TaxTMI Updates e-Newsletter
Oct 10,2023

Violation of principles of natural justice - public domain material - inspection of online material/web portals as evidence - alternative statutory remedy - dismissal of writ petition

Violation of principles of natural justice - public domain material - inspection of online material/web portals as evidence - Whether the impugned order was passed in violation of the principles of natural justice by taking into account material not included in the return or provided by the petitioner - HELD THAT: - The Court found that the material referred to in the impugned order (notably paragraph 19.3) was gathered from the petitioner-owned URLs www.pinkytravels.com and https://www.pinkytravels.com/Home/about. The petitioner did not dispute ownership of those web portals and did not contend that it had not been confronted with the material. As the material was in the public domain and the petitioner was not denied an opportunity to meet the same, the Court held that reliance on that material did not amount to a breach of the principles of natural justice.

No violation of the principles of natural justice was made out.

Alternative statutory remedy - dismissal of writ petition - Whether the writ petition was maintainable notwithstanding the existence of an alternative statutory remedy - HELD THAT: - The Court noted that an alternative statutory remedy is available against the impugned order. In the light of the conclusion that no breach of natural justice occurred and given the availability of statutory remedies, the Court declined to entertain the writ petition and dismissed it, while leaving open the petitioner's right to pursue the alternate remedy and preserving all contentions.

Writ petition dismissed; petitioner not precluded from pursuing alternative statutory remedies.

Final Conclusion: The writ petition challenging the impugned notice and order for FY 2017-18 and FY 2018-19 is dismissed on the merits and because an alternative statutory remedy exists; the Court held that reliance on information from the petitioner-owned public web portals did not breach natural justice and preserved the petitioner's rights to pursue available statutory remedies.

Refund of accumulated unutilised Input Tax Credit - computation of admissible refund under Rule 89(4) of the CGST Rules - definition of "turnover of zero-rated supply of goods" in Rule 89(4)(C) - relevant date for refund under Section 54 of the CGST Act - retrospective application of procedural amendment - crystallisation of refund right on date of export - effect of judicial striking down of a statutory amendment

Definition of "turnover of zero-rated supply of goods" in Rule 89(4)(C) - computation of admissible refund under Rule 89(4) of the CGST Rules - retrospective application of procedural amendment - Amendment to Rule 89(4)(C) (substituted w.e.f. 23.03.2020) cannot be applied to compute refund of ITC in respect of exports made prior to the amendment date when the refund right crystallised - HELD THAT: - The Court examined the substituted Clause (C) which caps export turnover at 1.5 times the value of like domestic supplies for purposes of computing the maximum refund under the Rule 89(4) formula. The Revenue's contention that the amended clause is merely procedural and therefore may be applied to refund applications filed after 23.03.2020 even if exports occurred earlier was rejected. The Court held that the right to refund of accumulated ITC crystallises on the date of export and limitation for filing a refund claim is reckoned from that "relevant date" under Section 54(2) Explanation (a). "Turnover" must be read with reference to the period in which supplies are effected and, absent express indication to the contrary, the refund-related turnover must be ascertained by the rules in force during that period. Consequently, applying the post-amendment definition of export turnover to exports made in the period 01.10.2018 to 30.09.2019 was impermissible and the appellate authority erred in doing so. [Paras 17, 18, 20, 21, 22]

Amended Clause (C) of Rule 89(4) could not be applied to compute refunds for exports made before 23.03.2020; export turnover for the relevant period must be determined by the law in force on the date of export.

Relevant date for refund under Section 54 of the CGST Act - crystallisation of refund right on date of export - refund of accumulated unutilised Input Tax Credit - Petitioner's refund claims for the period 01.10.2018 to 30.09.2019 are sustainable and impugned rejection orders must be set aside with directions to process the refund with interest - HELD THAT: - Applying the principle that the refund right crystallises on the date of export and that turnover is to be ascertained with reference to the period of supply, the Court found in favour of the petitioner. The appellate authority's conclusion upholding rejection on account of non-compliance with the amended Rule 89(4)(C) was quashed. In light of the finding, the impugned refund rejection orders and the orders-in-appeal were set aside and the assessing officer was directed to process the petitioner's refund claims for the specified period, along with applicable interest, pursuant to the refund applications already filed. [Paras 22, 25, 26]

Impugned orders rejecting refund claims for 01.10.2018 to 30.09.2019 set aside; concerned officer directed to process the petitioner's refund claims with applicable interest.

Final Conclusion: The petitions succeed: the amended Clause (C) of Rule 89(4) cannot be applied to compute refunds for exports effected in the period 01.10.2018 to 30.09.2019; the impugned rejection orders and appellate orders are set aside and the officer is directed to process the petitioner's refund claims for that period with applicable interest.

Presumptive taxation under section 44BB - Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils - non obstante clause and its effect on assessment under normal provisions - deletion of disallowances under sections 37 and 40(a)(i) consequent to applicability of presumptive regime - claim for depreciation under section 32 as ancillary once presumptive regime applies - verification of tax deduction at source credit by Assessing Officer - separability of penalty proceedings from quantum appeals

Presumptive taxation under section 44BB - non obstante clause and its effect on assessment under normal provisions - Income of the non-resident assessee from contracts with ONGC and Petrogas is to be determined under the presumptive scheme of section 44BB. - HELD THAT: - The Tribunal found that the assessee, a non-resident company, rendered services and supplied facilities in connection with prospecting/exploration/production of mineral oil as per the contracts with ONGC and Petrogas, and those activities fall squarely within the scope of the special provision. By virtue of the non obstante clause in section 44BB(1), the statutory regimen prescribes a deemed profit (presumptive rate) and displaces contrary provisions of the normal computation. The Tribunal further noted prior decisions in the assessee's own case and the settled principle that an assessee is not estopped from invoking a statutory provison even if the return reflected a different computation; substantial justice and the absence of estoppel against statute were applied. Consequently the income must be computed in accordance with section 44BB rather than under normal provisions. [Paras 5, 21, 25]

Assessee's income to be determined on presumptive basis as per section 44BB.

Deletion of disallowances under sections 37 and 40(a)(i) consequent to applicability of presumptive regime - Disallowances made by the Assessing Officer under general provisions (including under section 37 and section 40(a)(i)) are unsustainable once section 44BB applies. - HELD THAT: - The Tribunal observed that where the presumptive regime of section 44BB applies by operation of the non obstante clause, other statutory disallowances affecting computation under normal provisions cannot survive. Accordingly, the disallowances originally made in respect of chemical purchases, certain invoice-related expenditures, and amounts disallowed for failure to deduct TDS were held to be liable for deletion as they cannot override the special computation provided by section 44BB. [Paras 11, 12, 13, 14, 25]

All such disallowances are deleted consequent to computation under section 44BB.

Verification of tax deduction at source credit by Assessing Officer - Credit for tax deducted at source claimed by the assessee requires factual verification by the Assessing Officer. - HELD THAT: - The Tribunal held that the question of allowing proper and due credit of TDS involves factual aspects and documentary verification that fall within the jurisdiction of the Assessing Officer. Accordingly, the matter was remitted with a direction to the AO to grant TDS credit in accordance with law after necessary verification. [Paras 26]

Matter remitted to AO to give TDS credit in accordance with law.

Separability of penalty proceedings from quantum appeals - Initiation of penalty proceedings under provisions relating to false particulars or failure to keep accounts is not part of the present quantum appeal and is to be treated separately. - HELD THAT: - The Tribunal recorded that penalty proceedings under the relevant penalty provisions are distinct statutory processes, not emanating from the quantum orders under appeal, and therefore cannot be adjudicated in this appeal; such grounds were dismissed for being outside the scope of the present proceedings. [Paras 27]

Penalty-related grounds dismissed as not arising out of the orders under appeal.

Claim for depreciation under section 32 as ancillary once presumptive regime applies - The assessee's additional ground seeking depreciation under the normal provisions is rendered academic where income is determined under the presumptive scheme, but the ground is allowed in principle. - HELD THAT: - The Tribunal admitted the additional legal ground concerning depreciation and observed that once the presumptive computation under section 44BB applies, adjudication on depreciation under section 32 becomes academic. Nevertheless, the Tribunal allowed the additional ground insofar as the applicability of section 44BB was accepted and recorded that other detailed adjustments become unnecessary. [Paras 4, 25]

Additional ground on depreciation allowed in view of adoption of presumptive computation; substantive depreciation adjudication rendered academic.

General grounds not requiring specific adjudication - Certain general grounds of appeal raising broad objections or alleging conjectural additions do not require separate adjudication. - HELD THAT: - The Tribunal observed that several of the assessee's grounds were general in nature (challenging factual evaluation, alleging surmise and conjecture, or seeking general relief) and did not necessitate specific findings in the context of the issues decided; those grounds were noted but not specially adjudicated. [Paras 28]

General grounds left without separate adjudication.

Final Conclusion: The appeal is partly allowed: the Tribunal directed computation of the assessee's income for A.Y. 2010-11 under the presumptive regime of section 44BB, deleted the consequential disallowances made under normal provisions, remitted the issue of TDS credit to the Assessing Officer for verification, dismissed penalty-related grounds as outside the quantum appeal, and treated certain general grounds as not requiring specific adjudication.

Business expenditure - incidental to business - personal use disallowance - allowability of travelling and conveyance expenses - allowability of public relations expenses - allowability of interest on motor car loans

Allowability of public relations expenses - business expenditure - incidental to business - Disallowance of public relations expenses confirmed by lower authorities was unjustified and deleted. - HELD THAT: - The assessee's business was shown to consist of liaisoning, facilitating and providing logistics support for foreign manufacturers participating in global tenders of the Ministry of Railways, which inherently involves arranging business meetings and hosting foreign delegations. Given the nature of the business, the expenditure incurred as public relations expenses was held to be incurred in the course of business and incidental thereto. The Tribunal found no justification for the disallowance made by the Assessing Officer and confirmed by the Commissioner (Appeals) and therefore deleted the addition. [Paras 5]

Addition on account of public relations expenses deleted.

Allowability of travelling and conveyance expenses - business expenditure - personal use disallowance - Disallowance of travelling and conveyance expenses confirmed by lower authorities was unjustified and deleted. - HELD THAT: - The Tribunal accepted the assessee's explanation that travelling and conveyance expenses were incurred in furtherance of its liaisoning and facilitation business-activities such as attending delegations and procuring orders for foreign suppliers-thus constituting business expenditure. On this basis, the disallowance made by the Assessing Officer and upheld by the CIT(A) was found to be without justification and was accordingly deleted. [Paras 5]

Addition on account of travelling and conveyance expenses deleted.

Allowability of interest on motor car loans - business expenditure - personal use disallowance - Disallowance of interest on motor car loans (treated as personal use) confirmed by lower authorities was unjustified and deleted. - HELD THAT: - Considering the nature of the assessee's business, which required use of motor vehicles for business activities (including running, parking and facilitation), the Tribunal held that the interest on car loans was incurred for business purposes and was not a personal expense. Consequently, the addition sustained by the lower authorities on the ground of personal use was found to be unwarranted and was deleted. [Paras 5]

Addition on account of interest on motor car loans deleted.

Final Conclusion: The Tribunal allowed the appeal and deleted the additions made in respect of public relations expenses, travelling and conveyance expenses, and interest on motor car loans, holding these expenditures to be business expenses incidental to the assessee's liaisoning and facilitation activities.

Deduction under Section 80P - Late filing of return and bona fide delay - Reasonable cause for delay due to delayed statutory audit and pandemic - Non applicability of amendment mandating return filing on due date for AY 2020-21

Deduction under Section 80P - Late filing of return and bona fide delay - Reasonable cause for delay due to delayed statutory audit and pandemic - Non applicability of amendment mandating return filing on due date for AY 2020-21 - Whether the assessee is entitled to deduction under Section 80P for AY 2020-21 despite filing the return after the extended due date. - HELD THAT: - The Tribunal found that the assessee, a co operative society, had claimed deduction under Section 80P in the return filed on 31.03.2021 but the claim was denied solely because the return was filed after the extended due date of 15.02.2021. The Tribunal accepted the assessee's explanation that the delay resulted from the Government auditor furnishing the audit report belatedly and that the delay was attributable to circumstances beyond the assessee's control, including pandemic related constraints. The Tribunal also noted that the amendment making timely filing a mandatory condition for certain claims applied from AY 2021 22 and was therefore not applicable to AY 2020 21. On these findings the Tribunal held that denial of the Section 80P deduction solely on the ground of belated filing was not justified and that the assessee's reasonable cause for delay entitled it to claim the deduction for AY 2020 21.

The disallowance of the Section 80P deduction on the sole ground of late filing is set aside and the deduction is allowed for AY 2020 21; the appeal is allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, holding that the Section 80P deduction must be allowed for AY 2020 21 because the return was filed late for bona fide reasons (delayed government audit and pandemic related circumstances) and the amendment making timely filing a mandatory condition did not apply to AY 2020 21.

Addition under section 56(2)(vii)(b) as deemed income on undervaluation of immovable property - telescoping of additions against suo motu voluntary disclosure - reliance on survey statements under section 133A and requirement of corroborative material

Addition under section 56(2)(vii)(b) as deemed income on undervaluation of immovable property - telescoping of additions against voluntary disclosure - Validity of confirmation by CIT(A) of addition of Rs. 57,24,140 under section 56(2)(vii)(b) and whether that amount should be adjusted against the assessee's suo motu disclosure. - HELD THAT: - The Assessing Officer made an addition described under a non-existent provision in the assessment record and later the matter was treated as falling under section 56(2)(vii)(b). The Assessing Officer did not examine or record any basis showing a difference between consideration paid and stamp duty valuation or otherwise apply the statutory test for deeming income under section 56(2)(vii)(b). The Tribunal found that the assessee had made a suo motu voluntary disclosure of additional income during the year and that there was no material establishing unexplained credits, undisclosed income or assets to support separate independent additions. In these circumstances the addition of Rs. 57,24,140 cannot stand as a fresh addition under section 56(2)(vii)(b) and must be given telescopic effect against the suo motu disclosure of Rs. 84,40,690 already made by the assessee. [Paras 5]

Addition of Rs. 57,24,140 confirmed by CIT(A) under section 56(2)(vii)(b) set aside and directed to be telescoped out of the assessee's suo motu disclosure.

Reliance on survey statements under section 133A and requirement of corroborative material - addition based on post-survey voluntary disclosure - Sustainability of addition of Rs. 58,61,170 made on account of undisclosed income alleged to have been surrendered by the assessee after survey. - HELD THAT: - The assessee made post-survey voluntary disclosures by letter following a survey under section 133A. The Tribunal held that a disclosure made during or after survey based solely on statements recorded in survey is not sufficient to sustain an assessment addition; there must be corroborative material to support the addition. As there was no independent corroboration or material establishing that the disclosed amount represented undisclosed income, the addition recorded by the Assessing Officer and confirmed by the CIT(A) could not be sustained. [Paras 6]

Addition of Rs. 58,61,170 set aside for lack of corroborative material supporting the post-survey disclosure.

Final Conclusion: The appeal is allowed: the Tribunal set aside both additions confirmed by the CIT(A), directed that Rs. 57,24,140 be telescoped against the assessee's suo motu disclosure and quashed the addition of Rs. 58,61,170 for want of corroborative evidence.

Allowability of business expenditure under Section 37(1) - ad-hoc disallowance of expenses - requirement of supporting documentary evidence for deductions - comparative year-to-year consistency of expense ratios

Allowability of business expenditure under Section 37(1) - ad-hoc disallowance of expenses - requirement of supporting documentary evidence for deductions - comparative year-to-year consistency of expense ratios - Deletion of ad-hoc disallowance of 20% of site expenses claimed by the assessee. - HELD THAT: - The assessee, a railway contractor, produced a detailed breakup of site expenses which it claimed in the profit and loss account. The Assessing Officer made an ad-hoc disallowance at the rate of 20% without pointing to any specific defect in the particulars furnished or adducing material to dislodge the claim, having first excluded sales tax from the computation. The assessee also placed on record a comparative analysis showing that site-expense ratios remained broadly consistent in preceding and subsequent years. In the absence of any rational basis or evidentiary foundation for selecting an ad-hoc percentage and given the statutory principle under Section 37(1) that business expenditure is allowable unless it is capital, personal, or excluded by Sections 30-36, the Tribunal found the authorities below had not justified the disallowance. On these findings the adhoc deduction was deleted. [Paras 6, 7]

Ad-hoc disallowance of 20% of site expenses deleted and the appeal allowed.

Final Conclusion: The ad-hoc disallowance made by the Assessing Officer and confirmed by the Commissioner (Appeals) is deleted; the appeal is allowed for AY 2015-16.

Doctrine of constitutional priority - Certain transfers to be void u/s 281 - Supremecy of attachment passed by the Tax Recovery Officer / Income Tax Department or to the mortgage created in favour of the secured creditorsDues of the Income Tax Department precedence over the dues of the secured creditor - Scope and ambit of Section 281 of the Income Tax Act, 1961 and Section 26E of SARFAESI Act and Section 31B of the Recovery of Debts and Bankruptcy Act, 1993 - Tax recovery proceedings -

HELD THAT:- It is not in dispute that before filing of this Special Leave Petition, the auction sale has been completed. The documents produced on record show that the sale certificate has been issued and the auction purchasers have been placed in possession. Only on the basis of this factual aspect, we decline to entertain this Special Leave Petition. The same is, accordingly, dismissed.

Reopening of assessment - change of opinion - tangible material for reopening beyond four years / full and true disclosure - reasons recorded for reopening - violation of principles of natural justice in show-cause proceedings under Section 144B - disallowance under ipso facto doctrine for non-deduction of TDS (denial under the concept of disallowance for non-deduction of tax)

Reopening of assessment - change of opinion - tangible material for reopening beyond four years / full and true disclosure - reasons recorded for reopening - Validity of the notice dated 06.03.2020 under Section 148 reopening assessment for Assessment Year 2013-14 - HELD THAT: - The Court found that the reasons for reopening were based on the very same assessment record and material that had been placed and considered during the original scrutiny assessment culminating in the assessment order dated 23.03.2016. The assessee had responded to a specific query on outward remittances and provided a detailed chart and explanations during the original proceedings. The revenue's reliance on the same material and on inferences drawn therefrom amounted to a mere change of opinion which does not constitute tangible fresh material to justify reopening beyond four years. In absence of any finding that there was failure to make full and true disclosure of material facts, reopening the assessment for the relevant year was impermissible. Applying the principle that reassessment beyond four years requires tangible material establishing escapement due to non-disclosure, the Court held the notice to be bad in law. [Paras 6, 9, 11]

Notice dated 06.03.2020 under Section 148 is quashed as based on change of opinion and absence of tangible material or failure of full and true disclosure.

Reasons recorded for reopening - procedure for disposal of objections - violation of guidelines in GKN Driveshafts (India) Ltd. - Validity of the order dated 31.08.2021 disposing of objections and compliance with procedure in relation to objections to reasons recorded - HELD THAT: - The Court noted that the assessee lodged objections to the reasons recorded on 16.07.2020 but a notice under Section 142(1) was issued on 05.02.2021 without first disposing of those objections; the objections were disposed only on 31.08.2021 after a delay of over a year. This procedure violated the principles and guidelines articulated by the Supreme Court in GKN Driveshafts (India) Ltd. The delayed disposal and interim issuance of notices relying on pending objections constituted procedural irregularity which vitiated the reassessment process. [Paras 8]

Order disposing of objections dated 31.08.2021 is quashed for procedural violation in failing to dispose objections in time and issuing subsequent notices while objections were pending.

Violation of principles of natural justice in show-cause proceedings under Section 144B - opportunity of hearing / adjournment request - Validity of the assessment order dated 19.09.2021 passed under Section 143(3) read with Section 144B and 147 - HELD THAT: - The Court recorded that after the order disposing objections, a show cause/draft assessment order was emailed late in the evening of 15.09.2021 with a deadline of 23:59 hours on 17.09.2021, and the assessee sought reasonable time by applying for adjournment on 16.09.2021. The authority proceeded to complete assessment on 19.09.2021 without granting a hearing or responding to the adjournment request. Such conduct was held to be in gross violation of the principles of natural justice embedded in Section 144B procedure, rendering the assessment order invalid. Since the foundational notice and disposal of objections were already vitiated, the consequential assessment order could not stand. [Paras 12, 13]

Assessment Order dated 19.09.2021 is quashed for breach of principles of natural justice in the show-cause/144B proceedings and as consequential to the flawed reopening.

Final Conclusion: The writ petition is allowed: the notice dated 06.03.2020 under Section 148, the order disposing objections dated 31.08.2021, and the Assessment Order dated 19.09.2021 are quashed and set aside; no order as to costs.

Penalty under Section 271(1)(c) - furnishing of inaccurate particulars of income - concealment of particulars of income - requirement of specific charge in penalty notice under Section 274 - vagueness of penalty notice vitiating penalty order

Furnishing of inaccurate particulars of income - penalty under Section 271(1)(c) - Whether disallowance of expenses on the ground that they should have been capitalised constitutes furnishing of inaccurate particulars of income and whether penalty could be sustained on the ground of concealment of particulars of income when only that disallowance was made. - HELD THAT: - The Tribunal examined the sole addition made in assessment, which was a disallowance of expenses on the ground that they should have been capitalised. Such disallowance falls squarely within the limb of furnishing of inaccurate particulars of income under the penalty provision and not within the limb of concealment of particulars of income, which pertains to items of income not shown by the assessee. The two limbs are distinct: an addition arising from disallowed deductions is not to be equated with concealment of income. The possibility of treating matters under both limbs arises only where multiple independent additions exist, some qualifying as concealment and others as inaccurate particulars. Where there is a single item of addition, it must be categorised as one or the other; it cannot be treated as a hybrid. Consequently, the penalty, if sustainable, ought to have been framed solely on the charge of furnishing of inaccurate particulars of income. [Paras 3, 4]

Disallowance of expenses is furnishing of inaccurate particulars of income; penalty could not be sustained as one of concealment when only that disallowance was made.

Requirement of specific charge in penalty notice under Section 274 - vagueness of penalty notice vitiating penalty order - penalty under Section 271(1)(c) - Whether the penalty order is vitiated where the penalty notice and order refer to both concealment and furnishing of inaccurate particulars without specifically framing the charge, thereby making the notice vague. - HELD THAT: - The Tribunal relied on the settled principle that a lawful notice under Section 274 must clearly set out the charge on which penalty is proposed; vagueness in the charge renders the penalty order unsustainable. The penalty in the present case was imposed with reference to both limbs - furnishing of inaccurate particulars and concealment - even though only one addition (disallowance of expenses) was made. Because the notice and penalty order did not confine the charge to the correct limb and instead proceeded on both limbs, the penalty order was vitiated. The Tribunal referenced precedent recognising that an irrelevant or vague charge in the notice undermines the validity of the penalty order and found the Assessing Officer's and Commissioner (Appeals)'s approach unsustainable on that basis. [Paras 5, 6]

Penalty order vitiated for being founded on a vague/incorrect charge; penalty deleted.

Final Conclusion: The Tribunal held that the sole addition (disallowance of expenses) constituted furnishing of inaccurate particulars of income and not concealment; because the penalty notice and order proceeded on both limbs without framing the correct charge, the penalty order was vitiated and is deleted, and the appeal is allowed.

Rejection of books of account under section 145(3) of the Income tax Act - gross profit estimation on rejection of books - addition on account of unexplained cash credit under section 68 - verification/remand for documentary substantiation of cash deposits during demonetisation - application of the test of human probabilities in assessing genuineness of cash credits - invocation of section 115BBE in relation to income charged under section 68

Rejection of books of account under section 145(3) of the Income tax Act - gross profit estimation on rejection of books - Validity of rejection of books of account and estimate of gross profit resulting in addition - HELD THAT: - The Tribunal analysed the AO's reason for rejecting books - a decline in gross profit ratio vis a vis the preceding year and non production of books/bills when called for. The Bench found that the dealer is an HPCL authorised dealer whose purchase and sale prices and dealer commission are pre determined and that fluctuations in gross profit arise from market price movements beyond the assessee's control. The records before the AO included audited accounts, cash book for the demonetisation period, VAT returns and month wise stock/sales summaries; the AO's show cause did not point to a specific defect in the books of account warranting invocation of section 145(3). On these facts the Tribunal held that the limited ground relied on by the AO was not a sufficient basis to reject the books and sustain an estimated GP addition. Accordingly the GP addition made by applying the earlier year's GP was deleted. [Paras 8]

Addition of Rs. 4,60,052 on account of lower gross profit deleted; rejection of books on that basis held not sustainable.

Addition on account of unexplained cash credit under section 68 - verification/remand for documentary substantiation of cash deposits during demonetisation - application of the test of human probabilities in assessing genuineness of cash credits - Whether cash deposits during demonetisation totalling Rs. 86,90,500/- were rightly treated as unexplained credits under section 68 - HELD THAT: - The Tribunal noted that the AO treated the cash deposited during the demonetisation window as unexplained and charged it under section 68 because the assessee had not produced (according to the AO) stock registers, breakup of SBN/non SBN deposits and purchase bills. The assessee, however, had filed copies of cash book, bank statements, month wise cash sales, VAT returns and a month wise stock summary and asserted that dealers of petroleum products were permitted to accept specified bank notes during the relevant period under the applicable notifications. The Bench observed that sales were not disputed by Revenue and that, in the circumstances, the proper course was to verify the assessee's documentary records (including quantitative records maintained under the essential commodities regime and the additional evidence tendered) against the cash deposits rather than sustain an addition without such verification. The Tribunal directed the AO to examine and verify the sales vis a vis generation/deposition of SBNs and non SBNs and to admit/consider the additional evidence as appropriate so that there is no double addition of sales and bank deposits. [Paras 9]

Matter remitted to the AO for verification of documentary evidence supporting the cash deposits during the demonetisation period; the addition under section 68 set aside for verification.

Final Conclusion: The appeal is allowed for statistical purposes: the gross profit addition based on rejection of books is deleted; the addition treating demonetisation period bank deposits as unexplained credits is set aside and remitted to the AO for verification of the assessee's documentary evidence and quantitative records; consequential and general grounds were not separately adjudicated.

Applicability of section 153C as the mandatory route where incriminating material is seized from third parties - Validity of assessment under section 153A when no incriminating material is found in the searched person's premises - Distinction between abated regular assessments and assessments under the search provisions - Onus under section 68 to explain unexplained cash credits / sale proceeds - Claim of exemption under section 10(38) and assessment of genuineness of long term capital gains - Alleged denial of opportunity to cross examine witnesses and its effect on assessment validity

Applicability of section 153C as the mandatory route where incriminating material is seized from third parties - Validity of assessment under section 153A when no incriminating material is found in the searched person's premises - Assessment framed under section 153A could not be sustained insofar as it relied upon incriminating material seized from third parties where no incriminating material was found in the assessee's premises; the mandatory procedure under section 153C had to be followed. - HELD THAT: - The Tribunal found that no incriminating documents relating to the claimed LTCG were seized from the assessee's premises during the search (paras 8, 23). The Court examined the scheme of Chapter XIV and the text and legislative notes to section 153C, observing that where seized books/documents or information pertain to a person other than the searched person, those materials must be handed over to the Assessing Officer having jurisdiction over that other person and that officer alone must proceed under section 153C and then section 153A if satisfied (paras 23-29). The Tribunal held that the Assessing Officer in the assessee's case could not lawfully rely, in a section 153A assessment, upon material seized from other persons (MARL, directors, exit providers) because the non obstante and mandatory language of section 153C places the decision making and initiation of proceedings in the hands of the AO of the entry provider (paras 24, 29). Applying these principles to the facts, and having regard to the timing of centralisation/receipt of materials, the Tribunal concluded that the impugned addition based on third party materials could only have been pursued by following section 153C and not by direct reliance in the assessee's section 153A assessment (paras 23-29). [Paras 25, 26, 27, 28, 29]

The addition sustained in the section 153A assessment insofar as it rests on material seized from third parties is not sustainable; the mandatory route under section 153C ought to have been followed.

Claim of exemption under section 10(38) and assessment of genuineness of long term capital gains - Onus under section 68 to explain unexplained cash credits / sale proceeds - The assessee discharged the evidentiary onus in respect of the long term capital gains claimed as exempt under section 10(38); sale proceeds were explained within the meaning of section 68 and therefore the addition treating LTCG as unexplained/cash credit was not justified. - HELD THAT: - On the facts the assessee had documentary evidence that he was allotted shares on preferential basis, had paid consideration through banking channels, the shares were reflected in his balance sheet, dematerialised and sold through a registered broker on the stock exchange with STT suffered (paras 6, 30). The Tribunal observed absence of any cogent evidence of a money trail or of the assessee's involvement in price manipulation; no statements recorded in searches identified the assessee as part of the manipulation and SEBI's final order did not implead the assessee or his broker (paras 21, 33, 36-38). Applying the test under section 68, the Tribunal found the three ingredients satisfied and that the assessee had proved nature and source of the sale proceeds (para 39). Reliance was also placed on authorities holding off market transactions are not per se sham where documentary evidence and demat records exist (para 35). On these conclusions the Tribunal allowed the grounds challenging denial of exemption and additions (paras 40, 41). [Paras 36, 37, 38, 39, 40]

The claim of exemption under section 10(38) is accepted and the addition under section 68 is set aside; the assessee discharged the onus to explain the sale proceeds.

Alleged denial of opportunity to cross examine witnesses and its effect on assessment validity - The Tribunal considered the contention about denial of cross examination but did not find it fatal to invalidate the assessment under the facts; no deletion was directed on that ground alone. - HELD THAT: - The revenue relied on Supreme Court authority that absence of cross examination may not be fatal and suggested remand for conducting cross examination (para 17). The assessee relied on High Court authorities distinguishing the facts of M. Pirai Choodi and arguing that remand or other relief was not warranted (paras 18-19). The Tribunal examined these competing authorities and the factual matrix but proceeded to decide the appeal on substantive and jurisdictional grounds (paras 17-19, 40). There is no order quashing the assessment solely for failure to permit cross examination, nor was a direction given to the AO to reopen for cross examination in the present case. [Paras 17, 18, 19, 40]

The absence of cross examination was not held to be decisive in the facts; no separate relief was granted on this ground.

Prematurity of penalty proceedings and non pressing of limitation ground - Penalty proceedings under section 271(1)(c) were held to be premature for adjudication and the assessee's ground challenging limitation was not pressed and therefore dismissed as not pressed. - HELD THAT: - The Tribunal noted that initiation of penalty proceedings at this stage would be premature and therefore did not adjudicate the penalty issue (para 42). The ground challenging limitation (Ground No. 4) had been not pressed by the assessee after hearing submissions, and the Tribunal dismissed it as not pressed (para 41). Other general grounds and consequential interest challenge were treated as not requiring separate adjudication (paras 43-44). [Paras 41, 42, 43, 44]

Penalty proceedings are premature and not adjudicated; limitation ground was dismissed as not pressed and other general/consequential grounds need no further adjudication.

Final Conclusion: The appeal is partly allowed: additions and disallowance sustained under the section 153A assessment insofar as they relied upon third party seized material are set aside because the mandatory procedure under section 153C should have been followed; on the merits the assessee's claim of exempt LTCG under section 10(38) and explanation under section 68 are accepted and the related additions reversed; penalty proceedings are left undecided as premature and the limitation ground was dismissed as not pressed.

Arm's length principle - transactional net margin method (TNMM) - internal comparable / internal TNMM - comparable uncontrolled price method (CUP) not to be applied without comparable uncontrolled transactions - tested party selection - least complex entity and availability of reliable data - benchmarks must compare like-with-like (apples to apples) - aggregation of distinct international transactions not permissible for ALP determination - reimbursement of third party costs - value addition test and benchmarking

Tested party selection - least complex entity and availability of reliable data - arm's length principle - transactional net margin method (TNMM) - internal comparable / internal TNMM - benchmarks must compare like-with-like (apples to apples) - Deletion of TP adjustment made on purchases of raw materials and components from AEs - HELD THAT: - The Tribunal found the issue before it identical to the immediately preceding year in which the Tribunal had considered tested party selection, applicability of TNMM and use of internal comparables and had decided in favour of the assessee. Applying the same reasoning, the Tribunal held that (i) tested party selection requires the least complex party for which reliable data is available and the taxpayer's FAR and economic analysis must be considered unless there is adverse material; (ii) internal TNMM is permissible and often preferable where reliable internal comparables exist; and (iii) margins for contract manufacturing cannot be used to benchmark license manufacturing transactions - like with like comparison is mandatory. In the facts, the Tribunal disagreed with the TPO/DRP's adoption of comparables drawn from the contract manufacturing (sale of finished goods) segment and accepted that the assessee's benchmarking for purchases of raw materials and components was not to be displaced. Following its own earlier order in the assessee's case for the previous year and in the absence of distinguishing material from Revenue, the Tribunal set aside the DRP/TPO adjustment and directed deletion of the enhancement relating to raw material imports.

TP adjustment on purchase of raw materials and components deleted; ground of appeal allowed.

Comparable uncontrolled price method (CUP) not to be applied without comparable uncontrolled transactions - arm's length principle - transactional net margin method (TNMM) - Deletion of TP adjustment in respect of data management and related service fees charged by AE - HELD THAT: - The Tribunal noted that the TPO applied CUP but treated the ALP as nil without any comparable uncontrolled transactions, a result the Tribunal described as contradictory and without basis. The Tribunal, following its decision in the immediately preceding assessment year in the assessee's own case, accepted the assessee's evidences (invoices, agreements, cost allocation details) and its TNMM analysis which established an ALP of cost plus 6% markup. In absence of any material to distinguish the earlier decision or to show it was set aside, the Tribunal set aside the DRP/TPO finding and directed deletion of the proposed addition.

Adjustment in respect of data management and related services deleted; ground of appeal allowed.

Aggregation of distinct international transactions not permissible for ALP determination - arm's length principle - Deletion of adjustments made by aggregating purchase of fixed assets, payment of trademark fees and other transactions with raw material purchase transaction - HELD THAT: - The Tribunal observed that having accepted the import of raw materials and components at arm's length, there was no justification to aggregate unrelated transactions (purchase of fixed assets, purchase of intangibles, trademark fees) with the raw material purchases for determination of ALP. Following the Tribunal's earlier decision in the assessee's case for the prior year, and seeing no distinguishing material from Revenue, the Tribunal set aside the DRP/TPO's aggregation and directed deletion of the enhancements that arose from such aggregation.

Adjustments based on aggregation with raw material imports deleted; grounds of appeal allowed.

Reimbursement of third party costs - value addition test and benchmarking - arm's length principle - Sustenance of TP adjustment which recharacterised reimbursements as provision of support services and imputed a 5% markup - HELD THAT: - The Tribunal considered the prior year decision in the assessee's own case, which had upheld benchmarking of pass through reimbursements by imputing a mark up where the assessee had employed its resources to provide administrative assistance and had not established that no value addition took place. The earlier decision held that pass through costs are international transactions requiring benchmarking and, in absence of the assessee having determined ALP, the AO/TPO's reasonable benchmarking could not be faulted. The present Bench found no material placed by the assessee to distinguish that earlier adverse finding; accordingly it respectfully followed the Tribunal's prior decision and confirmed the DRP/TPO/AO adjustment of mark up on reimbursements.

Adjustment on reimbursement of expenses upheld; ground of appeal dismissed.

Procedural grounds dismissed as infructuous - Disposition of general preliminary grounds - HELD THAT: - The Tribunal treated the first two general grounds of appeal as general in nature and not requiring separate adjudication and dismissed them as infructuous.

General preliminary grounds dismissed as infructuous.

Final Conclusion: Following its own preceding year decisions in the assessee's case and in the absence of any contrary or distinguishing material from Revenue, the Tribunal set aside the DRP/TPO/AO adjustments and deleted the TP additions in respect of (a) purchase of raw materials and components, (b) data management and related services fees, and (c) adjustments based on aggregation with raw material imports; the adjustment in respect of reimbursements (recharacterised as support services with 5% markup) was confirmed. The appeal is partly allowed for Assessment Year 2018-2019.

Make available clause - fees for technical services - Article 12(4)(b) of Indo Singapore DTAA - taxability under section 9(1)(vii) - training versus imparting know how - principal activity versus non principal (administrative) services - interest under section 234A and 234B

Fees for technical services - make available clause - Article 12(4)(b) of Indo Singapore DTAA - management and support services - Whether receipts for management support, finance and treasury support, information technology support, human resources and administrative support, and legal support constitute Fees for Technical Services under Article 12(4) of the Indo Singapore DTAA - HELD THAT: - The Tribunal considered the character and mode of delivery of these services and the authorities and documentary evidence placed on record. It accepted the CIT(A)'s factual findings that these services largely supply outputs, templates, analyses or decisions to the Indian affiliate, that local functionaries perform the operative tasks, and that no transfer or imparting of technical knowledge, source code, processes or know how occurred which would enable the recipient to apply the technology independently. The authorities relied upon were examined and the Tribunal endorsed the distinction between merely providing advice, templates or final decisions and imparting enduring technical know how capable of autonomous use by the recipient. Applying the Article 12(4)(b) test, the Tribunal held the ''make available'' requirement was not satisfied in respect of these services and they therefore do not qualify as FTS under the Treaty (and consequently under section 9(1)(vii) on the facts). [Paras 9, 13]

Management support, finance and treasury, IT support, HR and administrative support, and legal support are not Fees for Technical Services under Article 12(4) of the Indo Singapore DTAA.

Fees for technical services - make available clause - Article 12(4)(b) of Indo Singapore DTAA - marketing and sales services - operations and standardization - training versus imparting know how - principal activity versus non principal (administrative) services - Whether receipts for marketing and sales services and operations & standardization constitute Fees for Technical Services under Article 12(4) of the Indo Singapore DTAA - HELD THAT: - The Tribunal examined the agreements, sample e mails and the nature of services delivered. While the CIT(A) had found that training, sharing of operational manuals, standard operating procedures and hands on tracking and review of performance amounted to ''making available'' technical knowledge/know how (relying on precedents such as Bovis and Foster Wheeler), the Tribunal analysed those factual findings against the Treaty test. The Tribunal emphasised that training per se does not amount to making available unless it transfers the technical processes/skills in a manner that enables the recipient to apply the technology independently without recourse to the provider. On the facts of CEVA, the Tribunal concluded that the materials and trainings were essentially familiarisation, compliance or guidance and did not result in transfer of durable technical know how enabling autonomous execution of the transacted services. Applying the Article 12(4)(b) criterion, it held the ''make available'' element was absent and the amounts attributable to marketing & sales and operations & standardization could not be taxed as FTS. [Paras 16, 17, 19, 25, 27]

Marketing and sales services and operations & standardization do not satisfy the 'make available' requirement of Article 12(4)(b) and therefore are not Fees for Technical Services under the Indo Singapore DTAA.

Interest under section 234A and 234B - Whether interest under sections 234A and 234B is chargeable as directed by the CIT(A) - HELD THAT: - The Tribunal noted the assessee's contention that section 234A is inapplicable because the return was filed in time and that section 234B is inapplicable because tax liabilities were discharged by TDS. The Tribunal did not decide the merits on the materials before it but restored the issue to the Assessing Officer for fresh adjudication in accordance with law after providing the assessee an opportunity of being heard. [Paras 29, 30]

Issue of interest under sections 234A and 234B is remitted to the Assessing Officer for decision in accordance with law after giving the assessee opportunity of hearing.

Final Conclusion: On the facts and evidence for AYs 2010-11 to 2014-15 the Tribunal held that none of the intra group services (management support, finance & treasury, IT, HR, administrative and legal) nor the marketing & sales and operations & standardization services satisfied the Treaty's ''make available'' test in Article 12(4)(b); accordingly, these receipts are not chargeable as Fees for Technical Services under the Indo Singapore DTAA (and the Revenue appeals on this issue are dismissed). The question of interest under sections 234A/234B was remanded to the Assessing Officer for fresh adjudication after opportunity to be heard. Appeals for the other assessment years stand disposed of mutatis mutandis.

Unexplained cash credit and burden of proof under Section 68 - Identity, genuineness and creditworthiness of share applicants - Forfeiture of share application money treated as capital receipt - Prospective application of amendment introducing Section 56(2)(ix) - Allowability of interest on late payment of TDS as business expenditure under Section 37

Unexplained cash credit and burden of proof under Section 68 - Identity, genuineness and creditworthiness of share applicants - Forfeiture of share application money treated as capital receipt - Prospective application of amendment introducing Section 56(2)(ix) - Deletion of addition of Rs. 5,25,00,000/- made under Section 68 in respect of forfeited share capital received from two companies - HELD THAT: - The Tribunal found that the assessee had placed on record documentary evidence-PAN, bank statements, confirmations and other records-sufficient to establish the identity of the share applicants, the genuineness of the transactions and the creditworthiness of the payers. The AO's conclusion rested on the inspector's field report and the recorded statement of a director of the investor companies, but no cogent corroborative material was produced to establish that the transactions were a device to introduce unexplained capital or accommodation entries. The revenue did not demonstrate rotation of the assessee's funds or involve any allegation of entry operators or cash movement; the AO's inferences about common addresses, common director and non-filing of returns were not held to be decisive of bogusness. The Tribunal further noted that the forfeited share application amounts were accounted by the assessee as capital (credited to capital reserve) and relied on precedents treating forfeited share application money as capital receipt. The amendment by which Section 56(2)(ix) taxed certain forfeitures as income was introduced later and could not be pressed retrospectively for AY 2011-12. Applying the rule that once the assessee discharges the initial onus under Section 68 the burden shifts to revenue to prove otherwise, the Tribunal concluded that the three ingredients of Section 68 were satisfied and the addition was unsustainable, and therefore deleted the addition. [Paras 6, 19, 22, 23, 24]

Addition under Section 68 in respect of forfeited share capital deleted; assessee's proof of identity, genuineness and creditworthiness accepted and forfeited amount treated as capital receipt for AY 2011-12.

Allowability of interest on late payment of TDS as business expenditure under Section 37 - Quashing of disallowance of interest of Rs. 2,19,170/- on late payment of TDS made under Section 37 - HELD THAT: - The Tribunal considered that interest levied for delayed remittance of tax deductible at source under statutory provision (Section 201(1A) contextually) is compensatory in nature and not punitive like a penalty. Reliance on judicial decisions holding that interest for belated statutory remittance is not a penalty and is allowable as an expenditure led the Tribunal to hold that the interest paid by the assessee on late deposit of TDS was not in the nature of penalty and therefore was deductible under Section 37. Accordingly, the disallowance confirmed by the authorities below was reversed. [Paras 25, 27, 28, 29]

Disallowance of interest on late payment of TDS quashed; interest held allowable under Section 37.

Final Conclusion: Delay in filing the appeal condoned; appeal allowed-addition under Section 68 deleted for Assessment Year 2011-12 and disallowance of interest on late payment of TDS under Section 37 set aside.

Classification of compensation for relinquishment of right as long-term capital gain - application of mercantile system of accounting to recognition of interest income - disallowance under section 36(1)(iii) in relation to interest on advances - remand for determination of appropriate rate of interest on an unsecured loan

Application of mercantile system of accounting to recognition of interest income - disallowance under section 36(1)(iii) in relation to interest on advances - remand for determination of appropriate rate of interest on an unsecured loan - Whether interest on the loan advanced to M/s City Beautiful Engineering Company Pvt. Ltd. ought to have been accounted for and taxed in A.Y. 2012-13 and whether disallowance under section 36(1)(iii) was warranted; and whether the rate of interest should be fixed by the AO. - HELD THAT: - The Tribunal found on the material on record that the advance of Rs. 75,77,838 was an interest-bearing loan: the borrower's confirmation described the advance as interest bearing, interest of Rs. 5,71,001 was subsequently paid and TDS under section 194A was deducted and reflected in Form 26AS for FY 2014-15. Where the assessee follows mercantile system of accounting, interest accruals must ordinarily be accounted for in the year in which they accrue. The assessee's assertion that the debt had become bad in the relevant year (FY 2011-12) was not supported by contemporaneous corroborative evidence; the confirmation from the borrower did not state that the debt was bad as on 31/03/2012. Accordingly, the Tribunal held that the interest should have been accounted for in the relevant year and subject to tax. However, because no agreed rate of interest was on record for the unsecured loan, the Tribunal set aside the matter to the file of the AO for the limited purpose of determining the appropriate rate of interest prevailing at the relevant time and bringing the same to tax, permitting the assessee to produce supporting material to assist the AO. [Paras 8, 9, 10, 11]

Disallowance under section 36(1)(iii) as made cannot be sustained in the form recorded; interest accrual ought to have been accounted and taxed for A.Y.2012-13, and the matter is remanded to the AO to determine the appropriate rate of interest on the unsecured loan.

Classification of compensation for relinquishment of right as long-term capital gain - Whether the amount of Rs. 28 lacs received on cancellation of an agreement to purchase land (where Rs. 14 lacs was paid as biana in 2005) is assessable as income from other sources or as long-term capital gain. - HELD THAT: - The Tribunal examined the agreement to sell (2005) and the compromise agreement (2012) under which the assessee agreed to forgo his right to get the land registered in consideration of Rs. 28 lacs. The compromise agreement effected relinquishment of the assessee's rights in the capital asset (right to own the property) originally acquired by part performance of the agreement and payment of consideration. Compensation received for relinquishment of such a right constitutes transfer of a capital asset and is chargeable under the head 'Capital gains'; the initial payment constitutes cost of acquisition for computing capital gains and indexation benefits apply. The Tribunal accepted precedents supporting treatment of relinquishment/abandonment/forfeiture of rights as transfer of a capital asset and rejected the Revenue's characterisation of the transaction as a sham rendering the receipt taxable as income from other sources. [Paras 12, 18]

The amount received on relinquishment of the right to acquire the property is capital receipt chargeable as long-term capital gain; the AO's assessment of the differential as income from other sources is set aside and the ground of appeal is allowed.

Final Conclusion: The appeal is partly allowed: the Tribunal allowed the ground treating the cancellation receipt as long-term capital gain, and disposed of the ground on interest disallowance by directing the AO to determine the appropriate rate of interest on the unsecured loan for assessment purposes and bring the resultant tax effect to account.

Tonnage Tax Scheme as applicable to qualifying ships and exclusion of offshore installations - Exclusion of tonnage tax income from book profit for MAT computation - Deductibility of interest under commercial expediency principle (section 36(1)(iii) context) - Treatment of employer's contribution to PF/ESI under Section 43B (requirement of deposit by statutory due date) - Unexplained cash credit under section 68 and explanation by contemporaneous cash balance - Withholding obligation under section 195 and disallowance under section 40(a)(ia) - Remand for de novo adjudication

Tonnage Tax Scheme as applicable to qualifying ships and exclusion of offshore installations - Exclusion of tonnage tax income from book profit for MAT computation - Allowability of tonnage tax exemption for income claimed from the Matdrill and consequential exclusion while computing book profit under section 115JB. - HELD THAT: - The Tribunal upheld the ld. CIT(A)'s deletion of the AO's disallowance of the assessee's claim under the tonnage tax scheme, following the reasoning of earlier appellate orders and the decision of the Jurisdictional High Court in the assessee's own case holding that the Deep Sea Matdrill is a ship and not an offshore installation. The Tribunal further observed that section 115VO excludes tonnage tax company income from book profit for the purpose of section 115JB, and therefore the AO's adjustment to include tonnage tax income in book profit was unsustainable. The revenue's grounds challenging the deletion were dismissed accordingly. [Paras 5, 6, 7, 8]

Deletion of disallowance relating to tonnage tax granted; tonnage tax income excluded from book profit for MAT purposes.

Deductibility of interest under commercial expediency principle (section 36(1)(iii) context) - Allowability of disallowance of interest attributable to interest free advances to subsidiary (whether not for business purpose). - HELD THAT: - Relying on earlier Tribunal orders in the assessee's own case and settled precedent, the Tribunal found that the AO had not established nexus between borrowed funds and interest free advances and that the advances were for business purposes. The ld. CIT(A)'s deletion of the addition was affirmed since the necessary conditions for disallowance under the relevant provision were not made out by the revenue. [Paras 9, 10]

Addition for notional interest on interest free advances deleted.

Treatment of employer's contribution to PF/ESI under Section 43B (requirement of deposit by statutory due date) - Tonnage Tax Scheme as applicable to qualifying ships and exclusion of offshore installations - Disallowance of employer's contribution to PF/ESI deposited after statutory due date but before filing return; and revised contention that such disallowance is irrelevant because assessee is under tonnage tax presumptive regime. - HELD THAT: - The Tribunal applied the Supreme Court decision in Checkmate Services Pvt. Ltd. to hold that employer's contribution (amounts held in trust) must be deposited on or before the statutory due date to qualify for deduction under section 43B; accordingly the assessee's ground challenging the disallowance was dismissed. Separately, the Tribunal allowed the assessee's revised ground that a disallowance affecting business income has no relevance to the tonnage tax computation because tonnage income is determined on a presumptive basis by net tonnage and days on voyage; that revised plea was accepted. [Paras 13, 14, 15, 16, 17]

Disallowance under Section 43B upheld; revised claim that disallowance is irrelevant to tonnage tax income allowed.

Unexplained cash credit under section 68 and explanation by contemporaneous cash balance - Addition on account of cash deposits in specified bank notes during demonetisation treated as unexplained cash credit. - HELD THAT: - The assessee furnished month wise cash movement and demonstrated substantial opening and month end cash balances (including audited closing cash as at 31.03.2016 and movements up to 08.11.2016). The AO had not rejected the books or the cash book and made no adverse finding on veracity of the cash records. The Tribunal accepted the contemporaneous records and concluded that the deposits during the demonetisation period were fully explained by existing cash balances; the addition made u/s 68 was therefore deleted. [Paras 18, 19, 20, 21]

Addition for cash deposits during demonetisation deleted.

Withholding obligation under section 195 and disallowance under section 40(a)(ia) - Remand for de novo adjudication - Whether payment to a non resident constitutes taxable 'fee for technical services' attracting withholding and consequent disallowance under section 40(a)(ia). - HELD THAT: - The AO treated the payment as taxable fee for technical services and invoked section 40(a)(ia) for disallowance on account of non deduction of tax at source. The assessee contended the payment was for import of rigs (capital goods) and relied on documentary evidence; however, invoices indicated amounts described as service charges for engineers. Given these factual disputes and absence of conclusive findings on permanent establishment and DTAA compliance, the Tribunal found it appropriate to remit the issue to the AO for fresh adjudication after considering the evidentiary record and legal submissions. [Paras 22, 23]

Issue restored to AO for de novo adjudication.

Remand for de novo adjudication - Allowability of amounts written off shown as 'Miscellaneous expenses'. - HELD THAT: - The assessee produced break up of write offs, largely comprising disputed and unrecovered bills with its principal customer; the AO made no detailed findings and treated the entire write off as inadmissible. In view of evidentiary gaps and the need for detailed examination of the breakup and supporting material, the Tribunal remanded the matter to the AO for fresh consideration and permitted the assessee to file additional evidence. [Paras 24, 25]

Issue remitted to AO for de novo adjudication.

Remand for de novo adjudication - Levy of penalty under section 270A at current stage. - HELD THAT: - The Tribunal found the assessee's ground on penalty premature for adjudication in the appeal and declined to decide the question at this stage. [Paras 13]

Ground on penalty dismissed as premature.

Final Conclusion: The Revenue's appeal is dismissed. The assessee's appeal is partly allowed: the challenge to PF/ESI disallowance under Section 43B is dismissed (while the revised contention that such disallowance is irrelevant to tonnage tax income is allowed), demonetisation period cash deposit addition is deleted, and issues concerning withholding tax (section 195/40(a)(ia)) and amounts written off are remitted to the Assessing Officer for de novo adjudication; the penalty ground is dismissed as premature.

Penalty under Section 112(a) of the Customs Act, 1962 - Re-export of goods - Confiscation followed by direction to re-export - No redemption fine or penalty where re-export is allowed (Siemens principle)

Penalty under Section 112(a) of the Customs Act, 1962 - Re-export of goods - No redemption fine or penalty where re-export is allowed (Siemens principle) - Whether penalties imposed under Section 112(a) could be sustained where the goods were directed to be re-exported and were in fact re-exported - HELD THAT: - The Tribunal examined the record and found that the appellants were directed to re-export the imported consignment and that re-export had been effected. The Tribunal relied on its earlier decision in Siemens Public Communication Networks Ltd., which held that where goods are allowed to be re-exported neither redemption fine nor duty is exigible and penalty is not imposable. Applying that principle, and noting that Revenue did not contest the appellants' claim of prior clearances of similar goods, the Tribunal concluded that the penalties levied under Section 112(a) were not justified. The determinative reasoning is that allowance and actualisation of re-export removes the basis for imposing redemption fines or penalties under the Customs law as recognised in the cited Tribunal precedent. [Paras 5, 6]

Penalties imposed under Section 112(a) are set aside and the appeals are allowed.

Final Conclusion: The Tribunal allowed the six appeals, set aside the penalties imposed under Section 112(a) of the Customs Act, 1962, and permitted the consequence of re-export without imposing redemption fine or penalty in accordance with the Tribunal's precedent.

Financial Creditor - Liquidation proceedings - Claim rejection by Liquidator - Adjudication of claims by Adjudicating Authority - Scheme approval by 100% Financial Creditor - Balance sheet inclusion not determinative of creditor status - Consent of creditors for approval of scheme

Financial Creditor - Claim rejection by Liquidator - Balance sheet inclusion not determinative of creditor status - Scheme approval by 100% Financial Creditor - Adjudication of claims by Adjudicating Authority - Consent of creditors for approval of scheme - Whether the Appellant, whose claim was rejected in liquidation proceedings, remained a Financial Creditor entitled to consent for approval or modification of a scheme which had been approved by the 100% Financial Creditor. - HELD THAT: - The Tribunal held that all creditor claims are to be considered in liquidation and, where disputed, adjudicated by the Adjudicating Authority. The Appellant's claim was filed in the liquidation proceedings and was rejected by the Liquidator and the Adjudicating Authority; that adjudication conclusively precluded acceptance of the claim in the liquidation and any entitlement under the waterfall mechanism. A subsequent scheme submitted under the liquidation process showed payment to the Appellant as nil and had the approval of SIDBI, the sole financial creditor as represented by the Liquidator. The fact that the Appellant's name had earlier appeared in the corporate debtor's balance sheet did not override or negate the adjudicatory proceedings which culminated in rejection of his claim. Accordingly, the Appellant could not contend that his consent was required for approval of the scheme or seek its modification on that ground. The Adjudicating Authority did not err in rejecting the Appellant's application challenging the scheme. [Paras 6, 7]

The claim having been adjudicated and rejected, the Appellant was not a Financial Creditor entitled to withhold consent or seek modification of the approved scheme.

Final Conclusion: Appeal dismissed; the Adjudicating Authority correctly rejected the application since the Appellant's claim in the liquidation had been adjudicated and rejected, and inclusion in the corporate debtor's balance sheet did not confer creditor status or a right to veto or modify a scheme approved by the 100% financial creditor.

Pre-deposit requirement for maintenance of appeal under FEMA - power of Appellate Tribunal to dispense with pre-deposit on grounds of undue hardship - judicial review of discretionary orders of the Tribunal - balancing appellant's financial hardship against public interest in revenue protection

Pre-deposit requirement for maintenance of appeal under FEMA - power of Appellate Tribunal to dispense with pre-deposit on grounds of undue hardship - Validity of the Tribunal's order waiving 60% of the penalty and directing deposit of 40% as conditional pre-deposit for continuation of the appeal - HELD THAT: - The Tribunal recorded the appellant's contentions and the material placed before it and exercised its statutory discretion to waive 60% of the penalty and call for deposit of the remaining 40% within 30 days, coupling compliance with consequential continuance of the appeal (see 13). The High Court examined the appellant's plea of undue hardship - including pending recovery proceedings, absence of movable or immovable assets and ongoing foreign litigation - and observed that the Tribunal had taken those factors into account and struck a balance between the appellant's hardship and the interest of the State (see 10, 11, 17). The court compared the facts with authorities relied upon by the appellant and with the decision in Nimesh Suchde (Siddharth Polymers) and found the present facts distinguishable; no extenuating circumstance was shown that would render the Tribunal's exercise of discretion perverse ( 19- 23). Having afforded the appellant an opportunity to remit a smaller portion (as in Monotosh Saha) and the appellant declining to remit any further amount, the High Court declined to interfere with the discretionary order of the Tribunal ( 18, 24). [Paras 13, 17, 24]

Tribunal's conditional waiver (deposit of 40%) upheld; no interference with Tribunal's exercise of discretion

Judicial review of discretionary orders of the Tribunal - balancing appellant's financial hardship against public interest in revenue protection - Whether the High Court should direct complete dispensation of the statutory pre-deposit in view of appellant's asserted inability to pay - HELD THAT: - The High Court noted that the Tribunal had already mitigated the statutory pre-deposit by waiving 60% after considering the appellant's financial situation and ongoing foreign proceedings, thereby balancing individual hardship against State interest ( 13, 17). The court made an analogous offer to the appellant to remit a portion to facilitate further hearing, but the appellant declined to remit any amount ( 18). On the facts, the court found no basis to override the Tribunal's discretionary determination; the discretion was not shown to be perverse or irrational and thus did not warrant interference ( 24). [Paras 17, 18, 24]

Request for complete dispensation of pre-deposit refused; High Court will not substitute its view for Tribunal's balanced discretionary order

Final Conclusion: The Tribunal's order waiving 60% of the penalty and directing deposit of 40% as a condition for hearing the appeal is confirmed; the Civil Miscellaneous Appeal is dismissed and the appellant is permitted to remit the amount by the listed date to enable the Tribunal to proceed with the appeal.

Conclusive effect of Discharge Certificate under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Voluntary disclosure exception to conclusiveness of discharge certificate - Extended period of limitation under the Finance Act invoked for service tax recovery - Value of free supply goods not includable in valuation of taxable services - Status of a statutory authority constituted by statute as a body corporate

Conclusive effect of Discharge Certificate under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - Discharge Certificate issued under the Scheme is conclusive as to the matter and time period and bars reopening proceedings in respect of the same matter and period. - HELD THAT: - The petitioner made a declaration under the Scheme in the category 'Litigation', paid the stipulated amount and was issued a Discharge Certificate. Section 129(1) makes the Discharge Certificate conclusive: the declarant shall not be liable to pay further duty, interest or penalty, shall not be prosecuted, and no matter and time period covered by the declaration shall be reopened. The Court found that the Discharge Certificate issued to the petitioner covers the subject matter of the impugned show cause notice and therefore precludes initiation of the impugned proceedings. Consequently the show cause notice was set aside as barred by the conclusive effect of the Discharge Certificate. [Paras 11, 12, 21, 22]

Impugned show cause notice set aside because the Discharge Certificate is conclusive of the matter and time period covered by the petitioner's declaration.

Voluntary disclosure exception to conclusiveness of discharge certificate - Section 129(2)(c) exception for voluntary disclosure where material particulars are found false does not apply to a declaration made under the category 'Litigation'. - HELD THAT: - Revenue relied on Section 129(2)(c) to contend that the Discharge Certificate could be reopened if material particulars were false. The Court held that the statutory presumption of revocation under Section 129(2)(c) relates to declarations made under the 'Voluntary Disclosure' category and not to declarations made under 'Litigation'. The petitioner had declared under 'Litigation' because adjudicatory proceedings (a show cause notice dated 23.04.2019) were pending; therefore the proviso for voluntary disclosures cannot be invoked to reopen the matter arising from litigation. [Paras 16, 17, 18, 19]

Section 129(2)(c) does not permit reopening of the petitioner's Discharge Certificate issued under the 'Litigation' category.

Value of free supply goods not includable in valuation of taxable services - The Revenue's assumption that free-of-cost supplies should be added to the taxable value of services is ex facie erroneous. - HELD THAT: - The impugned show cause notice asserted taxability of free supply (FOC) material provided by the employer. The Court observed this position is contrary to the Supreme Court's decision in Commissioner of Service Tax v. Bhayana Builders Pvt. Ltd., which holds that value of free supply items not part of the contract has no relevance in determining the value of taxable services. On that principle, the Revenue's premise to include FOC goods in the taxable value is incorrect. [Paras 23, 24]

Assumption that FOC material supplied by the employer is taxable as part of the service value is incorrect and does not sustain the impugned notice.

Status of a statutory authority constituted by statute as a body corporate - NOIDA is a body corporate by virtue of the Uttar Pradesh Industrial Area Development Act, 1976, and the Revenue's contrary premise is unsustainable. - HELD THAT: - The impugned notice alleged NOIDA was not a body corporate and sought to treat it accordingly for service-tax liability. The Court examined Section 3(2) of the Uttar Pradesh Industrial Area Development Act, 1976 and the notification constituting NOIDA, concluding that NOIDA was constituted by statute as a body corporate. Reliance was placed on authorities distinguishing entities created by statute from those merely constituted in accordance with company law; here the Act itself provides for constitution and composition of the Authority. The Revenue's interpretation of NOIDA's response (that it was not a company registered under the Companies Act) misunderstood the statutory character of NOIDA. [Paras 28, 29, 31, 32, 33]

NOIDA is a statutory body corporate; the Revenue's premise to the contrary is flawed and does not sustain the impugned demand.

Final Conclusion: The petition is allowed. The Discharge Certificate issued under the Sabka Vishwas Scheme in respect of the period 2014-15 to 2017-18 is conclusive and bars the impugned show cause notice; the Revenue's alternative contentions based on free-of-cost supplies and NOIDA's status are ex facie unsustainable. The impugned show cause notice is set aside and pending applications are disposed of.

No service tax on liquidated damages - declared service under section 66E(e) of the Finance Act - consideration for tolerating an act - agreement to refrain from an act or to tolerate an act or situation - intention of the parties and penal clauses not constituting consideration

No service tax on liquidated damages - declared service under section 66E(e) of the Finance Act - consideration for tolerating an act - Service tax is not leviable on liquidated damages received by the assessee from its clients. - HELD THAT: - The Tribunal considered whether amounts recovered as liquidated damages constitute a declared service falling within section 66E(e) as "consideration for agreeing to refrain from an act, or to tolerate an act or a situation, or to do an act". Relying on the reasoning in South Eastern Coalfields (and followed by subsequent Tribunal decisions), the Bench held that penal or liquidated damages clauses are safeguards of commercial interest and do not reflect an intention by the contracting parties to pay consideration for a service of toleration. An agreement must specifically envisage the activity of refraining, tolerating or doing an act and provide for a flow of consideration for that activity. Where the contract price and consideration are for supply of goods or services, recovery under penal clauses on breach does not amount to consideration for a declared service under section 66E(e). In these circumstances the confirmed demand based solely on receipt of liquidated damages could not be sustained, and the impugned order was set aside. [Paras 4, 6]

Impugned order confirming service tax on liquidated damages set aside and appeal allowed.

Final Conclusion: The appeal is allowed: the confirmed service-tax demand insofar as it relates to liquidated damages received by the appellant is quashed, following Tribunal precedents that such recoveries do not constitute a declared service under section 66E(e).

Clandestine manufacture and clearance - admissibility of computer printouts under Section 36B - use of statements recorded under Section 132 of the Income-tax Act - proof of excess raw material, power consumption and transportation as corroboration - production capacity as a determinative factor in clandestine removal cases - personal penalty under Rule 26 of the Central Excise Rules

Admissibility of computer printouts under Section 36B - clandestine manufacture and clearance - Reliance on computer printouts and electronic data provided by Income Tax authorities without satisfying the statutory conditions of Section 36B is not a valid basis to sustain a demand for central excise duty for alleged clandestine manufacture and clearance. - HELD THAT: - The Tribunal found that the Revenue's demand rested largely on Tally and Visual Udyog data and printouts obtained and handed over by the Income Tax authorities. Section 36B requires satisfaction of conditions (regular use, regular feeding of information, proper operation and derivation of information) and a certificate by a responsible official for computer printouts to be admissible. Those conditions and the requisite certificate were not complied with. Reliance on reconstructed/retrieved electronic data without strict compliance with Section 36B(2) and the certification requirement under Section 36B(4) renders such printouts inadmissible as evidence to establish clandestine manufacture and clearance. The Tribunal accordingly held that the demand based on such electronic documents is legally unsustainable. [Paras 4]

Demand based solely on electronic data/printouts not supported by compliance with Section 36B is set aside.

Use of statements recorded under Section 132 of the Income-tax Act - clandestine manufacture and clearance - Statements recorded by Income-tax authorities under Section 132/132(4) cannot be treated as admissible or conclusive evidence in Central Excise proceedings absent independent corroboration and independent inquiry by the excise authorities. - HELD THAT: - Section 132(4) confines the evidentiary value of statements recorded during income-tax searches to proceedings under the Income-tax Act. The Tribunal observed that reliance on such statements, without independent investigation by the Central Excise Department to verify buyer particulars, actual removals, raw material procurement, power consumption or other corroborative evidence, is impermissible. Oral statements alone, particularly where cross examination produced exculpatory responses, are insufficient to establish the serious charge of clandestine manufacture and clearance. [Paras 4]

Statements recorded by Income-tax authorities cannot substitute for independent evidentiary proof in excise proceedings; they do not sustain the demand.

Production capacity as a determinative factor in clandestine removal cases - proof of excess raw material, power consumption and transportation as corroboration - Revenue failed to establish clandestine manufacture and removal because it did not prove production capacity and omitted essential corroborative evidence such as excess procurement of raw materials, additional power consumption, transport/consignee verification and flow of sale proceeds. - HELD THAT: - The Tribunal examined the appellant's evidence (chartered engineer certificate and pollution control board consent) showing installed/operational capacity and noted the absence of inquiries or evidence by Revenue regarding excess raw material purchases, transporter statements, supplier statements, or excess electricity consumption. Fundamental criteria enumerated by the Tribunal for establishing clandestine removal (raw material shortfalls/excesses, instances of actual removals, discovery of goods outside factory, identified buyers, receipt of sale proceeds, transport proof, links between recovered documents and factory activities) were not satisfied. Mere entries in accounting software or cancelled invoice printouts, without affirmative independent investigation and corroboration, cannot replace tangible evidence of clandestine production and clearance. [Paras 4]

Allegation of clandestine manufacture and removal is not established for want of production-capacity analysis and corroborative evidence; demand is liable to be dropped.

Personal penalty under Rule 26 of the Central Excise Rules - clandestine manufacture and clearance - Consequential personal penalties imposed on co-appellants under Rule 26 are liable to be set aside where the foundational demand for excise duty based on clandestine manufacture is unsustainable. - HELD THAT: - Since the Tribunal held that the demand of central excise duty for clandestine manufacture and clearance was not proved for want of admissible electronic evidence, independent inquiry and corroboration, the prerequisite factual basis for imposition of personal penalties under Rule 26 (which presupposes confiscable goods and liability) did not exist. Therefore the penalties imposed on the company and co appellants were set aside as consequential relief. [Paras 5]

Personal penalties set aside as consequential to the dismissal of the excise demand.

Final Conclusion: The appeals are allowed: the adjudicated demand of central excise duty and consequential penalties premised on alleged clandestine manufacture and clearance are set aside for lack of admissible electronic evidence, absence of independent enquiry and failure to produce corroborative proof including production capacity and related material factors.

Entitlement to cenvat credit when alternative conditional exemption notifications exist - Option to avail conditional exemption versus mandatory absolute exemption under Section 5A(1A) - Interpretation of exemption conditions in Notification No. 04/2006-C.E. (Serial Nos. 90 and 91)

Entitlement to cenvat credit when alternative conditional exemption notifications exist - Interpretation of exemption conditions in Notification No. 04/2006-C.E. (Serial Nos. 90 and 91) - Option to avail conditional exemption versus mandatory absolute exemption under Section 5A(1A) - Whether the appellant was obliged to avail the nil-rate exemption under Serial No. 90 of Notification No. 04/2006-C.E. (and thereby be deprived of cenvat credit) or permissibly could opt for Serial No. 91 and retain cenvat credit. - HELD THAT: - The Tribunal examined the two notification entries and their attendant conditions. Serial No. 90 (nil rate) is subject to conditions at serial no. 10, including a quantitative limit on first clearances in a financial year and non availment of an earlier notification; Serial No. 91 (concessional rate) is subject to condition at serial no. 11. Because both entries are conditional, Serial No. 90 does not constitute an absolute exemption within the meaning of Section 5A(1A) that would remove the manufacturer's choice to pay duty. The Tribunal followed its earlier reasoning in Balkrishna Paper Mills Ltd , holding that where the nil rate entry is subject to conditions it cannot be treated as an absolute exemption compelling the assessee to forgo other entries. Applying that principle, the appellant lawfully elected Serial No. 91 and therefore was entitled to claim cenvat credit under the Cenvat Credit Rules, 2004. The Revenue's contention that Section 5A(1A) mandates application of Serial No. 90 was rejected because the conditions attached to Serial No. 90 prevent it from being an absolute exemption. [Paras 4, 5]

Appellant permissibly elected Serial No. 91 of Notification No. 04/2006-C.E.; cenvat credit rightly availed and the impugned disallowance set aside.

Final Conclusion: The Tribunal allowed the appellant's appeal, held that Serial No. 90 is not an absolute exemption for the purposes of Section 5A(1A) due to its conditions, that the assessee could validly opt for Serial No. 91, and that the cenvat credit claimed was admissible; the impugned order is set aside.

Input service - cenvat credit - nexus with manufacture - Rule 2(l) of Cenvat Credit Rules, 2004 - setting up of factory - means (main) clause versus inclusive/exclusive parts of the definition - post 01.04.2011 amendment of the definition of input service

Input service - cenvat credit - nexus with manufacture - Rule 2(l) of Cenvat Credit Rules, 2004 - setting up of factory - post 01.04.2011 amendment of the definition of input service - means (main) clause versus inclusive/exclusive parts of the definition - Appellant entitled to avail cenvat credit on services of erection, commissioning and installation used for setting up of plant/factory even after the amendment w.e.f. 01.04.2011. - HELD THAT: - The Tribunal examined the post-01.04.2011 definition of "input service" under Rule 2(l) and identified the threefold structure: the main (means) clause, the includes clause and the excludes clause. Services used by a manufacturer "in or in relation to" manufacture, whether directly or indirectly, fall within the main clause. Setting up a factory, though not manufacture per se, is an activity directly in relation to manufacture and therefore falls within the ambit of the main clause. Since the impugned services (erection, commissioning and installation of capital goods) are directly linked to enabling manufacture, they qualify as input services under Rule 2(l) unless specifically excluded. The Tribunal followed earlier consistent precedents (including Aditya Aluminium, Pepsico, Bharat Coking Coal and others) which held that omission of the words "setting up of factory" from the inclusive part post 01.04.2011 does not remove such services from the main clause coverage. Applying that reasoning to the facts for the audit period, the appellant's claimed credit on the services in question is allowable and the orders denying credit, demanding recovery with interest and imposing penalties cannot be sustained. [Paras 8, 9]

Allowance of cenvat credit on erection, commissioning and installation services used for setting up the plant; impugned order denying credit set aside and appeal allowed with consequential relief.

Final Conclusion: The Tribunal held that services used for setting up the plant have a direct nexus with manufacture and, under the main clause of Rule 2(l) of the Cenvat Credit Rules, 2004 (as amended w.e.f. 01.04.2011), qualify as input services; the denial of credit in the impugned order is set aside and the appeal is allowed with consequential relief.