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Showing 261 to 280 of 692 Records
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2010 (5) TMI 704
TDS u/s 194C - payment made by the assessee is under a contract to the contract workers - additions in the remand proceedings - as submitted by the assessee that the assessee sold seeds to farmers by raising invoices and, thereafter purchased the multiplied potatoes against invoice. The agreement was entered into to prevent the farmers from selling the multiplied seeds to other parties. The company was not making any payment in the nature of job work - HELD THAT:- The assessee in order to facilitate the proper production had advanced the amount to the farmers by way of seeds and cash in advance. The cost of seed and the amount so advanced have been adjusted against the sale proceeds. The conclusion of the AO that the farmer has to produce the potatoes seeds of desired size, in our considered opinion, is not correct. The growing of potatoes is a natural process. The size of potatoes depends upon the nature of land, the quantity of manures and fertilizers added, the quantity of water and the nature of the beds raised whether they were compact or porous enough to allow the size of potatoes to grow freely. The operations carried out by the farmers are purely agricultural operations. They cannot be by any stretch of imagination be said that they were in the nature of work contract.
The assessee had entered into agreement with the farmers to prevent them from selling the seeds so grown in the open market. Therefore, in our considered opinion, the provisions of section 194C are not applicable in the case of the assessee. Accordingly, the CIT (A) was justified in deleting the addition made by the AO u/s 40(a)(ia).
Expenditure claimed on labour charges - addition u/s 40(a)(ia) - certain payments were made by the assessee to labour contractors against the supply of labour for harvesting, grading and packing, etc. The assessee-company could not furnish confirmations of labour charges - HELD THAT:- AO disallowed the payment on the presumption that the payment was made to the contractors and the assessee had kept the payments below Rs.20,000 deliberately in order to circumvent the provisions of section 194C. If the payment has been made to a contractor, the payer has to deduct tax at source on even amounts less than Rs. 20,000. There is nothing on record to suggest that the payments on account of labour charges were made to contractors. On the contrary the assessee had made payment to labourers directly.
Therefore, the provisions of section 194C are not applicable. The AO had made disallowance on ad hoc basis out of total labour charges - Since no material has been brought on record, in our considered opinion the AO was not justified in invoking the provisions of section 40(a)(ia). Accordingly, the CIT (A) was justified in deleting the addition.
Appeal filed by the Revenue is dismissed.
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2010 (5) TMI 703
Issues involved: Jurisdiction of Assessing Officer to reopen assessment under section 147 after dropping proceedings under section 263.
The assessee raised a ground challenging the order passed by the Assessing Officer under section 147, contending that there was no income which escaped assessment and therefore the order should have been cancelled. The assessee also argued that since the Commissioner of Income-tax dropped the proposed proceedings under section 263 after accepting explanations, the Assessing Officer had no jurisdiction to issue notice under section 148 and frame an income escaping assessment. The Tribunal considered a similar legal issue in the assessee's case for the preceding assessment year and held that the Assessing Officer had no jurisdiction to reopen the assessment under section 147 after proceedings under section 263 were dropped. The Tribunal relied on the judgment of the Madras High Court and concluded that the Assessing Officer cannot circumvent the order of the Commissioner of Income-tax passed under section 263 by reopening the assessment under section 147.
The Revenue argued that the provisions of section 263 and section 147 operate independently, with the scope of revision under section 263 being narrower compared to the jurisdiction of the Assessing Officer under section 147. The Assessing Officer's jurisdiction under section 147 is focused on the escapement of income based on reasons recorded by him, while the Commissioner of Income-tax's role under section 263 is to determine if the order is erroneous and prejudicial to the Revenue's interests. The Revenue contended that the Assessing Officer's jurisdiction under section 147 is not affected by the dropping of proceedings under section 263.
The Tribunal analyzed the legal provisions and previous decisions, noting that the issue raised by the assessee was identical to the one decided in the preceding assessment year. The Tribunal followed the precedent set by its earlier decision in the assessee's case for the prior year, where it was held that the Assessing Officer had no jurisdiction to reopen the assessment under section 147 after proceedings under section 263 were dropped. Therefore, the Tribunal held that the order of the Assessing Officer reopening the assessment for the impugned year was without jurisdiction and set it aside. Consequently, the appeal filed by the Revenue was deemed infructuous. The Tribunal emphasized the importance of judicial precedence and discipline in following earlier decisions unless there are valid reasons to differ. The appeals were decided on the jurisdictional issue, rendering other grounds raised on merit academic and not considered. As a result, the appeal filed by the assessee was allowed, and the appeal filed by the Revenue was dismissed as infructuous.
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2010 (5) TMI 702
Employees' contribution to provident fund - allowable as deduction - HELD THAT:- the issue is covered in favour of the assessee by the decision of the hon'ble apex court in the case of CIT v. Alom Extrusions Ltd. [2009 (11) TMI 27 - SUPREME COURT] according to which contribution to employees' State insurance is allowable as deduction if the same is paid before the due date of filing the return. The hon'ble Delhi High Court in the case of CIT v. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT] following the aforesaid issue the hon'ble apex court has held that the employees' contribution to provident fund would be allowed if the same is paid before the due date of filing return.
Respectfully following the precedent, we set aside the order of the authorities below and decide the issue in favour of the assessee.
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2010 (5) TMI 701
Whether the determination by the respondent No.2 that the Industrial Undertaking of the petitioner at Hariyala is liable to be assessed at 60% of the consumption charges of electricity and for which no reason have been given and hence the said determination is void, illegal and have no legal effect?
Held that:- The respondent authorities are not justified in collecting/adjusting and/or enforcing the recovery of electricity duty at the rate of 60% by reclassifying the electrical energy consumed by the petitioners for their activities.
As per the definition of “industrial undertaking” given in Section 2(bb) of the Act, the petitioners' activities fall within the ambit of this definition. The Government of India in exercise of power conferred by Sections 5 and 7 of the Indian Explosives Act, 1884 has made Rules known as Gas Cylinder Rules, 1981. The Rule-2, Sub-clause-xxv defines the expression 'manufacturing of gas' which means filling of a cylinder with any compressed gas and also includes transfer of compressed gas from one cylinder to any other cylinder.” Thus, filling of LPG Gas Cylinder is evidently a process of manufacture and, therefore, the petitioners are Industrial Undertakings consuming high tension energy as provided by Section-3(1) and Clause 5(a) of the Schedule to the Act and as such the respondents had initially correctly levied duty at 20% of the consumption charges. Appeal allowed.
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2010 (5) TMI 700
Whether in the absence of one-to-one co-relation Appellant is liable to pay Modvat/Cenvat involved on raw material destroyed in fire?
Whether the Tribunal has failed to pass a Speaking Order?
Held that:- In the present case, it is on record that the Assessee has not received amount of Cenvat Credit involved on inputs, as compensation from the Insurance Company. It means, Assessee has borne loss of goods incident. It is undisputed fact that the Appellant has paid duty on inputs at the time of purchase of goods. The Assessee took credit and utilized the same for the payment of duty on finished goods. There is no one-to-one co-relation between the inputs and finished goods. In the absence of one-to-one co-relation, it is unjustified to ask the Assessee to reverse the credit which has already been utilized for the payment of finished goods. Thus the Assessee is not liable to pay duty equivalent to amount of Cenvat Credit availed on inputs and therefore question No. 1 is answered in favour of the appellant-assessee.
As far as the second question of law is concerned, a perusal of the order passed by the Tribunal shows that it is a speaking order. Hence, this question is also decided against the Revenue
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2010 (5) TMI 699
Issues:
- Whether CENVAT credit on service tax paid on outward freight up to the port of export is admissible under the Cenvat Credit Rules, 2004.
- Whether the port of export can be considered as the place of removal in the context of availing CENVAT credit on service tax paid on GTA services for transportation of export goods.
Analysis:
Issue 1: CENVAT Credit on Outward Freight:
The appellant, engaged in manufacturing Polyester Staple Fibre (PSF) and Tow, availed CENVAT credit on service tax paid on outward freight up to the port of export. The Assistant Commissioner disallowed this credit, citing Rule 2 of the Cenvat Credit Rules, 2004, which states that transport of goods to the port of export is not part of the manufacturing process and thus not an input service eligible for credit. Additionally, a CEBE Circular specified that credit on outward transport of goods is only allowed up to the place of removal, which does not include the port. The Department alleged intentional suppression of facts by the appellant, invoking Section 11A(1) of the Central Excise Act, 1944 for recovery of dues.
Issue 2: Port of Export as Place of Removal:
The appellant argued that in the case of exports, the actual sale occurs at the port of export, where goods leave the country only upon loading onto ships. They relied on legal interpretations and judgments, including Kuntal Granites Ltd., to support their claim that the port of export should be considered the place of removal for export goods. The appellant contended that since they disclosed the credit availed in their returns, the longer period of limitation under Section 11A(1) should not apply. They emphasized that they believed in good faith that the credit was admissible based on judicial precedents.
Judgment:
The Commissioner analyzed the contentions and legal principles involved. Referring to relevant judgments and legal provisions, the Commissioner concluded that in the context of export goods, the port of export can be recognized as the place of removal. The Commissioner found support in various tribunal decisions and the CBEC Circular, which acknowledged situations where the place of removal differs from the standard definition. As per Section 4(3)(c)(iii) of the Central Excise Act, 1944, the place of removal includes locations where goods are sold post-factory clearance. In the case of export, the sale is only realized upon goods leaving Indian shores, making the port of export the place of removal. Consequently, the Commissioner allowed the appeal, affirming the admissibility of CENVAT credit on GTA services up to the port of export and negating the demand for interest or penalty.
This comprehensive analysis of the issues and the legal reasoning behind the judgment highlights the considerations made by the Commissioner in arriving at the decision to allow the appeal filed by the Appellant.
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2010 (5) TMI 698
Disallowance of payment to Retired Partners and subscription fees - payments paid to retired partners and to spouses/nominees of deceased partners in terms of clause 22 of the partnership deed - AO noted that the assessee had excluded from the business income a sum being the amount paid to ex-partners and spouses of deceased partners - assessee has explained that the retired partners and the spouses of deceased partners were entitled to certain payments as per Clause – 22 of the partnership deed as computed as per Clause – 23A and 23B - HELD THAT:- Various factors mentioned in clause – 22 above, a retiring partner or spouse or nominee of a deceased partner is entitled to certain payments specified in clause 23A & 23B. These clauses provide that retiring partners and spouse/nominee of deceased partners are entitled to receive payments @20% of their shares on the date of retirement in future profits of the firm for certain number of years depending upon the length of service rendered. Further the clause 28 provides that the payments mention in clause 22 shall be a prior charge on the receipts of the firm.
The case of the assessee is that the payments made as per clause – 22 are a prior and overriding charges on the receipts of the firm and, therefore, these are diversion of income by overriding title and thus are required to be excluded from the profit. We respectfully following the decision of assessee own case as relying in the case of Sheetal Das Tirathas [1960 (11) TMI 17 - SUPREME COURT] as held that in case, by some obligation, income is diverted before it reaches the assessee the amount is deductible . The Tribunal after considering clause 22, 23 and 28 of the partnership deed held that there was an obligation in this case and income diverted before it reached the assessee and it was not a case of application of income. The Tribunal also observed that the revenue authorities had allowed the said deduction from the year 1990 onwards and, therefore, could not make any deviation in the subsequent year the factual and legal position remaining the same. The Tribunal accordingly held that the deduction was allowable.
Interest on borrowed funds advanced to the sister concern - said concern had utilized the loan for taking office premises on lease - A.O observed that though the assessee was a partner in the sister concern but the expenditure relating to the sister concern could not be allowed as deduction - deduction of interest has been claimed under the head “business” against the “ other source” allowed by CIT(A) - HELD THAT:- The assessee had also received interest of Rs.24,68,079/- from the sister concern and the interest paid is only Rs. 23,15,275/-. The CIT(A) has held that interest income received has to be treated as income from other sources and the claim of interest payment of Rs. 23,15,275/- has to be allowed as deduction u/s 57(iii). We see no infirmity in the order of CIT(A), in allowing the deduction as the A.O has not disputed the fact that borrowed funds had been utilized for advancing to sister concern from which the assessee had received interest and, therefore, interest expenditure incurred by the assessee has to be allowed as a deduction.
Claim of deduction under the head “business” as reasonable as the loans had been advanced to the sister concern in which the assessee had deep interest to be used for the business of the sister concern. The loan was therefore on commercial expediency and interest income has therefore to be treated as incidental business income and claim of deduction of interest has to be allowed under the head “business”. The order of CIT(A) is upheld with modification as mentioned.
Allowability of interest expenditure - HELD THAT:- As we have already held that loan had been advanced to sister concern on commercial expediency and, therefore, interest income as well as interest expenditure have to be considered under the head “business”. Accordingly we hold that interest expenditure has to be allowed under the head “business
Disallowance of various expenditure - bills in the name of sister concern of assessee - items of expenditure disallowed related to publication of quarterly flash, foreign travel, preparation of name plates, reimbursement of part of expenditure relating to an employee sent on deputation - HELD THAT:- There is no material produced by revenue to controvert the claim made by the assessee that the publication of quarterly newsletter was by the assessee and there is also no dispute that the expenditure had been incurred by the assessee. Similarly the foreign travel expenditure had been incurred by the assessee.The assessee had also given the name of the client for which the foreign travel had been undertaken by Shri Farid and no material has been produced by the revenue to disprove the claim of the assessee. Therefore, mainly on the ground that the bill was in the name of the sister concern the claim cannot be disallowed.
As regards the employee Shri Girish, there is no dispute that the he was an employee of the assessee who had been deputed to the sister concern and the amount not paid by the sister concern had been reimbursed by the assessee. The claim in our view has to be allowed on commercial expediency. In so far as the expenditure on preparation of name plate is concerned, there is common bill in relation to three parties and the assessee had paid its share of expenditure. The CIT(A) has allowed Rs.8000/- on the ground that the assessee paid Rs. 8000/- only. However, we find that the assessee had also made payment of Rs.8840/- as per voucher placed - The entire claim is thus allowable . We therefore, set aside the order of the CIT(A) and delete the additions made in respect of all items.
Computation of remuneration to working partner allowable as deduction under section 40(b)(v) - A.O had also excluded the share of profit of the firm in the other firms appearing in the P&L Account while computing remuneration allowable on the ground that the said income was exempt in the hands of the assessee under section 10(2A) - HELD THAT:- Respectfully following the decisions in the case of S.P. Equipment & Services [2009 (9) TMI 637 - ITAT JAIPUR-A] we hold that various item of income assessed as income from other sources and excluded from the purview of book profit computation have to be included while computing the remuneration allowable as deduction. The order of CIT(A) is accordingly set aside on this point and the claim of the assessee is allowed.
A.O had also excluded the share of profit of the firm in the other firms appearing in the P&L Account while computing remuneration allowable on the ground that the said income was exempt in the hands of the assessee under section 10(2A). There is no dispute that such income is exempt in the hands of the assessee u/s. 10(2A). Therefore, remuneration allowable proportionate to such income which is exempt has to be disallowed under section 14A. Such income has either to be excluded from the book, profit or incase it is included in the book profit then remuneration allowable as computed in the section 40(b)(v) in relation to such exempt income has to be disallowed. In this case the A.O has excluded the share of profit from other firm from the book profit which had the effect of disallowing the remuneration allowable proportionate to such exempt income. We therefore, do not find any infirmity in such approach as expenditure relatable to exempt income has to be disallowed. The order of CIT(A) on this point is confirmed.
Computation of interest chargeable u/s 234B - whether the interest payable under section 234B has for the purpose of section 140A is to be computed with respect to the tax payable on the returned income or the income determined in the regular assessment? - HELD THAT:- We find that the section 140(1B) provides that interest payable under section 234B, has to be computed on the amount by which the advance paid falls short of assessed tax and the assessed tax for the purpose of this sub-section has been defined in the Explanation to mean the tax on total income as declared in the return as reduced by tax deducted/collected at source etc. Therefore, we agree with the submission made by ld. A.R that the interest payable under section 234B for the purpose of adjustment against the tax paid under section 140A has to be computed with respect to assessed tax determined on the basis of total income declared in the return. But this is only for the limited purpose of adjustment of payment made u/s. 140A against interest payable under section 234B while making computation of interest payable by the assessee under section 234B,which has to be computed with respect to the total income determined in regular assessment as per the definition of assessed tax given in section 234B. The assessee has also followed the same procedure with which we agree
Both the appeals of the revenue are dismissed, whereas those of the assessee are partly allowed.
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2010 (5) TMI 697
Computation of business income - choosing the system of accounting - Addition made on the basis of percentage of completion method as per revised Accounting Standard-7 (AS-7), the assessee is engaged in the business of builder and developer - CIT(A) held that it is AS-9 that is applicable to the case of the assessee
HELD THAT:- As undisputed appellant is a developer and not a contractor. A reading of section 145 of the Act shows that the business income which is assessable under the income Tax Act is to be computed in accordance with the consistent system of accounting followed by the assessee unless such system of accounting is defective and /or from such system of accounting, profit cannot be deduced. Thus, in our considered opinion, the option for choosing the system of account is with the assessee and not with the Learned Assessing Officer provided the system chosen by the assessee is consistently followed by him and such system is not a defective system
Provisions of AS-7 cannot override the provisions of section 145 in so far as the computation of business income under the Income Tax Act for the purpose of determining assessable income is concerned. A reading of section 145 of the Act shows that the business income which is assessable under the income Tax Act is to be computed in accordance with the consistent system of accounting followed by the assessee unless such system of accounting is defective and /or from such system of accounting, profit cannot be deduced.
We find that AO has brought no material on record to show that the system of accounting adopted by the assessee for the year under appeal was not consistently followed by the assessee or the system adopted was a defective system. In our considered view, even a project completion method is also a recognised system of accounting. Simply, The Institute of Chartered Accountants of India has recommended percentage completion method does not mean that project completion method if consistently followed by the assessee, the same is not a bonafide system of accounting or the same is a defective system of accounting.
The CIT (A) has recorded a finding after perusing the assessment records of the subsequent years that the assessee has offered for taxation its income in the subsequent year as per the consistent system of accounting followed by the assessee. Therefore, we do not find any error in the order of the CIT (A) and therefore, the same is upheld and the appeal of the revenue is dismissed.
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2010 (5) TMI 696
Issues involved: Application for modifying the order restraining alienation of fixed assets of a company.
Summary:
The respondent filed applications seeking modification of an order restraining alienation of fixed assets. The respondent, a wholly owned subsidiary, received offers for leasing out the assets, claiming potential loss if not leased. The petitioners argued lack of probity in asset transfer and potential impact on their shareholding. Respondent received offers after the restraint order, prompting petitioners to allege circumvention. Both parties presented arguments citing legal precedents to support their positions.
The respondent argued for modification based on lack of applicability of certain provisions and equity grounds. The petitioners countered, emphasizing the need to protect their interests and prevent multiplication of litigation. The Bench noted the interim nature of the previous order and considered the interestedness of the parties in the asset transfer. It concluded that maintaining the restraint order was justified to prevent potential irreparable loss and injury to all parties involved.
The application for modification was dismissed, with the petitioners directed to file a rejoinder and present arguments within a specified timeframe. Failure to comply would result in the cancellation of the previous order. The decision aimed to balance the interests of the parties while ensuring a fair and just resolution in the ongoing legal proceedings.
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2010 (5) TMI 695
Issues Involved:
1. Maintainability of the Company Petition (CP) No. 88 of 2007.
2. Compliance with section 399 of the Companies Act, 1956.
3. Allegations of oppression and mismanagement.
4. Eligibility of petitioners to maintain the CP.
5. Consideration of evidence and documents.
6. Allegations of fraudulent cessation of membership and directorship.
7. Application of the Limitation Act to the proceedings before the Company Law Board (CLB).
Issue-wise Detailed Analysis:
1. Maintainability of the Company Petition (CP) No. 88 of 2007:
The CLB initially dismissed CP No. 88 of 2007 as not maintainable. The High Court of Calcutta remanded the matter back to the CLB, emphasizing that the documents relied upon by the respondents were not made available to the petitioners. The CLB was requested to hear the company's application afresh within eight weeks, conditional upon the petitioners depositing a sum of Rs. 1 lakh.
2. Compliance with section 399 of the Companies Act, 1956:
The applicant/respondent argued that the petitioners did not meet the necessary qualifications under section 399 to maintain the CP under sections 397 and 398. The petitioners claimed to hold 14,500 equity shares, constituting 19.33% of the share capital, but failed to produce sufficient evidence to establish their shareholding at the time of filing the petition. The shares were allegedly transferred to Suwidha Viniyog Co. (P.) Ltd. in 1989 and 1991, and the petitioners did not hold the requisite shares as per the company's records.
3. Allegations of Oppression and Mismanagement:
The petitioners alleged wrongful and fraudulent cessation of membership and directorship, diversion of company funds, misappropriation, non-compliance with statutory formalities, and erosion of the company's net worth. These allegations were to be examined only if the petitioners had the locus to maintain the petition, which they failed to establish.
4. Eligibility of Petitioners to Maintain the CP:
The petitioners did not provide sufficient evidence to prove their eligibility under section 399. The only document annexed to the CP was a part of an old annual return. The CLB concluded that the petitioners did not hold the requisite shareholding and thus could not maintain the petition. The petitioners' claim that they were entitled to have their names on the register of members was not substantiated.
5. Consideration of Evidence and Documents:
The respondents produced original share certificates, the register of members, and the resignation letter of P-1 to support their case. The petitioners did not produce any substantial evidence to counter these documents. The additional documents filed by the petitioners, including income-tax returns and balance sheets, were deemed irrelevant and self-supporting without proper verification and authentication.
6. Allegations of Fraudulent Cessation of Membership and Directorship:
The petitioners' allegations of fraudulent cessation of membership and directorship, diversion of funds, and misappropriation were not considered due to their failure to establish locus. The CLB emphasized that these issues could only be examined if the petitioners had the requisite membership qualification under section 399.
7. Application of the Limitation Act to the Proceedings Before the CLB:
The CLB held that the Limitation Act does not apply to its proceedings, but delay and latches do apply, starting from the date of knowledge. The petitioners admitted to being shareholders only up to 1993, and the alleged transfer of shares took place more than 17 years ago. The petitioners showed gross inaction and negligence, and there was no justification for condonation of delay.
Conclusion:
The CLB allowed Company Application No. 357/2007, dismissing Company Petition No. 88/2007 as non-maintainable due to the petitioners' failure to prove their locus and requisite membership qualification under section 399. The applicant was entitled to receive the sum of Rs. 1 lakh deposited by the petitioners, along with accrued interest.
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2010 (5) TMI 694
Issues Involved:
1. Status of R1-company as a deemed public company or private company.
2. Characteristics and compliance of R1-company with private company norms.
3. Characteristics and compliance of R1-company with public company norms.
4. Free transferability of shares in a public company.
5. Validity of pre-emption clauses in public company articles.
6. Entitlement of petitioners to be on the Board of R1-company.
7. Reliefs sought by petitioners.
Detailed Analysis:
1. Status of R1-company as a deemed public company or private company:
The R1-company was initially incorporated as a private limited company but became a deemed public company under Section 43A of the Companies Act, 1956, effective from August 17, 1988. Post the amendment in 2000, Section 43A was deleted, removing the category of deemed public companies. The R1-company did not revert to private company status by amending its articles or approaching the RoC. Consequently, the R1-company is not a deemed public company but a public company.
2. Characteristics and compliance of R1-company with private company norms:
The R1-company does not meet the characteristics of a private company as defined in Section 3(1)(iii) of the Act. It failed to limit its members to 50 and did not amend its articles to prohibit the acceptance of deposits from non-members. Therefore, it does not possess the characteristics of a private company.
3. Characteristics and compliance of R1-company with public company norms:
The R1-company fulfills the characteristics of a public company as defined in Section 3(1)(iv) of the Act. It has more than 50 members and did not revert to private company status. The High Court of Bombay also held that R1-company is a public limited company. Thus, R1-company is a public company.
4. Free transferability of shares in a public company:
As a public company, the shares of R1-company are freely transferable under Section 111A of the Act. Despite the existence of Article 57 in the AoA, which restricts share transfers to non-members, the statute prevails over the articles. Section 9 of the Act overrides any article contrary to the statute, making Article 57 void and unenforceable.
5. Validity of pre-emption clauses in public company articles:
Pre-emption clauses in the articles of a public company, such as Article 57 in R1-company's AoA, are invalid as they contradict the statutory provision of free transferability of shares under Section 111A. The legal position is clear that any article contrary to the statute is void.
6. Entitlement of petitioners to be on the Board of R1-company:
The petitioners hold 17% of the issued and subscribed paid-up capital and have been shareholders since the company's incorporation. However, the appointment of directors is within the discretion of the General Body of the company, not the CLB. Therefore, the petitioners are not entitled to be on the Board by default.
7. Reliefs sought by petitioners:
The petitioners sought to restrain respondents from selling or transferring shares without following Article 57 and to appoint one of the petitioners to the Board. Given the findings that Article 57 is void and the appointment of directors is the prerogative of the General Body, the petitioners are not entitled to the reliefs sought. The petition alleging oppression and mismanagement fails and is dismissed.
Conclusion:
The R1-company is a public company with shares freely transferable under Section 111A. Article 57 of the AoA is void. The petitioners' request to be on the Board is not within the CLB's purview. The petition is dismissed, and all interim orders are vacated.
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2010 (5) TMI 693
Issues Involved:
1. Legitimacy of the petition under Section 111A of the Companies Act, 1956.
2. Validity of the transfer deed.
3. Delay in filing the petition and the issue of limitation.
4. Issuance of bonus shares and dividends.
5. Responsibility of the registrar and transfer agent.
6. Steps taken by the petitioner to rectify the transfer issue.
Detailed Analysis:
1. Legitimacy of the Petition under Section 111A of the Companies Act, 1956:
The petitioner invoked Section 111A of the Companies Act, 1956, seeking reliefs as prayed in the petition. The respondent argued that the petitioner could avail of the benefit under this provision only if the company refused to register the transfer of shares without sufficient cause within two months from the date of delivery of the transfer instrument. The respondent highlighted that the petition was filed after 14 years, thus barred by limitation.
2. Validity of the Transfer Deed:
The petitioner purchased 100 shares of Kotak Mahindra Finance Ltd. and lodged the transfer deed along with the share certificate with the registrar. However, the registrar (respondent No. 2) could not register the transfer as the signature of the transferor differed from the specimen signature recorded with the company. Despite repeated attempts, the petitioner failed to obtain a fresh transfer deed from the transferor (respondent No. 4).
3. Delay in Filing the Petition and the Issue of Limitation:
The respondents argued that the petition was barred by the limitation, as it was filed 14 years after the shares were purchased and the transfer was rejected. The petitioner did not take any steps to address the issue promptly, displaying a lethargic attitude. The bench noted that the petitioner had not explained the delay in approaching the bench after such a long period, emphasizing the principle that "delay defeats equity."
4. Issuance of Bonus Shares and Dividends:
The respondent-company issued bonus shares on three occasions, and the number of shares held by the petitioner, after considering the bonus shares, should have been 333 equity shares. However, the respondent No. 4, being the registered shareholder, received the bonus shares and dividends, which were later dematerialized and sold. The petitioner claimed entitlement to these shares and dividends, but the respondents denied this claim due to the shares still being in the name of respondent No. 4.
5. Responsibility of the Registrar and Transfer Agent:
Respondent No. 2, the registrar and transfer agent, stated that they could not register the transfer due to the discrepancy in the transferor's signature. They argued that the petitioner's negligence and delay in pursuing the matter diligently contributed to the prolonged issue. The registrar emphasized that they could only act based on proper documentation or an order from the Company Law Board.
6. Steps Taken by the Petitioner to Rectify the Transfer Issue:
The petitioner approached the broker and the registrar for rectification but failed to obtain a fresh transfer deed from the transferor. The petitioner wrote to the registrar requesting the transferor's address and subsequently contacted the transferor, but received no response. The bench noted that the petitioner did not take sufficient steps to resolve the issue, such as filing a suit or obtaining a court order to restrain the company from transferring the shares to third parties.
Conclusion:
The bench concluded that the petitioner did not act diligently in addressing the transfer issue and failed to provide sufficient evidence of efforts taken to obtain a fresh transfer deed. The delay of 14 years in filing the petition was deemed inordinate and unjustifiable. The bench directed the respondent-company to issue notice to the transferor before taking any action on the transfer of shares and to act in accordance with the law if the petitioner proves his bona fides and provides the required documents. The petition was disposed of with these directions.
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2010 (5) TMI 692
Issues Involved:
1. Transmission of shares and ownership.
2. Alleged erroneous insertion of joint holders' names.
3. Limitation period for filing the petition.
4. Responsibility of the company in maintaining accurate records.
Summary:
1. Transmission of Shares and Ownership:
The petitioner, invoking provisions u/s 111(4) of the Companies Act, 1956, sought relief regarding 624 equity shares of Rs. 500 each in respondent No. 1 company, originally held by Mr. Manilal V. Shah, HUF. Upon his death, the shares were transmitted to his legal heirs and recorded in the register of members on July 26, 1990. The petitioner claimed to be the absolute owner of 384 shares and further acquired 260 shares, totaling 644 shares. She intended to sell these shares to form a trust for her dependent daughter but discovered the share certificates were lost/misplaced.
2. Alleged Erroneous Insertion of Joint Holders' Names:
The petitioner applied for duplicate share certificates on January 9, 2008. The respondent-company advised her to furnish an indemnity bond and FIR copy. The company later informed her that the shares were held jointly with Mr. Harish M. Shah and Mrs. Usha H. Shah, respondents Nos. 2 and 3. The petitioner contended that the names were erroneously inserted without her consent. Respondents Nos. 2 and 3 argued that the names were inserted in 1993 and 1994 and that the petitioner had consented to this addition.
3. Limitation Period for Filing the Petition:
The petitioner claimed she became aware of the erroneous insertion only on January 22, 2008, and filed the petition within eight months, thus within the limitation period of three years as per the Limitation Act, 1963. Respondents Nos. 2 and 3 argued that the petition should be dismissed due to unreasonable delay and unnecessary hardship, as more than 12 years had passed since the insertion of joint names.
4. Responsibility of the Company in Maintaining Accurate Records:
Respondent No. 1 company admitted the insertion of joint names during the tenure of an employee who is now untraceable. The company failed to produce any relevant documents or board resolutions justifying the insertion of respondents Nos. 2 and 3 as joint holders. The Company Law Board emphasized that mere entry in the register of members cannot entitle a person to shares without consideration. The burden of proof lay on respondent No. 1 company to explain the insertion of names, which it failed to do.
Judgment:
The Company Law Board found no justification for the insertion of respondents Nos. 2 and 3 as joint holders. Exercising powers u/s 111(5) of the Companies Act, the Board directed respondent No. 1 company to delete the names of respondents Nos. 2 and 3 from the register of members in respect of 644 shares within 30 days from the receipt of the order. The petition was disposed of with this direction.
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2010 (5) TMI 691
Issues Involved:
1. Allegations of fraud, misfeasance, and mismanagement.
2. Non-compliance with statutory requirements.
3. Misuse of company funds and fraudulent transactions.
4. Failure to hold annual general meetings and file annual returns.
5. Failure to appoint a whole-time company secretary.
6. Improper sale and lease of company assets.
7. Non-recovery of statutory records.
Summary:
1. Allegations of Fraud, Misfeasance, and Mismanagement:
The petitioners alleged that the respondent-company's directors committed acts of fraud, cheating, oppression, mismanagement, and misfeasance. They diverted company funds, sold fixed assets fraudulently, and created multiple charges on certain fixed assets. The petitioners requested an investigation into the company's affairs u/s 237(b) of the Companies Act, 1956.
2. Non-compliance with Statutory Requirements:
The company failed to maintain a quorum of minimum three directors as required by section 252 of the Act. The tenure of certain directors, appointed as additional directors in 2003, had expired in 2004, yet they continued to act as regular directors, violating the company's articles and section 290 of the Act. The directors also attracted disqualification u/s 274(1)(g).
3. Misuse of Company Funds and Fraudulent Transactions:
The directors misused company funds for personal gain, including an investment of Rs. 3 crores in Rutvij Chemicals Limited, which was not reflected in subsequent audited accounts. Additionally, Rs. 191.32 lakhs invested in two private companies in 1998 was missing from the company's accounts from 2001 onwards.
4. Failure to Hold Annual General Meetings and File Annual Returns:
The company failed to convene and hold annual general meetings for seven years (2000-2007) and did not file annual returns with the Registrar of Companies due to non-finalization of annual accounts. This contravened sections 159, 166, 210, and 220 of the Act. The directors also failed to inform shareholders about the reasons for not holding AGMs.
5. Failure to Appoint a Whole-time Company Secretary:
The directors did not appoint a whole-time company secretary as required by section 383A of the Act.
6. Improper Sale and Lease of Company Assets:
The company owned valuable properties in Mumbai, some of which were sold by the directors despite encumbrances by secured creditors. Additionally, 350 acres of land were leased to trusts managed by the company's chairman, overlooking the court receiver's presence. The Charity Commissioner later declared these leases illegal.
7. Non-recovery of Statutory Records:
The company failed to retrieve its statutory records from the court receiver for eight years, making it impossible to finalize annual accounts.
Conclusion:
The Board concluded that the directors violated various provisions of the Act and conducted the company's affairs with intent to defraud its members and the public. The Board ordered an investigation into the company's affairs u/s 237(b) to protect the interests of the company and its shareholders. The Central Government was directed to appoint inspectors for this purpose, and the petitioners were instructed to provide all relevant information during the investigation. The company petition was disposed of with these directions.
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2010 (5) TMI 690
Whether even if the assessment is made u/s 143(1), while reopening the assessment u/s 147 by issuing notice u/s 148, the assessing officer must have reason to believe that income chargeable to tax has escaped assessment and the reason to believe must have a live link with the formation of the belief that income chargeable to tax had escaped assessment
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2010 (5) TMI 689
Demand of duty - Whether excise duty is liviable on “Control Samples” drawn and retained by the 'Party', considering it to be deemed removal under Rule 4, 10, 11 & 6 of the Central Excise Rules, 2002 – alleged that 'Party' was drawing batch control samples of medicines after labeling and packing in terms of Rule 78 of the Drugs and Cosmetics Rules, 1945 - No duty was being paid by the 'Party' on these control samples although no exemption was available – Held that:- In the case of Dabur India lt.,( 2005 (2) TMI 166 - CESTAT, NEW DELHI ) case was in favour of the 'Party' relying upon the aforesaid decision
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2010 (5) TMI 688
Reopening of assessment – beyond the period of 4 years from the end of the relevant assessment year – change of opinion - disallowing the claim of bad debt under section 36(1)(vii) – Held that:- Reopening of the assessment after expiry of 4 years from the end of the relevant assessment year and the conditions of the first proviso to section 147 of the Income-tax Act have not been satisfied by the Assessing Officer in this case - assessee disclosed all primary facts before the Assessing Officer at the time of original assessment under section 143(3) of the Income-tax Act regarding claim of bad debt. The Assessing Officer after examining the issue accepted the claim of the assessee. Therefore, it is clear case of mere change of opinion for reopening of assessment which is bad in law - assessee has written off the bad debt as irrecoverable in its account - initiation of proceedings under section 147 of the Income-tax Act is not in accordance with law - Assessing Officer, therefore, was not justified in initiating the reassessment proceedings - Assessing Officer was not justified in making the disallowance on account of bad debt – in favor of assessee
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2010 (5) TMI 687
Issues:
1. Addition made in the assessment years based on embezzlement charges.
2. Validity of the additions made by the Assessing Officer.
3. Decision of the State Public Services Tribunal and the High Court.
4. Cross-objections by the assessee challenging the additions.
5. Rulings of the Tribunal and High Court impacting the assessment.
Issue 1: Addition made in the assessment years based on embezzlement charges:
The Assessing Officer noted cash deposits in the assessee's bank accounts and alleged embezzlement amounts in the assessment years 2004-05, 2005-06, and 2006-07. The additions were based on these alleged embezzlement amounts.
Issue 2: Validity of the additions made by the Assessing Officer:
The CIT(A) deleted the additions, stating that embezzlement amounts do not constitute the income of the employee. The assessee argued that the embezzlement charges were quashed by the State Public Services Tribunal and the High Court, rendering the additions unsustainable in law.
Issue 3: Decision of the State Public Services Tribunal and the High Court:
The State Public Services Tribunal quashed the punishment orders against the assessee, allowing reinstatement with continuity of service. The High Court upheld this decision, emphasizing that no charge was made out against the assessee, and the employer could conduct a fresh inquiry if needed.
Issue 4: Cross-objections by the assessee challenging the additions:
The assessee raised cross-objections, contending that the embezzlement charges were invalidated by the Tribunal and High Court decisions, making the basis for the additions non-existent.
Issue 5: Rulings of the Tribunal and High Court impacting the assessment:
The Tribunal and High Court decisions held that the embezzlement charges against the assessee were not substantiated, allowing for reinstatement and a fresh inquiry if required. Consequently, the additions made by the Assessing Officer were deemed unsustainable in light of these rulings.
In conclusion, the Tribunal dismissed the revenue's appeals as the embezzlement charges were invalidated by the Tribunal and High Court decisions. The cross-objections by the assessee were allowed, emphasizing that the additions made by the Assessing Officer could not be sustained due to the quashing of the embezzlement charges. The judgment highlighted the importance of legal rulings in determining the validity of additions in assessments based on disputed charges.
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2010 (5) TMI 686
Issues Involved:
1. Deduction under Section 80-IB(10) of the Income-tax Act.
2. Disallowance under Section 40(a)(ia) for non-deduction of tax at source.
3. Computation of profits for the purpose of Section 80-IB(10) after disallowance under Section 40(a)(ia).
Issue-wise Detailed Analysis:
1. Deduction under Section 80-IB(10) of the Income-tax Act:
The assessee, a partnership firm engaged in building and developing housing projects, claimed a deduction under Section 80-IB(10) for the assessment year 2006-07. The profits from the housing project "Shivdarshan Co-op. Hsg. Society" were shown as Rs. 3,76,78,403, which was accepted by the Assessing Officer (AO). However, the AO disallowed certain expenses amounting to Rs. 4,50,12,485 under Section 40(a)(ia) due to non-deduction of tax, thereby adding this amount to the total income. The AO allowed the deduction under Section 80-IB(10) only on the originally claimed profit of Rs. 3,76,78,403, not on the enhanced profit after disallowance.
2. Disallowance under Section 40(a)(ia) for non-deduction of tax at source:
The AO disallowed expenses related to construction, consultancy, architect fees, commission, and professional charges totaling Rs. 4,50,12,485 under Section 40(a)(ia) as the assessee failed to deduct tax at source on these payments. This disallowed amount was added back to the net profit, resulting in a gross total income of Rs. 8,26,90,888. The CIT(A) upheld the AO's decision, stating that the disallowed expenditure cannot be considered as profits derived from the industrial undertaking for the purpose of Section 80-IB(10).
3. Computation of profits for the purpose of Section 80-IB(10) after disallowance under Section 40(a)(ia):
The Tribunal addressed whether the profits for the purpose of Section 80-IB(10) should be computed after considering the disallowance under Section 40(a)(ia). The Tribunal referred to Section 80AB, which mandates that the income derived from the eligible business must be computed in accordance with the provisions of the Act, specifically Sections 30 to 43D. Hence, the disallowed expenses under Section 40(a)(ia) should be added back to the profits, resulting in an enhanced profit eligible for deduction under Section 80-IB(10).
The Tribunal cited several judgments, including CIT v. Albright Morarji & Pandit Ltd., Grasim Industries Ltd. v. Asstt. CIT, and Plastibends India Ltd. v. Addl. CIT, to support the view that the computation of profits for deductions under Chapter VI-A should follow the provisions of Sections 30 to 43D. The Tribunal also discussed the Supreme Court's judgment in Cambay Electric Supply Industrial Co. Ltd. v. CIT, which emphasized that the total income must be computed in accordance with the other provisions of the Act before considering the specific deduction sections.
The Tribunal rejected the revenue's argument that disallowed expenses cannot be considered as operational profits derived from the housing project. The Tribunal held that the statutory provisions require the computation of profits to include both deductions and disallowances as per Sections 30 to 43D. Therefore, the enhanced profits after disallowance under Section 40(a)(ia) should be eligible for deduction under Section 80-IB(10).
Conclusion:
The Tribunal concluded that the assessee is entitled to the deduction under Section 80-IB(10) on the enhanced profit of Rs. 8,26,90,888, which includes the disallowed expenses under Section 40(a)(ia). The Tribunal emphasized the importance of adhering to the statutory provisions and binding precedents in the computation of profits for deductions under Chapter VI-A.
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2010 (5) TMI 685
Issues:
Block assessment appeals regarding alleged deficiency of stock and undisclosed sources.
Analysis:
1. The appeals were filed by the assessees challenging additions made by the Assessing Officer for alleged stock deficiency and undisclosed sources during block assessments for the period 1989-90 to 1998-99.
2. The Tribunal initially allowed both appeals, concluding that the additions made by the Assessing Officer were unwarranted. The revenue then appealed to the High Court, questioning the Tribunal's findings.
3. The High Court considered whether the Tribunal had adequately reviewed all documents and reversed the Assessing Officer's findings without due consideration. The High Court found the Tribunal's order lacking in application of mind and directed a fresh disposal of the matter.
4. Upon rehearing the appeals, the Tribunal examined the submissions and documents presented by both parties. The issues revolved around alleged stock shortages, admissions by a partner regarding unaccounted sales, and construction costs.
5. The Tribunal scrutinized the evidence, including stock inventories and statements, to assess the validity of the Assessing Officer's additions. It was noted that the Assessing Officer's calculations were based on estimates rather than concrete evidence, undermining the claims of stock deficits.
6. Regarding the partner's statement under section 132(4), the Tribunal emphasized the importance of allowing cross-examination to challenge such statements. The absence of the partner for cross-examination weakened the evidentiary value of the statement.
7. Despite the revenue's arguments, the Tribunal found the Assessing Officer's additions unsustainable. The Tribunal reaffirmed its original decision, concluding that there was no reason to deviate from its initial views.
8. Consequently, the Tribunal allowed both appeals, upholding its previous decision in favor of the assessees. The matters were resolved in favor of the assessees, highlighting the importance of thorough examination of evidence and adherence to legal procedures in tax assessments.
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