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2020 (4) TMI 913
TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- CG Vak Software & Exports Ltd. company excluded as it is consistent loss making company - We noted that before the DRP the assessee stated that this comparable is having profit in the current year at 7.14% and can be considered as a comparable. It was also stated that merely because a company is incurring losses, it would not lose its status as a comparable and that losses and incidental of business which is at par with the profit. However, the contention of assessee was not accepted by DRP by taking view that those companies with fluctuating margins are to be excluded.
As this comparable is not consistent loss making as it had made profit in the relevant assessment year, hence, we direct the TPO/AO to include this comparable in the final set of comparable.
Infosys Ltd. was excluded by tribunal from compatibility on the ground of that Infosys ltd is engaged in Software product and have huge turnover is not comparable to the assessee as a captive service provider to its associated enterprises, therefore, we direct the assessing officer to exclude this comparable from the final set of comparable.
Exclusion of Wipro Technology Services Ltd. as it had related party transaction. e Infochips Ltd has provided hardware maintenance and product, providing back officer services and have substantial inventory. Sasken Communication Technology Ltd is engaged in software product. And Persistent system Ltd has huge intangible, made investment in intellectual property right and huge turnover. Therefore, accepting the similar view we are also of the view that these comparable cannot be compared with captive service provider. Hence, we direct the AO/TPO to exclude these four comparable.
Zylog System Ltd. company is engaged in R&D activities, has a license fee and developed in house intangible. Thus, cannot be compared with captive service provider.
Thus we direct the TPO/AO to include CG Vak Software & Export Ltd and exclude Infosys Ltd, Wipro Technology Services Ltd., e Infochips Ltd, Sasken Communication Technology Ltd, Persistent system Ltd and Zylog System Ltd from final set of comparable and recompute the ALP afresh.
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2020 (4) TMI 912
Conviction for offences punishable Under Sections 120-B, 364A, 302, 201 read with Section 34 Indian Penal Code - death sentence - death in the company of the Accused - kidnapping - demand of ransom.
Whether A-1 was arrested on 1st September 2014 - HELD THAT:- The judgment in Abdul Subhan is not applicable to the facts of the present case for the reason that A-1 was not proved to be arrested on 1st September, 2014. In the reported judgment, the person who was said to have arrested the Accused prior to the actual date of arrest, was examined before the High Court. It was on the basis of the additional evidence recorded, the High Court observed "that the statement made by Punwan, Accused, in his confession to the effect that he was apprehended on 1st March, 1938 is very probably true". The IO in his statement before the High Court could not convince the Court that he had not arrested Punnu, Accused, till 6th March, 1938. But the facts in the present appeals does not lead to any inference of the arrest of A-1 on 1st September, 2014.
Whether Common intention was terminated before the demand of ransom and death of victim? - HELD THAT:- In the present appeals, the facts speak volumes about the common intention shared by both the Appellants. Both the Accused planned the kidnapping and executed it together. A-1 called Dharmendra Yadav (PW-24), even before the victim could be kidnapped to make sure that the parents of the child were not at home. A-2 is the one who picked up the child from the gate of the Apartment building. They were together till at least 18:33 hrs. whereas; the tower location of the mobile of A-2 was Vinoba Bhave Nagar till 19.39 hrs., which is the area of the House of A-1. The conspiracy never came to an end when A-2 called Dr. Chandak (PW-1) demanding ransom, which was the reason of kidnapping the boy. Thus, the facts prove that both the Accused had a common intention to kidnap the child.
Applicability of Section 106 of the Evidence Act - HELD THAT:- The prosecution has discharged the onus of proof beyond reasonable doubt. It was then for the Accused to rebut the presumption of any other intervening fact before the death of the victim. In fact, none of the prosecution witnesses have been cross-examined on that possibility at all.
Changing version of the prosecution case - HELD THAT:- The Judgments of this Court reported as Karanpura Development Co. Ltd. [1956 (4) TMI 77 - SUPREME COURT] and Sri Venkataramana Devaru [1957 (11) TMI 21 - SUPREME COURT] have been relied upon to argue that an argument of fact cannot be raised for the first time before this Court. The reliance on such judgments is not tenable. In both the Judgments, no fact sought to be raised in appeal before this Court, was pleaded in civil proceedings. The reference to such judgments is inappropriate. In the present appeals, the arguments raised by the prosecution are on the basis of evidence led and available on record.
Recovery of dead body at the instance of A-1 cannot be believed - HELD THAT:- It is wholly immaterial whether the death was caused before 18:00 hrs. or afterwards as both the Accused were seen with the victim together and the victim was in an inert condition. The injuries and the placement of the boulder/stone on the face of the victim was to hide the identity of the victim. As per Dr. Avinash Waghmode (PW-27), the injuries were perimortem i.e. when the vitals of the victim were functioning - In the present case, the dead body was lying in a concealed place and that there was no possible explanation on behalf of the Accused as to how the body came to be concealed at that particular place, when the prosecution evidence proves that the Accused were near the place of recovery of dead body almost at the probable time of death.
The effect of putting of incriminating evidence to the Accused Under Section 313 of the Code - HELD THAT:- In the present case, there is overwhelming evidence that shows the victim to be in company of the Accused at five different places from 16:00 hrs. to 17:30 hrs - 18.00 hrs. Thereafter, the burden shifts to the Accused to explain the circumstances which occurred thereafter till the time of the recovery of dead body. There is no evidence to create a doubt on the prosecution version that somebody else had access to the victim before he died. The fact that the child was carried on shoulder by A-1 shows that the child was not in a position to move and was done to death in that condition which is corroborated by medical evidence of injuries being perimortem.
Sentence - it is argued that this Court has imposed a higher standard of proof for the purposes of a death sentence over and above "beyond reasonable doubt" necessary for criminal conviction similar to "residual doubt" - HELD THAT:- The argument is that since the Accused are young, aged about 19 years, and have no criminal antecedents, the sentence of death imposed upon them is not warranted. It is argued that A-1 surrendered at the first available opportunity and he was fully cooperative with the investigation, therefore, there are the mitigating circumstances to absolve them from noose - there are no merit in the argument that being young or having no criminal antecedents are mitigating circumstances. What is required to be examined is whether there is a possibility of rehabilitation and whether it is the rarest of the rare case where the collective conscience of the community is so shocked that it will expect the holders of judicial power to inflict death penalty irrespective of their personal opinion as regards desirability or otherwise of retaining death penalty. The manner of commission of murder when committed in an extremely brutal, grotesque, diabolical, revolting or dastardly manner are aggravating factors.
The motive of the Accused to take life was to become rich by not doing hard work but by demanding ransom after kidnapping a young, innocent boy of 8 years. Thus, having considered all the circumstances and facts on record, we are of the considered view that the present case falls short of the "rarest of rare" cases where a death sentence alone deserves to be awarded to the Appellants. It appears to us in light of all cumulative circumstances that the cause of justice will be effectively served by invoking the concept of special sentencing as evolved by this Court in the cases of Swamy Shraddananda and Sriharan. Thus, the present appeals succeed in part.
The Judgment and Order passed by the learned Trial Court and confirmed by the High Court convicting the Accused for the offences punishable Under Sections 302 and 364A read with Section 34 Indian Penal Code is hereby confirmed - appeals stand dismissed except modification in respect of sentence.
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2020 (4) TMI 911
Deduction of Capital Expenditure on R&D u/s 35(2AB) - whether the deduction is allowable only from 09.03.2009, the date on which the assessee received letter from DSIR or not? - HELD THAT:- A going concern basis basically means that an entity will remain in business in the near future. We find that the above provisions cannot be applied to the facts of the instant case as the approval u/s 35(2AB) in respect of the R&D unit has been granted by the DSIR w.e.f. 01.07.2008 as consequence to the approval granted to EML.
In conclusion, having gone through the entire facts of the instant case, we hold that the assessee is eligible for deduction u/s 35(2AB) from 01.07.2008, the date on which the EML divested the CV unit and the R&D facility.
Having said so, we also find that the ld. CIT (A) has given a categorical finding that the AO has disallowed total R&D expenses incurred by the assessee during the year including expenses that have incurred after the date of DSIR approval letter i.e. 09.03.2009.
We also find that the AO has observed that deduction u/s 35 has been claimed under the head “intangible assets”.
Core issue of examination of the expenditure has not been resorted as the revenue held that the assessee was not eligible for the deduction u/s 35(2AB) for expenses incurred prior to that date. Hence, in order to meet the ends of justice, a fair opportunity has to be allowed to both the parties, it is hereby directed to submit the details of capital expenditure and revenue expenditure for the entire period from 01.07.2008 to 31.03.2009 so as to avail the correct deduction as per the principle laid down in this order.
Addition u/s 14A r.w.r. 8D - assessee has earned exempt dividend income - HELD THAT:- Since no interest bearing funds have been utilized in investment and the revenue could not prove any expenses incurred, the addition made by the AO is hereby directed to be deleted.
Disallowance of Expenses - deduction denied on the grounds that the assessee did not furnish the copies of ITR of VIPL to prove that these expenses which were booked provisionally have not been claimed and also proof of payment against the aforesaid provision by the assessee during the year have not been submitted - CIT (A) after going through the ITRs gave a categorical finding that the deduction on account of the provisions has not been claimed by the assessee and also held that the assessee had discharged the liabilities against the provisions received from VIPL - HELD THAT:- CIT (A) has given this categorical finding after due verification of ledger and books of accounts. Since, the facts are not disputed by both the parties and the issue is purely based on the facts which have been verified by the ld. CIT (A) and since no legal issue is involved we decline to interfere with the well reasoned order of the Ld. CIT(A).
Disallowance of Bad Debts acquired from predecessor-in-interest - assessee has received the business from its predecessor EML by way of demerger - AO disallowed the amount on the ground that the said amount has not been offered to tax by the assessee - whether the amounts offered by the earlier company and duly offered to tax turned bad at a later date be allowed as per the provisions of Section 36(1)(vii) r.w.s. 36(2)? - CIT(A) held that the corresponding amount of the debts was offered as income by the predecessor assessee - HELD THAT:- The assessee has received the business from its predecessor EML by way of demerger wherein the EML sold the vehicles on credit and the said amounts were offered to tax in the earlier years. The question here is not about the debt becoming bad but whether the amounts offered by the earlier company and duly offered to tax turned bad at a later date be allowed as per the provisions of Section 36(1)(vii) r.w.s. 36(2) of the Income Tax Act, 1961.
Reliance is placed on the judgment of CIT Vs T. V. Rao [1985 (7) TMI 2 - SUPREME COURT] - Owing to it we hereby hold that the bad debts written off as irrecoverable in the books of accounts of the assessee in relation to the debts acquired on purchase of business which has been offered as income by the predecessor company is allowable u/s 36(2).
Disallowance of Training Expenses - assessee has claimed expenses on account of “service training school” under the head “selling and distribution expenses” - HELD THAT:- We find that the assessee is in the business of selling commercial vehicles wherein training of the drivers and other technicians is a business expediency. Owing to the new recruitment as well as job rotation, offboarding and attrition of employees, the training is taken to be an ongoing process for any industry.
AO observation that it goes to improve the brand building, if at all, is collateral benefit. There is no provision in the Income Tax Act for apportioning this expenditure over a period of three years as invoked by the AO. Section 37(1) mandates that any expenditure has to be allowed in entirety if it is spent in connection with business of the assessee. There cannot be any formula basis, criteria adopted by the AO while disallowing 2/3rd of such expenditure. At the same time, this expenditure cannot be treated as capital expenditure too - disallowance made by the AO is legally not tenable.
Revenue appeal dismissed.
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2020 (4) TMI 910
Investigation of an IAS by an CBI - principal ground canvassed by the Appellant before the High Court was that he being an officer of the Indian Administrative Service (IAS) employed in connection with the affairs of the Government of Bihar as District Magistrate at Aurangabad District (State of Bihar) could not be subjected to investigation by the CBI without the prior consent of the State.
Whether the proviso in the stated notification dated 19.2.1996 would come in the way of the officials of DSPE to register FIR and carry on investigation of specified offences committed within the Union Territory (National Capital Territory of Delhi), to which the 1946 Act applies?
HELD THAT:- The High Court, in the present case, after analysing the material on record clearly found that BRBCL was a Government undertaking and the project undertaken by it was funded by the Central Government and that it had its registered office in the Union Territory of Delhi (National Capital Territory of Delhi), where the offence of defrauding the undertaking (BRBCL) and siphoning of its funds was allegedly committed. We see no reason to deviate from the opinion so recorded by the High Court.
The alleged role played by the Appellant may be a means to facilitate the commission of crime of defrauding and siphoning of funds. The FIR in that sense is not limited to an offence of manipulation of official records of the State of Bihar as such, but is about the means used by the different actors who were party to the conspiracy in defrauding the Government of India undertaking (BRBCL) and siphoning of its funds.
Indisputably, the registered office of BRBCL is within the jurisdiction of Union Territory of Delhi (National Capital Territory of Delhi) and allegedly the offence has been committed at Delhi, for which reason the Delhi Court will have jurisdiction to take cognizance thereof. To put it differently, the offence in question has been committed outside the State of Bihar. The investigation of the stated offence may incidentally transcend to the territory of State of Bihar because of the acts of commission and omission of the Appellant who is resident of that State and employed in connection with the affairs of the State of Bihar. That, however, cannot come in the way of special police force (DSPE) from investigating the offence committed at Delhi and has been so registered by it and is being investigated. Had it been an offence limited to manipulation of official record of the State and involvement of officials of the State of Bihar, it would have been a different matter - If the State police has had no jurisdiction to investigate the offence in question, as registered, then, seeking consent of the State in respect of such offence does not arise. Any other approach would render the special provisions of the 1946 Act otiose.
Suffice it to observe that the proviso contained in the stated notification dated 19.2.1996 cannot be the basis to disempower the special police force/DSPE (CBI) from registering the offence committed at Delhi to defraud the Government of India undertaking (BRBCL) and siphoning of its funds and having its registered office at Delhi. Allegedly, the stated offence has been committed at Delhi. If so, the Delhi Courts will have jurisdiction to take cognizance thereof. The State police (State of Bihar) cannot investigate the specified offences committed and accomplished at Delhi, being outside the territory of the State of Bihar - the consent of the State Under Section 6 cannot come in the way or constrict the jurisdiction of the special police force constituted Under Section 2 to investigate specified offences Under Section 3 of the 1946 Act committed within the Union Territories. Indeed, when the Court of competent jurisdiction proceeds to take cognizance of offence and particularly against the Appellant, it may consider the question of necessity of a prior sanction of the State of Bihar qua its official(s) as may be required by law. That question can be considered on its own merits in accordance with law.
Appeal dismissed.
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2020 (4) TMI 909
TP Adjustment - Comparable selection - decision of TPO & DRP in adopting the threshold limit of 25% for “Related Party Transaction” filter as against the limit of 10% adopted by the assessee - HELD THAT:- We notice that the Ld DRP has given its decision of adoption of RPT filter, which is not the objection of the assessee.
With regard to the claim for Capacity Utilisation Adjustment, the Ld DRP, has expressed that the assessee has not raised this objection before the TPO and accordingly declined to adjudicate this ground. With regard to the substitution of PLI from OP/OR to OP/OC, the assessee had raised objection in ground 8.1 urged before Ld DRP. However, the Ld DRP has not adjudicated the same.
We notice that the assessee has furnished details of the companies, in its paper book. We notice that the Ld DRP has rejected the claim of the assessee by making general observations, i.e., without addressing specific grounds urged in respect of each of the companies. We have noticed that the assessee, in its Transfer Pricing study, has made adjustment towards under utilization of capacity. However, the said adjustment was not given by the TPO. Hence, we are of the view that the Ld DRP was not justified in declining to adjudicate this claim of the assessee. As noticed earlier, the Ld DRP has not adjudicated the issue relating to selection of PLI.
We are of the view that the Ld DRP has passed a non-speaking order. In this view of the matter, we are of the opinion that all the issues relating to Transfer pricing adjustment need to be restored to the file of Ld DRP/AO for adjudicating all the objections of the assessee by a speaking order. Accordingly, we set aside the Transfer pricing adjustment made in the final assessment order and restore all the issues relating there to the file of AO/DRP with the direction to the Ld DRP to pass a speaking order.
Disallowance made u/s 40(a)(ia) of the Act in respect of year end provisions made - HELD THAT:- Before us, the ld A.R argued that the yearend provisions are required to be made as per accounting principles on estimated basis. Assessee could not deduct tax therefrom, since the payees are not known. However, we notice that the assessee has stated before Ld DRP that the provisions have been made for payment to contractors, subcontractors, professional fees, royalty, rent and commission. Hence the payees should be known to the assessee. Accordingly, we are of the view that the assessee should have deducted tax at source, when the payees are known. Accordingly we confirm the addition made by the AO u/s 40(a)(ia) of the Act.
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2020 (4) TMI 908
Seeking that the national lock-down period ought to be taken into consideration while giving effect to the termination of the Toll Tax Collection Agreement dated 28th September, 2017 - HELD THAT:- A perusal of the letter dated 4th April, 2020 clearly shows that the SDMC had extended the effective date of termination in view of the 21 day national lock down - A perusal of the letter dated 4th April, 2020 shows that despite the defaults of the Petitioner, the effective date of the termination was postponed by the SDMC itself, due to the national lock-down. Since the national lock down has now been extended for a further period, the effective date of termination would, by the rationale of the above letter, be required to be extended for the further period of lockdown. In any event, a perusal of the NIT dated 6th April, 2020 shows that the opening of the tender is to take place on 22nd April, 2020.
While it is made clear that the SDMC would be permitted to go ahead with its NIT and finalize the tender, it is clarified that the effective date of termination shall stand postponed for a further period of 19 days. If the lock down is lifted with effect from 4th May, 2020, all the amounts which are collected upon lifting of the lockdown, by the Petitioner, by operating under the Toll Tax agreement shall be deposited with the SDMC. The effective date of termination is extended by a period of 19 days from 5th May, 2020 i.e., till 24th May, 2020. The SDMC shall, however, ensure that any new arrangement and award of tender in favour of any third party would not be effective till 24th May, 2020.
Application disposed off.
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2020 (4) TMI 907
Bequeathing of properties by the deceased Sangappa under the will or not - genuineness of the Will - Whether the trial Court was justified in holding the will dated 20.5.1991 executed by Sangappa as genuine or not? - HELD THAT:- The Will being a rather solemn document that comes into operation after the death of the testator, special provisions are made in the statutes for making of a Will and for its proof in a Court of law. Section 59 of the Succession Act provides that every person of sound mind, not being a minor, may dispose of his property by Will. A Will or any portion of a Will, the making of which has been caused by fraud or coercion or by any such importunity that has taken away the free agency of the testator, is declared to be void under Section 61 of the Succession Act; and further, Section 62 of the Succession Act enables the maker of a Will to make or alter the same at any time when he is competent to dispose of his property by Will.
Elaborate provisions have been made in Chapter VI of the Succession Act, in Sections 74 to 111, for construction of Wills which, in their sum and substance, make the intention of legislature clear that any irrelevant misdescription or error is not to operate against the Will; and approach has to be to give effect to a Will once it is found to have been executed in the sound state of mind by the testator while exercising his own free will. However, when the Will is surrounded by suspicious circumstances, the Court would expect that the legitimate suspicion should be removed before the document in question is accepted as the last Will of the testator.
Much emphasis is laid on behalf of the appellants on the submissions that execution of the Will in accordance with the requirements of Section 63 of the Succession Act and Section 68 of the Evidence Act has been duly established on record with the testimony of the attesting witnesses as also the witness with whom the Will along with the handwritten draft of the Will had been deposited by the testator. The submissions so made on behalf of the appellants cannot be accepted for the reason that mere proof of the document in accordance with the requirements of Section 68 of the Evidence Act is not final and conclusive for acceptance of a document as a Will. When suspicious circumstances exist and the suspicions have not been removed, the document in question cannot be accepted as a Will.
The Trial Court had largely been swayed by the fact that the deceased Sangappa was not inclined to give any property to the defendant No. 1 and his family as had been the case of the earlier Will executed by him in the year 1974. Admittedly, the said Will of the year 1974 was cancelled by Shri Sangappa on 26.09.1990. He perished in the vehicular accident on 20.05.1991. Whether he intended to bequeath any property to the defendants or not is hardly of any bearing in relation to the suspicious circumstances - the document in question falls flat at the very first question indicated in the case of H. Venkatachala Iyenger [1958 (11) TMI 46 - SUPREME COURT] that is, as to whether the testator signed the Will in question. The answer to this question is only in the negative. This is apart from the fact that the document in question, propounded as a Will, is non-compliant with the requirements of clause (b) of Section 63 of the Succession Act.
The High Court was right in reversing the decision of the Trial Court and in holding that the contested Will was not a genuine document.
Whether remand was called for? - Order XLI Rule 23A CPC - HELD THAT:- The procedure relating to appeals from original decrees (usually referred to as ‘regular first appeal’) is provided in Order XLI of the Code of Civil Procedure, 1908 and therein, various provisions relating to hearing of an appeal, remand of case, remitting of issues for trial, production of additional evidence in Appellate Court etc. are contained in Rules 16 to 29 under the sub-heading ‘Procedure on hearing’ - Rule 23A came to be inserted in Order XLI CPC by way of the Code of Civil Procedure (Amendment) Act, 1976. Prior to this amendment, it was generally accepted by the Courts that although under Rule 23, an order of remand could be made only on reversal of a decree disposing of suit on a preliminary point but, the Appellate Court has the inherent power of remanding a case where it was considered necessary to do so in the interest of justice. Some of the High Courts had made similar provisions by way of their respective amendments. Insertion of Rule 23A in Order XLI by the Amending Act of 1976 makes it explicit that even when the suit has been disposed of otherwise than on a preliminary point and the decree is reversed in appeal, the Appellate Court shall have the power of remand, if a re-trial is considered necessary.
A conjoint reading of Rules 23, 23A and 24 of Order XLI brings forth the scope as also contours of the powers of remand that when the available evidence is sufficient to dispose of the matter, the proper course for an Appellate Court is to follow the mandate of Rule 24 of Order XLI CPC and to determine the suit finally. It is only in such cases where the decree in challenge is reversed in appeal and a re-trial is considered necessary that the Appellate Court shall adopt the course of remanding the case - An order of remand only on the ground that the points touching the appreciation of evidence were not dealt with by the Trial Court may not be considered proper in a given case because the First Appellate Court itself is possessed of jurisdiction to enter into facts and appreciate the evidence. There could, of course, be several eventualities which may justify an order of remand or where remand would be rather necessary depending on the facts and the given set of circumstances of a case.
The present case had clearly been the one where the parties had adduced all their evidence, whatever they wished to; and it had not been the case of the plaintiff-appellants that they were denied any opportunity to produce any particular evidence or if the trial was vitiated because of any alike reason - The High Court has meticulously examined the same evidence and the same circumstances and has come to a different conclusion that appears to be sound and plausible, and does not appear suffering from any infirmity. There was no reason or occasion for the High Court to consider remanding the case to the Trial Court. The contention in this regard is required to be, and is, rejected.
The High Court has rightly interfered with the decision of the Trial Court and has rightly held that the document in question cannot be accepted as the genuine Will of the deceased Sangappa; and there was no reason for the High Court to remand the case to the Trial Court.
Appeal dismissed.
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2020 (4) TMI 906
Difference in receipts as per the bank account of the assessee and receipts as per its books of account - Addition on account of amount credited in bank account of the assessee in excess of receipts as per' books of account and also allowing the assessee appeal against the rejection of the books of accounts of the assessee -- As per CIT-A addition is not sustainable in view of documentary evidences already available on record to substantiate the said difference and AO has failed to make any sincere effort regarding the same and made addition only on the basis of doubt, suspicion, conjecture or surmises without affording proper opportunity of being heard to the appellant which is in violation of principles of natural justice - HELD THAT:- Revenue has failed to controvert the findings of CIT(A) in this regard. We find no merit in the issue raised vide ground of appeal no. 1. Before parting, we may also point out that no additional evidence was produced before the CIT(A) and hence there is no merit in the additional ground of appeal raised by the Revenue.
Difference in brokers’ accounts and party wise gross receipts - HELD THAT:- CIT(A) deleted the said addition made by the AO observing that the said difference in party wise detail and brokers’ account is due to Margin Money and STT. In view of the findings of the CIT(A) with regard to the aforesaid addition, we find no merit in the grounds of appeal no. 2 raised by the Revenue and the same is dismissed.
Non deduction of TDS on professional charges - HELD THAT:- CIT(A) noted that the assessee had not claimed the said professional expenses in its profit & loss account and had capitalized the same under work in progress i.e. “Building under Construction” in fixed assets schedule. The CIT(A) thus deleted the addition. We find merit in theorder of the CIT(A) and uphold that the provisions of section 40(a)(ia) of the Act are attracted only if expenses are claimed in the profit & loss account and not when the same are capitalized.
Disallowance u/s 14A r.w.r. 8D - HELD THAT:- CIT(A) noted that the assessee had made investment only in share application money as on 31.03.2011 and hence there was no merit in invoking the provisions of section 14A of the Act. We uphold the order of CIT(A) in this regard and dismiss the ground of appeal no. 3 raised by the Revenue.
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2020 (4) TMI 905
Profiteering - construction service - it is alleged that the Respondent had not passed on the benefit of Input Tax Credit (ITC) to him by way of commensurate reduction in price of the shop - contravention of provisions of section 171 of CGST Act - HELD THAT:- It is revealed that the Respondent is in the Real Estate business and the DGAP's Report is with regard to his project "U Faria" situated at C-04A, Sector-16B, Greater Noida, Uttar Pradesh under which he has constructed 190 commercial shops out of which he has sold 178 shops. It is also revealed that the Applicant No. 1 had filed a complaint with the Standing Committee on 29.11.2018 alleging that the Respondent had not passed on the benefit of additional ITC which he has availed after coming in to force of the GST w.e.f. 01.07.2017, in respect of Shop No. G-122 which he has purchased from the Respondent. The above complaint was examined by the Standing Committee on Anti-Profiteering in its meeting held on 11.03.2019 and was forwarded to the DGAP for detailed investigation under Rule 129 (I) of the above Rules.
It is clear that an amount of Rs. 1,77,50,478/- of ITC has been blocked by the State GST authorities as is evident from Annexure-2 mentioned above. Therefore, the Respondent cannot utilize the above amount for discharging his GST output liability. The Respondent can accordingly, not be said to have obtained the additional benefit of above amount of ITC during the post-GST period. Therefore, the ratio of ITC to the turnover computed by the DGAP during the post-GST period vide Table-B cannot be considered for computation of the profiteered amount until the above amount of ITC is made available to the Respondent for utilization. Therefore, the amount of Rs. 24, 78,383/- computed as the profiteered amount by the DGAP as per Annexure-14 cannot be determined as the profiteered amount in terms of Section 171 (1) of the above Act read with Rule 133 (1) of the CGST Rules, 2017.
As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules. Since, the present Report has been received by this Authority on 25.09.2019 the order was to be passed on or before 24.03.2020. However, due to prevalent pandemic of COVI 19 in the Country this order could not be passed on or before the above date due to force majeure. Accordingly, this order is being passed today in terms of the Notification No. 35/2020-Central Tax dated 03.04.2020 issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes & Customs under Section 168 A of the CGST Act, 2017
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2020 (4) TMI 904
Violation of Fundamental Rights - rights of minority section students - Procedure for selection to MBBS course - Validity of notifications dated 21.12.2010 issued by Medical Council of India (MCI) and other two notifications dated 31.5.2012, issued by Dental Council of India (DCI) - single eligibility-cum-entrance examination, namely, National Eligibility-cum-Entrance Test for admission to MBBS course in each academic year - whether by providing centralised examination system - NEET for admission to MBBS, PG, BDS and MDS by virtue of the provisions made in the Act and Regulations, there is violation of fundamental rights guaranteed Under Articles 19(1)(g), 25, 26, 29(1) and 30 of the Constitution of India?
HELD THAT:- There is no doubt as to the concept of limited Government and least interference is welcomed, but in which field and to what extent balancing with the larger public and national interest is required. The individual autonomy, rights, and obligations are to be free from official interference except where the rational basis for intrusion exists. The Constitution provides a limitation on the power of the State to interfere with life, liberty, and rights, however, the concept of limited government cannot be extended to a level when it defeats the very national interest. The maladies with which professional education suffers in this country are writ large. The regulatory framework created by the MCI/DCI is concomitant of conditions, affiliation and recognition, and providing central examination in the form of NEET cannot be said to be violative of the rights Under Articles 19(1)(g) and 30. The regulatory framework is not restrictive, but caters to the effective enjoyment of the rights conferred under the aforesaid provisions.
The prescription of NEET is definitely in order to improve the medical education, co-related to the improvement of public health, thus, it is a step-in furtherance of the duty of the State enshrined in the Directive Principles of the State Policy contained in Article 47 of the Constitution of India. Similarly, Article 46 aims at promotion of educational and economic interests of Scheduled Castes, Scheduled Tribes, and other weaker sections. By prescription of one equivalence examination of NEET, the interest of their merit is also equally protected and its aims of preventing various malpractices, which crept into system and prevent economic exploitation by selling seats with which malady the professional medical education system suffered. Article 51A(j) deals with the duty to strive towards excellence in all spheres of individual and collective activity so that the nation constantly rises to higher levels of endeavour and achievement - there is no violation of the provisions as argued by Appellants, rather action is in furtherance of the constitutional aims and directions to achieve intendment of Article 51A(j) and is in the national interest.
In view of the law laid down in T.M.A. Pai Foundation [2002 (10) TMI 739 - SUPREME COURT], it is apparent that NEET/common entrance test is a devise to standardise and computing equivalence between different kinds of qualifications. It does not interfere with the rights of the unaided minority institutions as it has been imposed in national interest considering the malpractices of granting illegal admission by virtually selling the seats in derogation to rights of meritorious students - The charitable activity of education became a saleable commodity and prerogative of wealthy persons and poor students were forced to get education funded from Banks making it difficult for them to come out of tentacular octave of interest. They are exploited in bud before they bloom into flower. The ill-reputation developed by MCI forced to change its entire structure. The national interest requires further improvement in the system to eradicate evils from the system. The situation is still grim and require to be dealt with firm hand and steely determination.
Thus, it is apparent that the provisions in question which have been incorporated in the Act relating to Medical/Dental education, the Government, MCI and DCI cannot be said to be an invasion of the fundamental rights. The intendment is to ensure fairness in the selection, recognition of merit, and the interests of the students. In the national interest, educational institutions are basically for a charitable purpose. By and large, at present education is devoid of its real character of charity, it has become a commodity - To weed out evils from the system, which were eating away fairness in admission process, defeating merit and aspiration of the common incumbent with no means, the State has the right to frame regulatory regime for aided/unaided minority/private institutions as mandated by Directives Principles, Articles 14 and 21 of the Constitution.
In St. Stephen's College v. University of Delhi [1991 (12) TMI 276 - SUPREME COURT], it was held that there has to be balancing of interest of rights of minorities. It was observed that 50% of the annual admission has to be given to the members of communities other than the minority community on the basis of merit. Regulations that serve the interest in standards of education amongst the recognised institutions could validly be made. Such general patterns and standards are the need, and such Regulation shall not have the effect of depriving the right of minorities to educate their children in their own institution.
The uniform Entrance Examination cannot be said to be unreasonable regulatory framework. Considering the terms and conditions for affiliation and recognition for professional medical and such other professional courses are binding, and no relaxation can be permitted in the conditions - rights Under Articles 19(1)(g) and 30 read with Articles 25, 26 and 29(1) of the Constitution of India do not come in the way of securing transparency and recognition of merits in the matter of admissions. It is open to regulating the course of study, qualifications for ensuring educational standards. It is open to imposing reasonable restrictions in the national and public interest. The rights Under Article 19(1)(g) are not absolute and are subject to reasonable restriction in the interest of the student's community to promote merit, recognition of excellence, and to curb the malpractices. Uniform Entrance Test qualifies the test of proportionality and is reasonable. The same is intended to check several maladies which crept into medical education, to prevent capitation fee by admitting students which are lower in merit and to prevent exploitation, profiteering, and commercialisation of education. The institution has to be a capable vehicle of education. The minority institutions are equally bound to comply with the conditions imposed under the relevant Acts and Regulations to enjoy affiliation and recognition, which apply to all institutions.
Thus, there is no violation of the rights of the unaided/aided minority to administer institutions Under Articles 19(1) (g) and 30 read with Articles 25, 26 and 29(1) of the Constitution of India by prescribing the uniform examination of NEET for admissions in the graduate and postgraduate professional courses of medical as well as dental science. The provisions of the Act and Regulation cannot be said to be ultra vires or taking away the rights guaranteed under the Constitution of India Under Article 30(1) read with Articles 19(1)(g), 14, 25, 26 and 29(1).
Petition disposed off.
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2020 (4) TMI 903
Profiteering - supply of Stayfree Sanitary Napkins - it is alleged that the Respondent had not passed on the benefit of tax reduction from 12% to Nil, by way of commensurate reduction in price - contravention of provisions of section 171 of CGST Act - HELD THAT:- It is clear from the Report dated 17.12.2019 filed by the DGAP that the above three issues mentioned in the Paras supra are required to be further investigated by the DGAP and only then this Authority can determine the profiteered amount as per the provisions of Section 171 of the CGST Act, 2017 read with Rule 133 of the CGST Rules, 2017. Accordingly, this Authority directs the DGAP to carry out further investigation under Rule 133 (4) of the above Rules, on the following issues:-
(i) The issue of the common input tax credit shall be investigated by the DGAP and a detailed Report shall be submitted accordingly.
(ii) The claim of reversal of common credit of Rs. 13,07,118/- made by the Respondent, shall be verified by the DGAP as per the provisions of Section 17 (2) of the CGST Act, 2017 read with Rule 42 of CGST Rules, 2017 and his findings shall be recorded in the Report.
(iii) The issue of benefit of discounts shall be examined by the DGAP in terms of Section 15 (3) of the CGST Act, 2017 as per the details submitted by the Respondent and a detailed Report shall be filed by him in this regard.
(iv) The profiteered amount shall be again computed by the DGAP on the closing and the fresh stocks separately and mentioned in his Report.
Investigation on the above issues shall be completed by the DGAP within a period of 3 months from the date of passing of this order and Report submitted under Rule 129 (6) of the CGST Rules, 2017. The Respondent is also directed to extend full co-operation to the DGAP during the course of the investigation - As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this order was required to be passed within a period of 6 months from the date of receipt of the Report from the DGAP under Rule 129 (6) of the above Rules.
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2020 (4) TMI 902
Limitation of Liability - liability to third parties - Whether Dr. Alpesh Gandhi could have been said to have been in the employ of the Respondent No. 3 on the date of the accident, as a result of which the limitation of liability provision in favour of the Respondent No. 1 as set out would kick in? - HELD THAT:- The High Court held in the impugned judgment that as additional premium had been paid so as to attract the applicability of IMT-5, in any case the Insurance Company would be liable under the policy to pay compensation in the case of death to unnamed passengers other than the insured and his paid driver or cleaner, Dr. Alpesh Gandhi being one such unnamed passenger. This was done on the footing that the exception to IMT-5 was that a person in the employ of the insured coming within the scope of the Workmen's Compensation Act, 1923 is excluded from the cover, but that as Dr. Alpesh Gandhi did not come within the scope of the Workmen's Compensation Act, compensation payable due to his death in a motor accident would be covered by IMT-5.
Whether the expression "employment" is to be construed widely or narrowly - if widely construed, a person may be said to "employed" by an employer even if he is not a regular employee of the employer? - HELD THAT:- The wider meaning that has been canvassed for by the insurance company cannot possibly be given, given the language immediately before, namely, "in the course of", thereby indicating that the "employment" can only be that of a person regularly employed by the employer. Even otherwise, assuming that there is an ambiguity or doubt, the contra proferentum Rule referred to hereinabove, must be applied, thus making it clear that such "employment" refers only to regular employees of the Institute, which, as we have seen hereinabove, Dr. Alpesh Gandhi was certainly not.
Appeal allowed.
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2020 (4) TMI 901
Revision u/s 263 by CIT - assessee company has not included the financials of Bhilai in the audited financial statements prepared for the AY 2013-14 - As submitted that the Bhilai unit of the assessee company was under control of Sh. Sunil Aggarwal, younger brother of Sh. Anil Aggarwal. Since, Sh. Sunil Aggarwal had obtained restrain order from CLB, the assessee company managed by Sh. Anil Aggrawal was not allowed to interfere with functioning of the Bhilai Unit. Therefore, the assessee company was not having financial details of the said unit - HELD THAT:- Admittedly, the assessee has its unit in Bhillai and the assessee has not included the financials of its Bhilai unit in the audit financial statements prepared by it for the AY 2013-14 due to alleged dispute between the promoters. As pointed out by the CIT, the AO issued notice u/s 133 (6) of the Act for obtaining financial statements of Bhilai unit from the other promoter of the assessee company. However, no details were received by the AO. We further notice that the AO has not mentioned any reason for not making any addition in respect of Bhilai unit.
As pointed out by the Ld. counsel, addition of 5% of the turnover made from the AY 2004-05 to 2007-08 and 2010-11 to 2012-13, however in the assessment year under consideration, the AO has not made any addition whereas in the assessment year 2014-15 and 2015-16 the AO had made ad-hoc addition. AO has not given any reason in the assessment order or even not discussed about the financial statements of Bhilai unit which shows that the AO has failed to exercise due diligence to determine the income arising from the operations of assessee’s company at its Bhilai unit.
Since, the AO has passed the assessment order without conducting proper enquiry in respect of Bhilai Unit, the same is erroneous as well as prejudicial to the interest of the revenue. As has been laid down by the Hon’ble Supreme Court in the case of Malabar Industries Company Ltd. vs. Commissioner of Income Tax [2000 (2) TMI 10 - SUPREME COURT], if due to an erroneous order of the AO revenue is losing tax lawfully payable by the assessee, the order passed by the AO is prejudicial to the interest of the revenue. Therefore, in our considered view, since the order passed by the AO is erroneous as well as prejudicial to the interest of the revenue, the Ld. Pr. CIT has rightly revised the assessment order passed by the AO. - Decided against assessee.
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2020 (4) TMI 900
Addition u/s 69C - telescoping of the said addition out of the available of funds with assessee - assessee is developing a township known as Ensara Metropark at Nagpur. The project was in progress during the year and the entire cost incurred was shown as work in progress - HELD THAT:- In this case the cash generated during the year out of over invoicing was ₹ 5,46,20,000/- and it has been admitted by Shri Sanjay Kothari during the course of recording of statement under section 132(4) of the Act that the source of these expenses were out of the cash generated through over invoicing.
AO has failed to bring on record any evidence to the effect that these expenses of ₹ 2,19,96,000/- were incurred out of some other source or the cash generated of ₹ 5,46,20,000/- was invested or incurred on some other activity. Therefore, under these circumstances, the only possible presumption is that the expenditure was incurred out of the funds available with the assessee generated through over invoicing. This has been admitted by the CEO of the project Shri Sanjay Kothari in the statement recorded under section 132(4) and therefore we can reasonably held that assessee is entitled to benefit of telescoping of ₹ 2,19,96,000/-. The case of the assessee finds support from the several decisions referred to by the assessee during the course of hearing. In the case of CIT vs. K.SREEDHARAN [1992 (6) TMI 24 - KERALA HIGH COURT] has held that if a intangible addition made in the earlier year is as good as other disclosed income of the assessee and it would be treated as available for investment from the year in which such addition was made.
Thus the assessee has available source with it to incur the cash expenses which was not in any way controverted by the AO by bringing on record any cogent and substantive materials or evidences and accordingly we set aside the order of Ld. CIT(A) and direct the AO to allow the telescoping and delete the addition.
Disallowing the setting off the loss against the assessed deemed income under section 69C - HELD THAT:- We observe that the income assessed under section 68/69C is eligible to be adjusted against any brought forward loss or depreciation. The position is clarified by the board’s circular No.11/2019 dated 19.06.2019 which provides for setting off of loss/depreciation against the income assessed under section 69C of the Act provided it relates to any assessment years prior to A.Y. 2017-18 and the same ratio has been laid down in the various decisions relied upon by the assessee. Accordingly, we hold that whatever income is assessed after giving effect to ITAT order is subject to set off against the loss/depreciation of the current year and also brought forward loss/brought forward depreciation of the earlier year.
Addition made on account of On money - Whether transactions of receipt of on money as evidenced by the receipts issued to the buyers were duly recorded in the books of accounts? - HELD THAT:- After perusing the material on record, we observe that the assessee has duly accounted for all the receipts issued to the customers from whom the said cash was received and duly recorded in the books of accounts of the assessee. Since the project “Ensara Metropark” was at the development stage and whatever explained was incurred was shown as work in progress at the year end and also no revenue was offered to tax. We find that assessee has duly accounted for all these entries in the books of accounts and thus the mere fact that the money has been received in cash by the assessee would not justify the order of Ld. CIT(A) confirming the order of AO wherein it has been held that money received by issuing various receipts represent the on money. The stand of the authorities below appears to be contrary to the facts on record as the money which has been alleged to be on money is duly recorded in the books of accounts. In such a scenario we are not in agreement with the conclusion drawn by the Ld. CIT(A) and accordingly we direct the AO to delete the addition.
Assessee appeal allowed.
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2020 (4) TMI 899
Money Laundering - Grant of Interim Bail - Present applications seeking interim bail are based primarily on two grounds i.e. keeping in view the present Covid-19 pandemic and the overcrowding in jail, thereby social distancing not being maintained and secondly, the petitioner claims parity with the co-accused on the ground that they have been released, however, the second issue would be relevant while hearing the regular bail applications.
HELD THAT:- There are no ground to interfere under Article 136 of the Constitution - SLP dismissed.
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2020 (4) TMI 898
Approval of Resolution Plan - Validity of decision of the RP for not short listing its Resolution Plan despite its plan is in compliance with Section 30(2) of the Insolvency and Bankruptcy Code, 2016 - validity of decision of RP for short listing and approving the CarVal’s Resolution Plan as successful Resolution Plan - whether the economic interest of this Applicant is getting prejudiced because his plan has not been admitted? - HELD THAT:- The issue decided in the case of STATE BANK OF INDIA VERSUS UTTAM GALAV METALLICS LIMITED, INVESTMENT OPPORTUNITIES IV PTE. LTD. AND ORS. VERSUS MR. RAJIV CHAKRABORTY AND ORS., NOBLE RESOURCES INTERNATIONAL PTE LIMITED VERSUS MR. RAJIV CHAKRABORTY, RESOLUTION PROFESSIONAL OF UTTAM GALVA METALLICS LIMITED & ORS. [2020 (3) TMI 1390 - NATIONAL COMPANY LAW TRIBUNAL PRINCIPAL BENCH, NEW DELHI] where it was held that Once plan is shortlisted, if at all any remedy is assumed to be present, it is only with regard to the procedure, as to the procedure is concerned, in Regulation 39 of the CIRP Regulations it has been categorically mentioned that the Committee of Creditors shall evaluate the resolution plan received under Regulation 39 strictly as per the evaluation matrix to identify the best resolution plan, when evaluation matrix figures are there, that being the special subject, as long as there is no objection from any of the Committee of Creditors over the process of evaluation, if the evaluation matrix discloses marks identifying the best plan, the CoC will have to opt for the best plan provided it is viable and feasible.
Application disposed off.
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2020 (4) TMI 897
Seeking a direction to the respondent/non-applicant i.e. Indian Overseas Bank to release all the funds of the corporate debtor which were retained by the respondent/non-applicant - HELD THAT:- The Hon’ble Supreme Court of India in State Bank of India Versus V. Ramakrishnan and Another [2018 (8) TMI 837 - SUPREME COURT] while holding that Section 14(3) of the Code has no application to the personal guarantors, discussed the background to the introduction of the amendment to Section 14(3) of the Code - A careful examination of Section 14(3)(b) of the Code and the decision of the Hon’ble Apex Court, indicates that the action of the respondent/nonapplicant is not covered under Section 14(3)(b) of the Code.
In the present case, it is in dispute that whether a charge was created in accordance with Section 77 of the Companies Act, 2013. Neither of the counsel filed any proof or document in support of their respective contentions. In the absence of the same, no finding can be given on this aspect.
The respondent/non-applicant shall release the amounts in Item Nos.2, 5, 6, 7, 8 and 9, of the table mentioned above, alongwith interest accrued, if any, to the account of the corporate debtor to enable it to utilize in accordance with the Code and the Regulations made thereunder - applicant/Resolution Professional is directed to file a detailed affidavit before this Tribunal with regard to utilization of the amounts, within two weeks from the date of reopening of National Company Law Tribunal, Chandigarh Bench, after the lockdown is removed.
Application disposed off.
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2020 (4) TMI 896
Seeking permission to withdraw this special leave petition - HELD THAT:- This Special Leave Petition need not be interfered -
Permission to withdraw the SLP is granted.
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2020 (4) TMI 895
Enforceability of the foreign award - Compliance with the contractual obligation to export groundnut due to the Government's refusal or not on the part of NAFED - whether NAFED could have been held liable in breach of contract to pay damages particularly in view of Clause 14 of the Agreement? - whether enforcement of the award is against the public policy of India?
HELD THAT:- In the present case, parties have agreed, and in Clause 14 of the Agreement, it was contemplated that during the contract if there is any prohibition of the export or any other executive or legislative Act by or on behalf the Government of the Country of origin, the unfulfilled part of the contract shall be cancelled. Because of the refusal by the Government, it was not permissible to the NAFED to make a supply to the Alimenta S.A. Hence; the unfulfilled part was required to be cancelled. Thus, NAFED was justified in not making the supply as it would have violated the Export Control Order, and it was not permissible to carry forward the quantity of the previous year to the next year because of the Export Control Order without permission of the Government.
In the present case, because of the clear stipulation in Clause 14 of the Agreement, it is apparent that the parties have agreed for a contingent contract. They knew very well that the Government's executive, or legislative actions might come in the way as provided in Clause 14 of the Agreement. Thus, in this case, Section 32 of the Contract Act is attracted and not the provisions of Section 56. It was an agreement to do an act impossible in itself without permission, and that is declared to be void by Section 32. The contract was capable of being performed in case the Government gave the requisite authorization - Section 56 is not attracted as the promisor and promisee both knew the reason in advance as in agreement such a contingency was provided itself in case of Government's executive order comes in the way, for cancellation of the contract. Thus, the contract became void on the happening of the contingency, as provided in Section 32 of the Contract Act.
This Court in SATYABRATA GHOSE VERSUS MUGNEERAM BANGUR & CO. [1953 (11) TMI 19 - SUPREME COURT], considered the applicability of Sections 32 and 56 while considering the doctrine of frustration of contract. Impossibility and frustration are used as interchangeable expressions. The principle of frustration is an aspect of the discharge of a contract. In India, the only doctrine the courts have to go by is that of intervening impossibility or illegality as laid down in Section 56, and the English decisions in this regard may have persuasive value but are not binding. This Court also considered if the contract contained impliedly or expressly a stipulation, according to which it would stand discharged on happening of particular circumstances. The dissolution of the agreement would take place under the terms of the contract itself. Such cases would be outside the purview of Section 56 of the Contract Act altogether.
The Court followed the decision in Satyabrata Ghose in NAIHATI JUTE MILLS LTD. VERSUS KHYALIRAM JAGANNATH [1967 (10) TMI 66 - SUPREME COURT], it held that if the contract contains implied or expressly a term according to which it would stand discharged on the happening of certain contingencies, dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of Section 56 of the Contract Act. Such cases have to be dealt with Under Section 32 of the Contract Act.
It is also apparent that the Government rightly objected to the supply being made at the rate of the previous season in the next season, particularly when the prices escalated thrice. The addendum was entered into subsequently, unfairly, and the parties fully understood that the Government would not permit export at the rate on which supply was proposed, and NAFED was acting only as a canalising agent of the Government of India. Thus, for such an unfair contract, permission was rightly declined by the Government. In the previous year, the commodity could not be supplied due to force majeure. In no event, supply could have been made in December 1980 and January 1981 sans permission from the Government of India.
Whether the ground of prohibition to supply imposed by the Government was sufficient to render the award unenforceable in terms of the provisions contained in Section 7 of the Foreign Awards Act? - HELD THAT:- It is provided in Section 7(1) (b)(ii) that if the court dealing with the case is satisfied that the enforcement of the award will be contrary to public policy, the foreign award may not be enforced. The foreign award may also not be executed in the case as per Section 7(1)(a)(i) if the parties to the agreement under the law applicable are under some incapacity or agreement is not valid under the law. Similar exigency is provided in Section 7(1)(a)(ii) if proper notice of appointment of Arbitrator is not given or the party was unable to present its case. Section 7(1)(a)(iii) provides that if the award deals with the questions not referred or contains decisions on matters beyond the scope of the agreement renders award unenforceable. Section 7(1)(a)(iv) makes an award not capable of enforcement in case the composition of the Arbitration Tribunal or procedure is not in accordance with the agreement of the parties.
When the award can be said to be contrary to public policy? - HELD THAT:- This Court considered the issue in several decisions. The expression "public policy" concerning the agreement relates to the public policy of the country where award is being enforced. Section 23 of the Contract Act, 1872 deals with what consideration and objects are lawful and what not. If the court regards it as immoral or opposed to public policy, in that event, the consideration or object of agreement is said to be unlawful, and any agreement of which the object or consideration is unlawful is void - It is apparent from various decisions as to enforceability of foreign awards, Clause 14 of FOSFA Agreement and as per the law applicable in India, no export could have taken place without the permission of the Government, and the NAFED was unable to supply, as it did not have any permission in the season 1980-81 to effect the supply, it required the permission of the Government. The matter is such which pertains to the fundamental policy of India and parties were aware of it, and contracted that in such an exigency as provided in Clause 14, the Agreement shall be cancelled for the supply which could not be made. It became void Under Section 32 of the Contract Act on happening of contingency.
The Arbitrator appeared at the appellate stage, though, as per the Indian Law and the ethical standards, the Arbitrator could not have appeared at the second stage to defend arbitration award passed by him, and should have kept aloof. However, no concrete material has been placed on record to substantiate the objection as to prevailing practice and law in U.K. at the relevant time. Hence, we are not inclined to decide the issue in this case. Suffice it to observe that Arbitrator is supposed to follow ethical standards, and, in our considered view, ought not to have defended arbitration award passed by him in the subsequent judicial proceedings.
The award is ex facie illegal, and in contravention of fundamental law, no export without permission of the Government was permissible and without the consent of the Government quota could not have been forwarded to next season. The export without permission would have violated the law, thus, enforcement of such award would be violative of the public policy of India - On the happening of contingency agreed to by the parties in Clause 14 of the FOSFA Agreement the contract was rendered unenforceable Under Section 32 of the Contract Act. As such the NAFED could not have been held liable to pay damages under foreign award.
The appeal filed by the NAFED is thus allowed - the impugned judgment and order passed by the High Court is set aside. Award is held to be unenforceable.
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2020 (4) TMI 894
Unexplained cash credit - bogus LTCG - addition u/s 68 - Penny stock purchases - as argued assessee was not provided the cross examination of those parties who gave statements against the assessee and also that materials used against the assessee in framing the assessment order were not provided to the assessee - HELD THAT:- Assessee held these shares for more than 12 months and all these transactions were routed through the banking channels. Thereafter, the investigation wing of the department conducted the investigation and searches on various operators in Kolkata and elsewhere and a racket of shares manipulation came to notice of the department. In the said racket the shares were purchased at a very minimal price and after certain period sold at a very astronomical price which is manifold the purchase price.
In the whole racket which was found that the various investors were indulged in these transactions in order to book the bogus long term capital gain/short term capital gain and routed their own money in order to convert the same into the long term capital gain - these penny stock companies were not having any financial strength or genuine business and the increase in the prices of the share was only through manipulation and connivance with the brokers. The assessee’s name was found to be in the list of beneficiary and accordingly the AO inquired upon these transactions by the assessee during the year.
Assessee has duly disclosed these long term capital gains in his return of income filed for the year. We note that the AO has not supplied any material to the assessee before finalizing the assessment and has merely relied upon the investigation report received by the assessee that assessee is a beneficiary of this racket. The AO merely reproduced the report of the investigation wing in the assessment order and discussed the financial of Premier Capital Services Ltd. However, it was never confronted to the assessee or any cross examination was allowed to find out the truth behind it. We note that assessee has purchased the shares and subsequently sold on the stock exchange through online trading portal and where it is very difficult to note about the subsequent buyer
Assessee has filed all the necessary evidences as stated above before the AO as well as before the Ld. CIT(A). However, no further enquiry was carried out by the AO or by Ld. CIT(A) but merely relied on the report of the investigation wing and statements of certain individuals recorded during the course of search who have stated that they were engaged in providing accommodation entries for LTCG/LTCL in various shares which are called penny stocks. However, these information were never provided to the assessee. Similarly, no cross examination was allowed by the AO to the assessee during the assessment proceedings - AO has merely relied on the investigation report and did not try to collect further evidences by conducting further investigation to prove that the assessee own funds have changed hands.. Under these circumstances, we are not in a position to subscribe to the conclusion by the authorities below - We direct the AO to delete the addition under section 68 - Decided in favour of assessee.
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