullify the time-bound insolvency process. [Paras 10, 15]

Intervention applications seeking to place belated plans before the Tribunal were rejected as not maintainable.

Disqualification of applicants under Section 29A - The application filed on behalf of the employee-constituted trust was barred by disqualification under Section 29A in respect of one of the applicants who was part of the ex-management. - HELD THAT: - The Tribunal noted that one of the applicants (the CFO) was part of the management of the corporate debtor at the time of default and that the proposed trust was not an existing entity in the manner required. On that basis the applicant was considered disqualified under the provisions dealing with ineligible persons and therefore lacked locus to present a resolution plan at that stage. That disqualification reinforced the conclusion that the belated application had no merit. [Paras 11, 15]

The application filed by the ex-management member/employee trust was held to be disqualified and was rejected.

Appointment of liquidator and commencement of liquidation process - cessation of earlier moratorium and commencement of fresh moratorium on liquidation - A liquidator was to be appointed and the liquidation process to commence, with the earlier moratorium ceasing and a fresh moratorium under liquidation commencing. - HELD THAT: - Pursuant to the order for liquidation, the Tribunal appointed the named insolvency professional as liquidator and directed the statutory public announcement and carrying out of liquidation in accordance with the Code and the Liquidation Process Regulations. The Tribunal directed communication of the order to the Registrar of Companies and the Insolvency and Bankruptcy Board of India, required the liquidator to issue the public announcement and to file quarterly progress reports. It also recorded that the moratorium previously in force would cease and a new moratorium under Section 33(5) would commence. [Paras 20, 21, 22, 23, 24]

Liquidator appointed; liquidation process to proceed as per the Code and Regulations; fresh moratorium to commence and periodic progress reports directed.

Final Conclusion: The Tribunal ordered liquidation of JVL Agro Industries Ltd. on conclusion that no approved resolution plan existed at the end of the CIRP, rejected belated attempts to place resolution plans before the Adjudicating Authority as not maintainable (including on grounds of ineligibility under Section 29A), appointed the liquidator and directed commencement of the liquidation process with the consequential moratorium and reporting directions.

Mandatory pre-deposit - right to be heard - set-aside of order for non-compliance to enable remittance of pre-deposit - classification of services as banking and other financial services

Mandatory pre-deposit - right to be heard - set-aside of order for non-compliance to enable remittance of pre-deposit - Whether the order rejecting the appeal for non-compliance with the mandatory pre-deposit (Ext.P4) must be set aside to permit the petitioner to remit the pre-deposit and have the appeal heard on merits. - HELD THAT: - The petitioner, a co-operative society, alleged a substantive legal point that the services rendered did not amount to 'banking and other financial services' under the Finance Act, 1994. Ext.P4 rejected the appeal for failure to deposit the mandatory pre-deposit and thereby foreclosed the petitioner's opportunity to ventilate that legal contention on merit. Although the respondents relied on the Apex Court decision in Anjani Technoplast Ltd. regarding applicability of pre-deposit requirements, the High Court found that the petitioner's inability to make the pre-deposit consequent to the manner in which the waiver application was disposed of resulted in loss of the opportunity to contest the substantive legal question. In the interest of hearing the appeal on merits, the Court exercised its discretion to permit the petitioner to remit the requisite pre-deposit within a limited time and directed that, upon such remittance, the earlier order rejecting the appeal for non-compliance (Ext.P4) shall stand set aside and the appellate authority shall decide the appeal on merits after affording further hearing. [Paras 7, 8]

Ext.P4 is set aside on the petitioner remitting the requisite pre-deposit within ten days; upon remittance the appeal (Ext.P3) shall be considered on merits after further hearing and decided within two months.

Classification of services as banking and other financial services - right to be heard - Permission for the petitioner to argue the substantive question on classification of services as 'banking and other financial services' before the appellate authority once pre-deposit is remitted. - HELD THAT: - The Court recognised that the question whether the petitioner's activities fall within 'banking and other financial services' is a question of law which was not adjudicated on merits because the appeal was dismissed for non-deposit. To protect the petitioner's right to contest that legal issue, the Court allowed the petitioner to make the mandated pre-deposit and required the appellate authority to afford further opportunity of hearing and decide the appeal on merits within a stipulated timeframe. [Paras 7, 8]

Petitioner permitted to remit the pre-deposit and to raise the legal contention regarding classification of services before the appellate authority; appeal to be decided on merits within two months thereafter.

Final Conclusion: Writ petition allowed: petitioner permitted to remit the requisite pre-deposit within ten days; on such remittance Ext.P4 shall stand set aside and Ext.P3 appeal shall be heard on merits after further hearing and decided by the appellate authority within two months.

Refund under Section 11B of Central Excise Act, 1944 - reverse charge mechanism - service provider definition - eligibility for Cenvat credit with nil tariff rate - remand for fresh decision

Reverse charge mechanism - service provider definition - refund under Section 11B of Central Excise Act, 1944 - Whether the appellant, who pays service tax under reverse charge mechanism, can be regarded as a service provider for the purpose of claiming refund of accumulated Cenvat credit. - HELD THAT: - The Tribunal did not decide the issue on merits but noted that identical questions had earlier been considered in proceedings culminating in the Tribunal's order dated 05.12.2017 and the Commissioner (Appeals)'s order dated 17.10.2018 which granted relief. In view of the prior treatment of the same controversy and the appellant's submission that the present dispute is identical, the Tribunal found it appropriate to remit the matter to the Commissioner (Appeals) for fresh adjudication on merits, giving the appellant an opportunity of personal hearing and directing that the issues be decided in line with the earlier orders as applicable. [Paras 3, 5, 6]

Remanded to the Commissioner (Appeals) for fresh decision on whether a payer under reverse charge is a service provider for refund purposes, with a direction to grant personal hearing and decide in line with the earlier orders.

Eligibility for Cenvat credit with nil tariff rate - refund under Section 11B of Central Excise Act, 1944 - remand for fresh decision - Whether a manufacturer of goods attracting a nil rate of duty is eligible to claim refund of accumulated Cenvat credit. - HELD THAT: - The Tribunal refrained from adjudicating the question on merits. Noting that the same issue had been remitted previously and relief granted by the Commissioner (Appeals) pursuant to the Tribunal's earlier direction, the Tribunal considered it appropriate to set aside the impugned order and remit the matter to the Commissioner (Appeals) for de novo consideration. The Commissioner (Appeals) is to decide the appellant's entitlement to refund of accumulated Cenvat credit in accordance with the precedents and after affording personal hearing. [Paras 3, 5, 6]

Remanded to the Commissioner (Appeals) for fresh adjudication on eligibility for Cenvat credit/refund where the manufactured goods bear a nil tariff rate, with directions to follow the earlier orders and grant personal hearing.

Final Conclusion: Impugned order set aside; appeal allowed by way of remand to the Commissioner (Appeals) for fresh decision on the identified issues, after affording the appellant personal hearing and in conformity with the earlier orders referred to by the Tribunal.

Entitlement to concessional rate against Declaration in 'C' forms for inter state purchases - continuing operation of Central Sales Tax Act for specified six commodities after GST - independent right to registration under the CST Act irrespective of seller's liability - judicially binding effect of in rem High Court decisions and their prospective application by assessing authorities - obligation of revenue authorities to permit online downloading and use of 'C' forms

Entitlement to concessional rate against Declaration in 'C' forms for inter state purchases - continuing operation of Central Sales Tax Act for specified six commodities after GST - Benefit of concessional rate of tax by using 'C' forms is available to a dealer purchasing High Speed Diesel by way of inter state sale and the CST Act continues to operate for such specified commodities. - HELD THAT: - The Court applied and followed the view expressed by the Single Judge in M/s Ramco Cements Ltd and the Division Bench decision confirming it, holding that the right of purchasing dealers to claim concessional tax by filing Declaration in 'C' forms survives the post GST amendments restricting the CST Act to six specified commodities. The Division Bench reasoning, adopted by the Court, recognises an independent entitlement to registration and to claim concessional treatment under the CST framework for purchasing dealers even where the seller's liability under the CST Act is the principal charge. Accordingly, High Speed Diesel, being a commodity within the scope of the contested relief, falls within the operability of Section 8(3)(b) and related provisions as interpreted by the Court, and the revenue's contention to the contrary was rejected. [Paras 5]

The petitioner is entitled to the concessional benefit under the CST regime for inter state purchase of High Speed Diesel by using 'C' forms.

Independent right to registration under the CST Act irrespective of seller's liability - judicially binding effect of in rem High Court decisions and their prospective application by assessing authorities - obligation of revenue authorities to permit online downloading and use of 'C' forms - Assessing authorities must give effect to the High Court's decision statewide by permitting inclusion of High Speed Diesel in registration and enabling issue/download of 'C' forms to eligible dealers. - HELD THAT: - Relying on the reasoning in the affirmed Ramco Cements decisions, the Court directed that, until those orders are stayed or reversed, the rationale is to be applied by all assessing authorities in the State. The petitioner was held entitled to have 'High Speed Diesel Oil' included in its registration certificate and to obtain 'C' forms online; the departmental practice of restricting the benefit to parties to the original litigation was held to be impermissible because the High Court's decisions operate in rem and bind assessing authorities. The Court therefore commanded administrative action to give effect to these rights within a specified short timeframe. [Paras 5]

The department is directed to include High Speed Diesel in the petitioner's registration certificate and to permit issuance and online downloading of 'C' forms to eligible dealers forthwith.

Final Conclusion: Writ petition allowed; following the Court's earlier decisions in Ramco Cements (as affirmed on appeal), the petitioner is entitled to claim concessional tax for inter state purchase of High Speed Diesel by filing 'C' forms, to have High Speed Diesel included in its registration certificate, and the revenue authorities are directed to implement these directions and enable online issuance of 'C' forms.