Tribunals and Commissions judgments

ITAT Jaipur holds that margin penalties levied by NCDEX for shortfalls in commodity trading are compensatory in nature and not prohibited under Section 37 of the Income Tax Act. The ruling deletes the 10% ad hoc disallowance under Section 36(1)(iii), setting a precedent for the tax treatment of such penalties in business expenditure claims.

CESTAT Chennai rules that non-air-conditioned restaurant services sourced from a common kitchen are exempt from service tax if clearly demarcated from AC sections. The ruling underscores strict compliance with Notification No. 03/2013-ST, impacting restaurant operators with mixed seating arrangements.

CESTAT Allahabad rules that confiscation and penalties under the Customs Act cannot stand without affording the accused the right to cross-examine witnesses and corroborating retracted statements. The tribunal sets aside orders imposing ₹61.9 lakh duty drawback recovery and penalties, reinforcing natural justice in adjudication proceedings.

CESTAT Kolkata has ruled that revenue authorities cannot sustain excise duty demands for clandestine removal without tangible, corroborative evidence-reinforcing that mere suspicion or intelligence reports are insufficient under Section 11A. This sets a critical precedent for manufacturers facing speculative assessments, shifting the burden firmly onto the tax department to prove intent and action with concrete proof.

The NCLAT has ruled that advance payments made under a consortium agreement for goods supply qualify as operational debt under Section 5(21) of the IBC, even when payment obligations are structured between consortium members rather than directly with a corporate debtor. This expands the scope of operational creditors in complex supply chains and clarifies that inter-se financial arrangements do not negate the existence of a debt arising from a transaction in the ordinary course of business.

CESTAT Kolkata rules that minor procedural breaches under the Advance Authorisation Scheme cannot justify confiscation of gold and jewellery unless there is intentional fraud or dishonest intent. This reinforces that administrative errors, absent mens rea, are curable and not punishable by asset seizure - a critical safeguard for exporters and jewellery traders facing rigid customs enforcement.

The NCLAT has clarified that Regulation 29 of the IBBI Liquidation Regulations does not permit set-off claims between a corporate debtor and a creditor through affiliated group entities, upholding the doctrine of corporate separateness. This ruling directly impacts how operational creditors and liquidators assess mutual obligations in insolvency proceedings, preventing cross-entity netting that could distort the waterfall of claims under the IBC.

CESTAT has ruled that taxpayers could lawfully utilize Cenvat credit to discharge service tax liability under the reverse charge mechanism for imported services prior to July 2012, overturning departmental demands and clarifying a critical ambiguity in pre-GST compliance. This decision protects businesses that relied on existing rules and sets a precedent for retrospective interpretation of credit utilization in indirect tax regimes.

CESTAT Kolkata rules that merely possessing exotic birds within India does not amount to smuggling under the Customs Act unless the Revenue proves they were illegally imported. This shifts the legal burden squarely onto the Department, protecting bird owners from presumption-based penalties and clarifying the limits of customs enforcement in wildlife cases.

ITAT Cochin has ruled that a reassessment notice issued on 06.05.2022 for AY 2015-16 is time-barred because the income escaped assessment did not exceed ₹50 lakh, triggering the three-year limitation under Section 149(1). This reinforces that post-2022 notices for pre-2019 assessments cannot be revived unless the monetary threshold is crossed, protecting taxpayers from arbitrary reopening.

The ITAT Kolkata has ruled that a taxpayer claiming weighted deduction under Section 35(1)(ii) for scientific research may offset the full Rs. 1.57 crore claim against income from other sources if business income is inadequate to absorb the deduction. This clarifies that the deduction is not capped by business profits, significantly benefiting R&D investors with diversified income streams and aligning with the legislative intent to incentivize innovation.

When an appellate authority deletes an addition of unexplained income under Section 69A, penalties imposed under Sections 271AAC(1) and 272A(1)(d) automatically lapse - the penalty cannot stand without its foundational tax liability. This ruling protects cooperative societies and other assessees from punitive measures rooted in nullified assessments, reinforcing that penalties are consequential, not independent, under the Income Tax Act.

CESTAT Chennai rules that ancillary services like air travel, cab rentals, telecom, insurance, and accommodation directly supporting export of IT services qualify as eligible input services under Rule 2(r) of the Cenvat Credit Rules, 2004. This expands the scope of claimable credits for IT exporters, removing arbitrary disallowances based on perceived lack of direct nexus and aligning with the intent of export promotion under service tax law.

The ITAT Delhi has ruled that a charitable trust’s exemption under Section 11 cannot be entirely revoked merely due to transactions with specified concerns; the disallowance must be confined strictly to the actual diverted funds. This clarifies a critical safeguard for trusts, ensuring proportionality in tax scrutiny and preventing punitive overreach under Section 13.

ITAT Delhi has ruled that a 175-day delay in filing an income tax appeal must be condoned when the delay stems from genuine hardship, affirming that procedural rigidity cannot override the core principle of substantial justice. This reinforces that appellate authorities must interpret condonation provisions liberally to ensure access to justice for taxpayers, especially where no prejudice is shown to the revenue.

Primary credit cooperative societies can claim tax deductions under Section 80P(2)(d) for interest earned on deposits with other cooperative banks, affirming that such income qualifies as business income derived from cooperative activities. This ruling reinforces the scope of cooperative-specific tax benefits and provides clarity for thousands of rural financial institutions across India.

CESTAT Kolkata holds that mere control over premises where smuggled gold is found, coupled with inability to prove lawful possession, suffices to impose penalty under Section 112 - shifting the burden to the possessor to explain lawful origin. This clarifies that statutory liability under customs law extends beyond ownership to de facto control, impacting warehouse operators, agents, and third-party custodians.

The ITAT Jaipur deleted a Rs. 40.82 lakh addition for unexplained cash deposits, ruling that mere deviations in cash sales or bank deposits-even amid demonetization-are insufficient to reject duly audited books of accounts. This reinforces that tax authorities must identify specific, material defects in accounting records, not rely on speculative patterns, protecting compliant businesses from arbitrary assessments.

CESTAT Kolkata rules that mere possession of unmarked gold, without any corroborating intelligence or border-crossing context, cannot invoke the Section 123 presumption of smuggling. The burden remains squarely on the Revenue to prove intent and illicit movement, reinforcing procedural safeguards for travelers and traders against speculative seizures.

CESTAT Chandigarh has ruled that penalties under Section 112(a)(i) of the Customs Act cannot be imposed solely for violations of Customs Broker Liability Rules unless the act or omission directly renders the goods liable for confiscation under Section 111. This decision shields customs brokers from punitive action for procedural lapses that do not facilitate smuggling or concealment of prohibited goods, reinforcing the principle that penalty must flow from substantive harm, not technical non-compliance.

The ITAT Delhi has ruled that an assessment under Section 153C cannot stand unless incriminating material directly belonging to the assessee is discovered during a search of a third party. This clarifies a critical jurisdictional limit on the tax department’s power to reassess unrelated taxpayers, reinforcing natural justice and statutory compliance in income tax proceedings.

CESTAT Chandigarh rules that Genpact Services LLC, providing BPO services directly to an overseas principal under a single contract, does not qualify as an 'intermediary' under the Place of Provision of Services Rules. The ruling entitles the appellant to Cenvat credit refunds worth ₹14.55 crore, setting a precedent for service exporters with direct overseas contracts.

The ITAT Delhi set aside a Rs. 35 lakh addition for unexplained cash deposits during demonetization because the reassessment under Section 147 lacked mandatory reasons and failed to secure prior approval under Section 151. Only Rs. 3 lakh was upheld after scrutiny, reinforcing that procedural compliance is non-negotiable in reassessments - a critical safeguard for taxpayers facing post-demonetization scrutiny.

CESTAT Mumbai quashes redemption fine and penalty under Sections 111(l), 111(m), and 114A of the Customs Act, ruling that a 13% excess in declared surface area-attributable to measurement methodology-does not constitute deliberate misdeclaration. The Tribunal emphasized that penalties require proof of mens rea, offering relief to importers facing disproportionate liabilities for minor discrepancies.