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1964 (3) TMI 76
Issues Involved:
1. Whether there was a completed sale of timber by the petitioner to the Director in Madhya Pradesh and whether the property in the goods passed in that State.
2. Whether the goods were delivered for consumption outside the State as a direct result of the sale.
Detailed Analysis:
1. Completed Sale and Passing of Property:
The petitioner-firm, with its head office in Kanpur and a branch in Madhya Pradesh, entered into a contract with the Director-General of Stores, Supplies and Disposals, Government of India, for the supply of timber. The Sales Tax Officer assessed the petitioner to sales tax for the period from 1st January, 1952, to 31st December, 1952, which was upheld by the Appellate Assistant Commissioner and the Commissioner of Sales Tax. The petitioner contended that the sales were not liable to tax under section 27-A of the Central Provinces and Berar Sales Tax Act, 1947, and Article 286 of the Constitution. The Sales Tax Officer concluded that the property in goods passed to the buyer within Madhya Pradesh, and the delivery of goods at places outside the State was not a direct result of the sale for consumption outside the State. The Appellate Assistant Commissioner and the Commissioner of Sales Tax affirmed this view.
The court emphasized that the sale was "F.O.R. Mandla Fort," indicating that the timber was delivered to the Director at that place. The petitioner lost the right and power of disposal over the timber upon despatch and received ninety percent of the price upon proof of despatch. The court concluded that the property in timber passed to the Director at Mandla Fort, and the goods were actually delivered there.
2. Delivery for Consumption Outside the State:
The petitioner argued that the timber was sent for consumption outside Madhya Pradesh and was delivered as a direct result of the sale for consumption in the States of the consignees, invoking the Explanation to Article 286(1) of the Constitution. The respondents contended that the property in goods passed within Madhya Pradesh, and the subsequent movement of goods was for better enjoyment of what had been acquired.
The court noted that the term "F.O.R. Mandla Fort" indicated that the actual delivery was at Mandla Fort, and the subsequent transportation was not a condition attached to the contract of sale but was according to the purchaser's instructions. The court referred to the legal principles in Halsbury's Laws of England and the Supreme Court decisions, emphasizing that the term "F.O.R." fixes the point at which the property passes and the risk falls upon the buyer. The court rejected the applicability of section 39 of the Sale of Goods Act, 1930, as the contract stipulated delivery "F.O.R. Mandla Fort," ruling out the operation of section 39.
The court concluded that the transport and delivery of timber by rail to consignees outside the State were not actual deliveries to the purchasers as a direct result of the sale transactions. The movement of timber was subsequent to the completion of the sale in Madhya Pradesh, and the tax liability accrued in this State. The court dismissed the petitioner's contention that some sales had delivery places outside the State, as no such plea was raised before the taxing authorities.
Conclusion:
The court found no ground for issuing a writ of certiorari to quash the assessment order and the decisions upholding it. The petition was dismissed with costs, and the counsel's fee was fixed at Rs. 200. The outstanding amount of security deposit, if any, after deduction of costs, was ordered to be refunded to the petitioner.
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1964 (3) TMI 75
Issues:
Interpretation of whether "cottage basin" used in the silk industry qualifies as "machinery" under item 20 of the Mysore Sales Tax Act, 1957.
Detailed Analysis:
The judgment by the Karnataka High Court, delivered by Justice Tukol, addressed the issue of whether a "cottage basin" used for spinning and reeling silk in the silk industry qualifies as "machinery" under item 20 of the Mysore Sales Tax Act, 1957. The respondent, a manufacturer of the apparatus, was assessed for sales tax treating the apparatus as machinery. The respondent contended that the apparatus was a charaka and thus exempt from sales tax under section 8 of the Act. The Commercial Tax Officer, Deputy Commissioner, and Sales Tax Appellate Tribunal rejected this contention. The Tribunal specifically considered whether the apparatus generated power and concluded that it did not, leading them to reject the view that it fell under item 20 of the Act's Second Schedule.
The State Government argued that the Tribunal erred in not considering that the Act lacked a specific definition of "machinery" and that the classification in the Schedule was for tax rates rather than distinguishing power-generating machinery. The Court observed the apparatus in question, the "cottage basin," and noted its mechanical contrivances operated with manual power to reel silk threads efficiently and minimize labor. Drawing on precedents like the Privy Council's decision in Corporation of Calcutta v. Cossipore Municipality, the Court emphasized the combined movement of parts in the apparatus achieving a specific result, akin to machinery. The Court also referenced a local case, Mangalore Ganesh Beedi Works v. Commissioner of Income-tax, to interpret the term "machinery" broadly without statutory limitation to self-contained units.
Further, the Court referred to a Madras High Court case, Krishnan v. Municipal Prosecutor, which distinguished machinery worked by power from that worked by hand, excluding handlooms from the former category. However, the Court in the present case found that the "cottage basin" directed natural forces to achieve a specific result, aligning with the Privy Council's definition of machinery. Consequently, the Court held that the "cottage basin" qualified as machinery under item 20 of the Act's Second Schedule, overturning the Tribunal's decision. The Court allowed the petitions, set aside the Tribunal's orders, and reinstated the Deputy Commissioner's orders, with costs awarded against the respondent.
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1964 (3) TMI 74
Issues Involved:
1. Liability of mills to pay sales tax for food sold in canteens.
2. Liability of Aligarh Muslim University to pay sales tax for fees charged for dining-halls.
3. Jurisdiction of the High Court under Article 226 in tax matters.
4. Definition and scope of "business" under the U.P. Sales Tax Act.
5. Retrospective application of the U.P. Taxation Laws Amendment Act, 1963.
6. Concept of "sale" under the Sale of Goods Act.
Issue-wise Detailed Analysis:
1. Liability of Mills to Pay Sales Tax for Food Sold in Canteens:
The court held that the sale of food in the canteens maintained by the mills is liable to tax under the U.P. Sales Tax Act, 1948. The mills are considered "dealers" as defined in section 2(c) of the Act, which includes any person or association of persons carrying on the business of buying or selling goods. Despite the mills running the canteens on a non-profit basis, clause (aa) of section 2 clarifies that the business of buying or selling includes such business carried on without the motive of making a profit. Therefore, the mills are liable to pay sales tax for the sale of food in the canteens.
2. Liability of Aligarh Muslim University to Pay Sales Tax for Fees Charged for Dining-Halls:
The court found that the Aligarh Muslim University is not engaged in any commercial activity and is predominantly an educational institution. The supply of food to students in dining-halls is incidental to the general academic activity of the University. The University does not carry on the business of buying or selling goods and is not a "dealer" as defined in section 2(c) of the Act. Consequently, the University is not liable to pay sales tax on the fee charged from students for covering the expenditure over dining-halls.
3. Jurisdiction of the High Court under Article 226 in Tax Matters:
The court addressed the preliminary objection raised by the respondent that the U.P. Sales Tax Act provides a complete machinery for obtaining relief in respect of any improper orders passed by the Sales Tax Authorities. The court referred to the Supreme Court decisions in C.A. Abraham v. Income-tax Officer and Bhopal Sugar Industry Limited v. D.P. Dube, which held that an aggrieved person cannot abandon resort to statutory machinery and invoke the jurisdiction of the High Court under Article 226 when an adequate remedy is available. However, since the petitions were entertained and leave was granted, the court decided to address the merits of the petitions.
4. Definition and Scope of "Business" under the U.P. Sales Tax Act:
The court discussed the definition of "business" in the context of the U.P. Sales Tax Act. The term "business" usually connotes some commercial activity. The U.P. Taxation Laws Amendment Act, 1963, introduced a new clause (aa) in section 2, stating that the business of buying or selling includes such business carried on without the motive of making a profit. This amendment fundamentally changed the concept of "carrying on business" in the context of the Act, excluding the profit motive from the essential ingredients of carrying on business of buying or selling.
5. Retrospective Application of the U.P. Taxation Laws Amendment Act, 1963:
The petitioner contended that the retrospective application of the U.P. Taxation Laws Amendment Act, 1963, violated its fundamental rights under Article 19 of the Constitution. However, the court noted that the petitioner, being a company, is not a "citizen" and cannot claim the protection of Article 19. Additionally, Article 358 suspends the provisions of Article 19 during a proclamation of emergency, which was in operation since October 1962. Therefore, the petitioner could not challenge the validity of the Amendment Act on these grounds.
6. Concept of "Sale" under the Sale of Goods Act:
The court examined whether the transactions in the canteens and dining-halls constituted "sales" under the Sale of Goods Act. The court held that the transactions in the canteens of the mills were "sales" as there was mutual assent between the vendor and the purchaser. The petitioner-company displayed goods in the canteen, inviting offers from the workmen, who voluntarily made offers by purchasing the goods. In contrast, the fee charged by the University from students was not considered a price for the food-stuffs consumed but a fee for the service provided, which does not constitute a "sale" under the Sale of Goods Act.
Conclusion:
- The mills are liable to pay sales tax for the food sold in their canteens.
- The Aligarh Muslim University is not liable to pay sales tax for the fees charged for dining-halls.
- The High Court has jurisdiction to entertain the petitions under Article 226 despite the availability of alternative remedies.
- The definition of "business" under the U.P. Sales Tax Act includes activities carried on without a profit motive.
- The retrospective application of the U.P. Taxation Laws Amendment Act, 1963, is valid and does not violate the petitioner's fundamental rights.
- The transactions in the mills' canteens are "sales" under the Sale of Goods Act, while the fee charged by the University is not.
Judgments:
- Civil Miscellaneous Writs Nos. 2572 of 1963 and 1447 of 1963 are dismissed with costs.
- Civil Miscellaneous Writ No. 1291 of 1963 is allowed with costs. The order dated 13th March, 1963, is quashed, and the respondents are prohibited from pursuing the assessment proceedings initiated under the notice dated 20th February, 1963.
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1964 (3) TMI 73
Issues:
- Whether the order for refund is maintainable in the given circumstances and facts of the case?
Analysis:
The judgment delivered by the High Court of Allahabad pertains to a reference made by the Sales Tax Judge (Revisions) regarding the maintainability of an order for refund. The case involved M/s. Lord Krishna Sugar Mills Ltd., a dealer in sugar and rab, for the assessment year 1950-51. The respondent had recovered sales tax amounts from customers on sugar sold inside and outside Uttar Pradesh, as well as on rab. The respondent had deposited a specific amount in the Government treasury, clearly indicating that it was for the tax due on sales made inside Uttar Pradesh. Subsequently, the Sales Tax Officer held the respondent liable to deposit an additional amount under section 8-A(4) for sales made outside Uttar Pradesh and on rab, and appropriated the deposited sales tax amount against this liability.
Upon appeal, the Judge (Appeals) determined the tax liability on sugar sold inside Uttar Pradesh and directed the adjustment of the deposited amount against the liability under section 8-A(4). The respondent was required to deposit the balance due and an additional sum towards tax liability. The respondent, in revision before the Judge (Revisions), argued that it was only liable to deposit a specific amount representing the difference between determined sales tax and the amount already deposited. The Judge (Revisions) agreed with this contention and ordered a refund of the excess amount deposited.
The judgment emphasized the debtor's right to appropriate payments to specific debts, as well as the creditor's right to do so if not specified by the debtor. The court referred to legal principles from English Civil Law and the Indian Contract Act to support the decision. It was held that the Sales Tax Authorities were not justified in appropriating the deposit against the liability under section 8-A(4), as no provision of law allowed such appropriation.
Regarding the jurisdiction of the Judge (Revisions) to direct a refund, the court found that the order was valid under section 10(3) as a consequential order following the determination that the respondent was not liable to deposit the additional sum towards tax liability. The judgment also dismissed the State's argument of acquiescence by the respondent, stating that compliance with a demand under the law does not imply acquiescence.
In conclusion, the court answered the reference in the affirmative, directing the issuance of copies of the judgment to the relevant tax authorities and awarding costs to the respondent. The judgment clarified the legal principles governing the appropriation of payments and the jurisdiction of the revising authority to order refunds in such cases.
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1964 (3) TMI 72
whether the loss of Rs. 13,277suffered in the business during the period April 1, 1948, to March 30, 1949,can be set off against income under other heads in the assessment for the assessment year 1949-50 - The sum exempted under section 25(4) is not referred to in section16(1)(a) and is not liable to be included in the total income of the assessee.It is exempt altogether from the operation of the Act - the amendment of the definition of "total income" does not eliminate the distinction between the two categories of exempted sums, those which are exempt from charge as well as from inclusion in the total income and those which are exempt from charge but areliable to be included in the total income - If the assessee has earned a profit during the broken period, it is not liable to be considered for any purpose in respect of the assessment year to which the broken period relates - Held that: assessee is not entitled to have the loss suffered during the period April 1, 1948, to March 30, 1949, set off against the income under other heads under section 24(1) in the assessment for thea ssessment year 1949-50 - Question answered in the negative
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1964 (3) TMI 70
Whether on the facts the property in the goods sold by auction conducted at Fort Cochin really passed at Fort Cochin in the Madras State?
Whether it passed in Willingdon Island in Travancore-Cochin when the goods were actually delivered to the buyer?
Whether the sale is inside or outside the State?
Held that:- Appeal allowed. Exercising the power under clause (2) the Parliament has enacted the Central Sales Tax Act (74 of 1956), and by section 4(2) the doctrine of territorial nexus has been given legislative recognition, though in some- what limited form. Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub- section shall apply as if there were separate contracts in respect of the goods at each of such places
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1964 (3) TMI 66
Whether the assessee who had elected the previous year are liable to pay tax in the assessment year 1948-49 according to the rates prevailing during the year?
Held that:- Appeal allowed. Application of the relevant law to a problem raised by the reference before the High Court is not normally excluded merely because at the date when the Tribunal decided the question the relevant law was not or could not be brought to its notice. There is nothing so peculiar in the nature of a reference under the Indian Income-tax Act or the Sales Tax Acts that in deciding it the High Court is restricted to the application of the law which has been superseded by legislation since the date when the reference was made by the Tax Tribunal and is obliged to refuse to apply the law which by legislative direction has to be applied to a particular transaction which is the subject-matter of the reference.
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1964 (3) TMI 55
Whether legislative power to pass an Act retrospectively has been reasonably exercised or not?
Held that:- Appeal dismissed. In any event, we do not think that in the circumstances of this case it would be possible to hold that by making the provision of section 2 of the Orissa Sales Tax Validation Act, 1961 retrospective the Legislature has imposed a restriction on the petitioners' fundamental right under Article 19(1)(g) which is not reasonable and is not in the interest of the general public.
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1964 (3) TMI 46
Issues:
Winding up petition under just and equitable clause; Allegations of mismanagement, misconduct, and sale of undertakings; Prima facie grounds for winding up; Consideration of close relationship among directors; Company's financial position and profitability; Alleged disappearance of substratum; Petitioner's shareholding and motives; Availability of alternative remedies under Companies Act.
Analysis:
The judgment pertains to a winding up petition filed under the just and equitable clause, with allegations of mismanagement, misconduct, and impending sale of company undertakings. The court emphasized the importance of establishing prima facie grounds before admitting a winding-up petition, particularly when brought by a contributory. The court noted that the reputation of a company is adversely affected by such petitions and highlighted the need for reasonable and probable cause. The judge referred to relevant case laws to underscore the court's discretion in admitting or staying winding-up petitions based on the merits presented.
Regarding the specific grounds alleged in the petition, the court found little substance in the claims. The close relationship among directors was acknowledged but deemed insufficient for a winding-up order unless it led to misconduct or domination of the company. The court noted a change in the board composition, indicating efforts to address any potential conflicts of interest. Mismanagement allegations were mainly tied to the previous board, with no substantial evidence against the current board. The court scrutinized financial aspects, including profitability, dividend payments, and share value, concluding that the company was not commercially insolvent and showed prospects of profitability.
The court addressed the alleged disappearance of the company's substratum due to the sale of undertakings. It highlighted that the company still owned viable assets for its business activities, and decisions regarding the sale of remaining undertakings were within the permissible scope of its memorandum. The petitioner's shareholding, motives, and rejection of a premium offer for his shares were also scrutinized to assess the legitimacy of the winding-up petition. The court suggested that alternative remedies under the Companies Act, such as Section 398 applications, could be more appropriate for the petitioner's grievances, rather than seeking a winding-up order.
In conclusion, the court dismissed the winding-up petition, accepting the application brought by the company. The judgment underscored the need for petitioners to pursue reasonable remedies and demonstrated a thorough analysis of the legal and factual aspects surrounding the petition.
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1964 (3) TMI 37
Issues Involved:
1. Control of Company Affairs
2. Allegations of Mismanagement and Fraud
3. Withdrawal of Company Funds
4. Sale of Loom Hours
5. Ownership and Title to Shares
6. Appointment of an Administrator
7. Investigation into Company's Affairs
8. Calling of a General Meeting
Issue-wise Detailed Analysis:
1. Control of Company Affairs:
The petitioner and Tribeni Debi, who control the majority of equity shares, have been excluded from the company's management by the respondents. The respondents, holding a negligible minority of shares, are controlling the company's affairs, which is contrary to the doctrine of majority rule. The court emphasized that a small minority of shareholders cannot control the company's affairs while ignoring the majority's wishes.
2. Allegations of Mismanagement and Fraud:
The petitioner alleged that the respondents are guilty of mismanagement, misappropriation of funds, and other wrongful acts detrimental to the company's interest. The court noted that the allegations lacked particulars and were verified based on information rather than personal knowledge. The court held that general and vague allegations without particulars should be ignored and not relied upon for making any order.
3. Withdrawal of Company Funds:
Sambhu Prosad withdrew Rs. 8,10,000 from the company's account without authorization. Although the funds were invested in I.S.S. Co. (1951) Private Ltd., the court criticized Sambhu Prosad's conduct as wrongful and unauthorized. However, the court noted that this single act did not justify an order under sections 397 and 398 of the Companies Act.
4. Sale of Loom Hours:
The petitioner alleged wrongful and fraudulent sale of loom hours by the respondents, resulting in secret profits. The court found the allegations vague and lacking particulars. The court was not convinced by the allegations and noted that the sale of loom hours was correctly entered in the ledger.
5. Ownership and Title to Shares:
The respondents argued that the shares belong to the joint family of Ramnath Bajoria, and neither the petitioner nor Tribeni Debi are the true owners. The court held that the company must recognize as shareholders those whose names appear in the share register, regardless of any claims to beneficial ownership by the joint family. The court emphasized that the company cannot take notice of claims to beneficial ownership.
6. Appointment of an Administrator:
The court held that the current board of directors should be superseded, and an administrator should be appointed to take charge of the company's affairs until the disputes regarding the shares are resolved. The administrator will manage the company's affairs and call a general meeting for the appointment of new directors after rectification of the share register.
7. Investigation into Company's Affairs:
The court found that the charges made in the petition did not justify a general order for investigation. The court emphasized that vague charges of mismanagement and misappropriation without particulars should not lead to an investigation. The court declined to order an investigation under sections 397 and 398 of the Companies Act.
8. Calling of a General Meeting:
The court noted that nearly half of the shareholders were restrained from exercising their voting rights due to injunctions. Given the disputes and the injunctions, the court held that it was impracticable to call a general meeting for the appointment of directors. The court emphasized that a general meeting should not be directed when a significant portion of shareholders cannot participate.
Conclusion:
The court appointed an administrator to take charge of the company's affairs and superseded the current board of directors. The administrator will manage the company's affairs until the disputes regarding the shares are resolved and will call a general meeting for the appointment of new directors after rectification of the share register. The court declined to order an investigation into the company's affairs and held that a general meeting should not be directed under the current circumstances.
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1964 (3) TMI 35
Issues Involved:
1. Proof of Debt
2. Preferential Payment of Trust Money
3. Preferential Payment of Advances for Wages
Detailed Analysis:
1. Proof of Debt:
The appellant challenged the acceptance of the proof of debt by the official liquidator, arguing that the sums claimed by the respondent firm were not genuinely owed by the company. The appellant alleged gross mismanagement and undue influence by the respondent firm over the company's management, resulting in unfair financial terms and transactions. The official liquidator, however, accepted the proof of debt after scrutinizing the company's account books, which showed a balance of Rs. 1,14,892.29 nP. due to the respondent firm. The court upheld the liquidator's decision, noting that the appellant failed to provide sufficient evidence to disprove the indebtedness or to show any fraudulent or collusive behavior between the firm and the company's management. The court emphasized that the official liquidator had a duty to ensure the debt was real and just, which he fulfilled by examining relevant documents and entries in the company's books.
2. Preferential Payment of Trust Money:
The respondent firm claimed preferential payment for a sum of Rs. 50,000, described as trust money deposited with the company. The official liquidator and the court accepted this claim, finding that the deposit was made as security for the firm's obligations as an agent of the company. The court determined that the deposit was impressed with the character of a trust, meaning it did not vest in the liquidator and was not distributable among the company's creditors. This conclusion was based on the definition of a trust under the Indian Trusts Act and the nature of the deposit as security for the agency agreement. The court referred to various precedents supporting the view that such deposits, even if they earned interest or were mixed with other assets, retained their trust character.
3. Preferential Payment of Advances for Wages:
The respondent firm also claimed preferential payment for a sum of Rs. 1,06,983.82 nP., which was advanced to the company for the payment of wages and salaries. The official liquidator and the court upheld this claim, citing section 530(4) of the Companies Act, which grants priority to creditors who advance money for the payment of wages or salaries. The court found that the advances were used to pay wages for the months of September, October, and November 1958, falling within the twelve months preceding the relevant date (the appointment of the provisional liquidator). The court clarified that the right of priority was limited to the amount by which the company's liability was diminished due to the payment of wages, which in this case was fully supported by the company's account books and the liquidator's report.
Conclusion:
The court dismissed the appeal, affirming the official liquidator's acceptance of the proof of debt and the claims for preferential payment. The court found no evidence to support the appellant's allegations of fraud or mismanagement and determined that the respondent firm's claims were legitimate and supported by the company's records. The court also rejected the appellant's request to produce further evidence, finding it irrelevant to the matters at hand. Consequently, the respondent firm was entitled to preferential payment for both the trust money deposit and the advances made for wages.
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1964 (3) TMI 34
Issues Involved:
1. Applicability of the rule in Foss v. Harbottle.
2. Allegations of misfeasance by the defendant.
3. Whether damages were caused to the company.
4. Exception to the rule in Foss v. Harbottle based on justice requirements.
5. Jurisdiction of the court to stop the action.
Detailed Analysis:
1. Applicability of the Rule in Foss v. Harbottle:
The central issue revolves around whether the rule in Foss v. Harbottle [1843] 2 Hare 461 should apply, which generally stipulates that a company is the proper plaintiff to sue for wrongs done to it. The court examined if an exception to this rule was warranted in this case, where a shareholder sought to sue on behalf of himself and other shareholders, excluding the majority shareholder who controlled the company.
2. Allegations of Misfeasance by the Defendant:
The plaintiff alleged two instances of misfeasance by the defendant:
- Withholding Patent Application: The defendant, as managing director, received a patent application in February 1956 but withheld it until July 1957 while asserting personal entitlement to the invention. This withholding allegedly delayed the company's development and profitability related to the invention.
- Non-Disclosure of Negotiation Details: In early 1955, the defendant purportedly negotiated an agreement to sell the only machine made according to the invention but refused to disclose details to other directors unless they ratified a cheque he had wrongfully drawn.
3. Whether Damages were Caused to the Company:
The court evaluated if the alleged misfeasance resulted in damage to the company:
- Patent Application Withholding: The court found that the allegation of damage due to withholding the patent application was theoretically plausible, but the actual impact was deemed "wholly visionary." The company's paralysis due to internal discord made it unlikely that the withheld document would have altered its activities.
- Non-Disclosure of Negotiation Details: The court dismissed this complaint, finding no factual basis to conclude that the company lost an opportunity to sell the prototype machine.
4. Exception to the Rule in Foss v. Harbottle Based on Justice Requirements:
The plaintiff argued that justice required an exception to the rule in Foss v. Harbottle, citing various dicta suggesting exceptions when necessary to achieve justice. However, the court concluded that the present case did not necessitate such an exception. The alleged misfeasance did not involve fraud or ultra vires actions, and the internal discord within the company rendered the claims of damage speculative and baseless.
5. Jurisdiction of the Court to Stop the Action:
The court considered whether it had the jurisdiction to summarily end the action. The judge in the lower court had dismissed the action, finding it did not fall within exceptions to the rule in Foss v. Harbottle. The court of appeal upheld this decision, emphasizing that the litigation was "barren and futile," and that the company's deadlock and internal disputes negated any real prospect of damage from the alleged misfeasance.
Conclusion:
The appeal was dismissed, affirming the lower court's decision that the action did not qualify for an exception to the rule in Foss v. Harbottle. The court found the claims of damage speculative and unsupported by the facts, and thus, the interests of justice did not require a departure from the established rule. The litigation was characterized as futile, given the company's state of paralysis due to internal discord.
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1964 (3) TMI 17
Whether, on the facts and circumstances of the case, the profit computed at ₹ 3,11,646 on the sale of shares in Rohtas Industries Ltd. was in accordance with law ?
Held that:- The cost of 31,909 shares, namely, ₹ 5,83,210 must be spread over those shares and the 31,909 bonus shares taken together. The cost price of the bonus shares therefore was ₹ 2,92,141 because the bonus shares were to rank equal to the original shares. The answer to the question given by the High Court was therefore erroneous and the right answer would be that the profit computed at ₹ 3,11,646 was not in accordance with law. The appeal is therefore allowed
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1964 (3) TMI 16
Whether certain proceedings for the recovery of tax from the assessee under the Income-tax Act, 1922, were invalid and should be quashed as the assessment orders on which they were based had been revised in appeal?
Held that:- If the effect of an appellate order reducing the assessment as in the present case did not wipe out the original order, a most anomalous situation would, in my view, arise. Under section 46(1) of the Act after a default has been committed in terms of section 45(1) the Income-tax Officer may impose a penalty not exceeding the amount of the tax due in respect of which the default has occurred. This penalty may be recovered in the same way as the tax due, that is to say, by a notice under Section 29 and thereafter by a certificate issued under section 46(2). Now suppose the penalty for the full amount of the tax found due by the Income-tax Officer has been imposed and thereafter the appellate order reduces the amount of the tax. What happens to the order of penalty then ? Obviously, it does not automatically stand reduced to the reduced amount of the tax. It would again be absurd if the penalty could be recovered for the full original amount. The only sensible view to take in such a case would be that the order of penalty falls to the ground and the only logical way to support that conclusion would be to say that the original default has disappeared. Appeal dismissed.
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1964 (3) TMI 15
Whether the income received by the appellant is the income of the State of Andhra Pradesh within the meaning of article 289(1)?
Held that:- The High Court was right in rejecting the argument that by virtue of the repugnancy between the material provisions of the Act and the charging section of the Income-tax Act, it should be held that the appellant was not liable to pay tax on its income. Appeals dismissed.
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1964 (3) TMI 14
Whether in the facts and circumstances of this case the inference drawn by the Tribunal that the fixed deposit of ₹ 5 lakhs in the names of S. P. Agarwalla did not represent the concealed income of the assessee firm was justified in law?
Held that:- We are not in this case called upon to consider whether any question of law arises from the finding of the Tribunal in respect of the two deposit receipts in the names of Raghunath Prasad Agarwalla and B. N. Gupta, but it would be impossible to hold that the finding of the Tribunal in respect of the deposit made on October 11, 1944, in the name of Sheo Prasad Agarwalla was so perverse that no reason able body of persons properly instructed in the law could have reached it. The circumstances relied upon by Mr. Sastri do raise suspicion, but suspicion cannot take the place of evidence. Appeal dismissed.
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1964 (3) TMI 13
Whether the first respondent Corporation is entitled to levy a tax on pensioners in respect of the pensions received by them?
Held that:- The appeal accordingly succeeds and the appellant is held entitled to the relief prayed by him in the petition he filed in the High Court, viz., a writ of prohibition against the respondent-Corporation from enforcing the demand
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1964 (3) TMI 12
Whether condition would be satisfied whenever a terminal tax (without reference, either to the article on which it was levied or the rate) was being lawfully," levied by the municipality prior to the commencement of the Constitution and as in this case admittedly a terminal tax was being levied on certain, articles, that condition was satisfied?
Held that:- The argument of Attorney-General has to be rejected as lacking any substance, for on no construction or narrow, of the expression " levy " in the pharse " continue to be levied " can such a case be comprehended. From the mere fact that a State enacrtnent has authorised a municipality to levy a tax it cannot said that a tax which had never been imposed was " being lawfully levied " by the municipality, not to speak of the tax, etc., collected being "applied to the same purposes" before the commencement of the Constitutions as contemplated by the concluding portion of the article.
The last portion of article 277 uses the words " continue to be levied " and to be applied to the same purposes ". By reason of this collocation between the concept of the levy and of application of the proceeds of the tax, the Constitution makers obviously intended the word " levy " to be understood as including the collection of the tax, for it is only when a tax is collected that any question of its application to a particular purpose would arise. It is apparent that if the word " levied " were understood in the sense which Mr. Setalvad contends, there could be no " application " of the proceeds of the tax to the same purposes as at the commencement of the Constitution. For ex concessis at that date there were no proceeds to be applied. The decision of the High Court is, therefore, correct and the appeal fails.
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1964 (3) TMI 11
True construction of the provisions of section 4 of the Indian Income-tax (Amendment) Act, 1959 (1 of 1959) questioned
Held that:- The clear intention of the legislature is to save the validity of the notice as well as the assessment from an attack on the ground that the notice was given beyond the prescribed period. That intention would be effectuated if the wider meaning is given to the expression " issued ". The dictionary meaning of the expression " issued " takes in the entire process of sending the notice as well as the service thereof. The said word used in section 34(1) of the Act itself was interpreted by courts to mean " served ". The limited meaning, namely, " sent " will exclude from the operation of the provision a class of cases and introduce anomalies. In the circumstances, by interpretation, we accept the wider meaning the word " issued " bears. In this view, though the notices were served beyond the prescribed time, they were saved under section 4 of the Amending Act. Appeal dismissed.
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1964 (3) TMI 10
Whether, on the facts and circumstances of the case, the collections by the assessee-company described in its accounts as 'empty bottles return security deposits' were income assessable under section 10 of the Income-tax Act ?
Held that:- The charge now under consideration is a charge additional to that collected under the " buy-back scheme " and this we have earlier said. It has never been in dispute, either in the earlier case or now, that the charge under the " buy-back scheme " which was collected under Government's sanction constituted a taxable income. This court had never said, nor was it ever contended by the assessee, that a collection would not be taxable if it had been made with the sanction of the Government. The first point of distinction sought to be made by the High Court is, therefore, unfounded.
It seems to us that the only reason why the rules required a wholesaler to return the bottles to the distiller was to authorise the imposition of a term of the sale upon the breach of which, the charges made for the bottles would cease to be refundable. all that the rule does is to authorise the making of a contract concerning the deposit on the terms mentioned in it the object apparently being to avoid any question as to its validity arising later. We may here point out that the trade in liquor is largely controlled by Government regulations. It must, therefore, be held that the deposit was actually taken under a contract; it was none the less so though the contract was authorised by the statutory rules. The third point of distinction on which the High Court relied was, therefore, also without foundation. Appeal allowed.
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