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Showing 141 to 160 of 1478 Records
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2016 (3) TMI 1347
Depreciation on goodwill - depreciation on customer relationship rights (non-compete fees) which was considered as an intangible asset by the Appellant - slump sale - This asset was acquired by the Appellant as a part of business transfer agreement with MIS TVS Electronics Ltd. - Whether the expression "any other business or commercial right of similar nature" would include such "Customer Relationship Rights (Non-compete fees)", which is essential to carry on the business after the business transfer? - HELD THAT:- The transaction of purchase of contract manufacturing service division of TVS Electronics Ltd. by the assessee is slump sale as the consideration was agreed and paid in lump sum without assigning any value to specific assets. Therefore as per the agreement the consideration was paid lump sum without giving any details of payment for any specific assets. The business was purchased by the assessee and it was transferred by the TVS Electronics as an on going business/division. However, in its books of accounts the assessee has valued the fixed asset and intangibles as per the valuation made by the consultants.
The assessee in its books of accounts has allocated sum to the intangible being customer relationship. Therefore, though the seller has agreed not to engage in any business for a period of three years or participate or engage as owner, partner shareholder, consultant, advisor or any other capacity solicit the employees of the CMS Business however in the absence of any intention of parties to pay consideration for such restrictive covenants in the agreement the payment in question cannot be regarded as non-compete fees
The claim of the assessee is required to be considered by treating the said payment as goodwill. The learned Authorised Representative of the assessee has relied upon the judgment of Hon'ble Supreme Court in the case of CIT Vs. Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] and submitted that in view of the said judgment of the Hon'ble Supreme Court, goodwill eligible for depreciation as per the Section 31(1)(ii) . Since the assessee did not claim depreciation on goodwill in the return of income and even not made any claim before the CIT (Appeals). Therefore, the issue of allowing depreciation on goodwill has not been examined by the authorities below.
Additional ground in respect of depreciation on goodwill - The issue of ‘depreciation’ on goodwill is a legal issue and does not require any further investigation of fact as the Assessing Officer has not disputed or disturbed the valuation allocated/assigned by the assessee in the books of accounts to the fixed assets and intangibles including goodwill. Therefore we admit the additional ground raised by the assessee. Since this issue has been raised for the first time by the assessee before us, therefore we set aside this issue to the record of the Assessing Officer for deciding the same as per law. Appeal of the assessee is allowed for statistical purpose.
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2016 (3) TMI 1345
Rectification petition u/s 254 - as submitted the Hon’ble Bench has inadvertently remanded the order appeal against by the revenue to the file of the learned CIT(A), whereas after the conclusion of hearing on 16.10.2014, it had pronounced its order dismissing the revenue’s appeal - addition u/s 68 - HELD THAT:- Application has no merit and deserves to be dismissed. We find from the record that the basic submission of the assessee that the order under challenge is “inadvertently” at variance with the pronounced order is wrong on facts as we find on consulting the records that no pronouncement dismissing the appeal of the Revenue was made. Further we find no such recording on record that the revenue’s appeal is dismissed on merits. The hearing in the present case, as is admitted by all concerned, stood concluded on 25.06.2014 when no pronouncement was made. However, while considering the fact that the ld. Sr. Advocate had submitted that consistently the issue has been decided in its favour by the ITAT, this submission was found to be factually incorrect and contrary to record. Accordingly, the appeal was listed for clarification on 22.08.2014 and the hearing was finally concluded on 16.10.2014.
In view of the above order dated 22.08.2014 the parties were heard on 16.10.2014 in respect of the above clarification. The ld. Sr. Advocate had addressed the correct factual position on the said date by clarifying on query that the identical issue in 2005-06 and 2006-07 assessment years had been restored by the ITAT to the CIT(A) in the two immediately preceding assessment year. Hence contrary to the submission made earlier on behalf of the assessee that the issue stood concluded consistently in assessee’s favour by the ITAT it was submitted on clarification that infact the issue did not stand concluded in assessee’s favour by consistent orders of the ITAT in the earlier years. Consequently this fact stands addressed in para 6.1 of the order of the ITAT leading to the conclusion drawn requiring that the issue should be restored back to the file of the CIT(A) in para 8 & 8.1.
The present case is squarely covered by the exception carved out by the decision of the Hon’ble Supreme Court in Vinod Kumar Singh vs BHU [1987 (11) TMI 385 - SUPREME COURT] as there was no pronouncement that the Revenue’s appeal is being dismissed and there was no order dictated in the open Court dismissing the Revenue’s appeal. Further the exceptional feature why the case itself was required to be re-heard is evident from the order sheet dated 22.08.2014 on which date the clarification was addressed, the merits of which have not been touched upon in the M.A filed by the assessee.
Accordingly on consideration of the peculiar facts and circumstances of the case, we find that by filing the M.A. the assessee is infact seeking a Review of the order dated 12.12.2014 as is evident from the arguments advanced on merit and reliance placed on CIT vs Kamdhenu [2011 (12) TMI 394 - DELHI HIGH COURT] in the context of proposition of law in regard to addition u/s 68 of the Income Tax Act. The assessee having failed to point any error apparent on the face of the record, the M.A filed is dismissed. - Decided against assessee.
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2016 (3) TMI 1344
Validity of Reopening u/s. 148 - Non independent application of mind by AO - lacking tangible material / reasonable cause and justification - HELD THAT:- AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. See PR. COMMISSIONER OF INCOME TAX-4 VERSUS G & G PHARMA INDIA LTD. [2015 (10) TMI 754 - DELHI HIGH COURT] - Decided in favour of assessee
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2016 (3) TMI 1343
Adjournment petition - assessee’s counsel Mr. G. Gopalan is not in station on account of a medical emergency and he is not in a position to appoint another counsel within the short time span - earlier adjournment letter, the assessee stated that assessee’s counsel was Shri G. Gopalan and now, he is stating that Shri C.M. Shrikanth Subramanian, FCA - HELD THAT:- The assessee is not able to satisfy the Bench that there exists a reasonable cause for not appearing before the Tribunal on the scheduled date of hearing, i.e. on 1.6.2015. Had it been, if proper vakalat is filed in the name of Shri G. Gopalan or in the name of Shri C.M.Shrikanth Subramanian, in earlier occasion, we would have taken a liberal view to recall the order of the Tribunal, since the assessee has filed adjournment letter and affidavit.
Therefore, we are of the opinion that the assessee is only tried to prepare the document to show that there is good and sufficient reason for not appearing before the Tribunal. We are not convinced by the reasons advanced by the assessee to recall the earlier order of the Tribunal.
Adjournment petition cannot be allowed stating that the counsel is not in station due to medical emergency. - decided against assessee.
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2016 (3) TMI 1342
Disallowance of claim of exemption u/s 54 - investment made in more than one residential house - interpretation of the word “a” preceding the expression “residential house” as used in section 54(1) - as per AO exemption claimed under section 54 has to be restricted to “one” residential house and not two flats as claimed by the assessee - Held that:- The Hon'ble Karnataka High Court in D. Anand Basappa (2008 (10) TMI 99 - KARNATAKA HIGH COURT), while interpreting the expression “a residential house” used in section 54 has held that the expression “a” used therein would not mean “one”. Only condition imposed under section 54(1) is, the house should be of residential nature. The Court held that the expression “a” should not be understood to indicate a singular number. The Court observed, where the assessee had purchased two residential flats it is entitled to exemption under section 54 in respect of both the flats.
Thus an assessee is eligible for exemption under section 54(1) even if the investment on capital gain has been made in more than one house. As far as the contention of the learned Departmental Representative that the amendment to section 54(1) by substituting the word “a” with “one” clarifies the position, we are of the view that such amendment having been made effective from 1st April 2015, would apply prospectively and will not apply to the impugned assessment year. Moreover, the aforesaid amendment brought to the statute by substituting the word “a” with “one” all the more supports the case of the assessee that prior to the amendment the exemption provided under section 54(1) was not restricted to investment made in one residential house. - Decided in favour of assessee.
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2016 (3) TMI 1341
Revision u/s 263 - eligibility to claim deduction u/s 80IC in the relevant assessment year @ 100%, after claiming 100% exemption in first five years on the plea that during the year it has undertaken substantial expansion of the undertaking - Held that:- The assessee is required to inform the location of the Industry and column (c) specifically ask the assessee to state whether business is a new business? Column (d) clearly ask the assessee whether existing business has undertaken substantial expansion, therefore, there are two categories of business and substantial expansion is possible only in case of existing business. In our opinion, CIT(A) has correctly adjudicated this issue.
In view of the above detailed discussion we hold that the assessee before us i.e. M/s Hycron Electronics [2015 (6) TMI 725 - ITAT CHANDIGARH] is entitled to only 25% of deduction during the present year because the assessee has already availed the period of full deduction @ 100% in the earlier five years i.e. from assessment years 2004-05 to 2008-09. In this background, we find nothing wrong with the order of CIT(A) and we uphold the same. Accordingly, assessee’s appeal is dismissed.
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2016 (3) TMI 1340
Disallowance of alleged inflated purchases of birds, inflated and unproved expenses and alleged undervaluation of closing stock - Held that:- CIT(A) found that proper records of mortality has not been maintained to substantiate its claim of closing stock - the concrete evidence has not been furnished to disallow the ad-hoc addition towards unexplained expenses. Similarly, the basis for addition on account of undervaluation of closing stock is February and March purchases which invariably pertains to chicks less than 45 days old remaining unsold. The assessee has not offered any specific explanation on this aspect except mortality factor. CIT(A) has given partial relief after examining the remand report and the submissions of the assessee and restricted the disallowance to ₹ 5,00,000/- resulting in GP addition of ₹ 5,00,000/-. We find no infirmity in the process of reasoning in arriving at the aforesaid findings of the CIT(A) - decided against assessee
Addition u/s 36(1)(iii) - assessee transferred a shed valuing to his brother’s account at the end of the year and shown the amount as a debtor without charging any interest - scope of amendment - Held that:- The contention of the assessee that the shed was constructed with a view to expand existing business remains uncontroverted. Section 36(1)(iii) as relevant for assessment year 2001-02 provides that the amount of interest paid in respect of capital borrowed for the purpose of business or profession. The interest paid for loan utilized whether in capital field or in revenue field is irrelevant consideration.
A proviso to section 36(1)(iii) has been inserted by the Finance Act, 2003 w.e.f. 01.04.2004 whereby any amount of interest paid in respect of capital borrowed for acquisition of assets for expansion of existing business or profession upto the date on which such capital asset is first put to use shall not be allowed as deduction. The assessee has incurred the expenditure relevant to assessment year 2001-02 when such proviso was not present in the statute. Therefore, we find no justification in the action of the Revenue in resorting to the disallowance of interest expenses - Decided in favour of assessee
Unexplained loan from brother - no proper evidence of availability of loan amount with brother has been brought on record - no records of sale proceeds of crop has been furnished in support of source of amount granted as loan - Held that:- No substance in the premise taken by the CIT(A) in sustaining the addition. The assessee has furnished the confirmation letter as well as 7/12 extracts concerning the agricultural land showing the agricultural activity. This, in our view, is plausible and reasonable evidence to support the source in the hands of the lender. It is common knowledge that the agricultural produce are sold in cash. The impugned loan is very small having regard to the agricultural land available for cultivation. Thus bonafides of loan of ₹ 75,000/- received from agriculturist brother deserves to be accepted - Decided in favour of assessee
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2016 (3) TMI 1339
Claim of deduction u/s 10A in respect of interest on fixed deposits and tax refund by holding it to be income under the head 'Profits & Gains of Business or Profession' - Held that:- Revenue has not raised the issue before the Tribunal that as the appellant had not claimed in its Return of Income that interest on deposits is to be classified under the heads 'Profits & Gains of Business or profession' it could not now urge the same before the Appellate Authorities. On being specifically asked Mr. Pinto, the Revenue candidly states that from the reading of the impugned order of the Tribunal, it is clear that such a contention was not raised by the Revenue before the Tribunal. Thus, question no.(a) does not arise from the impugned order of the Tribunal.
This issue on merits stand concluded by the decision of this Court in CIT v/s. Pruthvi Brokers & Shareholders Pvt. Ltd. (2012 (7) TMI 158 - BOMBAY HIGH COURT) where it has been held that not raising an issue before the original authority would not bar the party from raising the issue before the Appellate Authority.
Interest on deposit which the impugned order of the Tribunal holds is chargeable to tax under the head 'Profits & Gains of Business or Profession' and consequently eligible for deduction under Section 10A - Held that:- When asked, Mr. Pinto fairly states that the issue of classification of interest on tax refund was not agitated before the Tribunal. We are of the view that the above issue of interest on tax refund not to be treated as interest on deposits was not agitated by the Revenue before the Tribunal. Thus this issue not arising from the order of the Tribunal, does not arise for our consideration.
In any case we find that the impugned order of the Tribunal has followed its decision rendered in the Assessee's case for A.Y. 2004-05 [2009 (6) TMI 677 - ITAT MUMBAI]. Mr. Pinto is unable to point out any distinguishable features in the present Appeal which would warrant our taking a different view from that having been taken in the order passed by the Tribunal for the A.Y. 200405. Moreover, nothing has been shown to us which would indicate that the Tribunal's order for the A.Y. 2004-05 has not been accepted by the Revenue.
Brought forward unabsorbed depreciation and business loss for set-off against the current year's profit of the same 10A unit - Held that:- Issue stands covered against the Revenue by the decision of this Court in CIT v/s. Black & Veatch Consulting Pvt. Ltd. (2012 (4) TMI 450 - BOMBAY HIGH COURT).
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2016 (3) TMI 1338
Condonation of delay of 581 days - Section 5 of the Limitation Act - Held that:- Considering the huge delay in filing of this application under section 5 and the fact that the delay has not been properly explained, the present application for condonatoin of delay cannot be allowed and the same is dismissed - application disposed off.
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2016 (3) TMI 1337
Disallowance of proportionate interest on capital work-in-progress u/s 36(1)(iii) - assessee had not established availability of interest free funds for making advances for purchase of units at Bharat Diamond Bourse and Gujarat Hira Bourse - Held that:- As relying on assessee's own case for the assessment years 2006-07 and 2007-08 deduction was allowable since the loan taken was working capital on which the interest was paid and no interest has been paid on the loan taken from Directors/shareholders/ex-partners.
Claim of deduction u/s 10AA made by the assessee in respect of the profits arising out of trading activity - whether trading is covered within the definition of 'services' under the SEZ Rule - Held that:- As relying on assessee's own case for the assessment years 2006-07 and 2007-08 CIT(A) had allowed deduction u/s.10AA on goods exported and imported from SEZ. It was also observed that no such benefit should be given for the local purchase and sale made by the appellant. The AO is directed to follow the direction of the Hon’ble ITAT and delete the disallowances after due verification. Further, the effect of the disallowance upheld with reference to FD interest as discussed also has to be taken into account while giving effect to this order
TPA - arm’s length price adjustment in respect of realization of export proceeds beyond 180 days from the AEs - Recharcaterization of transaction as an unsecured loan - Held that:- This is uncontroverted stand of the assessee that he has not charged interest on delay in realization of debts in non AE situations as well. Once it is not in dispute, as is the case before us, that no interest is charged from the non AEs, i.e. independent transactions, as well, there cannot be any occasion to make an ALP adjustment, for notional interest, on delay in realization of trade debts from the AEs. The very purpose of the arm’s length price adjustments is to neutralize the impact of intra AE relationship on commercial transaction, but, given the above facts, there is no impact of intra AE relationship in the above case.
As regards, the rechracterization of transaction as an unsecured loan, we find that CIT Vs EKL Appliances Limited [2012 (4) TMI 346 - DELHI HIGH COURT] has held that recharacterization of a transaction is possible in only two situations – i.e. (i) where the economic substance of a transaction differs from its form and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner.
None of these conditions is satisfied in the present case. The form and substance of the transactions are the same. The Transfer Pricing Officer has not brought on record any material to demonstrate and establish that the form and substance of transactions are different. It is not, and it cannot be, the case of the Transfer Pricing Officer that the export transaction was a sham transaction to finance the AE. The assessee has also behaved in a commercially rational manner inasmuch as whatever are the terms of realization of his exports proceeds, the same are the terms of realization of exports from the non AEs. Recharcaterization of this transaction, therefore, is not permissible. The very foundation of the Transfer Pricing Officer is thus wholly unsustainable in law. - Decided in favour of assessee.
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2016 (3) TMI 1336
Penalty levied u/s. 271(1)(c) - addition u/s 43B - addition of duty, cess, taxes and EPF as payments have been made after due date in the relevant years - Held that:- The assessee has filed complete particulars in respect to claim of deduction u/s. 43B of the Act and when all particulars were filed in the Tax Audit Report and its computation of income along with return of income, it cannot be a case of furnishing of inaccurate particulars of income or concealment of income. It is only a case of opinion whether the deduction is to be allowed or not. Once this is the case, the assessee is not liable for penalty u/s. 271(1)(c) of the Act. Respectfully following the decision of Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT ], we confirm the order of CIT(A) deleting the penalty. Appeal of revenue is dismissed.
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2016 (3) TMI 1335
Appeals are admitted on the following identical substantial question of law :“
(i) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in directing the AO to treat the profit arising on the frequent and voluminous transactions initiated with borrowed funds in shares as 'Short Term Capital Gain' instead of 'Business Income'?”
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2016 (3) TMI 1334
Seeking stay the outstanding demand - Held that:- We are inclined to accept the request of the assessee for grant of stay for a period of six months or till the disposal of the appeal, whichever is earlier, subject to the assessee depositing a further sum of ₹ 12.50 lac by 31.3.2016. AR agreed to deposit the above amount by the stipulated date. This accommodation is subject to furnishing of undertaking to the satisfaction of the AO to the effect that assessee will not alienate or dispose of any of its immovable properties till the final disposal of the present appeal. The assessee will also not be entitled to seek any adjournment without just cause. In case any of the terms and conditions is/are violated, the stay herein granted shall be vacated and appeal will revert to its original position to be fixed in routine manner - stay application of the assessee gets disposed of accordingly
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2016 (3) TMI 1333
Addition made u/s 14A - assessee has made investment of interest bearing funds in the partnership firm, profit of which was exempt - Held that:- As decided in assessee's own case it has to be necessarily held that once the appellant has earned substantial taxable income from investment in partnership firm and the Exempt Income earned being merely 3% of the substantial taxable income earned by the appellant at ₹ 52.84 lacs, the disallowance has to be made in the ratio of Exempt/Taxable income which comes to 1:30.85 and accordingly, disallowance made under rule 8D has to be proportionately reduced to 1,81,050/-. Therefore, the disallowance made at ₹ 57,52,608/- is hereby directed to be reduced to ₹ 1,81,050/- and appellant shall get consequential relief. We uphold the action of the CIT(A) in restricting the addition to the ratio of exempt income to taxable income. - Decided against revenue
Addition of office and general expenses - Held that:- AO has failed to bring out any instances of missing vouchers and the cash payments made by the assessee. The Ld. DR could not bring anything contrary to the finding of the ld. CIT(A). Hence, we uphold the action of the ld. CIT(A) in restricting the addition to ₹ 50,000/-. - Decided against revenue
Addition under the head “Repairs and Maintenance" - Held that:- We found that the reason given by the Assessing Officer for this disallowance was the missing vouchers and bills. The AO has not brought out any instances of any missing supporting vouchers. The Ld. DR could bring anything contrary to the finding of the ld. CIT(A). We uphold the action of the ld. CIT(A) in restricting the addition of ₹ 10,000/-.- Decided against revenue
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2016 (3) TMI 1332
Unaccounted stock - assessee during survey proceedings had made a surrender of ₹ 2,40,00,000/- - Held that:- In the present case we find that there is no material with the department to make additions to the tune of ₹ 2,40,00,000/- whereas the material available was only for ₹ 1,94,28,618/-. The calculations made by learned CIT(A) to arrive at the turnover made by assessee and thus profits estimated by him are not based upon any material and are based upon only on surmises and conjectures - we see merits in the arguments of the learned AR that the additions sustained by learned CIT(A) are not based upon any material - decided in favour of assessee
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2016 (3) TMI 1331
Validity of Complete and overall cap on the duty credit scrip - Incremental Export Incentivisation Scheme (IEIS) - misuse of the scheme - Held that:- The issue stands decided in the case of JSW STEEL LIMITED [2016 (1) TMI 957 - BOMBAY HIGH COURT], where it was held that The 2013 Notification places no cap or restriction on the value of the IEIS scrip - petition allowed - decided in favor of petitioner.
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2016 (3) TMI 1330
CENVAT Credit - inputs/capital goods - denial on the ground that drawing of wires from the input namely, “Wire Roads” is not amounting to manufacture - Held that:- It is an admitted fact that even though the activity undertaken by the appellant does not amount to manufacture, but the Central Excise duty paid on removal of “H.B. Wire” and “Binding Wire” has been accepted by the department and retained as Government dues.
Issue is no more res-integra and decided in the case of R.B. Steel Services and Ors. v. CCE, Rohtak [2015 (1) TMI 292 - CESTAT NEW DELHI], where it was held that Cenvat credit cannot be denied, which has been utilized towards payment of duty on the final products, even when the process does not amount to manufacture.
Credit allowed - appeal allowed - decided in favor of appellant.
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2016 (3) TMI 1329
Disallowance u/s 14A - expenditure attributable for earning exempt income - Held that:- We hereby direct the learned Assessing Officer to delete the addition made by the AO which was further sustained by the learned Commissioner of Income Tax (Appeals) on account of section 14A read with Rule 8D, subject to verification that all the investments are made by the assessee in its subsidiary/sister concerns and to the extent of investments the assessee has own funds in the form of reserves & surplus. See THE ASSISTANT COMMISSIONER OF INCOME TAX VERSUS M/S. DATA SOFTWARE RESEACH COMPANY (INTERNATIONAL) PVT. LTD. AND VICE-VERSA [2016 (2) TMI 905 - ITAT CHENNAI] - decided in favour of assessee for statistical purposes.
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2016 (3) TMI 1328
Penalty proceedings u/s 271AAA - Addition of unexplained expenditure u/s 69C - Held that:- As decided in assessee's own case None of the sellers have been examined by the AO to strengthen his views that cash has been paid over and above the registered amount. There is not a single document/evidence of parties involved in the sale of land at different villages brought on record to show that an amount other than the payment of consideration has changed hands. No confession from the sellers have been brought on record.
There being no evidence to support the revenue’s case that use figure, whatever be its quantum, over and above the figure in the records and accounts changed hands between the parties, no addition could therefore be made under section 69C of the Act to the income of the assessee considering the entire facts brought on record, we have no hesitation to hold that even on merits no addition could be sustained - Decided in favour of assessee.
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2016 (3) TMI 1327
Anti-Competitive Activities - interpretation of statute - meaning of 'Turnover' appearing in Section 27(b) of the Competition Act, 2002 - imposition of penalty under Section 27(b) or its proviso.
Whether the term 'turnover' appearing in Section 27(b) of the Competition Act, 2002 and its proviso means the total turnover of any enterprise or association of enterprises or person or association of persons, who may have entered into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services in violation of Section 3 of the Act or of an enterprise or a group which may be found guilty of abuse of dominant position within the meaning of Section 4? - Held that:- One of the well-recognized rules of interpretation of statutes is the rule of contextual interpretation. This rule requires that the Court should examine every word of a statute in its context. In doing so, the Court has to keep in view preamble of the statute, other provisions thereof, pari materia statutes, if any, and the mischief intended to be remedied. Context often provides the key to the meaning of the word and the sense it carries. Its setting gives colour to it and provides a cue to the intention of the legislature in using it.
The term 'turnover' used in Section 27(b) and its proviso will necessarily relate to the goods, products or services qua which finding of violation of Section 3 and/or Section 4 is recorded and while imposing penalty, the Commission cannot take average of the turnover of the last three preceding financial years in respect of other products, goods or services of an enterprise or associations of enterprises or a person or associations of persons. The definition of the term 'turnover' which includes value of sale of goods or services will necessarily mean the value of goods or services which are made subject-matter of investigation under Section 26 and order of punishment under Section 27. If the accusation/allegation relates to abuse of dominant position, then the Commission is required to take into consideration the factors enumerated in Section 19(4), (5), (6) and (7).
Whether while deciding the issue relating to imposition of penalty under Section 27(b) or its proviso, the Commission is required to follow some objective criteria and take into consideration factors like the nature of anti-competitive agreement and/or abuse of dominant position, appreciable adverse effect on competition, financial health of the enterprise and market condition? - Held that:- Proviso to Section 27(b) (unamended) was couched in a language, which made it mandatory for the Commission to impose on each producer, seller, distributor, trader or service provider included in a cartel, a penalty equivalent to three times of the amount of profits made out of such agreement by the cartel or 10% of the average of the turnover of the cartel for the last preceding three financial years, whichever was higher. It is thus clear that if the proviso to Section 27(b) had not been amended, then the Commission had no option but to impose penalty on each producer, seller, distributor, trader or service provider in cases involving formation of cartel. However, in its wisdom, Parliament amended the proviso and substituted the word 'shall' with the word 'may' - Since the legislature has not laid down any criteria for imposing penalty, the Commission is duty bound to consider all the relevant factors like - nature of industry, the age of industry, the nature of goods manufactured by it, the availability of competitors in the market and the financial health of the industry etc.
Unfortunately, the Commission has, while reiterating the penalty imposed on the appellants by the original order dated 24.02.2012, altogether ignored the principles laid down by the Supreme Court and the High Courts on the interpretation of statutes, which confer power upon the competent authority to impose penalty on a person who is found guilty of having acted in violation of the particular provision - Another error committed by the Commission is that even though it took cognisance of the mitigating factors highlighted by the appellants and others, it brushed aside the same simply because they were found guilty of forming a cartel and indulging in bid-rigging. The fact that many of the appellants were small scale units was also not given due weightage by the Commission while passing the impugned order.
The impression which we gather from the impugned order is that the Commission proceeded to decide the issue of penalty with a determination that the appellants who were found to be guilty of formation a cartel/collusive bidding must be punished so that others may learn a lesson from this. This approach is wholly inconsistent with the objective sought to be achieved by the Act, which is not only aimed at preventing practices having adverse effect on competition, but also to promote and sustain competition in market and to protect the interest of consumers. The Commission could not have over looked the fact that the appellants had reduced their rates after negotiations with IOCL and there was no evidence that they had made unwarranted profits by supplying cylinders at the particular rates.
The matter is again remitted to the Commission for deciding the issue relating to imposition of penalty under Section 27(b).
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9911796707
