TaxTMI Updates e-Newsletter
Nov 06,2020

Saving of subordinate legislation - repeal-and-saving clause of Section 174(2)(e) of the CGST Act - effect of repeal under Section 6 of the General Clauses Act - continuation of rules on repeal-and-reenactment under Section 24 of the General Clauses Act - survival of Rule 5A of the Service Tax Rules, 1994 - competence of officers by deeming under Section 3 of the CGST Act - scope of audit/verification (including scrutiny and audit) saved by the repeal clause

Survival of Rule 5A of the Service Tax Rules, 1994 - repeal-and-saving clause of Section 174(2)(e) of the CGST Act - saving of subordinate legislation - Rule 5A of the Service Tax Rules, 1994 is saved and remains available for institution or continuation of audit/verification proceedings notwithstanding the enactment of the CGST Act. - HELD THAT: - The Court examined Section 174(2)(d)-(e) of the CGST Act and held that Parliament intended to save not only ongoing investigations but also to permit initiation of fresh investigations, inquiries and verifications under the omitted Chapter V of the Finance Act, 1994. The Court rejected the contention that absence of an express mention of the Service Tax Rules excludes subordinate legislation from the saving; rules framed to carry out Chapter V are necessarily within the ambit of what the saving clause preserves. The Court relied on the purposive interpretation of the saving clause and the operation of Section 6 of the General Clauses Act to conclude that the Service Tax Rules, including Rule 5A, survive for the disputed period and may be invoked as if the repeal had not occurred. [Paras 6, 7, 33, 34]

Rule 5A is saved and can be invoked for audit/verification in respect of acts and omissions relating to the erstwhile service tax regime.

Effect of repeal under Section 6 of the General Clauses Act - continuation of rules on repeal-and-reenactment under Section 24 of the General Clauses Act - Section 6 and Section 24 of the General Clauses Act operate to preserve rules, notifications and subordinate instruments made under the repealed enactment where there is no contrary legislative intention. - HELD THAT: - The Court reviewed authorities and the text of Sections 6 and 24 and concluded that where a Central Act is repealed and re-enacted (or amended in a manner amounting to repeal), Section 24 preserves subordinate legislation insofar as it is not inconsistent with the re-enacted provisions. The CGST Act expressly incorporates the application of Section 6 (Section 174(3)), and Section 174(2)(e) employs wide language ("including scrutiny and audit" and "any other legal proceedings"), demonstrating no contrary intention to destroy continuity of rules like Rule 5A. The Court distinguished precedents relied upon by the petitioner on factual grounds and held that Section 24 bolsters the saving of the Service Tax Rules for the transitional period. [Paras 21, 22, 23, 24, 30]

Sections 6 and 24 operate to preserve the Service Tax Rules to the extent not inconsistent with the CGST enactment; the mere framing of CGST Rules does not ipso facto supersede Rule 5A.

Competence of officers by deeming under Section 3 of the CGST Act - proper officer - Officers vested with powers by notifications under the Central Excise Act and the CGST Act are competent to exercise powers under Rule 5A for audit/verification; the visiting officers are proper officers for carrying out such scrutiny. - HELD THAT: - The Court observed that the proviso to Section 3 of the CGST Act and the Government notifications (appointing officers under the Central Excise Act and vesting powers with respect to Chapter V of the Finance Act) create a deeming and continuity such that Central Excise/Service Tax officers continue to exercise the powers required to conduct audits under Rule 5A. The petitioner produced no material to show the officers were not properly appointed; therefore the challenge to the competence of the officers fails. [Paras 31]

The officers carrying out the verification/audit are proper officers empowered to act under the preserved scheme of Chapter V and Rule 5A.

Scope of audit/verification (including scrutiny and audit) saved by the repeal clause - obligation and liability accrued prior to repeal - An audit/verification under Rule 5A can be conducted in respect of the disputed period and may lead to consequential adjudicatory proceedings; such proceedings are within the scope of Section 174 and Section 6 and are not precluded because adjudication has not crystallised before 01.07.2017. - HELD THAT: - The Court rejected the petitioner's submission that Section 174(2)(d)'s reference to duty or tax "due or may become due" is limited to liabilities crystallised before the CGST commencement. It held that the liability to pay service tax accrued at the time taxable events occurred during the disputed period, and audits under Rule 5A are part of the process that may reveal unpaid or short-paid tax, after which adjudication and recovery may follow. To interpret the saving clause narrowly would grant immunity to pre-GST evasions not yet subjected to inquiry, contrary to legislative intent. [Paras 33]

Audit/verification under Rule 5A for the disputed period is permissible and may lead to enforcement steps, including adjudication and recovery, under the saved regime.

Final Conclusion: The petition is dismissed. The Court holds that Rule 5A of the Service Tax Rules, 1994 survives the enactment of the CGST Act by virtue of Section 174(2)(e), read with Section 6 and Section 24 of the General Clauses Act, that the officers conducting the audit/verification are competent, and that audit/verification for F.Y. 2014-15 to 2016-17 (up to June 2017) may be validly undertaken and may give rise to consequential proceedings.

Pre-deposit requirement for filing GST appeal - maintainability of writ petition where appellate tribunal is non-functioning - conditional relief subject to compliance with statutory pre-conditions

Pre-deposit requirement for filing GST appeal - maintainability of writ petition where appellate tribunal is non-functioning - conditional relief subject to compliance with statutory pre-conditions - Petitioner's request for time to comply with the pre-condition of deposit under Section 112 of the Uttar Pradesh Goods and Services Tax Act, 2017 so as to pursue the statutory appeal in the absence of a functioning Appellate Tribunal. - HELD THAT: - The Court noted that the impugned order is appealable under the statutory appellate provision but the Appellate Tribunal in the State is not functioning. The petitioner offered to make the statutory deposit of tax, interest, fine fee and penalty as required for filing the appeal and sought a short period to comply. In the circumstances the Court granted limited, time-bound relief permitting the petitioner to deposit the amounts and produce the receipt within two days, subject to the statutory requirement being satisfied. The Court made clear that the relief was conditional on actual compliance within the stipulated period and that non-compliance would result in dismissal of the writ petition without further reference to the Court.

Two days' time granted to the petitioner to make the required deposit and submit the receipt; failure to do so will result in dismissal of the writ petition.

Final Conclusion: Writ petition permitted to remain pending for two days to enable the petitioner to comply with the statutory pre-deposit requirement under Section 112; if the petitioner fails to submit proof of deposit within that period, the petition shall stand dismissed without further reference.

Rectification under Section 161 of Uttar Pradesh Goods and Services Tax Act, 2017 - recall of appellate order - stay of operation of impugned order - interim relief pending adjudication - direction to file response and pleadings

Rectification under Section 161 of Uttar Pradesh Goods and Services Tax Act, 2017 - recall of appellate order - Whether the appellate authority could recall its earlier appellate order by invoking its power of rectification under Section 161 - HELD THAT: - The Court noted that, on a prima facie reading, the appellate authority's subsequent order impugning and recalling its earlier order appears to raise a substantive question about the proper scope of the power of rectification under Section 161 when an order has already been passed on merits. The Court did not finally adjudicate the legal question on merits but observed that the contention advanced by the petitioner has prima facie substance and that the matter requires consideration. Consequently the respondents were directed to file a response so that the issue may be contested and adjudicated on the merits in due course.

Issue not finally decided on merits; remanded for fresh consideration after responses are filed and adjudication on merits.

Stay of operation of impugned order - interim relief pending adjudication - Whether the impugned order dated 4.8.2020 (annexure 7) should be stayed pending further orders of the Court - HELD THAT: - On hearing learned counsel and having noted the prima facie view that the recall of the appellate order may be impermissible, the Court granted interim relief to preserve the status quo. The Court directed that, until further orders, the effect and operation of the impugned order dated 4.8.2020 shall remain stayed, thereby preventing any operation or consequence of that order while the matter is being contested and responses are filed.

Operation and effect of order dated 4.8.2020 stayed until further orders of the Court.

Direction to file response and pleadings - interim relief pending adjudication - Procedural directions for conduct of further proceedings in the petition - HELD THAT: - The Court ordered that all respondents file their response within four weeks and permitted the petitioner to file any rejoinder within one week thereafter. The listing for further hearing was directed to follow after the filing of such pleadings. These directions were issued to ensure that the disputed legal question and factual matrix are fully placed before the Court for final adjudication.

Respondents to file response within four weeks; petitioner may file reply within one week; matter to be listed thereafter.

Final Conclusion: Interim orders: respondents directed to file responses; operation of the impugned order dated 4.8.2020 is stayed pending further orders; the substantive question whether an appellate order passed on merits can be recalled by a rectification under Section 161 was left open for adjudication after responses are filed.

Challenge to show cause notice under Section 74 of the GST Act - judicial restraint in pre-adjudication interference - right to adjudicatory remedy and objection procedure - consideration of jurisdictional objections by the adjudicating authority - time bound disposal of adjudicatory proceedings

Challenge to show cause notice under Section 74 of the GST Act - judicial restraint in pre-adjudication interference - Writ challenge to Ext.P10 show cause notice - HELD THAT: - The Court declined to entertain a pre adjudication challenge to Ext.P10 show cause notice. Noting that the petitioner has an effective remedy by filing objections and securing adjudication before the competent authority, the Court held that interference with the show cause notice at the writ stage is not warranted even if the challenge includes contentions of want of jurisdiction. The petition is dismissed insofar as it seeks to set aside or quash the show cause notice. [Paras 1]

Writ petition dismissed insofar as it challenges Ext.P10; no interference with the show cause notice at this stage

Right to adjudicatory remedy and objection procedure - consideration of jurisdictional objections by the adjudicating authority - time bound disposal of adjudicatory proceedings - Direction to adjudicating authority to consider the petitioner's objections and to decide the proceedings initiated by Ext.P10 - HELD THAT: - Although the show cause notice will not be quashed, the Court directed that the objections filed by the petitioner through Ext.P12, including objections as to the propriety of issuance and jurisdictional contentions, must be considered by the 1st respondent while adjudicating the proceedings. The order must record consideration of those objections and any further objections raised at the hearing. The 1st respondent is required to hear the petitioner and pass a reasoned order within an outer limit of two months from receipt of a copy of this judgment. The petitioner is to produce a copy of the judgment and the writ petition before the 1st respondent for further action. [Paras 2, 3]

Adjudicating authority to consider objections (including jurisdictional objections) and pass a reasoned order after hearing the petitioner within two months

Final Conclusion: The writ petition challenging Ext.P10 show cause notice is dismissed; however, the adjudicating authority is directed to consider the petitioner's objections (Ext.P12 and any raised at hearing), hear the petitioner and pass a reasoned order in the proceedings initiated by Ext.P10 within two months of receipt of this judgment.

Release of detained goods against bank guarantee and simple bond under Section 129 of the SGST Act - Adjudication under Section 129 of the SGST Act - Prima facie detention for seizure and imposition of penalty - Non-adjudication of Circular's applicability pending statutory adjudication

Release of detained goods against bank guarantee and simple bond under Section 129 of the SGST Act - Release of the detained goods on furnishing a bank guarantee and a simple bond in terms of Section 129 of the SGST Act. - HELD THAT: - Petitioner sought release of goods and restraint on further proceedings. The Court declined to examine the merits of detention or applicability of the administrative Circular at interlocutory stage but allowed immediate release of the goods upon compliance with the statutory conditions prescribed by Section 129, namely furnishing a bank guarantee and a simple bond. The direction is conditional and interlocutory, leaving substantive adjudication to the statutory process. [Paras 3]

Goods to be released by the 1st respondent on the petitioner furnishing the bank guarantee and simple bond; adjudication to proceed in accordance with law.

Adjudication under Section 129 of the SGST Act - Non-adjudication of Circular's applicability pending statutory adjudication - Prima facie detention for seizure and imposition of penalty - Whether the Court would decide applicability of the Circular or merits of detention and penalty at interlocutory stage. - HELD THAT: - The Court expressly refrained from adjudicating the applicability of Circular Ext.P5 or from examining the correctness of the detention and penalty on the present petition. It recorded that the Adjudicating Authority may take a prima facie view to detain goods and impose penalty, and that such questions are to be raised and canvassed before the appropriate adjudicating authority during the statutory proceedings. The petitioner was left free to press all contentions during adjudication, which the Court directed to be completed expeditiously. [Paras 2, 3]

Court will not decide applicability of the Circular or merits of detention/penalty at this stage; those matters are to be considered in the adjudication proceedings which shall be conducted expeditiously.

Final Conclusion: Writ petition disposed: detained goods ordered released on the petitioner furnishing a bank guarantee and simple bond; the Court declined to decide the applicability of the Circular or the merits of detention and penalty, leaving those issues to be adjudicated by the statutory authority expeditiously.

Taxability of mesne profits - Revenue receipt vs capital receipt - Income from house property - Section 25B - clarificatory effect - Relation-back/accrual of mesne profits

Taxability of mesne profits - Revenue receipt vs capital receipt - Income from house property - Mesne profits and interest received pursuant to the civil decree in the facts of the present case constitute revenue receipt and are taxable under the head income from house property/under the Act. - HELD THAT: - The Court held that, on the facts, the mesne profits and interest were awarded as compensation in lieu of rent the assessee would otherwise have earned while the tenancy subsisted. The capital asset (the property) remained intact, title was not diminished and there was no sterilisation or impairment of the capital asset akin to cases where compensation is linked to procurement or loss of a capital asset. Applying the established principle that the character of a receipt depends on the factual matrix and the test in Kettlewell Bullen and related authorities, the Court concluded that the receipt was directly referable to the revenue-earning capacity of the property and thus constituted revenue receipt. The Court also relied on precedent of this Court in Uberoi Sons (Machines) Limited which followed the Madras High Court view affirmed by the Supreme Court, holding mesne profits to be taxable as income; the present facts were held to be on all fours with that decision. Consequently, the ITAT's finding that the mesne profits and interest are taxable under Section 23(1) was upheld. [Paras 41, 44, 46, 48, 52]

Mesne profits and interest awarded by the Civil Court in these facts are revenue receipts and taxable under Section 23(1) of the Act.

Section 25B - clarificatory effect - Relation-back/accrual of mesne profits - Section 25B is clarificatory in nature and the principle that mesne profits are taxable in the year of receipt (and not to be related back to earlier years) is consistent with settled law; accordingly the provision and related authorities support taxing the receipt in the year of receipt. - HELD THAT: - The Court noted that Section 25B (introduced w.e.f. 01.04.2001) is clarificatory and encapsulates the law that receipts such as arrears of rent/mesne profits are to be taxed in the year of receipt rather than being related back to earlier years when the right was inchoate. The Court relied upon its earlier decision in Uberoi Sons (Machines) Limited which applied P. Mariappa Gounder and held that mesne profits are taxable as income and that Section 25B merely clarifies the year of taxation. The Court observed that the accrual of mesne profits as a quantified amount often requires adjudication, and relation-back theories are inappropriate to determine accrual for income-tax purposes; accordingly, taxation in the year of receipt is the correct approach in line with the authorities considered. [Paras 18, 30, 48, 52]

Section 25B is clarificatory and the mesne profits in issue are to be taxed in the year of receipt; the ITAT correctly applied this principle.

Final Conclusion: The High Court dismissed the assessee's appeal and upheld the ITAT: the mesne profits and interest received pursuant to the Civil Court decree in the facts of this case are revenue receipts taxable under the Act (Section 23(1)), and the treatment in the year of receipt (with Section 25B being clarificatory) is correct.

Revenue expenditure - Capital expenditure - Enduring benefit test - Business expenditure wholly and exclusively for business - Allocation of lump sum payment across years

Revenue expenditure - Capital expenditure - Business expenditure wholly and exclusively for business - Enduring benefit test - Nature of lump sum payment made to third party for establishment of additional infrastructure to secure uninterrupted power supply - whether capital or revenue expenditure - HELD THAT: - The Tribunal's conclusion that the payment was revenue expenditure was upheld. The Court applied the settled principle that where an advantage merely facilitates the assessee's trading operations or enables the conduct of business more efficiently while leaving the field capital of the other party untouched, the expenditure is on revenue account even if the advantage endures. The court observed that the asset in question remained the property of the third party and that the factual matrix did not warrant treating the sum as an acquisition of a capital asset by the assessee. The Court rejected the Revenue's emphasis on the enduring benefit and on the third party's receipt of depreciation as irrelevant to the characterisation when that was not the case argued before the authorities or Tribunal. [Paras 8, 10]

Payment held to be revenue expenditure; Tribunal rightly characterised the expenditure as revenue and not capital.

Allocation of lump sum payment across years - Distortion of profit - Whether the lump sum expenditure incurred to ensure uninterrupted power supply for a multi year period could be allowed in one year notwithstanding that it may result in distorted profits - HELD THAT: - The Court endorsed the Tribunal's approach in allowing the claim in the manner it did and answered the substantial question against the Revenue. The court noted that the Revenue's contention that allowing the expenditure in one year would distort the assessee's profits did not merit interference where the expenditure was properly characterised as revenue in nature and the nature of the transaction did not support capitalisation. The factual distinction from authorities relied upon by the Revenue was also noted, and no basis was found to require apportionment or to treat the payment as capital merely to avoid perceived distortion. [Paras 5, 10]

Allowance of the lump sum expenditure in the year claimed was sustained; objection based on distortion of profit did not justify recharacterisation to capital.

Final Conclusion: The appeals are dismissed. The Tribunal was correct in holding the lump sum payment for infrastructure to secure uninterrupted power supply to be revenue expenditure and in allowing the claim as made; the substantial questions of law are answered against the Revenue.

Vivad Se Vishwas Scheme - declaration under Section 4 - determination of amount payable under Section 3 - immunity from prosecution and penalty under the Scheme - restoration of appeal without condonation of delay - substantial questions of law left open

Vivad Se Vishwas Scheme - declaration under Section 4 - restoration of appeal without condonation of delay - Disposition of the tax appeals by permitting the assessee to pursue settlement under the Vivad Se Vishwas Act, 2020 and directions regarding filing and processing of the declaration, leaving the substantial questions of law undecided. - HELD THAT: - The High Court declined to decide the substantial questions of law on account of subsequent legislative relief available under the Direct Tax Vivad Se Vishwas Act, 2020. The court permitted the assessee to file Form No. I (declaration under Section 4) on or before the date directed, and directed the competent authority to process the declaration and pass appropriate orders expeditiously, preferably within eight weeks of receipt of a complete declaration. The court further granted the assessee liberty to restore the appeals if the outcome under the declaration is not in its favour; such restoration petitions are to be entertained without requiring a separate application for condonation of delay and shall be placed before the Division Bench for orders. Consequently, the court disposed of the tax appeals subject to the said directions and expressly left the framed substantial questions of law open for adjudication if restoration is sought.

Appeals disposed of by directing filing and processing of declaration under the Vivad Se Vishwas Act with liberty to restore the appeals if the declaration's outcome is adverse; substantial questions of law left open.

Final Conclusion: The High Court disposed of the appeals by directing the assessee to avail the Vivad Se Vishwas Scheme (file Form No. I by the date directed) and by ordering expeditious processing of the declaration; the appeals may be restored without condonation of delay if the declaration's outcome is unfavourable, and the substantial questions of law are left open.

Vivad Se Vishwas Scheme - declaration under Section 4 - disputed tax - determination of amount payable under Section 3 - immunity from initiation of proceedings and penalty - restoration of appeal without condonation of delay

Vivad Se Vishwas Scheme - declaration under Section 4 - determination of amount payable under Section 3 - Direction to file declaration under the Vivad Se Vishwas Act and for the competent authority to process the same - HELD THAT: - The Court directed the assessee to file Form No.I (declaration under Section 4 of the Direct Tax Vivad Se Vishwas Act, 2020) by 09.11.2020 and required the designated authority to process the declaration and pass appropriate orders in accordance with the Act. The Court noted the statutory scheme whereby a declarant filing on or before the last date will have the amount payable determined under Section 3 and summarised the relevant provisos dealing with matters pending before various appellate forums. The directive is procedural and intended to enable resolution under the VSV Scheme rather than an adjudication on the substantial questions of law framed in the appeal. [Paras 3, 5, 8]

Assessee directed to file the declaration in Form No.I by 09.11.2020 and the competent authority directed to process it expeditiously, preferably within six weeks of filing.

Restoration of appeal without condonation of delay - liberty to restore appeal - Liberty to restore the appeal if the VSV declaration outcome is adverse, without requirement of condonation of delay - HELD THAT: - The Court granted the assessee liberty to seek restoration of the appeal in the event the decision on the declaration is not in its favour and directed the Registry to entertain such a Miscellaneous Petition for Restoration without insisting upon an application for condonation of delay; the Registry is to place the petition before the Division Bench for orders. This is a procedural concession to facilitate revival of appellate proceedings if relief under the VSV Act is not obtained. [Paras 7]

Assessee given liberty to restore the appeal without filing a separate condonation application; Registry to place restoration petition before the Division Bench.

Vivad Se Vishwas Scheme - substantial questions of law left open - Disposition of the appeal by reference to the VSV Act and leaving the substantial questions of law undecided - HELD THAT: - In view of the availability of the VSV Scheme and the directions given to pursue the statutory declaration, the Court disposed of the Tax Case Appeal with the aforementioned liberty and explicitly left the substantial questions of law framed in the appeal open. The Court therefore did not adjudicate the merits of the questions posed by the Revenue concerning the classification of receipts between heads of income or the applicability of earlier decisions. [Paras 4, 9]

The appeal is disposed of with liberty as directed; the substantial questions of law are left open.

Final Conclusion: The appeal was disposed of by directing the assessee to file a declaration under the Vivad Se Vishwas Act by the stipulated date and by directing expeditious processing; the assessee was granted liberty to restore the appeal without condonation of delay if the declaration's outcome is adverse; the Court left the substantial questions of law undecided.

Classification of government assistance as grant or loan - treatment of financial assistance as interest-free loan by subsequent Government Order - application of Explanation 10 to Section 43(1) for exclusion from cost of asset - allowability of depreciation on assets acquired from government assistance

Classification of government assistance as grant or loan - treatment of financial assistance as interest-free loan by subsequent Government Order - application of Explanation 10 to Section 43(1) for exclusion from cost of asset - allowability of depreciation on assets acquired from government assistance - Whether the financial assistance extended by the Government of Tamil Nadu to the assessee for TEAP works was a grant (requiring exclusion from cost of asset) or a loan (permitting depreciation on assets), for the assessment years 2014-15 and 2015-16. - HELD THAT: - The Court examined the sequence of Government Orders and related material placed before it. G.O.Ms.No.581 dated 19.10.2005 expressly referred to financial assistance as loan assistance from the Asian Development Bank, and the Head of Account nomenclature did not alter the substance of the assistance. Subsequent Government Orders (G.O.Ms.Nos.668 and 817) and the opinion relied upon by the CIT(A) supported the loan character. G.O.Ms.No.22 dated 03.02.2016, issued after communications from the assessee beginning 30.01.2014, treated the ADB assistance as an interest-free loan from the Government, thereby clarifying the recipient's liability as to the Government rather than characterising the transfer as a grant. The Assessing Officer's view that earlier orders used the word 'grant' and that G.O.Ms.No.22 was an afterthought was rejected on the basis that the original sanction recorded the ADB loan and that the assessee had sought and obtained governmental treatment as an interest-free loan prior to or in the course of assessment proceedings. On this factual and documentary foundation, the Court held that the amounts were loans and that the CIT(A) and the Tribunal were justified in allowing depreciation on assets acquired from those receipts despite Explanation 10 being invoked by the Assessing Officer. [Paras 12, 13, 14, 16, 17]

The assistance was in the nature of a loan (ultimately treated as an interest-free loan by G.O.Ms.No.22/2016), and the relief granted by the CIT(A) and the Tribunal permitting depreciation is upheld.

Final Conclusion: The appeals filed by the Revenue are dismissed; the common order of the Tribunal is confirmed and the substantial questions of law are answered against the Revenue.

Charitable purpose and the dominant object test - proviso to section 2(15) defining activities in the nature of trade, commerce or business - exemption under section 11 for trusts carrying out activities for general public utility - incidental surplus not converting charitable activity into business - reliance on precedent decisions including Sabarmati Ashram Gaushala Trust

Proviso to section 2(15) defining activities in the nature of trade, commerce or business - exemption under section 11 for trusts carrying out activities for general public utility - incidental surplus not converting charitable activity into business - charitable purpose and the dominant object test - Whether the proviso to section 2(15) applied so as to deny exemption under section 11 to the Trust for AY 2014-15, having regard to the nature of its activities. - HELD THAT: - The Tribunal found that the Trust's objects (breeding and improvement of cattle, production and sale of milk, agricultural and scientific research, training and allied activities) are for general public utility and charitable in nature. The generation of surplus from activities incidental to these objects does not by itself convert them into activities in the nature of trade, commerce or business. Applying the dominant object test and the indicia of business (profit motive, continuity and application of business principles), the Tribunal held that profit making was neither the aim nor the principal activity of the Trust and that any surplus was incidental. The Tribunal followed coordinate bench decisions and the decision in Sabarmati Ashram Gaushala Trust, and noted that the Special Leave Petition against Sabarmati was dismissed by the Supreme Court. For these reasons the proviso to section 2(15) was held not to be attracted and the Trust was entitled to exemption under section 11 for the assessment year in question. [Paras 6, 7, 8]

The proviso to section 2(15) does not apply and the Trust is entitled to exemption under section 11 for AY 2014-15; the revenue appeal is dismissed.

Final Conclusion: Following coordinate bench precedent and Sabarmati Ashram (SLP dismissed), the Tribunal affirmed the CIT(A)'s conclusion that the Trust's activities are charitable and the proviso to section 2(15) is not attracted; the revenue's appeal for AY 2014-15 is dismissed.

Revenue expenditure versus capital expenditure - allowability of professional and consultancy fees - allowability of advertisement and sales promotion expenses - deductibility of loss on waiver/settlement of loans - consistency of treatment across assessment years / precedential value of earlier assessment-year decision

Revenue expenditure versus capital expenditure - allowability of professional and consultancy fees - consistency of treatment across assessment years / precedential value of earlier assessment-year decision - Deletion of addition of Rs. 17,90,806/- disallowing professional and consultancy fees held to be rightly deleted by CIT(A). - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the payments (including amounts paid to Control Risk Group and consultancy for office space) were incurred in the ordinary course of the assessee's ancillary management and related services and conferred no enduring capital benefit. The CIT(A) applied the assessee's own Tribunal decision in Assessment Year 2007-08, noting no change in material facts for the year under consideration; on that basis these expenses were held to be revenue in nature and allowable. The Assessing Officer's characterisation of those payments as capital was therefore rejected. [Paras 7]

Ground No. 1 dismissed; addition deleted and expenses treated as revenue expenditure.

Revenue expenditure versus capital expenditure - allowability of advertisement and sales promotion expenses - consistency of treatment across assessment years / precedential value of earlier assessment-year decision - Deletion of addition of Rs. 1,40,69,932/- on account of advertisement and sales promotion held to be correctly deleted by CIT(A). - HELD THAT: - The Tribunal agreed with the CIT(A) that advertisement and sales promotion expenditures are revenue in nature, following the assessee's own Tribunal decision for Assessment Year 2007-08. As there were no different or new facts in Assessment Year 2008-09 to warrant a different conclusion, the Assessing Officer's disallowance was not sustained. [Paras 8]

Ground No. 2 dismissed; advertisement and sales promotion expenses allowed as revenue expenditure.

Deductibility of loss on waiver/settlement of loans - deductibility of loss on waiver/settlement of loans - Deletion of addition of Rs. 1,33,40,751/- on account of loss on waiver of loans held to be correctly deleted by CIT(A). - HELD THAT: - The CIT(A)'s finding, affirmed by the Tribunal, records that the assessee converted outstanding demands into various loan advances to GLH Hotels (secured interest-bearing, unsecured non-interest-bearing and interest-free unsecured loans) and thereafter settled the credit facility to safeguard its financial interest. The settlement resulted in a discounted recovery (NCB) and a net loss which had already been offered to tax in the relevant assessment years. On these facts the loss was not exigible to further addition, and the Assessing Officer's disallowance was rightly deleted. [Paras 9]

Ground No. 3 dismissed; loss arising from loan settlement held allowable as already offered to tax.

Final Conclusion: The Revenue's appeal is dismissed in entirety; the additions made by the Assessing Officer on account of professional and consultancy fees, advertisement and sales promotion, and loss on waiver/settlement of loans were correctly deleted by the CIT(A) and are not interfered with.

Disallowance of interest attributable to advances - genuineness and business purpose of claimed expenses - capitalization versus revenue expenditure (advertising/glow shine boards) - vouching and evidentiary burden for business expenses - precedent of past allowance in prior assessments as relevant evidential circumstance

Disallowance of interest attributable to advances - precedent of past allowance in prior assessments as relevant evidential circumstance - Validity of the Assessing Officer's disallowance of interest as attributable @12% on advances allegedly made to Shri Arun Kumar - HELD THAT: - The Tribunal upheld the finding of the CIT(A) that the advances were interest free and the assessee had produced material before the revenue authorities establishing the nature of the advances. The CIT(A) recorded that the sum was advanced interest free to a person related to the founder and noted that in earlier assessment years similar treatment had been accepted by the Revenue. On the basis of the material before it and the earlier allowance, the AO's disallowance was not sustained. [Paras 9, 22]

Revenue's appeal against the disallowance of interest attributable to the advance is dismissed for assessment years 2013 14 and 2014 15.

Genuineness and business purpose of claimed expenses - vouching and evidentiary burden for business expenses - Allowability of various expenses (marriage gift, club subscriptions, consultancy fees, commemorative advertisement) treated by AO as personal in nature - HELD THAT: - The Tribunal accepted the CIT(A)'s conclusion that the assessee had produced evidence before the AO and the CIT(A) to establish these claims, and that there was no fresh finding by the Revenue as to why the expenses should be disallowed. The fact that similar claims had been allowed in earlier years and that supporting evidence was on record led the Tribunal to conclude that the additions were not justified. [Paras 12, 23]

Revenue's appeals against deletion of these additions are dismissed for assessment years 2013 14 and 2014 15.

Capitalization versus revenue expenditure (advertising/glow shine boards) - genuineness and business purpose of claimed expenses - Proper treatment of glow shine board expenses claimed by the assessee - HELD THAT: - The CIT(A) found, and the Tribunal upheld, that the glow shine boards were not owned by the assessee and that amounts were charged from dealers against supply of those boards. The assessee had provided details to the AO and the CIT(A), and earlier assessments had accepted similar treatment. On these findings, the Tribunal held that the AO's contention based on normal useful life and capitalization was not sustained. [Paras 15, 24]

Revenue's appeal against disallowance of glow shine board expenses is dismissed for assessment years 2013 14 and 2014 15.

Vouching and evidentiary burden for business expenses - genuineness and business purpose of claimed expenses - Allowability of un vouched expenses (entertainment, prizes and rewards, sale promotion, staff welfare) disallowed by the AO - HELD THAT: - The Tribunal accepted the CIT(A)'s finding that the assessee had furnished details and supporting evidence to demonstrate the business exigency and genuineness of these expenses. Given that similar expenses had been allowed in prior years and that the AO/CIT(A) had been furnished with explanations and evidence, the AO's additions were not upheld. [Paras 18, 25]

Revenue's appeal against additions made on account of un vouched business expenses is dismissed for assessment years 2013 14 and 2014 15.

Genuineness and business purpose of claimed expenses - vouching and evidentiary burden for business expenses - Allowability of foreign travel expenses partly questioned as personal to the promoter family - HELD THAT: - The assessee had produced supporting evidence before the AO and the CIT(A) demonstrating that the foreign trips were for business purposes. The CIT(A) gave a categorical finding to that effect, which the Tribunal endorsed on review of the record. The Department did not point to a fresh or persuasive factual basis to overturn that conclusion. [Paras 21]

Revenue's appeal against the disallowance in respect of foreign travel expenses is dismissed for assessment year 2013 14.

Final Conclusion: For assessment years 2013 14 and 2014 15 the Tribunal dismissed the Revenue's appeals in entirety, upholding the CIT(A)'s deletions and findings that the relevant advances and expenses were properly evidenced, genuine and for business purposes, and noting prior acceptance of similar claims in earlier assessments.

Allowability of job work expenses - appreciation of evidence - benefit of TDS credit - disallowance for lack of party-wise details

Allowability of job work expenses - appreciation of evidence - benefit of TDS credit - Deletion of addition of Rs. 5,00,000 disallowed from job work charges claimed by the assessee - HELD THAT: - The Tribunal examined whether the addition of Rs. 5,00,000 made by the AO (and upheld by the CIT(A)) out of the job work expenses claimed by the assessee was sustainable. The assessee had produced detailed documentary evidence including party-wise lists of payments, mode of payment and particulars of TDS deducted; major payments were made by cheque and TDS was deducted. The CIT(A) granted credit for the TDS but maintained the addition on the ground that party-wise details were not furnished. The Tribunal found that the evidences filed were material and had not been properly appreciated by the authorities below. Because the assessee had substantiated the expenditure with documentary proof and TDS details which the revenue did not controvert, the addition lacked a proper evidentiary foundation. Applying the principle that disallowance cannot be sustained where sufficient evidence of payment and tax deduction is produced and not satisfactorily rebutted by Revenue, the Tribunal concluded that the addition was wrongly made and deserved deletion.

The addition of Rs. 5,00,000 out of job work charges is deleted and the assessee's appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal for assessment year 2016-17, deleting the addition of Rs. 5,00,000 made on account of job work expenses after finding that the assessee had furnished sufficient documentary evidence including party-wise payment details, mode of payment and TDS particulars which were not satisfactorily controverted by Revenue.

Condonation of delay - scope of proceedings under section 263 - Explanation (1)(c) to section 263 - adjudication by Commissioner (Appeals) of issues not subject-matter of revision - remand to adjudicatory authority for fresh adjudication

Condonation of delay - bonafide belief based on legal advice - Whether the inordinate delays in filing the appeals for AY 2005-06 and AY 2004-05 should be condoned. - HELD THAT: - The Tribunal accepted the assessee's explanation that appeals against the CIT(A)'s orders were filed late because the assessee, on professional/legal advice, believed the contested issues in the original assessments could be agitated in proceedings pursuant to the CIT's orders under section 263. The assessee did not appeal the section 263 orders to the Tribunal because it bona fide believed the assessments had been set aside and would be re examined by the AO. Receipt of the Tribunal's adverse rulings on related matters in 2016 clarified that the remaining issues had not been adjudicated, and thereafter, after legal consultations, the assessee filed the present appeals. Given the factual matrix and that substantive rights should not be defeated by technicalities, the Tribunal found the delay to be for bona fide reasons and exercised its discretion to condone the delays in both appeals. [Paras 9, 10, 11, 20]

Delay in filing the appeals for AY 2005-06 and AY 2004-05 is condoned and the appeals are admitted.

Scope of proceedings under section 263 - Explanation (1)(c) to section 263 - adjudication by Commissioner (Appeals) of issues not subject-matter of revision - remand to adjudicatory authority for fresh adjudication - Whether the CIT(A) erred in treating the appeals as infructuous and not adjudicating issues which were not the subject-matter of the CIT's section 263 directions. - HELD THAT: - The Tribunal held that the CIT's exercise under section 263 did not, by itself, oust the jurisdiction of the Commissioner (Appeals) to decide issues in the original assessment which were not the subject of the revisionary directions. In terms of Explanation (1)(c) to section 263(1), matters in an assessment that were not considered and decided in an appeal continue to fall within the appellate forum's remit. The CIT(A)'s conclusion that the entire assessment had been set aside by the section 263 order was erroneous because the issues raised by the assessee (for example, treatment of software expenditure, computation of deduction under the relevant export deduction provision, and certain transfer pricing adjustments) were not part of the matters remitted by the CIT under section 263. Consequently, those issues remained to be adjudicated by the CIT(A). The Tribunal therefore set aside the CIT(A)'s orders and restored the issues raised in the appeals for adjudication on merits by the CIT(A). [Paras 12, 13, 21]

The CIT(A)'s orders are set aside to the extent they declined to adjudicate issues not covered by the section 263 directions; those issues are restored to the CIT(A) for fresh adjudication on merits.

Final Conclusion: The delays in filing the appeals for AY 2005-06 and AY 2004-05 are condoned; the CIT(A)'s orders dismissing the appeals as infructuous are set aside, and the issues raised in the appeals are restored to the Commissioner (Appeals) for adjudication on merits; appeals are treated as allowed for statistical purposes.

Notice under Section 274 must specifically state whether penalty is for concealment of particulars of income or for furnishing inaccurate particulars of income - Imposition of penalty under Section 271(1)(c) invalid if show-cause notice is vague or does not confine penalty to the grounds on which proceedings were initiated - Initiation of penalty proceedings on one limb and imposing penalty on another is bad in law - Principles of natural justice require that the assessee be made aware of the specific grounds to be met in penalty proceedings - Penalty proceedings are distinct and independent from assessment proceedings

Notice under Section 274 must specifically state whether penalty is for concealment of particulars of income or for furnishing inaccurate particulars of income - Imposition of penalty under Section 271(1)(c) invalid if show-cause notice is vague - Principles of natural justice - Validity of penalty under Section 271(1)(c) in view of a show-cause notice under Section 274 that did not specify whether the charge was concealment of particulars of income or furnishing inaccurate particulars of income. - HELD THAT: - The Tribunal found that the show-cause notice issued under Section 274 merely presented both limbs ("have concealed the particulars of your income or furnished inaccurate particulars of such income") without striking out the inapplicable portion and thus failed to specify the precise charge against the assessee. Relying on the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory, the Tribunal held that where the notice is vague and does not confine the assessee to the particular limb of Section 271(1)(c), principles of natural justice are offended. The Tribunal observed that the CIT(A)'s construction - treating a tick mark as equivalent to striking out the other limb - was contrary to the rule that initiation and imposition of penalty must be on the same specified ground; initiating proceedings on one limb and imposing penalty on another is impermissible. Because the notice did not disclose the specific grounds the assessee was required to meet, the imposition of penalty could not be sustained and had to be cancelled. [Paras 6, 8]

Penalty imposed under Section 271(1)(c) set aside as the Section 274 notice was defective for not specifying the limb on which penalty was sought.

Final Conclusion: Appeal allowed; the penalty imposed under Section 271(1)(c) is cancelled for Assessment Year 2006-07 because the show-cause notice under Section 274 failed to specify whether the charge was concealment of particulars of income or furnishing inaccurate particulars of income.

Condonation of delay in filing appeal - revision of assessment as erroneous and prejudicial to the interest of revenue under Explanation 2 to section 263 - non-application of mind by assessing officer - assessment of Annual Lettable Value of unsold flats held as stock-in-trade

Condonation of delay in filing appeal - Whether the delay of 20 days in filing the appeal before the Tribunal should be condoned. - HELD THAT: - The assessee explained that the order under challenge was sent to an old residential address of a partner which was locked and thus the assessee remained unaware of the order; this factual position was supported by an affidavit and was not controverted by the revenue. On the material before the Tribunal the delay of 20 days was found to have occurred for bona fide reasons beyond the control of the assessee and therefore deserved condonation. [Paras 5]

Delay of 20 days in filing the appeal is condoned.

Revision of assessment as erroneous and prejudicial to the interest of revenue under Explanation 2 to section 263 - non-application of mind by assessing officer - assessment of Annual Lettable Value of unsold flats held as stock-in-trade - Whether the Principal Commissioner of Income Tax rightly invoked jurisdiction under section 263 and set aside the assessment on the ground that the Assessing Officer failed to consider the ALV of unsold flats held as closing stock. - HELD THAT: - The Tribunal examined the assessment record and the query and reply exchanged during assessment. The queries and replies related to valuation of opening and closing work-in-progress and determination of cost of sale, and did not disclose that the AO had addressed whether the Annual Lettable Value of unsold flats (held as stock-in-trade) should be assessed under the head 'house property'. Consequently the AO had not applied his mind to that specific issue. In such circumstances the omission falls within Explanation 2(a) to section 263 as constituting an order which is erroneous and prejudicial to the revenue. The Principal Commissioner relied on relevant precedent and rightly directed that the assessment be set aside and the AO be asked to pass a fresh order after considering the ALV issue and affording opportunity to the assessee. [Paras 8]

The invocation of jurisdiction under section 263 and the requirement to set aside the assessment for fresh consideration by the AO are upheld; the appeal is dismissed.

Final Conclusion: The Tribunal condoned the 20-day delay in filing the appeal, found no infirmity in the Principal Commissioner's exercise of jurisdiction under section 263 (on account of the AO's non-application of mind regarding assessment of ALV of unsold flats held as stock-in-trade), upheld the order setting aside the assessment for fresh consideration by the AO, and dismissed the assessee's appeal.

Arm's Length Price - Comparability analysis in transfer pricing - Exclusion of comparables for functional dissimilarity and extraordinary events - Verification of comparables with different financial year endings - Prospective operation of Safe Harbour Rules - Working capital adjustment precluding separate interest-on-receivables adjustment - Allowability of depreciation on acquired business database and goodwill as intangible assets - Binding effect of Transfer Pricing Officer's findings on valuation

Comparability analysis in transfer pricing - Exclusion of comparables for functional dissimilarity and extraordinary events - Certain companies included in the final set of comparables were not functionally comparable and were to be excluded from benchmarking of the ITeS segment - HELD THAT: - The Tribunal examined the functional profiles, scale of operations and extraordinary events of the companies included as comparables by the TPO/DRP. Accentia Technologies Ltd. was excluded because it was functionally dissimilar (diversified services, significant intangibles, and an amalgamation in the year) and the amalgamation constituted an extraordinary event making that year unsuitable for comparison. Infosys BPO Ltd., TCS e-Serve Ltd. and TCS e-Serve International Ltd. were excluded on the ground that their large scale and brand-driven profitability rendered them functionally dissimilar and thereby unsuitable as comparables for the assessee. eClerx Services Limited was excluded because KPO margins are not comparable with BPO margins. The Tribunal directed the Assessing Officer/TPO to exclude these concerns from the final comparable set and recompute the arm's length price accordingly. [Paras 12, 13, 14, 15, 19]

Accentia Technologies Ltd., Infosys BPO Ltd., TCS e-Serve Ltd., TCS e-Serve International Ltd., and eClerx Services Limited are to be excluded from the final list of comparables.

Verification of comparables with different financial year endings - Comparability analysis in transfer pricing - Two proposed comparables with different accounting year-ends were not to be excluded automatically and require verification for possible inclusion - HELD THAT: - The Tribunal held that comparables should not be excluded solely because their financial year-end differs from that of the tested party if, from available data, results for the required financial year can reasonably be extrapolated. The Assessing Officer/TPO was directed to afford the assessee a reasonable opportunity to produce data for M/s R Systems International Limited (segmental) and M/s Caliber Point Business Solutions Limited and to verify and decide on their inclusion; the ALP for the ITeS segment was to be recomputed after such verification. [Paras 16, 17, 19]

Assessing Officer/TPO to verify and, after hearing, decide on inclusion of R Systems International Limited (segmental) and Caliber Point Business Solutions Limited and recompute the arm's length price for the ITeS segment accordingly.

Prospective operation of Safe Harbour Rules - Safe Harbour Rules were held not to apply to the year under consideration as they operate prospectively - HELD THAT: - Relying on precedents of the jurisdictional High Court, the Tribunal found that the Safe Harbour Notification relied upon by the Revenue is prospective and therefore not operative for the Assessment Year in issue. Consequently, directions premised on applying safe harbour methodology to the year under consideration were set aside. [Paras 20]

Orders of authorities below that applied or relied on Safe Harbour Rules for the year under consideration are reversed.

Working capital adjustment precluding separate interest-on-receivables adjustment - No separate transfer pricing adjustment for interest on receivables where working capital adjustment has been allowed - HELD THAT: - Applying the ratio of the jurisdictional High Court, the Tribunal held that if a working capital adjustment has been permitted in computing the arm's length price, a further adjustment on account of interest on receivables is not permissible. The earlier adjustment made by the AO/TPO on account of interest on overdue receivables was therefore held to lack merit and was disallowed. [Paras 21, 23]

Interest-based adjustment on receivables is not sustainable where working capital adjustment has been allowed; the adjustment made by the AO/TPO is set aside.

Allowability of depreciation on acquired business database and goodwill as intangible assets - Binding effect of Transfer Pricing Officer's findings on valuation - Cost of acquired business database and goodwill not to be restricted; depreciation on both is allowable - HELD THAT: - The Tribunal followed its earlier decisions in the assessee's own case and applicable High Court precedents to hold that (a) the TPO had accepted the purchase consideration for the acquired business database, and absent any cogent material to show the price was excessive, the AO could not substitute his valuation; accordingly the restriction of the database cost was held unsustainable and depreciation on the full amount was to be allowed; and (b) the acquisition included goodwill and, following earlier Tribunal rulings and Supreme Court precedent, depreciation on goodwill acquired for business is allowable as an intangible asset under section 32. The AO was directed to allow depreciation accordingly. [Paras 27, 28, 29, 31, 32]

Restriction of the cost of the acquired database is set aside; the Assessing Officer is directed to allow depreciation on the entire payment for the acquired business database and to permit depreciation on acquired goodwill.

Final Conclusion: The assessee's appeal is allowed: specified non-comparable entities are excluded from the comparable set; the Assessing Officer/TPO is directed to verify two proposed comparables with different year-ends and recompute the ALP for the ITeS segment after hearing the assessee; Safe Harbour Directions for the year are set aside; the interest-on-receivables adjustment is disallowed as working capital adjustment was permitted; and the restriction on the cost of acquired business database and denial of depreciation on database and goodwill are set aside, with depreciation to be allowed.

Bogus purchases disallowance - documentary evidence of purchase - adverse inference for non-production of suppliers - when sales are not doubted 100% disallowance cannot be made - quantification of disallowance by profit element - 12.5% reduced by declared gross profit

Bogus purchases disallowance - when sales are not doubted 100% disallowance cannot be made - documentary evidence of purchase - adverse inference for non-production of suppliers - Whether the addition of 100% of purchases as bogus is sustainable where sales are not doubted and the assessee produced purchase vouchers and payments through banking channel but could not produce suppliers. - HELD THAT: - The Tribunal found that the assessee had produced documentary evidence of purchases and shown payments through banking channels, although the suppliers were not produced which gave rise to an adverse inference. The Tribunal applied the settled principle that where sales are not doubted, a blanket 100% disallowance of purchases as bogus is impermissible because sales cannot ordinarily occur without actual purchases. The Tribunal relied on the reasoning in the cited jurisdictional High Court decision to reject a complete disallowance, while noting factual distinctions (supplier transactions through grey market) that affected the extent of disallowance.

The 100% disallowance was held unsustainable and reduced.

Quantification of disallowance by profit element - 12.5% reduced by declared gross profit - The appropriate method and quantum of disallowance to be applied in place of the 100% addition. - HELD THAT: - On quantification, the Tribunal accepted the assessee's submission that it would be double prejudice to disallow the standard 12.5% without accounting for gross profit already declared. Having regard to the nature of purchases (including grey market purchases) and the need to reflect the profit element attributable to such purchases, the Tribunal directed that disallowance be restricted to 12.5% of the purchases alleged to be bogus, to be reduced by the gross profit already declared by the assessee. The counsel for the assessee agreed to this computation.

Disallowance directed to be limited to 12.5% of the impugned purchases after deducting the gross profit already declared by the assessee.

Final Conclusion: Revenue's appeal dismissed; assessee's cross-objection partly allowed by restricting the disallowance to 12.5% of the alleged bogus purchases reduced by the gross profit already declared.

Monetary limits for departmental appeals and exception for organised tax evasion (bogus LTCG/STCL through penny stocks) - Filing of appeals on merits pursuant to a special order under section 268A - Rectification of Tribunal order under section 254(2) of the Act

Monetary limits for departmental appeals and exception for organised tax evasion (bogus LTCG/STCL through penny stocks) - Filing of appeals on merits pursuant to a special order under section 268A - Whether CBDT Circular No. 23 of 2019 and the CBDT special order dated 16.09.2019 operate to permit filing or revival of appeals on merits in appeals already filed or dismissed prior to issuance of the special order. - HELD THAT: - The Tribunal examined Circular No. 23 of 2019 and the subsequent special order communicated by the CBDT vide office memorandum dated 16.09.2019. The Circular provides that notwithstanding monetary limits fixed under earlier circulars issued under section 268A, appeals may be filed on merits as an exception where the Board, by way of special order, directs filing of appeal on merits in cases involving organised tax-evasion through bogus LTCG/STCL via penny stocks. The special order dated 16.09.2019, issued under the Board's powers, exempts such cases from monetary limits and directs that appeals/SLPs in such cases shall be filed on merits. The Tribunal held that the special order contemplates filing of appeals pursuant to that order and thus applies to appeals filed on or after the date of the special order. It does not contemplate retroactive application to appeals already filed and dismissed prior to issuance of the special order; accordingly the exception cannot be read to apply to the Revenue's appeal filed on 22.05.2019 which was decided on 21.08.2019. [Paras 6, 7, 8, 9]

CBDT Circular No. 23 of 2019 and the special order dated 16.09.2019 do not apply to appeals already filed and dismissed prior to the special order; they permit filing on merits only for appeals filed pursuant to the special order (on or after 16.09.2019).

Rectification of Tribunal order under section 254(2) of the Act - Whether non-consideration of Circular No. 23 of 2019 and the CBDT special order dated 16.09.2019 at the time of passing the Tribunal's order of 21.08.2019 constitutes a mistake apparent on the face of the record capable of rectification under section 254(2). - HELD THAT: - The Tribunal noted that both Circular No. 23 of 2019 and the special order dated 16.09.2019 were not in existence and were not part of the record when the matter was heard on 20.08.2019 and the order was passed on 21.08.2019. Given that the special order was issued later and, on the Tribunal's construction, applies prospectively to appeals filed pursuant to it, the omission to consider those instruments at the earlier hearing is not an apparent error of record. The limited scope of section 254(2) does not permit recall or rectification on this basis where the material relied upon was not in existence at the time of the original order. [Paras 10]

Non-consideration of the later-issued Circular and special order is not a mistake apparent on the face of the record and cannot be rectified under section 254(2); the miscellaneous application is therefore dismissed.

Final Conclusion: The miscellaneous application filed by the Revenue is dismissed: the CBDT Circular No. 23/2019 and the special order dated 16.09.2019 do not apply retrospectively to appeals filed and dismissed before the special order, and their non-consideration at the earlier hearing does not amount to a mistake apparent on the face of the record warranting rectification under section 254(2).

Prohibited goods - interim injunction/relief - customs assessment and clearance subject to conditions - survey for reusability - undertaking for reuse sale - conditional release pending final adjudication

Prohibited goods - reusability test - Whether old and used tyres which are reusable fall within the ambit of the "prohibited goods" - question reserved for final adjudication and not finally decided. - HELD THAT: - The Court observed that the core controversy whether old and used tyres that are reusable amount to "prohibited goods" is prima facie covered by earlier coordinateBench orders but the main Special Civil Application No.8492 of 2015 remains pending for final hearing. The Court therefore declined to decide the substantive question at this stage and directed that the stance of the Union of India be placed on record for final disposal. The matter is to be decided once the main lis is finally heard.

Substantive question reserved and listed for final hearing; not finally adjudicated in this order.

Interim injunction/relief - customs assessment and clearance subject to conditions - survey for reusability - undertaking for reuse sale - Grant of interim relief to permit assessment and clearance of the imported used tyres subject to conditions. - HELD THAT: - Relying on a coordinate Bench order in a similar matter, the Court directed interim release of the goods subject to specified conditions. The determinative conditions require that a Customs-deputed surveyor inspect the tyres to ascertain whether they are reusable with or without retreading; the petitioner shall not clear any goods found to be non-reusable; and the responsible person shall furnish an undertaking that the imported goods will be sold in a manner that they will be reused. The Court recorded that identical interim directions shall apply and that respondents must ensure compliance by the returnable date.

Interim directions issued permitting assessment and clearance subject to the stated conditions; matter listed for final disposal on the returnable date.

Final Conclusion: The Court reserved the substantive question whether reusable old and used tyres are "prohibited goods" for final adjudication, while granting interim relief permitting assessment and conditional clearance of the tyres subject to a survey for reusability and an undertaking as to sale for reuse; the matter is listed for final hearing on the returnable date and Special Civil Application No.8492 of 2015 is to be notified along with the present petition.

Liability of an auction purchaser for antecedent electricity dues - effect of express sale-deed clause absolving purchaser of pre-confirmation statutory dues - recoverability of dues through company liquidation proceedings and role of the Official Liquidator - applicability of electricity supply regulations to bar new connection where earlier dues are claimed - availability of alternative remedy and discretionary interference by writ jurisdiction

Liability of an auction purchaser for antecedent electricity dues - effect of express sale-deed clause absolving purchaser of pre-confirmation statutory dues - The petitioner is not liable to pay electricity dues arising prior to confirmation of sale and the sale-deed absolves the petitioner of such pre- confirmation dues. - HELD THAT: - The sale deed executed by the Official Liquidator expressly provides that dues of the company up to the date of the winding up order would be treated as claims against the company and that the vendee would be liable only for dues arising from the date of confirmation of sale (paras 20, 21, 31). The Court noted that the disputed electricity dues are prior to 25/27.07.2017 and that the Company Judge had earlier disposed of the interlocutory application after an assurance by the promoters that they would pay the charges; the electricity company did not pursue the claim before the Company Judge nor challenge that order (paras 16-17, 31). In these peculiar facts-an express contractual clause in the sale deed, confirmed by the Company Court, and abandonment of the claim before the Company Judge-the Court held that recovery of pre-confirmation dues from the petitioner does not arise and quashed the demand (paras 21, 31-32, 35). [Paras 20, 21, 31, 32, 35]

Demand for recovery of pre-2017 electricity dues from the petitioner quashed; petitioner not liable for those dues.

Applicability of electricity supply regulations to bar new connection where earlier dues are claimed - liability of an auction purchaser for antecedent electricity dues - Regulation relied upon by the respondent (Clause 4.12 of the Electricity Supply Code) and precedents on auction-purchaser liability do not override the sale-deed and the Company Court's orders in the peculiar facts of this case. - HELD THAT: - The Court examined Clause 4.12 and prior decisions relied on by the respondent and observed that the regulation is not applicable in the present factual matrix because the electricity company had pursued its claim in Company Petition No.17/2002, obtained disposal of its interlocutory application on an assurance by the promoters, and thereafter did not press the claim or challenge the company-court orders (paras 24-26, 28-31). Though the authorities establish that distributors may, in general, insist on clearance of antecedent dues or that auction purchasers can be made liable where sale conditions so provide, the present case is distinguishable: the sale deed expressly absolves the purchaser of dues prior to confirmation dates and the sale and sale-deed were confirmed by the Company Court and left unchallenged (paras 25-31). Consequently the regulation and the precedents relied upon do not justify recovering the pre-confirmation dues from the petitioner in these circumstances. [Paras 24, 25, 26, 31]

Clause 4.12 and the cited authorities do not justify recovery from the petitioner given the express sale-deed clause and the Company Court's orders.

Availability of alternative remedy and discretionary interference by writ jurisdiction - The existence or assertion of an alternative remedy did not bar the petitioner from obtaining relief by writ in the peculiar facts of the case. - HELD THAT: - The respondent pleaded availability of alternative remedy but did not identify the forum or demonstrate prejudice; the Court held that even if an alternative remedy existed, the petitioner could not be dismissed on that ground given the facts-particularly the finality of the Company Court's treatment of the dues, the sale-deed clause, and the respondent's conduct in abandoning its claim before the Company Judge (paras 10, 22-23, 31). The Court therefore proceeded to exercise writ jurisdiction and grant relief. [Paras 10, 22, 23, 31]

Writ petition maintainable; alternative remedy plea rejected in the circumstances.

Recoverability of dues through company liquidation proceedings and role of the Official Liquidator - fact-finding inquiry into abandonment of claim and recovery from promoters - The Court directed a fact-finding exercise and recovery steps against responsible officials and promoters; recovery from promoters/ assets and investigation into respondent's conduct to be undertaken within specified periods. - HELD THAT: - Observing that the respondent had an opportunity to press its claim before the Company Judge but appears to have abandoned it on the basis of assurances by the promoters, the Court ordered the Managing Director of the respondent to conduct a fact-finding inquiry, fix responsibility and take action under law against persons found responsible (para 33). The Court also directed that the respondent take appropriate steps to recover outstanding dues from the promoters of Dhar Cement Limited or from assets held by them in accordance with the Company Judge's order, to be completed within six months, while the inquiry to be completed within three months (para 33). These directions constitute an administrative/ investigative remand for action and verification, not an adjudication on the merits of recovery from promoters. [Paras 33]

Directed inquiry into respondent's conduct and mandated steps for recovery from promoters/assets with timelines; matter remitted for fact-finding and execution of recovery steps.

Final Conclusion: The writ petition is allowed: the demand dated 10.07.2020 for recovery of pre-confirmation electricity dues from the petitioner is quashed and the respondent is restrained from recovering those dues from the petitioner; the respondent is directed to pursue recovery (if any) from the promoters/ assets in accordance with company-liquidation procedures and to complete a fact-finding inquiry and recovery steps within court-prescribed timelines.

Transfer of pending winding up proceedings to the National Company Law Tribunal under substituted Section 434 - fifth proviso conferring judicial discretion to may by order transfer - effect of 2018 amendment to Section 434 in furtherance of the Code's object of avoiding parallel proceedings - applicability of Section 238 of the Insolvency and Bankruptcy Code over inconsistent provisions

Transfer of pending winding up proceedings to the National Company Law Tribunal under substituted Section 434 - fifth proviso conferring judicial discretion to may by order transfer - effect of 2018 amendment to Section 434 in furtherance of the Code's object of avoiding parallel proceedings - Whether the company petition pending before the High Court (Company Petition No.353 of 2016) is liable to be transferred to the Tribunal under the Insolvency & Bankruptcy Code, 2016 pursuant to the substituted Section 434 as amended effective 17/08/2018, and whether the company court must exercise the discretion under the fifth proviso in favour of transfer. - HELD THAT: - The Court examined the legislative scheme as interpreted by the Supreme Court in Forech India Ltd., which explains that the 2018 substitution of Section 434 expanded transferability so that winding up petitions pending in High Courts at various stages could be transferred to the NCLT to avoid parallel proceedings and to advance the Code's objective of corporate rescue. The third proviso's clause dealing with petitions where notice had been served is subject to the subsequently enacted fifth proviso which begins with "provided further" and empowers the company court that "may by order transfer" such petitions. The use of the word "may" imports judicial discretion; that discretion must be exercised having regard to the object of the 2018 amendment and the statutory purpose of preventing duplicated fora and allowing insolvency proceedings under the Code to run their course. Where the insolvency process under the Code has been invoked by a financial creditor under Section 7 and concurrent proceedings exist in the High Court, transfer aligns with the legislative intent and is appropriate. Applying these principles to the facts, the Court found that transfer of Company Petition No.353 of 2016 to the Tribunal under the Code is consonant with the object of the amendment and that the discretionary power under the fifth proviso ought to be exercised in favour of transfer.

Company Petition No.353 of 2016 is ordered to be transferred to the Tribunal under the Insolvency & Bankruptcy Code, 2016; the discretionary power under the fifth proviso is exercised in favour of transfer and the oral application for stay is refused.

Final Conclusion: The petition for transfer under the substituted Section 434 (as amended effective 17/08/2018) is allowed and Company Petition No.353 of 2016 is directed to be transferred to the NCLT in furtherance of the Code's object; the request to stay the transfer is declined.

Oppression and mismanagement - waiver of threshold under proviso to Section 244(1) - consent under Section 244(2) - statutory threshold of one-tenth (10%) of members / issued share capital - authentication of overseas authorizations - qualified auditor's report and reliability of financial statements - Tribunal's duty at waiver stage not to decide merits of proposed Section 241 application

Consent under Section 244(2) - authentication of overseas authorizations - Validity of the consents submitted by the Petitioners - HELD THAT: - The Tribunal examined the list of shareholders and the annexed consents and found double entries for certain members, reducing the claimed number of consents. Further, several authorizations executed outside India were not notarised or authenticated by Indian consular authorities and therefore were not valid. On this basis the Tribunal rejected the Petitioners' contention as to the validity and number of the consents submitted and concluded that the accepted consents are fewer than alleged by the Petitioners. [Paras 27]

The consents relied upon by the Petitioners are not all valid; double counts and defective overseas authorizations reduce the effective number of valid consents.

Consent under Section 244(2) - waiver of threshold under proviso to Section 244(1) - Whether the members had authorised the Petitioners to seek waiver under the proviso to Section 244(1) - HELD THAT: - The Tribunal observed that the consents produced by the Petitioners were in the form of consent to make a petition under Section 241 and did not demonstrate authorization to seek a waiver under the proviso to Section 244(1). Apart from the three petitioners there was no proper authorization by other members to file the instant leave/waiver petition. Consequently, the Tribunal could not accept that the members had authorised the Petitioners to seek waiver enabling filing under Section 241. [Paras 27]

Members have not validly authorised the Petitioners to file the present petition seeking waiver under the proviso to Section 244(1).

Oppression and mismanagement - qualified auditor's report and reliability of financial statements - Whether the proposed application under Section 241 (oppression and mismanagement) is made out - HELD THAT: - While the Petitioners alleged mismanagement and relied on qualified audit observations and deterioration in shareholder funds, the Tribunal found that these allegations did not amount to established oppression and mismanagement at the leave stage. The Petitioners had not produced evidence that they had previously raised these issues with the Board or demanded explanations. The Tribunal treated the material as insufficient to show that the proposed Section 241 application concerned established oppression and mismanagement rather than apprehensions. [Paras 27, 28]

The allegations do not, at the leave stage, amount to oppression and mismanagement sufficient to sustain the proposed Section 241 application.

Tribunal's duty at waiver stage not to decide merits of proposed Section 241 application - waiver of threshold under proviso to Section 244(1) - Whether exceptional circumstances exist to grant waiver of the statutory threshold under the proviso to Section 244(1) - HELD THAT: - The Tribunal applied the principle that it must form an objective opinion on whether exceptional circumstances exist to justify waiver, without deciding the merits of the proposed Section 241 petition. The burden of establishing exceptional circumstances rested on the Petitioners. The Tribunal found that the Petitioners had neither presented exceptional circumstances nor cited facts sufficient to warrant waiver. Reliance on general apprehensions and defective consents did not satisfy the required threshold for discretionary waiver. [Paras 27, 30]

No exceptional circumstances were shown; waiver of the requirements of Section 244(1) is not warranted.

Final Conclusion: The Company Petition is dismissed for want of merit and for failure to establish valid consents, authority to seek waiver, and exceptional circumstances; the Tribunal did not grant waiver to enable filing under Section 241. Parties shall bear their own costs.

Extension of Corporate Insolvency Resolution Process - outer limit of 330 days for CIRP - time-bound insolvency resolution - maximisation of value of assets

Extension of Corporate Insolvency Resolution Process - outer limit of 330 days for CIRP - time-bound insolvency resolution - Application by the Resolution Professional for extension of 30 days beyond 270 days of CIRP was allowed. - HELD THAT: - The Resolution Professional moved under the relevant provisions of the Insolvency and Bankruptcy Code seeking 30 days' extension beyond the 270-day period because two resolution plans had been submitted and there was a real prospect of a plan being approved, which would save the corporate debtor from liquidation. The Tribunal recorded the object of the Code as requiring time-bound resolution aimed at maximisation of asset value and promoting revival of the corporate debtor. Noting the Supreme Court's observation that 330 days is the outer limit for completing CIRP, the Tribunal concluded that granting the requested 30-day extension (measured from 13.08.2020) would remain within that outer limit and would reasonably advance the likelihood of acceptance and approval of a resolution plan. On this factual and legal basis the extension was allowed. [Paras 3, 4, 6, 7, 8]

Application IA 469 of 2020 is allowed and the CIRP period is extended by 30 days from 13.08.2020.

Final Conclusion: The Tribunal allowed the Resolution Professional's application and granted a 30-day extension of the CIRP from 13.08.2020, observing that the extension remained within the 330-day outer limit and was justified to enable possible approval of a resolution plan.

Pre-existing dispute - Section 9 of the Insolvency and Bankruptcy Code, 2016 - rejection of application under Section 9(5)(2)(d) - notice of dispute and acknowledgement in communications - Mobilox principle that a plausible contention of dispute defeats a Section 9 application

Pre-existing dispute - notice of dispute and acknowledgement in communications - Section 9 of the Insolvency and Bankruptcy Code, 2016 - Mobilox principle that a plausible contention of dispute defeats a Section 9 application - Whether the Adjudicating Authority rightly dismissed the Section 9 application on the ground of a pre-existing dispute between the parties. - HELD THAT: - The Tribunal upheld the Adjudicating Authority's finding that communications exchanged prior to issuance of the Section 8/9 notice evidenced a pre-existing dispute. The Adjudicating Authority relied on contemporaneous emails and correspondence (including emails of 28.11.2018 and related exchanges) which complained of service deficiencies, raised debit/credit notes and sought reconciliation of ledger entries. These communications constituted more than a spurious or hypothetical plea and amounted to a plausible contention that required further investigation, engaging the principle in Mobilox that an adjudicating authority must reject a Section 9 application where notice of dispute or record of dispute exists. Having applied that test, the Tribunal found no infirmity in the conclusion that a pre-existing dispute existed and that the Section 9 petition was therefore liable to be dismissed. [Paras 6, 7]

The Tribunal dismissed the appeal, holding that the Adjudicating Authority correctly rejected the Section 9 application on the ground of a pre-existing dispute.

Final Conclusion: Appeal dismissed; the rejection of the Section 9 application was upheld on the ground that pre-existing disputes evidenced by prior communications rendered the petition liable to be dismissed under the Mobilox test.

Extension of Corporate Insolvency Resolution Process under Section 12(2) of the IBC, 2016 - invitation of fresh Expression of Interest under Regulation 36A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - verification of eligibility under Section 29A and submission of Resolution Plan under Section 30 of the IBC, 2016 - compliance with time lines and submission requirements under Regulation 39(4) and evidence of performance security under Regulation 36B

Extension of Corporate Insolvency Resolution Process under Section 12(2) of the IBC, 2016 - verification of eligibility under Section 29A and submission of Resolution Plan under Section 30 of the IBC, 2016 - compliance with time lines and submission requirements under Regulation 39(4) and evidence of performance security under Regulation 36B - Prayer for extension of the period of CIRP for a further period of 90 days from 18.10.2020 was allowed. - HELD THAT: - The Tribunal considered that only one resolution plan was then before the Committee of Creditors and that time to examine the plan, conduct due diligence to satisfy eligibility under Section 29A and to verify the contents as required by Section 30 was limited. The Tribunal also took into account the disruption caused by the Covid 19 lockdowns which affected submission of Expressions of Interest and practical difficulty in complying with the time thresholds and requirements under Regulation 39(4) and the need to obtain performance security as contemplated by Regulation 36B. The Committee of Creditors had unanimously resolved to seek a 90 day extension and to invite fresh EOIs if the existing plan failed. On these considerations the request under Section 12(2) was held to be justifiable and the CIRP period was extended, with a direction to the Resolution Professional to adhere to IBBI rules and complete the CIRP on or before 16.01.2021.

Extension of the CIRP for 90 days from 18.10.2020 granted; CIRP to be completed on or before 16.01.2021.

Invitation of fresh Expression of Interest under Regulation 36A of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 - powers of the Resolution Professional and the Committee of Creditors to invite EOIs during extended CIRP period - Resolution Professional was permitted to invite fresh Expression of Interest during the extended period if the plan under consideration was rejected by the Committee of Creditors. - HELD THAT: - The Tribunal noted the Committee of Creditors' view that the pandemic may have prevented bona fide applicants from submitting EOIs when the invitation coincided with lockdowns, and accepted the CoC's resolution to invite fresh EOIs during the extended period as reasonable and in the interest of the CIRP. Accordingly, the RP was authorised to invite fresh EOIs during the extended CIRP period conditional on rejection of the existing plan by the CoC.

RP allowed to invite fresh Expressions of Interest during the extended CIRP period if the plan under consideration is rejected by the CoC.

Final Conclusion: The Tribunal allowed the IA under Section 12(2) of the IBC, 2016 granting a 90 day extension of the CIRP from 18.10.2020 (to be completed by 16.01.2021) and authorised the Resolution Professional to invite fresh Expressions of Interest during the extended period if the existing plan is rejected by the Committee of Creditors.

Liquidation on failure to receive a resolution plan within the Section 12 timeframe - effect of post filing settlement on a pending Section 33 liquidation application - requirement to follow Section 12A procedure after formation of the Committee of Creditors - appointment of a liquidator following a liquidation order

Liquidation on failure to receive a resolution plan within the Section 12 timeframe - effect of post filing settlement on a pending Section 33 liquidation application - Whether the liquidation order made following filing of the Section 33 application could be set aside on the basis of a settlement arrived at and partial payments made after the Section 33 application was filed and after the Section 12 period had expired. - HELD THAT: - The Tribunal recorded that it was an admitted fact that no resolution plan was received within the time limit under Section 12. Once the Section 12 timeframe lapsed without a resolution plan, the statutory consequence of a liquidation order could not be avoided. Although the appellant subsequently asserted that a settlement had been reached with the financial creditor and made partial payments, the settlement was reported to have failed and the appellant did not place material on record showing other claimants or that the settlement was sufficient to negate the consequence of non receipt of a resolution plan. The mere assertion of a post filing settlement and partial payments, particularly where the financial creditor (ARCIL) no longer supported the settlement, did not prevent the Adjudicating Authority from passing the liquidation order and appointing a liquidator.

The post filing settlement and partial payments did not vitiate the liquidation order; appeal dismissed on this ground.

Requirement to follow Section 12A procedure after formation of the Committee of Creditors - appointment of a liquidator following a liquidation order - Whether the procedure under Section 12A, once the Committee of Creditors was formed, had to be followed before passing the liquidation order and whether non compliance with that procedure invalidated the liquidation order. - HELD THAT: - The Tribunal noted that once the CoC is formed during CIRP, the procedure under Section 12A is required to be followed. The record did not demonstrate that the Section 12A process was complied with prior to the liquidation order. However, given the admitted absence of any resolution plan within the Section 12 period and the failure of the claimed settlement, the Adjudicating Authority's conclusion to proceed to liquidation and appoint a liquidator was not shown to be without jurisdiction or merit. The absence of evidence that Section 12A had been followed did not persuade the Tribunal to set aside the liquidation order in the circumstances before it.

Non compliance with Section 12A was noted, but it did not lead to setting aside the liquidation order; appeal dismissed on this ground.

Final Conclusion: The appeal is dismissed. The admitted absence of any resolution plan within the Section 12 timeframe, the failure of the post filing settlement, and the material on record did not justify interference with the Adjudicating Authority's liquidation order and appointment of a liquidator.

Approval of resolution plan by Committee of Creditors - commercial/business decision of Committee of Creditors - limited judicial review under Section 61(3) - estoppel of an assenting Financial Creditor - distribution mechanism of the resolution fund - contingent allocation / contingency fund

Approval of resolution plan by Committee of Creditors - commercial/business decision of Committee of Creditors - limited judicial review under Section 61(3) - estoppel of an assenting Financial Creditor - Whether a Financial Creditor who voted in favour of the resolution plan can subsequently challenge the distribution mechanism of the approved resolution plan. - HELD THAT: - The Tribunal found that the appellant, a constituent of the Committee of Creditors, had voted in favour of the revised resolution plan and thereby assented to the plan approved collectively by the Committee. The jurisprudence cited (K. Shashidhar and Committee of Creditors of Essar Steel) establishes that the commercial decisions of the Committee are collective business judgments not ordinarily open to judicial interference, and that judicial review under Section 61(3) is limited to specified grounds. The Tribunal noted that no material irregularity in the Corporate Insolvency Resolution Process prior to approval was shown. The Resolution Professional's allocation of a contingency sum (described as a business decision to retain the corporate debtor as a going concern) reflected the commercial wisdom of the Committee and was binding on all members, including the appellant. Accordingly, having assented at the voting stage, the appellant was estopped from attacking the distribution mechanism of the approved plan. [Paras 3, 4, 5]

The challenge by the assenting Financial Creditor to the distribution mechanism of the approved resolution plan is not maintainable; no interference is warranted under the limited judicial review.

Distribution mechanism of the resolution fund - contingent allocation / contingency fund - Whether the Adjudicating Authority erred in dismissing M.A. No. 99 of 2020 seeking equal revision of share proportion of the resolution fund among similarly placed Secured Financial Creditors. - HELD THAT: - The Tribunal examined the facts that the total admitted financial creditor claims and the proposed settlement had been placed before the Committee, and that the appellant's claim had been admitted by the Resolution Professional. The appellant's application for revision was filed post-approval of the resolution plan. The Resolution Professional and the Committee had characterised the Rs. 135 Crore allocation as a contingent business decision to address potential eventualities. Given that the allocation formed part of the commercially-driven distribution mechanism approved by the Committee and that no material irregularity was demonstrated to displace the Committee's business judgment, the Adjudicating Authority's dismissal of the application was upheld. The Tribunal observed that the appellant did not claim discrimination as a dissenting creditor nor that its admitted claim was ignored in the distribution. [Paras 2, 3, 5]

The dismissal of M.A. No. 99 of 2020 seeking equal revision of the share proportion was proper and does not call for interference.

Final Conclusion: The appeal is dismissed as devoid of merit; the Committee of Creditors' commercial decision on the resolution plan and its distribution mechanism, including the contingent allocation, is binding on an assenting Financial Creditor and not susceptible to interference under the limited judicial review; no orders as to costs.

Renting of immovable property - transfer of theatrical exhibition rights - consideration and flow of payment - declared service - negative list

Renting of immovable property - transfer of theatrical exhibition rights - consideration and flow of payment - Whether the appellant rendered 'renting of immovable property' service to film distributors in respect of theatrical exhibition agreements - HELD THAT: - The Tribunal examined the agreement relied upon in the show cause notice (agreement dated 29.08.2012 / RUD-7) and found that the distributor had granted theatrical exhibition rights to the appellant and the appellant paid a share of Net Box Office Collection to the distributor in return for those rights. The adjudicating authority had held that the appellant was providing a mix of services and thereby rendering renting of immovable property services to distributors. The Tribunal disagreed, observing that the agreements confer the right to exhibit upon the appellant and that the appellant, not the distributor, makes payments to obtain those rights. On that factual and contractual foundation the Tribunal applied the principle that no service can be said to be provided by the appellant to the distributor where no consideration flows from the distributor to the appellant. The Tribunal also relied on earlier Division Bench authority (Moti Talkies) which reached the same conclusion. For these reasons the finding that the appellant rendered 'renting of immovable property' service to distributors was held unsustainable. [Paras 15, 16, 17]

Finding of service under 'renting of immovable property' set aside; no service tax leviable on the theatrical exhibition agreements as characterised by the adjudicating authority.

Renting of immovable property - negative list - declared service - Whether amounts shown in the appellant's balance sheet as 'Car Parking Hire', 'Shorts and Slides', 'Rent Received' and 'Miscellaneous Receipts' were liable to service tax as renting of immovable property - HELD THAT: - The Tribunal considered the departmental demand in respect of several balance-sheet income heads for the period stated in the notice. The appellant had contended that (inter alia) some receipts were excluded or exempted from service tax by notifications or by virtue of the statutory exclusions (including selling of space/time for advertisement and parking-related exclusions) and that in earlier years aggregate turnover thresholds precluded taxability. The Tribunal accepted the appellant's submissions on these points, held that the confirmation of demands on these income heads could not be sustained, and recorded that the impugned demand in respect of these receipts was to be set aside. [Paras 18, 19]

Departmental demands in respect of car parking hire, shorts and slides, rent received and miscellaneous receipts set aside.

Final Conclusion: The impugned order dated 25 January 2016 confirming demands for service tax (October 2008 to March 2014) including demands framed under 'renting of immovable property' and in respect of specified balance-sheet receipts is set aside and the appeal is allowed.

Input service - CENVAT credit - banking and other financial services - statutory obligation / co-terminus service - negative list - accepting of deposits vs extending deposits - rule 6(3B) of the Cenvat Credit Rules, 2004 - reversal of credit by banking companies

Input service - CENVAT credit - banking and other financial services - statutory obligation / co-terminus service - rule 6(3B) of the Cenvat Credit Rules, 2004 - reversal of credit by banking companies - negative list - accepting of deposits vs extending deposits - Banks are entitled to avail CENVAT credit of service tax paid on insurance service received from the Deposit Insurance and Credit Guarantee Corporation (DICGC) as an input service for rendering output services. - HELD THAT: - The Larger Bench held that the insurance service provided by DICGC to banks falls within the main part of the definition of input service, being a service used by a provider of output service for providing an output service. Acceptance of deposits is integral to a bank's core activity of mobilising funds for lending and investment; registration with and payment of premium to the Deposit Insurance Corporation is compulsory and thereby a statutory obligation for licensed banks. That statutory and commercial nexus makes the insurance service co-terminus with the banks' output activity of banking and other financial services, so the service is not excluded from the definition of input service. The Larger Bench also rejected the Department's reliance on the negative list entry concerning services by way of extending deposits (financed by interest) by distinguishing 'accepting deposits' from 'extending deposits' and explaining that the negative-list provision does not capture the mandatory insurance taken by banks for deposits. Separately, the Larger Bench noted that even if some portion of inputs relates to exempt or interest/investment income, banks are governed by rule 6(3B)

Allow appeals of the banks and dismiss departmental appeals; banks can avail CENVAT credit of service tax paid on insurance premium to DICGC as an input service, subject to compliance with rule 6(3B).

Final Conclusion: By following the Larger Bench decision, the Tribunal allowed the banks' appeals and dismissed the Department's appeals, holding that the insurance service provided by the Deposit Insurance and Credit Guarantee Corporation to banks is an input service and CENVAT credit of service tax paid thereon is admissible to banks (with statutory reversal under rule 6(3B) where applicable).