TaxTMI Updates e-Newsletter
Nov 15,2022

Job work - Supply of services - Manufacturing services on physical inputs (goods) owned by others - Service Accounting Code 9988 - Service Accounting Code 998816 - Rate notification for services

Job work - Supply of services - Service Accounting Code 998816 - Manufacturing services on physical inputs (goods) owned by others - Rate notification for services - GST rate applicable to services classified under SAC 998816 - HELD THAT: - The activity of the applicant is a treatment or process undertaken on goods belonging to another registered person and thus is a service under Schedule II of the CGST Act. The Explanatory Notes classify such outsourced manufacturing services under Heading 9988. The consolidated notifications and the Annexure to the classification of services show the specific six-digit SAC 998816 as 'Other food product manufacturing services'. Read together with the rate notifications applicable to Heading 9988 and the scheme of classification, services falling under SAC 998816 (food product manufacturing services on physical inputs owned by others) attract the rate specified for that entry, namely 2.5% CGST and 2.5% SGST. [Paras 9, 10]

Services under SAC 998816 are taxable at 2.5% CGST and 2.5% SGST.

Final Conclusion: The Advance Ruling holds that the applicant's job-work/manufacturing services classified under SAC 998816 (Other food product manufacturing services) are taxable at 2.5% CGST and 2.5% SGST.

Manufacturing services on physical inputs (goods) owned by others - job work - composite supply - principal supply - tax liability on composite and mixed supplies

Manufacturing services on physical inputs (goods) owned by others - job work - Rate of tax where content and physical inputs are supplied by the recipient of printing services - HELD THAT: - Where the recipient supplies both the content and the physical inputs (paper, cover board etc.), the applicant's activity is a job work/manufacturing service on physical inputs owned by others and falls under the entries in Notification No.11/2017 (Heading 9988). The Authority identifies the specific entries dealing with printing of books, journals and periodicals when inputs are supplied by the customer and notes that such entries attract the concessional rate specified in the notification. Applying the classification in Entry No.26(i)(d) (and related sub-items), the service of printing of books, journals and periodicals on materials belonging to the recipient is liable to tax at the rate prescribed for such job work. [Paras 8]

Where content as well as physical inputs are supplied by the recipient of printing services the rate of tax is 2.5% CGST and 2.5% SGST.

Composite supply - principal supply - tax liability on composite and mixed supplies - Rate of tax where only content is supplied by the recipient and physical inputs belong to the printer - HELD THAT: - When only the content is supplied by the recipient and the printer supplies the paper and other materials, the supply comprises two elements (goods and printing service) which are naturally bundled for a single consideration and therefore constitute a composite supply. The Authority applies the definitions of "composite supply" and "principal supply" and the rule under section 8 of the CGST Act that a composite supply is treated as supply of its principal supply. The Authority holds that printing is the predominant element and therefore the composite supply must be taxed as printing. It then examines Notification No.11/2017 and subsequent amendments to determine the applicable rate: entry 27 originally provided a 6% rate (6% CGST + 6% SGST) for specified printing where only content is supplied and inputs belong to the printer, but the entry was subsequently amended by Notification No.6/2021 which subsumed item (i) and made the broader heading taxable at the revised rate. The Authority thus identifies the rate applicable before and after the amendment date. [Paras 8]

Where only content is supplied by the recipient and the physical inputs belong to the printer, the service was taxable at 6% CGST + 6% SGST up to 30.09.2021 and is taxable at 9% CGST + 9% SGST from 01.10.2021 onwards.

Final Conclusion: The Authority rules that (i) printing services where both content and physical inputs are supplied by the recipient are taxable as job work under Heading 9988 at 2.5% CGST and 2.5% SGST; and (ii) where only content is supplied and inputs belong to the printer the composite supply is taxed as printing - 6% (3% CGST + 3% SGST as applicable under earlier entry) up to 30.09.2021 and 9% CGST + 9% SGST from 01.10.2021 following the amendment to the notifications.

Assessments under Section 153A of the Income Tax Act, 1961 - incriminating material requirement for interference with completed assessments - abated and non abated assessments - finality of completed assessments - binding effect of existing High Court precedent pending SLP

Assessments under Section 153A of the Income Tax Act, 1961 - incriminating material requirement for interference with completed assessments - finality of completed assessments - binding effect of existing High Court precedent pending SLP - Whether additions could be made in completed (non abated) assessments under Section 153A in the absence of any incriminating material found during the search. - HELD THAT: - The Court recorded concurrent findings of fact by the CIT(A) and the ITAT that no incriminating material had been found or seized during the search for the assessment years 2008-09 to 2011-12, and that the assessments for those years had attained finality. Relying on the legal principles distilled in Kabul Chawla and summarized in PCIT v. Meeta Gutgutia, the Court held that completed assessments can be interfered with under Section 153A only upon the basis of incriminating material unearthed during the search or other post search material which can be related to the seized material. In the absence of any such material, the completed assessments stand and no additions could be made under Section 153A. The Court noted that although the correctness of Kabul Chawla is under challenge before the Supreme Court, there was no stay of that High Court decision; consequently the existing Delhi High Court precedent and subsequent consistent authority (including Bhadani Financiers Pvt. Ltd.) govern the matter. Applying these principles to the facts, the appeals were dismissed as no substantial question of law arose. [Paras 4, 5, 6, 8, 9]

Additions in the completed assessments for AY 2008-09 to AY 2011-12 made under Section 153A were not sustainable in the absence of incriminating material; appeals dismissed.

Final Conclusion: The appeals are dismissed as the impugned additions under Section 153A could not be sustained for AY 2008-09 to AY 2011-12 in the absence of incriminating material; the orders will, however, abide by the final decision of the Supreme Court in the pending SLP.

Registration under Section 12AA - genuineness of charitable objects - examination of application of income at registration stage - role of Assessing Officer in year to year scrutiny - recognition by competent educational authority and its relevance

Registration under Section 12AA - genuineness of charitable objects - Whether the Assessee society is entitled to registration under Section 12AA of the Act on the basis of its objects and running of a school. - HELD THAT: - The ITAT found that the aims and objects of the society demonstrate that it was established to run educational and vocational institutions for the benefit of poor and backward children, which falls within the definition of "charitable activities". The High Court noted there was no dispute that the society was running the Rainbow Kids Valley School and that the CIT(E)'s rejection was premised on perceived deficiencies which the ITAT held were not grounds to deny registration. The Court observed that the Revenue failed to show any infirmity in the ITAT's finding that the objects are charitable and that the facts were correctly assessed by the ITAT. [Paras 6, 7]

Registration under Section 12AA must be granted as the society's objects and activities qualify as charitable and the ITAT's direction to register was upheld.

Examination of application of income at registration stage - role of Assessing Officer in year to year scrutiny - Whether the CIT(E) is entitled at the registration stage to examine the application of income and conduct a detailed inquiry into the actual application of funds. - HELD THAT: - The ITAT held, and the High Court accepted, that scrutiny of the application of income is an exercise for the Assessing Officer during assessment proceedings on a year to year basis and not a requirement for granting registration under Section 12AA. The Court endorsed the principle that registration does not involve an inquiry into year to year application of funds or detailed examination of income application, particularly where there is nothing on record to show the objects or activities were not genuine. [Paras 7]

CIT(E) erred in treating registration as an occasion to examine application of income; such examination is for the AO and cannot justify denial of registration.

Recognition by competent educational authority and its relevance - genuineness of activities in light of cash deposits - Whether lack of formal recognition by the Department of Education and unexplained cash deposits in FY 2016-17 warranted refusal of registration. - HELD THAT: - The CIT(E) noted absence of formal recognition by GNCTD and unexplained cash deposits in the bank account for FY 2016-17. The High Court observed there was no dispute on the fact that the school was being run and that no adverse finding had been recorded by the Assessing Officer for AY 2017-18 (relevant to FY 2016-17). In the absence of any adverse assessment or material showing the objects were not genuine, the ITAT correctly declined to deny registration on those grounds. [Paras 6, 8]

Neither the lack of formal recognition nor the cash deposits without an adverse AO finding justified denial of registration; these matters are not impediments to granting Section 12AA registration in the circumstances.

Final Conclusion: The High Court found no substantial question of law and dismissed the Revenue's appeal, upholding the ITAT's direction that the Assessee society be granted registration under Section 12AA, on the grounds that its objects and running of the school qualified as charitable and that detailed scrutiny of application of income or alleged deficiencies is a matter for assessment proceedings.

Allowability of business expenditure under Section 37(1) - Explanation 1 to Section 37(1) - expenses on prohibited/illegal activity - scope and powers of Dispute Resolution Panel under Section 144C - remand versus direction for fresh enquiry under Section 144C - transfer pricing - determination of arm's length price - Bright Line Test as a method for benchmarking AMP expenditure - treatment of Advertising, Marketing and Promotion expenditure as revenue or capital - binding effect of High Court precedent pending SLP

Scope and powers of Dispute Resolution Panel under Section 144C - remand versus direction for fresh enquiry under Section 144C - Validity of DRP's direction to the Assessing Officer to determine disallowance of AMP expenditure under Section 37(1) after fresh inquiry. - HELD THAT: - The Tribunal held that the DRP's direction to the AO to determine disallowance under Section 37(1) amounted to a remand and was impermissible under Section 144C, because the DRP's statutory role is confined to confirming, reducing or enhancing variations proposed in the draft order and not to sending the matter back for fresh determination. The High Court agreed with the Tribunal's conclusion and recorded that the direction issued by the DRP was beyond the scope of its powers under Section 144C and that the AO was not empowered to make a fresh determination under that provision. [Paras 6, 10]

DRP's direction for fresh determination of disallowance under Section 37(1) was impermissible and the disallowance could not be sustained.

Allowability of business expenditure under Section 37(1) - Explanation 1 to Section 37(1) - expenses on prohibited/illegal activity - Whether AMP expenditure could be disallowed under Explanation 1 to Section 37(1) on the ground that promotional activities violated Cable Television Network Rules/ASCI. - HELD THAT: - The Tribunal found that neither the DRP nor the AO had recorded specific findings of fact establishing that the Assessee had violated the Cable Television Network Rules or ASCI such as would attract the bar in Explanation 1 to Section 37(1). The Tribunal therefore deleted the disallowance. The High Court accepted the Tribunal's reasoning and upheld deletion, observing that the DRP/AO had taken a general view without factual findings of statutory violation and that the direction to disallow was not sustainable. [Paras 6, 10]

Disallowance of AMP expenditure under Explanation 1 to Section 37(1) was deleted for lack of factual basis and improper exercise of power.

Transfer pricing - determination of arm's length price - Bright Line Test as a method for benchmarking AMP expenditure - binding effect of High Court precedent pending SLP - Whether the TPO's adjustment applying the Bright Line Test to determine ALP of AMP expenditure should be sustained. - HELD THAT: - The Tribunal, following its coordinate decisions and judicial precedents, accepted the DRP's deletion of the TPO's adjustment made using the Bright Line Test. The High Court held that the Bright Line Test had been expressly negatived by this Court in Sony Ericsson (supra) and, although an SLP was pending before the Supreme Court, that decision remains binding in absence of a stay. Applying the principle in Kunhayammed, the Court concluded the Tribunal's deletion of the transfer pricing adjustment was justified. [Paras 6, 8, 10]

Adjustment made by applying the Bright Line Test to AMP expenditure was rightly deleted; BLT cannot be applied in view of this Court's precedent.

Treatment of Advertising, Marketing and Promotion expenditure as revenue or capital - Whether AMP expenditure is capital in nature or revenue expenditure. - HELD THAT: - The High Court found Revenue's contention that AMP expenditure was capital in nature to be vague and unsupported. It noted that Revenue had treated such expenditure as revenue in previous years and that the Tribunal in earlier assessment years had held the expenditure to be bona fide revenue expenditure incurred for commercial expediency. There was no satisfactory material to reclassify the expenditure as capital. [Paras 6, 9, 10]

AMP expenditure is revenue in nature; Revenue's plea of capitalisation rejected.

Final Conclusion: The appeals are dismissed. The Tribunal's deletion of the transfer pricing adjustment made by applying the Bright Line Test and its deletion of the disallowance of AMP expenditure under Explanation 1 to Section 37(1) are upheld; the DRP's direction for fresh determination was impermissible and the AMP expenditure is held to be revenue in nature.

Revisional jurisdiction under section 263 - erroneous order - prejudicial to the interest of revenue - twin conditions for exercise of revisional jurisdiction - application of section 115BBE(2) to income declared during survey - on-money declared during survey treated as business income - allowability of expenses (service tax and partners' remuneration) out of declared on-money - Assessing Officer adopting one of the possible views

Revisional jurisdiction under section 263 - erroneous order - prejudicial to the interest of revenue - twin conditions for exercise of revisional jurisdiction - Assessing Officer adopting one of the possible views - Validity of the Principal CIT's exercise of revisional jurisdiction under section 263 to set aside the assessment order for AY 2015-16. - HELD THAT: - The Tribunal held that the Principal CIT's exercise of jurisdiction under section 263 was unwarranted. The requisites for invoking section 263 are twin: the AO's order must be erroneous and such erroneous order must be prejudicial to the interests of revenue. An order of the AO is not automatically erroneous where the AO has adopted a view permissible in law. On the facts, the AO had accepted the assessee's stance that the amount disclosed during survey was business income and, after enquiry, allowed deductions (service tax and partners' remuneration) related to that declared income. The Tribunal found that the AO had applied his mind and taken one of the possible views; therefore the order could not be characterized as erroneous or unsustainable in law. Reliance was placed on authoritative decisions holding that where two views are possible the AO's choice of one view does not make the order erroneous prejudicial to revenue unless that view is unsustainable in law. Consequently, the Principal CIT's revisional order was quashed as an unjustified usurpation of power under section 263. [Paras 14, 16, 17, 18]

The exercise of revisional jurisdiction by the Principal CIT under section 263 is quashed; the assessment order for AY 2015-16 is not erroneous or prejudicial to revenue and the appeal is allowed.

On-money declared during survey treated as business income - application of section 115BBE(2) to income declared during survey - allowability of expenses (service tax and partners' remuneration) out of declared on-money - Whether service tax paid and partners' remuneration claimed against the on-money declared during survey were allowable deductions. - HELD THAT: - The Tribunal accepted the factual finding that the amount disclosed during survey represented net profit from the assessee's construction business (on-money). Where undisclosed receipts are attributable to the business, expenses necessarily incurred in relation thereto - including service tax paid and remuneration paid to partners - are allowable in computing business income. The Tribunal relied on the factual statements recorded during survey and binding jurisprudence recognizing that undisclosed receipts attributable to the business are assessed as business income and related expenditures are admissible. In these circumstances the Assessing Officer's allowance of deductions was a tenable view and not contrary to law; application of section 115BBE(2) to disallow such business expenses was not warranted on the facts. [Paras 11, 13, 14, 16]

Service tax and partners' remuneration claimed against the on-money declared during survey are allowable deductions because the declared on money was business income; the Assessing Officer's allowance of these deductions was sustainable.

Final Conclusion: The Principal CIT's revision under section 263 is quashed: the Assessing Officer's acceptance of the assessee's declaration of on money as business income and allowance of related deductions (service tax and partners' remuneration) for AY 2015 16 represented a permissible view and was neither erroneous nor prejudicial to revenue; the appeal is allowed.

Reopening of assessment under section 147 - reason to believe - relevancy of material impounded during survey for formation of belief - treatment of diary notings as evidence of escapement of income - distinction between proposed purchase and sale for assessment purposes - remand for verification of factual material and admission of evidence - addition under section 69C - unexplained expenditure

Reopening of assessment under section 147 - reason to believe - relevancy of material impounded during survey for formation of belief - treatment of diary notings as evidence of escapement of income - Validity of reopening the assessment under section 147 on the basis of notings found in the director's diary impounded during survey. - HELD THAT: - The Tribunal examined whether the Assessing Officer had a 'reason to believe' that income chargeable to tax had escaped assessment when the original assessment under section 143(3) was completed. The proviso and explanations to section 147 were inapplicable because the reopening was within four years. The court applied the principle that reasons for belief must have a rational connection with the material relied upon. The diary notings, impounded in the survey, showed entries of cash transactions and receipts not recorded in the books; such independent material can furnish prima facie grounds for an AO to infer in good faith that income may have escaped assessment. The Tribunal found that the notings were relevant material having a direct nexus with formation of belief and therefore sufficient to sustain the reopening. [Paras 11]

Reopening of assessment under section 147 was valid and the grounds challenging the reopening are dismissed.

Distinction between proposed purchase and sale for assessment purposes - treatment of diary notings as evidence of escapement of income - Whether the addition of Rs.32,04,000 as undisclosed income by alleged sale of steel scrap, based on diary notings, was sustainable. - HELD THAT: - The AO treated certain diary notings as records of sale of steel scrap and made an addition. The assessee produced ledger copies and bank remittance evidence showing that the notings related to a proposed import/purchase from SAIT (Senegal) which materialized in the subsequent financial year and involved outward remittance confirmed by the bank. The Tribunal noted that the lower authorities did not examine whether the notings crystallized in the subsequent year and that the factual character of the transactions (import/purchase expense as against sale/income) was not properly considered. Given that the ledger and bank evidence established that the transaction was an expense/purchase in a later year and not an unaccounted sale in the year under consideration, the AO's finding was factually incorrect. [Paras 19]

Addition of Rs.32,04,000 treated as undisclosed income is deleted.

Addition under section 69C - unexplained expenditure - remand for verification of factual material and admission of evidence - Whether additions of Rs.17,00,000 (noted as 'Steel Scrap') and Rs.6,64,180 (miscellaneous diary entries) should be sustained or require further verification/admission of evidence. - HELD THAT: - For the Rs.17,00,000 entry the assessee contended it was a projected receipt from a sister concern and produced ledger and bank evidence showing receipts in the subsequent year; the AO did not examine those materials and the CIT(A) upheld the addition by reference to findings in another year without addressing the documents. The Tribunal observed that assessment of each year must rest on facts of that year and that the materials showing subsequent receipts and ledger entries needed verification. Regarding the miscellaneous entries totalling Rs.6,64,180, the assessee asserted many were personal to the director or pertained to sister concerns and produced documents during appellate proceedings which the CIT(A) rejected as not filed earlier; the Tribunal found that these contentions and documents merited factual examination by the AO. Accordingly, both matters required fresh factual inquiry and consideration of evidence that was not properly addressed by the lower authorities. [Paras 20, 25, 26]

Both issues are remitted to the Assessing Officer for fresh examination and verification of the ledger, bank and other documents; AO to give the assessee opportunity to be heard and decide in accordance with law.

Final Conclusion: The appeal is partly allowed: the reopening of assessment under section 147 is sustained; the addition of Rs.32,04,000 as undisclosed income is deleted; additions of Rs.17,00,000 and Rs.6,64,180 are remitted to the Assessing Officer for fresh verification and adjudication after permitting the assessee to produce and have considered relevant evidence.

Treatment of cash deposits as unexplained income under section 69A - onus on assessee to prove source of cash deposits - verification of loan parties and documentary evidence - requirement of cross-verification by revenue to disprove genuineness - deletion of addition where cumulative sources satisfactorily explain deposits - peak credit theory

Treatment of cash deposits as unexplained income under section 69A - onus on assessee to prove source of cash deposits - verification of loan parties and documentary evidence - requirement of cross-verification by revenue to disprove genuineness - Whether the addition of cash deposits of Rs. 10,40,800/- as unexplained cash under section 69A was justified or liable to be deleted. - HELD THAT: - The Tribunal examined the cash deposits and the explanations offered by the assessee - recoveries of loans/advances shown as opening balance, bank withdrawals, and declared business profit. Although the AO and CIT(A) disbelieved the explanation largely because closing loans/advances increased and because withdrawals/deposits movements appeared abnormal, the Tribunal held that the assessee had produced a cash book, confirmations and supporting documents for loan recoveries and evidence of bank withdrawals and declared profit. The Tribunal observed that abnormal transactions alone do not permit rejection without cross verification of the parties; where the assessee furnishes documentary material and the facts show recoveries, withdrawals and declared profit which cumulatively can account for the deposits, the revenue must disprove the claimed source by independent verification rather than relying on surmise and conjecture. On the materials before it the Tribunal found there was sufficient cash available from (i) recoveries of loans/advances, (ii) bank withdrawals (net of advances re made), and (iii) declared business profit, and therefore set aside the findings of the authorities below and directed deletion of the addition. [Paras 12, 13]

Addition under section 69A deleted and appeal allowed.

Final Conclusion: The Tribunal allowed the assessee's appeal, held that cumulative evidence of loan recoveries, bank withdrawals and declared profit sufficiently explained the cash deposits, and directed deletion of the addition made under section 69A for Assessment Year 2014-15.

Bogus long term capital gains - exemption under section 10(38) - modus operandi of penny stock insufficient without corroborative material - onus on Revenue to prove sham transactions - deduction under section 24(b) for interest on borrowed capital regardless of payer

Bogus long term capital gains - exemption under section 10(38) - onus on Revenue to prove sham transactions - modus operandi of penny stock insufficient without corroborative material - Validity of addition treating claimed long-term capital gain as bogus and denying exemption under section 10(38). - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the AO's conclusion that the LTCG was bogus rested on assumptions about the modus operandi of penny stocks without adducing independent or specific corroborative material implicating the assessee or her broker. The record admitted, without dispute, that purchases and sales were executed through a recognised broker on the stock exchange, payments for purchase were made by cheque, shares were dematerialised, STT was paid on sale and sale proceeds were received through banking channels. The AO had nevertheless allowed cost of acquisition while treating the gain as bogus, reflecting a contradictory stance. In the absence of any investigation report, SEBI/stock-exchange finding, or other material showing collusion with entry providers, the Revenue failed to discharge the burden of proving that the transactions were sham. Relying on the principle that suspicion or price movement alone cannot substitute for evidence, and following the Delhi High Court authority cited, the Tribunal concluded that the gain could not be treated as bogus and the addition was rightly deleted by the CIT(A). [Paras 11]

Addition treating the LTCG as bogus is deleted and the Revenue's ground is dismissed.

Deduction under section 24(b) for interest on borrowed capital regardless of payer - allowability of housing loan interest where loan and property are jointly held - Allowability of deduction under section 24(b) of interest on housing loan where interest payments were made from the husband's account though loan and property were in joint names. - HELD THAT: - The Tribunal affirmed the CIT(A)'s conclusion that section 24(b) requires that capital be borrowed and interest be payable in respect of funds used for acquisition/construction of the property, but does not mandate that the assessee personally make the payment. The facts showed the loan and property were in joint names, the borrowed funds were applied to acquire the property and the payment of interest was made (albeit from the husband's account). The source and utilisation of funds were established, and the payment by the husband could, at most, be treated as a gift; it did not disentitle the assessee from the statutory deduction. Consequently, the disallowance by the AO was not sustainable. [Paras 12, 14, 17]

Deduction of housing loan interest under section 24(b) is allowable to the assessee; AO's disallowance is deleted.

Final Conclusion: Both grounds of the Revenue appeal are dismissed: the addition treating the LTCG as bogus is deleted and the disallowance of housing loan interest under section 24(b) is reversed, resulting in allowance of the assessee's claims for Assessment Year 2013-14.

Cost of acquisition - assignment agreement - unregistered assignment agreement and actual outflow as cost of acquisition - remand for verification and computation of cost of acquisition - consideration of brokerage and cost of improvements in computation of capital gains - eligibility of non-resident assessee for DRP under amended section 144C

Cost of acquisition - assignment agreement - unregistered assignment agreement and actual outflow as cost of acquisition - consideration of brokerage and cost of improvements in computation of capital gains - remand for verification and computation of cost of acquisition - Whether amounts paid under an assignment agreement (including payments to builder and stamp duty) and expenses for brokerage and improvements should be recognised as part of cost of acquisition for computing long term capital gains, and whether the matter should be remitted for verification and computation. - HELD THAT: - The Tribunal found that the assessee's actual outflow as recorded in the assignment agreement - including amounts paid to the assignment holders, payments to the builder (covered car park, corpus deposit), and assignment fee - are undisputed and evidenced by banking transactions and documents; therefore, mere non registration of the assignment agreement does not warrant ignoring the actual payments in computing cost of acquisition. The Tribunal observed that the AO's recorded figure for cost of acquisition lacks a clear breakup and that the AO acknowledged the payments but did not explain how his figure was derived. Given the prima facie sufficiency of evidence for the payments and the presence of bills/invoices for improvements and brokerage, the Tribunal remitted the matter to the AO for fresh computation with directions to consider the actual amounts paid as per the assignment agreement (including amounts to L&T and stamp duty) and to verify and consider brokerage and costs of improvements in accordance with law, giving the assessee an opportunity of being heard. [Paras 16]

Remitted to the Assessing Officer for recomputation of cost of acquisition with a proper breakup, directing the AO to consider the actual payments under the assignment agreement and to verify and consider brokerage and improvement expenses.

Eligibility of non-resident assessee for DRP under amended section 144C - Whether the draft assessment order in this case could be routed to the Dispute Resolution Panel (DRP) for a non resident assessee in view of the amendment effective from 1.4.2020. - HELD THAT: - Relying on the Explanatory Memorandum to the Finance Bill, 2020, the Tribunal noted that the amendment to include non residents as eligible assessees under the amended provision would apply to pending assessments for which draft orders were issued after 1.4.2020. As the AO issued the draft assessment order on 27.9.2021, the amended provision applied and the DRP route was available. The additional ground challenging maintainability was therefore dismissed. [Paras 6]

The additional ground challenging maintainability was dismissed; the amended provisions rendering non residents eligible for DRP applied to the draft order issued on 27.9.2021.

Final Conclusion: The appeal is allowed for statistical purposes: the Tribunal upheld the applicability of the amended DRP route to the non resident assessee and remitted the capital gains computation to the Assessing Officer for recomputation of cost of acquisition with a clear breakup, directing consideration of amounts paid under the assignment agreement and verification of brokerage and improvement expenses, with opportunity to the assessee to be heard.

Estimation of profit element embedded in non-genuine purchases - application of Task Force report on Diamond Sector for fixing profit margins - assessment reopened under section 147 proceedings

Estimation of profit element embedded in non-genuine purchases - application of Task Force report on Diamond Sector for fixing profit margins - Whether the Commissioner (Appeals) was justified in reducing the profit percentage applied to disputed/tainted purchases to 3% (from 5% adopted by the Assessing Officer). - HELD THAT: - The assessee traded in and manufactured diamonds and had made purchases from dealers identified as tainted in search-linked information. The Assessing Officer restricted relief and assessed the profit element embedded in such purchases at 5%. The Commissioner (Appeals) reduced the estimated profit element to 3%. The Tribunal noted the Task Force for Diamond Sector report which placed net profit ranges for traders at 1%-3% and for manufacturers at 1.5%-4.5%. Given that the assessee was engaged in both trading and manufacturing, the Commissioner (Appeals)'s selection of 3% fell within the industry ranges recommended by the Task Force and well supported by the Tribunal's consistent practice of adopting those ranges for estimation. The Revenue did not prefer an appeal against the Commissioner (Appeals)'s order. On these grounds the Tribunal held the 3% estimate to be just and fair and not liable to interference.

The Commissioner (Appeals)'s estimate of 3% profit on the disputed purchases is upheld; the assessee's appeals are dismissed.

Final Conclusion: The Tribunal affirmed the Commissioner (Appeals)'s reduction of the embedded profit rate to 3% on non-genuine/tainted purchases for A.Ys. 2010-11, 2011-12 and 2013-14, finding the estimate consistent with the Task Force's industry profit-range guidance and refusing interference with the CIT(A)'s order; all appeals dismissed.

Provisional approval under section 80G(5) - sixth proviso to section 80G(5) - approval to operate from the first of the assessment year for which provisionally approved

Provisional approval under section 80G(5) - sixth proviso to section 80G(5) - assessment year commencement - Whether the provisional approval granted to the trust should operate from 01.04.2021 (the first of the assessment year for which the institution was provisionally approved) instead of from 23.09.2021. - HELD THAT: - The Tribunal examined the operative language of the sixth proviso to section 80G(5), which prescribes that where an application is made under the clause relating to provisional approval, the approval "shall apply ... from the first of the assessment years for which such institution or fund was provisionally approved". The provisional approval order issued by the PCIT recorded the period "From 23-09-2021 to AY 2024-25" and granted provisional approval w.e.f. 23.09.2021. Applying the clear and unambiguous tenor of the sixth proviso, the Tribunal held that approval is to be given from the first of the assessment year for which provisional approval stands (i.e., effective from 01.04.2021) and not from the mid year date on which the administrative order was issued. The statutory provision was found to admit no ambiguity; consequently the PCIT was directed to amend the provisional approval so that it operates from 01.04.2021. [Paras 5]

Provisional approval must operate from 01.04.2021; PCIT directed to amend the approval accordingly.

Final Conclusion: The appeal is allowed; the PCIT(Exemption) is directed to amend the provisional approval so that it operates from 01.04.2021 (the first of the assessment year for which the institution was provisionally approved) instead of from 23.09.2021.

Legality of dealing with Specified Bank Notes up to the appointed date - appointed date under the Specified Bank Notes (Cessation of Liabilities) Act, 2017 - treatment of cash deposits during demonetisation as unexplained money under the Income-tax Act - onus of proof and admissible evidence for source of cash deposits - acceptance of sale consideration as source for bank deposits

Legality of dealing with Specified Bank Notes up to the appointed date - appointed date under the Specified Bank Notes (Cessation of Liabilities) Act, 2017 - treatment of cash deposits during demonetisation as unexplained money under the Income-tax Act - onus of proof and admissible evidence for source of cash deposits - acceptance of sale consideration as source for bank deposits - Whether the addition of Rs.7,67,500/- as unexplained cash under section 69/69A was justified where the assessee claimed the deposits were from sale proceeds received on 09.11.2016 and whether dealing in Specified Bank Notes was prohibited on that date. - HELD THAT: - The Tribunal interpreted the Specified Bank Notes (Cessation of Liabilities) enactments and held that the appointed date for cessation of liabilities is 31.12.2016, and therefore there was no blanket prohibition on dealing with Specified Bank Notes up to that appointed date. The Assessing Officer's objection that the assessee could not accept demonetised currency on 09.11.2016 was found to be incorrect in law. On the factual thread, the AO had accepted that the assessee received consideration for sale of property and the purchaser furnished a confirmation of payment in cash. Given that acceptance and the evidence placed on record, the Tribunal held that the assessee discharged the evidentiary onus in respect of the source of the bank deposits. The CIT(A)'s confirmation of the addition was set aside because the AO ought to have accepted the sale consideration as source for the disputed cash deposits and there was no valid legal bar under the Specified Bank Notes enactment to the transaction as of the date in question. [Paras 6, 7, 8]

Addition of Rs.7,67,500/- treated as unexplained cash is deleted and the appeal is allowed.

Final Conclusion: The Tribunal held that dealings in Specified Bank Notes were not prohibited up to the appointed date of 31.12.2016, accepted the assessee's evidence of sale consideration as the source of the disputed deposits, set aside the appellate authority's confirmation, directed deletion of the addition and allowed the appeal.

Deductibility of share issue expenses as business expenditure under section 37(1) - Capital versus revenue character of expenditure incurred in raising fresh capital - Adjustment under section 143(1)(a) where an incorrect claim is apparent from the return

Deductibility of share issue expenses as business expenditure under section 37(1) - Capital versus revenue character of expenditure incurred in raising fresh capital - Effect of abandonment of proposed capital raising on nature of expenditure - Share issue expenses amounting to Rs.3.10 Crores are deductible as revenue expenditure under section 37(1) for AY 2017-18. - HELD THAT: - The Tribunal examined whether preliminary expenses incurred for a proposed public issue-legal fees, exchange filing fee, lead manager fees, advertisement and audit/certification charges-retain revenue character when the proposal to raise fresh capital through an IPO was abandoned. While acknowledging the settled principle in Brooke Bond India Ltd. v. CIT that expenditure incurred in raising fresh capital which increases the capital base is capital in nature, the Tribunal noted the subsequent exposition in CIT v. General Insurance Corporation that such expenditure is not capital if it does not result in an inflow of funds or an increase in capital employed. Applying these authorities to the facts, the Tribunal accepted that the nature and type of the expenses prima facie were revenue in nature and that, since the IPO proposal was abandoned and no new capital was raised, there was no increase in the capital base nor creation of an enduring asset. Reliance was placed on analogous decisions including the ITAT Bangalore view in M/s.Adadyn Technologies Pvt. Ltd. that expenditure on an abandoned project remains revenue in nature. On these facts the Tribunal concluded that the expenditures were incurred wholly and exclusively for the purposes of business and, having been rendered abortive by abandonment of the capital-raising exercise, should be allowed as revenue expenditure deductible under section 37(1). The Tribunal therefore set aside the CIT(A)'s affirmation of the disallowance and directed deletion of the addition. [Paras 7, 8, 9]

Appeal allowed and the addition disallowing share issue expenses deleted; the expenses are deductible as revenue expenditure under section 37(1).

Final Conclusion: The Tribunal allowed the appeal for Assessment Year 2017-18, holding that the share issue expenses incurred for a proposed IPO which was subsequently abandoned are revenue in nature and deductible under section 37(1); the disallowance sustained by the lower authorities is set aside.

Treatment of unregistered memorandum of understanding in property transactions - related party transactions and genuineness of consideration - deemed sale consideration under section 50C for computation of capital gains - disallowance under section 40A(3) for payments in cash exceeding prescribed limits

Treatment of unregistered memorandum of understanding in property transactions - related party transactions and genuineness of consideration - deemed sale consideration under section 50C for computation of capital gains - Validity of rejecting the unregistered MoU and computing short term capital gain by applying deemed consideration under section 50C based on the registered sale deed and guideline value - HELD THAT: - The Tribunal found the MoU to be an unregistered document between the assessee and connected persons, involving allotment of shares at a large premium as part of the consideration. Because the transfer was between related parties and the purported consideration under the MoU could not be substantiated with necessary evidence, the AO was justified in rejecting the unregistered MoU. The registered sale deed and the guideline value recorded for stamp duty were taken as reliable indicia of value; accordingly the AO applied the deemed consideration concept under section 50C to compute short term capital gain. The Tribunal agreed with the reasoning of the AO and the CIT(A) that in absence of credible evidence to support the lower consideration recorded in the unregistered MoU, the deemed consideration under the registered documents and guideline value could be adopted for computing capital gains. [Paras 7]

The addition of short term capital gain computed by the AO and sustained by the CIT(A) is upheld and the ground of the assessee is rejected.

Disallowance under section 40A(3) for payments in cash exceeding prescribed limits - Sustainability of disallowance of a portion of cash incurred expenses under section 40A(3) - HELD THAT: - The AO disallowed 30% of cash expenses and the CIT(A) after scrutiny allowed most payments supported by evidence but held that certain general, printing and stationery, and vehicle expenses were incurred in cash and not substantiated, attracting the statutory cash payment restriction. The CIT(A) disallowed 20% of the expenses incurred in cash; the assessee failed to file evidence to rebut the factual findings that payments were in cash and in excess of the prescribed limit. The Tribunal found no error in the CIT(A)'s approach or findings and concurred with the limited disallowance under section 40A(3). [Paras 8]

The disallowance of Rs. 17,721 imposed by the CIT(A) is sustained and the assessee's ground is rejected.

Final Conclusion: Both grounds raised by the assessee are dismissed: the Tribunal upholds the rejection of the unregistered MoU and sustains the capital gains addition computed by applying deemed consideration, and also upholds the limited disallowance under section 40A(3); the appeal is dismissed.

Condonation of delay due to COVID-19 limitation extension - Assessment completed under 143(3) read with 153C without notice under 153C - Assessment void ab initio for lack of jurisdictional notice

Condonation of delay due to COVID-19 limitation extension - Delay in filing the appeal of 65 days was condoned. - HELD THAT: - The Tribunal accepted the assessee's explanation that the delay was attributable to difficulties arising from the COVID-19 pandemic and reliance on the Hon'ble Supreme Court's suomotu Writ Petition No.3 of 2020 extending limitation w.e.f. 15.03.2020. The Revenue did not oppose condonation. Having regard to the general exemption period declared by the Apex Court and the facts and circumstances, the Tribunal exercised its discretion in the interest of natural justice and condoned the delay. [Paras 2, 3, 4]

Delay of 65 days in filing the appeal is condoned.

Assessment completed under 143(3) read with 153C without notice under 153C - Assessment void ab initio for lack of jurisdictional notice - The assessment for AY 2016-17, completed u/s. 143(3) r.w.s. 153C without issuance of notice under section 153C, is void ab initio and was quashed. - HELD THAT: - A search was conducted on 17.11.2015. Under the scheme of sections 153A/153C, the assessing officer may assess or reassess income for the six assessment years preceding the year in which the search occurs; those years are AY 2010-11 to 2015-16 in the present case. AY 2016-17 is the year of search itself, for which notice under section 153C cannot be issued. The record and the Revenue's concession show no notice under section 153C was issued; instead a notice under section 142(1) was issued and the assessment was recorded as completed u/s. 143(3) r.w.s. 153C. Because the statutory notice required to invoke proceedings under section 153C was absent, the assessment completed under the stated provision lacked the requisite jurisdictional foundation and was therefore void ab initio. [Paras 7, 8, 9]

Assessment order dated 29.12.2017 framed u/s. 143(3) r.w.s. 153C for AY 2016-17 is quashed as void ab initio.

Final Conclusion: The appeal is allowed: delay in filing the appeal is condoned and the assessment for AY 2016-17 completed as u/s. 143(3) r.w.s. 153C without the statutory notice under section 153C is quashed.

Reimbursement of expenses - disallowance under section 40(a)(ia) for non-deduction of tax at source - applicability of TDS to payments made to a Government organisation - appreciation of evidences and burden of proof

Reimbursement of expenses - disallowance under section 40(a)(ia) for non-deduction of tax at source - applicability of TDS to payments made to a Government organisation - appreciation of evidences and burden of proof - Whether the addition of Rs.21,60,162/- towards harbour expenditure disallowed under section 40(a)(ia) is sustainable where the amount was a reimbursement to a third party and the payment was made to a Government organisation without deduction of TDS. - HELD THAT: - The Tribunal found that the harbour expenditure represented reimbursement to M/s. Trimex Minerals (P) Ltd., which had paid Chennai Port Trust on behalf of the assessee, and that the assessee filed debit notes, ledger extracts and a confirmation from the third party showing the payment to Chennai Port Trust. The Tribunal recorded that Chennai Port Trust is a Government organisation and that TDS was not deducted on that payment. The Tribunal concluded that the Assessing Officer ignored the evidences filed and therefore the disallowance under section 40(a)(ia) for non-deduction of TDS was not sustainable. On this basis the addition was directed to be deleted and the claim allowed. [Paras 6, 7]

Addition towards harbour expenditure disallowed under section 40(a)(ia) is deleted; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that the harbour expenditure was a reimbursement supported by debit notes, ledger extracts and confirmation from the payor, that the payment to Chennai Port Trust (a Government organisation) did not attract TDS, and directing the Assessing Officer to delete the addition.

Prospective operation of penal provisions - protection under Article 20(1) of the Constitution - quashing of prosecution or show-cause proceedings for transactions entered into prior to the coming into force of the 2016 Amendment - benami transaction - offence under amended Section 53 of the Prohibition of Benami Property Transactions Act, 1988

Prospective operation of penal provisions - protection under Article 20(1) of the Constitution - quashing of prosecution or show-cause proceedings for transactions entered into prior to the coming into force of the 2016 Amendment - offence under amended Section 53 of the Prohibition of Benami Property Transactions Act, 1988 - Show Cause Notice dated 04.04.2022 issued under amended Section 53 could not be sustained in respect of alleged transactions entered into prior to 01.11.2016. - HELD THAT: - The Court applied the authoritative declaration of the Supreme Court in Union of India v. Ganpati Dealcom Pvt. Ltd. that the criminal provisions introduced by the Benami Transactions (Prohibition) Amendment Act, 2016 operate only prospectively. The Supreme Court accepted the concession that penal liability under the amended provision is prospective and held that applying the 2016 Act retrospectively to conduct occurring before it came into force would violate Article 20(1). Accordingly, authorities cannot initiate or continue criminal prosecution or confiscation proceedings in respect of transactions entered into prior to the commencement of the 2016 amendments. In the present case it was admitted that the alleged benami transactions and the sale of shares occurred before 01.11.2016; applying the Supreme Court's reasoning, the Show Cause Notice premised on the amended penal provision could not be sustained and had to be quashed. [Paras 6, 7]

Show Cause Notice dated 04.04.2022 quashed as the alleged transactions pre-dated the 2016 amendments and the penal provisions apply only prospectively.

Final Conclusion: Writ petition allowed; Show Cause Notice dated 04.04.2022 issued under amended Section 53 set aside because the alleged transactions were entered into prior to the coming into force of the 2016 Amendment and criminal provisions operate prospectively.

Provisional release conditions under section 110 of the Customs Act, 1962 - Requirement of type-approval certificate/COP for imported motor vehicles - Applicability of Foreign Trade Policy licensing conditions to provisional release - Registration under the Motor Vehicles Act as evidence of roadworthiness

Provisional release conditions under section 110 of the Customs Act, 1962 - Requirement of type-approval certificate/COP for imported motor vehicles - Registration under the Motor Vehicles Act as evidence of roadworthiness - Relevance of Foreign Trade Policy licensing notes to provisional release - Mandate to produce a type-approval certificate/ certificate of conformity from specified testing agencies as a condition for provisional release of an imported motor vehicle - HELD THAT: - The Tribunal examined whether the prescription in the licensing notes of the ITC(HS) classification-requiring production of a type-approval certificate/COP from specified agencies (VRDE/ARAI or equivalent) -could be imposed as a condition for provisional release of a seized imported vehicle under section 110. The Tribunal accepted that licensing norms under the Foreign Trade Policy aim to ensure post-clearance compliance with regulatory requirements governing operation of vehicles on Indian roads, but held that where the vehicle has already been registered by the competent authority under the Motor Vehicles Act, 1988 the requirement of producing the specified certificate for provisional release is redundant. The Tribunal relied on precedent holding that type-approval requirements are concerned with roadworthiness and are to be considered by the registering authority, and that an importer cannot be compelled to obtain a certificate which is not practically obtainable. Applying that reasoning, the Tribunal concluded that the specific condition insisting on the certificate from the named agencies is superfluous to the exercise of provisional release powers and therefore expunged it from the list of conditions for provisional release.

The condition requiring production of the specified type-approval/certificate of conformity for provisional release is expunged as redundant and superfluous.

Final Conclusion: The appeal is allowed by deleting the requirement to produce the specified type-approval/certificate of conformity as a condition for provisional release of the imported vehicle; the vehicle's registration with the competent authority suffices for provisional release purposes.

Special Additional Duty refund - limitation under notification for refund - conflicting High Court decisions - awaiting outcome of Special Leave Petition - remand for fresh consideration and de novo adjudication

Special Additional Duty refund - limitation under notification for refund - conflicting High Court decisions - awaiting outcome of Special Leave Petition - remand for fresh consideration and de novo adjudication - Refund claim of Special Additional Duty remanded to the adjudicating authority for fresh consideration in light of conflicting High Court decisions and pending SLP. - HELD THAT: - The Tribunal noted that High Courts of Delhi and Bombay have taken divergent views on whether the limitation prescribed by the relevant notification governs SAD refund claims and that the Jurisdictional High Court (Madras) had, in an earlier decision, followed the taxpayer favourable view but later, in CMS Info Systems Ltd., remanded matters to await the outcome of the SLP filed against the Bombay High Court decision. In the present appeal the Tribunal observed the conflict of authorities and the subsequent direction of the Jurisdictional High Court to await the Supreme Court's decision. In view of this legal uncertainty, the Tribunal refrained from deciding the refund claim on merits and directed remand to the adjudicating authority to follow the directions of the Madras High Court and await the outcome of the SLP in the CMS Info Systems matter, after which the adjudicating authority is to pass a fresh de novo order giving opportunity of hearing and applying the law as finally declared. [Paras 5, 6]

Appeal allowed in part by remanding the refund claims to the adjudicating authority for de novo consideration after awaiting the outcome of the SLP and following the directions of the Jurisdictional High Court.

Final Conclusion: The Tribunal remanded the appellant's SAD refund claim for fresh adjudication by the lower authority, to await the Supreme Court's determination of the conflicting High Court rulings, and directed that a de novo order be passed thereafter.

Scope of appellate power to remand for fresh adjudication - effect of payment of duty and penalty on existence of dispute - validity of show cause notice issued by a specialized investigation branch - application of precedent in remand decisions

Scope of appellate power to remand for fresh adjudication - application of precedent in remand decisions - Whether the Commissioner (Appeals) was justified in remanding the matter to the adjudicating authority in view of the Apex Court decision relied upon. - HELD THAT: - The Commissioner (Appeals) remanded the case to the original authority to re-examine the propriety of the SCN issuance in light of the Apex Court's decision in Canon India. The Tribunal examined the appellate order and the subsequent factual posture of the case and found that the remand direction was unnecessary. The adjudicatory exercise that the Commissioner (Appeals) directed for was rendered redundant by the factual position affirmed on record. The Tribunal held that where the appellant (revenue) seeks to remand an adjudication point already determined and the respondent has no continuing dispute on that point, the appellate direction to remit for re-examination in the circumstances of this case was beyond the appropriate exercise of appellate discretion and therefore liable to be set aside. [Paras 7, 8]

Order of the Commissioner (Appeals) directing remand to the adjudicating authority is set aside; the remand was unnecessary and uncalled for.

Effect of payment of duty and penalty on existence of dispute - validity of show cause notice issued by a specialized investigation branch - Whether payment of the duty and penalty by the respondent extinguished the controversy and precluded further re-examination of the correctness of the SCN issuance. - HELD THAT: - The record shows that the respondent paid the duty confirmed by OIO No.78721/2020 and the penalty imposed by OIO No.79248/2021 and expressly did not contest those orders further. The Tribunal observed that, in view of this voluntary and complete satisfaction of the demand and penalty, there remained no live controversy requiring re-adjudication on the technical question whether the SIIB was the proper authority to issue the SCN. Having accepted and discharged the liability, the respondent did not seek to pursue further litigation; accordingly, the appellate remand to probe the technical validity of the SCN was unnecessary. The Tribunal therefore allowed the revenue's appeal and sustained the original adjudication. [Paras 6, 7, 8]

Payment of the duty and penalty by the respondent extinguished the dispute; no further re-examination was required and the original order survives.

Final Conclusion: Revenue's appeal is allowed; the Commissioner (Appeals) order remanding the matter is set aside and the Original Authority's order confirming the duty stands; no consequential reliefs granted.

Provisional release of seized goods - security for provisional release - bank guarantee as security - parity in administrative orders

Provisional release of seized goods - security for provisional release - bank guarantee as security - parity in administrative orders - Quantum and nature of security to be accepted for provisional release of the seized export consignments - HELD THAT: - The only substantive question adjudicated was the security to be furnished for provisional release of 13 containers covered by seven Shipping Bills. The appellant sought leniency in the security demanded by Revenue, offering to execute the bond as directed but with a reduced bank guarantee. The Tribunal took note of a provisional release order issued by JNCH in a similar case and applied the principle of parity in administrative treatment. Having considered the appellant's offer and the analogous JNCH order, the Tribunal directed provisional release on execution of a bond for the estimated value of the seized goods (Rs.64,26,000/-) supported by a bank guarantee of Rs.10,00,000/-, with all other conditions of the provisional release order of 01.09.2021 to remain applicable. The Tribunal thus moderated the security demanded by the adjudicating authority by accepting the appellant's proposed bank guarantee amount while requiring the bond for the estimated value. [Paras 4, 5]

Provisional release directed on execution of a bond for the estimated value of the seized goods supported by a bank guarantee of Rs.10,00,000/-, subject to other conditions of the provisional release order dated 01.09.2021.

Final Conclusion: The appeal is allowed to the extent that the Revenue is directed to provisionally release the goods on a bond for the estimated value and a bank guarantee of Rs.10,00,000/-, with remaining conditions of the provisional release order to apply.

Obligation of suspended management to cooperate with IRP/RP/Liquidator - power to direct directors and statutory auditor to provide assistance under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 - authority to seek local police assistance for enforcement of cooperation - permitted use of digital forensics by Liquidator to retrieve computerized data

Obligation of suspended management to cooperate with IRP/RP/Liquidator - power to direct directors and statutory auditor to provide assistance under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 - Direction that specified director and statutory auditor must provide assistance and cooperation to the Interim Resolution Professional within a stipulated time - HELD THAT: - The Adjudicating Authority, noting that CIRP was commenced and that intimation and requests for information had been sent to the suspended director and statutory auditor with no substantive response, proceeded ex parte. Applying the obligation under Section 19(1) of the Code that the suspended management must extend assistance to the IRP/RP, the Authority directed respondent No.1 (director) and respondent No.2 (statutory auditor) to provide the requisite information and cooperation to the IRP and to complete the process within three weeks. The order followed from the recorded non-appearance and absence of replies despite service, and the Authority exercised its power to compel cooperation in aid of the CIRP process.

IA No. 21/2020 allowed; Mr. Krishna Kajaria and U P Singh & Associates directed to provide assistance to the IRP within three weeks, failing which the IRP may approach local police or move appropriate application before the Authority.

Obligation of suspended management to cooperate with IRP/RP/Liquidator - power to direct directors and statutory auditor to provide assistance under Section 19(2) of the Insolvency and Bankruptcy Code, 2016 - permitted use of digital forensics by Liquidator to retrieve computerized data - authority to seek local police assistance for enforcement of cooperation - Direction that listed directors of the suspended board must furnish specified information and assistance to the Liquidator and that the Liquidator may employ digital forensics and approach local police for enforcement - HELD THAT: - Following resolution for liquidation and appointment of the Liquidator, the Liquidator sought a wide range of documents and information from the suspended directors. Notices were served and the respondents failed to appear or file replies; the Authority proceeded ex parte. Relying on the statutory obligation in Section 19(1) that the suspended management must assist the Liquidator in managing company affairs, the Authority directed the listed suspended directors to provide the enumerated information and cooperation within three weeks. The Authority further authorised the Liquidator to retrieve data from the corporate debtor's computerized systems, including by engaging empanelled digital forensic firms, and permitted recourse to local police in case of non-compliance, with liberty to move the Adjudicating Authority thereafter.

IA No. 69/2021 allowed; specified directors directed to provide the listed information to the Liquidator within three weeks; Liquidator authorised to employ digital forensics and to approach local police or this Authority for enforcement.

Final Conclusion: Both interlocutory applications were allowed: the Tribunal directed the suspended directors and the statutory auditor to provide required information and cooperation to the IRP/RP and to the Liquidator within three weeks, authorised the Liquidator to retrieve computerized data (including by using empanelled digital forensic firms), and permitted recourse to local police and further applications to the Adjudicating Authority in case of non-compliance.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - provisional attachment and confirmation under Chapter III of the Prevention of Money Laundering Act - civil forfeiture / proceeds of crime - non obstante clause and interplay of special statutes - Section 32A of the IBC as trigger for cessation of action against corporate debtor's property - distinction between debt recovery proceedings and confiscation under PMLA - protection of bona fide third party interests on PMLA attachment

Moratorium under Section 14 of the Insolvency and Bankruptcy Code - provisional attachment and confirmation under Chapter III of the Prevention of Money Laundering Act - Whether the moratorium under Section 14 IBC bars the Enforcement Directorate from making or prosecuting provisional attachment and confirmation proceedings under Sections 5 and 8 of the PMLA during the CIRP. - HELD THAT: - The Court held that Section 14's moratorium, aimed at preserving the insolvency estate and preventing pecuniary attacks by creditors, does not operate to oust the ED's power to provisionally attach or seek confirmation of attachment under the PMLA. The two statutes serve distinct objectives: IBC to resolve insolvency and preserve value for stakeholders; PMLA to prevent money laundering and to deprive offenders of proceeds of crime through a civil forfeiture scheme. Attachment under PMLA is not an ordinary debt recovery action but a measure to preserve tainted assets pending adjudication and possible confiscation. Given this difference in purpose and character, proceedings under PMLA (provisional attachment/confirmation) do not fall within the prohibition in Section 14(1)(a). The Court therefore refused to interpret Section 14 as a blanket bar on PMLA attachment proceedings during CIRP.

Section 14 IBC does not prohibit the ED from exercising attachment and confirmation powers under Sections 5 and 8 PMLA during the CIRP.

Section 32A of the IBC as trigger for cessation of action against corporate debtor's property - non obstante clause and interplay of special statutes - The legal effect and scope of Section 32A of the IBC and its bearing on the interplay between IBC and PMLA, including whether Section 32A replaces or limits the moratorium's operation vis a vis PMLA. - HELD THAT: - The Court accepted that Section 32A (inserted later) is the legislative mechanism that defines the terminal point at which actions against the corporate debtor or its property in relation to pre CIRP offences cease: namely upon approval of a resolution plan or sale of liquidation assets fulfilling the statutory conditions. While both IBC and PMLA contain non obstante clauses, the proper reconciliation requires attention to Section 32A as the later expression of legislative intent: Parliament chose to protect resolution applicants and property only upon the trigger events in Section 32A. Consequently the non obstante clause in IBC cannot be read to oust PMLA powers prior to the occurrence of those trigger events; after the Section 32A events occur, PMLA action against the corporate debtor's property is statutorily barred to the extent prescribed.

Section 32A marks the definitive point at which PMLA action against corporate debtor's property ceases; before those trigger events, PMLA powers remain exercisable.

Distinction between debt recovery proceedings and confiscation under PMLA - civil forfeiture / proceeds of crime - Whether attachment/confiscation proceedings under the PMLA amount to debt recovery or creditor action within the meaning of the IBC definitions (creditor, debt, operational creditor). - HELD THAT: - The Court concluded that the ED does not act as a creditor when it attaches properties under the PMLA. Proceeds of crime are not equivalent to a debt owed to the State; the PMLA regime effects civil forfeiture to deprive offenders of ill gotten gains and serves a public law purpose distinct from commercial recovery. Therefore PMLA attachment is not an enforcement of an IBC type claim and cannot be equated to actions by operational or financial creditors under the IBC framework.

Attachment under PMLA is not debt recovery by a creditor and does not fall within creditor centric definitions of the IBC.

Provisional attachment and confirmation under Chapter III of the Prevention of Money Laundering Act - protection of bona fide third party interests on PMLA attachment - The legal effect of provisional attachment under PMLA on property rights and the adequacy of statutory safeguards for bona fide third parties and for the resolution professional. - HELD THAT: - The Court explained that provisional attachment is a protective, custodial measure that restrains further alienation of suspected tainted assets; it does not extinguish title or vest property absolutely in the State. PMLA contains statutory safeguards (opportunity before the Adjudicating Authority, special court mechanisms, and provisions for restoration to bona fide claimants) and therefore attachment does not automatically defeat bona fide third party interests or render the property unavailable for lawful challenge. The resolution professional and other affected parties retain remedies under PMLA to seek release or restoration in accordance with statutory procedures. The Court reiterated that where a bona fide third party claim predates the criminal activity, that claim may be satisfied first and PMLA's claim take the residual value.

Provisional attachment under PMLA is a temporary custodial restraint subject to statutory safeguards; third party and RP remedies remain available and attachment does not amount to absolute divestment of rights.

Final Conclusion: Writ petition dismissed. The moratorium in Section 14 IBC does not, by itself, bar the ED from exercising attachment and confirmation powers under Sections 5 and 8 PMLA during CIRP; Section 32A IBC prescribes the specific trigger (approval of a resolution plan or sale of liquidation assets) after which PMLA action against the corporate debtor's property is statutorily curtailed. Attachment under PMLA is not a debt recovery action by a creditor, and provisional attachment remains subject to the PMLA's safeguards and to lawful challenges by bona fide third parties and the resolution professional.

Renting of immovable property - supply of tangible goods - Business Support Service - infrastructural support services

Renting of immovable property - supply of tangible goods - Business Support Service - infrastructural support services - Whether the consideration received by the appellant for leasing plant, machinery and equipment and land to ISFPL falls within Business Support Service (infrastructural support) or is to be treated as renting of immovable property and supply of tangible goods for use, and hence not taxable for the period under dispute. - HELD THAT: - The Tribunal found that the Conducting Agreement transferred possession of plant, machinery and equipment and land to ISFPL so that ISFPL conducted its production activity independently; the appellant did not provide ongoing day-to-day services or facilities contemplated by the Explanation to the definition of Business Support Service. The Explanation describes infrastructural support as provision of office with utilities, reception with personnel, secretarial services, internet/telecom, pantry and security - services outsourced to support another's business operations. The facts show outright leasing of land and fixed plant and, in respect of movable machinery, supply of tangible goods for use. The Tribunal observed that those activities were subsequently brought expressly within the taxable net and that their later inclusion confirms they were not covered earlier under Business Support Service. Reliance was placed on this Tribunal's precedent holding that renting of land and supply of plant and equipment do not fall within infrastructural support, and in consequence the impugned classification under Business Support Service could not be sustained. Having decided the substantive classification against the revenue, the Tribunal did not adjudicate other grounds raised by the appellant.

The activity is renting of immovable property and supply of tangible goods for use, not Business Support Service (infrastructural support), and therefore the demand confirmed in the impugned order is unsustainable for the period May 2006 to March 2007.

Final Conclusion: Impugned order set aside and appeal allowed on merits on the classification issue: the lease of plant, machinery, equipment and land to ISFPL is not Business Support Service (infrastructural support) and thus the confirmed service tax demand for May 2006 to March 2007 is not sustainable.

Exemption under Notification No. 12/2003 ST dated 20.06.2003 - documentary proof specifically indicating the value of goods and materials - service tax treatment of study materials supplied by commercial coaching and training institutes - delegated legislation under the executive power to grant exemptions vis a vis administrative circulars - CBEC circular cannot modify or restrict the scope of a statutory exemption notification

Exemption under Notification No. 12/2003 ST dated 20.06.2003 - documentary proof specifically indicating the value of goods and materials - service tax treatment of study materials supplied by commercial coaching and training institutes - Entitlement to exemption under Notification No. 12/2003 ST for study materials supplied by the appellant which were not standard text books but for which documentary proof of value was available. - HELD THAT: - The Notification exempts from service tax so much of the value of taxable services as equals the value of goods and materials sold by the service provider to the recipient, subject to documentary proof specifically indicating that value. The Notification contains no restriction as to the type of goods or materials eligible for exclusion. The study materials supplied by the appellant, though not standard printed textbooks with MRP, were sold as part of the service and their value was shown with documentary evidence. Consequently, that value is excludable from the taxable value under the Notification and not taxable as part of the service. [Paras 5]

The appellant is entitled to the benefit of the exemption under Notification No. 12/2003 ST for the value of the study materials shown by documentary proof; such value is excluded from service tax.

Delegated legislation under the executive power to grant exemptions vis a vis administrative circulars - CBEC circular cannot modify or restrict the scope of a statutory exemption notification - Validity and effect of the CBEC Circular of 20.06.2003 insofar as it sought to restrict the Notification to 'standard textbooks which are priced'. - HELD THAT: - The exemption notification is a subordinate legislation issued by the Central Government under its statutory power to grant exemptions. The CBEC circular is an administrative instruction addressed to departmental officers and does not have statutory authority to amend, restrict or add conditions to a notification issued by the Central Government. The attempt in the circular to confine the exemption to priced standard textbooks transgresses the scope of the Notification and is without authority; therefore reliance on that circular to deny the Notification's benefit is impermissible. [Paras 5, 7]

The CBEC circular cannot lawfully curtail the scope of Notification No. 12/2003 ST; the circular's restriction is of no effect and cannot be used to deny the exemption.

Final Conclusion: The appeal is allowed; the impugned order denying benefit of Notification No. 12/2003 ST is set aside and the appellant is granted consequential reliefs, the CBEC circular being ineffective to restrict the statutory exemption.

Cenvat credit on countervailing duty and cess paid on import where payment made by utilization of DEPB scrips - Bill of Entry as admissible documentary evidence for availing credit - No disability under Rule 3 of the Cenvat Credit Rules to claim credit where duty paid through DEPB scrips - Disallowance under Rule 14 of the Cenvat Credit Rules

Cenvat credit on countervailing duty and cess paid on import where payment made by utilization of DEPB scrips - Bill of Entry as admissible documentary evidence for availing credit - No disability under Rule 3 of the Cenvat Credit Rules to claim credit where duty paid through DEPB scrips - Disallowance under Rule 14 of the Cenvat Credit Rules - Whether the appellant was entitled to Cenvat credit of CVD and cess on imported raw materials where such duties were discharged by utilising DEPB scrips and credit was taken on the basis of bill of entry/certified copies. - HELD THAT: - The Tribunal found no rule-based bar to availment of cenvat credit where countervailing duty and cess on imports were paid by utilisation of DEPB scrips. The court observed that Rule 3 of the Cenvat Credit Rules does not provide any disability to deny credit in such circumstances. Further, Rule 9 recognises the bill of entry as one of the documents for availing credit; the bill of entry in the present case reflected the CVD and cess and certified copies of the bills of entry were produced before the Range Authority after originals were misplaced. On these facts, the Tribunal concluded that the appellant had valid documentary basis to claim credit and therefore the disallowance framed as under Rule 14 was not sustainable. Having regard to these determinations, the appellant's claim of cenvat credit was held to be rightly availed. [Paras 7, 8]

Credit of CVD and cess paid by utilisation of DEPB scrips, supported by bill of entry/certified copies, was rightly availed; disallowance under Rule 14 is set aside.

Final Conclusion: Appeals allowed; impugned order set aside and the appellant entitled to consequential benefits.

Remission under Rule 21 of the Central Excise Rules, 2002 - loss by unavoidable fire / unavoidable accident - negligence as basis for demand and penalty - duty demand and penalty set aside where goods lost due to causes beyond assessee's control

Remission under Rule 21 of the Central Excise Rules, 2002 - loss by unavoidable fire / unavoidable accident - Entitlement to remission under Rule 21 for finished goods lost or rendered unfit due to fire. - HELD THAT: - The Tribunal found the occurrence of fire and loss of finished goods to be undisputed and attributable to sparks from a nearby transformer during stormy weather, an event beyond the appellant's control. The appellant took prompt steps to inform the police and Fire Department, the Fire Officer issued a supporting certificate, and there was no prior history of similar incidents at the premises. The Fire Department's report did not attribute negligence to the appellant. The Tribunal held that the loss constituted an unavoidable fire accident and that the partially damaged medicines were rendered unfit for human consumption and marketing prior to removal from the factory. On these findings the appellant satisfied the factual and legal prerequisites for remission under Rule 21, and the claim for remission was allowed. [Paras 10]

Remission under Rule 21 granted as the loss was due to unavoidable fire and the damaged goods were rendered unfit for consumption or sale.

Negligence as basis for demand and penalty - duty demand and penalty set aside where goods lost due to causes beyond assessee's control - Sustainability of duty demand, interest and penalty imposed on the appellant on the ground of negligence. - HELD THAT: - The adjudicating authority had confirmed duty and imposed equal penalty and interest on the assumption that the loss resulted from the appellant's negligence. The Tribunal, however, on evaluation of the material-fire report, certificate of the Fire Officer, absence of findings of negligence by the Fire Department, and the circumstances of the transformer-originated sparks-found no basis to hold the appellant negligent. Because the loss was held to be due to natural causes/unavoidable accident, the matching duty demand and penalty could not be sustained. The Tribunal therefore set aside the demand of duty and the penalty and allowed the appeals. [Paras 10, 11, 12]

Demand of duty, interest and penalty set aside as unsustainable where loss resulted from causes beyond the appellant's control and not from negligence.

Final Conclusion: The impugned orders confirming duty and imposing penalty were set aside; the appellant's claim for remission under Rule 21 was allowed and both appeals were allowed.

Classification of beverages under Central Excise Tariff - fruit pulp or fruit juice based drinks v. lemonade - application of Regulation 2.3.10 and Regulation 2.3.30 - test of Total Soluble Solids (Brix) and fruit juice percentage - precedent and follow-on effect of Larger Bench decision - allowance of out of turn/early hearing

Allowance of out of turn/early hearing - Applications for early hearing - HELD THAT: - The Tribunal considered the applicant's request for early hearing on the ground that the relevant classification issue had been decided by the Larger Bench in Brindavan Beverages. Having heard both parties and noting that the Larger Bench had given a favourable decision on the same controversy, the Tribunal found merit in the submission and allowed the applications for early hearing so that the appeals could be taken up expeditiously. [Paras 4, 5]

Early hearing applications allowed and appeals taken up for consideration.

Classification of beverages under Central Excise Tariff - fruit pulp or fruit juice based drinks v. lemonade - application of Regulation 2.3.10 and Regulation 2.3.30 - precedent and follow-on effect of Larger Bench decision - Proper classification of 'Minute Maid Nimbu Fresh' (MMNF) and consequent validity of demands confirmed under Tariff Item No. 2202 10 20 - HELD THAT: - The Tribunal held that the question of classification raised in these appeals is squarely covered by the Larger Bench decision in Brindavan Beverages which examined both common parlance and the supporting legislation. The Larger Bench applied Regulation 2.3.10/2.3.30 and concluded that where the lime or lemon juice content is not less than 5% and Total Soluble Solids meet the prescribed threshold, the product is a fruit juice based drink classifiable under Tariff Item 2202 90 20. It rejected the narrower approach that had led to classification under 2202 10 20, and held that the demands confirmed by original authorities treating the products as falling under 2202 10 20 were not sustainable. Respectfully following that Larger Bench consensus, the Tribunal allowed the appeals. [Paras 3, 5, 6]

Appeals allowed by following the Larger Bench; MMNF and similar products to be classified under Tariff Item 2202 90 20 and demands premised on classification under 2202 10 20 set aside.

Final Conclusion: The Tribunal allowed the applications for early hearing, and-following the Larger Bench decision in Brindavan Beverages-held that Minute Maid Nimbu Fresh and comparable products are classifiable as fruit pulp or fruit juice based drinks under Tariff Item 2202 90 20; demands based on classification under Tariff Item 2202 10 20 were set aside and the appeals were allowed.

Transfer to defraud revenue void - protection under Sec.24-A of TNGST Act - bonafide purchaser for consideration without notice - knowledge of transferor defeats protection under Sec.24-A - effect of void transfer on subsequent purchasers

Bonafide purchaser for consideration without notice - protection under Sec.24-A of TNGST Act - The appellants are not entitled to protection as bonafide purchasers without notice under Sec.24-A(i) of the TNGST Act. - HELD THAT: - The courts found that the transferor, late K. Muthusami, was aware of the tax arrears and surcharge proceedings (initiated from 1993 and notices recorded as early as 1997). The gift executed by Muthusami in 2002 in favour of his daughter and the subsequent transfers were held to be made with the intention to defraud the revenue. The purchasers (plaintiffs 1 to 3) had not taken steps to record title in revenue records and there was no evidence of effective enquiries prior to purchase. On these facts the lower courts correctly held that the appellants could not claim the statutory protection for a purchaser for adequate consideration without notice under Sec.24-A(i). [Paras 13]

Claim to protection as bonafide purchasers without notice under Sec.24-A(i) rejected.

Transfer to defraud revenue void - knowledge of transferor defeats protection under Sec.24-A - effect of void transfer on subsequent purchasers - The transfers (gift and subsequent sales) were held void as transfers made to defraud the revenue and therefore ineffective against the department's claim. - HELD THAT: - The trial and appellate courts concluded on evidence that the settlement/gift by Muthusami and the subsequent sale transactions were executed to defeat recovery of sales tax arrears. Because the transferor had knowledge of the pending proceedings and the transfers were made with intent to defraud, they are void against the revenue under Sec.24-A. Consequentially, purchasers deriving title from that void instrument did not acquire better title vis-a -vis the department. [Paras 13]

Transfers set aside as void against the department; purchasers deriving title from those transfers cannot claim protection.

Effect of void transfer on subsequent purchasers - The appellants cannot resist enforcement of the charge/attachment by invoking protections under the Transfer of Property Act where the underlying transfer is void as against the revenue. - HELD THAT: - The court endorsed the conclusion that, although attachment was effected in 2009, the tax liability arose and proceedings were pending from 1993 onward and were ultimately upheld on appeal. Given that the foundational transaction was held to be void to defeat revenue, the plaintiffs lacked locus to challenge the department's attachment and sale; the protection claimed under the Transfer of Property Act did not avail them where the transfer itself was void as against the department's claim. [Paras 14]

Protection under Transfer of Property Act not available; attachment and enforcement by the department sustainable.

Final Conclusion: The Second Appeal is dismissed; the concurrent findings of the trial and appellate courts that the transfers were executed to defraud the revenue and that the appellants are not bonafide purchasers entitled to protection under Sec.24-A are affirmed, and the department's attachment/sale is sustained.