TaxTMI Updates e-Newsletter
Dec 29,2020

Concessional GST rate for composite supply of works contract under Sl. No. 3(iii) and 3(vi) of Notification No.11/2017 (construction services) - works contract as defined in section 2(119) of the CGST Act, 2017 - definition of Government Entity and Governmental Authority under Notification No.12/2017 - predominant use test (use other than for commerce, industry or any other business or profession) - proviso requiring procurement by Government Entity in relation to a work entrusted by Government or local authority - pari materia application of CGST and SGST rates

Definition of Government Entity and Governmental Authority under Notification No.12/2017 - proviso requiring procurement by Government Entity in relation to a work entrusted by Government or local authority - Whether Kerala State Electricity Board Ltd. falls within the categories required by the notifications (Governmental Authority / Government Entity) so as to be eligible for the concessional entries. - HELD THAT: - Kerala State Electricity Board Ltd. was held to be a company incorporated under the Companies Act with ninety per cent or more participation by way of equity or control of the State Government and a State Transmission Utility under the Electricity Act, 2003. It is not a body constituted to carry out functions entrusted to a municipality or panchayat under Articles 243W/243G and therefore does not fall within the definition of "Governmental Authority" in Para 2(zf). Having regard to its incorporation and 90% government participation and that it procures the works in relation to functions entrusted by the State Government, KSEB Ltd. squarely falls within the definition of "Government Entity" in Para 2(zfa). Consequently, the condition concerning recipient (Government Entity) and the proviso requiring procurement in relation to a work entrusted by Government/local authority are satisfied. [Paras 10, 14]

Kerala State Electricity Board Ltd. is a "Government Entity" for the purpose of the concessional entries.

Concessional GST rate for composite supply of works contract under Sl. No. 3(vi) of Notification No.11/2017 (predominant use test) - works contract as defined in section 2(119) of the CGST Act, 2017 - predominant use test (use other than commerce, industry or any other business or profession) - Whether the works executed by the appellant for the Pazhassi small hydro electric project qualify as works "meant predominantly for use other than for commerce, industry, or any other business or profession" so as to attract the concessional rate under Sl. No. 3(vi). - HELD THAT: - There is no dispute that the contract is a "works contract" within section 2(119). The determinative question is the predominant character of the end-use. KSEB Ltd.'s principal activity is generation, transmission and distribution of electricity on commercial principles, including charging tariff pursuant to the Electricity Act and its Memorandum which expressly contemplates buying and selling electricity. The works executed by the appellant are ancillary to KSEB's predominant commercial activity of supplying electricity. Consequently the works cannot be regarded as intended predominantly for non-commercial use and do not satisfy the condition in Sl. No. 3(vi)(a). [Paras 9, 11, 14]

The works do not qualify as "meant predominantly for use other than for commerce, industry, or any other business or profession" and thus are not eligible for the concessional rate under Sl. No. 3(vi).

Concessional GST rate for composite supply of works contract under Sl. No. 3(iii) of Notification No.11/2017 (canal, dam or other irrigation works) - Whether the civil works for the Small Hydro Electric Project in the existing Pazhassi irrigation project qualify as "canal, dam or other irrigation works" so as to attract the concessional rate under Sl. No. 3(iii)(b). - HELD THAT: - On examination of the Letter of Acceptance and Work Order, the work awarded relates to civil works of a Small Hydro Electric Project carried out in the existing dam of the Pazhassi irrigation project. The appellate authority found that the nature of the works as awarded cannot be considered civil works for canal, dam or other irrigation works within the meaning of Sl. No. 3(iii)(b) and therefore the specific condition for that entry is not fulfilled. [Paras 12, 14]

The civil works do not qualify as "canal, dam or other irrigation works" under Sl. No. 3(iii)(b) and hence are not eligible for concessional rate under that entry.

Final Conclusion: The Appellate Authority upheld the Advance Ruling: KSEB Ltd. is a Government Entity but the works executed by the appellant for the Pazhassi small hydro electric project do not meet the additional substantive conditions of Sl. No. 3(iii) or 3(vi) of Notification No.11/2017; therefore the concessional rate of 6% CGST (and pari materia 6% SGST) is not applicable to the said works contract services.

Mandatory procedure under Section 144C - remand to decide de novo - draft assessment order and Dispute Resolution Panel procedure - change of forum and cessation of Assessing Officer's jurisdiction upon draft order - failure to follow Section 144C renders assessment null and void - power must be exercised in the manner provided by statute

Remand to decide de novo - mandatory procedure under Section 144C - draft assessment order and Dispute Resolution Panel procedure - Remand directing the Assessing Officer to decide the transfer pricing matter de novo requires the Assessing Officer to follow the procedure under Section 144C, including issuance of a draft order and reference to the Dispute Resolution Panel before passing any final assessment order. - HELD THAT: - The Tribunal's direction to the Assessing Officer to decide the matter de novo meant the matter required a fresh hearing as if the original hearing had not taken place (paras 13-15). Section 144C is a self-contained code for cases where variation arises from a TPO order and mandates that the AO first forward a draft order to the eligible assessee, allow the assessee to accept or file objections with the DRP, and thereafter act in conformity with DRP directions or the assessee's acceptance (paras 16-18). Where objections are filed, the statutory scheme vests the DRP with powers co-extensive with appellate authority and makes its directions binding on the AO; consequently the AO cannot bypass the DRP and pass a final order on a matter remanded to him for de novo decision when objections are pending (paras 17-19). The phrase 'in the first instance' signifies the first step in the statutory sequence and does not permit the AO to decide objections which the statute allocates to the DRP (para 19). [Paras 15, 16, 17, 18, 19]

The AO was required to follow Section 144C procedure on remand; passing a final assessment without issuing the draft order and without DRP consideration was contrary to law.

Failure to follow Section 144C renders assessment null and void - power must be exercised in the manner provided by statute - Failure to adhere to the mandatory procedure under Section 144C vitiates the final assessment order and renders it null and void rather than a merely curable procedural irregularity. - HELD THAT: - The Court reiterated settled precedent that where the AO fails to first pass a draft assessment order under Section 144C(1) and to follow the DRP process, the final assessment order is without jurisdiction and void ab initio (paras 21-24). The Court relied on earlier decisions holding the mandatory nature of Section 144C and rejected the contention that the defect was curable, observing that when a statute prescribes a manner of exercise of power it must be followed (para 21) and subsequent case law has consistently invalidated assessments where Section 144C was not complied with (para 23). Applying this principle to the facts, the AO's final order dated 31.03.2014 was held null and void for non-compliance with Section 144C (paras 22, 24). [Paras 21, 22, 23, 24]

The assessment framed without compliance with Section 144C is null and void; the Revenue's appeal is dismissed as nothing survives for consideration.

Final Conclusion: The High Court affirmed the ITAT's annulment of the assessment dated 31.03.2014, holding that a remand to decide de novo required strict compliance with Section 144C (draft order and DRP process) and that failure to follow that mandatory procedure rendered the final assessment void; the Revenue's appeal is dismissed with costs.

Commencement of limitation under Section 254(2) - communication and actual receipt of Tribunal order - service of notice to the assessee - recall/rectification of Tribunal order - quashing of ex-parte order and remand for fresh hearing

Commencement of limitation under Section 254(2) - communication and actual receipt of Tribunal order - service of notice to the assessee - recall/rectification of Tribunal order - Whether the miscellaneous application under Section 254(2) was barred by limitation when the assessee had not been served with the ITAT order at its new address and received actual knowledge of the order only later. - HELD THAT: - The Court found that the ITAT erred in treating the period of limitation as beginning from the date the order was passed without examining whether the assessee had actual or constructive knowledge of that order. The assessee had changed its address and the Department had used the former address when communicating the appeal to the Tribunal; consequently the assessee was not served and did not have notice of the impugned order. Relying on the principle that communication or knowledge (actual or constructive) of the order is critical for commencement of limitation under Section 254(2), the Court held that limitation runs from the date of actual receipt/communication of the order and not merely from the date on which the order was passed. The ITAT's mechanical application of the words "six months from the end of the month in which the order was passed" without considering whether the assessee had knowledge was therefore erroneous. The decision in Golden Times Services Pvt. Ltd. was treated as squarely applicable in favour of the assessee. [Paras 7]

The miscellaneous application was not barred by limitation as it was filed within six months of the assessee's actual receipt of the ITAT order; the ITAT's conclusion to the contrary was erroneous.

Quashing of ex-parte order and remand for fresh hearing - Whether the ITAT's dismissal for non-prosecution and its refusal to recall the ex-parte order should be set aside and the matter remitted for fresh disposal on merits. - HELD THAT: - Given the absence of service and the erroneous limitation finding, the Court concluded that the sequence adopted by the ITAT-dismissing the appeal for non-prosecution and thereafter refusing to entertain the recall application-could not be sustained. In the peculiar facts, the Court exercised its supervisory jurisdiction to quash the ITAT order and set aside the ex-parte order, directing the ITAT to afford the parties an opportunity of hearing and to decide ITA No. 6686/De1/2013 on merits. The Court also noted the assessee's statement regarding intention to apply under the Amnesty Scheme "Vivad Se Vishwas" and accepted that the matter would be bound by that statement. [Paras 9, 10]

The ITAT order dated 29th July, 2019 is quashed and the ex-parte order dated 1st September, 2017 is set aside; the ITAT is directed to hear and dispose of the appeal on merits after hearing the parties.

Final Conclusion: Writ petition allowed; ITAT order dated 29th July, 2019 quashed and ex-parte order dated 1st September, 2017 set aside; matter remitted to the ITAT for fresh hearing and disposal on merits after giving parties an opportunity to be heard.

Certificate under Section 197 - non-application of mind - computation of existing and estimated tax liability - Rule 28AA - judicial review limited to patent illegality / error apparent - remand for fresh determination

Rule 28AA - computation of existing and estimated tax liability - non-application of mind - Validity of the certificate refusing NIL TDS rate where the Assessing Officer did not compute existing and estimated tax liability as mandated by Rule 28AA(2) - HELD THAT: - The Court examined Rule 28AA and held that the parameters listed in sub-rule (2) are mandatory and must be taken into account by the Assessing Officer when determining existing and estimated tax liability for issuance of a certificate under Section 197. The impugned certificate was founded on broad, generalized reasoning rejecting the assessee's estimates without performing the statutory determination called for by Rule 28AA(2). That failure amounted to non-application of mind and rendered the decision-making process contrary to law. Consequently, the impugned order and the reasons recorded were set aside and the matter remanded to the Assessing Officer for fresh determination in accordance with law, to be completed expeditiously, preferably within three weeks. [Paras 8, 9]

Impugned certificate set aside; matter remanded to the Assessing Officer for fresh determination in accordance with Rule 28AA.

Certificate under Section 197 - judicial review limited to patent illegality / error apparent - remand for fresh determination - Interim relief pending fresh determination on remand in respect of TDS rates applicable to the petitioner - HELD THAT: - While remanding for fresh determination, the Court granted interim relief to the petitioner. The petitioner is to be given the benefit of the revised TDS rates prescribed for Financial year 2019-2020 (as determined by the order dated 26th July, 2019) together with the 25% rebate announced by the Ministry of Finance on account of the Covid-19 crisis (Press Release dated 13th May, 2020). Respondents were directed to ensure compliance forthwith until the Assessing Officer completes the fresh determination. [Paras 10]

Interim direction to apply the revised TDS rates and the 25% Covid-19 rebate for Financial year 2019-2020; respondents to comply forthwith.

Final Conclusion: The certificate refusing NIL deduction under Section 197 was set aside for non-application of mind and failure to follow the mandatory parameters of Rule 28AA(2); the matter is remitted to the Assessing Officer for fresh determination in accordance with law, and interim benefit of the revised TDS rates for Financial year 2019-2020 (including the 25% Covid-19 rebate) is granted to the petitioner pending that determination.

Condonation of delay in filing appeal in absence of mala fide or dilatory tactics - admission of additional evidence under Rule 29 of the ITAT Rules - duty of the Tribunal to decide pending application for additional evidence before disposing appeal on merits - distinction between rectification under Section 254(2) and appeal under Section 260A - remand for de novo disposal where Tribunal failed to consider admissibility of additional evidence

Condonation of delay in filing appeal in absence of mala fide or dilatory tactics - Whether the delay in filing the present appeal should be condoned. - HELD THAT: - The Court found that the appellant had filed a rectification application within the limitation period and that the Tribunal had reserved orders on that application but not pronounced them. In view of the pending rectification, the impending deadline for availing the amnesty scheme and the absence of any material showing mala fide or deliberate dilatory conduct by the appellant, the Court applied the settled principle that delay should normally be condoned to promote substantial justice. Reliance was placed on established authorities for the proposition. Consequently the delay in filing the appeal was condoned to avoid prejudice to the appellant. [Paras 15, 16, 17]

Delay in filing the appeal is condoned.

Distinction between rectification under Section 254(2) and appeal under Section 260A - Whether the pendency of an application under Section 254(2) bars invocation of remedy under Section 260A. - HELD THAT: - The Court held that the scope of Sections 254(2) and 260A are entirely different and not parallel or mutually exclusive, so invoking one does not ipso facto bar the other. While ordinarily the Court would refrain from entertaining an appeal under Section 260A if a rectification application under Section 254(2) is pending (because a successful rectification could render the appeal infructuous), the Court concluded that due to the Tribunal's inordinate non-decision and the imminent prejudice to the appellant from the amnesty scheme deadline, it was appropriate to permit the appeal to proceed. The Court rejected the respondent's contention that entertaining the appeal would amount to permitting abandonment of the rectification application. [Paras 14, 18, 19]

Pending rectification under Section 254(2) does not automatically bar an appeal under Section 260A; the appeal may be entertained in appropriate circumstances.

Admission of additional evidence under Rule 29 of the ITAT Rules - duty of the Tribunal to decide pending application for additional evidence before disposing appeal on merits - remand for de novo disposal where Tribunal failed to consider admissibility of additional evidence - Whether the Tribunal erred in passing the impugned order without adjudicating the appellant's application under Rule 29 for admission of additional evidence, and the appropriate remedy. - HELD THAT: - The record showed that the appellant filed an application for admission of additional evidence under Rule 29 prior to the final hearing, and that the Tribunal passed the impugned order without referring to or deciding that application or the written submissions referencing the additional documents. The Court held that the Tribunal was incumbent upon it to consider the Rule 29 application before proceeding to decide the appeal on merits. The Court declined the respondent's invitation to presume that the Tribunal had considered the documents in the absence of any indication in the impugned order, observing that such a presumption cannot be made. Relying on the Supreme Court precedent in Jyotsna Suri v. ITAT, the Court set aside the Tribunal's order and remitted the matter to the Tribunal for de novo hearing, directing that the application under Rule 29 be disposed of on merits prior to disposal of the appeal. [Paras 4, 21, 22, 23, 24]

Impugned order set aside; appeal restored to Tribunal for de novo hearing and for the Tribunal to first decide the Rule 29 application on merits and then dispose of the appeal.

Final Conclusion: The Court condoned the delay in filing the appeal, held that a pending rectification under Section 254(2) does not automatically bar an appeal under Section 260A, found that the Tribunal erred in failing to adjudicate the application under Rule 29 before disposing the appeal, set aside the Tribunal's order dated 28.02.2019 and restored the appeal to the Tribunal for de novo hearing with directions to first decide the Rule 29 application on merits.

Penalty under Section 271(1)(c) of the Income Tax Act - admission of appeal as indication of a debatable substantial question of law - penalty proceedings as an outcome of assessment - requirement of proof of concealment for levy of penalty - failure to specify a specific charge in show cause notice/assessment order

Admission of appeal as indication of a debatable substantial question of law - penalty under Section 271(1)(c) of the Income Tax Act - penalty proceedings as an outcome of assessment - requirement of proof of concealment for levy of penalty - Whether the penalty imposed under Section 271(1)(c) was unsustainable because the High Court had admitted the assessee's quantum appeals framing substantial questions of law, indicating the additions were debatable. - HELD THAT: - The Court held that where the quantum assessment itself is debatable - demonstrated by the High Court admitting the assessee's appeals and framing substantial questions of law - the consequent penalty proceedings under Section 271(1)(c) cannot survive. Penalty is not an automatic consequence of confirmed additions; it can only be levied where concealment of income is proven. Admission of the appeals on legal and merits grounds showed the alleged concealment was not finally established and the issue was disputable. The Court relied on its precedents in which deletion of penalty was upheld where substantial questions of law in quantum proceedings were admitted, treating such admission as proof of a debatable issue and therefore negating justification for imposing penalty. [Paras 9, 10, 11, 12]

Penalty deleted because admission of the appeals showed the additions were debatable and concealment was not finally established.

Failure to specify a specific charge in show cause notice/assessment order - penalty under Section 271(1)(c) of the Income Tax Act - Whether the penalty was liable to be cancelled because the assessing officer failed to formulate a specific charge in the show cause notice and assessment order. - HELD THAT: - The Court endorsed the Tribunal's finding that the show cause notices and assessment orders did not set out any specific charge against the assessee but merely recorded a general satisfaction that penalty proceedings should be initiated. In the absence of a specific charge in the notice and assessment order, the imposition of penalty under Section 271(1)(c) could not be sustained. The Court observed that when the show cause notice fails to create a specific charge, penalty cannot be levied. [Paras 7, 12]

Penalty cancelled for both years on the ground that no specific charge was stated in the show cause notice/assessment order.

Final Conclusion: Both appeals are dismissed; the deletion of penalties under Section 271(1)(c) for assessment years 2004 05 and 2005 06 is upheld on the grounds that the admitted quantum appeals rendered the additions debatable and because the show cause notices/assessment orders did not specify a particular charge.

Capital gains arising on transfer notwithstanding direct payment of sale proceeds to third parties - deductibility under section 48 as cost of acquisition or improvement where mortgage is discharged - diversion at source / overriding title of creditors - distinction between mortgage created before acquisition and mortgage created after acquisition

Capital gains arising on transfer notwithstanding direct payment of sale proceeds to third parties - The effect of sale consideration being paid directly to the bank (to discharge a company's loan) on the assessee's liability to capital gains tax - HELD THAT: - The Tribunal and the High Court recorded that although the purchasers paid the sale proceeds directly to the bank for discharging the company's loan and the assessee did not personally receive the consideration, such payment does not extinguish the assessee's liability to capital gains tax. The Court applied the statutory scheme governing computation of capital gains and followed precedents which hold that payment made to discharge debts of the transferor or a related company does not convert the sale into a non-taxable transaction where the assessee has effected the transfer. The Assessing Officer's computation of capital gain (after allowing cost of acquisition and cost of improvement as permissible under section 48) was held to be correct and the Commissioner (Appeals) order allowing the assessee's claim was set aside. [Paras 4]

Assessee's contention that no capital gains arose because sale proceeds were paid directly to the bank is rejected and the Assessing Officer's computation is confirmed.

Deductibility under section 48 as cost of acquisition or improvement where mortgage is discharged - distinction between mortgage created before acquisition and mortgage created after acquisition - diversion at source / overriding title of creditors - Whether amounts applied to discharge a mortgage or loan (by paying to the creditor) can be deducted as cost of acquisition or treated as diversion at source so as to exclude the amount from capital gains - HELD THAT: - Relying on and applying the reasoning of the Supreme Court decisions considered in the judgment, the Court held that where the mortgage or encumbrance was created by the owner after he had acquired the property, discharge of that mortgage prior to transfer does not qualify as cost of acquisition or cost of improvement under section 48. The ratio distinguishing cases where the mortgage existed at the time of the owner's acquisition (in which case payment to clear the mortgage may represent acquisition of the mortgagee's interest and be deductible) from cases where the owner himself created the encumbrance subsequently was expressly applied. Consequently, clearing of the mortgage debt in the present facts (where the encumbrance arose after acquisition and in relation to the company's liability) cannot be deducted while computing capital gains, and diversion-at-source / overriding-title arguments do not avail the assessee. [Paras 4]

Amounts applied to discharge the loan/mortgage in these circumstances are not allowable deductions under section 48 and do not exclude the transfer from capital gains taxation.

Final Conclusion: The High Court answered the admitted questions against the assessee and in favour of the Revenue, setting aside the Commissioner (Appeals) order and confirming the Assessing Officer's computation of capital gains; the appeal is dismissed and no costs are awarded.

Reopening of assessment - jurisdiction to reopen assessment under the proviso to Section 147 - change of opinion - failure to disclose fully and truly all material facts - binding effect of Tribunal and Division Bench findings - quashing of block assessment and consequential effect on reassessment - challenge to notice under Section 148 by writ proceedings

Reopening of assessment - change of opinion - failure to disclose fully and truly all material facts - jurisdiction to reopen assessment under the proviso to Section 147 - Validity of the notices issued under Section 148 for reopening assessments in respect of the assessment years 1995-96, 1996-97 and 1997-98. - HELD THAT: - The Court examined the factual matrix including that the transactions in question had been disclosed in the returns and in the books of account, that the block assessment (which scrutinised the same transactions) had been quashed by the Tribunal on merits, and that an order passed under revisional jurisdiction was also quashed by a Division Bench of this Court. In that factual backdrop the Court held that reopening beyond four years would require an allegation or material showing that the assessee had failed to truly and fully disclose material facts. The Department failed to demonstrate the existence of any fresh tangible material different from the material available and considered in the earlier two rounds of litigation. Consequently the proposed reopening amounted to a review or change of opinion and not a valid reassessment exercise under the proviso to Section 147. Relying on the conceptual distinction between review and reassessment, the Court held the notices to be without jurisdiction and liable to be set aside. [Paras 34, 37, 48]

Notices under Section 148 issued for the three assessment years are without jurisdiction, being founded on change of opinion and lacking any allegation or fresh material that the assessee failed to disclose fully and truly all material facts; notices quashed.

Challenge to notice under Section 148 by writ proceedings - binding effect of Tribunal and Division Bench findings - quashing of block assessment and consequential effect on reassessment - Whether the writ petitions challenging the Section 148 notices were premature and should have been dismissed for failure to avail statutory remedies before the tax authorities. - HELD THAT: - While recognising the general principle that courts exercise restraint in entertaining pre-emptive challenges to show-cause notices under taxation statutes and that ordinarily the assessee should seek reasons and pursue statutory remedies, the Court found the present cases to be exceptional. The writ petitions had been pending for many years with interim protection, the Department had not pressed interlocutory steps earlier and material reasons for reopening were later disclosed and were identical to matters already finally adjudicated against the Revenue (block assessment and s.263 proceedings). Given the binding findings of the Tribunal and the Division Bench in favour of the assessee, the Court exercised its constitutional jurisdiction to examine the validity of the notices and declined to treat the petitions as premature in the peculiar facts of the case. [Paras 23, 29, 40]

Writ petitions were properly entertained on the facts; the Court examined the merits and set aside the Section 148 notices rather than relegating the assessee to statutory remedies.

Final Conclusion: On the particular facts - where the transactions were disclosed in returns, the block assessment was quashed on merits by the Tribunal and the revisional order under Section 263 was quashed by a Division Bench - the notices under Section 148 issued beyond four years were held to be without jurisdiction (mere change of opinion and no failure to disclose) and were quashed; the writ appeals are allowed.

Taxability of bonus shares under Section 56(2)(vii) of the Income Tax Act - application of fair market value under Rule 11U/11UA of the Income Tax Rules - distinction between creation/allotment of shares and transfer of property - anti abuse object of Section 56(2) - reallocation of company funds by capitalization of reserves - no inflow of fresh funds on issue of bonus shares

Taxability of bonus shares under Section 56(2)(vii) of the Income Tax Act - application of fair market value under Rule 11U/11UA of the Income Tax Rules - distinction between creation/allotment of shares and transfer of property - reallocation of company funds by capitalization of reserves - Fair market value of bonus shares computed under Rule 11U/11UA cannot be treated as income from other sources under Section 56(2)(vii) when bonus shares are issued by capitalization of reserves. - HELD THAT: - The court held that Section 56(2)(vii) contemplates two contingencies: receipt of property without consideration and receipt for consideration less than fair market value. The issue of bonus shares by capitalization of reserves is a reallocation of the company's funds and does not involve any inflow of fresh funds or transfer of company property to the shareholder. On allotment of bonus shares the capital employed and total funds available with the company remain unchanged; the market and intrinsic value of the aggregate holding of the shareholder correspondingly adjust. Absent any material indicating that bonus shares were transferred to evade tax, no benefit accrues to the shareholder that falls within the mischief of Section 56(2)(vii). Accordingly, computing and bringing to tax the fair market value of bonus shares under Rule 11U/11UA as income from other sources is not attracted on the facts of this case.

The tribunal and Commissioner (Appeals) were correct in holding that Section 56(2)(vii)(c) does not apply to the allotment of bonus shares; the addition was deleted.

Final Conclusion: The substantial question of law is answered against the revenue and in favour of the assessee; the appeal is dismissed.

Allowability of management fee paid to an associated enterprise - transfer pricing adjustment for advertising, marketing and promotion (AMP) expenses - application of Resale Price Method as most appropriate method in import-for-resale transactions - Bright Line Test for benchmarking AMP expenses - treatment of advertisement and publicity expenditure as revenue or capital - admissibility of additional evidence and consistency in transfer pricing proceedings - depreciation rate on software licence fees - set-off of brought forward losses - verification on remand - treatment of provision for impairment of stock under AS-2 - credit for tax deducted at source and self-assessment tax - verification and grant

Allowability of management fee paid to an associated enterprise - Deletion of disallowance of management fees paid to Michelin Asia Pacific Pte. Ltd.; claim allowed. - HELD THAT: - The Tribunal followed its coordinate-bench precedent in the assessee's own case (A.Y. 2008-09) and held that where the assessee has filed evidence demonstrating availment of management/support services from the AE, the AO/CIT(A) cannot substitute commercial judgment and disallow the expenditure merely because the assessee also incurs local management/establishment costs. The benefit need not be separately proved once sufficiency of evidence is on record and the TPO's acceptance on ALP reinforces the conclusion. Accordingly the disallowances made for A.Y. 2009-10 and A.Y. 2010-11 were deleted. [Paras 22, 23, 24]

Disallowances of management fees for both years deleted; taxpayer's grounds on this issue allowed.

Set-off of brought forward losses - verification on remand - Claim for set-off of brought forward losses remitted to Assessing Officer for verification. - HELD THAT: - AO/CIT(A) had disallowed brought forward losses for the earlier years though the matter was pending before the Tribunal. The Tribunal remitted the issue to the AO to verify facts and grant the set-off if admissible, without deciding the substantive entitlement on merits. [Paras 25]

Issue remitted to AO for fact verification and admissibility of set-off.

Treatment of provision for impairment of stock under AS-2 - Deletion of disallowance of provision for impairment of stock upheld. - HELD THAT: - Following the coordinate-bench decision in the assessee's own case, the Tribunal held that where the assessee values closing stock as per AS-2 (cost or net realizable value, whichever is lower) and applies a consistent, systematized method, the AO's disallowance on the basis that the provision is an unascertained liability is not sustainable. The CIT(A)'s deletion is therefore upheld. [Paras 26, 27, 28]

Disallowance on account of impairment of stock deleted; revenue's grounds dismissed.

Treatment of advertisement and publicity expenditure as revenue or capital - Deletion of AO's ad hoc 50% disallowance of AMP expenses upheld; AMP treated as revenue in nature for these years. - HELD THAT: - The Tribunal followed its earlier decision in the assessee's own case and applied commercial tests, as well as precedents, to conclude that the AMP expenditures (dealer signage, brochures, launches, print ads, seminars, hoardings etc.) were incurred for the assessee's business and are revenue expenses. An ad hoc 50% capitalisation by the AO was found arbitrary and without basis. Consequently the CIT(A)'s deletion of the disallowance was sustained. [Paras 29, 30, 31]

AO's disallowance of AMP expenses set aside; revenue appeals on this point dismissed.

Depreciation rate on software licence fees - Depreciation on software licence fees to be allowed at 60% instead of 25%. - HELD THAT: - The Tribunal held that licence fees paid for computer software (to facilitate inventory, order and sub-contract management etc.) qualify to be clubbed with computer/software for depreciation purposes and are eligible for higher depreciation at 60% as per applicable Appendix/Rule. AO/CIT(A)'s allowance at 25% was held to be in error and the AO was directed to grant depreciation at 60%. [Paras 32, 33]

Depreciation on the software licence fee revised to 60%; taxpayer's ground allowed.

Credit for tax deducted at source and self-assessment tax - verification and grant - AO directed to verify and grant full credit for TDS and self-assessment tax claimed by the assessee. - HELD THAT: - On production of evidence by the assessee for tax deducted at source and self-assessment tax deposited, the Tribunal directed the AO to verify and allow full credit in computing tax demand. The matter was therefore determined in favour of the assessee subject to verification. [Paras 34]

AO to verify records and grant full credit for TDS and self-assessment tax.

Admissibility of additional evidence and consistency in transfer pricing proceedings - Additional evidence (RPM workings) and an additional ground admitted; related TP issues remitted to TPO for fresh consideration for A.Y. 2009-10. - HELD THAT: - The Tribunal allowed the assessee's applications to admit additional evidence and an additional ground, observing that consistency required consideration of RPM workings used in the assessee's own A.Y. 2010-11. The Tribunal remitted the transfer pricing issues (including benchmarking of AMP expenses and RPM-based adjustments) for A.Y. 2009-10 to the TPO to decide afresh in light of the admitted evidence and applicable precedent (Sony Ericsson decision relied upon by CIT(A)). The Tribunal also required the TPO to verify whether freight considered relates to import of goods (only import-related freight is to be adjusted). [Paras 35, 38, 39, 40]

Additional evidence and ground admitted; TP issues for A.Y. 2009-10 remitted to TPO for fresh adjudication with directions on freight.

Transfer pricing adjustment for advertising, marketing and promotion (AMP) expenses - application of Resale Price Method as most appropriate method in import-for-resale transactions - Bright Line Test for benchmarking AMP expenses - For A.Y. 2010-11, CIT(A)'s direction to apply RPM (including AMP in gross profit computation) was sustained and rejection of Bright Line Test was upheld; revenue's TP grounds dismissed. - HELD THAT: - The Tribunal declined to interfere with the CIT(A)'s conclusion - which followed the jurisdictional High Court (Sony Ericsson) - that RPM is the most appropriate method for the import-for-resale segment and that gross profit margins should be computed after including AMP expenditure where appropriate. The Tribunal noted that Bright Line Test has no statutory mandate and has been rejected in several High Court decisions. It however clarified that outward freight within India should not be considered for adjustment unless it pertains to import of distributed goods; AO/TPO to verify freight nature. On this basis the revenue's grounds challenging CIT(A)'s TP directions for A.Y. 2010-11 were dismissed. [Paras 42, 43, 44, 45]

Revenue's transfer-pricing challenges for A.Y. 2010-11 dismissed; CIT(A)'s RPM-based directions sustained with freight verification caveat.

Final Conclusion: The Tribunal partly allowed the assessee's appeals and dismissed the revenue's appeals: disallowances of management fees and AMP expenses were deleted; provision for impairment of stock deletion was upheld; software licence depreciation was directed at 60%; TDS/self-assessment tax credit was to be verified and granted; brought forward losses were remitted to the AO for verification; transfer pricing issues for A.Y. 2009-10 were remitted to the TPO in light of admitted additional evidence and consistency with A.Y. 2010-11, while for A.Y. 2010-11 the Tribunal upheld the CIT(A)'s RPM approach (including AMP in gross profit) and rejected the Bright Line Test, subject to verification that only import-related freight is adjusted.

Assessment framed in the name of a non-existent entity - void ab initio - eligible assessee under section 144C(15)(b) - jurisdictional defect (not a procedural irregularity) - curable defect under section 292B - transfer pricing order passed in the name of amalgamating company - limitation for final assessment under section 153(1) read with section 153(4)

Assessment framed in the name of a non-existent entity - eligible assessee under section 144C(15)(b) - curable defect under section 292B - transfer pricing order passed in the name of amalgamating company - jurisdictional defect (not a procedural irregularity) - limitation for final assessment under section 153(1) read with section 153(4) - Transfer pricing order and consequent draft/final assessment framed in the name of the erstwhile (amalgamating) company are void ab initio and the assessment proceedings are quashed; the defect is not curable under section 292B and the final assessment is also time-barred. - HELD THAT: - The Tribunal examined whether the Transfer Pricing Officer's order and the draft/final assessment passed in the name of the amalgamating entity (Cairn India Ltd.)-which had ceased to exist on the date of the TP order-could sustain proceedings under the 144C scheme. The court held that an "eligible assessee" for purposes of section 144C(15)(b) must be the correct existing entity (Vedanta Limited) and that framing an assessment against a non-existent person goes to the root of jurisdiction and is not a mere procedural irregularity. Relying on the reasoning in Spice Entertainment (affirmed by the Supreme Court in Maruti Suzuki), the Tribunal concluded that such defect is not curable under section 292B because it is a jurisdictional vice and not an error capable of being treated as in substance conforming to the Act. The Revenue's contention that the TPO's subsequent rectification under section 154 cured the defect was rejected: the original TP order being in the name of a non-existent entity rendered the consequent assessment order bad in law. The Tribunal also observed that, on the timeline established, the final assessment ought to have been completed within the relevant limitation period (section 153(1) read with section 153(4)), and the order dated 28.11.2019 was therefore barred by limitation. In view of these findings the Tribunal quashed the assessment without adjudicating other merits. [Paras 12, 16, 17, 20]

Assessment proceedings founded on the TP order in the name of the non-existent amalgamating company are void ab initio and the assessment is quashed; consequential final order is also time-barred.

Final Conclusion: The appeal is allowed: the transfer pricing order and the assessment framed in the name of the non-existent amalgamating company are nullities and the assessment is quashed; other grounds were not adjudicated. The stay petition is dismissed as infructuous.

Reopening of assessment on basis of information without independent satisfaction - reassessment under section 147/148 - requirement of AO's independent satisfaction - validity of reasons recorded for reopening of assessment - quashing of reassessment for want of jurisdiction

Reopening of assessment on basis of information without independent satisfaction - validity of reasons recorded for reopening of assessment - quashing of reassessment for want of jurisdiction - Reopening of assessment for A.Y. 2008-09 was not sustainable as the Assessing Officer did not have the requisite material on record before recording reasons and failed to form an independent satisfaction. - HELD THAT: - The Tribunal examined the material placed on record by the Revenue and the reasons recorded by the AO dated 30.03.2015. The only document showing information from the investigation wing (ADIT(Inv.) letter) is dated 31.03.2015 in the paper book, and the Revenue did not produce evidence that the AO had received that information on or before 30.03.2015. The reasons recorded therefore appear founded solely on information from the investigation wing without any independent application of mind by the AO. In these circumstances the AO failed to satisfy the legal requirement of forming his own belief that income had escaped assessment; the notice under section 148 was issued without requisite jurisdiction. The Tribunal held that, on the peculiar facts and material before it, the reassessment proceedings were vitiated and not sustainable, and hence quashed the reassessment; since reopening was quashed, the Tribunal declined to adjudicate the merits of the addition. [Paras 14, 15]

Reassessment proceedings under section 147/148 for A.Y. 2008-09 are quashed for lack of independent satisfaction by the Assessing Officer.

Final Conclusion: The appeal is allowed: the reassessment initiated by notice under section 148/147 for A.Y. 2008-09 is quashed because the Assessing Officer issued the notice without forming an independent satisfaction on the basis of material available prior to recording the reasons.

Validity of notice under section 148 where wrong PAN is quoted - Section 292B - curative effect for inadvertent mistakes in notices - Reference to Valuation Officer under section 55A - applicability of amendment w.e.f. 01.07.2012 - Fair market value determination and admissibility of DVO report - Remand for fresh computation/verification of valuation components (construction, earth filling, boundary works)

Validity of notice under section 148 where wrong PAN is quoted - Section 292B - curative effect for inadvertent mistakes in notices - Whether a notice under section 148 is invalid where the PAN quoted on the notice belongs to a different assessee-entity although the notice is addressed to the correct person and the body of the notice and reasons recorded identify the assessee in his individual capacity. - HELD THAT: - The Tribunal examined the reasons recorded and the text of the notice and found that the reasons for reopening named Shri Narendra Kumar Gill and the body of the notice, address and hand-written identification indicated that the notice was intended for the assessee in his individual capacity. The mere mistake in quoting the PAN of the HUF on the printed PAN column was treated as a clerical/typing error. Applying section 292B, which saves returns, notices or proceedings that are in substance and effect in conformity with the intent and purpose of the Act despite mistakes or defects, the Tribunal held that the incorrect PAN was an inadvertent error. The Tribunal distinguished decisions where notices were issued to a different juridical status (individual vs HUF) and where such defects rendered the notice invalid, and observed that on the facts record there was no prejudice to the assessee and the Assessing Officer had applied his mind to the correct person. Therefore the invocation of jurisdiction under section 147/148 was held to be valid and not vitiated by the wrong PAN entry. [Paras 22, 23, 24, 25, 26]

The notice issued under section 148 was not invalidated by the wrong PAN entry; the notice is saved by section 292B and the reassessment proceedings are maintainable.

Reference to Valuation Officer under section 55A - applicability of amendment w.e.f. 01.07.2012 - Fair market value determination and admissibility of DVO report - Remand for fresh computation/verification of valuation components (construction, earth filling, boundary works) - Whether the Assessing Officer rightly invoked section 55A and relied upon the Valuation Officer's (DVO) report for determining fair market value as on 01.04.1981 and whether the DVO valuation should be adopted. - HELD THAT: - The Tribunal held that the amendment to section 55A (changing "less than its fair market value" to "is at variance with its fair market value") introduced w.e.f. 01.07.2012 is substantive and prospective and therefore applicable to proceedings taken up after that date; the assessment and reference to the DVO in the present case (notice issued 18.03.2014; proceedings concluded later) were within the scope of the law in force at the time the reference was made. The AO had satisfied the primary condition for a reference by contrasting the registered valuer's report with circle rates and recording grounds for referral. The DVO inspected the site, identified the property location and derived FMV based on notified circle rates. However, on evaluating the competing valuation evidence (registered valuer relying on Tahsildar/local enquiries and DVO relying on ADM Finance circle rates), the Tribunal found some deficiencies in the DVO-based computation as regards allowance for construction-related items (nala, boundary wall, tube-well, earth filling, height adjustments). In the interests of justice the Tribunal accepted the validity of the reference and DVO process but set aside the valuation result and directed remand to the AO to re-compute the value giving further benefit to the assessee for construction and allied components and to determine price taking into account the appropriate Mohalla segment. [Paras 48, 50, 51, 52, 53]

Reference to the Valuation Officer under section 55A was proper and the DVO report is admissible, but the DVO-based computation is set aside for defects in allowing construction/ancillary items; the matter is remanded to the Assessing Officer for fresh computation/verification in accordance with the directions given.

Final Conclusion: The appeal is dismissed insofar as the challenge to reopening and the validity of the notice under section 148; the notice is saved by section 292B. The Assessing Officer was entitled to refer the matter to the Valuation Officer under section 55A (amendment effective 01.07.2012 applies), but the DVO's computation is set aside and the matter is remanded to the AO for fresh computation and to grant additional benefit for specified construction and allied works before finalising capital gains.

Excess sugarcane price paid - Statutory Minimum Price (SMP) and additional price under Clause 5A - Distribution of profits versus deductible business expenditure - Section 40A(2) - excessive or unreasonable payment - Fair and Remunerative Price (FRP) regime vis-a -vis SMP - Sale of sugar at concessional rate to members - includibility in society's income - Impact of custom and trade practice, State policy and Diwali sales on taxability - C class membership fee - capital receipt v. revenue receipt - Remand to Assessing Officer for fresh determination

Excess sugarcane price paid - Statutory Minimum Price (SMP) and additional price under Clause 5A - Distribution of profits versus deductible business expenditure - Section 40A(2) - excessive or unreasonable payment - Fair and Remunerative Price (FRP) regime vis-a -vis SMP - Remand to Assessing Officer for fresh determination - Whether the excess price paid for sugarcane is allowable as business expenditure or constitutes distribution of profit, and the manner of its adjudication. - HELD THAT: - Following the binding authority of the Hon'ble Supreme Court (as applied by the Co ordinate Bench), the Tribunal set aside the impugned assessment on this issue and remitted it to the Assessing Officer. The Assessing Officer is directed to allow deduction for the price payable under Clause 3 (SMP) in full and to examine the final/additional price fixed under Clause 5A; he must determine, by calling for the assessee's accounts, balance sheet and the material supplied to the State Government, what component of the difference between SMP and the final price constitutes an appropriation/distribution of profit (not allowable as deduction) and what part is a deductible business charge. Payments to members may contain a profit sharing component to be treated as appropriation of income; payments to non members must be examined under the test of Section 40A(2) for excessiveness or unreasonableness. Where the assessee raises contentions about the post 2009 FRP regime, the AO shall consider those contentions on the merits in the fresh adjudication. The assessee must be afforded a reasonable opportunity of hearing.

Issue remitted to the Assessing Officer for fresh determination in accordance with the Supreme Court's directions; Ground Nos.1-14 allowed for statistical purposes.

Sale of sugar at concessional rate to members - includibility in society's income - Impact of custom and trade practice, State policy and Diwali sales on taxability - Remand to Assessing Officer for fresh determination - Whether the difference between market/levy price and concessional price of sugar sold to members/cane growers is includible in the society's total income and related factual questions. - HELD THAT: - The Tribunal found that lower authorities had not complied fully with the directions of the Hon'ble Supreme Court in Krishna SSK and accordingly remitted the issue to the Assessing Officer for fresh adjudication. The AO is to address (and record reasons on) whether the difference is assessable in the hands of the society, taking into account whether the practice is a trade custom, any supporting State Government resolution or order, the basis for month to month quantities sold (including exclusions for Diwali sales as per the Apex Court), and the applicable statutory orders. If the AO holds the difference to be taxable, he must specify the quantity of sugar so taxed and give reasoned findings. The assessee shall be given reasonable opportunity of hearing.

Issue remanded to the Assessing Officer for fresh consideration to give effect to the Supreme Court's directions; Ground No.15 allowed for statistical purposes.

C class membership fee - capital receipt v. revenue receipt - Remand to Assessing Officer for fresh determination - Whether the amounts collected as C class (beneficiary membership) fees constitute capital receipts or revenue receipts for tax purposes. - HELD THAT: - Following the Co ordinate Bench precedent, the Tribunal held that the question of the nature of the C class membership fee requires fresh adjudication and remitted the matter to the Assessing Officer. The AO is directed to examine relevant precedents, the assessee's consistent conduct in treating such receipts as capital in other assessment years, and other material; conduct a fresh factual and legal inquiry; grant the assessee reasonable opportunity of hearing; and pass a speaking order determining whether the receipt is capital (not taxable) or revenue (taxable).

Issue remitted to the Assessing Officer for fresh adjudication; Grounds Nos.16 and 17 allowed for statistical purposes.

Final Conclusion: Appeal allowed for statistical purposes; the matters concerning (i) excess sugarcane price, (ii) sale of sugar at concessional rates to members, and (iii) nature of C class membership fees are remanded to the Assessing Officer for fresh adjudication in accordance with the directions and considerations specified by the Tribunal and the cited Supreme Court authorities, with reasonable opportunity of hearing to the assessee.

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - Explanation 2 to section 263 - lack of enquiry versus inadequate enquiry - assessing officer having taken a possible view - duty of Principal Commissioner to conduct inquiry before remitting

Revisionary jurisdiction under section 263 - erroneous and prejudicial to the interests of the revenue - lack of enquiry versus inadequate enquiry - assessing officer having taken a possible view - Explanation 2 to section 263 - Validity of the Principal Commissioner invoking section 263 and setting aside the assessment to re-examine the claim of long term capital gain exempt under section 10(38). - HELD THAT: - The Tribunal examined whether the twin conditions for exercise of power under section 263 - that the assessing officer's order is both erroneous and prejudicial to the interests of the revenue - were satisfied. The material on record showed that the assessing officer had issued queries under section 143(2), obtained documentary evidence (contract notes, demat statements, share transfer documents), and recorded the assessee's statement; the assessing officer had therefore conducted enquiries and taken a view accepting the exemption claim. The revisional order relied on the absence of further verification and on an investigation-wing report to conclude that the assessment was passed without necessary enquiries. The Tribunal reviewed authorities distinguishing 'no enquiry' from 'inadequate enquiry' and reiterating that section 263 cannot be used where the assessing officer has taken a possible view based on material on record. Where enquiries were made and a permissible view was taken, mere disagreement by the Commissioner does not render the assessment order erroneous and prejudicial. Applying these principles to the facts, the Tribunal found that the assessing officer had applied his mind and taken a possible view on the genuineness of the LTCG claim on the basis of documents produced; consequently the Pr. CIT's remand under section 263 was not justified under the settled tests for invoking revisionary powers.

The Tribunal set aside the revision order passed by the Principal Commissioner under section 263 and allowed the assessee's appeal, holding that the exercise of revisional jurisdiction was not sustainable on the facts.

Final Conclusion: The order of the Principal Commissioner invoking section 263 and setting aside the assessment for AY 2014-15 was quashed; the Tribunal held that the assessing officer had conducted enquiries and taken a possible view accepting the exempt long term capital gain, and therefore the revisional exercise was not justified, allowing the assessee's appeal.

Charitable purpose - medical relief - application of income under section 11 - registration under section 12AA - proviso to section 2(15) - trade, commerce or business test - separate books of account for business under section 11(4A) - undue benefit to specified persons under section 13(1)(c) and section 13(3) - rule of consistency

Charitable purpose - medical relief - application of income under section 11 - registration under section 12AA - proviso to section 2(15) - trade, commerce or business test - separate books of account for business under section 11(4A) - rule of consistency - Whether the assessee is a charitable institution entitled to exemption under sections 11 and 12 for A.Y. 2014-15 - HELD THAT: - The Tribunal upheld the CIT(A)'s conclusion that the assessee's primary activity is medical relief, a category treated as per se charitable under section 2(15), and that the society continues to hold registration under section 12AA. The Tribunal accepted the appellate authority's approach of assessing the trust's activities and surplus on a composite basis (aggregate receipts, expenses and net surplus over a five-year window) rather than carving out a single unit in isolation. The chemist run by the hospital was held to be ancillary/integral to the hospital's operations (comparable to a hostel to an educational institution) and not an independent commercial business; maintenance of separate books and the incidental nature of the pharmacy profit were found to satisfy the requirement in section 11(4A). The Tribunal also applied the principle of consistency, noting prior acceptance of the assessee's charitable status over many years and the absence of material change in facts to justify a different conclusion for the assessment year under appeal. On these bases the AO's finding that the activities were carried on commercial lines was reversed and the benefit under section 11 was directed to be allowed.

Assessee is a charitable institution for A.Y. 2014-15 and entitled to exemption under section 11; AO's denial of exemption on the ground of commerciality and on account of the pharmacy is set aside.

Undue benefit to specified persons under section 13(1)(c) and section 13(3) - application of income under section 11 - rule of consistency - Whether payments to Dr. R.S. Chahal fall foul of section 13(1)(c) / 13(3) so as to deny exemption - HELD THAT: - The Tribunal agreed with the CIT(A) that the AO had not established that payments to Dr. R.S. Chahal were unreasonable or constituted undue private benefit. The AO failed to compare the doctor's remuneration with remunerations of comparable specialists in the market and overlooked that payments of similar or higher amounts were made to other medical professionals. The doctor was not a trustee (though a relative of a trustee), prior years' acceptance of comparable payments and the evidence of income-tax returns filed by the doctor were relevant. In absence of adverse material establishing unreasonableness or private enurement, the payments were held to be application of income for trust purposes and not hit by section 13.

Payments to Dr. R.S. Chahal do not attract section 13(1)(c)/13(3); they are to be treated as application of income for the purposes of the trust.

Application of income under section 11 - separate books of account for business under section 11(4A) - Whether the loss claimed from Kinder Women Hospital is disallowable - HELD THAT: - The Tribunal found that the AO disallowed the loss without pointing to any defect in the books, vouchers or audited accounts of the unit. The assessee explained that the unit was a new, rented venture that proved unviable and was closed after a contractual lock-in; receipts and payments were evidenced and TDS had been deducted where applicable. The Department had accepted similar losses in adjacent assessment years. In these circumstances, and in absence of material to impugn the genuineness of the expenditures, the CIT(A)'s allowance of the loss was sustained.

Loss from Kinder Women Hospital is allowable; AO's disallowance is set aside.

Final Conclusion: Having considered the record, the Tribunal dismissed the Revenue's appeal and sustained the CIT(A)'s findings: the assessee is a charitable institution entitled to exemption under section 11 for A.Y. 2014-15; payments to the doctor do not attract section 13 and are treated as application of income; and the loss of the Kinder Women Hospital is allowable.

Approval of resolution plan - compliance with Section 30(2) of IBC and CIRP Regulations - permission for reduction of capital - distribution to operational creditors - cessation of moratorium - obligation to obtain statutory approvals - forwarding of CIRP records to the Insolvency and Bankruptcy Board of India - remand for fresh consideration of belated claim

Approval of resolution plan - compliance with Section 30(2) of IBC and CIRP Regulations - The revised Resolution Plan annexed with IA 617 of 2019 is approved under Section 31 of the IBC. - HELD THAT: - The CoC approved the Resolution Plan by 100% voting share and the Resolution Professional certified that the Plan conforms to the requirements of Section 30(2) of the Insolvency and Bankruptcy Code, 2016 read with the relevant CIRP Regulations. The Plan provides for settlement of claims of financial creditors, operational creditors, workmen and statutory dues and contains an implementation schedule and details of funding by the successful Resolution Applicant. On that basis the Tribunal held the Plan meets statutory requirements and granted approval. [Paras 8, 11, 12]

The revised Resolution Plan is approved and shall be binding on the corporate debtor and its stakeholders.

Permission for reduction of capital - Permission for reduction of equity capital, as provided in the Resolution Plan, is granted. - HELD THAT: - The Plan contemplates writing existing equity to zero and infusion of funds by the Resolution Applicant. The Tribunal held that the reduction, as part of the approved Plan, is permissible and directed necessary amendments to the Memorandum and Articles of Association to be filed with the Registrar of Companies for record. [Paras 9, 13]

The permission for reduction of capital is granted and the MoA/AoA shall be amended and filed with the RoC.

Distribution to operational creditors - Pending IAs concerning operational creditors' claims are disposed of with directions for allocation in accordance with the Plan. - HELD THAT: - Certain interlocutory applications raised issues of denial of input tax credit and belated claims by statutory authorities. The Tribunal directed the Resolution Professional to consider the claims in the cited IAs while distributing amounts to operational creditors in the same proportion as applicable to other operational creditors; those IAs were disposed of in terms indicated. A separately filed belated claim (IA No. 344 of 2020) is to be considered on the listed date. [Paras 7, 18]

IA Nos. 88/2020, 89/2020 and 61/2020 disposed of with directions to the RP on distribution; IA No. 344/2020 to be considered separately on the listed date.

Cessation of moratorium - obligation to obtain statutory approvals - forwarding of CIRP records to the Insolvency and Bankruptcy Board of India - Ancillary directions attendant to approval: effective date of Plan, cessation of moratorium, duties of the Resolution Professional and obligations of the Resolution Applicant. - HELD THAT: - The Tribunal directed that the approved Plan becomes effective from the date of the order and the moratorium declared on 12.11.2018 shall cease from that date. The RP is directed to send a copy of the order to participants and forward all CIRP records to the IBBI for recording. The Resolution Applicant must obtain any statutory approvals required under law within one year from the date of approval (or within the period prescribed by such law). The Plan remains subject to applicable laws and any concessions sought must be pursued before competent statutory authorities. [Paras 16]

The Plan is effective from the date of the order; the moratorium ceases; RP and Resolution Applicant to comply with the directed obligations.

Remand for fresh consideration of belated claim - The claim of the State Tax Officer filed belatedly (IA No. 344 of 2020) is not decided on the merits and is directed to be considered separately on a listed date. - HELD THAT: - While other pending IAs were disposed of with directions, the Tribunal noted that IA No. 344/2020 concerning a belated tax claim requires separate consideration and therefore directed that it be listed for hearing on 29.09.2020. The issue is remanded for fresh adjudication by the Tribunal on that date. [Paras 7]

IA No. 344 of 2020 is remanded for separate consideration on the listed date.

Final Conclusion: The Tribunal allowed IA 617 of 2019 and approved the revised Resolution Plan, granted permission for the proposed reduction of capital, disposed of specified interlocutory applications with directions to the Resolution Professional for distribution of operational creditors' claims, recorded ancillary directions (including cessation of moratorium, forwarding of CIRP records to IBBI and statutory approval obligations) and remanded a belated tax claim for separate consideration.

Operational creditor - maintainability of application under Section 9 of the Insolvency and Bankruptcy Code, 2016 - default and operational debt - limitation bar - requirement of corroborative documentary evidence for supply of goods (purchase order, delivery/lorry receipt, acknowledgement) - proof of payment and bank evidence - claim for contractual or antecedent interest - service of notice and ex parte hearing

Requirement of corroborative documentary evidence for supply of goods (purchase order, delivery/lorry receipt, acknowledgement) - operational creditor - Sufficiency of documentary evidence to prove supply of goods relied upon by the operational creditor. - HELD THAT: - The Tribunal found that the petitioner relied on four tax invoices but failed to produce vital corroborative documents such as purchase order, lorry receipt or acknowledgement of receipt of goods which are necessary to substantiate the claim of supply. In absence of these documents the claim could not be satisfactorily established and weighed against the requirement under Section 9 and the Rules to demonstrate existence of an operational debt arising from supply of goods. [Paras 9, 10, 15]

The petition is not maintainable for want of necessary corroborative documentary evidence and the claim based solely on tax invoices is rejected.

Limitation bar - default and operational debt - Whether the application was barred by limitation. - HELD THAT: - The Tribunal noted that the last invoice relied upon was dated 04.03.2016 while the petition was filed on 19.09.2019, i.e. beyond three years from the date of the last invoice. The entry in the petitioner's self-prepared computation purporting a later cash receipt was unsupported by any receipt or voucher and therefore could not be relied upon to cure the delay. Consequently, the claim was held to be time-barred. [Paras 11, 12, 15]

The application is barred by limitation and liable to be dismissed on that ground.

Proof of payment and bank evidence - requirement of corroborative documentary evidence for supply of goods (purchase order, delivery/lorry receipt, acknowledgement) - Reliability of the petitioner's entry recording a cash receipt and relevance of bank certificate produced. - HELD THAT: - The Tribunal observed an entry in the petitioner's computation recording a cash receipt on 10.11.2017 but no receipt/voucher was produced to substantiate it; given that invoices requested payment by account payee cheque, the unsupported cash-entry could not be accepted and appeared contrived to bring the claim within limitation. Further, the bank certificate showing no RTGS/NEFT between 27.08.2019 and 16.09.2019 was held to be irrelevant to transactions that occurred in 2015-2016. [Paras 11, 14, 15]

The alleged cash receipt is not substantiated and the bank certificate produced is irrelevant; the entries cannot be relied upon to save the claim.

Claim for contractual or antecedent interest - Whether the claim for interest at 18% per annum was supportable. - HELD THAT: - The Tribunal recorded that the petitioner claimed interest at 18% p.a. but failed to place any contract, term in the invoice or other documentary proof showing entitlement to such interest. As the tax invoices were silent on levy of interest and no other supporting document was filed, the claim for interest was held to be legally unsustainable. [Paras 13, 15]

The claim for interest at 18% per annum is not supported by evidence and is rejected.

Service of notice and ex parte hearing - Validity of service and proceeding in absence of the respondent. - HELD THAT: - The Tribunal found that service had been effected upon the corporate debtor and paper publication made; the respondent did not appear or file a reply despite opportunities. On that basis the Tribunal proceeded to hear and decide the petition in the absence of the respondent. [Paras 8]

Service is complete and the matter was properly heard and decided ex parte.

Final Conclusion: The Company Petition (IB) No. 702 of 2019 filed under Section 9 of the IBC was dismissed without cost on grounds of lack of necessary corroborative documentary evidence to establish supply and operational debt, the claim being time-barred, unsupported allegations of payment, and an unsustained claim for interest.

Admission of Section 9 application - operational debt and default - moratorium under Section 14(1) - appointment of Interim Resolution Professional - public announcement and calling of claims under Section 15 - duties of Interim Resolution Professional to manage as a going concern - prohibition on termination or suspension of supply during moratorium - advance to IRP for conduct of CIRP

Admission of Section 9 application - operational debt and default - Application under Section 9 of the Insolvency & Bankruptcy Code, 2016 admitted on proof of operational debt and default. - HELD THAT: - The Tribunal examined invoices, statement of account and passbook entries and found that the Operational Creditor had rendered consultancy services for the accounting year 2018-19, raised Invoice No. SNT/19-20/04 dated 04.01.2019, and the evidence established (i) the debt claimed was due and payable and (ii) the Corporate Debtor had defaulted in payment. The application was found defect free and accordingly admitted to commence CIRP. [Paras 4, 6]

Application under Section 9 admitted and CIRP initiated.

Moratorium under Section 14(1) - Moratorium declared consequent to admission of the Section 9 application. - HELD THAT: - Upon admission, the Tribunal declared the moratorium prohibiting institution or continuation of suits or proceedings against the Corporate Debtor, transfer or disposal of its assets, enforcement of security interests and recovery of property in possession of the Corporate Debtor, with effect from the date of the order until completion of CIRP or approval of a resolution plan or order for liquidation as applicable. [Paras 1, 2]

Moratorium under Section 14(1) imposed with stated scope and duration.

Appointment of Interim Resolution Professional - Interim Resolution Professional appointed as proposed by the Operational Creditor. - HELD THAT: - The Operational Creditor proposed an IRP who provided written consent and had no pending disciplinary proceedings. In view of this, the Tribunal appointed Mr. Amrish Navinchandra Gandhi as Interim Resolution Professional to act under the Code. [Paras 3]

Proposed IRP appointed to conduct CIRP.

Public announcement and calling of claims under Section 15 - duties of Interim Resolution Professional to manage as a going concern - IRP directed to make public announcement, call for claims and discharge statutory duties including management of the Corporate Debtor as a going concern. - HELD THAT: - The Tribunal directed the IRP to make the statutory public announcement and call for submission of claims as required by the Code. The IRP was also directed to perform functions under the Code, including protecting and preserving the Corporate Debtor's assets and managing its operations as a going concern, and was empowered to seek the Adjudicating Authority's assistance if personnel connected with the Corporate Debtor failed to cooperate. [Paras 5, 7]

IRP to make public announcement, call for claims and perform duties to protect assets and manage the Corporate Debtor as a going concern.

Prohibition on termination or suspension of supply during moratorium - Supply of goods or services to the Corporate Debtor shall not be terminated, suspended or interrupted during the moratorium. - HELD THAT: - The Tribunal expressly directed that any continuing supply of goods or services to the Corporate Debtor shall not be discontinued during the moratorium period, thereby protecting ongoing supplies needed for continuation of business operations during CIRP. [Paras 6]

Suppliers shall not terminate or suspend supply to the Corporate Debtor during the moratorium.

Advance to IRP for conduct of CIRP - Operational Creditor directed to pay an advance to the IRP for smooth conduct of CIRP and IRP to file proof of receipt. - HELD THAT: - To ensure smooth conduct of the CIRP, the Tribunal directed the Operational Creditor to pay an advance to the IRP within two weeks and required the IRP to file proof of receipt along with the First Progress Report. The Registry was also directed to communicate the order to the parties and the Registrar of Companies and upload the order on the website. [Paras 7, 8]

Advance payment to IRP ordered and registry communications directed.

Final Conclusion: The Tribunal admitted the Section 9 application, held that the operational debt was due and in default, initiated CIRP, declared moratorium, appointed the proposed IRP, directed statutory public announcement and calling of claims, imposed duties on the IRP to manage the Corporate Debtor as a going concern, protected ongoing supplies during the moratorium, ordered an advance to the IRP and directed registry communications; CP(IB) No. 701/9/NCLT/AHM/2019 allowed.

Exemption from service tax for SEZ units - Overriding effect of SEZ Act - Prescribed terms and conditions under SEZ Act must be by SEZ Rules - Notifications under the Finance Act not to govern SEZ exemptions (pre August 5, 2016) - Reversal of CENVAT credit treated as non availment - Refund entitlement subject to proof of payment - Date of payment, not date of invoice, determines eligibility under refund notification

Exemption from service tax for SEZ units - Overriding effect of SEZ Act - Prescribed terms and conditions under SEZ Act must be by SEZ Rules - Notifications under the Finance Act not to govern SEZ exemptions (pre August 5, 2016) - Applicability of notifications issued under the Finance Act to SEZ units claiming exemption under the SEZ Act and SEZ Rules for the refund periods in dispute. - HELD THAT: - The Tribunal held that section 26(1)(e) of the SEZ Act read with rule 31 of the SEZ Rules grants substantive exemption from service tax to Developers and Units for authorized operations and, by virtue of section 51, the SEZ Act has overriding effect over inconsistent provisions of other laws. The Central Government's power under section 26(2) to 'prescribe' terms and conditions refers to rules made under the SEZ Act (per definition of 'prescribed'), not to notifications issued under section 93 of the Finance Act. Consequently, notifications issued under the Finance Act (3.3.2009 and 20.5.2009) could not be applied to deny the SEZ substantive exemption for refund claims filed before the insertion of rule 47(5) (w.e.f. 5.8.2016). The Tribunal therefore found that the Commissioner (Appeals) erred in rejecting the claims by applying the Finance Act notifications to these refund applications. [Paras 23, 24, 25, 28]

Notifications under the Finance Act were not applicable to deny the SEZ substantive exemption for the refund applications filed in the stated periods; the Commissioner (Appeals) erred in applying them.

Exemption from service tax for SEZ units - Approval by Unit Approval Committee - Whether absence of prior approval from the Unit Approval Committee (UAC) for specified input services justified rejection of the refund claims. - HELD THAT: - The Tribunal accepted that the appellant's unit operated solely in the SEZ for authorized operations and there was no finding that output services were for non authorized operations. It applied precedents holding that UAC approval requirements are procedural and that the SEZ Act's substantive exemption cannot be denied on such procedural grounds. Consequently, the Commissioner (Appeals) was not justified in rejecting refund claims solely for lack of UAC approval. [Paras 43, 44, 45, 46]

Lack of prior UAC approval did not justify rejection; the UAC requirement is procedural and cannot defeat the substantive exemption under the SEZ Act.

Reversal of CENVAT credit treated as non availment - Whether refund claims could be rejected because the SEZ unit had earlier availed CENVAT credit which was, however, reversed prior to filing the refund applications. - HELD THAT: - The Tribunal held that reversal of CENVAT credit prior to its utilization and before filing the refund claim is tantamount to non availment of credit. Reliance was placed on authoritative decisions recognizing that where credit is reversed, the claimant is to be treated as not having taken such credit. Hence denial of refund on the ground of earlier availment (where reversal occurred before claim) was not justified. [Paras 49, 50, 51, 52, 53]

Reversal of CENVAT credit prior to its utilization and prior to filing the refund claim satisfies the non availment requirement; refund cannot be rejected on that ground.

Refund entitlement subject to proof of payment - Whether the refund applications could be rejected for lack of admissible documentary evidence correlating input invoices and bank payments. - HELD THAT: - The Tribunal noted that while the Commissioner (Appeals) expressed doubts about correlation between the input service invoice register and bank statements, records showed the register and bank statements were on file and the appellant submitted further evidence (including a chartered accountant's certificate dated 8.5.2019) to establish correlation. The Tribunal concluded that the factual question whether the appellant had in fact paid the service tax must be examined afresh by the Commissioner (Appeals) in the light of the documents and afforded an opportunity to the appellant to place the certificate and supporting documents. Accordingly, the matter was remitted for fresh decision on factual verification of payment. [Paras 32, 33, 34, 77, 78]

Refund claims not to be rejected at this stage for documentary correlation issues; remand to Commissioner (Appeals) to verify whether service tax was paid on the services claimed and to re examine documents, including the chartered accountant's certificate.

Date of payment, not date of invoice, determines eligibility under refund notification - Whether input service invoices dated before notification effective date barred refund where service tax was paid on or after the notification date. - HELD THAT: - The Tribunal accepted the appellant's submission and precedent that the relevant criterion under the refund notification is the date of payment of service tax, not the date of service or invoice. Thus services rendered earlier but where service tax was paid on or after the notification publication date fall within the notification and cannot be denied refund merely because invoices pre dated the notification. [Paras 67, 68, 69, 70]

Refund eligibility depends on date of payment of service tax; invoices dated prior to notification do not preclude refund if tax was paid on or after the notification date.

Exemption from service tax for SEZ units - Whether the proviso in the May 20, 2009 notification (granting unconditional exemption for services consumed wholly within SEZ and refund for those consumed outside) could be used to deny substantive exemption under the SEZ Act for services consumed within SEZ. - HELD THAT: - The Tribunal reiterated that the substantive benefit under section 26 of the SEZ Act and rule 31 of the SEZ Rules cannot be defeated by procedural conditions in a Finance Act notification. Although the May 20, 2009 notification distinguished services consumed wholly within SEZ, the appellant had nevertheless deposited tax and is entitled to seek refund; denial based on procedural requirements of the notification was not sustainable for the refund periods in dispute. [Paras 72, 73, 74, 75, 76]

May 20, 2009 notification's procedural distinction cannot defeat the substantive SEZ exemption for the refund periods; refund cannot be denied on that ground alone.

Final Conclusion: The appeal is allowed in part: the Commissioner (Appeals)'s order rejecting the five refund applications is set aside. The Tribunal held that SEZ substantive exemptions under section 26 read with rule 31 precluded application of the Finance Act notifications for the refund periods in dispute (pre 5.8.2016), that procedural prerequisites in those notifications (including UAC approval) could not defeat the substantive exemption, and that reversal of CENVAT credit prior to utilization qualifies as non availment. The matter is remitted to the Commissioner (Appeals) to decide afresh, on the record and after affording the appellant opportunity, whether service tax was actually paid on the services for which refund is claimed; refunds are to be allowed if payment is established.

Liabilities of demerged undertakings vesting in the resulting company - demerger transfers assets and liabilities of specified undertakings, not merger of corporate entities - person chargeable for service tax - show cause notice under section 73 must be issued to the person chargeable - service tax liability lies on service provider and not on service recipient - contractual transfer of liability between private parties does not create a contractual obligation in favour of the Revenue

Person chargeable for service tax - show cause notice under section 73 must be issued to the person chargeable - service tax liability lies on service provider and not on service recipient - Validity of show cause notice issued to the Appellant (service recipient) for service tax payable purportedly by Abhijeet Ltd. and Corporate Ltd. - HELD THAT: - The Tribunal held that the statutory scheme contemplates that a show cause notice under the service tax provisions be issued to the person who is chargeable with service tax. Section 68 assigns the primary obligation to pay service tax to the person providing the taxable service; section 73 empowers issuance of notice on the person chargeable. The Appellant was a service recipient and not shown to be the person chargeable for the alleged business auxiliary services; therefore the proceedings initiated by serving show cause notice on the Appellant were without jurisdiction. The Court relied on the statutory language and relevant precedents to conclude that notice should have been issued to the entities that rendered the alleged services, not to the Appellant merely as recipient or by reason of an alleged transfer of liabilities. [Paras 31, 32, 34, 35]

The show cause notice issued to the Appellant was invalid; the demand confirmed on that basis cannot be sustained.

Demerger transfers assets and liabilities of specified undertakings, not merger of corporate entities - liabilities of demerged undertakings vesting in the resulting company - contractual transfer of liability between private parties does not create a contractual obligation in favour of the Revenue - Whether the Scheme of Arrangement merged Abhijeet Ltd. and Corporate Ltd. into the Appellant such that all liabilities of those companies (including service tax liabilities) stood fastened upon the Appellant. - HELD THAT: - On construction of the sanctioned Scheme of Arrangement, the Tribunal found that only the identified "Demerged Undertakings" - the Sponge Iron Plants and Power Plants - were transferred and vested in the Resulting Company. The Scheme expressly confined transfer to assets, rights and liabilities "pertaining to Demerged Undertakings"; the body corporate of the Demerged Companies continued to exist and operate. Consequently the liabilities of the demerged companies qua their corporate existence were not automatically fastened on the Appellant. Even assuming the services were taxable, the liabilities attributable to the demerged companies would lie with those companies (or at most with the undertakings as transferred under the Scheme), and private arrangements between transferor and transferee cannot be invoked by the Revenue as creating a contractual obligation enforceable against the transferee in place of the original taxpayer. [Paras 21, 24, 25, 26, 27]

The Scheme effected transfer only of the specified demerged undertakings and their attributable liabilities; it did not effect a merger of the corporate entities, and therefore the Appellant could not be fastened with the service tax liabilities of Abhijeet Ltd. and Corporate Ltd.

Final Conclusion: The impugned order confirming service tax demand, interest and penalties is set aside; the appeal is allowed as the show cause notice was not maintainable against the Appellant and the Scheme of Arrangement did not merge the corporate entities so as to fasten their service tax liabilities on the Appellant.

Assessable value - place of removal - ex works sale - FOR / delivery at buyer's premises - inclusion of freight in value - effect of transit insurance / transit risk on place of removal - precedential application of Ispat Industries over Roofit Industries

Place of removal - ex works sale - assessable value - Whether freight charges separately shown and recovered from buyers must be included in the assessable value where sales were ex works and the factory gate was the place of removal. - HELD THAT: - The Tribunal found on the material that invoices expressly recorded that the appellant's responsibility ceased when goods left the factory and freight was separately stated and recovered from buyers, indicating ex works pricing and that the factory gate was the place of removal. Rule 5 of the Central Excise Valuation Rules and the Board's Circular (October 20, 2014) support that transportation cost from place of removal to place of delivery is not includable in assessable value and that payment of insurance or who bears transit risk is not decisive for determining place of removal. The Tribunal held that the facts of this case align with the Supreme Court's decision in Ispat Industries (which treats factory gate/ex works sales as place of removal) and distinguishable from Roofit Industries, and therefore freight need not be added to the assessable value. [Paras 15, 16, 18, 19, 22]

Freight charges separately indicated and recovered in ex works sales are not includable in the assessable value; factory gate is the place of removal.

Effect of transit insurance / transit risk on place of removal - assessable value - Whether payment of transit insurance by the seller or bearing of transit loss determines that place of removal is the buyer's premises and requires inclusion of freight in assessable value. - HELD THAT: - The Tribunal endorsed the Board's clarification that payment of transport or insurance and who bears transit risk are not relevant considerations for ascertaining place of removal; the decisive factor is where the sale takes place or when property passes from seller to buyer. The Supreme Court's reasoning in Ispat Industries, relied upon by the Tribunal, confirms that transit insurance or incidental payments do not automatically convert an ex works sale into a destination sale for excise valuation. [Paras 15, 16, 18]

Payment of transit insurance or occasional payments for transit loss by the seller does not convert an ex works sale into a sale at buyer's premises nor justify inclusion of freight in assessable value.

Precedential application of Ispat Industries over Roofit Industries - Whether the decision in Roofit Industries requires adding freight in this case despite Ispat Industries. - HELD THAT: - The Tribunal examined Roofit Industries and noted that the Supreme Court in Ispat Industries distinguished Roofit on facts, observing Roofit applied where price was inclusive of freight and ownership remained with supplier till destination. On the facts before the Tribunal (ex works invoicing, separate freight, property passing at factory gate), Ispat Industries is applicable and Roofit is distinguishable; hence Roofit does not mandate inclusion of freight here. [Paras 18, 19, 20]

Ispat Industries governs the present facts; Roofit Industries is distinguishable and does not compel addition of freight to assessable value.

Final Conclusion: The appeal is allowed: the order of the Commissioner (Appeals) confirming addition of freight to assessable value is set aside because sales were ex works with factory gate as place of removal; freight separately invoiced and recovered is not includable in the assessable value for April, 2013 to June, 2017.

Refund of excess tax paid - withholding of refund by exercise of discretion to protect revenue - adjustment of refund against future assessments - statutory interest on delayed refund - procedural requirement of filing refund application under refund rules

Refund of excess tax paid - adjustment of refund against future assessments - withholding of refund by exercise of discretion to protect revenue - statutory interest on delayed refund - Validity of the Assessing Officer's direction to adjust alleged excess tax of the petitioner against future assessments instead of granting refund and entitlement to interest. - HELD THAT: - The Assessing Officer mechanically directed adjustment of the excess tax against future assessments without recording that any order giving rise to the refund was subject to appeal or that any proceedings were pending, nor did he form the requisite opinion that grant of refund would adversely affect the revenue and render recovery impossible. Under the statutory scheme the Commissioner/Assessing Officer may withhold a refund under the power to protect revenue only if (a) the order giving rise to refund is the subject matter of appeal or further proceeding or (b) proceedings under the Act are pending and the authority forms the opinion that grant of refund would adversely affect the revenue and make later recovery impossible. The impugned portion of the assessment directing adjustment in future assessments is therefore illegal. Where no further assessments or liabilities exist, the excess tax determined in the fresh assessments is to be refunded without the dealer being required to file a fresh refund application; statutory interest under the Act is payable if the refund is not made in time. The Court clarified that any amounts already adjusted pursuant to the impugned order need not be refunded, but amounts not so adjusted must be refunded with interest after verification. [Paras 6, 8]

The direction to adjust the excess tax against future assessments is set aside; the authority shall verify whether any future liability exists and, if none, refund the excess tax with statutory interest within three months.

Procedural requirement of filing refund application under refund rules - refund of excess tax paid - Whether the petitioner was obliged to file a refund application under the TVAT Rules in view of the Assessing Officer's assessment order. - HELD THAT: - Although the TVAT Rules (Rule 35) prescribe the manner and time for filing refund applications, the Assessing Officer's fresh assessment order itself treated the excess tax as to be adjusted against future assessments and thereby precluded the dealer from seeking a refund under the Rules. Until that order was set aside, a refund application under Rule 35 would have been ineffectual and likely dismissed. Consequently the petitioner is not required to file a fresh refund claim for amounts that remain unadjusted and are found to be due after verification. [Paras 7, 8]

The petitioner need not file a refund application under Rule 35 for amounts not adjusted by subsequent assessments; the authority must verify and refund such amounts with interest.

Final Conclusion: The Assessing Officer's direction to adjust the petitioner's excess tax against future assessments is quashed; the authority is directed to verify whether any future liability exists and, if none, to refund the unadjusted excess tax with statutory interest within three months, without requiring a fresh refund application.

Whether properties fall within the definition of 'asset' under the Wealth Tax Act - remand for re-verification of evidence - redo assessment after considering additional evidence - disposal of appeal without awaiting remand report - ex parte assessment after failure to file return

Disposal of appeal without awaiting remand report - remand for re-verification of evidence - whether properties fall within the definition of 'asset' under the Wealth Tax Act - redo assessment after considering additional evidence - The appeals were set aside and remanded to the Assessing Officer for fresh verification and reassessment in respect of the assets in question. - HELD THAT: - The learned Commissioner of Wealth Tax (Appeals) had called for a remand report from the Assessing Officer regarding certain additional evidence relating to the use and taxability of properties but proceeded to decide the appeals without awaiting that report. The Tribunal observed that, in view of the outstanding remand and the assessee's claim that the assets did not fall within the definition of 'asset' under the Wealth Tax Act, the matter required re examination. Accordingly, the Tribunal concluded that the Assessing Officer should re verify the averments and documentary evidence filed by the assessee, determine whether the properties come within the meaning of 'asset' as defined under the Act, and thereafter redo the assessment in accordance with law. The Tribunal did not pronounce finally on the merits of the taxability of the individual assets but remitted the matter for fresh consideration by the Assessing Officer. [Paras 6, 7]

Both appeals are set aside and remitted to the Assessing Officer for re verification and fresh assessment after considering the evidence filed by the assessee; appeals treated as allowed for statistical purposes.

Final Conclusion: The Tribunal remitted the matters relating to assessment years 2005-06 and 2006-07 to the Assessing Officer for re verification of evidence and fresh assessment on whether the properties qualify as 'assets' under the Wealth Tax Act; appeals disposed of as allowed for statistical purposes.

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten liability of directors/partners - quashing of criminal proceedings for absence of factual foundation in complaint - admissibility and effect of Form 32 as public document on resignation

Vicarious liability under Section 141 of the Negotiable Instruments Act - requirement of specific averments to fasten liability of directors/partners - admissibility and effect of Form 32 as public document on resignation - Whether the complaint against the petitioner/A3 discloses the necessary averments to fasten liability under Section 141 and whether proceedings against her should be quashed. - HELD THAT: - The Court applied the principles laid down in S.M.S. Pharmaceuticals and subsequent decisions that, to invoke Section 141, the complaint must contain specific averments that, at the time of commission of the offence, the accused was in charge of and responsible for the conduct of the business of the company or firm; mere repetition of formulaic words is insufficient. Reading the complaint as a whole, the Court found absence of factual averments explaining how the petitioner was responsible for A1 company's business. The petitioner produced Form 32 evidencing resignation dated prior to the cheque date, and the Court accepted that Form 32 is a public document whose impeachment is not appropriate at this stage. On these bases the Court concluded that requisite factual foundation for vicarious liability under Section 141 was lacking and that the complaint ought to be quashed as against the petitioner. The Court noted that contested factual contentions about intent or motive (attempts to pre-date resignation) are matters for trial but are not sufficient to sustain the complaint where foundational averments are absent. [Paras 11, 12, 13, 14]

Proceedings under S.T.C.Nos.690 & 688 of 2014 are quashed as against the petitioner/A3 for want of the necessary averments to fasten liability under Section 141; Form 32 accepted as evidence of resignation.

Final Conclusion: The Criminal Original Petitions are allowed and the criminal proceedings in the specified cases are quashed as against the petitioner/A3 alone; connected petitions closed.

Appellate power under section 148 to order deposit of a minimum of twenty per cent of the fine or compensation awarded by the trial court - limitation on deposit to fine or compensation awarded (not cheque amount) - direction to lower court for expeditious disposal of appeal

Appellate power under section 148 to order deposit of a minimum of twenty per cent of the fine or compensation awarded by the trial court - limitation on deposit to fine or compensation awarded (not cheque amount) - Impugned order directing deposit of 20% of the cheque amount instead of 20% of the fine or compensation awarded by the trial court was legally impermissible and required setting aside. - HELD THAT: - The Court examined the text of section 148 as amended, which empowers the appellate court in an appeal by the drawer against conviction under section 138 to order the appellant to deposit such sum which shall be a minimum of twenty per cent of the fine or compensation awarded by the trial court. Applying that statutory command, the Court held that the appellate court's direction to deposit 20% of the cheque amount was contrary to the statute because the statute refers to the fine or compensation awarded by the trial court. Since the trial court had imposed only a fine of Rs. 10,000 and sentence of imprisonment, the correct deposit obligation pending the appeal is 20% of that fine. The impugned order was therefore set aside and replaced by a direction to deposit 20% of the fine imposed by the trial court within sixty days from receipt of the copy of the order. [Paras 9, 10]

Impugned order set aside; petitioner directed to deposit 20% of the fine imposed by the trial court to the credit of the appeal within 60 days.

Direction to lower court for expeditious disposal of appeal - Whether the Principal Sessions Court, Krishnagiri should be directed to dispose of Criminal Appeal No.1 of 2019 within a reasonable time. - HELD THAT: - On the respondent's request and in view of the limited deposit directed by this Court, and having regard to the restricted functioning of courts during the Covid-19 pandemic, the High Court considered it appropriate to give a supervisory direction. The Court therefore directed the Court below to dispose of the criminal appeal as expeditiously as possible, while noting the pandemic-related constraints and without fixing an exact time-limit beyond the admonition to proceed promptly. [Paras 11, 12]

Court below directed to dispose of the appeal expeditiously.

Final Conclusion: The impugned order directing deposit of 20% of the cheque amount is set aside; the petitioner is directed to deposit 20% of the fine imposed by the trial court within 60 days and the Principal Sessions Court, Krishnagiri is directed to dispose of the criminal appeal expeditiously.

Penal liability under Section 138 of the Negotiable Instruments Act arises only where cheque is drawn for discharge of debt or liability - presumption under Section 139 of the Negotiable Instruments Act is limited to cheques given for discharge of debt or liability - professional misconduct and public policy bar on an advocate engaging in money lending to a client or taking interest in subject matter of litigation - abuse of process of law by a complainant advocate for recovery of money advanced to a client

Professional misconduct and public policy bar on an advocate engaging in money lending to a client or taking interest in subject matter of litigation - abuse of process of law by a complainant advocate for recovery of money advanced to a client - penal liability under Section 138 of the Negotiable Instruments Act arises only where cheque is drawn for discharge of debt or liability - Whether the complaint under the Negotiable Instruments law filed by the respondent, a practising advocate, for dishonour of a cheque issued by the petitioner is an abuse of process and liable to be quashed on the ground that the advocate engaged in money lending to his client and the claim is against public policy/professional ethics. - HELD THAT: - The Court applied the principle that to attract criminal liability under the Negotiable Instruments provisions a cheque must be issued for the purpose of discharging a debt or other legally enforceable liability; mere issuance of a cheque does not conclusively establish such liability. The Court relied on the Supreme Court exposition that an advocate claiming fees by way of a share in the subject matter or otherwise carrying on money lending business with a client involves professional misconduct and is against public policy. Where an advocate is shown to have engaged in such conduct, proceedings instituted by him for recovery based on the cheque may amount to an abuse of the process of law. Applying these principles to the material before it, the High Court found that the respondent, being an advocate, was barred from engaging in the impugned money lending arrangement with his client and that continuation of the criminal complaint would amount to misuse of process; accordingly the complaint required quashing. [Paras 7, 8]

The complaint in C.C.No.3560 of 2019 instituted by the respondent advocate is quashed as an abuse of the process of law; consequent petitions are closed.

Final Conclusion: The petition is allowed and the criminal complaint founded on the dishonour of the cheque is quashed on the ground that the advocate's claim arose from a money lending/professional relationship contrary to public policy and amounted to abuse of process.

Defective statutory notice under Section 138(c) of the Negotiable Instruments Act - Fiduciary prohibition on advocate-client monetary transactions and professional misconduct - Territorial jurisdiction for offences under Section 138 determined by branch where cheque was delivered for collection

Defective statutory notice under Section 138(c) of the Negotiable Instruments Act - The statutory notice served by the complainant did not comply with the fifteen days requirement of Section 138(c) and was therefore defective. - HELD THAT: - The notice dated 27.08.2019 demanded payment within seven days whereas Section 138(c) mandates payment within fifteen days of receipt of the notice. The Court held that the notice therefore did not fulfil the statutory requirement and could not sustain the complaint based on such defective demand. The determinative legal consequence of a notice deficient in the prescribed period is that the statutory pre-condition for initiating prosecution under Section 138 is not satisfied. [Paras 6]

Notice defective for non-compliance with the fifteen days requirement; complaint cannot be sustained on that basis.

Fiduciary prohibition on advocate-client monetary transactions and professional misconduct - The complainant, being the advocate of the accused, was barred from entering into lending/business transactions with his client and initiation of proceedings in such circumstances amounted to abuse of process. - HELD THAT: - The Court relied on principles that the lawyer-client relationship is fiduciary and that an advocate is debarred from having business or loan transactions with a client. Where an advocate seeks to enforce such a transaction by criminal process, it offends public policy and professional ethics and may constitute professional misconduct. Applying those principles to the material before it, the Court found the complainant's conduct to be a bar to maintaining the complaint and treated the proceedings as an abuse of process. [Paras 7, 8]

Proceedings by the advocate based on a loan/transaction with his own client are barred as professional misconduct and an abuse of process; complaint liable to be quashed on this ground.

Territorial jurisdiction for offences under Section 138 determined by branch where cheque was delivered for collection - The complaint was instituted before a court lacking territorial jurisdiction because the cheque was presented for collection at a different bank branch. - HELD THAT: - Applying the principle that, for an offence under Section 138, jurisdiction is determined by the branch where the cheque was delivered for collection (the branch of the payee/holder in due course where the drawee maintains an account), the Court noted the cheque was presented at the Indian Bank, High Court branch, Chennai, while the complaint was filed at Chengalpattu. Consequently, the court before which the complaint was filed did not have territorial jurisdiction to take cognizance of the offence. [Paras 9]

Complaint filed in Chengalpattu was beyond the territorial jurisdiction applicable to the cheque presented at the Indian Bank High Court branch; proceedings unsustainable on jurisdictional ground.

Final Conclusion: For the reasons stated - defective statutory notice, prohibition on advocate-client lending constituting professional misconduct and abuse of process, and lack of territorial jurisdiction - the Criminal Original Petition is allowed and the proceedings in C.C.No.670 of 2019 are quashed.