TaxTMI Updates e-Newsletter
Dec 17,2022

Detention under Section 129(3) of the Central Goods and Services Tax Act, 2017 - extension of e-way bill validity under Rule 138(10) of the Goods and Services Tax Rules, 2017 - penalty mitigation under Circular No.10/2019 paragraph 10 - absence of revenue loss / no scope for evasion - residuary penalty provision under Section 125 of the CGST Act

Detention under Section 129(3) of the Central Goods and Services Tax Act, 2017 - extension of e-way bill validity under Rule 138(10) of the Goods and Services Tax Rules, 2017 - absence of revenue loss / no scope for evasion - Validity of detention and penalty insofar as the defence of vehicle breakdown/repair and inability to extend the e-way bill due to portal blockage are concerned. - HELD THAT: - The Court examined the factual contentions that the truck broke down and was under repair and that the e-way bill could not be extended because the portal was blocked though some hours of validity remained. The second respondent rejected both contentions on the record. The court found on the available narrative that, had the truck reached its destination without interception, there would have been no revenue loss. Reliance was placed on the departmental enforcement approach set out in Circular No.10/2019 (paragraph 10) and, by reference to Example 2 therein, the expiry of an e-way bill in such circumstances does not create a scope for evasion. In that factual matrix, the core justification for detention and a higher penalty - prevention of evasion or revenue loss - was absent. The Court therefore treated the factual defences (breakdown/repair and portal access) as not attracting a finding of revenue loss and as insufficient to justify sustained detention or imposition of a higher penalty. [Paras 9, 10, 11]

Detention and penalty could not be sustained on the ground of revenue loss or evasion given the facts; the impugned detention/proceedings were set aside subject to the directions in the subsequent issue.

Penalty mitigation under Circular No.10/2019 paragraph 10 - residuary penalty provision under Section 125 of the CGST Act - absence of revenue loss / no scope for evasion - Quantum of penalty and consequential relief, including setting aside the impugned order and release of the vehicle upon payment of a mitigated penalty. - HELD THAT: - On a demurrer and assuming against the petitioner that there was no breakdown and the portal was active, the court held that paragraph 10 of Circular No.10/2019 applies to such factual situations (closest to Example 2), providing for a penalty not exceeding Rs.5,000 per act where expiry of e-way bill does not indicate evasion. This position was to be read with the residuary penalty framework under Section 125 of the CGST Act for categories not expressly enumerated elsewhere. Exercising discretion in light of the peculiar trajectory of the hearing (and expressly without creating precedent), the Court set aside the present impugned order dated 08.12.2022 and the impugned proceedings dated 02.12.2022, directed payment of the mitigated penalty under paragraph 10 of the circular by the writ petitioner by the specified date, and ordered immediate release of the truck and consignment on such payment. [Paras 13, 14, 15]

Impugned order dated 08.12.2022 set aside; impugned proceedings dated 02.12.2022 set aside subject to payment of a penalty of Rs.5,000 as per paragraph 10 of Circular No.10/2019 and release of the vehicle on payment.

Final Conclusion: Writ petition and connected WMP allowed in part: impugned orders set aside; petitioner directed to pay the mitigated penalty under paragraph 10 of Circular No.10/2019 and, on payment, the vehicle and consignment shall be released. The order is made as a one off and shall not operate as a precedent.

Cancellation of registration under Section 29 of the Bihar Goods and Services Tax Act, 2017 - non-speaking order - violation of principles of natural justice - quashing of administrative order - restoration of registration - finalisation of assessment in accordance with law - condonation of delay - penal and pecuniary consequences

Cancellation of registration under Section 29 of the Bihar Goods and Services Tax Act, 2017 - non-speaking order - violation of principles of natural justice - Legality of the ex parte order dated 20.01.2022 cancelling the petitioner's GST registration. - HELD THAT: - The Court found that the cancellation order is cryptic and non-speaking, failing to refer to the contents of the show cause notice and the petitioner's response. The order does not disclose reasons for cancellation and records that no reply was submitted and that the petitioner did not appear on the hearing date, but the authority did not engage with the material on record. Given that the cancellation entails penal and pecuniary consequences, the failure to provide a reasoned order and to observe principles of natural justice rendered the cancellation invalid. The Court therefore quashed the cancellation order and restored the petitioner's registration.

The ex parte cancellation order dated 20.01.2022 is quashed and the petitioner's registration is restored.

Finalisation of assessment in accordance with law - condonation of delay - Post-quash procedural direction regarding assessment and the question of delay in filing returns. - HELD THAT: - Having set aside the cancellation, the Court directed the Commissioner to finalise the petitioner's assessment and/or pass appropriate orders in accordance with law. The Court observed that, in the peculiar facts, the authority ought to have considered condonation of delay but did not, and therefore ordered that the question of delay in filing returns shall remain closed and will not be raised again by the respondents as represented by their counsel.

Respondent is directed to finalise assessment/pass appropriate orders in accordance with law; the issue of delay in filing returns shall remain closed and will not be raised again by the respondents.

Final Conclusion: Writ petition allowed: the ex parte cancellation order of 20.01.2022 is set aside, the petitioner's GST registration is restored, the respondents are directed to finalise assessment/pass orders in accordance with law, and the respondents shall not raise the question of delay in filing returns.

Summary order. The writ petition challenging the notice was disposed of as withdrawn, while preserving the writ petitioner's rights and contentions to be urged in a statutory appeal.

Liability to pay GST on licence fee - substitution of GST for service tax - contractual obligation to pay service tax - new levy versus substituted levy

Liability to pay GST on licence fee - substitution of GST for service tax - contractual obligation to pay service tax - The petitioner is liable to pay GST on the licence fee payable under the Deed of Licence. - HELD THAT: - The Deed of Licence expressly required the licensee to pay service tax on the monthly licence fee (Clause (43) of the Deed of Licence). The respondents had been separately charging and collecting service tax under that agreement and the petitioner had paid it without protest. With the introduction of GST w.e.f. 01.07.2017, the statutory regime under which service tax was levied was subsumed into GST. The demand for GST by the respondents therefore represents a substituted levy in place of service tax and is not a new or additional levy imposed by the respondents. Given the contractual undertaking to bear service tax, the petitioner cannot evade the corresponding liability to pay GST which has replaced service tax. On these grounds the petitioner's contention that she is not liable to pay GST on the licence fee is unsustainable. [Paras 8, 9, 10, 11, 12]

Writ petition dismissed; the claim of non-liability to pay GST on the licence fee is without merit.

Final Conclusion: The High Court dismissed the writ petition, holding that GST, which replaced service tax w.e.f. 01.07.2017, is payable on the licence fee pursuant to the contractual obligation to bear service tax; the demand for GST is not a new levy.

Failure to provide statutory minimum 30 days' notice under Section 74(A) of CGST/BGST Act, 2017 - quashing of ex parte assessment for non-compliance with mandatory notice period - direction to reissue notice and hold fresh assessment in accordance with law

Failure to provide statutory minimum 30 days' notice under Section 74(A) of CGST/BGST Act, 2017 - quashing of ex parte assessment for non-compliance with mandatory notice period - direction to reissue notice and hold fresh assessment in accordance with law - Notice dated 15.02.2021 and the ex parte assessment order dated 24.02.2021 were quashed for non-compliance with the mandatory 30 day notice requirement and the assessing officer was directed to issue a fresh notice and pass an appropriate order in accordance with law. - HELD THAT: - The statutory minimum period of 30 days mandated under Section 74(A) was not afforded to the petitioner. The notice dated 15.02.2021 called for a reply on 21.02.2021, which fell within the 30 day period, but the assessing officer proceeded to pass an ex parte assessment order on 24.02.2021 before the expiry of the statutory period. The court held that compliance with the 30 day notice requirement is mandatory. For this reason the notice and the consequent assessment order were set aside. The assessing officer is directed to issue a fresh notice in accordance with the statutory provisions and to pass an appropriate order after affording the petitioner the opportunity contemplated by law. The petitioner has undertaken to cooperate and all proceedings must be complied with positively.

Notice dated 15.02.2021 and assessment order dated 24.02.2021 quashed; assessing officer directed to reissue notice and pass fresh assessment in accordance with law.

Final Conclusion: Writ petition allowed. The impugned notice and ex parte assessment are quashed for failure to afford the mandatory 30 day period; the assessing officer is directed to issue fresh notice and pass an order in accordance with law. The petitioner shall cooperate; interlocutory application, if any, stands disposed of.

Limitation period for statutory appeal - condonation of delay - computation of limitation in months applying the Dodds v. Walker principle - effect of COVID-19 limitation exclusion (Suo Motu COGNIZANCE FOR EXTENSION OF LIMITATION) - statutory appeal under Section 107 of the TN-GST Act and revocation under Section 30 of the TN-GST Act

Limitation period for statutory appeal - condonation of delay - computation of limitation in months applying the Dodds v. Walker principle - effect of COVID-19 limitation exclusion (Suo Motu COGNIZANCE FOR EXTENSION OF LIMITATION) - Whether the Appellate Authority was justified in dismissing the statutory appeal as barred by limitation. - HELD THAT: - The prescribed limitation for an appeal under the statutory scheme is three months from the date of communication of the order with a further condonable period of one month; both periods are expressed in months. Consequently, the time for computing limitation must be applied in months using the Dodds v. Walker principle (i.e., by reference to the last date of the succeeding English calendar month). The cancellation order was communicated on 10.11.2021. The period 15.03.2020 to 28.02.2022 was excluded by the Supreme Court's Suo Motu order on extension of limitation, which provided that where the expiry falls within that excluded period, a litigant would have 90 days from 01.03.2022. Applying that order, the 90-day period ran until 30.05.2022 and the additional condonable month ran until 30.06.2022. The statutory appeal in the present matter was filed on 29.09.2022, after the expiry of both the prescribed and condonable periods. Therefore the appeal was rightly held to be time-barred and dismissal on limitation grounds was justified. [Paras 5, 6, 7, 8]

Appeal dismissed as barred by limitation; no interference with the impugned order.

Final Conclusion: Writ petition dismissed; the High Court upheld the Appellate Authority's order dismissing the statutory appeal as time-barred. The petitioner remains at liberty to apply afresh for GST registration, which the authority shall consider expeditiously and in accordance with law.

Alternate remedy rule in fiscal statutes - availability of statutory appeal under Section 107 of the C-GST Act - scrutiny under Section 61 of the C-GST Act - show cause notice requirement under Section 73 of the C-GST Act - principles of natural justice

Alternate remedy rule in fiscal statutes - availability of statutory appeal under Section 107 of the C-GST Act - Maintainability of writ petition under Article 226 when an alternate statutory remedy of appeal under Section 107 of the C-GST Act is available - HELD THAT: - The Court applied the settled jurisprudence that the alternate remedy rule is a self imposed restraint of the writ jurisdiction, particularly strict in fiscal matters. Having adverted to binding precedents including Dunlop India, Satyawati Tandon, K.C. Mathew, Commercial Steel and Greatship, the Court held that where an effective statutory remedy exists, the writ forum should ordinarily be declined except in exceptional circumstances (breach of fundamental rights, violation of natural justice, excess of jurisdiction or challenge to vires). The petition did not establish any such exception; factual disputes and merits assessment were matters for the appellate authority. Consequently, the writ petition was dismissed while preserving the right to pursue the statutory appeal under Section 107 subject to limitation and pre deposit rules. [Paras 18, 20, 21, 22, 23]

Writ petition dismissed; petitioner relegated to statutory appeal under Section 107 of the C GST Act, subject to limitation and pre deposit if any, with the appellate authority to decide on merits independently.

Scrutiny under Section 61 of the C-GST Act - show cause notice requirement under Section 73 of the C-GST Act - principles of natural justice - Whether the petitioner was denied opportunity of notice/hearing and whether the reply to scrutiny under Section 61 was perfunctorily dealt with - HELD THAT: - The Court noted competing factual claims: the impugned order refers to notices issued in the course of scrutiny and to personal hearings which the revenue records show the dealer did not attend; the petitioner contends absence of a show cause notice and non attendance at personal hearings. The Court found that the allegation that the petitioner's objections in response to the scrutiny notice were merely summarily rejected (stated as 'not satisfactory' without dispositive reasoning) constitutes a valid ground for challenge but concluded that such grievance should be pursued by way of the statutory appeal rather than by invoking writ jurisdiction. The disputed factual questions regarding issuance of a show cause notice and attendance at hearings were not finally adjudicated in writ jurisdiction. [Paras 8, 9, 10, 11, 21]

The contention that the petitioner's replies were perfunctorily dealt with is recognised as a ground for appeal; factual disputes about notices/hearings were not decided on merits in this petition and the petitioner is directed to agitate these issues in the statutory appeal under Section 107.

Final Conclusion: The writ petition and connected WMP are dismissed; the petitioner may pursue the statutory appeal under Section 107 of the C GST Act subject to limitation and pre deposit, and the Appellate Authority shall consider the appeal on its own merits and in accordance with law.

Refund of IGST on export - Deemed application for refund by shipping bill - Automatic / system-driven sanction of refund under Rule 96 - Obligation to sanction 90% of claimed refund within seven days - Interest for delayed refund under Section 56 of the CGST Act - GSTN / ICES matching and software reconciliation responsibility

Refund of IGST on export - Deemed application for refund by shipping bill - Obligation to sanction 90% of claimed refund within seven days - Refund of IGST paid on export represented by Shipping Bill No.1218425 dated 06.02.2020 along with interest is payable to the petitioner. - HELD THAT: - The Court found that shipping bills are deemed to be refund applications for IGST paid on export and that the electronic mechanism under Rule 96 (read with Section 54 procedures) requires processing and sanction of refund, including the obligation to sanction 90% of the amount claimed within seven days from acknowledgement. The respondent's affidavit admits an automated ICES/ICEGATE-GSTN matching process and records attempts to process the shipping bill, including initial scrolling and subsequent re-processing after a bank rejection on account of a name mismatch. Two other export invoices for the same period had been successfully refunded into the petitioner's bank account, and there was no dispute as to export or the documentary proof (shipping bills, GSTR-1, GSTR-3B). The shortfall was attributable to a system/network/software mismatch rather than any contested legal disqualification. Given the statutory scheme that the shipping bill constitutes the refund application and the respondent's admitted system-driven mechanism, the Court concluded the petitioner is entitled to the refund and directed payment with interest. [Paras 8, 9, 11]

Refund of IGST in respect of Shipping Bill No.1218425 dated 06.02.2020 is to be paid to the petitioner with interest at 6% per annum and consequential benefits within two weeks from receipt of the order.

Automatic / system-driven sanction of refund under Rule 96 - GSTN / ICES matching and software reconciliation responsibility - Responsibility for resolving electronic matching / software failures in the refund process lies with the system authorities and such technical defects cannot be a ground to deny or indefinitely delay the statutory refund. - HELD THAT: - The Court noted the refund process is automated and dependent on electronic data matching between ICES/ICEGATE and GSTN. The affidavit-in-reply acknowledged instances of 'Failed after Success' where PFMS/Bank rejections require reprocessing via SCROLL_PC. The Court observed that where exports and return filings are undisputed and two comparable refunds were credited, the remaining non-payment resulted from an apparent software/network mismatch. The Court emphasised that officers are dependent on the network and that the GSTN/system owners must address and rectify such technical shortcomings; merely attributing delay to system limitations cannot justify withholding or protracted non-payment of refunds. [Paras 6, 9, 10]

GSTN/concerned system authorities and the respondent must address and rectify the electronic matching/processing failure so that the statutory automatic refund mechanism operates effectively; technical failure cannot permit denial or undue delay of the refund.

Final Conclusion: Petition allowed; respondent directed to pay the IGST refund for Shipping Bill No.1218425 dated 06.02.2020 with interest at 6% p.a. and consequential benefits within two weeks, and the Court urged remedial action by the system authorities (GSTN/ICES) to prevent recurrence of such electronic processing failures.

Arm's length price - Comparable Uncontrolled Price method - transfer pricing adjustment - currency of repayment determines interest rate - benchmarking of INR denominated debentures to domestic market rates - section 40(a)(ia) disallowance for failure to deduct tax at source - capitalization as capital work in progress versus claim of depreciation - retraction of statement recorded during search and its evidentiary effect

Arm's length price - Comparable Uncontrolled Price method - benchmarking of INR denominated debentures to domestic market rates - currency of repayment determines interest rate - Whether the interest paid on unsecured INR non convertible debentures (NCDs) issued to the associated enterprise is at arm's length and whether the TPO/DRP's transfer pricing adjustment is sustainable. - HELD THAT: - The Tribunal examined the NCD terms: unsecured, INR denominated, repayable at maturity after 25 years and carrying coupon computed with reference to SBI Base/PLR related benchmarks. Applying the principle that the market rate applicable to the currency of repayment is the relevant parameter, the Tribunal found persuasive the coordinate bench reasoning that INR denominated instruments should be benchmarked to rupee market rates. The Tribunal also held that duration and unsecured nature of the debentures are commercially material and justified comparison with longer tenure unsecured third party borrowings; the TPO's rejection of such filters was not appropriate. In the facts of these appeals the assessee's coupon (around 14.70%-15%) fell within the relevant domestic market benchmark (SBI PLR/Base plus permissible spread) and was therefore within arm's length range. Accordingly the TPO/DRP transfer pricing adjustments were not sustained. [Paras 11, 12, 13, 14]

TP adjustment on interest paid on NCDs deleted; no addition for excess interest.

Section 40(a)(ia) disallowance for failure to deduct tax at source - reimbursement of salary on cost to cost basis - absence of income element in reimbursement - Whether salary reimbursements paid to a sister concern are subject to disallowance under section 40(a)(ia) for failure to deduct tax at source. - HELD THAT: - The assessee established that payments to the sister concern were pure cost to cost salary reimbursements (no markup), employees were under assessee's supervision and the underlying salary payments had been subjected to TDS by the paying entity. The Tribunal accepted that there was no element of income in the reimbursements and that the payments did not constitute fees for technical/contractual services attracting sections 194J/194C. Reliance was placed on the proposition that reimbursements lacking an income element are not liable to TDS. On these facts the Tribunal concluded that disallowance under section 40(a)(ia) was not warranted. [Paras 20, 25, 26]

Disallowance under section 40(a)(ia) in respect of salary reimbursements deleted.

Capitalization as capital work in progress versus claim of depreciation - protective disallowance - retraction of statement recorded during search and its evidentiary effect - Whether depreciation disallowances (both substantive and protective) in respect of amounts capitalized as capital work in progress are sustainable. - HELD THAT: - The AO disallowed depreciation on amounts alleged to be not genuinely incurred (relying on a statement recorded during search) and made a protective disallowance. The Tribunal noted that the amounts in question were recorded as capital work in progress and no depreciation had been claimed in the relevant year. The Tribunal further observed that the AO had made the adjustments without adequately examining documentary evidence and that the recorded statement was subsequently retracted; in those circumstances the substantive and protective disallowances of depreciation could not be sustained. [Paras 21, 22, 25, 31]

Substantive and protective disallowances of depreciation on amounts shown as capital work in progress deleted.

Disallowance of depreciation on pre operative expenses - capital work in progress versus claimed allowance - retraction of statement recorded during search and its evidentiary effect - Whether the disallowance of depreciation in respect of pre operative expenses capitalized as capital work in progress is sustainable. - HELD THAT: - The AO/DRP disallowed a portion of pre operative expenses on the basis of an adverse statement recorded during search. The Tribunal noted that the pre operative expenses were capitalized as capital work in progress and that no depreciation had been claimed in the assessment year. Coupled with the retraction of the earlier statement and the assessee's documentary production, the Tribunal held that the disallowance of depreciation was not tenable. [Paras 27, 28, 29, 31]

Disallowance of depreciation on pre operative expenses deleted.

Final Conclusion: All contested additions - transfer pricing adjustment on NCD interest, disallowance under section 40(a)(ia) for salary reimbursements, substantive and protective disallowance of depreciation on capitalized salary costs, and disallowance of depreciation on pre operative expenses - were deleted and the appeals allowed in favour of the assessees.

Prohibition on reopening assessment during pendency of rectification proceedings under Section 154 - limitation under Section 154(7) and validity of a Section 154 notice - reopening assessment under Section 147/148 while Section 154 proceedings are pending

Prohibition on reopening assessment during pendency of rectification proceedings under Section 154 - reopening assessment under Section 147/148 while Section 154 proceedings are pending - Whether initiation of proceedings under Section 147/148 was impermissible while proceedings under Section 154 were pending, notwithstanding the High Court's view that the Section 154 notice was time-barred. - HELD THAT: - The Court held that the High Court erred in declaring the Section 154 notice invalid on the ground that it was beyond the period prescribed by Section 154(7), because the validity of the Section 154 proceedings was not the subject-matter before the High Court and there was no record of any specific withdrawal of the Section 154 notice. In the absence of an express withdrawal or a clear adjudication that the Section 154 notice was invalid, the rectification proceedings must be treated as pending. While such rectification proceedings remain pending, the Revenue was not permissible to initiate re-opening under Section 147/148. The High Court's presumption that the Section 154 proceedings were time-barred and therefore did not preclude reopening was found to be a serious error of law. For these reasons the Court restored the ITAT's order which had quashed the reopening proceedings initiated under Section 147/148.

ITAT order quashing the reassessment proceedings under Section 147/148 is restored; High Court judgment holding the Section 154 notice invalid is quashed and set aside.

Final Conclusion: Appeals allowed to the extent that the High Court judgment and its review dismissal are quashed and set aside; the ITAT order quashing the reassessment proceedings is restored. No costs.

Faceless assessment procedure under Section 144B - Principles of natural justice - right to personal hearing - Retrospective operation of procedural amendments - Distinction between procedural and substantive law

Faceless assessment procedure under Section 144B - Retrospective operation of procedural amendments - Distinction between procedural and substantive law - Validity of omission of sub section (9) of Section 144B by the Finance Act, 2022 and whether the omission is unconstitutional or retrospectively takes away vested rights. - HELD THAT: - The Court examined the nature and object of Section 144B and the amendment by the Finance Act, 2022 which omitted sub section (9) with retrospective effect from 1.4.2021. Noting that Section 144B prescribes procedure for faceless assessment and that the Finance Act, 2022 introduced additional checks and facilitative measures to streamline faceless assessments, the Court treated the omission as procedural in nature. Citing settled principles that procedural statutes are generally presumed to operate retrospectively unless they create new substantive rights or liabilities, the Court held that sub section (9) imposed a burden on the department rather than conferring a substantive vested right on the assessee. The amendment was intended to remove technical and IT related difficulties that had generated litigation and to simplify the assessment process. Consequently, the challenge that the omission is ultra vires or unconstitutionally retrospective was rejected. [Paras 15, 16, 17, 18, 19]

Challenge to omission of sub section (9) of Section 144B is dismissed; the amendment is procedural and not unconstitutional.

Principles of natural justice - right to personal hearing - Faceless assessment procedure under Section 144B - Whether the assessment order dated 30.3.2022 is vitiated for denial of personal hearing and requires setting aside and remand for fresh assessment with opportunity of hearing. - HELD THAT: - The Court reviewed the material showing that the petitioner participated at all stages, filed replies, and uploaded a request for personal hearing through video conferencing which was acknowledged. The faceless assessment scheme (as amended) mandates that where an assessee requests personal hearing the authority "shall allow" such hearing through video conferencing. The assessment order did not record any personal hearing being granted nor any reason for denial. Given that the request was acknowledged, the substantial reply filed by the assessee and the statutory framework requiring facilitation of personal hearing in faceless proceedings, the Court found denial of opportunity to be a breach of principles of natural justice and a defect in essential procedural compliance. In consequence, the assessment was set aside and the matter remitted for fresh decision after granting the requested opportunity of hearing. [Paras 35, 36, 37, 38, 39]

Impugned assessment order set aside; matter remitted to the National Faceless Assessment Centre/competent authority for fresh assessment after providing personal hearing by video conferencing.

Final Conclusion: The constitutional challenge to omission of sub section (9) of Section 144B is rejected as the amendment is procedural; however the assessment order dated 30.3.2022 is set aside for denial of the assessee's request for personal hearing and the matter is remitted for fresh faceless assessment after affording the petitioner a video conference hearing.

Permanent Establishment - Attribution of profits to Permanent Establishment - Article 7(1) of the India-Finland Double Taxation Avoidance Agreement - Net profit margin method - Global net loss - Research and development activities not constituting PE - Software supplies not taxable as royalty

Permanent Establishment - Attribution of profits to Permanent Establishment - Article 7(1) of the India-Finland Double Taxation Avoidance Agreement - Net profit margin method - Global net loss - Whether any profit is taxable in India by attributing income to an alleged PE where the foreign enterprise has recorded a global net loss - HELD THAT: - The Tribunal found as a fact that the assessee recorded a global net loss for the relevant period. Applying Article 7(1) of the India Finland DTAA, the court accepted the Tribunal's reasoning that profits of an enterprise are taxable in the other Contracting State only to the extent attributable to a PE and only if the foreign enterprise is making a profit. The Special Bench's approach of applying the foreign enterprise's global net profit margin to Indian sales for attribution was noted; where the global net result is a loss, no profit can be attributed to the PE. The Assessing Officer's adoption of gross profit margins instead of net profit margins and failure to allow deductions for payments to the alleged PE were held to be contrary to Article 7(1) and the Special Bench approach; even on the AO's computation, after allowing such deductions, the result would be a loss and thus no taxable attributable profit. In view of the Tribunal's factual finding of global net loss, the substantial questions of law framed as A and B do not arise for consideration and the appeal was not entertained on those grounds. [Paras 11, 12, 13, 14, 15]

On the Tribunal's factual finding of a global net loss, no profit could be attributed to the alleged PE under Article 7(1) and the questions of law as framed (A and B) do not arise; appeal dismissed.

Research and development activities not constituting PE - Software supplies not taxable as royalty - Whether the Tribunal erred in holding that R&D activities do not constitute a PE and that software supplies are not taxable as royalty - HELD THAT: - Counsel for the appellant conceded that the questions framed as C and D are covered against the revenue by existing precedent. The High Court recorded that the question in C is covered by this Court's decision in Adobe Systems Incorporated v. ADIT and that question D is covered by the Supreme Court's decision in Engineering Analysis Centre of Excellence Pvt. Ltd. As such, those legal questions were treated as settled against the appellant/revenue and were not independently re adjudicated. [Paras 7, 8]

Questions C and D are covered against the appellant by binding precedent and are not entertained in its favour.

Final Conclusion: The appeal is dismissed: on the Tribunal's finding of a global net loss no profit was attributable to any alleged PE in India under Article 7(1) of the India Finland DTAA, and the remaining legal questions on R&D activity as PE and taxability of software as royalty were found to be covered against the revenue by existing precedent.

Valuation of unexplained jewellery - ancestral jewellery evidentiary standard - probable disposal of ancestral assets - appellate tribunal's fact finding finality - remand for fresh consideration - levy of surcharge

Valuation of unexplained jewellery - ancestral jewellery evidentiary standard - appellate tribunal's fact finding finality - Whether the Appellate Tribunal was justified in setting aside the Commissioner (Appeals) and restoring additions by treating the jewellery as unexplained, and whether any substantial question of law arises. - HELD THAT: - The High Court held that the controversy related solely to the quantum of unexplained jewellery and that no substantial question of law arose for its determination. The Court emphasised that the Appellate Tribunal is the ultimate fact finding authority in such matters and that on facts this Court cannot reappraise or arrive at a different conclusion from the Tribunal. Having regard to the Tribunal's findings that the forefathers' possession of jewellery did not necessarily mean the entire quantum devolved on the assessees, and that some probable disposal over generations could not be ruled out, the High Court found no merit in interfering with the Tribunal's factual conclusions. [Paras 25, 26, 27]

No substantial question of law arises; the Court will not interfere with the Tribunal's factual conclusions and the appeal is liable to be dismissed (as to T.C.A.No.232 of 2011) or otherwise dealt with by remand (as to T.C.A.No.768 of 2009).

Levy of surcharge - Whether the levy of surcharge was correctly sustained by the Appellate Tribunal. - HELD THAT: - Both parties agreed that the issue of surcharge had been decided against the assessees by the Supreme Court in CIT v. Suresh N. Gupta. The Tribunal followed that precedent and disallowed the assessees on the question of surcharge; the High Court, noting the parties' concession and the controlling Supreme Court decision, declined to depart from that view. [Paras 16]

Surcharge sustained against the assessees; Revenue succeeds on this ground.

Remand for fresh consideration - appellate tribunal's fact finding finality - Whether the matter in T.C.A.No.768 of 2009 should be remitted to the Assessing Officer for fresh adjudication in accordance with the Tribunal's reasoning in I.T.(SS) A.No.43/Mds/2007. - HELD THAT: - Although the Court found no substantial question of law on the merits, it observed that the Assessing Officer in T.C.A.No.768 of 2009 should perform a like exercise as directed by the Tribunal in the related order (I.T.(SS) A.No.43/Mds/2007 as modified on 03.01.2011). Consequently the High Court set aside the impugned Tribunal order dated 13.02.2009 in I.T.(SS) A.No.0044/Mds/2007 and remitted the matter to the Deputy Commissioner of Income Tax to pass a fresh order on merits in accordance with law and in line with the Tribunal's direction, directing completion within three months. [Paras 27, 28]

Impugned order in T.C.A.No.768 of 2009 set aside and remitted to the Assessing Officer for fresh disposal in line with the Tribunal's reasoning; assessment exercise to be completed within three months.

Final Conclusion: T.C.A.No.768 of 2009 is set aside and remitted to the Assessing Officer for fresh adjudication in accordance with the Tribunal's reasoning in I.T.(SS) A.No.43/Mds/2007; T.C.A.No.232 of 2011 is dismissed; surcharge sustained against the assessees; no costs; Assessing Officer to complete the exercise within three months.

Quashing of criminal prosecution upon cancellation of penalty - Simultaneity of penalty and prosecution under fiscal law - Effect of appellate setting aside of penalty on prosecution under section 276C of the Income tax Act - Prosecution under section 276C of the Income tax Act - Show cause and sanction for prosecution - Distinguishing decisions where penalty is quashed on technical grounds

Quashing of criminal prosecution upon cancellation of penalty - Simultaneity of penalty and prosecution under fiscal law - Effect of appellate setting aside of penalty on prosecution under section 276C of the Income tax Act - Distinguishing decisions where penalty is quashed on technical grounds - Whether the criminal proceedings (including order taking cognizance) under sections 276C(1), 277 and 278E of the Income tax Act could be quashed where the penalty relating to the same subject matter was set aside by the appellate authority. - HELD THAT: - The Court applied the settled principle in K.C. Builders and G.L. Didwania that levy of penalty and prosecution under Section 276C proceed simultaneously and that, where the appellate authority sets aside the penalty on merits (thereby negating the finding of concealment), the criminal prosecution based upon that finding becomes unsustainable. The petitioners relied on the cancellation of penalty by the second appellate authority in one matter; in the other matter no penalty had been imposed. The Court examined the rival judgment relied upon by the respondent and distinguished it on facts: where a penalty or adjudication is quashed on technical grounds without addressing the merits, prosecution may continue, but that distinction does not apply where the appellate authority has quashed the penalty on merits. Applying these principles to the materials on record and the appellate ruling setting aside the penalty, the Court concluded that no offence survives in law and that continuation of criminal proceedings would be an abuse of process. [Paras 13, 15, 16]

Criminal proceedings (including the order taking cognizance dated 10.11.2016) under sections 276C(1), 277 and 278E were quashed in both matters.

Final Conclusion: Both petitions were allowed: the High Court quashed the entire criminal proceedings (including the order taking cognizance dated 10.11.2016) in the two complaint cases, and disposed of the petitions with interim orders vacated.

Deduction under section 80IB(10) - pro rata allowance for incomplete housing project - Taxation of unsold flats held as stock-in-trade - income from house property v. business income - Temporal application of amendment to section 23(5)

Deduction under section 80IB(10) - pro rata allowance for incomplete housing project - Deduction under section 80IB(10) claimed pro rata in respect of the housing project "Costa Blanca" was allowable. - HELD THAT: - The Tribunal upheld the Commissioner (Appeals) who had allowed the assessee's claim on a pro-rata basis, noting that the deduction was not claimed for an incomplete project as a whole but proportionately. The CIT(A) approach was mainly founded on the Tribunal's earlier order in the assessee's own case for the immediately preceding assessment years, a view which the Tribunal found to be applicable mutatis mutandis. Although the Department relied on another Tribunal decision in a different case, the Tribunal distinguished that authority and, following the assessee-specific precedents and approvals by various High Courts in principle, sustained the pro-rata deduction without re-examining the rival decision relied upon by Revenue. [Paras 5]

Impugned order allowing 80IB(10) deduction on pro-rata basis is upheld.

Taxation of unsold flats held as stock-in-trade - income from house property v. business income - Temporal application of amendment to section 23(5) - Addition on account of deemed rent in respect of unsold flats held as stock-in-trade was correctly deleted by the CIT(A). - HELD THAT: - For AY 2014-15 the Tribunal observed that the Finance Act, 2017 amendment to section 23(5), which treats annual value of unsold stock as income from house property after specified periods, is effective only from 01-04-2018 and therefore does not apply to the year under consideration. Prior to that amendment, consistent Tribunal decisions (including referred precedents) held that income from unsold flats held as stock-in-trade cannot be brought to tax under the head 'Income from House Property' and, if at all, arises under 'Profits and Gains from Business or Profession'. There is no deeming provision under the business income head equivalent to section 23(5) for the relevant year. On this basis the Tribunal found the AO's bringing of alleged annual letting value to tax unsustainable and affirmed deletion of the addition. [Paras 8]

Deletion of addition on account of deemed rent is upheld.

Final Conclusion: Revenue's appeal is dismissed; the CIT(A)'s allowance of pro-rata deduction under section 80IB(10) and deletion of deemed rent addition are sustained.

Allowability of commission as business expenditure - deeming provision under section 56(2)(viia) regarding receipt of property (shares) for inadequate consideration - buyback of own shares and reduction of share capital - accretion of asset in the hands of the company on buyback

Allowability of commission as business expenditure - Deletion of addition disallowing commission payments claimed as business expenses - HELD THAT: - The assessee produced agreements, invoices, computation of commission linked to sales, proof of payment through banking channels and TDS deduction before the CIT(A). The AO had disallowed the entire commission for lack of documentation, but the CIT(A) after calling for a remand report (which the AO did not submit) accepted the assessee's contemporaneous records. The Tribunal found no contradictory evidence before it and held that the documentary proof and TDS deduction sufficiently substantiated the commission payments, thereby supporting the CIT(A)'s deletion of the disallowance. [Paras 4]

Order of the CIT(A) deleting the disallowance of commission is confirmed and the Revenue's ground in this regard is dismissed.

Deeming provision under section 56(2)(viia) regarding receipt of property (shares) for inadequate consideration - buyback of own shares and reduction of share capital - accretion of asset in the hands of the company on buyback - Whether section 56(2)(viia) applies to buyback by a company of its own shares from a shareholder - HELD THAT: - On a plain reading, section 56(2)(viia) targets situations where a firm or company receives 'property, being shares of a company' for inadequate consideration so that such shares become property in the hands of the recipient. In a buyback the company is acquiring and extinguishing its own shares, resulting in reduction of share capital rather than acquisition of shares that become property of the recipient company. The Tribunal agreed with the view in Vora Financial Services (P.) Ltd. that own shares acquired in a buyback do not become 'property' of the recipient company in the sense envisaged by section 56(2)(viia), and that buyback leads to capital reduction without asset accretion to the company. Consequently, invoking section 56(2)(viia) and Rule 11UA to revalue such buyback and tax the differential was not warranted. [Paras 9]

CIT(A)'s deletion of the addition made by the AO under section 56(2)(viia) in respect of the buyback of the assessee's own shares is affirmed and the Revenue's ground is dismissed.

Final Conclusion: Both impugned additions - disallowance of commission and addition under section 56(2)(viia) on account of buyback of own shares - were correctly deleted by the CIT(A); the Revenue's appeal is dismissed.

Exercise of revisional jurisdiction under section 263 of the Income-tax Act, 1961 - additional depreciation under section 32(1)(iia) - capitalisation of pre-operative expenditure and capital work-in-progress as part of block of assets - scope of revision where Assessing Officer has conducted enquiries and adopted a plausible view

Exercise of revisional jurisdiction under section 263 of the Income-tax Act, 1961 - scope of revision where Assessing Officer has conducted enquiries and adopted a plausible view - Whether the Principal Commissioner of Income Tax validly invoked revisional jurisdiction under section 263 to set aside the assessment order in respect of allowance of depreciation and additional depreciation. - HELD THAT: - The Tribunal found that the Assessing Officer had issued detailed notices u/s. 142(1) and called for explanations and supporting bills, and the assessee furnished detailed replies and documents which the AO considered before completing the assessment. The AO's assessment, though silent on the specific additional depreciation in the order, reflected that proper enquiries had been made and a plausible view was adopted. Applying the ratio of the cited High Court and Supreme Court decisions, revision under section 263 is available where the AO has not made any inquiry, has not applied his mind, or the order is unsustainable in law; it is not available simply because the Commissioner prefers a different view. In the present facts the AO had conducted necessary enquiries and reached a sustainable conclusion, hence the revisional jurisdiction could not be validly exercised to direct fresh verification or take a different view. [Paras 5, 6]

Revision order dated 27-03-2015 under section 263 was quashed and the appeal on this ground allowed.

Additional depreciation under section 32(1)(iia) - capitalisation of pre-operative expenditure and capital work-in-progress as part of block of assets - Whether the Assessing Officer's allowance of additional depreciation and treatment of capital work-in-progress and pre-operative expenses as forming part of plant & machinery was erroneous or prejudicial to revenue. - HELD THAT: - The Tribunal recorded that the assessee had furnished annexures, bills and explanations showing that additions related to a new EDC project and that pre-operative expenses and capital WIP were capitalised on commissioning and thereby became part of the block of assets. The AO examined the material and was satisfied; consequently the view permitting additional depreciation and capitalisation was a plausible view. Since the AO had applied his mind to the evidence, the Commissioner could not treat the AO's approach as erroneous or prejudicial merely because an alternative view might exist. [Paras 2, 5]

The AO's allowance and treatment were not shown to be erroneous or prejudicial; the AO's view is sustained.

Consequential assessment orders rendered infructuous on quashing of revisional order - Whether the assessment order passed giving effect to the revisional order survives after the revisional order is quashed. - HELD THAT: - Having quashed the revisional order, the Tribunal held that any consequential assessment order passed pursuant to that revisional order has no legal basis and therefore becomes infructuous. The appeal challenging the consequential order was dismissed as infructuous in limine. [Paras 8, 9]

The consequential assessment order dated 31/08/2015 is infructuous; the related appeal is dismissed as infructuous.

Final Conclusion: The Tribunal quashed the Principal Commissioner's revision order dated 27-03-2015 under section 263, upheld the Assessing Officer's enquiries and plausible view on allowance and capitalisation relating to depreciation and additional depreciation for A.Y. 2010-11, allowed the primary appeal, and held the consequential assessment order passed to give effect to the revision to be infructuous.

Rectification under Section 154 - book profit computation under Section 115JB - prior period income - double taxation - debatable question not to be decided by rectification

Rectification under Section 154 - book profit computation under Section 115JB - prior period income - double taxation - debatable question not to be decided by rectification - Validity of the AO's rectification under Section 154 to add prior year income to book profit under Section 115JB when the same income had already been offered in an earlier assessment year. - HELD THAT: - The Tribunal found on the material placed before it that the prior period income of Rs.1 crore had already been offered to tax in assessment year 2007-08 by the assessee (including by a revised return after survey). The AO's rectification order under Section 154 for assessment year 2009-10 added the said prior year income to book profit under Section 115JB on the ground that it was shown 'below the line' in the profit and loss account for the year ending 31.03.2009. The Tribunal held that, first, once the income had been offered and taxed in assessment year 2007-08 it could not be subjected to a second addition in assessment year 2009-10. Secondly, the question whether such prior year income should be taxed in the earlier year or in the year in which it appears in the books was a contentious and debatable issue; such a disputed question of law and fact could not be conclusively resolved by exercise of the rectification power under Section 154. On these bases the Tribunal concluded that the rectification was not permissible and set aside the addition made by the AO and confirmed by the CIT(A).

The rectification order under Section 154 adding the prior year income to book profit under Section 115JB was not sustainable and the appeal is allowed.

Final Conclusion: The Tribunal allowed the appeal, holding that prior period income already offered in assessment year 2007-08 could not be added again in assessment year 2009-10 by way of a rectification under Section 154, particularly because the issue was debatable and not amenable to summary correction under Section 154.

Applicability of section 56(2)(viia) to receipt of shares - 'Becoming property' of recipient for shares - Buy back of own shares and extinguishment by reduction of paid up capital - Shares must be of a company other than the recipient for section 56(2)(viia) to apply - Remand for verification of factual extinguishment of shares

Applicability of section 56(2)(viia) to receipt of shares - 'Becoming property' of recipient for shares - Shares must be of a company other than the recipient for section 56(2)(viia) to apply - Whether the provisions of section 56(2)(viia) are attracted in respect of buy back by a company of its own shares - HELD THAT: - The Tribunal followed the coordinate Bench of ITAT Mumbai and held that the anti abuse provision in section 56(2)(viia) is attracted only where a firm or company receives "property, being shares in a company" which thereby become property in the hands of the recipient. The combined reading of the provision and its legislative memorandum shows the provision targets transfers where the recipient obtains shares of another company at inadequate consideration. Own shares cannot become property of the recipient company in the sense contemplated by section 56(2)(viia). Consequently, buy back of a company's own shares, which are extinguished by reduction of capital, does not meet the statutory tests of "becoming property" and being "shares of any other company", and therefore normally falls outside the ambit of section 56(2)(viia). [Paras 6, 7]

Held that section 56(2)(viia) is not attracted to buy back of the assessee's own shares extinguished by reduction of paid up capital, subject to verification of extinguishment.

Buy back of own shares and extinguishment by reduction of paid up capital - Remand for verification of factual extinguishment of shares - Whether the fact of extinguishment of purchased shares by reduction of paid up capital had been established and ought to be verified by the assessing officer - HELD THAT: - Although the Tribunal accepted the legal position that buy back and subsequent extinguishment by reduction of capital places the transaction outside section 56(2)(viia), it noted that the factual claim of extinguishment in the assessee's accounts had not been examined by the AO. The Tribunal therefore directed a limited remand to the AO to examine and verify whether the purchased shares were in fact extinguished by reducing the paid up capital in the assessee's accounts. The AO was directed to delete the addition if the extinguishment is found to be correct. [Paras 7, 8]

Issue restored to the file of the AO for limited purpose of verifying extinguishment of shares by reduction of paid up capital; deletion to follow if verification is positive.

Final Conclusion: The Revenue's appeal is allowed only to the limited extent of directing the AO to verify whether the shares bought back were extinguished by reduction of paid up capital; on the established legal position, section 56(2)(viia) does not apply to buy back of a company's own shares extinguished by reduction of capital, and the addition must be deleted if extinguishment is verified.

Treatment of discounts to distributors as commission attracting TDS under section 194H and disallowance under section 40(a)(ia) of the Income-tax Act - Interconnect Usage Charges (IUC) paid to foreign/non-resident telecom operators not constituting Fees for Technical Services or Royalty and not taxable in India for lack of accrual/arising or Permanent Establishment - benefit of bona fide belief where divergent High Court decisions exist - following coordinate-bench precedents of the Tribunal

Reopening of assessment - reopening of assessment proceedings - HELD THAT: - The assessee did not press the challenge to the validity of reopening before the Tribunal. The counsel expressly stated the issue was not pressed and the Tribunal recorded that it was dismissed as not pressed. [Paras 3]

Challenge to reopening dismissed as not pressed.

Treatment of discounts to distributors as commission attracting TDS under section 194H and disallowance under section 40(a)(ia) of the Income-tax Act - benefit of bona fide belief in view of conflicting High Court decisions - following coordinate-bench precedents of the Tribunal - disallowance under section 40(a)(ia) of amounts treated as discounts/commissions to prepaid distributors and franchisees - HELD THAT: - The Tribunal considered whether discounts shown net in revenue to prepaid distributors/franchisees were in the nature of commission attracting TDS under section 194H and hence disallowable u/s 40(a)(ia). Although the jurisdictional Delhi High Court's decision in Idea Cellular supports treating such discounts as commission, conflicting High Court authority exists (e.g., Karnataka High Court in Bharti Airtel) and the matter was pending before the Apex Court. A coordinate Bench of this Tribunal in the assessee's own case for a similar year had found in favour of the assessee and set aside the disallowance, and the present Bench found parity of facts. The Tribunal further accepted that, given the divergence of authoritative views and the proviso and administrative treatment relevant to BSNL, the assessee was entitled to the benefit of bona fide belief. In consequence the impugned disallowance could not be sustained. [Paras 13]

Disallowance made under section 40(a)(ia) in respect of discounts to distributors/franchisees deleted; ground allowed in favour of the assessee.

Interconnect Usage Charges (IUC) paid to foreign/non-resident telecom operators not constituting Fees for Technical Services or Royalty and not taxable in India for lack of accrual/arising or Permanent Establishment - following coordinate-bench precedents of the Tribunal - addition/disallowance in respect of IUC charges paid to foreign/non-resident telecom operators and related TDS liability - HELD THAT: - The Tribunal examined whether payments of IUC to foreign telecom operators were taxable in India as FTS/royalty or otherwise deemed to accrue/arise in India, thereby attracting withholding obligations. Relying on and following a coordinate Bench decision that after technical examination the IUC payments do not amount to FTS or royalty and that the foreign operators' operations were carried out outside India without a Permanent Establishment, the Tribunal held that the payments were not chargeable to tax in India and no TDS under section 195 was required. On parity of facts the impugned disallowance was held unsustainable. [Paras 17]

Disallowance in respect of IUC payments to foreign/non-resident operators deleted; ground allowed in favour of the assessee.

Final Conclusion: The appeal is partly allowed: the challenge to reopening was dismissed as not pressed; the disallowance under section 40(a)(ia) relating to discounts to distributors/franchisees is deleted; and the disallowance relating to IUC payments to foreign/non-resident operators is deleted. The appeal is allowed in part in favour of the assessee.

Applicability of section 43B to service tax liability - Service tax as a collected liability/trustee of Government and not income or an expense in Profit & Loss Account - Disallowance under section 43B limited to deductions otherwise allowable - Effect of mercantile system of accounting on disallowance of amounts not debited to Profit & Loss Account

Applicability of section 43B to service tax liability - Service tax as a collected liability/trustee of Government and not income or an expense in Profit & Loss Account - Deletion of addition made under section 43B in respect of unpaid service tax for the assessment year 2012-13 upheld. - HELD THAT: - The Tribunal accepted the view recorded by the CIT(A) that service tax collected from clients is a liability collected on behalf of the Government and is not treated as income of the assessee nor as an expense or deduction charged against profits in the Profit & Loss Account. Section 43B applies to amounts which represent deductions otherwise allowable and which are debited to profit/loss but not actually paid; where service tax has not been routed through the Profit & Loss Account and no deduction has been claimed, the rigour of section 43B is not attracted. The Tribunal relied on earlier decisions dealing with identical controversy, including the decision of the Tribunal in Planet Advertising Pvt. Ltd. and the view in CIT v. Noble and Hewitt , which held that disallowance under section 43B is not warranted where the amount is not debited to the Profit & Loss Account and the assessee acts as a collection agent for the Government. Applying these principles to the facts before it, the Tribunal concluded that the addition made by the Assessing Officer under section 43B in respect of unpaid service tax was untenable and correctly deleted by the CIT(A). [Paras 5, 9]

The deletion of the addition made under section 43B in respect of unpaid service tax is upheld.

Final Conclusion: The appeal filed by the Revenue is dismissed; the Tribunal upholds the CIT(A)'s deletion of the addition made under section 43B in respect of unpaid service tax for AY 2012-13.

Characterisation of Common Area Maintenance (CAM) charges for TDS - tax deduction at source under Section 194C - tax deduction at source under Section 194I - assessee-in-default under Section 201(1) - interest under Section 201(1A) - separate contractual payment versus component of rent

Characterisation of Common Area Maintenance (CAM) charges for TDS - tax deduction at source under Section 194C - tax deduction at source under Section 194I - separate contractual payment versus component of rent - Whether payments described as CAM charges are liable to TDS under Section 194I (rent) or under Section 194C (contractual payment for services). - HELD THAT: - The Tribunal held that CAM charges are payments for maintenance services and are independent and separate from rent. The definition of "rent" under Section 194I covers payments for use of land, building, machinery, plant, equipment, furniture or fittings, i.e., payments for use of premises or equipment. CAM charges, being for maintenance services and not for the use of premises/equipment, do not fall within the scope of "rent". Such payments are contractual payments for carrying out work and therefore fall within the scope of Section 194C. The Tribunal relied on and followed coordinate-bench decisions addressing identical facts, including the decisions in Connaught Plaza Restaurants and Kapoor Watch Company Pvt. Ltd., and the ITAT Delhi 'SMC' Bench decision in Nijhawan Travel Service (P) Ltd., which reached the same conclusion that CAM charges attract TDS under Section 194C and not under Section 194I.

CAM charges are liable to TDS under Section 194C (at the contractual rate) and not under Section 194I.

Assessee-in-default under Section 201(1) - interest under Section 201(1A) - Whether the assessee can be held an assessee-in-default and made liable to tax demand and interest under Sections 201(1) and 201(1A) for alleged short deduction on CAM charges. - HELD THAT: - Having concluded that CAM charges attract TDS under Section 194C and were paid to distinct entities (rent paid to owner with TDS under Section 194I and maintenance payments made directly to service providers with TDS under Section 194C), the Tribunal held that the AO and CIT(A) erred in treating the assessee as an assessee-in-default under Section 201(1). The character and recipient of the payments were distinct and the record showed deduction under the correct provision as per the Tribunal's view; consequently, the consequential demand and interest under Section 201(1A) could not be sustained. The Tribunal set aside the orders creating liability under Sections 201(1) and 201(1A), following the reasoning of the coordinate Bench decisions cited.

Assessee's liability as an assessee-in-default under Section 201(1) and interest under Section 201(1A) deleted; impugned demands directed to be deleted.

Final Conclusion: Appeals allowed: CAM charges treated as contractual payments subject to TDS under Section 194C (not Section 194I); consequential assessment of the assessee as an assessee-in-default and interest under Sections 201(1)/201(1A) set aside for Assessment Years 2011-12 and 2012-13.

Transfer under Section 2(47) of the Income-tax Act - Part performance under Section 53A of the Transfer of Property Act - Effect of cancellation/annulment of a registered sale deed and requirement of court order - Date of transfer for computation of capital gains - Classification of short-term and long-term capital gains (holding period rule)

Effect of cancellation/annulment of a registered sale deed and requirement of court order - Transfer under Section 2(47) of the Income-tax Act - Date of transfer for computation of capital gains - Whether the cancellation deed dated 30/31.07.2015 annulled the registered sale deed of 16.01.2006 so as to treat the assessee as having held the property since 1986 for computing capital gains. - HELD THAT: - The Tribunal accepted the reasoning of the ld. CIT(A) that a registered sale deed, once executed and consummated with transfer of possession and rights, cannot be unilaterally annulled by a subsequent deed between the parties; cancellation of a registered instrument in law requires appropriate court proceedings (Specific Relief Act, Section 31). The entrustment of possession and rights to the daughter in 2006 brought the transaction within the ambit of Section 2(47) read with Section 53A, and those rights could not be divested by a later private cancellation. The subsequent document executed in 2015, accompanied by payment of stamp duty, was properly treated as a fresh transfer from the daughter back to the assessee; consequently the date of acquisition for computing capital gains is the date of that fresh transfer in 2015 and not the original date in 1986. The Tribunal noted absence of any legal provision or judicial authority that would permit effective unilateral annulment of a registered sale deed outside the prescribed judicial remedy, and upheld the view that the 2015 instrument operates as retransfer with effect from its date. [Paras 7]

The cancellation deed of 30/31.07.2015 did not revive the assessee's 1986 acquisition; it amounted to a fresh acquisition on the date of the 2015 instrument and therefore the subsequent sale in October 2015 gives rise to short-term capital gain.

Transfer under Section 2(47) of the Income-tax Act - Part performance under Section 53A of the Transfer of Property Act - Classification of short-term and long-term capital gains (holding period rule) - Whether only the superstructure (66.92 sq. m.) was transferred in 2006 and the balance land remained with the assessee so that any short-term capital gain would be confined to the superstructure alone. - HELD THAT: - On examination of the conveyance and sale deeds and related documents, the Tribunal agreed with the ld. CIT(A) that the 2006 sale deed was verbatim in its schedule to the 1986 conveyance and transferred all rights, title, interest and possession in the property to the daughter. The assessee herself had treated the area description as erroneous only after the fact and sought correction from the Housing Board; the consideration received in 2006 related to the entire property and the daughter enjoyed all rights in respect of the whole. Consequently the contention that only a part (superstructure) was transferred was rejected and the entire property was held to have been transferred in 2006, attracting the legal consequences under Section 2(47) and Section 53A. [Paras 8]

The sale deed of 16.01.2006 transferred the entire property; the plea that only the superstructure was transferred is rejected and the entire subsequent sale is governed by the holding period computed from the 2015 retransfer.

Final Conclusion: The appeal is dismissed; the Tribunal upheld that the registered 2006 sale effected a transfer within the meaning of Section 2(47)/Section 53A and that the 2015 instrument operated as a fresh retransfer, making the October 2015 sale a short-term capital transfer and disallowing the claim for deduction under Section 54.

Provisional release conditions for seized imported goods - type approval certificate requirement for imported motor vehicles - Foreign Trade Policy licensing notes applicable to chapter 87 of ITC(HS) classification - registration under the Motor Vehicles Act as indicium of road-worthiness - seizure and provisional release under the Customs legal framework - scope of powers under section 110A of the Customs Act

Provisional release conditions for seized imported goods - type approval certificate requirement for imported motor vehicles - registration under the Motor Vehicles Act as indicium of road-worthiness - Foreign Trade Policy licensing notes applicable to chapter 87 of ITC(HS) classification - Whether production of the type approval/certification insisted upon in the licensing notes was a necessary condition for provisional release of the imported vehicle - HELD THAT: - The Tribunal examined the limited question of whether the certificate insisted upon among the licensing prescriptions for imported vehicles must be insisted upon as a condition of provisional release. It observed that the licensing norms in the Foreign Trade Policy serve to ensure imported vehicles comply with municipal regulatory requirements (including safety and road-worthiness) assessed by the registering authority under the Motor Vehicles Act. The record showed that the impugned vehicle had already been registered by the competent authority, indicating compliance with requirements for operation on Indian roads. The Tribunal relied on precedent treating confiscation for non-production of a type-approval certificate as untenable where registration and other indicia of compliance exist, and noted the limits on the Commissioner of Customs' powers (including the scope of section 110A) to impose conditions beyond statutory empowerment. Applying these principles, the Tribunal concluded that insisting on the extra-curricular certificate as a condition for provisional release was redundant and beyond what was legitimately required for provisional release in the circumstances of this case. [Paras 6, 7, 8]

The certificate requirement was expunged as a condition for provisional release; the impugned condition held redundant and superfluous.

Final Conclusion: Appeal allowed to the extent that the condition demanding production of the type approval/certification for provisional release of the vehicle is expunged; provisional release shall not be conditional on the said certificate where, as here, the vehicle is shown to be registered and compliant with requirements for road operation.

Amendment of documents under Section 149 of Customs Act, 1962 - Proviso to Section 149 - limitation for amendment of shipping bills - Distinction between 'documents' and 'shipping bills' - Facilitative intent of CBEC circulars on migration between FTP schemes - Requirement of notice under Section 122A when rejection effects adjudication under other laws - Division of jurisdiction between Customs and DGFT in determining scheme eligibility

Amendment of documents under Section 149 of Customs Act, 1962 - Proviso to Section 149 - limitation for amendment of shipping bills - Distinction between 'documents' and 'shipping bills' - Permissibility of amendments to shipping bills under section 149 and the relevance of the proviso that restricts amendment after export - HELD THAT: - The Court held that section 149 vests a discretionary power in the proper officer to authorise amendments of documents presented in the customs house, and that the proviso specifically constrains amendment of bills of entry and shipping bills after clearance/exportation except on the basis of documentary evidence existing at the time. The judgment distinguishes between the general term 'document' and the specially enumerated 'bill of entry' and 'shipping bill', observing that the proviso reflects a deliberate limitation applicable to those State-prescribed forms. Consequently, not every amendment sought in a shipping bill attracts the full rigour of the proviso; the determinative factor is whether the amendment would alter the facts as they existed at the time of clearance/exportation or requires verification frozen at that moment. The proper officer must exercise discretion reasonably, require justification for the change, put the applicant on notice of any defects, and record reasons if rejecting the request. Rejection based solely on lapse of time, without consideration of the ascertainability of the facts or giving the applicant an opportunity to respond, is not a correct exercise of discretion under section 149. [Paras 5, 9, 10]

Amendments to shipping bills may be permitted under section 149 where they do not contravene the proviso by altering facts as of exportation; limitation of time per se is not decisive and the proper officer must afford opportunity and reasoned consideration before rejecting.

Facilitative intent of CBEC circulars on migration between FTP schemes - Amendment of documents under Section 149 of Customs Act, 1962 - Validity of invoking circular no.36/2010-Cus (and its predecessors) as a time-bar to refuse post-export amendments under section 149 after the 2019 amendment to the statute - HELD THAT: - The Tribunal observed that the CBEC circulars were intended as facilitative guidance to enable migration between Foreign Trade Policy schemes and do not derive statutory force from section 149. The Finance Act, 2019 amendment to section 149 empowered prescriptions to regulate form, manner and time for amendment, but no such statutory prescriptions had been issued up to the date of the impugned order. Therefore, invoking the earlier circular as a rigid statutory bar to the exercise of discretion under the amended section is unsustainable. Where the circulars are facilitative, they should inform a liberal approach to requests for conversion or appending of schemes, rather than operate as an absolute limitation that overrides the discretionary statutory provision. [Paras 5, 6, 7]

The pre-amendment circular cannot be treated as a statutory time-bar under section 149 in the absence of prescriptions issued under the post-2019 empowerment; the circular's facilitative intent requires a liberal application, not rigid disbarment.

Requirement of notice under Section 122A when rejection effects adjudication under other laws - Division of jurisdiction between Customs and DGFT in determining scheme eligibility - Whether the proper officer could refuse amendment by effectively adjudicating the appellant's eligibility under a different FTP scheme (DFIA) without issuing notice under section 122A or otherwise, and whether customs could pre-judge DGFT's role - HELD THAT: - The Tribunal held that the impugned refusal traversed beyond a permissible exercise under section 149 by determining lack of eligibility for the DFIA scheme - a determination that ineluctably involves adjudication under other provisions and the competence of another authority. Such consequential adjudication engages the procedural safeguards of section 122A (notice and opportunity) and is impermissible when undertaken as part of a section 149 decision without placing the importer/exporter on notice and affording opportunity to rebut. Further, eligibility for post-export DFIA processing is primarily within the domain of the Directorate General of Foreign Trade; customs cannot pre-emptively police or decide statutory authority vested in that agency. A decision to reject an amendment on the ground that it would confer benefits under another scheme, without procedural notice and the requisite jurisdictional competence, is contrary to law. [Paras 10, 11, 12]

Rejection of the amendment on grounds that effectively decide eligibility under another statutory scheme is impermissible without notice/opportunity under section 122A and constitutes an excess of jurisdiction by customs which cannot pre-judge DGFT's statutory role.

Amendment of documents under Section 149 of Customs Act, 1962 - Relief sought - whether the impugned rejection should be set aside and amendments ordered - HELD THAT: - Applying the foregoing principles, the Tribunal found that the impugned order rejecting the appellant's request was passed without proper notice, pre-judged eligibility under DFIA, and wrongly relied on a time-bar or absence of goods for examination as a basis for refusal. As those aspects rendered the exercise of discretion flawed and in excess of jurisdiction, the rejection could not be sustained. The Tribunal therefore set aside the impugned order and directed the Commissioner to effect the amendments sought. [Paras 13]

Impugned rejection set aside; respondent directed to effect the amendments in the shipping bills as sought by the appellant.

Final Conclusion: The Tribunal set aside the Commissioner's rejection of the appellant's request to amend the shipping bills filed between July 2017 and May 2019, holding that section 149 must be exercised reasonably (distinguishing the proviso's freeze on facts at export), that pre-amendment circulars are facilitative and cannot operate as a statutory time-bar in the absence of post-2019 prescriptions, and that customs cannot refuse amendment by pre-emptively adjudicating eligibility under DGFT-administered schemes without notice and proper jurisdiction; the respondent is directed to effect the amendments.

Powers to summon and examine witnesses under Section 424 of the Companies Act, 2013 - summary nature of tribunal proceedings - requirement of special circumstances to permit examination of witnesses - necessity of producing material evidence to justify examination of a witness - discretionary orders and principle of non-interference in absence of illegality

Powers to summon and examine witnesses under Section 424 of the Companies Act, 2013 - summary nature of tribunal proceedings - requirement of special circumstances to permit examination of witnesses - necessity of producing material evidence to justify examination of a witness - discretionary orders and principle of non-interference in absence of illegality - Whether the Appellate Tribunal should interfere with the NCLT order refusing to summon and examine a proposed witness. - HELD THAT: - The Appellate Tribunal held that there was no illegality in the NCLT's refusal to summon the proposed witness. The Tribunal examined the documents filed by the parties and found the main petition to be ripe for arguments; the applicants had not produced material documents or made out specific, demonstrable reasons showing that examination of the witness was necessary. The court reiterated that proceedings before the Tribunal are summary in nature and that the examination of witnesses on oath should be permitted only in special circumstances or where the party seeking examination adduces compelling evidence that grave injustice would result otherwise. Having regard to the stage of the proceedings and the absence of irrefutable material justifying witness examination, the impugned order declining to summon the witness did not call for interference under appellate principles which decline to disturb discretionary orders in the absence of established illegality. [Paras 8]

The NCLT order refusing to summon and examine the witness is affirmed and the appeal is dismissed.

Final Conclusion: The impugned order dated 31.05.2022 of the National Company Law Tribunal (New Delhi Court IV) refusing to summon the witness is affirmed; the appeal is dismissed as devoid of merit and I.A., if any, stands disposed of.

Reasoned order - natural justice - interference for lack of reasons - de novo consideration - setting aside of impugned order

Interference for lack of reasons - reasoned order - Whether the impugned order fixing the auditor's fee at Rs.2,00,000 per year (total Rs.12,00,000) was vitiated by absence of adequate reasoning and required interference. - HELD THAT: - The Tribunal found that the National Company Law Tribunal's order fixing the auditor's fee did not advert to the contents of the letter dated 01.06.2020 in sufficient qualitative and quantitative terms and failed to evaluate the pros and cons of the submissions and documents placed on record. A tribunal or adjudicating authority must pass a reasoned order after examining the materials and parties' pleas so that a superior forum can test the order. Since the impugned order reached a conclusion on the quantum of fee without meaningful evaluation of the contested document and reasoning, it suffered from legal infirmity and could not be sustained.

Impugned order fixing the auditor's fee is set aside for lack of adequate reasoning; interference is warranted.

De novo consideration - natural justice - The remedial direction to be given after setting aside the impugned order. - HELD THAT: - On finding the impugned order legally infirm, the Tribunal directed restoration of the file and remand of the application to the adjudicating authority for fresh disposal in a de novo manner. The remand must be carried out after affording adequate opportunity to the parties and adhering to principles of natural justice. The Tribunal also clarified that its observations should not influence the fresh decision and that the earlier direction to appoint a new auditor from the administrator's list does not survive.

The matter is remanded for de novo adjudication after hearing parties in accordance with natural justice; earlier direction regarding appointment of a new auditor is set aside.

Final Conclusion: The Tribunal set aside the impugned order fixing the auditor's fee for want of reasoned consideration, restored the file to the adjudicating authority and directed a fresh de novo disposal after affording parties full opportunity in accordance with natural justice; prior direction to appoint a new auditor is vacated.

Restoration of company name to the Register of Companies - striking off under Section 248 of the Companies Act, 2013 - default in statutory compliance and non-filing of statutory returns - proof of continued operation and existence of assets as ground for restoration - conditional restoration subject to payment of costs and filing of returns - Registrar of Companies' power to take punitive action despite restoration

Striking off under Section 248 of the Companies Act, 2013 - proof of continued operation and existence of assets as ground for restoration - Whether the Registrar of Companies' strike-off of the appellant company's name was sustainable in law in view of material showing the company carried on business and possessed movable and immovable assets. - HELD THAT: - The Appellate Tribunal examined the material placed on record, including audited financial statements for the financial years ending 31.03.2015, 31.03.2016 and 31.03.2017 and the company's income tax filings, and concluded that the company possessed substantial movable and immovable assets and was carrying on business. On that basis the Tribunal held that the Registrar's action in striking off the company's name, taken due to non-filing up to 31.03.2013 as recorded by the RoC, was not sustainable. The reasoning rests on the finding that the factual matrix established continued operation and assets which justified restoration of the name notwithstanding defaults relied upon by the RoC. [Paras 6]

Strike-off set aside and the Registrar's and NCLT's orders upholding strike-off held not sustainable; company entitled to restoration of name.

Restoration of company name to the Register of Companies - conditional restoration subject to payment of costs and filing of returns - Under what conditions the appellant company's name should be restored to the Register of Companies. - HELD THAT: - Having concluded that strike-off was not sustainable, the Tribunal ordered restoration of the company's name but imposed conditions aimed at regularising statutory defaults. The company was directed to pay costs to the RoC and thereafter to file all outstanding annual returns and balance sheets and to pay all requisite fees, late fees and charges as applicable. These conditions were imposed to ensure compliance with statutory filing obligations while permitting revival. [Paras 7]

Name restored subject to payment of costs and compliance with filing of annual returns and payment of requisite fees/late fees.

Registrar of Companies' power to take punitive action despite restoration - default in statutory compliance and non-filing of statutory returns - Whether the Registrar of Companies is precluded from taking any further steps for past non filing or late filing after the Tribunal directs restoration. - HELD THAT: - The Tribunal expressly preserved the RoC's statutory powers, holding that notwithstanding the order of restoration the RoC remains free to take any other steps, punitive or otherwise, under the Companies Act, 2013 in respect of past non filing or late filing of statutory returns/documents against the company and its directors. The order thus restores the company while leaving open the RoC's enforcement remedies. [Paras 7]

RoC permitted to initiate or continue punitive or other actions under the Companies Act for prior non filing/late filing despite restoration.

Final Conclusion: The appeal is allowed: the NCLT and RoC orders striking off the company's name are set aside and the company's name is restored to the Register on payment of costs and completion of statutory filings and fees; the Registrar remains free to take appropriate action under the Companies Act for prior defaults.

Cancellation of approved resolution plan - forfeiture of upfront deposit by successful resolution applicant - no exit route for a successful resolution applicant / prohibition on withdrawal or modification of an approved resolution plan - duty of resolution applicant to conduct independent due diligence - implementation of resolution plan on an "as is where is" and "as is what is" basis - timely completion of Corporate Insolvency Resolution Process and statutory timelines under the IBC - reference under Section 74(3) of the IBC for knowingly and wilfully contravening an approved resolution plan

Cancellation of approved resolution plan - forfeiture of upfront deposit by successful resolution applicant - implementation of resolution plan on an "as is where is" and "as is what is" basis - duty of resolution applicant to conduct independent due diligence - no exit route for a successful resolution applicant / prohibition on withdrawal or modification of an approved resolution plan - Validity of the Adjudicating Authority's cancellation of approval of the Resolution Plan and forfeiture of the upfront deposit paid by the Successful Resolution Applicant. - HELD THAT: - The Appellate Tribunal upheld the Adjudicating Authority's decision cancelling approval of the Resolution Plan and affirming forfeiture of the upfront deposit. The Tribunal found on the materials and affidavits on record that the Appellant was aware of the disputes in relation to the fifth floor (including the pending avoidance application C.A. No. 01/2018) and had expressly submitted the bid on an "As is Where is" and "As is What is" basis. The Appellant had filed affidavits before the Adjudicating Authority undertaking that the plan was not conditional on the outcome of the fifth-floor litigation and further undertook to pay the remaining consideration within 30 days of approval. The Tribunal applied the principle that a successful resolution applicant cannot withdraw or modify an approved resolution plan and bears responsibility to have conducted its own due diligence; reliance on later-discovered disputes did not excuse non-implementation. Given the Appellant's failure to pay the balance amount as per the undertaking and the record that the Appellant was not prepared to deposit the balance, the Adjudicating Authority was justified in concluding the Appellant was not interested or capable of implementing the plan and in cancelling the approval and forfeiting the deposit (see paras 19, 21, 22, 23, 31, 39, 41). [Paras 22, 23, 31, 39, 41]

The cancellation of the Resolution Plan approval and the forfeiture of the upfront deposit are affirmed.

Reference under Section 74(3) of the IBC for knowingly and wilfully contravening an approved resolution plan - Validity of the Adjudicating Authority's referral of the matter to the IBBI under Section 74(3) of the IBC. - HELD THAT: - The Tribunal held that the Adjudicating Authority's direction to refer the matter to the IBBI under Section 74(3) was unsustainable insofar as there was no finding, even prima facie, that the Successful Resolution Applicant had "knowingly and wilfully" contravened the terms of the approved resolution plan. Absent any recorded observation constituting a prima facie finding of such mens rea, a referral under Section 74(3) was not called for. Accordingly, that part of the impugned order was set aside (see paras 46-49). [Paras 46, 47, 48, 49]

The direction referring the matter to the IBBI under Section 74(3) is set aside.

Timely completion of Corporate Insolvency Resolution Process and statutory timelines under the IBC - effect of pending litigation on value realization and conduct of the Committee of Creditors - Whether the Appellant's applications seeking directions to facilitate implementation of the plan and appropriation of accruals should be allowed. - HELD THAT: - The Tribunal rejected the Appellant's applications (C.A. No. 719(PB)/2020 and C.A. No. 1247(PB)/2019) seeking directions connected to implementation and appropriation. Since the primary cancellation of the plan was sustained owing to non-implementation by the Appellant, the related applications for directions were also properly dismissed by the Adjudicating Authority. The Tribunal emphasised the objective of IBC to ensure timely resolution and noted that pending litigation (notably C.A. No. 01/2018) affected market interest and valuation, but that did not entitle the Appellant to withhold performance or seek the reliefs claimed after failing to honour the plan (see paras 31, 40, 50). [Paras 31, 40, 50]

The rejection of C.A. No. 719(PB)/2020 and C.A. No. 1247(PB)/2019 is upheld and these appeals are dismissed.

Effect of pending avoidance/avoidance-like litigation on the resolution process - role of the Adjudicating Authority in deciding pending applications affecting realization of value - Whether the pending avoidance application C.A. No. 01/2018 should be expeditiously decided and the consequential directions to the Adjudicating Authority and the Resolution Professional. - HELD THAT: - The Tribunal observed that non-decision of C.A. No. 01/2018 (relating to the fifth floor) was materially affecting the resolution process and the ability of the CoC to secure competitive bids; major players were reluctant to participate while the litigation remained undecided. For maximization of value and to remove the hurdle created by the pendency, the Tribunal requested the National Company Law Tribunal, Principal Bench, New Delhi to dispose of C.A. No. 01/2018 preferably within three months from production of the copy of this judgment. The Tribunal further directed that, after that decision, the Resolution Professional may invite fresh Expressions of Interest and complete the process within two months, with the CIRP period treated as extended until then (see paras 45, 51(iii)-(iv)). [Paras 45, 51]

C.A. No. 01/2018 should be decided expeditiously (preferably within three months) and, following that decision, the RP may invite fresh Expressions of Interest and complete the process within two months; the CIRP period shall be treated as extended to that end.

Final Conclusion: The Tribunal affirmed the Adjudicating Authority's cancellation of the Resolution Plan and forfeiture of the upfront deposit, set aside the referral to IBBI under Section 74(3), dismissed the Appellant's applications seeking directions for implementation and appropriation, and directed that the pending avoidance application C.A. No. 01/2018 be expeditiously decided (preferably within three months) after which fresh EoIs may be invited and the resolution process completed within the specified period.

Condonation of delay - power to condone delay under proviso to Section 61(2) - computation of limitation when order is pronounced - application of Section 4 of the Limitation Act where court is closed - effect of e-filing date in reckoning delay

Condonation of delay - power to condone delay under proviso to Section 61(2) - computation of limitation when order is pronounced - application of Section 4 of the Limitation Act where court is closed - effect of e-filing date in reckoning delay - Whether the delay in filing the Appeal was within the 15 day period permissible under the proviso to Section 61(2), and whether sufficient cause existed to condone that delay. - HELD THAT: - The Tribunal held that the period of limitation for filing the appeal is 30 days running from the date the order is pronounced and that the Tribunal's power to condone delay under the proviso to Section 61(2) is limited to a further 15 days (paras 6, 11). Applying the settled rule that limitation commences from pronouncement of the order, the 30 day period expired on 07th May, 2022; because 07th and 08th May were holidays, Section 4 of the Limitation Act (and Rule 3 of the NCLAT Rules) moved the last date to 09th May, 2022 (paras 7-9). Counting the 15 day condonation period from 10th May, 2022, the fifteenth day was 24th May, 2022; the appeal was e filed on 23rd May, 2022 and therefore fell within the 15 day condonable period (para 10). The Tribunal distinguished authority relied on by the respondent as not applicable as that case refused to extend the benefit of Section 4 to days beyond the initial 30 day period where holidays fell on the 46th/47th days (para 11-12). On facts, the appellant explained non receipt of the order and lack of relevant documents until 08th April, 2022; the Tribunal found this constituted sufficient cause for condonation of the 15 day delay and allowed the condonation application (para 13). [Paras 9, 10, 11, 12, 13]

Delay in filing the appeal was within the 15 day condonable period and sufficient cause was shown; the application for condonation of delay is allowed.

Final Conclusion: Application for condonation of delay is allowed; appeal listed for admission on 19th December, 2022.

Substitution of assignee as financial creditor - continuation of pending proceedings after assignment - initiation and prosecution of proceedings under Section 7 of the IBC by assignee - definition of Financial Creditor including assignee - continuance of proceedings by assignee under SARFAESI jurisprudence

Substitution of assignee as financial creditor - continuation of pending proceedings after assignment - definition of Financial Creditor including assignee - Whether an assignee of a financial debt, who acquired the debt during the pendency of a Section 7 application, can be substituted as the financial creditor and continue the pending Section 7 proceedings. - HELD THAT: - The Adjudicating Authority permitted substitution of the assignee on the basis of the registered assignment made during the pendency of the Section 7 proceedings. The Tribunal agreed that the IBC and its regulations contain no express prohibition against an assignee continuing pending proceedings initiated by the assignor. The definition of Financial Creditor in the IBC contemplates a person to whom the debt has been legally assigned, enabling the assignee to step into the assignor's shoes. The Tribunal noted supportive statutory analogue in sub-section (4) of Section 5 of the SARFAESI Act, 2002, which expressly contemplates that pending suits, appeals or proceedings relating to an acquired financial asset may be continued and prosecuted by the asset reconstruction company; and observed that principles of devolution of rights (as reflected in Order XXII Rule 10 CPC) similarly recognise continuance of proceedings by successors in interest. The Tribunal also held that the contrary view in the NCLT, Bengaluru order relied upon by the appellant did not lay down a binding rule of law to displace the above statutory and doctrinal position. Applying these principles to the facts where assignment to the respondent occurred during pendency and the respondent applied for substitution, the Tribunal found no error in the Adjudicating Authority's order allowing substitution. [Paras 5, 6, 7, 8]

Substitution of the assignee as financial creditor to continue the pending Section 7 proceedings was permissible; the Adjudicating Authority's order allowing I.A. No. 3105/2022 is upheld.

Final Conclusion: The appeal is dismissed and the order of the Adjudicating Authority permitting substitution of the assignee to continue the pending Section 7 proceedings is affirmed.

Locus standi of third-party lessee in insolvency proceedings - effect of cancellation of lease on third-party agreements - protection under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 - repossession rights following termination of lease - due diligence by persons contracting with corporate debtor

Locus standi of third-party lessee in insolvency proceedings - effect of cancellation of lease on third-party agreements - repossession rights following termination of lease - Whether the appellant, who entered into a management/lease agreement with the corporate debtor after cancellation of the allotment, could seek repossession of the demised premises from RIICO. - HELD THAT: - The Appellating Tribunal upheld the Adjudicating Authority's finding that the lease had been cancelled on 01.12.2015 and, accordingly, the corporate debtor had no right or interest in the demised premises thereafter. The agreement between the appellant and the corporate debtor dated 01.04.2017 was entered into after cancellation and therefore could not confer on the appellant any superior right to possession against RIICO. The Tribunal endorsed the view that the appellant's remedy, if any, lay against the corporate debtor for alleged losses, and not in seeking repossession from RIICO. The Tribunal also noted that the appellant had not shown due diligence as to the status of the property before making investments or entering into the agreement, and this infirmity could not be used as a defence to claim rights against RIICO. On these bases the Adjudicating Authority's dismissal of the application was sustained.

The appellant cannot claim repossession of the premises from RIICO because the lease had been terminated prior to the appellant's agreement with the corporate debtor; the appellant's grievance lies against the corporate debtor and not against RIICO.

Protection under Section 14(1)(d) of the Insolvency and Bankruptcy Code, 2016 - Whether the appellant could invoke protection under Section 14(1)(d) of the Code through the corporate debtor's proceedings to prevent RIICO from taking possession. - HELD THAT: - The Tribunal recorded that the corporate debtor had not been found entitled to protection under Section 14(1)(d) of the Code in related proceedings; since the corporate debtor lacked such protection at the relevant time, the appellant-being a third party who entered into an agreement after cancellation of allotment-could not derive protection through the corporate debtor. The Appellate Tribunal therefore found no merit in invoking Section 14(1)(d) on behalf of the appellant to restrain RIICO's lawful possession following termination of the lease.

The appellant is not entitled to invoke Section 14(1)(d) by relying on the corporate debtor's insolvency proceedings to prevent RIICO from taking possession.

Final Conclusion: The appeal is dismissed; the Adjudicating Authority's order refusing the appellant's application for repossession and reliefs was affirmed as the lease had been terminated before the appellant contracted with the corporate debtor and no protection under Section 14(1)(d) could be derived by the appellant.

Eligibility for exemption under Section 102 of the Finance Act, 1994 - exemption from service tax on works contract services - tender receipt/opening not equivalent to acceptance - definition of acceptance under the Indian Contract Act, 1872 - administrative instruction cannot override statutory provision

Eligibility for exemption under Section 102 of the Finance Act, 1994 - tender receipt/opening not equivalent to acceptance - definition of acceptance under the Indian Contract Act, 1872 - administrative instruction cannot override statutory provision - Whether the appellant was entitled to refund of service tax for works contract services on the basis that the tender was received prior to 01.03.2015 though the contract was accepted and signed on 19.03.2015. - HELD THAT: - The Tribunal accepted the statutory test in Section 102 that the contract must be entered prior to 01.03.2015 to attract the exemption. The court applied the ordinary contract law principle of acceptance under Section 2(b) of the Indian Contract Act, 1872, observing that acceptance occurs when the offeree signifies assent and that mere receipt or opening of a tender does not constitute acceptance. Consequently, the administrative clarification issued by the Directorate of Contract Management, MES, which treated tenders received before 01.03.2015 differently, could not override the clear statutory requirement. On the admitted facts the contract was signed and accepted on 19.03.2015; therefore the statutory condition for exemption was not satisfied and the refund claim was rightly rejected. [Paras 7, 8, 9]

Refund claim dismissed; appellant not eligible for exemption because the contract was entered on 19.03.2015 and mere receipt/opening of tender (23.01.2015) does not amount to contractual acceptance.

Final Conclusion: The authorities correctly rejected the refund claim: statutory requirement of contract entered before 01.03.2015 was not met since acceptance occurred on 19.03.2015, and administrative correspondence cannot supplant the statutory condition.

Export of services as governed by Rule 6A of the Service Tax Rules, 1994 - Place of provision of services - Rule 3 and Rule 9 of the Place of Provision of Services Rules, 2012 - Intermediary services - definition and tests under Rule 2(f) of the Place of Provision of Services Rules, 2012 - Export of taxable services under Rule 3 of the Export of Service Rules, 2005 - Refund of CENVAT credit under Rule 5 of the CENVAT Credit Rules, 2004 - Principal to principal supply v. agency/intermediary - contractual indicators (Cost Plus remuneration, absence of authority to bind, independent contractor status)

Export of services as governed by Rule 6A of the Service Tax Rules, 1994 - Export of taxable services under Rule 3 of the Export of Service Rules, 2005 - Business Auxiliary Services - Whether services rendered prior to 01.07.2012 by the appellant qualify as export of services for the purpose of refund under Rule 5 of the CENVAT Credit Rules, 2004. - HELD THAT: - The Tribunal found that Rule 3(1) of the 2005 Export Rules treats services specified under clause (105) of section 65 as exportable unless expressly excluded, and Business Auxiliary Services (BAS) taxable under the Finance Act were not excluded by the rule. The Commissioner (Appeals) erred in holding BAS excluded from export. Applying Rule 3(1) of the 2005 Export Rules and the definition of export in Rule 6A, the appellant satisfied the conditions for export of services for the pre negative list period. Consequently the refund claim for the period prior to 01.07.2012 was held to have been wrongly denied by the adjudicating authority. [Paras 21]

The appellant's services for April 2012 to June 2012 qualify as export of services and the rejection of refund for that period is set aside.

Place of provision of services - Rule 3 and Rule 9 of the Place of Provision of Services Rules, 2012 - Intermediary services - definition and tests under Rule 2(f) of the Place of Provision of Services Rules, 2012 - Principal to principal supply v. intermediary - contractual indicia - Whether, for the post 01.07.2012 period, the appellant performed 'intermediary services' so that the place of provision would be the location of the service provider and the services would not qualify as export. - HELD THAT: - The Tribunal examined the contract terms and applied the definition and guidance for 'intermediary' in Rule 2(f) and the Department's communication of March 16, 2012. The Agreement established (i) the appellant as an independent contractor providing promotion, technical marketing assistance and related services to Blackberry Singapore on a Cost Plus basis; (ii) no principal agent relationship or authority in the appellant to represent or bind Blackberry Singapore; (iii) no contractual privity between the appellant and Blackberry Singapore's customers and no role by the appellant in arranging or facilitating a separate main supply between Blackberry Singapore and those customers; (iv) consideration to the appellant was cost plus and not a commission linked to sales. Applying the three indicia (nature and value, separation of value, identity and title) the appellant did not merely arrange or facilitate a main supply between two other parties and therefore did not fall within the 'intermediary' definition. Reliance on precedents (including Verizon and Tribunal decisions) supported that provision of services under contract to a foreign principal on cost plus basis are export of services and not intermediary services. [Paras 30, 31, 32, 33, 39]

The appellant was not acting as an intermediary for the post 01.07.2012 periods; the place of provision is not the location of an intermediary and the services qualify for export, so the denial of refund for April 2013 to June 2013 and July 2013 to September 2013 cannot be sustained.

Final Conclusion: The orders rejecting the appellant's refund claims are set aside. The Tribunal allowed the appeal and held that the appellant's services for the stated periods qualify as export of services (pre and post 01.07.2012) and were wrongly denied refund under Rule 5 of the CENVAT Credit Rules, 2004; consequential relief follows.

Refund of service tax on services used for export - strict compliance with conditions of Notification No.41/2007-S.T. as amended by Notification No.3/2008-S.T. - broad co-relation of input services with exports - self-certification/Chartered Accountant's certificate for co-relation - C.B.E. & C. Circular No.120/01/2010-S.T. clarifying correlation and scrutiny

Refund of service tax on services used for export - strict compliance with conditions of Notification No.41/2007-S.T. as amended by Notification No.3/2008-S.T. - broad co-relation of input services with exports - self-certification/Chartered Accountant's certificate for co-relation - C.B.E. & C. Circular No.120/01/2010-S.T. clarifying correlation and scrutiny - Entitlement to refund of service tax on GTA services for export where lorry receipts did not quote export invoice details required by the Notification. - HELD THAT: - The Tribunal found that the mandatory condition in the Notification requiring reference to the exporter's invoice in the lorry receipts and shipping bill was not complied with on the facts of this case. However, the Tribunal examined Circular No.120/01/2010-S.T. which records that the scheme under Notification No.41/2007 was simplified (by Notification No.17/2009-S.T.) to permit self-certification or Chartered Accountant certification to establish the co-relation/nexus between input services and exports and requires only a basic scrutiny by departmental officers. The Tribunal also relied on its earlier decision in Jumbo Mining Ltd. v. CCE where, given the peculiarities of bulk cargo exports, compliance with the condition was held capable of being satisfied by broadly correlating transport evidence, service tax paid and quantity exported. In the present case the appellant had produced a Chartered Accountant's certificate broadly correlating quantities transported and exported together with bills and challans, and the Revenue did not demonstrate the extent to which a liberal view could not be taken in light of the Circular and precedent. Applying these principles, the Tribunal concluded that the appellate authority's rejection could not be sustained and restored the original order granting refund for the quarters in question. [Paras 6, 7, 8, 9, 10]

Impugned appellate order set aside; Order in Original dated 24.01.2017 restored and appeal allowed, directing consequential relief in accordance with law.

Final Conclusion: The Tribunal allowed the appeal, holding that in the factual matrix of bulk exports and in view of Circular No.120/01/2010-S.T. and Tribunal precedent a broad co-relation aided by self/CA certification sufficed to permit refund; the appellate rejection was set aside and the original order granting refund restored.

Time-bar under Section 11B of the Central Excise Act - transitional refund mechanism under Section 142(5) of the CGST Act - completion of service for issuance of invoice - refund entitlement notwithstanding limitation where transitional provision applies - no requirement of limitation for cash refund under transitional provision subject to absence of unjust enrichment

Time-bar under Section 11B of the Central Excise Act - transitional refund mechanism under Section 142(5) of the CGST Act - Applicability of the one-year time limit in Section 11B of the Central Excise Act to the refund claim vis-a -vis the transitional provisions of the CGST Act. - HELD THAT: - The Tribunal held that Section 11B(1) of the erstwhile Central Excise Act, which prescribes a one-year limitation for refund claims, was wrongly invoked. Section 142(5) of the CGST Act operates as a specific transitional provision dealing with refund of tax paid under the existing law in respect of services not provided before the appointed day and provides for disposal in accordance with existing law but mandates payment in cash notwithstanding certain provisions of the existing law. Applying the Board's Circular explaining 'completion of service' and the transitional scheme, the Tribunal concluded that where the service remained incomplete on the appointed day and there is no controversy as to quantum or allegation of unjust enrichment, the transitional provision governs and excludes the operation of the Section 11B time-bar so far as entitlement to refund under the transition is concerned. [Paras 5, 7, 8]

Section 11B's one-year limitation was inapplicable in the facts under the transitional mandate of Section 142(5) of the CGST Act; the impugned order invoking the time bar was set aside.

Completion of service for issuance of invoice - refund entitlement notwithstanding limitation where transitional provision applies - Whether the appellant's service was completed before the appointed day and thus whether the refund claim was governed by the pre-GST limitation period. - HELD THAT: - The Tribunal accepted the appellant's admission and the effect of the Board's Circular that 'completion of service' includes ancillary activities necessary to be in a position to issue an invoice. The invoice for the service was dated January 2017 but approval (treated as date of invoice) remained pending and the service was therefore not completed before 01.07.2017 when the CGST Act came into effect. Given that the one-year period computed from the unapproved invoice date had not expired by the appointed day and that the service stood incomplete at transition, the refund claim fell within the transitional provisions and the claim was entitling the appellant to refund in cash subject to the absence of any finding of unjust enrichment or dispute as to quantum. [Paras 5, 6]

The service was not completed before 01.07.2017; the refund claim is governed by the transitional provision and the appellant is entitled to refund notwithstanding invocation of Section 11B time limit.

Final Conclusion: The Tribunal set aside the orders rejecting the refund on time-bar grounds, held that Section 142(5) of the CGST Act governs the transitional refund in the facts, and allowed the appeal directing that the refund entitlement be given in accordance with the transitional provision.

Exemption under Notification No. 25/2012-ST Serial No. 13(d) - construction of a pollution control or effluent treatment plant (except as part of a factory) - factory in terms of section 2(e) of the Central Excise Act, 1944 - extraction of crude oil not amounting to manufacturing - extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994

Factory in terms of section 2(e) of the Central Excise Act, 1944 - construction of a pollution control or effluent treatment plant (except as part of a factory) - exemption under Notification No. 25/2012-ST Serial No. 13(d) - Whether onshore oil fields of ONGC registered under the Mines Act, 1952, where only extraction of crude oil is done, qualify as a 'factory' and therefore exclude ETPs constructed therefrom from the exemption at Serial No.13(d) of Notification No.25/2012-ST. - HELD THAT: - The Tribunal's earlier decision in ST/50293 of 2016 (M/s UEN India Limited vs Commissioner of Service Tax) is applied. That decision held that oil fields where only extraction of crude oil takes place do not qualify as a 'factory' within the meaning of section 2(e) of the Central Excise Act, 1944. Applying that determinative finding, the construction of Effluent Treatment Plants in such onshore oil fields falls within the exemption at Serial No.13(d) of Notification No.25/2012-ST (which exempts construction of pollution control or effluent treatment plants except where located as part of a factory). The Commissioner's denial of the exemption on the ground that the sites were factories is therefore unsustainable in light of the Tribunal's precedent, which the Department has accepted and not appealed. [Paras 10, 11]

The oil fields in question do not qualify as a 'factory' and the construction of ETPs there is covered by the exemption at Serial No.13(d) of Notification No.25/2012-ST; the Commissioner's denial is set aside.

Extraction of crude oil not amounting to manufacturing - exemption under Notification No. 25/2012-ST Serial No. 13(d) - Whether extraction of crude oil amounts to 'manufacturing' for the purpose of treating the site as a factory thereby affecting exemption availability. - HELD THAT: - Relying on the Tribunal's finding in ST/50293 of 2016 (M/s UEN India Limited vs Commissioner of Service Tax) , extraction of crude oil in the onshore fields under consideration is not manufacturing that would convert the site into a 'factory' under section 2(e) of the Central Excise Act. Since the sites are not factories, the exclusion in Serial No.13(d) (which excepts plants located as part of a factory) does not apply, and the exemption for construction of pollution control or effluent treatment plants is available. The Commissioner's contrary conclusion is therefore annulled. [Paras 10, 11]

Extraction of crude oil in the cited fields does not amount to manufacturing; consequently the exemption applies and the demand based on treating the sites as factories is unsustainable.

Final Conclusion: The Commissioner's order dated 31.08.2018 confirming service-tax demand (with invocation of extended limitation) in respect of ETPs/STPs constructed in the onshore ONGC fields is set aside; the appellant's appeal is allowed for the tax period 2013-14 to 2015-16.