TaxTMI Updates e-Newsletter
Nov 23,2023

Enforceability of e-way bill requirement - penalty for transporting goods without e-way bill - precedential effect of Division Bench judgments - refund of deposits on quashing of orders

Enforceability of e-way bill requirement - penalty for transporting goods without e-way bill - precedential effect of Division Bench judgments - refund of deposits on quashing of orders - Impugned orders imposing penalty and related orders in respect of goods transported without e-way bill for the period 01.02.2018 to 31.03.2018 are unsustainable and liable to be quashed; amounts deposited to be refunded. - HELD THAT: - The Court applied the law laid down by earlier Division Bench decisions in M/s Godrej and Boyce Manufacturing Co. Ltd. and M/s Varun Beverages Limited, which held that the requirement of an e-way bill under the U.P. GST enactment was unenforceable for the period 01.02.2018 to 31.03.2018. The respondents did not contest the applicability of those precedents and conceded their finality. In light of those binding Division Bench rulings, the impugned orders imposing penalty for transport without an e-way bill were quashed. The Court directed that any sums deposited by the petitioner pursuant to the impugned orders be refunded in accordance with law within one month.

Impugned orders dated 22.12.2020 and 12.02.2018 quashed; amounts deposited to be refunded within one month.

Final Conclusion: Writ petition allowed: penalties and orders imposing penalty for absence of e-way bill during 01.02.2018 to 31.03.2018 quashed in view of binding Division Bench precedents; deposits to be refunded in accordance with law within one month.

Validity of assessment against a company dissolved under Section 560(5) of the Companies Act, 1956 - Nullity of assessment passed on a non-existent juridical person - Juridical personality of a struck-off company and restoration under Section 560(6)-(7) - Liability and locus to challenge assessment of directors and persons holding money under Sections 179 and 226(3) of the Income Tax Act - Maintainability of appeals instituted in the name of a company after dissolution

Validity of assessment against a company dissolved under Section 560(5) of the Companies Act, 1956 - Nullity of assessment passed on a non-existent juridical person - Juridical personality of a struck-off company and restoration under Section 560(6)-(7) - An assessment passed under the Income Tax Act against a company which had been struck off and stood dissolved under Section 560(5) of the Companies Act, 1956 was invalid and a nullity. - HELD THAT: - The Court found on facts that the appellant-company had been struck off the Register and stood dissolved with effect from publication of the notice in the Official Gazette prior to the date of assessment. Section 560(5) effects dissolution on publication, while Subsections (6) and (7) confer a limited fictional continuation only for the purpose of seeking restoration by application to the Tribunal (or Court) within the statutory period. A dissolved company thereby ceases to exist for all other purposes and an assessment can be made only against a person in existence as an "assessee" under the Income Tax Act. Consequently, an order of assessment made against a non-existent company is void. The Court relied on the statutory scheme in Section 560 and on precedents and commentary holding that dissolution terminates corporate existence and that assessment on a non-existent entity is a nullity, and accordingly set aside the assessment order dated 21.12.2006. [Paras 6, 7, 10, 11, 24]

Assessment dated 21.12.2006 made against the company, which stood dissolved under Section 560(5), is invalid and a nullity; the assessment order is set aside.

Maintainability of appeals instituted in the name of a company after dissolution - Liability and locus to challenge assessment of directors and persons holding money under Sections 179 and 226(3) of the Income Tax Act - Proceedings and appeals filed in the name of the dissolved company were not maintainable as such; however, directors or other persons liable or having locus under Sections 179 and 226(3) of the Income Tax Act may challenge the assessment. - HELD THAT: - The Court held that under the Companies Act, 1956 there was no provision equivalent to Section 250 of the Companies Act, 2013 that would confer continuing juridical personality on a struck-off company for the purpose of pursuing ordinary litigation. The limited fiction under Section 560(6)-(7) exists solely to enable restoration proceedings. Independent provisions in the Income Tax Act (Section 226(3) permitting recovery from persons holding money for the assessee and Section 179 regarding director's liability where tax is unrecoverable) preserve liability and thereby confer standing on such persons to challenge an assessment that may affect them. While the appeals were instituted by the company, the Court observed that the director had been representing the company throughout and, in the interest of justice, treated the proceedings as proceedings by the director so as to avoid injustice, but emphasised that the dissolved company itself was not competent to maintain the appeals. [Paras 13, 15, 17, 18]

Proceedings in the name of the dissolved company are not maintainable; directors or persons with statutory liabilities under Sections 179 and 226(3) have locus to challenge the assessment and, on the facts, proceedings were treated as those by the director to avoid prejudice.

Final Conclusion: The appeal is allowed: the assessment order dated 21.12.2006 and the subsequent appellate orders are set aside because the company stood dissolved under Section 560(5) of the Companies Act, 1956 at the time of assessment; appeals in the name of the dissolved company are not maintainable though directors or other liable persons may challenge the assessment.

Condonation of delay - remand for fresh hearing - right to be heard before reliance on adverse precedent - addition under Section 68 of the Income Tax Act, 1961 (unexplained share capital/share premium)

Condonation of delay - Delay of 47 days in re-filing the appeal was condoned. - HELD THAT: - The application for condonation of delay in re-filing the appeal, stated as 47 days, was considered. The respondent did not oppose the prayer having regard to the period involved. In these circumstances the Court exercised its discretion to condone the delay and disposed of the application accordingly. [Paras 1, 2, 3, 4]

The delay in re-filing the appeal is condoned and the application is disposed of.

Remand for fresh hearing - right to be heard before reliance on adverse precedent - addition under Section 68 of the Income Tax Act, 1961 (unexplained share capital/share premium) - Impugned Tribunal order dated 18.01.2023 is set aside and the matter is remanded to the Tribunal for fresh hearing on merits. - HELD THAT: - The appeal relates to an addition made under Section 68 concerning unexplained credit entries in share capital/share premium. The Tribunal's impugned order dated 18.01.2023 relied, inter alia, on a decision of its Kolkata Bench in ITO vs Blessings Commercial Pvt. Ltd. The appellant was not represented before the Tribunal and therefore had no opportunity to address or respond to the adverse precedent on which the Tribunal relied; no hearing was held between notification of that decision and the impugned order. For these reasons the Court found that the impugned order could not stand and directed that the matter be remitted to the Tribunal for a fresh hearing, without expressing any opinion on the merits. The Tribunal is free to reach its own conclusion on merits and to progress the matter; the matter is to be placed for directions before the concerned bench on the specified date to expedite proceedings. [Paras 13, 14, 15, 16, 17]

Impugned order set aside; matter remanded to the Tribunal for fresh hearing (Tribunal to decide on merits afresh and list for directions).

Final Conclusion: Delay in re-filing the appeal (47 days) is condoned. The Tribunal's order dated 18.01.2023 is set aside and the matter is remanded for fresh hearing because the appellant was not represented and had no opportunity to address the adverse precedent relied upon; no decision on merits has been made.

Adjustment of seized cash as advance tax under Section 132B - treatment of seized cash as self-assessment tax - prospective application of Explanation 2 to Section 132B - effect of CBDT Circular No. 20 of 2017 - liability to pay interest under Sections 234A, 234B and 234C where advance tax is in question

Adjustment of seized cash as advance tax under Section 132B - prospective application of Explanation 2 to Section 132B - effect of CBDT Circular No. 20 of 2017 - Seized cash of Rs. 50 lakhs was to be treated as advance tax for AY 2009-10 and the insertion of Explanation 2 to Section 132B (via FA 2013 w.e.f. 01.06.2013) did not affect requests made prior to that date. - HELD THAT: - The court found on the record that the assessee, after a search on 15.01.2009, expressly offered the cash seized to be treated as advance tax in the return and accompanying computation filed on 15.03.2010. Prior to insertion of Explanation 2 by FA 2013 (w.e.f. 01.06.2013), the statutory scheme under Section 132B permitted application of seized money towards existing liabilities, which included advance tax. The Explanation introduced by FA 2013 narrowed the scope prospectively; it did not negate the assessee's entitlement where the request for adjustment was made before 01.06.2013. The court relied on the reasoning in Latika Datt Abbott and the clarificatory effect of CBDT Circular No.20/2017 to conclude that discrimination between assessees who had earlier requested adjustment and those who subsequently remained in default could not be sustained. Consequently, the respondents were directed to treat the seized amount as advance tax for the AY in question. [Paras 11, 14, 16, 17]

The cash seized shall be treated as advance tax and the request for adjustment must be accepted, having effect from the date the request was first made.

Liability to pay interest under Sections 234A, 234B and 234C where advance tax is in question - treatment of seized cash as self-assessment tax - Interest levied under Sections 234A, 234B and 234C in the assessment order was wrongly imposed because the seized cash should have been treated as advance tax; respondents must excise these interest demands, recompute refund and pay interest accordingly. - HELD THAT: - Sections 234A, 234B and 234C impose interest for default in filing return, default in payment of advance tax and deferment of advance tax instalments respectively. Because the assessee filed the return after the search and had offered the seized cash to be treated as advance tax under the pre-Explanation 2 regime, there was no default in payment of advance tax nor a deferment attributable to the assessee that would justify interest under those provisions. The assessment order's imposition of interest under these sections was therefore held to be incorrect. The respondents are directed to excise the interest levied under Sections 234A, 234B and 234C, recompute the refund payable (adjusting the previously paid refund of Rs. 20,73,340/- as indicated in the order), and pay interest at 6% from the date of filing the return (15.03.2010). The court also directed payment of interest on the refund amount shown in the ROI and interest on the interest wrongly imposed. [Paras 19, 20, 21, 22, 24]

The interest demands under Sections 234A, 234B and 234C are to be excised; refund recalculated and adjusted, and the respondents shall pay interest at 6% from 15.03.2010 together with interest on the refund and on the wrongly imposed interest.

Final Conclusion: Writ petition allowed: seized cash of Rs. 50 lakhs to be treated as advance tax for AY 2009-10; interest levied under Sections 234A, 234B and 234C set aside; respondents to recompute refund, adjust amounts already paid, and remit the balance with interest as directed within six weeks of receiving this judgment.

Invalid initiation of proceedings under Section 153C in absence of incriminating material - Requirement to record satisfaction in the case of the searched person even where the Assessing Officer is common - Effect of non-recording of satisfaction on jurisdiction to proceed under Section 153C - Circular No. 24/2015 - requirement to record satisfaction for the searched person

Requirement to record satisfaction in the case of the searched person even where the Assessing Officer is common - Effect of non-recording of satisfaction on jurisdiction to proceed under Section 153C - Circular No. 24/2015 - requirement to record satisfaction for the searched person - Validity of proceedings under Section 153C where the satisfaction note was recorded by the AO of the assessee and not by the AO of the searched person - HELD THAT: - The Tribunal held that the satisfaction was recorded in the proceedings relating to the assessee and not in the case of the searched person, and therefore the jurisdiction assumed was not valid. The High Court records that the Tribunal's conclusion on this point cannot be sustained in view of the Supreme Court's decision in Super Malls Pvt. Ltd. v. Principal Commissioner of Income Tax. The court therefore does not uphold the Tribunal's ruling on the consequences of the satisfaction note being recorded by the AO of the assessee rather than by the AO of the searched person. [Paras 7, 9]

Tribunal's conclusion on invalidity of proceedings due to non-recording of satisfaction by AO of the searched person is not sustained in view of the Supreme Court authority.

Invalid initiation of proceedings under Section 153C in absence of incriminating material - Validity of proceedings under Section 153C where no incriminating material was found during the search - HELD THAT: - The Tribunal found, and the High Court agrees, that no incriminating material was discovered in the search of the directors; the additions were based on documents already in the Department's possession and furnished with the regular return, and thus could not be characterised as incriminating material. On this basis the Tribunal concluded that proceedings under Section 153C were bad in law. The High Court, noting that this view accords with earlier decisions of this Court and the Supreme Court's affirmation in Abhisar Buildwell Pvt. Ltd., answers the framed question of law against the revenue and in favour of the assessees. [Paras 4, 8, 10]

Proceedings initiated under Section 153C are invalid where no incriminating material is found; the question of law is answered in favour of the assessees.

Final Conclusion: Appeals disposed of in favour of the assessees: the High Court rejects the Tribunal's reasoning on non-recording of satisfaction by the AO of the searched person in light of Supreme Court precedent, but upholds the Tribunal's and CIT(A)'s conclusion that proceedings under Section 153C are invalid where no incriminating material was found; the framed question of law is answered against the revenue.

Credit for tax deducted at source - bar against direct demand on assessee under Section 205 of the Income Tax Act - requirement of payment to the Central Government for TDS credit under Section 199 of the Income Tax Act - deductor as agent for tax collection and liability of the deductor where TDS is not deposited

Bar against direct demand on assessee under Section 205 of the Income Tax Act - indirect recovery by adjustment against refunds - No recovery of the tax deducted at source could be made from the petitioner (the deductee). - HELD THAT: - The Court applied the statutory bar in Section 205 which precludes calling upon the assessee to pay tax to the extent tax has been deducted at source. Reliance was placed on the reasoning in Sanjay Sudan (Delhi High Court) that neither direct recovery nor indirect recovery (for example by adjusting future refunds) may be enforced against the deductee. The Court therefore concluded that, although the deductor (Ninex) failed to deposit the deducted amount, the legal consequence is that recovery proceedings, if any, must be directed against the deductor and not the deductee; coercive measures against the petitioner are barred. [Paras 21]

The petitioner cannot be made liable to pay or have tax recovered from it in respect of the TDS deducted by Ninex.

Credit for tax deducted at source - requirement of payment to the Central Government for TDS credit under Section 199 of the Income Tax Act - deductor as agent for tax collection and liability of the deductor where TDS is not deposited - The petitioner is entitled to credit for the TDS deducted by Ninex notwithstanding that Ninex did not deposit the amount with the Central Government and the same does not reflect in Form 26AS. - HELD THAT: - The Court examined the contention that Section 199 prevents granting credit unless the TDS is paid to the Central Government. It held that this submission was untenable in the factual matrix: TDS is withheld from the assessee's income and forms part of the assessee's offered income, and the deductee followed the statutory regime by treating the deducted amount as tax paid on its behalf. Granting credit to the deductee does not amount to permitting the revenue to do indirectly what Section 205 forbids directly. The proper remedy for non-deposit by the deductor is action against the deductor as the government's agent for collection. Applying these principles, the Court allowed the petitioner credit for the TDS amount claimed and set aside the Section 154 order which had disallowed that credit. [Paras 21, 22, 23, 28]

Petitioner to be given credit for the TDS of Rs. 29,16,674/-, notwithstanding its absence in Form 26AS; the Section 154 order of 25.06.2020 is set aside.

Final Conclusion: Writ petition allowed: (i) no recovery of the TDS may be made from the petitioner in view of the bar under Section 205; and (ii) petitioner is entitled to credit for the TDS of Rs. 29,16,674/- deducted by Ninex for FY 2018-19 (AY 2019-20); the Section 154 order dated 25.06.2020 is set aside.

Recording of satisfaction note - jurisdiction of the Assessing Officer under Section 158BD - requirement of reasons / mental process for invoking Section 158BD - transmission of seized documents to the Assessing Officer having jurisdiction

Recording of satisfaction note - jurisdiction of the Assessing Officer under Section 158BD - requirement of reasons / mental process for invoking Section 158BD - Validity of assumption of jurisdiction by the Assessing Officer under Section 158BD where no satisfaction note was recorded by the Assessing Officer of the searched person - HELD THAT: - The Court examined whether proceedings under Section 158BD could be validly initiated in the absence of a satisfaction note recorded by the Assessing Officer of the searched person. The record showed that despite an earlier direction to produce original files, the Revenue failed to produce them; on that basis the Court drew an adverse inference that no satisfaction note had been generated (paragraph 10). The Court treated the matter as already addressed by binding Supreme Court precedents (Manish Maheshwari v. ACIT; Commissioner of Income-Tax v. Calcutta Knitwears; Tapan Kumar Dutta v. CIT), which establish that the conditions precedent to invoke Section 158BD include recording satisfaction that undisclosed income belongs to a person other than the searched person, transmission of seized documents to the AO having jurisdiction, and that the satisfaction must disclose the Assessing Officer's reasons or mental and dispassionate thought-process. Applying those authorities, and given the absence of a satisfaction note (and the Revenue's failure to produce files), the Court concluded that the assumption of jurisdiction was invalid. The Court further observed that the challenge to jurisdiction had in fact been raised before the Tribunal (see the grounds and written submissions extracted in the record) and therefore the issue was properly before the Court (paragraphs 13-16). [Paras 10, 13, 16, 17]

The question of law is answered in favour of the assessee; the assumption of jurisdiction under Section 158BD without a recorded satisfaction note was held invalid.

Final Conclusion: The appeals filed by the assessee are allowed on the ground that no satisfaction note was recorded by the Assessing Officer of the searched person and, applying binding Supreme Court authority, the consequent assumption of jurisdiction under Section 158BD was invalid; the Revenue's appeals are rendered academic and are closed.

Comparability for transfer pricing - functional comparability - exclusion of comparables where business is KPO but assessee is BPO - reliance on segmental financial data for comparability - effect of intangibles and brand advantage on comparability

Comparability for transfer pricing - functional comparability - exclusion of comparables where business is KPO but assessee is BPO - Validity of excluding Accentia Technologies Limited as a comparable for ALP determination. - HELD THAT: - The Tribunal upheld the CIT(A)'s exclusion of Accentia on the ground that Accentia's business profile-including software development, product sales and KPO activities-was materially different from the assessee's routine BPO activities. Accentia's acquisition and involvement in software products changed its revenue composition and made segment-level comparability infeasible. The Tribunal followed coordinate-bench precedents which treated Accentia as functionally dissimilar to the assessee and concluded that inclusion of Accentia as a comparable was not justified. [Paras 7]

Accentia Technologies Limited excluded from the final set of comparable companies.

Comparability for transfer pricing - functional comparability - exclusion of comparables where business is KPO but assessee is BPO - Validity of excluding eClerx Services Limited as a comparable for ALP determination. - HELD THAT: - The Tribunal sustained the CIT(A)'s finding that eClerx is a KPO providing specialised data analytics and advisory services, whereas the assessee performs routine BPO/data-processing tasks. Given the difference in functional profile and business model, coordinate-bench decisions were held to support exclusion of eClerx from the comparable set. The Tribunal found no error in the CIT(A)'s conclusion and declined to interfere. [Paras 8]

EClerx Services Limited excluded from the final set of comparable companies.

Comparability for transfer pricing - functional comparability - reliance on segmental financial data for comparability - effect of intangibles and brand advantage on comparability - Validity of excluding TCS E-Serve Limited as a comparable for ALP determination. - HELD THAT: - The Tribunal agreed with the CIT(A) that TCS E-Serve is functionally dissimilar: it provides transaction-processing and technology services, develops software, and benefits from substantial intangibles and the 'Tata' brand, placing it in a different league from the assessee. The absence of relevant segmental data further undermined its suitability as a comparable. Although a coordinate-bench decision in another factual matrix had treated TCS E-Serve as comparable, the Tribunal found the factual differences here decisive and declined to disturb the CIT(A)'s exclusion. [Paras 9, 10]

TCS E-Serve Limited excluded from the final set of comparable companies.

Final Conclusion: Revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s exclusions of Accentia Technologies Limited, eClerx Services Limited and TCS E-Serve Limited from the set of comparables for determination of ALP for AY 2011-12.

Requirement of incriminating material for assessment under section 153A - deletion of addition on account of unexplained share application money under section 68 - deletion of addition on account of unexplained commission expenses under section 69C - quashing of assessments completed under section 153A for lack of incriminating material - non-application of mind by Assessing Officer in making additions

Requirement of incriminating material for assessment under section 153A - quashing of assessments completed under section 153A for lack of incriminating material - Whether additions could be sustained under section 153A in absence of incriminating material recovered during search - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that for framing and sustaining additions under section 153A there must be incriminating material recovered in relation to the assessee for the relevant year. The Tribunal noted the CIT(A)'s detailed consideration of seized documents (paras 3.1.3 and sub paras) and his finding that the documents seized from the group office were not incriminating insofar as R.V. Buildtech & Amusement Pvt. Ltd. and VGRM Infrastructure & Amusement Pvt. Ltd. were concerned. Following precedents cited by the CIT(A), the Tribunal accepted that assessments under section 153A cannot be sustained where there is no incriminating material specific to the assessee and accordingly endorsed the quashing/deletion of the impugned additions made under section 153A. [Paras 7, 14, 15]

Held that additions under section 153A are not sustainable in absence of incriminating material specific to the assessee; CIT(A)'s quashing/deletion on this ground is endorsed.

Deletion of addition on account of unexplained share application money under section 68 - non-application of mind by Assessing Officer in making additions - Sustenance of addition of share application money treated as unexplained cash credit under section 68 - HELD THAT: - The Tribunal recorded that the CIT(A) examined the AO's reliance on seized share certificates and other material and found that no share certificates of the two assessee companies were seized, that the seized documents related to other group companies and therefore could not be treated as incriminating material against these assessee companies (paras 3.1.3.2-3.1.3.4 as set out in the CIT(A)'s order). The CIT(A) further found on merits in the group order that the additions were not sustainable. The Tribunal found no factual error in the CIT(A)'s reasoning, noted absence of any interference from a higher forum, and accordingly endorsed deletion of the addition made under section 68. [Paras 7, 13]

Addition under section 68 deleted; Tribunal upholds CIT(A)'s deletion for lack of incriminating material and on merits.

Deletion of addition on account of unexplained commission expenses under section 69C - Validity of addition made as commission expenses for obtaining accommodation entries under section 69C - HELD THAT: - The Tribunal noted that the CIT(A) deleted the addition of commission expenses following the reasoning in the group order in Surana Buildtech Pvt. Ltd., where similar facts were considered and deleted (CIT(A)'s order paras referenced at page 10). The Tribunal found no material to displace the CIT(A)'s conclusion and accepted the deletion of the addition under section 69C. [Paras 8, 13]

Addition under section 69C deleted; Tribunal affirms CIT(A)'s deletion.

Non-application of mind by Assessing Officer in making additions - Sustenance of addition treating inter company loans/advances as assessee's own unaccounted funds - HELD THAT: - The CIT(A) found that the AO treated amounts as unsecured loans to the assessee while records showed the assessee had advanced monies to K.D. Consultancy Pvt. Ltd. and that the AO had not examined audited accounts or relevant bank transactions, resulting in non application of mind (paras 3.3.2.2-3.3.2.3 in CIT(A)'s order). The Tribunal noted that Revenue did not challenge the CIT(A)'s deletion of the addition of Rs. 1,71,34,000/-, and therefore accepted the deletion as recorded by the CIT(A). [Paras 9, 13]

Addition treated as assessee's own funds deleted for non application of mind; deletion accepted and not challenged by Revenue.

Final Conclusion: The Revenue's appeal is dismissed. The Tribunal affirms the CIT(A)'s deletions and quashing of the impugned additions for AY 2013-14, holding that additions under section 153A are unsustainable without incriminating material specific to the assessee and endorsing the CIT(A)'s findings of non application of mind where applicable.

Aggregate approach - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - arm's length price - need and benefit test - Rule 10B of the Income Tax Rules - rule of consistency

Aggregate approach - Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - arm's length price - need and benefit test - Validity of transfer pricing adjustment on payment for intra-group services amounting to Rs. 72,27,543/- - HELD THAT: - The Tribunal held that the Transfer Pricing Officer was not justified in selectively segregating the intra-group services payment from the other international transactions when the assessee had aggregated eleven of the twelve transactions and benchmarked them under TNMM, an approach substantially accepted by the TPO for nine transactions. The assessee produced an entrustment agreement and voluminous contemporaneous material (minutes, quarterly reports, invoices, management certificate and service-specific documents) demonstrating that planning, safety and environment, information systems, procurement and HR services were actually rendered and produced tangible benefits (cost savings, efficiency, compliance, IT economies, procurement savings, HR improvements). The Tribunal found the departmental authorities' contrary conclusions to be conjectural and observed that the TPO could not, without adducing a comparable uncontrolled transaction, apply CUP and fix ALP at nil. Given acceptance of TNMM for the aggregated portfolio and the evidence of rendition and benefit, the TPO's segregation and application of CUP to arrive at nil ALP was unsustainable; the transfer pricing adjustment and consequent addition were deleted. [Paras 15, 18, 19]

The transfer pricing adjustment in respect of payment for intra-group services is unsustainable and is deleted; the addition is reversed.

Transactional Net Margin Method (TNMM) - Comparable Uncontrolled Price (CUP) method - arm's length price - Rule 10B of the Income Tax Rules - rule of consistency - Validity of transfer pricing adjustment on purchase of capital goods (imported from AE) and correctness of determining ALP by rejecting the mark-up - HELD THAT: - The Tribunal observed that the fact of purchase of capital goods from AEs was not disputed and that the TPO determined ALP by disallowing the mark-up without applying any recognised benchmarking method under section 92C read with Rule 10B. The Commissioner (Appeals) applied an ad hoc allowance of 2% on written down value; both approaches were held to be adhoc and not in accordance with the transfer pricing provisions. The assessee had also furnished secondary benchmarking (treating the AE as tested party) and evidence regarding proprietary nature of assets, invoices and customs valuation acceptance. The Tribunal found that the departmental authorities failed to demonstrate factual dissimilarity with earlier years where similar transactions were accepted and that the TPO/CIT(A) did not follow Rule 10B methodology; accordingly the adjustment was deleted. [Paras 20, 21, 24]

The transfer pricing adjustment in respect of the import of capital goods is not upheld; the adhoc disallowance is deleted.

Final Conclusion: Appeal allowed: transfer pricing adjustments and resultant additions in respect of (i) payment for intra-group services and (ii) purchase/import of capital goods are deleted; the Assessing Officer/TPO and Commissioner (Appeals) approaches in the impugned assessment year are held unsustainable.

Distinction between rental income and maintenance/hire business - nexus for deduction of expenses - deductibility of maintenance expenses as business expenditure - treatment of depreciation on assets given on hire - treatment of depreciation on lifts as part of building vis-a -vis separable assets - standard deduction under section 24 - rule of consistency in successive assessment years - remand for computation/verification of depreciation allowance

Distinction between rental income and maintenance/hire business - deductibility of maintenance expenses as business expenditure - nexus for deduction of expenses - Deductibility of maintenance expenses claimed against maintenance income and whether they could be disallowed as expenses related to rental activity. - HELD THAT: - The Tribunal accepted the assessee's position that maintenance income and rental income arose from two separate, identifiable activities, supported by separate maintenance agreements and distinct accounting treatment. The Assessing Officer's approach of disallowing maintenance expenses by applying a pro rata reduction based on the ratio of maintenance income to total income was rejected because many maintenance expenses related exclusively to the maintenance business and not to the letting of the property. The Tribunal noted that the assessee had not claimed standard deduction under the head of rental income in respect of maintenance receipts, and found no evidence brought on record by the AO to rebut the assessee's claim that the expenses were wholly and exclusively incurred for the maintenance business. The rule of consistency, in that no disallowance was made in earlier and later assessment years on identical facts, was also noted in favour of the assessee. Applying these findings, the Tribunal held that no disallowance of the maintenance expenses was warranted and allowed the assessee's appeal on this ground. [Paras 20, 21]

Maintenance expenses are deductible against maintenance income; the disallowance made by the AO is set aside and the assessee's appeal is allowed.

Treatment of depreciation on assets given on hire - deductibility of depreciation on fixed assets used in maintenance and hiring businesses - standard deduction under section 24 - Whether depreciation claimed on fixed assets used in maintenance business and on assets given on hire is liable to be disallowed by applying a pro rata reduction based on maintenance income being part of total income. - HELD THAT: - The Tribunal found that a substantial part of the depreciation claimed related to assets (computers, electrical equipment, furniture, plant and machinery) used in the assessee's maintenance and hiring businesses, which were offered to tax under the head 'Business Income' and were not part of the building let out. The Assessing Officer's blanket disallowance of depreciation by applying a percentage reduction (leaving only 23.92% allowed) was held to be unjustified because no nexus was demonstrated between those assets and the letting business. The Tribunal observed that the AO also failed to consistently treat hire and maintenance receipts for purposes of standard deduction under section 24, which undercuts the AO's basis for disallowance. On these grounds, the Tribunal concluded that depreciation relating to the maintenance and hiring businesses should not have been disallowed and that no part of the depreciation claimed need be disallowed on that basis. [Paras 30, 32]

Depreciation on fixed assets used in maintenance and hiring businesses cannot be disallowed by the AO's pro rata method; revenue's appeal is dismissed and the assessee's claim is allowed.

Treatment of depreciation on lifts as part of building vis-a -vis separable assets - remand for computation/verification of depreciation allowance - Appropriate allowance of depreciation on lifts - whether lifts are inseparable from the building (and therefore not separately depreciable) or whether certain additional lifts installed at tenants' request are separable and eligible for depreciation; and the manner of computing allowance. - HELD THAT: - While the Tribunal accepted that certain lifts integral to the multi storey building may be treated as part of the building, it also noted that the assessee claimed depreciation only on additional lifts installed at tenants' specific request. The CIT(A) had directed certain adjustments regarding depreciation on lifts; the Tribunal did not finally quantify the allowance itself but directed a limited remand to the Assessing Officer to compute the allowance in accordance with the directions given by the CIT(A). The assessee was directed to submit a detailed depreciation chart to the AO to enable computation. Thus the substantive question of computation was left for verification and mechanical calculation in light of the factual record and prior directions. [Paras 31]

Matter remanded to the AO for computation of depreciation on lifts as per the CIT(A)'s directions; assessee to furnish depreciation chart to AO.

Final Conclusion: The Tribunal allowed the assessee's appeal by holding that maintenance expenses were properly deductible against maintenance income and that depreciation on fixed assets used in maintenance and hiring businesses could not be disallowed by the AO's pro rata method; the Revenue's appeal was dismissed. A limited remand was directed for computation of depreciation on lifts in accordance with the CIT(A)'s directions, with the assessee required to submit a depreciation chart to the AO.

Validity of assessment orders without Document Identification Number (DIN) - Mandatory quoting of DIN pursuant to CBDT Circular No.19/2019 - Exception and regularisation procedure for manual communications without DIN - Communications treated as invalid and deemed never issued if not in conformity with the Circular

Validity of assessment orders without Document Identification Number (DIN) - Mandatory quoting of DIN pursuant to CBDT Circular No.19/2019 - Exception and regularisation procedure for manual communications without DIN - Communications treated as invalid and deemed never issued if not in conformity with the Circular - Assessment orders issued without quoting a computer-generated DIN in contravention of CBDT Circular No.19/2019 are invalid and liable to be quashed. - HELD THAT: - The Tribunal applied the mandate of CBDT Circular No.19/2019 (issued under section 119) that, on or after 1 October 2019, no communication relating to assessment shall be issued unless a computer-generated DIN is allotted and quoted in the body of the communication. The Circular permits limited exceptions where manual communications may be issued, but only after recording reasons in the file, obtaining prior written approval of the competent authority and quoting the approval details in the communication; further, communications not conforming to Paras 2 and 3 are to be treated as invalid and deemed never issued. In the present cases the assessment orders did not quote any DIN, nor did they record the requisite reasons or approval details in the body of the orders. Applying the clear language of the Circular and following the reasoning in a coordinate bench decision reproduced in the record, the Tribunal held that the assessment orders must be declared non-est and deemed never to have been issued. The Tribunal nevertheless granted liberty to the Revenue to file a Miscellaneous Application if it can incontrovertibly demonstrate that a DIN was generated and communicated as required by the Circular, permitting regularisation only upon satisfaction of those prerequisites. [Paras 5, 6]

The assessment orders for the stated years are quashed as invalid for non-compliance with CBDT Circular No.19/2019; the appeals of the assessee are allowed, subject to liberty to the Revenue to prove subsequent compliance regarding DIN.

Final Conclusion: Assessment orders for AYs 2017-18 and 2018-19 are declared void and deemed never to have been issued for failure to comply with the mandatory DIN requirements of CBDT Circular No.19/2019; appeals allowed, with limited liberty to the Revenue to seek regularisation only upon proving proper generation/communication of DIN as mandated.

Comparability in transfer pricing - functional comparability - Transactional Net Margin Method (TNMM) - profit level indicator - operating profit to operating cost - related party transactions filter - segmental reporting for comparability - working capital adjustment - computation and remand

Comparability in transfer pricing - functional comparability - segmental reporting for comparability - Aptico Limited excluded as a comparable - HELD THAT: - The Tribunal found Aptico to be a diversified project development and services entity whose consolidated revenue includes multiple activities (asset reconstruction, project services, micro enterprise development, tourism, environment management etc.) and the financial statements do not provide segmental expense break-up or details of the purported research/tourism activity. The TPO had used entire company revenue for comparison, which the Tribunal held to be unreliable where the company is multi-segmented and segmental details are not available to isolate activities comparable to the assessee. For these reasons the company is functionally dissimilar and must be excluded as a comparable. [Paras 7]

Exclude Aptico Limited from the list of comparables.

Comparability in transfer pricing - functional comparability - segmental reporting for comparability - Indus Technical and Financial Consultants Limited excluded as a comparable - HELD THAT: - Although the company reports consultancy revenue, the annual report and notes show multiple divisions (consultancy and agriculture) and the accounts lack adequate segmental allocation of expenses despite an asserted single-segment revenue presentation. Given the absence of reliable segmental expense data and parity with a coordinate bench decision (Motorola Solutions India Pvt. Ltd.) for the same assessment year, the Tribunal held the company functionally dissimilar for comparability purposes and directed its exclusion. [Paras 11]

Exclude Indus Technical and Financial Consultants Limited from the list of comparables.

Comparability in transfer pricing - functional comparability - segmental reporting for comparability - Techni-com Chemie (India) Limited excluded as a comparable - HELD THAT: - The Tribunal noted that the company's disclosed income includes commission, consultancy and services but lacks segmental detail to separate activities; on inspection it functions as a marketing organisation dealing in capital goods with technical support and spare parts, and the assessed records do not permit reliable segmentation for benchmarking the assessee's market research/testing services. Following the coordinate bench decision for the same assessment year, the Tribunal concluded the company is not sufficiently functionally comparable and directed exclusion. [Paras 14]

Exclude Techni-com Chemie (India) Limited from the list of comparables.

Comparability in transfer pricing - functional comparability - segmental reporting for comparability - WAPCOS Limited excluded as a comparable - HELD THAT: - WAPCOS operates across a broad range of engineering and turnkey activities (feasibility, design, turnkey contracts, construction management, operation & maintenance and other segments) and is a techno-commercial organisation under a Government Ministry. Although service segment revenue is reported, the annual report lacks adequate segmental expense allocation and the company's multi segment and turnkey character render it functionally dissimilar to the assessee's single segment market research/testing operations. On that basis and consistent with prior Tribunal practice, the Tribunal directed that WAPCOS be excluded. [Paras 17]

Exclude WAPCOS Limited from the list of comparables.

Comparability in transfer pricing - functional comparability - India Tourism Development Corporation Limited included as a comparable - HELD THAT: - The TPO's sole reason for excluding ITDC was that service income was below the 75% service income filter. The Tribunal observed that no adverse finding was recorded on functional similarity and, having regard to the jurisdictional High Court's earlier acceptance of ITDC as a comparable in the assessee's case for a prior year, held ITDC to be functionally comparable. Accordingly, ITDC is to be included among the comparables. [Paras 20]

Include India Tourism Development Corporation Limited as a comparable.

Comparability in transfer pricing - functional comparability - segmental reporting for comparability - Idma Laboratories Limited included as a comparable - HELD THAT: - The Tribunal noted that Idma's annual report discloses a distinct quality control testing (QCT) segment in addition to pharmaceutical formulations. The QCT segment is functionally similar to the assessee's testing services; furthermore, the company had been accepted as a comparable for the assessee in earlier assessment years by the TPO and upheld by the High Court, and was treated as comparable in multiple subsequent assessment years. On this basis the Tribunal found Idma's QCT division to be comparable and directed its inclusion. [Paras 23]

Include Idma Laboratories Limited as a comparable.

Working capital adjustment - computation and remand - Working capital adjustment computation remanded to the Assessing Officer for fresh computation - HELD THAT: - The assessee raised an additional ground alleging a computational error in the working capital adjustment (incorrect SBI PLR rate used). The Tribunal did not adjudicate the computation on merits; instead it restored the matter to the Assessing Officer with a direction to compute the working capital adjustment correctly after affording the assessee a due and reasonable opportunity of being heard. [Paras 25]

Remand computation of the working capital adjustment to the Assessing Officer for correct computation after hearing the assessee.

Final Conclusion: Appeal partly allowed: the Tribunal directed exclusion of Aptico Limited, Indus Technical and Financial Consultants Limited, Techni com Chemie (India) Limited and WAPCOS Limited from the comparable set; directed inclusion of India Tourism Development Corporation Limited and Idma Laboratories Limited; and remanded the working capital adjustment computation to the Assessing Officer for fresh computation after affording the assessee an opportunity of hearing.

Disallowance under section 40A(2)(b) - onus on revenue to prove excessiveness of related party payment - reasonableness / fair market value of interest in related party transactions - genuineness of business expenditure - commission paid to foreign agents - penalty under section 271(1)(c) contingent on substantive additions

Disallowance under section 40A(2)(b) - onus on revenue to prove excessiveness of related party payment - reasonableness / fair market value of interest in related party transactions - Deletion of disallowance of interest paid to directors claimed at 18% where revenue failed to establish excessiveness - HELD THAT: - The Tribunal found that neither the Assessing Officer nor the first appellate authority furnished any cogent basis to demonstrate that the interest rate of 18% paid to a director was excessive or that a lower rate reflected the fair market value. The authorities applied rates (12% by AO and 15% by CIT(A)) without establishing how those rates were reasonable vis a vis the fair market rate. In absence of material or reasoned justification to invoke section 40A(2), the statutory conditions for disallowance were not satisfied. Reliance on precedent requiring reasoned material before invoking section 40A(2) was noted. Accordingly the disallowance premised on treating 15% as reasonable (in lieu of 18% claimed) was held untenable and deleted. [Paras 9, 11]

Disallowance of interest under section 40A(2)(b) deleted; ground allowed.

Genuineness of business expenditure - commission paid to foreign agents - onus on assessee to substantiate payments as for commercial consideration - Allowability of commission payments to six foreign agents disallowed by AO and confirmed by CIT(A) - HELD THAT: - The Tribunal examined the material placed on record and noted that the assessee, a 100% export unit with no presence abroad, produced confirmations from all six agents, country wise sales details, invoices, debit notes, shipping bills and contracts showing the basis for payments. The CIT(A) rejected the claim primarily for want of email/correspondence and absence of agent wise turnover details, but the Tribunal found no material infirmity pointed out in the documents filed and observed that lack of certain correspondence did not negate the voluminous other evidence proving services and necessity for such agents in export business. Precedent of acceptance in adjacent assessment years was also noted. On this basis the Tribunal concluded genuineness and business purpose were established and directed allowance of the commission expenditure. [Paras 15, 20]

Commission payments of Rs. 50,64,385/- accepted as business expenditure and disallowance deleted; grounds allowed.

Penalty under section 271(1)(c) contingent on substantive additions - Deletion of penalty imposed under section 271(1)(c) which was based on additions sustained by appellate authority - HELD THAT: - Having set aside the substantive additions (interest disallowance and commission disallowance) in the quantum appeal, the Tribunal held that the penalty confirmed by the CIT(A) stood on no independent foundation. The penalty, being dependent on the additions which the Tribunal deleted, was accordingly unsustainable and was deleted. [Paras 22]

Penalty under section 271(1)(c) deleted; appeal allowed.

Final Conclusion: Both appeals of the assessee for Assessment year 2010-11 are allowed: the disallowance of interest under section 40A(2)(b) is deleted, the commission payments to foreign agents are allowed, and the penalty under section 271(1)(c) premised on the additions is deleted.

Capital gains under section 45(1A) - deemed transfer on receipt of insurance claim - extinguishment of rights on destruction not amounting to transfer - treatment of insurance rejection as zero receipt for capital gains computation

Capital gains under section 45(1A) - deemed transfer on receipt of insurance claim - treatment of insurance rejection as zero receipt for capital gains computation - Whether the capital loss on a building destroyed by earthquake is to be computed in the impugned assessment year or in the year when the insurance claim was rejected/settled, for the purposes of section 45(1A). - HELD THAT: - Section 45(1A) deems profits or gains arising from receipt of insurance moneys for damage or destruction of a capital asset to be chargeable as capital gains in the previous year in which such money is received; it was enacted to override the consequence of destruction not constituting a transfer under section 2(47) (as held in Vania Silk Mills). The legislative memorandum confirms the provision is intended to treat receipts under insurance for destroyed assets as capital gains in the year of receipt. In the present facts the building was destroyed by an earthquake and the assessee's claim was rejected by the insurer, with the assessee prosecuting an appeal before the High Court. The Tribunal holds that section 45(1A) is invoked at the point the insurer settles the claim initially (here, rejection by the insurer), and that a rejection is to be treated as a zero receipt for the purposes of computing capital gain or loss for that year. The subsequent outcome of the assessee's appeal before the Court will relate back to that year but does not alter the year in which section 45(1A) is initially invoked. Therefore the capital loss on the destroyed building is to be computed in the assessment year in which the insurance claim was initially rejected by the insurance company, and the same may be set off against the capital gain on sale of land in the impugned assessment year if permissible within statutory time limits. [Paras 14, 15]

Capital loss on the destroyed building is to be computed under section 45(1A) in the assessment year when the insurance claim was initially rejected (treated as zero receipt), and the AO is directed to allow set off against the capital gain on sale of land if within the statutory period.

Final Conclusion: The assessee's appeal is dismissed subject to directions: the capital loss on the destroyed building shall be computed in the assessment year in which the insurance claim was initially rejected (treated as zero receipt under section 45(1A)), and the AO shall allow its set off against the capital gain on sale of land if allowable within the period prescribed by law.

Exemption under section 10(1) of the Income tax Act for agricultural income - Seed Production Agreement and joint cultivation - ownership or lawful possession of land not necessary for claiming agricultural income - rule of consistency in successive assessments - allowability of ESOP expenses as deduction under section 37(1) - section 14A and computation of disallowance under Rule 8D

Exemption under section 10(1) of the Income tax Act for agricultural income - Seed Production Agreement and joint cultivation - ownership or lawful possession of land not necessary for claiming agricultural income - rule of consistency in successive assessments - Entitlement to exemption under section 10(1) in respect of income from growing and selling of hybrid seeds for AY 2009-10 - HELD THAT: - The Tribunal examined the Seed Production Agreements, statements recorded during assessment and the long litigation history in the assessee's own case. Earlier years (from AY 1990 91 onwards) the Tribunal and the Bombay High Court had held that it is sufficient that agricultural operations are actually carried on by the assessee and ownership of land is not a prerequisite. The Assessing Officer and CIT(A) relied on selective statements and the Karnataka High Court decision in Namdhari Seeds, but the Tribunal found the alleged 'new facts' did not displace the earlier findings: the agreements, supervision, supply of foundation seed and continuous involvement by production supervisors demonstrated joint agricultural operations. Clause wording relied upon by Revenue was a typographical/interpretative issue and did not negate jointness. In view of binding precedent in the assessee's own case and consistency of facts, the assessee was held entitled to exemption under section 10(1). [Paras 20, 21, 25, 27, 28]

Claim of exemption under section 10(1) for AY 2009-10 allowed.

Exemption under section 10(1) of the Income tax Act for agricultural income - Seed Production Agreement and joint cultivation - rule of consistency in successive assessments - Entitlement to exemption under section 10(1) in respect of income from growing and selling of hybrid seeds for AY 2012-13 - HELD THAT: - Facts for AY 2012 13 were similar to those adjudicated for AY 2009 10 and earlier years. The Tribunal applied the same reasoning mutatis mutandis and held that the assessee's involvement (agreements, supervision, control, and previous binding judicial decisions in the assessee's own case) entitled it to claim exemption under section 10(1). Therefore the CIT(A)'s denial was reversed to the extent relevant. [Paras 37]

Claim of exemption under section 10(1) for AY 2012-13 allowed (consistent with findings in AY 2009-10).

Allowability of ESOP expenses as deduction under section 37(1) - Allowability of ESOP expense debited by the assessee (disallowance by AO challenged by Revenue) for AY 2012-13 - HELD THAT: - The Tribunal considered the nature of the ESOP expense (reimbursement to parent company for difference between market price and grant price) and followed the Special Bench decision in Biocon and the Karnataka High Court in CIT v. Biocon that such discount/expense represents an ascertained business liability and is an expenditure 'laid out or expended' within section 37(1). The Tribunal found no infirmity in the CIT(A)'s deletion of the AO's disallowance and dismissed the Revenue's grounds. [Paras 33, 34, 35]

ESOP expense allowed as deduction under section 37(1); Revenue's appeal dismissed.

Section 14A and computation of disallowance under Rule 8D - Validity of disallowance under section 14A read with Rule 8D relating to dividend income for AY 2012-13 - HELD THAT: - The assessee had made a suo moto disallowance and later limited it to an ad hoc amount; the AO invoked section 14A and computed disallowance as per Rule 8D(2)(iii) (0.5% of average investments). The Tribunal examined the assessment record and found the AO had considered the assessee's submissions and recorded reasons for rejecting them; the assessee's revised ad hoc calculation (25% of Treasury Department cost) did not take into account board level/admin involvement. Accordingly the Tribunal upheld the AO's computation under Rule 8D(2)(iii) and dismissed the assessee's grounds on this issue. [Paras 41, 44, 45]

Disallowance under section 14A read with Rule 8D(2)(iii) upheld; assessee's challenge dismissed (appeal partly allowed overall on other grounds).

Final Conclusion: The Tribunal allowed the assessee's appeals on the question of exemption under section 10(1) for AY 2009 10 and, by application of the same reasoning, for AY 2012 13. The Revenue's appeal against allowance of ESOP expenses for AY 2012 13 was dismissed. The assessee's challenge to the section 14A disallowance for AY 2012 13 was rejected and the Rule 8D computation upheld; consequential interest issues were left as consequential.

Transaction value - determination of transaction value under Customs Valuation Rules - inclusion of freight, insurance and landing charges in transaction value - valuation of remnant ATF - proviso to Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007

Transaction value - valuation of remnant ATF - inclusion of freight, insurance and landing charges in transaction value - proviso to Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 - Cost of transportation, loading/unloading/handling charges and insurance are not to be added to the transaction value for determining duty on remnant ATF. - HELD THAT: - The Tribunal examined whether transportation, loading/unloading/handling charges and insurance could be added to the transaction value of remnant Aviation Turbine Fuel for reassessing customs liability. Relying on the Larger Bench decision in Jet Airways, the Tribunal accepted that the Division Bench precedent (Inter Globe Aviation) which held such notional costs cannot be included is the correct law. The Larger Bench expressly concluded that no amount towards alleged transportation cost is required to be included in the value of remnant ATF under Rule 10(2) for determining transaction value under Section 14(1) of the Customs Act. Applying that reasoning, the notional additions of freight, insurance and landing charges are extraneous to the transaction value and cannot be added for computing duty on fuel remaining on board after arrival. Consequently the Commissioner's enhancement of value by those costs was found unsustainable. [Paras 6, 7]

Addition of transportation, loading/unloading/handling and insurance charges to the transaction value of remnant ATF is not permissible; the impugned demand is set aside.

Final Conclusion: Appeals allowed; impugned order confirming differential duty by adding transportation, handling and insurance to the transaction value of remnant ATF set aside in view of the Larger Bench precedent; differential demands annulled accordingly.

Maintainability of a joint Section 7 application against multiple corporate debtors in a single real estate project - Second proviso to Section 7(1) - threshold requirement of 100 allottees or 10% for real estate allottees - continuing breach and computation of limitation in real estate allottee agreements - consolidated/group CIRP for interconnected corporate entities in a real estate project - principal-agent/agency effect of collaboration and developer agreements for imputing liability - aggregation of default under Explanation to Section 7(1) and application of the default test

Maintainability of a joint Section 7 application against multiple corporate debtors in a single real estate project - consolidated/group CIRP for interconnected corporate entities in a real estate project - principal-agent/agency effect of collaboration and developer agreements for imputing liability - Joint Section 7 application against the three corporate respondents (Anand Infoedge Pvt. Ltd., Mist Avenue Pvt. Ltd., Mist Direct Sales Pvt. Ltd.) in respect of the single real estate project was maintainable. - HELD THAT: - The Tribunal examined the collaboration and builder-buyer arrangements and the sequence of events (including cancellation of the first collaboration agreement and a subsequent collaboration under which the second developer acknowledged taking charge of inventories and payments). The materials showed that the three companies were integrally engaged in the one project, with obligations and powers under the collaboration agreements that bound and affected the allottees; the developer acted on behalf of the owner and sales/advances collected by the developer were held to be binding on the owner. The Tribunal accepted the Adjudicating Authority's factual findings that the companies were intrinsically interwoven for the Festival City project, that the project could not be developed by any one corporate debtor alone, and that without inclusion of all three entities a meaningful resolution of the project would be impossible. Having regard to the distinct character of real estate projects and the authorities recognising consolidated/group CIRP in such settings, the Tribunal upheld the Adjudicating Authority's conclusion that a joint Section 7 petition against the three corporate debtors was maintainable. [Paras 14, 15, 16]

Maintainability of the joint Section 7 application as against all three corporate debtors is upheld.

Second proviso to Section 7(1) - threshold requirement of 100 allottees or 10% for real estate allottees - aggregation of default under Explanation to Section 7(1) and application of the default test - Manish Kumar principle regarding default aggregation and threshold timing - The Section 7(1) second proviso threshold was satisfied and the Adjudicating Authority correctly held that the application met the numerical requirement for allottees. - HELD THAT: - The Tribunal analysed the Adjudicating Authority's computation (which found 103 qualifying allottees) and the contentions that several applicant claims should be excluded (claims said to be time barred, settled, premature or hit by Section 10A). Applying the Explanation to Section 7(1) and the Supreme Court's exposition of the amended proviso, the Tribunal held that what is determinative is existence of the requisite default (and its being within limitation) for the corporate debtor as pleaded - the default may be qua any applicant or any other financial creditor and the proviso's numerical threshold must be satisfied as on the date of filing. Where at least one relevant default of the requisite amount and within limitation is made out, the inclusion of co applicants whose individual claims may be time barred or later settled does not defeat the threshold. The Tribunal therefore found no error in the Adjudicating Authority's conclusion that the proviso's requirement was met. [Paras 11, 26, 29, 46]

Threshold under the second proviso to Section 7(1) is satisfied and the Adjudicating Authority's finding in this regard is affirmed.

Continuing breach and computation of limitation in real estate allottee agreements - aggregation of default under Explanation to Section 7(1) and application of the default test - It is not necessary that each co applicant/allottee in a joint Section 7 petition individually demonstrate an unbarred financial debt; continued contractual breaches under builder-buyer terms sustain causes of action and the statutory test focuses on existence of default of requisite amount as against the corporate debtor. - HELD THAT: - The Tribunal considered the builder-buyer clause providing ongoing entitlements (including delay charges) and held that the contract envisaged continuing breach, so causes of action subsist and limitation does not automatically exclude such allottees from the count. Relying on principles of continuing breach and the Supreme Court's ruling that default may be established qua any financial creditor (and need not be owed to each applicant), the Tribunal rejected arguments that time barred, settled or premature co applicants must be excluded for threshold computation. Thus the Adjudicating Authority correctly declined to dissect each co applicant's entitlement at admission stage and to exclude them from the numerical threshold where an in rem default of requisite amount and within limitation is pleaded. [Paras 34, 35, 44, 45]

The requirement that each joint applicant separately prove a fresh, unbarred financial debt is rejected; continuing breach sustains claims and the Section 7 default test is met as held.

Final Conclusion: The Tribunal found no infirmity in the Adjudicating Authority's order admitting the joint Section 7 application: the petition against the three corporate respondents in respect of the single real estate project was maintainable, the numerical threshold under the second proviso to Section 7(1) was satisfied, and it was unnecessary for each co applicant to individually establish an unbarred financial debt at the admission stage. The appeals are dismissed and the impugned order dated 21.10.2022 is upheld.

Acknowledgment in writing under Section 18 of the Limitation Act - entries in the balance sheet as acknowledgment of debt - continuous acknowledgment extending limitation - maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - auditors' notes/caveats and their effect on acknowledgment - judicial discretion not to admit Section 7 petition in light of Vidarbha

Acknowledgment in writing under Section 18 of the Limitation Act - entries in the balance sheet as acknowledgment of debt - continuous acknowledgment extending limitation - Whether the Section 7 petition was barred by limitation or was saved by acknowledgments in the corporate debtor's balance sheets, thereby rendering the petition maintainable. - HELD THAT: - The Tribunal applied the legal test in Asset Reconstruction Company (India) Ltd. v. Bishal Jaiswal and held that entries in the balance sheets can constitute an acknowledgment under Section 18 depending on the facts. It examined the balance sheets from FY 2005-06 onwards and the notes thereto, noting that the secured loan (later shown as unsecured after assignment) continued to appear in successive financial statements. The Adjudicating Authority had considered the notes and caveats but concluded that such annexures did not amount to a categorical denial of the liability; rather they related to dispute over quantum of interest and classification as secured/unsecured. On that factual appraisal the Tribunal agreed that the balance-sheet entries amounted to continuous acknowledgment, each giving rise to a fresh period of limitation, and therefore the Section 7 application filed on 11.10.2019 was within the extended limitation period and maintainable. [Paras 15, 18, 21, 23, 24]

The Tribunal upheld the Adjudicating Authority's conclusion that the balance-sheet entries amounted to acknowledgments within the meaning of Section 18, extending limitation and rendering the Section 7 petition maintainable.

Auditors' notes/caveats and their effect on acknowledgment - entries in the balance sheet as acknowledgment of debt - Whether the caveats/notes in the auditor's report or directors' notes negatived the balance-sheet entries so as to preclude a finding of acknowledgment. - HELD THAT: - The Tribunal assessed the specific caveats and notes reproduced in the record and the impugned order. While the notes recorded disputes regarding classification of the loan and provision for interest, the Tribunal held that these disclosures did not amount to a categorical denial of the liability recorded in the balance sheets. Reading the notes together with the balance-sheet entries, the Tribunal concluded that the acknowledgments remained operative for the purposes of Section 18 and that earlier Tribunal decisions cited by the appellant (on caveats negating acknowledgment) were distinguishable on the facts. [Paras 9, 15, 21, 22, 23]

The Tribunal held that the auditors' notes and caveats did not negate the acknowledgments appearing in the balance sheets and therefore did not defeat the extension of limitation.

Maintainability of an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 - judicial discretion not to admit Section 7 petition in light of Vidarbha - Whether the Adjudicating Authority ought to have exercised discretion to refuse admission of the Section 7 petition under the Vidarbha line of reasoning. - HELD THAT: - The Tribunal noted that the Adjudicating Authority considered the appellant's plea invoking Vidarbha but correctly distinguished that decision on facts. Relying on subsequent authority and the facts that debt and default stood established and that the Vidarbha doctrine applies to a narrowly defined fact-situation (where realizable dues exceed payable dues), the Tribunal found no basis for withholding admission. The Tribunal agreed there were no cogent grounds to refuse admission after finding debt and default. [Paras 26, 27]

The Tribunal held that the Adjudicating Authority was not required to and correctly did not refuse admission on the basis of Vidarbha; admission of the Section 7 petition was appropriate.

Final Conclusion: The appeal is dismissed. The Tribunal found no error in the Adjudicating Authority's admission of the Section 7 application: balance-sheet entries, read with their annexed notes, constituted continuing acknowledgments under Section 18 of the Limitation Act thereby extending limitation, and there was no valid basis to exercise discretion to refuse admission under the facts of the case.

Right to be heard - adjudication after audit - treatment of draft audit report as a show cause notice - requirement of a speaking order - Section 72A(4) of the Finance Act, 1994

Right to be heard - adjudication after audit - treatment of draft audit report as a show cause notice - requirement of a speaking order - Section 72A(4) of the Finance Act, 1994 - Whether the department could proceed to raise demands on the basis of the draft audit report without affording the assessee an opportunity of adjudication, and the consequent relief to be granted. - HELD THAT: - The Court found that the draft audit extract and the subsequent demand notices were issued without the jurisdictional officer having adjudicated the matter after affording the assessee an opportunity to respond. The spot memo recorded that the assessee had paid service tax to the subcontractor and was eligible for input tax credit but had erroneously reflected it in returns; that position had been put on record by the assessee in replies. The procedure contemplated by the audit-adjudication scheme, including the assessee's entitlement to be heard under Section 72A(4) of the Finance Act, 1994 (as relied upon by the appellants), requires that allegations in an audit para be treated as a show cause and adjudicated by the jurisdictional officer after affording personal hearing and passing a reasoned order. Because that procedure was not followed and the correctness of the assessee's stand was not considered by the adjudicating authority, the Court concluded that the matter must be sent back for adjudication. The Court therefore directed that the allegations in paragraph 2 of Draft Audit Report No.191/ST/DGP Audit/Gr.-02/17-18 appended to the demand dated 24.04.2019 be treated as a show cause notice; the assessee be permitted to file objections within the time fixed; and the Assistant Commissioner (jurisdictional officer) shall afford personal hearing and pass a speaking order on merits in accordance with law. The appellants may rely on and file earlier replies along with fresh objections. [Paras 11, 12, 13]

The writ petition was disposed of by setting aside the impugned order and directing that the audit allegations be treated as a show cause notice, objections be filed within 30 days, and the jurisdictional officer shall afford personal hearing and pass a speaking order on merits.

Final Conclusion: The intra-court appeal is allowed; the Single Bench order is set aside. The draft audit allegations appended to the demand dated 24.04.2019 are to be treated as a show cause notice, the appellants granted 30 days to file objections, and the jurisdictional Assistant Commissioner will afford personal hearing and pass a speaking order on merits, with the appellants permitted to rely on earlier replies.

Service Tax demand - identification of service head - prima facie demand not sustainable without specifying service - reconciliation between ST-3 return and balance sheet - remand for fresh verification

Service Tax demand - identification of service head - prima facie demand not sustainable without specifying service - reconciliation between ST-3 return and balance sheet - Whether a demand for service tax premised on a difference between figures in the ST-3 return and the balance sheet can be sustained without the department specifying the head of service to which the difference relates, and whether the matter requires remand for verification. - HELD THAT: - The Tribunal found that neither the Adjudicating Authority nor the Commissioner (Appeals) had identified which specific service head the alleged difference between the ST-3 return and the balance sheet related to. It applied the settled principle that a demand cannot be sustained prima facie unless the relevant service involved is determined. The appellant had supplied detailed reconciliation in the appeal identifying the differences; in view of that material the Tribunal held that the differences must be re-verified and re-considered by the Adjudicating Authority. Consequently the impugned order was set aside and the matter remanded with all issues kept open for fresh adjudication. [Paras 5, 6]

Impugned order set aside and matter remanded to the Adjudicating Authority for fresh verification and consideration of the reconciliation and to determine the specific service head; all issues kept open.

Final Conclusion: Appeal allowed by way of remand: the adjudication is set aside and the matter is remitted to the Adjudicating Authority for fresh verification and determination of the service head in relation to the differences between the ST-3 return and the balance sheet.

Works Contract Service - laying of pipelines - non-commercial non-industrial purpose exclusion - turnkey/EPC contracts classified by essential character - sub-contractor status and availability of exemption - classification of works contract under clause (b) of WCS

Works Contract Service - laying of pipelines - non-commercial non-industrial purpose exclusion - classification of works contract under clause (b) of WCS - Demand of service tax under Works Contract Service on contracts for laying pipelines for TWAD (drinking water supply) for the period 04.06.2009 to 12.01.2010 - HELD THAT: - The Tribunal examined the nature of the contract executed by the appellant for laying pipelines for a drinking water supply project of TWAD and held that the activity falls within clause (b) of the definition of "Works Contract Service". Applying the exclusion in clause (b) - that construction of a pipeline or conduit primarily for non-commercial, non-industrial purposes is not exigible to service tax - the Tribunal found that laying of pipelines for supply of drinking water to the Government undertaking is for non-commercial, non-industrial purposes. The Bench relied on the Larger Bench decision in Lanco Infratech Ltd. which concluded that construction/laying of pipelines for water supply or sewerage for Government entities is classifiable under clause (b) and excluded from levy, and on subsequent consistent decisions (including Progressive Constructions Ltd. and the Bench's own decision in Shriram EPC Ltd.). The Tribunal also considered the departmental contention that exemption applies only where contract is directly from Government and rejected the lower authorities' finding that the appellant was merely a sub-contractor, noting the contract document indicated the appellant was engaged by TWAD. On these grounds the demand, interest and penalties confirmed below were held unsustainable and set aside. [Paras 5, 6, 9]

Demand of service tax under Works Contract Service on the appellant's contracts for laying pipelines for TWAD for the specified period is set aside and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the impugned order confirming demand, interest and penalties, and held that laying of pipelines for the TWAD drinking water project falls within clause (b) of the WCS definition and is not exigible to service tax for the period in question; consequential reliefs to follow.

CENVAT credit reversal on opting for exemption - sub-rule (2) of Rule 11 of the Cenvat Credit Rules, 2004 - burden of proof for enhancement of input stock - limitation and extended period for demand - penalty under Section 11AC of the Central Excise Act, 1944 - bonafide mistake defence in transitional expungement

CENVAT credit reversal on opting for exemption - burden of proof for enhancement of input stock - Validity of demand for reversal of CENVAT credit attributable to inputs and inputs contained in finished goods as on 31.03.2007. - HELD THAT: - The Tribunal examined whether the Department established that input credit additional to the five admitted invoices remained unexpunged in the closing stock declared by the assessee on transition to SSI exemption. The assessee's balance sheet and CENVAT records showing closing input stock were on record and the assessee accepted liability arising from five post-15.03.2007 invoices. The adjudicating authorities enhanced the input stock beyond the admitted invoices but did not place any contemporaneous report or other evidence supporting that enhancement; a report from the Divisional Office was referred to in the order but not produced or relied upon in evidence. Absent supporting material or calculation, the Tribunal held that enhancement based on assumption and presumption is not sustainable. Consequently, only the quantification corresponding to the admitted five invoices is maintainable; the remainder of the demand for reversal was set aside for lack of evidence. [Paras 8, 9]

Demand for reversal sustained only to the extent of the credit attributable to the five admitted invoices (amount accepted by the assessee); the enhanced demand beyond that amount is set aside for lack of evidential foundation.

Limitation and extended period for demand - bonafide mistake defence in transitional expungement - penalty under Section 11AC of the Central Excise Act, 1944 - Whether the demand beyond the amount admitted by the assessee is barred by limitation and whether penalty under Section 11AC is sustainable. - HELD THAT: - The Tribunal accepted the assessee's explanation that omission to include the five invoices in the closing stock was a bonafide mistake and that those invoices were reflected in ER.1 returns and CENVAT registers; the assessee promptly accepted and paid the admitted liability when pointed out. Because no suppression with intent to evade duty was established in respect of amounts other than the admitted invoices, the extended period of limitation could not be invoked to sustain the excess demand. Further, in view of the finding of bonafide mistake and absence of intent to evade, imposition of penalty in respect of the admitted amount and the set-aside excess demand was not justified and therefore was cancelled. [Paras 10, 11]

Demand beyond the admitted amount is barred by limitation; penalty confirmed by lower authorities is set aside (penalty also set aside in respect of the admitted amount). Admitted liability upheld with interest.

Final Conclusion: Appeal partly allowed: the Tribunal upheld the demand (with interest) only to the extent of the liability admitted by the assessee arising from five invoices, and set aside the remaining demand, interest and penalties for lack of evidence and on limitation/bonafide mistake grounds.

Summary order. Special Leave Petitions dismissed; pending applications disposed of.

Issuance of Form C under the Central Sales Tax Act, 1956 - interplay between CST regime and GST for Extra Neutral Alcohol (ENA) - administrative direction to keep web portal open and accept manual filings - interim application of State/central tax regime pending legislative amendment

Issuance of Form C under the Central Sales Tax Act, 1956 - interplay between CST regime and GST for Extra Neutral Alcohol (ENA) - Petitioner entitled to have Form 'C' issued for purchases of ENA from 01.07.2017 to till date and respondents directed to enable reporting of such purchases - HELD THAT: - The Court noted that until a final legal/legislative determination is made, the position followed by States and suppliers has been to treat ENA transactions under the CST regime. The GST Council, by its 52nd Meeting on 07.10.2023, recommended keeping ENA used for manufacture of alcoholic liquor for human consumption outside the purview of GST and that the Law Committee will examine a suitable amendment. In light of that decision and the absence of a contrary binding legal change, the Court held it appropriate to require the State respondents to permit issuance of Form 'C' for ENA purchases effected from 01.07.2017 onwards, thereby allowing the petitioner to furnish declarations to selling dealers as required under the CST framework until the contemplated legal amendment is completed. [Paras 6, 8]

Respondents directed to issue Form 'C' for ENA purchases from 01.07.2017 to till date and to keep the web portal open to enable uploading of such purchases

Administrative direction to keep web portal open and accept manual filings - interim application of State/central tax regime pending legislative amendment - Respondents directed to re-open the commodity code on the portal for ENA and, if portal remains closed, to accept manual applications and issue Form 'C' accordingly - HELD THAT: - To give effect to the entitlement to Form 'C' and to remove the practical impediment caused by blocking of the ENA code on the departmental web portal, the Court directed the respondents to reopen the portal for the ENA commodity so that purchases can be uploaded with Form 'C'. The Court further provided an administrative fallback: if the portal is not opened, the petitioner may submit relevant forms manually and the respondents must consider them and issue Form 'C'. This relief is granted administratively to operate until the Law Committee effects the recommended legal amendment following the GST Council decision. [Paras 8]

Web portal to be kept open for ENA commodity; alternatively, manual filings to be accepted and Form 'C' issued

Final Conclusion: Writ petition disposed by directing the respondents to permit issuance of Form 'C' for all ENA purchases from 01.07.2017 to till date and to keep the departmental web portal open (or accept manual filings) until the Law Committee implements the GST Council's recommendation to exclude ENA from GST.

Input tax credit under Section 11 of the KVAT Act - special rebate under Section 12 of the KVAT Act - exemption notification under Section 8(5) of the CST Act - third proviso to Section 11(3) of the KVAT Act limiting input tax credit where inter state sale is exempted - third proviso to Section 12(1) of the KVAT Act limiting special rebate where inter state sale is exempted - retrospective amendment/clarificatory notification enabling adjustment of CST paid

Input tax credit under Section 11 of the KVAT Act - special rebate under Section 12 of the KVAT Act - exemption notification under Section 8(5) of the CST Act - third proviso to Section 11(3) of the KVAT Act limiting input tax credit where inter state sale is exempted - third proviso to Section 12(1) of the KVAT Act limiting special rebate where inter state sale is exempted - Entitlement to input tax credit or special rebate where inter state sales of rubber were covered by State exemption notifications despite the dealer having paid CST on those sales. - HELD THAT: - The Court held that the exemption notifications issued under Section 8(5) of the CST Act (Annexures I and II) must be read in the statutory context of Sections 11 and 12 of the KVAT Act. The 3rd proviso to Section 11(3) and the 3rd proviso to Section 12(1) expressly restrict availment of input tax credit and special rebate where the inter state sale is exempted. Consequently, even if, viewed in isolation, the exemption notifications might appear optional, they operate to bring the prohibition in the provisos into effect for purposes of the KVAT Act. Therefore, so long as those notifications were in force and operative, dealers effecting inter state sales of rubber could not claim input tax credit or special rebate in respect of purchases within the State merely because they had chosen to pay CST under Section 8(1); the inter state sales had to be treated as exempt for the limited purpose of the provisos and the statutory restriction applied. [Paras 7]

The petitioners were not entitled to avail input tax credit or special rebate for the periods when the exemption notifications were in force; the questions of law on this point are answered against the assessees and in favour of the Revenue.

Retrospective amendment/clarificatory notification enabling adjustment of CST paid - exemption notification under Section 8(5) of the CST Act - Effect of the 2019 clarificatory/retrospective notification permitting adjustment of CST paid by dealers who had paid tax despite the earlier exemption notifications. - HELD THAT: - The Court noted that the Appellate Tribunal had granted dealers the limited relief of permitting adjustment of CST amounts paid during the assessment years against demands raised due to disallowance of input tax credit/special rebate, based on a 2019 notification clarifying that the earlier exemption notification would be optional retrospectively for those who continued to pay under Section 8(1). The High Court found no error in that limited relief: while the exemption notifications operated to trigger the provisos for entitlement to input tax credit/rebate during their operation, the retrospective amendment/clarificatory notification enabled those who had in fact paid CST to seek adjustment of such payments towards the demands arising from disallowance. The Tribunal's grant of that limited relief therefore did not call for interference. [Paras 4, 7]

The Appellate Tribunal's allowance to adjust CST paid pursuant to the 2019 clarification is sustainable and need not be set aside.

Final Conclusion: The O.T. Revisions are dismissed. The questions of law are answered against the assessees and in favour of the Revenue; the Tribunal's limited relief permitting adjustment of CST paid pursuant to the 2019 clarificatory notification is upheld.

Condonation of delay under Section 5 of the Limitation Act - sufficient cause - discretionary power of courts - liberal and justice-oriented approach - governmental impersonal machinery and bureaucratic delay - interference by appellate court with discretion

Condonation of delay under Section 5 of the Limitation Act - sufficient cause - governmental impersonal machinery and bureaucratic delay - liberal and justice-oriented approach - interference by appellate court with discretion - Whether the High Court was justified in condoning the delay of 479 days in presenting the appeal by the first respondent under Section 5 of the Limitation Act. - HELD THAT: - The Court examined the exercise of discretion by the High Court in condoning the delay and applied established principles that (i) the expression 'sufficient cause' must receive a liberal construction to advance substantial justice, (ii) the sufficiency and acceptability of the explanation - not merely the length of delay - determine the exercise of discretion, and (iii) the impersonal and procedural nature of governmental functioning may, within reasonable limits, be a relevant consideration. The Bench observed that while some recent decisions have declined to accept governmental lethargy as sufficient cause, the order under challenge must be tested against the then-prevailing precedents which endorsed a pragmatic and justice-oriented approach. The High Court had set out reasons - including preference for substantial justice over technicality, acceptance of explained (as opposed to inordinate unexplained) delay, and the view that negligence did not amount to callousness - and the Supreme Court found that those reasons did not amount to an arbitrary or clearly wrong exercise of discretion. It was further noted that an appellate court should not ordinarily interfere with a discretionary order unless it is clearly wrong; having regard to the material before the High Court and the line of authoritative decisions recognising limited latitude for governmental delay, the condonation was held to be within permissible judicial discretion. [Paras 30, 31, 32, 37, 38]

The High Court did not commit any error in condoning the delay; its exercise of discretion in allowing the application under Section 5 was not vitiated and is upheld.

Final Conclusion: The appeal is dismissed. The High Court's order condoning the delay in filing the appeal by the first respondent is upheld as a proper exercise of discretion; parties shall bear their own costs.

Applicability of Section 37 of the NDPS Act - Controlled substance versus psychotropic substance distinction - Requirement of chemical analysis to prove a seized substance as psychotropic/narcotic - Offence under Section 25A (allowing premises to be used) of the NDPS Act - Bail under Section 439 CrPC in NDPS cases

Applicability of Section 37 of the NDPS Act - Controlled substance versus psychotropic substance distinction - Whether the rigours of Section 37 of the NDPS Act apply to the applicant in respect of recoveries of Pseudoephedrine. - HELD THAT: - The Court held that Pseudoephedrine is a 'controlled substance' and not a 'narcotic drug' or 'psychotropic substance' for the purposes of the NDPS Act; therefore the bar in Section 37 does not apply to cases where only controlled substances are involved. The decision relied on precedents of Coordinate Benches of this Court granting bail in cases of large recoveries of controlled substances and concluded that allegations under Section 25A (controlling/regulated substances) are not caught by Section 37. Having regard to the nature of the substance recovered (Pseudoephedrine) and the settled position in the cited decisions, Section 37 was held inapplicable to the applicant insofar as the Pseudoephedrine recoveries are concerned. [Paras 22, 32]

Section 37 of the NDPS Act does not apply to the applicant in respect of the recoveries of Pseudoephedrine; thus the statutory bar in Section 37 is not attracted.

Requirement of chemical analysis to prove a seized substance as psychotropic/narcotic - Applicability of Section 37 of the NDPS Act - Whether the rigours of Section 37 apply to the applicant in respect of alleged recoveries/supply of Ketamine Hydrochloride (a psychotropic substance) absent chemical analysis linking the recovered items to the psychotropic substance. - HELD THAT: - The Court observed that proof that a substance falls within the category of 'narcotic drug' or 'psychotropic substance' lies upon the prosecution and is discharged by chemical analysis of representative samples taken from the alleged recoveries. In the present matter, although invoices and business records referred to injections allegedly containing Ketamine Hydrochloride, there was no chemical analysis to establish that any seized material attributable to the applicant was indeed Ketamine. The recovery of Ketamine was from another firm's premises (M/s. G.T. Biopharma) and the prosecution did not demonstrate that the applicant ran that concern. Consequently, mere invoices and entries, without chemical analysis of seized material, cannot ground the application of Section 37 or sustain prosecution against the applicant for the psychotropic substance allegation. [Paras 23, 25, 26]

In absence of chemical analysis tying seized material to Ketamine Hydrochloride, the rigours of Section 37 cannot be invoked against the applicant on the psychotropic-substance allegation; the invoices alone do not suffice to fasten that charge on the applicant.

Bail under Section 439 CrPC in NDPS cases - Offence under Section 25A (allowing premises to be used) of the NDPS Act - Whether the applicant is entitled to regular bail and on what conditions, having regard to the charges framed under Sections 22, 25A and 29 of the NDPS Act and the period of custody. - HELD THAT: - The Court took into account that the applicant has been in custody for a prolonged period (custody particulars recorded), that many co-accused have been granted bail, and that Section 37 does not operate in respect of the Pseudoephedrine recoveries. The Court noted medical grounds and prior interim bails, absence of previous NDPS involvement, and that the prosecution's case on psychotropic substance could not be sustained against the applicant without chemical analysis. Balancing these factors and the nature of the offences under Section 25A (punishable with imprisonment up to ten years), the Court exercised discretion under Section 439 CrPC and admitted the applicant to bail subject to stringent conditions designed to ensure presence and prevent tampering with evidence or witness influence. The conditions include personal bond and sureties, reporting to the DRI twice weekly, provision and operation of mobile numbers, location sharing, prohibition on leaving India without court permission, and standard non-tampering and cancellation provisos. [Paras 30, 31, 32, 33]

The applicant is admitted to bail on furnishing a personal bond and two sureties and subject to specified conditions, including regular reporting to DRI, operational contact details and location sharing, and prohibitions on leaving India or tampering with evidence.

Final Conclusion: The petition for regular bail is allowed: Section 37 NDPS bar is not attracted to the Pseudoephedrine recoveries, the psychotropic-substance allegation against the applicant cannot be sustained without chemical analysis, and accordingly the applicant is released on bail subject to specified monetary bonds and supervisory and restrictive conditions.