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1960 (11) TMI 93
The High Court of Andhra Pradesh clarified that section 12-A(6) of the Madras General Sales Tax Act applies to orders passed on merits and appeals dismissed for default. The Court allowed the revision case, set aside the Tribunal's order, and directed the Tribunal to restore the application and consider it on merits. No costs were awarded. (Case citation: 1960 (11) TMI 93 - Andhra Pradesh High Court)
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1960 (11) TMI 92
Issues:
- Whether gunny bags sold along with rice attract sales tax under the General Sales Tax Act, 1125.
Analysis:
The judgment pertains to petitions under section 15-B of the General Sales Tax Act, 1125, seeking a revision of orders by the Sales Tax Appellate Tribunal. The central issue in both cases is whether the gunny bags sold along with rice are subject to sales tax under the Act. The Tribunal held that the tax is applicable, which is being challenged. It is established that the rice itself is exempt from taxation under Section 5(vi) of the Act. The petitioners did not charge separately for the gunny bags but the bags' value was not indicated to be given for free. The Tribunal concluded that the price per bag of rice includes both the rice and the bags, justifying the tax imposition.
The definition of "dealer" under section 2(d) of the Act includes persons engaged in buying or selling goods, encompassing the petitioners. The term "goods" under section 2(e) covers all movable property, including rice and gunny bags. As the petitioners sell rice in gunny bags with a composite price, they are considered dealers in both rice and bags. The Act imposes tax on a dealer's turnover, defined in section 2(k) as the total amount for which goods are bought or sold. The transactions involving the sale of rice and gunny bags qualify as sales under section 2(j) of the Act, subjecting the turnover to sales tax.
The judgment references various cases from the Sales Tax Cases, emphasizing the applicability of the Act's provisions to the present scenario. The petitioners argued for an integrated commodity concept, suggesting the exemption for foodgrains should extend to the bags. However, the court held that the bags do not lose their identity when packed with foodgrains, rejecting the extension of the exemption. Consequently, the petitions were dismissed with costs, upholding the imposition of sales tax on the turnover involving the sale of gunny bags along with rice.
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1960 (11) TMI 91
Whether sales under which goods were delivered outside the State of Bihar for the purpose of consumption but not within the State of first delivery or first destination, are exempt from the levy of sales tax by the Bihar State by virtue of Article 286(1)(a) of the Constitution as it stood before the recent amendment?
Held that:- Appeal allowed. The power of the State to levy sales tax relying upon the territorial nexus between the taxing power of the State and the sale is impaired for reasons already set out to the extent to which it is restricted by the incorporation of Article 286(1)(a) and the Explanation thereto, in that Act. Therefore, sales effected on or after January 26, 1950, where goods are as a direct result of the sale delivered in another State for consumption in that other State, are not liable to be taxed. The order of the Superintendent of Taxes is set aside. He is directed to grant refund of tax paid in the light of this judgment. The appellant will be entitled to exemption from payment of tax if the goods are, as a direct result of the sale, delivered in another State for the purpose of consumption in that State.
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1960 (11) TMI 82
Whether the respondents were carrying on such a business in respect of coal?
Held that:- Appeal dismissed. The position of the respondents was merely that of agents, arranging the sale to a disclosed purchaser, though guaranteeing payment to the colliery on behalf of their principal. In view of what we have said, no business of selling coal was disclosed in the instance cited before the Collector, and the order of the Tribunal was correct on the facts placed before it.
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1960 (11) TMI 73
Whether in the rules or in the licence itself that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption?
Whether the conditions upon which the licence is given are fulfilled or not?
Held that:- Appeal dismissed. The appellants have been found to have contravened the provisions of the Act as well as the rules and therefore it cannot be said that they have observed the conditions upon which the exemption under the licence is available. In that view of the matter, it was rightly held that they were not exempt from assessment under the Act.
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1960 (11) TMI 71
Whether the transaction in question in this case amounted to a sale within the meaning of the Act?
Held that:- Appeal dismissed. The stipulation that the contractors themselves will have to supply the spare parts, as and when needed, for replacements of the worn out parts is also consistent with the case of the respondent that title had passed to the contractors and that they were responsible for the upkeep of the machinery and equipments and for depreciation. If it were a mere contract of hiring, the owner of the goods would have continued to be liable for replacements of worn out parts and for depreciation. Applying those tests to the terms of the agreement between the parties, it is clear that the transaction was a sale on deferred payments with an option to re-purchase and not a mere contract of hiring, as contended on behalf of the appellant.
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1960 (11) TMI 55
Issues Involved:
1. Service of the letter of demand.
2. Compliance with verification requirements.
3. Interpretation of Section 434(1)(a) of the Companies Act, 1956.
4. Whether the petitioning creditor's debt is a disputed debt.
Issue-wise Detailed Analysis:
1. Service of the Letter of Demand:
The primary issue was whether the letter of demand was properly served on the appellant company. The respondent company had sent a letter of demand by registered post, which was allegedly refused by the appellant company. The appellant company argued that no such letter was received and claimed the refusal was fabricated. However, the court noted that the original envelope with postal marks indicated it was correctly addressed to the registered office of the appellant company, albeit with a minor error in the company name. The court found that this error did not prejudice the appellant company, as the address was otherwise correct. Additionally, a supporting affidavit from a creditor indicated a similar refusal of a correctly addressed letter. The court concluded that the facts supported the respondent company's claim that the letter was duly posted and refused, thus establishing proper service.
2. Compliance with Verification Requirements:
The appellant company contended that the verification clause in the petition did not comply with Order XIX, Rule 3 of the Code of Civil Procedure, and thus the statement regarding the service of the letter of demand should be ignored. The court, however, clarified that the verification was made in accordance with the company rules of the court, which override the general provisions of the Code of Civil Procedure. Therefore, the court found no merit in the appellant's contention regarding the verification clause.
3. Interpretation of Section 434(1)(a) of the Companies Act, 1956:
The appellant company argued that Section 434(1)(a) requires the statutory notice of demand to be actually delivered to the company's registered office, and since the letter was returned, there was no service. The court interpreted that the term "delivered" includes a situation where the registered letter is tendered but refused by the addressee. The court stated that a refusal to accept a registered letter is as good as delivery and precludes the addressee from pleading ignorance. The court emphasized that allowing a debtor to avoid service by refusing a registered letter would render the statutory provision ineffective. The court held that the presumption of service under Section 27 of the General Clauses Act and Sections 114 and 16 of the Indian Evidence Act applies, and the refusal of the letter by the appellant company constituted proper service.
4. Whether the Petitioning Creditor's Debt is a Disputed Debt:
The appellant company argued that the debt claimed by the respondent company was disputed because the appellant had filed a suit against the respondent company for a substantial sum, which was pending. The court dismissed this argument, stating that the respondent company's claim was based on a decree passed after contest, which is not a disputed debt merely because an appeal is pending. The court noted that unless there is a stay of execution of the decree, the judgment-debt can form the foundation of a winding-up petition.
Conclusion:
The court dismissed the appeal, holding that the letter of demand was properly served, the verification requirements were met, the statutory notice was validly delivered despite refusal, and the petitioning creditor's debt was not a disputed debt. The appeal was dismissed with costs, and the decision was certified for two counsel.
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1960 (11) TMI 47
Issues:
Procedure to be followed in the issue of subpoena on the Registrar of Companies for document production.
Analysis:
The judgment addressed the procedure for issuing a subpoena on the Registrar of Companies for document production. The application sought to recall a subpoena issued to the Registrar of Companies, West Bengal, and exempt the applicant from producing documents. The Registrar argued that the Master had no jurisdiction to issue subpoenas without court leave, as it would disrupt office work and public rights to inspect records under the Companies Act.
The court examined Chapter VI rules and Section 610 of the Companies Act, which grants rights for document inspection, certification, and court-ordered production. The court agreed with the Registrar that Section 610(2) was enacted to prevent inconvenience to the public and ensure orderly document access. The provision was deemed essential for public interest and efficient document management.
Reference was made to the Bankers' Books Evidence Act to interpret the Companies Act's requirement for court leave to produce original documents. Certified copies were deemed valid in evidence, but originals might be necessary in cases of forgery or discrepancies. The court emphasized that the judge should decide if original documents are required at trial.
The judgment highlighted the need for court leave to issue subpoenas under Section 610(2) and distinguished such applications from general suit-related matters. It cited a precedent emphasizing that granting leave was a judicial act, requiring judge intervention. The vague nature of the subpoena in this case led the court to set it aside and order the petitioner to bear their own costs.
In conclusion, the judgment clarified the necessity of court leave for issuing subpoenas on the Registrar of Companies, emphasizing the judge's role in determining the need for original document production. The decision to set aside the vague subpoena underscored the importance of clarity and adherence to legal procedures in document requests.
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1960 (11) TMI 46
Issues Involved:
1. Validity of the compulsory acquisition under section 209 of the Companies Act, 1948.
2. Fairness of the price offered for the minority shareholder's shares.
3. The legitimacy of the scheme or contract dated July 14, 1959.
4. The propriety of the transferee company's actions and intentions.
Detailed Analysis:
1. Validity of the compulsory acquisition under section 209 of the Companies Act, 1948:
The transferee company, Jackson and Shaw (Holdings) Ltd., sought to exercise its statutory rights of compulsory acquisition under section 209. The minority shareholder challenged this, and the court had to determine whether the transferee company was entitled to acquire the shares. The court noted that the mechanism of section 209 had been invoked by forming the holding company specifically to enable the majority shareholders to expropriate the minority shareholder's shares. The court concluded that such a use of section 209 was contrary to the fundamental principle of law that a shareholder cannot be forced to sell their shares without just cause.
2. Fairness of the price offered for the minority shareholder's shares:
The court examined whether the price offered to the minority shareholder was fair. The transferee company argued that the onus was on the minority shareholder to show that the price was unfair. However, the court found that the burden was on the transferee company to prove that the price was fair, especially given the unusual nature of the case where the majority shareholders were essentially the same as the transferee company. The court noted that the minority shareholder had shown that the offer was not fair, as evidenced by higher offers made earlier and the company's profit-earning potential.
3. The legitimacy of the scheme or contract dated July 14, 1959:
The court scrutinized the legitimacy of the purported scheme or contract dated July 14, 1959. It was argued that there was no actual scheme or contract as required by the section. The court observed that the so-called scheme was a sham, created by the majority shareholders themselves, and did not constitute a genuine scheme or contract. The court highlighted that the minority shareholder could have ignored the notice altogether, as there was no real scheme or contract in place.
4. The propriety of the transferee company's actions and intentions:
The court assessed the propriety of the actions and intentions of the transferee company. It was evident that the transferee company was formed solely to facilitate the expropriation of the minority shareholder's shares. The court found this to be a barefaced attempt to circumvent the fundamental rule of company law that forbids the majority from expropriating the minority without proper provision in the articles. The court noted that the transferee company did not even comply with the procedural requirements of the section, such as the length of delay and notice. The court concluded that the actions of the transferee company were improper and dismissed the appeal.
Conclusion:
The court upheld the decision of Buckley J., concluding that the transferee company was not entitled to acquire the minority shareholder's shares under the purported scheme. The court emphasized that the mechanism of section 209 could not be used to enable majority shareholders to expropriate the minority without a genuine scheme or contract and a fair price. The appeal was dismissed, and the minority shareholder was not compelled to sell his shares at the proposed price.
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1960 (11) TMI 45
Issues:
1. Application under section 17 of the Companies Act for confirmation of alteration of memorandum of association to enable contributions to political parties.
2. Opposition by Registrar of Companies based on section 17(1)(a) prohibiting enlargement of company objects.
3. Comparison with similar alterations permitted by Calcutta and Bombay High Courts.
4. Consideration of conditions imposed by other courts for disclosure of political contributions in balance sheet and profit and loss account.
5. Argument regarding discriminatory nature of imposing conditions on existing companies while new companies can freely make contributions without disclosure.
6. Decision on confirming special resolution without imposing any conditions.
Analysis:
The High Court of Rajasthan heard an application by a company seeking confirmation of the alteration of its memorandum of association to allow contributions to political parties under section 17 of the Companies Act. The Registrar of Companies opposed the application, citing section 17(1)(a) which prohibits the enlargement of company objects. The court noted a similar alteration permitted by the Calcutta High Court in a previous case, emphasizing the importance of a healthy relationship between the government and industry for business efficiency in the modern age. The court highlighted the conditions imposed in the Calcutta case, including the requirement to disclose contributions in the balance sheet and profit and loss account annually.
In another case, the Jayantilal v. Tata Iron and Steel Co., similar alterations were confirmed with conditions such as clear disclosure of contributions in financial statements and publication in leading newspapers. The petitioner argued that new companies could freely provide for contributions without disclosure, questioning the necessity of imposing such conditions on existing companies. The court referenced a Madras High Court case where no conditions were imposed on disclosure, leading to a discussion on the discriminatory nature of imposing conditions on existing companies.
Ultimately, the court decided to confirm the special resolution without imposing any conditions, reasoning that imposing such conditions would create a discriminatory environment as new companies could make contributions without disclosure. The court highlighted that contributions to political parties are lawful and should be decided by the shareholders, with the Registrar having the authority under section 234 to request necessary information.
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1960 (11) TMI 25
Whether the amounts received by the assessee are capital or revenue receipts and for that purpose it is necessary to investigate the nature of the grants made by the appellant?
Held that:- The question which has to be decided is what was the nature of the transaction. The covenants in the licence show that the licensee had a right to enter upon the land and take away and appropriate samples of all bauxite of every kind up to 100 tons and, therefore, there was a transfer of the right the consideration for which would be a capital payment.
In our opinion, the High Court was in error and the question referred should have been decided in favour of the appellant. Allow the appeal.
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1960 (11) TMI 24
Whether on the facts of the case, the Appellate Tribunal was right in applying section 8(3) of the Excess Profits Tax Act ?
Whether in the computation of the capital employed in the business of the assessee, the Tribunal erred in not including the value of the goodwill or any portion thereof ?
Held that:- A question of law did arise in the case whether the goodwill of the Eros Theatre and Restaurant Ltd. was calculated in accordance with law. The Tribunal seems to have taken into account only the value of the leasehold of the site to the subsidiary company, and rejected other considerations which go to make up the goodwill of a business.
It is manifest that the matter of goodwill needs to be considered in a much broader way than what the Tribunal has done. A question of law did arise in the case, and, in our opinion, the High Court should have directed the Tribunal to state a case upon it. Appeal allowed.
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1960 (11) TMI 23
Whether the admission fees of members or authorised assistants received by the assessee is taxable income in its hands ?
Held that:- The entrance fees were payable by the trading members elected under the rules and bye-laws of the association, who alone with their associates, could transact business in stocks and shares in the association. Therefore, the body of trading members who paid the entrance fees, and the shareholders among whom the profits were distributed were not identical and thus the element of mutuality was lacking. The High Court correctly answered the question in favour of the respondent
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1960 (11) TMI 22
Whether the sum of ₹ 5 lakhs has been properly brought to tax in the hands of the assessee for the assessment year 1951-52 ?
Held that:- The sum of ₹ 5,00,000 was not paid to the assessee in token of appreciation for the services rendered as a Dewan of Bhavnagar State but as a personal gift for the personal qualities of the assessee and as a token of personal esteem.
The appeal is, therefore, allowed and the order of the High Court set aside and the reference is answered against the Commissioner of Income-tax.
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1960 (11) TMI 21
Whether as between the appellant company and the respondent the amount decreed is due as salary payment which attracts the statutory liability imposed by section ?
Held that:- In the present case there is a decree passed in favour of the respondent ; under the scheme of the Civil Procedure Code, that decree has to be executed as it stands, subject to such deductions or adjustments as are permissible under the Code. There was no tax liability which the respondent was assessed to pay in respect of this amount till the date on which the appellant company sought to satisfy the alleged tax liability of the respondent. As between the appellant company and the respondent, the amount did not represent salary ; it represented a judgment debt and for payment of income-tax thereon, no provision was made in the decree. The Civil Procedure Code bars an action of the nature which was filed in Westminster Bank's case. The defence to the execution, if any, must be raised in the execution proceeding and not by a separate action. The amount payable by the appellant company to the respondent was not salary but a judgment debt, and before paying that debt the appellant company could not claim to deduct at source tax payable by the respondent. Nor could the appellant company seek to justify its plea on the ground that the judgment creditor was indebted to a third person. Appeal dismissed.
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1960 (11) TMI 20
Whether after the dissolution of the firm by the death of M. P. Thomas in October, 1949, no order imposing a penalty could be passed against the firm?
Held that:- the petition filed by the appellant should not have been entertained. The Income-tax Act provides a complete machinery for assessment of tax and imposition of penalty and for obtaining relief in respect of any improper orders passed by the income-tax authorities, and the appellant could not be permitted to abandon resort to that machinery and to invoke the jurisdiction of the High Court under article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Tribunal.
On the merits, the appellant is not entitled to relief. The Income-tax Officer found that the appellant had with a view to evade payment of tax, deliberately concealed material particulars of his income. Even though the firm was carrying on transactions in food grains in diverse names, no entries, in respect of those transactions in the books of account were posted and false credit entries of loans alleged to have been borrowed from several persons were made. The conditions prescribed by section 28(1)(c) for imposing penalty were, therefore, fulfilled. Appeal dismissed.
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1960 (11) TMI 19
Whether in the circumstances of the case assessment proceedings were validly initiated under section 34 of the Indian Income-tax Act ?
Whether in the circumstances of the case the amount received from interest on arrears of agricultural rent was rightly included in the income of the assessee ?
Held that:- No question of law was raised before us, as it could not be in view of the decision of this court in Narayana Chetty v. Income-tax Officer [1958 (10) TMI 10 - SUPREME Court] that the proviso was not mandatory in character. Indeed, there was time enough for fresh notices to have been issued, and we fail to see why the old notices were not recalled and fresh ones issued. Appeal dismissed.
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1960 (11) TMI 18
Whether, in the facts and circumstances of this case, the Appellate Tribunal was right in holding that ₹ 61,818, spent by the assessee to train Indian boys as jockeys, did not constitute expenses of the business of the assessee allowable under section 10(2)(xv) ?
Held that:- High Court has rightly held that the expenditure claimed was one which was wholly and exclusively laid out for the purpose of the respondent's business. It was to prevent the threatened extinction of the business of the respondent. In the result this appeal is dismissed
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1960 (11) TMI 17
Whether the assessee is entitled to a deduction of ₹ 1,350 and ₹ 18,000 from his total income of the previous year relevant to the assessment year 1953-54/1954-55 ?
Held that:- The question referred to the High Court ought to have been answered in the negative. We, accordirgly, discharge the answer given by the High Court, and the question will be answered in the negative. The appeal is thus allowed
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1960 (11) TMI 16
Whether the assessee's claim is sustainable under section 10(2)(xv) of the Act?
Whether the assesse's claim that the loss was a business loss and, therefore, allowable as a deduction in computing the profits of the assessee's business is sustainable under law ?
Held that:- Considering the finding that there is mutuality and custom of borrowing money on joint pronotes for the carrying on of business. In our opinion, in the circumstances proved in the present case, and on the facts established and on the findings given, the respondent was rightly held to be entitled to deduct the loss which was suffered by him in the transaction in dispute. Appeal dismissed.
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9911796707
