TaxTMI Updates e-Newsletter
Oct 22,2019

Composite supply of works contract - original works - immovable property - Government Entity / Governmental Authority - predominant use for commerce, industry or any other business or profession - rate differential 12% v. 18% for works contract services - definition of business under the CGST Act

Composite supply of works contract - original works - immovable property - Whether the contracts entered into by the applicant constitute works contract services / original works falling under Heading 9954 (i.e., are composite works contracts resulting in immovable property). - HELD THAT: - The Authority found that the contracts are turnkey projects comprising supply of goods and services including site survey, supply, inland transportation, insurance, unloading, handling, storage, erection, testing and commissioning. Such contracts involve transfer of property in goods in execution of the contract and result in installation/erection of plant, equipment and civil structures that are permanently located and not capable of being shifted without dismantling. Applying the tests of permanency and annexation as discussed in the jurisprudence cited, and the definition of "original works" in the Rate Notification context, the contracts qualify as works contract services and as original works covered under Heading 9954.

The contracts are composite works contract services and constitute original works/immovable property covered by Heading 9954.

Government Entity / Governmental Authority - works contract procured in relation to work entrusted by Government - Whether the electricity distribution companies (BESCOM, MESCOM, HESCOM) are Government Entities for the purposes of the Rate Notification. - HELD THAT: - On the material before it (shareholding details, statutory scheme under the Karnataka Electricity Reforms Act and the Electricity Act, functions entrusted by statute and evidence of government control), the Authority concluded that the distribution companies are established by the State with 90% or more participation and carry out functions entrusted by the Government. The entities therefore fall within the definition of "Government Entity/Governmental Authority" as envisaged in the Rate Notification.

BESCOM, MESCOM and HESCOM are Government Entities within the meaning of the Rate Notification.

Predominant use for commerce, industry or any other business or profession - definition of business under the CGST Act - rate differential 12% v. 18% for works contract services - Whether the works executed for these Government Entities are meant predominantly for use other than for commerce, industry or any other business or profession thereby attracting the concessional 12% rate under entry 3(vi)(a), or whether they are predominantly for business use and therefore taxable at 18% under entry 3(ii). - HELD THAT: - Although the contracts qualify as works contracts supplied to Government Entities and are original works, the Authority examined the fourth condition of entry 3(vi)(a) - predominant use. The Authority observed that the distribution companies' predominant activity is supply of electricity (a supply of goods for consideration), falling within the expansive statutory definition of "business" in section 2(17) of the CGST Act. The works executed by the applicant are for enabling the distribution companies' core commercial activity (supply of electricity) and are used predominantly for that activity. The Explanation in the Notification excluding activities undertaken by Government when engaged as public authorities was held inapplicable because the activities of distribution companies constitute business/commerce as defined under the Act. Consequently the essential condition of predominant non-business use was not satisfied.

The works are predominantly for use in commerce/business (supply of electricity); entry 3(vi)(a)'s condition of predominant non commercial use is not satisfied and the concessional 12% rate does not apply.

Final Conclusion: The Authority ruled that, while the contracts are works contract/original works and the electricity distribution companies are Government Entities, the works are predominantly for use in commerce/business and therefore do not fall under entry 3(vi)(a) of the Rate Notification; accordingly the services are not eligible for the reduced 12% rate and are taxable at the standard works contract rate of 18%.

Renting of immovable property - supply of services by way of storage or warehousing - classification under SAC 997212 - applicability of GST on renting of commercial space - exemption for storage/warehousing of rice and agricultural produce

Renting of immovable property - classification under SAC 997212 - applicability of GST on renting of commercial space - Whether the services provided by Central Warehousing Corporation to the applicant constitute renting of immovable property (taxable) or storage/warehousing services (potentially exempt) and the consequent tax treatment. - HELD THAT: - The Advance Ruling Authority examined the terms of the agreement between the applicant and Central Warehousing Corporation and found features characteristic of renting of immovable property: exclusive use of a dedicated area for a fixed period, charging on gross area basis, the applicant bearing costs of utilities and installing separate sub-meter, the applicant arranging insurance and being entitled to maintain own stock accounting and security, the obligation to restore premises on termination, and express allocation of tax liability to the applicant. These contractual terms indicate transfer of possession and control of a specified immovable space on a dedicated basis rather than provision of mere storage services. On this basis the Authority held that the service falls within the category of renting of commercial space, classified under SAC 997212, and is taxable under the applicable notifications at the rate specified for renting of commercial property. [Paras 5, 6]

The service is renting of commercial space (not storage service of goods) and is covered by SAC 997212, liable to GST as applicable to renting of commercial property.

Final Conclusion: The Advance Ruling holds that the services rendered by Central Warehousing Corporation to the applicant are renting of immovable commercial space (SAC 997212) and are taxable under the GST notifications applicable to renting of commercial property; they are not to be treated as exempt storage/warehousing services for the applicant's commodities.

Classification of goods by tariff heading - Functional character test for tariff classification - Parts of air conditioning machines - scope of Heading 8415 - Air circulators and fans - scope of Heading 8414 - Section Note 2(a) to Section XVI - classification of parts presented separately - Residual tariff entry versus specific heading

Classification of goods by tariff heading - Parts of air conditioning machines - scope of Heading 8415 - Functional character test for tariff classification - Air Handling Units supplied by the applicant are classifiable as parts of air conditioning machines under HSN 8415 90 00. - HELD THAT: - The Air Handling Unit (AHU) supplied by the applicant contains a heat exchanger/temperature control mechanism together with fan/blower and sections such as mixing, filters, heat exchanger, heater and fan. Heading 8415 covers air conditioning machines comprising a motor driven fan and elements for changing temperature and humidity; parts of such machines are covered by 8415 90 00. Given the AHU's integral elements for changing temperature and its use in central air conditioning systems, it falls squarely within the scope of Heading 8415 rather than the residual entry in Heading 8414. The applicant's contention that the components form part of a system and therefore must be classified under their independent headings (relying on Note 2(a) to Section XVI and related authorities) does not alter the fact that the AHU, by its construction and function, is a part of an air conditioning machine as described in Heading 8415; consequently it cannot be placed under the general residual entry 8414 80 90. [Paras 7]

AHU classified under HSN 8415 90 00.

Classification of goods by tariff heading - Air circulators and fans - scope of Heading 8414 - Functional character test for tariff classification - Ventilation Units supplied by the applicant are classifiable as air circulators under HSN 8414 59 10. - HELD THAT: - The Ventilation Unit lacks temperature control elements and consists principally of a pre filter, fan section and controls serving to exhaust and circulate air. Heading 8414 includes fans and specifically lists air circulators under 8414 59 10. Because the Ventilation Unit's dominant function is to circulate/exhaust air and it does not perform temperature or humidity modification, it is classifiable as an air circulator under Heading 8414 rather than as a part of air conditioning machines under Heading 8415. [Paras 7]

Ventilation Unit classified under HSN 8414 59 10.

Final Conclusion: Advance ruling: the Air Handling Units supplied by the applicant are classifiable under HSN 8415 90 00 (parts of air conditioning machines), and the Ventilation Units are classifiable under HSN 8414 59 10 (air circulators/fans).

Value of supply under section 15 of the CGST Act - Inclusion of reimbursed costs and allied amounts in transaction value - Definition of "intermediary" under the IGST Act - Principal-to-principal supply - Distinction between facilitation services and supply of transport services

Value of supply under section 15 of the CGST Act - Inclusion of reimbursed costs and allied amounts in transaction value - Distinction between facilitation services and supply of transport services - Whether the value of bus passes distributed by the applicant is to be included in the value of the facilitation charges for the applicant's supply. - HELD THAT: - The Authority examined the contractual arrangement and the billing practice and found that BMTC provides chartered bus services to the applicant and charges consideration in the form of bus passes; the applicant is the recipient of BMTC's services and pays for those passes (5.2, 5.3). The applicant issues bills to companies at ITPB and recovers both the pass amount and a separate facilitation charge, but treats only the facilitation charge as taxable consideration. Applying the test under section 15, the Authority held that the total amount charged to the service recipient - being the monthly passes issued plus the facilitation charges and any other amounts included under section 15 - constitutes the value of the services supplied by the applicant (5.7, 6). Consequently, the reimbursed cost of bus passes cannot be excluded from the transaction value when the applicant supplies the service to the commuters/companies; such amounts form part of the value of supply. [Paras 5, 6]

The value of the bus passes distributed by the applicant and the facilitation charges are to be included in the value of services provided by the applicant.

Definition of "intermediary" under the IGST Act - Principal-to-principal supply - Distinction between facilitation services and supply of transport services - Whether the applicant's supply is merely a facilitation/intermediary service arranging supply between BMTC and the commuters. - HELD THAT: - The Authority analysed the agreement terms and contractual obligations and observed that BMTC supplies services to the applicant (including default and compensation clauses) and invoices BMTC's supply to the applicant (5.4, 5.5). The applicant, in turn, supplies services to the commuters/companies and is required to arrange alternate transport if BMTC ceases service (5.6). On this basis the Authority concluded that the parties stand on a principal-to-principal footing: the applicant is not acting as an agent or intermediary arranging BMTC's supply on behalf of the commuters but is itself the recipient of BMTC's services and the supplier to its clients. Reliance on the definition of "intermediary" under the IGST Act led to the conclusion that intermediary treatment is not applicable where the applicant supplies services on its own account rather than merely facilitating a supply between two other parties (5.8, 5.9, 5.10). [Paras 5]

The supply in the hands of the applicant cannot be classified merely as an intermediary/facilitation supply between BMTC and the commuters; the applicant is supplying services on its own account.

Final Conclusion: The Authority ruled that the cost of bus passes distributed by the applicant must be included in the transaction value of the applicant's supply (monthly passes plus facilitation charges), and that the applicant's supply is not merely an intermediary facilitation between BMTC and commuters but a supply made by the applicant on its own account.

Advance Ruling application - Application not to be admitted where identical question is pending or decided - Rejection of application under Section 98(2) proviso - Admissibility of advance ruling

Advance Ruling application - Application not to be admitted where identical question is pending or decided - Rejection of application under Section 98(2) proviso - Whether the advance ruling application should be admitted or must be rejected because the same question had already been the subject-matter of an earlier advance ruling application before another Authority. - HELD THAT: - The Authority examined the application and the records and noted that the applicant had earlier filed an application before the Gujarat Authority for Advance Ruling on the identical question concerning classification of the product "Fanta Fruity Orange". Section 98(2) and its proviso bar admission of an application where the question raised is already pending or decided in any proceedings in the case of the applicant under the Act. Having found that the same question had already been decided by the Gujarat Authority for Advance Ruling, the Authority concluded that the present application could not be admitted and therefore had to be rejected. The Authority recorded that an opportunity of hearing would be required before rejection as contemplated by the provisos, and proceeded to reject the application for the specified reason. [Paras 8, 9]

Application rejected as not admissible under the proviso to Section 98(2) because the identical question had already been decided by the Gujarat Authority for Advance Ruling.

Final Conclusion: The Advance Ruling Authority rejected the applicant's application for advance ruling on admissibility grounds under Section 98(2) since the identical question had previously been decided by the Gujarat Authority for Advance Ruling.

Exemption under Notification No.12/2017 entry 3 - exemption under Notification No.12/2017 entry 3A - composite supply - works contract - recipient-based exemption - functions entrusted to Municipality/Panchayat under Articles 243W/243G

Exemption under Notification No.12/2017 entry 3 - exemption under Notification No.12/2017 entry 3A - recipient-based exemption - Whether supplies by subcontractors to the applicant for landscape development and garden maintenance are exempt from GST under the entries in Notification No.12/2017. - HELD THAT: - The Authority found that the applicant's activities fall into two categories: pure services (potentially covered by entry 3) and composite supplies/works contracts involving goods (potentially covered by entry 3A). Entry 3A's exemption is subject to conditions including that goods do not exceed 25% of the composite supply, the recipient must be the Central/State/Union Territory/local authority or specified Government Entity, and the activity must relate to functions entrusted to Municipalities/Panchayats under Articles 243W/243G. Even assuming the goods-value condition and that the activity (maintenance of parks) is a municipal function, the exemption applies only where the supply is made to the class of recipients enumerated in the notification. Supplies by the subcontractor are made to the applicant (an Association of Persons and not itself a specified government recipient). Therefore the subcontractor's supply to the applicant does not satisfy the recipient-based condition of either entry 3 or entry 3A and is not exempt under Notification No.12/2017. [Paras 4, 5]

Supplies by subcontractors to the applicant for execution of the subcontracted landscape/maintenance work are not exempt under entry 3 or entry 3A of Notification No.12/2017 and are thus taxable.

Final Conclusion: The Authority ruled that subcontracted supplies for landscape development and garden maintenance provided to the applicant are not covered by the cited exemptions because the exemptions are recipient-specific and the applicant is not within the class of government recipients specified in the notification.

Classification of goods - Interpretation of HSN heading 0604 - Classification under entry no.198A - grass, leaf or reed or fibre products - Exclusion from entry relating to goods suitable for bouquets or ornamental purposes - Applicability of GST rate 2.5% to leaf products

Classification of goods - Interpretation of HSN heading 0604 - Classification under entry no.198A - grass, leaf or reed or fibre products - Applicability of GST rate 2.5% to leaf products - Areca leaf plates made out of the pericarnium of areca leaves are classifiable as leaf products and taxable at 2.5% under the CGST Act and the Karnataka GST Act. - HELD THAT: - The Authority examined the composition and manufacture of the commodity and found the plates are produced by heat-pressing the pericarnium (sheath) of areca leaves (5.1-5.2). HSN 0604 describes foliage and plant parts suitable for bouquets or ornamental purposes; the plates are not goods of that kind and therefore do not fall under HSN 0604 (5.3). The entry identified as Khali Dona and goods made of certain leaves (entry 114B) was considered and the areca plates were found not to fall within that entry (5.4). The Authority then considered entry no.198A of the Notification (Schedule I) which covers "Grass, leaf or reed or fibre products, including mats, pouches, wallets" (5.5). Given that the plates are manufactured from a part of the areca plant and are therefore a leaf product, the Authority held they are covered by entry no.198A and attract the 2.5% rate under the CGST Act and similarly under the Karnataka GST Act (5.5). [Paras 5, 6]

Areca leaf plates made from the pericarnium are taxable as leaf products at 2.5% under both the CGST Act and the Karnataka GST Act with effect from 22.09.2017.

Final Conclusion: The Advance Ruling holds that Areca Palm Leaf Plates manufactured from the pericarnium are classifiable as leaf products under entry no.198A and attract GST at 2.5% under both Central and Karnataka GST law, effective from 22.09.2017.

Services in the course of employment (Schedule III clause 1) - reimbursement of expenses not constituting consideration for supply - definition of consideration under Section 2(31) - reverse charge under Section 9(3) of the CGST Act - services supplied by a director to the company liable under Notification No. 13/2017 (Entry 6)

Services in the course of employment (Schedule III clause 1) - reimbursement of expenses not constituting consideration for supply - definition of consideration under Section 2(31) - Whether expenses incurred by staff on behalf of the company and reimbursed periodically are liable to tax - HELD THAT: - The Authority found that employees incur expenses on behalf of the applicant in the course of employment and are subsequently reimbursed. Services rendered by an employee to his employer fall within clause (1) of Schedule III and are neither a supply of goods nor a supply of services. The statutory definition of consideration treats payments made by an agent on behalf of a principal as payments by the principal; accordingly amounts paid by employees to third-party suppliers for services received on behalf of the company are to be regarded as applicant's expenses paid through employees. Consequently reimbursement by the applicant to its employees does not constitute consideration for a taxable supply by the employee and is not liable to GST under the Act, subject to the qualification that tax, if any, is on the underlying supply availed of in fact by the company irrespective of whether initially paid by employee or applicant. [Paras 4]

Reimbursements to employees of expenses incurred in the course of employment are not liable to GST as a supply by the employee to the employer.

Reverse charge under Section 9(3) of the CGST Act - services supplied by a director to the company liable under Notification No. 13/2017 (Entry 6) - Whether reverse charge is applicable on remuneration paid to Directors - HELD THAT: - Directors are not employees of the company; services provided by directors to the company do not fall within clause (1) of Schedule III. The director is the supplier and the company is the recipient. Notification No. 13/2017 issued under Section 9(3) specifically covers services supplied by a director to the company (Entry 6), thereby attracting whole of central tax under reverse charge payable by the recipient. On these facts, remuneration paid to directors for services rendered to the applicant company is exigible to tax on reverse charge basis in the hands of the company. [Paras 5]

Remuneration paid to the Director is liable to GST under reverse charge mechanism in the hands of the applicant company.

Final Conclusion: The Authority ruled that (i) periodic reimbursement by the company to its employees of expenses incurred by them in the course of employment is not a taxable supply by the employees and therefore not liable to GST, and (ii) remuneration paid to directors for services rendered to the company is taxable under the reverse charge mechanism as covered by Notification No. 13/2017 (Entry 6).

Discount excluded from value of supply under Section 15(3) - post supply credit note treated as incentive, not a taxable supply - no adjustment of GST where credit note does not alter taxable value - input tax credit reversal requirement for post supply discount - no obligation to issue tax invoice where transaction is not a supply

Post supply credit note treated as incentive, not a taxable supply - no adjustment of GST where credit note does not alter taxable value - Volume discount received on purchases in the form of a credit note without adjustment of GST is not liable to GST. - HELD THAT: - The Authority found that the authorised supplier issues tax invoices on sale and the applicant claimed input tax credit thereon. Where the authorised supplier later issues a credit note as an incentive for purchases exceeding targets but makes no adjustment to the price of goods already sold and no adjustment of GST in that credit note, the payment is an incentive and a financial/accounting adjustment rather than a fresh supply. Because the credit note does not affect the taxable value of earlier supplies and no GST adjustment is recorded, the amount received does not give rise to a liability to charge GST. [Paras 4]

No GST is payable on volume discount received on purchases when given by credit note without any adjustment of GST.

Post supply credit note treated as incentive, not a taxable supply - no adjustment of GST where credit note does not alter taxable value - Volume discount received on retail (sales) in the form of a credit note without adjustment of GST is not liable to GST. - HELD THAT: - The Authority observed that where the applicant exceeds sales targets and receives an incentive in the form of a credit note from the authorised supplier, that credit note does not alter the sale price of goods nor does it record any tax adjustment. The amount is therefore an incentive/discount provided by the supplier and not a consideration for a supply by the applicant; consequently, it does not attract GST. [Paras 4]

No GST is payable on volume discount received on retail (sales) when given by credit note without any adjustment of GST.

Discount excluded from value of supply under Section 15(3) - input tax credit reversal requirement for post supply discount - no obligation to issue tax invoice where transaction is not a supply - The applicant is not required to issue a tax invoice for the credit note discount since the amount is a discount and not a supply by the applicant. - HELD THAT: - Applying the principle in Section 15(3), the Authority noted that discounts do not form part of the value of supply if they fall within the statutory exceptions. The credit note in this case is a post supply incentive but the conditions of Section 15(3)(b) are not satisfied because the discount was not linked to reversal of input tax credit by the recipient. The credit note therefore functions as a financial discount/incentive and not as consideration for a supply by the applicant; accordingly, there is no requirement to issue a tax invoice for such amounts. [Paras 4]

No tax invoice need be issued by the applicant for the credit note volume discount since it is a discount/incentive and not a taxable supply.

Final Conclusion: The Authority ruled that volume discounts received (both on purchases and on retail sales) by the applicant in the form of credit notes which do not adjust the GST are not liable to GST, and the applicant is not required to issue tax invoices for such credit note discounts.

Composite supply with principal supply being supply of timber - appropriation of goods by purchaser (transfer of cut timber logs) - deeming of composite supply as supply of principal supply under section 8 of the CGST Act - classification of timber under HSN 4403 - applicability of rate entry no. 134 of Schedule III of Notification No.1/2017 - Central Tax (Rate) - advance ruling on rate of GST

Composite supply with principal supply being supply of timber - appropriation of goods by purchaser (transfer of cut timber logs) - deeming of composite supply as supply of principal supply under section 8 of the CGST Act - classification of timber under HSN 4403 - applicability of rate entry no. 134 of Schedule III of Notification No.1/2017 - Central Tax (Rate) - Whether the transaction of cutting and removing standing live trees under contract is taxable and at what rate. - HELD THAT: - The Forest Department awarded contracts by which areas were allotted to the applicant to cut and remove standing live trees; the Department sold the standing trees to the applicant but directed the applicant to cut and remove them. The applicant undertakes the cutting and ultimately appropriates the timber logs and removes the cut logs from the allotted area. The supply is therefore a composite contract comprising cutting to obtain logs and transfer of the timber logs, with the transfer of timber logs being the principal supply. Applying the deeming rule for composite supplies in section 8 of the CGST Act, the entire transaction is to be treated as supply of the principal supply, namely timber classified under HSN 4403. That classification falls under entry no. 134 of Schedule III of Notification No.1/2017 - Central Tax (Rate), making the supply chargeable to tax at the rate specified therein. The same characterisation and rate apply under the KGST Act.

The transaction is a composite supply whose principal supply is timber (HSN 4403) and is taxable at 9% under the specified entry; the same rate applies under the KGST Act.

Final Conclusion: The Authority ruled that the applicant's contract for cutting and removing standing live trees constitutes a composite supply whose principal supply is timber (HSN 4403) and is taxable at 9% under entry no. 134 of Schedule III of Notification No.1/2017 - Central Tax (Rate); the same rate applies under the Karnataka GST Act.

Concessional rate of GST - entry number 252 of Schedule I to the Notification No.01/2017-Central Tax (Rate) - parts of goods falling under tariff heading 8902 - classification under Chapter 89 - use as parts only when meant for those goods

Concessional rate of GST - entry number 252 of Schedule I to the Notification No.01/2017-Central Tax (Rate) - parts of goods falling under tariff heading 8902 - Applicability of the concessional 5% GST rate to marine propeller, rudder set, stern tube set, propeller shaft and MS couplings manufactured by the applicant. - HELD THAT: - The Authority examined whether the products manufactured by the applicant qualify as parts of goods of headings 8901, 8902, 8904, 8905, 8906 and 8907 so as to attract the concessional rate under entry 252 of Schedule I to Notification No.01/2017-Central Tax (Rate). Chapter 89 and tariff heading 8902 cover ships, boats and floating structures and expressly include fishing vessels such as trawlers designed for commercial fishing. The Authority noted the applicant manufactures marine propellers and accessories intended for use in the fishing sector but has not produced evidence of exclusive use on vessels of heading 8902. The concessional 5% rate under entry 252 applies to parts of the specified headings irrespective of their classification only when those parts are actually meant for and form parts of goods falling under those headings. Applying this principle, the Authority held that the concessional rate is available to the applicant's products only if they are used as parts of goods falling under 8901, 8902, 8904, 8905, 8906 or 8907. [Paras 5, 6]

The products are eligible for the concessional 5% GST under entry 252 of Schedule I to Notification No.01/2017-Central Tax (Rate) provided they form parts of goods falling under headings 8901, 8902, 8904, 8905, 8906 or 8907.

Final Conclusion: Advance ruling: the specified marine parts will attract the concessional 5% GST rate under entry 252 of Schedule I to Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 only when they are used as parts of goods falling under headings 8901, 8902, 8904, 8905, 8906 or 8907.

Passenger Transport Services - Rental services of transport vehicles - Motorcab definition - Entry 8(vii) residual entry - SAC 9964 - SAC 9966

Passenger Transport Services - SAC 9964 - SAC 9966 - Motorcab definition - Entry 8(vii) residual entry - Classification of the applicant's composite operation and maintenance of employee commutation vehicles and transportation services as either passenger transport service under SAC 9964 (entry 8(vii)) or rental service of transport vehicles under SAC 9966. - HELD THAT: - The Authority examined whether the service fits within entry 8(ii)/(vi) or the explanatory notes to SAC 9964 and SAC 9966. The Motor Vehicles Act definition of "motorcab" (carrying not more than six passengers excluding driver) excludes buses used by the applicant; hence entries referring to motorcabs and contract/stage carriage do not apply. The explanatory notes to SAC 9964 (notably classifications covering local land transport by bus and passenger transportation over predetermined routes for a specific segment such as enterprises) correspond to the applicant's operation of buses on set routes and schedules for a single corporate client. Conversely, SAC 9966 (rental services) contemplates a renter who defines operation, schedules and routes; in the present case the client, not the applicant, determines schedules and routes. Applying these determinative features, the Authority concluded the applicant's service is not a rental of transport vehicles but is covered by the residual entry under entry 8(vii) to Notification No. 11/2017 and falls within passenger transport services under SAC 9964. [Paras 8, 9]

The services are passenger transport services under Heading 9964, covered by entry 8(vii) of Notification No. 11/2017, and not rental services under SAC 9966.

Final Conclusion: The Authority ruled that the applicant's services to the corporate client constitute passenger transport services under SAC 9964 (entry 8(vii)) and are taxable at 9% under the CGST Act and 9% under the KGST Act.

Supply of services - intermediary - classification under HSN 9983.11 - liability to register - applicable tax rate for intra State and inter State supplies - time of supply under sub section (2) of section 13 - value of supply to include reimbursements

Supply of services - Services rendered by the applicant to M/s H J Family of Companies constitute a supply of services. - HELD THAT: - The Authority examined the contractual documents, nature of activities, manner of remuneration and the applicant's own tax filings. Although the applicant described his role as an "Independent Regional Sales Manager", the returns filed by him treated the receipts as business income and there is no conclusive evidence of an employer-employee relationship. The applicant facilitates presentations, solicits orders on behalf of the Company and does not supply goods on his own account; on these facts the Authority concluded the applicant is a supplier who arranges or facilitates the supply and therefore his activities result in a taxable supply of services under the Act. [Paras 9]

The services provided by the applicant result in a supply of services.

Intermediary - classification under HSN 9983.11 - The services rendered by the applicant are classifiable as intermediary/management marketing services under HSN 9983.11. - HELD THAT: - Applying the definition of "intermediary" in the IGST Act and the deeming provision that definitions in the IGST Act apply for terms not defined in the CGST Act, the applicant's role-arranging and facilitating supply of the Company's goods without supplying on his own account-falls within the definition of an intermediary. On that basis the Authority classified the services as other professional, technical and business services with HSN 9983.11. [Paras 9]

The services are classifiable under HSN 9983.11 as intermediary/other professional, technical and business services.

Liability to register - The applicant is required to obtain registration under the CGST Act. - HELD THAT: - Having held that the applicant is supplying taxable services and noting that the consideration received exceeds the prescribed threshold, the Authority concluded the applicant falls within the ambit of persons liable to be registered under the Act. [Paras 9]

The applicant is required to be registered under the CGST Act, 2017.

Applicable tax rate for intra State and inter State supplies - Tax rates applicable to the applicant's services are 9% CGST and 9% KGST for intra State supplies and 18% IGST for inter State supplies. - HELD THAT: - Relying on the Notification specifying rates for Heading 9983 (other professional, technical and business services), the Authority applied clause (ii) of the entry dealing with services other than advertising space and held that intra State transactions attract 9% under CGST and 9% under KGST (as per state notification), whereas inter State transactions attract 18% under the IGST rate notification. [Paras 9]

Intra State supply: CGST 9% and KGST 9%; Inter State supply: IGST 18%.

Time of supply under sub section (2) of section 13 - value of supply to include reimbursements - Time of supply is to be determined under sub section (2) of section 13 of the CGST Act; value of supply includes remuneration received and amounts reimbursed by the recipient. - HELD THAT: - The Authority directed that the time of supply be ascertained in accordance with the statutory provision (sub section (2) of section 13). For valuation, it held that the consideration comprises both the amounts received by the applicant for the services and reimbursements/expenses borne by the recipient (company) on behalf of the applicant, which form part of the value of supply. [Paras 9]

Time of supply to be determined under section 13(2); value includes consideration received and reimbursed expenses.

Final Conclusion: The Advance Ruling holds that the applicant's activities amount to a taxable supply of services classifiable as intermediary/other professional, technical and business services (HSN 9983.11); the applicant must obtain GST registration; applicable tax is 9% CGST and 9% KGST for intra State supplies and 18% IGST for inter State supplies; time of supply is to be determined under section 13(2) and the value includes reimbursements.

Definition of "intermediary" under section 2(13) of the IGST Act - arrange or facilitate the supply of goods or services - exception for supply on one's own account - classification as support services - SAC 998599 - export of services - place of supply - advance ruling jurisdiction - place of supply outside authority's competence

Definition of "intermediary" under section 2(13) of the IGST Act - arrange or facilitate the supply of goods or services - exception for supply on one's own account - Whether the services supplied by the applicant to McAfee Singapore are in the nature of services supplied by an intermediary - HELD THAT: - The Authority examined section 2(13) which defines "intermediary" as a broker, an agent or any other person who arranges or facilitates the supply of goods or services between two or more persons, but excludes a person who supplies such goods or services on his own account. The decisive inquiry is whether the supplier's activity amounts to arranging or facilitating the supply of goods or services. The agreements (Marketing Services Agreement and Master Services Agreement) expressly record that the applicant shall "support and facilitate the selling, marketing and distribution of Products by Company and its affiliates" and undertake activities such as identifying potential customers, liaising and facilitating technical communication, assisting in demonstrations and keeping the Company informed of market developments. The Authority held that these functions fall within facilitating the supply of the Company's products and are therefore captured by the operative part of the definition. The applicant's contention that a principal-to-principal relationship or the basis of remuneration (cost-plus rather than commission) excludes it from being an intermediary was rejected because the definition does not condition intermediary status on the form of contractual relationship or the mode of consideration; instead it depends on whether arranging or facilitating of the supply is carried out. The exception for supplies made on the supplier's own account was found inapplicable since the applicant does not supply the Company's products on its own account; the applicant facilitates supplies of the Company's products.

The services supplied by the applicant to McAfee Singapore are in the nature of services supplied by an intermediary.

Classification as support services - SAC 998599 - applicable GST rate - Classification of the services and the applicable rate of tax if not treated as export of services - HELD THAT: - Having found the services to be intermediary in nature, the Authority referred to the Explanatory Notes and SAC entries for support services and held that the activity falls under SAC 998599 (other support services). Consequentially, the Authority applied the relevant entries in the notifications cited and concluded the tax treatment as follows: under the Central and State law the applicable tax component is 9% each under CGST and KGST; under IGST the applicable consolidated rate is 18%. The classification and rates were stated to apply where the supply is not treated as export of services.

The services are covered under SAC 998599 and attract tax at 9% CGST + 9% SGST (or 18% IGST) if not treated as export of services.

Export of services - place of supply - advance ruling jurisdiction - place of supply outside authority's competence - Whether the services qualify as export of services by reason of place of supply being outside India - HELD THAT: - The Authority noted that other export conditions (supplier located in India, recipient located outside India, payment in convertible foreign exchange, separate legal entities) were prima facie satisfied on the material before it. However, the determinative element for export classification is the place of supply. The Authority expressly held that determination of place of supply is outside its jurisdiction in this instance and therefore it could not pronounce a ruling on whether the services constituted export of services or an inter-State supply. Consequently the question of zero rating could not be decided by the Authority in this advance ruling.

No advance ruling is given on whether the services qualify as export of services because determination of place of supply is outside the Authority's jurisdiction.

Final Conclusion: The Authority ruled that the applicant's marketing support services to McAfee Singapore are intermediary services and, if not treated as export, are classifiable under SAC 998599 attracting tax at 9% CGST + 9% SGST (or 18% IGST). The Authority declined to rule on export treatment because the place of supply determination falls outside its competence.

Input Tax Credit - Restriction of input tax credit where inputs are used partly for taxable supplies (including zero-rated) and partly for exempt supplies under section 17(2) - Apportionment of input tax credit and manner of determination under Rule 42 - Reverse Charge Mechanism and entitlement to input tax credit - Eligibility to pronounce advance ruling confined to matters pending or proposed under Section 95(a)

Input Tax Credit - Restriction of input tax credit where inputs are used partly for taxable supplies (including zero-rated) and partly for exempt supplies under section 17(2) - Apportionment of input tax credit and manner of determination under Rule 42 - Claiming of input tax credit on by product Cotton Seed Oil Cake (taxable at nil/0%) - HELD THAT: - The Authority held that where inputs or input services are used partly for effecting taxable supplies (including zero rated) and partly for exempt supplies, the input tax credit claim must be restricted to the portion attributable to taxable supplies as provided by section 17(2). The procedure for apportionment and reversal is governed by Rule 42 which prescribes the manner of attribution between taxable, exempt and non business uses and the computation of amounts to be added back to output tax liability. Since Cotton Seed Oil Cake is chargeable at nil rate (exempt for this purpose), the applicant must reverse the input tax credit attributable to the supply of Cotton Seed Oil Cake in accordance with section 17(2) read with Rule 42.

Input tax credit attributable to Cotton Seed Oil Cake must be reversed as per section 17(2) read with Rule 42.

Apportionment of input tax credit and manner of determination under Rule 42 - Restriction of input tax credit where inputs are used partly for taxable supplies (including zero-rated) and partly for exempt supplies under section 17(2) - Applicability of apportionment provisions of section 17 to the by product Cotton Seed Oil Cake - HELD THAT: - The Authority ruled that the apportionment regime under section 17 (and its procedural mechanism in Rule 42) applies to the by product Cotton Seed Oil Cake. The by product, being an exempt/nil rated supply, falls within the class of supplies that require attribution of input tax between taxable (including zero rated) and exempt supplies and consequent reversal of the portion attributable to exempt supplies.

Provisions of apportionment under section 17 (with Rule 42 procedure) apply to Cotton Seed Oil Cake.

Reverse Charge Mechanism and entitlement to input tax credit - Restriction of input tax credit where inputs are used partly for taxable supplies (including zero-rated) and partly for exempt supplies under section 17(2) - Entitlement to input tax credit on Raw Cotton purchased from agriculturist where tax was paid under reverse charge - HELD THAT: - The Authority accepted that the applicant is eligible to claim input tax credit for tax paid under reverse charge on purchases of raw cotton from agriculturists subject to the general conditions in section 16. However, such credit must be restricted under section 17(2) to the extent attributable to taxable supplies (including zero rated), and the portion attributable to exempt supplies (Cotton Seed Oil Cake) must be reversed in accordance with Rule 42.

ITC on raw cotton purchased under reverse charge is available subject to restrictions and reversal under section 17(2) and Rule 42.

Input Tax Credit - Restriction of input tax credit where inputs are used partly for taxable supplies (including zero-rated) and partly for exempt supplies under section 17(2) - Entitlement to input tax credit on Plastic Bags (Bardana) used exclusively for packing Cotton Seed Oil Cake - HELD THAT: - While Section 16 permits claiming input tax credit on inward supplies such as plastic bags, the Authority found that where such bags are used exclusively for packing a product that is exempt (Cotton Seed Oil Cake), the input tax credit attributable to those bags must be reversed under section 17(2). The Authority treated the bags as integral to the exempt supply in the facts of this case and applied the attribution and reversal rule accordingly.

Input tax credit on plastic bags used exclusively for the exempt Cotton Seed Oil Cake must be reversed under section 17(2).

Eligibility to pronounce advance ruling confined to matters pending or proposed under Section 95(a) - Whether the Authority should rule on reversal of ITC for past periods 2017 18 and 2018 19 under Rule 42 - HELD THAT: - The Authority observed that it is mandated to pronounce rulings on matters that are being undertaken or are proposed to be undertaken (as per Section 95(a) of the GST Act). The question seeking a ruling on reversal of input tax credit for past periods (2017 18, 2018 19) relates to past transactions and therefore falls outside the scope of matters properly determinable under Section 95(a). Consequently, the Authority declined to give a ruling on that issue.

No ruling is given on reversal of ITC for past periods (2017 18, 2018 19) as the issue falls outside Section 95(a).

Final Conclusion: The Authority ruled that input tax credit attributable to the exempt (nil rated) Cotton Seed Oil Cake must be reversed as per section 17(2) read with Rule 42; the apportionment provisions apply to the by product; ITC on raw cotton acquired under reverse charge is claimable subject to reversal under section 17(2); ITC on plastic bags used exclusively for the exempt by product must be reversed; and no advance ruling is given on reversal for past periods 2017 18 and 2018 19 as those fall outside the Authority's mandate under Section 95(a).

Validity of assessment under Section 143(3) where notice under Section 143(2) is issued to PAN database address - Service of notice and sufficiency of issuance within proviso period to Section 143(2) - Obligation to intimate change of address and update PAN database for service of notices - Effect of filing Form 18 with Registrar of Companies as intimation to the Assessing Officer

Validity of assessment under Section 143(3) where notice under Section 143(2) is issued to PAN database address - Service of notice and sufficiency of issuance within proviso period to Section 143(2) - Obligation to intimate change of address and update PAN database for service of notices - Whether the assessment for A.Y. 2006-07 was vitiated by non-service of notice under Section 143(2) where the notice was issued within the proviso period to the address in the PAN database despite the assessee having changed its address. - HELD THAT: - The Court held that the Assessing Officer issued the notice under Section 143(2) within the time prescribed by the proviso and did so by sending it to the address available in the PAN database. The assessee failed to prove any specific intimation of change of address to the Assessing Officer; the alleged communication dated 06.12.2005 was not produced and was stated to be unavailable. Filing Form 18 with the Registrar of Companies does not, by itself, constitute intimation to the Assessing Officer or substitute for updating the PAN database. Notices under Section 143(2) are generated by the Department's automated system that picks the address from the PAN database; therefore a change of address requires an application to the Department to change PAN records. In these circumstances issuance of the notice to the PAN database address within the proviso period satisfied the statutory requirement and actual subsequent service became immaterial. The High Court and lower authorities erred in setting aside the assessment solely on the ground that actual service occurred beyond the proviso period. [Paras 6, 7, 9]

Notice issued within the proviso period to the address in the PAN database was sufficient; the assessment order cannot be held invalid on the ground that actual service occurred later.

Effect of filing Form 18 with Registrar of Companies as intimation to the Assessing Officer - Whether the matter should be remitted for consideration of other grounds on merits which were not decided by the learned CIT(A). - HELD THAT: - The Court found that the learned CIT(A) set aside the assessment solely on the procedural ground relating to service of notice and therefore did not decide other substantive grounds raised by the assessee on merits. In the interest of adjudicating all contentions, the Court quashed and set aside the impugned orders and remanded the matter to the learned CIT(A) for consideration of the remaining grounds in accordance with law. [Paras 9, 10]

Matter remanded to the learned CIT(A) to decide the appeal on the other grounds on merits.

Final Conclusion: The appeal is allowed: the High Court, ITAT and CIT(A)'s orders setting aside the assessment for A.Y. 2006-07 on the ground of non-service beyond the proviso period are quashed and set aside; the assessment is not vitiated where the notice under Section 143(2) was issued within the proviso period to the PAN database address and the matter is remanded to the CIT(A) to decide remaining grounds on merits.

Penalty u/s 271AAA - accounting treatment of the transaction of the JV vs sale of land whereas the assessee treated the same as development agreement / JV - ITAT deleted the penalty levy - The High Court [2017 (8) TMI 1581 - RAJASTHAN HIGH COURT] concurs with the appellate finding that the penalty under section 271AAA could not be sustained in view of the books of account, documentary evidence of a JV/development agreement and bona fide accounting treatment; Revenue's appeal is dismissed and no substantial question of law arises.

HELD THAT:- Special Leave Petition is dismissed on the ground of low tax effect.

Addition to income under Section 68 - unexplained cash credit - identity and genuineness of shareholders - burden of proof on the assessee - perversity - substantial question of law under Section 260A - Appeal dismissed by HC [2018 (5) TMI 807 - CALCUTTA HIGH COURT] concurrent findings of fact upholding the addition under Section 68 sustained and no substantial question of law established under Section 260A.

HELD THAT:- The delay in filing the restoration application is condoned and petition is restored to its original number subject to payment of costs of ₹ 5000/- with the Supreme Court Secretarial Staff Welfare Association within four weeks from today. If the costs are not deposited within four weeks then this order cease to operate and the matter shall be deemed to have been dismissed

Deduction under Section 80-O - technical or professional services - services rendered from India - services rendered in India - fees for technical services - commercial information supplied to foreign enterprises -

The appeal is allowed [2008 (4) TMI 12 - HIGH COURT OF DELHI] as the assessee's commission income for providing commercial information qualifies as technical/professional services and, having been received in convertible foreign exchange pursuant to contracts to render such services from India, is eligible for deduction under Section 80-O; the Tribunal's apportionment restricting the deduction to 70% was set aside - HELD THAT:- Learned counsel for the appellant, on instructions, in terms of the Circular dated 22.8.2019 bearing number F.No. 390/Misc./116/2017-JC issued by the Department of Revenue, Ministry of Finance, seeks permission to withdraw this appeal alongwith pending applications therein due to low tax effect.

Permission is granted, subject to just exceptions.

Deduction u/s 80HHC - appeal and pending applications are dismissed as withdrawn, leaving question of law open - HELD THAT:- The appeal and pending applications are dismissed as withdrawn, leaving question of law open.

Undisclosed income of the Assessee as recorded by the Securities and Exchange Commission in USA - HC [2008 (4) TMI 839 - DELHI HIGH COURT] proceeded to reverse the finding of fact recorded by the Appellate Tribunal who deleted the addition - HELD THAT:- We have perused the two letters which had weighed with the High Court. Our analysis of the said letters is that, they had been in refutal of the allegations contained in the news items which were published around that time, when the communication was sent by the assessee to the Department with an explanation and a without-prejudice offer.

Such communication(s) cannot be treated as admission of non-disclosure as such. What is significant to note is that in the present case, the disclosure is attributed to Goodyear Tyre & Rubber Co., USA, filed by it in the proceedings in USA; and not by the assessee as such. It is not the case of the Department that the amount referred to in the said disclosure has been received in the accounts of the assessee or spent for and on behalf of the appellant – assessee under instruction, so as to be treated as undisclosed income of the appellant.

As aforesaid, the two communications relied upon by the High Court cannot be taken as admission of non-disclosure nor being a case of unconditional offer to pay tax in that behalf. On the other hand, we find that the ITAT had exhaustively analyzed the entire evidence, including the two letters and taken a view which, in our opinion, is a possible view. That being purely a finding of fact, no interference was warranted.

Accordingly, these appeals must succeed and the same are allowed. The impugned judgment of the High Court is set aside and instead the judgment of ITAT is restored.

Final Conclusion: The appeals are allowed; the impugned judgment of the High Court is set aside and the judgment of the Income Tax Appellate Tribunal is restored. No costs.

Depreciation - ownership and use requirement for depreciation - transfer of undertaking under Transfer Scheme, 2003 - identifiability of transferred assets - remand for verification based on auditor's report

Depreciation - ownership and use requirement for depreciation - identifiability of transferred assets - transfer of undertaking under Transfer Scheme, 2003 - remand for verification based on auditor's report - Claim for depreciation on fixed assets transferred to the assessee pursuant to the U.P. Transfer of Distribution Undertaking Scheme, 2003 - HELD THAT: - The assessing officer had disallowed depreciation claimed in respect of assets which were transferred under the Transfer Scheme, 2003 on the ground that itemwise identification and finalisation of those assets was not then available and, accordingly, the assets were not identifiable or shown as used by the assessee. It is recorded that the auditors engaged by the assessee completed itemwise determination and submitted their report on 4.12.2015 and that the assets became identifiable only in the assessment year 2016-17. Given these facts, the Court did not adjudicate the merit of the depreciation claim on the existing record but directed fresh consideration. The assessing officer is to verify the auditor's itemwise account of assets and liabilities and reconsider the claim for depreciation in accordance with law, using the auditor's report as material for verification. The remand is limited to verification and fresh decision on the claim of depreciation in light of the completed auditor's report and the identifiability of the assets. [Paras 21, 22]

Matter remitted to the assessing officer for verification of the auditor's itemwise asset records and for fresh consideration and decision on the depreciation claim in respect of assets transferred under the Transfer Scheme, 2003.

Final Conclusion: Appeals disposed by remitting the issue of depreciation on assets transferred under the Transfer Scheme, 2003 to the assessing officer for verification of the auditor's itemwise report (dated 4.12.2015) and for passing a fresh order; exercise to be completed within three months from production of a certified copy of this order.

Re-opening of assessment - reason to believe - omission or failure to disclose fully and truly all material facts - non-application of mind - interim restraint on reassessment proceedings - notice under Section 148 and proviso to Section 147

Notice under Section 148 and proviso to Section 147 - omission or failure to disclose fully and truly all material facts - re-opening of assessment - Whether the reassessment proceeding initiated by notice dated March 31, 2019 and order dated September 3, 2019 was sustainable in view of the petitioner's contention that the conditions for reopening beyond four years were not satisfied and that there was non-application of mind. - HELD THAT: - The Court recorded the petitioner's contention that the notices and the order did not satisfy the proviso to Section 147 because the alleged escaped income had been explained earlier and was part of the assessment for a later year, and that the authorities had acted mechanically without considering the petitioner's rebuttal. The judgment cites established authority that jurisdiction to reopen beyond four years requires satisfaction of the condition that omission or failure to disclose material facts has occurred, and that once primary facts are disclosed the inference to be drawn is for the assessing authority. The Court noted that the same income had been earlier addressed and upheld as capital gains by an appellate authority. Rather than finally adjudicating the legality of the reopening on merits, the Court directed the respondents to file affidavit-in-opposition within a week after reopening and permitted a reply, thereby requiring the authorities to consider the petitioner's rebuttal and the material on record before proceeding further. The Court therefore left the substantive question of jurisdiction and applicability of the proviso to Section 147 to be considered by the authorities in the light of the petitioner's submissions and the prior appellate outcome.

Substantive legality of reopening not decided on merits; authorities directed to consider petitioner's rebuttal afresh and file affidavit-in-opposition.

Interim restraint on reassessment proceedings - Whether to grant interim protection against giving further effect to the reassessment notices and order. - HELD THAT: - Having heard the petitioner's contentions and in the absence of any appearance for respondents, the Court imposed an interim bar on the authorities proceeding with the reassessment. The restraint is temporal and expressed to operate until a specified date to enable exchange of affidavits and fresh consideration by the authorities. The Court also directed communication of the order to respondents and fixed the matter for further listing after the vacation period.

Authorities restrained from proceeding with the reassessment up to November 30, 2019; directions given for filing affidavit-in-opposition and reply within specified short timelines.

Final Conclusion: The writ petition was not finally adjudicated on the merits; the Court granted limited interim protection restraining the income-tax authorities from proceeding with the reassessment until November 30, 2019 and directed exchange of affidavits so that the legality of the reopening under the proviso to Section 147/notice under Section 148 can be considered afresh by the authorities; the matter was listed for further hearing thereafter.

Income Declaration Scheme, 2016 - credit for tax deducted at source (TDS) - credit for advance tax / prepaid tax - rejection of declaration for non-payment by due date - appropriation of payment under incorrect minor head - CBDT clarification on credit under IDS

Credit for advance tax / prepaid tax - Income Declaration Scheme, 2016 - CBDT clarification on credit under IDS - Credit for advance tax/prepaid tax paid for an assessment year covered by the declaration is allowable against the tax, surcharge and penalty payable under the Income Declaration Scheme, 2016. - HELD THAT: - The Court accepted the CBDT's purposive clarification that credit for TDS in respect of income declared under the IDS is to be allowed and held there is no logical basis to deny similar treatment to advance tax paid for the same period where such advance tax has not already been given credit. The Division Bench decision in Kumudam Publications (affirmed by the Supreme Court by dismissal of SLP) was followed to the effect that the IDS contains no express or implied bar to reckoning previously paid amounts which have nexus with the periods covered by the declaration. In the present case the advance tax related to assessment year 2013-14 which falls within the declared period 2010-11 to 2015-16, there was no regular assessment whereby the payment could be appropriated, and therefore the amount must be allowed as adjustment while computing the liability under the IDS. [Paras 8, 11, 12, 13, 15]

The petitioner is entitled to have the advance tax of Rs. 1,10,000/- (paid for AY 2013-14) credited/adjusted against his liability under the IDS along with the admitted credit for TDS; declaration must be reconsidered accordingly.

Appropriation of payment under incorrect minor head - rejection of declaration for non-payment by due date - The respondent could not sustain rejection of the declaration on a new factual/legal ground not stated in the impugned proceedings; the Revenue cannot, in these proceedings, appropriate a payment under Minor Head - 400 where no regular assessment exists and the ground was not taken in the order rejecting the declaration. - HELD THAT: - The Court held that the impugned order rejecting the declaration proceeded solely on the premise that the IDS did not provide for credit for prepaid taxes; the Revenue's subsequent contention that the payment was made under the wrong minor head (Minor Head - 400 instead of Minor Head - 100) was not raised in the impugned proceedings and therefore cannot be used to improve the case in these writ proceedings. Further, on merits the Court found that where no regular assessment existed, the payment could not lawfully be appropriated to tax on regular assessment merely because an incorrect head was mentioned; that contention was rejected. [Paras 9, 10, 15]

The Revenue may not rely on the after-arising ground of wrong appropriation under Minor Head - 400 to sustain rejection; that contention is rejected and the impugned order set aside insofar as it denies credit.

Final Conclusion: Writ petition allowed. The order rejecting the declaration dated 06.02.2018 is set aside and the Principal Commissioner of Income Tax-6, Hyderabad is directed to reconsider the petitioner's IDS declaration, allowing credit for TDS and the advance tax paid for AY 2013-14, and complete the exercise within four weeks of receipt of this order.

Disallowance under section 14A - Application of Rule 8D for apportionment of expenditure relating to exempt income - Mandatory recording of AO's satisfaction before invoking Rule 8D - Prohibition on making section 14A disallowance in computation of book profit under section 115JB - Weighted deduction under section 35(2AB) - Pre-amendment effect of Rule 6(7A) and Form 3CL - registration with DSIR sufficing for weighted deduction

Disallowance under section 14A - Application of Rule 8D for apportionment of expenditure relating to exempt income - Mandatory recording of AO's satisfaction before invoking Rule 8D - Deletion of disallowance made under section 14A (computed under Rule 8D) where the assessee had itself offered a suo moto disallowance and the AO failed to record satisfaction as to why that apportionment was incorrect. - HELD THAT: - The Tribunal held that where the assessee has itself made an apportionment and offered a disallowance, the Assessing Officer must record satisfaction that the apportionment is incorrect before applying Rule 8D. In the present case the AO proceeded to compute disallowance under Rule 8D without recording any such satisfaction. Following the principle in Maxopp Investments Ltd. (as cited by the Tribunal), the absence of the mandatory satisfaction vitiates the addition; accordingly the disallowance sustained by the Commissioner (Appeals) was deleted. The same reasoning was applied to the subsequent assessment year where identical factual and decisional posture prevailed. [Paras 4, 10]

Disallowance under section 14A computed under Rule 8D deleted for the years under appeal for lack of required recording of satisfaction by the AO.

Prohibition on making section 14A disallowance in computation of book profit under section 115JB - Section 14A disallowance cannot be made in computation of book profit under section 115JB; therefore no addition can be sustained in computation of book profit even apart from deletion of the disallowance itself. - HELD THAT: - The Tribunal observed that, even if a disallowance under section 14A were sustained, such disallowance could not be incorporated in the computation of book profit under section 115JB. The Tribunal relied upon judicial precedents to conclude that additions under section 14A are not to be made in the computation under section 115JB, and applied that principle to the facts of both assessment years. [Paras 5, 11]

No addition on account of section 14A can be made in computation of income under section 115JB for the years under appeal.

Weighted deduction under section 35(2AB) - Pre-amendment effect of Rule 6(7A) and Form 3CL - registration with DSIR sufficing for weighted deduction - Assessee entitled to the full weighted deduction under section 35(2AB) for the pre-amendment years on the basis of DSIR registration, notwithstanding that DSIR subsequently quantified a lesser amount; year-to-year approval by DSIR became relevant only after amendment effective 01-07-2016. - HELD THAT: - The Tribunal examined the rule and form regime before and after the amendment w.e.f. 01-07-2016. Prior to the amendment, entitlement to weighted deduction under section 35(2AB) arose upon registration/recognition by DSIR and there was no requirement of year-wise quantification by DSIR. The legislative and procedural change effected from 01-07-2016 made year-wise approval and quantification material only thereafter. For the assessment years before the amendment, once registration and other statutory conditions were satisfied, the entire expenditure on in-house R&D qualified for weighted deduction; therefore the AO's disallowance of part of the claim (and consequential reduction in weighted deduction) was not sustainable. [Paras 6, 7, 8, 12]

Weighted deduction under section 35(2AB) allowed in full for the assessment years under appeal on the basis of pre-amendment entitlement upon DSIR registration.

Final Conclusion: Both appeals for A.Y. 2013-14 and 2014-15 are allowed: disallowances under section 14A computed under Rule 8D deleted for lack of recorded satisfaction by the AO and cannot be added to book profit under section 115JB; weighted deduction under section 35(2AB) upheld in full for the pre-amendment years on the basis of DSIR registration.

Deletion of penalty where corresponding quantum additions are deleted - treatment of sale of land as capital gain versus business income - retrospective effect of benevolent CBDT circulars relieving TDS hardship - non-applicability of disallowance under section 14A where no exempt income is earned

Deletion of penalty where corresponding quantum additions are deleted - principle in K.C. Builders v. ACIT - Whether penalty under section 271(1)(c) survives when the corresponding additions on which concealment penalty was levied have been deleted by the Tribunal. - HELD THAT: - The Tribunal held that the penalty levied under section 271(1)(c) has no basis to survive once the corresponding quantum additions made by the Assessing Officer have been deleted by the Tribunal in a connected appeal. The Bench relied on the settled principle that where the additions on the basis of which concealment penalty is imposed are deleted, there remains no foundation for the penalty, and it must be cancelled. The Tribunal applied that principle to the present facts and concluded that the penalty amount cannot stand in view of the deletion of the underlying additions.

Penalty under section 271(1)(c) deleted as the corresponding additions have been set aside by the Tribunal; revenue appeal dismissed on this ground.

Treatment of sale of land as capital gain versus business income - binding effect of prior Tribunal and High Court decisions on identical facts - Whether the gain on sale of the land in the year under consideration is assessable as business income or as capital gain. - HELD THAT: - The Tribunal examined the treatment of the land in earlier assessment years, noting consistent classification as a capital asset in books, absence of activities or development on the land, prior acceptance of capital treatment (including a capital loss in an earlier year), and the fact that entering into a development agreement in respect of other land does not alter the character of the land sold. A prior Tribunal decision on substantially similar facts, affirmed by the Hon'ble Delhi High Court, held that the land was held as a capital asset and the sale resulted in capital gain; that precedent was treated as binding for the same facts. Applying that reasoning, the Tribunal concluded the income is chargeable as capital gain under the Income-tax Act. [Paras 10]

Income from sale of the disputed land to be taxed as capital gain; assessing officer's treatment as business income reversed.

Retrospective effect of benevolent CBDT circulars relieving TDS hardship - non-deduction of TDS on bank guarantee commission-no disallowance under section 40(a)(ia) - Whether disallowance under section 40(a)(ia) can be sustained for bank guarantee/commission charges in view of CBDT Circular No. 56/2012. - HELD THAT: - The Tribunal observed that the CBDT circular clarified that no TDS is required to be deducted on bank guarantee commission and similar payments, and that such benevolent circulars intended to remove hardship must be given retrospective effect. On that basis, the Tribunal held that payments of bank commission/guarantee fees prior to issuance of the circular cannot be disallowed under section 40(a)(ia) and allowed the assessee's contention. [Paras 11, 12]

Disallowance under section 40(a)(ia) on account of non-deduction of TDS on bank guarantee/commission deleted; issue decided in favour of the assessee.

Non-applicability of disallowance under section 14A where no exempt income is earned - binding effect of Cheminvest precedent - Whether any disallowance under section 14A can be made in the absence of exempt income earned by the assessee. - HELD THAT: - Relying on the jurisdictional High Court decision in Cheminvest, the Tribunal noted the settled position that section 14A disallowance is not triggered where the assessee has not earned any exempt income. Applying that binding precedent to the facts, and noting that the assessee had no exempt income, the Tribunal held that no disallowance under section 14A could be made. [Paras 13]

No disallowance under section 14A; issue decided in favour of the assessee.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal affirmed that the disputed gain on sale of land is taxable as capital gain, held that disallowances under sections 40(a)(ia) and 14A are not sustainable on the stated facts, and directed deletion of the penalty under section 271(1)(c) because the underlying additions have been set aside.

Charitable purpose - education as charitable purpose - formal schooling test - genuineness of activities - registration under section 12AA - advancement of public utility - remand for fresh consideration

Registration under section 12AA - charitable purpose - education as charitable purpose - formal schooling test - genuineness of activities - Whether the assessee fulfilled the conditions for registration under section 12AA of the Income-tax Act, 1961 - HELD THAT: - The Tribunal identified the two statutory conditions for registration under section 12AA: that the entity's object must be charitable in nature and its activities must be genuine (para 5). The assessee claimed to impart education within the meaning of section 2(15) and produced a recognition certificate under the Companies (Registered Valuers and Valuation) Rules, 2017; the CIT(E) treated the activity as commercial coaching (paras 2.1-2.2, 3). Applying the authoritative exposition of 'education' in Sole Trustees, LokaShikshana Trust v. CIT, the Tribunal noted that 'education' in the statutory sense denotes systematic instruction or formal schooling and is not to be equated with every form of knowledge acquisition (para 8). The Tribunal found that the CIT(E) had not examined whether the assessee's offerings amounted to formal schooling or had verified the nature of examinations or certificates awarded; consequently, the determinative question whether the assessee's objectives and activities satisfy the charitable limb of section 2(15) and the genuineness requirement under section 12AA remained unadjudicated (para 9). The Tribunal therefore set aside the CIT(E)'s order and remitted the matter for fresh decision, directing that the CIT(E) examine whether the education imparted is of the character of formal schooling and, alternatively, consider eligibility under the fourth limb of 'advancement of general public utility' if raised, while affording the assessee an opportunity of hearing (para 10). [Paras 5, 8, 9, 10]

Order of the CIT(E) rejecting registration under section 12AA set aside and matter remitted to the CIT(E) for fresh decision on whether the assessee imparts formal education and satisfies the charitable and genuineness requirements of section 12AA, with leave to examine eligibility under the fourth limb of section 2(15) and after affording the assessee opportunity of hearing.

Final Conclusion: The Tribunal allowed the appeal for statistical purposes, set aside the CIT(E)'s order rejecting registration under section 12AA and remitted the matter to the CIT(E) for fresh adjudication on whether the assessee's activities qualify as formal education (or, alternatively, as advancement of public utility), directing that the assessee be given an opportunity of being heard.

Rejection of books of account under section 145(3) - requirement to record specific defects before rejecting books - estimation of income on basis of gross profit rate - power to assess on estimate under section 144 - acceptance of mercantile system of accounting and treatment of prior period items - taxability of notional income on accrual (rent) versus realizability - treatment of deferred revenue expenses and principle of consistency

Rejection of books of account under section 145(3) - requirement to record specific defects before rejecting books - estimation of income on basis of gross profit rate - power to assess on estimate under section 144 - Validity of AO's rejection of assessee's books of account and consequent estimation of gross profit at 16% leading to addition. - HELD THAT: - The Tribunal examined whether the AO complied with the statutory preconditions for invoking section 145(3) before rejecting books and applying an estimated GP rate under section 144. The authorities below relied on a fall in GP and certain tabulated comparisons (production loss, consumption rates, cost v. sale price) which were drawn from the assessee's own records. The Tribunal held that the AO did not point to any specific defect showing books were incorrect, incomplete or that the method of accounting contravened notified accounting standards; nor was independent evidence produced to show under-invoicing or other falsity. Mere decline in GP, without specific findings of incompleteness/falsity or accounting non-compliance, does not justify rejection of books. Because rejection was unsustainable, the consequent estimation of GP at 16% and the addition based thereon were also held erroneous. The Tribunal noted that in a later, factually identical assessment year a remand report led to deletion of a large GP addition, reinforcing that mechanical application of prior/future year GP without lawful rejection is improper.

Rejection of books and estimation of GP at 16% set aside; grounds 2(a)-(c) allowed.

Acceptance of mercantile system of accounting and treatment of prior period items - Disallowance of prior period expenses of Rs. 13,52,866/- and taxation of prior period income. - HELD THAT: - The Tribunal considered whether the disallowance was proper where the assessee had not taken the prior period expenses into computation of income for the year under assessment and followed mercantile accounting. The CIT(A) had directed the AO to verify whether any prior period income had been taxed and to reopen prior year if required. The Tribunal held that income and expenditure should be taxed in the year of accrual; however, since the assessee had not included the prior period expenses in the computation for the current year, there was no basis for the AO to disallow them. The Tribunal therefore found the AO's disallowance unsustainable and accepted the assessee's position.

Disallowance set aside; ground allowing prior period expenses is allowed.

Taxability of notional income on accrual (rent) versus realizability - acceptance of mercantile system of accounting and treatment of prior period items - Addition of notional rental income in respect of machines let out to related party (GIL). - HELD THAT: - The Tribunal reviewed the lease arrangement, the assessee's disclosure, the suit and subsequent amicable settlement in which GIL paid a composite amount towards machine value and rent. The assessee's contention that rent was unrealizable and thus not to be accrued was rejected because (i) the assessee followed mercantile accounting and rent accrued on the due date, (ii) the settlement payment expressly covered rent/charges as well as asset value, and (iii) there was a legal obligation on GIL to pay rent and return assets. The Tribunal held the rental income was not hypothetical and the authorities below were right to treat the accrual as taxable in the assessment year.

Addition for notional rent sustained; ground no.5 dismissed.

Treatment of deferred revenue expenses and principle of consistency - Disallowance of deferred revenue expenses of Rs. 19,67,582/- relating to restructuring/management fees paid to financial institutions. - HELD THAT: - The Tribunal considered that identical deferred revenue expense claims had been accepted by Revenue from AY 2002-03 onwards and that the amounts related to genuine payments spread over the loan period to reflect true profit and loss. The AO disallowed the claim relying on provisions relating to deferred revenue and on technical grounds, and the CIT(A) upheld the disallowance. Applying the rule of consistency and on the record showing apportionment of actual expenses over the loan period, the Tribunal held the disallowance to be unjustified in absence of any change in facts or rebuttal of genuineness.

Disallowance deleted; claim of deferred revenue expenses allowed.

Final Conclusion: The appeal is partly allowed: the Tribunal set aside the rejection of books and the GP-based addition (grounds 2(a)-(c)), allowed the prior period expenses and the deferred revenue expenses, but upheld the addition for notional rent; the remainder of grounds were general or consequential.

Minimum Alternate Tax (MAT) under Section 115JB - Exemption under Section 115JB(6) for units or Developers in Special Economic Zones - Book profits for MAT and non-allowability of Chapter VI-A deductions (section 80IB) while computing book profits under Section 115JB - Interest under sections 234B and 234C where income is computed under Section 115J

Minimum Alternate Tax (MAT) under Section 115JB - Exemption under Section 115JB(6) for units or Developers in Special Economic Zones - Levy of MAT under Section 115JB on the assessee for assessment year 2011-12 - HELD THAT: - The Tribunal affirmed the authorities below in holding that the assessee does not fall within the exemption carved out by sub section (6) of section 115JB because that proviso, inserted by the SEZ Act, 2005, exempts only income from business or services carried on by an entrepreneur or developer in a Unit or Special Economic Zone as those terms are defined in the SEZ Act. The Court applied the principle that when a provision is incorporated by reference, the words used in it derive their meaning from the parent enactment (SEZ Act), and therefore the exemption cannot be given an independent or wider meaning (including ordinary dictionary meaning of "unit"). The Tribunal relied on its earlier coordinated decisions and on authorities construing incorporation and the SEZ scheme to conclude that the assessee-being neither a Unit nor an approved SEZ developer/entrepreneur-was not entitled to exemption, and therefore MAT as applied by the AO was sustained. [Paras 8]

Ground No.1 dismissed; MAT under Section 115JB sustained for AY 2011-12.

Interest under sections 234B and 234C where income is computed under Section 115J - Levy of interest under sections 234B and 234C where the company's income is computed under section 115J - HELD THAT: - The Tribunal admitted the additional legal ground and, in view of the binding decision of the Apex Court in CIT v. Kwality Biscuits Ltd., held that interest under sections 234B and 234C cannot be levied on a company whose income is computed under section 115J. The Tribunal found the Supreme Court decision unambiguous on this point and accordingly allowed the additional ground in favour of the assessee. [Paras 12]

Additional ground allowed; interest under sections 234B and 234C not leviable where income is computed under Section 115J.

Final Conclusion: Appeal dismissed on the main point: MAT under Section 115JB applies to the assessee for AY 2011-12. The additional legal ground is allowed: interest under sections 234B and 234C is not leviable where income is computed under Section 115J (as per the Supreme Court in CIT v. Kwality Biscuits Ltd.).

Mesne profits as capital receipt - treatment of arbitration award as damages versus rent - taxability of arrear/unrealised rent as income from house property - interest on delayed payment taxable as income from other sources

Mesne profits as capital receipt - treatment of arbitration award as damages versus rent - taxability of arrear/unrealised rent as income from house property - Whether the amounts awarded by arbitration (aggregate Rs.56,83,006/-) constituted mesne profits/damages (a capital receipt) or were taxable as arrear rent/interest under the heads "Income from House Property" and "Income from Other Sources". - HELD THAT: - The Tribunal examined the lease terms, the arbitration award and the factual matrix and found that the lease expressly provided that no landlord-tenant relationship would subsist after expiry of the lease on 31.10.1996 and set out the consequence for continued occupation. The arbitration award granted damages and interest pursuant to that contractual scheme. Applying the precedent in Smt. Lila Ghosh, the Tribunal held that mesne profits or damages of this character are in the nature of capital receipt and not taxable as income from house property. The Tribunal further found that the authorities below had erred in treating the arbitration award as arrear rent assessable under the head "Income from House Property" and in taxing the interest component as income from other sources; having regard to the nature of the award and the contractually stipulated remedy, the amount was not rent but damages and therefore not chargeable to tax under those heads. The Tribunal therefore allowed the assessee's substantive ground reversing the additions made by the Assessing Officer and confirmed by the CIT(A). [Paras 4]

The amounts awarded by arbitration are damages/mesne profits in the nature of a capital receipt and are not chargeable as income from house property or income from other sources; the additions confirmed by the lower authorities are set aside.

Treatment of arbitration award as damages versus rent - Whether the assessee's claim for deduction of TDS of Rs.17,807/- is maintainable. - HELD THAT: - The assessee formally declined to press this ground in view of the smallness of the amount. The Tribunal recorded the concession and accordingly did not adjudicate the substantive merit of the claim. [Paras 5]

The ground relating to TDS disallowance is not pressed and is therefore declined.

Final Conclusion: Appeal partly allowed: the Tribunal reversed the additions treating the arbitration award as taxable rent/interest and held the award to be damages/mesne profits (capital receipt) not chargeable as income from house property or other sources; the TDS claim was not pressed and is declined.

Validity of show cause notice issued under Drawback Rules, 1995 after repeal w.e.f. 01.10.2017 - Absence of mechanism in Drawback Rules, 1995 to raise demand under Rule 16 - Power to reassess value of goods already exported - Maintainability of writ petition where pure questions of law and jurisdiction arise despite availability of alternative remedy

Validity of show cause notice issued under Drawback Rules, 1995 after repeal w.e.f. 01.10.2017 - Show cause notice issued invoking Rule 16 of the Drawback Rules, 1995 after repeal of those Rules w.e.f. 01.10.2017 is not sustainable. - HELD THAT: - The Court reproduced and applied its earlier conclusions in Famina Knit Fabs and Jairath International, holding that Rule 20(2) of the Drawback Rules, 2017 preserves only limited rights/actions and does not sustain issuance of a show cause notice under Rule 16 of the repealed Drawback Rules, 1995 after 1.10.2017. On that basis, a notice issued post-repeal invoking Rule 16 of the 1995 Rules cannot be maintained. [Paras 5, 6]

Show cause notice invoking Rule 16 of Drawback Rules, 1995 issued after 01.10.2017 is unsustainable.

Absence of mechanism in Drawback Rules, 1995 to raise demand under Rule 16 - Demand for recovery of drawback under Rule 16 of the Drawback Rules, 1995 is unsustainable for want of an adequate procedural mechanism in those Rules. - HELD THAT: - Relying upon statutory scheme including relevant provisions of the Customs Act and precedents such as Commissioner of Central Excise v. Larsen & Toubro and this Court's decision in Laqshya Media, the Court held that the Drawback Rules, 1995 do not provide a proper mechanism to raise and recover a demand under Rule 16. Consequently, demands premised on that provision cannot be sustained. [Paras 6]

Demand under Rule 16 of the Drawback Rules, 1995 is not sustainable for want of a procedural mechanism.

Power to reassess value of goods already exported - The department has no power to reassess the value of goods which have already been exported. - HELD THAT: - Although left open in the earlier Famina Knit Fabs decision, this Court in Jairath International applied the Supreme Court's reasoning in ITC v. Commissioner of Central Excise to conclude that value of goods once exported cannot be reassessed by the department. On that legal foundation the Court rejected the department's contention of reassessment of FOB value of exported goods. [Paras 6]

Respondent has no authority to reassess the declared value of goods already exported.

Final Conclusion: Writ petition allowed; impugned show cause notice dated 31.7.2014 quashed insofar as it seeks rejection/reassessment of declared FOB value and recovery of duty drawback under Rule 16 of the Drawback Rules, 1995.

Reasonable period of limitation - effect of repeal on saved rights of earlier rules - absence of statutory mechanism for recovery under Rule 16 of the Drawback Rules, 1995 - power to reassess declared FOB value of goods already exported - maintainability of writ jurisdiction despite existence of alternative remedy

Reasonable period of limitation - Period within which a show cause notice can be validly issued to question drawback claims or declared FOB value. - HELD THAT: - The Court held that a period of five years from the date of export/assessment constitutes a reasonable period for issuance of a show cause notice impugning declared FOB value and claiming recovery of drawback. The conclusion is founded on analogous precedents of this Court and the Supreme Court which have recognised a five-year limitation as reasonable in similar revenue matters, and the same principle is applied to the facts before the Court to invalidate belated notices outside that period.

A five-year period from the date of export/assessment is a reasonable limitation period for issuing a show cause notice.

Effect of repeal on saved rights of earlier rules - Whether show cause notices invoking Rule 16 of the Drawback Rules, 1995 issued after 01.10.2017 (when Drawback Rules, 2017 came into force) are sustainable. - HELD THAT: - The Court held that the repeal and re-enactment effected by the Drawback Rules, 2017 contain savings which preserve limited rights/actions expressly saved, and that invocation of Rule 16 of the Drawback Rules, 1995 after the cut-off date of 01.10.2017 is not sustainable where the earlier rule no longer applies. Applying the saving/prospective operation principle, the Court concluded that notices issued after the repeal date relying on Rule 16 (1995 Rules) cannot be sustained.

Show cause notices issued after 01.10.2017 invoking Rule 16 of the Drawback Rules, 1995 are not sustainable.

Absence of statutory mechanism for recovery under Rule 16 of the Drawback Rules, 1995 - Validity of demands for recovery of duty drawback under Rule 16 of the Drawback Rules, 1995 in the absence of an adequate statutory mechanism. - HELD THAT: - Having regard to the statutory scheme and relevant provisions of the Customs Act, the Court found that the Drawback Rules, 1995 do not provide a mechanism analogous to statutory recovery procedures required for enforcement of demand. In the absence of a clear and available recovery procedure within the Drawback Rules, reliance on Rule 16 alone to raise and recover drawback demand is untenable, and such demands cannot be sustained.

Demand and recovery under Rule 16 of the Drawback Rules, 1995 is unsustainable due to absence of a statutory mechanism for recovery in those rules.

Power to reassess declared FOB value of goods already exported - Whether the Department has power to reassess or re-determine the declared FOB value of goods after they have been exported and drawback paid. - HELD THAT: - The Court, following the legal principles laid down by higher judicial authority and earlier decisions of this Court, held that the Department has no power to reassess the declared FOB value of goods which have already been exported and for which drawback has been released. The absence of statutory provision permitting post-export reassessment of declared export value and the settled legal position disallow retrospective reassessment in such circumstances weighed against the Department's power to re-determine FOB value.

The Department lacks power to reassess or re-determine the declared FOB value of goods already exported.

Maintainability of writ jurisdiction despite existence of alternative remedy - Whether writ petitions under Article 226 are maintainable when alternative remedies exist under the Customs statute. - HELD THAT: - The Court reaffirmed that notwithstanding the availability of alternative statutory remedies, writ jurisdiction is maintainable where pure questions of law and jurisdiction arise. Given that the petitions raised pure legal questions concerning limitation, repeal effects, absence of recovery mechanism and reassessment power, the Court exercised its constitutional jurisdiction to decide the issues on merits rather than relegating the petitioners to alternate remedies.

Writ petitions are maintainable despite availability of alternative remedies where pure questions of law and jurisdiction are involved.

Final Conclusion: All three writ petitions are allowed; the impugned orders-in-original dated 31.3.2019 and 2.5.2019 are quashed in view of the conclusions on limitation, the effect of repeal, absence of recovery mechanism under Rule 16 of the 1995 Rules, and the lack of power to reassess declared FOB value of already exported goods.

Admission of Section 9 application - Corporate insolvency resolution process commencement - Default in payment under Power Purchase Agreement - Operational creditor's compliance with Section 9(3)(b)&(c) - Moratorium under Section 14 - Appointment of Interim Resolution Professional - Supply of essential goods during moratorium

Admission of Section 9 application - Corporate insolvency resolution process commencement - Default in payment under Power Purchase Agreement - The Section 9 application filed by the Operational Creditor was admitted and CIRP was ordered on finding default by the Corporate Debtor. - HELD THAT: - The Tribunal examined the Power Purchase Agreement dated 05.01.2016, the invoices raised by the Operational Creditor and the claim of unpaid operational debt. The Operational Creditor asserted a principal claim and supplied invoices evidencing supply pursuant to the agreement. The Tribunal was satisfied that the Corporate Debtor had committed default in payment of the claimed dues and that the Operational Creditor had fulfilled the statutory prerequisites for admission of the Section 9 application. On that basis the application was admitted and the Corporate Insolvency Resolution Process was ordered to commence forthwith. [Paras 4, 5, 6, 7, 10]

Application under Section 9 is admitted and CIRP is ordered on finding of default.

Operational creditor's compliance with Section 9(3)(b)&(c) - The Operational Creditor complied with the affidavit requirement under Section 9(3)(b) & (c) by averring absence of notice of dispute or pendency of suit/arbitration. - HELD THAT: - The Tribunal noted the affidavit filed by the Operational Creditor, in which it was deposed that the Corporate Debtor had not issued any notice of dispute nor was there any pending suit or arbitration concerning the claimed operational debt. The affidavit was placed on record and considered as satisfying the specific statutory attestations required under the proviso to Section 9. [Paras 9]

The statutory affidavit requirement under Section 9(3)(b) & (c) is satisfied.

Moratorium under Section 14 - Supply of essential goods during moratorium - A moratorium under Section 14 was declared upon commencement of CIRP, with a direction that supply of essential goods or services shall not be terminated during the moratorium. - HELD THAT: - On admission of the Section 9 application and commencement of CIRP, the Tribunal declared the moratorium effective from the date of the order until completion of the process. The order enjoins prohibition on institution or continuation of suits, transfer or disposal of assets, enforcement of security interests and recovery of property as specified. The Tribunal expressly recorded that supply of essential goods or services to the Corporate Debtor shall not be terminated, suspended or interrupted during the moratorium and that the exemptions in sub section (1) of Section 14 for such transactions, as notified by the Central Government, would apply. [Paras 11, 12]

Moratorium declared; essential supplies to the Corporate Debtor shall continue during the moratorium.

Appointment of Interim Resolution Professional - An Interim Resolution Professional was appointed to take charge of the Corporate Debtor's management and to perform duties under the Code. - HELD THAT: - The Operational Creditor had not proposed an IRP; accordingly the Tribunal appointed Mr. Madurai Sundaram Sankar from the IBBI panel, noting absence of disciplinary proceedings against him. The IRP was directed to take immediate charge, make the public announcement, call for claims and comply with the statutory provisions applicable to the role of IRP, while the directors and promoters were directed to extend cooperation. [Paras 13, 14, 15]

Mr. Madurai Sundaram Sankar appointed as Interim Resolution Professional with directions to assume charge and comply with statutory obligations.

Final Conclusion: The Tribunal admitted the Section 9 petition on finding of default by the Corporate Debtor, declared the moratorium, appointed an Interim Resolution Professional and directed continuity of essential supplies during the CIRP; the Operational Creditor's statutory compliance under Section 9(3)(b)&(c) was recorded.

Admission of an application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - establishment of operational debt and default - initiation of the Corporate Insolvency Resolution Process - moratorium under Section 14 - appointment of an Interim Resolution Professional - tribunal's territorial jurisdiction

Establishment of operational debt and default - admission of an application under Section 9(5) of the Insolvency and Bankruptcy Code, 2016 - The application filed by the operational creditor was admitted on the basis that the operational debt and default were established and the requirements of Section 9(3) and Section 9(5) were satisfied. - HELD THAT: - The Tribunal found that the applicant supplied goods to the corporate debtor and raised invoices for supplies made between 31.01.2015 and 03.03.2016, with a sum outstanding. The applicant filed the statutory demand notice under Section 8; the corporate debtor did not raise a timely dispute under Section 9(3)(b) prior to the application but purportedly raised a dispute thereafter. The applicant produced an affidavit confirming non-receipt of payment and compliance with the requirement to produce a bank statement under Section 9(3)(c). On these facts the Tribunal concluded that the application was complete and that default in payment of the operational debt was established, entitling the applicant to relief under Section 9(5). [Paras 10, 12, 14, 15, 17]

Application admitted and default held to be established; requirements of Section 9(3) and Section 9(5) satisfied.

Tribunal's territorial jurisdiction - The Tribunal held that it had jurisdiction to entertain and try the application because the registered office of the corporate debtor is situated within its territorial limits. - HELD THAT: - The Tribunal noted the registered office address of the corporate debtor in New Delhi and, on that basis, recorded that the Tribunal had jurisdiction to hear the Section 9 application. [Paras 6, 16]

Tribunal has jurisdiction to entertain and try the application.

Moratorium under Section 14 - initiation of the Corporate Insolvency Resolution Process - On admission of the Section 9 application, the Corporate Insolvency Resolution Process was initiated and the moratorium under Section 14 was imposed in respect of the corporate debtor. - HELD THAT: - Following admission under Section 9(5), the Tribunal applied the statutory consequences and prohibited institution or continuation of suits, transfer or disposal of assets, enforcement of security, and recovery of property by lessors, while noting exceptions for specified transactions and supply of essential goods or services. The order of moratorium was directed to operate from the date of the order until completion of the CIRP or earlier approval of a resolution plan or liquidation. [Paras 18]

Moratorium under Section 14 imposed and CIRP initiated upon admission of the application.

Appointment of an Interim Resolution Professional - duties of the Interim Resolution Professional - Since the operational creditor did not nominate an Interim Resolution Professional, the Tribunal appointed an IRP and directed him to perform the statutorily mandated functions. - HELD THAT: - The Tribunal appointed Mr. Piyush Moona as the Interim Resolution Professional and directed him to undertake steps required under the Code, specifically referencing duties under provisions dealing with interim management and conduct of the CIRP (including sections relating to the IRP's powers and responsibilities). The Registry was directed to communicate the order to the parties and to the IBBI. [Paras 19, 20]

Mr. Piyush Moona appointed as Interim Resolution Professional and directed to take steps as required under the Code; registry to serve order to parties and IBBI.

Ex parte proceeding - Proceeding was continued ex parte against the corporate debtor due to its non-appearance despite service of notices and the application. - HELD THAT: - The Tribunal recorded that the corporate debtor did not appear before it and that proof of service of the Section 8 notice and the Section 9 application was on file, thereby proceeding ex parte in accordance with the circumstances. [Paras 13]

Proceeding continued ex parte against the corporate debtor.

Final Conclusion: The Section 9 application by the operational creditor is admitted; the Tribunal found default and invoked the Corporate Insolvency Resolution Process, imposed the moratorium under Section 14, proceeded ex parte against the corporate debtor, and appointed an Interim Resolution Professional, directing communication of the order to the parties and IBBI.

Summary order. Delay condoned; appeal dismissed in view of low tax effect and instructions dated 22.08.2019 issued by the Director (Review), Ministry of Finance, Department of Revenue, CBIC (Judicial Cell); question of law kept open; pending applications disposed of.

Time limit for refund under an exemption notification - condonation of delay in filing refund claim - exemption to exporters and refund by way of claim - self-contained procedure in notification prevailing over Section 11B where no reference exists

Time limit for refund under an exemption notification - condonation of delay in filing refund claim - self-contained procedure in notification prevailing over Section 11B where no reference exists - Whether refund claims filed beyond one year from the date of export under Notification No. 17/2009 could be condoned and allowed. - HELD THAT: - The Tribunal held that Notification No. 17/2009 (superseding Notification No. 41/2007) prescribes a mandatory time limit that "the claim for refund shall be filed within one year from the date of export of the said goods." The notification constitutes a self-contained exemption procedure with binding conditions for claiming refund; none of those conditions is expressed as directory or subject to extension. In the absence of any provision in the notification linking the procedure to Section 11B or otherwise empowering the authority to extend time, the time limit cannot be treated as a mere procedural defect capable of condonation. The Tribunal relied on the reasoning of the Gujarat High Court and several precedents of the Tribunal which have applied the same principle, and distinguished decisions relied upon by the appellant as not governing the present facts. Accordingly, the Commissioner (Appeals) was correct in rejecting refund claims filed after the one-year period. [Paras 9, 10, 11]

Refund claims filed beyond one year from the date of export under Notification No. 17/2009 are not condonable and were rightly disallowed.

Final Conclusion: The appeals challenging rejection of refund claims filed beyond one year from date of export are dismissed; claims within one year were allowed but those beyond the one-year statutory time bar under the notification cannot be condoned.

Cenvat credit transfer by ISD - liability of service provider v. service recipient for credit availment - reopening/assessment at recipient's end - limitation for issuance of show cause notice post-audit/visit - maintainability of penalty against director where demand set aside

Cenvat credit transfer by ISD - liability of service provider v. service recipient for credit availment - reopening/assessment at recipient's end - Denial of Cenvat credit to the assessee on the ground that the head office (registered as ISD) had purportedly wrongly availed the credit and therefore should not have passed it on to the assessee. - HELD THAT: - The credit in question was availed by the appellant on the basis of three invoices issued by its head office which is registered as an ISD; Revenue did not dispute the correctness of those invoices but contended that the head office's own availment was improper. The Tribunal held that where the alleged defect relates to the correctness of credit availed by the service provider (head office/ISD), proceedings ought to be initiated against that provider by the authority having jurisdiction over it and the matter cannot be reopened at the recipient's end by relying on objections relatable to the provider. The assessee could not reasonably be required to explain records maintained at the head office; no objection had been raised by the jurisdictional Service Tax authority of the head office. Applying these principles, the denial of credit to the appellant was not justified and had to be set aside. [Paras 8]

Denial of Cenvat credit to the appellant on account of alleged improper availment by the head office (ISD) set aside.

Limitation for issuance of show cause notice post-audit/visit - Whether the show cause notice dated 30/03/2016 initiating demand was barred by limitation having regard to the officers' visit on 05/08/2014 and earlier statutory records. - HELD THAT: - The Tribunal noted that the appellant's factory was inspected on 05/08/2014 and that the material facts concerning availment and utilisation of credit were reflected in statutory records from August 2013 onwards. The show cause notice was issued on 30/03/2016, about nineteen months after the officers' visit. Applying the reasoning in the authoritative view relied upon by the Tribunal that issuance of a show cause notice after a prolonged gap from the date of audit/visit is barred by limitation, the Tribunal concluded that initiation of proceedings after a gap of around nineteen months rendered the demand time-barred. Consequently the impugned demand was set aside. [Paras 10]

Show cause notice and consequent demand held barred by limitation; impugned order set aside and appeal allowed.

Maintainability of penalty against director where demand set aside - Maintainability of Revenue's appeal seeking imposition of penalty on the Managing Director after the demand against the manufacturer was set aside. - HELD THAT: - Revenue's appeal against dropping of penalty on the Managing Director was filed while the appeal proceeded against the manufacturer as respondent. The Tribunal observed that since the demand against the manufacturer stood set aside and penalties imposed upon them were set aside as a consequence, Revenue's separate appeal seeking imposition of penalty on the Managing Director was not maintainable in the circumstances. Accordingly, the appeal in respect of penalty on the Managing Director was rejected. [Paras 12]

Revenue's appeal seeking imposition of penalty on the Managing Director rejected as not maintainable.

Final Conclusion: The impugned order confirming demand and penalties was set aside: denial of Cenvat credit to the respondent was reversed because the defect, if any, lay at the head office (ISD) and not the recipient; the show cause notice was held time barred and the demand set aside; Revenue's appeal to impose penalty on the Managing Director was rejected as not maintainable.

Classification under Heading 2202 - fruit pulp or fruit juice based drinks - lemonade - General Rules for Interpretation of the First Schedule - common parlance test - Food Safety and Standards Regulations 2.3.10 and 2.3.30 - burden of proof on the revenue

Classification under Heading 2202 - fruit pulp or fruit juice based drinks - lemonade - General Rules for Interpretation of the First Schedule - common parlance test - Food Safety and Standards Regulations 2.3.10 and 2.3.30 - burden of proof on the revenue - Whether Minute Maid Nimbu Fresh, 7up Nimbooz Masala Soda and 7up Nimbooz are classifiable under Tariff Item 2202 90 20 as "fruit pulp or fruit juice based drinks" or under Tariff Item 2202 10 20 as "lemonade" - HELD THAT: - The Tribunal examined the structure of Heading 2202 and the General Explanatory Notes: items at three-dash ( - -) level (e.g., 2202 10 20 "lemonade") are sub-classifications of the immediately preceding single-dash (-) description and therefore presuppose that the product first satisfies the single-dash description (waters, including mineral and aerated waters, containing added sugar or flavoured). Consequently, a product not essentially a flavoured water cannot be classed straightaway as "lemonade" at 2202 10 20. The General Rules for Interpretation (in particular Rule 3) require preference to the most specific heading or, where appropriate, classification by essential character. The Tribunal applied the common parlance test by comparing product labels in the market: products with lemon/lime juice content of 5% or more are marketed and described as "Ready to Serve Fruit Drink" or "Carbonated Fruit Drink," whereas beverages sold as "lemonades" or lemon-flavoured drinks expressly state they contain no fruit juice. The supporting legislation (Food Safety and Standards Regulations 2.3.10 and 2.3.30) prescribes minimum fruit-content and total soluble solids thresholds (notably lime/lemon ready-to-serve beverages require fruit content not less than 5% and total soluble solids not less than 10%), which the three products satisfy (MMNF 5.7%; Pepsico products 5%). The Supreme Court's decision in Parle Agro was held to endorse consideration of such regulatory classification and manufacturing licences as relevant. The Tribunal therefore concluded that where lemon/lime juice constitutes the basis of the drink at or above the regulatory threshold, the product falls under Tariff Item 2202 90 20 as a fruit pulp/fruit juice based drink; only where lemon is merely a flavouring in a water-based beverage falling within the single-dash 2202 10 would 2202 10 20 apply. The revenue bore the burden to prove commercial treatment as "lemonade" and adduced no documentary evidence to satisfy that burden. [Paras 47, 64, 65, 67]

The three products are classifiable under Tariff Item 2202 90 20 as "fruit pulp or fruit juice based drinks" and not under Tariff Item 2202 10 20 as "lemonade".

Final Conclusion: The reference is answered: Minute Maid Nimbu Fresh, 7up Nimbooz Masala Soda and 7up Nimbooz are classifiable under Tariff Item 2202 90 20 as "fruit pulp or fruit juice based drinks"; the appeals to be listed before the Regular Bench.

Reassessment limitation (five-year bar) - reassessment notice under section 35(1) of GVAT Act - issue-based assessment under section 34(8A) of GVAT Act - interim stay of assessment order - service of process

Interim stay of assessment order - service of process - Grant of interim relief pending adjudication and permission for direct service. - HELD THAT: - The High Court, on the petitioner's contention that the impugned assessment order may have been passed without valid notice and that limitation and jurisdictional questions arise, issued notice returnable on the specified date and granted ad interim relief by staying operation of the impugned order dated 31.7.2017. Direct service on the respondents was permitted to facilitate expeditious adjudication of the petition. [Paras 4, 5]

Operation of the impugned order dated 31.7.2017 is stayed pending further orders; notice issued returnable on 24.10.2019; direct service permitted.

Reassessment limitation (five-year bar) - reassessment notice under section 35(1) of GVAT Act - issue-based assessment under section 34(8A) of GVAT Act - Questions as to validity of reassessment on limitation grounds and competence to invoke section 34(8A) were not finally adjudicated and are to be considered on receipt of response to the petition. - HELD THAT: - The petitioner challenged the reassessment on two principal contentions: that reassessment under section 35(1) was time-barred because five years had expired for Assessment Year 2008-2009, and that the authority proceeded as if invoking issue-based assessment under section 34(8A) though no proceeding under the GVAT Act was shown to be pending. The Court recorded these contentions and, without deciding them on merits, directed issuance of notice and preservation of the subject matter by an interim stay so that these legal questions may be ventilated and determined after parties' submissions. [Paras 1, 2, 3, 4]

These substantive questions were left open for adjudication after service and hearing; the court has not finally decided the merits.

Final Conclusion: The petition was admitted for consideration by issuance of notice; the impugned assessment order dated 31.7.2017 is stayed interimly and direct service on the respondents was permitted, while the substantive questions of limitation and the applicability of section 34(8A) remain to be decided on the return date.

Power under Section 482 Cr.P.C. - Quashing of criminal proceedings - Exercise of inherent jurisdiction sparingly - Disputed factual findings not to be recorded in Section 482 petitions - Novation of contract - Criminal liability for cheating and criminal conspiracy where mens rea is alleged - Civil remedies and proceedings under the Negotiable Instruments Act not automatically barring criminal prosecution

Power under Section 482 Cr.P.C. - Quashing of criminal proceedings - Exercise of inherent jurisdiction sparingly - Disputed factual findings not to be recorded in Section 482 petitions - Whether the High Court was justified in allowing petitions under Section 482 Cr.P.C. and quashing the criminal complaints. - HELD THAT: - On a reading of the complaints and the impugned order, the High Court erred in entertaining and resolving disputed factual controversies at the Section 482 stage. The High Court disbelieved material averments (for example, the Schedules to the MOUs) and held that there was novation of contract and other factual conclusions; such determinations require trial and cannot be made in summary exercise of inherent jurisdiction unless the complaint discloses no triable offence or is a clear abuse of process. The Court reiterated that the power under Section 482 Cr.P.C. must be exercised sparingly and that mere existence of civil remedies or a proceeding under the Negotiable Instruments Act does not, by itself, justify quashing criminal complaints where allegations of cheating, dishonest intention and conspiracy are made. Consequently, quashing on the grounds relied upon by the High Court (pageless schedule, alleged novation, existence of civil/NI suits) was inappropriate at the interlocutory stage. [Paras 7, 9, 11]

High Court's order allowing the Section 482 petitions and quashing the complaints was set aside.

Novation of contract - Disputed factual findings not to be recorded in Section 482 petitions - Criminal liability for cheating and criminal conspiracy where mens rea is alleged - Whether the subsequent agreement of 08.11.2012 amounted to novation extinguishing criminal liability as a matter fit for summary adjudication. - HELD THAT: - The Court held that whether the later agreement effected a novation and its legal effect are questions of fact and law which must be examined after full trial; the High Court erred in recording a conclusion of novation at the Section 482 stage. Further, where the complaint alleges that the accused had a dishonest intention (for example, that lands were sold prior to the agreement and security cheques were drawn on a closed account), those allegations, if established after trial, may give rise to penal liability notwithstanding subsequent contractual arrangements. Determination of mens rea, genuineness of schedules and the impact of subsequent agreements are matters for the trial court and are not amenable to summary rejection in a Section 482 petition. [Paras 9, 10]

Question of novation and its consequences remitted for trial; not a valid ground to quash complaints at interlocutory stage.

Civil remedies and proceedings under the Negotiable Instruments Act not automatically barring criminal prosecution - Quashing of criminal proceedings - Whether the pendency of civil suits for recovery and complaints under the Negotiable Instruments Act warranted quashing of the criminal complaints. - HELD THAT: - The Court held that mere filing of suits for recovery or complaints under the Negotiable Instruments Act does not, by itself, constitute a ground for quashing criminal proceedings alleging cheating, criminal breach of trust or conspiracy. The existence of alternate civil remedies is a relevant but not determinative consideration; where allegations disclose criminality (including dishonest intention), the matter must ordinarily proceed to trial. The High Court's reliance on the pendency of civil/NI proceedings as a basis for quashing was therefore misplaced. [Paras 7, 9]

Pendency of civil suits or NI Act complaints is not a standalone ground to quash the criminal complaints; criminal proceedings to proceed to trial.

Trial on merits - Quashing of criminal proceedings - What is the appropriate course following setting aside of the High Court order? - HELD THAT: - Having set aside the High Court's order, the Supreme Court made clear that its findings are confined to these appeals and are not expressions on the merits of the allegations. The trial court is directed to proceed in accordance with law and decide the complaints on their merits. Investigation and charge-sheeting already completed in respect of one complaint remain subject to regular trial procedures. [Paras 11]

Matters remitted to the trial court to proceed and decide the complaints on merits in accordance with law.

Final Conclusion: The appeals are allowed; the High Court's common order dated 28.4.2017 quashing the criminal complaints is set aside and the matters are remitted to the trial court to decide the complaints on their merits, without this judgment constituting an expression on the substantive claims.

Exclusion of organisations in the Second Schedule under Section 24 of the RTI Act - exemption for personal information under Section 8(1)(j) of the RTI Act - application of Section 24 to information received from Directorate General of Income tax (Investigation) - requirement of larger public interest for disclosure of personal tax information

Exclusion of organisations in the Second Schedule under Section 24 of the RTI Act - application of Section 24 to information received from Directorate General of Income tax (Investigation) - Whether the Additional Director/Directorate General of Income tax (Investigation) is exempt from the RTI Act and, consequently, whether information emanating from that Directorate can be furnished in response to the petitioner's RTI request. - HELD THAT: - The Court held that Section 24(1) of the RTI Act excludes from the Act the intelligence and security organisations specified in the Second Schedule and information furnished by such organisations to the Central Government. Entry 16 of the Second Schedule expressly lists the Directorate General of Income tax (Investigation). Therefore the Additional Director, Income Tax (Investigation), to whom the RTI application was addressed, is covered by the exclusion in Section 24 and information received from that Directorate falls within the statutory exclusion. The Court also relied on the reasoning in Central Board of Direct Taxes v. Satya Narain Shukla to support the position that information emanating from the Directorate General of Income tax (Investigation) may be denied under Section 24. [Paras 11, 12]

Information originating from the Directorate General of Income tax (Investigation) is excluded from disclosure under Section 24 and the denial of information on that ground is justified.

Exemption for personal information under Section 8(1)(j) of the RTI Act - requirement of larger public interest for disclosure of personal tax information - Whether the information sought by the petitioner concerning steps taken in relation to a complaint involving a third party (Prakash Nautiyal) constitutes ''personal information'' exempt under Section 8(1)(j) and therefore can be denied unless larger public interest is shown. - HELD THAT: - The Court applied Section 8(1)(j) which exempts personal information the disclosure of which has no relationship to any public activity or interest, unless the public interest in disclosure outweighs the privacy. Reliance was placed on the Supreme Court's decision in Girish Ramchandra Deshpande and a Coordinate Bench decision of this Court in Naresh Trehan v. Rakesh Kumar Gupta, which hold that details disclosed in income tax returns and related documents are personal information and ordinarily exempt from disclosure unless the public interest justifies disclosure. Although the petitioner framed the request as seeking only the steps taken by the department, the Court found this to be an indirect attempt to obtain personal tax related information of the third party and therefore covered by the exemption. [Paras 13, 14, 15]

The information sought falls within ''personal information'' exempt under Section 8(1)(j) and, absent a demonstrable larger public interest, may be denied; the impugned order refusing disclosure on this ground is valid.

Final Conclusion: The writ petition is dismissed. The denial of information was upheld both because the Directorate General of Income tax (Investigation) is excluded from the RTI Act under Section 24 (Second Schedule) and because the material sought amounts to personal tax related information exempt under Section 8(1)(j) absent a larger public interest.