TaxTMI Updates e-Newsletter
Nov 18,2021

Maintainability of writ petition in presence of statutory appeal - appealability of orders under the Goods and Services Tax Act - refund under Section 54 of the Goods and Services Tax Act, 2017 - alternative remedy

Maintainability of writ petition in presence of statutory appeal - alternative remedy - appealability of orders under the Goods and Services Tax Act - Writ petition challenging rejection of refund applications is not maintainable in view of the statutory remedy of appeal under the GST law. - HELD THAT: - The Court accepted the respondents' preliminary objection that Section 107(1) of the Goods and Services Tax Act, 2017 renders orders passed by an adjudicating authority appealable. Given the availability of a specific statutory appellate remedy, the High Court found that the writ petition filed by the petitioner challenging orders rejecting refund claims could not be entertained. The petition was therefore dismissed on the ground of existence of an alternative remedy by way of appeal before the appropriate Appellate Authority. [Paras 3, 4, 5]

Writ petition dismissed on the ground of alternative remedy; petitioner directed to pursue statutory appeal.

Remedy by statutory appeal - direction for expeditious disposal of appeal - Court granted liberty and procedural directions for filing and disposal of the statutory appeal. - HELD THAT: - Although the writ was dismissed for alternative remedy, the Court afforded the petitioner a limited concession to file the appeal promptly. The petitioner was directed to file the appeal within three weeks, and the Appellate Authority was requested to decide the appeal as early as possible, preferably within six months from the date of filing. This direction is ancillary to the dismissal and aimed at securing expeditious adjudication of the statutory remedy. [Paras 6]

Liberty granted to file appeal within three weeks; appellate authority to decide preferably within six months.

Final Conclusion: Writ petitions challenging rejection of refund applications dismissed on the ground of existence of an alternative statutory appeal under Section 107(1) of the GST Act, with liberty to file appeals within three weeks and a direction that the Appellate Authority decide them preferably within six months.

Regular bail - disclosure statement as primary evidence - absence of recovery - investigation complete and challan presented - offences triable by Magistrate

Regular bail - disclosure statement as primary evidence - absence of recovery - offences triable by Magistrate - Grant of regular bail to the petitioner - HELD THAT: - The Court examined the custodial status of the petitioner, the nature of the evidence against him and the stage of the proceedings. It was recorded that the principal material implicating the petitioner is his own disclosure statement, that no recoveries were made pursuant to that disclosure and that, although investigation has been completed and a challan has been presented, the offences are triable by the Magistrate. In light of these facts and without expressing any view on the merits, the Court found the balance of considerations adequate for release on bail. The Court noted the petitioner's period in custody and earlier involvement in an identical case where he was similarly not shown to be a beneficiary, and observed that no further immediate custodial requirements were shown to outweigh the case for bail.

Petitioner released on regular bail subject to furnishing bail/surety bonds to the satisfaction of the trial Court/Illaqa Magistrate/Duty Magistrate.

Final Conclusion: Bail petition allowed; petitioner directed to be released on regular bail on furnishing bonds to the satisfaction of the concerned Magistrate.

Assessment under Section 73 of the Central Goods and Services Tax Act, 2017 - maintainability of writ under Article 226 where statutory appeal period has lapsed - exclusive statutory remedy by way of appeal and limitation/condonation rules - wrong provision invoked versus lack of jurisdiction - acceptance of assessment order by part payment

Maintainability of writ under Article 226 where statutory appeal period has lapsed - exclusive statutory remedy by way of appeal and limitation/condonation rules - challenge to assessment order under Article 226 after expiry of the statutory period for filing appeal is not maintainable - HELD THAT: - The Court held that an order passed under the Act is contestable by appeal to the appellate authority within the statutory period and the single one month extension exercisable by the authority. Where both the primary period and the extended one month period have expired and the statute provides no further extension, recourse to writ jurisdiction to circumvent the limitation is impermissible. The Court relied on the principle reiterated by the Supreme Court that the High Court should not entertain writ petitions that effectively seek to bypass a foreclosed statutory remedy of appeal when limitation under the statute has run out. [Paras 5, 6, 10, 11]

Writ petition challenging the Order in Original dated 28.03.2019 cannot be entertained on the ground that the statutory remedy of appeal is time barred.

Wrong provision invoked versus lack of jurisdiction - assessment under Section 73 of the Central Goods and Services Tax Act, 2017 - acceptance of assessment order by part payment - invoking Section 73 instead of Section 62 did not amount to absence of jurisdiction and part payment constituted acceptance affecting maintainability - HELD THAT: - The Court found that the assessing authority possessed jurisdiction to assess the petitioner and that proceeding under one statutory provision instead of another, if within the authority's jurisdictional ambit, amounts to an error in law but not to jurisdictional inexistence. Consequently, alleged wrongful invocation of Section 73 in place of Section 62 did not render the Order in Original void for want of jurisdiction. Further, the petitioner had partly complied by paying the tax dues under the order; such part compliance amounted to acceptance of the order and diminished the scope for a collateral challenge in writ proceedings. [Paras 8, 9]

The contention of lack of jurisdiction is rejected; the invocation of the wrong provision does not make the assessment void, and part payment of dues indicates acceptance which affects maintainability of the challenge.

Final Conclusion: Writ petition under Article 226 is dismissed as not maintainable; petitioners' challenge to the Order in Original dated 28.03.2019 is refused, with no order as to costs.

GST recovery proceedings - service of order of assessment - period for initiation of recovery after service - exercise of power under proviso to Section 79(1)(c) requires reasons in writing - interim stay subject to deposit

Service of order of assessment - period for initiation of recovery after service - Validity of notice under Section 79(1)(c) when issued within three months of the assessment/recovery order and without service of the assessment order on the petitioner. - HELD THAT: - The Court noted that the recovery notices (recovery No.34/2021 and No.35/2021) record order dates of 18.8.2021 while the notice under Section 79(1)(c) was issued on 1.10.2021, i.e., within less than three months from the stated order dates. The petitioner also asserted that the assessment/recovery order recorded in Annexure P-9 was never served on him. The Court observed that Section 78 contemplates a three-month period after service of the order of assessment before initiation of recovery, and that the proviso permitting earlier action requires recording of reasons in writing. It was not disputed that no specific reasons were recorded for initiating recovery before the lapse of three months, and the petitioner declared non-service of the order. On these facts the Court found the procedure leading to issuance of Annexure P-10 to be procedurally defective for the purpose of the interim remedy sought, and accordingly entertained the petition for interim relief.

Operation of the notice dated 01.10.2021 (Annexure P-10) is stayed as an interim measure.

Interim stay subject to deposit - Condition on which interim stay of the recovery notice would be granted. - HELD THAT: - Balancing the parties' contentions and the material placed before it, the Court directed that the interim stay of the notice dated 01.10.2021 would be subject to the petitioner depositing 50% of the total payable tax within three weeks, with adjustment of the sum already paid by the petitioner. This direction was framed as a provisional measure until the next date of hearing.

Petitioner to deposit 50% of the total payable tax within three weeks (adjusting amounts already paid); stay to remain till the next date of hearing.

Final Conclusion: The Court granted interim relief by staying operation of the recovery notice dated 01.10.2021 (Annexure P-10) subject to the petitioner depositing 50% of the total payable tax within three weeks (adjusting amounts already paid); the procedural irregularities identified-issuance within three months and absence of recorded reasons and asserted non-service-formed the basis for the interim order and the matter was listed for further hearing in the week commencing 6th December 2021.

Habeas corpus - default bail under Section 167(2) Cr.P.C. - illegal detention / personal liberty - offence under Section 132 of the Central Goods and Services Tax Act - custody pending investigation in respect of cognizable non-bailable offence

Habeas corpus - illegal detention / personal liberty - custody pending investigation in respect of cognizable non-bailable offence - Whether the detenue is in illegal confinement and entitled to release by writ of habeas corpus. - HELD THAT: - The Court recorded that the detenue was arrested on 18.06.2021, a complaint for an offence under Section 132 of the CGST Act has been filed before a Judicial Magistrate and the detenue remains in judicial custody. The petitioner's challenge to the lawfulness of detention was considered in the context of the material on record, including that judicial proceedings are pending and applications for bail/default bail have been disposed of or withdrawn. In these circumstances the Court concluded that the detenue's confinement cannot be characterised as illegal and that habeas corpus relief is not warranted.

Petition seeking habeas corpus relief on grounds of illegal detention dismissed.

Default bail under Section 167(2) Cr.P.C. - offence under Section 132 of the Central Goods and Services Tax Act - illegal detention / personal liberty - Whether the order dated 18.08.2021 (Annexure P-6) dismissing the detenue's application for default bail is liable to be set aside in these proceedings. - HELD THAT: - The Court noted that the application under Section 167(2) Cr.P.C. by the detenue seeking default bail was dismissed by the Magistrate vide Annexure P-6. It further noted that a revision against that order had been withdrawn from the Additional Sessions Judge and an earlier petition with similar prayers had been withdrawn before this Court. In view of the pending criminal proceedings, the dismissal of the default bail application, and the procedural history including withdrawals, the High Court found no basis in the instant petition to invalidate Annexure P-6 or to direct release of the detenue. The Court therefore declined to interfere with the Magistrate's order in these proceedings.

Prayer to declare Annexure P-6 invalid and to release the detenue on default bail refused; impugned order not set aside.

Final Conclusion: Writ petition under Article 226 seeking habeas corpus relief and setting aside of the Magistrate's order dismissing default bail is dismissed as the detenue's confinement is not shown to be illegal and the court declines to invalidate the impugned order in the present proceedings.

Cancellation of GST registration for non-filing of returns - right to appeal and limitation for appeals - inapplicability of judicially granted COVID-19 extension where limitation expired prior to lockdown - jurisdiction of High Court under Article 226 to scrutinize cancellation orders - principle of natural justice in cancellation proceedings and issuance of show cause notice - inbuilt revocation remedy under Section 30

Cancellation of GST registration for non-filing of returns - right to appeal and limitation for appeals - inapplicability of judicially granted COVID-19 extension where limitation expired prior to lockdown - Validity of the appeal against the cancellation order dated 21.09.2019 in view of statutory limitation and the applicability of COVID-19 relief - HELD THAT: - The Court found that the statutory period for preferring an appeal under the relevant appellate provision is three months from communication with a possible extension of one month under the provision. The limitation for filing the appeal expired on 19.01.2020, which was prior to the COVID-19 lockdown and prior to the Apex Court's general extension of limitation. Consequently the judicial extension for the period from 15.03.2020 to 14.03.2021 could not be invoked to cure the belated appeal filed on 10.04.2021. The asserted non-receipt of the cancellation order for 477 days, and reliance on an advocate's failure to inform, did not excuse the delay so as to attract the post facto COVID relief or revive the barred appeal. [Paras 6, 9]

Appeal was barred by limitation and the COVID-19 extension was inapplicable; the petitioner's challenge based on extended limitation is rejected.

Jurisdiction of High Court under Article 226 to scrutinize cancellation orders - principle of natural justice in cancellation proceedings and issuance of show cause notice - Whether the High Court could, in exercise of writ jurisdiction under Article 226, examine the validity of the principal cancellation order despite the appellate remedy being time barred - HELD THAT: - The Court examined the exceptions identified by the Full Bench of the Gujarat High Court that permit writ scrutiny of cancellation orders (e.g., absence of jurisdiction, assumption or excess of jurisdiction, procedural infirmity, misapplication of law, or violation of natural justice). Applying those criteria to the present facts, the Court found no pleading or evidence that the cancelling authority acted without jurisdiction, assumed jurisdiction it did not possess, exceeded its powers, or misapplied the statutory provision. The show cause notice dated 09.09.2019 was issued prior to cancellation and the petitioner failed to respond; therefore the circumstances do not attract the exceptional grounds for writ intervention. [Paras 11, 12, 13]

Writ jurisdiction under Article 226 cannot be invoked to reopen the principal cancellation order in this case; the exceptions permitting such scrutiny are not attracted.

Principle of natural justice in cancellation proceedings and issuance of show cause notice - inbuilt revocation remedy under Section 30 - Whether the cancellation order suffered from violation of natural justice because of non-communication of proceedings or denial of opportunity to be heard - HELD THAT: - The record and admitted facts show that a show cause notice was issued on 09.09.2019 before cancellation. The petitioner attributed non communication to his advocate, but the Court treated non communication to counsel as an internal lapse of the petitioner's arrangements and not a procedural failure by the authority. Further, the statute provides an inbuilt remedy of revocation which the petitioner did not invoke within the prescribed time. In these circumstances the order cannot be said to have violated principles of natural justice. [Paras 4, 12]

No breach of natural justice is established; the cancellation order does not suffer from procedural infirmity on this ground.

Final Conclusion: The writ petition is dismissed. The appeal against cancellation of GST registration was time barred and the petitioner has not shown any exceptional circumstance warranting writ interference under Article 226; the cancellation order stands valid and the challenge fails.

Disallowance of estimated expenses on tax exempt income - Classification of software expenditure as capital expenditure - Revenue treatment of fees for increasing authorised capital - Disallowance of arrears of wages payable under a memorandum of understanding - Disallowance of ex gratia payments to employees - Reopening of assessment under Section 147 (reassessment) - Remand for fresh consideration in light of subsequent law

Classification of software expenditure as capital expenditure - Tribunal's confirmation of disallowance of software expenses as capital expenditure - HELD THAT: - The Court accepted precedents of this High Court holding that software expenditure is not necessarily revenue in nature and that the Tribunal's view was contrary to those authorities. The decision in Commissioner of Income Tax v. Southern Railways Ltd. (and subsequent recognition in a later bank case) was held to favour the assessee. Accordingly, the Tribunal's confirmation of disallowance on capitalisation grounds was set aside in favour of the assessee. [Paras 11]

Answered in favour of the assessee.

Revenue treatment of fees for increasing authorised capital - Application of binding Supreme Court precedent - Tribunal's disallowance of payment made to Registrar of Companies for increasing authorised capital - HELD THAT: - The Tribunal applied the Supreme Court's decision in Punjab State Industrial Development Corporation Ltd. v. CIT and followed that ratio. The High Court found no error in the Tribunal's reliance on that Supreme Court authority and sustained the disallowance against the assessee. [Paras 12]

Answered in favour of the Revenue.

Disallowance of arrears of wages payable under a memorandum of understanding - Tribunal's confirmation of disallowance of arrears of wages pursuant to an upward pay decision under an MOU - HELD THAT: - The Court followed the Division Bench decision in Commissioner of Income Tax, Chennai I v. M/s. Kasturi and Sons Ltd., which favoured the assessee on this point. Applying that precedent, the High Court held the assessee entitled to succeed on the question of disallowance of arrears of wages for the specified assessment year. [Paras 13]

Answered in favour of the assessee.

Disallowance of ex gratia payments to employees - Tribunal's confirmation of disallowance of ex gratia payments - HELD THAT: - The Court noted that the issue had already been decided in the assessee's favour in the assessee's own earlier case (Karur Vysya Bank Ltd.) and applied that earlier decision to allow the assessee on this point. Therefore the Tribunal's disallowance was reversed. [Paras 14]

Answered in favour of the assessee.

Disallowance of estimated expenses on tax exempt income - Remand for fresh consideration in light of subsequent law - Validity of Tribunal/CIT(A)'s confirmation of a 2% ad hoc disallowance of expenses attributable to tax exempt income - HELD THAT: - The assessee maintained it incurred no collection expenses and had interest free funds, and so no proportionate disallowance should apply. The CIT(A) had not adjudicated the factual contention but restricted disallowance to 2% as reasonable; the Tribunal upheld that. Subsequent higher court decisions (including Maxopp and later High Court authority concerning banks) were not available when the Tribunal decided the matter. Because the CIT(A) did not examine the assessee's factual stand and there has been development in law, the High Court remanded the issue to the Tribunal for fresh consideration so that the assessee may place those decisions and factual contentions before the Tribunal and the Tribunal may adjudicate afresh. [Paras 15, 16, 19]

Left open and remanded to the Tribunal for fresh consideration.

Reopening of assessment under Section 147 (reassessment) - Question on validity of reassessment invoked under Section 147 - HELD THAT: - The appellant filed a memo not pressing the question relating to reopening of assessment for the stated assessment year. The Court recorded that the substantial question of law on reopening is not pressed by the appellant and therefore left open. [Paras 20]

Left open as not pressed by the appellant.

Final Conclusion: The Court disposed of the appeals: the software expenditure and ex gratia and arrears of wages questions were answered in favour of the assessee; the issue on fees for increasing authorised capital was answered in favour of the Revenue; the question on a 2% ad hoc disallowance of expenses on tax exempt income is remanded to the Tribunal for fresh consideration in light of the assessee's factual contentions and subsequent law; and the reassessment point under Section 147 was left open as not pressed.

Reopening of assessment under Section 147 - liability to deduct tax at source under Section 195 - royalty for use of copyright - distribution agreements/EULAs - binding effect of Supreme Court precedent

Liability to deduct tax at source under Section 195 - royalty for use of copyright - distribution agreements/EULAs - binding effect of Supreme Court precedent - Whether amounts paid by resident Indian distributors/end users to non resident computer software suppliers under distribution agreements/EULAs constitute payment of royalty attracting TDS liability under section 195. - HELD THAT: - The High Court treated the question of TDS liability as settled by the Supreme Court in Engineering Analysis Centre of Excellence Private Limited v. CIT, which categorized cases of cross border software transactions and held that payments made by resident end users/distributors to non resident software manufacturers/suppliers under EULAs/distribution agreements do not constitute payment of royalty for use of copyright. The Supreme Court concluded that such arrangements do not create an interest or right amounting to use of or right to use copyright and accordingly persons liable under section 195 were not obliged to deduct TDS. The Madras High Court applied that binding precedent and accepted its legal conclusion as dispositive of the contentious tax deduction question in this case. [Paras 4, 6, 7]

Payments for resale/use of computer software under distribution agreements/EULAs do not amount to royalty and do not attract a TDS obligation under section 195 in light of the Supreme Court's ruling.

Reopening of assessment under Section 147 - binding effect of Supreme Court precedent - Whether the reopening of assessment for the stated Assessment Year under Section 147 was valid. - HELD THAT: - Although the Tribunal upheld the Assessing Officer's reopening under Section 147, the High Court found that the foundational legal basis for reopening - the asserted TDS liability - was rendered unsustainable by the Supreme Court's authoritative decision. Because the substantive legal question on which reopening rested (TDS liability in respect of the software transactions) was answered in favour of the assessee, the High Court held that the reopening cannot stand. The court observed that permitting the reopening to remain valid despite the binding precedent would be inappropriate and that the appeal must be allowed to set aside the reopening in law. [Paras 7, 8]

Reopening of assessment was unsustainable in law and is set aside in view of the Supreme Court's decision; the Tax Case Appeal is allowed.

Final Conclusion: The High Court allowed the Tax Case Appeal, holding that the Supreme Court's decision that payments under distribution agreements/EULAs are not royalty and do not attract TDS under section 195 renders the reopening under Section 147 unsustainable; the reopening is set aside and the substantial question of law is answered in favour of the assessee.

Permanent Establishment - Business Connection - Passage of property, risk and reward - Royalty under DTAA - Attribution of profits to permanent establishment - Interest under section 234B

Permanent Establishment - Business Connection - Passage of property, risk and reward - Whether the appellant had a business connection or a Permanent Establishment in India in respect of supply of GSM systems such that profit could be attributed to India - HELD THAT: - The Tribunal examined the contracts, acceptance-test clauses and survey material and applied the ratio of earlier orders in the assessee's own case and relevant precedents. It held that the determinative factor for taxability of supply transactions is the place where property, with attendant risk and reward, passes. On the materials and contract terms, property, risk and reward passed outside India at the port of delivery and the acceptance tests and contract-signing in India did not alter that position. The Tribunal found the facts of the years under appeal not distinguishable from those in which the Special Bench and the Hon'ble High Court had ruled in favour of the assessee, and rejected the ld. CIT(A)'s contrary inferences drawn from survey material and contract clauses. Consequently, no business connection or PE was constituted in India and attribution of profit to India did not arise. [Paras 50, 51, 52]

No business connection or Permanent Establishment in India in respect of the supply of GSM systems; profits not attributable to India.

Royalty under DTAA - Characterisation of software receipts - Whether payments received in respect of supply of software constituted 'royalty' taxable in India under the Indo Sweden DTAA or were business income not chargeable to tax in India - HELD THAT: - Relying on the authoritative pronouncement of the Hon'ble Supreme Court in the line of cases summarized in the judgment, the Tribunal held that payments by Indian end-users/distributors to non resident software suppliers pursuant to distribution agreements/EULAs do not create rights amounting to 'royalty' under the DTAA in the circumstances of these cases. Applying that ratio to the facts before it, the Tribunal concluded that the software receipts could not be characterised as royalty taxable in India and that the Revenue's contention to the contrary failed. [Paras 60, 61]

Software payments are not 'royalty' taxable in India under the Indo Sweden DTAA; Revenue's appeals on this ground dismissed.

Attribution of profits to permanent establishment - Applicability of comparable tribunal decisions - Whether a higher percentage of profit should be attributed to India (as urged by Revenue) in light of survey findings and other materials - HELD THAT: - The Tribunal considered the Revenue's submission on higher attribution and compared factual matrix of the present years with earlier years where the Special Bench and the High Court ruled for the assessee. It found the facts not distinguishable and observed that the accepted legal position requires attribution only where PE/ business connection exists. Since no PE was found, and on the facts the passage of property was offshore, the Tribunal declined to increase attribution and dismissed the Revenue's appeals on attribution. [Paras 52, 53]

No increase in attribution to India; Revenue's appeal on attribution dismissed.

Interest under section 234B - Whether interest under section 234B could be charged for the years in question - HELD THAT: - The Tribunal applied the binding ratio of the Hon'ble Supreme Court in Mitsubishi Corporation and directed the Assessing Officer to compute interest in accordance with law as laid down by that decision. The Tribunal therefore adjusted the position on interest consistent with the Apex Court's ruling that, for years prior to AY 2013-14, interest under section 234B could not be charged as previously claimed. [Paras 56, 57]

Interest to be charged/adjusted in accordance with the Mitsubishi Corporation ratio; consequential direction to AO issued.

Final Conclusion: The appeals filed by the assessee are allowed in part: the Tribunal held there was no business connection or PE in India for the supply of GSM systems for AYs 1999-2000 to 2004-05 and software receipts are not taxable as royalty under the Indo Sweden DTAA; the Revenue's appeals challenging these conclusions are dismissed; interest is to be charged/adjusted in accordance with the Supreme Court's decision in Mitsubishi Corporation. Appeals disposed accordingly.

Section 36(1)(vii) read with Section 36(2)(i) - bad debts written off as irrecoverable - prior taxation of interest satisfying condition of Section 36(2)(i) - business of money lending

Section 36(1)(vii) read with Section 36(2)(i) - bad debts written off as irrecoverable - prior taxation of interest satisfying condition of Section 36(2)(i) - Whether the amount of Rs. 4,35,00,000 written off as irrecoverable is allowable as a deduction under Section 36(1)(vii) read with Section 36(2)(i) of the Income tax Act. - HELD THAT: - The Court held that one limb of Section 36(2)(i) is satisfied where a part of the debt (interest) had earlier been taken into account in computing the assessee's income. It was factually undisputed that interest of Rs. 15,73,952 relating to the deposits was offered and assessed as business income for Assessment Year 2001 02. Relying on the reasoning in the Division Bench decision in Pudumjee Pulp & Paper Mills Ltd. and the principle in Shreyas S. Morakhia, the Court reiterated that satisfaction of either of the two alternative conditions in Section 36(2)(i) is sufficient to entitle the assessee to deduction under Section 36(1)(vii). Consequently, the Tribunal did not commit any error in allowing the claim and the High Court found no substantial question of law arising from the factual and legal matrix; the Court expressly declined to decide the alternate question whether the assessee was in the business of money lending since the first limb was conclusively met. [Paras 9, 10, 11]

Deduction of the written off amount of Rs. 4,35,00,000 is allowable under Section 36(1)(vii) read with Section 36(2)(i) as the interest had been earlier brought to tax; the Tribunal's order allowing the claim is sustained.

Final Conclusion: The appeal is dismissed; the ITAT's allowance of the bad debt deduction is upheld on the ground that the earlier taxation of the related interest satisfies the first limb of Section 36(2)(i), and no decision is recorded on whether the assessee was engaged in money lending.

Tax deduction at source under Section 194A - Ascertainability of the assessee for TDS - Effect of attachment/freeze orders on present entitlement to interest - Applicability of UCO Bank precedent and CBDT Circular dated 28.12.2015

Tax deduction at source under Section 194A - Ascertainability of the assessee for TDS - Effect of attachment/freeze orders on present entitlement to interest - Applicability of UCO Bank precedent and CBDT Circular dated 28.12.2015 - Whether respondent banks are obliged to deduct TDS on interest accruing on the petitioner's fixed deposits which have been frozen/attached by the CBI pending adjudication. - HELD THAT: - Section 194A requires deduction of tax at source when interest is credited to the account of a payee who is ascertainable as the assessee. Where fixed deposits are frozen/attached under a prohibitory order, the depositor does not have a present entitlement to the interest and no ascertainable assessee exists in praesenti. The Court applied the legal reasoning in UCO Bank (as reiterated by the CBDT Circular dated 28.12.2015) that in such circumstances the machinery of TDS breaks down because there is no person in whose hands the interest can presently be assessed and credited; deducting tax against a person who is not the recipient/assessee would result in an anomalous consequence of tax being reflected as paid to a person who has ceased to have dominion over the funds. Accordingly, until the conclusion of the CBI proceedings and determination of entitlement, the interest accruing on the frozen FDs cannot be treated as income attracting deduction under Section 194A. The Court clarified, however, that this direction does not absolve the petitioner of any tax liability that may arise if the petitioner becomes entitled to the interest after conclusion of the proceedings, and that TDS already deducted prior to the interim order remains unaffected. [Paras 8, 9, 11, 12]

Respondent banks are directed not to deduct TDS on interest accruing on the petitioner's frozen fixed deposits till conclusion of the CBI proceedings; any tax liability, if entitlement arises thereafter, will be determined following conclusion of those proceedings, and prior deductions are unaffected.

Final Conclusion: Writ petition allowed; respondent Nos.3 to 5 (banks) restrained from deducting TDS on interest accruing on the petitioner's frozen fixed deposits until the conclusion of the proceedings initiated by the CBI, without prejudice to any tax liability that may arise if the petitioner is later found entitled to such interest and without affecting TDS already deducted prior to the interim order.

Exemption under Section 10(26B) - Corporation established by Central, State or Provincial Act - Body, institution or association wholly financed by Government - Government company incorporated under the Companies Act - Literal construction and Noscitur a sociis in statutory interpretation - Interference under Section 260A

Exemption under Section 10(26B) - Government company incorporated under the Companies Act - Body, institution or association wholly financed by Government - Literal construction and Noscitur a sociis in statutory interpretation - Whether a company incorporated under the Companies Act, wholly financed by the Government and formed to promote the interests of Scheduled Tribes, is entitled to exemption under Section 10(26B). - HELD THAT: - The Court construed Section 10(26B) by literal reading and by applying interpretative aids including noscitur a sociis. The subsection contemplates two disjunctive classes: (a) a corporation established by a Central, State or Provincial Act and (b) any other body, institution or association that is wholly financed by Government and formed for promoting the interests of Scheduled Castes, Scheduled Tribes or backward classes. The expression 'established' is tied to the limb concerning corporations created by legislation, whereas the corresponding limb dealing with 'other body, institution or association' uses the word 'formed'. A government company incorporated under the Companies Act is a body corporate with legal identity; when it is wholly financed by the Government and its objects are to promote the interests of Scheduled Tribes, it falls within the class of 'any other body, institution or association' contemplated by the subsection. The Revenue's narrow construction excluding companies incorporated under the Companies Act is, therefore, erroneous; the Court found the Tribunal's conclusion that the assessee qualified for exemption to be correct and not distinguishable on the authorities relied upon by the Revenue. [Paras 9]

Assessee, though incorporated under the Companies Act and wholly financed by Government for promoting Scheduled Tribe interests in Lakshadweep, is entitled to exemption under Section 10(26B).

Interference under Section 260A - Exemption under Section 10(26B) - Whether the Tribunal's order granting exemption and declining to adjudicate other additions/disallowances warranted interference under Section 260A. - HELD THAT: - The Court held that questions 2 and 3 were dependent on the answer to the primary question of applicability of Section 10(26B). Having upheld the Tribunal's construction and conclusion that the assessee qualified for exemption, the ancillary challenges to the Tribunal's reliance on the assessee's submissions and the decision to render other grounds infructuous did not merit interference. The Tribunal's approach and conclusion were accepted by the High Court. [Paras 10, 11]

No interference under Section 260A; Tribunal's order is sustained and ancillary grounds rendered infructuous.

Final Conclusion: The appeals are dismissed. The assessee, a Government-financed company incorporated under the Companies Act and formed to promote Scheduled Tribe interests in Lakshadweep, is entitled to exemption under Section 10(26B); the Tribunal's order was upheld and no interference under Section 260A was warranted.

Penalty under Section 271(1)(c) - concealment of particulars of income - tax sought to be evaded - quantification of penalty - penalty on estimated income

Penalty under Section 271(1)(c) - penalty on estimated income - tax sought to be evaded - Whether penalty under Section 271(1)(c) can be levied on the total tax assessed (including tax on estimated income) or must be computed with reference to the tax sought to be evaded. - HELD THAT: - The court examined the plain language and scheme of Section 271(1)(c) and concluded that the statutory criterion for levy and quantification of penalty is the amount of tax sought to be evaded by reason of concealment or furnishing of inaccurate particulars, and not the total tax assessed on the assessee. The Tribunal had treated the penalty on the basis of the total tax figure; the High Court held that the correct yardstick is the tax sought to be evaded and therefore the penalty must be quantified by reference to that figure rather than the entire assessed tax liability. The court declined to remit the matter for fresh adjudication on this legal question, applying the statutory test itself to the record before it. [Paras 8]

Penalty under Section 271(1)(c) must be determined with reference to the tax sought to be evaded and not on the total tax assessed.

Quantification of penalty - tax sought to be evaded - Quantum of penalty payable where the Tribunal directed minimum penalty of 100% under Section 271(1)(c). - HELD THAT: - Having held that penalty is to be computed on the tax sought to be evaded, the court applied the available computations on record and accepted the parties' calculation that a 100% penalty on the tax sought to be evaded works out to Rs. 5,62,918. The court thus fixed the penalty at the minimum 100% of the tax sought to be evaded and allowed the appeal accordingly, answering the substantial questions of law in favour of the assessee and against the Revenue. [Paras 8]

Penalty fixed at 100% of the tax sought to be evaded, namely Rs. 5,62,918.

Final Conclusion: The appeal is allowed: penalty under Section 271(1)(c) is to be quantified with reference to the tax sought to be evaded (not the total tax assessed), and the penalty is fixed at 100% of the tax sought to be evaded amounting to Rs. 5,62,918.

Principles of natural justice - opportunity to explain documents - assessment under the Income Tax Act - alternative statutory remedy before the First Appellate Authority - exclusion of period for computation of limitation - stay of coercive action pending filing of appeal

Principles of natural justice - opportunity to explain documents - alternative statutory remedy before the First Appellate Authority - Maintainability of writ petition challenging assessment on ground of alleged denial of opportunity to explain voluminous documents without first availing the statutory appeal remedy. - HELD THAT: - The Court held that the grievance that the assessee was not given adequate opportunity to explain voluminous documents relates to matters of appreciation and procedure in the assessment process under the Income Tax Act. The Act constitutes a self-contained code providing a hierarchy of remedies. Accordingly, such complaints are ordinarily to be agitated before the First Appellate Authority rather than by bypassing the statutory appellate forum. The Single Judge's view that an alternate remedy exists was accepted after hearing submissions that the authorised representative had appeared during assessment proceedings and that notices had been issued; nevertheless, factual disputes about adequacy of opportunity are appropriate for adjudication in the statutory appeal. [Paras 8, 11]

Writ petition dismissed for want of exhaustion of the statutory appeal remedy; the assessee must file appeal before the First Appellate Authority.

Exclusion of period for computation of limitation - stay of coercive action pending filing of appeal - Relief to preserve the assessee's right to appeal by excluding specified period from limitation and restraining coercive action pending filing of appeal. - HELD THAT: - The Court exercised its supervisory powers to grant limited relief to prevent prejudice to the assessee. The period from the date of filing of the writ petition until receipt of a certified copy of the judgment was ordered excluded for computation of limitation. The assessee was granted two weeks from receipt of certified copy to file the appeal before the First Appellate Authority, and the First Appellate Authority was directed to admit the appeal notwithstanding limitation. Meanwhile, respondents were restrained from initiating coercive action. This measure was granted to ensure the statutory remedy remains effective despite the dismissal of the writ. [Paras 12]

Period excluded for limitation; two weeks granted to file appeal; appeal to be taken on file despite limitation; no coercive action to be taken meanwhile.

Final Conclusion: Writ appeal dismissed for failure to exhaust the statutory appellate remedy; assessee permitted two weeks from receipt of certified copy to prefer appeal before the First Appellate Authority with exclusion of interim period for limitation and protection from coercive action until the appeal is filed.

Provisional attachment - formation of opinion - necessity to protect the interest of the government revenue - tangible material - doctrine of proportionality - non-speaking / cryptic order - Article 226 writ maintainability

Provisional attachment - formation of opinion - tangible material - doctrine of proportionality - non-speaking / cryptic order - Validity of the provisional attachment orders passed under Section 281-B(1) of the Income Tax Act, 1961. - HELD THAT: - The High Court applied the principles laid down by the Apex Court in Radha Krishan Industries, holding that the power to order provisional attachment is draconian and its exercise must strictly comply with statutory preconditions. The authority must form an opinion that attachment is necessary to protect the revenue and that opinion must be based on tangible material showing a proximate link between the need for attachment and protection of revenue; mere apprehension of a future demand is insufficient. The impugned orders here consisted only of a bare statement that large tax demands were likely and that attachment was necessary to protect revenue, without recording reasons, satisfaction or citing tangible material establishing necessity or proportionality. The orders were therefore cryptic, unreasoned and non-speaking, and did not satisfy the mandatory requirements for a valid provisional attachment. The Court also found the respondents' asserted apprehension unfounded in view of initiated assessment proceedings and statutory protections against alienation, and the petitioners' stated immovable property holdings. Applying these principles, the provisional attachment orders were quashed. [Paras 9, 10, 11]

The impugned provisional attachment orders are quashed for non-compliance with statutory preconditions, lack of reasons and absence of tangible material demonstrating necessity to protect revenue.

Final Conclusion: Writ petition allowed; the provisional attachment orders dated 26.03.2021 at Annexures D, D1, D2 and D3 are quashed, with liberty to the revenue to proceed in accordance with law mindful of the Court's observations.

Ex-gratia payments as business expediency - Deduction under Section 37(1) of the Income Tax Act, 1961 - Applicability of the Payment of Bonus Act to ex-gratia payments - Binding effect of precedent - CIT vs. National Engineering Industries Ltd.

Ex-gratia payments as business expediency - Deduction under Section 37(1) of the Income Tax Act, 1961 - Applicability of the Payment of Bonus Act to ex-gratia payments - Binding effect of precedent - Whether ex-gratia payments made to employees not covered by the Payment of Bonus Act are allowable as a deduction under Section 37(1) as business expenditure. - HELD THAT: - The Division Bench considered the Tribunal's conclusion that payments described as ex-gratia to employees outside the purview of the Payment of Bonus Act were made as an incentive and constituted business expenditure. The Court observed that Section 37(1) does not prohibit a claim for deduction of such ex-gratia payments where they are made out of business expediency. The Tribunal's reliance on the Calcutta High Court decision in CIT vs. National Engineering Industries Ltd. was noted and treated as persuasive precedent. Applying that view, the Court held that even if such payments exceed statutory limits applicable under the Payment of Bonus Act, they may nevertheless be deductible as business expenditure under Section 37(1) when made as an incentive to employees not covered by the Bonus Act. The substantial question of law framed on admission was therefore answered by following the earlier Division Bench and the cited High Court authority which supported allowing the deduction. [Paras 4, 5]

The Tribunal was right to treat the ex-gratia payments to employees outside the Bonus Act as deductible business expenditure under Section 37(1); the substantial question of law is answered against the Revenue and the appeal is dismissed.

Final Conclusion: The tax case appeal is dismissed; the substantial question of law is answered against the Revenue, affirming that ex-gratia payments to employees not covered by the Payment of Bonus Act may be allowable as a deduction under Section 37(1) when made as a business expedient. No costs.

Reopening of assessment - reason to believe - tangible material - change of opinion - alternative statutory remedy by way of appeal - Article 226 jurisdictional restraint - principles of natural justice

Alternative statutory remedy by way of appeal - Article 226 jurisdictional restraint - Maintainability of the writ petition under Article 226 where an alternative efficacious remedy of appeal under the Income Tax Act exists. - HELD THAT: - The Court held that where the statute provides a complete machinery to challenge an assessment order, the High Court should ordinarily refrain from entertaining a writ under Article 226 and the petitioner must resort to the statutory appellate remedies. The judgment surveyed binding precedents establishing that non-entertainment of writ petitions in such cases is a self-imposed rule of restraint and a matter of discretionary policy. The Assessing Officer had passed a Speaking Order and the reassessment order thereafter; accordingly, an alternative efficacious remedy was available and the petition could not bypass the statutory mechanism. The Court therefore declined to exercise writ jurisdiction in favour of the petitioner. [Paras 6, 7, 8]

Writ petition not maintainable as the petitioner has an adequate and efficacious alternative remedy of appeal under the Income Tax Act; petition dismissed on this ground.

Reopening of assessment - reason to believe - tangible material - change of opinion - Whether the reopening of assessment was impermissible as a mere change of opinion or was justified by tangible material giving rise to a 'reason to believe'. - HELD THAT: - Applying the legal test that reopening under the Act requires 'tangible material' having a live link with the formation of belief (to avoid permitting mere change of opinion), the Court observed that the Assessing Officer did not consider certain material (Appendix 6 to Form 3CD) at the time of the original assessment. The subsequent consideration of that material was therefore not a mere change of opinion but constituted tangible material from which the Assessing Officer could form a 'reason to believe' that income had escaped assessment. On this basis the Court indicated that reopening was not vitiated as being founded on mere change of opinion. [Paras 9, 10]

Reopening of the assessment was not set aside on the ground of mere change of opinion; the Assessing Officer acted on tangible material giving rise to a reason to believe.

Principles of natural justice - reopening of assessment - Whether non-consideration of the petitioner's adjournment request rendered the reassessment order contrary to principles of natural justice requiring interference by the High Court. - HELD THAT: - The Court noted the respondent's contention that the adjournment request was received after the impugned order was passed and observed that even if the adjournment request was not considered, such omission would at most amount to an irregularity. In the presence of an efficacious alternative statutory remedy, an irregularity of this character did not warrant exercise of extraordinary writ jurisdiction to set aside the assessment order. [Paras 8]

Alleged failure to consider adjournment did not justify interference under Article 226; any irregularity was not a ground to bypass the statutory appellate remedy.

Final Conclusion: The writ petition was dismissed. The High Court declined to exercise its extraordinary jurisdiction because an efficacious alternative remedy of appeal under the Income Tax Act was available; on the merits the reopening was found to be based on tangible material and any procedural irregularity alleged did not warrant interference under Article 226.

Arm's-length price - transfer pricing methodology - combined transaction approach - transactional net margin method (TNMM) - comparable uncontrolled price (CUP) method - benefit test - revenue expenditure versus capital expenditure - allowability under section 37(1) - capitalisation of royalty as enduring benefit - admission of additional grounds on point of law - deductibility of education cess

Arm's-length price - transfer pricing methodology - combined transaction approach - transactional net margin method (TNMM) - benefit test - Deletion of transfer pricing adjustment made in respect of export commission paid to associated enterprise. - HELD THAT: - The Tribunal followed the coordinate bench decision in the assessee's own earlier years and found no change in facts for AY 2016-17. The coordinate bench had rejected the TPO's characterization of the assessee as a contract manufacturer, accepted the assessee's combined transaction approach and TNMM benchmarking, and held that the assessee had demonstrated benefit and higher profitability from exports. On that basis the Tribunal directed deletion of the TPO/DRP adjustment which had determined the ALP of the export commission at nil.

Transfer pricing adjustment on export commission of the assessee is deleted; ground allowing deletion is allowed.

Arm's-length price - transfer pricing methodology - CUP method - benefit test - Deletion of transfer pricing adjustment made in respect of royalty on exports to associated enterprise. - HELD THAT: - Relying on the coordinate bench's prior adjudication on identical facts and on the absence of any distinguishing change, the Tribunal held the coordinate bench reasoning applicable. The coordinate bench had dealt with the benefit/contract-manufacturer characterisation and found royalty in the facts to be not determinable as nil under the TPO's application of the CUP/benefit test. Accordingly, the Tribunal allowed the assessee's challenge to the ALP determination of royalty at nil and directed deletion of the adjustment.

Transfer pricing adjustment on royalty for export sales is deleted; ground allowing deletion is allowed.

Revenue expenditure versus capital expenditure - allowability under section 37(1) - Whether expenditure on signage fixed at dealers' premises is capital or allowable as revenue expenditure. - HELD THAT: - Following the coordinate bench precedent in the assessee's own earlier years, the Tribunal observed that signage affixed at dealers' premises does not satisfy ownership test of the assessee and does not result in acquisition of an asset providing enduring benefit. The coordinate bench earlier held such expenditure to be revenue in nature and allowable. Applying that reasoning to the unchanged facts for AY 2016-17, the Tribunal directed deletion of the disallowance.

Disallowance in respect of signage is deleted; signage expenditure held revenue in nature and allowable.

Revenue expenditure versus capital expenditure - allowability under section 37(1) - Whether sales tool expenses incurred for dealers are allowable as business expenditure under section 37(1). - HELD THAT: - The Tribunal followed the coordinate bench which, on identical facts and contract terms, found that sales tools/fixtures were procured as per assessee specifications, were part-funded by the assessee in exercise of its dealer policy, and were incurred to maintain uniform showroom standards to promote the assessee's business. The coordinate bench reasoning that such recurring promotional/standardisation expenditure is wholly and exclusively for the assessee's business was applied to AY 2016-17, leading to deletion of the disallowance.

Disallowance of sales tool expenses is deleted; such expenses held allowable revenue expenditure.

Capitalisation of royalty as enduring benefit - revenue expenditure versus capital expenditure - Whether 25% of running royalty paid for technical know-how is capital in nature and should be capitalised. - HELD THAT: - The Tribunal applied coordinate bench precedents which distinguished the Supreme Court authority relied on by Revenue as relating to payments for setting up a manufacturing facility. On the facts, the assessee was an existing manufacturer and royalties related to ongoing manufacture/technology upgradation rather than creation of a new capital asset; earlier coordinate-bench and High Court authorities treating similar running royalties as revenue expenditure were followed. Consequently the AO's arbitrary allocation of 25% as capital was set aside and the addition deleted.

Addition on account of capitalisation of royalty is deleted; running royalty held revenue in nature.

Admission of additional grounds on point of law - deductibility of education cess - Admission and allowance of additional ground seeking deduction of education cess as allowable expenditure. - HELD THAT: - The Tribunal admitted the additional legal ground because it raises pure law and no fresh facts were required. Applying binding decisions of the Bombay and Rajasthan High Courts and following a coordinate bench decision which considered similar arguments, the Tribunal held the claim for deduction of education cess under section 37(1) to be allowable and directed the AO to allow the deduction.

Additional ground admitted and allowed; deduction of education cess directed to be allowed.

Procedural grounds and consequential relief - Disposition of the general ground challenging the assessment order and consequential grounds including penalty and interest. - HELD THAT: - The general ground 1 (a broad challenge to the assessment order) was dismissed for want of specific argument. Consequential grounds (grounds 11-13) became infructuous in view of the Tribunal's substantive allowances and were therefore dismissed as such.

General ground dismissed; consequential grounds rendered infructuous and dismissed.

Final Conclusion: The appeal is partly allowed. Transfer pricing adjustments in respect of export commission and royalty on exports are deleted; disallowances for signage and sales tool expenditures are deleted as revenue expenditures; the AO's capitalisation of a portion of running royalty is set aside and treated as revenue in nature; an additional legal ground on deductibility of education cess is admitted and allowed. General unspecified challenge dismissed and consequential grounds rendered infructuous.

Admission of claim without a revised return - consideration of claim during assessment proceedings - revised return under section 139(5) - power to remit to the Assessing Officer for fresh consideration

Admission of claim without a revised return - consideration of claim during assessment proceedings - revised return under section 139(5) - Whether the assessee's revised computation of long term capital gains could be considered by the revenue authorities without filing a revised return and whether the claim should be admitted for fresh consideration by the Assessing Officer. - HELD THAT: - The Tribunal held that the determinative question was not the availability of remedy under revised return under section 139(5) but whether the assessee's claim could be admitted and examined by revenue authorities notwithstanding that a revised return was not filed. The Tribunal noted the decision of the Hon'ble Bombay High Court in CIT v. Pruthvi Brokers and shareholders Pvt. Ltd. as mandating that an assessee's claim should be considered and decided according to law, and observed that the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT does not preclude the Tribunal from allowing the claim to be considered otherwise than by a revised return. Applying these authorities, the Tribunal concluded that the appropriate course was to remit the matter to the Assessing Officer for consideration of the assessee's revised computation after affording the assessee an opportunity of being heard, rather than finally deciding the correctness of the claim at the appellate stage. [Paras 7, 8]

Matter remitted to the Assessing Officer to consider the assessee's revised computation and pass an order according to law after giving the assessee an opportunity of being heard; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the issue to the Assessing Officer for fresh consideration of the assessee's revised computation of long term capital gain (AY 2013 14) after hearing the assessee, and allowed the appeal for statistical purposes.

Treatment of amounts in stale draft account as income - deductibility of ex-gratia payments under business expediency - deduction for debts written off under Section 36(1)(vii) - provision for bad and doubtful debts for rural branches under Section 36(1)(viia) - recognition and taxation of interest on non-performing assets - disallowance of expenditure attributable to exempt income under Section 14A read with Rule 8D - computation of deduction for eligible business under Section 36(1)(viii) - deductibility of Education Cess and Secondary & Higher Education Cess as business expense under Section 37(1) - scope of rectification under Section 154 - mistake apparent from record

Treatment of amounts in stale draft account as income - Amount standing in stale draft account is not assessable as the bank's income where the bank held the sums on behalf of payees and was obliged to remit unclaimed sums to the RBI Depositors Education & Awareness Fund after the statutory period. - HELD THAT: - The Tribunal accepted the factual and legal position that the bank received money when issuing demand drafts/pay orders and held it as liability until the drawee claimed it; the bank had no proprietary right over unclaimed drafts and was bound to remit unclaimed amounts to the Depositors Education & Awareness Fund after the statutory period. Consistent decisions in the assessee's own earlier years and a coordinate bench and the Madras High Court support that such stale draft balances recorded under 'outstanding liabilities' do not constitute the bank's income. The CIT(A)'s deletion of the addition was therefore upheld. [Paras 6]

Deletion of addition made by AO towards stale draft account upheld; Revenue's ground rejected.

Deductibility of ex-gratia payments under business expediency - Ex-gratia payments to staff (not covered by Bonus Act) were deductible as business expenditure under Section 37(1) where facts are similar to earlier favourable tribunal decisions. - HELD THAT: - The Tribunal followed its coordinate-bench precedents in the assessee's own case and found that ex-gratia payments were not an appropriation of profits but expenditures incurred wholly and exclusively for business, thus allowable under Section 37(1). The CIT(A)'s deletion of the disallowance made by AO was consistent with those precedents and therefore sustained. [Paras 7]

Deletion of addition disallowing ex-gratia payments upheld; Revenue's ground rejected.

Deduction for debts written off under Section 36(1)(vii) - Bad debts actually written off in the books are allowable under Section 36(1)(vii) notwithstanding differences vis-a -vis provision accounts, following Supreme Court and coordinate-bench authority. - HELD THAT: - The Tribunal relied on the Supreme Court's and earlier tribunal and High Court rulings to hold that, after statutory amendments, deduction under Section 36(1)(vii) is available where debts are written off in the books, and the proviso does not negate deduction for non-rural/urban advances merely because of provision account balances. The CIT(A)'s deletion of AO's disallowance was therefore correct. [Paras 8]

Deletion of disallowance under Section 36(1)(vii) upheld; Revenue's ground rejected.

Provision for bad and doubtful debts for rural branches under Section 36(1)(viia) - Whether certain branches qualify as 'rural branches' for Section 36(1)(viia) depends on which census figures were officially published and available as on the relevant previous year's first day; this factual question is not a mistake apparent on record and requires verification by AO. - HELD THAT: - The Tribunal noted that the assessee followed RBI classification based on 2001 census when provisions were created and produced RTI reply indicating village-level 2011 census data was published in the Gazette only on 30.04.2013 (after the relevant date). The Revenue relied on asserted earlier release of provisional 2011 data. Because the exact date when provisional/final 2011 village-level figures became officially available is material and disputed, the Tribunal held this to be a question requiring examination of extraneous records and factual verification. Therefore the matter was remitted to the AO to ascertain whether 2011 provisional data was officially published before the relevant date; if not, the assessee's 2001-based classification is to be accepted, otherwise 2011 figures apply. [Paras 14]

Matter remitted to AO for determination of the date of official publication of 2011 village-level census figures and consequent classification of the specified branches for Section 36(1)(viia) purposes.

Recognition and taxation of interest on non-performing assets - Interest accrued on NPAs is not to be taxed on accrual when classified as NPA in terms of judicial precedents; deletion of AO's addition was appropriate. - HELD THAT: - The Tribunal applied its prior decision in the assessee's own case and relied on the Supreme Court's authority that interest income cannot be said to have accrued to the assessee-bank on NPA accounts for taxation on accrual basis. The CIT(A)'s deletion of the addition made by the AO under the assessment was therefore upheld. [Paras 10]

Deletion of addition for interest on NPAs upheld; Revenue's ground rejected.

Disallowance of expenditure attributable to exempt income under Section 14A read with Rule 8D - Section 14A and Rule 8D do not apply to shares and securities held by a bank as stock-in-trade; consequently disallowance under Section 14A/read with Rule 8D is not permissible for the bank. - HELD THAT: - The Tribunal followed its coordinate-bench precedent in the assessee's own case and the Supreme Court's decision in South Indian Bank Ltd. which held that for banking companies shares and securities are stock-in-trade and income therefrom is business income; Section 14A therefore is not attracted. On that basis the CIT(A)'s reduction/disallowance was set aside and the AO directed to delete the disallowance under Section 14A/read with Rule 8D. [Paras 12]

Addition under Section 14A/read with Rule 8D deleted; AO directed to give effect.

Computation of deduction for eligible business under Section 36(1)(viii) - Methodology for computing deduction under Section 36(1)(viii) requires reconsideration by the AO in light of earlier Tribunal directions; issue remitted for fresh consideration. - HELD THAT: - While eligibility for deduction under Section 36(1)(viii) was not disputed, the CIT(A) substituted his method for the assessee's computation. The Tribunal observed that similar computation issues for earlier assessment years were remitted to the AO and, having noted that the AO in subsequent proceedings had accepted the assessee's methodology for other years, directed that the AO reconsider computation for the impugned year following the Tribunal's earlier directions. The matter was therefore set aside to the AO for compliance with earlier Tribunal guidance. [Paras 15]

Issue remitted to AO to recompute deduction under Section 36(1)(viii) in accordance with Tribunal's earlier directions.

Deductibility of Education Cess and Secondary & Higher Education Cess as business expense under Section 37(1) - Education Cess and Secondary & Higher Education Cess are deductible as business expenditure under Section 37(1) in principle, but factual claim was not before the AO and the matter is to be remitted to AO for fresh consideration. - HELD THAT: - The Tribunal admitted the additional ground as a pure question of law and, relying on a recent High Court decision (Bombay High Court in Sesa Goa Ltd.), held that such cesses are allowable under Section 37(1). However, since the facts and materials in support of the claim were not placed before the AO at assessment, the Tribunal remitted the issue to the AO to consider the claim in accordance with law and the cited precedent. [Paras 16, 17]

Additional ground admitted; issue remitted to AO to decide deductibility of cesses in accordance with law and relevant precedents.

Scope of rectification under Section 154 - mistake apparent from record - Application of Section 154 is confined to glaring mistakes apparent from record; classification of branches using 2001 or 2011 census is a debatable question requiring extraneous inquiry and therefore not rectifiable under Section 154. - HELD THAT: - The Tribunal reiterated that Section 154 permits correction of mistakes that are obvious and do not require further investigation or extraneous evidence. The question whether 2011 provisional/final village-level census figures were officially available before the relevant date is disputed and entails examination of external documents; hence it is not a mistake apparent from record. Applying these principles and precedent, the Tribunal set aside the CIT(A)'s rectification order under Section 154 and allowed the assessee's appeal on this point. [Paras 19]

Order passed under Section 154 by CIT(A) set aside; assessee's appeal allowed on rectification point.

Final Conclusion: For Assessment Year 2013-14, the Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s deletions on stale drafts, ex-gratia payments, bad-debt write-offs under Section 36(1)(vii) and interest on NPAs; it deleted the Section 14A/Rule 8D disallowance for the bank; it remitted specific factual issues (qualification of certain branches as 'rural' under Section 36(1)(viia), computation under Section 36(1)(viii), and the claim for Education Cess/SHE Cess) to the AO for verification/decision in accordance with law; and it set aside the CIT(A)'s rectification under Section 154 as impermissible. Appeals accordingly disposed as reflected above.

Principle of audi alteram partem - Cross-examination of witnesses whose statements are relied upon - Reliance on ex-parte statements/secondary material recorded by investigation wing - Admissibility and evidentiary value of statements in assessment proceedings - Use of section 133(6) enquiries to verify lender's documents - Application of section 68 - identity, genuineness and creditworthiness of creditors

Cross-examination of witnesses whose statements are relied upon - Principle of audi alteram partem - Reliance on ex-parte statements/secondary material recorded by investigation wing - Whether additions/disallowance based primarily on statements recorded by investigation officers, which were not made available for cross-examination, could be sustained against the assessee. - HELD THAT: - The Tribunal found that the addition of interest was made by the Assessing Officer relying principally on statements recorded by officers of the investigation wing and not on any incriminating material discovered during the search. The assessee had produced documentary evidence supporting the genuineness, identity and creditworthiness of the lender and the Assessing Officer had himself issued notices under section 133(6) and received consistent replies and documents from the lender without finding discrepancies. The assessee requested opportunity to cross-examine the departmental witnesses whose statements were relied upon; summons were issued but the witnesses did not appear and the Assessing Officer proceeded without ensuring their presence. The CIT(A) held that mere confrontation of statements sufficed and declined to require cross-examination. The Tribunal, applying the principle of audi alteram partem and following Supreme Court authority (Andaman Timber Industries) and its own precedents, held that where an adverse inference is sought to be drawn from unilateral statements recorded behind the assessee, the assessee must be afforded effective opportunity to test that material; mere confrontation with the statements, without permitting cross-examination of the deponents, renders such statements unsustainable as the sole basis for additions. Given that the other documentary material (including replies obtained under section 133(6) and accepted assessments of the lender) supported the assessee's claim, the reliance on untested ex parte statements could not be sustained. [Paras 4, 5]

Addition/disallowance based primarily on unexamined statements was held unsustainable and deleted insofar as it rested on those statements; grounds contesting the disallowance were allowed.

Application of section 133(6) enquiries - Application of section 68 - identity, genuineness and creditworthiness of creditors - Whether, after discounting the untested statements, the documentary evidence (including replies obtained under section 133(6) and the lender's own assessment) supported the assessee's case under section 68. - HELD THAT: - The Tribunal recorded that the assessee had filed confirmations, bank statements, ITRs and other documents in support of the unsecured loan and that the Assessing Officer had himself obtained corresponding documents from the lender under section 133(6) which did not disclose discrepancies. The lender's assessment accepted the interest as income. The Tribunal held that absent the impugned untested statements, the documentary record supported the assessee on the three ingredients relevant to section 68 - identity, genuineness and creditworthiness - and there being no incriminating material found during search to the contrary, the addition could not be sustained on the remaining material. [Paras 4, 5]

Documentary evidence and section 133(6) replies supported the assessee; in consequence the addition was not sustainable once the untested statements were excluded.

Final Conclusion: The Tribunal partly allowed the appeal: it held that additions/disallowance premised on ex parte statements which were not made available for cross-examination could not be sustained, and having excluded those statements the documentary evidence (including replies obtained under section 133(6) and the lender's assessment) supported the assessee; the impugned addition was therefore deleted and the appeal was partly allowed.

Jurisdiction of Additional Director General, DRI to issue show cause notice - proper officer under Section 2(34) of the Customs Act - issue of notice under Section 28 of the Customs Act - entrustment of functions under Section 6 of the Customs Act - validity of notification purporting to assign customs functions

Jurisdiction of Additional Director General, DRI to issue show cause notice - proper officer under Section 2(34) of the Customs Act - issue of notice under Section 28 of the Customs Act - validity of notification purporting to assign customs functions - entrustment of functions under Section 6 of the Customs Act - Validity of show cause proceedings initiated by Additional Director General, DRI by issuing notice under Section 28(4) read with Section 124 of the Customs Act, 1962. - HELD THAT: - The Tribunal held that only an officer who qualifies as a 'proper officer' under Section 2(34) - i.e., an officer of customs to whom specific functions have been assigned by the Board or the Commissioner of Customs - is competent to issue a notice under Section 28. A notification issued by the Board purporting to assign functions under the definition provision (Section 2(34)) is ultra vires because that provision is definitional and does not confer power to entrust functions. Entrustment of functions to officers of the Directorate of Revenue Intelligence, if intended, must be effected by the Central Government under Section 6. Following the decision of the Supreme Court in Canon India Pvt. Ltd. and its reasoning construing Sections 2(34), 6 and 28 (and the antecedent decision in Commissioner of Customs v. Sayed Ali), the Tribunal concluded that proceedings initiated by the Additional Director General, DRI are without authority of law. The Tribunal therefore set aside the impugned proceedings and allowed the appeal on this ground. [Paras 10]

Proceedings initiated by the Additional Director General, DRI, Lucknow by issuing the Show Cause Notice under Section 28(4) read with Section 124 of the Customs Act are invalid for lack of jurisdiction; the impugned proceedings are set aside and the appeal is allowed with consequential relief.

Final Conclusion: The Appeal is allowed on the ground that the Additional Director General, DRI is not a 'proper officer' competent to issue the Show Cause Notice under Section 28(4) read with Section 124 of the Customs Act, 1962; the impugned proceedings are set aside and consequent relief is granted.

Restoration of company struck off - power of Tribunal under Section 252 of the Companies Act, 2013 - reinstatement subject to fulfillment of statutory compliances - consequential actions on restoration (status change, DIN activation, bank intimation) - filing of INC-28 and payment of prescribed fees/additional fees - condition of payment of costs for revival - order confined to violations that led to striking off without precluding further action by ROC

Restoration of company struck off - power of Tribunal under Section 252 of the Companies Act, 2013 - Application under Section 252 for restoration of the company's name in the Register of Companies was allowed. - HELD THAT: - The Tribunal, after considering the applicant's averments and the Registrar's report, accepted that the company had been operational, that the failure to file statutory returns arose from inadvertence, and that the necessary documents were ready for filing. Exercising powers under Section 252 and the NCLT rules, the Tribunal found the case fit for restoration in the interest of the company, its shareholders and creditors and ordered restoration of the company's status as if it had not been struck off. [Paras 9, 11]

The company is to be restored to the Register and the application CA No. 07/252/HDB/2021 is allowed.

Reinstatement subject to fulfillment of statutory compliances - filing of INC-28 and payment of prescribed fees/additional fees - consequential actions on restoration (status change, DIN activation, bank intimation) - condition of payment of costs for revival - order confined to violations that led to striking off without precluding further action by ROC - Restoration was made subject to specified conditions and directions to the Registrar of Companies. - HELD THAT: - The Tribunal directed the Registrar to restore the company's status and take consequential administrative actions (change status to Active for e filing, restore/activate DINs if applicable, intimate bankers to defreeze accounts). The company was directed to file all statutory documents along with INC-28 and pay prescribed fees/additional fees/fine within 30 days of restoration and to comply with ROC observations. The company must deliver a certified copy of the order to the ROC for publication in the Gazette and pay specified costs for revival. The Tribunal clarified that the order is confined to the violations that led to striking off and does not bar the ROC from taking other actions under law for any other violations/offences.

Restoration ordered on the stated terms and conditions; ROC to give effect and the company to comply with filings, fees, cost and ROC observations.

Final Conclusion: The Tribunal allowed the Section 252 petition and ordered restoration of M/s. CFL Health Care Private Limited to the Register of Companies, subject to specified compliance directions (filing of statutory documents and INC-28, payment of prescribed fees/additional fees and costs, compliance with ROC observations, and procedural steps for publication), while reserving ROC's power to take further action for any other violations.

Restoration of name struck off from Register of Companies - striking off of company for non-filing of statutory returns - opportunity to take remedial measures before striking off - restitution as if name had not been struck off - conditional restoration subject to filing outstanding documents and payment of fees - setting aside freezing of bank accounts consequent to restoration

Restoration of name struck off from Register of Companies - striking off of company for non-filing of statutory returns - conditional restoration subject to filing outstanding documents and payment of fees - Whether the Appellant Company's name should be restored to the Register of Companies notwithstanding its failure to file statutory returns for the defaulting years - HELD THAT: - The Tribunal found that the Registrar of Companies' action of striking off the company's name was based on an assumption of non-operation arising solely from non-filing of statutory returns. The records placed by the appellant - including audited financial statements, bank statements, Form 26AS and tax return acknowledgements, and invoices/work orders - demonstrated business operations. The Tribunal noted that the Act provides remedies for defaults in filing and that striking off is a severe step which ordinarily requires affording an opportunity to take remedial measures. In the absence of exceptional circumstances warranting refusal, restoration is appropriate. Consequently restoration was ordered but made conditional: the appellant must file all outstanding documents for the defaulting years and complete formalities, including payment of late fees or other charges leviable for late filing; costs were imposed to meet restoration expenses payable to the ROC with which the appellant is registered. [Paras 5, 6, 7]

Allowed; the company's name shall be restored in the Register of Companies subject to filing all outstanding documents for the defaulting years, payment of applicable late fees/charges and payment of costs to the ROC.

Opportunity to take remedial measures before striking off - setting aside freezing of bank accounts consequent to restoration - restitution as if name had not been struck off - Whether consequential measures taken against the company, including freezing of bank account(s), should be set aside upon restoration - HELD THAT: - The Tribunal observed that once restoration is directed and the company complies with conditions, consequential steps premised on the struck-off status should be reversed to enable the company to carry on business. Accordingly, the direction freezing the company's bank account(s), if grounded on the struck-off status, was directed to be set aside immediately to enable resumption of operations. The Tribunal also clarified that restoration shall operate as if the company's name had not been struck off and that the Income Tax Department remains at liberty to proceed in accordance with law in relation to tax dues. [Paras 8]

Freezing of bank account(s) grounded on the struck-off status shall be set aside on compliance; restoration shall operate with all consequential effects as if the name had not been struck off.

Final Conclusion: The appeal is allowed: the Appellant Company's name is ordered restored in the Register of Companies as if it had not been struck off, subject to filing all outstanding statutory documents for the defaulting years, payment of applicable fees/charges and costs to the ROC; consequential freezing of bank accounts grounded on the struck-off status is to be set aside; the Income Tax Department may pursue any tax claims as per law.

Anticipatory bail under Section 438 Cr.P.C. - Prevention of Money Laundering Act, 2002 - serious economic offence / gravity of offence - failure to challenge non-conversion of warrant / earlier order - principle in P. Chidambaram

Anticipatory bail under Section 438 Cr.P.C. - Prevention of Money Laundering Act, 2002 - serious economic offence / gravity of offence - principle in P. Chidambaram - failure to challenge non-conversion of warrant / earlier order - Anticipatory bail sought by the petitioner in proceedings under the Prevention of Money Laundering Act, 2002 was to be granted or refused. - HELD THAT: - The Court examined the petition for anticipatory bail under Section 438 Cr.P.C. in the backdrop of allegations under the Prevention of Money Laundering Act, 2002 and the facts that the petitioner had not challenged the trial court's order dated 17.09.2021 rejecting conversion of the non-bailable warrant. The Court noted the seriousness and gravity of the alleged economic offence and observed that the principles articulated by the Supreme Court in P. Chidambaram were relevant, but, without expressing any opinion on merits, found the present case not fit for enlargement on anticipatory bail. The non-prosecution of the challenge to the earlier order was considered a relevant factor against granting anticipatory bail. Having considered the submissions of both parties and the record, the Court declined to exercise its discretion in favour of the petitioner.

Anticipatory bail application dismissed.

Final Conclusion: On consideration of the facts, the gravity of the alleged money-laundering offence, the petitioner's failure to challenge the trial court's order refusing conversion of the warrant, and applying the governing principles without expressing on merits, the High Court dismissed the anticipatory bail application.

Prevention of coercive action - interim protection following Supreme Court order - scope of stay in interlocutory order - attachment of property - continuation of investigation and prosecution - requirement to challenge orders by amendment

Attachment of property - requirement to challenge orders by amendment - scope of stay in interlocutory order - Whether the learned Single Judge's interim order stayed the Department's provisional attachment of the petitioner's property dated 18.01.2021. - HELD THAT: - The impugned interim direction restrained the respondents from taking any coercive steps against the petitioner "as directed by the Supreme Court," but did not expressly include a stay of the provisional attachment dated 18.01.2021. The attachment was effected in 2021 and was not the subject of challenge in the original 2017 petition nor was the petition amended to seek relief against that attachment. For these reasons the Single Judge's order cannot be read as having stayed the Department's attachment; absent an express challenge and corresponding prayer, the learned Single Judge could not properly stay the attachment.

No stay was granted against the Department's provisional attachment of the petitioner's property; the attachment remains unaffected by the impugned order.

Prevention of coercive action - interim protection following Supreme Court order - continuation of investigation and prosecution - Whether the learned Single Judge's restraint on taking coercive steps barred the Department from continuing investigation and prosecution against the petitioner. - HELD THAT: - The Single Judge followed the Supreme Court's earlier order in Anil Kumar Gadodia by restraining coercive steps against the petitioner. However, the Supreme Court later clarified and modified its order to provide that such interim directions do not stay trial or investigation and that investigation or trial may proceed in accordance with law. In view of that clarification, the court held that the restraint in the impugned order does not prevent the Department from carrying on with investigation and prosecution; the Department remains free to investigate and prosecute the petitioner in accordance with law, subject to any separate remedy the petitioner may pursue.

The restraint against taking coercive steps does not bar continuation of investigation or prosecution; the Department may proceed in accordance with the Supreme Court's clarified position.

Final Conclusion: The appeal is disposed of with clarifications: the Single Judge's interim direction did not stay the Department's attachment of the petitioner's property and does not prevent the Department from continuing investigation or prosecution; the petitioner remains free to seek appropriate remedies in law.

Constitutional validity of statutory provisions - presumption of constitutionality - duty to cooperate with investigation - interim protection from coercive measures - challenge to summons after compliance

Duty to cooperate with investigation - challenge to summons after compliance - Petitioner's obligation to comply with summons and effect of earlier compliance with the first summon. - HELD THAT: - The Court found on the material before it that the petitioner had already replied to the first summon dated 24.9.2021 by furnishing the requested information and documents on 7.10.2021 and had sought adjournment and accommodation for appearance by video conference or at the Kolkata office. Having regard to that conduct and the nature of the summons, the Court recorded that there was no question of avoiding cooperation with the investigating authority and that the first summon had been dealt with by the petitioner. On that basis the petitioner was directed to cooperate further with the respondent by appearing either via video conferencing or by physical appearance at the respondent's Kolkata office as required for the ongoing investigation.

Petitioner to cooperate with the investigation and to appear by video conference or physically at the respondent's Kolkata office; the first summon (24.9.2021) was effectively dealt with by the petitioner's earlier response.

Interim protection from coercive measures - Whether coercive action may be taken against the petitioner pending further proceedings. - HELD THAT: - Balancing the petitioner's stated willingness to cooperate, the nature of the proceedings as investigative, and the absence of any showing that the petitioner was a named FIR accused, the Court granted limited interim protection. The Court observed that blanket stays of investigation or arrest absent reasons are inappropriate, but in the facts before it a limited protection was warranted to enable processing of the challenge and for the petitioner to make submissions. Consequently, the Court restrained the respondents from taking any coercive measures against the petitioner in connection with the investigation for a specified limited period.

No coercive measures to be taken against the petitioner in connection with the investigation for six weeks from the date of the order.

Constitutional validity of statutory provisions - presumption of constitutionality - Challenge to the constitutional validity of specified provisions of the Prevention of Money Laundering Act, 2002. - HELD THAT: - The petitioner challenged the constitutional validity of Sections 50(2),(3),(4) read with Sections 24, 63 and 66 of the PMLA, 2002 as violative of Articles 14, 20(3) and 21. The Court recorded submissions on both sides, noted the doctrine of presumption of constitutionality and that similar challenges were pending before the Supreme Court, and observed that the ultimate fate of this challenge would be governed by any decision of the Apex Court on the like issues. The Court did not finally adjudicate the constitutional challenge on merits at this stage but indicated that the result of the writ petition would abide by the decision of the Supreme Court if applicable.

Constitutional challenge not finally decided; matter to await or abide by the outcome of similar proceedings in the Supreme Court.

Final Conclusion: The writ petition was not finally determined on the constitutional challenge; the petitioner was directed to cooperate with the investigation (by video conference or physical appearance at Kolkata) and was granted limited interim protection from any coercive measures for six weeks, with respondents directed to file affidavit-in-opposition and the matter listed after six weeks.

Amnesty scheme - Sabka Viswas (Legacy Dispute Resolution Scheme, 2019) - condition precedent of deposit for waiver - automatic dismissal on failure to pay by cut-off date - no extension of scheme period - challenge to recovery notice

Amnesty scheme - condition precedent of deposit for waiver - automatic dismissal on failure to pay by cut-off date - no extension of scheme period - Whether the petitioner, having failed to deposit the prescribed sum by the cut-off date under the Sabka Viswas scheme, was entitled to relief or extension and could restrain recovery by invoking the scheme. - HELD THAT: - The scheme required deposit of a specified portion of the disputed tax by the cut-off date as a condition for waiver of the remaining liability. It is admitted that the last date for payment was 30.06.2020 and that the petitioner did not make the deposit by that date. The petitioner did not dispute the departmental computation of the amount to be deposited. The scheme contains no provision for extending the time for payment and expressly contemplates termination of the scheme on expiry of the period. On these admitted facts and in view of the scheme's terms, the petitioner's grounds of personal illness and alleged portal/system difficulties did not entitle him to an extension or prevent automatic dismissal of his application under the scheme; accordingly the department was entitled to proceed with recovery.

Writ petition dismissed; no extension of time or relief under the scheme available to the petitioner and recovery may proceed.

Final Conclusion: The petitioner, having failed to make the deposit required by the Sabka Viswas scheme by the prescribed cut-off date and in the absence of any provision for extension, was not entitled to relief; the writ petition challenging the consequent recovery notice is dismissed.

Service of show cause notice - maximum limitation period of five years - violation of statutory mandate - principle of natural justice - opportunity of being heard - invalidity of adjudication for defective service - remand for limited verification unsustainable where fundamental prejudice exists - importance of correct registered address for service

Service of show cause notice - maximum limitation period of five years - violation of statutory mandate - importance of correct registered address for service - natural justice - opportunity of being heard - Validity of the show cause notice served for Financial Year 2012-13 where service was effected at an address different from the address in the registration certificate and after the statutory maximum period. - HELD THAT: - The Tribunal found on the material on record that the Department had served the impugned show cause notice at an address which did not correspond to the residential or official addresses recorded in the appellant's registration certificate. The appellant produced contemporaneous correspondence showing that the SCN dated 25.04.2018 was received by them only on 17.09.2018 and that earlier communications had been sent to the wrong address. There was no satisfactory explanation from the Department for the incorrect service or for invoking the extended maximum period. The non-service within the statutory period and at the correct address amounted to a breach of the statutory mandate and a denial of the opportunity to be heard, thereby violating the principle of natural justice. Having regard to these findings, the Tribunal concluded that the SCN could not be sustained and the consequent demand could not be confirmed. [Paras 6, 7, 8]

SCN held invalid for want of valid service within the statutory period and at the correct registered address; demand cannot be confirmed.

Remand for limited verification unsustainable where fundamental prejudice exists - invalidity of adjudication for defective service - natural justice - opportunity of being heard - Sustainability of Commissioner (Appeals)'s remand to the adjudicating authority for verification of a three-month period notwithstanding the admitted defective service. - HELD THAT: - Commissioner (Appeals) had remanded the matter to the original authority to verify the assertion limited to three months following acceptance of liability up to 31.12.2012. The Tribunal observed that remanding the matter for limited verification was not a proper course where the foundational requirement of valid service and opportunity to be heard had been breached. Because the SCN and subsequent processes were not served at the correct address and the appellant was deprived of the chance to contest the demand, a mere remand for verification would not cure the fundamental illegality. The remand order was therefore held to be unsustainable in law. [Paras 7, 8, 9]

Remand set aside as unsustainable; remand could not validate proceedings tainted by defective service and denial of hearing.

Final Conclusion: The order under challenge is set aside; the appeal is allowed and the show cause notice and the demand based thereon quashed for invalid service and breach of the right to be heard.

Refund of accumulated cenvat credit - essential input service - nexus between input services and exported services - Rule 5 of Cenvat Credit Rules - claim of cenvat credit on input services

Refund of accumulated cenvat credit - essential input service - nexus between input services and exported services - Rule 5 of Cenvat Credit Rules - Denial of refund of accumulated cenvat credit in respect of input services (Advertising Agency Services; Business Auxiliary Services; Convention Services; Design Services; Event Management Services; Public Relations Management Service; and Real Estate Agent and Consultant Services - insofar as claimed) except as to Real Estate Agent and Consultant Service. - HELD THAT: - The Tribunal examined whether the impugned denial of refund was sustainable in law. It applied its earlier consistent decisions holding that the services in question qualify as input/essential input services and observed that the Department had not challenged these services when cenvat credit was originally availed. The Tribunal relied on the principle that once a service has been accepted as input service at the time of taking credit, the Department cannot re-open that classification at the refund stage. The Bench further noted the effect of the clarification from the Tax Research Unit of CBEC and the amended Rule 5 which does not mandate a strict correlation between a particular input service and the exported output service; therefore lack of direct nexus between the specific input service and the exported service could not justify denial of refund. Following those precedents and reasoning, the Tribunal held that refusal of refund in respect of the listed input services (other than Real Estate Agent and Consultant Service) was not sustainable and set aside that part of the impugned order.

Denial of refund in respect of the specified input services (other than Real Estate Agent and Consultant Service) set aside; appellant entitled to refund of accumulated cenvat credit on those services.

Essential input service - claim of cenvat credit on input services - Denial of refund in respect of Real Estate Agent and Consultant Service. - HELD THAT: - The appellant asserted that the Real Estate Agent and Consultant Service related to renting of office space. The Tribunal observed that the appellant did not furnish sufficient particulars about the nature of the spaces rented during the relevant period to establish entitlement. On the record before it, the Bench declined to interfere with the denial regarding this service for want of requisite explanation or evidence linking the service to the claimed output activity.

No interference with the rejection of refund claimed in respect of Real Estate Agent and Consultant Service.

Final Conclusion: The impugned order is set aside insofar as it denied refund of accumulated cenvat credit on the input services held to be essential input services; the appeal is allowed on those terms. The rejection of refund in respect of Real Estate Agent and Consultant Service is left undisturbed for lack of necessary particulars, and the appeal is disposed accordingly.

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - onus on accused to prove cheques were issued as security - proof by complainant by production of statement of account and corporate resolution - authorization of company representative to testify - remand for fresh disposal to permit additional evidence

Presumption under Sections 118 and 139 of the Negotiable Instruments Act - onus on accused to prove cheques were issued as security - proof by complainant by production of statement of account and corporate resolution - Whether the acquittal should be upheld in view of non-production at trial of account statements and corporate resolution, when signatures on the cheques are admitted and the accused plead that the cheques were blank/security. - HELD THAT: - The court accepted that there was a credit transaction and that the accused admitted the signatures on the cheques but pleaded they were issued in blank as security. The trial court disbelieved the complainant because the statement of account showing adjustments and a company resolution authorising the witness were not produced, and because differences between invoice totals and cheque amounts were not explained. The High Court noted the legal presumption that a cheque, once signature is established, is presumed to have been drawn for consideration under the provisions relied upon, and that where signature is admitted and plea of security is taken the burden lies on the accused to prove that plea. The complainant came to the High Court with applications to place on record the omitted statement of accounts and the corporate resolution which the court found to be relevant and material to establish that the cheques covered legally enforceable debt and that the witness was authorised to represent the company. In view of the relevance of these documents and the legal presumption favouring the complainant once signature is admitted, the High Court held that the interests of justice require an opportunity to prove those documents and to permit further evidence before a final adjudication on merits. [Paras 5, 6, 7, 8, 9]

Acquittal set aside and matter remanded to the court below for fresh disposal permitting both parties to adduce further evidence including the statement of accounts and the corporate resolution; opportunity to prove the documents granted.

Authorization of company representative to testify - remand for fresh disposal to permit additional evidence - Whether the trial court erred in rejecting the complainant's case on the ground that the witness was not shown to be authorised, when a company resolution and authorising documents were subsequently produced to the High Court. - HELD THAT: - The trial court treated the absence of a company resolution and the fact that the complainant's witness did not sign the complaint as factors undermining the complainant's case. The complainant subsequently produced a corporate resolution authorising the witness. The High Court found the document relevant to the issue of representation and concluded that, since the resolution was produced post-trial and is material to the core controversy, the proper course is to remit the matter for fresh disposal so that the trial court may consider the resolution along with any further evidence and determine the issue of authorization in the trial context. [Paras 7, 8, 9]

Trial court's adverse inference on authorization set aside to the extent that the newly produced corporate resolution must be considered; remand ordered for fresh consideration with opportunity to adduce evidence.

Final Conclusion: Appeal allowed; judgment of acquittal in CC No. 628/2009 dated 20/10/2010 is set aside and the case is remanded to the Special Judicial First Class Magistrate Court, Kozhikode for fresh disposal in accordance with law after affording both sides an opportunity to adduce further evidence; trial court directed to conclude the matter within six months.