TaxTMI Updates e-Newsletter
Dec 12,2020

Supply of service by a Government Entity to Central Government, State Government, Union territory, local authority or any person specified by them against consideration received in the form of grants (exemption entry) - Government Entity (definition for exemption eligibility) - Exempt supply - Advance Ruling

Supply of service by a Government Entity to Central Government, State Government, Union territory, local authority or any person specified by them against consideration received in the form of grants (exemption entry) - Government Entity (definition for exemption eligibility) - Exempt supply - Whether amounts credited in favour of H.P. Tourism Development Board by the Department of Tourism, Government of Himachal Pradesh, as grant-in-aid or financial assistance are taxable under GST or exempt - HELD THAT: - The Authority considered Notification No. 32/2017-Central Tax (Rate) dated 13 October 2017 which inserted the exemption entry for supply of service by a "Government Entity" to specified government bodies where consideration is received in the form of grants. The Authority examined the statutory definition of "Government Entity" and the statutory origin and control of the H.P. Tourism Development Board. The Board was constituted under the Himachal Pradesh Tourism Development Board & Registration Act, 2002 and is established and fully controlled by the State government to carry out the function of promotion and regulation of tourism in the State. Applying the exemption entry to these facts, the amounts credited by the Department of Tourism to the Board in the form of grants (including license fees and other receipts credited as grant-in-aid) fall within the scope of the notified exemption and are therefore not taxable under GST. The Authority explicitly found that the Board fulfils the criteria of a "Government Entity" for the purpose of the notification and accordingly the receipts so credited are exempt. [Paras 5, 6, 7]

The amounts credited as grant-in-aid by the Department of Tourism to the H.P. Tourism Development Board are exempt from GST under Serial No. 9C of Notification No. 32/2017-Central Tax (Rate) dated 13 October 2017.

Final Conclusion: The Authority ruled that receipts credited to the H.P. Tourism Development Board by the Department of Tourism, Government of Himachal Pradesh, as grants or financial assistance are exempt from GST under the cited notification, and consequently no further question on liability for payment was answered.

Summary order. Writ petition dismissed as withdrawn with liberty to the petitioner to challenge the Intimation dated 30.09.2020 in accordance with law; no costs.

Extraordinary jurisdiction under Article 226 - right to be heard / audi alteram partem - quashing of administrative order - restoration for fresh adjudication - extension of time for filing reply - completeness of show cause notice

Right to be heard / audi alteram partem - extension of time for filing reply - quashing of administrative order - restoration for fresh adjudication - Impugned order dated 19.03.2020 quashed and the proceedings restored because the authority failed to consider the petitioner's request for additional time and opportunity for personal hearing. - HELD THAT: - The High Court found that the third respondent did not take a decision on the petitioner's request for a fifteen day extension to file detailed objections and for personal hearing and that the impugned order was passed without addressing that request. The Court noted no legal prohibition on granting an extension of time and, in the interest of justice, set aside the impugned order and directed restoration of the proceedings for fresh adjudication. The petitioner was permitted a fixed time to file detailed objections and the authority was granted liberty to fix a date for personal hearing, thereby vindicating the petitioner's entitlement to be heard before final adjudication.

Impugned order quashed; proceedings restored to the third respondent for reconsideration with liberty to receive petitioner's objections and to grant personal hearing.

Completeness of show cause notice - restoration for fresh adjudication - Alleged deficiencies in the show cause notice were not finally adjudicated and were left open for fresh consideration by the adjudicating authority. - HELD THAT: - The Court observed that the contention regarding deficiencies in the show cause notice is a matter for adjudication by the authority. The writ petition did not result in a determination on the merits of that contention; instead, by quashing the impugned order for procedural reasons, the Court restored the proceedings to enable the authority to consider any such contentions afresh after giving the petitioner an opportunity to file detailed objections and for personal hearing.

Issue of adequacy of the show cause notice remanded to the third respondent for fresh adjudication.

Final Conclusion: Writ petition allowed in part: the order dated 19.03.2020 is quashed and the proceedings restored to the third respondent for fresh adjudication, permitting the petitioner to file detailed objections by the date directed and affording an opportunity for personal hearing.

Bid disqualification for non-submission of documents - GST registration requirement in tender evaluation - eligibility criteria in RFP - opportunity of hearing before adverse administrative action - speaking order - remand for fresh determination - judicial review to prevent arbitrariness in procurement

GST registration requirement in tender evaluation - eligibility criteria in RFP - bid disqualification for non-submission of documents - judicial review to prevent arbitrariness in procurement - Validity of disqualification of the petitioner's bid for not submitting GST registration certificate with the bid documents - HELD THAT: - The petitioner's bid was rejected on the ground that he had not submitted a GST registration certificate in his name along with the bid. The petitioner, a new entrant falling under Eligibility Condition-B of the RFP, contended that the RFP did not expressly require an inexperienced bidder to furnish GST registration at the time of bid submission and that GST registration could be obtained and produced after award in the event of contract execution. The State relied on the bid forms and notes (including that the quoted prices are exclusive of GST) and on the general requirement that relevant documents be furnished with the technical proposal. The High Court found that no final contract had been executed and that the financial bids had been opened but no award made; it observed the need to examine whether disqualification on the stated ground was permissible in the circumstances and noted the principle, as applied in the cited Supreme Court authority, that procurement processes must not disqualify bidders on criteria that were not notified or applied arbitrarily. In view of these considerations, and because the RFP conditions did not specifically mandate prior GST registration for bidders in the petitioner's category, the Court did not adjudicate the substantive validity of the disqualification on the merits but directed the administrative authority to reconsider the decision.

Matter remitted to the Commissioner-cum-Secretary, Tourism Department to examine the validity of the Committee's disqualification decision in the light of the RFP terms and the cited authority, grant opportunity of hearing to the petitioner and any bidder likely to be affected, and pass a reasoned speaking order before execution of the agreement.

Opportunity of hearing before adverse administrative action - speaking order - remand for fresh determination - Procedure to be followed by the administrative authority before proceeding to award and execution of agreement in respect of the disputed bid rejection - HELD THAT: - Given that no contract had been signed and that the financial bid stage had not culminated in award, the Court required the Department to afford the petitioner an opportunity to make a representation and to hear parties likely to be affected by any reconsideration. The Department was directed to consider the petitioner's representation (to be filed within seven days) and to pass a reasoned, speaking order on the validity of the disqualification before taking any final action, thereby ensuring compliance with principles of fairness and preventing arbitrary disqualification in procurement proceedings.

Commissioner-cum-Secretary directed to consider the petitioner's representation within the stipulated time, provide hearing to interested bidders where appropriate, and pass a speaking order disposing of the grievance prior to execution and signing of any agreement.

Final Conclusion: The petition is allowed to the extent that the matter is remitted to the Commissioner-cum-Secretary, Tourism Department for fresh consideration of the disqualification for non-submission of GST registration; the petitioner is to file a representation within seven days and the Department must afford opportunity of hearing and pass a reasoned speaking order before any award or execution of agreement.

Summary order. Appeals disposed in view of declaration filed under the Direct Tax Vivad Se Vishwas Act, 2020; Competent Authority directed to process the declaration and pass appropriate orders expeditiously; assessee granted liberty to restore the appeals without applications for condonation of delay if the outcome under the scheme is adverse.

Exemption under Section 10(23-C)(vi) - educational institution existing solely for educational purposes and not for purposes of profit - remand for fresh consideration - principles of natural justice - speaking order

Exemption under Section 10(23-C)(vi) - educational institution existing solely for educational purposes and not for purposes of profit - remand for fresh consideration - speaking order - principles of natural justice - Whether the petitioner is entitled to exemption under Section 10(23-C)(vi) and whether the impugned order rejecting the claim can be sustained or requires fresh consideration. - HELD THAT: - The Court examined the impugned order rejecting the petitioner's claim for exemption and found that the authority below did not have complete material on crucial aspects, including whether the petitioner generated profit by taking fees for conducting the examination. The parties agreed that the matter would better be decided afresh if the competent authority is provided with all relevant material. In view of the incompleteness of the material before the authority and in the interest of affording a fair hearing, the Court quashed the impugned order and remanded the matter to the appropriate nominated authority for fresh consideration. The remand directs that adequate opportunity of hearing be afforded with full compliance of the principles of natural justice, that the authority decide the application afresh by passing a speaking order, and that parties be permitted to place additional material on record. The Court also recorded a timetable and procedural directions to facilitate expeditious disposal and preserved the parties' liberty to pursue other remedies as per law. [Paras 8, 9, 10]

Impugned order dated 26.09.2014 is quashed; matter remanded to the nominated authority for fresh consideration after affording opportunity and on receipt of additional material, with the authority to pass a speaking order in accordance with principles of natural justice.

Final Conclusion: Writ petition disposed by quashing the impugned order and remanding the petitioner's claim for exemption under Section 10(23-C)(vi) to the appropriate authority for fresh consideration with opportunity to place additional material, compliance with principles of natural justice and a speaking order.

Royalty under a Double Taxation Avoidance Agreement - Explanation 4 to section 9(1)(vi) of the Income Tax Act - sale of software as transfer of goods versus grant of a right to use - retrospective effect of legislative amendment on DTAA

Royalty under a Double Taxation Avoidance Agreement - sale of software as transfer of goods versus grant of a right to use - Receipts of the assessee from sale of software are taxable as royalty under the India-UK DTAA - HELD THAT: - The Court held that the ITAT correctly concluded that the consideration received by the assessee on account of sale of software did not constitute 'royalty' within Article 13 of the India-UK DTAA. The ITAT's conclusion was founded on this Court's earlier decisions which distinguish payments for acquisition of a copyrighted product from payments for the grant of a right to use copyright. Where software is sold as a product (a transfer of a copyrighted article) the payment is for purchase of the product and not for the use of copyright, and therefore does not amount to royalty under the DTAA. The High Court found these precedents binding and applied them to the facts of the present appeals, endorsing the ITAT's reasoning. [Paras 8]

The receipts from sale of software were not held to be royalty under the India-UK DTAA; the appeals on this ground fail.

Explanation 4 to section 9(1)(vi) of the Income Tax Act - retrospective effect of legislative amendment on DTAA - Applicability of Explanation 4 to section 9(1)(vi) of the Act for interpreting 'royalty' in the India-UK DTAA - HELD THAT: - The Court agreed with the ITAT that Explanation 4 to section 9(1)(vi) of the Income tax Act cannot be read so as to alter the meaning of 'royalty' in the India-UK DTAA. In view of the primacy accorded by section 90(2) of the Act, the DTAA definition governs where there is a treaty; the Court relied on its earlier decisions (including New Skies Satellite and InfraSoft/M. Tech precedents) to reject the Revenue's contention that Explanation 4 or prior circulars operate to change treaty interpretation or have retrospective effect to convert such receipts into royalty for years governed by the DTAA. [Paras 9]

Explanation 4 to section 9(1)(vi) does not alter the DTAA definition of 'royalty' for the years in question; the ITAT was right to decline to apply it to the India-UK DTAA.

Sale of software as transfer of goods versus grant of a right to use - Whether statutory copyright classification of sale/rental under the Copyright Act renders such receipts as royalty for income tax purposes - HELD THAT: - The Court treated the Revenue's reliance on the Copyright Act provision as not decisive to convert the receipts into royalty under the DTAA. Applying the established distinction in the precedents, the Court observed that sale of a copy of computer programme as a product does not equate to transfer of the right to use the underlying copyright such as would attract royalty treatment. Accordingly, the mere fact that copyright law describes sale or commercial rental in particular terms does not override the treaty based construction of 'royalty' adopted by the precedents relied upon by the ITAT. [Paras 8]

The Copyright Act provision did not warrant treating the receipts as royalty for purposes of the India-UK DTAA; the ITAT's conclusion stands.

Final Conclusion: The appeals are dismissed. The High Court upheld the ITAT's findings-following this Court's precedents-that receipts from the sale of software in the facts of these cases do not constitute 'royalty' under the India-UK DTAA and that Explanation 4 to section 9(1)(vi) does not alter the treaty interpretation for the assessment years before the Court.

Liability of banking companies to Minimum Alternate Tax under section 115JB - Deductibility of prudential provision for bad debts as deduction under section 36(1)(vii) - Application of precedent by a coordinate Bench

Liability of banking companies to Minimum Alternate Tax under section 115JB - Application of precedent by a coordinate Bench - Banking companies are not liable to pay Minimum Alternate Tax under section 115JB for the Assessment Year 2006-07 as contended by the revenue. - HELD THAT: - The Court, on being informed that the substantial question had been answered against the revenue by the decision of this Court dated 06.11.2020 in ITA No.140/2016, accepted the assessee's submission and applied that precedent. Having regard to the reasoning and conclusion recorded in the earlier judgment, the coordinate Bench answered the question in favour of the assessee and against the revenue, thereby negating the asserted liability of banking companies to MAT for the said assessment year. [Paras 4]

Question answered against the revenue and in favour of the assessee; revenue's contention dismissed.

Deductibility of prudential provision for bad debts as deduction under section 36(1)(vii) - Application of precedent by a coordinate Bench - The assessee bank is eligible to claim deduction for the prudential provision for bad debts (prudential write-off) in computation under section 36(1)(vii) for the Assessment Year 2006-07 despite not debiting a corresponding bad debt write-off in the profit and loss account. - HELD THAT: - Relying on and applying the reasoning of this Court's earlier judgment dated 06.11.2020 in ITA No.140/2016, the Court accepted the assessee's submission that the substantial question concerning the allowability of the claimed prudential provision as a deduction had already been decided in the assessee's favour. The coordinate Bench's precedent was applied to resolve the controversy in favour of the assessee for the specified assessment year. [Paras 4]

Question answered against the revenue and in favour of the assessee; deduction allowed as per the precedent.

Final Conclusion: The substantial questions of law framed at admission have been answered against the revenue and in favour of the assessee by applying the earlier decision of this Court; the revenue's appeal is dismissed.

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interests of the revenue - Deduction under Chapter VI A / section 80P(2)(d) - Acceptable alternate view and application of mind by Assessing Officer - Limits of revisional power where two views are possible

Revisional jurisdiction under section 263 - Erroneous and prejudicial to the interests of the revenue - Deduction under Chapter VI A / section 80P(2)(d) - Acceptable alternate view and application of mind by Assessing Officer - Validity of the Pr. CIT's exercise of revisional jurisdiction under section 263 to set aside the assessment framed under section 143(3) for AY 2015-16 on the ground that deduction under section 80P(2)(d) was wrongly allowed - HELD THAT: - The Assessing Officer conducted limited scrutiny, called for and considered detailed submissions and documents on the claim of deduction under Chapter VI A, and specifically allowed the deduction while framing assessment under section 143(3). The Tribunal found that the AO had applied his mind and adopted a possible view, supported by contemporaneous judicial decisions, in allowing the deduction. Reliance placed in the order under review on precedents that an order is "erroneous" only when it is not in accordance with law and that revisional power under section 263 cannot be used to substitute the Commissioner's view for a reasoned alternative view taken by the AO is determinative. The Tribunal referred to Malabar Industrial Co. Ltd. V/s CIT , CIT V/s Max India Ltd. , Grasim Industries Ltd. V/s CIT , CIT V/s Vikas Polymers and Gabriel India Ltd. as laying down that mere loss of revenue or differences of opinion do not render an assessment order "erroneous and prejudicial" where the AO's view is sustainable in law. Applying that principle, the Tribunal held that the Pr. CIT's satisfaction was not justified and the exercise of revisional jurisdiction was invalid. [Paras 5, 6]

Pr. CIT's order dated 13/11/2019 invoking section 263 quashed; revisional jurisdiction held invalid and the appeal allowed.

Final Conclusion: The revisional order passed by the Pr. CIT under section 263 for AY 2015-16 is quashed; the Tribunal held that the Assessing Officer had taken a tenable view after applying his mind in allowing the deduction, and therefore the exercise of revisional jurisdiction was not justified.

Exception to monetary limits for filing appeals - Special order under section 268A - Low tax effect circulars and applicability to pending appeals - Section 254(2) rectification for mistake apparent on record - Penny stock organised tax evasion

Exception to monetary limits for filing appeals - Special order under section 268A - Penny stock organised tax evasion - Whether CBDT Circular No. 23 of 2019 and the subsequent special order operate to permit filing or recall of departmental appeals in cases involving bogus LTCG/STCL through penny stocks where the appeal was filed before the special order. - HELD THAT: - The Tribunal examined Circular No. 23 of 2019 and the CBDT special order communicated by office memorandum dated 16.09.2019. The Circular provides that notwithstanding any monetary limits fixed under earlier circulars issued under section 268A, appeals may be filed on merits as an exception in cases involving organised tax-evasion activity through bogus LTCG/STCL on penny stocks. The special order, however, is a distinct administrative direction stating that monetary limits shall not apply in such cases and that appeals shall be filed on merits. The Tribunal held that the exception contemplated by Circular No. 23 requires a specific special order and that the special order relates to appeals filed pursuant to that order on or after its date. Consequently, an appeal filed prior to the special order cannot be retroactively treated as filed pursuant to that special order so as to negate the earlier monetary-limit regime. Applying that principle, the Tribunal found that the Revenue's appeal in the instant case (filed before the special order) did not fall within the exception and therefore remained subject to the low-tax-effect limits in force when the appeal was heard. [Paras 7, 8, 9, 10]

CBDT Circular No. 23 of 2019 and the CBDT special order dated 16.09.2019 do not apply to appeals filed before the special order; the exception for penny-stock organised tax-evasion cases applies only to appeals filed pursuant to the special order.

Low tax effect circulars and applicability to pending appeals - Section 254(2) rectification for mistake apparent on record - Whether non-consideration of Circular No. 23 of 2019 and the special order at the time of hearing amounted to a mistake apparent on record amenable to rectification under section 254(2) so as to recall the Tribunal's earlier dismissal on account of low tax effect. - HELD THAT: - The Tribunal noted that both Circular No. 23 of 2019 and the special order dated 16.09.2019 were not in existence and were not part of the record when the appeal was heard and decided. While prior low-tax-effect circulars have been held in some contexts to apply to pending appeals, the present exception is effected by a special order which must exist and be operative at the time an appeal is filed or pursued pursuant to it. The Tribunal held that absence of consideration of a subsequently issued circular or special order is not a "mistake apparent on record" within the narrow ambit of section 254(2) where the material relied upon was not available at the time of hearing and decision. [Paras 5, 11]

Non-consideration of Circular No. 23 of 2019 and the special order was not a mistake apparent on the record; rectification under section 254(2) is not available to recall the earlier dismissal on account of low tax effect.

Final Conclusion: The miscellaneous application filed by the Revenue seeking recall of the Tribunal's order is dismissed; the appeal was rightly dismissed on account of low tax effect because the CBDT special order creating an exception for penny-stock LTCG/STCL cases did not apply to appeals filed before that special order and non-consideration of the subsequent circular/special order is not a mistake apparent on record.

Addition on account of unexplained investment - Presumption under section 132(4A) as to documents found on search - Onus on the person in whose name seized documents appear to prove source from disclosed income - Distinction between documents found at residential premises and office premises for attribution - Penalty under section 271(1)(c) - recomputation limited to sustained additions

Addition on account of unexplained investment - Presumption under section 132(4A) as to documents found on search - Onus on the person in whose name seized documents appear to prove source from disclosed income - Distinction between documents found at residential premises and office premises for attribution - Validity of additions made in respect of two seized bills for purchase of electronic items - HELD THAT: - Two bills from Ganpati Electronics (No.1198 dated 10.11.2003 for Rs.45,000 and No.1199 dated 11.11.2003 for Rs.1,75,000) were seized during search from the residential premises of a partner, Shri S.K. Singhal. The presumption under section 132(4A) arises in respect of documents found during search at the residence and, absent rebuttal, such documents are presumed to belong to the person from whose premises they were seized. Bill No.1198 was issued in the name of the assessee firm and the firm itself accepted that invoice as relating to it; consequently the onus lay on the firm to prove by verifiable evidence that the purchase was from disclosed sources. No corroborative evidence was produced to support the claim that payment was made by a third party; therefore the unexplained investment represented by bill No.1198 is upheld. By contrast, bill No.1199 did not bear the firm's name, was found at the partner's residence, and the presumption as to ownership was not rebutted in the hands of the individual; there was consequently no basis to attribute that bill to the firm. The Tribunal therefore sustained the addition corresponding to bill No.1198 and deleted the addition corresponding to bill No.1199. [Paras 7, 8]

Addition of Rs.45,000 upheld as unexplained investment in the hands of the assessee firm; addition of Rs.1,75,000 deleted.

Penalty under section 271(1)(c) - recomputation limited to sustained additions - Levy of penalty under section 271(1)(c) and its quantification in light of partly sustained additions - HELD THAT: - The penalty levied under section 271(1)(c) was confirmed on merits by the Tribunal. However, because the Tribunal has partly sustained and partly deleted the additions, the matter is remanded to the Assessing Officer for limited purposes of recomputation of the quantum of penalty corresponding only to the addition sustained by the Tribunal. No specific arguments were advanced by the assessee before the Tribunal on the penalty point. [Paras 10]

Penalty under section 271(1)(c) confirmed; matter remitted to the Assessing Officer for recomputation of penalty limited to the sustained addition.

Final Conclusion: The assessee's appeal is partly allowed: the addition relating to the invoice in the firm's name is upheld, the addition relating to the other seized invoice is deleted, and the penalty is confirmed but remitted for recomputation limited to the sustained addition.

Disallowance under section 14A read with Rule 8D - Computation of disallowance under Rule 8D(2)(ii) - interest linkage with own funds - Administrative expenditure disallowance under Rule 8D(2)(iii) - Limitation of section 14A disallowance to amount of exempt income - Disallowance as notional/real expenditure - nexus with business project - Disallowance under section 40(a)(ia) and applicability of second proviso - retrospective/curative operation - Restoration/remand to Assessing Officer for factual verification in light of judicial precedents

Computation of disallowance under Rule 8D(2)(ii) - interest linkage with own funds - Administrative expenditure disallowance under Rule 8D(2)(iii) - Validity of disallowance computed by AO under Rule 8D for AY 2011-12, distinguishing interest component and administrative expenditure component. - HELD THAT: - The Tribunal examined the assessee's contention that no disallowance out of interest expenditure under Rule 8D(2)(ii) was warranted for AY 2011-12 because the assessee's own funds exceeded the value of investments, a contention supported by the jurisdictional High Court decision in Micro Labs Ltd. The Tribunal held that this factual contention requires verification by the AO and therefore set aside the CIT(A)'s order on the interest-disallowance point and restored the matter to the AO to examine and apply the Micro Labs decision. However, the Tribunal confirmed the disallowance of administrative expenses made under Rule 8D(2)(iii) for AY 2011-12. [Paras 5]

Interest disallowance under Rule 8D(2)(ii) is restored to AO for factual examination in accordance with Micro Labs Ltd.; disallowance under Rule 8D(2)(iii) is confirmed.

Disallowance under section 14A read with Rule 8D - Limitation of section 14A disallowance to amount of exempt income - Whether disallowance under section 14A (computed under Rule 8D) for AY 2010-11 and AY 2012-13 can be limited to the amount of exempt dividend income. - HELD THAT: - The Tribunal noted that the CIT(A) restricted the section 14A disallowance to the extent of exempt dividend income, following coordinate-bench precedent and judicial authority including decisions of the Delhi High Court. The revenue's submission that the CIT(A) should have followed CBDT Circular No.5/2014 was considered but the Tribunal found the CIT(A)'s approach supported by the referred authorities and coordinate bench orders. On this basis the Tribunal found no infirmity in the CIT(A)'s orders for AY 2010-11 and AY 2012-13 and confirmed the limitation of disallowance to exempt income for those years. [Paras 6]

For AY 2010-11 and AY 2012-13 the disallowance under section 14A is confirmed to the extent it is restricted to the amount of exempt dividend income.

Disallowance as notional/real expenditure - nexus with business project - Allowability of compensation paid on cancellation of Joint Development Agreement (claimed as part of project cost) in AY 2010-11. - HELD THAT: - The AO disallowed the portion of compensation claimed as project cost on the basis that the payment lacked nexus with the NLI project and the assessee had independent dealings indicating a profit motive from facilitating transfer of land. The CIT(A) applied an identical coordinate-bench Tribunal decision in the assessee's own earlier year (AY 2009-10) which held that the payment had no nexus with the NLI property and therefore was not an allowable project cost. The Tribunal observed there was no change in facts and, accordingly, found no infirmity in the CIT(A)'s reliance on the earlier coordinate-bench conclusion and confirmed the disallowance. [Paras 7]

The disallowance of the claimed compensation in AY 2010-11 is confirmed.

Disallowance under section 40(a)(ia) and applicability of second proviso - retrospective/curative operation - Restoration/remand to Assessing Officer for factual verification in light of judicial precedents - Whether interest paid without deduction of tax at source (claimed as deduction) for AY 2010-11 should be disallowed under section 40(a)(ia), or whether the second proviso (held by some courts to be retrospective/curative) applies. - HELD THAT: - The AO disallowed the interest deduction under section 40(a)(ia) for failure to deduct tax at source. The assessee urged applicability of the second proviso to section 40(a)(ia) (inserted w.e.f. 1.4.2013) on the basis that judicial decisions have treated that proviso as retrospective/curative and as removing hardship. The Tribunal observed that the Hon'ble Bombay High Court has held the proviso to be retrospective/curative in character and found merit in the assessee's submission. Consequently, the Tribunal restored the issue to the AO to examine the applicability of the second proviso to section 40(a)(ia) in AY 2010-11 in the light of that judicial view. [Paras 8]

Issue remitted to the AO for examination of the applicability of the second proviso to section 40(a)(ia) for AY 2010-11 in light of relevant judicial decisions.

Final Conclusion: The Tribunal dismissed the revenue appeal and the assessee's appeal for AY 2012-13; the assessee's appeals for AY 2010-11 and AY 2011-12 are partly allowed - (i) section 14A disallowance limited to exempt income confirmed for AY 2010-11 and AY 2012-13, (ii) interest component under Rule 8D(2)(ii) for AY 2011-12 remanded to AO for factual verification while administrative expenses under Rule 8D(2)(iii) confirmed, (iii) compensation disallowance for AY 2010-11 confirmed, and (iv) the section 40(a)(ia) issue for AY 2010-11 remanded to AO for examination of the second proviso's applicability.

Registration under section 12AA - Genuineness of charitable activities - Examination of past annual accounts for registration - Distinction between newly established and pre-existing trusts - Opportunity of hearing before adverse order - Remand for fresh consideration

Registration under section 12AA - Genuineness of charitable activities - Distinction between newly established and pre-existing trusts - Whether the Commissioner (Exemption) may examine the genuineness of activities of a trust while deciding an application for registration under section 12AA. - HELD THAT: - The Tribunal held that section 12AA(1) empowers the CIT(E) to call for documents and to satisfy himself about the genuineness of activities before granting or refusing registration. A distinction was drawn between (a) a newly set up trust which may seek registration on the basis of proposed activities and (b) a trust already in existence for several years where the CIT(E) may examine actual activities carried out in earlier years. Acceptance of a blanket rule barring examination of activities would negate the statutory mandate. The facts showed the present trust was constituted in 1999 and applied for registration two decades later, therefore examination of past accounts and activities by the CIT(E) was lawful and permissible. [Paras 4, 5]

CIT(E) is entitled to examine the genuineness of activities, and where a long-established trust applies for registration after several years, its past activities may properly be scrutinised under section 12AA.

Examination of past annual accounts for registration - Opportunity of hearing before adverse order - Remand for fresh consideration - Whether the impugned refusal of registration should be upheld or the matter remitted for fresh consideration after affording the assessee an opportunity of hearing. - HELD THAT: - The Tribunal noted deficiencies in the assessee's accounting presentation (income routed directly to balance-sheet funds rather than the Income & Expenditure account) and observed that the CIT(E) had concluded no charitable activity was traceable. However, the Tribunal found that the assessee had not been afforded adequate opportunity to explain its accounting treatment and the factual matrix. In the absence of a proper opportunity of hearing and given the factual and accounting issues that required clarification, the Tribunal set aside the CIT(E)'s order and directed remand to the file of the CIT(E) for de novo consideration after allowing a reasonable hearing. The Tribunal cautioned that its observations should not be construed as vindicating either party's stand. [Paras 6, 7, 8]

Impugned order set aside and matter remitted to the CIT(E) for fresh decision after giving the assessee a reasonable opportunity of hearing; appeal allowed for statistical purposes.

Final Conclusion: The Tribunal held that the CIT(Exemption) may enquire into the genuineness of activities under section 12AA, especially where a long-established trust seeks registration long after its constitution; but because the assessee was not given an adequate opportunity to explain its accounts and activities, the CIT(E)'s refusal is set aside and the matter is remitted for fresh consideration after affording a reasonable hearing; appeal allowed for statistical purposes.

Characterisation of profit on sale of shares as business income or capital gains - maintenance of separate portfolios for investment and trading - delivery-based transactions and period of holding - principle of consistency in treatment of transactions across assessment years - disallowance under Section 14A read with Rule 8D of the Income Tax Rules - limitation of Section 14A/Rule 8D disallowance to exempt income

Characterisation of profit on sale of shares as business income or capital gains - maintenance of separate portfolios for investment and trading - delivery-based transactions and period of holding - principle of consistency in treatment of transactions across assessment years - Profit on sale of the shares in dispute is to be assessed as income from capital gains and not as business income. - HELD THAT: - The Tribunal found on the facts that the assessee maintained two distinct portfolios - an investment portfolio and a trading portfolio - and had presented and computed gains accordingly. The shares in dispute were delivery-based transactions, held for periods exceeding six months, and some were purchased in earlier years. The Revenue had consistently accepted the assessee's treatment of similar transactions as capital gains in earlier assessment years. Relying on the decision of the Jurisdictional High Court in CIT v. Gopal Purohit, which upheld the Tribunal's finding that an assessee may maintain separate portfolios and that delivery-based transactions held as investments are taxable as capital gains, the Tribunal held that the findings and facts in the present case are identical and applicable. Consequently the CIT(A)'s conclusion treating the disputed gains as business income was set aside. [Paras 8, 9, 10]

Ground No.1 is allowed: the disputed gains are capital gains and not business income.

Disallowance under Section 14A read with Rule 8D of the Income Tax Rules - limitation of Section 14A/Rule 8D disallowance to exempt income - The disallowance under Section 14A read with Rule 8D is not maintainable to the extent it exceeds the exempt income; disallowance restricted to the exempt dividend income. - HELD THAT: - The assessee earned exempt dividend income which was claimed as exempt. The AO applied Rule 8D and made a disallowance, upheld by CIT(A). The Tribunal, following consistent decisions of High Courts (including the Jurisdictional High Court) and recent Tribunal decisions, held that a disallowance under Section 14A read with Rule 8D cannot exceed the exempt income earned by the assessee and must have a rational nexus to the income. Applying that principle to the facts, the Tribunal restricted the disallowance to the amount of exempt income shown by the assessee. [Paras 12, 13, 14, 15]

Ground No.2 is partly allowed: disallowance under Section 14A/Rule 8D is restricted to the exempt dividend income of Rs. 2,03,834.

Final Conclusion: The appeal is partly allowed: the Tribunal sets aside the CIT(A)'s treatment of the disputed share-sale gains as business income and holds them to be capital gains; the Section 14A/Rule 8D disallowance is modified and restricted to the exempt dividend income of Rs. 2,03,834.

Taxability of export commission paid to non-resident agents - deduction of tax at source under section 195 - disallowance under section 40(a)(i) for failure to deduct tax - territorial nexus for taxation of fees for technical services / royalty - application of Explanation to section 9(2) and its amendment - treatment of services rendered outside India for marketing/canvassing

Taxability of export commission paid to non-resident agents - deduction of tax at source under section 195 - disallowance under section 40(a)(i) for failure to deduct tax - territorial nexus for taxation of fees for technical services / royalty - application of Explanation to section 9(2) and its amendment - Export commission paid to a non-resident agent for services rendered outside India is not liable to withholding under section 195 and therefore not disallowable under section 40(a)(i). - HELD THAT: - The Tribunal affirmed the view taken by the CIT(A) that the payments to M/s. Biggleswade Ltd., Hong Kong were for marketing/export sales services rendered outside India and that the assessee produced evidence that the payments for the relevant year related only to export sales. Following the coordinate Bench decision in M/s. Turbo Energy Ltd. and the Madras High Court decision in Faizan Shoes Pvt. Ltd., the Tribunal held that such services do not amount to managerial or consultancy services taxable as fees for technical services under section 9(1)(vii) absent a sufficient territorial nexus with India. The Tribunal relied on the principle that the deeming fiction in section 9 does not itself create territorial nexus; for taxation there must be services rendered in and/utilised in India, as explained in Ishikawajima-Harima Heavy Industries Ltd. The Tribunal noted the post facto amendment to the Explanation to section 9(2) introduced by Finance Act, 2010, but observed that for the assessment period in issue the law did not treat services rendered outside India to foreign agents as taxable under section 9(1)(vii). Applying these legal propositions to the facts, and noting that the foreign agent had no permanent establishment or business connection in India, the Tribunal found no obligation on the assessee to deduct tax under section 195 and consequently no ground for disallowance under section 40(a)(i). [Paras 7, 8]

The CIT(A)'s deletion of the disallowance was upheld and the Revenue's appeal dismissed.

Final Conclusion: The Tribunal dismissed the Revenue's appeal for A.Y. 2009-10, upholding the CIT(A)'s deletion of the addition: export commission paid to the non-resident agent for services rendered outside India is not subject to withholding under section 195 and not disallowable under section 40(a)(i).

Reopening beyond four years - failure to disclose fully and truly all material facts - reason to believe - tangible material required to form reason to believe - independent application of mind versus borrowed satisfaction - reopening within four years - requirement of live nexus between material and belief - assessment completed under proceedings consequent to search/survey and effect on reopening jurisdiction - onus of proving genuineness of transactions and limitation on reopening by change of opinion

Reopening beyond four years - failure to disclose fully and truly all material facts - reason to believe - Validity of reassessment for AY 2009-10 reopened beyond four years under the first proviso to Section 147 where the AO issued notice before possessing the appraisal report and without demonstrating failure by the assessee to disclose fully and truly all material facts. - HELD THAT: - The Tribunal held that where an assessment had been completed under section 153A/143(3), reopening beyond four years required the AO to record reasons showing that income had escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts. The reasons must stand on their own and be based on information in the AO's possession before issue of notice. For AY 2009-10 the reasons recorded merely referenced an appraisal report which the AO received after issuance of notice dated 31-03-2016; the appraisal report was received on 05-04-2016. The reasons did not identify any primary facts omitted by the assessee or demonstrate failure to disclose fully and truly all material facts. Applying the binding principles in Calcutta Discount Co., Ganga Saran, and NDTV, the Tribunal concluded that the AO lacked the requisite foundation and jurisdiction to reopen and that the reassessment order was a nullity. [Paras 15, 17, 18, 19, 20]

Reopening and reassessment for AY 2009-10 quashed for failure to satisfy the condition precedent and for issuing notice without requisite information; cross objection allowed.

Reopening beyond four years - failure to disclose fully and truly all material facts - reasons must disclose which material facts were not disclosed - Validity of reassessments for AYs 2010-11 and 2011-12 reopened beyond four years where the recorded reasons alleged non disclosure but did not identify primary facts not disclosed. - HELD THAT: - The Tribunal examined the recorded reasons and the original assessment requisitions and found that the AO's predecessor had specifically enquired into commodity transactions and the assessee had furnished primary facts and supporting documents in the original proceedings. The recorded reasons for reopening were general and did not specify which material facts were not truly and fully disclosed; a bald averment of non disclosure without linking to primary facts does not meet the statutory requirement of the first proviso to Section 147. Reliance on authorities (including Calcutta Discount Co., Hindustan Lever, Amiya Sales, Tao Publishing and NDTV) led the Tribunal to conclude that the condition precedent for reopening beyond four years was not satisfied and that the reassessments were void ab initio. [Paras 24, 25, 26, 27, 30]

Reopenings and reassessments for AYs 2010-11 and 2011-12 quashed for non compliance with the requirement to record specific reasons showing failure to disclose primary facts; cross objections allowed.

Reopening within four years - requirement of live nexus between material and belief - independent application of mind versus borrowed satisfaction - tangible material required to form reason to believe - Validity of reassessment for AY 2012-13 reopened within four years where the AO relied on an appraisal report but did not independently apply his mind or possess tangible material establishing a live nexus with escapement of income. - HELD THAT: - Although the proviso to Section 147 did not apply to reopening within four years, the AO still had to form a genuine 'reason to believe' based on tangible material having a proximate link with escapement of income and arising from the AO's own application of mind. The Tribunal reviewed the appraisal report, survey statements (including director and broker statements), and the AO's conduct and found that the appraisal report merely expressed apprehensions and did not contain tangible evidence; the AO adopted the appraisal report without independent verification and recorded mechanically worded reasons. Citing precedents (Lakhmani Mewal Das, Kelvinator, and authorities emphasising live nexus and that change of opinion is not a ground for reopening), the Tribunal held that the AO's belief was a 'borrowed satisfaction' and lacked the requisite tangible material and independent application of mind. Consequently the reassessment was quashed. [Paras 35, 36, 37, 38, 39]

Reassessment for AY 2012-13 quashed for absence of tangible material and independent reasons to believe; cross objection allowed.

Onus of proving genuineness of transactions and limitation on reopening by change of opinion - assessment completed under proceedings consequent to search/survey and effect on reopening jurisdiction - Merits-whether losses claimed by the assessee from trading on NMCE were bogus for AYs 2009-10, 2010-11, 2011-12, 2012-13 and 2014-15 and whether the CIT(A)'s deletion of the disallowance should be interfered with. - HELD THAT: - The Tribunal accepted the CIT(A)'s findings that the AO's conclusions were not supported by tangible evidence. The assessee had furnished primary documents, time stamped contract notes, broker confirmations and the AO's order sheet acknowledged production of supporting documents. Statements recorded u/s 131 from the director and broker did not contain self incriminating admissions; enquiries from brokers under section 133(6) corroborated the transactions. Penalties or token fines imposed by the regulator on some brokers did not pertain to the assessee's relevant periods or establish that the assessee's transactions were in genuine. The AO relied on statistical and generalized assertions (synchronized trading, clustering) without identifying live links to the assessee or adducing evidence of contrivance. The Tribunal held that suspicion alone cannot substitute for evidence; the assessee discharged the primary onus of proving genuineness and the Revenue failed to rebut it. [Paras 47, 48, 52, 53, 55]

CIT(A)'s deletion of disallowance of NMCE losses upheld; Revenue's appeals dismissed for all the relevant years including AY 2014-15.

Final Conclusion: The Tribunal quashed the reassessments reopened under Section 147/148 for AYs 2009-10, 2010-11, 2011-12 and 2012-13 for failing to meet the statutory and judicially declared requirements for recording reasons (absence of primary facts, issuing notice without requisite information, lack of tangible material and borrowed satisfaction). On merits the Tribunal upheld the CIT(A)'s deletion of disallowance of losses claimed from trading on NMCE and dismissed the Revenue's appeals for AYs 2009-10 to 2012-13 and 2014-15; all cross objections by the assessee were allowed.

Deemed dividend under section 2(22)(e) - Assessment under section 153A - Requirement of incriminating material for additions in completed assessments - Reopening / reassessment of completed assessments only on basis of seized material - Abatement of pending assessments on initiation of search

Deemed dividend under section 2(22)(e) - Assessment under section 153A - Requirement of incriminating material for additions in completed assessments - Validity of addition as deemed dividend under section 2(22)(e) in assessment framed under section 153A where no assessment was pending on date of search and no incriminating material was found. - HELD THAT: - The Tribunal held that where, on the date of search and seizure, no assessment proceedings for the year under consideration were pending, any assessment under section 153A must be founded on incriminating material seized or requisitioned in the search. The AO had added amounts as deemed dividend without any nexus to incriminating material discovered during the search; the CIT(A) quashed that addition on the jurisdictional ground. The Tribunal analysed authoritative decisions including Kabul Chawla and other High Court precedents which interpret section 153A as linked to 'search' and 'requisition', explain that pending assessments abate while completed assessments do not and can be reopened under section 153A only if incriminating material is gathered in the search. Applying this settled principle to the facts (no pending assessment on date of search and no incriminating material), the Tribunal found the AO lacked jurisdiction to make the addition under section 153A and upheld the CIT(A)'s order quashing the addition. [Paras 9, 10]

The addition of Rs. 2,80,00,000 made as deemed dividend under section 2(22)(e) was quashed as unsustainable in the absence of incriminating material and where no assessment was pending on the date of search.

Final Conclusion: The revenue's appeal is dismissed; the Tribunal upholds the CIT(A)'s order quashing the addition made under section 2(22)(e) for A.Y. 2010-11 for lack of incriminating material and absence of pending assessment on the date of search.

Depreciation on intangible stock-exchange membership rights - beneficial ownership for claiming depreciation and related expenses - owner within the meaning of Section 32 - disallowance of interest on interest free advances under Section 36(1)(iii) - disallowance under Section 14A read with Rule 8D - limitation that disallowance under Section 14A/Rule 8D cannot exceed exempt income - allowability of penalty/penal charges under Section 37 - allowability of bad debts under Section 36(2) for broker transactions - Explanation to Section 73 (speculative loss) and its application to broker/client transactions - cost of acquisition on demutualisation - Section 55(2)(ab) and Explanation 1(ha) to Section 2(42A) - special rule for depreciable assets - Section 50 (written down value) vis-a -vis Section 55(2)(ab) - obligation to deduct TDS - Sections 194J/194I and Section 40(a)(ia) - remand for fresh verification/quantification to Assessing Officer

Depreciation on intangible stock-exchange membership rights - owner within the meaning of Section 32 - Deletion of addition for depreciation claimed on stock-exchange membership card - HELD THAT: - The Tribunal confirmed the CIT(A)'s deletion of the AO's addition in respect of depreciation on the Ahmedabad stock exchange membership card, following the Tribunal's earlier decision in the assessee's own case for AY 2008 09. The court accepted that the decision on identical facts by a coordinate bench in the assessee's own earlier proceedings covers the issue and there is no change in facts or law to warrant interference. Accordingly the AO was directed to delete the addition. [Paras 9]

Addition disallowing depreciation on membership card deleted; Revenue's ground dismissed.

Beneficial ownership for claiming depreciation and related expenses - owner within the meaning of Section 32 - Allowability of depreciation, interest and insurance on vehicles registered in directors' names - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the assessee was the beneficial owner of the vehicles despite legal registration in individual names. The assessee had borne purchase cost, loan repayments, running expenses and paid wealth tax; vehicles were shown as assets in the balance sheet and used for business. Ownership for Section 32 was construed in substance - exclusive possession, control and right to use - and registration under Motor Vehicles Act was not determinative. The claim for depreciation, interest and insurance was therefore allowable. [Paras 22]

Addition rejected; depreciation, interest and insurance allowed.

Disallowance of interest on interest free advances under Section 36(1)(iii) - Disallowance of proportionate interest on advances to sister concerns - HELD THAT: - Following the Tribunal's earlier decision in the assessee's own case for AY 2008 09 and Supreme Court guidance, the CIT(A) deleted the AO's proportionate interest disallowance. The assessee's own funds exceeded the interest free advances, and evidence showed advances were made from such own funds; thus no disallowance under Section 36(1)(iii) was warranted. The Tribunal, finding no change in facts or law, confirmed deletion. [Paras 32]

Addition under Section 36(1)(iii) deleted; Revenue's ground dismissed.

Disallowance under Section 14A read with Rule 8D - limitation that disallowance under Section 14A/Rule 8D cannot exceed exempt income - Disallowance under Section 14A/Rule 8D in relation to exempt dividend income and administrative expenses - HELD THAT: - The Tribunal confirmed the CIT(A)'s approach: interest disallowance deleted because the assessee's interest free funds exceeded investments yielding exempt income; administrative expenses disallowance under Rule 8D(2)(iii) was sustained but recomputed after excluding amounts relating to an amalgamated subsidiary. The Tribunal further clarified and applied the settled proposition (citing High Court and Supreme Court authorities) that disallowance under Section 14A/Rule 8D cannot exceed the amount of exempt income; accordingly in the later AY the Revenue's disallowance was restricted and the assessee's appeal partly allowed. [Paras 42]

Interest disallowance deleted; administrative expenses disallowance sustained to limited extent and recomputed; disallowance cannot exceed exempt income.

Allowability of penalty/penal charges under Section 37 - Deductibility of penalties levied by stock exchanges for by law procedural non compliance - HELD THAT: - The CIT(A) and Tribunal followed the assessee's own earlier Tribunal decisions and accepted that the penalties imposed by exchanges for procedural delays in complying with bye laws did not amount to infraction of law attracting Explanation 1 to Section 37. Such penalties were held to be incurred in the course of business and allowable. The Tribunal found no contrary material and confirmed deletion of the AO's disallowance. [Paras 50]

Addition disallowing penalty expenses deleted; Revenue's ground dismissed.

Allowability of bad debts under Section 36(2) for broker transactions - Deletion of addition disallowing bad debt claim - HELD THAT: - Relying on the Tribunal's earlier decision in the assessee's own case, the Tribunal accepted that amounts written off in respect of client transactions executed by a broker could qualify as bad debts under Section 36(2). The AO's disallowance was set aside as the assessee had offered brokerage income to tax and the written off amounts arose in the course of broking operations; no material was shown to distinguish the facts from the earlier favourable decision. [Paras 59]

Bad debt disallowance deleted; Revenue's ground dismissed.

Explanation to Section 73 (speculative loss) and its application to broker/client transactions - Treatment of Saudafer (trading errors) loss as business loss not speculative loss - HELD THAT: - On facts the Tribunal held the impugned loss arose from transactions entered on behalf of clients and not from proprietary share trading by the assessee; the audit report and P&L supported that the assessee's business was stockbroking. Consequently the Explanation to Section 73 (which deems purchase sale business in shares to be speculation) did not apply. The Revenue's addition treating the loss as speculative was therefore dismissed and the assessee's ground allowed in respect of the portion relating to F&O executed through recognized exchanges. [Paras 75]

Loss held not speculative; Revenue's ground dismissed; assessee's ground allowed to extent held.

Cost of acquisition on demutualisation - Section 55(2)(ab) and Explanation 1(ha) to Section 2(42A) - special rule for depreciable assets - Section 50 (written down value) vis-a -vis Section 55(2)(ab) - Computation of capital gain on BSE shares allotted on demutualisation - cost and year for indexation - HELD THAT: - The Tribunal analysed the interplay of Section 55(2)(ab), Explanation 1(ha) to Section 2(42A) and Section 50. For the membership card acquired in 1995 96 (no depreciation claimed) the original cost under Section 55(2)(ab) was to be taken. For the membership card acquired in 2000 01, depreciation had been claimed and Section 50 (depreciable asset rule) would ordinarily apply; however once the card converted to shares in 2005 06 it ceased to be a depreciable asset - the Tribunal concluded Section 50 could not be applied for the year of sale. The assessee had, at the CIT(A) stage, accepted indexation from AY 2006 07 (FY 2005 06); the Tribunal declined to interfere with that concession and dismissed both parties' appeals on this point. [Paras 95]

Cost taken per Section 55(2)(ab) for non depreciated card; Section 50 not applied after demutualisation; indexation from AY 2006 07 as accepted before CIT(A) - grounds dismissed.

Obligation to deduct TDS - Sections 194J/194I and Section 40(a)(ia) - Liability to deduct TDS in respect of stock exchange membership/transaction charges and VSAT/lease line charges - HELD THAT: - The Tribunal held that transaction and membership charges payable to stock exchanges are payments for facilities necessary for trading and are not 'fees for technical services' under Section 194J; relying on Supreme Court and High Court authority, no TDS obligation arose and Section 40(a)(ia) disallowance could not be sustained. Similarly, VSAT and lease line charges were held to be reimbursement/nature of facility (no element of income) and not subject to TDS under Section 194I; consequently disallowances were deleted or set aside in favour of the assessee. [Paras 122, 128]

No obligation to deduct TDS on membership/transaction charges and on VSAT/lease line charges; disallowances deleted.

Allowability of expenses - revenue v. capital - Nature of expenditure on mobile phones - revenue expense allowed - HELD THAT: - The Tribunal disagreed with the CIT(A)'s classification of mobile phones as capital (plant & machinery). Noting absence of specific entry for mobile phones in Appendix I and rapid obsolescence of mobile phones, the Tribunal held the expenditure to be revenue in nature and directed deletion of the addition; the AO was directed to allow revenue treatment (or, as earlier directed, depreciation if treated capital), but the Tribunal concluded revenue treatment was appropriate and allowed the assessee's ground. [Paras 115]

Mobile phone expenditure allowed as revenue; addition deleted.

Documentary onus for ITS/26AS mismatches - Addition on account of ITS/26AS mismatch (small amount) confirmed - HELD THAT: - The AO made additions for amounts reflected in Form 26AS but not accounted for by the assessee. The CIT(A) deleted most items after documentary reconciliation, but confirmed an addition of Rs. 8,678 where the assessee failed to produce evidence that the amount was not received. The Tribunal upheld the CIT(A)'s limited confirmation, observing the onus lay on the assessee to disprove receipt. [Paras 104]

Addition of Rs. 8,678 confirmed; other mismatches deleted.

Remand for fresh verification/quantification to Assessing Officer - Deposits made with landlords - matter remanded for fresh adjudication - HELD THAT: - The assessee sought deduction for deposits written off; it had not filed supporting documents before the authorities below. The assessee requested opportunity to furnish evidence and the Revenue did not oppose restoration. The Tribunal set aside that issue to the file of the AO for fresh adjudication and directed the assessee to file necessary supporting documents and cooperate in assessment proceedings. [Paras 161]

Issue remitted to Assessing Officer for fresh adjudication; ground allowed for statistical purposes.

Monetary threshold for Revenue appeals - CBDT circular - Maintainability of Revenue appeal for AY 2012 13 due to tax effect threshold - HELD THAT: - The Tribunal noted CBDT Circular No.17/2019 raising monetary limits for filing departmental appeals. The Revenue's appeal for AY 2012 13 had tax effect below the prescribed threshold for filing before the Tribunal; no exception applied on the face of the record. The appeal was held not maintainable and dismissed, with liberty to Revenue to seek recall if verification shows an exception applies or tax effect exceeds threshold. [Paras 172, 173]

Revenue appeal dismissed as not maintainable under CBDT monetary limit circular.

Final Conclusion: The Tribunal, after hearing rival contentions and relying largely on coordinate bench decisions in the assessee's own earlier proceedings and on binding authority, confirmed the CIT(A)'s orders in favour of the assessee on multiple substantive heads (depreciation on membership cards, beneficial ownership of vehicles, deletion of interest disallowance under Section 36, allowability of penalties and bad debts, exclusion of speculative treatment for client losses, TDS not attracted on exchange facilities and on VSAT/lease lines, and treatment of mobile phones as revenue expenditure). Section 14A/Rule 8D disallowances were restricted and recomputed consistent with the principle that such disallowance cannot exceed exempt income. One factual matter (deposit writen off claims) was remanded to the AO for fresh adjudication on production of documents. Revenue appeals were otherwise dismissed; the Revenue appeal for AY 2012 13 was held not maintainable under the CBDT monetary limit circular.

Outstanding receivables as separate international transaction - Imputation of interest on receivables - Working capital adjustment subsumes interest on receivables - Benchmarking deferred receivables - Amendment to Clause (c) of Explanation to Section 92B and its effect

Outstanding receivables as separate international transaction - Benchmarking deferred receivables - Amendment to Clause (c) of Explanation to Section 92B and its effect - Whether outstanding receivables constitute a separate international transaction requiring benchmarking. - HELD THAT: - The Tribunal held that, as a matter of law following the post-2012 amendment to Clause (c) of the Explanation to Section 92B, "deferred receivables" can constitute an international transaction and are to be benchmarked for delay beyond a reasonable credit period. The Bench nonetheless examined the facts of the case and noted that the TPO had granted working capital adjustments for the comparables and that there was no dispute about the WCA having been applied. Applying these facts, the Tribunal concluded that although outstanding receivables are in principle a separate international transaction, in the peculiar facts of this case the effect of receivables is subsumed within the working capital adjustment already allowed by the TPO. [Paras 5]

Outstanding receivables are capable of being a separate international transaction, but on the facts (where WCA was granted) no separate benchmarking adjustment is required.

Working capital adjustment subsumes interest on receivables - Imputation of interest on receivables - Whether a separate adjustment by imputing interest on outstanding receivables is required when working capital adjustment has been granted. - HELD THAT: - Relying on the fact that the TPO had allowed working capital adjustments for the comparables and on precedents treating WCA as taking into account the interest impact of receivables, the Tribunal held that additional imputation of interest on outstanding receivables would amount to double counting. The Tribunal referred to its earlier order for the assessee (A.Ys. 2011-12 and 2012-13) and to authority holding that differential working capital impact between the assessee and comparables is already factored into pricing and profitability, and therefore further adjustment on account of receivables is unwarranted. Consequently the Tribunal directed that no adjustment by way of imputing interest on outstanding receivables be made in the instant case. [Paras 5]

No separate imputation of interest on outstanding receivables is to be made where the working capital adjustment has been allowed.

Interest under charging provisions consequential to TP adjustment - Charging of interest under the charging provisions as a consequence of transfer pricing adjustment. - HELD THAT: - The Tribunal recorded that the ground relating to charging of interest under the relevant charging provision (noted in the order as consequential) was not adjudicated on merits in this appeal and remains consequential in nature. No substantive determination on the merits of interest computation or applicability was made at this stage. [Paras 6]

Left open as consequential; not adjudicated in the present order.

Initiation of penalty proceedings - Prematurity of penalty adjudication - Whether penalty proceedings under the relevant penalty provisions should be adjudicated in the present appeal. - HELD THAT: - The Tribunal observed that the challenge to initiation of penalty proceedings under the cited penalty provisions is premature for adjudication at this stage. It did not proceed to determine the merits of penalty imposition, leaving the matter for adjudication at the appropriate stage when ripe. [Paras 7]

Penalty issue is premature and not adjudicated in this order.

Final Conclusion: Appeal allowed: the Tribunal directed that no separate transfer pricing adjustment by imputation of interest on outstanding receivables be made in the facts of this case (where WCA was granted); consequential interest and penalty issues were left open as premature or consequential.

Provisional release under section 110-A of the Customs Act - Confiscation of conveyances under section 115 of the Customs Act - Definition of "goods" to include vessels for certain purposes - Central Government's power to prohibit imports under section 11 (notification requirement) - Validity and scope of Board's Circular No.35/2017-Cus. vis-a -vis provisional release

Provisional release under section 110-A of the Customs Act - Validity and scope of Board's Circular No.35/2017-Cus. vis-a -vis provisional release - Provisional release could not be refused merely on the ground that the imported goods were 'prohibited' by reference to the Board's circular. - HELD THAT: - Section 110-A confers a statutory mechanism for provisional release of goods, documents or things seized under section 110 by taking a bond with such security and conditions as the adjudicating authority may require. The High Court in Sidharth Vijay Shah was held to the effect that the words of section 110-A are general and do not exclude provisional release of goods categorized as prohibited by administrative circular. Applying that reasoning, the Additional Commissioner's refusal to grant provisional release on the ground that the goods are prohibited relying on Circular No.35/2017-Cus. is misplaced. The circular cannot be read to impose a statutory bar where section 110-A provides for provisional release subject to conditions imposed by the adjudicating authority. [Paras 27, 28, 29]

Refusal of provisional release on the sole ground of prohibition under the Board's circular was not legally sustainable.

Central Government's power to prohibit imports under section 11 (notification requirement) - The Additional Commissioner acted beyond his jurisdiction in treating the imported goods as prohibited under section 11 in absence of any notification issued by the Central Government. - HELD THAT: - Section 11 empowers the Central Government to prohibit importation/exportation by notification in the Official Gazette upon satisfaction of specified purposes. The adjudicating authority cannot itself declare goods prohibited under section 11; it required a gazetted notification by the Central Government. Respondent No.1 admitted that no notification under section 11 had been issued. The adjudicating authority's assertion that the goods were rendered prohibited under section 11 was therefore factually incorrect and legally untenable, indicating bias and vitiating the rejection order. [Paras 31, 33]

The finding that the goods were prohibited under section 11 (absent a government notification) was incorrect and vitiated the order refusing provisional release.

Detention by Directorate General of Shipping and exercise of powers under section 110-A - Detention of the vessel by the Directorate General of Shipping does not in itself preclude the customs authority from considering provisional release under section 110-A. - HELD THAT: - The DG Shipping's detention pertains to separate regulatory/safety concerns and is an independent issue. While clearance from DG Shipping may be required as a formal condition, its existence does not oust the power of the adjudicating authority under section 110-A to entertain provisional release applications. The Court declined to adjudicate on the DG Shipping detention in these proceedings, observing it to be a separate matter. [Paras 30]

DG Shipping detention is not a bar to the exercise of discretion under section 110-A, subject to any necessary formalities including DG Shipping clearance.

Confiscation of conveyances under section 115 of the Customs Act - Definition of "goods" to include vessels for certain purposes - Penalty provision under section 114AA vis-a -vis requisitioning security - Condition imposed by adjudicating authority demanding bank guarantees/bond equivalent to five times the market value of the vessel (under section 114AA) and additional BG equivalent to market price of goods (to secure redemption fine under section 115(2)) was unjustified. - HELD THAT: - Sections 114AA and 115, read with the definition of 'goods', concern penalties and confiscation relating to goods sought to be smuggled. Although 'goods' may in some contexts include vessels, the statutory scheme shows that fines in lieu of confiscation of conveyances under section 115(2) are to be capped by the market price of the goods sought to be smuggled. A demand for security equal to five times the market value of the vessel under section 114AA is not supported where the object is to secure likely penalty/redemption fine tied to the goods. The imposition of a condition requiring bank guarantees for five times the vessel value was therefore held to be untenable. [Paras 34]

The requirement of bank guarantee equal to five times the market value of the vessel and additional BG for the cargo was not justified.

Provisional release under section 110-A of the Customs Act - The rejection order dated 28.10.2020 was quashed and the vessel was to be provisionally released on specified security subject to completion of formalities including DG Shipping clearance. - HELD THAT: - Having found the principal legal grounds for refusal to be unsustainable (misapplication of section 11, misplaced reliance on the Board circular, and unjustified security conditions), and without expressing any final opinion on the ultimate validity of the seizure, the Court exercised supervisory jurisdiction to set aside the rejection of provisional release. The Court directed provisional release under section 110-A on furnishing bond and bank guarantee in specific amounts noted in the order, and made release subject to completion of necessary formalities including clearance from DG Shipping, while keeping all substantive contentions open for adjudication. [Paras 38, 39, 40]

Order dated 28.10.2020 is set aside; respondent to grant provisional release of the vessel on furnishing the specified bond and bank guarantee and subject to DG Shipping formalities; substantive issues left open.

Agent's locus standi for seeking provisional release (procedural aspect) - Locus standi of the shipping agent is a procedural matter between customs and the vessel owner and does not, by itself, preclude consideration of provisional release under section 110-A. - HELD THAT: - The question whether an agent may seek provisional release is essentially procedural and concerns the relationship and documentary proof between the owner and agent. It cannot be treated as a substantive bar to the adjudicating authority's exercise of discretion under section 110-A. The Court treated locus standi as not being a ground to decline provisional release outright in the circumstances of the case. [Paras 32]

Locus standi of the agent, being a procedural issue, did not justify outright refusal of provisional release.

Final Conclusion: The order refusing provisional release dated 28.10.2020 is quashed. The High Court directed provisional release of the vessel under section 110-A of the Customs Act on the furnishing of security and subject to DG Shipping formalities, while leaving all substantive challenges to the seizure open for adjudication.

Review on the ground of error apparent on the face of the record - power to reopen or set aside adjudication order - remand for fresh consideration with directions to issue notice and decide expeditiously - interplay between interim writ relief and pending adjudication - objection to non-disclosure of prior adjudication order in writ proceedings

Review on the ground of error apparent on the face of the record - Whether the Review Application against the order dated 29.02.2016 in W.P.No.2968 of 2016 discloses any error apparent on the face of the record warranting interference. - HELD THAT: - The Court examined whether the Review Applicants have pointed out any error apparent on the face of the record in the order dated 29.02.2016 which had directed deposit of 50% of duty and release of the gold on such deposit. The Court observed that the matters raised in the Review Application amounted to re-argument of contentions already considered while disposing of the writ petition and that no demonstrable error apparent on the face of the record was shown. Consequently, there was no ground to reopen or review the earlier order under review jurisdiction. [Paras 6]

Review Application dismissed for lack of error apparent on the face of the record.

Power to reopen or set aside adjudication order - remand for fresh consideration with directions to issue notice and decide expeditiously - Whether the adjudication order dated 27.02.2016, which confiscated the gold and imposed penalty, should be quashed and remitted for fresh consideration because the petitioner had not participated in the adjudication. - HELD THAT: - Although the Court dismissed the Review Application, it considered the separate writ petition seeking certiorari against the adjudication order dated 27.02.2016. Noting that the petitioner contended non-participation in the adjudication, the Court set aside the impugned adjudication order and remitted the matter to the adjudicating authority for fresh consideration. The Court directed the authority to issue notice to the petitioner, to decide the matter afresh as expeditiously as possible and preferably within eight weeks, and clarified that the petitioner must cooperate in the adjudication. The Court's order preserves procedural fairness by requiring fresh adjudication rather than affirming the confiscation and penalty. [Paras 8, 9, 10]

Adjudication order dated 27.02.2016 set aside and matter remitted to the 2nd respondent for fresh adjudication with directions to issue notice and decide expeditiously (preferably within eight weeks).

Interplay between interim writ relief and pending adjudication - Whether the interim order dated 29.02.2016 directing deposit of 50% of duty for release of the gold remains operative in light of the remand and fresh adjudication. - HELD THAT: - The Court reaffirmed that the order passed in W.P.No.2968 of 2016 directing deposit of 50% of the duty and release of the gold on such deposit shall stand. It further clarified that respondents are obligated to comply with that order prior to completing the fresh adjudication to be conducted by the 2nd respondent. Thus, the interim relief granted earlier is preserved and must be honoured during the remand proceedings. [Paras 2, 8, 10]

The order dated 29.02.2016 directing deposit of 50% of duty and release on such deposit shall stand and respondents shall comply with it prior to the fresh adjudication.

Final Conclusion: The Review Application is dismissed for want of any error apparent on the face of the record; the adjudication order dated 27.02.2016 is set aside and the matter remitted to the adjudicating authority for fresh consideration after issuing notice and deciding expeditiously (preferably within eight weeks); the interim direction of 29.02.2016 for deposit of 50% of duty and release on such deposit remains operative and must be complied with.

Burden of proof for non-notified goods - Admissibility of unaccredited laboratory report - Confiscation for alleged smuggling - Customs action where goods are alleged to be unfit for human consumption

Burden of proof for non-notified goods - Confiscation for alleged smuggling - Whether the Department discharged the burden to prove that the seized betel nut, a non notified commodity, was smuggled into India so as to justify confiscation. - HELD THAT: - The Tribunal found that betel nut is not a commodity notified under Section 123 of the Customs Act and therefore the onus lay on the Department to establish smuggling by cogent, positive evidence rather than by negative inference. The investigation produced material creating reasonable doubts as to origin but did not furnish direct, corroborative proof of foreign origin or of illegal importation; there was no specific narration showing how and from where the goods were smuggled. Reliance on inability to verify purchase vouchers or on certain adverse statements in the inquiry was insufficient to discharge the burden. Consequently the Department failed to establish that the seized goods were smuggled and liable to confiscation. [Paras 10, 12]

Burden on the Department to prove smuggling of non notified goods was not discharged; confiscation not justified.

Admissibility of unaccredited laboratory report - Confiscation for alleged smuggling - Whether the test report/certificate of the Arecanut Research and Development Foundation (ARDF), Mangalore, could be relied upon to establish foreign origin and justify seizure and confiscation. - HELD THAT: - The Tribunal examined the Department's heavy reliance on the ARDF certificate and noted precedent and judicial findings that ARDF is not an accredited laboratory; in the absence of accreditation by the competent authority the report cannot found legal liability. The Tribunal observed prior decisions holding that an unaccredited private laboratory's report is not sufficient to establish country of origin, and that confiscation cannot rest solely on such a test report especially where betel nut is also produced domestically. The Department had not adduced corroborative evidence to supplement the ARDF report. [Paras 11, 12]

Report of ARDF, being from an unaccredited private body, could not be relied upon to fasten liability; reliance on it was insufficient to justify seizure/confiscation.

Customs action where goods are alleged to be unfit for human consumption - Confiscation for alleged smuggling - Whether a finding that the seized betel nut was unfit for human consumption warranted action by Customs in the absence of proof of importation or smuggling. - HELD THAT: - The Tribunal held that since the seized goods were not shown to be imported nor proved to be smuggled into India, a determination about fitness for human consumption did not, by itself, confer jurisdiction or justify confiscation by Customs. Action under Customs law requires proof of contravention within the ambit of Customs jurisdiction; where foreign origin or illegal importation is not established, mere unsuitability for consumption does not supply the necessary legal basis for confiscation. [Paras 12]

Finding of unfitness for human consumption does not sustain Customs action where importation or smuggling is not proved.

Final Conclusion: Seizure and confiscation of the betel nut set aside: the Department failed to prove smuggling of a non notified commodity and could not rely on the unaccredited laboratory report; appeal allowed with consequential relief as per law.

Restoration of company name in the Register of Companies - application under Section 252(1) of the Companies Act, 2013 treated despite being filed under Section 252(3) - protection of legitimate interest of revenue - continuing liability of directors and officers after dissolution - conditional restoration subject to compliance and publication

Application under Section 252(1) of the Companies Act, 2013 treated despite being filed under Section 252(3) - The appeal filed under Section 252(3) is to be treated and adjudicated under Section 252(1) of the Companies Act, 2013. - HELD THAT: - The Tribunal examined the text and scope of Section 252(1) and Section 252(3) and observed that Section 252(3) applies where the company or its members/creditors/workmen apply within twenty years of publication, whereas Section 252(1) governs appeals by any person aggrieved by an order of the Registrar notifying a company as dissolved. Noting authority that pleading the wrong provision does not disentitle a party to relief, the Tribunal treated the present application under Section 252(1) and proceeded to determine it on that basis. [Paras 11, 12]

Application filed under Section 252(3) is treated as an appeal under Section 252(1) and adjudicated accordingly.

Restoration of company name in the Register of Companies - protection of legitimate interest of revenue - Whether the company's name should be restored in the Register of Companies to protect public interest and the revenue. - HELD THAT: - On the material placed before it, including the ROC's representation and the Income Tax Department's contention that proceedings under the Income Tax Act were pending and that restoration was necessary to protect revenue interests, the Tribunal found restoration to be just and equitable. The ROC had filed a representation and, having regard to a relevant MCA circular, expressed no objection to restoration. The Tribunal concluded that restoration was not barred by law and was necessary in the public interest and to safeguard the legitimate interest of the revenue. [Paras 6, 7, 8, 13, 14]

The name of M/s. Ramdev Marketing Pvt. Ltd. is to be restored in the Register of Companies maintained by the ROC, Ahmedabad.

Conditional restoration subject to compliance and publication - continuing liability of directors and officers after dissolution - The conditions, directions and ancillary orders attached to restoration including publication, compliance with statutory requirements and effect on initiation of Income Tax proceedings. - HELD THAT: - The Tribunal directed restoration subject to publication of notice in two leading newspapers and the Official Gazette as per a draft approved by the ROC, at the cost of the appellant. It directed the company to comply with requirements under the Companies Act and other statutory obligations. The Tribunal also noted the statutory position that liabilities of directors/officers continue as if the company had not been dissolved and expressly exempted the time consumed in disposal of the application from reckoning for the purpose of initiation of Income Tax or legal proceedings against the company. Directions for communication of the order to the ROC and the company were also given. [Paras 8, 15, 16, 17, 18]

Restoration ordered subject to publication, statutory compliance by the company, and directions including exemption of time consumed for initiation of Income Tax/legal proceedings; ROC to give effect to restoration and communicate the order.

Final Conclusion: The appeal is allowed: the Tribunal treated the application under Section 252(1), directed restoration of M/s. Ramdev Marketing Pvt. Ltd. to the Register of Companies as just and equitable to protect public and revenue interests, imposed publication and compliance conditions, and granted ancillary directions including exemption of the time consumed in disposal for initiation of Income Tax/legal proceedings.

Restoration of company name - striking off by Registrar of Companies - section 252(1) of the Companies Act, 2013 - section 252(3) of the Companies Act, 2013 - protection of legitimate interest of revenue - public interest - wrong provision cited will not disentitle relief

Section 252(1) of the Companies Act, 2013 - section 252(3) of the Companies Act, 2013 - wrong provision cited will not disentitle relief - Proper statutory provision under which the appeal for restoration lies and effect of citing an incorrect provision. - HELD THAT: - The Tribunal examined whether the appeal brought by the Income Tax Department should proceed under section 252(3) or section 252(1). It found that section 252(3) contemplates restoration where a company or its members/creditors/workmen apply within twenty years of the Gazette notice, whereas section 252(1) applies to appeals against orders of the Registrar where the name has been struck off for failure to file statutory returns. Noting that the company's name was struck off by the Registrar, the Tribunal held the application properly falls under section 252(1). However, relying on the principle, as noted from the Supreme Court, that quoting an incorrect provision does not necessarily disentitle a party to relief, the Tribunal proceeded to treat the petition under section 252(1) and adjudicate the restoration on merits. [Paras 8, 9]

The appeal, though filed under section 252(3), is treated and adjudicated under section 252(1) of the Companies Act, 2013; citing the wrong provision did not bar consideration of the relief.

Restoration of company name - striking off by Registrar of Companies - protection of legitimate interest of revenue - public interest - Whether restoration of the company's name in the ROC register is just, having regard to public interest and protection of revenue. - HELD THAT: - On the merits the Tribunal considered the public interest and the legitimate interest of the revenue, noting that restoration was necessary to enable the Income Tax Department to proceed with pending proceedings under the Income Tax Act. Finding no legal bar to restoration and that it would be just and equitable to revive the company, the Tribunal directed restoration subject to conditions including publication in two leading newspapers and the Official Gazette, compliance with statutory requirements by the company, and that the time consumed in disposal of the application be exempted for initiation of Income Tax/Legal proceedings against the company. [Paras 10, 11, 12, 13, 14]

The company's name is to be restored in the Register of Companies maintained by ROC, Ahmedabad, subject to publication and compliance conditions; time consumed in disposal is exempted for purposes of Income Tax/legal proceedings.

Final Conclusion: The appeal by the Income Tax Department is allowed: the Tribunal treated the wrongly pleaded petition as one under section 252(1), and ordered restoration of M/s. Bindal Impex Pvt. Ltd. to the ROC register subject to publication in newspapers and the Official Gazette and statutory compliance; the time consumed in disposal is exempted for initiation of Income Tax/legal proceedings.

Sanction of scheme of amalgamation under provisions of sections 230-232 of the Companies Act, 2013 - appointed date and retroactive effectiveness of schemes of arrangement - transfer and vesting of assets, liabilities and proceedings in amalgamation - preservation and custody of books of account and records under section 239 - compliance with prescribed accounting standards and accounting treatment on amalgamation - filing of order in Form INC-28 and compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - change of name of transferee company consequent to sanction of scheme - dissolution of transferor companies without winding up - payment of stamp duty and related statutory dues on increase in share capital - obligations to comply with observations of Regional Director and Official Liquidator

Sanction of scheme of amalgamation under provisions of sections 230-232 of the Companies Act, 2013 - Sanction of the scheme of amalgamation between transferor company No.1, transferor company No.2 and the transferee company. - HELD THAT: - The Tribunal considered the petition, the scheme annexed thereto, reports and replies of the Regional Director and Official Liquidator, the chairperson's report of the meeting of unsecured creditors and the undertakings furnished by the petitioner companies. On the materials placed before it and subject to the directions and conditions contained in the operative part of the order, the Tribunal sanctioned the scheme of amalgamation. The order makes clear that sanction does not exempt the parties from payment of stamp duty, taxes or compliance with other statutory requirements.

The scheme of amalgamation is sanctioned subject to the Tribunal's directions and conditions.

Appointed date and retroactive effectiveness of schemes of arrangement - The scheme shall be effective from the appointed date of April 10, 2019 and be binding on members, employees and creditors. - HELD THAT: - Having examined the rationale for selecting April 10, 2019 (linked to the acquisition event) and the petitioners' reliance on applicable authority and MCA clarification, the Tribunal endorsed the appointed date as stated in the scheme and directed that the scheme be effective from that date so as to be binding on all concerned. [Paras 8]

Appointed date of April 10, 2019 is accepted and the scheme is effective from that date.

Transfer and vesting of assets, liabilities and proceedings in amalgamation - dissolution of transferor companies without winding up - All properties, rights, liabilities and proceedings of the transferor companies shall stand transferred to and vest in the transferee company, and the transferor companies shall be dissolved without winding up upon the scheme becoming effective. - HELD THAT: - Pursuant to section 232 and the sanctioned scheme, the Tribunal ordered that the whole of the property, rights and liabilities of the transferor companies be transferred to the transferee company and that all pending proceedings by or against the transferor companies shall continue by or against the transferee company. Upon the scheme becoming effective the transferor companies are to be dissolved without winding up. [Paras 2, 3, 6, 11]

Assets, liabilities and proceedings are vested in the transferee company and transferor companies shall be dissolved without winding up on effectiveness of the scheme.

Preservation and custody of books of account and records under section 239 - obligations to comply with observations of Regional Director and Official Liquidator - Books of account and records of the transferor companies shall be handed over to the transferee company and the transferee company shall preserve books and records and shall not dispose of them without prior permission of the Central Government; petitioners to comply with RD and OL observations. - HELD THAT: - The Tribunal directed that after completion of the arrangement the transferor companies shall hand over possession of books and relevant documents to the transferee company for purposes of section 239, and further directed the transferee company to preserve such books and not dispose of them without prior Central Government permission. The petitioners were also directed to comply with the observations made by the Regional Director and the Official Liquidator in their reports. [Paras 10, 12, 13]

Custody and preservation directions for books and records are imposed and petitioners must comply with RD and OL observations.

Compliance with prescribed accounting standards and accounting treatment on amalgamation - filing of order in Form INC-28 and compliance with Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - payment of stamp duty and related statutory dues on increase in share capital - Petitioner companies are directed to comply with applicable accounting standards, statutory filing obligations including Form INC-28 and to pay any difference of stamp duty on increase in share capital as required. - HELD THAT: - The Tribunal required strict compliance with accounting treatment standards under section 133 and noted the statutory auditor's certification of accounting treatment. The petitioners were directed to file the certified copy of the order and the scheme with the Registrar in accordance with rule 25(7) and to comply with rule 17(2) regarding filing of the order in Form INC 28. The transferee company was directed to pay any difference of stamp duty payable on increase in share capital after setting off fees paid by the transferor companies. [Paras 5, 7, 9, 15]

Directives given to comply with accounting standards, file requisite forms with ROC and to pay any additional stamp duty/fees as applicable.

Change of name of transferee company consequent to sanction of scheme - employee protection undertaking - Upon the scheme becoming effective the transferee company's name shall be changed to Karix Mobile P. Ltd., and petitioners have given an undertaking against retrenchment of employees in service as on the appointed date. - HELD THAT: - The Tribunal permitted the change of name of the transferee company to that of the transferor company as provided in the sanctioned scheme, subject to compliance with provisions of the Companies Act. The petitioners furnished an undertaking that there would be no retrenchment of any employee who was in service as on the appointed date, and the Tribunal recorded that undertaking. [Paras 17, 18]

Transferee company to change its name to Karix Mobile P. Ltd. upon effectiveness and undertaking against retrenchment is recorded.

Final Conclusion: The National Company Law Tribunal, Hyderabad Bench, sanctioned the scheme of amalgamation between the two transferor companies and the transferee company subject to specified directions: the scheme is effective from the appointed date April 10, 2019; assets, liabilities and proceedings stand transferred to the transferee company; the transferee must comply with accounting standards, statutory filings, preservation of records and other observations of the Regional Director and Official Liquidator; transferor companies shall be dissolved without winding up; and the transferee shall change its name to Karix Mobile P. Ltd., with other incidental directions as recorded.

Scheme of amalgamation - Reasonableness and bona fide of scheme - Compliance with statutory procedure under sections 230-232 of the Companies Act, 2013 - Tribunal's supervisory jurisdiction not appellate over commercial wisdom - Successor liability for taxes and pending proceedings - Sanction subject to outcome of pending Income-tax proceedings - Payment of legal fees and expenses of statutory authorities - Filing and stamping formalities on sanction

Compliance with statutory procedure under sections 230-232 of the Companies Act, 2013 - Scheme of amalgamation - The petitioners have complied with the statutory requirements under sections 230-232 and the scheme of amalgamation is approvable on merits. - HELD THAT: - On perusal of the scheme and the proceedings, and after considering the submissions and statutory reports, the Tribunal found that the requirements of sections 230-232 are satisfied. The Tribunal applied established principles (including the scope of the court's supervisory jurisdiction) to examine reasonableness and bona fides and concluded that the scheme is genuine, bona fide and in the interest of shareholders and creditors. Consequently the company petition is allowed and the scheme is approved. [Paras 19, 20, 22, 25]

Company petition C. P. (CAA) No. 128/NCLT/AHM/2018 is allowed and the scheme of amalgamation is approved.

Tribunal's supervisory jurisdiction not appellate over commercial wisdom - Reasonableness and bona fide of scheme - The Tribunal will not substitute its view for commercial wisdom of shareholders if statutory requirements and fairness are satisfied. - HELD THAT: - Relying on settled precedent, the Tribunal emphasised that its role is supervisory and not to sit in appeal over commercial decisions of shareholders and management. If the scheme is backed by the requisite majorities and is fair and bona fide, the Tribunal should not interfere with the commercial wisdom, though it must ensure legality and procedural compliance. [Paras 20, 21, 22]

The Tribunal exercised supervisory review and declined to substitute its commercial judgment where statutory conditions and fairness were met.

Successor liability for taxes and pending proceedings - Sanction subject to outcome of pending Income-tax proceedings - On sanction, liabilities of the transferor, including tax liabilities and pending proceedings, vest in the transferee; sanction is made subject to outcome of pending Income-tax proceedings. - HELD THAT: - The scheme expressly provides that the transferee will take over and discharge all liabilities of the transferor, including tax liabilities. Having considered representations of the Regional Director, Registrar of Companies and the official liquidator and the petitioners' undertakings and clarificatory affidavit, the Tribunal recorded that sanction will be subject to the outcome of pending Income-tax proceedings and appeals, and that sanction does not absolve the transferor of liabilities but transfers them to the transferee. [Paras 17, 18, 25]

Liabilities of the transferor, including tax liabilities and pending proceedings, shall vest in the transferee and the sanction is subject to the outcome of pending Income-tax proceedings.

Payment of legal fees and expenses of statutory authorities - Legal fees and expenses quantified for the Official Liquidator and Regional Director are to be paid by the transferee company within the specified period. - HELD THAT: - Having considered the request of the Regional Director and the quantified fees from the office of the Official Liquidator, the Tribunal directed payment of the quantified amounts by the transferee company within four weeks from issuance of certified copy of the order. [Paras 26, 27]

The transferee company shall pay the legal fees and expenses quantified for the Official Liquidator and the Regional Director within four weeks of issuance of the certified copy of the order.

Filing and stamping formalities on sanction - Post-sanction filing and stamping formalities are mandated to be complied with by the petitioner-companies within stipulated timeframes. - HELD THAT: - The Tribunal directed that the petitioner-companies lodge a copy of the order, the schedule of immovable assets and the authenticated scheme with the Superintendent of Stamps for adjudication of stamp duty within 60 days, and file the order and scheme with the Registrar of Companies electronically (Form INC-28) within 30 days of issuance of the certified copy. Filing of drawn-up orders was dispensed with, and authorities may act on a certified copy. [Paras 28, 29, 30]

Petitioner-companies must comply with the directed stamping and filing formalities within the specified time periods.

Final Conclusion: The Tribunal sanctioned the composite scheme of amalgamation between the transferor and transferee companies as genuine, bona fide and in the interest of shareholders and creditors, while clarifying that sanction does not grant exemption from taxes or duties, that all liabilities (including tax liabilities and pending proceedings) shall vest in the transferee and that sanction is subject to the outcome of pending Income-tax proceedings; the transferee is directed to pay quantified statutory fees and the petitioners to comply with filing and stamping requirements within stipulated timeframes.

Oppression and mismanagement - Right to apply for rectification of register of members under section 59 - Maintainability of a petition under section 241 by a person who is not a member - Requirement to pursue rectification remedy before invoking oppression and mismanagement - Limitation and laches in company petitions - Unclean hands / bona fide requirement in petitions under the Companies Act - Imposition of costs for frivolous or vexatious company petitions

Right to apply for rectification of register of members under section 59 - Requirement to pursue rectification remedy before invoking oppression and mismanagement - Rectification under section 59 and invocation of relief under section 241 cannot be clubbed; a separate remedy under section 59 must be pursued if a person's name has been omitted from the register of members. - HELD THAT: - The Tribunal held that petitions under section 59 (rectification of register of members) and section 241 (oppression and mismanagement) are distinct causes of action and cannot be combined in a single petition. Rule 70 of the NCLT Rules contemplates a separate appeal/petition procedure for rectification under section 59 with its own formalities. Consequently, where the core complaint is omission from the register, the aggrieved person must seek rectification under the statutory route provided before or instead of invoking relief under section 241; filing a combined petition shows non-compliance with the statutory scheme and bears on maintainability. [Paras 7, 8, 9]

The petition was not maintainable insofar as it sought to club rectification under section 59 with a section 241 petition; rectification must be pursued by a separate application.

Maintainability of a petition under section 241 by a person who is not a member - Unclean hands / bona fide requirement in petitions under the Companies Act - A person who is not a member of the company as on the date of filing cannot maintain a petition under section 241; the petitioner here was not a shareholder at the time of filing and therefore lacked locus to seek relief under section 241. - HELD THAT: - The Tribunal found from the pleadings that the petitioner had ceased to be a director and transferred his shares long before filing the petition and therefore was not a member when the petition under section 241 was instituted. Section 244 confers the right to apply under section 241 only on members (subject to specified thresholds). The Tribunal held that a non-member cannot maintain a petition under section 241 and that the present petition, insofar as it sought relief under section 241, was filed by a person without the requisite status and with unclean hands. [Paras 9]

The petition under section 241 was not maintainable because the petitioner was not a member on the date of filing.

Limitation and laches in company petitions - Unclean hands / bona fide requirement in petitions under the Companies Act - The petition was barred by laches and limitation and was filed without bona fide grounds; the petitioner had knowledge of the contested acts long before instituting proceedings. - HELD THAT: - On the merits, the Tribunal recorded that the petitioner had resigned in 1992 and transferred shares by 2000-01, yet waited until 2018 to challenge those transactions. The Articles and the public availability of statutory filings made the petitioner's asserted ignorance implausible. Applying the law on laches and limitation, and accepting the respondents' contention that the petitioner had long-standing opportunity to object, the Tribunal concluded that the petition was time-barred, lacking bona fides and brought with unclean hands. [Paras 10, 11]

The petition was dismissed as barred by laches and limitation and for being instituted without bona fide grounds.

Imposition of costs for frivolous or vexatious company petitions - A cost order is appropriate where a petition is frivolous, vexatious or abused the process of the Tribunal. - HELD THAT: - Having found the petition to be not maintainable, time-barred and instituted with unclean hands, the Tribunal considered precedent and its discretion to award costs. The Tribunal held that this case was fit for imposition of costs to penalize misuse of process and deter similar conduct. [Paras 11, 12]

The petition was dismissed with costs of Rs. 25,000 to be deposited with the Ministry of Corporate Affairs within 30 days.

Final Conclusion: The Company Petition C.P. No. 478/BB/2018 was dismissed as not maintainable and barred by laches and limitation, and for being filed with unclean hands; the petition was held to improperly combine a rectification remedy under section 59 with a section 241 claim, and costs of Rs. 25,000 were imposed to be deposited with the Ministry of Corporate Affairs within 30 days.

Approval of resolution plan under Section 30(4) and sanction under Section 31(1) - commercial wisdom of the Committee of Creditors - feasibility and viability of a resolution plan including manner of distribution - treatment of secured creditors based on priority and value of security interest - limited judicial review under Section 30(2) - compliance with Regulation 38 and Regulation 39 (Form H) of the CIRP Regulations - binding effect of an approved resolution plan on stakeholders

Approval of resolution plan under Section 30(4) and sanction under Section 31(1) - compliance with Regulation 38 and Regulation 39 (Form H) of the CIRP Regulations - binding effect of an approved resolution plan on stakeholders - Sanction of the Resolution Plan submitted by Nitrex for International Book House Private Limited - HELD THAT: - The Tribunal examined whether the Resolution Plan fulfilled the mandatory requirements of Section 30 of the I&B Code and Regulations 38 & 39 of the CIRP Regulations. The RP had certified compliance and filed Form H; the CoC approved the plan with the requisite voting share (96.91%) and approved the distribution pattern by the requisite majority (66.98%). The plan contained provisions relating to effective date, payment timelines, promoter contribution, treatment of CIRP costs, distribution to secured and unsecured creditors, employees and operational creditors, and mechanisms for supervision and implementation. The Tribunal was satisfied that the plan addressed feasibility and viability and complied with the statutory and regulatory requirements. Consequential directions were issued under Section 31(3) to cease moratorium and to forward records to the Board. The plan was therefore sanctioned and declared binding on the corporate debtor and all stakeholders. [Paras 36, 37, 38, 39, 40]

Resolution Plan approved and sanctioned; MA 3114/2019 allowed and disposed of, with directions under Section 31(3).

Commercial wisdom of the Committee of Creditors - treatment of secured creditors based on priority and value of security interest - feasibility and viability of a resolution plan including manner of distribution - limited judicial review under Section 30(2) - Challenge by IndusInd Bank to the distribution pattern as discriminatory vis-a -vis another secured creditor - HELD THAT: - The Tribunal considered whether similarly situated secured creditors were discriminated against and whether the Adjudicating Authority could question the CoC's commercial decision. It noted that Section 30(4) permits the CoC to take into account the priority and value of security interests when approving distribution. The valuation reports (unchallenged) indicated a substantial difference between the realizable liquidation values of securities held by Religare and IndusInd; Religare's security (immovable) had a much higher liquidation value than IndusInd's hypothecation over current assets. The CoC's distribution, including modest excesses over liquidation values, was a commercial decision reached with requisite majorities. Relying on the Supreme Court precedents (Essar and K. Sashidhar), the Tribunal held that judicial review is limited to the parameters in Section 30(2) and cannot substitute the CoC's commercial wisdom so long as statutory requirements are met. The applicant had also voted in favour of the Resolution Plan itself. On these bases the Tribunal found no ground to interfere and dismissed the challenge. [Paras 58, 59, 60, 61, 62]

MA 3197/2019 dismissed; distribution pattern approved by CoC not set aside.

Feasibility and viability of a resolution plan including manner of distribution - commercial wisdom of the Committee of Creditors - Challenge by an unsecured financial creditor to the distribution among unsecured creditors - HELD THAT: - The Tribunal considered whether unsecured financial creditors were treated discriminatorily. The Resolution Plan provided an equal sharing mechanism for all unsecured creditors and the CoC had approved the plan and distribution within statutory parameters. Applying the same principles that govern review of CoC decisions, the Tribunal found no discriminatory treatment among unsecured creditors and no violation of the Code or Regulations warranting interference. Consequently, the application lacked merit. [Paras 63, 64]

MA 3236/2019 dismissed.

Final Conclusion: The Tribunal sanctioned and approved the Resolution Plan submitted by Nitrex for International Book House Private Limited as meeting the requirements of Section 30 and the CIRP Regulations and issued consequential directions under Section 31(3). Challenges to the distribution pattern by a secured creditor (IndusInd Bank) and by an unsecured creditor were dismissed: the CoC's commercial decision on distribution, taken with requisite majorities and based on differing values and priorities of security interests, was not interfered with within the limited judicial review permitted under the Code.

Exclusion of period of lockdown from liquidation timeline - Computation of time line for liquidation process - Verification and admission of claims by liquidator - Extension of limitation due to COVID 19 - Regulation 47A - Exclusion of lockdown period for liquidation process

Exclusion of period of lockdown from liquidation timeline - Computation of time line for liquidation process - Verification and admission of claims by liquidator - Regulation 47A - Exclusion of lockdown period for liquidation process - Application to exclude the lockdown period from computation of the liquidation process timeline so as to permit claimants to submit and the liquidator to verify claims. - HELD THAT: - The Tribunal found the material facts were not in dispute and that the law was settled by the authorities relied upon by the liquidator, including the Supreme Court's suo motu extension of limitation during the COVID 19 pandemic and the insertion of Regulation 47A to the Liquidation Process Regulations which provides for non counting of the lockdown period for tasks that could not be completed due to the lockdown. Given that claimants were unable to file requisite documents within the originally stipulated period and the liquidator was consequently unable to verify and admit/reject claims and prepare the stakeholders' list, exclusion of the lockdown period was warranted. The Tribunal, therefore, allowed the application and granted the specific exclusion of the stated lockdown period from the liquidation timeline, while directing the liquidator to take expeditious steps to finalise the liquidation without further delay.

Application allowed; lockdown period excluded from the liquidation process period and liquidator directed to finalise the liquidation expeditiously.

Final Conclusion: I.A. No.277/2020 allowed: the period from 25.03.2020 to 22.07.2020 is excluded from the liquidation process timeline; the liquidator directed to proceed expeditiously to finalise the liquidation.

Financial Creditor - financial debt - interpretation of Section 5(8) of the Code - time value of money - Form C versus Form F classification of claims - composition of Committee of Creditors

Financial Creditor - financial debt - time value of money - Form C versus Form F classification of claims - Whether the applicant (parent company) could be admitted as a Financial Creditor and included in the Committee of Creditors on the basis of the claim filed in Form C. - HELD THAT: - The Tribunal found that the Interim Resolution Professional did not reject the claim but sought clarificatory and supporting documents and, in the absence of those documents, advised the applicant to file the claim as an 'other creditor' in Form F. The Tribunal held that to qualify as a Financial Creditor the claimant must demonstrate a financial debt which requires evidence of a disbursement of funds for consideration for the time value of money as contemplated by the interpretation of Section 5(8) of the Code. An unsecured inter-company loan without proof of any arrangement evidencing time value of money (such as a contractual obligation to pay interest or other evidence) cannot be characterised as a financial debt. The applicant's claim was supported only by balance sheets showing an unsecured loan and a self-calculated interest figure assumed at 12% p.a.; there was no documentary proof of entitlement to interest or other indicia of time value consideration. The Tribunal relied on earlier appellate observations that interest-free or unsupported unsecured loans between related entities do not, by themselves, create a financial debt. Applying this principle, the Tribunal concluded that the applicant failed to establish the essential ingredients of a financial debt and therefore could not be admitted as a Financial Creditor or included in the CoC on the basis of the Form C filed. [Paras 16, 17, 18]

The application seeking directions to admit the applicant as a Financial Creditor and to include it in the CoC is rejected; the IRP's action in seeking supporting documents and advising filing under Form F is upheld.

Final Conclusion: The application filed by the Resolution Professional of the parent company to be admitted as a Financial Creditor and included in the Committee of Creditors of the subsidiary is dismissed for failure to prove that the claimed debt satisfies the requirements of a financial debt under Section 5(8) of the Code; the IRP's request for supporting documents and guidance to file the claim as an other creditor is sustained.

Corporate Insolvency Resolution Process - Operational Debt and Default - Pre-existing dispute - Admission under section 9(5) of the Insolvency and Bankruptcy Code, 2016 - Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Jurisdiction of the Adjudicating Authority - Appointment of Interim Resolution Professional - Compliance with section 8 and section 9(3) requirements

Operational Debt and Default - Compliance with section 8 and section 9(3) requirements - Existence of operational debt and default and compliance with statutory requirements for filing section 9 application - HELD THAT: - The Tribunal examined the invoices, ledger copies, demand notice and bank statements placed on record by the Operational Creditor and found that the invoices were acknowledged and the debt was shown as due. The applicant also produced proof of service of the demand notice under section 8 and filed the affidavit and bank statements required under section 9(3). Given the material on record and the absence of specific particulars or evidence from the Corporate Debtor to negate the claimed debt, the Tribunal held that the Operational Creditor had established default in payment of an operational debt and had complied with the statutory prerequisites for instituting a section 9 application. [Paras 12, 14, 15, 18, 20]

Default in payment of the operational debt was established and the section 9 application met the filing requirements.

Pre-existing dispute - Corporate Insolvency Resolution Process - Whether a pre-existing dispute barred admission of the section 9 application - HELD THAT: - Relying on the principles that a pre-existing dispute must have been raised prior to the demand notice or invoices, and applying the standard that a dispute must be a plausible contention supported by evidence (not mere bluster), the Tribunal considered the Corporate Debtor's assertion of an oral arrangement and its denial of the alleged email acknowledgement. The Tribunal observed that the alleged email dated 6-9-2019 was annexed by the applicant with the demand notice and that the Corporate Debtor had not produced specific material to sustain a pre-existing dispute. Consequently, the Tribunal found no pre-existing dispute that would preclude admission of the application. [Paras 14, 15, 16, 17, 20]

No pre-existing dispute existed; the defence was not a plausible, evidence-supported bar to admission.

Jurisdiction of the Adjudicating Authority - Jurisdiction of the Tribunal to entertain the section 9 application - HELD THAT: - The Tribunal noted that the registered office of the Corporate Debtor was situated in New Delhi and accordingly held that the National Company Law Tribunal, New Delhi Bench, had territorial jurisdiction to entertain and try the application. [Paras 19]

The Tribunal has jurisdiction to hear the application.

Admission under section 9(5) of the Insolvency and Bankruptcy Code, 2016 - Appointment of Interim Resolution Professional - Moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Admission of the section 9 application, appointment of Interim Resolution Professional and consequences thereof - HELD THAT: - Finding that the application was complete and the Operational Creditor entitled to claim its dues, the Tribunal admitted the petition under section 9(5). The Tribunal appointed the proposed Interim Resolution Professional and directed him to perform statutory functions. It directed the Operational Creditor to deposit a specified sum with the IRP to meet expenses, subject to adjustment by the Committee of Creditors. Upon admission, the moratorium under section 14 was declared to follow, with attendant statutory consequences during the moratorium period. [Paras 20, 21, 22, 23]

The section 9 application was admitted, IRP appointed, security directed to be deposited, and moratorium imposed.

Final Conclusion: The Tribunal admitted the section 9 application after finding established operational debt and default and no pre-existing dispute; the Tribunal also held it had jurisdiction, appointed the Interim Resolution Professional, directed an interim deposit for IRP expenses, and declared the moratorium in accordance with the Code.

Initiation of corporate insolvency resolution process under Section 9 - existence of debt and default - pre-existing dispute - requirement of supporting evidence for a bona fide dispute - service of demand notice - moratorium in terms of Section 14 - appointment of interim resolution professional

Pre-existing dispute - requirement of supporting evidence for a bona fide dispute - The plea of a pre-existing dispute regarding quality/delivery raised by the corporate debtor is not substantiated and is a spurious defence. - HELD THAT: - The Tribunal examined the correspondence and documents on record and found no material demonstrating that the corporate debtor communicated any specific complaint about quality or delivery to the operational creditor, nor any particulars of damage or counterclaim. The letters relied upon by the corporate debtor lacked essential particulars (addresses, tracking, signatures) and no contemporaneous complaint was filed. In absence of supporting evidence, the assertion of a dispute was held to be vague and motivated to evade liability. Relying on the standard that a defence must be a plausible contention supported by evidence rather than a bare assertion, the Tribunal rejected the corporate debtor's contention of a pre-existing dispute as patently feeble. [Paras 4, 5]

The alleged pre-existing dispute is not established on the record and is rejected as a defence.

Existence of debt and default - initiation of corporate insolvency resolution process under Section 9 - The operational creditor established existence of an operational debt and default, warranting initiation of CIRP under Section 9. - HELD THAT: - On consideration of the documents and submissions, and having rejected the pleaded dispute for lack of evidence, the Tribunal found that the operational creditor showed there was a debt due from the corporate debtor for goods supplied and that default had occurred. Applying the requisite threshold for admission under Section 9, the Tribunal concluded that the petition satisfied the statutory requirements for initiation of the corporate insolvency resolution process. [Paras 6]

CIRP is initiated against the corporate debtor with immediate effect.

Moratorium in terms of Section 14 - A moratorium as contemplated by the Code is imposed consequent to initiation of CIRP. - HELD THAT: - Following initiation of CIRP, the Tribunal imposed the statutory moratorium forthwith in the terms set out in the Code, restraining institution or continuation of suits or proceedings, transfer or disposal of assets, enforcement of security, and recovery of property occupied by the corporate debtor, subject to the statutory exceptions for specified transactions. [Paras 7]

Moratorium under Section 14 is imposed from the date of the order until completion of the CIRP.

Appointment of interim resolution professional - requirement to deposit funds for immediate IRP expenses - An IRP is appointed and the operational creditor is directed to deposit funds to meet immediate IRP expenses. - HELD THAT: - As the operational creditor had not proposed an IRP, the Tribunal appointed a named empanelled insolvency professional to act as interim resolution professional and directed him to undertake steps mandated by the Code and to file reports within 30 days. The operational creditor was ordered to deposit a specified sum to meet immediate IRP expenses, to be accounted for by the IRP and recoverable as CIR costs from the committee of creditors. [Paras 8, 9]

Mr. Kumud Shekhar is appointed as IRP and the operational creditor shall deposit the directed amount for immediate IRP expenses.

Final Conclusion: The Tribunal, having found no cogent evidence of a pre-existing dispute and satisfied that operational debt and default exist, admitted the Section 9 petition, initiated CIRP against the corporate debtor, imposed the statutory moratorium, appointed an IRP and directed deposit of funds to meet immediate IRP expenses.

Operational debt and default - pre-existing dispute and plausibility test - service of Section 8 demand notice - compliance with Form and affidavit requirements under Section 9 - admission under Section 9 and appointment of Interim Resolution Professional - moratorium under Section 14 - operational expenses deposit to Interim Resolution Professional

Operational debt and default - The claim of the applicant constituted an operational debt and there was a default which justified admission under Section 9. - HELD THAT: - On the material placed on record the Tribunal found that the applicant and the corporate debtor had executed a work order and that running account bills were raised, verified and approved by the corporate debtor's authorised signatory. The applicant produced measurement sheets, ledger accounts and communications evidencing performance and claim. The Tribunal held that absence of substantiation by the corporate debtor for its contention that no work was performed made the defence unsustainable. The date of default was recorded as 11.09.2019 and the application filed on 09.10.2019 was held to be within limitation. Taking these findings together, the Tribunal concluded that operational debt and default were established and the Section 9 application was otherwise complete and maintainable. [Paras 7, 9, 11, 12, 15]

The operational debt and date of default are established; the Section 9 application is maintainable and admitted.

Pre-existing dispute and plausibility test - The defence of a pre-existing dispute raised by the corporate debtor was spurious and not a plausible dispute requiring rejection under Section 9(5)(2)(d). - HELD THAT: - Applying the test of plausibility, the Tribunal observed that the corporate debtor had not placed any documentary evidence to show existence of a genuine dispute prior to issuance of the Section 8 notice. The contention of loss claimed by the corporate debtor was unsupported by documentation. Relying on the established principle that the adjudicating authority must reject only where a plausible pre-existing dispute is shown, the Tribunal found the corporate debtor's objections to be afterthoughts and mere assertions incapable of defeating the application. [Paras 10, 11]

The alleged pre-existing dispute is not proved and does not bar admission of the Section 9 application.

Service of Section 8 demand notice - compliance with Form and affidavit requirements under Section 9 - Technical objections regarding service of the Section 8 notice and alleged defects in the Form/affidavit were rejected and the application was held to comply with the statutory requirements. - HELD THAT: - The corporate debtor contended non-service of the demand notice in prescribed manner and defects in the affidavit under Section 9(3)(b). The Tribunal noted service of the Section 8 notice on 13.09.2019 and considered precedent treating service at the corporate office as valid. The applicant had filed the affidavit required under Section 9(3)(b) and the application was filed on the prescribed proforma under Rule 6. In light of the material on record, the Tribunal found no merit in the maintainability objections and held the procedural requisites to be satisfied. [Paras 6, 8, 14, 15]

Service of the Section 8 notice and statutory/formal compliance under Section 9 and the Rules are satisfactory; maintainability objections are overruled.

Admission under Section 9 and appointment of Interim Resolution Professional - moratorium under Section 14 - operational expenses deposit to Interim Resolution Professional - Upon admission of the Section 9 application the Tribunal appointed an Interim Resolution Professional, declared the moratorium, and directed a refundable deposit to meet IRP expenses. - HELD THAT: - Having admitted the application under Section 9(5), the Tribunal appointed the IRP proposed by the applicant subject to standard conditions and recorded that the moratorium under Section 14(1) would follow with applicable provisions in Sections 14(2)-(4) to operate. The Tribunal directed the applicant to deposit a specified sum with the IRP within one week to meet the IRP's expenses, subject to adjustment by the Committee of Creditors and refund as accounted for by the IRP. Directions were given for communication of the order to parties, IBBI and ROC for record and updating. [Paras 15, 16, 17, 18, 19]

Application admitted; IRP appointed; moratorium declared; applicant directed to deposit funds for IRP expenses and orders communicated to relevant authorities.

Final Conclusion: The Section 9 application by the operational creditor is admitted: the Tribunal found operational debt and default proved, rejected the corporate debtor's pre-existing dispute and procedural objections, appointed the Interim Resolution Professional, declared the moratorium, and directed a refundable deposit to the IRP and communications to IBBI and ROC.

Existence of pre-existing dispute - service of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - operational debt and documentary proof of debt - mandate of Section 9(5) of the Insolvency and Bankruptcy Code, 2016

Existence of pre-existing dispute - quality of goods as constituting a 'dispute' - effect of pre-existing dispute on maintainability under Section 9 - There existed a pre-existing dispute regarding the quality of goods prior to the issuance of the demand notice, rendering the Section 9 application not maintainable. - HELD THAT: - The Tribunal applied the test in Mobilox Innovations to examine whether a dispute pre-existed before receipt of the demand notice. The Corporate Debtor produced earlier communications dated 06.06.2017 and subsequent correspondence showing dissatisfaction with the quality of goods supplied. Those communications pre-dated the demand notice dated 25.09.2018 and therefore fell within the definition of 'Dispute' (including quality of goods) as contemplated under the Code. Having found that the dispute was brought to the Operational Creditor's notice prior to issuance of the Section 8 demand notice, the Tribunal held that the statutory condition for initiating CIRP under Section 9 was not satisfied and the application could not be admitted. [Paras 20, 21]

Application rejected and dismissed on the ground of a pre-existing dispute concerning the quality of goods raised prior to the demand notice.

Service of demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 - validity of notice served at registered or corporate/plant address - The demand notice under Section 8 was served on the Corporate Debtor at its registered and plant addresses and proof of service was placed on record. - HELD THAT: - The Operational Creditor produced postal receipt, tracking report and proof of service asserting delivery at the registered office and at the plant address. The Tribunal noted the presence of proof of service in the petition records and the Operational Creditor's contention that the notice was served at both addresses. Although service was accepted as recorded, the Tribunal's finding on service did not cure the defect arising from the pre-existing dispute which independently rendered the Section 9 petition untenable. [Paras 8, 16]

Service of the demand notice was treated as established on the record, but this did not affect the dismissal of the Section 9 application on account of the prior dispute.

Final Conclusion: The Section 9 application was dismissed: while service of the Section 8 demand notice was recorded on the papers, the Corporate Debtor had raised a dispute concerning quality of goods prior to that notice and, applying the statutory tests, the Tribunal held the petition not maintainable and rejected it; the Tribunal's observations are without prejudice to rights of the parties before any other forum and the Tribunal retained jurisdiction.

Corporate Insolvency Resolution Process - Operational Creditor - Operational Debt - Demand Notice (Form 3) - service and receipt - admission under Section 9(5)(i) of the Code - plausible dispute test (as applied in Mobilox) - Moratorium under Section 14 of the Code - Appointment and powers of Interim Resolution Professional

Demand Notice (Form 3) - service and receipt - The demand notice dated 21.08.2019 was duly served on the corporate debtor. - HELD THAT: - The petition discloses that the demand notice in Form No.3 dated 21.08.2019 was dispatched to the address appearing in the corporate debtor's master data and a delivery receipt with an acknowledgement is attached as Annexure-II. The affidavit required under Section 9(3)(b) was filed affirming service of the notice. On the material on record the Tribunal found that the statutory notice was properly delivered to the corporate debtor. [Paras 13, 17]

Demand notice of 21.08.2019 was properly delivered to the corporate debtor.

Plausible dispute test (as applied in Mobilox) - Operational Debt - There was no pre-existing or bona fide dispute raised by the corporate debtor in respect of the operational debt claimed by the operational creditor. - HELD THAT: - The Tribunal applied the Mobilox principle that the adjudicating authority must reject an application only where a genuine dispute or record in the information utility exists. The corporate debtor did not file any reply disputing the liability; learned counsel on record conceded inability to pay rather than asserting a dispute. No notice of dispute was shown to have been received by the operational creditor and no record of dispute in the information utility was placed on record. The Tribunal accordingly held that the claimed debt was undisputed for the purposes of admission. [Paras 14, 16, 17]

No notice of dispute or plausible defence was established; the operational debt stood undisputed.

Admission under Section 9(5)(i) of the Code - Operational Debt - The application under Section 9 was complete, default was proved and the petition was admissible leading to initiation of CIRP. - HELD THAT: - The petition in Form 5 was complete and supported by invoices, agreement, ledger account and statutory affidavit. The Tribunal found an unpaid operational debt in default exceeding the statutory threshold and that conditions (completeness, non-payment, delivery of notice, absence of dispute and absence of disciplinary proceedings against the proposed IRP) required by Section 9(5)(i) were satisfied. Applying these findings, the Tribunal admitted the application and ordered initiation of the Corporate Insolvency Resolution Process. [Paras 15, 17, 18, 19]

Petition admitted under Section 9(5)(i); CIRP initiated against the corporate debtor.

Moratorium under Section 14 of the Code - A moratorium as contemplated by the Code was declared from the date of the order until completion of CIRP or further order of the Tribunal. - HELD THAT: - Upon admission of the Section 9 petition, the Tribunal declared the moratorium in terms of Section 14(1), restraining institution or continuation of suits, enforcement of security, transfer or disposition of assets and recovery of property occupied by the corporate debtor. The Tribunal also observed the statutory carve-outs regarding supply of essential goods or services and other exceptions as provided in the Code and rules. [Paras 20, 21, 22]

Moratorium declared with effect from the date of the order until completion of CIRP or further order.

Appointment and powers of Interim Resolution Professional - Mr. Jugraj Singh Bedi was appointed as Interim Resolution Professional and found fit to act; his powers and duties as IRP were delineated. - HELD THAT: - The proposed IRP's consent was on record and the Tribunal's due diligence disclosed no adverse material or pending disciplinary proceedings. The Tribunal appointed Mr. Jugraj Singh Bedi as Interim Resolution Professional, directed that the management's powers vest in him under the Code, required preparation of inventory, public announcement, constitution of the Committee of Creditors after collating claims, and directed periodic reporting to the Tribunal, in keeping with statutory provisions governing the IRP's role and duties. [Paras 9, 23]

Mr. Jugraj Singh Bedi appointed as Interim Resolution Professional with the statutory powers and duties directed by the Tribunal.

Final Conclusion: The Section 9 petition filed by the operational creditor is admitted; CIRP is initiated against Ebusinessware (India) Private Limited, moratorium is declared from the date of the order, and Mr. Jugraj Singh Bedi is appointed as Interim Resolution Professional.

Admissibility of cenvat credit at refund stage - entitlement to refund of unutilised cenvat credit under Rule 5 of CCR, 2004 - requirement of nexus between input service and output service - classification of services as 'input service' under Rule 2(l) of CCR, 2004 - preclusive effect of absence of objection at time of availment

Admissibility of cenvat credit at refund stage - preclusive effect of absence of objection at time of availment - Admissibility of cenvat credit cannot be used to deny a refund claim under Rule 5 where the credit was availed earlier without objection and the question of admissibility was not raised at the time of availment. - HELD THAT: - The Tribunal noted that the challenge to admissibility of cenvat credit is a legal issue but emphasised the settled principle that where credit was availed and not objected to at the time of availment, denial of refund later on the ground that the services are not 'input services' is not sustainable. The Bench relied on earlier decisions of this Tribunal (including M/s Verisign Services India Pvt. Ltd. and Technip India Pvt. Ltd.) which held that refund cannot be refused merely because the services on which unutilised credit remained are later characterized as not being 'input services' when no objection was taken at the time of taking credit. Applying those precedents, the Tribunal found no merit in the revenue's rejection of the refund on this ground and set aside the impugned order.

Rejection of refund on the ground of inadmissibility of cenvat credit where credit was earlier availed without objection was set aside; appeal allowed on this ground.

Requirement of nexus between input service and output service - classification of services as 'input service' under Rule 2(l) of CCR, 2004 - Refund under Rule 5 cannot be denied on the basis that the input services in question purportedly lack nexus with output services when those services have been used in providing the output and their admissibility was not contested at the time of availment. - HELD THAT: - The Tribunal examined the contention that a strict nexus between the input service and the output service must be shown to claim refund of unutilised cenvat credit. Relying on precedent, the Bench observed that services such as renting of immovable property for parking and supplies for cafeteria have been held to be integral to the provision of output services and thus qualifying as input services. Given that the services were utilized in providing the output services and that no objection was raised at the time of taking credit, the requirement of a separate or stricter nexus test could not justify denial of the refund. Consequently, the impugned order rejecting the refund on nexus/qualification grounds was set aside.

Denial of refund for lack of nexus or because certain services are said not to qualify as 'input service' was held unsustainable where utilisation and earlier acceptance of credit were not disputed; refund allowed.

Final Conclusion: The impugned order rejecting the appellant's refund claim for the quarter January 2017 to March 2017 is set aside; the appeal is allowed and the appellant is entitled to the refund with consequential relief, as per the Tribunal's order.

Reversal of CENVAT credit under Rule 16(2) of Central Excise Rules, 2002 - remake / reconditioning versus clearance as such - clearance as scrap to related unit and revenue neutrality

Reversal of CENVAT credit under Rule 16(2) of Central Excise Rules, 2002 - remake / reconditioning versus clearance as such - clearance as scrap to related unit and revenue neutrality - Whether reversal of cenvat credit under Rule 16(2) was required where rejected finished goods, taken back and subjected to re-make, were in some cases found non-reparable and thereafter cleared as scrap to the appellant's sister unit on payment of duty. - HELD THAT: - The show cause notice records that returned goods were received and cenvat credit was availed on such receipts. The Tribunal found on the record that the returned goods were subjected to re-make/reconditioning processes and, only when certain goods could not be remade, they were cleared as scrap on payment of duty. Therefore the goods cleared as scrap were not cleared "as such" without any process; they had been subjected to the attempted re-make and were ultimately found non-reparable. Given this factual matrix, the conditions envisaged by Rule 16(2) for mandatory reversal on clearance "as such" are not attracted. Further, the goods were transferred to another unit of the same concern and duties paid on such clearances are eligible for cenvat credit by that unit; on that footing the transaction is revenue neutral. The Tribunal accordingly held that the adjudicating authority's demand for reversal of cenvat credit, interest and penalty was unsustainable on the facts of this case and the precedents cited for reversal did not apply to these facts. [Paras 6, 7]

Demand for reversal of cenvat credit under Rule 16(2) set aside; no differential duty payable as the goods were subjected to re-make and transfers to sister unit rendered the exercise revenue neutral.

Final Conclusion: Impugned order is set aside and the appeal is allowed with consequential relief.

Cenvat credit on input services - eligibility of repair and renovation services as input service under Rule 2(l) of Cenvat Credit Rules, 2004 - statutory requirement under the Factories Act, 1948 and entitlement to Cenvat credit for mandated health centre services - Cenvat credit for disposal of hazardous waste - quashment of show cause notice where allegation does not arise from audit objection

Eligibility of repair and renovation services as input service under Rule 2(l) of Cenvat Credit Rules, 2004 - Cenvat credit on input services - quashment of show cause notice where allegation does not arise from audit objection - Appellant entitled to Cenvat credit on services for repair and renovation of factory premises; show cause notice alleging construction where audit objection was confined to repairs was without basis. - HELD THAT: - The appellant had availed Cenvat credit on repair and maintenance of factory premises. The audit objection raised related to repair/maintenance of civil structures/buildings. The show cause notice, however, framed allegations as if credit was taken for construction/laying of foundation, which the Tribunal finds unsupported by the record. On the factual and legal matrix the services in question fall within the scope of eligible input services as contemplated by the amended definition under Rule 2(l) of the Cenvat Credit Rules, 2004. Because the show cause notice did not reflect the actual audit objection and no material supported the allegation of construction, the denial was unsustainable. Applying the legal test of admissibility of input services, the Tribunal allowed the credit claimed for repair and renovation. [Paras 8, 9]

Cenvat credit of Rs. 9,32,087/- for repair and renovation of factory premises allowed; show cause notice quashed insofar as it alleged construction not supported by record.

Statutory requirement under the Factories Act, 1948 and entitlement to Cenvat credit for mandated health centre services - Cenvat credit on input services - Appellant entitled to Cenvat credit on manpower services for running the health centre required under the Factories Act, 1948. - HELD THAT: - The Tribunal applied its earlier reasoning in M/s Rallis India Limited [reported in 2018 (11) TMI 1452 - CESTAT, Mumbai] that health services provided in fulfilment of a statutory requirement for emergency/first aid/primary treatment in hazardous manufacturing units retain their character as input services connected to manufacture and remain eligible for credit despite the general exclusion of health services introduced in the 2012 amendment. Given that the factory was required under the Factories Act, 1948 to maintain a health centre, the manpower services for running that centre are related to the manufacturing process and therefore admissible as Cenvat credit. [Paras 4, 10, 11]

Cenvat credit of Rs. 3,34,319/- for manpower services running the health centre allowed.

Cenvat credit for disposal of hazardous waste - Cenvat credit on input services - Appellant entitled to the remaining Cenvat credit denied by the Commissioner (Appeals) in respect of disposal of hazardous waste. - HELD THAT: - The show cause notice initially proposed to disallow a larger amount in respect of hazardous waste disposal services; the Commissioner (Appeals) had allowed credit largely but denied a small portion without recording reasons. The Tribunal found the denial of the residual amount unexplained and therefore unsustainable. On that basis the Tribunal held that the appellant is entitled to the balance Cenvat credit in respect of hazardous waste disposal services. [Paras 12]

Cenvat credit of Rs. 6,171/- for disposal of hazardous waste allowed; impugned denial set aside.

Final Conclusion: The appeal is allowed: the impugned order and the defective show cause notice are set aside; Cenvat credit for repair and renovation of factory premises, manpower services for the mandated health centre, and the residual sum for hazardous waste disposal are allowed with consequential relief.

Amnesty Scheme - settlement of arrears - reckoning of arrears as on the date of option - effect of departmental appeal pending on settlement - right of appeal of the Department - holistic reading of scheme provisions

Amnesty Scheme - effect of departmental appeal pending on settlement - reckoning of arrears as on the date of option - Whether an assessee can exclude an assessment year from the Amnesty Scheme on the ground that a favourable appellate order existed on the date of filing the option, when the Department had filed a further appeal within the statutory period. - HELD THAT: - The Court held that the Amnesty Scheme must be read holistically and that its benefit is conditional: an assessee who opts for settlement must opt for all outstanding arrears under the enactments covered. Where the Department has preferred an appeal against an order favourable to the assessee within the time permitted by the statute, that appeal cannot be ignored for the purposes of reckoning outstanding arrears. Allowing an assessee to unilaterally exclude such an assessment year would render the statutory right of appeal illusory. Consequently, notwithstanding a favourable order from the first appellate authority on the date the assessee submitted the option, the original liability confirmed by the assessing authority for that year must be included when calculating arrears for settlement if the Department has filed a timely appeal.

The petitioner must include the liability for assessment year 2012-13 in the Amnesty application; if so included, the respondents shall consider the application in accordance with the Scheme.

Final Conclusion: Writ petition disposed by directing that the petitioner include the liability for assessment year 2012-13 in its Amnesty application and, upon such inclusion, the respondents shall consider the same in accordance with the provisions of the Scheme.

Requirement of affidavit for an application under Section 156(3) CrPC - Application of mind in exercise of Section 156(3) CrPC - Compliance with Sections 154(1) and 154(3) of the Code of Criminal Procedure before invoking Section 156(3) - Validity of FIR, chargesheet and cognizance where referral under Section 156(3) is defective - Proceedings under Chapter XV CrPC (complaint jurisdiction)

Requirement of affidavit for an application under Section 156(3) CrPC - Application of mind in exercise of Section 156(3) CrPC - Compliance with Sections 154(1) and 154(3) of the Code of Criminal Procedure before invoking Section 156(3) - Legality of the Magistrate's referral of the complaint under Section 156(3) CrPC without affidavit, without application of mind and without compliance with Sections 154(1) and 154(3) CrPC. - HELD THAT: - The Court applied the principle laid down by the Hon'ble Supreme Court in Priyanka Srivastava that an application under Section 156(3) CrPC must be supported by an affidavit and cannot be referred in a routine or mechanical manner. The Magistrate's endorsement consisting solely of the notation "156(3) Cr.P.C." and the absence of an affidavit or any indication that Sections 154(1) and 154(3) CrPC had been followed demonstrated lack of prior application of mind. The complaint itself did not seek referral under Section 156(3) and contained no affidavit; only a lawyer's certificate about absence of previous complaint. For these reasons the exercise of jurisdiction under Section 156(3) was held to be vitiated. [Paras 5, 6]

The referral under Section 156(3) CrPC was quashed as invalid for want of affidavit, non-compliance with Sections 154(1) and 154(3) CrPC and absence of application of mind.

Validity of FIR, chargesheet and cognizance where referral under Section 156(3) is defective - Non-speaking order and requirement of reasons for taking cognizance - Consequential validity of the First Information Report, the chargesheet, the order taking cognizance and issuance of summons founded on the defective referral. - HELD THAT: - Because the Magistrate's referral under Section 156(3) CrPC was rendered bad by the defects identified, all consequential actions taken pursuant to that referral-including registration of the FIR, the police investigation and chargesheet, and the court's subsequent order of cognizance and issuance of summons-were held to be vitiated. The Court observed that the order taking cognizance and issuing summons was cryptic and non-speaking, rendering it unsustainable in law. Accordingly, those consequential acts were set aside. [Paras 6]

The FIR, the chargesheet, the order taking cognizance dated 28.04.2016 and the summons issued thereon were quashed and set aside as consequentially invalid.

Proceedings under Chapter XV CrPC (complaint jurisdiction) - Remand for fresh consideration of the complaint - Procedure to be followed thereafter in respect of the complaint registered as C/1 Case No.2931 of 2014. - HELD THAT: - Having set aside the referral under Section 156(3) CrPC and the consequential processes, the Court directed that the complaint case (C/1 Case No.2931 of 2014) be proceeded with by the court below in accordance with Chapter XV of the Code of Criminal Procedure. This direction contemplates fresh consideration of the complaint under the statutory complaint procedure rather than by summary referral under Section 156(3). [Paras 7]

The matter is remitted to the Court below to proceed with the complaint under Chapter XV CrPC.

Final Conclusion: The referral under Section 156(3) CrPC was quashed for want of affidavit, non-compliance with Sections 154(1) and 154(3) CrPC and lack of application of mind; the FIR, chargesheet, cognizance and summons consequent thereto were set aside; the complaint (C/1 Case No.2931 of 2014) is remitted to the trial court to be dealt with under Chapter XV CrPC.

SARFAESI proceedings against guarantor - application of Section 60 of the Insolvency and Bankruptcy Code regarding bankruptcy of personal guarantor - moratorium under Section 14 of the Insolvency and Bankruptcy Code and its inapplicability to guarantor - parallel proceedings during corporate insolvency resolution process - alternative remedy under Section 17 of the SARFAESI Act - exercise of writ jurisdiction where efficacious statutory remedy exists

SARFAESI proceedings against guarantor - application of Section 60 of the Insolvency and Bankruptcy Code regarding bankruptcy of personal guarantor - parallel proceedings during corporate insolvency resolution process - SARFAESI proceedings initiated against the petitioner in his capacity as guarantor are maintainable despite pendency of corporate insolvency proceedings against the corporate debtor. - HELD THAT: - The Court relied on the Apex Court's observations in V. Ramakrishnan that 'bankruptcy' in the context of Section 60 does not include SARFAESI proceedings against a guarantor, and expressly held that SARFAESI proceedings against the guarantor can continue under the SARFAESI Act even while insolvency proceedings against the corporate debtor are pending. The Court rejected the petitioner's contention that pendency of proceedings before the NCLT bars parallel SARFAESI action against the guarantor, noting also that provisions of the Code apply to the corporate debtor and do not create a bar to recovery steps against the guarantor under SARFAESI. The impugned notices and steps taken under the SARFAESI Act were therefore not vitiated by the existence of a moratorium in the corporate insolvency proceedings. [Paras 5, 6]

Proceedings under the SARFAESI Act against the petitioner as guarantor are maintainable notwithstanding pendency of CIRP against the corporate debtor.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code and its inapplicability to guarantor - parallel proceedings during corporate insolvency resolution process - The moratorium order passed in the corporate insolvency proceedings does not operate to protect the personal assets of the guarantor from action under the SARFAESI Act. - HELD THAT: - Although the NCLT has passed an order of moratorium in the CIRP, the Court observed that the moratorium under Section 14 of the Code pertains to the corporate debtor and does not extend to bar proceedings against a personal guarantor. Consequently, steps taken under the SARFAESI Act in respect of the petitioner's personal properties pledged as security were not rendered impermissible merely by the existence of the moratorium in the corporate insolvency matter. [Paras 2, 6]

The moratorium in the CIRP does not preclude SARFAESI action against the guarantor's personal properties.

Alternative remedy under Section 17 of the SARFAESI Act - exercise of writ jurisdiction where efficacious statutory remedy exists - The writ petition is not entertainable because the petitioner has statutory alternative remedies under the SARFAESI Act and related fora, and no exception to the rule against entertaining writs in presence of efficacious remedy was established. - HELD THAT: - The Court applied established precedents holding that where the statute provides an efficacious alternative remedy (notably remedy under Section 17 and appellate remedy under Section 18 of the SARFAESI Act and remedies before the DRT), extraordinary writ jurisdiction should ordinarily not be exercised. The Court found that the respondent had followed the SARFAESI procedure and that the petition did not plead any exceptional circumstance to displace the rule of exhaustion of statutory remedies. Reliance was placed on consistent authorities emphasizing restraint in exercising Article 226 where a comprehensive statutory scheme for recovery and redressal exists. [Paras 8, 10, 13, 14]

The writ petition is dismissed for failure to avail the efficacious statutory remedies under the SARFAESI regime; extraordinary jurisdiction is not warranted.

Final Conclusion: The Court dismissed the writ petition: SARFAESI actions against the petitioner as guarantor are maintainable despite pendency of CIRP against the corporate debtor; the moratorium in the CIRP does not protect the guarantor's personal assets; and the petition was not maintainable in view of efficacious alternative remedies under the SARFAESI Act.