TaxTMI Updates e-Newsletter
Nov 27,2019

Place of supply - export of services - pure agent - value of supply - advance ruling under Section 97

Place of supply - export of services - advance ruling under Section 97 - Authority's power to rule on whether the services provided to foreign affiliates constitute export by determining the place of supply - HELD THAT: - The Authority examined whether the project management/co-ordination services supplied by the applicant to its foreign affiliates amount to export of services, which requires determination of the place of supply. While the factual matrix shows services are supplied to a recipient located outside India and that the services relate to goods (drugs) physically made available to investigators, the Authority held that Section 97(2) empowers it to give a ruling on time and value of supply but does not empower it to decide the place of supply of goods or services. Consequently the Authority declined to answer whether the activity qualifies as export because it lacks jurisdiction to rule on place of supply under the Advance Ruling provisions relied upon by the applicant. [Paras 16, 17]

The question whether the services amount to export cannot be answered by this Authority as it is not empowered under Section 97 to rule on the place of supply.

Pure agent - value of supply - Rule 33 of CGST Rules - Whether the pass-through reimbursements recovered by the applicant from foreign affiliates qualify to be excluded from the value of supply as expenditure incurred by a pure agent - HELD THAT: - The Authority examined the applicant's contracts and the manner in which amounts reimbursed to investigators and institutions are handled. Applying the Explanation to Rule 33 and the conditions in Rule 33 of the CGST Rules, the Authority found that the applicant acts as a representative or pure agent of the sponsor/recipient: payments to third parties are made on authorization of the recipient, such amounts are separately indicated, the applicant neither intends to hold nor holds title to the goods or services procured, does not use them for its own interest and receives only the actual amounts incurred in addition to the consideration for services rendered. On this basis the Authority concluded that the pass-through expenses satisfy the conditions of Rule 33 and thus those expenditures may be excluded from the value of the applicant's supply. The Authority clarified that this ruling does not determine the nature of supply made by investigators/institutions to the sponsor. [Paras 15]

The pass-through expenses qualify as expenditures incurred by a pure agent and are excluded from the value of supply for the applicant, subject to the conditions of Rule 33 being met.

Final Conclusion: The Authority declined to rule on whether the services supplied to foreign affiliates constitute export because it is not empowered under Section 97 to decide the place of supply; separately, it held that the pass-through reimbursements meet the conditions of a "pure agent" under Rule 33 and may be excluded from the value of the applicant's supply.

Works Contract - immovable property - transfer of property in goods - composite supply - definition of Works Contract under Section 2(119) of the CGST Act, 2017 - rate of tax on composite supply of works contract (Notification 11/2017 - Central Tax (Rate))

Works Contract - immovable property - transfer of property in goods - definition of Works Contract under Section 2(119) of the CGST Act, 2017 - The proposed activity of setting-up of data centre facilities qualifies as a 'works contract' under the definition in Section 2(119) of the CGST Act, 2017 and the corresponding provision in the Karnataka GST Act. - HELD THAT: - The Authority examined the scope of the applicant's Scope of Work (civil, mechanical, electrical, building management systems and obtaining statutory approvals) and held that the contracts envisaged are indivisible and require both supply of goods and provision of services to deliver a fully equipped, operational data centre. The defining elements of a works contract - activities such as erection, fitting out, renovation and commissioning carried out in relation to an immovable property together with transfer of property in goods - are present. The works involve substantial refurbishment and fixtures that impart permanence to the building and cannot be removed without substantial damage; on that basis the activities are in relation to immovable property and satisfy the statutory definition. The Authority rejected the contention that the definition of works contract extends beyond immovable property to plant and machinery on the basis of Section 17(5)(c), observing that the statutory definition in Section 2(119) is clear and confined to immovable property and that plant and machinery, though secured to foundations, do not acquire the same degree of permanence as a building. Consequently the proposed activities fall within the first limb of the works contract definition and constitute an indivisible composite involving transfer of goods and services. [Paras 9]

The activities for setting up the data centre qualify as a works contract under Section 2(119) of the CGST Act, 2017.

Composite supply - rate of tax on composite supply of works contract (Notification 11/2017 - Central Tax (Rate)) - The GST rate applicable on the proposed works contract for setting up data centre facilities. - HELD THAT: - Having concluded that the proposed activity constitutes a works contract, the Authority applied the rate schedule in Notification 11/2017 - Central Tax (Rate) dated 28 June 2017. The Notification treats composite supply of works contract (as defined in clause 119 of Section 2 of the CGST Act, 2017) as taxable at the rate specified therein. On that basis the Authority held that the applicable rate is the tax rate specified for composite works contract supplies under the Notification. [Paras 10]

The works contract is taxable at the rate prescribed for composite supply of works contract under Notification 11/2017 - Central Tax (Rate).

Final Conclusion: The Authority ruled that the applicant's proposed activity of setting up data centre facilities is a works contract under the CGST/KGST Acts and that the supply is taxable as a composite works contract at the rate specified in Notification 11/2017 - Central Tax (Rate) (charged as 9% CGST and 9% SGST).

Validity of notification appointing Central Tax Officers as Government notification published in the official gazette - assignment of functions to Proper Officer by administrative circular - appointment and powers of Proper Officer under the CGST scheme - requirement of gazette publication for exercise of appointment power - investigatory jurisdiction of intelligence officers as Proper Officers for multi State GST fraud inquiries

Validity of notification appointing Central Tax Officers as Government notification published in the official gazette - requirement of gazette publication for exercise of appointment power - Validity and competence of Annexure P-2 notification which appointed officers as Central Tax Officers - HELD THAT: - The Court examined whether the appointment underlying Annexure P-2 was made by the competent authority and whether it satisfied the statutory requirement of publication in the official gazette. A corrigendum published on 29.07.2019 corrected an inadvertent misdescription in the original notifications, clarifying that the notifications were issued by the Government and were published in the Gazette. On this basis the Court held that the appointment of the officers as Central Tax Officers was effected by the Government in conformity with the statutory mandate and the requirement of gazette publication was satisfied. The Court therefore rejected the Petitioners' challenge that the Board, and not the Government, had issued the appointment and that the notification was invalid. [Paras 21, 24]

Annexure P-2 notification is valid as having been issued by the Government and published in the official gazette; the challenge to its competence fails.

Assignment of functions to Proper Officer by administrative circular - appointment and powers of Proper Officer under the CGST scheme - Validity of Annexure P-1 circular assigning functions of 'Proper Officer' to the officers appointed by the notification - HELD THAT: - The Court considered whether functions assigned by Annexure P-1 could be validly conferred on the officers identified in the notification. Given the finding that the officers were validly appointed by a Government notification (as clarified by the corrigendum), the administrative circular assigning the specified functions to those officers was held to be intra vires and effective for the stated investigatory purposes. The Court observed that the assignment of functions to the notified officers followed from and was supported by the Government notification and the statutory scheme. [Paras 24]

Annexure P-1 circular is validly operative in assigning the functions of 'Proper Officer' to the notified officers; the challenge fails.

Investigatory jurisdiction of intelligence officers as Proper Officers for multi State GST fraud inquiries - appointment and powers of Proper Officer under the CGST scheme - Legitimacy of multiple Proper Officers and the contention of 'One Assessee, One Officer' leading to harassment - HELD THAT: - The Court addressed the contention that appointment of multiple officers nationwide would breach the scheme of a single assessing officer and cause harassment. It distinguished investigatory functions undertaken by the Directorate General (intelligence officers) from assessment proceedings conducted by the assessing authority at the place of registration. The Court accepted the State's rationale that intelligence officers need investigatory reach across States to detect and investigate multi State fraudulent networks and that such investigatory summonses are not the same as assessment proceedings. There was no finding of multiple officers issuing summons in respect of the same assessment proceeding; accordingly the alleged multiplicity did not render the notifications or circular arbitrary or violative of equality. [Paras 19, 24, 25]

Challenge based on multiplicity of officers and the 'One Assessee, One Officer' contention is rejected; investigatory powers conferred on intelligence officers are legitimate and do not amount to unlawful harassment.

Final Conclusion: The Court upheld the corrigendum and the impugned notification and circular as validly issued and operative; the writ petitions challenging Annexure P-1 and Annexure P-2 are dismissed for lack of merit.

Principal business - Explanation to Section 73 - speculation business / speculation loss - deeming provision - fund deployment criterion - set-off of business loss - non-banking financial company

Principal business - Explanation to Section 73 - fund deployment criterion - speculation business / speculation loss - set-off of business loss - non-banking financial company - Whether the principal business of the assessee for AY 2004-05 was granting loans and advances so as to bring the assessee within the exception to the Explanation to Section 73 and thereby treat the loss from share dealing as business loss and allowable for set-off. - HELD THAT: - The Tribunal, following the remit of the High Court, examined the nature of activities and the factual matrix rather than confining the inquiry to the numerical computation of incomes. The assessee was a registered non-banking financial company and one of its main objects was granting loans and advances. The Tribunal held that the decisive inquiry on what constitutes the principal business depends on facts and circumstances and may include memorandum of association, past history, deployment of capital, turnover and income over relevant years. The AO erred by comparing loans & advances with aggregate shares held as investments; the correct comparison for determining principal business is between funds deployed in the business of share dealing (stock-in-trade) and funds deployed in loans & advances. On the facts, funds deployed in loans & advances (both in the relevant year and on a comparative multi-year basis), turnover of lending activity and interest income exceeded the funds, turnover and results of share trading. Applying the fund deployment, turnover and income criteria and having regard to the assessee's objects and historical pattern, the Tribunal concluded that the principal or dominant business was granting of loans & advances. As a result, the assessee was excluded from the mischief of the Explanation (a deeming provision) and the loss from share dealing could not be treated as a deemed speculation loss; it was assessable as business loss and available for set-off. [Paras 11, 12, 13, 14]

Principal business was granting loans and advances; assessee falls outside the Explanation to Section 73 and the share trading loss is a business loss allowable for set-off.

Final Conclusion: Appeal allowed: on the facts for AY 2004-05 the Tribunal held that the assessee's principal business was granting loans and advances and accordingly the loss from share dealing is business loss and may be set off; the assessment order disallowing set-off is reversed.

Genuineness of expenditure - deduction under section 37(1) of the Income Tax Act - payments by cheque not conclusive proof of genuineness - appreciation of evidence and documentary credibility - fabrication/afterthought documents to create fictitious expenditure - prohibition on double taxation / same income taxed twice - Both additions disallowing the alleged settlement/compensation payments (Rs. 6,00,60,000 to BRACT and Rs. 4.07 crores to Paramount and others) were upheld on concurrent findings of non-genuineness, fabricated/afterthought documents and lack of credible corroboration; no question of law was found and the appeal is dismissed by HC [2019 (4) TMI 1178 - BOMBAY HIGH COURT] - HELD THAT:- SLP Dismissed.

Scope of a revisional order passed under Section 263 - jurisdiction of the AO on remand pursuant to a Section 263 order - addition of receipts beyond the matters specified in a revisional direction - treatment of entrance fees as capital or revenue receipt - disallowance of annual subscription challenged as beyond revisional scope - direction to initiate penalty proceedings under Explanation 1 to Section 271(1)(c) and Section 271(1)(b)

As decided by HC [2019 (2) TMI 241 - BOMBAY HIGH COURT] AO exceeded the scope of the Commissioner's revisional direction under Section 263 by making additions in respect of entrance fees and annual subscription which were not specified for fresh inquiry; therefore those additions could not be sustained and adjudication on the merits of classification was unnecessary, resulting in dismissal of the Revenue appeals.

HELD THAT:- Special leave petition is dismissed on the ground of low tax effect.

Registration u/s 12AA - Genuineness of activities - Corpus created from donations - Assets created for charitable objects - Application of income to charitable purposes vis-a -vis grant of registration - Non-filing of income-tax returns as ground for denial of registration

The Tribunal's order directing grant of registration was upheld; no substantial question of law arose and the revenue's appeal is dismissed, with the registration to be granted from the date of application as directed by the Tribunal as held by HC [2018 (12) TMI 125 - PUNJAB AND HARYANA HIGH COURT]

HELD THAT:- SLP dismissed.

Penalty u/s 271(1)(c) - whether the Assessee is guilty of concealment of income, which is deliberate? - Additional income declared by the assessee by filing revised return consequent to notices u/s.143(2) and 142(1) - factual matrix - 'substantial question of law' -

HELD THAT:- SLP dismissed.

Discrimination in tax exemption under Section 10(10AA) - Classification of Central Government and State Government employees as a distinct class - Status of employees of Public Sector Undertakings and nationalised banks vis-a -vis government servants - Judicial scrutiny of notification fixing exemption limit under clause (ii) of Section 10(10AA)

Discrimination in tax exemption under Section 10(10AA) - Classification of Central Government and State Government employees as a distinct class - Validity of challenge to Section 10(10AA) as discriminatory for treating Central/State Government employees differently from other employees including those of PSUs and nationalised banks. - HELD THAT: - The Court found no merit in the petitioners' challenge to Section 10(10AA) on the ground of discrimination. It held that employees of the Central and State Governments constitute a distinct class, and the classification has a reasonable nexus with the object sought to be achieved since government servants occupy a different legal status and are governed by different terms and conditions of service. The Court relied on the established principle that the legal position of a government servant is more one of status than of contract and that government employees enjoy statutory protection and privileges not available to non-government employees. Consequently, differential treatment in the statute is not arbitrary or unconstitutional. [Paras 5]

Petitioners' challenge to Section 10(10AA) as violative of equality/differential treatment was rejected.

Status of employees of Public Sector Undertakings and nationalised banks vis-a -vis government servants - Article 12 and its effect on employee status - Whether employees of Public Sector Undertakings and nationalised banks acquire the status of Central/State Government employees by reason of such entities being 'State' under Article 12. - HELD THAT: - The Court rejected the submission that employees of PSUs and nationalised banks assume the status of Central/State Government employees merely because those entities may be subject to Article 12 for certain purposes. Relying on precedent, the Court observed that identification of a government company with the Union does not follow merely from government ownership and that employees of government companies are not civil servants entitled to constitutional protections reserved for government servants. The Court noted authorities holding that employees of government companies/PSUs cannot claim identical legal rights as government employees. [Paras 6, 7]

Employees of PSUs and nationalised banks do not, by virtue of Article 12 classification of their employers, acquire the status of Central/State Government employees for the purposes of exemption under Section 10(10AA).

Judicial scrutiny of notification fixing exemption limit under clause (ii) of Section 10(10AA) - Whether the exemption limit specified by the notification under clause (ii) of Section 10(10AA) requires reconsideration given that the last notification dates from 2002. - HELD THAT: - The Court expressed a prima facie view that the grievance regarding the exemption limit having remained unchanged since the 2002 notification appears justified in light of upward revisions of pay-scales and inflation over the intervening period. The Court did not decide the substantive correctness of the limit but issued notice to the respondents limited to this aspect and directed filing of counter-affidavits for consideration on the next date. [Paras 8]

Notice issued to respondents limited to reconsideration of the exemption limit under clause (ii) of Section 10(10AA); matter listed for further adjudication.

Final Conclusion: The petitioners' constitutional challenge to Section 10(10AA) and the contention that PSU employees are equivalent to government servants was dismissed; however, the Court granted limited relief by issuing notice and directing consideration of the contention that the exemption limit fixed by the 2002 notification under clause (ii) of Section 10(10AA) warrants reconsideration.

Deemed dividend under Section 2(22)(e) - binding effect of CBDT circulars issued under Section 119 - trade advances / commercial transactions exclusion from deemed dividend - taxability of dividend in hands of recipient under Section 10(34) read with Section 115 O / explanation to Section 115 Q - application of Section 2(22)(e) where more than one specified shareholder exists - validity of assessments under Section 153A read with Section 153C in absence of incriminating material

Maintainability of writ under Article 226 against Settlement Commission order - Maintainability of challenge under Article 226 to the Settlement Commission's order dated 14.09.2015. - HELD THAT: - The Court examined authorities which restrict interference with Settlement Commission orders to cases where the order is contrary to the provisions of the Act or the decision-making process is flawed. The petitioner challenged the Commission's order as being contrary to statutory provisions (not a piecemeal acceptance of part of the order), and the Court held that where the challenge alleges that the Commission's order is not in accordance with the Act, interference under Article 226 is maintainable. The Court rejected the Department's contention that a piecemeal challenge rendered the petition infirm on maintainability grounds.

Writ petition challenging the Settlement Commission order is maintainable under Article 226.

Binding effect of CBDT circulars issued under Section 119 - trade advances / commercial transactions exclusion from deemed dividend - Whether CBDT Circular No.19/2017 and Circular No.495/1987 are binding and whether Circular No.19/2017 benefits the petitioner. - HELD THAT: - The Court reviewed Supreme Court and High Court precedents on the scope and binding character of CBDT circulars issued under Section 119. It noted that such circulars, when issued to ensure uniform and proper administration or to mitigate rigour of the law, are binding on revenue authorities. Circular No.19/2017 records settled judicial views that trade advances in the nature of commercial transactions do not attract Section 2(22)(e), and Circular No.495/1987 addresses taxation of advances to concerns having common shareholders. The Court found that the petitioner had specifically pleaded and placed evidence before the Settlement Commission that the inter corporate advances were in the ordinary course of business and constituted commercial transactions; the Commission did not dispute that factual position apart from recording that lending was not a substantial part of RSPL's business. On the material before it, the Court held the petitioner entitled to the benefit of the CBDT circular directing that normal commercial trade advances would not be treated as deemed dividend.

CBDT circulars are binding on the Department and Circular No.19/2017 applies to exclude bona fide commercial inter company advances from Section 2(22)(e) for the petitioner.

Taxability of dividend in hands of recipient under Section 10(34) read with Section 115 O / explanation to Section 115 Q - Whether dividend (including deemed dividend) is taxable in the hands of the recipient, specifically the applicability of Section 10(34) read with Chapter XII D (Section 115 O / explanation to Section 115 Q). - HELD THAT: - The Court examined the legislative scheme in Section 10(34), Section 115 O and the then existing explanation to Section 115 Q which ties the definition of 'dividend' for Chapter XII D to clause (22) of Section 2 but excluded sub clause (e). The Court reasoned that dividends referred to in Section 115 O (and, by reference, those encompassed by the Chapter) are exempt in the hands of the recipient by Section 10(34). Having found the CBDT circulars binding and noting the statutory interplay, the Court held that the Settlement Commission's treatment taxing the petitioner by treating the alleged advances as deemed dividend ran contrary to Section 10(34) read with Chapter XII D and the relevant explanation, and therefore was not in accordance with the Act.

Dividend (as referred to in Section 115 O) is exempt in the hands of the recipient under Section 10(34); the Settlement Commission's contrary finding on taxability is contrary to the Act.

Application of Section 2(22)(e) where more than one specified shareholder exists - Whether Section 2(22)(e) can be applied for assessment years in which more than one specified shareholder (holding substantial interest) exists, given the statutory computation scheme. - HELD THAT: - The Court observed that Section 2(22)(e) operates by deeming a payment by a closely held company to a specified shareholder to be dividend and that the charging provision is accompanied by a statutory scheme of computation. Where more than one specified shareholder exists, the provision does not provide a mechanism to divide or apportion the deemed dividend among multiple specified shareholders, producing a failure of the computation mechanism. The Court noted that the Revenue ultimately sought to tax the same amount in the hands of another shareholder by reassessment, which would lead to double taxation. On this basis the Court held that for assessment years where multiple specified shareholders existed, Section 2(22)(e) could not be properly applied because the computation scheme could not be effectuated.

Section 2(22)(e) cannot be applied for assessment years where more than one specified shareholder exists so as to make the charging/computation scheme inapplicable for those years.

Validity of assessments under Section 153A read with Section 153C in absence of incriminating material - Whether assessments under Section 153A read with Section 153C are valid where no incriminating material relating to the alleged addition (deemed dividend) was found in the search. - HELD THAT: - The petitioner had specifically contended before the Settlement Commission that no incriminating material relevant to deemed dividend was unearthed during the search under Section 132; the Commission recorded the submission but did not address it. The Court referred to precedents holding that the power under Section 153A should not be routinely exercised in the absence of incriminating material discovered in the search and that assessment jurisdiction under Section 153A is limited to what is found during the search. Because the Settlement Commission failed to consider this plea and the absence of incriminating material was not adjudicated, the Court held the proceedings under Section 153A/153C with respect to the deemed dividend issue to be invalid.

Proceedings and additions made under Section 153A read with Section 153C in relation to the deemed dividend are invalid where no incriminating material was found and the Commission failed to adjudicate that contention.

Final Conclusion: The Settlement Commission's order of 14.09.2015 insofar as it assessed the petitioner for deemed dividend for assessment years 2009-2010 to 2013-2014 is quashed. The Court held the writ challenge maintainable, accepted the binding effect of the CBDT circulars excluding bona fide commercial inter company advances from Section 2(22)(e), concluded that dividend falling within Chapter XII D is exempt in the hands of the recipient under Section 10(34), found Section 2(22)(e) inapplicable where multiple specified shareholders prevent statutory computation, and held the Section 153A/153C proceedings invalid insofar as no incriminating material was found; the petitioner is entitled to claim any tax refund arising therefrom.

Genuineness of unsecured loans - burden of proof on assessee to establish identity, creditworthiness and genuineness - duty of Assessing Officer to verify creditors by summons and oral examination - addition based on conjectures and surmises is impermissible - preponderance of probabilities cannot substitute for affirmative enquiry and evidence

Genuineness of unsecured loans - burden of proof on assessee to establish identity, creditworthiness and genuineness - preponderance of probabilities cannot substitute for affirmative enquiry and evidence - Deletion of addition made by the Assessing Officer of the amounts treated as unexplained loans - HELD THAT: - The Tribunal found that the assessee produced loan confirmations and details of creditors and that the Commissioner (Appeals) examined the Assessing Officer's remand report before deleting the addition. The Assessing Officer rejected the confirmations primarily on the ground that the creditors were small-time agriculturists, labourers and vendors and therefore lacked creditworthiness, and on the basis that transactions ought to have been routed through banking channels. The Tribunal held that such conclusions based on assumptions and suspicion do not displace the confirmations produced by the assessee. Where the assessee furnishes documentary confirmations and particulars identifying creditors and the Assessing Officer harbours doubts, the correct course is to summon and examine the creditors to test veracity; absent such enquiries the Assessing Officer cannot rely on mere conjectures and probabilities to make the addition. Applying these principles to the material on record - including repayment particulars in respect of a large number of creditors and the remand report which recorded appearances and statements - the Tribunal concluded that the assessee discharged the burden of proving identity, creditworthiness and genuineness of the unsecured loans and that the addition could not be sustained on the basis of surmises. [Paras 5, 10]

Addition of the unsecured loans was deleted; the Assessing Officer's addition based on conjecture and absence of summons/examination was not sustained.

Duty of Assessing Officer to verify creditors by summons and oral examination - addition based on conjectures and surmises is impermissible - Whether the Assessing Officer erred in not issuing summons or examining creditors before rejecting loan confirmations - HELD THAT: - The Tribunal expressly held that if the Assessing Officer suspected the genuineness of the confirmations, he had to proceed to summon and examine the creditors to elicit the truth. The Assessing Officer's failure to make such enquiries, while relying upon stereotyped observations about the socio-economic status of creditors and on a presumption that transactions should have been banker-mediated, rendered the addition vulnerable. The Tribunal endorsed the Commissioner (Appeals) view that the Assessing Officer could not disregard results of his own enquiry and that absence of cogent defects in the confirmations meant the assessee had met his basic obligation of proof. [Paras 10]

Assessing Officer's failure to summon and examine creditors was a material lapse; the addition premised on such failure was rightly deleted.

Preponderance of probabilities cannot substitute for affirmative enquiry and evidence - Whether reliance on preponderance of probability by the Assessing Officer justified sustaining the addition - HELD THAT: - The Tribunal rejected the Assessing Officer's reliance on preponderance and probabilities in the absence of affirmative enquiries. It observed that mere probabilities or assumptions about the mode of transactions or the socio-economic status of creditors cannot alone justify additions where contemporaneous confirmations and supporting details have been produced and where repayment entries were recorded. The Tribunal agreed with the Commissioner (Appeals) that additions founded on such preponderance are not sustainable. [Paras 5, 10]

Addition based solely on preponderance of probabilities was untenable and was accordingly deleted.

Final Conclusion: The Tribunal upheld the Commissioner (Appeals) order deleting the addition of the unsecured loans in Assessment Year 2011-12, holding that the assessee had discharged the burden of proof by producing confirmations and particulars and that the Assessing Officer could not sustain the addition on conjecture without summoning and examining the creditors; the Revenue appeal was dismissed and the assessee's cross-objection was dismissed as time-barred.

Amalgamating company ceases to exist upon sanctioned scheme of amalgamation - nullity of proceedings and orders passed against a non existent juristic person - requirement to substitute successor and give opportunity of hearing before exercise of revisional jurisdiction - curability of clerical error under Section 292B - distinction between substantive illegality and procedural defect

Amalgamating company ceases to exist upon sanctioned scheme of amalgamation - nullity of proceedings and orders passed against a non existent juristic person - requirement to substitute successor and give opportunity of hearing before exercise of revisional jurisdiction - distinction between substantive illegality and procedural defect - Validity of orders passed under section 263 of the Income tax Act in the name of companies which had ceased to exist pursuant to NCLT sanctioned schemes of amalgamation - HELD THAT: - The Tribunal found that each assessee had been amalgamated by an NCLT order with effect from 01.04.2017 and thus had ceased to exist before the Principal Commissioner of Income tax issued the impugned show cause notices and passed the revisional orders dated March 2019. Relying on the principle that an amalgamating company, once dissolved under an approved scheme, ceases to be a juristic person, the Tribunal held that proceedings and orders made in the name of such non existent entities constitute substantive illegality and are void. The Tribunal distinguished authorities dealing with clerical mistakes curable under Section 292B on their facts (conversion cases or where successor was plainly identifiable in the proceedings) and followed the reasoning in Spice Infotainment Ltd. as affirmed and applied by the Supreme Court in PCIT v. Maruti Suzuki India Ltd., where initiation or completion of assessment in the name of a ceased entity was held to be a nullity. The Tribunal further observed that, having been informed of the amalgamations, the Revenue ought to have substituted the successor companies and afforded them opportunity of hearing before exercising revisional jurisdiction; failure to do so rendered the revisional orders vulnerable for want of proper party substitution and for violating principles of natural justice. [Paras 3, 17, 24]

Impugned revisional orders under section 263 passed in the name of the amalgamating companies which had ceased to exist were void and are quashed.

Final Conclusion: All appeals are allowed and the revisional orders passed under section 263 in the name of the amalgamating (ceased) companies for A.Y. 2012 13 are quashed.

Allowability of depreciation on goodwill as an intangible asset constituting "business or commercial rights" under Explanation 3 to section 32(1) - classification of excess consideration in composite slump sale agreements as goodwill and supporting non compete rights - depreciation on amounts attributable to non compete clauses when they form part of a composite business acquisition - applicability of Explanation 5 to section 32(1) permitting allowance of depreciation even if not claimed in the original return - role of valuation of acquired assets (book value vs fair market value) in establishing existence of purchased goodwill

Allowability of depreciation on goodwill as an intangible asset constituting "business or commercial rights" under Explanation 3 to section 32(1) - role of valuation of acquired assets (book value vs fair market value) in establishing existence of purchased goodwill - Depreciation on goodwill arising from acquisition of distribution businesses by slump sale is allowable. - HELD THAT: - The Tribunal examined the slump sale agreements and found that the assessee acquired running distribution businesses as going concerns (customers, business contracts, business information, key employees, inventories, receivables and business movable assets) under composite lump sum consideration. The excess of purchase consideration over net tangible assets (book values incorporated in the acquirer's books) was held to represent intangible assets (goodwill/customer list and related business rights). The AO's objection-that the assessee had not ascribed fair market values to individual assets and had merely used book values so that no goodwill was proved-was rejected because no land/building (whose market value would notably distort book figures) was involved, the acquired tangible assets were movable items whose book values were not shown to be unreliable, and Revenue did not produce cogent material to rebut the assessee's valuation. Relying upon precedent treating customer lists and bundled business rights as falling within "business or commercial rights" under Explanation 3 to section 32(1), the Tribunal held that goodwill so arising is an intangible asset eligible for depreciation.

Allowed - depreciation on goodwill arising from the slump sale acquisitions is admissible for the specified assessment years.

Classification of excess consideration in composite slump sale agreements as goodwill and supporting non compete rights - depreciation on amounts attributable to non compete clauses when they form part of a composite business acquisition - Amounts in the lump sum consideration attributable to non compete obligations forming part of the composite business acquisition are treated as supportive commercial rights and are eligible for depreciation. - HELD THAT: - The Tribunal analysed the non compete clauses in the agreements and concluded they formed part of the composite contract for acquiring the business and operated as supporting clauses to strengthen the commercial rights transferred (continuity of business, protection of customer relations and contracts). The Tribunal distinguished authorities where non compete alone was held non depreciable, and followed decisions (including the Madras High Court's approach in Pentasoft and coordinate bench ITAT decisions) holding that where non compete is part of a composite acquisition supporting transferred intangible rights, the consideration attributable to it falls within Explanation 3 to section 32(1) and is amenable to depreciation.

Allowed - amounts attributable to non compete clauses forming part of the composite business acquisition are to be treated as intangible commercial rights eligible for depreciation.

Applicability of Explanation 5 to section 32(1) permitting allowance of depreciation even if not claimed in the original return - Depreciation claimed during assessment proceedings though not included in the original or revised return is allowable under Explanation 5 to section 32(1). - HELD THAT: - The Tribunal applied Explanation 5 to section 32(1), which declares that the provisions relating to depreciation shall apply whether or not the assessee has claimed the deduction in computing total income. On this basis, the Tribunal held that the assessee's claim for depreciation made during assessment proceedings (despite not being in the original or revised return) could be admitted and allowed. The Tribunal rejected the AO's contention that the claim was impermissible without a revised return.

Allowed - the claim for depreciation made during assessment proceedings is admissible under Explanation 5 to section 32(1).

Final Conclusion: The Tribunal dismissed the revenue appeals for AYs 2010-11 to 2012-13 and upheld the allowance of depreciation on the goodwill and related intangible rights (including non compete components forming part of the composite slump sale) acquired by the assessee; the depreciation claim made during assessment proceedings was held admissible under Explanation 5 to section 32(1).

Reasonable cause - penalty under section 271C - non-deduction of tax at source - exemption under section 10(5) for leave travel concession - Rule 2B - bona fide belief - admission of substantial question of law by the High Court

Penalty under section 271C - non-deduction of tax at source - reasonable cause - bona fide belief - exemption under section 10(5) for leave travel concession - Rule 2B - admission of substantial question of law by the High Court - Sustainability of penalty under section 271C for non-deduction of TDS on leave travel concession where the assessee acted on a bona fide belief and has paid the liability - HELD THAT: - The Tribunal found that the assessee-bank failed to deduct TDS on LTC reimbursements discovered during survey but had explained the position in penalty proceedings, acted on a bona fide belief, and had accepted and paid the demand raised under section 201. The Tribunal applied the reasoning of a co-ordinate bench (paras.11-14 of Syndicate Bank decision) and the principle that admission of substantial questions of law by the High Court lends credence to the assessee's bona fides. Having regard to the assessee's consistent historical practice, absence of any suggestion of connivance or forged claims, collection of supporting evidence, the fact that the question whether the amounts were exigible to TDS was debatable and pending appellate adjudication, the Tribunal held there was reasonable cause within the meaning of the law and that imposition of penalty under section 271C was not sustainable. The Tribunal therefore deleted the penalty and directed the Assessing Officer to give effect to that deletion. [Paras 5]

Penalty under section 271C deleted; grounds of appeal allowed

Final Conclusion: Penalty levied under section 271C for non-deduction of TDS on LTC reimbursements is deleted on the finding of reasonable cause and bona fide belief; the appeals are allowed and the Assessing Officer is directed to delete the penalty.

Exemption under section 54F of the Income Tax Act, 1961 - Investment of capital gains within the prescribed period for purchase or construction of residential house - Burden of proof and credibility of undocumented or unregistered transactions - Corroboration by conduct and non-declaration by purchaser

Exemption under section 54F of the Income Tax Act, 1961 - Investment of capital gains within the prescribed period for purchase or construction of residential house - Burden of proof and credibility of undocumented or unregistered transactions - Corroboration by conduct and non-declaration by purchaser - Claim for exemption under section 54F for AY 2012-13 based on alleged purchase/ investment in a residential property within the prescribed period was rejected. - HELD THAT: - The Tribunal examined whether the assessee had invested the sale proceeds of the original property within the time limits prescribed under section 54F. The assessee relied on an agreement of sale dated 30.3.2012 and a later registered sale deed dated 9.7.2015, contending that the investment was made within the statutory period though possession and final registration occurred later. The authorities below disbelieved the claimed transaction on multiple grounds: the assessee did not declare the capital gain or claim exemption in the return; the purported purchaser (vendor) did not declare any capital gains or income as a builder; the alleged agreement was unregistered and unsupported by contemporaneous documentation; the sale deed of 29.4.2011 showed receipt of consideration by cheque and contained no recital indicating an intention by vendors to sell back a constructed portion; the sale deed executed on 9.7.2015 lay beyond the three-year period from date of transfer. The Tribunal found that the recital in the 2015 sale deed asserting prior receipt by book entry was not substantiated by the agreement to sell and that the parties' conduct (non-declaration in returns, lack of contemporaneous registration) corroborated the authorities' doubts. In these circumstances the Tribunal held it unsafe to accept the alleged investment as having been made within the statutory period, and upheld the additions made by the Assessing Officer and confirmed by the CIT(A). [Paras 15, 16, 19, 21, 22]

The Tribunal upheld the rejection of the assessee's claim for exemption under section 54F, finding no reliable evidence that the capital gains were invested within the prescribed period.

Final Conclusion: Appeal dismissed; the orders of the revenue authorities rejecting the claim of exemption under section 54F for Assessment Year 2012-13 are upheld for want of credible contemporaneous evidence of investment within the statutory period.

Power of Transfer Pricing Officer to impose penalty under section 271G - Penalty for failure to furnish transfer pricing documents under section 92D(3) - Event of default determines jurisdiction for penalty - Penal liability governed by law in force on date of default - Technical breach and bona fide defence to penalty

Power of Transfer Pricing Officer to impose penalty under section 271G - Event of default determines jurisdiction for penalty - Penal liability governed by law in force on date of default - Penalty for failure to furnish transfer pricing documents under section 92D(3) - TPO lacked jurisdiction to levy penalty under section 271G for non submission of documents where the event of default occurred before the amendment conferring penalty making power on the TPO came into force. - HELD THAT: - The Tribunal examined undisputed facts that notice under section 92CA(2)/92D(3) was issued on 16.09.2013, show cause for penalty was issued on 28.10.2013 and the alleged default therefore arose well before the Finance (No.2) Act, 2014 amendment to section 271G which came into force on 01.10.2014. Applying the principle that a penalty is governed by the law in force on the date of the wrongful act and that the event of default defines the authority competent to impose penalty, the Tribunal followed the ratio of the Delhi High Court in Ericsson India Pvt. Ltd. and held that only the Assessing Officer had power to levy penalty for that default. Consequently the TPO's penalty order passed later was held to be without jurisdiction and unsustainable. [Paras 11, 12, 14, 15]

Penalty order passed by the TPO under section 271G was without jurisdiction and is quashed.

Technical breach and bona fide defence to penalty - Penalty for failure to furnish transfer pricing documents under section 92D(3) - Even on merits the penalty was not sustainable because documents were ultimately furnished, no prejudice was caused to Revenue and the delay was technical/bona fide. - HELD THAT: - The Tribunal found as a factual and legal matter that the assessee had ultimately filed the documents on which the TPO made the transfer pricing adjustment and that there was no mala fides or prejudice to Revenue. Relying on the principle that when a breach is technical or flows from a bona fide belief the competent authority may refrain from imposing penalty, the Tribunal concluded that the imposition of penalty was not warranted on merits. [Paras 16, 17]

Penalty is not sustainable on merits and is liable to be quashed.

Final Conclusion: The penalty imposed by the TPO under section 271G (and confirmed by the CIT(A)) is quashed: the TPO lacked jurisdiction because the event of default occurred before the amendment vesting penalty making power in the TPO, and, moreover, the penalty was unsustainable on merits as the documents were ultimately furnished and the breach was technical/bona fide.

Disallowance of interest expense where borrowed funds are parked as interest-free advances - capitalization of expenses and consequent disallowance as business expenditure - ex parte adjudication for non-appearance and liberty to seek restoration under Rule 24 of the ITAT Rules, 1963

Disallowance of interest expense where borrowed funds are parked as interest-free advances - Whether interest of Rs. 20,38,472 claimed as business expenditure was rightly disallowed where borrowed funds were parked as interest-free advances to the assessee's daughter. - HELD THAT: - The Tribunal upheld the First Appellate Authority's finding that the assessee had claimed interest on borrowings of Rs. 1,11,73,554 while substantial funds (Rs. 1,57,26,728) were advanced interest-free to the assessee's daughter and were not used for business purposes. The Tribunal agreed with the revenue that, in absence of documentary evidence to show business application of the borrowed funds, the interest expense was not incurred wholly and exclusively for business and thus properly added back. The appellate authorities' reasoning that the funds were 'parked' outside the business and therefore the interest could not be allowed was accepted, and no interference was called for. [Paras 4]

Addition of Rs. 20,38,472 on account of disallowed interest is upheld and the ground raised by the assessee is rejected.

Capitalization of expenses and consequent disallowance as business expenditure - Whether amounts totalling Rs. 5,90,175 relating to credit card/credit facility payments were correctly treated as capitalized by the assessee and therefore rightly added back to income. - HELD THAT: - The Tribunal concurred with the revenue authorities that the assessee had transferred expenses relating to ICICI credit card and a credit facility from Phoenix ARC Pvt. Ltd. to his capital account, thereby capitalizing those amounts instead of charging them to the profit and loss account. The AO made the addition and the CIT(A) confirmed it on the basis of the documentary evidence on record. The Tribunal found no error in the reasoning of the lower authorities and sustained the addition. [Paras 4]

Addition of Rs. 5,90,175 on account of capitalized credit card/credit facility payments is upheld and the ground raised by the assessee is rejected.

Ex parte adjudication for non-appearance and liberty to seek restoration under Rule 24 of the ITAT Rules, 1963 - Whether the appeal could be decided ex parte for non-appearance of the assessee and whether the assessee should be given an opportunity to seek restoration. - HELD THAT: - The Tribunal recorded that notices were duly served and the assessee failed to appear on two listed dates despite service; the matter was therefore decided ex parte after hearing the Revenue. In the interest of justice, the Tribunal granted the assessee liberty to move an application under Rule 24 of the ITAT Rules, 1963 to seek restoration of the appeal on showing sufficient cause for non-appearance, and reserved to restore the appeal if satisfied in accordance with law. [Paras 2, 5]

Appeal decided ex parte; assessee given liberty to apply under Rule 24 for restoration of the appeal.

Final Conclusion: The Tribunal dismissed the assessee's appeal on merits by upholding the additions of Rs. 20,38,472 (disallowed interest) and Rs. 5,90,175 (capitalized credit card/credit facility payments), and decided the matter ex parte for non-appearance while permitting the assessee to apply for restoration under Rule 24 of the ITAT Rules, 1963.

Section 17A of the Prevention of Corruption Act - prior approval of competent authority - proviso to Section 17A - offence of accepting or attempting to accept undue advantage - quash FIR

Section 17A of the Prevention of Corruption Act - proviso to Section 17A - offence of accepting or attempting to accept undue advantage - prior approval of competent authority - Whether prior approval under Section 17A of the Prevention of Corruption Act was required before conducting preliminary enquiry/investigation and filing the FIR dated 10.4.2019. - HELD THAT: - The petitions challenge the FIR on the ground that Section 17A required prior approval of the competent authority before initiating enquiry or investigation against public servants. The court examined the proviso to Section 17A which excludes the need for such approval "for cases involving arrest of a person on the spot on the charge of accepting or attempting to accept any undue advantage for himself or for any other person." The material on record included prima facie electronic videography evidence of demand of a bribe. Applying the proviso, and having regard to the reasoning in the cited Delhi High Court decision (para-36) which holds that where the act is ex facie criminal or constitutes accepting/attempting to accept undue advantage prior approval is not necessary, the court found that the requirement of prior approval under Section 17A was not attracted. Accordingly, non-compliance with Section 17A did not vitiate the FIR in the facts of the present case.

Petitioners' challenge to the FIR for non-obtaining of prior approval under Section 17A is rejected; the proviso to Section 17A applies and the FIR dated 10.4.2019 is not quashed on that ground.

Final Conclusion: Writ petitions dismissed; interim protection vacated. Observations made are not to be construed as deciding the matter on merits.

Mandatory time limits for revocation proceedings under the Customs Broker Licensing Regulations - forfeiture and revocation as draconian regulatory sanctions - due diligence and KYC obligations of a Customs Broker - proof required to establish unauthorised use of broker's licence and login credentials - standard of evidence for imposition of disciplinary action under CBLR

Mandatory time limits for revocation proceedings under the Customs Broker Licensing Regulations - Whether non-compliance with the time limits prescribed by the CBLR and Board Circular vitiates the order of revocation of the Customs Broker licence. - HELD THAT: - The Tribunal accepted the appellant's contention that Regulations and the Board's circular prescribe specific time frames for each stage of revocation proceedings and an overall time limit for completion. It noted the offence report dated 11.6.2018, the Show Cause Notice dated 14.9.2018 (issued beyond the 90 days prescribed) and completion of proceedings beyond the nine month period mandated by the Board. The Tribunal followed precedents of the High Court which held that non compliance with such prescribed time limits is fatal to an order of revocation. Applying that principle to the facts, the Tribunal concluded that the revocation was issued without complying with the statutory time limits and therefore could not be sustained. [Paras 4, 10, 11]

Non compliance with the prescribed time limits rendered the revocation order invalid.

Due diligence and KYC obligations of a Customs Broker - proof required to establish unauthorised use of broker's licence and login credentials - standard of evidence for imposition of disciplinary action under CBLR - Whether, on merits, the department established that the appellant allowed unauthorised persons to use its licence/login and failed to exercise due diligence so as to warrant revocation, forfeiture and penalty. - HELD THAT: - The Tribunal examined the material on record and observed that the department failed to adduce evidence to prove that the appellant permitted others to use its licence or login credentials; allegations in the Show Cause Notice were unsupported by contemporaneous proof. The appellant had obtained KYC details of the IEC holder and the transactional interface was through a representative (Shri A. Sathish). The Tribunal accepted authorities recognising the limited obligations of a CHA/Customs Broker and that it is onerous to require personal verification of the IEC holder for every transaction. On the facts, no direct involvement of the appellant in the alleged illegal importation was established and the departmental case on merits did not succeed. [Paras 12, 13]

On merits the departmental allegations were not established and the appellant succeeds.

Final Conclusion: The revocation order, forfeiture and penalty were set aside: the revocation was invalid for non compliance with prescribed time limits and, on merits, the department failed to prove unauthorized use of the appellant's licence or a breach of due diligence sufficient to justify the disciplinary sanctions.

Alteration of company name under Companies Act - Effect of certificate of incorporation on change of name - Rectification of name of company - Judicial review - quashing of administrative order - Mandamus to reconsider application for recording change of name

Alteration of company name under Companies Act - Effect of certificate of incorporation on change of name - Rectification of name of company - Judicial review - quashing of administrative order - Mandamus to reconsider application for recording change of name - Validity of respondent's refusal to record the company's new name and the appropriate relief. - HELD THAT: - The petitioner completed statutory formalities for change of name under the Companies Act and obtained a fresh certificate of incorporation in the new name on 30.10.2002. The impugned order dated 29.8.2019 rejecting the request to record the changed name proceeded without adequate regard to the provisions dealing with change and rectification of a company's name and the effect of issuance of a fresh certificate of incorporation. In these circumstances there was no reason recorded to deny the petitioner the benefit of the changed name. Exercise of judicial power is limited to quashing the impugned administrative decision and directing the authority to reconsider the petitioner's application in the light of the statutory position and the certificate of incorporation already issued to the petitioner. The Court therefore set aside the impugned order and directed respondents to reconsider and decide the application within a specified period.

Impugned order dated 29.8.2019 quashed; respondents directed to reconsider and decide the petitioner's application to record the changed company name within six weeks.

Final Conclusion: Writ petition allowed; order dated 29.8.2019 quashed and respondent nos. 3 and 4 directed to reconsider and decide the petitioner's application for recording the change of name from Shaz Investment Pvt. Ltd. to Shaz Housing Pvt. Ltd. within six weeks.

Condonation of delay - Sufficient cause - Discretionary power of Tribunal in condonation applications - Limitation for appeal against refusal to register transfer - Right to refuse registration of transfer of shares - Permission to prefer appeal without production of certified copy

Permission to prefer appeal without production of certified copy - Production of certified copy - Application for leave to prefer the appeal without filing the certified copy of the impugned order was allowed subject to furnishing the certified copy within a week. - HELD THAT: - On the appellants' request that the certified copy of the impugned order had been applied for and that limitation for preferring the appeal was about to expire, the Tribunal exercised its discretion to permit filing of the present appeal without immediate production of the certified copy. The appellants were directed to furnish the certified copy of the impugned order within one week. The interlocutory application seeking this relief was accordingly disposed of. [Paras 1, 2]

I.A. No. 3632 of 2019 disposed; appellants permitted to prefer the appeal without the certified copy but directed to furnish the certified copy within one week.

Condonation of delay - Sufficient cause - Discretionary power of Tribunal in condonation applications - Limitation for appeal against refusal to register transfer - Right to refuse registration of transfer of shares - Whether the Adjudicating Authority erred in condoning the delay of 186 days in filing CA No. 67/2017 and whether that condonation should be interfered with on appeal. - HELD THAT: - The Appellants challenged the NCLT's condonation of delay, arguing that limitation for appealing refusal to register share transfer commenced in 2011 and that no sufficient cause was shown. The Appellate Tribunal confined its scrutiny to the condonation application and did not go into merits of the main dispute. It reiterated that determination of 'sufficient cause' is a discretionary exercise for the adjudicating authority to be made on facts and circumstances; the length of delay is not determinative if a sufficient explanation is shown. The Tribunal noted material facts relied on below, including allegations of undelivered earlier communication, the need to collect documents dating to 2011 from another State, compliance with procedural requirements for filing before NCLT, and the NCLT's conditional requirement of a deposit. Having considered these factors and the NCLT's exercise of discretion, the Appellate Tribunal found no material irregularity or patent illegality in the impugned order condoning the delay and refused to interfere. [Paras 28, 31, 36, 37, 38]

The NCLT's order condoning the delay in CA No. 67/2017 is upheld; Company Appeal (AT) No. 326 of 2019 dismissed.

Final Conclusion: The Tribunal allowed the appellants to file the appeal without immediate production of the certified copy subject to filing it within a week, and refused to interfere with the NCLT's exercise of discretion in condoning the 186 day delay; the appeal is dismissed and the parties remain free to raise factual and legal pleas before the NCLT on merits.

Manipulative trading - prohibition of fraudulent and unfair trade practices - substantial acquisition of shares - disclosure obligation on acquisition and pledge - persons acting in concert - insider trading obligations - penalty-exercise of adjudicatory discretion

Manipulative trading - prohibition of fraudulent and unfair trade practices - Appellant Tarun Kumar Brahambhatt engaged in manipulative trading in the scrip of Rajratan and thereby violated the PFUTP Regulations. - HELD THAT: - SEBI's investigation of trading in Rajratan for the specified period showed a marked increase in volume and price during the investigation period, with appellant being buyer No.1 and seller No.1. Trading pattern analysis established a consistent strategy: acquiring bulk shares at lower prices, placing small buy orders at market open at substantially higher prices (sometimes for one share), thereby raising the price and selling held stock; occasional self-trades were also recorded. The Adjudicating Officer found this temporal and transactional pattern indicative of manipulative intent rather than genuine trading, and the Tribunal concurred with that factual and legal conclusion. The exoneration of other counter-parties did not negate the appellant's dominant role and the manipulative pattern established from his trades. The Tribunal therefore upheld the finding of violation of the PFUTP Regulations by the appellant.

Finding of violation of PFUTP Regulations by Tarun Kumar upheld and penalty confirmed.

Substantial acquisition of shares - disclosure obligation on acquisition and pledge - persons acting in concert - insider trading obligations - Transfers of shares of Velan Hotels Ltd. to the appellants amounted to acquisition (not a recorded pledge), attracting disclosure obligations under the SAST Regulations and consequences under the PIT Regulations, and appellants Tarun Kumar and Jinesh were effectively acquirers with others acting in concert. - HELD THAT: - Though appellants contended the transfers were pledges given as security for financing, the transfers were reflected as beneficial ownership changes in depository records and the promoters did not record the transfers as pledges in transfer accounts. The purported pledge agreement dated after the transfers and cheques dated subsequently did not accord with the contemporaneous transfer records. Regulation 7 and its Explanation treat a pledgee (other than bank/financial institution) as an 'acquirer' required to disclose creation of pledge; moreover, the public market observed a change in shareholding beyond the 15% threshold. Given that shares stood in appellants' accounts and the absence of contemporaneous marking of pledge in transfer/depository records, the Tribunal found the transaction, as it appeared to the market and investors, to be an acquisition triggering disclosure under the SAST Regulations and attendant obligations under PIT, and accepted that appellants Tarun Kumar and Jinesh were acquirers with others acting in concert.

Adjudicating Officer's conclusion that the transfers amounted to acquisition attracting SAST and PIT obligations upheld.

Penalty-exercise of adjudicatory discretion - The quantum of penalties imposed by the Adjudicating Officer for the violations was reasonable and did not warrant interference. - HELD THAT: - The Tribunal reviewed the Adjudicating Officer's reasoning which linked the manipulative trading, nondisclosure of acquisition, and failure to make public announcement to deprivation of fair treatment of shareholders and change in control issues affecting the market. The appellants' submission likening penalty assessment to criminal sentencing or contending lack of hearing on quantum was rejected; the Tribunal treated the matter as regulatory/adjudicatory, not criminal, and found the AO's exercise of discretion in quantifying penalties supported by material on record. Accordingly, the Tribunal declined to interfere with the AO's assessment of penalties.

Penalties as imposed by the Adjudicating Officer affirmed.

Final Conclusion: The Tribunal upheld the Adjudicating Officer's findings that appellant Tarun Kumar engaged in manipulative trading in Rajratan (violating PFUTP Regulations), that transfers in Velan Hotels Ltd. constituted acquisition (not a recorded pledge) attracting SAST and PIT obligations with appellants acting in concert, and that the penalties imposed were justified; the appeals are dismissed.

Binding nature of departmental trade notices on quasi judicial authorities - taxability of banking or financial services provided by foreign and intermediary banks - place of provision of services and identification of the recipient for bank guarantee related charges - liability for service tax where the assessee ultimately bears expenditure through its domestic banker

Binding nature of departmental trade notices on quasi judicial authorities - Whether the Trade Notice dated 10.02.2014 issued by the Commissioner, Service Tax I, Mumbai, is binding on the adjudicating/appellate authorities in another Commissionerate. - HELD THAT: - The Court examined precedent and concluded that departmental trade notices or circulars are administrative instructions binding on assessing officers of the issuing department but are not binding on quasi judicial authorities or Courts. The earlier Apex Court observation in NITDIP Textile Processors was held not to mean that a trade notice of one Commissionerate binds adjudicating authorities of another Commissionerate. Subsequent authority of the Apex Court in Minwool Rock Fibres and a Division Bench of this Court in a related customs/central excise context reinforce that departmental circulars do not bind quasi judicial authorities. On that basis the petitioners' reliance on the Mumbai trade notice to displace the adjudicatory findings was rejected. [Paras 15, 16]

The trade notice dated 10.02.2014 is not binding on the adjudicating/appellate authorities in the present matters and cannot be used to quash the impugned orders.

Taxability of banking or financial services provided by foreign and intermediary banks - place of provision of services and identification of the recipient for bank guarantee related charges - liability for service tax where the assessee ultimately bears expenditure through its domestic banker - Whether the petitioner (assessee) or its domestic banker is the recipient liable to pay service tax for commissions and charges paid to intermediary/foreign banks in relation to issuance of bank guarantees for the petitioner's overseas contract. - HELD THAT: - The Court found on the facts that the chain of transactions (engagement of intermediary banks and local correspondent bank to issue guarantees abroad) were undertaken solely to provide the service of furnishing bank guarantees to the petitioner for its foreign contract. Although payments were effected by the petitioner's domestic banker, the expenses were borne by the petitioner and the service (banking/financial service of issuing guarantees and realisation services) was performed for the petitioner. The adjudicating and appellate authorities had recorded that taxable services by intermediary and foreign banks were rendered to the petitioner. Given that the petitioner was the ultimate recipient and the place of provision of the service was the petitioner's location in India, service tax liability appropriately attached to the petitioner rather than to the domestic banker. [Paras 18, 19]

The petitioner is the recipient liable for service tax on bank guarantee commissions and related realisation charges paid via its domestic banker; the tax demand was rightly confirmed.

Final Conclusion: Both writ petitions challenging confirmation of service tax demands, interest and penalties in respect of bank guarantee commissions and related charges were dismissed: the Mumbai trade notice did not bind the adjudicating/appellate authorities, and on merits the petitioner (not its banker) was held to be the recipient liable for service tax for the periods decided.

Maintainability of writ petition where statutory appellate remedy exists - statutory appellate remedy before CESTAT - service tax liability determined by classification as Mining Services - service tax liability determined by classification as Survey and Exploration Services - consideration of administrative Circulars in adjudication - remand of factual issues to next fact-finding authority - consideration of appeals without regard to limitation

Maintainability of writ petition where statutory appellate remedy exists - statutory appellate remedy before CESTAT - Whether the writ petition is maintainable when a statutory appellate remedy before the CESTAT is available and the controversy requires factual enquiry. - HELD THAT: - The adjudicating authority passed a reasoned order after issuing show cause notice, considering replies and hearing the petitioner, and concluded on service tax liability by analysing the factual matrix and contract terms. The court found that the petitioner's primary grievance - that certain administrative Circulars were not considered - raises factual questions about their effect in the present case. Such factual determinations fall within the competence of the appellate fact-finding authority. When a statutory appeal lies to the CESTAT, and the dispute involves factual analysis, the writ forum should not supplant the appellate process. Accordingly, the petition is not entertained on merits and the petitioner is directed to pursue the statutory appellate remedy.

Writ not entertained; petitioner granted liberty to file statutory appeal before the CESTAT.

Consideration of administrative Circulars in adjudication - remand of factual issues to next fact-finding authority - consideration of appeals without regard to limitation - Whether the effect of Circular No.32/06/2018 - GST and Circular No.35/2018 - GST on the impugned adjudication must be considered afresh by the appellate fact-finding authority. - HELD THAT: - The court noted the two Circulars were issued prior to the adjudication but that their effect in the petitioner's case involves application to the contractual and factual matrix assessed by the adjudicating authority. Because this is essentially a factual determination (whether the Circulars alter the legal classification or tax liability in the specific circumstances), the court declined to decide the matter itself. Instead, the court remitted the question for consideration by the CESTAT, which is empowered to examine whether the adjudicating authority had in substance considered those Circulars and to decide the merits. The court afforded the petitioner a limited procedural direction to file the appeal and instructed the CESTAT to hear the appeal on merits without being constrained by limitation.

Issue remitted to the CESTAT for fresh consideration of the effect of the specified Circulars; CESTAT to decide merits and may entertain the appeal without reference to limitation.

Final Conclusion: Writ petition dismissed without adjudication on merits; petitioner granted liberty to prefer an appeal to the CESTAT within four weeks, and the CESTAT directed to decide the appeal on its own merits, including consideration of the two Circulars, without reference to limitation.

Cenvat credit - re-credit of excess duty - suo motu re-credit under intimation - refund of excess duty as deposit with Government - no requirement to file refund under Section 11B of the Central Excise Act, 1944 - penalty under Rule 15 of the Cenvat Credit Rules, 2004 - interest under Section 11AB of the Central Excise Act, 1944

Cenvat credit - re-credit of excess duty - suo motu re-credit under intimation - refund of excess duty as deposit with Government - no requirement to file refund under Section 11B of the Central Excise Act, 1944 - penalty under Rule 15 of the Cenvat Credit Rules, 2004 - interest under Section 11AB of the Central Excise Act, 1944 - Validity of appellant taking re-credit of excess central excise duty paid on CIF value (instead of FOB) for exported goods and entitlement to refund/disbursement - HELD THAT: - The Tribunal found that the excess duty paid (difference between CIF and agreed FOB duty) was accepted by the rebate authority to be a deposit with Government and refundable, and that the appellant had informed the Department and taken re-credit in its Cenvat account under intimation. Reliance was placed on precedents where suo motu reversal or re-credit of entries, followed by intimation to revenue, was held permissible and not to require a separate refund application under Section 11B. The Commissioner (Appeals) erred in treating the re-credit as unauthorized for want of valid duty paying documents; that finding was factually incorrect and the impugned order was non-speaking. In the view of the Tribunal, penal provisions and interest were not attracted on the facts where the amount was undisputedly refundable and the re-credit represented an accounting correction of excess duty debited, and the appellant was entitled to consequential refund/disbursement under the provisions now applicable (Section 142(3) of the Central Goods and Services Tax Act, 2017).

Impugned order disallowing the re-credit is set aside; appellant entitled to re-credit and consequential refund/disbursement.

Final Conclusion: Appeal allowed. The Tribunal set aside the impugned order, held that the appellant validly took re-credit of the excess duty under intimation to Revenue and is entitled to consequential refund/disbursement.

Includibility of cash discount in assessable value - invoice-declared discount not availed and not passed on - binding effect of earlier Tribunal final order - precedential application of Purolators India Ltd. - res integra

Includibility of cash discount in assessable value - invoice-declared discount not availed and not passed on - precedential application of Purolators India Ltd. - Cash discount shown on the invoice, though not availed by the buyer and not passed on, is not to be included in the assessable value of the goods. - HELD THAT: - The Tribunal observed that the identical question in the appellant's own case had been finally decided by the Tribunal vide Final Order No. A/11542/2019 dated 14/08/2019, where reliance was placed upon the Hon'ble Supreme Court's decision in Purolators India Ltd. and other Tribunal precedents. Having regard to that earlier final order and the applicable precedents, the question was treated as no longer res integra. The present appeals were therefore disposed of by following the reasoning and outcome of the earlier Final Order, resulting in setting aside the impugned order.

Impugned order set aside and the appeals allowed by following the Tribunal's earlier Final Order dated 14/08/2019 and the authorities relied upon therein.

Final Conclusion: The appeals are allowed; the impugned order is set aside and the matter is decided in favour of the appellant by applying the Tribunal's earlier final order and the cited precedents.

Cenvat credit on outward Goods Transport Agency (GTA) service - FOR (free on road/freight on road) sales and destination contract - Place of removal versus point of sale - Qualification of outward freight as input service - Beneficial administrative Circulars not withdrawn retrospectively - Limitation and extended period when issue not free from doubt

Cenvat credit on outward Goods Transport Agency (GTA) service - FOR (free on road/freight on road) sales and destination contract - Place of removal versus point of sale - Qualification of outward freight as input service - Admissibility of Cenvat credit on GTA service where sales were on FOR basis and freight was included in assessable value - HELD THAT: - The Tribunal found the material facts undisputed: the appellant bore freight, freight was included in the assessable value and excise duty was discharged on that basis, and ownership/risk remained with the seller until delivery at the customer's premises. Applying the principle that where sale is effected at the buyer's premises under a FOR/destination contract the point of sale is the customer's doorstep, the outward freight forms part of the cost borne by the manufacturer until transfer of ownership. Under these circumstances the service tax on outward GTA qualifies as an input service for Cenvat credit. The Tribunal followed its earlier decision in Ultratech Cement (as reproduced) which applied the Supreme Court's analysis of point of sale and the exceptions for FOR contracts, and held that the Supreme Court decisions relied upon by the revenue (which addressed place of removal) did not negate the admissibility of credit on the specific facts where freight and transit risk remained with the seller.

Cenvat credit on outward GTA service was allowed on the facts that sale was on FOR basis, freight was included in the assessable value and ownership/risk remained with the appellant until delivery.

Beneficial administrative Circulars not withdrawn retrospectively - Limitation and extended period when issue not free from doubt - Availability of relief under withdrawn Circulars and applicability of limitation for extended period demands - HELD THAT: - The Tribunal accepted the appellant's contention that circulars operative at the relevant time giving guidance on treatment of outward GTA ought to afford benefit to the appellant, observing that a beneficial circular cannot be withdrawn retrospectively. Further, given the longstanding litigation and genuine doubt since introduction of the Cenvat scheme regarding outward GTA credits, the Tribunal found that extended-period demands could not be sustained on the ground of time-bar or alleged mala fides. The Tribunal therefore left open incidental quantification issues but held the appellant entitled to benefit of the circulars and not liable to extended-period demands where the issue was not free from doubt.

Benefit of the relevant Circulars shall be available for the material period and extended-period demands are not sustainable where the issue was not free from doubt.

Final Conclusion: The appeal is allowed. The impugned order is set aside and Cenvat credit on outward GTA service is held admissible on the facts that sales were on FOR basis with freight included in assessable value and ownership/risk remaining with the appellant until delivery; the appellant is entitled to benefit of the relevant administrative Circulars for the material period and extended-period demands are not sustained where the issue was not free from doubt.

Cenvat credit on outward GTA - FOR destination sale - place of removal - point of sale - transfer of property under the Sale of Goods Act - beneficial circulars and retrospective withdrawal - limitation / time-bar in excise demands

Cenvat credit on outward GTA - FOR destination sale - place of removal - point of sale - transfer of property under the Sale of Goods Act - Admissibility of Cenvat credit in respect of GTA services for outward transportation where sales are on FOR basis and freight is included in the assessable value. - HELD THAT: - The Tribunal found that where goods are sold on FOR basis, freight and related liabilities are borne by the seller until delivery at the buyer's premises and the excise invoice shows price inclusive of freight, the point of sale is the customer's doorstep. Applying the principle that the place of removal must be determined with reference to the point of sale and the intention of parties under the Sale of Goods Act, the Tribunal followed its earlier decision in Ultratech Cement (reproduced) and held that the outward freight paid qualifies as an input/service eligible for Cenvat credit. The revenue's reliance on Supreme Court decisions addressing only the place of removal did not negate the FOR-sale destination principle applicable on the facts here. The impugned orders denying credit were set aside and the appeals allowed on this ground. [Paras 4, 5]

Cenvat credit on GTA for outward transportation is admissible where the sale is on FOR basis and freight is included in the assessable value, and the point of sale is the buyer's premises.

Beneficial circulars and retrospective withdrawal - Availability of benefit of departmental circulars issued earlier in favour of assessees despite subsequent withdrawal. - HELD THAT: - Having regard to settled law that a beneficial circular cannot be withdrawn retrospectively, the Tribunal held that the appellant is entitled to rely on the Circulars operative during the material period even though they were withdrawn later. The Tribunal observed that the law on the issue has been repeatedly settled by higher courts and therefore the benefit of such circulars shall be available to the appellant for the relevant period. [Paras 4]

Benefit of the earlier circulars shall be available to the appellant for the material period; retrospective withdrawal does not defeat that benefit.

Cenvat credit vis-a -vis excise duty on freight - limitation / time-bar in excise demands - Whether demand can be negated because excise duty paid on the freight element exceeds Cenvat credit claimed, and the question of extended period demands. - HELD THAT: - The Tribunal noted the appellant's contention that excise duty paid on the freight element exceeded the Cenvat credit claimed and found merit in the argument but expressly left this aspect open because the appeal was decided on merits concerning admissibility of credit under the Cenvat Credit Rules. On limitation, the Tribunal observed that the issue was long contested in litigation and not free from doubt; accordingly, demands for extended periods where raised would not be sustainable on time-bar grounds in the facts of this case. [Paras 4]

The question of adjustment or negation of demand vis-a -vis excise duty on freight exceeding Cenvat credit is left open for determination; demands for extended periods were held not sustainable on limitation grounds in the facts before the Tribunal.

Final Conclusion: Following its earlier reasoning in Ultratech Cement, the Tribunal allowed the appeals, set aside the impugned orders and held that Cenvat credit on outward GTA is admissible where sales are on FOR basis with freight included in assessable value; the appellant may rely on beneficial circulars operative during the material period and extended-period demands are not sustainable on the facts, while the precise adjustment between excise on freight and credit claimed was left open for determination.

Requirement to intimate commencement or cessation of business operations - Best judgment assessment after rejection of books of account - Burden on assessee to prove non-operation when accounts are rejected - Reliance on survey observations and contemporaneous material to determine period of operation

Requirement to intimate commencement or cessation of business operations - There is no provision in the U.P. Trade Tax Act, 1948 mandating a brick kiln owner to inform the Sales Tax/Assessing Authority about the starting or closure of firing (Phukai). - HELD THAT: - The Court observed that neither party could point to any provision in the Act or Rules obliging the brick kiln owner to give such intimation. While noting absence of a statutory mandate, the Court accepted the State's submission that a prudent businessman would ordinarily give such intimation to avoid tax liability. The point was answered by recording that no mandatory requirement exists in the statute, while also recognising that failure to give voluntary intimation may be a relevant circumstance in assessment proceedings.

No statutory requirement exists to inform the Assessing Authority about starting or closure of firing; absence of such a requirement does not alter that giving such intimation is commercially prudent and may be relevant in assessment.

Best judgment assessment after rejection of books of account - Burden on assessee to prove non-operation when accounts are rejected - Reliance on survey observations and contemporaneous material to determine period of operation - The Assessing Officer's determination of the period of operation (38 days) and consequential assessment based on best judgment, as affirmed by the Tribunal, is sustainable and not perverse in the absence of acceptable evidence from the revisionist to show non-operation. - HELD THAT: - The Court noted that the revisionist's books had been rejected and that he did not state to the Assessing Authority that the kiln had closed on the claimed date, though an opportunity existed when his statement was recorded. The Assessing Officer relied on survey findings (including bricks at the stage prior to firing, 'Pathai') and other reasons to infer ongoing operations and that coal would have been procured subsequently for 'Phukai'. The Court reiterated the settled principle that where books are rejected a best judgment assessment is permissible and some degree of inference or estimation is inevitable. Given cogent reasons in the assessment order and absence of evidence from the revisionist to rebut operation beyond the claimed date, the Court found no arbitrariness or perversity in the assessment and upheld the Tribunal's confirmation.

The best judgment assessment fixing the period of operation at 38 days and the resulting tax liability is upheld; the revision is dismissed for lack of merit.

Final Conclusion: The petition is dismissed. The Court held there is no statutory duty to intimate start/closure of firing but, in the facts of the case, the Assessing Officer's best judgment assessment-based on rejected accounts, the assessee's failure to adduce evidence of non-operation, and survey material-was reasonable and correctly affirmed by the Tribunal.

Tax exemption entitlement - adjustment or refund of unallowed exemption - finality of assessment - rectification of assessment orders - limitation bar - compliance with court direction

Adjustment or refund of unallowed exemption - finality of assessment - limitation bar - Whether the endorsement dated 31.08.2019 rejecting adjustment or refund of the balance unallowed tax exemption could be set aside. - HELD THAT: - The Court found that the petitioner sought adjustment/refund of an alleged unallowed tax exemption after the assessment orders for the KST periods had attained finality. The Assessing Authority declined the request on the ground that clarification of exemption could not be entertained once the assessments were final, and that the claim was time-barred. The Court noted that the petitioner had not earlier raised objections in the KST proceedings and that the endorsement refusing adjustment was therefore unassailable. Having regard to the finality of the assessment orders and the limitation bar, no error was found in the impugned endorsement. [Paras 5, 6]

Endorsement dated 31.08.2019 rejecting adjustment/refund upheld; writ petition dismissed on this ground.

Tax exemption entitlement - rectification of assessment orders - compliance with court direction - Whether the respondent was obliged at this stage to reconsider the petitioner's rectification application in light of the original entitlement certificate dated 21.03.2001. - HELD THAT: - The Court observed that the petitioner had earlier challenged the VAT-related entitlement and the Court's directions had been complied with by issuance of a revised entitlement certificate. However, the petitioner had not previously challenged or sought rectification of the KST assessment orders for the years 2000-01 to 2004-05. Given that those assessments had become final and the revised entitlement certificates remained unchallenged, the authorities were not obliged to reopen or rectify the concluded KST assessments. Therefore the request for reconsideration in light of the original certificate could not be entertained. [Paras 5, 6]

No obligation on respondent to reopen or rectify final KST assessments; rectification request refused and not maintainable.

Final Conclusion: The writ petition challenging the endorsement rejecting adjustment/refund of the claimed unallowed tax exemption is dismissed: the assessments for the KST periods stood final, the revised entitlement certificates and court directions had been complied with, and the claim was barred by limitation.

Notice under section 17 of the Wealth Tax Act, 1957 - formation of belief regarding escapement of wealth - jurisdiction of the assessing officer - application of Income-tax Act provisions to Wealth Tax jurisdiction (sections relating to transfer and reference of jurisdiction) - remand for fresh consideration

Notice under section 17 of the Wealth Tax Act, 1957 - formation of belief regarding escapement of wealth - jurisdiction of the assessing officer - application of Income-tax Act provisions to Wealth Tax jurisdiction (sections relating to transfer and reference of jurisdiction) - remand for fresh consideration - Validity of initiation of reassessment proceedings under section 17 of the Wealth Tax Act, 1957 in respect of the assessments in dispute was not adjudicated by the CWT(A) and is remanded for fresh consideration. - HELD THAT: - The Tribunal found that the CWT(A) failed to address the core jurisdictional question-namely who formed the requisite belief that net wealth had escaped assessment and whether the officer issuing the notice had jurisdiction to do so. Section 8 of the Wealth Tax Act makes Income-tax authorities the wealth-tax authorities and section 11 imports the operation of the Income-tax Act provisions on transfer and reference of jurisdiction. Under the Income-tax Act regime, challenges to jurisdiction require adjudication by the assessing officer or reference under the statutory mechanism. Because the CWT(A) proceeded to uphold the reopening without deciding who lawfully formed the belief or whether the proceedings were continued by an authority competent in law, the Tribunal held that these vital issues must be examined afresh by the CWT(A) after affording the assessee an opportunity of being heard. Consequent to this lacuna, the Tribunal refrained from deciding other substantive grounds and remanded the matter for fresh consideration on the jurisdictional point. [Paras 13]

Matter remanded to the CWT(A) for fresh adjudication of the validity of initiation of proceedings under section 17 of the Wealth Tax Act, 1957; other grounds left open.

Final Conclusion: The Tribunal set aside the CWT(A)'s order on the jurisdictional point and remanded the question of validity of notices and initiation of reassessment under section 17 to the CWT(A) for fresh consideration after hearing the assessee; the appeals are treated as allowed for statistical purposes and other issues remain undecided.

Valuation of property for wealth-tax - market value adoption based on circle rate - burden of proof to establish encroachment or adverse possession - reliance on documentary evidence to rebut registry/circle rates

Valuation of property for wealth-tax - market value adoption based on circle rate - burden of proof to establish encroachment or adverse possession - Whether the assessing officer and Commissioner (Appeals) were justified in adopting the circle rate from tnreginet and rejecting the assessee's claim for lower valuation on account of alleged encroachment. - HELD THAT: - The Tribunal examined the assessee's contention that the T. Nagar land should be valued lower because hutment dwellers had encroached the property, preventing construction or hypothecation to banks. The assessing officer adopted the circle rate from the official registry site as market value after noting absence of supporting verification, and the Commissioner (Appeals) upheld that adoption. The Court found that the assessee bore the onus of proving encroachment or adverse possession by documentary evidence (as distinguished from the facts in Dr. A. Gomes where such proof was placed before the Tribunal). The assessee failed to produce evidence of applications to banks, refusal of loans, possession by hutment dwellers as on the valuation dates, or other documentary proof demonstrating that the property's marketability was impaired. In those circumstances the registry/circle rate was a permissible basis for determining market value, and there was no material before the authorities or the Tribunal to displace that valuation. The Tribunal therefore saw no error in upholding the AO's adoption of circle rates and dismissing the claim for reduction in value.

Assessee's claim for lower valuation due to alleged encroachment rejected for lack of documentary proof; adoption of circle rate upheld and assessments for the stated years sustained.

Final Conclusion: The appeals are dismissed; the adoption of the circle rate as market value was sustained because the assessee did not discharge the evidential burden to establish encroachment or impaired marketability for assessment years 2007-08 to 2012-13.