TaxTMI Updates e-Newsletter
Dec 13,2021

Interim release of confiscated goods and conveyance - Section 130(2) of the Central Goods and Services Act, 2017 - show cause notice under Section 129(3) - prima facie bona fides - appellate tribunal not constituted under Section 109 of the Act

Interim release of confiscated goods and conveyance - Section 130(2) of the Central Goods and Services Act, 2017 - show cause notice under Section 129(3) - prima facie bona fides - Petition for interim release of confiscated goods and conveyance subject to conditions under Section 130(2) of the Act. - HELD THAT: - The Court noted that certain documents and invoices were produced before the intercepting authority and the remainder were subsequently filed in response to the show cause notice issued under Section 129(3). The respondents did not dispute that the invoices and other documents had been produced before the proper authority in response to that notice. On perusal of the MOV forms and the appellate order, the petitioner's case appeared prima facie bona fide and required consideration on merits. In view of this prima facie satisfaction and the absence of a constituted appellate tribunal under Section 109, the Court granted interim relief permitting release of the confiscated goods and conveyance subject to statutory conditions. The relief was made conditional on payment in terms of Section 130(2) based on the amounts disclosed in the invoices and furnishing of security for the balance by way of a bond within the time stipulated; the respondents were granted time to file a counter and the matter was listed thereafter for further consideration.

Confiscated goods and conveyance released to the petitioner on payment as per Section 130(2) based on disclosed invoices and on furnishing security for the balance by bond within two weeks; respondents to file counter and matter listed for further consideration.

Final Conclusion: The writ petition was entertained because the appellate tribunal under Section 109 was not constituted; on a prima facie view of bona fides the Court granted interim release of the confiscated goods and conveyance subject to payment under Section 130(2) based on invoices and furnishing of security, while directing respondents to file a counter and listing the matter for further consideration.

Release of goods and conveyance on deposit and security under Section 129(1)(a) of the Act - security and deposit for interim release pending adjudication - requirement and evidentiary significance of the e-way bill where vehicle is changed during transit - interim relief pending filing of counter and rejoinder affidavits

Release of goods and conveyance on deposit and security under Section 129(1)(a) of the Act - security and deposit for interim release pending adjudication - Interim release of the seized goods and vehicle on conditions prescribed under Section 129(1)(a) of the Act. - HELD THAT: - The Court directed conditional release of the goods and vehicle in favour of the petitioners on compliance with terms framed under Section 129(1)(a). The petitioners are required, within two weeks, to deposit fifty per cent of the amount claimed as penalty and tax and to furnish security for the remaining fifty per cent of the penalty (other than cash or a bank guarantee) to the satisfaction of the authority in the prescribed manner. The order is an interim measure granted while the respondents file a counter affidavit and the petitioners may file a rejoinder thereafter; no decision was rendered on the merits of the seizure, valuation or e-way bill compliance at this stage.

Goods and vehicle released subject to deposit of 50% of claimed tax and penalty and furnishing security for remaining 50% within two weeks, security to be other than cash or bank guarantee and to the satisfaction of the authority.

Interim relief pending filing of counter and rejoinder affidavits - requirement and evidentiary significance of the e-way bill where vehicle is changed during transit - Procedural timetable for adjudication following grant of interim relief. - HELD THAT: - The Court granted four weeks to the respondents to file a counter affidavit and allowed two weeks thereafter to the petitioners to file a rejoinder affidavit. The Court noted the competing contentions - the petitioners' point regarding timing of generation of the e-way bill and valuation, and the respondents' reliance on sub rule (5) of Rule 138 regarding e way bill and changed vehicle - but did not decide these contested questions at this interim stage; those contentions remain for consideration on pleadings to be filed pursuant to the timetable ordered.

Respondents to file counter affidavit within four weeks and petitioners to file rejoinder within two weeks thereafter; substantive issues reserved for adjudication on pleadings.

Final Conclusion: Interim order: goods and vehicle released on conditions - deposit of 50% of claimed tax and penalty and security for remaining 50% (other than cash or bank guarantee) to authority's satisfaction within two weeks; respondents granted four weeks to file counter and petitioners two weeks for rejoinder; merits of seizure, valuation and e way bill compliance not decided.

Input tax credit exclusion for works contract services for construction of immovable property - Availability of ITC on plant and machinery including machine foundation - Definition of plant and machinery for input tax credit - ITC not available on goods or services received for construction on own account

Input tax credit exclusion for works contract services for construction of immovable property - Availability of ITC on plant and machinery including machine foundation - ITC not available on goods or services received for construction on own account - Eligibility of input tax credit on GST charged by the contractor for works contract services in relation to construction activities carried out for the applicant. - HELD THAT: - The Authority examined Section 17(5) and its explanation to determine the scope of disallowance of ITC. Section 17(5) excludes ITC on works contract services when supplied for construction of an immovable property (other than plant and machinery), while the explanation identifies "plant and machinery" to include apparatus, equipment and machinery fixed to earth by foundation or structural support and explicitly includes such foundation and structural support but excludes land, building or other civil structures and certain external pipelines. Applying these provisions to the facts, works contract services and goods/services used for construction of immovable property on the applicant's own account are generally ineligible for ITC, except where they relate to plant and machinery. Machine foundations fall within the explained scope of "plant and machinery" and hence qualify for ITC. Civil structures and building-related works do not qualify. Therefore, only the portion of the contractor's charges attributable to machine foundations is eligible for input tax credit. [Paras 7, 8]

The applicant is eligible for input tax credit only to the extent of machine foundation; ITC on works contract services or goods/services for construction of immovable property (other than plant and machinery) is not available.

Final Conclusion: Advance ruling: ITC on GST charged by the contractor for construction is available solely in respect of machine foundations; ITC on other construction-related works for immovable property or on works undertaken on the applicant's own account is disallowed.

Stay of operation of impugned order - Violation of principles of natural justice - Non-compliance of Rule 142(1A) of the CGST Rules, 2017 - Interim relief pending adjudication

Stay of operation of impugned order - Interim relief pending adjudication - Grant of interim stay of operation of the impugned order dated 27th September 2021 and incidental interlocutory directions. - HELD THAT: - Petitioner challenged the impugned adjudication order alleging that it was non-reasoned, passed in breach of the principles of natural justice by denying personal hearing, and that the Show Cause Notice was uploaded late so the petitioner had no opportunity to reply. The Court entertained the petition as a prima facie case for grant of interim relief and issued notice to the respondent. In the exercise of its interlocutory jurisdiction the Court stayed the operation of the impugned order pending further orders, while permitting the respondent to file a counter-affidavit within four weeks and directing that any rejoinder be filed before the next date of hearing. The Court listed the matter for further hearing on the specified date. The order records these procedural directions and the interim stay without adjudicating the merits of the allegations regarding natural justice or compliance with Rule 142(1A).

Operation of the impugned order dated 27th September 2021 is stayed till further orders; notice issued; counter-affidavit to be filed in four weeks; rejoinder, if any, before next date; matter listed for further hearing.

Final Conclusion: The High Court issued notice, granted an interim stay of the impugned adjudication order dated 27th September 2021, and directed exchange of affidavits; the merits of the challenge (including alleged breach of natural justice and non-compliance of Rule 142(1A)) remain to be adjudicated on the returnable date.

Classification of advertising services for GST - distinction between sale of space for advertisement in print media and other advertisement space - composite supply - tariff classification under Notification No. 11/2017 - advance ruling under Section 98(4) of the CGST Act

Classification of advertising services for GST - distinction between sale of space for advertisement in print media and other advertisement space - tariff classification under Notification No. 11/2017 - Services supplied by the applicant are to be classified as 'Other advertisement space' (SAC 998366) and not as 'selling of space for advertisement in print media' (SAC 998362). - HELD THAT: - The Authority examined the schedules to Notification No. 11/2017 which separately list 'selling of space for advertisement in print media' and 'other advertising space or time' with distinct SAC codes and tariff entries. The notification draws a clear distinction between mere sale of advertisement space in print media and other/ornate advertising space. The artwork or design supplied by the applicant cannot be treated as assimilating the activity into the print-media space category where a separate SAC applies. Consequently, the applicant's combined activity of supplying ornate/other advertisement space (with artwork) falls under the SAC for 'Other advertisement space' (998366) rather than the SAC for sale of print-media advertisement space (998362). [Paras 7, 8]

The services fall under 'Other advertisement space' (SAC 998366).

Tariff classification under Notification No. 11/2017 - composite supply - classification of advertising services for GST - GST cannot be charged at an aggregate rate of 5%; the applicable tax rate on the service as classified is the rate corresponding to 'other advertisement space', resulting in GST leviable at 18% (9% CGST + 9% SGST). - HELD THAT: - Having classified the service as 'Other advertisement space' under the SAC applicable in Notification No. 11/2017, the Authority applied the tariff entries in that notification. The notification prescribes a higher rate for 'other professional, technical and business services' falling under item (ii) of serial no. 21, which includes other advertising space/time, attracting 9% CGST and 9% SGST. The applicant's contention that the artwork forms part of a composite supply attracting the lower print-media space rate is rejected because the distinct SAC and tariff for 'other advertisement space' governs the transaction. [Paras 7, 8]

GST is leviable at 18% on the services as classified (9% CGST + 9% SGST); GST at 5% is not applicable.

Final Conclusion: The Authority rules that the applicant's supply (advertising space with artwork) is classifiable as 'Other advertisement space' (SAC 998366) under Notification No. 11/2017 and therefore attracts the rate applicable to that category (9% CGST + 9% SGST), so GST at 5% is not permissible.

Revision of declaration in FORM GST TRAN-1 - Extension of time by the Commissioner under Rule 120A - Right to seek rectification for inadvertent transitional errors - Interim protection from coercive action pending administrative decision

Revision of declaration in FORM GST TRAN-1 - Extension of time by the Commissioner under Rule 120A - A registered person who has submitted FORM GST TRAN-1 is entitled to seek revision of that declaration and to request the Commissioner to extend the time for filing a revised declaration under Rule 120A. - HELD THAT: - The Court reproduced Rule 120A which permits a registered person who submitted a declaration electronically in FORM GST TRAN-1 to revise that declaration once within the time period specified in the relevant rules or within such further period as may be extended by the Commissioner. On plain reading, the Rule authorises revision within the timelines of the governing provisions (here Rule 117) and also contemplates that the Commissioner may enlarge the period generally or by specific order on request. The petitioner had not earlier sought a specific extension; therefore the remedy under Rule 120A to request extension remained available and its availability was recognised by the Court. [Paras 5, 6, 7]

Petitioner may make a specific request to the Commissioner under Rule 120A to extend time to file a revised FORM GST TRAN-1 so as to correct the alleged mistake.

Opportunity to seek administrative remedy - No coercive action pending administrative decision - The Commissioner must consider any such request for extension on its merits and the petitioner is entitled to interim protection from coercive action until the Commissioner decides the request. - HELD THAT: - The Court directed that if the petitioner makes a written request to the relevant Commissioner within a fortnight, the Commissioner will consider the matter on its merits and without reference to the impugned order. The Court further ordered that until the Commissioner decides the request, no coercive action pursuant to the original show-cause notice or the impugned order shall be taken against the petitioner. In the event of refusal, the Commissioner must communicate reasons for the decision within six weeks of receipt of the written request. These directions preserve the administrative decision-making process while affording temporary protection to the petitioner. [Paras 8, 9]

Commissioner to consider the extension request afresh; no coercive action to be taken meanwhile; if declined, reasons to be communicated within six weeks.

Right to seek rectification for inadvertent transitional errors - Whether a mistake or inadvertence occurred in the petitioner's original declaration was not adjudicated by the Court and remains for the Commissioner to consider in accordance with law. - HELD THAT: - The Court explicitly refrained from determining whether the petitioner had committed an inadvertent error while electronically filing the declaration during the transitional phase. It observed that the Commissioner remains free to examine and take an appropriate view on that question in the exercise of statutory powers, once the petitioner's request for extension and revision is considered. Thus the factual/legal question of inadvertence was not finally decided by the Court and is left for administrative determination. [Paras 10]

Question of inadvertence not decided; left open for the Commissioner to determine in the course of considering the extension/revision request.

Final Conclusion: Writ petition allowed in part: petitioner permitted to make a written request within two weeks under Rule 120A to the Commissioner for extension to file a revised FORM GST TRAN-1; Commissioner to consider the request afresh and communicate reasons if refused within six weeks; no coercive action to be taken pending the Commissioner's decision; Court did not decide whether any inadvertence occurred in the original filing.

Pre-arrest bail - Interim protection pending arrest - Conditions of interim bail (personal recognizance bond, surety, reporting to police) - Non-tampering with prosecution evidence - Delay in prosecution / sanction for prosecution - Automatic stay under Section 107(7) of the GST Act

Pre-arrest bail - Interim protection pending arrest - Conditions of interim bail (personal recognizance bond, surety, reporting to police) - Non-tampering with prosecution evidence - Grant of interim protection by release on interim bail in anticipation of arrest and imposition of specific conditions - HELD THAT: - The Court, on hearing, noted that the applicant faces anticipated arrest in connection with Crime No.677/2021 for alleged offences under the Indian Penal Code and the Goods and Services Tax Act. Although the nature of accusation requires consideration, the Court observed delay in issuance of sanction for prosecution and noted the effect of Section 107(7) of the GST Act concerning automatic stay of certain compliances. In the interregnum while the matter is considered on notice, the Court protected the applicant's liberty by ordering interim relief. The relief is conditional: the applicant is to furnish a personal recognizance bond with one surety in the specified amount, to attend the concerned police station on Saturdays and Sundays between 11 a.m. and 2 p.m., and to refrain from tampering with prosecution evidence. The Court issued notice to the non-applicant returnable on the specified date. [Paras 5]

In the event of arrest, the applicant shall be released on interim bail on furnishing a P.R. bond with one surety in the specified amount; the applicant shall report weekly to the police station as directed and shall not tamper with prosecution evidence; notice issued to the non-applicant.

Final Conclusion: Interim protection granted: applicant to be released on interim bail upon arrest subject to bond, surety, specified reporting obligations and a prohibition on tampering with evidence; notice to the non-applicant returnable on the listed date.

Compliance with statutory time limit under Section 107(13) of the Gujarat Goods and Services Tax Act, 2017 - adjudication of appeals in a time-bound manner - direction to list and decide pending appeals - judicial restraint on merits

Compliance with statutory time limit under Section 107(13) of the Gujarat Goods and Services Tax Act, 2017 - adjudication of appeals in a time-bound manner - direction to list and decide pending appeals - Direction to the appellate authority to list the pending appeals and adjudicate them in accordance with law within a specified time frame. - HELD THAT: - The petitioner sought a writ directing the respondents to comply with the time limit envisaged in Section 107(13) of the Gujarat GST Act and to adjudicate the appeals listed in paragraph 4.5. The Court, while not entering into the merits of the underlying appeal, accepted the legal obligation to decide appeals in a time bound manner and recorded the State's assurance of cooperation. The Court directed that the appeals be listed within two weeks and disposed of in accordance with law, with the petitioner required to cooperate. No substantive adjudication on the merits was undertaken by the Court and the appellate authority is to decide the matters afresh in accordance with applicable law and procedure. [Paras 5, 6]

Petition disposed by directing the appellate authority to list the appeals within two weeks and decide them in accordance with law; merits left open for the authority to determine.

Final Conclusion: The petition is disposed of by directing the respondent appellate authority to list the specified appeals within two weeks and adjudicate them in accordance with law; the Court did not adjudicate the merits of the appeals.

Classification of parts of railway rolling-stock - Chapter Heading 8607 - Chapter Heading 8537 - Chapter Note 3 (suitability for use test) - coach work - sole or principal use

Classification of parts of railway rolling-stock - Chapter Heading 8607 - Chapter Heading 8537 - Chapter Note 3 (suitability for use test) - sole or principal use - Classification of the Switch Board Cabinet supplied to Indian Railways as parts of railway rolling-stock under Chapter Heading 8607 and not under Chapter Heading 8537. - HELD THAT: - The Appellate Authority examined whether the Switch Board Cabinet should be classified under Chapter 8537 (boards, panels, consoles, cabinets for electrical control/distribution) or under Chapter 8607 (parts of railway rolling-stock). The Authority recorded that the product is manufactured strictly as per RDSO/Indian Railways specifications and is supplied only to Indian Railways for coach work. Applying the "suitability for use" test embodied in Chapter Note 3, and following the reasoning in the cited larger bench decision which recognises that parts suitable solely or principally for use with Chapter 86 articles must be classified in that chapter, the Authority held that the Switch Board Cabinet is an integral part of coach work and is suitable solely/principally for use in railway coaches. The earlier Advance Ruling did not adequately address the product's exclusive design and use for Indian Railways; on the facts and by analogy to Tribunal precedents dealing with coach-fitment items, the correct classification is under Chapter Heading 8607 as parts of rolling-stock rather than under 8537. [Paras 9, 15, 16]

The Switch Board Cabinet manufactured to Indian Railways/RDSO specifications and supplied only to Indian Railways is classifiable under Chapter Heading 8607 as parts of railway rolling-stock.

Final Conclusion: The appeal is allowed to the extent that the Switch Board Cabinet, made as per RDSO/Indian Railways specifications and supplied exclusively to Indian Railways for coach work, is held classifiable under Chapter Heading 8607 of the Customs Tariff Act, 1975.

Classification of goods - Chapter 86 - parts of railway rolling-stock - Chapter 84 - mechanical appliances for projecting, dispersing or spraying - Suitability for use test - HSN classification

Classification of goods - Chapter 86 - parts of railway rolling-stock - Suitability for use test - HSN classification - Bellow Ducts manufactured as per Railway specifications and supplied exclusively to Indian Railways are classifiable under Chapter Heading 8607. - HELD THAT: - The Appellate Authority examined whether the impugned Bellow Ducts fall under Chapter Heading 8607 as parts of railway rolling-stock or under Chapter Heading 8424 as mechanical appliances for projecting, dispersing or spraying. Chapter 86 and its Note 3 require that references to 'parts' apply only to parts suitable for use solely or principally with the articles of those Chapters and that a part answerable to two headings is to be classified according to its principal use. The Authority accepted the appellant's uncontested factual position that the Bellow Ducts are custom-built to RDSO specifications and are used exclusively in coach air-conditioning units of Indian Railways. Applying the "suitability for use test" as explained by the Supreme Court in Westinghouse Saxby Farmer Ltd and consistent tribunal precedents cited, items specifically designed and fit solely or principally for railway coaches must be classified under Chapter 86. The Advance Ruling's classification under Chapter 84 was therefore not appropriate given the principal use of the product for coach work, and the Bellow Ducts merit classification under heading 8607 as parts of railway rolling-stock. [Paras 10, 12, 13, 15, 16]

The Bellow Ducts manufactured to Railway design and supplied exclusively to Indian Railways are classifiable under Chapter Heading 8607.

Final Conclusion: Appeal allowed; the Advance Ruling is set aside to the extent it classified the Bellow Ducts under HSN 8424, and the product is held classifiable under Chapter Heading 8607 as parts of railway rolling-stock.

Classification of goods - taxability of wood logs for pulping - interpretation of tariff entry - HSN Code 4401 - HSN Code 4403 - advance ruling

Classification of goods - HSN Code 4401 - HSN Code 4403 - taxability of wood logs for pulping - Whether payment of GST at 5% on supply of pulp wood classified under Chapter 4401 is correct. - HELD THAT: - The Authority examined the tariff entries and held that the entry at Sl. No.198 (Chapter 4401) covers "wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms" and therefore applies only to wood chips, particles, sawdust, waste or scrap and to logs that are the result of agglomeration of such materials. Debarked eucalyptus/subabul cut to sizes supplied as pulp wood are not agglomerated products of chips or sawdust and thus do not fall within that entry. The Authority found that HSN 4403 expressly covers "logs ... for pulping" and similar forms and, being the correct classification for the applicant's supply of wood logs for pulping, attracts the rate applicable to that heading. Applying this classification, the Authority concluded that the correct combined rate is 18% (9% CGST + 9% SGST). [Paras 7, 8]

Payment of GST at 5% under Chapter 4401 is incorrect; the correct classification is HSN 4403 and the applicable rate is 18%.

Final Conclusion: The Authority ruled that debarked eucalyptus/subabul cut to sizes for pulping are classifiable under HSN 4403 (logs for pulping) and not under the Chapter 4401 entry for agglomerated wood chips, and accordingly the supply is taxable at the 18% GST rate (9% CGST + 9% SGST).

Transfer of input tax credit to Input Service Distributor under Rule 54(1A) - treatment of such transfer as outward taxable supplies - filing obligation of outward details in Form GSTR-1 - presentation of transferred credit in GSTR-3B - utilisation of IGST credit for discharging CGST and SGST liabilities under Section 49

Transfer of input tax credit to Input Service Distributor under Rule 54(1A) - treatment of such transfer as outward taxable supplies - filing obligation of outward details in Form GSTR-1 - presentation of transferred credit in GSTR-3B - Transfer of credit under Rule 54(1A) to an ISD by issuance of an invoice or debit/credit note is to be treated as outward taxable supplies and the details must be furnished in Form GSTR-1; the taxable value and tax amount so transferred are to be reflected in returns including GSTR-3B. - HELD THAT: - Rule 54(1A) permits a registered person to transfer credit of common input services to an ISD by issuing an invoice or credit/debit note, which must state the taxable value and amount of credit to be transferred. Sections 37(1) of the CGST Act and Section 14 of the IGST Act read with rule 59(1) of the CGST Rules require furnishing details of outward supplies in Form GSTR-1 by every registered person other than an ISD and certain excluded persons. A combined reading leads to the conclusion that the transfer effected under Rule 54(1A) attracts the reporting obligation in GSTR-1; correspondingly the transfer and related amounts are to be reflected in the relevant heads of GSTR-3B so as to ensure proper compliance and reporting of the transfer of credit. [Paras 7, 8]

Yes; transfer under Rule 54(1A) is outward taxable supplies and must be reported in Form GSTR-1 and appropriately shown in GSTR-3B.

Utilisation of IGST credit for discharging CGST and SGST liabilities under Section 49 - treatment of IGST when transferor and transferee are in the same State - Where the transferor and the ISD transferee have the same PAN and are located in the same State, the ITC transferred will be available as CGST and SGST (not as IGST) by utilising available IGST credit in terms of Section 49. - HELD THAT: - The Authority observed that when an invoice is raised on an ISD having the same State code, the credit of tax can be issued for CGST and SGST by utilising IGST credit, pursuant to the provisions governing utilisation of input tax credit. Thus, for intra state transfers between registrations under the same PAN and State code, the practical effect is that the transferred credit is reflected as CGST and SGST, with IGST credit capable of being used to meet such Central and State tax components as provided by the law on set off/utilisation. [Paras 7, 8]

Transfer of ITC between registrations in the same State (same PAN) will be in the form of CGST and SGST, utilising IGST credit as permissible under law.

Treatment of transfers between registrations in different States - consistency with intra state transfer ruling - The position where transferor and transferee are in different States is answered by the ruling on intra state transfers and the obligation to report the transfer in returns; the treatment follows from the answer given to the intra state scenario. - HELD THAT: - The Authority indicated that the question regarding transfers between registrations in different States is addressed by its response to the intra state situation, i.e., reporting in GSTR 1 and GSTR 3B as outward details and the applicable mechanics of credit transfer under Rule 54(1A). No separate contrary dispensation was made; parties must follow the reporting and credit transfer mechanism as governed by the Rules and related provisions. [Paras 8]

Answered by reference to the ruling in Question 2; parties must follow the same reporting and credit transfer mechanism under Rule 54(1A) and applicable credit utilisation provisions.

Final Conclusion: The Authority rules that transfers of common input service credit to an ISD under Rule 54(1A) are to be treated as outward taxable supplies and must be reported in Form GSTR 1 and shown in GSTR 3B; where both registrations are under the same PAN and in the same State, the transferred ITC will be reflected as CGST and SGST, utilising IGST credit as permissible, and the position for inter state registrations is to be governed by the same reporting and transfer mechanism as indicated above.

Exemption from income-tax under Section 50 of the SIDBI Act - non-obstante clause - tax on distributed profits under Section 115-O - charge on the company paying dividend - interpretation of overlapping non-obstante clauses

Exemption from income-tax under Section 50 of the SIDBI Act - tax on distributed profits under Section 115-O - charge on the company paying dividend - Whether amounts declared, distributed or paid by the petitioner by way of dividend fell within the exemption conferred by Section 50 of the SIDBI Act and were therefore not liable to additional tax under Section 115-O of the Income-tax Act, 1961. - HELD THAT: - Section 50 of the SIDBI Act contains a non-obstante clause exempting the Small Industries Development Bank from payment of income-tax on any income, profits or gains derived or any amount received by it. Section 115-O imposes an additional tax on amounts declared, distributed or paid by a domestic company by way of dividend and is a charge on the company paying the dividend. The court held that where Section 50 operates to render the petitioner not chargeable to income-tax, the limited non-obstante provision in Section 115-O(1A) (which presupposes a company chargeable to tax under the Act) does not apply. The court further reasoned that transfers or payments by the petitioner to IDBI and payments to shareholders constitute distributions falling within the category of income, profits or gains for the purposes of Section 50; consequently Section 50's overriding exemption covers such distributions. In view of the foregoing, the petitioner was not liable to pay additional income-tax under Section 115-O on the amounts in question. [Paras 11, 12, 13, 14, 15]

The amounts declared, distributed or paid by way of dividend fell within the exemption under Section 50 of the SIDBI Act and were not liable to additional tax under Section 115-O.

Non-obstante clause - interpretation of overlapping non-obstante clauses - Whether the absence of a specific overriding provision in the Income-tax Act analogous to Section 115R rendered Section 50's exemption applicable to the petitioner without being displaced by Section 115-O. - HELD THAT: - The court observed that where the legislature intends to override an exemption conferred by another Act it has, in previous instances, introduced a specific provision in the Income-tax Act (for example Section 115R in relation to the Unit Trust of India). The lack of a comparable provision expressly overriding Section 50 indicated legislative intent that Section 50's exemption remain effective. The court thus construed the non-obstante clause in Section 50 as having operative effect to exclude the petitioner from liability under Section 115-O in the circumstances of this case. [Paras 11, 12, 13, 15]

In the absence of a specific statutory provision in the Income-tax Act overriding Section 50, the non-obstante clause in Section 50 applies and Section 115-O does not displace that exemption as to the petitioner.

Exemption from income-tax under Section 50 of the SIDBI Act - Whether payments of additional income-tax made by the petitioner under protest should be refunded. - HELD THAT: - Having held that the petitioner was not liable to pay additional income-tax under Section 115-O because Section 50's exemption applied to the distributions and transfers in question, the court concluded that amounts paid by the petitioner under protest require refund. The court made the rule absolute and directed refund in terms of the reliefs sought by the petitioner for the relevant years. [Paras 15, 16]

Payments of additional tax made under protest by the petitioner are to be refunded.

Final Conclusion: The petition is allowed: the court held that distributions/transfers in issue fall within the exemption of Section 50 of the SIDBI Act and are not liable to tax under Section 115-O; the impugned communication is quashed and the amounts paid under protest for assessment years 1997-98 to 2000-2001 are to be refunded.

Disallowance under section 14A read with Rule 8D(iii) of the Income Tax Rules - Exclusion of investments in subsidiaries for computation of exempt-income related disallowance - Characterisation of corporate guarantee to Associated Enterprise as an international transaction - Application of Arm's Length Price for guarantee fee - Benefit conferred on Associated Enterprise and transfer of benefit

Disallowance under section 14A read with Rule 8D(iii) of the Income Tax Rules - Exclusion of investments in subsidiaries for computing disallowance - Whether the Tribunal erred in excluding investments in subsidiaries (considering only investments yielding dividend/exempt income) for computing disallowance under section 14A read with Rule 8D(iii). - HELD THAT: - The High Court admitted the appeal on this question for adjudication. The order records that the matter is taken up for hearing before this Court and does not decide the substantive correctness of the Tribunal's approach. The Tribunal's exclusion of certain subsidiary investments from the Rule 8D(iii) computation is identified as a substantial question of law meriting consideration by this Court; no final finding on the merits is recorded in the order under review.

Admitted for determination by the High Court; remanded for adjudication on merits.

Characterisation of corporate guarantee to Associated Enterprise as an international transaction - Explanation to section 92B - Application of transfer pricing principles - Whether the Tribunal erred in reversing the Assessing Officer and Dispute Resolution Panel in holding that providing corporate guarantees to an Associated Enterprise constitutes an international transaction under the explanation to section 92B and in applying ALP to fix a guarantee fee at 3%. - HELD THAT: - The Court has admitted this substantial question of law for hearing. The order does not resolve the question on its merits; instead, it frames the matter for consideration by this Court. The correctness of treating corporate guarantees as international transactions under the statutory explanation and the appropriateness of applying Arm's Length Price methodology (and the 3% fee fixed by the Tribunal) remain open for determination.

Admitted for determination by the High Court; remanded for full adjudication on the transfer-pricing characterisation and ALP application.

Deletion of addition relating to guarantee fee - Appropriateness of 3% guarantee fee as Arm's Length Price - Whether the Tribunal committed substantial error of law in deleting the addition of Rs. 2,56,49,228/- by holding that a 3% guarantee fee was at arm's length for receipts of corporate guarantees from the subsidiary. - HELD THAT: - The order admits this specific challenge to the Tribunal's deletion of the addition for consideration by the High Court. The Court has not adjudicated the correctness of the Tribunal's conclusion on the 3% rate; rather, it has preserved the legal question for hearing. The factual and transfer pricing assessment underlying the deletion will be examined at the hearing; no decision on the merits is recorded in the present order.

Admitted for hearing on merits by the High Court; remanded for detailed adjudication.

Benefit conferred on Associated Enterprise and pass on of benefit - Guarantee commission chargeable at Arm's Length Price - Whether the Tribunal erred in disregarding that a clear benefit accrued to the Associated Enterprises from the guarantee, and that where such benefit was passed on the guarantee commission should be charged at the Arm's Length Price. - HELD THAT: - The Court has admitted this question as a substantial question of law to be determined. The present order does not resolve whether a benefit accrued or was passed on, nor does it determine the appropriate pricing consequence; these factual and legal issues are to be considered and decided by the High Court at the hearing of the admitted appeal.

Admitted for determination by the High Court; remanded for full consideration of benefit accrual and ALP consequences.

Final Conclusion: The High Court has not decided the substantive merits of the admitted questions; the appeal is admitted for hearing limited to four substantial questions concerning (a) exclusion of certain subsidiary investments in computation of disallowance under section 14A read with Rule 8D(iii), and (b)-(d) the characterization of corporate guarantees to Associated Enterprises as international transactions, the application of Arm's Length Price (including the 3% guarantee fee) and the issue of benefit accrual and pass on. Other substantial questions earlier raised were not entertained by the Court in view of binding precedent. The admitted questions are listed for final adjudication on the merits at a subsequent hearing.

Vivad Se Vishwas Scheme - declaration under Section 4 of the DTVSV Act, 2020 - pending as on the specified date - condonation of delay treated as appeal filed in time - CBDT Circular No.21/2020 Question No.59

Declaration under Section 4 of the DTVSV Act, 2020 - pending as on the specified date - condonation of delay treated as appeal filed in time - Validity of rejection of declarations by the Designated Authority where appeals were filed belatedly with applications for condonation of delay which were subsequently condoned - HELD THAT: - The Court followed the coordinate-bench decision in Karan Ventakeshwara Associates and held that once delay in filing an appeal is condoned, the appeal must be treated as having been filed in time and therefore as pending on the specified date (31st January, 2020) for purposes of the Vivad Se Vishwas Scheme. Applying that principle to the petitioner - who filed appeals on 7th April, 2019 with applications for condonation of delay that were later condoned by the ITAT - the Court found that the declarations furnished under Section 4 of the DTVSV Act, 2020 fell within the class of matters pending on the specified date. Consequently, the Designated Authority's rejection of those declarations was held to be bad in law and liable to be quashed. The Court directed respondent No.3 to process the declarations in accordance with law expeditiously. [Paras 14, 17, 18, 19, 20]

Rejection of the declarations was held bad-in-law; the impugned communication rejecting the declarations is quashed and respondent No.3 directed to process the declarations in accordance with law.

CBDT Circular No.21/2020 Question No.59 - Vivad Se Vishwas Scheme - Challenge to the scope and legality of the clarification in Question No.59 of CBDT Circular No.21/2020 - HELD THAT: - The petitioner contested that the clarification in Question No.59 impermissibly added qualifications beyond the DTVSV Act by treating only appeals admitted before the specified date as pending. The Court observed factual nuances (service and limitation dates) that raised doubt about the circular's application to the petitioner's case but, having found the rejection of declarations to be bad in law on the condonation principle, the Court refrained from deciding the broader challenge to the circular. That challenge was expressly kept open for decision in an appropriate proceeding. [Paras 15, 16]

Challenge to the circular's clarification left open for adjudication in an appropriate proceeding.

Final Conclusion: Petition partly allowed: the rejection of the petitioner's declarations under Section 4 of the DTVSV Act, 2020 (for assessment years 2011-12, 2012-13, 2013-14, 2015-16 and 2017-18) is quashed; respondent No.3 directed to process the declarations in accordance with law; challenge to CBDT Circular No.21/2020 Question No.59 is left open for decision in appropriate proceedings.

Liability to deduct tax at source on provisions made head-wise not referable to any particular payee - identification of payees for the purpose of TDS - no income accrual to the payee as prerequisite for TDS - application of Section 40(a)(ia) read with Sections 194C, 194H, 194I and 194J - requirement of adequate reasons in appellate orders

Liability to deduct tax at source on provisions made head-wise not referable to any particular payee - identification of payees for the purpose of TDS - no income accrual to the payee as prerequisite for TDS - application of Section 40(a)(ia) read with Sections 194C, 194H, 194I and 194J - Whether the Tribunal correctly held the assessee liable to deduct tax at source in respect of head wise provisions which were not referable to any particular party and were later reversed - HELD THAT: - The Court found that the provisions in question were made head wise on an adhoc basis without identification of payees, were reversed in the subsequent year and no expenditure was claimed in the relevant returns; on these facts the existence of a TDS obligation depends on whether income had actually accrued to any payee. The Tribunal's conclusion that payees were identified and that the provision was not adhoc was held to be unsupported by the material and based on cryptic reasoning; consequently the Tribunal's reliance on the consequences under Section 40(a)(ia) and on Shree Choudhary Transport Company was not treated as dispositive without a fresh fact sensitive analysis. The Court referred to and relied on earlier decisions holding that absent accrual of income to a payee there is no liability to deduct TDS, and emphasised that the question whether Section 40(a)(ia) operates in the circumstances requires reconsideration by the Tribunal with proper reasoning and regard to the statutory provisions and authorities. For these reasons the common order of the Tribunal was set aside and the matter remitted to the Tribunal for fresh consideration in accordance with law, keeping all contentions open. [Paras 7, 9, 10, 11]

Impugned Tribunal order set aside and the matter remanded to the Tribunal for fresh consideration on whether income accrued to any payee and consequent applicability of Section 40(a)(ia) read with the relevant TDS provisions

Final Conclusion: Appeal allowed; the common order dated 17.01.2018 is set aside and the matters relating to assessment years 2012-13 and 2013-14 are restored to the Tribunal for fresh adjudication in accordance with law, with all rights and contentions left open.

Cancellation of registration under section 12AA(3) and section 12AA(4) - Application of section 13(1) - use or application of income/property for benefit of specified persons - Use of trust property for benefit of trustees / violation of section 11(5) - Requirement to furnish satisfactory explanation to avoid cancellation / reasonable cause defence

Cancellation of registration under section 12AA(3) and section 12AA(4) - Application of section 13(1) - use or application of income/property for benefit of specified persons - Use of trust property for benefit of trustees / violation of section 11(5) - Requirement to furnish satisfactory explanation to avoid cancellation / reasonable cause defence - Whether the Commissioner was justified in cancelling the trust's registration under section 12AA by holding that trust funds were applied for the benefit of persons covered by section 13(3) and that the trust had violated provisions of section 11(5), thereby invoking section 12AA(4). - HELD THAT: - The Commissioner issued a show-cause after noting, from financial statements, audit report and assessment records, substantial advances made by the trust to individuals and entities who were trustees or concerns in which trustees were interested, contradictions between the trust's explanations and the audit report (notably as to whether advances were interest-bearing), absence of corresponding trust asset (land) for the alleged housing scheme, and omission of interest income in accounts. The assessee filed a brief reply but did not satisfactorily explain the discrepancies or produce agreements/confirmations supporting the advances. The Commissioner applied section 12AA(4) (as inserted w.e.f. 1-10-2014) and the explanatory notes, concluding that the trust property had been utilised for benefit of specified persons and that provisions of section 13(1) and section 11(5) were attracted. The Tribunal, after hearing ex parte because the assessee failed to appear and had not removed defects in the appeal, found no error in the Commissioner's factual and legal conclusions, including the finding that no reasonable cause had been established to avert cancellation, and upheld the cancellation of registration. [Paras 5, 6, 7, 8]

The Tribunal upheld the Commissioner's order cancelling registration under section 12AA and dismissed the assessee's appeal.

Final Conclusion: The Tribunal, on the material before it and in absence of a satisfactory explanation from the assessee, affirmed the Commissioner's finding that trust funds were applied for the benefit of trustees/related concerns thereby attracting section 13(1) and section 11(5), and held that cancellation of registration under section 12AA(4) was justified; the appeal was dismissed.

Limitation under Section 144C(4)(b) - Time limit to file objections under Section 144C(2) - Effect of belated filing of objections before the Dispute Resolution Panel - Validity of final assessment order passed after expiry of prescribed period

Time limit to file objections under Section 144C(2) - Limitation under Section 144C(4)(b) - Validity of final assessment order passed after expiry of prescribed period - Effect of belated filing of objections before the Dispute Resolution Panel - Whether the final assessment order dated 12.01.2021 is time barred and therefore invalid, where the assessee filed objections before the DRP after the thirty day period prescribed under Section 144C(2) had expired. - HELD THAT: - The Tribunal examined the scheme of Section 144C as a whole and recorded that an eligible assessee has thirty days from receipt of the draft order to either accept the variation or file objections before the DRP with intimation to the Assessing Officer. Sub sections (3) and (4) mandate that if no objections are received within that period the Assessing Officer must pass the final assessment within one month from the end of the month in which the period for filing objections expires. In the present case the period for filing objections expired on 17.01.2020, but the assessee filed objections only on 27.01.2020. The Tribunal held that there is no statutory compulsion on the Assessing Officer to wait beyond the prescribed period in anticipation of a belated filing; the time limits in sub sections (2) and (4) are sacrosanct and must be strictly followed by both the assessee and Revenue. Consequently, since the Assessing Officer passed the final assessment on 12.01.2021-well beyond the period fixed by Section 144C(4)(b)-the order is time barred and invalid. The Tribunal noted that the DRP's dismissal in limine of the belated objections was appropriate as the statute does not empower the DRP to accept objections filed beyond the prescribed period. [Paras 8, 9, 10]

Final assessment order dated 12.01.2021 is quashed as having been passed beyond the period of limitation prescribed under Section 144C(4)(b).

Final Conclusion: The appeal is allowed; the final assessment order dated 12.01.2021 is quashed as time barred under Section 144C(4)(b) because the assessee's objections were filed after the thirty day period under Section 144C(2) had expired.

Assessment framed in the name of a non-existent amalgamating company - failure to comply with directions issued in revision under section 264 - voidness of assessment completed against a non-existent entity - curability of defect under section 292B - effect of amalgamation on corporate existence and assessability - jurisdictional competence of assessing officer

Assessment framed in the name of a non-existent amalgamating company - failure to comply with directions issued in revision under section 264 - effect of amalgamation on corporate existence and assessability - Assessment completed by the Assessing Officer on the amalgamating (now non-existent) company despite specific directions in the revision order to reassess in the hands of the existing correct legal entity is vitiated and void. - HELD THAT: - The Tribunal accepted the findings of the CIT(A) that the Assessing Officer was aware of the PCIT's order under section 264 directing reassessment in the hands of the existing legal entity but nevertheless issued notice and completed assessment in the name of the amalgamating company which had ceased to exist w.e.f. the effective date of amalgamation. The Court relied on the legal principle that on amalgamation the transferor company ceases to exist and assessments cannot validly be completed in the name of a non-existent entity. The AO's repetition of earlier action despite explicit directions rendered the assessment order vitiated. The Tribunal noted that the CIT(A) also recorded that the officer completing the assessment lacked jurisdiction over the existing legal entity. On these facts the Tribunal found no legal infirmity in the quashing of the assessment by the CIT(A). [Paras 11, 12, 15, 17, 18]

The assessment completed in the name of the non-existent amalgamating company is void and liable to be quashed; the CIT(A)'s quashing of the assessment is upheld.

Curability of defect under section 292B - voidness of assessment completed against a non-existent entity - The defect of framing assessment in the name of a non-existent entity is not a procedural irregularity curable under section 292B. - HELD THAT: - The Tribunal considered Revenue's contention that the notice/assessment name error was curable under section 292B. Reliance was placed on binding precedents to the effect that framing assessment in the name of a non-existent entity is not a mere procedural defect and cannot be remedied by invoking section 292B. Applying those authorities and the facts that the AO completed assessment on a company which had ceased to exist despite being informed, the Tribunal held that section 292B cannot rescue the assessment. [Paras 16, 17]

The defect is not curable under section 292B and does not validate the assessment framed against a non-existent company.

Jurisdictional competence of assessing officer - Assessment completed by an Assessing Officer who did not have jurisdiction over the existing correct legal entity further vitiates the assessment. - HELD THAT: - The CIT(A) recorded, and the Tribunal accepted, that the AO (ACIT, Central Circle-13) did not have jurisdiction over the existing legal entity (Pride Residency Private Limited), jurisdiction being vested in another circle. The failure to take action against the correct legal entity and the exercise of jurisdiction (or attempted action) by an officer not competent over that entity was a factor contributing to the invalidity of the assessment order. [Paras 12, 15]

Lack of jurisdiction of the assessing officer over the existing legal entity vitiates the assessment and supports quashing of the order.

Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s quashing of the assessment which was completed in the name of a non-existent amalgamating company; the defect was not curable under section 292B and the assessment was held void.

Deduction under section 80P(2)(a)(i) - income from investments with non-cooperative banks - deduction under section 80P(2)(d) - allowability of expenditure under section 57 - computation of net income before exclusion under section 80P(2)

Deduction under section 80P(2)(a)(i) - income from investments with non-cooperative banks - deduction under section 80P(2)(d) - Interest income earned by the co-operative society from investments parked with a nationalised bank does not qualify for deduction under section 80P(2)(a)(i) or section 80P(2)(d). - HELD THAT: - The Tribunal agreed with the view of the jurisdictional High Court relied on by the CIT(A) that a society whose principal activity is providing credit to members cannot claim the benefit of section 80P(2)(a)(i) in respect of interest income arising from investments made with a nationalised bank, since such bank is not a co-operative society and the income does not fall within categories contemplated by section 80P(2). The same conclusion applies equally to section 80P(2)(d). [Paras 6, 7]

Claim for deduction under section 80P(2)(a)(i) and section 80P(2)(d) in respect of the interest income from the nationalised bank is not allowable.

Allowability of expenditure under section 57 - computation of net income before exclusion under section 80P(2) - Expenditure relatable to earning the interest income must be allowed under section 57 and the net interest income, after such deduction, is to be computed before excluding that amount for the purpose of section 80P(2). - HELD THAT: - The Tribunal held that where a component of income does not qualify for deduction under section 80P(2)(a)(i), that income should nonetheless be computed on a net basis. Since the interest was treated as "income from other sources," relevant expenditure under section 57 is allowable against that income. The AO is directed to determine the net interest income by permitting appropriate expenditure and then exclude only that net amount when considering the admissibility of deduction under section 80P(2). The CIT(A)'s approach of allowing a notional 5% expenditure was noted, but the matter of quantification is remitted to the AO for determination of actual allowable expenditure and netting-off. [Paras 7]

The AO is directed to allow expenditure under section 57 against the interest income and compute the net interest; only that net amount is to be considered for exclusion under section 80P(2). The appeal is partly allowed to this extent and remitted for computation.

Final Conclusion: The Tribunal upheld that interest income from investments with a nationalised bank does not qualify for deduction under section 80P(2)(a)(i) or section 80P(2)(d), but directed the AO to allow expenditure under section 57 and compute the net interest income before applying the exclusion under section 80P(2); the appeal is partly allowed and remitted to the AO for quantification.

Allowability of foreign exchange fluctuation loss as revenue expenditure - capital versus revenue expenditure in respect of borrowings for acquisition of shares - monetary items and treatment of foreign currency loans vis-a -vis accounting standards and ICDS - rule of consistency in treatment of foreign exchange gains/losses across assessment years - disallowance of expenditure attributable to exempt income under section 14A read with Rule 8D - disallowance of interest on borrowed funds where loans to subsidiary are advanced out of own funds - use of own funds versus borrowed funds for intra-group lending - disallowance under section 40A(3) for cash payments exceeding prescribed limit

Allowability of foreign exchange fluctuation loss as revenue expenditure - capital versus revenue expenditure in respect of borrowings for acquisition of shares - monetary items and treatment of foreign currency loans vis-a -vis accounting standards and ICDS - rule of consistency in treatment of foreign exchange gains/losses across assessment years - Foreign exchange fluctuation loss on a foreign currency loan taken to acquire 70% shares in a foreign company is allowable as revenue expenditure in assessment year 2014-15. - HELD THAT: - The Tribunal found that the loan was contracted to acquire control in Vimercati SPA for commercial expediency to further the assessee's business (enhancement of exports and expansion of business) and thus was incurred for business purpose; the nature of the loan as a monetary item does not change because it was used to purchase shares. Reliance on accounting standards and ICDS to characterise the loan as a monetary item supports treatment of exchange fluctuation as income/expense, but the determinative factor is that capitalization of such exchange fluctuation could only be relevant up to the year of acquisition (financial year 2011-12) and not for the year under consideration. The Tribunal also applied the rule of consistency, noting acceptance by the department of exchange fluctuation losses/gains in earlier and later assessment years, and held it was not open to Revenue to adopt a contrary stance for 2014-15. In view of these findings the addition made by the Assessing Officer was deleted and the loss held allowable as revenue expenditure. [Paras 8, 13, 14, 15]

Addition on account of foreign exchange fluctuation loss deleted; loss allowed as revenue expenditure for AY 2014-15.

Disallowance of expenditure attributable to exempt income under section 14A read with Rule 8D - restriction of disallowance to exempt dividend - Whether interest component disallowable under Rule 8D(2)(ii) should be added where no borrowed funds were used to make investments yielding exempt income. - HELD THAT: - The Tribunal accepted the factual finding that the assessee's investments producing exempt dividend were made out of own funds (share capital, reserves and surplus far exceeding the investments) and no borrowed, interest-bearing funds were applied for such investments. Consequently, the interest component attributed under Rule 8D(2)(ii) could not be sustained. The only appropriate disallowance under Rule 8D was the amount under Rule 8D(2)(iii), which both parties and the Assessing Officer agreed. The CIT(A)'s attempt to limit disallowance by equating it to the exempt dividend was held to be incorrect; instead, the interest disallowance was deleted and only the agreed amount under sub-rule (iii) restored. [Paras 16, 17, 18]

Interest component disallowance under Rule 8D(2)(ii) deleted; disallowance restored only to the agreed amount under Rule 8D(2)(iii).

Disallowance of interest on borrowed funds where loans to subsidiary are advanced out of own funds - use of own funds versus borrowed funds for intra-group lending - Whether differential interest disallowance should be made where the assessee paid higher interest on borrowings but advanced loans to its subsidiary at a lower rate. - HELD THAT: - The Tribunal upheld the factual conclusion of the CIT(A) that the assessee had substantial own funds (share capital, reserves and surplus) in the relevant years which exceeded the amounts advanced to the subsidiary, and that the loans to the subsidiary were advanced out of such own funds in furtherance of business expediency. The Assessing Officer failed to establish that borrowed funds were used for advancing loans to the subsidiary; having regard to the facts and precedent relied upon by the CIT(A), the disallowance based on the rate differential was found to be unsustainable and was thus deleted. [Paras 19, 20, 21]

Addition on account of disallowance of interest based on rate differential deleted; CIT(A)'s deletion of the addition upheld.

Disallowance under section 40A(3) for cash payments exceeding prescribed limit - Whether disallowance under section 40A(3) was warranted for aggregated cash payments allegedly exceeding the statutory limit. - HELD THAT: - CIT(A) found as a fact that the assessee had booked expenses on a single day for payments made to different persons on different dates and that no single person received cash payments aggregating to more than the prescribed limit in a day. The Revenue produced no material to controvert this factual finding. In absence of contrary material, the Tribunal found no reason to interfere with the factual conclusion and confirmed deletion of the disallowance under section 40A(3). [Paras 22]

Deletion of addition under section 40A(3) confirmed.

Final Conclusion: The assessee's appeal is allowed in part and the Revenue's appeal is dismissed: the foreign exchange fluctuation loss for AY 2014-15 is held allowable as revenue expenditure; the interest disallowance under Rule 8D(2)(ii) is deleted with only the agreed Rule 8D(2)(iii) amount restored; the Assessing Officer's addition on account of interest rate differential is deleted; and the section 40A(3) disallowance is confirmed deleted.

Deduction under section 80-IC - initial assessment year - substantial expansion - 100% deduction for specified initial years and 25% thereafter - ten-year deduction period under section 80-IC

Deduction under section 80-IC - initial assessment year - substantial expansion - Whether the assessee is entitled to claim deduction at 100% under section 80-IC for Assessment Year 2015-16 on account of substantial expansion made earlier. - HELD THAT: - The Tribunal, following the Supreme Court decision in Arham Softronics as extracted in the order, applied the definition of 'initial assessment year' contained in section 80-IC and the rule that where an undertaking undertakes a 'substantial expansion' within the ten-year benefit period the previous year in which such expansion is undertaken becomes a new 'initial assessment year'. Under that principle an undertaking which qualifies under clause (ii) of sub-section (2) is entitled to 100% deduction for five assessment years commencing with the initial assessment year and 25% (or 30% for a company) for the next five years, and if substantial expansion occurs within the ten-year span the year of expansion re-starts the 100% five-year window (subject to the overall ten-year cap). Applying this ratio to the facts, the Tribunal held that the assessee's substantial expansion operated to re-fix the initial assessment year so as to entitle the assessee to claim 100% deduction for the year under consideration, and therefore the Assessing Officer's restriction to 25% was inconsistent with the ratio in Arham Softronics. [Paras 9, 10]

Assessee entitled to claim deduction at 100% under section 80-IC for Assessment Year 2015-16; Assessing Officer directed to allow the claim accordingly.

Final Conclusion: Appeal allowed; order of the AO/CIT(A) restricting the deduction to 25% is set aside and the Assessing Officer is directed to allow 100% deduction under section 80-IC for Assessment Year 2015-16 in accordance with the Supreme Court decision in Arham Softronics.

Limitation under section 201(3) of the Income-tax Act - deemed assessee in default under section 201(1) - retrospective effect of statutory amendment - time-barred proceedings - effect of Finance Act, 2012 amendment to limitation - effect of Finance Act (No. 2), 2014 amendment to limitation

Deemed assessee in default under section 201(1) - limitation under section 201(3) of the Income-tax Act - time-barred proceedings - Impugned order under section 201(1)/201(1A) passed on 29/12/2016 was barred by limitation in respect of payments made and TDS statements filed in financial year 2009-10. - HELD THAT: - The assessee made payments on 18/05/2009 and 01/09/2009 and filed the TDS statements in FY 2009-10. Under the scheme introduced by Finance (No. 2) Act, 2009, section 201(3) provided differing limitation periods where statements were filed (two years) and where they were not filed (four years). The Tribunal noted that as the statements were filed, the applicable limitation expired on 31/03/2012. The subsequent amendment by Finance Act, 2012 substituted four years by six years with retrospective effect from 01/04/2010 but did not alter the fact that limitation had already expired for the assessee under the earlier provision. The Finance (No. 2) Act, 2014 substituted a common seven year period prospectively (w.e.f. 01/10/2014) and did not indicate retrospective operation. Applying these provisions to the case facts, the Tribunal held that the order dated 29/12/2016 was beyond the applicable limitation and therefore time barred; accordingly the demand raised pursuant to that order had to be deleted. As the Tribunal decided the appeal on the limitation ground, it declined to examine merits. [Paras 9, 12, 13]

Order under section 201(1)/201(1A) dated 29/12/2016 is barred by limitation and the demand raised pursuant thereto is to be deleted.

Retrospective effect of statutory amendment - effect of Finance Act (No. 2), 2014 amendment to limitation - Amendment by Finance (No. 2), 2014 to section 201(3) is prospective and cannot revive proceedings already time barred prior to its effective date. - HELD THAT: - The Tribunal examined the legislative history: Finance Act, 2012 expressly provided retrospective substitution of 'four years' by 'six years' from 01/04/2010, whereas Finance (No. 2), 2014 expressly applied w.e.f. 01/10/2014 and did not state retrospective effect. Relying on the distinction in the amendments and on precedents (including the Gujarat High Court decision cited), the Tribunal held that where a right of the assessee had accrued because limitation had already expired under the earlier law, the 2014 amendment could not be invoked to reopen time barred years. Consequently, the 2014 amendment did not validate the impugned order passed in 2016 for payments/statements whose limitation had expired earlier. [Paras 10, 12]

Finance (No. 2), 2014 amendment to section 201(3) operates prospectively and does not cure orders passed after expiry of the earlier limitation period; therefore the impugned order cannot be sustained on the basis of the 2014 amendment.

Final Conclusion: Appeal allowed: the Tribunal set aside the demand raised under the order dated 29/12/2016 under section 201(1)/201(1A) as time barred, holding that the 2014 amendment to section 201(3) is prospective and cannot revive proceedings for which limitation had already expired.

Registration under section 12AA of the Income-tax Act - charitable purpose - preservation of environment - genuineness of objects and activities - ancillary commercial objects and their relevance to charitable status - power of the Commissioner to call for documents and make enquiries while granting registration - carrying out charitable activities outside India and requirement of CBDT approval - verification of alleged violations under section 11 and section 13 by the Assessing Officer

Charitable purpose - preservation of environment - ancillary commercial objects and their relevance to charitable status - Whether the assessee's main objects are charitable (falling under preservation of environment) and whether registration under section 12AA can be denied merely because certain ancillary objects are commercial in nature. - HELD THAT: - The Tribunal found on the materials that the assessee's main object-to conserve and enhance the natural environment and biodiversity-falls within the preservation of environment limb of charitable purpose. Ancillary objects which are commercial in form were held to be provided only to achieve the main objects and do not, by themselves, negate the charitable nature of the principal objects. The authorities below exceeded the permissible scope for refusal of registration by treating ancillary commercial objects as independently determinative; registration under section 12AA cannot be refused merely because the memorandum contains incidental commercial powers unless and until actual activities demonstrate misuse. If commercial activities are later carried out, entitlement to exemption under section 11 (and related provisions) can be examined by the Assessing Officer in the course of assessment or exemption adjudication. [Paras 8, 9]

Assessee's principal objects are charitable (preservation of environment) and registration under section 12AA cannot be denied solely because of ancillary commercial objects; registration directed.

Power of the Commissioner to call for documents and make enquiries while granting registration - carrying out charitable activities outside India and requirement of CBDT approval - verification of alleged violations under section 11 and section 13 by the Assessing Officer - Whether the Commissioner (Exemptions) could refuse registration on apprehensions that the trust might carry out activities outside India without CBDT approval or might violate provisions of section 11(1)(a) and section 13, without factual verification. - HELD THAT: - The Tribunal applied the settled principle that while the Commissioner must satisfy himself about the genuineness of objects and proposed activities when considering registration, he may not refuse registration on mere apprehensions or speculative conclusions about future violations. The proper course is to call for documents and make enquiries to satisfy genuineness but not to deny registration on assumed non-compliance; alleged or actual violations of section 11(1)(a) or section 13(1)(c), or the need for CBDT approval for overseas activities, are matters that the Assessing Officer or relevant authority can examine when exemption is claimed or in the course of assessment. Since the assessee had not commenced activities, the Commissioner could not refuse registration on the basis of possible future contraventions. [Paras 7, 8]

Refusal of registration on mere apprehensions of overseas activity or possible violations of section 11 and section 13 was impermissible; such matters are for verification by the AO and do not justify denial of registration.

Final Conclusion: The Tribunal held that the assessee's objects are charitable (preservation of environment) and that the Commissioner (Exemptions) erred in refusing registration under section 12AA on the ground of ancillary commercial objects or speculative apprehensions of statutory violations; the matter was directed to be registered under section 12AA.

Condonation of delay - sufficient cause - proviso to section 200A(1) - time limit for processing TDS statements - levy of fee under section 234E in TDS return processing - prospective operation of statutory amendment

Condonation of delay - sufficient cause - Whether the delay in filing appeals before the CIT(A) ought to be condoned - HELD THAT: - The Tribunal found that the delay in filing appeals before the CIT(A) was caused by the assessee's employee who alone handled TDS matters and who was not tech-savvy, subsequently ceased to work for the assessee and the assessee came to know of the processing orders after considerable lapse of time. There was no mala fide intention and the circumstances constituted a reasonable and sufficient cause. Applying the principle of liberal construction of 'sufficient cause' and advancement of substantial justice, the Tribunal held that the CIT(A) erred in refusing to condone the delay and that the appeals should have been admitted for adjudication on merits. [Paras 11]

Delay in filing the appeals is condoned and the CIT(A)'s refusal to do so is set aside.

Proviso to section 200A(1) - time limit for processing TDS statements - levy of fee under section 234E in TDS return processing - Whether orders processed under section 200A(1) after the one year proviso for the stated quarters are time barred and whether the fee under section 234E levied in those time barred orders must be deleted (ITA Nos. 26 to 28/Asr/2021) - HELD THAT: - For the specified returns (Form 24Q for Quarter 2 FY 2012-13 and Form 24Q/26Q for Quarter 4 FY 2012-13) the Tribunal recorded the dates of filing and the one year limitation under the proviso to section 200A(1). The orders under section 200A were passed beyond that one year period (on 29.08.2016, 05.12.2016 and 04.12.2016). As there was no dispute on those dates, the Tribunal held the section 200A orders to be time barred and consequently quashed the levy of fee under section 234E made by virtue of those orders. [Paras 12]

The orders under section 200A for the referenced quarters are time barred; the fees levied under section 234E in respect of those orders are deleted.

Prospective operation of statutory amendment - levy of fee under section 234E in TDS return processing - Whether fee under section 234E could be levied in returns processed under section 200A before the amendment effective 1 June 2015 (ITA Nos. 29 & 30/Asr/2021) - HELD THAT: - The Tribunal noted that the challenged orders under section 200A were processed on 27 March 2015, i.e., before the Finance Act amendment effective 1 June 2015 which empowered assessment officers to levy fee under section 234E while processing returns under section 200A. Citing consistent authorities, the Tribunal held that the power to levy such fee arose only w.e.f. 1 June 2015 and therefore no fee under section 234E could be validly levied in orders processed prior to that date. Following those principles, the Tribunal deleted the fees levied in ITA Nos. 29 and 30. [Paras 13]

Fees under section 234E levied in section 200A orders processed before 1 June 2015 are not sustainable and are deleted.

Final Conclusion: The Tribunal allowed the appeals: it condoned the delay in filing the appeals and set aside the CIT(A)'s refusal to condone; it quashed section 200A orders that were time barred and deleted the corresponding fees under section 234E for ITA Nos. 26-28; and it deleted fees levied in orders processed prior to the 1 June 2015 amendment for ITA Nos. 29-30.

Carry forward and set-off of deficits of charitable trusts - application of income for charitable purposes - computation of income of charitable trusts on commercial principles - allowability of depreciation to charitable trusts as application of income - effect of amendment restricting deduction by way of depreciation for application of income

Carry forward and set-off of deficits of charitable trusts - computation of income of charitable trusts on commercial principles - application of income for charitable purposes - Set-off of brought forward deficit/excess application against income of the trust in the year under consideration is allowable. - HELD THAT: - The Tribunal affirmed the CIT(A)'s allowance of carried forward deficit/excess application relying on binding precedent of the Delhi High Court and other High Courts which held that income derived from trust property is to be computed on commercial principles. Adjustment of expenses incurred in earlier years against income earned in a subsequent year, when made, constitutes application of income for charitable purposes and is excludable from taxable income under section 11(1)(a). The Tribunal noted identical treatment in the Coordinate Bench's decision for AY 2013-14 and found no contrary High Court precedent; accordingly it found no infirmity in the CIT(A)'s order and dismissed Revenue's ground challenging the set-off. [Paras 6, 8]

Ground No.1 dismissed; carried forward deficit/set-off allowed in favour of the assessee.

Allowability of depreciation to charitable trusts as application of income - effect of amendment restricting deduction by way of depreciation for application of income - application of income for charitable purposes - Depreciation was held allowable as application of income for AY 2014-15; the statutory amendment barring such allowance is effective from 01/04/2015 and does not apply to the assessment year in issue. - HELD THAT: - The CIT(A) deleted addition and allowed depreciation relying on the Supreme Court's decision in Commissioner of Income-tax-III, Pune vs. Rajasthan and Gujarati Charitable Foundation, Poona and on supportive decisions of the Delhi High Court. The Tribunal observed that the Finance (No.2) Act, 2014 introduced section 11(6) to disallow deduction by way of depreciation where acquisition was claimed as application of income, but that provision is effective from 01/04/2015 (AY 2015-16) and therefore is not applicable to AY 2014-15. In these circumstances the allowance of depreciation as application of income in the year under consideration was upheld. [Paras 9, 11]

Ground No.2 dismissed; depreciation allowed for AY 2014-15 as application of income.

Final Conclusion: Revenue's appeal dismissed; the Tribunal upheld the CIT(A)'s allowance of set-off of carried forward deficit and of depreciation as application of income for assessment year 2014-15, noting that the amendment disallowing depreciation as application of income applies only from AY 2015-16 onwards.

Mandatory electronic filing of appeal - non-maintainability for non-compliance of prescribed form - statutory right to appeal - failure of government portal and relief from procedural strictness - remand for fresh adjudication

Mandatory electronic filing of appeal - non-maintainability for non-compliance of prescribed form - statutory right to appeal - failure of government portal and relief from procedural strictness - Whether a paper appeal filed when Rule 45 mandates electronic filing is invalid and not maintainable where the assessee could not access the e-filing portal. - HELD THAT: - The Tribunal accepted that Rule 45 requires appeals to be filed electronically where applicable, and that statutory conditions for filing an appeal are ordinarily mandatory. However, on the material before it the assessee made persistent, documented attempts to access the e-filing portal and to rectify PAN/KYC/log in problems; correspondence and a grievance ticket were placed before the authorities but access remained unavailable. The Tribunal held that rules are framed to secure justice and not to erect procedural impediments; where non compliance resulted from the department's portal malfunction or inaccessibility despite bona fide efforts, the Revenue cannot take advantage of such failure to deny the statutory right of appeal. Applying this principle, the Tribunal concluded that the paper appeal could not be treated as invalid in the circumstances and that the appellant should not be non suited for inability to use the department's portal. [Paras 14, 15, 16]

Paper appeal not to be treated as invalid for want of electronic filing where the assessee, despite genuine and documented attempts, could not access the e filing portal; procedural strictness relaxed to prevent denial of the statutory right of appeal.

Remand for fresh adjudication - opportunity of hearing - What order should follow where the paper appeal is accepted in view of portal inaccessibility. - HELD THAT: - Having held that the paper appeal should not be rejected for lack of electronic filing under the particular facts, the Tribunal set aside the CIT(A)'s orders that treated the paper appeal as invalid. The Tribunal directed that the CIT(A) decide the appeals (both the physically filed appeal and the subsequently filed e appeal) on merits, after granting the assessee an opportunity of hearing and permitting the filing of any documents the assessee deems appropriate. The direction contemplates fresh adjudication by the CIT(A) in accordance with applicable rules while affording procedural fairness to the assessee. [Paras 16]

Orders of the CIT(A) treating the paper appeal as invalid set aside; appeals remanded to the CIT(A) for fresh adjudication on merits after hearing and permitting filing of documents.

Final Conclusion: The Tribunal allowed the appeals for statistical purposes, held that the paper appeal could not be rejected where the assessee was bona fide unable to access the e filing portal, set aside the CIT(A)'s orders treating the appeals as invalid and remanded the matters to the CIT(A) to decide the appeals on merits after granting opportunity of hearing and permitting relevant documents.

Acknowledgement of liability and effect under the Limitation Act - promise to pay a time barred debt under Section 25(3) of the Indian Contract Act - maintainability of a Section 9 petition under the Insolvency and Bankruptcy Code where the claim is time barred

Maintainability of a Section 9 petition under the Insolvency and Bankruptcy Code where the claim is time barred - effect of limitation on operational debt claims - The claim in the Section 9 petition was barred by limitation and the petition was not maintainable on that ground. - HELD THAT: - The invoices on which the Operational Creditor founded its claim are dated 11 February 2012. The demand notice was issued on 7 November 2017 and the Section 9 application was filed on 26 October 2018. The period of limitation for the cause of action arising from the invoices expired by February 2015. The Adjudicating Authority admitted the Section 9 petition by construing subsequent correspondence as bringing the claim within limitation. On review, the Tribunal held that the letter relied upon did not operate to extend or revive the limitation period so as to render the Section 9 petition within time. Consequently the application under Section 9 was time barred and not maintainable. [Paras 9]

The claim was barred by limitation and the Section 9 petition was not maintainable.

Acknowledgement of liability and effect under the Limitation Act - promise to pay a time barred debt under Section 25(3) of the Indian Contract Act - The letter dated 14 December 2017 did not constitute an acknowledgement of liability under the Limitation Act nor a written promise to pay a time barred debt under Section 25(3) of the Indian Contract Act. - HELD THAT: - The Adjudicating Authority treated the Managing Director's letter inviting the Operational Creditor to send a representative with documents for discussion as an acknowledgement or promise to pay. The Tribunal analysed Section 18 of the Limitation Act and Section 25(3) of the Indian Contract Act and distinguished the facts from precedents. It concluded that a mere proposal to discuss settlement, without a clear written promise to pay or an unequivocal acknowledgement of existing liability, cannot be equated with an acknowledgement under the Limitation Act or a Section 25(3) promise to revive a time barred debt. There was no written promise to pay the time barred debt or part thereof in the letter relied upon, and the phrase that the corporate debtor 'did not dispute the claim' could not be equated with an acknowledgment of liability. [Paras 9]

The 14 December 2017 letter is not an acknowledgement or a Section 25(3) promise to pay a time barred debt.

Final Conclusion: The Appeal is allowed; the Adjudicating Authority's order admitting the Section 9 petition is set aside as the claim was time barred and the correspondence relied upon did not revive limitation. The Corporate Insolvency Resolution Process is terminated and management of the corporate debtor is to be restored to the erstwhile directors.

Pre-existing dispute under Section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute as contemplated by Section 5(6) of the Insolvency and Bankruptcy Code, 2016 - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - right to withhold payment pending GST assessment and demand for bank guarantee to secure Input Tax Credit

Pre-existing dispute under Section 8(2)(a) of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute as contemplated by Section 5(6) of the Insolvency and Bankruptcy Code, 2016 - right to withhold payment pending GST assessment and demand for bank guarantee to secure Input Tax Credit - maintainability of an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether a bona fide pre-existing dispute regarding Input Tax Credit and related GST assessment exists so as to preclude admission of the Section 9 petition and require rejection of the application to initiate CIRP. - HELD THAT: - The Tribunal found on the material before it that the Corporate Debtor had raised a genuine apprehension that Input Tax Credit may be disallowed in view of an alert circular declaring a supplier fictitious; the Corporate Debtor admitted liability subject to providing a bank guarantee to secure GST exposure and communicated this after receipt of the demand notice. The Operational Creditor failed to place on record original supplier invoices to rebut the Corporate Debtor's apprehension despite asserting that supplies were from other genuine suppliers. Although the Corporate Debtor's response reached the Operational Creditor after the ten-day statutory period under Section 8, the Tribunal held that the dispute was real and genuine and arose from circumstances (the declaration of the supplier as fictitious) that had not existed at the inception of the business relationship. In these circumstances the Tribunal concluded that a pre-existing dispute within the meaning of Section 8(2)(a) read with Section 5(6) of the Code was established, rendering the Section 9 petition not maintainable. The Tribunal therefore applied the principle that a bona fide disputed claim as to liability or quantum, particularly where it affects statutory taxes and gives rise to an express condition (bank guarantee) for payment, bars the admission of a Section 9 application. [Paras 8, 9, 10]

The pre-existing dispute concerning GST/Input Tax Credit and the Corporate Debtor's conditional offer to pay subject to a bank guarantee is bona fide; the Section 9 petition is not maintainable and is rejected, and CP(IB) No. 555/9/NCLT/AHM/2019 is dismissed and disposed of.

Final Conclusion: The Tribunal found a genuine pre-existing dispute over Input Tax Credit and GST exposure; accordingly the Section 9 application to initiate CIRP was rejected and the petition dismissed.

Cognizance on complaint under Section 45 of the PMLA notwithstanding Cr.P.C. - independence of adjudication under Chapter III from prosecution under Chapter II of the PMLA - scope of offence of money laundering including concealment, possession, acquisition, use and projecting as untainted property - liability of persons in charge of company under Section 70 of the PMLA

Cognizance on complaint under Section 45 of the PMLA notwithstanding Cr.P.C. - Validity of Special Court taking cognizance on a complaint filed by an authorised Enforcement Directorate officer without registration of an FIR under Section 154 Cr.P.C. - HELD THAT: - The Court held that the complaint filed by the authorised Officer of the Enforcement Directorate is analogous to a private complaint and, pursuant to the non obstante commencement of Sections 44 and 45 of the PMLA, the Special Court is empowered to take cognizance of offences under the Act on such a complaint notwithstanding the Cr.P.C. The petitioner's contention that cognizance required registration of an FIR under Section 154 Cr.P.C. was held to be unfounded and rejected. The Court relied on the statutory scheme which allows a complaint in writing by an authorised officer to found cognizance under Section 45(1) and noted the existence of notifications and authorisations empowering the respondent to file the complaint. [Paras 21]

Petitioner's challenge to cognizance for want of FIR is dismissed; Special Court validly took cognizance on the complaint.

Independence of adjudication under Chapter III from prosecution under Chapter II of the PMLA - scope of offence of money laundering including concealment, possession, acquisition, use and projecting as untainted property - Whether the adjudicating authority's order setting aside provisional attachment precludes or bars prosecution for the offence of money laundering under Chapter II of the PMLA. - HELD THAT: - The Court explained that Chapter II (criminal prosecution for money laundering) and Chapter III (preventive adjudication and attachment) serve different objects and operate independently: prosecution is punitive whereas adjudication/attachment is preventive. A finding by the Adjudicating Authority that certain properties are not proceeds of crime does not amount to a determination that the accused has not committed the offence of money laundering, because the offence in Section 3 covers a variety of activities (including concealment, possession, acquisition, use, projecting as untainted property) and is a continuing activity. Consequently, setting aside a provisional attachment does not entitle the accused to have criminal proceedings under Chapter II quashed as premature; the two processes can run independently and the former does not negate prima facie material for prosecution. [Paras 25]

Adjudicating authority's refusal to confirm provisional attachment does not bar prosecution under Chapter II; summons and prosecution cannot be quashed on that ground.

Liability of persons in charge of company under Section 70 of the PMLA - Whether the petitioner could be proceeded against individually notwithstanding the adjudicating authority's order and in view of his connection with the accused company. - HELD THAT: - Relying on Section 70, the Court observed that where a contravention is committed by a company, persons in charge and responsible for the conduct of the company's business may be deemed guilty unless they establish lack of knowledge or due diligence. The Court found that the petitioner's denials were self serving and that the adjudicating authority had, in any event, confirmed provisional attachment in respect of the company in which the petitioner had pecuniary interest. Thus, summons issued to the petitioner were not premature or illegal and he is liable to face trial both in individual capacity and as a person in charge/responsible for the company's conduct. [Paras 29]

Summons to the petitioner were valid; petitioner may be proceeded against individually and as person in charge under Section 70.

Final Conclusion: The petition under Section 482 Cr.P.C. is dismissed. The Special Court validly took cognizance of the complaint filed by the authorised Enforcement Directorate officer; the adjudicating authority's setting aside of provisional attachment does not bar prosecution for money laundering and the petitioner may be tried both individually and as a person in charge of the company. The trial Court is directed to proceed expeditiously.

Power of search and seizure under the Foreign Exchange Management Act - Analogy of summons and investigative powers to Income tax authorities - Summons under Section 37 of FEMA not ordinarily amenable to writ challenge - No right to be accompanied by advocate during preliminary FEMA enquiry - Right to copies of statements recorded during search and fair opportunity to respond - Panchanama defects do not ipso facto vitiate validity of search - Distinction between preliminary investigation and status of accused

Power of search and seizure under the Foreign Exchange Management Act - Analogy of summons and investigative powers to Income tax authorities - Summons under Section 37 of FEMA not ordinarily amenable to writ challenge - Validity and justiciability of summons and search under Section 37 of the FEMA Act and whether such summons may be quashed by writ at the preliminary stage. - HELD THAT: - The Court held that officers exercising powers under Section 37(3) of FEMA exercise powers analogous to those of income tax authorities under the Income tax Act. Summons issued under Section 37 for preliminary inquiry and search are for collection of material and cannot, as a rule, be challenged by way of writ at the initial stage unless shown to be palpably without jurisdiction, violative of natural justice or ultra vires. Investigation at the preliminary stage does not convert the person summoned into an accused and the statutory scheme contemplates inquiry and collection of evidence before any final adjudicatory conclusion is reached. Consequently, the petitions seeking to quash the summons or to treat the summons as void were not maintainable. [Paras 15, 19]

Petitions challenging the validity of the summons/search under Section 37 of FEMA are not maintainable at this stage; the investigation may proceed in accordance with law.

No right to be accompanied by advocate during preliminary FEMA enquiry - Distinction between preliminary investigation and status of accused - Whether a person summoned under Section 37 FEMA is entitled to have an advocate of his choice present during the preliminary enquiry/recording of statement. - HELD THAT: - Relying on precedents and statutory comparison, the Court concluded that the statutory scheme of preliminary enquiry under provisions analogous to income tax and customs statutes does not confer a right to be accompanied by an advocate at the stage of initial interrogation. The person summoned is not an accused during preliminary enquiry and the presence of an advocate is not required; authorities may conduct inquiry to prevent frustrative practices and to collect evidence. Established case law supports refusal of a general right to record statements in the presence of counsel at this stage. [Paras 13, 19]

No entitlement to have an advocate of choice present during preliminary FEMA enquiry; refusal of that relief is affirmed.

Right to copies of statements recorded during search and fair opportunity to respond - Fair and just investigation - Whether statements recorded during the search must be furnished to the petitioners and whether the petitioners are entitled to an opportunity to respond. - HELD THAT: - While upholding the respondents' statutory powers to investigate, the Court emphasised that fair and impartial investigation is a hallmark of lawful procedure. To ensure fairness, the Court directed that copies of the statements recorded during the search be furnished to the petitioners within a stipulated period so that they may file their versions; the respondent authority must consider those versions on merits. The direction balances the investigatory prerogative of the Enforcement Directorate with the procedural right of a person to know the material relied upon and to respond. [Paras 21]

Respondents directed to furnish copies of statements obtained during the search and to consider petitioners' responses; investigation may continue in accordance with law.

Panchanama defects do not ipso facto vitiate validity of search - Whether omissions or administrative lapses in the panchanama automatically nullify the search and seizure action. - HELD THAT: - The Court noted that although panchanama is an important document and lapses are undesirable, minor or administrative defects in the panchanama do not in themselves invalidate a search or affect the credibility of the case. The effect of any such lapse on the weight of seized material is a matter for appraisal on merits and not a ground for summary quashing of investigatory action. [Paras 13, 19]

Defects in the panchanama do not automatically vitiate the search; such lapses do not warrant setting aside the investigation.

Final Conclusion: Writ reliefs seeking to quash summons or search under Section 37 of FEMA were declined; petitioners were directed to be furnished copies of the statements recorded during the search and given two weeks to file their versions, which the respondent authority shall consider; investigation may proceed further strictly in accordance with law.

Refund of tax paid by mistake - limitation under Section 11B - double recovery / restitution of tax paid twice - Article 265 of the Constitution

Refund of tax paid by mistake - double recovery / restitution of tax paid twice - limitation under Section 11B - Whether the refund claim for service tax paid twice due to erroneous challan registration is barred by limitation under Section 11B. - HELD THAT: - The Tribunal found on the material that the appellant paid service tax twice for the same taxable value: first by a challan bearing the Tirupur registration (05.01.2015) which was incorrect, and thereafter by payment on the correct Ahmedabad registration (26.09.2016) after the department declined to adjust or transfer the earlier payment. The Tribunal treated this as an impermissible double recovery by the department. Following the decisions of the Hon'ble High Court of Madras in 3E Infotech and other authorities cited, the Tribunal held that where tax has been paid by mistake (or where double collection has occurred), the claim for refund cannot be defeated solely by the expiry of the period prescribed under Section 11B. The Court relied on the constitutional principle under Article 265 and the line of judicial authority that a limitation bar under Section 11B does not preclude refund of tax paid erroneously or twice, and that the claim must therefore be considered on merits rather than rejected as time-barred. [Paras 12, 16]

Rejection of the refund as time-barred under Section 11B is not justified; the impugned order is set aside and the refund claim is allowed with consequential relief as per law.

Final Conclusion: The appeal is allowed: where service tax was collected twice from the appellant due to an erroneous challan and the department declined to adjust the earlier payment, the refund claim cannot be rejected solely on the ground of limitation under Section 11B and the claim must be granted; the impugned order is set aside with consequential relief as per law.

Classification of composite contracts between Works Contract Service and Commercial or Industrial Construction Service - applicability of service tax on composite works contracts post 01.06.2007 - requirement of positive act of willful suppression for invoking extended limitation - interpretational dispute as a ground for limitation defence

Classification of composite contracts between Works Contract Service and Commercial or Industrial Construction Service - applicability of service tax on composite works contracts post 01.06.2007 - Demand of service tax under the category of Commercial or Industrial Construction Service on composite contracts involving supply of materials and rendering of services cannot be sustained for the period in dispute. - HELD THAT: - The Tribunal accepted the appellant's contention that the construction contract was composite in nature involving both supply of materials and rendering of services and therefore fell within the definition of Works Contract Service. Reliance was placed on earlier Tribunal decisions (as discussed in the order) which held that where a show-cause notice proposes demand under a classification different from Works Contract Service, confirmation under that different category cannot be sustained. The Tribunal followed the reasoning in those precedents and held that for indivisible composite contracts the levy for the post-01.06.2007 period must be under Works Contract Service and not under Commercial or Industrial Construction Service; accordingly the demand confirmed under Commercial or Industrial Construction Service was held unsustainable on merits.

Demand under Commercial or Industrial Construction Service set aside as not sustainable on composite contracts.

Requirement of positive act of willful suppression for invoking extended limitation - interpretational dispute as a ground for limitation defence - The demand is also barred by limitation since the department did not establish any positive act of willful suppression and the issue was an interpretational one then sub judice in higher forums. - HELD THAT: - The Tribunal accepted the appellant's submission that the show-cause notice issued in 2012 for the period 2008-09 to 2010-11 did not disclose any evidence of willful suppression or mis-statement by the appellant. The Tribunal noted that the question of levy of service tax on work contracts was an interpretational issue that had been subject to litigation up to the Supreme Court, and in those circumstances the extended period of limitation requiring positive suppression could not be invoked against the appellant. On this basis the Tribunal found for the appellant on limitation grounds as well.

Proceedings held time-barred in absence of proof of willful suppression; limitation defence allowed.

Final Conclusion: The impugned order confirming demand, interest and penalties is set aside and the appeal is allowed for the periods 2008-09 to 2010-11; consequential relief, if any, to follow.

Interest on reversed input tax credit - availability of input tax credit - penalty for wrongful availing of credit - extended period of limitation for demand

Interest on reversed input tax credit - availability of input tax credit - Whether interest is payable where input credit, though taken, remained unutilized and was reversed on audit before issuance of show cause notice. - HELD THAT: - The audit in March 2010 recorded that inadmissible credit had been taken and the appellant reversed that credit on 31.3.2010. The Tribunal noted conflicting High Court decisions and precedent of the Apex Court were relied upon by the Revenue, but observed that this Tribunal in GTL Infrastructure Limited had held that where credit taken earlier remained unutilized and was reversed without utilization, interest is not payable. Applying that view to the present facts, and distinguishing the reliance on Sundaram Fasteners, the Tribunal held that no interest is payable. The appellant's subsequent payment of interest and a letter requesting dropping of proceedings were considered not determinative of the legal question on interest liability, the facts of Sundaram Fasteners being different and the payment being made after hearing; accordingly the finding on non-liability for interest was maintained. [Paras 9, 10, 11, 12, 13]

No interest is payable on the reversed but unutilized input credit.

Penalty for wrongful availing of credit - Whether penalty can be imposed where no interest is payable because the input credit was reversed without utilization. - HELD THAT: - Having concluded that the appellant was not liable to pay interest on the reversed unutilized credit, the Tribunal proceeded that penalty founded on such interest liability could not stand. The reasoning follows that imposition of penalty presupposes liability for the underlying interest/addition, which is absent on these facts. [Paras 13, 14]

No penalty is imposable in the absence of any liability for interest on the reversed unutilized credit.

Final Conclusion: The impugned order confirming demand of interest and imposing penalty is set aside; the appeal is allowed with consequential relief, if any.

Limitation under Section 11A(1) proviso - wilful suppression with intent to evade duty - invocation of extended limitation period - bona fide belief in exemption

Limitation under Section 11A(1) proviso - wilful suppression with intent to evade duty - bona fide belief in exemption - Whether the proviso to Section 11A(1) could be invoked to extend the period of limitation by holding that the appellant wilfully suppressed facts with intent to evade payment of central excise duty in respect of clearances for the periods 1997-1998 to 1999-2000. - HELD THAT: - The Court examined the material on record and the Tribunal's conclusion that the appellant deliberately withheld information so as to attract the proviso to Section 11A(1). Reliance in the impugned orders was principally upon the statement of the Executive Engineer and the fact that the appellant did not obtain registration until after service of the show cause notice. The Court applied the settled principle laid down by the Supreme Court in M/s. Chemphar Drugs and Liniments , M/s. Padmini Products , and the larger Bench in Cosmic Dye Chemical , that mere omission, negligence or non-registration does not suffice; there must be material to show wilful mis-statement or suppression with an intention to evade duty. The appellant's reply to the show cause notice asserted that it had acted under the exemption Notification No.74/1993 until 31.3.1996 and that, on becoming a statutory corporation, it bona fide believed the exemption continued; it admitted potential liability but denied any intention to evade payment and sought relief from penalty and interest. The Court found no independent or corroborative material on record to support a finding of wilful suppression or evasion beyond the isolated statement relied upon by the Department. In these circumstances the invocation of the proviso to extend limitation was held to be unjustified. The Court therefore concluded that the Tribunal's satisfaction on the jurisdictional fact of wilful suppression was without support and that the demand, insofar as it depended on the extended period under the proviso, was barred by limitation. [Paras 7, 8, 9, 10, 11]

The proviso to Section 11A(1) could not be invoked in the absence of material showing wilful suppression with intent to evade duty; the Tribunal's conclusion was unjustified and the demand for the periods in question is barred by limitation.

Final Conclusion: The Tribunal's judgment upholding invocation of the extended limitation period under the proviso to Section 11A(1) was set aside for lack of material to demonstrate wilful suppression with intent to evade duty; the appeal is allowed and the demand insofar as based on the extended period is held to be barred by limitation, with liberty to the appellant to seek refund under Section 11B if so advised.

Cenvat credit on stock transfers between sister units - Interpretation of "purchase" versus "procurement" in the Cenvat Credit Rules - Primacy of substantive eligibility rule over procedural record-keeping rule (Rule 3 over Rule 7(4)) - Admissibility of input tax credit on receipt of inputs in factory - Effect of amendment substituting "purchased" with "procured" in Rule 7(4)

Cenvat credit on stock transfers between sister units - Interpretation of "purchase" versus "procurement" in the Cenvat Credit Rules - Primacy of substantive eligibility rule over procedural record-keeping rule (Rule 3 over Rule 7(4)) - Admissibility of Cenvat credit on inputs received from sister units under stock transfer invoices and whether 'purchase' is a pre condition prior to substitution by 'procured' in Rule 7(4) - HELD THAT: - The Tribunal held that Rule 3 of the Cenvat Credit Rules, which prescribes the substantive eligibility for availing Cenvat credit, does not distinguish between 'purchase' and 'procurement' and requires only receipt of inputs or capital goods in the factory of manufacture. Rule 7(4), dealing with maintenance of records, is procedural in nature and cannot restrict the substantive entitlement under Rule 3. The amendment by Notification substituting 'procured' for 'purchased' in Rule 7(4) does not operate retrospectively to alter the substantive test; moreover, the definitions and related rules do not make 'purchase' a sine qua non for claiming credit. The Tribunal relied on earlier judicial authorities, including the Karnataka High Court decision and Tribunal precedents (notably Exide Industries Ltd.), which support the view that book adjustments or stock transfers between separately registered units can qualify for credit provided the inputs were received and used in manufacture and appropriate duty liability has been borne where required. Applying these principles, the impugned denial of credit on the ground that inputs were not 'purchased' was unsustainable. [Paras 6, 7, 8]

Impugned order set aside; appeal allowed and respondent directed to grant consequential relief as per law.

Final Conclusion: The Tribunal allowed the appeal, holding that Cenvat credit is admissible on inputs received from sister units under stock transfer where inputs are received in the factory and used in manufacture, and that Rule 7(4)'s procedural requirement cannot override the substantive entitlement under Rule 3; the impugned order denying credit on the ground of absence of 'purchase' was set aside with consequential relief.

Cenvat credit on common input services - Demand under Rule 6(3A) of Cenvat Credit Rules, 2004 - Remand for verification of credit availed

Cenvat credit on common input services - Demand under Rule 6(3A) of Cenvat Credit Rules, 2004 - Remand for verification of credit availed - Whether the demand calculated at the prescribed percentage under Rule 6(3A) could be sustained where the adjudicating authorities had not verified whether the appellant had availed Cenvat credit of common input services. - HELD THAT: - The Tribunal found that the show cause notice and the impugned orders did not specify the exact amount of credit taken or identify precisely the common services on which credit was availed. In identical earlier proceedings for the appellant for the period 2013-14 to 2015-16 the Tribunal remanded the matter for the Adjudicating Authority to verify whether any Cenvat credit of common input services had in fact been availed, stating that if no credit had been availed no demand under Rule 6(3A) would arise. Applying the same reasoning, the Tribunal concluded that the present record likewise lacks proper verification and therefore the demand could not be sustained without such verification. The Tribunal set aside the impugned order and remitted the matter to the Original Adjudicating Authority to re-adjudicate in accordance with the directions given in the earlier order dated 05.03.2020 and to consider the Tribunal's earlier judgment while passing the de novo order.

Impugned order set aside and matter remanded to the Original Adjudicating Authority for verification whether appellant availed Cenvat credit of common input services and for de novo adjudication in accordance with earlier directions.

Final Conclusion: Appeals allowed by way of remand; the matter is remitted for fresh adjudication to verify whether any Cenvat credit of common input services was availed, failing which the demand under Rule 6(3A) will not survive.

Refund of duty paid in cash - Cenvat credit set-off and refund interplay - assessable value excluding freight/transportation charges - refund of duty paid on transportation/ freight charges - reliance on Tribunal precedent

Refund of duty paid in cash - Cenvat credit set-off and refund interplay - reliance on Tribunal precedent - Entitlement to refund of duty paid in cash where goods were cleared on payment of duty and Cenvat credit remained unutilized due to return of goods. - HELD THAT: - The Tribunal found on the record that the appellant paid duty at the time of clearance and sought refund only of the duty so paid in cash, while an unutilized Cenvat credit remained due to return of goods. Relying on the principle in the earlier Tribunal decision in Shree Nath Industries (as reproduced in the order), Notification No.56/2002-CE contemplates that duty paid in cash after adjusting Cenvat credit is refundable and a situation where only duty paid in cash is claimed for refund is revenue-neutral. The Tribunal observed that the appellant did not claim refund of Cenvat credit and that the excess amount paid in cash was not taxable duty recoverable under Section 11A; thus, the claim relates to refund of cash duty paid at clearance and is allowable.

Allowed the appellant's claim for refund of duty paid in cash at the time of clearance.

Assessable value excluding freight/transportation charges - refund of duty paid on transportation/ freight charges - Entitlement to refund of duty paid on transportation charges where freight was not included in the assessable value of goods. - HELD THAT: - The Tribunal examined the invoices placed on record and accepted the appellant's contention that transportation charges were not included in the assessable value. Although the Revenue sought verification and had contended that only sample invoices were produced, the Tribunal noted that invoices were submitted before the adjudicating authority and Commissioner (Appeals) and concluded further re-examination was unnecessary. On that basis and by reference to the appellant's submissions (including reliance on the cited Tribunal decision), the Tribunal held the appellant entitled to refund of duty paid on transportation charges.

Allowed the appellant's claim for refund of duty paid on transportation/ freight charges.

Final Conclusion: The appeals are allowed and the appellant is entitled to refund of duty paid in cash at the time of clearance and refund of duty paid on transportation charges, with consequential relief as may be applicable.

Payment of duty on removal of capital goods used as waste or scrap - prerequisite showing that cenvat/Modvat credit was availed on the capital goods - invalidity of show cause notice for failure to allege essential facts - onus on revenue to satisfy condition precedent before demanding duty - transaction value as basis for duty on removal of waste and scrap

Payment of duty on removal of capital goods used as waste or scrap - prerequisite showing that cenvat/Modvat credit was availed on the capital goods - invalidity of show cause notice for failure to allege essential facts - Whether the show cause notice validly demanded duty on removal of conveyor belt scrap where it did not allege that cenvat/Modvat credit had been taken on the relevant conveyor belt. - HELD THAT: - The Tribunal applied the statutory provision embodied in Rule 5A of Rule 3 of the Cenvat Credit Rules which requires payment of an amount equal to duty on transaction value where capital goods on which cenvat credit has been taken are removed as waste or scrap. The condition precedent for invoking that liability is that credit must have been availed on the relevant capital goods. The show cause notice under challenge contained only a bald allegation that conveyor belt scrap had been cleared and did not allege that cenvat/Modvat credit had been taken on those conveyor belts. In the absence of any allegation or factual finding that credit was availed on the relevant capital goods, the essential prerequisite for demanding duty under the rule was not satisfied. Accordingly the notice was held to be bad and the demand could not be sustained. [Paras 7, 8]

Show cause notice is bad for want of the condition precedent that cenvat/Modvat credit had been taken on the conveyor belt; appeal allowed and impugned order set aside with consequential benefits.

Final Conclusion: The appeal was allowed: because the show cause notice did not allege that cenvat/Modvat credit had been availed on the conveyor belt, the statutory condition for demanding duty on removal of capital goods as waste/scrap was not satisfied; the impugned order is set aside with consequential benefits.

CENVAT credit on outward transportation - place of removal - FOR destination sale - sale price inclusive of transportation - refund of tax, interest and penalty - interest under Section 35EE

CENVAT credit on outward transportation - place of removal - FOR destination sale - sale price inclusive of transportation - Entitlement of the appellant to CENVAT credit of service tax paid on outward transportation where goods were sold on FOR destination basis and the sale price was inclusive of transportation. - HELD THAT: - The Tribunal found on the admitted facts that the sales were effected on FOR destination/delivery basis at the buyer's plant and the contract price charged to the buyer was inclusive of transportation. Consequently, the place of removal was held to be the premises of the buyer and not the factory gate of the appellant. Applying that legal characterization, the Tribunal concluded that the element of transportation formed part of the assessable consideration and the appellant was therefore entitled to take CENVAT credit of service tax paid on outward transportation. The Tribunal set aside the findings of the lower authorities which treated the place of removal as the factory gate and disallowed the credit. [Paras 9, 10]

Appeal allowed; appellant entitled to CENVAT credit on outward freight/transportation and to consequential relief.

Refund of tax, interest and penalty - interest under Section 35EE - Entitlement to refund of amounts deposited and interest following allowance of the appeal. - HELD THAT: - The Tribunal directed that the Adjudicating Authority refund the tax, interest and penalty deposited by the appellant, and ordered payment of interest at 12% per annum from the date of deposit until disbursal. The direction as to the rate of interest was applied having regard to a Division Bench decision in Parle Agro holding interest payable at 12% per annum under Section 35EE. [Paras 10]

Refund directed with interest @ 12% p.a. from date of deposit until disbursal.

Final Conclusion: The appeal is allowed: CENVAT credit on outward transportation is admissible where goods are sold on FOR destination with price inclusive of transportation; the impugned order is set aside and the amounts deposited are to be refunded with interest at 12% p.a.

Disciplinary proceedings and requirement of enquiry where charges are denied - prohibition on double or successive charge sheeting without compliance with Rule 3 of Director General P & T Orders - liability of subordinate staff for disbursement where payment is sanctioned by superior officer - vires of departmental penalty in absence of enquiry

Liability of subordinate staff for disbursement where payment is sanctioned by superior officer - disbursing authority - Whether the respondent, as a postal assistant, could be held liable for the cash disbursement when the Assistant Post Master signed the voucher and sanctioned payment. - HELD THAT: - The Court examined the payment process at the post office and found that after presentation of the MIS pass book the ledger clerk tallied the signature and the Assistant Post Master signed the vouchers; only thereafter could the postal assistant effect payment. On this factual and procedural basis the Court held that the respondent was not the disbursing authority and, once the Assistant Post Master had sanctioned payment, the respondent could not lawfully be blamed for not stopping the payment. Applying these findings, the implication of the respondent in the irregular disbursement was held not tenable on facts or in law. [Paras 8, 11]

The respondent cannot be held liable for the alleged illegal cash disbursement because he was not the disbursing authority and the payment had been sanctioned by the Assistant Post Master.

Prohibition on double or successive charge sheeting without compliance with Rule 3 of Director General P & T Orders - procedural regularity in departmental proceedings - Whether issuance of two charge sheets for the same cause of action without complying with Rule 3 of the Director General P & T Orders vitiated the proceedings. - HELD THAT: - The Court found that two charge sheets were issued in respect of the same alleged misconduct. Rule 3 requires that reasons be given when an original charge sheet is cancelled or proceedings dropped and that the order state the position regarding future action; this was not done. The attempt to justify the second charge sheet on grounds that the first omitted specific references was held insufficient to cure the procedural defect. The failure to comply with Rule 3 was held to be a violation of mandatory procedure and undermined the departmental proceedings. [Paras 9]

The second charge sheet issued without complying with Rule 3 of the Director General P & T Orders was procedurally irregular and vitiated the proceedings.

Disciplinary proceedings and requirement of enquiry where charges are denied - vires of departmental penalty in absence of enquiry - Whether imposing penalty without holding an enquiry was permissible where the delinquent employee had denied factual charges. - HELD THAT: - Relying on the principle in O.K. Bhardwaj, the Court observed that when charges are factual and denied by the employee an enquiry ought to be held. In the present case the respondent had clearly disputed the allegations in his reply, yet no enquiry was conducted before imposing penalty. In absence of an enquiry to test the factual allegations, the disciplinary implication was held unsustainable. [Paras 10]

Imposition of penalty without holding an enquiry despite the respondent's denial of factual charges was impermissible and rendered the disciplinary action untenable.

Final Conclusion: The High Court upheld the Central Administrative Tribunal's judgment quashing the recovery and ordering refund; the application is dismissed and the Tribunal's order dated 29.08.2019 is not interfered with, with no order as to costs.