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2014 (7) TMI 1387
Power of the TPO to determine ALP transaction as sham - HELD THAT:- By the impugned judgment and order of the learned Tribunal[2014 (2) TMI 673 - ITAT HYDERABAD] which is sought to be appealed against, the Tribunal held, following the ratio of the decision in the case of L.G. Polymers India (P) Ltd. v. A.C.I.T. [2011 (9) TMI 259 - ITAT VISAKHAPATNAM]Transfer Pricing Officer is not empowered to hold the transaction as sham transaction. Reading the provision of law, the aforesaid conclusion in our view is not erroneous.
We, therefore, dismiss the appeal.
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2014 (7) TMI 1386
Challenge to public notice imposing penalty - withdrawal of national award including plaque and recovery of award money and information thereof to the public, without being called upon to participate in any proceedings that might have been drawn up - HELD THAT:- To hold that service of an order or a notice on the addressee would never give rise to a cause of action to move the Court within whose territorial limits the order/notice is received, may not be reasonably sound. If service of an order or a notice is an event of substance i.e. an event which is a material, essential or integral part of the lis connected with the action that is impugned in a writ petition, there is no plausible reason as to why the same should not be construed as constituting a material, essential or integral part of the cause of action. The plea of affectation of right or interest by reason of such order/notice being served, if based on a substantial fact forming a part of the bundle of facts constituting the cause of action, would indeed be relevant for determination of the question as to whether the writ petition ought to be entertained or not. Here, the decision to withdraw the award and the plaque from the petitioner was never communicated to him prior to the public notice being published in the print media and it is such publication, the only one in the series to make the public aware of the penalty imposed on the petitioner, that vitally affects the reputation and respect that he has earned over the years.
Such affectation having taken place in Santiniketan, where the petitioner alleges he read the public notice for the first time and derived knowledge of the impugned decision of the Akademi (there being no material at least at this stage that the decision was formally served on the petitioner in any territory beyond West Bengal prior to the public notice being published), it is an integral, essential and material part of the lis constituting the cause of action to approach the Court and conferring jurisdiction on this Court to entertain the writ petition. The fact that the petitioners before the Allahabad High Court withdrew their writ petitions with liberty to approach the appropriate High Court is absolutely irrelevant and immaterial for a decision on the preliminary objection to the maintainability of this writ petition.
The decision to withdraw the award and the plaque were taken behind the petitioner's back - no interim protection is required and granted at this stage.
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2014 (7) TMI 1385
Validity of proceeding u/s 153C - AO completed the assessment by disallowing the agricultural income declared by the assessee in the original return of income filed by him treating it as unexplained credit - HELD THAT:- As assessment made by the AO is not with reference to any incriminating material found as a result of search. Therefore, respectfully following the M/s. Avinash Estates & Resorts Ltd [2014 (10) TMI 668 - ITAT VISAKHAPATNAM] decision of the coordinate bench, we quash the assessment order passed for all these assessment years. Decided in favour of assessee.
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2014 (7) TMI 1384
Validity of proceeding u/s 153C - reference to any incriminating material found as a result of search - AO completed the assessment by disallowing the agricultural income declared by the assessee in the original return of income filed by him treating it as unexplained credit - CIT(A) sustained 50% of the addition made by the assessing officer as unexplained credit - HELD THAT:- We have dealt with identical issue in case of another group company viz. M/s. Avinash Estates & Resorts Ltd [2014 (10) TMI 668 - ITAT VISAKHAPATNAM] as held that assessment made by the assessing officer is on the basis of the entries made in the books of accounts and income disclosed in the return of income much prior to search and which has no reference to any incriminating material found as a result of search and seizure operation, we are of the view that the proceeding initiated u/s 153C of the Act is invalid in law.
The matter can also be looked into from another angle. As rightly been stated by the Ld. A.R., on the date notice was issued u/s 153C of the Act, there is no assessment proceeding pending before the assessing officer for the aforesaid assessment year. Therefore, in absence of any incriminating material showing concealed/undisclosed income of the assessee, the assessing officer could not have proceeded to assess income which has already been reflected in the books of accounts and disclosed in the return of income filed by the assessee.
Even otherwise also, conclusion drawn by the assessing officer in the assessment order that the agricultural income is unexplained also found to be not on cogent material, because of the fact that the CIT(A) has accepted 50% of the income shown as agricultural income against which the department is not in appeal. Also in the remand report, the assessing officer himself has accepted that the assessee has earned income from coconut trees and casurina plantation which can be considered as agricultural income. In aforesaid view of the matter, the proceeding initiated u/s 153C of the Act in absence of any incriminating material and only on the basis of the material already disclosed by the assessee is invalid and consequently the assessment orders passed are also unsustainable in law.
In present case also assessment made by the AO is not with reference to any incriminating material found as a result of search. Therefore, respectfully following the aforesaid decision of the coordinate bench, we quash the assessment order passed for all these assessment years. Decided in favour of assessee.
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2014 (7) TMI 1383
Unexplained credits - Peak balance of the credits - credit of surrendered income - suppression of gross profit - HELD THAT:- The first addition made in the hands of the assessee is on account of estimation of gross profit rate and we uphold the said addition. In view thereof, ground of appeal in Cross Objection filed by the assessee are dismissed. Similarly, as we have upheld the order of Commissioner of Income Tax (Appeals) in giving the benefit of surrendered amount after arriving at the total addition, we find no merit in the ground of appeal No. 2 raised by the revenue.
Bogus purchases - Investigation made by the AO that the concern M/s Glass Plastic Co. of India was a bogus party created by the assessee through whom no purchases or sales were made and was utilized for making bogus payments. The assessee was depositing cash in his bank account from which cheques were issued which in-turn were deposited in the bank of M/s Glass Plastic Co. of India, from which cash was withdrawn of exact amount of the cheque deposited. In view of the facts and circumstances of the case where the exercise was being carried out from day-to-day, there is no merit in treating the total deposits as unexplained and the theory of peak credit is to be applied to work out the addition in the hands of the assessee.
CIT(A) direction that the addition on account of peak credits be made in the hands of the assessee and the benefit of surrendered amount should be given after making total additions in the hands of the assessee upheld - no merit in ground of appeal No. 1 raised by the revenue.
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2014 (7) TMI 1382
Imposition of 'damages' as envisaged Under Section 14B of the EPF Act - request for a waiver of damages rejected on the predication that the said establishment was neither a sick unit nor the subject of any scheme for rehabilitation sanctioned by the Board for Industrial and Financial Reconstruction - ELD THAT:- There is no gainsaying that criminal liability remains steadfastly fastened to the actual perpetrator and cannot be transferred by any compact between persons or even by statute. But this incontrovertible legal principle does not support or validate the contention of Mr. Jayant Bhushan, learned Senior Advocate for the Appellants, that damages levied in terms of Section 14B of the EPF Act cannot be foisted onto his clients. Sections 14, 14A, 14AA, 14AB and 14AC of the EPF Act are the provisions postulating prosecution; in contradistinction Section 14B contemplates the power to "recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme".
Section 14B is complete in itself so far as the computation of damages is concerned. It is conceivable that the money due from an employer would have to be calculated Under Section 7A, and in the event the default or neglect of the employer is contumacious and contains the requisite mens rea and actus reus yet another exercise of computation has to be undertaken Under Section 14B. Where the Authority is of the opinion that damages Under Section 14B need to be imposed, the computations would come within the purview of Section 14B and it would be recoverable jointly and severally from the erstwhile as well as the current managements. A perusal of the Appeals Section, namely, 7I is illustrative of the fact that these exercises are distinct from each other as per the enumerations found in the first Sub-section of Section 7I. It also appears logical to us, in the wake of the numerous and different dates of amendments, that Section 7A(2) would also be available to proceedings Under Section 14B of the Act.
The impugned judgment deserves to be upheld - Appeal is devoid of merit - appeal dismissed.
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2014 (7) TMI 1381
Over valuation of the closing stock - computation of opening and closing balances - HELD THAT:- We do agree on the last bit of submission of ld. AR that whatever the value of the stock has been accepted by the AO as closing stock during the impugned assessment year, the same should have been taken as the opening stock in the succeeding assessment year i.e. in A.Y 2002-03. We noted that in the succeeding assessment year, the AO has taken the opening stock to be at Rs. 2,92,49,971/- instead of Rs.2,07,38,120/-.
To that extent the AO was bound to give effect in the succeeding assessment year. Whatever will be the closing stock of the impugned assessment year, the same will become the opening stock of the succeeding year. In view of this fact and in the absence of evidence being brought on record by the ld. AR, we confirm the action of the AO of reducing the closing stock by Rs.85,11,851/- during the impugned assessment year but direct the AO to reduce the opening stock in the succeeding assessment year 2002-03 and give the credit to the Assessee in accordance with law in the succeeding assessment year. We, accordingly, dismiss ground no. 2 taken by the Assessee.
Deduction u/s 80HHC(1A) as a supporting manufacturer - HELD THAT:- As the section allows the supporting manufacturers to claim deduction of the profit derived by it from the sale of the goods or merchandise to the export houses or trading houses in respect of which the certificate has been issued by the export or trading house. There is no compulsion whatsoever that the export house has to necessarily export the goods only in that year in which it has purchased the goods from the supporting manufacturers.
The fact that the certificate has been issued by the export houses prove that the goods purchased from the Assessee (supporting manufacturer) were ultimately exported and that should enable the supporting manufacturer to claim appropriate deduction under the section in the year of its supply to the export house. There cannot be any other interpretation of this provision. We, accordingly, set aside the order of CIT(A) and allow ground no. 3 taken by the Assessee and direct the AO to allow the claim of the Assessee u/s 80HHC(1A) during the impugned assessment year.
Cessation of liability u/s 41(1) - AO noted that the sundry creditors and loans and advances taken by the Assessee are being carried forward for many year - HELD THAT:- For the addition made u/s 41(1) the onus, in our opinion, lies on the Revenue to prove that the liability has ceased during the impugned assessment year. Merely liability has become barred by limitation will not prove that the liability of the Assessee has ceased.
The liability ceases when it has become barred by limitation and Assessee has unequivocally expressed its intention not to honour the liability even when demanded. Our aforesaid view is duly supported by the decision of Chase Bright Steel Ltd [1988 (12) TMI 80 - BOMBAY HIGH COURT] We, therefore, set aside the order of CIT(A) and delete the addition made by the AO as ultimately the addition which remains sustained by CIT(A) relates to the sundry creditors and the liability outstanding against the Assessee.
Unrecovered balance in respect of the advances the same has already been allowed by the AO while making the net addition even though these unrecovered debtors have to be allowed, as observed by us earlier, in the year in which they have been written off. We, therefore, set aside the order of CIT(A) and delete the addition respectfully - Ground taken by the Assessee stands allowed.
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2014 (7) TMI 1380
Nomination of Mr. Bharat Prashar, an officer of Delhi Higher Judicial Service for being posted as Special Judge to deal and exclusively try the offences pertaining to coal block allocation matters - HELD THAT:- The competent authorities are directed to issue requisite notifications appointing Mr. Bharat Prashar, an officer of Delhi Higher Judicial Service as Special Judge for the above purpose. The notifications shall be issued within two weeks from the date of communication of copy of this order.
Mr. R.S. Cheema, senior advocate shall be appointed as Special Public Prosecutor by the Government of India to conduct the prosecution of the offences pertaining to coal block allocation matters on behalf of CBI and Enforcement Directorate. On such appointment, Mr. R.S. Cheema may choose two other advocates, who, in his opinion, will be of assistance in the matter - List this group of matters on 1.9.2014 at 2 P.M.
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2014 (7) TMI 1379
Grant of sanction Under Section 197 of Code of Criminal Procedure - public servant within the meaning of Section 21 of the Indian Penal Code - Case of appellant is that the sanction for prosecution of the Appellant Under Section 197 of the Code of Criminal Procedurewas not obtained or granted prior to the date of taking of cognizance - whether the acts giving rise to the alleged offences had been committed by the accused in the actual or purported discharge of his official duties? - HELD THAT:- In a series of pronouncements commencing with Satwant Singh v. State of Punjab [1959 (10) TMI 32 - SUPREME COURT], Harihar Prasad v. State of Bihar [1971 (9) TMI 186 - SUPREME COURT] and Prakash Singh Badal and Anr. v. State of Punjab and Ors. [2006 (12) TMI 548 - SUPREME COURT] it has been consistently held that it can be no part of the duty of a public servant or acting in the discharge of his official duties to commit any of the offences covered by Section 406, 409, 420 etc. and the official status of the public servant can, at best, only provide an opportunity for commission of the offences. Therefore, no sanction for prosecution of the public servant for such offences would be required Under Section 197 of the Code. Notwithstanding the above, the High Court had granted liberty to the Appellant to raise the issue of sanction, if so required, depending on the evidence that may come on record in the course of the trial.
There are no occasion to cause any interference with the orders passed by the High Court in the proceedings instituted before it by the Appellant which have been impugned in the appeals under consideration - appeal dismissed.
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2014 (7) TMI 1378
Demand of Compensation - Validity of Award - challenge has been raised to the validity of the acquisition proceedings contending that since the notification under Section 3-D of the Act was published within the prescribed time, it has ceased - it is alleged that the procedure adopted for awarding compensation is erroneous - HELD THAT:- There is a statutory obligation for publishing the notice in two newspapers for the purpose of award of compensation under Section 3-G of the Act. The petitioner has categorically stated in paragraph 20 of the writ petition that no such notice was ever published nor any opportunity was given to the petitioner to file any objections.
Sri Mehrotra submits that the notification dated 3.11.2011 should be considered to be a notification published in the newspaper under Section 3-G of the Act.
It is observed that that the said notification is a notification under Section 3-D and is not a notification under Section 3-G of the Act. The averment contained in paragraph 28 of the counter affidavit is, therefore, misleading. The respondents, therefore, have not complied with a statutory provision containing the principles of natural justice engrafted in the Act itself. It is settled law that if an act requires to be performed after publication of the notice in the newspaper then it is not a mere formality and the matter relating to award of compensation dealing with substantive right of a tenure holder cannot be defeated by delivering the award without complying with the aforesaid provision. Once it is held that the award is in violation of principles of natural justice then it is not necessary for this Court to relegate the petitioner to the remedy under the 1996 Act. The award itself being contrary to the provisions of Section 3-G and in contravention thereof, we have no hesitation to hold that the said act of the authority was in complete disregard of the statutory provisions resulting in violation of principle of natural justice. The question, therefore, availing of any alternative remedy by the petitioner on the facts of this case does not arise.
The award which has been rendered in relation to the agricultural land of the petitioner is clearly in violation of Section 3-G of the Act as the award itself also nowhere recites that any such notice was published in the newspaper as required in the said provision. Consequently, the impugned award dated 30.4.2013 to the said extent is quashed.
Petition allowed in part.
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2014 (7) TMI 1377
Vicarious Liability of Chairman, Managing Director and Directors of the Company, in the offence of the company - Liable to be prosecuted in a Criminal Case, being the Director of M/s. Davangere Sugars Co. Ltd., and Chairman of M/s. Shamanur Sugars Co. Ltd. (by virtue of his position) - petitioner is having knowledge and has a specific role and active participation in the conduct and business of the Companies at the time of commission of the alleged offence by the companies or not - HELD THAT:- The normal rule in the case involving criminal liability is against vicarious liability, i.e., no one is to be held guilty of criminal liability for an act of another. This normal rule is however subject to exception on account of specific provision being made in the statute, extending liability to others. One such provision is Section 10 of the EC Act. Therefore, if an offence is committed by a company, it extends the criminal liability to other officers of the company if the requirements contemplated under the said provision are satisfied before the liability is fastened on such Officers. Since the provision creates criminal liability, the conditions have to be very strictly and meticulously complied with. With this background, now let me go through the decisions in this regard.
In fact, this Court also had an occasion to deal with similar matters under the EC Act between Smt. Vidya Murkumbi and Others vs. India Sugars and Refineries Ltd., in Crl.P. No. 7563/2009 dated 4.11.2009, wherein, learned brother Judge Justice Jawad Rahim, evaluated the provisions under the EC Act as well as the NI Act - In the said decision, the learned Judge has observed the wordings used in sub-Section (2) of Sec. 10 of the EC Act - that "if proved" pre-supposes "sufficient material" that such person by his consent or connivance or attributable negligence indulged in the crime. If such prima facie proof is not available in the complaint, then such person cannot be fastened with liability. However, the learned Judge has observed that the liability of the Chairman and the Director stand on a different footing and come in the category of sub-Section (1) of Section 10 of the EC Act. Therefore, they could be termed as personnel being in charge of/or responsible to the Company and its business and an element of presumption is being available against them.
Thus, it is crystal clear that there is almost unanimous judicial opinion that necessary averments ought to be contained in the complaint, particularly against a person who are not deemed to be persons in charge of a Company or looking after the day to day affairs of the Company and therefore, it is necessary to specifically aver the duties, role of each and every person to show his responsibility, his duties and functions assigned under the Memorandum of Articles of the Company.
Whether by virtue of his position as a Chairman, ipso-facto liable for all the offences committed by the Company? - HELD THAT:- The term Chairman is not defined under the Companies Act, 1965. The Chairman is a necessary person in company meetings and is usually appointed by the articles of the Company. Generally, Chairman is the highest post in the Company, who represents the name and fame of the Company. Chairman's role is to attend the meetings and to act according to the byelaws of the Company and also exercise any defined or reserved rights or duties. Regulation 76(1) of table A to Schedule-I to the Companies Act 1956, provides that the Board may elect a Chairman and determine the period for which he has to hold the office. Generally, the Directors elect one of them to be the Chairman of the Board who continues to be as such until he seizes to be a Director or some other Director who is appointed as a Chairman. Normally, the Chairman is a Director who is authorised to preside over the Board and General Meetings - the Chairman of a Company presides over the meetings of the board and as a member on all the board committees and he presides over all the committee meetings. Therefore, the Chairman has the powers under the common law, such as (1) the power to preside over the meetings, (2) bring the discussion on any question and (3) the power to adjourn the meeting if necessary under the circumstances.
Looking to the powers and duties of the Chairman, it goes without saying that the Chairman is as good as a Director, but as he is higher in position, he presides over the meetings of the Company. Therefore, unless a specific role is given to a Chairman by virtue of articles of the Company to represent the management and participate in the day to day business, conduct and affairs of the Company, he is not liable for all the offences committed by the Company.
The Chairman also stands on the same footing as that of a Director. If any liability has to be fastened on the Chairman, in law, a specific role has to be given to him and what is the overt act committed by him to share the criminal liability of the Company. Therefore, in the absence of such allegations and specific averments in the complaint, even Chairman also, ipso-facto by virtue of his position, cannot be made as an accused in a criminal case for the offence committed by the Company.
It is a well settled law that at the time of issuing of the process, the Magistrate is required to see the allegations in the complaint in order to ascertain whether the allegations made in the complaint constitute an offence against a person, then only the Magistrate can call upon the persons cited as accused to answer the charges. Otherwise, the complaint has to be dismissed by exercising powers u/s. 203 of the Code of Crl. Procedure - the cognizance taken by the Magistrate and the process issued against the petitioner who is a Director and Chairman of the respective companies is bad in law and the same is liable to be quashed.
The petition is allowed.
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2014 (7) TMI 1376
Wealth tax assessment - leasehold rights in the land whether be brought to Wealth Tax under the deeming provisions of Section 4(8) of the Act - HELD THAT:- Respectfully following the earlier ITAT judgements in assessee's own case the issues relating to property at Raniwala Oil Mills, property at Mangal Marg, Alwar, property at Rishikesh and property at Kush Marg, Alwar as raised by the Revenue in 1 to 3 and 5 are dismissed.
Property at Station Road, Alwar also, we see no infirmity in the order of the ld. CWT(A) as on the valuation date the property had become the commercial complex and reflected as commercial asset in the accounts of the assessee which is further evident from the fact that some of the shops were also sold. Thus the building in question was a commercial complex which is not includible in the definition of Section 2(ea)(i) of the Act. Besides, the issue in question is also covered in favour of assessee by the decision of Hon'ble Kerala High Court in the cae of Apollo Tyres Ltd. [2009 (12) TMI 572 - KERALA HIGH COURT] - Thus the ground no. 4 of the Revenue is dismissed.
Property at Nangali Khor, it has not been disputed that in lieu of assessee's two plots, the impugned plot was allotted to the assessee for 99 years lease. As per plain meaning of legal fiction of section 4(8) of the Wealth Tax Act, it applies only to leasehold right in a building and not on the land. The scope of fiction cannot be enlarged by intendment. In view thereof, we see no infirmity in the order of the ld. CWT(A) which has been passed keeping in view the plain meaning of Section 4(8) of the Wealth Tax Act and the decisions of Hon'ble Supreme Court in the case of CWT vs. Biswanath Chatterjee [1976 (4) TMI 1 - SUPREME COURT] and case of Vysya Bank Ltd. [2007 (2) TMI 161 - KARNATAKA HIGH COURT]. Thus the order of ld. CWT(A) is upheld. The ground raised by the Revenue is dismissed.
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2014 (7) TMI 1375
Suit for declaration that the “Structured Currency Option” Agreements entered into between the plaintiff and the defendant Bank are agreements by way of wagers hit by the bar of Section 30 of the Indian Contract Act, 1872, or not - seeking permanent injunction restraining the defendant Bank from in any manner acting upon or seeking to enforce any transaction under the said agreements - HELD THAT:- The preamble to the DRT Act describes the same as “an Act to provide for the establishment of tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto”; Section 3 thereof provides for establishment of tribunals to be known as DRTs, to exercise the jurisdiction, power and authority conferred thereon by the Act - Had the DRT no jurisdiction, power and authority to adjudicate on the defence of the defendant, there would have been no need to provide for legal representation by the defendant or for the defendant to examine witnesses.
The DRT vide Section 17 has the jurisdiction, power and authority to decide on the defence to an application for recovery of debt filed before it. Once the DRT is held to have such a power, the jurisdiction of the Civil Court to declare existence of a state of affairs which is a defence to a claim before the DRT, has to be necessarily held to be barred.
The Supreme Court recently in STANDARD CHARTERED BANK VERSUS DHARMINDER BHOHI AND OTHERS [2013 (9) TMI 1289 - SUPREME COURT] has reiterated that the intendment of the DRT Act is speedy recovery of dues to the bank and the DRTs and DRATs are expected to see to it that an ingenious litigant does not take recourse to dilatory tactics. It was further held that any delay would fundamentally frustrate the purpose of the legislation. The Supreme Court with the said observations set aside the part of the order of the DRAT giving liberty to the auction purchaser of a property to file a civil suit.
If the jurisdiction of this Court to grant the consequential relief of injunction is barred, can this Court have jurisdiction to grant the relief of declaration and / or should this Court grant the relief of declaration, which, without the consequential relief of injunction, would be a toothless declaration, incapable of saving the plaintiff from the claim of the defendant Bank if the DRT was to conclude otherwise and thus, but a mere scrap of paper - this Court ought to refuse to grant the relief of declaration also, which is but a discretionary relief. It cannot be forgotten that grant of every injunction entails declaration of rights and no injunction can be granted without adjudicating conflicting rights of the parties. Thus, where grant of injunction is prohibited, such prohibition cannot be circumvented by instead granting declaration. This follows from Section 34 of the Specific Relief Act also which bars making of such a declaration where the plaintiff, able to seek further relief, omits to do so. The only difference here is that though the plaintiff has claimed further relief, such further relief is barred by Section 34 of the SARFAESI Act.
The suit is thus found to be not maintainable. The amendment claimed to the plaint does not affect its maintainability. Thus, the suit is dismissed and resultantly the pending applications are infructuous. The plaintiff is also burdened with costs of the suit. Counsel‟s fee assessed at Rs.20,000/-.
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2014 (7) TMI 1374
Seeking for specific performance of the terms and conditions of the allotment letter as well as the Addendum specifically pertaining to execution of conveyance deed and possession in terms of allotment letter and the Addendum - HELD THAT:- The issue concerning whether there was a subsisting lease between Omaxe and M/s Aero Club Woodland, the learned Arbitrator has considered the documentary evidence to return a finding that no tenancy had ever come into being. The learned Arbitrator had given reasons for the same which have been noted by the learned Single Judge in paragraph 28 and 29 of the impugned decision.
We simply highlight that no argument was advanced before us that a principle of law was ignored or misapplied by the learned Arbitrator. The entire gamut of the arguments in the appeal was a rehash of the contentions urged before the Arbitrator as also before the learned Single Judge. The thrust of the argument was that the findings returned are wrong. Whether the findings were right or wrong required us to re-appreciate the entire evidence led and reinterpret the contract as if we were to interpret the contract for the first time; a task which we refuse to perform because law prohibits us from doing so.
The appeal is dismissed with cost assessed at ₹ 50,000/- to be paid by the appellant to the respondents.
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2014 (7) TMI 1373
Works Contract - Composite supply - Deductions of TDS from the payment of valuable consideration made to the petitioner for execution of various works contracts for the State after deducting the amount therefrom towards labour and service charges including earth work - Section 44 of the Jharkhand Value Added Tax 2005 read with Rule 23 of the Jharkhand Value Added Tax Rules 2006 - whether the Decuction of tax at source on the whole bill amount without deducting the value of earth work which involves labour and service is arbitrary? - HELD THAT:- The Scheme of the JVAT Act being self contained, stands on a different footing. In terms of Section 29 of the Act, it is mandated upon every registered dealer to file periodical returns adjusting input credit and making deductions as prescribed under the Act. Section 44 stipulates deduction of tax at source to be made by the contractee for execution of the works contract in the State involving transfer of property in goods whether as goods or in some other form. The works contract referred to in Section 44 is a composite contract which involves transfer of property in goods whether as goods or in some other form and also labour and service. As per Section 44(5), any tax deducted at source paid to the State Government shall be adjustable by the payee on the authority of the certificate issued to him under subsection (4) with the tax payable to him under the Act.
Having regard to the various provisions of the Act under the VAT regime, there is no question of the dealers waiting for years to get back the refund of any excess amount deducted from him. In this regard, Revenue has submitted the monthly returns filed by the petitioner which shows that in the monthly returns filed by the petitioner, tax deducted at source was adjusted from the tax payable by the petitioner.
The tax deduction at source commonly referred to as “TDS” is also known as “withholding tax”. The TDS provisions are meant for tentative deduction of tax subject to regular assessment. The Act does not conceive a situation that there would be a pre-assessment prior to the assessment by the Assessing Authority - there are no merit in the contention of the petitioner that the contractee is under an obligation to exclude the component of labour and service charges involved in the execution of a composite works contract while making deduction of tax at source as prescribed under notification dated 31.03.2006 and TDS @ 4% on the entire bill amount is illegal and not supported by authority of law.
Whether the Letter dated 11.03.2013 directing deduction of VAT @ 4% on the entire value of the Bill is contrary to law? - HELD THAT:- The Revenue has contended that since the contract of the petitioner is a composite contract involving structural work along with earth work, deduction at 4% on the whole amount, in which earth work is also included, is necessary. In terms of Section 44(5), any tax is paid to the State in accordance with sub-section (3) shall be adjustable by the payee on the authority of the certificate issued to him under sub-section (4); tax payable by him under JVAT Act where any component of labour or service is involved in the earth work and if so, what is the extent of such labour and service involved will be examined at the time of filing returns with supporting documents. When tax is deducted at source by the contractee, it is not physically possible to segregate the elements of labour and service.
There is no merit in the contention that various items of the earth work in the agreement of the petitioner involved only labour and services and therefore, the petitioner is not liable to pay tax for the earth work. Though the earth work might involve certain amount of labour and service, it has to be substantiated by the documents. As rightly contended by the Revenue, the works contract is a composite work involving transfer of property in goods as well as labour and services - Merely going by the description of the items of earth work contained in the agreement, it cannot be said that the items contained in Part A of the Contract, earth work is purely earth work involving only labour and services.
Notification not making provision for deduction of labour and service charges - notification dated 31.3.2006 - HELD THAT:- The Notification SO 208 dated 31.3.2006 was issued in exercise of powers conferred by sub-section (1) of Section 44 of the Act. Section 44(1) of the Act stipulates that the State Government may by notification in the official gazette specify TDS to be deducted by the contractee from any valuable consideration paid to the contractors for the execution of works contract in the State. Since the notification was issued in exercise of power under Section 44(1) of the Act, the notification is not be read in isolation but to be read along with the Scheme and other provisions of the Act - The Scheme of the Act provides for filing of monthly/periodical/annual returns, deductions to be made as prescribed under the Act and assessment by the competent authorities. In terms of Section 2(lvi), "taxable turnover" means turnover on which dealer shall be liable to pay tax as determined after making such deductions from his total turnover and in such manner as may be prescribed.
As per Rule 22(1)(d), the value of goods involved shall be taxable after deducting from it the charges as indicated in Rule 22(1)(d)(i) to (vii) where the amount of charges towards labour and service, hire charges or any other like charges in any contract are not ascertainable, in terms of Rule 22(2), such charges shall be calculated at the prescribed percentage as indicated in Rule 22(2) - The various provisions of the JVAT Rules, in particular Rules 22 and 23, stipulate various provisions for deductions to be made including labour and service charges and the Notification SO 208 has to be read along with other provisions of the JVAT Act and Rules and not in isolation. The Notification SO 208 dated 31.3.2006 is not derogatory to the provisions of the JVAT Act and the Rules.
From the bills submitted by the petitioner, it appears that deduction of certain taxes at source have been made. The petitioner had obtained interim order in this writ petition on 21st June, 2013 and thereafter no deduction of VAT at source was made from the bill amount paid to the petitioner. Since the writ petition is dismissed, it is for the Department to take appropriate steps to collect the amount payable by the petitioner either from the pending bills, if any, or otherwise by separate proceedings and in accordance with law - Petition dismissed.
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2014 (7) TMI 1372
Denial of deduction in respect of amount of credit under DEPB Scheme - AO denied the same holding that the assessee has not actually utilized the credit before closing of the relevant previous year for payment of duty on the import of goods - HELD THAT:- As decided in M/s. Excel Industries Ltd [2013 (10) TMI 324 - SUPREME COURT] even if it is assumed that the assessee is entitled to the benefits under the advance licences as well as under the duty entitlement pass book, there was no corresponding liability on the customs authorities to pass on the benefit of duty free imports to the assessee until the goods are actually imported and made available for clearance. The benefits represent, at best, a hypothetical income which may or may not materialize ad its money value is therefore not the income of the assessee - thus we are of the opinion that the assessee is entitled to relief. Accordingly, ground no.1 raised by the assessee is allowed.
Addition u/s 14A - expenditure incurred for earning of the exempt income - HELD THAT:- Assessee mentioned that the said grounds require revisit to the file of the AO considering the fact that the assessee was not given a proper opportunity to clarify the allegations against the bogus purchases on one side and the Assessing Officer failed to record his dissatisfaction with regard to the claim of the assessee that no expenditure was incurred for earning of the exempt income and this is relevant for the issue raised in ground no.3.
Denial of weighted deduction u/s 35(2AB) with regard to the expenditure incurred on scientific research - HELD THAT:- As gone through the cited judgment of CADILA HEALTHCARE LTD [2013 (3) TMI 539 - GUJARAT HIGH COURT] On hearing both the parties and on perusal of the said order of the High Court, we are of the opinion that the issues raised in ground no.4 should be set aside to the file of the AO to examine each of the expenses in detail and apply the cited judgment of the Hon’ble Gujarat High Court (supra) in connection with the claim of expenses relating to the clinical trials. Accordingly, we remand this part of the ground to the file of the AO and ground no.4 is partly allowed statistical purposes.
Deduction u/s 80IB admissible to the eligible units - HELD THAT:- The Tribunal in assessee own case after considering the departmental argument that the AO has correctly invoked the proviso to section 80IA(a) as well as in applying the “global profit percentage method”, while confirming the order of the CIT (A). We find that the facts for this year in question are no different. Therefore, we find no reason to interfere with the order of the CIT (A) for this year. Accordingly, ground raised by the Revenue is dismissed.
Deduction u/s 80IB in respect of receipts in sale of scrap - HELD THAT:- Representatives of both the parties mentioned this issue is required to revisit the file of the AO in view of the fact that the said scrap not only includes generated during manufacturing activity but also other general scrap such as packing material etc. It is a settled issue that the receipts received on sale of scrap during the manufacturing activity is entitled for deduction u/s 80IB and other scrap proceeds are not eligible in view of the principles laid down in the judgment of Liberty India [2009 (8) TMI 63 - SUPREME COURT] AO is required to examine the above issue afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, ground no.4 is allowed for statistical purposes.
Disallowance of provision of loss on forward contracts - HELD THAT:- The tests laid down by the Hon’ble Supreme Court in the case of Wodward Governor [2009 (4) TMI 4 - SUPREME COURT] are satisfied in the appellant’s case on the basis that the appellant is following mercantile system of accounting, the accounting policy in this behalf has been consistently followed by the appellant and the claim made by the appellant is bona fide.
Therefore, appellant has made correct claim for deductibility of provision for loss by marking to marking the outstanding forward cover contracts and the disallowance by the AO is not justified both on facts and in law. The disallowance is therefore directed to be deleted.
The loss quantified on revaluation of the forward contract is an allowable business loss. This is not the case of the Revenue that the impugned losses are earned on account of premature cancellation of forward contracts.
Appeal of the Revenue is partly allowed.
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2014 (7) TMI 1371
Execution of decrees passed by Courts in reciprocating territory - maintainability of the present lis before the High Court of Delhi - presentation of a petition seeking execution of a decree of a superior Court of any reciprocating territory before a ‘District Court’ - Whether the decree passed by a superior court of a reciprocating territory can be executed by the High Court of Delhi in exercise of its original jurisdiction in terms of Section 44A(1 )of the Code of Civil Procedure, 1908 ? - HELD THAT:- As legislature has consciously in its wisdom chosen not to infuse the conception of ‘competent jurisdiction’ in Section 44A of the Code of Civil Procedure, 1908 in contra-distinction to Section 39 which provides the mechanism for execution of ‘domestic decrees’. The requirements saddled on the executing court under the scheme of Section 39 are alien to the ‘District Court‟; the jurisdiction of which may be invoked by the holder of a foreign decree in terms of Section 44A. Rather it may be pertinently observed that the legislature has vested such ‘District Court’ the power to execute the ‘foreign decree’ as if it had been passed by itself. The conception of ‘competence of jurisdiction’ of executing court contained in Section 39 being wholly absent in the language employed by the legislature in Section 44A of the Code, the same cannot be circuitously injected by this Court as the same would tantamount to legislative re-writing, which is impermissible.
The authoritative observations in M.V. Al. Quamar’s case [2000 (8) TMI 1124 - SUPREME COURT] unequivocally evince that the jurisdiction of the ‘District Court’ in terms of Section 44A of the Code of Civil Procedure, 1908 can be invoked by a holder of a decree of a Superior Court of reciprocating territory, unhindered by the lack of jurisdictional competence of the said Court while dealing with the execution of ‘domestic decrees
For the reasons extensively highlighted by us we are of the considered view that the High Court of Delhi not being a ‘District Court’ in terms of Section 44A of the Code of Civil Procedure, 1908 is not vested with the jurisdiction to entertain the present Execution Petition. In view thereof, the same is liable to be transferred to the ‘Court of District Judge‟ within whose jurisdiction the property sought to be attached is situated for being dealt with in accordance with law.
The appeal is allowed. The impugned order dated November 29, 2013 is set aside in so far it is held that the Delhi High Court would be the ‘District Court’ to execute the foreign decree. Needless to state decision on the objections on merits is also set aside being without jurisdiction. The executing Court shall decide the objections uninfluenced by any observation made by the learned Single Judge on merits. The Execution Applications filed by the appellants are restored save and except the application which challenged the jurisdiction of this Court, which application is allowed.
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2014 (7) TMI 1370
Disallowance u/s 11 - whether objects of the Societies are the general public utility as defined under Section 2(15)? - HELD THAT:- Assessee has been granted registration u/s 12A - The objects of the Societies are the general public utility as defined u/s 2(15) - No action was taken by the A.O. u/s 12-AA(3) before denied the benefit, but directly disallowed the exemption/benefit under Section 11 of the Act. From the order of the CIT (A), it appears that there is no instance of misuse of the funds by the trustees of the Society.
The grant of exemption under Section 11 is not automatic and the assessee shall have to meet out the requirements of Section 11 of the Act. Once, the registration is granted to the assessee under Section 12-A, then the A.O. cannot pass a contrary order without following the provisions of Section 12AA(3), but the same was not done in the instant case. When it is so, then by keeping mind the ratio laid down in the case of CIT Vs. Gujarat Maritime Board, [2007 (12) TMI 7 - SUPREME COURT] as well as C.M.S. Vs. Union of India [2009 (5) TMI 41 - ALLAHABAD HIGH COURT] we find no reason to interfere with the impugned orders passed by both the Appellate Authorities, the same are hereby sustained alongwith the reasons mentioned therein.
No substantial question of law is emerging from the impugned orders.
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2014 (7) TMI 1369
Exemption u/s 11 - AO has declined to extend the benefit of Section 11 of Income Tax Act, though the Society is registered under Section 12A - HELD THAT:- As undisputed fact that the assessee has been granted registration under Section 12A of the Act. The objects of the Societies are the general public utility as defined under Section 2(15) of the Act. No action was taken by the A.O. under Section 12-AA(3) of the Act, before denied the benefit, but directly disallowed the exemption/benefit under Section 11 of the Act. From the order of the CIT (A), it appears that there is no instance of misuse of the funds by the trustees of the Society.
The grant of exemption under Section 11 is not automatic and the assessee shall have to meet out the requirements of Section 11 - Once, the registration is granted to the assessee under Section 12-A, then the A.O. cannot pass a contrary order without following the provisions of Section 12AA(3), but the same was not done in the instant case. When it is so, then by keeping mind the ratio laid down in the case of CIT Vs. Gujarat Maritime Board [2007 (12) TMI 7 - SUPREME COURT] as well as C.M.S. Vs. Union of India, [2009 (5) TMI 41 - ALLAHABAD HIGH COURT] we find no reason to interfere with the impugned orders passed by both the Appellate Authorities, the same are hereby sustained alongwith the reasons mentioned therein.
No substantial question of law is emerging from the impugned orders.
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2014 (7) TMI 1368
Violation of FEMA - Imposition of Penalty - Definition of Person u/s 2(u) - penalty was imposed on the President of the Board of Control for Cricket in India for the violation of the Act - Matter remanded back with direction to Special Director, Directorate of Enforcement first to form his opinion, after recording reasons, whether to proceed against the petitioner with regard to the impugned 11 show cause notices - HELD THAT:- Special leave petition is dismissed.
Any observation made in the impugned order in regard to the merit of the case shall have no bearing at the later stage of the proceedings.
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