Corporate news and case laws updates for 3rd week January 2025.

Procedure for seeking waiver or reduction of interest in

respect of recovery proceedings initiated for failure to pay

penalty

SEBI vide this circular has laid down the procedure for making

the application seeking waiver or reduction of interest, in respect of

recovery proceedings initiated for failure to pay penalty, which may be

forwarded to the Recovery Officer having the necessary jurisdiction

over the matter in the format detailed in Annexure A along with all

documents in support of the satisfaction of requirements under clauses

(i), (ii) and (iii) of Section 220 (2A) of the Income-tax Act, 1961. Further,

provided that the application for waiver or reduction of interest may

only be sought for the period subsequent to the service of the notice of

demand and application may be filed only in the cases where the

principal amount due under the notice of demand stands fully paid.

NFRA plans 7 papers to strengthen the audit standards

In an effort to improve audit quality, the National Financial Reporting Authority (NFRA) is set to release a series of papers addressing critical areas of statutory audits. NFRA Chairman Ajay Bhushan Pandey told that seven such papers are planned for release over the next 2–3 months. “Based on our experience and the current gaps observed in overall auditing, we have identified critical areas requiring attention from auditors, audit committee members, independent directors, and other board directors. These papers are aligned with international practices followed by regulatory agencies like the PCAOB,” Pandey said. “Keeping in view NFRA’s objectives of protecting public interest and investor protection, NFRA is commencing with this series of auditor-audit committee interactions, which will be issued on significant areas of accounting and auditing, from time to time,” the paper said

Mandatory Use of eBKray Auction Platform for Liquidation Processes

In continuation of efforts to streamline the liquidation process and improve transparency, the Insolvency and Bankruptcy Board of India (IBBI), through circular No. IBBI/LIQ/78/2024 dated 29th October 2024, issued directions regarding the use of the eBKray auction platform. The IPs were, inter-alia, directed that they shall exclusively list the details of all the unsold assets in respect of the ongoing liquidation processes on the eBKray platform and that they may utilize the eBKray auction platform for the sale of assets in respect of

ongoing cases for auctions. The platform has received an encouraging response since its introduction. To date, 210 assets have been listed, and 25 auctions have been scheduled or conducted on the platform. The platform is presently running on a pilot mode and will be improved based on the experiences of usage. In this regard, all IPs handling liquidation processes are hereby directed to exclusively use the eBKray auction platform for conducting auctions for sale of assets during the liquidation process with effect from 1st April 2025. It is further directed that listing of unsold assets in all ongoing liquidation cases shall be completed by 31st March 2025.

Foreign Exchange Management (Mode of Payment and Reporting of Non- Debt Instruments) (Third Amendment) Regulations, 2025

Third Amendment Regulations, 2025 inter alia provides that a start-up company issuing convertible notes to a person resident outside India shall receive the amount of consideration by inward remittance through banking channels or by debit to any repatriable foreign currency or Rupee account of the person concerned, maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016. Repayment or sale proceeds may be remitted outside India or credited to any repatriable foreign currency or Rupee account of the person concerned, maintained in accordance with the Foreign Exchange Management Deposit) Regulations, 2016.

For the purpose of these regulations, “banking channels” shall include any rupee vostro accounts, including Special Rupee Vostro Accounts, permitted to be held by a person resident outside India, in terms of Regulation 7(1) of Foreign Exchange Management (Deposit) Regulations, 2016.

For the Purchase or sale of equity instruments of an Indian company by a person resident outside India the mode of payment are as follows:

(1) The amount of consideration shall be paid as inward remittance from abroad through banking channels or out of funds held in any repatriable foreign currency or Rupee account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.

Explanation: The amount of consideration shall include:

(i) Issue of equity shares by an Indian company against any funds payable by it to the investor.

(ii) Swap of equity instruments or equity capital.

(2) Equity instruments shall be issued to the person resident outside India making such investment within sixty days from the date of receipt of the consideration.

Explanation: In case of partly paid equity shares, the period of 60 days shall be reckoned from the date of receipt of each call payment.

(3) Where such equity instruments are not issued within sixty days from the date of receipt of the consideration the same shall be refunded to the person concerned by outward remittance through banking channels or by credit to his repatriable foreign currency or Rupee account maintained in accordance with

the Foreign Exchange Management (Deposit) Regulations, 2016, as the case may be within fifteen days from the date of completion of sixty days.

(4) An Indian company issuing equity instruments under this Schedule may open a foreign currency account with an Authorised Dealer in India in accordance with Foreign Exchange Management (Foreign currency accounts by a person resident in India) Regulations, 2016.

Further the sale proceeds (net of taxes) of the equity instruments may be remitted outside India or may be credited to any repatriable foreign currency or Rupee account of the person concerned, maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016

CASE Laws

 INSOLVENCY LAW

 M/s Acute Daily Media Pvt. Ltd. & Ors  Vs. M/s Rockman Advertising and

Marketing (India) Ltd. & Ors  --NCLAT

Adjudicating Authority has jurisdiction under the Section 65 of IBC to consider the allegations of fraudulent and malicious initiation of CIRP proceedings

Hon’ble NCLAT observed that while there is no quarrel over the fact that Section 7 vests rights on the financial creditors to initiate CIRP proceedings against the defaulting Corporate Debtor, however, debt and default cannot always be seen in isolation. We cannot be unmindful of the fact that the Adjudicating Authority is also required to take care that the provisions of Section 7 of IBC are not misused or abused in any manner either by the financial creditor or the promoters of the Corporate Debtor to take undue

advantage at the cost of insolvency resolution.

Present is a case where the promoters of the Corporate Debtor and the Financial Creditors in trying to create a non-existent financial debt out of routine business entries, have ended up unwittingly committing lapses which lapses when seen cumulatively points to a web of conspiracy and collusion on their part to create a contrived situation of debt and default. The mistakes and infirmities committed by the Appellants in the process are not one-off or stand-alone mistakes or inadvertent errors. These errors are also grave in that it also included violation of other statutes like Companies Act.

When we take a comprehensive and holistic view of the entire conspectus of facts and circumstances, we find that there is ample proof to show that the Section 7 application was a motivated attempt to bring the Corporate Debtor into the rigours CIRP proceedings. The bonafide of the Appellants in the filing of the Section 7 application is clearly doubtful. Viewed from the angle of the totality of circumstances, the findings of the Adjudicating Authority that the insolvency proceedings in C.P.(IB)-50(PB)/2021 resulting in the order dated 17.05.2022 were initiated fraudulently and with malicious intent for a purpose other than the resolution of the insolvency of the Corporate Debtor, is neither dehors the records nor unwarranted. When such fraudulent CIRP proceedings are initiated, the Adjudicating Authority has jurisdiction under the IBC to consider the allegations of fraudulent and malicious initiation of CIRP proceedings in terms of Section 65 and recall the CIRP admission order.

 INCOME TAX LAWS

 M/S. Kashvi International Pvt. Ltd. & Another v/s

Union of India Orissa High Court

Cognizance of offences punishable u/s 276B/276BB - Non deposit of TDS and TCS amounts in the revenue account by the stipulated due date.

The allegations against the petitioners are that they have collected TDS and TCS amounts from various sources during the financial year 2021-2022 to the tune of Rs. 1,03,78,362/- but did not deposit the same in the revenue account by the stipulated due date. As per Rule 30 of the Income Tax Rules 1962, the tax deducted from source is required to be deposited by 7th day of the succeeding month and if the TDS is made in the month of March, then the said amount is to be deposited by 20th April of the next financial year.

In the present case, the TDS amount has been deposited by the petitioners in the Government account belatedly delayed ranging from 1 day to 84 days. Therefore, they have allegedly committed the offences punishable under Sections 276B and 276BB of the Income tax Act.

The petitioners were issued show cause notice under Section 279 (1) read with Section 276B and Section276BB of the Income tax Act on 08.02.2023 calling upon them to explain the delay in depositing the amount collected from different sources towards TDS and TCS. The petitioners vide separate reply dated 01.03.2023.Pursuant to this notice, the competent authority has accorded sanction under Section 279 (1) of the Income tax Act, 1961 vide its order dated 09.05.2023 Perusal of the sanction order reveals that the competent authority although has taken into consideration some of the explanation offered by the petitioners to explain the sufficient reason for delay in depositing the TDS amount, but the vital aspect of the explanation offered by the petitioners regarding the cause of delay attributable to the COVID restriction has not been considered. Be that as it may, after obtaining sanction from the competent authority through the Public Prosecutor, the complaint case being 2(C)C.C. Case No.47 of 2023 has been lodged against the petitioners.

Subsequent thereto, cognizance of offences has been taken by the competent court by the impugned order.

INCOME TAX LAWS

Tejash Ramesh Shah, HUF vs ITO ITAT MUMBAI

Addition u/s 68 - Bogus Share Transaction - Allegation of price rigging or circulation of black money to generate LTCG.

Facts of the Case: The assessee had purchased 10,000 equity shares of Midland Polymers Ltd (MPL) through Bombay Stock Exchange (BSE) on 30-03-2012 @ Rs. 30.25 per share. The shares are delivered in the demat account of the assessee and for this impugned assessment year, the purchase cost was Rs. 1,51,734. The Face Value of the shares had split from Rs. 10 to Rs. 1 per share. The split increased the quantity from 10,000 to 100,000 with proportionate reduction in the market price. Subsequently, bonus was issued in the ratio 1:1 which made the quantity of equity shares to 200,000. After one year, the assessee sold the share in staggered manner in two assessment years i.e. A.Y. 2014-15 & 2015-16. The assessee sold the shares for A.Y. 2015-16 amount to Rs. 63,31,089 and after deduction of the proportionate purchase cost, the assessee earned long term capital gain (LTCG) amount to Rs. 61,75,355.

Based on the findings of the Kolkata Investigation Directorate, the Ld.AO found that the assessee dealt with the share of Midland Polymers Ltd and considered the said scrip as penny stock and the exemption u/s 10(38) was rejected on LTCG and treated the amount to Rs. 61,75,355/- as a bogus transaction and accordingly, the addition was made under section 68 of the Act. The Ld.AO described the modus operandi of the penny stock in the impugned assessment year but was not able to bring any material fact with his own investigation. The assessment order was assailed before the Ld. CIT(A). The Ld. CIT(A) confirmed the impugned assessment order.

ITAT Judgement: We note that the assessee earned LTCG related to the scrip MPL through transactions conducted on the BSE. No adverse findings or comments have been issued by SEBI regarding this scrip, and the Ld. DR was unable to submit any such directions or allegations by SEBI related to the scrip in question.

The Ld. AO did not reject any of these primary pieces of evidence during assessment proceeding. In this context, the Hon’ble Bombay High Court in Shyam R. Pawar, 229 Taxman 256 (Bom) held that when details of share transactions are substantiated by DEMAT account statements and contract notes, and the Assessing Officer fails to prove such transactions as bogus, the capital gains cannot be treated as unaccounted income under Section 68 of the Act. The Ld. AR respectfully relied on the order of the coordinate bench of ITAT, Mumbai, D-Bench in the case of Ramesh Rikhavdas Shah, HUF (supra) where the assessee earned LTCG on same scrip MPL after detailed observation the bench allowed the appeal of the assessee and directed the Assessing Officer to allow the exemption on LTCG. The said order was followed by the ruling of the Hon’ble Bombay High Court in case Indravadan Jain (HUF)(supra). The coordinate bench of ITAT Delhi-F in the case Puja Gupta(supra) allowed the appeal of the assessee related to the same scrip & allowed the exemption claimed u/s 10(38) of the Act. We find no evidence of any irregularities or price rigging concerning the scrip MPL. We find no basis to conclude that the assessee was involved in any price rigging or circulation of black money to generate LTCG. The evidence and documents submitted during the assessment proceedings were neither denied nor challenged in terms of their authenticity. Accordingly, we hold that the appeal order is flawed and perverse. The addition under Section 68 of the Act amounting to Rs. 61,79,355/- is hereby deleted.

COMPANY LAW

Murlidhar Vincom Pvt Ltd vs Skoda (India) Pvt Ltd - NCLAT

Whether share application money can be treated as financial debt under IBC, where such money had not been refunded within the period prescribed under Section 42 of the Companies Act, 2013 read with Companies (Acceptance of Deposit) Rules, 2014

Hon’ble NCLAT inter alia observed that when we look at Rule 2(c)(vii) of the CADR Rules, 2014 and the explanatory clause appended thereto, it becomes clear that it refers to any amount received and held pursuant to an offer made in accordance with the provisions of the Companies Act, 2013 towards subscription to any securities, including share application money. It flows therefrom that for the aforementioned CADR Rules to be attracted in respect of share application money, there has to be a clear nexus to show that the share application money amount was advanced in conformity with the relevant provisions of the Companies Act, 2013. When we look at Section 42 of the Companies Act, 2013 it is clear that several statutory compliances are required to be met prior to issue of shares on private placement basis.

Section 42(2) of the Companies Act stipulates the requirement of issue of private placement offer letter in such cases. From the records available on file, we do not find that the Corporate Debtor had issued any such private placement offer letter to the Appellant. There is no evidence of any valid concluded agreement between the two parties with respect to allotment of shares. Hence, the amount which was advanced by the Appellant cannot be treated to be amount in response to the private placement offer. Rule 2 of CADR Rules envisages that only if any amount is received pursuant to any private placement offer made in accordance with the provisions of the Companies Act, 2013 and no shares are allotted qua that amount, only then the sum becomes a deposit. When no proof of any private placement offer made in accordance with the provisions of the Companies Act, 2013 has been placed on record by the Appellant, the CADR Rules cannot be held to be applicable. Since the amount advanced cannot be related to Section 42 of the Companies Act, the applicability of Section 42(6) cannot be pressed as is being sought by the Appellant in the present case.

NCLAT did not find any infirmity in the order of the Adjudicating Authority rejecting the Section 7 application of the Appellant. It shall however remain open to the Appellant to seek refund/recovery of the share application money in appropriate proceedings before an appropriate forum in accordance with law. There is no merit in the Appeal. The Appeal is dismissed.

  INCOME TAX LAWS

Late Smt. Ramilaben Harshadrai Patel (Through Legal Heir Son Devraj H. Patel) v/s Income Tax Officer

Devraj Harshadrai Patel v/s Deputy Commissioner of Income And

Assistant Commissioner of Income Tax, Ahmedabad v/s

Devraj Harshadra Y Patel

LEGAL POINT

Addition of Long-Term Capital Gain Without allowing deduction for indexed cost and exemption u/s 54B

Facts of the Case:

The assessee had sold immovable property, jointly with other co-owners for an amount of Rs. 2,00,00,000. Out of the above sale consideration, an amount of Rs. 40,00,000 was received by the assessee from Harishbhai Prahladbhai Patel (purchaser) through banking channels and an amount of Rs. 40,000 was also withheld by the purchaser as Tax Deducted at Source (TDS). During the course of assessment, the Assessing Officer observed that against the aforesaid sale consideration of Rs. 40 lakhs, the assessee had shown capital gains of Rs. 17,14,550 only and has claimed benefit of TDS of Rs. 40,000 deducted by the purchaser. The Assessing Officer asked the assessee to give justification of the capital gains offered to tax amounting to Rs. 17,14,500,

however, the Assessing Officer observed that the assessee has not been able to give any justification on how she had worked out the capital gains amounting to Rs. 17,14,500. Accordingly, the Assessing Officer added The entire sale consideration of Rs. 40,00,000 (being 1/5th share of the assessee on sale of such property) and accordingly, added a sum of Rs. 22,85,450.

There were five co-owners in such property, with each co- owner having 20% share. In appeal, Ld. CIT(A) dismissed the appeal of the assessee by observing that the assessee has been able to furnish evidence of investment in new property and hence claim of deduction under Section 54B of the Act

cannot be granted to the assessee. Accordingly, Ld. CIT(A) dismissed the appeal of the assessee.

ITAT Judgement:

It would be useful to reproduce the relevant extracts of the order passed by Ld. CIT(A) vide order dated 07.11.2023 in the hands of the co-owner, Shri Devraj H. Patel, for ready reference:

“I have perused the remand report of A.O., written submission and additional evidences furnished by the\ appellant. The appellant sold the agriculture land for Rs. 40,00,000 (being 1/5th share of the total value of Rs. 2.0 Crore). It is observed that the A.O. has added total sale consideration without giving effect of the indexed cost of acquisition of the said property. The appellant has submitted the sale deed, valuation report, proof of agricultural activity. In view of the above documents and the remand furnished by the A.O., it is held

that the appellant is entitled to get benefit of the indexed cost of acquisition while computing the capital gain arose with regard to sale of the aforementioned property.”

Even Ld. D.R. has accepted that the aforesaid addition is liable to be deleted in terms of aforesaid order passed\ by Ld. CIT(A), in the case of co-owner of this property.

November 27, 2024 Prabhat Jain Liquidator of Narmada Cereal Pvt Ltd. VS. MP Industrial Development Corporation& Ors  -  NCLAT

Brief Facts

The Respondent No.1 is the Lessor of the land of the subject factory of the Corporate Debtor. The Appellant Liquidator of the Corporate Debtor filed an application seeking to sub-lease the factory to a third party without the consent of the Respondent No.1. The Adjudicating authority [NCLT] rejected and dismissed the application. Hence the present appeal to the NCLAT.

Judgement

Hon’ble NCLAT observed that the Section 35(1)(d) of the Code does not entitle a Liquidator to grant sub-leases over properties not owned by the Corporate Debtor and therefore Section 238 of the Code cannot be interpreted in a manner that has the effect of overriding the Respondent No. 1 duty to enforce the relevant Rules on how public lands are to be regulated. NCLAT has already noted earlier that this is supported by a three-judge bench decision of the Hon'ble Supreme Court in Municipal Corporation of Greater Mumbai vs.

Abhilash La/, (2020) 13 SCC 234. NCLAT found this judgment clearly negates the contention of the Appellant, that Section 238 of the Code override the provisions of the M.P. State Industrial Land and Building Management Rules, 2019.

NCLAT noted that the Hon'ble Supreme Court of India has categorically held that the statutory powers of a public body to regulate public lands cannot be overridden by provisions of the Code. Therefore, NCLAT found that the Appellant did not have right to create sub- leases over a third party's land. NCLAT also noted that this judgement has been followed by this Appellate Tribunal in New Okhla Industrial Development Authority vs. Abhishek Anand, Liquidator of Mega Soft Infrastructure Pvt. Ltd., Company Appeal (AT) (Ins.) No. 998 of 2021 and Maharashtra Industrial Development Corporation vs. Santanu T Ray, Company Appeal (AT) (Ins.) No. 1004 of 2021 etc., and therefore, we are duty bound to follow the same.

In view of above detailed analysis, NCLAT held that action of the Appellant to sub-lease to M/s Maa Yashoda Food Grains, without specific permission of the Respondent No. 1 was incorrect and illegal as correctly held by the Adjudicating Authority in the Impugned Order.

INCOME TAX LAWS

Sita Sudhir Hotkar v/s ITAT Mumbai

Assessee has made some unexplained investment for purchase of property - addition was made u/s 69 and tax was charged u/s 115BBE @ 60%

Facts of the Case: An assessee is an individual who is a house-wife and has not filed any return of income as she does not have any kind of income. In this case, information was received on inside portal of Income Tax

Department that income chargeable to tax has escaped assessment in the case of the assessee and accordingly, notice u/s 148A (b) of the Act was issued. Since, there was no submission filed by the assessee, accordingly, notice u/s 148 was issued on 31/03/2022 after obtaining the approval from ld. PCIT. As per the information, the assessee has made some unexplained investment for purchase of property of Rs. 1,18,66,200/- and accordingly, various notices were issued, however, assessee could not respond to notices

sent on ITBA portal and accordingly, entire addition was made u/s 69 of Rs. 1,18,66,200/- and tax was charged u/s. 115EBE @ 60%.

The Ld. CIT (A) too dismissed the appeal holding that there was a delay in filing of appeal about 227 days. It has been informed that assessee could not receive order of ld. AO itself and therefore, assessee was not even aware of such order being uploaded in ITBA portal, because assessee being a house-wife was not aware of any such proceedings and she was not filing any regular return of income.

ITAT Judgement:

It has been stated that her son, Mr. Gajanan Sudhir Hotkar who was non-resident and was employed in USA had sent the money from US to buy the properties in his father’s and mother’s name. In fact he had bought

two property, one for Rs. 1,02,66,200/- and other for Rs. 32,00,000/-. It has been brought on record that in the case of her son, Mr. Gajanan Sudhir Hotkar, assessment was passed u/s. 147 r.w.s. 144 of the Act based on same information wherein after detail examination, the source of investment with regard to one property for Rs. 1,02,66,200/- has been accepted to be from his own resources which he has explained. Thus, to the extent of Rs. 1,02,66,200/- addition cannot be added in the hands of the assessee. In so far as other property purchased for Rs. 30,00,000/- also, the source was also from the son through his remittance in the bank account from US. Since the assessment has been decided exparte, therefore, in the interest of justice, the matter is restored for the limited purpose that in so far as investment in one property for Rs. 1,02,66,200/- which has been accepted to be invested by her son Shri Gajanan Sudhir Hotkar, then no addition should be made; and

secondly, as regards other property for sum of Rs. 30,00,000/-, the ld. AO is directed to verify whether this property has been purchased from the funds / sources given by her son and if that is the case then, no addition should be made. For this limited purpose, the matter is restored back to the file of the ld.

Jurisdictional AO (JAO) and assessee should comply with the notice and substantiate the source from her son for the purchase of second property for Rs. 30,00,000.

GENERAL LAW - CONSTITUTION OF INDIA

Pandurang Vithal Kevne{Petitioner (s)) VS Bharat Sanchar Nigam Limited & Anr - Supreme Court of India

Right to access the Courts is a Cornerstone of our Democracy. However, this Right is not Absolute and must be exercised Responsibly

Order

The petitioner has filed multiple meritless review petitions, appeals, and motions before Supreme Court and the High Court against his dismissal order from service. Hon’ble Apex Court inter alia observed that the right to access the courts is a cornerstone of our democracy. However, this right is not absolute and must be exercised responsibly. When litigants, like the petitioner before us, engage in forum shopping, file repetitive and meritless pleas, and deliberately delay proceedings, they erode the very foundation of our legal system.

The petitioner’s repeated and frivolous litigation has wasted the court’s valuable time and resources. It is in interest of justice that genuine and timely claims are addressed efficiently, without being hindered by such

unscrupulous litigation.

Apex Court referred here an observation given by Supreme Court in Subrata Roy Sahara Vs Union of India (2014) 8 SCC 470: 2014 INSC 367:

“150. The Indian judicial system is grossly afflicted, with frivolous litigation. Ways and means need to be evolved, to deter litigants from their compulsive obsession, towards senseless and ill-considered claims. One needs to keep

in mind, that in the process of litigation, there is an innocent sufferer on the other side, of every irresponsible and senseless claim. He suffers long drawn anxious periods of nervousness and restlessness, whilst the litigation

is pending, without any fault on his part.”

Supreme Court imposed a cost of ₹ 1,00,000 /- (Rupees One Lakh) against the petitioner to be deposited with the Maharashtra State Legal Services Authority within four weeks. On failure, recovery be affected from the petitioner as arrears of land revenue.

INTELLECTUTAL PROPERTY RIGHTS

Comviva Technologies Limited (Appellant) Vs. Assistant Controller of Patents & Design (Respondent) - Delhi High Court

Brief Facts

An appeal filed by ‘Appellant’ against an order passed by the Assistant Controller of Patents and Design refusing an application for grant of patent for an invention titled ‘Methods and Devices for Authentication of an Electronic Payment Card using Electronic Token’ on the ground that the same relates to ‘computer program per se’ and ‘business method’ and hence not patentable under Section 3(k) of the Patents Act, 1970.

Judgement

Hon’ble High Court inter alia observed that a perusal of the Guidelines for Examination of Computer Related Inventions, 2017(CRI Guidelines, 2017) clearly shows that the term “business method” would apply where the activity is in relation

to the transaction of goods or services. However, where the subject matter of the application specifies an apparatus and/or a technical process for carrying out the invention, even partly, the Claims have to be examined as a whole. In

other words, the Claims shall be treated as “business method” only if they are essentially about carrying out business/ trade/ financial activity/ transaction. The use of words such as “business”, “sales”, “transaction” “payment” by themselves are not relevant to conclude that the invention is the business method.

While analysing the patentability of „business methods‟ under Section 3(k) of the Patents Act, a Coordinate Bench in Opentv INC v. The Controller of Patents and Designs, 2023 SCC OnLine Del 2771, has made the following observations:

“73. Thus, the only question that the Court or the Patent Office while dealing with patent applications involving a business method, needs consider is whether the patent application addresses a business or administrative problem and provides a

solution for the same.

74. In order to judge as to whether a particular patent application seeks to patent business methods or not, at the outset, the following aspects, ought to be considered - (i) whether the invention is primarily for enabling conduct or administration of a particular business i.e., sale or purchase of goods or services;

ii) whether the purpose of the invention is for claiming exclusivity or monopoly over a manner of doing business;

(iii) whether the invention relates to a method of sale or purchase of goods or services or is in fact a computer program producing a technical effect or exhibiting technical advancement. If it is the latter, it would be patentable but not if it is the former.”

Further the Court said that while assessing the patentability of “computer software per se” under Section 3(k) of the Patents Act, the Controller has to see whether the invention results in a technical effect or a technical advancement. A

Coordinate Bench of this court in Ferid Allani v. Union of India 2019 SCC OnLine Del 11867, has observed that in today’s digital era where the majority of the inventions are based on computer programmes, it would be a step backward to claim that all such inventions are not patentable. The relevant portion is set out below:

“10…….The bar on patenting is in respect of “computer programs per se….”and not all inventions based on computer programs. In today's digital world, when most inventions are based on computer programs, it would be retrograde to argue

that all such inventions would not be patentable. Innovation in the field of artificial intelligence, blockchain technologies and other digital products would be based on computer programs, however the same would not become non-patentable

inventions - simply for that reason. It is rare to see a product which is not based on a computer program. Whether they are cars and other automobiles, microwave ovens, washing machines, refrigerators, they all have some sort of computer programs in-built in them. Thus, the effect that such programs produce including in digital and electronic products is crucial in determining the test of patentability…………….. .

Hon’ble High Court held that the Controller has overlooked the aforesaid aspects in the subject application and has wrongly come to the conclusion that it would be non-patentable under Section 3(k) of the Patents Act as it would fall into the category of “business method” and “computer programme per se”