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2008 (6) TMI 629
Issues involved:
- Entitlement of welfare fund boards to receive interest payment without deduction of income tax at source u/s 194A(1) of the Income Tax Act.
Summary:
The judgment dealt with the issue of whether welfare fund boards, established under various State Legislations, are entitled to receive interest payment without deduction of income tax at source u/s 194A(1) of the Income Tax Act. The petitioners sought a declaration to this effect, arguing that they should be exempt from tax deduction based on their inclusion under a specific clause of a notification issued by the Central Government. However, the court found that the petitioners did not fall within the scope of the exemption notification as they were not considered statutory corporations as per the relevant clause. The court emphasized that the control exercised by the Government over the administration of the boards did not transform them into statutory corporations eligible for the exemption. Therefore, the petitioners were not covered by the exemption notification.
Furthermore, the judgment addressed the procedure for the petitioners to claim exemption from tax deduction on interest payments. The court noted that if the petitioners had no tax liability, they should approach the Assessing Officer or the Income Tax Officer for a certificate u/s 197 of the Income Tax Act. However, the court highlighted the importance of establishing entitlement to exemption from income tax, rather than merely seeking payment of interest without tax deduction. The court suggested that the State Government should intervene and take up the matter with the Central Government to seek a policy decision on the exemption claims of various boards with similar objectives. The court directed the respondents to continue withholding the tax portion of the interest for another six months to allow the petitioners time to obtain orders from the Central Government.
In conclusion, the writ petitions were disposed of with the court ruling that the petitioners were not entitled to receive interest payment without deduction of tax at source under the current circumstances.
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2008 (6) TMI 628
Issues involved:
Classification of GLA-120 Capsules under KGST Act
Summary:
The assessee, a registered dealer under KGST Act, filed annual returns conceding a total turnover for certain assessment years, including sales of GLA-120 Capsules. The assessing authority treated the capsules as food supplement taxable at 20% under Entry No. 87 of the First Schedule. The Tribunal upheld this decision based on previous rulings. The core issue is whether GLA-120 Capsules should be classified under Entry 87, Entry 56, or as an unclassified item under the residuary entry.
The assessee argued different classifications before various authorities, claiming it should be treated as an unclassified item, under Entry 56, or as Medicine under Entry 79. The product manual described GLA-120 as containing Gamma Linolenic Acid for nerve growth/functioning, particularly for diabetic neuropathy. The assessing authority classified it under Entry 87 for non-alcoholic drinks and similar items, while the residuary entry taxed unclassified goods at 12.5%.
The Tribunal noted the distinction between dietary supplements and medicines, emphasizing the need for clear categorization based on usage. Since no authority determined the nature of GLA-120, the court set aside all previous orders and directed the assessing authority to reevaluate the classification, considering the purpose of the product. The reassessment must be completed within six months, affording the assessee a fair hearing.
In conclusion, the court ordered the closure of pending applications and disposed of the revision petitions accordingly.
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2008 (6) TMI 627
Issues involved: Classification of rental income u/s "Income from house property" or "Income from other source".
Issue 1: Classification of rental income
The question raised in the case was whether the rental income received for the building should be assessed under the head "Income from house property" or as "Income from other source". The petitioner had let out a lodging house charging separate rent for the building and the furniture. While the petitioner had been returning the entire income as income from other sources for several years, the Assessing Officer for the assessment year 1990-91 bifurcated the rent. The rental income from the building was assessed under the head "Income from house property" and the rental income from furniture under the head "Income from other source". The court noted that rental income from the building squarely falls under the head "Income from house property" as per the Income-tax Act. The court emphasized that the petitioner cannot ask for a shift in the classification of income merely because the agreement provides for the collection of rent for the building along with furniture. The court upheld the order of the Tribunal, ruling in favor of the revenue and against the assessee.
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2008 (6) TMI 626
Issues Involved:
1. Classification of services under "cargo handling agency" service.
2. Violation of principles of natural justice.
3. Applicability of small-scale exemption.
4. Classification under "Business Auxiliary Service" and "manpower recruitment agency" service.
5. Invocation of extended period for demand.
6. Application of "cum-tax price" principle.
Summary:
1. Classification of Services under "Cargo Handling Agency" Service:
The main issue was whether the activities carried out by the appellants fall under "cargo handling service." The Assistant Commissioner confirmed the amounts mentioned in the SCNs and imposed penalties without discussing how the activities fall under "cargo handling service." The judgment concluded that mere transportation of goods, stitching of sugar bags, handling of bagasse, and handling of press-mud do not fall under "cargo handling service" as per the statutory definition and CBEC Circular F.No. B.11/1/2002 TRU dated 1-8-2002.
2. Violation of Principles of Natural Justice:
The first five appellants claimed that the Assistant Commissioner passed orders ex-parte without hearing them, violating the principles of natural justice. The sixth appellant claimed that his detailed reply was ignored. The judgment noted that the orders were issued before the stipulated date, indicating a mechanical approach by the adjudicating authority.
3. Applicability of Small-Scale Exemption:
The appellants argued that the amounts received during the financial year 2005-06 were within the exemption limit. The judgment agreed, noting that the Assistant Commissioner failed to extend the small-scale exemption, further indicating a mechanical issuance of demand notices.
4. Classification under "Business Auxiliary Service" and "Manpower Recruitment Agency" Service:
The judgment held that the activities of stitching sugar bags and handling bagasse could be classified under "Business Auxiliary Service" and "manpower recruitment agency" service, respectively. However, these services were either exempt or not applicable during the relevant period as per statutory definitions and notifications.
5. Invocation of Extended Period for Demand:
The appellants contended that mere omission to obtain registration and pay service tax is insufficient to invoke the extended period unless mala fide intention is proven. The judgment agreed, citing Supreme Court decisions (Tamilnadu Housing Board v. CCE, Padmini Products v. CCE, Cosmic Dye Chemicals v. CCE) and concluded that the Department failed to prove mala fide intention.
6. Application of "Cum-Tax Price" Principle:
The appellants argued that the principle of "cum-tax price" was not followed while raising demands. The judgment agreed, noting that this principle must be followed when fresh demands are raised, further highlighting the adjudicating authority's omissions.
Conclusion:
The judgment allowed all six appeals, setting aside the Orders-in-originals, and concluded that the appellants succeeded on merits, time bar aspect, and consequently, imposition of penalty and interest did not survive.
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2008 (6) TMI 625
Issues involved: Challenge to order passed by a Single Judge of the Patna High Court dismissing application u/s 482 of CrPC, validity of order taking cognizance in Complaint Case No. 40 of 1994.
Summary:
Issue 1: Challenge to Order under Section 482 of CrPC
The appeals challenged the order passed by a Single Judge of the Patna High Court dismissing the application filed u/s 482 of CrPC. The petition questioned the validity of the order taking cognizance in Complaint Case No. 40 of 1994 pending in the Court of Judicial Magistrate, First Class, Patna City.
Details: The appellant, a member of a raiding party, along with others, was involved in a raid where Respondent 1 was arrested for theft of electricity. Respondent 1 later filed a complaint alleging illegal gratification demand by the appellant and another individual. The High Court's view was that the complaint was not timely and lacked specific details, leading to the question of abuse of process of the court.
Issue 2: Exercise of Power under Section 482 of CrPC
The judgment highlighted the inherent powers of the High Court u/s 482 of CrPC, emphasizing the need for caution and specific circumstances for exercising such powers to prevent abuse of the court's process and secure the ends of justice.
Details: The judgment cited the importance of preventing abuse of process and ensuring justice. It outlined categories of cases where inherent power can be exercised, such as lack of legal evidence or when allegations do not constitute an offense. The court must not interfere with the trial judge's function and should exercise discretion judiciously.
Conclusion:
The proceedings were deemed mala fide and an abuse of the legal process, falling under Category (7) of Bhajan Lal case. The appeals were allowed, and the proceedings in Complaint Case No. 40 of 1994 were quashed by the Supreme Court.
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2008 (6) TMI 624
Issues Involved:
1. Allegations of illegal increase and allotment of shares.
2. Allegations of siphoning off funds and mismanagement.
3. Allegations of oppression and reduction of majority shareholder to minority.
4. Allegations of fraudulent transfer of shares.
5. Allegations of improper conduct by the auditor (R-8).
6. Allegations of diversion of business and funds.
7. Allegations of improper removal of the petitioner from the directorship.
Detailed Analysis:
1. Allegations of Illegal Increase and Allotment of Shares:
The petitioner alleged that the increase and allotment of shares were illegal and unauthorized, violating Clause 16 of the Articles of Association. It was contended that no board meeting was held, and no notice was given to the petitioner regarding the increase in share capital. The respondents argued that the increase was necessary for securing bank facilities and was done with the petitioner's consent, as evidenced by his signatures on balance sheets and annual returns. The court found the respondents' explanations unconvincing, noting that the petitioner had handed over control due to personal difficulties and the respondents took undue advantage. The court held that the increase and allotment of shares were fraudulent and set them aside, restoring the status quo ante.
2. Allegations of Siphoning Off Funds and Mismanagement:
The petitioner alleged that R-3 and R-8 siphoned off funds through fictitious bills and mismanagement. Specific instances included payments to Spectron Engineers Pvt. Ltd. (R-5) for non-existent catering services and fraudulent transactions with Barkha Industries. The respondents denied these allegations, arguing that the payments were legitimate and necessary for business operations. The court found the respondents' justifications inadequate and noted that the respondents failed to refute the specific allegations. The court ordered an investigative audit to ascertain and quantify the siphoned-off funds.
3. Allegations of Oppression and Reduction of Majority Shareholder to Minority:
The petitioner, who initially held 97.33% of the shares, alleged that the respondents reduced his shareholding to 19.20% through fraudulent means. The court found that the respondents exploited the petitioner's personal difficulties and lack of oversight to manipulate the shareholding structure. The court held that the acts of oppression were continuous and prejudicial to the petitioner's interests, warranting relief under Sections 397 and 398 of the Companies Act.
4. Allegations of Fraudulent Transfer of Shares:
The petitioner alleged that 3,10,000 shares were fraudulently transferred to R-3 through benami transactions. The respondents argued that the transfers were legitimate and made with the petitioner's knowledge and consent. The court found the respondents' explanations unconvincing, noting the lack of proper documentation and the involvement of R-8 in the fraudulent transactions. The court set aside the fraudulent transfers and restored the petitioner's original shareholding.
5. Allegations of Improper Conduct by the Auditor (R-8):
The petitioner alleged that R-8, the auditor, masterminded the fraudulent activities and mismanagement. R-8 denied these allegations, arguing that he acted within his professional duties. The court found that R-8 connived with the respondents to manipulate records and accounts, causing oppression to the petitioner. The court held that R-8 misused his position and breached the trust reposed in him, contributing to the reduction of the petitioner's shareholding.
6. Allegations of Diversion of Business and Funds:
The petitioner alleged that R-3 diverted the business of the respondent company to their own group companies, causing financial loss. The respondents denied these allegations, arguing that the transactions were legitimate and necessary for business operations. The court found that the respondents failed to refute the specific allegations and noted the contradictions in their statements. The court held that the diversion of business and funds was part of the oppressive conduct against the petitioner.
7. Allegations of Improper Removal of the Petitioner from the Directorship:
The petitioner alleged that the respondents attempted to remove him from the directorship through an EGM requisitioned by R-3. The respondents argued that the removal was justified due to the petitioner's detrimental activities. The court found that the removal was part of the continuous oppressive conduct against the petitioner and quashed the notice for the EGM, declaring it illegal and unwarranted.
Conclusion:
The court held that the petitioner had established a case of continuous oppression and mismanagement by the respondents, leading to the reduction of his majority shareholding and causing financial loss. The court set aside the illegal increase and allotment of shares, ordered an investigative audit to ascertain the siphoned-off funds, and quashed the notice for the EGM. The petition was disposed of with no order as to the cost of litigation.
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2008 (6) TMI 623
Issues involved: Restraining a Residuary Non-Banking Finance Company from accepting deposits, violation of fundamental rights, compliance with Reserve Bank of India regulations.
Summary:
The petitioner, a Residuary Non-Banking Finance Company, challenged an order restraining it from accepting deposits, claiming it violated its fundamental right under Article 19(1)(g) of the Constitution. The petitioner argued that its operations had improved, and there was no emergent development warranting the order. The respondent contended that the petitioner had not followed RBI directions since receiving registration in 1998. After considering submissions, the court noted the petitioner's large number of depositors and employees. The court stayed the order, allowing deposits until June 2010, and directed compliance with RBI regulations. The case was listed for further hearing in July 2008.
The petitioner, a Residuary Non-Banking Finance Company, was issued a show cause notice by the Reserve Bank of India based on inspections. Despite submitting a detailed reply and an action plan, the petitioner was restrained from accepting deposits beyond June 2010. The petitioner claimed no complaints were made by depositors to the RBI. The court stayed the order to prevent harm to depositors and employees, directing the petitioner to comply with RBI regulations.
The court considered the petitioner's compliance with RBI regulations and the impact of the order on depositors and employees. It noted the lack of complaints from depositors and stayed the order, allowing deposits until June 2010. The petitioner was directed to fulfill RBI formalities and follow its directions. The case was scheduled for further proceedings in July 2008.
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2008 (6) TMI 622
The Calcutta High Court issued an order in favor of the petitioner based on clause 9 of the Scheme of Amalgamation. The petitioners must provide a computerized printout of the Scheme and Schedule of assets to the department. The Central Government's objection is noted, and the applicants are directed to pay costs to the Central Government. Case CP No.150 of 2008 is disposed of, and all parties are to act on a signed xerox copy of the order.
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2008 (6) TMI 621
Issues Involved:
1. Classification of various spice products under the Central Excise Tariff Act.
2. Determination of whether the products retain the essential character of spices.
3. Application of common parlance test for classification.
4. Reliance on chemical analysis and percentage of ingredients.
5. Consideration of previous classifications and uniformity in taxation.
Detailed Analysis:
1. Classification of Various Spice Products:
The primary issue is whether the products in question, such as Rasam Powder, Jiraloo, Tea Masala, and various other masalas, should be classified under Chapter 09 (spices) or Chapter 21 (mixed condiments and mixed seasonings) of the Central Excise Tariff Act, 1985. The adjudicating authority initially classified these products under Chapter 09.03, which covers spices, while the revenue sought classification under Chapter 21.03 and 21.08, which cover mixed condiments and seasonings.
2. Determination of Essential Character of Spices:
The tribunal examined whether the products retained the essential character of spices despite containing other ingredients. The chapter note 3 of Chapter 9 indicates that the addition of other substances to spices shall not affect their inclusion in this heading, provided the resulting mixtures retain the essential character of spices. The tribunal found that the products in question contained up to 96% spices and only 4% to 5% other ingredients, which did not alter their essential character as spices. This was supported by the CBEC circular No. 427/60/98, which stated that compounded asafoetida containing 85% other ingredients still retained its essential character.
3. Application of Common Parlance Test:
The tribunal emphasized the importance of the common parlance test, which determines the classification based on how products are understood in the market. The respondents provided evidence, including certificates from reputed consumers and the Institute of Hotel Management, indicating that the masalas were known and used as spices. The tribunal noted that the revenue did not provide any contrary evidence to dispute this market understanding.
4. Reliance on Chemical Analysis and Percentage of Ingredients:
The revenue's argument relied on the report of the Deputy Chief Chemist, which was deemed unclear. The tribunal found that the respondents consistently stated that the products were predominantly spices, and the revenue did not provide evidence to refute this. The tribunal also noted that the revenue failed to provide the percentage of ingredients necessary to determine the essential character of the products.
5. Consideration of Previous Classifications and Uniformity in Taxation:
The tribunal considered the importance of uniformity in classification across different Commissionerates. Evidence showed that identical products manufactured by competitors were classified under Chapter 09 or were considered non-excisable. The tribunal cited the Supreme Court's decision in Damodar J. Malpani v. CCE, which emphasized the need for uniform classification to avoid competitive disadvantages. The tribunal also referenced the case of Crane Betel Nut Powder Works, where the classification of mouth fresheners under Chapter 09 was upheld, reinforcing the need for consistency.
Conclusion:
The tribunal upheld the adjudicating authority's classification of the products under Chapter 09.03 as spices, except for Jiraloo, which was remanded for reconsideration. The tribunal emphasized the importance of retaining the essential character of spices, the common parlance test, and uniformity in classification across different jurisdictions. The appeals were disposed of accordingly.
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2008 (6) TMI 620
Issues Involved:
1. Validity of the Board Meeting held on 05.02.2005.
2. Validity of the appointment of respondents 2 and 4 as directors.
3. Voting rights of the second respondent.
4. Operation of the company's bank account by respondents 2 and 4.
5. Forced transfer of 9.50% shares by the petitioner to the second respondent.
6. Alienation or encumbrance of company assets by the respondents.
7. Compensation for losses caused to the company by the respondents.
8. Reconstitution of the Board of Directors.
9. Preparation of a scheme for the administration of the company.
Detailed Analysis:
1. Validity of the Board Meeting held on 05.02.2005:
The petitioner alleged that the Board meeting held on 05.02.2005 was invalid due to coercion and fraud. The petitioner claimed that he was forced to sign documents under threat. However, the records, including an affidavit sworn by the petitioner, indicated that the petitioner had consented to the decisions made during the meeting without coercion. The Board minutes dated 05.02.2005 confirmed the appointment of the second respondent as Managing Director and the fourth respondent as director. The petitioner's subsequent actions were consistent with the Board's decisions, indicating his acceptance of the resolutions.
2. Validity of the Appointment of Respondents 2 and 4 as Directors:
The petitioner contested the validity of the appointments of respondents 2 and 4 as directors, citing non-compliance with the company's Articles of Association and the lack of proper procedure. The Board minutes and other documents, however, confirmed their appointments. The petitioner's own affidavit and actions post-appointment further validated these appointments. The court found no grounds to invalidate the appointments.
3. Voting Rights of the Second Respondent:
The petitioner sought to restrain the second respondent from exercising voting rights at general meetings. However, the court did not find sufficient grounds to restrict the second respondent's voting rights, as the allegations of fraud and coercion were not substantiated in a manner that could be adjudicated in a summary proceeding.
4. Operation of the Company's Bank Account by Respondents 2 and 4:
The petitioner claimed that respondents 2 and 4 unlawfully took control of the company's bank account. The Board minutes and subsequent actions by the petitioner indicated that the change in signatories was agreed upon by the petitioner. The court upheld the validity of the resolutions authorizing respondents 2 and 4 to operate the bank account.
5. Forced Transfer of 9.50% Shares by the Petitioner to the Second Respondent:
The petitioner alleged that he was forced to transfer 9.50% of his shares to the second respondent. The court found that the petitioner's consent to the transfer was documented and that the petitioner had acted upon this consent. The court did not find sufficient evidence to support the claim of coercion.
6. Alienation or Encumbrance of Company Assets by the Respondents:
The petitioner sought to restrain the respondents from alienating or encumbering the company's assets. The court found that the respondents had mismanaged the company's assets, leading to a significant shortage of stock. The respondents were held accountable for the shortfall in stock and were ordered to reimburse the company.
7. Compensation for Losses Caused to the Company by the Respondents:
The court held the respondents responsible for the mismanagement and misappropriation of company assets. The respondents were ordered to reimburse the company for the shortfall in stock value amounting to Rs. 36,91,120.
8. Reconstitution of the Board of Directors:
The court did not find sufficient grounds to reconstitute the Board of Directors. However, it ordered the petitioner to exit the company by selling his shares to the respondents at a fair value determined by an independent valuer.
9. Preparation of a Scheme for the Administration of the Company:
The court did not find it necessary to prepare a new scheme for the administration of the company. Instead, it focused on resolving the disputes by facilitating the petitioner's exit from the company and ensuring compensation for the losses caused by the respondents.
Conclusion:
The court ordered the impugned allotments of shares to be set aside and directed the respondents to reimburse the company for the shortfall in stock value. The petitioner was directed to exit the company by selling his shares to the respondents at a fair value. The court also upheld the validity of the Board meeting held on 05.02.2005 and the appointments of respondents 2 and 4 as directors. The respondents were restrained from selling the company's immovable properties until the petitioner's exit was completed.
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2008 (6) TMI 619
Issues Involved:
1. Validity of the transaction under Section 536(2) of the Companies Act.
2. Whether the transaction should be validated by the Court.
3. The nature of the applicant's possession of the premises.
4. The impact of the supplementary agreements and the sponsorship agreement on the applicant's claim.
5. The Official Liquidator's actions and the applicant's response.
6. Determination of market rent and the recovery of possession.
Issue-wise Detailed Analysis:
1. Validity of the transaction under Section 536(2) of the Companies Act:
The Court examined whether the transaction between the Company in Liquidation and the applicant was void under Section 536(2) of the Companies Act. The winding-up action commenced with the presentation of the Company Petition on 29th October 1996/28th November 1996, and any disposition of property made after this date is void unless the Court orders otherwise. The rent note dated 13th June 1997 and the supplementary agreement dated 14th January 1998 were executed during the pendency of the winding-up petition, making the transactions void unless validated by the Court.
2. Whether the transaction should be validated by the Court:
The Court has the discretion to validate transactions if they are in the interest of the company or for keeping the company going. The applicant failed to plead or prove that the transaction was for the benefit of the Company or for keeping it going. The rent note and supplementary agreement did not indicate that they were executed without knowledge of the winding-up proceedings or for the benefit of the Company. Therefore, the transaction could not be validated.
3. The nature of the applicant's possession of the premises:
The applicant claimed possession based on a rent note dated 13th June 1997, which described the premises and terms of lease. The Court found the rent amount of Rs. 2500/- per month for a prime location in Mumbai to be starkly inadequate and preposterous. The agreement's terms, such as allowing sub-leasing, were unnatural and indicated a lack of good faith. The supplementary agreement dated 14th January 1998 was also found to be suspicious and not in good faith.
4. The impact of the supplementary agreements and the sponsorship agreement on the applicant's claim:
The applicant introduced new facts in a further affidavit, claiming a sponsorship agreement dated 7th November 1994 and subsequent agreements acknowledging the Company's liability. The Court found these agreements irrelevant to the rent note and supplementary agreement, which were the basis of the applicant's possession claim. The sponsorship agreement did not entitle the applicant to possession of the premises, and the new claims were inconsistent with the original application.
5. The Official Liquidator's actions and the applicant's response:
The Official Liquidator opposed the application, stating that the lease period had expired and the applicant was not the original tenant. The premises were sealed due to non-compliance with the request to vacate. The applicant claimed that the sealing was high-handed and caused irreparable harm. The Court found the applicant's possession based on a void transaction and not in good faith.
6. Determination of market rent and the recovery of possession:
The Court directed the Official Liquidator to take possession of the premises and determine the market rent to be recovered from the applicant and Videocon Appliances Limited from 13th June 1997. The applicant was ordered to deposit the original documents in Court, which would be impounded and forwarded to the Deputy Inspector General of Registration and Deputy Controller of Stamps for action.
Conclusion:
The application was dismissed with costs, and the Official Liquidator was directed to take possession of the premises and determine the market rent. The applicant's possession was found to be based on a void and non-bonafide transaction, and the supplementary agreements did not alter this conclusion. The Court also directed the impounding of the original documents for further legal action.
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2008 (6) TMI 618
Issues involved: Amendment of complaint after plea recorded, nature of amendment sought, legality of amendment u/s Cri.P.C, revision of order of issuing process.
Summary:
Amendment of Complaint after Plea Recorded:
The main issue in this case was the permission granted to the respondent-complainant to amend the complaint after the plea of the applicants was recorded. The amendment sought was to correct the name of the bank in the complaint from Punjab National Bank to Veershaiva Co-operative Bank. The JMFC allowed the amendment despite the opposition of the applicant, leading to a dispute regarding the validity of the amendment.
Legality of Amendment u/s Cri.P.C:
The advocate for the applicants argued that there is no provision in the Criminal Procedure Code (Cri.P.C) permitting such an amendment to be made. Changing the name of the bank in the complaint would render the notice issued to the applicants under section 138 of the negotiable instruments act faulty. It was contended that the order of the JMFC allowing the amendment should be quashed and set aside.
Revision of Order of Issuing Process:
The advocate for respondent No.1 contended that the order of issuing process is revisable, suggesting that the applicant should have filed a revision instead of challenging the amendment directly. However, the court found that the nature of the amendment sought by the respondent could not be permitted at that stage. The court emphasized that the change in the name of the bank resulted in a substantial change in the complaint, making the amendment impermissible.
Conclusion:
The court ruled that the amendment allowing the change in the name of the bank was not permissible and set aside the order, quashing the amendment. The court clarified that the application was disposed of only in respect of one prayer clause, while directing the applicant to pursue the alternate remedy of filing a revision for the other prayer clause. The application was ultimately disposed of accordingly.
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2008 (6) TMI 617
The Bombay High Court admitted an appeal regarding substantial questions of law related to CENVAT credit rules. The questions include the correctness of allowing 100% credit when only 50% is admissible and the inclusion of sales tax in CENVAT account when not permissible.
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2008 (6) TMI 616
Claim made on amount towards professional fees for assessment of market attractiveness of business - Claimed deduction u/s 36(1)(iii).
Claim made on amount towards professional fees for assessment of market attractiveness of business - gaining global market, reputise on dealing with global markets, evaluation of business ability to compete, analysis of business’s future growth trend, development detailed business strategies to grow in the dynamic business environment - revenue or capital Expenditure ? - Whether the Tribunal was right in law in deleting the addition in respect of payments made to M/s. McKinsey & Co., management consultant and the same should be allowed as revenue expenditure is valid in law? - Expenditure incurred as interest paid on capital borrowed - AO added the entire interest to the cost of the fixed asset by rejecting the claim of the assessee that the expenditure is revenue in nature.
HELD THAT:- It is well-settled that it is not only permissible, but is also necessary for any business to update its own knowledge and adopt better ways of organising its business, if it is to survive in the market. The expenditure incurred for such purpose cannot be regarded as capital expenditure and it is only a revenue expenditure. The fees paid to the consultant was disallowed by the revenue officials as capital expenditure on the premise that the benefits derived from such consultancies would enure to the future years also. According to the ld counsel for the assessee, this question of law is covered against the revenue by the decision of this Court in the case of CIT v. Crompton Engineering Co. Ltd.[1998 (6) TMI 23 - MADRAS HIGH COURT] - Hence, the first question of law is covered against the assessee (sic - revenue).
Claimed deduction u/s 36(1)(iii) - Whether the Tribunal was right in law in deleting the addition made towards interest paid on borrowed capital is valid? - HELD THAT:- Assessee borrowed money for the expansion project and claimed deduction u/s 36(1)(iii). In respect of the AY 1994-95 in assessee’s own case, the issue has been decided in favour of the assessee by a Division Bench of this Court in the case of Carborandum Universal Ltd.[2006 (2) TMI 649 - MADRAS HIGH COURT]. This factum has also been brought to the knowledge of the Court by the learned counsel for the assessee.
Therefore, the appeals are dismissed as the questions of law raised in the present appeals are covered against the revenue.
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2008 (6) TMI 615
Issues involved: Challenge to order passed by National Consumer Disputes Redressal Commission regarding jurisdiction of Consumer Forums in dispute between chit fund and prized subscriber.
Summary:
1. The appeal challenged the order passed by the National Consumer Disputes Redressal Commission, which upheld the State Commission's decision in favor of the complainant, a prized subscriber of a chit fund.
2. The complainant defaulted on payments to the chit fund, leading to a dispute over the amount owed. The State Commission ruled in favor of the complainant, ordering payment of a specific sum.
3. The appellant, Kiran Chit Fund, argued that Consumer Forums lack jurisdiction in disputes involving chit funds and prized subscribers, citing a previous case for support.
4. The respondent contended that the jurisdiction issue was not raised earlier and should not be considered now.
5. The Supreme Court noted the importance of determining jurisdiction under the Consumer Protection Act and disagreed with the National Commission's dismissal of the revision petition without considering the jurisdiction issue.
6. Consequently, the Court set aside the National Commission's order, remitting the matter back to the State Commission to decide on the jurisdiction question. The parties were directed to appear before the State Commission for further proceedings.
7. The Court clarified that its decision did not touch upon the merits of the case and allowed the appeal without costs.
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2008 (6) TMI 614
Issues:
Confirmation of demand of duty, imposition of penalty under Central Excise Rules and Cenvat Credit Rules.
Confirmation of Demand of Duty:
The appellant's counsel acknowledged the undisputed confirmation of demand issue, citing a previous Tribunal order rejecting similar appeals. The penalty imposition was challenged as erroneous, emphasizing incorrect findings by the adjudicating authority. The Respondent's submission supported the correctness of the penalty imposition. The Tribunal upheld the confirmation of demand of duty, stating that the issue was covered against the appellants on merits, leading to no interference with that part of the order.
Imposition of Penalty under Central Excise and Cenvat Credit Rules:
The Commissioner imposed a penalty based on the balance in the Cenvat Account, citing Rules 25 and 27 of Central Excise Rules, 2002, and Rule 15 of Cenvat Credit Rules, 2004. The appellant's counsel pointed out an error in the submitted annexure, highlighting a significant difference in the balance in the Cenvat account compared to the claimed abatement amount. The Tribunal noted the substantial difference in the account balance and the claimed abatement, leading to the conclusion that the penalty imposed under Rule 15(2) of Cenvat Credit Rules was unwarranted and unsustainable. Consequently, the penalty imposition on the appellants was set aside, and the appeal was partly allowed on this issue.
This judgment involved the confirmation of demand of duty and the imposition of penalties under Central Excise and Cenvat Credit Rules. The Tribunal upheld the confirmation of demand of duty, finding it covered against the appellants on merits. Regarding the penalty imposition, discrepancies in the Cenvat account balance and claimed abatement amount led to the setting aside of the penalty under Rule 15(2) of Cenvat Credit Rules. The detailed analysis provided clarity on the legal reasoning behind the decision, ensuring a comprehensive understanding of the judgment.
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2008 (6) TMI 613
Issues involved: Consideration of interest on refunded amount regarding anti-dumping duty.
Summary:
The High Court of Calcutta, in a case involving the consideration of interest on the refunded amount regarding anti-dumping duty, heard arguments from both parties' advocates. The petitioner's advocate requested appropriate directions for the grant of interest, as the customs authorities had not considered the prayer for interest. The respondent's advocate expressed no objection to the matter being sent back to the authorities for consideration of interest payment. After considering the arguments and circumstances, the Court disposed of the writ petition by granting the petitioner liberty to file an application for interest payment within a fortnight before the Assistant Commissioner of Customs, Appraising and Refund Section, Kolkata. The respondent was directed to dispose of the application within four weeks by passing a reasoned order in accordance with the law. The Court clarified that it had not delved into the case's merits, leaving all points open for consideration by the respondent if the application was filed within the stipulated time frame. No costs were awarded, and all parties were instructed to act on the signed copy of the order.
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2008 (6) TMI 612
Suspension of CHA licence - charge of forgery dropped, which was the base of suspension of licence - penalty - Held that: - there was specific finding regarding forgery and mis-declaration of goods by the adjudicating authority against the appellant and the impugned order was passed immediately after passing the adjudication order. The appellant filed appeal and the Commissioner (Appeals) reduced the penalty and the appellant's appeal against the Commissioner (Appeals) order is still pending with the Tribunal. Therefore, the allegation against appellant regarding mis-declaration of goods is still there - appeal dismissed - decided against appellant.
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2008 (6) TMI 611
Issues Involved:
1. Applicability of deemed dividend u/s 2(22)(e) of the IT Act, 1961.
2. Calculation of deemed dividend.
3. Eligibility for deduction u/s 80IB(4).
Summary:
1. Applicability of deemed dividend u/s 2(22)(e):
The assessee, a company engaged in assembling DG sets, received advances from Jakson Generators Pvt. Ltd. (JGPL). The Assessing Officer treated these advances as deemed dividend u/s 2(22)(e) of the IT Act, 1961, as the shareholders of both companies had substantial holdings. The assessee contended that it was not a registered shareholder of JGPL and that the advances were not for the individual benefit of the shareholder. The Tribunal held that the provisions of section 2(22)(e) applied to the advances/loans paid by JGPL to the assessee, as the shareholders held substantial interest in both companies. The Tribunal rejected the assessee's argument that the term "person" in section 2(22)(e) referred only to individuals, stating that the definition of "person" in section 2(31) of the Act applied.
2. Calculation of deemed dividend:
The assessee argued that the calculation of deemed dividend by the Assessing Officer was incorrect and provided an alternate calculation based on the principles laid down by the Hon'ble Bombay High Court in the case of P.K. Bidiani and approved by the Hon'ble Supreme Court in the case of Mukund Ray K. Shah. The Tribunal restored the issue of calculation back to the file of the Assessing Officer to recompute the deemed dividend in line with the decisions of the Hon'ble Supreme Court and the Hon'ble Bombay High Court, after giving the assessee adequate opportunity to produce evidence.
3. Eligibility for deduction u/s 80IB(4):
The assessee claimed that it was eligible for deduction u/s 80IB(4) as an industrial undertaking in a backward state. The Tribunal noted that this issue was not considered by the Assessing Officer or the Commissioner of Income-tax (Appeals). In the interest of natural justice, the Tribunal remitted the issue back to the file of the Assessing Officer to verify the allowability of deduction u/s 80IB(4), granting the assessee the opportunity to produce evidence to support its claim.
Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, with the issues of calculation of deemed dividend and eligibility for deduction u/s 80IB(4) remitted back to the Assessing Officer for reconsideration.
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2008 (6) TMI 610
Issues involved:
The judgment involves issues related to the treatment of loans received by the assessee as deemed dividend under section 2(22)(e) and the charging of interest under sections 234B and 234D.
Treatment of loans as deemed dividend under section 2(22)(e):
The assessee objected to the order upholding the treatment of loans received from M/s. Palghar Steels Private Limited as deemed dividend under section 2(22)(e). The Assessing Officer noted the loan received and directed the assessee to show cause why it should not be taxed as deemed dividend. The assessee argued for exemption under clause (ii) below section 2(22) as the loan was part of the company's money-lending business. The CIT(A) held that the major income of the assessee was from interest and questioned if money lending was a substantial part of the business. The assessee cited various legal decisions and the memorandum of association to support its case. The ITAT allowed the appeal, considering money lending as a business transaction not covered by section 2(22)(e).
Charging of interest under sections 234B and 234D:
The second ground of appeal was against the charging of interest under section 234D. The assessee's Representative argued that the assessment order only directed to charge interest under sections 234B and 234C. The ITAT accepted this plea as correct and allowed the appeal on this ground. The next ground regarding interest under section 234B was considered consequential, and the Assessing Officer was directed to provide relief accordingly.
In conclusion, the ITAT Mumbai allowed the appeal of the assessee regarding the treatment of loans as deemed dividend and the charging of interest under sections 234B and 234D.
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