TaxTMI Updates e-Newsletter
Oct 13,2021

Pre deposit for statutory appeal - utilisation of electronic credit ledger - utilisation of electronic cash ledger - restriction on use of input tax credit for non return liabilities - mandatory mode of payment prescribed by statute

Pre deposit for statutory appeal - utilisation of electronic credit ledger - utilisation of electronic cash ledger - mandatory mode of payment prescribed by statute - Whether the pre deposit required under Section 107(6) of the OGST Act could be discharged by debiting the electronic credit ledger instead of the electronic cash ledger - HELD THAT: - The Court held that the pre deposit mandated by Section 107(6) must be discharged in the manner prescribed by Section 49(3) read with the OGST Rules and could not be equated with 'output tax' payable out of the electronic credit ledger. A collective reading of Section 49(3), Section 49(4), Rule 85(3) and Rule 85(4) shows that use of the electronic credit ledger is confined to liabilities permissible under the statute (notably self assessed output tax as per return) and the proviso to Section 41(2) limits utilisation of ITC. The appellate authority therefore correctly rejected the appeal as defective where the pre deposit was paid by debiting the electronic credit ledger contrary to the statutory requirement to make such payment from the electronic cash ledger. Reliance on decisions treating certain provisions as machinery provisions or on cases concerning refunds was not persuasive to permit debiting the credit ledger for the pre deposit obligation. [Paras 14, 16]

Pre deposit under Section 107(6) cannot be paid by debiting the electronic credit ledger; payment must be made from the electronic cash ledger as prescribed and the appeals were rightly treated as defective.

Utilisation of electronic credit ledger - separate remedy for reversal of ledger entries - Whether the Court should direct reversal of the debit in the electronic credit ledger made by the petitioner and permit payment of pre deposit from the electronic cash ledger - HELD THAT: - The Court declined to order reversal of the debit entry in the electronic credit ledger. It observed that seeking reversal of an earlier ledger debit is a distinct cause of action and the petitioner must pursue appropriate remedies in accordance with law in that regard. The obligation to make the statutory pre deposit is not contingent upon any such reversal, and the petitioner cannot avoid the prescribed mode of payment by relying on a prospective reversal order. [Paras 17, 18]

Prayer for reversal of the debit in the electronic credit ledger was refused; the petitioner must pursue an independent remedy for reversal and the pre deposit obligation remains nonetheless.

Final Conclusion: Writ petitions dismissed for lack of merit; the appellate authority correctly treated appeals as defective where the mandatory pre deposit was debited from the electronic credit ledger instead of the electronic cash ledger, and no order was made regarding costs.

Provisional attachment to protect Government revenue under Section 83 - inspection, search and seizure under Section 67 - formation of opinion by the Commissioner based on tangible material - requirement of a reasoned and speaking opinion with reference to material - attachment of bank accounts as a last resort and consideration of liquidity/threat to recovery - power under Section 83 to be exercised sparingly and not to harass assessee - dual procedural safeguards under Rule 159(5) including opportunity of being heard

Provisional attachment to protect Government revenue under Section 83 - formation of opinion by the Commissioner based on tangible material - inspection, search and seizure under Section 67 - Validity of the provisional attachment of the petitioner's bank accounts under Section 83 where proceedings under Section 67 had been conducted but no assessment proceedings under Sections 73/74 had been completed. - HELD THAT: - The Court held that invocation of Section 83 requires a genuine, reasoned opinion by the sanctioning authority that provisional attachment is necessary to protect revenue. Completion of investigation under Section 67 does not automatically justify attachment; the Commissioner must form an opinion on tangible material that the assessee is likely to defeat recovery. In the present case the sanctioning note and the Commissioner's order proceeded on a premature conclusion that the petitioner had availed fraudulent ITC, without reference to or analysis of the materials of investigation and prior to verification and hearings of the entities alleged to be bogus. That non speaking, conclusory opinion amounted to non-application of mind and was inadequate to justify provisional attachment under Section 83. [Paras 11, 12, 13, 21, 27]

Impugned provisional attachment set aside as the opinion recorded under Section 83 was non speaking, premised on a premature conclusion and unsupported by tangible material; attachment quashed.

Requirement of a reasoned and speaking opinion with reference to material - formation of opinion by the Commissioner based on tangible material - power under Section 83 to be exercised sparingly and not to harass assessee - Whether the Commissioner is required to record reasons and consider relevant factors before ordering provisional attachment under Section 83. - HELD THAT: - The Court reiterated that the statutory reference to the Commissioner's 'opinion' cannot be satisfied by perfunctory or conclusory words. The opinion must disclose the tangible material and reasoning on which the necessity of attachment is based. The power is draconian and must be exercised sparingly, on substantive weighty grounds; authorities must balance protection of revenue with the assessee's ability to continue business and avoid irreversible harm. Mere repetition of allegations or a prior officer's request without independent application of mind by the Commissioner is inadequate. [Paras 13, 21, 22, 23, 24]

Commissioner failed to record a reasoned opinion addressing the materials and relevant factors; such failure vitiates the attachment under Section 83.

Attachment of bank accounts as a last resort and consideration of liquidity/threat to recovery - dual procedural safeguards under Rule 159(5) including opportunity of being heard - Appropriate safeguards and considerations in ordering attachment of bank accounts and the scope for future action by revenue. - HELD THAT: - The Court observed that attachments of liquid assets like bank accounts can debilitate business and should be a last resort. The sanctioning authority must consider liquidity and whether the assessee can meet future demands; equities and the assessee's financial position must be weighed. The decision noted precedents emphasizing procedural safeguards (objections and hearing) and reasoned orders addressing those objections. The order set aside the attachment but clarified that revenue remains free to invoke Section 83 again if, after due application of mind and on proper material, such attachment is warranted in accordance with law. [Paras 22, 24, 25, 28]

Attachment of bank accounts was inappropriate in the circumstances; attachment quashed, with liberty to the revenue to reconsider and re-invoke Section 83 lawfully if justified after due process.

Final Conclusion: Writ petition allowed; the provisional attachment of the petitioner's bank accounts is set aside for lack of a reasoned, material based opinion under Section 83 and non application of mind by the sanctioning authority. Respondents directed to complete assessment proceedings within six weeks; order does not preclude lawful re invocation of Section 83 if circumstances warrant.

Electronic Credit Ledger - blocking and unblocking of input tax credit - proceedings under the Central Goods and Services Tax Act, 2017 in relation to recovery of disputed credit - technical glitch as ground for administrative delay - reporting compliance

Electronic Credit Ledger - blocking and unblocking of input tax credit - technical glitch as ground for administrative delay - proceedings under the Central Goods and Services Tax Act, 2017 in relation to recovery of disputed credit - Unblocking of the petitioner's blocked credit in the Electronic Credit Ledger on the basis of the Revenue's concession that disputed credit has been recovered and the delay is due to a technical glitch. - HELD THAT: - The Court recorded the petitioner's averment that proceedings under the Central Goods and Services Tax Act, 2017 had been issued and that the disputed credit had been recovered. The Revenue, through its counsel, accepted that factual position, undertook that there was no dispute on the facts, and stated that unblocking of the Electronic Credit Ledger would be effected within a week, attributing the delay to a technical glitch. Having recorded the Revenue's categorical concession and its commitment to remedy the administrative blockage promptly, the Court disposed of the petition by directing unblocking within the stated time and listed the matter for reporting compliance. [Paras 5, 6]

The Electronic Credit Ledger shall be unblocked within one week; the writ petition is disposed of recording the Revenue's stated position, with a compliance listing.

Final Conclusion: Writ petition disposed of by recording the Revenue's concession that disputed credit was recovered and by directing that the temporary blocking of the Electronic Credit Ledger be undone within one week; matter listed for reporting compliance.

Supply - Services provided to Government - Services by Government - Exemption under Entry 6 of Notification No. 12/2017 - Services by Government - Tax liability where an agent collects fees on behalf of Government

Supply - E Procurement transaction fee collected by the applicant falls within the meaning of 'supply'. - HELD THAT: - The Authority examined the nature of the e procurement transaction fee collected by the applicant while acting as fund manager for the ITE&C Department. The service of facilitating online tenders and collecting transaction fees is an activity capable of consideration and falls within the statutory concept of supply under the GST Act. The Authority therefore concludes that the transaction constitutes a taxable supply of services.

Yes; the e procurement transaction fee constitutes 'supply'.

Tax liability where an agent collects fees on behalf of Government - Tax liability arises on the e procurement transaction fee collected on behalf of the State Government department. - HELD THAT: - Having found that the activity is a supply of services, the Authority addressed whether tax liability attaches when the applicant collects transaction fees in that capacity. The applicant retains a service charge and remits the balance to the department, but the collection and facilitation remain a supply by the applicant. Consequently, the tax liability arises on the transaction fee collected, and the applicant must discharge GST as applicable.

Yes; tax liability arises on the e procurement transaction fee collected by the applicant.

Exemption under Entry 6 of Notification No. 12/2017 - Services by Government - Services provided to Government - Services by Government - The services performed by the applicant do not fall under Entry 6 of Notification No.12/2017 and are not exempt. - HELD THAT: - The Authority analysed Entry 6 which exempts 'services by the Central Government, State Government, Union territory or local authority' subject to specified exclusions. The entry relates to services provided by the government, not services provided to the government. The applicant provides services to government departments (and, in effect, to business entities through the e procurement platform), and services to business entities are explicitly excluded from the exemption. Thus, the applicant's services do not qualify for exemption under Entry 6.

No; the services are not covered by Entry 6 of Notification No.12/2017 and are not exempt.

Final Conclusion: The Authority rules that the e procurement transaction fee collected by M/s TSTSL constitutes a taxable supply of services, tax liability arises on such fee collected by the applicant, and the services do not qualify for exemption under Entry 6 of Notification No.12/2017; the application is disposed accordingly.

Storage or warehousing services - exemption for raw agricultural produce - raw and unmanufactured as predicates for exemption - processes making agricultural produce marketable for the primary market - ginning and pressing as taxable processing beyond primary-market operations - exclusion from Entry 24B of Notification No. 21/2019 for processed cotton bales - taxability of warehousing services at the applicable GST rate

Storage or warehousing services - exemption for raw agricultural produce - raw and unmanufactured as predicates for exemption - ginning and pressing as taxable processing beyond primary-market operations - exclusion from Entry 24B of Notification No. 21/2019 for processed cotton bales - taxability of warehousing services at the applicable GST rate - Whether godown rent collected from the Cotton Corporation of India for storage of fully pressed cotton bales is exempt under Entry 24B of Notification No. 21/2019 dated 30.09.2019. - HELD THAT: - Entry 24B exempts services by way of storage or warehousing of agricultural produce which are in their raw or unmanufactured state; the notification predicates exemption on the words "raw" and "unmanufactured" and on processes that merely make produce marketable for the primary market. Ginning and subsequent pressing into bales are processing activities that alter the essential character of raw cotton and are not operations confined to making produce marketable for the primary market. The Cotton Corporation of India purchases raw cotton in the primary market and gets it processed (ginning and pressing) on job-work basis and pays GST on those processing services. Consequently, cotton after ginning and pressing cannot be treated as raw/unmanufactured cotton for the purpose of Entry 24B, and warehousing of such processed cotton bales does not fall within the exemption. The Authority therefore holds that the applicant's warehousing services to CCI are not covered by Entry 24B of Notification No. 21/2019 and are taxable. [Paras 7, 8]

The warehousing services rendered to CCI for fully pressed cotton bales do not qualify for exemption under Entry 24B of Notification No. 21/2019 and are taxable at the prescribed GST rates.

Final Conclusion: Advance ruling: godown rent received for storage of fully pressed cotton bales is not exempt under Entry 24B of Notification No. 21/2019 and is taxable under GST; the application is disposed accordingly.

Reassessment under Section 147 of the Income Tax Act, 1961 - requirement of prior opinion recorded in assessment under Section 143(3) - reason to believe that income has escaped assessment - disallowance under Section 40A(3) of the Income Tax Act, 1961 - rebuttable statutory presumption and the proviso to Section 40A(3) - totality of circumstances test for cash payments

Reassessment under Section 147 of the Income Tax Act, 1961 - requirement of prior opinion recorded in assessment under Section 143(3) - Validity of initiation of reassessment proceedings when no assessment order under Section 143(3) had been passed - HELD THAT: - The Court held that where no assessment order under Section 143(3) had been passed, the Assessing Officer cannot be said to have formed any prior opinion on the subject-matter; consequently, the principle that reasons to believe must arise from material discovered after formation of opinion in a prior assessment does not apply. The reasons recorded on 30.03.2005, confined to cash expenditure contrary to Section 40A(3), were not vitiated merely because they were not founded on fresh material subsequent to an earlier 143(3) assessment. The legal constraint about change of opinion applies only when an assessing officer has already formed an opinion in a Section 143(3) order on the same subject-matter. [Paras 4]

Reassessment proceedings under Section 147 were legally maintainable despite absence of any prior assessment under Section 143(3); question nos. (i) and (ii) answered against the assessee and in favour of the revenue.

Reason to believe that income has escaped assessment - Whether the Assessing Officer had reason to believe that income had escaped assessment sufficient to sustain reassessment - HELD THAT: - Linked to the absence of a prior 143(3) assessment, the Court found that the Assessing Officer's reasons to believe-limited to cash payments potentially contrary to Section 40A(3)-could be validly recorded without the need to demonstrate fresh material emerging after a prior concluded assessment. Thus the Tribunal was legally justified in holding that the Assessing Officer had reason to believe that income had escaped assessment in the facts of this case. [Paras 4]

The Tribunal was justified in holding that the Assessing Officer had reason to believe that income had escaped assessment; answered against the assessee and in favour of the revenue.

Disallowance under Section 40A(3) of the Income Tax Act, 1961 - rebuttable statutory presumption and the proviso to Section 40A(3) - totality of circumstances test for cash payments - Whether the disallowance under Section 40A(3) was rightly confirmed despite the assessee's explanation and supporting evidence under the proviso - HELD THAT: - The Court recognised that Section 40A(3) creates a statutory presumption in favour of disallowance for certain cash payments, but that presumption is rebuttable. Applying the test in Commissioner of Income Tax v. Chaudhary & Co., the Court considered the totality of circumstances: (i) statements and affidavits that sellers insisted on cash payment; (ii) disclosure of sellers' identities; (iii) certificates/affidavits from sellers corroborating insistence on cash; and (iv) genuineness of the payments evidenced by registered sale deeds. On the facts, the assessee had filed unrebuffed affidavits, the identities and registered sale deeds were not impeached, and there was no adverse material. Applying the precedent, the Court found that the assessee had satisfactorily rebutted the statutory presumption and that the Tribunal erred in mechanically applying Section 40A(3) without considering these factors. [Paras 5, 6, 8, 9]

Disallowance under Section 40A(3) was not sustainable; question no. (iii) answered in favour of the assessee and against the revenue.

Final Conclusion: The appeal is partly allowed: reassessment proceedings under Section 147 were upheld (questions i and ii decided against the assessee), but the disallowance under Section 40A(3) was set aside on the facts and law (question iii decided in favour of the assessee) for A.Y. 2000-01.

Reopening of assessment - Reason to believe - Change of opinion - New material / new facts requirement for reassessment - Power to re-assess versus power to review - Reasonable time for furnishing reasons for reopening

Reopening of assessment - Reason to believe - Change of opinion - New material / new facts requirement for reassessment - Validity of the reassessment proceedings under Section 148/147 insofar as they were based on the same materials available at the time of the original assessment. - HELD THAT: - The Court held that reassessment must be founded on a "reason to believe" supported by new material facts which have come to the Assessing Officer's notice after the original assessment, and not on mere re-appreciation of facts or a change of opinion. The Single Bench's view that tracing a new "dimension" or undertaking a comparison with the original assessment suffices was held to be incorrect. On the facts, the reasons recorded for reopening were culled from the return and annexures already before the original authority and the Assessing Officer's own disposal of objections conceded that those grounds had been considered earlier. Consequently the reopening constituted a change of opinion and was without lawful foundation. [Paras 14, 16]

Reopening quashed as a clear case of change of opinion for Assessment Year 2013-2014.

Reasonable time for furnishing reasons for reopening - Assessee's right to reasons - Whether the reasons for initiating reopening were furnished to the assessee within a reasonable time after the assessee's request. - HELD THAT: - The Court noted that although no fixed statutory period is prescribed for furnishing reasons, the Assessing Officer is obliged to supply reasons within a reasonable time once requested. The Assessing Officer delayed furnishing the reasons: the notice under Section 148 was issued on 29.03.2018, the assessee requested reasons on 27.04.2018 and again on 27.08.2018, but reasons were supplied only on 30.08.2018. The Court described this delay as "enormous" and concluded that the reasons were not furnished within a reasonable time on the facts before it. However, the Court declined to lay down a definitive legal rule on the temporal dimension of "reasonable time" and left that broader legal question open for future consideration. [Paras 18]

On the facts, reasons were not furnished within a reasonable time; the broader legal question of what constitutes reasonable time is left open.

Final Conclusion: Writ appeal allowed; the order in W.P. No.29023 of 2018 is set aside, the writ petition is allowed and the reassessment proceedings for Assessment Year 2013-2014 are quashed; no costs.

Substitution of statutory provision - repeal by substitution - delegated legislation cannot override principal legislation - extension of limitation by enabling legislation - non-obstante clause and its limited scope - mandatory procedure for reassessment under newly enacted Section 148A - jurisdictional validity of reassessment notices

Substitution of statutory provision - repeal by substitution - Effect of Finance Act, 2021 substitution on pre-existing reassessment provisions - HELD THAT: - The Court held that substitution of Sections 147-151 (and related provisions) by the Finance Act, 2021 w.e.f. 01.04.2021 effected simultaneous repeal of the prior provisions and enactment of the new scheme; in absence of any express saving clause, the pre-existing reassessment provisions could not survive for initiating fresh proceedings after 01.04.2021. Consequently, the law applicable from 01.04.2021 is the Act as amended by the Finance Act, 2021, and any attempt to apply the old unamended provisions for initiation of reassessment after that date is impermissible. [Paras 64, 65, 66]

Pre-existing provisions relating to reassessment stood replaced by the Finance Act, 2021 and cannot be invoked to initiate reassessment proceedings after 01.04.2021.

Extension of limitation by enabling legislation - delegated legislation cannot override principal legislation - non-obstante clause and its limited scope - Whether the Enabling Act and Notifications could extend or save the unamended reassessment regime for notices issued after 01.04.2021 - HELD THAT: - The Court decided that the Enabling Act (and the Notifications issued under it) was a statute to enlarge time-limits existing during the specified pandemic period and to protect proceedings already in existence from limitation; it did not authorize the Executive to resurrect or validate substantive or procedural provisions that had been substituted by the Finance Act, 2021. The non-obstante language in Section 3(1) of the Enabling Act was held to be confined to protecting proceedings already pending (i.e., where jurisdiction had been validly assumed prior to substitution) and could not be read to override the effect of the Finance Act, 2021 so as to permit initiation of reassessment under the now-omitted provisions after 01.04.2021. Delegated notifications therefore cannot overreach the principal legislation. [Paras 67, 68, 69, 70, 71]

The Enabling Act and its Notifications do not save or extend the pre-existing reassessment regime for notices issued after 01.04.2021; their protective effect is limited to proceedings validly pending before that date.

Mandatory procedure for reassessment under newly enacted Section 148A - jurisdictional validity of reassessment notices - Validity of reassessment notices issued after 01.04.2021 without complying with the substituted law - HELD THAT: - Because the Finance Act, 2021 substituted the reassessment scheme and introduced mandatory pre-issuance procedures (including Section 148A), any reassessment notice issued after 01.04.2021 must comply with the new statutory requirements. The Court noted that in the present batch all impugned notices were issued after 01.04.2021 and that no reassessment proceedings had been validly initiated under the unamended law prior to substitution. Therefore, notices issued post-substitution without adhering to the new statutory procedure were without jurisdiction and could not be sustained. [Paras 72, 75, 76]

Reassessment notices issued after 01.04.2021 that rely on the pre-existing provisions (or that do not comply with the substituted statutory procedure) are without jurisdiction and are quashed.

Final Conclusion: The Court quashed the reassessment notices challenged in these petitions (including the notice dated 09.04.2021 for A.Y. 2017-18), holding that the Finance Act, 2021 substituted the prior reassessment provisions w.e.f. 01.04.2021 and that the Enabling Act and its Notifications cannot be read to revive or validate the pre-existing reassessment regime for notices issued after that date; assessing authorities remain free to initiate reassessment only in accordance with the Act as amended by the Finance Act, 2021.

Deduction under section 80IC - Entitlement dependent on classification of product under customs/tariff headings - Follow-on effect of Tribunal's earlier orders in assessee's own case - Precedential consistency where facts are identical

Deduction under section 80IC - Follow-on effect of Tribunal's earlier orders in assessee's own case - Precedential consistency where facts are identical - Deletion of addition made by AO by denying claim of deduction under section 80IC was sustained and the CIT(A) order allowing the deduction was upheld. - HELD THAT: - The Assessing Officer denied the claim of deduction under section 80IC to keep the issue alive pending the outcome of challenges to earlier years, despite facts remaining unchanged. The Commissioner (Appeals) allowed the claim following the decision in assessee's own case in earlier assessment years. A Coordinate Bench of the Tribunal had already held in the assessee's favour for earlier years (noting classification of the product under tariff heading 7607 and applying relevant Board circulars) and the same view was followed in the Tribunal's order for the subsequent year. No material was produced to show any change in facts for the year under consideration or that the earlier Tribunal orders had been set aside or stayed by a higher forum. In these circumstances, the Tribunal applied the principle of follow-on effect of its earlier orders in the assessee's own case and found no reason to interfere with the CIT(A)'s allowance of the deduction. [Paras 7, 8]

Revenue's appeal against deletion of the addition by allowing deduction under section 80IC is dismissed and the CIT(A) order is affirmed.

Final Conclusion: Where identical facts in the year under consideration are governed by earlier Tribunal decisions in the assessee's own case and no contrary order from a higher forum exists, the follow-on effect of those decisions warrants upholding allowance of deduction under section 80IC; Revenue's appeal is dismissed.

Penalty under Section 271(1)(c) of the Income-tax Act - notice issued under Section 274 - requirement of specification of the limb of penalty (concealment of income v. furnishing inaccurate particulars) - nullity of penalty notice for failure to specify the charge

Penalty under Section 271(1)(c) of the Income-tax Act - notice issued under Section 274 - requirement of specification of the limb of penalty (concealment of income v. furnishing inaccurate particulars) - nullity of penalty notice for failure to specify the charge - Validity of penalty proceedings where the notice under Section 274 read with Section 271(1)(c) did not specify whether penalty was for concealment of income or for furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the notice dated 29/12/2011 issued under Section 274 read with Section 271(1)(c) did not specify which limb of Section 271(1)(c) the penalty proceedings were initiated under and that the assessment order likewise failed to specify the charge. Reliance was placed on the decision in M/s SSA's Emerald Meadows (as discussed in the judgment) and on the line of authority following Manjunatha Cotton & Ginning Factory, which hold that a notice which does not indicate whether the penalty is for concealment of income or for furnishing inaccurate particulars is deficient and renders the proceedings bad in law. The Tribunal rejected the Revenue's contention that omission to strike off inappropriate words would not invalidate the proceedings, concluding instead that where the notice does not indicate the specific limb, the penalty proceedings are vitiated. Applying that principle to the facts, the Tribunal held that the penalty imposed under Section 271(1)(c) could not be sustained and directed cancellation of the penalty. [Paras 7, 8]

Penalty under Section 271(1)(c) deleted and order of CIT(A) set aside because the notice failed to specify which limb of Section 271(1)(c) had been invoked.

Final Conclusion: The appeal is allowed; the penalty imposed under Section 271(1)(c) for Assessment Year 2004-05 is quashed because the notice under Section 274 read with Section 271(1)(c) did not specify whether the charge was concealment of income or furnishing inaccurate particulars of income.

Deduction under section 36(1)(va) - employees' contribution to PF/ESI treated as income until deposited - timing of payment - deposit before filing return entitling to deduction - application of section 43B to payment-based deduction

Deduction under section 36(1)(va) - employees' contribution to PF/ESI treated as income until deposited - timing of payment - deposit before filing return entitling to deduction - application of section 43B to payment-based deduction - Whether amounts of employees' contribution to PF/ESI deposited after statutory due dates but before the filing of return are allowable as deduction under section 36(1)(va). - HELD THAT: - The Tribunal accepted the assessee's case that although deposits of employees' contribution to PF and ESI were made after the statutory due dates, the sums were deposited with the appropriate authorities before the date of filing the return of income. Relying on the principle applied by the Delhi High Court in AIMIL Ltd. and followed in subsequent decisions, the Tribunal observed that where the employer makes the actual payment before the return is filed, the assessee is entitled to the deduction; statutory consequences such as interest or penalty under the Provident Fund or ESI enactments do not negate this entitlement under the Income-tax scheme. The Assessing Officer's reliance on a contrary decision of a different High Court did not persuade the Tribunal, and no binding contrary authority was placed before it. On these grounds the Tribunal found no reason to interfere with the CIT(A)'s favorable finding and allowed the claimed deduction. [Paras 8, 10, 11]

Addition disallowing employees' contribution to PF/ESI under section 36(1)(va) deleted; appeal allowed.

Final Conclusion: For AY 2013-14 the Tribunal allowed the assessee's appeal, holding that employees' contributions to PF/ESI deposited before filing the return are deductible under the Income-tax provisions despite having been paid after the statutory due dates.

Application of income for purpose of Section 11 - exemption under Section 11 not to be denied for foreign application except to extent not applied in India - disallowance of expenditure as not application of income under Section 11(1)(c) - deletion of addition under Section 40A(2)(a) - levy of interest under Sections 234B and 234D

Application of income for purpose of Section 11 - disallowance of expenditure as not application of income under Section 11(1)(c) - Whether amounts remitted by the assessee-society to University of Texas, USA constituted application of income for charitable purposes and whether exemption under Section 11 could be denied on account of such foreign remittance. - HELD THAT: - The Tribunal noted that the Assessing Officer treated the foreign sub-grant as not being an application of income and disallowed it under the concept embodied in Section 11(1)(c). The CIT(A) held that exemption under Section 11 cannot be wholly denied on account of application of income outside India and directed that only the portion of income to the extent not applied in India would be ineligible for exemption. The Tribunal, after perusal of the assessment order, the appellate order and the materials on record, found the CIT(A)'s approach to be legally correct and in accordance with the statutory scheme governing application of income; there was no reason to interfere with the conclusion that denial of exemption in entirety was not justified and that only the portion not applied in India is to be disallowed for exemption purposes.

CIT(A)'s conclusion that exemption under Section 11 cannot be denied in toto for application of income outside India and that only the portion not applied in India is ineligible for exemption is upheld; the Assessing Officer's wholesale disallowance is not sustained.

Deletion of addition under Section 40A(2)(a) - Whether the addition of a sum representing 15% of salary under Section 40A(2)(a) for AY 2014-15 was correctly deleted by the CIT(A). - HELD THAT: - The CIT(A) deleted the addition of the specified amount treated as disallowance under Section 40A(2)(a) and allowed the assessee's ground. The Tribunal examined the appellate finding and the basis on which the CIT(A) allowed the deletion, and found that the CIT(A)'s decision was warranted by the material and law considered at that stage. There being no arguable error in the appellate conclusion, the Tribunal declined to interfere with the deletion.

Deletion of the addition under Section 40A(2)(a) by the CIT(A) is sustained.

Levy of interest under Sections 234B and 234D - Whether the levy of interest under Sections 234B and 234D was correctly sustained by the revenue and whether the CIT(A) erred in upholding the levy. - HELD THAT: - The CIT(A) considered precedents and legal position regarding imposition of interest under Sections 234B and 234D (including applicability from the date of introduction) and dismissed the assessee's grounds challenging the levy. The Tribunal reviewed the CIT(A)'s reliance on authoritative decisions and the reasoning applied, found the appellate conclusion to be in accordance with law, and observed no reason to interfere with the CIT(A)'s determination upholding the interest demand.

CIT(A)'s upholding of the levy of interest under Sections 234B and 234D is affirmed.

Final Conclusion: All five appeals filed by the assessee are dismissed; the Tribunal upholds the CIT(A)'s determinations that only the portion of income not applied in India is disallowable for exemption under Section 11, sustains the deletion of the specified Section 40A(2)(a) addition for AY 2014-15, and affirms the appellate ruling upholding levy of interest under Sections 234B and 234D.

Stay of recovery - extension of stay pending disposal of appeal - condition of not pressing for refund - rectification under Section 154 - direction to disposing officer to decide expeditiously after hearing

Stay of recovery - extension of stay pending disposal of appeal - Extension of stay of recovery of outstanding demand for the impugned assessment year on the same terms and conditions previously imposed. - HELD THAT: - The Tribunal noted that stay of recovery had earlier been granted on condition that the assessee would not press for a specified refund and that the stay was subsequently extended on the same terms. Although the assessee sought variation of the condition, the Tribunal observed that the assessee's rectification application under Section 154 was still pending and the actual demand had not crystallized. Considering that non-disposal of the appeal was not solely attributable to the assessee, the Tribunal declined to vary the earlier conditions and extended the stay for a further period of 180 days or till disposal of the appeal, whichever was earlier, on the same terms as before. [Paras 4]

Stay extended for 180 days or until disposal of the appeal, on the same terms and conditions previously imposed.

Condition of not pressing for refund - rectification under Section 154 - Refusal to vary the previously imposed condition restraining the assessee from pressing for the refund. - HELD THAT: - The Tribunal refused the assessee's request to vary the condition because the assessee's claim that the actual tax liability was lower rested on a rectification application under Section 154 which remained pending before the assessing officer. In the absence of a crystallized demand, the Tribunal was not prepared to alter the condition imposed earlier. [Paras 4]

Application to vary the condition restraining the assessee from pressing for the refund is declined.

Rectification under Section 154 - direction to disposing officer to decide expeditiously after hearing - Direction to the assessing officer to dispose of the assessee's rectification application filed under Section 154. - HELD THAT: - Noting that the rectification application filed by the assessee remained pending, the Tribunal directed the assessing officer to dispose of the Section 154 application expeditiously and after affording the assessee an opportunity of hearing. This direction was given to enable crystallization of the correct demand which is material to the stay conditions. [Paras 5]

Assessing officer directed to dispose of the rectification application expeditiously after providing opportunity of hearing to the assessee.

Final Conclusion: The application for extension of stay is allowed: the stay of recovery for assessment year 2015-16 is extended for 180 days or until disposal of the appeal, whichever is earlier, on the same terms as earlier; the request to vary the refund-related condition is refused; and the assessing officer is directed to decide the pending Section 154 rectification application expeditiously after hearing the assessee.

Application of section 13(1)(c) concerning benefit to specified persons - definition of 'specified person' under section 13(3)

Application of section 13(1)(c) concerning benefit to specified persons - definition of 'specified person' under section 13(3) - Whether the finding of the CIT(A) that the provisions of section 13(1)(c) read with section 13(3) were not attracted in respect of rent paid for properties belonging to M.N. Navale (Bigger HUF) should be sustained or required fresh consideration. - HELD THAT: - The Tribunal noted that in the assessee's appeals for multiple assessment years a common order was passed disposing of cross appeals and, in relation to the present year, observed that issues raised by the Revenue were identical to those in AY 2007-08 and that the Tribunal's decision for the earlier year applied mutatis mutandis. In the Tribunal's disposal of AY 2007-08 the linked grounds raised by the Revenue were allowed and the issue was sent back to the file of the CIT(A). Reading the Tribunal's orders together makes clear that the question regarding attraction of section 13(1)(c)/13(3) had been remitted to the CIT(A). The present rectification sought before the CIT(A) arose from the original order which the Tribunal had already directed to be reconsidered. Consequently, the impugned order is set aside and the matter is remitted to the CIT(A) for reconsideration and decision in conformity with the view taken in proceedings flowing from the Tribunal's order for the assessment year 2009-10 on this issue. [Paras 4, 5]

Impugned order set aside and matter remitted to the file of the CIT(A) for fresh decision in conformity with the Tribunal's directions.

Final Conclusion: Appeal allowed for statistical purposes; the impugned order is set aside and the issue regarding attraction of section 13(1)(c)/13(3) is remitted to the CIT(A) for decision in conformity with the Tribunal's order.

Classification of receipts between profits and gains of business or profession and income from other sources - genuineness and corroboration of inter-company agreements by subsequent conduct and documentary evidence - allowability of business expenditure where income is held to be business income - interest on loans to subsidiary as business income when loans are advanced for business purpose - verification by Assessing Officer of claimed business expenses

Classification of receipts between profits and gains of business or profession and income from other sources - genuineness and corroboration of inter-company agreements by subsequent conduct and documentary evidence - Development management fees received from wholly owned subsidiary are assessable as business income and not as unexplained income under the head Income from other sources. - HELD THAT: - The Tribunal found that the assessee's Memorandum of Association included real estate development and related consultancy/management activities, the assessee was appointed to provide development management services to its wholly owned subsidiary with an agreement in place, invoices were raised and payments received through banking channels with TDS, and the subsidiary confirmed the transactions under notice. Deficiencies in the written agreement did not invalidate the arrangement where both parties acted upon it and documentary evidence and conduct corroborated the services rendered. On this basis the fees displayed the characteristics of business receipts and the lower authorities were not justified in re classifying them as unexplained income under Income from other sources. (Decision recorded at 4.1) [Paras 4]

Management fees held to be business income; ground allowing reclassification in favour of the assessee.

Interest on loans to subsidiary as business income when loans are advanced for business purpose - allowability of related finance cost as business expenditure - Interest earned on loans advanced to the wholly owned subsidiary is business income and the corresponding interest expense is an allowable business deduction. - HELD THAT: - The Tribunal noted that loans were advanced to the subsidiary in furtherance of the assessee's business project which fell within its main objects, and the loans were funded from proceeds of debentures issued by the assessee. Since the advances were for business purposes and in connection with the development project managed by the assessee, interest receipts were rightly offered as business income and the finance cost incurred in relation thereto is allowable as business expenditure. (Decision recorded at 4.2) [Paras 4]

Interest receipts treated as business income and corresponding interest expenditure allowable as business deduction.

Allowability of business expenditure where income is held to be business income - verification by Assessing Officer of claimed business expenses - Business expenses claimed in relation to the management services and loans are allowable, subject to verification by the Assessing Officer. - HELD THAT: - Having held that the receipts were business income, the Tribunal concluded that the associated employee costs, finance costs and other expenditures claimed in the profit and loss account qualify as business expenses. The Tribunal directed the Assessing Officer to verify the claimed expenditures and allow those that are properly attributable to the business activity; the direction contemplates factual verification rather than re adjudication of the classification already decided. (Decision recorded at 4.3) [Paras 4]

Disallowed business expenses to be reconsidered and allowed by AO upon verification; ground allowed for statistical purposes.

Classification of receipts between profits and gains of business or profession and income from other sources - interest on loans to subsidiary as business income when loans are advanced for business purpose - allowability of business expenditure where income is held to be business income - Findings in respect of AY 2012 13 apply mutatis mutandis to AY 2013 14: business receipts and interest income to be treated as business income and business expenditure to be allowed subject to verification; revenue appeal dismissed. - HELD THAT: - The Tribunal recorded that facts and issues for AY 2013 14 are pari materia to AY 2012 13 and therefore the conclusions reached for 2012 13 apply to 2013 14. Consequently, the assessee's appeal for 2013 14 is allowed and the revenue's cross appeal is dismissed. (Decision recorded at 6) [Paras 6]

Adjudication for AY 2012 13 applied to AY 2013 14; assessee's appeal allowed and revenue's appeal dismissed for 2013 14.

Final Conclusion: Both appeals of the assessee for AY 2012 13 and AY 2013 14 are allowed: development management fees and interest on loans to the subsidiary are held to be business income and related business expenses are to be allowed subject to verification by the Assessing Officer; the revenue's appeal for AY 2013 14 is dismissed.

Processing of return under section 143(1) as summary intimation - limitations on adjustments under Explanation to section 143(1) - exemption from capital gains by reinvestment under section 11(1A) - accumulation of income for charitable purposes under section 11(2) - admissibility of Form No.10 and appellate acceptance of belated Form No.10

Processing of return under section 143(1) as summary intimation - limitations on adjustments under Explanation to section 143(1) - exemption from capital gains by reinvestment under section 11(1A) - Validity of adjustments made at the stage of processing return under section 143(1) by treating capital gain as taxable despite claim of exemption under section 11(1A). - HELD THAT: - The Tribunal held that intimation under section 143(1) is not a regular assessment and adjustments to total income at that stage are permissible only to the limited extent provided by the Explanation to section 143(1). No prior intimation of such adjustments was given to the assessee here. The assessee had claimed exemption of the capital gain under section 11(1A) by reinvesting the sale consideration in another capital asset held for charitable purposes; that claim was not examined before making the 143(1) adjustment. Consequently, the adjustment towards capital gain made while processing the return was not in accordance with law. The Tribunal directed that the Assessing Officer allow the exemption under section 11(1A) in respect of the reinvested sale consideration and revisit the computation of income accordingly. [Paras 8, 9]

Adjustment of capital gain made in the 143(1) intimation deleted and Assessing Officer directed to allow exemption under section 11(1A) for reinvestment of sale proceeds.

Accumulation of income for charitable purposes under section 11(2) - admissibility of Form No.10 and appellate acceptance of belated Form No.10 - Whether accumulation of income under section 11(2) can be denied because Form No.10 was not attached with the return where the omission arose from inability to upload the form and the intimation under section 143(1) is not a completed assessment. - HELD THAT: - While an assessee must furnish the intimation required by section 11(2) (Form No.10) before completion of assessment proceedings, the Tribunal observed that a section 143(1) intimation does not constitute a regular assessment and the Assessing Officer cannot make adjustments beyond the narrow scope permitted by the Explanation to section 143(1). The assessee produced Form No.10 and a Board resolution showing accumulation and investment in specified modes and explained that the form could not be uploaded due to technical glitches. The appellate authority, being a continuation of original proceedings with co-extensive powers, ought to have admitted the Form No.10 tendered during appellate proceedings rather than foreclosing the statutory benefit on a procedural ground. The Tribunal relied on precedents holding that appellate authorities can accept Form No.10 and directed restoration to the file of the Assessing Officer to allow the benefit of accumulation under section 11(2) after considering the Form No.10 and other evidence. [Paras 10, 11, 12, 14]

Order of CIT(A) set aside; issue restored to Assessing Officer with direction to admit and consider Form No.10 and allow accumulation benefit under section 11(2) if appropriate.

Final Conclusion: The appeal is allowed: the Tribunal deleted the wrongful 143(1) adjustments in respect of capital gain and directed the Assessing Officer to allow exemption under section 11(1A) for reinvestment; the Tribunal also set aside the CIT(A)'s rejection of accumulation under section 11(2), directed admission of Form No.10 tendered on appeal, and restored the matter to the Assessing Officer for consideration. The stay application was dismissed as infructuous.

Project Completion Method of accounting - Percentage Completion Method of accounting - recognized method of accounting - applicability of AS-9 to real estate developers - applicability of AS-7 to contractors - consistency and prior acceptance of accounting method by the revenue

Project Completion Method of accounting - Percentage Completion Method of accounting - applicability of AS-9 to real estate developers - consistency and prior acceptance of accounting method by the revenue - Assessee was justified in adopting Project Completion Method (AS-9) instead of Percentage Completion Method (AS-7) for computing income. - HELD THAT: - The Tribunal, following its earlier decision in the assessee's own case and the subsequent decision of the Hon'ble Allahabad High Court, held that the assessee, a real estate developer, had consistently followed the Project Completion Method of accounting which is a recognized method prescribed by the Institute of Chartered Accountants of India. There were no defects in the books of account, no findings of distortion of profits, and the Department had accepted the method in earlier years. The revised AS-7 applies to construction contractors, whereas AS-9 is applicable to real estate developers; the law and authorities relied upon establish that where a recognized method has been consistently followed and accepted by the revenue, it cannot be disturbed in the absence of convincing reasons showing distortion of profits. Applying these principles, the Tribunal directed deletion of additions made by applying the percentage completion method.

Impugned addition made by applying percentage completion method is deleted and the assessee's adoption of project completion method is upheld.

Final Conclusion: Following the Tribunal's earlier order and the Allahabad High Court's decision, the appeal is allowed: the assessee's use of the Project Completion Method (AS-9) is upheld for AY 2014-15 and the additions based on the Percentage Completion Method (AS-7) are deleted.

Requirement of incriminating material for making additions where original assessment stood completed on date of search - assessment under section 153A of the Income Tax Act - addition recorded as income under section 68 on account of share capital/share premium - use of material collected in survey of a connected person in block assessment under section 158BB/158BH - inadmissibility of sole hearsay statement of a dummy director as conclusive evidence without opportunity of confrontation/cross-examination

Requirement of incriminating material for making additions where original assessment stood completed on date of search - assessment under section 153A of the Income Tax Act - Whether additions made in respect of share capital/share premium received from three investor parties were unsustainable where the original assessment for the year stood completed on the date of search and no incriminating material was found at the assessee's premises. - HELD THAT: - The Tribunal accepted the CIT(A)'s deletion of additions relating to three parties. It noted as admitted that the original assessment was completed on the date of search and that no incriminating material was found at the assessee's premises in relation to those investments. Relying on precedents holding that, in cases where assessment is completed, additions cannot be sustained in the absence of incriminating material obtained from the assessee's premises or other relatable material, the Tribunal found no infirmity in the appellate authority's deletion of those additions. [Paras 8]

Deletion of additions in respect of the three parties is upheld and the Revenue's appeal on this point is dismissed.

Addition recorded as income under section 68 on account of share capital/share premium - use of material collected in survey of a connected person in block assessment under section 158BB/158BH - inadmissibility of sole hearsay statement of a dummy director as conclusive evidence without opportunity of confrontation/cross-examination - assessment under section 153A of the Income Tax Act - Whether the addition of income on account of share capital/share premium received from M/s Aachman Vanijya (P.) Ltd. could be sustained solely on the basis of a statement recorded in a survey of that company, where the assessment was framed under section 153A. - HELD THAT: - The Tribunal examined the CIT(A)'s reliance on the Supreme Court decision permitting use of material collected in a survey of a connected person in the context of block assessments under sections 158BB/158BH. It observed that the ratio of that decision is confined to block assessment provisions which expressly refer to 'such other materials or information' and that identical language is not present in section 153A. The only incriminating material relied upon was the statement of a person who admitted to being a 'dummy director' and who deferred substantive information to another person; that statement was not confronted to the assessee and no other corroborative material from the survey was adduced. Applying the principle that a bald statement not subjected to confrontation/cross-examination cannot be the sole basis for adverse findings, the Tribunal held that confirmation of the addition on this basis was unjustified. [Paras 9]

The addition of income in respect of M/s Aachman Vanijya (P.) Ltd. is deleted and the assessee's appeal on this point is allowed.

Final Conclusion: The Revenue's appeal is dismissed and the assessee's appeal is allowed: additions made in respect of three investor parties are upheld as rightly deleted by the CIT(A), and the confirmed addition relating to M/s Aachman Vanijya (P.) Ltd. is deleted on account of absence of admissible and corroborative incriminating material under the provisions applicable to assessment under section 153A.

Piercing the corporate veil - colourable device / shell or paper company - place of effective management / residence of company - international transaction under transfer pricing - corporate guarantee as an international transaction - arm's length price (ALP) and benchmarking of guarantee fee - assignment of profits to associated enterprises / attribution to foreign subsidiary or operating subsidiary - sales tax subsidy - revenue v. capital receipt and deduction under section 80IB - deeming under section 50C and reference to Valuation Officer - deductibility of business loss on discovery of embezzlement / fraud

Colourable device / shell or paper company - piercing the corporate veil - place of effective management / residence of company - Characterisation of M/s Rubamin FZC as a shell/paper company and whether its profit should be treated as the assessee's income - HELD THAT: - The Tribunal reviewed search-recovered emails, internal documents, board/resolution evidence and financial statements and accepted that Rubamin FZC (RFZC) displayed characteristics of a shell/paper company - limited physical presence in UAE, minimal fixed assets, substantial paper routing of DRC-origin sales, maintenance of books and certain functions outside the UAE and extensive control/exercise of group policy from India (see findings recorded at paras 9-26, 49-56). On that basis the Tribunal held RFZC to be a shell/paper company (para 56). However, the Tribunal separately examined whether RFZC's profits should be taxed in the hands of the Indian parent. Noting absence of invocation of residency/PoEM under section 6, that much of the profitable activity originated in DRC and that Revenue had not established a statutory violation (and that GAAR/PoEM provisions were not applicable to the year under consideration), the Tribunal concluded that the profit legitimately belonged either to RFZC or to the DRC entities and could not be attributed to the assessee merely because RFZC was a paper company; consequently the addition of RFZC profits to the assessee's income was disallowed (paras 61-65). The Tribunal therefore allowed the assessee's grounds 4-7 for the years in question (paras 47-65). [Paras 56, 61, 63, 64, 65]

Held that RFZC is a shell/paper company, but RFZC's profits were not attributable to the assessee and therefore cannot be taxed in the assessee's hands; assessee's grounds 4-7 allowed.

Timeliness of assessment / extended time for transfer pricing reference - Validity of assessments as time-barred where taxability of RFZC profits was contested - HELD THAT: - The assessee challenged assessments as barred by limitation (grounds 1-2) on the basis that if RFZC profits were merged with the assessee then TP reference/extension would not apply. The Tribunal observed that its substantive decision on clustering/attribution of RFZC profits (grounds 4-7) was in favour of the assessee (paras 47-65). In light of that outcome the time-bar challenge depending on the converse factual premise was dismissed as not sustainable (para 3). [Paras 3, 47, 65]

Assessee's time-bar challenge dismissed insofar as it depended on a contrary finding on attribution; assessments were not set aside on limitation grounds.

International transaction under transfer pricing - corporate guarantee as an international transaction - arm's length price (ALP) and benchmarking of guarantee fee - Whether corporate guarantee furnished to the AE is an international transaction and the appropriate ALP for guarantee commission - HELD THAT: - The Tribunal accepted that guarantee transactions fall within the enlarged definition of 'international transaction' (Finance Act 2012 retrospective clarification and subsequent judicial authority) and that benchmarking is required (paras 85-88). While the TPO/DRP had applied a methodology based on credit rating differentials and derived a risk spread (~2.456%), the Tribunal found that reliance on US bond coupon spreads was not an appropriate benchmark in the circumstances; instead it followed reasoning in the Mumbai ITAT line of cases and held that the fair approach is to limit the adjustment to a rate in the range established in comparable precedents for guarantee fees (concluding that restricting the addition to 0.5% of the guaranteed amount is reasonable on the facts) (paras 90-91). The Tribunal accordingly partly allowed the assessee's challenge to the quantum of the TP adjustment (paras 84-91). [Paras 80, 85, 86, 90, 91]

Corporate guarantee held to be an international transaction requiring benchmarking; TP adjustment reduced and restricted to 0.5% of the guaranteed amount (addition partly disallowed).

Sales tax subsidy - revenue v. capital receipt and deduction under section 80IB - Tax character of sales tax subsidy and entitlement to deduction under section 80IB - HELD THAT: - The Tribunal followed earlier tribunal precedent in the assessee's own case and Supreme Court authority to hold that the sales tax subsidy is a revenue receipt chargeable to tax (paras 92-101). However, applying CBDT Circular No.39/2016 and relevant precedents (Meghalaya Steels/Shree Balaji Alloys), the Tribunal accepted the assessee's alternative submission that such subsidy is a reimbursement of business costs and thus eligible for deduction under section 80IB; the DRP's direction to allow 80IB deduction (after verification) was left undisturbed (paras 96, 100-102). [Paras 92, 96, 100, 101, 102]

Sales tax subsidy is revenue in nature and chargeable to tax, but deductible under section 80IB subject to verification - DRP direction upheld.

Deeming under section 50C and reference to Valuation Officer - Application of section 50C to sale of land and requirement to refer valuation to Valuation Officer - HELD THAT: - The AO had substituted stamp registration value under section 50C where registration value exceeded the declared consideration and did not refer the matter to the Valuation Officer. The DRP upheld the AO, noting that reference to the Valuation Officer under section 50C(2) is discretionary ('may') and the assessee had not produced cogent reasons to show market value was lower (paras 103-106, 17.x extracts). Nevertheless, the Tribunal noted that an identical issue in the assessee's own case for an earlier year had been remitted to the AO by the Tribunal and, on that basis and on facts, set aside the addition to the file of the AO for fresh adjudication and verification after opportunity to the assessee (paras 108-111). [Paras 103, 105, 109, 110, 111]

Addition under section 50C set aside and remitted to the AO for fresh adjudication; DVO reference is discretionary but fresh verification required.

Deductibility of business loss on discovery of embezzlement / fraud - Allowability of fraud/embezzlement loss in the year of discovery - HELD THAT: - The Tribunal reviewed CBDT circulars and Supreme Court/High Court precedents holding that loss by embezzlement is deductible when discovered (i.e., when the assessee is satisfied amounts are irrecoverable). On the facts the DRP had found detection in FY 2012 13 but also that the last recoveries were received in that year and crystallisation occurred subsequently; the Tribunal differed on the effect of those facts, held that discovery in the assessment year (AY 2013 14) sufficed and that the assessee had made out that the unrecovered balance was irrecoverable; accordingly the Tribunal allowed the fraud loss deduction for AY 2013 14 (paras 66-69, 153-164). This finding was applied across relevant years where the same claim arose and allowed where appropriate (paras 164-166, 175-176). [Paras 158, 161, 162, 163, 164]

Fraud/embezzlement loss allowed in the year it was discovered (AY 2013 14) where facts show irrecoverability; corresponding grounds allowed.

Application of tribunal findings across assessment years - Application of findings from AY 2011 12 to subsequent assessment years - HELD THAT: - The Tribunal repeatedly observed that issues and findings decided for AY 2011 12 (notably on attribution of RFZC profits and consequential matters) were identical across AYs 2012 13, 2013 14 and 2014 15. Parties agreed that the conclusions would be applied to subsequent years; accordingly the Tribunal applied its earlier conclusions to dispose of equivalent grounds in those years (see repeated application at paras 113-126, 133-146, 168-176, 179-198). [Paras 122, 138, 141, 168, 169]

Findings on core issues for AY 2011 12 applied to the subsequent assessment years where identical issues arose; remedial directions followed accordingly.

Transfer pricing benchmarking - methodological remand - Remand of certain transfer pricing issues to AO/TPO for fresh verification in light of earlier Tribunal orders - HELD THAT: - On transfer pricing adjustments (interest on loans and certain CUP/TNMM methodology questions) the Tribunal referenced earlier Tribunal orders in the assessee's own case (AY 2008 09) and other coordinate bench directions, and set those matters aside to the file of the AO/TPO for fresh adjudication/verification consistent with the prior Tribunal directions (paras 191-193, 222). [Paras 191, 192, 222]

TP issues relating to benchmarking of loan interest and comparable selection remitted to the file of the AO/TPO for fresh consideration in accordance with the Tribunal's earlier directions.

Administrative disposal for low tax effect (CBDT guidance) - Revenue appeal dismissed on account of low tax effect in terms of CBDT Circular - HELD THAT: - The Revenue's appeal for AY 2009 10 was dismissed in limine because the tax effect fell below the revised monetary threshold set out in CBDT Circular No.17/2019 (para 245-246). The Revenue conceded applicability and the Tribunal dismissed the appeal as not maintainable, while leaving open restoration if the Revenue could show inapplicability of the circular (para 246). [Paras 245, 246]

Revenue appeal dismissed as not maintainable under CBDT Circular No.17/2019 for low tax effect; restoration left open on proof of inapplicability.

Final Conclusion: On the consolidated appeals the Tribunal held that (a) RFZC exhibited attributes of a shell/paper company but, on the available materials and law applicable to the years in question, RFZC's profits could not be attributed to the Indian parent and therefore the additions holding those profits to be the assessee's income were disallowed (core grounds 4-7 allowed); (b) the corporate guarantee constituted an international transaction requiring benchmarking but the TP addition was restricted (quantum reduced to a 0.5% benchmark on the facts); (c) sales tax subsidy was revenue in nature but deductible under section 80IB subject to verification; (d) certain section 50C additions were remitted to the AO for fresh adjudication; (e) fraud/embezzlement loss was allowable in the year of discovery on the facts before the Tribunal; (f) several transfer pricing and valuation issues were remitted to the file of the AO/TPO for fresh consideration consistent with earlier Tribunal directions; and (g) a Revenue appeal was dismissed for low tax effect under the CBDT circular. The appeals were thus partly allowed, partly remitted and partly dismissed as recorded in the Order.

Allowability of depreciation on assets acquired on amalgamation/ takeover - computation of deduction under section 80HHC for book-profits purposes - treatment of provisions for bad and doubtful debts in computation of book profits under section 115JB - set-off of unabsorbed losses and unabsorbed depreciation of amalgamating company under section 72A - allowability of capital loss on sale of unlisted shares and substitution of consideration - allowability of deduction for bad debts written off under section 36(1)(vii) - valuation and inclusion/exclusion of unutilised MODVAT (CENVAT) in inventory under section 145A - deductibility of interest and prepayment charges incurred for business expansion under section 36(1)(iii) - deductibility of professional fees as revenue expenditure under section 37(1) versus amortisation under section 35DD - treatment of various receipts (interest, rent, commission etc.) under Explanation (baa) to section 80HHC - net vs gross - taxability and indexation on redemption of redeemable preference shares as transfer for capital gains - levy of penalty under section 271(1)(c) consequent to allowance of disputed expenditure

Allowability of depreciation on assets acquired on amalgamation/ takeover - Direction to allow depreciation claimed by the assessee on assets taken over under earlier amalgamations/takeovers was upheld. - HELD THAT: - The Tribunal followed its earlier decision in the assessee's own case for a later assessment year, which held that depreciation not claimed by a transferor cannot be notionally reduced from the transferee's written down value; the DRP's direction to allow the claim was binding and the Assessing Officer was directed to allow depreciation as computed by the assessee.

Claim of depreciation allowed; Revenue ground dismissed.

Computation of deduction under section 80HHC for book-profits purposes - treatment of various receipts (interest, rent, commission etc.) under Explanation (baa) to section 80HHC - net vs gross - Whether deduction under section 80HHC should be computed after reducing 90% of relevant other receipts and whether net interest or gross interest is to be considered. - HELD THAT: - The Tribunal held that the Supreme Court's decision in ACG Associated Capsules requires that 90% of the net amount of receipts of the nature covered by Explanation (baa) (interest, rent, commission, etc.) actually included in profits be deducted; accordingly the Assessing Officer was directed to recompute the deduction taking net interest into account. The CIT(A)'s partial allowance (excluding processing charges from exclusion) was accepted subject to recomputation.

Assessee's challenge allowed in part; AO directed to recompute deduction under section 80HHC using net interest as per Supreme Court precedent.

Treatment of provisions for bad and doubtful debts in computation of book profits under section 115JB - Whether provision for bad and doubtful debts must be added back in computing book profits under section 115JB. - HELD THAT: - The Tribunal held that Explanation (1)(i) to section 115JB(2) (as amended by Finance Act (No.2), 2009, retrospective from 01/04/2001) treats amounts set aside as provision for diminution in value of any asset as required to be added back. The provision for doubtful debts constitutes provision for diminution in value of an asset and therefore falls within Clause (i) of Explanation 1 and must be added back while computing book profits. Prior authorities based on facts where debts were actually written off were distinguished.

Provision for bad and doubtful debts to be added back for computation of book profits; Revenue ground allowed.

Set-off of unabsorbed losses and unabsorbed depreciation of amalgamating company under section 72A - Whether the assessee was entitled to set off unabsorbed business losses and unabsorbed depreciation of the amalgamating company post-sanctioned amalgamation. - HELD THAT: - The Tribunal found that the scheme of amalgamation was duly sanctioned by the High Court, no appeal under section 391(7) had been filed by revenue, and the statutory conditions of section 72A(2) (as applicable to A.Y.2003-04) and Rule 9C (including achievement of requisite capacity levels certified in Form No.62) were satisfied. Pre-merger slump sale by the amalgamating company did not entail that the merger was a colourable device, particularly where the petition for sanction was filed after that sale and the Hon'ble Court had approved the scheme. Consistent authorities emphasize the binding effect of a court-sanctioned scheme and that objections should have been raised in the court proceedings.

Set-off of amalgamating company's losses and unabsorbed depreciation allowed; Revenue ground dismissed.

Allowability of capital loss on sale of unlisted shares and substitution of consideration - Allowability of capital loss claimed on sale of shares of two unlisted joint ventures where sale consideration produced a capital loss. - HELD THAT: - On the facts the Tribunal accepted the assessee's evidentiary narrative and the undisputed sale consideration (including correction of a typographical error). Revenue produced no material to rebut the arm's-length nature or fair market value of the transactions. The Tribunal followed jurisdictional High Court precedents holding that the Assessing Officer had no power to substitute the agreed consideration in the relevant years by an assumed fair market value (Section 50D was not then applicable) and that mere contrivance allegations are insufficient unless revenue proves receipt of a higher consideration.

Capital loss on sale of shares allowed; Revenue ground dismissed.

Allowability of deduction for bad debts written off under section 36(1)(vii) - Whether deduction for bad debts written off is allowable where the assessee has written off the debts in the books and complied with conditions of section 36(2). - HELD THAT: - Following authoritative tribunal and High Court decisions, and in light of the amendment w.e.f. 01/04/1989, the Tribunal accepted that if an amount has been actually written off in the books and conditions of section 36(2) are complied with, proof that the debt has become bad is not a prerequisite. The CIT(A)'s allowance was therefore upheld.

Bad debts written off allowed as deduction; Revenue ground dismissed.

Valuation and inclusion/exclusion of unutilised MODVAT (CENVAT) in inventory under section 145A - Whether unutilised MODVAT credit reflected in closing stock should be included in stock value under section 145A and the manner of verifying the net impact. - HELD THAT: - Following the Tribunal's earlier directions in the assessee's own case for another year, the matter was remitted to the Assessing Officer for readjudication with directions to verify the tax-audit workings (including Clause 12(b)) and the claimed net impact, affording the assessee opportunity to substantiate its computation. The issue was not finally decided on merits but restored for verification in light of prior directions.

Issue remanded to Assessing Officer for fresh adjudication and verification; returned for readjudication.

Deductibility of interest and prepayment charges incurred for business expansion under section 36(1)(iii) - Whether interest and prepayment charges paid in relation to loans raised for acquisition/expansion of business are deductible. - HELD THAT: - Following the Tribunal's earlier reasoning in the assessee's own case, and applying the commercial expediency test endorsed by the Supreme Court, the Tribunal treated the interest and prepayment charges as incurred for carrying on the business and allowable under section 36(1)(iii). The proviso excluding pre-use interest was inapplicable for the relevant year because it came into effect later.

Interest and prepayment charges allowed as deduction; assessee's ground allowed.

Deductibility of professional fees as revenue expenditure under section 37(1) versus amortisation under section 35DD - Whether payments to Accenture for integration/consultancy are revenue deductible under section 37(1) or require amortisation under section 35DD. - HELD THAT: - The Tribunal followed its earlier decision that the Accenture fees related to professional services for pre-integration study and realisation of synergies and therefore constituted revenue expenditure deductible under section 37(1). The CIT(A)'s direction to restrict deduction to 1/5th under section 35DD was reversed. Consequentially, the penalty levied under section 271(1)(c) in respect of the same fees was set aside because the expenditure was held to be allowable.

Entire Accenture fee allowed as revenue deduction under section 37(1); corresponding penalty vacated.

Taxability and indexation on redemption of redeemable preference shares as transfer for capital gains - Whether long-term capital loss arising on redemption of redeemable preference shares (by reason of indexation) is allowable. - HELD THAT: - On facts the Tribunal found the redemption genuine and commercially rational; preference shares were not bonds/debentures for the purpose of denying indexation. The Tribunal followed High Court precedents which treated redemption of preference shares as a transfer attracting capital gains treatment with entitlement to indexation where statutory conditions are met. The CIT(A)'s disallowance treating the transaction as colourable was rejected.

Long-term capital loss on redemption of preference shares allowed; assessee's ground allowed.

Levy of penalty under section 271(1)(c) consequent to allowance of disputed expenditure - Whether penalty under section 271(1)(c) was sustainable in respect of Accenture fees when those fees were held to be deductible. - HELD THAT: - Because the Tribunal held the Accenture fees to be allowable revenue expenditure under section 37(1), there remained no sustainable basis for the penalty. The penalty imposed by the Assessing Officer and upheld by the CIT(A) was therefore set aside.

Penalty deleted; assessee appeal allowed.

Final Conclusion: For A.Y.2003-04 the Tribunal partly allowed the Revenue's appeal and partly allowed the assessee's appeal. Key outcomes: depreciation claims on takeover assets, several deductions (including interest, Accenture professional fees and capital loss on sale of shares) and set-off of amalgamating company losses were allowed in favour of the assessee; provision for bad and doubtful debts was held to be required to be added back in computing book profits under section 115JB; the MODVAT/CENVAT valuation issue under section 145A was remitted to the Assessing Officer for fresh verification in light of prior directions; and the penalty under section 271(1)(c) in respect of the Accenture fees was deleted.

Collation of claims by Resolution Professional - no adjudicatory powers of Resolution Professional - financial debt versus operational debt - duties of Resolution Professional under Section 18 and Section 25 - verification of claims under Regulation 13 - admission of claim as operational creditor - disposal of application as infructuous

Financial debt versus operational debt - admission of claim as operational creditor - verification of claims under Regulation 13 - Whether the claimant's asserted claim was a financial debt or an operational debt and whether it has been admitted by the Resolution Professional. - HELD THAT: - The petitioner initially placed a claim as a Financial Creditor but during the hearing conceded that the claim is in fact an Operational Debt. The Tribunal recorded that the petitioner was given liberty to file the appropriate claim form with the RP and that the petitioner subsequently filed the claim as an Operational Creditor. The RP admitted the claim as an Operational Debt after examination of the documents including the audited balance sheets. Having been admitted by the RP as an Operational Creditor, the dispute about characterization as a financial debt stands resolved in favour of admission as an operational claim and there remains no live controversy in the instant application. The Tribunal therefore found nothing surviving in the petition and treated the application as infructuous. [Paras 33, 34, 35, 36, 39]

The claim is to be treated and has been admitted as an Operational Creditor claim by the Resolution Professional; the application is disposed of as infructuous.

Collation of claims by Resolution Professional - no adjudicatory powers of Resolution Professional - duties of Resolution Professional under Section 18 and Section 25 - disposal of application as infructuous - Whether any further adjudication in the present IA was necessary and what directions, if any, should be issued to the Resolution Professional concerning the ongoing CIRP. - HELD THAT: - The Tribunal reiterated the administrative role of the RP in receiving and collating claims and noted that, in the facts of this case, the RP has admitted the claim as an operational debt. Given the admission and the advanced stage of CIRP, the Tribunal held that no useful purpose would be served by further adjudication in this IA and warned against filing irrelevant or frivolous interlocutory applications intended to delay the CIRP. The Tribunal directed the RP to consider the admitted claim in accordance with the provisions of the Code and to expeditiously carry the CIRP forward to identify a viable resolution plan for the MSME corporate debtor. [Paras 36, 37, 38, 39]

No further relief in this IA; RP directed to consider the admitted claim in accordance with the Code and to complete the CIRP without delay; frivolous IAs filed to delay CIRP may be dismissed with costs.

Final Conclusion: The petitioner's claim has been recharacterised and admitted by the Resolution Professional as an operational creditor's claim; the IA is disposed of as infructuous and the RP is directed to proceed with the CIRP and consider the admitted claim in accordance with the Code, with a caution against filing irrelevant applications to delay the process.

Corporate Insolvency Resolution Process - Admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - Financial Debt - Default - Multiple Banking Arrangement - Deed of Assignment - Non-Performing Asset classification - Moratorium - Interim Resolution Professional appointment - Limitation and acknowledgement of debt

Admission under section 7 of the Insolvency and Bankruptcy Code, 2016 - Limitation and acknowledgement of debt - Company petition under section 7 of the IBC was complete and liable to be admitted - HELD THAT: - The Tribunal examined whether the application under section 7 was complete and whether pre conditions for admission under sub section (5)(a) were satisfied. The record establishes sanction and disbursement of loan/working capital facilities, persistent non payment by the Corporate Debtor, and the Petitioner's completion of prescribed formalities. The Corporate Debtor filed an additional affidavit admitting liability and default and withdrew its maintainability objections (IA No. 2297). The Petitioner also asserted the petition was within limitation and relied upon acknowledgements and repayment records to support limitation. On these bases the Adjudicating Authority found the application complete and fit for admission under section 7. [Paras 37, 38, 39, 42, 43]

Petition under section 7 is admitted and IA No. 2297 is rejected and disposed of.

Financial Debt - Default - Multiple Banking Arrangement - Deed of Assignment - Non-Performing Asset classification - Existence of a financial debt and occurrence of default by the Corporate Debtor were established - HELD THAT: - The Tribunal found that term loans and working capital facilities were granted under multiple banking arrangements, later restructured, and that accounts were classified as NPA for various member banks. Following mergers of associate banks into SBI and assignment of debt to the Financial Creditor by Deed of Assignment, records including sanction letters, notices accelerating facilities, demand notices and payment entries demonstrated the existence of debt and persistent non payment. The Corporate Debtor's admission in its affidavit corroborated default. Applying the statutory definitions, the Tribunal concluded the debt qualified as a "Financial Debt" and there was a "Default" for purposes of section 7 admission. [Paras 36, 40, 41]

The loan/working capital facilities constitute a Financial Debt and default has occurred; the two essentials for admission under section 7 are satisfied.

Interim Resolution Professional appointment - Moratorium - Corporate Insolvency Resolution Process - Consequential reliefs on admission were ordered, including appointment of IRP, directions for CIRP costs, and imposition of moratorium - HELD THAT: - Upon admitting the petition, the Tribunal appointed the named Insolvency Professional as Interim Resolution Professional to perform functions under the Code and directed the Operational Creditor to deposit initial CIRP costs. The Tribunal declared the statutory moratorium prohibiting institution or continuation of suits, execution, transfer or disposal of assets, and actions to enforce security interests, and directed compliance with public announcement and statutory steps for CIRP. Supply of essential goods/services was directed not to be interrupted and certain exemptions to section 14(1) were noted as applicable per Central Government notifications and regulators. [Paras 43]

IRP appointed; moratorium and ancillary directions for initiation and conduct of CIRP issued; registry to communicate order and update ROC data.

Final Conclusion: The Tribunal admitted the petition under section 7 of the IBC, having found that the Petitioner had a valid financial debt and that default had occurred; IA No. 2297 was rejected, the named IRP was appointed, initial CIRP costs were directed to be deposited, and moratorium and other statutory steps for initiation of CIRP were ordered.

Initiation of corporate insolvency resolution process (CIRP) - suspension of initiation of CIRP for defaults arising on or after 25th March, 2020 - application under Section 7 of the Insolvency and Bankruptcy Code - date of default versus date of initiation/filing - effect of Section 10A on filings during the notified suspension period

Effect of Section 10A on applications for initiation of CIRP - date of default versus initiation date - maintainability of petition filed under Section 7 - Whether the petition filed under Section 7 claiming a date of default of 31.10.2020 (filed on 30.12.2020) was barred by the suspension introduced by Section 10A and the related notifications. - HELD THAT: - The Bench examined the statutory bar engrafted by Section 10A which, by reference to defaults arising on or after 25.03.2020, suspended the filing of applications under Sections 7, 9 and 10 for the notified period. The Form 1 submitted by the Financial Creditor expressly recorded 31.10.2020 as the date of default, and the petition was filed on 30.12.2020 when the suspension remained in force by subsequent notifications. The Tribunal followed the reasoning in the Supreme Court decision in Ramesh Kymal vs. Simens Gamesa Renewal Power Private Limited , which distinguishes the date of initiation (filing) from the insolvency commencement date (admission) and holds that Section 10A bars initiation of proceedings in respect of defaults arising on or after 25.03.2020. Applying that principle, the Bench held that an application under Section 7 cannot be entertained where the claimed default occurred during the suspension period; an attempt to amend or set back the date of default by an additional affidavit was found untenable in view of the recorded date in Form 1. The Tribunal therefore concluded that the petition was not maintainable on account of the statutory bar under Section 10A and the relevant notifications. [Paras 31, 32, 33, 34]

The petition under Section 7 is barred by Section 10A as the claimed default occurred on 31.10.2020 (after 25.03.2020) and is therefore dismissed.

Final Conclusion: The application under Section 7 seeking initiation of CIRP against the corporate debtor is dismissed as not maintainable because the date of default claimed falls within the period for which initiation of CIRP was suspended by Section 10A and the subsequent government notifications.

Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Demand notice under Section 8 and pre-existing dispute under Section 5(6) of the Code - Proof of debt and existence of default - Effect of part payment as admission/estoppel - Appointment of Interim Resolution Professional and moratorium on proceedings

Proof of debt and existence of default - Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 - The Operational Creditor proved the debt and default and the Company Petition under Section 9 was liable to be admitted. - HELD THAT: - The Tribunal found that the Operational Creditor produced invoices, delivery documents, ledger entries and records of authentication on the Information Utility, and that the Corporate Debtor repeatedly failed to pay the claimed dues despite opportunities to reply. The Corporate Debtor's conduct - including failure to file a reply when directed, offering a post-dated cheque which was not realised, and making inconsistent statements - demonstrated liability. The Tribunal held that the ingredients for admission under Section 9 were satisfied and, accordingly, the petition was admitted and CIRP ordered with appointment of an Interim Resolution Professional and imposition of moratorium. [Paras 5, 6, 7, 12, 13]

Company Petition under Section 9 admitted; Interim Resolution Professional appointed and moratorium ordered.

Demand notice under Section 8 and pre-existing dispute under Section 5(6) of the Code - There was no pre-existing dispute raised within the statutory period in response to the demand notice; the Corporate Debtor's contention of a pre-existing dispute was rejected. - HELD THAT: - The Operational Creditor sent the demand notice by email and by physical delivery; no reply disputing the claim was furnished within the statutory period. The Corporate Debtor's later assertions about quality and non-receipt of the notice were found to be unsubstantiated and inconsistent with the record. For these reasons the Tribunal held that the plea of pre-existing dispute under the Code did not survive legal scrutiny and could not bar admission of the petition. [Paras 9, 10]

Contention of a pre-existing dispute rejected and the demand notice held effective.

Effect of part payment as admission/estoppel - The part payment made by the Corporate Debtor did not render the petition infructuous and was treated as an admission of liability. - HELD THAT: - The Tribunal observed that the Corporate Debtor made a part payment and entered into settlement negotiations but subsequently sought dismissal of the petition and refund of the part payment by way of an interlocutory application. The Bench regarded the part payment and the conduct surrounding it as evidence that the debt was owed and that the application to dismiss was a delay tactic. Consequently, the IA praying for dismissal and refund was rejected in view of admission of the petition. [Paras 7, 11]

Part payment treated as admission; IA seeking dismissal and refund rejected.

Final Conclusion: The Tribunal admitted the Company Petition filed under Section 9, held that the Operational Creditor had proved debt and default and that no pre-existing dispute barred the petition, treated the part payment as an admission of liability, appointed an Interim Resolution Professional and imposed the moratorium; the interlocutory application for dismissal and refund was rejected.

Withdrawal of company petition under Rule 11 of the NCLT Rules - exercise of inherent powers by NCLT under Rule 11 - settlement between parties before constitution of Committee of Creditors - permission to withdraw petition prior to constitution of Committee of Creditors - proceeding in rem under the Insolvency and Bankruptcy Code

Permission to withdraw petition prior to constitution of Committee of Creditors - exercise of inherent powers by NCLT under Rule 11 - proceeding in rem under the Insolvency and Bankruptcy Code - NCLT's power to entertain and allow an application for withdrawal of a company petition under Rule 11 before constitution of the Committee of Creditors. - HELD THAT: - The Court applied the principle laid down in Swiss Ribbons that where a Committee of Creditors is not yet constituted, a party may approach the NCLT directly and the Tribunal may, in exercise of its inherent powers under Rule 11, allow or disallow an application for withdrawal or settlement. This principle recognises that while the insolvency proceeding is in rem, the NCLT retains jurisdiction to consider withdrawal applications prior to constitution of the CoC, after hearing relevant parties and on the facts of each case. The decision in the present case follows that ratio and treats the question of withdrawal before constitution of CoC as one for the Tribunal to determine under Rule 11 in the exercise of its inherent powers. [Paras 3]

The Court affirmed that NCLT may, under Rule 11 and its inherent powers, entertain and decide an application for withdrawal of a company petition before constitution of the Committee of Creditors.

Withdrawal of company petition under Rule 11 of the NCLT Rules - settlement between parties before constitution of Committee of Creditors - Whether the application filed by respondent no.1 under Rule 11 for withdrawal of the company petition on the ground of settlement was justified and whether the NCLT's rejection of that application should be set aside. - HELD THAT: - Having regard to the facts and circumstances and after hearing counsel, the Court concluded that the applicant (respondent no.1) was justified in filing the Rule 11 application on the ground that the parties had reached a settlement prior to constitution of the CoC. The Supreme Court found that the NCLT erred in rejecting the withdrawal application and, applying the discretionary power recognised in Swiss Ribbons, set aside the NCLT order and allowed withdrawal of the company petition for which the Rule 11 application was filed. [Paras 4, 5, 6]

The NCLT order dated 06.08.2021 is set aside and the company petition is ordered to be withdrawn; no costs.

Final Conclusion: The appeal is allowed: the Supreme Court affirmed that the NCLT may permit withdrawal of a company petition under Rule 11 before the Committee of Creditors is constituted and, on the facts, set aside the NCLT's rejection and ordered withdrawal of the petition.

Anticipatory bail under Section 438 Cr.P.C. - Money laundering investigation under the PML Act - Interplay between PMLA and the remedy of anticipatory bail - Arrest under Section 19 of the PML Act - Provisional attachment under Section 5(1) of the PML Act - Risk of tampering with evidence and impediment to investigation - Gravity of economic offences and conspiracy affecting public/financial health

Anticipatory bail under Section 438 Cr.P.C. - Money laundering investigation under the PML Act - Risk of tampering with evidence and impediment to investigation - Entitlement of the petitioners to anticipatory bail under Section 438 Cr.P.C. in the course of ongoing PMLA investigation. - HELD THAT: - The Court examined the nature and gravity of the allegations that the petitioners, erstwhile directors of a company, were involved in large-scale bank loan fraud and subsequent money laundering through shell/dummy entities, which resulted in substantial alleged loss and gave rise to registration of the PMLA offence. Investigation was at a nascent and continuing stage, requiring examination of voluminous records and recording of a large number of witness statements. The Court recorded that the PMLA scheme permits arrest after formation of reason to believe under Section 19 and enables provisional attachment under Section 5(1), and that granting anticipatory bail at this stage would likely impede the respondent's ability to trace proceeds of crime, conduct interrogations and effect provisional attachment. The petitioners were also alleged to have not cooperated with investigation. The Court noted earlier dismissal of bail applications and considered authorities referred to by both sides, including a decision cited by petitioners and other High Court decisions relied upon by the respondent, but proceeded to assess the matter on the material on record and the stage of investigation. Having regard to the seriousness of the economic offences, the large scale and alleged conspiracy, the potential for tampering with evidence and hampering of the investigation, the Court concluded that this was not a fit case for grant of anticipatory bail under Section 438 Cr.P.C. [Paras 7, 8, 9]

Anticipatory bail under Section 438 Cr.P.C. is refused; the Criminal Petitions are dismissed.

Final Conclusion: Considering the grave allegations of large-scale money laundering, the pendency and stage of investigation, the risk of tampering with evidence and the possibility of frustrating provisional attachment under the PML Act, the petitions for anticipatory bail are dismissed.

Claim for refund of duty - mistaken payment not constituting duty - inapplicability of Section 11B to non-duty refunds - late payment charges not includible in taxable value - retrospective application of beneficial departmental clarification - limitation defence under refund provision - obligation to refund amounts paid without authority of law (Article 265)

Inapplicability of Section 11B to non-duty refunds - mistaken payment not constituting duty - retrospective application of beneficial departmental clarification - Whether Section 11B of the Central Excise Act, 1944 applies to a refund claim in respect of service tax voluntarily paid under a mistaken notion on late payment charges (LPC), and whether the departmental clarification exempting LPC applies to the period in question. - HELD THAT: - The Court held that Section 11B deals with claims for refund of 'duty' as defined under the Central Excise Rules and Act, and does not extend to amounts paid which do not fall within the statutory concept of 'duty'. Where an amount has been paid voluntarily under a mistaken belief and such amount is not a duty collectible under the Act, Section 11B is not the statutory code governing refund. The Board's circular of 03.08.2011 clarified that delayed payment charges collected by stock brokers are not includible in taxable value as they are penal in nature and not consideration for taxable services. That beneficial clarification is to be applied, and where the same principle has been applied for an overlapping period (October 2010 to March 2011), identical treatment must follow for April 2009 to September 2010. Reliance on precedent governing limitation under Section 11B or on authorities dealing with exemption notifications that are factually distinct was rejected as inapposite to the present situation of voluntary payment under a mistaken notion. The appellate authority's finding that procedural lapses (such as non-segregation in invoices) were inadequate to defeat the claim was accepted, and the Tribunal's sole reliance on limitation under Section 11B was held to be misplaced because Section 11B does not govern the refund claimed. [Paras 12, 13, 14, 15, 17]

Section 11B is not applicable to the refund claim for service tax voluntarily paid on LPC; the departmental clarification excluding LPC from taxable value applies and supports refund for the period April 2009 to September 2010.

Limitation defence under refund provision - obligation to refund amounts paid without authority of law (Article 265) - Whether the claim for refund for the period April 2009 to September 2010 is barred by limitation and whether the Revenue may retain amounts paid without legal authority. - HELD THAT: - The Court found that the Tribunal's dismissal of the claim solely on the ground of limitation under Section 11B was unsustainable because Section 11B does not govern refunds of amounts that are not 'duty'. Where an amount has been collected or paid without authority of law (i.e., not constituting duty), the department cannot lawfully retain it; accordingly the limitation regime under Section 11B cannot be invoked to defeat such a refund claim. The Court directed refund of the amount claimed for April 2009 to September 2010, clarifying that no interest shall be paid thereon. [Paras 14, 17, 18]

The limitation defence under Section 11B cannot be used to deny refund of amounts paid without authority of law; the Revenue must refund the claimed amount for April 2009 to September 2010 (without interest).

Final Conclusion: Appeal allowed; the substantial question answered in favour of the assessee. The Tribunal's order rejecting the refund for April 2009 to September 2010 set aside and the authorities directed to refund the service tax paid on late payment charges for that period within four weeks, without interest.

Valuation of taxable service received from outside India - actual consideration as value for service tax - service tax on TDS borne by the recipient - reverse charge mechanism - Rule 7 of Service Tax Valuation Rules, 2006 - value equal to actual consideration

Service tax on TDS borne by the recipient - actual consideration as value for service tax - valuation of taxable service received from outside India - Rule 7 of Service Tax Valuation Rules, 2006 - value equal to actual consideration - Levy of service tax on the TDS portion of royalty payments borne by the appellant - HELD THAT: - The Tribunal examined whether the TDS component, though paid by the appellant on behalf of the foreign service provider, forms part of the taxable value for services received from outside India. Applying the principle in Rule 7 of the Service Tax Valuation Rules, 2006, the value of a taxable service received from outside India is the actual consideration charged for the services. The Tribunal relied on its earlier decision (including Magarpatta Township Development and Construction Co. Ltd. and the appellant's own prior order) which held that where the invoice from the foreign provider shows the consideration and the recipient has discharged that invoiced amount, there is no material to treat any separately borne TDS as additional consideration for the service. On that basis the Tribunal concluded that the TDS amount borne by the appellant did not constitute consideration for services and therefore could not be subjected to service tax in addition to the amount already discharged under the invoice; the earlier findings were held to govern the present period.

Demand of service tax on the TDS portion borne by the appellant set aside; appeal allowed with consequential relief.

Final Conclusion: The appeal is allowed: the impugned demand of service tax on the TDS portion borne by the appellant for April 2007 to March 2008 is quashed, the order is set aside and consequential relief, if any, is granted.

Reckoning of limitation from date of communication/receipt of order - service of orders by registered post with acknowledgement - burden on department to prove actual delivery - statutory prescription of mode of service - remand for fresh adjudication on merits

Reckoning of limitation from date of communication/receipt of order - service of orders by registered post with acknowledgement - burden on department to prove actual delivery - statutory prescription of mode of service - Appeal before Commissioner (Appeals) was filed within the statutory period when limitation is reckoned from actual receipt of the order in terms of Section 35 read with Section 37C of the Central Excise Act. - HELD THAT: - Sections 35 and 37C mandate that the period of sixty days for filing an appeal runs from the date of communication of the decision to the aggrieved person and that service is to be effected by registered post with acknowledgement due. Dispatch alone is insufficient; the department must prove actual delivery. The Tribunal relied on authoritative precedents holding that proof of delivery is necessary and that statutory mode must be followed. On the facts the appellant did not receive the order until 03.07.2019 as evidenced by departmental correspondence and the appellant's efforts to obtain the order; there is no record produced by the department proving earlier receipt. Counting limitation from 03.07.2019, the appeal filed on 29.08.2019 fell within the sixty-day period. The Commissioner (Appeals) erred in presuming dispatch on 21.04.2017 and rejecting the appeal as time-barred; the absence of proof of delivery renders the department's calculation of limitation unsustainable. [Paras 8, 9, 10, 11, 12]

Finding of rejection on ground of limitation is set aside and appeal is held to have been filed within the statutory period.

Remand for fresh adjudication on merits - Whether the merits of the refund claim should be adjudicated afresh by the Commissioner (Appeals). - HELD THAT: - Although the Tribunal has set aside the limitation-based rejection, the original adjudicating authority and the Commissioner (Appeals) had not examined the merits of the refund claim. In view of the defect in communication and the Tribunal's conclusion on limitation, the matter requires consideration on merits by the Commissioner (Appeals) who shall decide the refund claim afresh. [Paras 12, 13]

Matter remanded to the Commissioner (Appeals) for fresh adjudication on merits; appeal allowed by way of remand.

Final Conclusion: The order rejecting the appeal as time-barred is set aside as limitation runs from actual receipt of the order; there being no proof of delivery by the department the appeal was within time. The matter is remanded to the Commissioner (Appeals) to decide the refund claim on merits.

Limitation for refund under Section 11B(5) - refund claim under Notification No. 41/2007-ST as amended - payment under protest - prospective operation of amending notification

Limitation for refund under Section 11B(5) - refund claim under Notification No. 41/2007-ST as amended - Whether the refund claims filed by the appellants for 2008-09 and 2009-10 are barred by limitation - HELD THAT: - The Tribunal examined the correspondence between the parties and the interim stay obtained by the Association from the Hon'ble Madras High Court, including the Association's circular advising members not to pay service tax while the matter was sub-judice. The adjudicating and appellate authorities held the claims barred by the limitation periods prescribed in Notification No. 41/2007-ST as amended, and noted the amending Notification No. 18/2009-ST as prospective. The Tribunal, however, found on the record a clear contemporaneous sequence of communications and the letter by the appellant (Annexure A-8) indicating payment made in response to repeated directions while the levy remained sub-judice. Viewing these facts together, the Tribunal concluded that the payment was made under protest and therefore the limitation under Section 11B(5) and the time prescriptions of the impugned notifications did not bar the refund claim. [Paras 11, 12]

Refund claims for 2008-09 and 2009-10 are not barred by limitation.

Payment under protest - prospective operation of amending notification - Whether the appellant deposited the disputed service tax under protest so as to render the limitation inapplicable - HELD THAT: - Although the Revenue relied on the view that the amending Notification No. 18/2009-ST had prospective effect, the Tribunal resolved the dispute on the factual and legal significance of payment under protest. On the facts-stay by the Madras High Court, repeated departmental correspondence demanding payment, and the appellant's letter asserting payment in response to such directions while the issue remained sub-judice-the Tribunal held that the payments were ipso facto payments under protest. Consequently, the question of prospective operation of the amending notification did not bar the appellant's entitlement to refund, and the authorities were directed to grant refund with interest. [Paras 11, 12]

Payments were made under protest; therefore limitation under the notifications and Section 11B(5) does not preclude refund.

Final Conclusion: The appeals are allowed; the adjudicating authority is directed to grant the refund claimed for 2008-09 and 2009-10, with interest, within thirty days of receipt of the order.

Recovery of erroneously refunded duties under Section 11A - effect of a subsequent decision declaring an earlier precedent per incuriam on inter partes finality - res judicata / finality of orders rendered in earlier lis - precedential value of a decision declared per incuriam

Recovery of erroneously refunded duties under Section 11A - precedential value of a decision declared per incuriam - Whether amounts refunded as Education Cess and Higher Education Cess pursuant to the law as declared by the Apex Court in SRD Nutrients (when that decision was binding) can be recovered as "erroneously refunded" under Section 11A after SRD Nutrients was later held to be per incuriam. - HELD THAT: - The Court held that refunds made to the petitioners were effected in accordance with the law prevailing at the time, namely the Apex Court decision in SRD Nutrients, and therefore cannot be treated as erroneous refunds for the purpose of recovery under Section 11A. A later judgment (Unicorn Industries) declaring SRD Nutrients to be per incuriam only removes its precedential value prospectively; it does not undo rights and liabilities already fixed between the Revenue and the parties when the earlier decision was the law. The Court relied on the principle that a decision which attained finality inter partes cannot be reopened in collateral proceedings merely because the earlier precedent has subsequently been held per incuriam. Applying those principles, the Court concluded the statutory condition of an "erroneous refund" under Section 11A was not satisfied here and the recovery notices were without jurisdiction. [Paras 34, 35]

Amounts refunded as Education Cess and Higher Education Cess pursuant to SRD Nutrients when it was binding are not recoverable as "erroneously refunded" under Section 11A merely because SRD Nutrients was later declared per incuriam.

Res judicata / finality of orders rendered in earlier lis - precedential value of a decision declared per incuriam - Whether the refunds and orders made in favour of the petitioners, having attained finality, can be reopened by the Revenue in collateral proceedings after the Apex Court declared the earlier precedent per incuriam. - HELD THAT: - The Court reiterated that a decision that has attained finality in the earlier lis binds the parties inter partes and cannot be reopened in subsequent collateral proceedings merely because the earlier decision has lost precedential value. The refunds were made pursuant to orders based on the law then in force and those orders were not revoked; the Revenue's attempt to recover the amounts on the basis of a later overruling/per incuriam finding does not disturb the finality between the parties. Consequently, the show cause notices seeking recovery were held to be without jurisdiction. [Paras 16, 33, 34]

The refunds and orders that had attained finality inter partes cannot be reopened by the Revenue in collateral proceedings even though the earlier precedent has been declared per incuriam; the show cause notices are without jurisdiction.

Final Conclusion: The writ appeals are dismissed; the High Court's order quashing the show cause notices and upholding the finality of refunds made pursuant to the law as it stood (SRD Nutrients) is confirmed, and the Revenue cannot recover the refunded Education Cess and Higher Education Cess under Section 11A on the ground that the earlier precedent was later declared per incuriam.

Eligibility of cenvat credit on capital goods and factory fittings (doors and windows) - interpretation of Rule 2(k) of Cenvat Credit Rules, 2004 in relation to inputs used in manufacture - cenvat credit on goods transport agency (GTA) services for intra-company/stock transfers - revenue neutrality in intra-group transfers as basis for input credit - Good Manufacturing Practices (GMP) as exigency for input classification

Eligibility of cenvat credit on capital goods and factory fittings (doors and windows) - Good Manufacturing Practices (GMP) as exigency for input classification - interpretation of Rule 2(k) of Cenvat Credit Rules, 2004 in relation to inputs used in manufacture - Cenvat credit on doors and windows used in the manufacturing premises is admissible as input/capital goods. - HELD THAT: - The doors and windows installed in the appellant's factory were held to be essential for maintaining the required dust free manufacturing environment for production of active pharmaceutical ingredients in accordance with Good Manufacturing Practices. The Court applied the principle that any input purchased by a manufacturer and used in the factory for manufacture of final products qualifies as an input for cenvat credit purposes, regardless of whether it forms part of the finished goods. In view of the admitted use of the doors and windows in the manufacturing process and the Board Circular relied upon, the credit availed on such fittings is allowable. [Paras 9]

Cenvat credit on the doors and windows is allowable and the demand in respect thereof is set aside.

Cenvat credit on goods transport agency (GTA) services for intra-company/stock transfers - revenue neutrality in intra-group transfers as basis for input credit - interpretation of Rule 2(k) of Cenvat Credit Rules, 2004 in relation to inputs used in manufacture - Cenvat credit is admissible on GTA/transportation charges incurred for transfer of finished goods to the appellant's sister unit where the transfer is revenue neutral and freight is borne by the transferring unit. - HELD THAT: - The appellant demonstrated that goods were transferred to its sister unit for captive consumption, that duty was paid on the value as per the valuation rule, and that the consignment documentation showed freight payable as zero, indicating the transferring unit bore the transport cost. The receiving unit is part of the same company and manufactures excisable goods which are cleared on payment of duty, making the transaction revenue neutral between the two units. Given that the transportation charges formed part of the cost of goods and were incurred by the appellant, the Tribunal held that such GTA service-credit is admissible under the Cenvat Credit Rules. [Paras 9]

Cenvat credit on GTA/transportation charges for intra-company transfers is allowable and the demand in respect thereof is set aside.

Final Conclusion: The appeal is allowed; the impugned order is modified by allowing cenvat credit on the doors and windows and on GTA/transportation charges for intra company transfers for the periods in dispute.

Write-off of inventory under Rule 3(5B) of Cenvat Credit Rules, 2004 - general provision for non/slow-moving inventory - reversal of cenvat credit - requirement of identification of specific asset for invocation of Rule 3(5B) - distinction between provision for doubtful debts and write-off

Write-off of inventory under Rule 3(5B) of Cenvat Credit Rules, 2004 - general provision for non/slow-moving inventory - requirement of identification of specific asset for invocation of Rule 3(5B) - Whether Rule 3(5B) is attracted by creation of a general provision for non/slow moving inventory in the books without any write off or specific asset wise provision. - HELD THAT: - The Tribunal held that Rule 3(5B) is attracted only where the value of an asset or inventory is written off, either fully or partially, or a specific provision to write off a particular asset/inventory is made in the books. A mere managerial or general provision for non/slow moving items, created as an overall accounting exercise and not attributable to any identified capital good or input, does not amount to a write off. The Revenue failed to identify any particular asset or inventory item for which a write off or specific provision had been made; hence the statutory condition for reversal under Rule 3(5B) was not satisfied. The Tribunal also noted the established accounting distinction (as recognised in precedent) between general provisions and actual write offs. [Paras 14]

Rule 3(5B) is not attracted by the appellant's general provision for non/slow moving inventory and no reversal under that rule was warranted.

Reversal of cenvat credit - general provision for non/slow-moving inventory - Whether the demand and show cause notice seeking reversal of cenvat credit (including demand based on alleged reversal of the provision) was valid. - HELD THAT: - The Tribunal found the show cause notice to be misconceived because the demand was premised on equating the general provision with a write off and even sought to treat reversal of the provision as triggering Rule 3(5B). Given that there was no change in the ledger value of inventory or capital goods and no specific write off was recorded, the computation and demand made by the Department were erroneous. The Tribunal observed that the case was covered by the assessee's earlier decision and that the demand, interest and penalty confirmed below could not be sustained. [Paras 14]

The demand and the impugned adjudication based on reversal of the provision are quashed.

Final Conclusion: The impugned order is set aside and the appeal is allowed; the demand for reversal of cenvat credit (and related interest/penalty) based on the appellant's general provision for non/slow moving inventory is quashed, and the appellant is entitled to consequential relief in accordance with law.

Input tax credit - entitlement to full credit for tax paid inputs used in manufacturing or processing - proviso to Section 19(2) limiting credit to excess of three percent for purposes of clause (v) - application of proviso confined to inter state sales under clause (v) and not to clause (ii) dealers/manufacturers

Input tax credit - proviso to Section 19(2) limiting credit to excess of three percent for purposes of clause (v) - entitlement to full credit for tax paid inputs used in manufacturing or processing - application of proviso confined to inter state sales under clause (v) and not to clause (ii) dealers/manufacturers - Whether the proviso (inserted by Act 28 of 2013) to Section 19(2) of the TNVAT Act, restricting input tax credit to 'in excess of three percent' for purposes of clause (v), can be applied to dealers/manufacturers falling under clause (ii) and thereby curtail their claim of full input tax credit. - HELD THAT: - The Court applied and followed the reasoning in the earlier decision in M/s. Everest Industries Limited (W.P.No.7969 of 2014 etc.) holding that the proviso introduced by amendment is applicable only to the circumstances envisaged by clause (v) - i.e., sales in the course of inter state trade or commerce - and not to other sub clauses of Section 19(2). Where manufacturers/dealers claim credit for inputs referred to in the First Schedule and tax has been paid on such inputs used in manufacturing or processing, they are entitled to the full input tax credit and the proviso limiting credit to the excess of three percent cannot be invoked to reduce that entitlement. The Court noted that the same principle was applied in an earlier similar order (Tvl. Jupiter Industries) and that the respondent did not dispute the applicability of that decision to the present petitions. Consequently, assessments and consequential orders which reversed or disallowed ITC by applying the proviso to clause (ii) were held to be incorrect and liable to be quashed. [Paras 10, 11, 12]

Proviso to Section 19(2) is not applicable to dealers/manufacturers under clause (ii); impugned orders reversing ITC by applying the proviso are quashed and the writ petitions are allowed.

Final Conclusion: The writ petitions are allowed; impugned assessment orders that reversed or curtailed input tax credit by applying the proviso to Section 19(2) to manufacturers/dealers are quashed. In W.P.(MD)No.215 of 2015, the amount conditionally deposited at admission may be returned or adjusted against future tax. No order as to costs.

Mandatory pre-deposit of 75% under Section 19 of the MSME Act, 2006 - application under Section 34 of the Arbitration & Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006 - discretion to allow pre-deposit to be made in instalments - interim deposit arrangement not to be treated as precedent

Mandatory pre-deposit of 75% under Section 19 of the MSME Act, 2006 - discretion to allow pre-deposit to be made in instalments - application under Section 34 of the Arbitration & Conciliation Act, 1996 read with Section 19 of the MSME Act, 2006 - Whether an appellate court has any discretion to deviate from the requirement of depositing 75% of the awarded amount as a pre-deposit when entertaining an application under Section 34 of the Arbitration & Conciliation Act read with Section 19 of the MSME Act, 2006. - HELD THAT: - The Court held that the requirement to deposit 75% of the amount in terms of the award as a pre-deposit before entertaining an application under Section 34 is mandatory. This conclusion is based on the plain language, object and purpose of Section 19 of the MSME Act, 2006 and consistent judicial exposition in Goodyear India Limited v. Norton Intech Rubbers Private Limited. However, the expression "in the manner directed by such court" in Section 19 confers limited discretion on the court to permit the pre-deposit to be made in instalments where satisfaction of the appellate court that immediate lump-sum deposit would cause undue hardship is shown. The High Court and the learned Additional District Judge were therefore justified in directing the pre-deposit; meanwhile the Supreme Court continued an earlier interim arrangement directing a specified deposit to be made and held that such interim arrangement would operate until final disposal but shall not be treated as precedent. [Paras 9, 11, 12]

Requirement of 75% pre-deposit under Section 19 is mandatory, subject only to limited judicial discretion to allow payment by instalments; the interim deposit order previously made continues until final disposal and is not to be treated as precedent.

Final Conclusion: Appeal dismissed on the question of law: deposit of 75% of the award as pre-deposit under Section 19 MSME Act, 2006 is mandatory, with courts permitted to allow instalments in appropriate cases; the Supreme Court continued the interim deposit arrangement made earlier until final disposal and declined to treat that arrangement as a precedent.