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2005 (7) TMI 722
The Supreme Court granted special leave in a case where a condition of monthly payment of Rs. one lakh post-bail was deemed unjustified. The Court held that assuming guilt at the bail stage and directing repayment was unwarranted. The High Court's decision to grant bail was upheld, but the condition of monthly payment was removed.
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2005 (7) TMI 721
The Appellate Tribunal CESTAT, Bangalore rejected the Revenue's appeal against the Commissioner (Appeals) Order No. 696/2002, which held that Service Tax is not leviable on the appellants under the category of 'Consulting Engineer'. The Tribunal cited Circular No. 79/9/2004-S.T., clarifying that charges for erection, installation, and commissioning are not covered under Consulting Engineer Services before 2003.
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2005 (7) TMI 720
Issues Involved:
1. Incorporation and Name Changes of the Company
2. Termination of Agreements and Financial Crisis
3. Provisional Liquidator Appointment and Deposits
4. Scheme of Arrangement with Creditors
5. Disputes Between RHSL and S.K. Modi Group
6. Objections to the Scheme of Arrangement
7. Legal and Procedural Compliance for Scheme Approval
Issue-wise Detailed Analysis:
1. Incorporation and Name Changes of the Company:
The company was initially incorporated as Genius Leasing Finance & Investment Company under the Indian Companies Act, 1956. It underwent several name changes: to M.G. Express (17th February 1993), Modiluft Limited (12th April 1994), and finally to Royal Airways Ltd. (31st December 2001). The authorized share capital was Rs. 100 crores, divided into 10 crore equity shares of Rs. 10 each, with issued capital of Rs. 63.4 crores as of 28th February 1999.
2. Termination of Agreements and Financial Crisis:
The company started domestic airline operations in 1993 in collaboration with Lufthansa, which later terminated all agreements and repossessed its aircrafts, leading to a halt in operations. Creditors filed petitions for winding up under Sections 433 and 434 of the Act due to the company's inability to repay debts. The court admitted one such petition on 12th January 1998 and appointed an official liquidator on 29th April 1998.
3. Provisional Liquidator Appointment and Deposits:
The company deposited Rs. 9 crores with the Registrar of the Court by 31st December 1999 to restart operations. It received approvals from the Foreign Investment Promotion Board (FIPB) and the Ministry of Commerce & Industry to issue CRCPS worth $17.5 million in collaboration with Verus Group, Canada, for relaunching the airline.
4. Scheme of Arrangement with Creditors:
The company filed CA No. 797/2000 in May 2000 under Sections 391(1) and 393 of the Act, proposing a scheme of arrangement with creditors. RHSL secured investments and entered into agreements with investors, depositing $15,462,246.10 in an escrow account. The company settled disputes with major creditors, including Indian Oil Corporation and Hindustan Petroleum Corporation Limited, and received court orders for convening creditor meetings.
5. Disputes Between RHSL and S.K. Modi Group:
Differences arose between RHSL and the S.K. Modi Group, leading to multiple lawsuits and disputes over management control. The court noted that the scheme proposed by RHSL was bona fide, reasonable, and feasible, directing meetings of Inter Corporate Depositors and Staff Creditors, both of which approved the scheme by significant majorities.
6. Objections to the Scheme of Arrangement:
Three main objectors, including the S.K. Modi Group, raised objections. The S.K. Modi Group argued that RHSL, a foreign company, lacked locus standi to file the scheme and that CRCPS were never properly converted into equity shares. The court found these objections unconvincing, noting that necessary government approvals had been obtained and that RHSL's actions were consistent with prior shareholder resolutions.
7. Legal and Procedural Compliance for Scheme Approval:
The court emphasized that the scheme should be fair, reasonable, and in the interest of creditors. It rejected objections regarding the scheme's workability and funding, noting that RHSL had already spent significant amounts and secured necessary approvals. The court also addressed specific objections from Malanpur Steels Ltd. and Paradise Credit Pvt. Ltd., finding them without merit.
Conclusion:
The court sanctioned the scheme of compromise under Section 391(2) read with Section 394 of the Companies Act, 1956, subject to certain conditions, including the outcome of pending suits and necessary government approvals. The scheme was found to be in the interest of creditors and feasible for the company's revival.
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2005 (7) TMI 719
Issues:
Challenge to order of Customs, Excise & Service Tax Appellate Tribunal under Article 227 of the Constitution of India. Questions of jurisdictional error by Tribunal, consideration of new documents, and finding on gold bars.
Analysis:
1. The petition challenged the order of Customs, Excise & Service Tax Appellate Tribunal, West Zone Bench, dated 30th June 2004, under Article 227 of the Constitution. The petitioner raised important questions of law regarding jurisdictional errors by the Tribunal, including proceeding with the appeal of respondents while petitioner's appeal was pending, considering new documents not part of the investigation, and making findings on gold bars not of foreign mark.
2. The High Court noted that the order was appealable under the Customs Act, 1962, and thus, the petition was required to be summarily rejected due to the availability of a statutory alternative remedy. However, the petitioner's counsel made elaborate submissions on the raised issues. Regarding the jurisdictional error in hearing only the respondent's appeal, the Court rejected the contention, emphasizing the timelines for filing appeals and the duty of parties to bring relevant information to the Tribunal's notice.
3. The Court further explained that the petitioner's failure to point out the filing of their appeal during the Tribunal hearing precluded them from alleging jurisdictional error. The Court highlighted the importance of parties being vigilant about their rights in legal proceedings. The issues raised about new documents were dismissed due to lack of evidence and failure to establish whether the documents were part of the original record.
4. The Court clarified that questions about documents and additional evidence admitted by the Tribunal are matters of fact requiring evidence and are beyond the scope of the present proceedings. The petitioner's argument on a particular defense not being raised was deemed as a potential mistake apparent on record, which could be rectified by the Tribunal.
5. Ultimately, the High Court concluded that it could not entertain the petition on any grounds raised. The scope of intervention under Article 227 is limited to jurisdictional matters, and the Court found no basis to interfere with the Tribunal's order. The Court reiterated that even if it could reach a different conclusion, it was not sufficient to overturn the Tribunal's findings of fact.
6. Therefore, the petition was rejected based on the established legal principles and the lack of grounds for the High Court to intervene in the Tribunal's decision. The judgment highlighted the importance of parties fulfilling their obligations in legal proceedings and the limited scope of judicial review under Article 227 of the Constitution.
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2005 (7) TMI 718
Issues Involved:
1. Whether the assessee-trust was obliged to deduct tax at source under sections 201 and 201(1A) of the Income-tax Act.
2. Whether the interest credited to the account of retired employees was outside the scope of total income under section 10(12) of the Income-tax Act.
3. Whether the provisions of section 194A of the Income-tax Act were applicable to the interest credited by the appellant to the accounts of retired employees.
4. Whether the trust's failure to obtain written consent from retired employees to retain their amounts was a mere technical breach.
5. Whether the principle of mutuality applied to the income credited by the trust.
6. Whether the interest credited should be taxed under the head 'Salaries' and subject to section 192 rather than section 194A.
Detailed Analysis:
1. Obligation to Deduct Tax at Source:
The CIT(A) confirmed the order under sections 201 and 201(1A) of the Income-tax Act, holding the assessee-trust liable for not deducting tax at source on interest credited to the accounts of retired employees. The Tribunal upheld this view, stating that the assessee was in default for failing to deduct tax as required under section 194A.
2. Scope of Total Income under Section 10(12):
The assessee argued that the interest credited to retired employees' accounts was outside the scope of total income under section 10(12). However, the Tribunal found that the interest credited did not qualify for exemption under section 10(12) because it did not meet the conditions specified in rule 8 of Part A of the Fourth Schedule. The interest credited to accounts of employees after their retirement was not exempt from tax.
3. Applicability of Section 194A:
The Tribunal held that the provisions of section 194A were applicable to the interest credited by the appellant to the accounts of retired employees. Since the interest credited was not exempt under section 10(12), the assessee was obliged to deduct tax at source under section 194A.
4. Technical Breach of Rule 5:
The assessee contended that the failure to obtain written consent from retired employees to retain their amounts was a mere technical breach. The Tribunal rejected this argument, stating that non-compliance with rule 5 of Part A of the Fourth Schedule was not merely technical but significant for determining tax liability.
5. Principle of Mutuality:
The assessee argued that the principle of mutuality applied, and therefore, no income was chargeable to tax. The Tribunal dismissed this argument, stating that the principle of mutuality could not be extended to the taxing of amounts in the hands of individual recipients.
6. Taxation under 'Salaries' and Section 192:
The assessee contended that the interest credited should be taxed under the head 'Salaries' and subject to section 192 rather than section 194A. The Tribunal disagreed, noting that the interest credited to the accounts of retired employees did not qualify as 'Salaries' under the Act. Therefore, the provisions of section 194A were correctly applied.
Conclusion:
The Tribunal affirmed the CIT(A)'s decision that the assessee-trust was liable to deduct tax at source under section 194A for the interest credited to the accounts of retired employees who ceased to be in employment with ONGC. Consequently, the assessee was in default under sections 201/201(1A) for the financial years in question. All the appeals of the assessee were dismissed.
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2005 (7) TMI 717
Issues:
Whether duty paid on spares of a ropeway used for transporting crushed limestone entitles Modvat credit.
Analysis:
The appeal addressed the issue of whether duty paid on spares of a ropeway used for transporting crushed limestone from mines to a factory entitles Modvat credit. The Customs, Excise & Gold (Control) Appellate Tribunal disallowed the credit, stating that the ropeway is not material handling equipment within the factory premises. However, previous cases like J.K. Udaipur Udyog Ltd. Vs. CCE, Jaipur-II and CCE, Chennai Vs. Pepsico India Holdings Ltd. supported Modvat credit entitlement in similar situations. The Commissioner of Central Excise's appeal was dismissed due to not pressing the appeal, accepting the principles laid down in previous cases. The court emphasized maintaining consistency in decisions to avoid confusion and allowed the appeal, granting Modvat credit to the appellant.
The judgment also covered related appeals, including C.A.No.8268/2003, CIVIL APPEAL NO.4526/2005, and CIVIL APPEAL NO.4527/2005. These appeals were allowed based on the precedent set in M/s. Birla Corporation Ltd. Vs. Commnr. of Central Excise[C.A.No.5118/2003]. The court held that the appellants were entitled to Modvat credit claimed before the tribunal, aligning with the decisions made in the referenced case. The judgments emphasized consistency in rulings and upheld the entitlement to Modvat credit for the appellants in question.
In conclusion, the Supreme Court's judgment clarified the entitlement to Modvat credit for duty paid on spares of a ropeway used for transporting crushed limestone. By aligning with previous decisions and emphasizing consistency in rulings, the court ensured clarity in the application of tax credits in similar cases. The appeals were allowed, setting aside the previous decisions disallowing the Modvat credit and granting the appellants the credit claimed before the tribunal.
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2005 (7) TMI 716
Issues Involved:
1. Minimum requirements to issue process under Section 138 of the Negotiable Instruments Act.
2. Circumstances under which persons referred to in Section 141 can be proceeded against for an offence under Section 138.
3. Liability of a person who neither issues a cheque nor maintains an account.
Detailed Analysis:
1. Minimum requirements to issue process under Section 138:
The court examined the essential elements required to constitute an offence under Section 138 of the Negotiable Instruments Act. It was emphasized that the cheque must be drawn by the accused on an account maintained by him, and the cheque must be for the payment of money to another person from that account. The court noted that none of these requirements were met by the petitioner or the society in this case, as the cheque was drawn by the second accused in his personal capacity.
2. Circumstances under which persons referred to in Section 141 can be proceeded against for an offence under Section 138:
Section 141 deals with offences by companies and states that every person in charge of and responsible for the conduct of the business of the company, at the time the offence was committed, shall be deemed guilty. The court highlighted that for a person to be held liable under Section 141, the commission of the offence by the company must first be established. In this case, there was no evidence that the society committed the offence, as the cheque was not drawn on the society's account. Thus, the petitioner, as the secretary of the society, could not be held liable.
3. Liability of a person who neither issues a cheque nor maintains an account:
The court clarified that a person who neither issues a cheque nor maintains an account cannot be held guilty under Section 138. The petitioner did not maintain an account or issue the cheque in question. The cheque was drawn by the second accused on his personal account. Therefore, the petitioner had no personal liability under Section 138, and no proceedings could be initiated against him under Section 141.
Conclusion:
The court concluded that the trial court acted hastily in issuing summons to the petitioner based solely on the description in the cause-title of the complaint. The proceedings against the petitioner were quashed, and the learned Magistrate was directed to drop all further proceedings against him. The judgment emphasized the necessity of establishing the basic requirements of Section 138 and the conditions under Section 141 before proceeding against any individual.
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2005 (7) TMI 715
Issues Involved:
1. Maintainability of the complaint against the company under Section 138 of the Negotiable Instruments Act.
2. Personal liability of the Director for the dishonoured cheques.
3. Legal requirements for prosecuting a company and its directors under Section 141 of the Negotiable Instruments Act.
4. Validity of the discharge application filed by the accused.
Detailed Analysis:
1. Maintainability of the Complaint Against the Company:
The primary issue was whether the respondent-company could be prosecuted under Section 138 of the Negotiable Instruments Act, 1881, for issuing dishonoured cheques. The court noted that the cheques were issued by the company and were dishonoured due to insufficient funds. The complainant had issued a legal notice demanding payment, which the company failed to comply with, leading to the prosecution.
The court referenced Section 141 of the Negotiable Instruments Act, which states that if an offence is committed by a company, both the company and the person in charge of its business at the time of the offence shall be deemed guilty. The court concluded that the company is liable for prosecution despite the non-prosecution of its directors, emphasizing that the company itself can be prosecuted for the offence under Section 138.
2. Personal Liability of the Director:
The revision petitioner argued that the Director, Sri Rahul Kejriwal, should not be personally liable as there were no specific allegations that he was responsible for the day-to-day business of the company. The court acknowledged that the Director was not individually impleaded as an accused and that the complaint did not contain specific allegations against him personally. Therefore, the Director could not be held personally liable under Section 141 of the Act.
3. Legal Requirements for Prosecuting a Company and Its Directors:
The court examined the legal requirements under Section 141 of the Negotiable Instruments Act, which necessitates that the person in charge of and responsible for the conduct of the company's business at the time of the offence must be prosecuted alongside the company. The court reviewed several judgments, including *K.P.J. Nair v. Jindal Menthol India Ltd.*, *Katta Sujatha v. Fertilizers and Chemicals Travancore Ltd.*, and *Monaben Ketanbhai Shah v. State of Gujarat*. These cases established that specific allegations must be made against individuals to hold them liable.
However, the court differentiated these cases from the present one, noting that the prosecution was against the company itself and not against the Director in his personal capacity. The court cited judgments like *Sheoratan Agarwal v. State of M.P.* and *State of Punjab v. Kasturi Lal*, which held that a company can be prosecuted independently of its directors.
4. Validity of the Discharge Application:
The accused filed an application for discharge under Sections 239 and 245 of the Criminal Procedure Code (Cr. P.C.), which the trial court dismissed. The revision petitioner argued that the application itself was not maintainable under law as the offence under Section 138 is a summons case, and the procedure prescribed under Chapter XX of the Cr. P.C. does not contemplate a stage of discharge. The court referenced *Subramanium Sethuraman v. State of Maharashtra*, which clarified that in summons cases, the trial must follow the procedure to its logical conclusion without a discharge stage.
The court concluded that the trial court correctly found sufficient material to proceed with the trial and that the Sessions Court erred in setting aside the Magistrate's order.
Conclusion:
The revision petition was allowed, and the order of the Sessions Court was set aside. The court confirmed the order of the IV Metropolitan Magistrate, holding that the prosecution against the company was maintainable under Section 138 of the Negotiable Instruments Act, and the Director was not personally liable in the absence of specific allegations.
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2005 (7) TMI 713
Issues:
1. Contention regarding the direction in the impugned order of not arresting the first Respondent for three years without prior notice.
2. Validity of the direction for holding an inquiry by the Additional Chief Secretary, Home Department.
3. Challenge to the blanket protection order against arresting the first Respondent.
Analysis:
1. The main issue in this case revolves around the grievance of the Appellant State concerning the direction in the impugned order that prevented the arrest of the first Respondent for a period of three years without serving advance notice. The High Court had issued this direction in response to a contempt petition filed by the first Respondent, who had been granted anticipatory bail but was still arrested by the police, allegedly in violation of the court order. The Supreme Court, after considering the facts and the order dated 26.8.2002, concluded that such a blanket protection from arrest could not be justified. Therefore, the Court set aside the direction providing the first Respondent with immunity from arrest without prior notice.
2. Another aspect of the case involved the direction for holding an inquiry by the Additional Chief Secretary, Home Department, in response to a complaint filed by the first Respondent. The Court clarified that it was not within the scope of the current appeal to determine the correctness of this inquiry direction, as it was not challenged by the State. Therefore, this issue was not further addressed in the judgment.
3. The final issue addressed by the Supreme Court was the challenge to the blanket protection order against arresting the first Respondent. The Court emphasized that while the first Respondent could not enjoy absolute immunity from arrest, he still had the right to challenge any false cases registered against him in the appropriate legal forum. By allowing the criminal appeal to the extent of modifying the impugned order and setting aside the blanket protection from arrest, the Court upheld the principle that individuals should not be shielded from the consequences of potential false accusations.
In conclusion, the Supreme Court's judgment focused on striking a balance between protecting individual rights and ensuring accountability within the legal system. The Court clarified that while false arrests should be challenged through legal means, blanket immunity from arrest without notice was not a justifiable remedy.
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2005 (7) TMI 712
Issues Involved:
1. Ownership of the disputed property.
2. Adverse possession claim by the defendants.
3. Dismissal of the original suit by the trial court.
4. Condonation of delay in filing the appeal.
5. Rejection of the application under Section 5 of the Limitation Act.
6. Merger of the trial court's decree with the appellate court's order.
7. Maintainability of the writ petition under Articles 226/227 of the Constitution of India.
Detailed Analysis:
1. Ownership of the Disputed Property:
The plaintiff claimed ownership of the disputed property based on a sale deed executed by Smt. Mariyam and Smt. Basheeran, who inherited the property and sold it to the plaintiffs on 18.3.1949. The defendants did not challenge the execution of this sale deed.
2. Adverse Possession Claim by the Defendants:
The father of the respondents, Hameed Shah, claimed that he had perfected his title by adverse possession. However, the trial court dismissed the original suit (O.S No. 108 of 1983) filed by the plaintiffs for injunction, ejectment, and damages.
3. Dismissal of the Original Suit by the Trial Court:
The trial court dismissed the original suit on 10.3.1999. The petitioners, being the legal heirs of the plaintiff, filed an appeal along with an application under Section 5 of the Limitation Act for condonation of delay.
4. Condonation of Delay in Filing the Appeal:
The petitioners explained the delay by stating that the certified copies of the judgment and decree were not handed over to their counsel in time. The appeal was filed on the first day after the summer vacation of the Civil Court. The District Judge dismissed the application under Section 5 of the Limitation Act, citing ignorance of law as no excuse.
5. Rejection of the Application under Section 5 of the Limitation Act:
The application under Section 5 was rejected without issuing any notice to the respondents or any rebuttal from them. The petitioners argued that the rejection was arbitrary and without proper judicial consideration.
6. Merger of the Trial Court's Decree with the Appellate Court's Order:
The court discussed the doctrine of merger, stating that a decree or order merges with the appellate court's order only when the case is decided on merit. Since the appeal was dismissed on the ground of limitation without a proper hearing, the trial court's decree did not merge with the appellate court's order.
7. Maintainability of the Writ Petition under Articles 226/227 of the Constitution of India:
The respondents argued that a second appeal should be filed under Section 100 of the Civil Procedure Code, not a writ petition. However, the court held that the writ petition was maintainable as the impugned order was passed in a Misc. Case No. 223 of 1999, against which no appeal lies under the Civil Procedure Code.
Conclusion:
The court found that the lower appellate court had taken a too technical view by rejecting the appeal on the ground of delay. The writ petition was allowed, quashing the impugned order dated 2.7.1999. The application under Section 5 of the Limitation Act was allowed, and the matter was remitted back to the lower appellate court for proper adjudication. The appeal should be registered and decided in accordance with the law. No order as to costs was made.
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2005 (7) TMI 711
Issues Involved
1. Validity of Notifications and Public Notice.
2. Retrospective application of subordinate legislation.
3. Clarificatory nature of the notifications.
4. Vested rights of the petitioners.
5. Doctrine of promissory estoppel.
6. Levy of fees by DGFT.
Detailed Analysis
1. Validity of Notifications and Public Notice
The primary issue in this petition is the validity of the Notifications and Public Notice issued by the Central Government and DGFT. The petitioners argue that the impugned Notifications, which amend the Exim Policy with retrospective effect, are ultra vires as there is no power conferred by Parliament to do so. The respondents contend that these clarifications were issued to prevent misuse of the scheme by status holders who were artificially inflating their export figures.
2. Retrospective Application of Subordinate Legislation
The petitioners argue that delegated or subordinate legislation can only operate prospectively unless expressly provided otherwise by the statute. The Supreme Court's decisions in State of Bihar vs Krishna Kumar Kabra and others support this view. The respondents argue that the amendments are merely clarificatory and thus can be applied retrospectively.
3. Clarificatory Nature of the Notifications
The court examines whether the Notifications dated 28th January 2004 and subsequent ones are merely clarificatory or introduce new conditions. The Central Government issued these Notifications to clarify the correct meaning of the scheme and prevent its misuse. The court finds that the provisions of the Notification dated 28th January 2004 are clarificatory and align with the basic objective of the scheme.
4. Vested Rights of the Petitioners
The petitioners contend that their right to receive duty-free entitlement crystallized upon achieving the prescribed incremental growth. The court agrees, stating that the right vests immediately upon achieving the incremental growth, and subsequent amendments cannot take away this vested right. The court refers to the Supreme Court's decisions in Bejgam Veeranna Venkata Narasimloo vs State of Andhra Pradesh and Samtel India Ltd vs Commissioner of Central Excise to support this view.
5. Doctrine of Promissory Estoppel
The petitioners argue that the Central Government is bound by the doctrine of promissory estoppel and cannot withdraw the benefits after exports have been completed. However, the court notes that this issue is not seriously pressed in light of the Supreme Court's decisions in Kasinka Trading and anr vs Union of India and The Sales Tax Officer vs Shree Durga Oil Mills.
6. Levy of Fees by DGFT
The petitioners challenge the levy of fees by the DGFT based on the value of the application for duty-free certificates. The court finds no substance in this challenge.
Conclusion
The court partially allows the petition, quashing and setting aside the Public Notice dated 28th January 2004. It declares that the Notifications dated 21st and 23rd April 2004 will have only prospective operation. The exports made by the petitioners prior to these Notifications will be computed for determining their entitlement. No order as to costs.
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2005 (7) TMI 710
Issues Involved:
1. Disallowance of expenses by the Assessing Officer (AO) amounting to Rs. 9,60,661.
2. Addition of Rs. 7,46,200 in respect of depreciation claimed by the appellant.
3. Addition of Rs. 2,94,900 concerning unexplained cash credits.
4. Disallowance of earlier years' losses by treating business income of Rs. 23,56,415 as income from other sources.
5. Charging of interest under sections 234B and 234C.
Issue-wise Detailed Analysis:
1. Disallowance of Expenses (Rs. 9,60,661):
The AO disallowed expenses amounting to Rs. 10,60,661, later reduced by the CIT(A) to Rs. 9,60,661, on the grounds that the assessee did not conduct any business activities apart from minor sales. The assessee argued that the expenses were necessary for maintaining the office and included minimum charges for electricity, administrative expenses, and other essential costs. The Tribunal found that the assessee had no intention to close the manufacturing unit permanently and that the expenses were incurred due to a temporary lull in business. The Tribunal concluded that the disallowance was unjustified and deleted the entire addition of Rs. 9,60,661.
2. Addition of Depreciation (Rs. 7,46,200):
The AO disallowed the depreciation claimed by the assessee, arguing that no production activity took place and the assets were not used during the financial year. The CIT(A) upheld this disallowance. The Tribunal, however, found that the assets were kept ready for use and the manufacturing activity resumed in the subsequent year. It referenced several case laws supporting the allowance of depreciation for assets kept ready for use. Consequently, the Tribunal deleted the addition of Rs. 7,46,200.
3. Addition of Unexplained Cash Credits (Rs. 2,94,900):
The assessee did not press this ground, and it was dismissed by the Tribunal.
4. Disallowance of Earlier Years' Losses (Rs. 23,56,415 as Income from Other Sources):
The AO treated the business income of Rs. 23,56,415, which included commission income and income from the sale of Safeda trees, as income from other sources, thus disallowing the set-off of earlier years' losses. The CIT(A) upheld this decision. The Tribunal found that the commission income was earned from film distribution activities, which was a main object of the assessee's business as per its Memorandum and Articles of Association. It also noted that the commission income was accepted in subsequent years. Therefore, the Tribunal held that the commission income should be treated as business income and not as income from other sources. However, the Tribunal upheld the AO's decision regarding the income from the sale of Safeda trees due to the lack of evidence supporting the existence and sale of these trees.
5. Charging of Interest under Sections 234B and 234C:
The issue of charging interest under sections 234B and 234C was deemed consequential by the Tribunal, dependent on the final determination of the main issues. The Tribunal directed the AO to take appropriate action based on its findings.
Conclusion:
The Tribunal allowed the appeal partly, deleting the additions related to disallowed expenses and depreciation, and directed the AO to treat the commission income as business income. The addition concerning unexplained cash credits was dismissed, and the income from the sale of Safeda trees was upheld as income from undisclosed sources. The charging of interest under sections 234B and 234C was left to be recalculated based on the Tribunal's findings.
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2005 (7) TMI 709
Issues Involved:
1. Res judicata applicability.
2. Title and ownership of the suit property.
3. Validity and effect of the mortgage deed.
4. Settlement and relinquishment of property rights.
5. Non-joinder of necessary parties.
Issue-wise Detailed Analysis:
1. Res Judicata Applicability:
The core issue is whether the judgment in the former suit (OS No. 843/74) operates as res judicata under Section 11 of the Code of Civil Procedure, thereby barring the present suit. The trial court and the first appellate court rejected the plea of res judicata, while the High Court reversed this decision, holding that the previous judgment indeed constituted res judicata. The High Court emphasized that the right and title of Muthuswami to the suit house were substantially involved and decided in the former suit, which upheld the rights of the wife and children.
2. Title and Ownership of the Suit Property:
The property in question, house door No.206 in Harvaipatt township, was initially allotted to Muthuswami Naidu's mother by the Madurai Mills Cooperative Housing Society. After her death, Muthuswami inherited the property and later executed a mortgage deed on 3.12.1974. The former suit (OS No. 843/74) involved a dispute over this property, where the wife claimed ownership based on a settlement in a village panchayat in 1971. The trial court in the former suit found that the settlement was proven and that the wife and children were in possession of the house.
3. Validity and Effect of the Mortgage Deed:
The mortgage deed executed by Muthuswami on 3.12.1974 was central to the former suit. The trial court found the mortgage deed genuine but not binding, as Muthuswami did not testify to prove it. Consequently, the court denied the relief of permanent injunction sought by Muthuswami and his mortgagee, Chinnaswamy, against the wife. This decision was not appealed, thus attaining finality.
4. Settlement and Relinquishment of Property Rights:
The wife and children claimed ownership based on a settlement in a village panchayat in 1971, where Muthuswami allegedly relinquished his rights to the property. The trial court in the former suit accepted this settlement, noting that the wife had proven possession of the property. The High Court upheld this finding, indicating that the settlement and relinquishment were significant in deciding the ownership and possession issues.
5. Non-joinder of Necessary Parties:
The trial court in the former suit also addressed the issue of non-joinder of necessary parties, specifically the children, who were considered necessary parties due to the settlement. The court held that the suit was bad for non-joinder of these parties, further supporting the wife's claim.
Conclusion:
The Supreme Court upheld the High Court's judgment, affirming that the former suit's findings on ownership and possession were directly and substantially involved, thus constituting res judicata. The appellant's subsequent suit, based on a sale deed from Muthuswami, was barred by constructive res judicata, as the issue of title could and should have been raised in the former suit. The appeals were dismissed, and no costs were ordered.
Key Judgments Referenced:
- Sulachana Amma vs. Narain Nair [1994 (2) SCC 14]
- Ishar Singh vs. Sarwan Singh [AIR 1965 SC 948]
- Jumma Masjid vs. Kodimaniandra Deviah [AIR 1962 SC 847]
Final Decision:
The appeals were dismissed, and the High Court's judgment was upheld, confirming the application of res judicata and constructive res judicata to bar the subsequent suit filed by the appellant.
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2005 (7) TMI 708
Issues: Challenge to order under Voluntary Disclosure Scheme
Analysis:
The Petitioner challenged the order of the Commissioner of Income-Tax, Mumbai City XXV, refusing to entertain the application under the Voluntary Disclosure Scheme. The Petitioner, a partner in multiple firms, made a declaration of undeclared money following a raid at the common office premises. However, discrepancies arose as the Petitioner failed to disclose all relevant material in the application made under the scheme. The Respondent contended that despite being asked, the Petitioner did not provide all details and particulars of the partnership firms. Consequently, the court declined to interfere, and the Petition was dismissed.
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2005 (7) TMI 707
Issues:
Manufacture and clearance of goods without duty payment by fraud, reliance on statements of involved persons, lack of facilities for manufacturing goods, failure to issue notice to another manufacturing unit, retraction of statements, absence of independent evidence, lack of investigation into goods receipt, admissibility of statements given under custody, lack of correlation between raw material procurement and finished goods clearance, incorrect findings on Central Excise registration, absence of evidence on payments received, capacity of manufacturing units, absence of findings on manufacturing capacity, and previous tribunal judgments.
Analysis:
The judgment pertains to the appellants, manufacturers of parts of Air-conditioning and Refrigeration appliances, who were found to have manufactured and cleared goods without duty payment through fraudulent means involving three individuals. The investigation revealed discrepancies in the declaration of manufacturing premises and machinery usage. The Commissioner adjudicated the matter based on statements of involved persons and evidence seized, concluding that the appellants were the actual manufacturers. However, the Tribunal found discrepancies in relying solely on retracted statements without corroboration and lack of evidence on the appellants' manufacturing facilities.
Regarding the absence of facility evidence for M/s. Engineering Industries, the Tribunal noted that the Commissioner's finding lacked substantial evidence and contradicted the available records showing the necessary machinery. The Tribunal also highlighted the insufficiency of the appellants' facility as a ground for concluding their manufacturing involvement solely based on equipment availability.
The judgment emphasized the failure to issue a notice to M/s. Engineering Industries, a registered manufacturing unit, as a procedural flaw vitiating the proceedings. It cited previous tribunal cases to support the necessity of notifying all involved parties. The retraction of statements by involved individuals raised doubts on the reliability of evidence, urging the need for independent corroboration, which was lacking in the investigation.
Moreover, the Tribunal critiqued the lack of customer investigation to verify goods receipt, the inadmissibility of statements given under custody, and the absence of correlation between raw material procurement and finished goods clearance. It also addressed incorrect findings on Central Excise registration, absence of evidence on payments received, and the capacity of manufacturing units in determining the actual manufacturer.
In conclusion, the Tribunal set aside the Commissioner's order based on detailed observations and previous tribunal judgments, allowing the appeals with consequential relief. The judgment highlighted the importance of thorough investigations, corroborative evidence, and adherence to procedural requirements in establishing duty evasion and manufacturing involvement in excise cases.
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2005 (7) TMI 706
Issues Involved:
1. Quashing of FIR No. 20 of 2003.
2. Allegations under Sections 409, 420, and 120B of IPC.
3. Allegations under Section 65 of the Information Technology Act, 2000.
4. Allegations under Section 63 of the Copyright Act, 1957.
Issue-wise Detailed Analysis:
1. Quashing of FIR No. 20 of 2003:
The petitioners sought relief under Section 482 of the Code of Criminal Procedure, 1973, to quash FIR No. 20 of 2003 registered by the Criminal Investigation Department (CID) Police, Hyderabad. The FIR was based on a complaint by the Head of Sales and Marketing Wing of Reliance Infocomm Ltd., alleging unethical practices by rival service providers to woo their customers. The High Court admitted both petitions and stayed further proceedings, including the investigation, pending the disposal of the main petition.
2. Allegations under Sections 409, 420, and 120B of IPC:
The petitioners, employees of Tata Tele Services Limited (TTSL), were accused of criminal breach of trust, cheating, and conspiracy. The court found that the allegations did not constitute an offence under Section 409 (criminal breach of trust) or Section 420 (cheating) of IPC. There was no evidence of dishonest appropriation or fraudulent inducement. Consequently, the charge under Section 120B (criminal conspiracy) of IPC, which is related to the alleged offences under Sections 409 and 420, was also deemed misconceived. The court held that the FIR did not disclose the commission of cognizable offences under these sections, justifying the quashing of the investigation related to these charges.
3. Allegations under Section 65 of the Information Technology Act, 2000:
The petitioners were also accused of tampering with computer source documents under Section 65 of the IT Act. The court analyzed the definitions of "computer," "computer system," and "computer network" under the IT Act and concluded that a cell phone, being a programmable device capable of data processing, falls under these definitions. The court noted that altering the Electronic Serial Number (ESN) of the cell phones, which are integral to the service provided by Reliance Infocomm, constituted tampering with computer source code. The court rejected the argument that there was no law requiring the maintenance of computer source code, emphasizing that the second respondent was indeed maintaining such code. Therefore, the court held that the allegations prima facie made out an offence under Section 65 of the IT Act, and the investigation could not be quashed.
4. Allegations under Section 63 of the Copyright Act, 1957:
The court examined the allegations under Section 63 of the Copyright Act, which deals with the infringement of copyright in computer programs. The court noted that the Copyright Act, as amended in 1995, includes computer programs as literary works protected by copyright. The court held that altering the computer program (source code) of the cell phones supplied by Reliance Infocomm could constitute an infringement of copyright. The court emphasized that this issue would be subject to evidence presented during the trial. Consequently, the court did not quash the investigation related to this charge.
Conclusion:
The High Court quashed the FIR insofar as it related to offences under Sections 409, 420, and 120B of IPC, but allowed the investigation to proceed regarding offences under Section 65 of the Information Technology Act and Section 63 of the Copyright Act. The CID Police were directed to complete the investigation and file a final report within three months. The criminal petitions were dismissed accordingly.
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2005 (7) TMI 705
Payment of ad valorem court fee - Non-disclosure of any cause of action - Whether the trial court and the High Court were right in holding that the plaint under Order VII Rule 11 of the Code of Civil Procedure was liable to rejection - HELD THAT:- In the present suit, the relief indirectly claimed is of declaring the sale deed of 5.5.1953 to be not really a sale deed but a loan transaction. Relief of reconveyance of property under alleged oral agreement on return of loan has been deliberately omitted from the relief clause. In our view, the present plaint is liable to rejection, if not on the ground that it does not disclose 'cause of action', on the ground that from the averments in the plaint, the suit is apparently barred by law within the meaning of Clause (d) of Order VII, Rule 11 of Code of Civil Procedure.
The High Court does not seem to be right in rejecting the plaint on the ground that it does not disclose any 'cause of action'. In our view, the trial court was right in coming to the conclusion that accepting all averments in the plaint, the suit seems to be barred by limitation. On critical examination of the plaint as discussed by us above, the suit seems to be clearly barred on the facts stated in the plaint itself. The suit as framed is prima facie barred by the law of limitation, provisions of Specific Relief Act as also under Order 2 Rule 2 of the Code of Civil Procedure.
This is a fit case not only for rejecting the plaint but imposing exemplary costs on the appellant on the observations of this Court in the case of T. Arvindam v. T.V. Satyapal [1977 (10) TMI 116 - SUPREME COURT].
In the result, the appeal fails with costs incurred throughout by the respondents to be paid by the appellants. A further cost in the sum of ₹ 10,000 (Rupees ten thousand only) is imposed on the appellant to be paid to the respondents for prosecuting and prolonging litigation up to this Court in a hopelessly barred suit.
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2005 (7) TMI 704
Issues:
Quashment of orders summoning the petitioner for offences under Section 138 of the Negotiable Instruments Act based on complaints filed by M/s International Print-O-Pac Ltd.
Analysis:
1. The petitioner, accused No. 3, was summoned along with accused No. 1 and accused No. 2 by the Metropolitan Magistrate based on complaints filed by M/s International Print-O-Pac Ltd. The complaints alleged that cheques issued by accused No. 1 were dishonored due to insufficient funds, implicating the accused company and its directors, including the petitioner.
2. The petitioner denied any involvement in transactions with the complainant, stating that her husband, accused No. 2, handled all dealings of the accused company. The complaints did not attribute any specific act to the petitioner except for her role as a director. The petitioner argued that she should not have been summoned for the offence under Section 138 of the Act.
3. The Court emphasized that the responsibility of each accused must be established before summoning them. Referring to previous judgments, the Court highlighted that the complainant must specify how each accused, especially a director, is responsible for the alleged offence. Without clear allegations and basis for responsibility, summoning a director solely based on their position is not justified.
4. In this case, the complainant failed to provide any specific allegations against the petitioner regarding her involvement in the dishonored cheques. The Court found the complaint's assertion that the petitioner, as a director, was responsible for the company's conduct to be a mere bald allegation without substantiation. Consequently, the Metropolitan Magistrate erred in summoning the petitioner based on vague accusations, leading the Court to quash the orders and discharge the petitioner in all five complaints filed by M/s International Print-O-Pac Ltd.
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2005 (7) TMI 703
Issues Involved:
1. Interpretation of Section 145 of the Negotiable Instruments Act, 1881.
2. Obligation of the court to examine the complainant in person despite the submission of an affidavit.
3. Applicability of precedents and judicial interpretations concerning Section 145.
4. The right of the accused to cross-examine the complainant.
Issue-wise Detailed Analysis:
1. Interpretation of Section 145 of the Negotiable Instruments Act, 1881
The court analyzed Section 145 of the Negotiable Instruments Act, 1881, which allows the complainant to submit evidence via affidavit. The section reads:
- "(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the evidence of the complainant may be given by him on affidavit and may, subject to all just exceptions, be read in evidence in any enquiry, trial or other proceeding under the said Code.
- (2) The Court may, if it thinks fit, and shall, on the application of the prosecution or the accused, summon and examine any person giving evidence on affidavit as to the facts contained therein."
The court noted that this section was introduced to expedite the trial process under the Negotiable Instruments Act.
2. Obligation of the Court to Examine the Complainant in Person Despite the Submission of an Affidavit
The court referred to the conflicting judgments by single judges and the Division Bench on whether the court is obliged to examine the complainant in person even after the submission of an affidavit. The Division Bench in "KSL Industries case" held that:
- Once the complainant submits an affidavit of examination-in-chief, the court is not required to record the examination-in-chief again if the accused applies under Section 145(2). The complainant must be made available for cross-examination and re-examination.
3. Applicability of Precedents and Judicial Interpretations Concerning Section 145
The court discussed the precedents:
- The decision in "Raminder Singh's case" by a learned Single Judge, which mandated the court to record the examination-in-chief even after an affidavit was submitted.
- The Division Bench's decision in "KSL Industries case" which clarified that the court need not record the examination-in-chief again if an affidavit is already submitted and the accused applies under Section 145(2).
The court concluded that the Division Bench's interpretation in "KSL Industries case" is binding and has clearly addressed the issue.
4. The Right of the Accused to Cross-examine the Complainant
The court emphasized that under Section 145(2), the accused has the right to cross-examine the complainant. The court stated:
- "The mandatory provision of sub-section (2) is that the Court has to call the witness whose affidavit in examination-in-chief is filed for the cross-examination by the rival party when an Application under sub-section (2) of section 145 is made."
Conclusion
The court modified the impugned order to direct the complainant (Respondent No.2) to make himself available for cross-examination by the petitioners. The petitions were disposed of accordingly, ensuring the accused's right to cross-examine the complainant while adhering to the streamlined process intended by Section 145 of the Negotiable Instruments Act, 1881.
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2005 (7) TMI 702
Issues Involved:
1. Petition under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Allegations of suppression of material facts.
3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
4. Prima facie case for pre-award attachment.
Issue-wise Detailed Analysis:
1. Petition under Section 9 of the Arbitration and Conciliation Act, 1996:
The petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking a direction for the Public Works Department (PWD) of Rajasthan State to release Rs. 1.33 crores out of a total escalation of Rs. 4.51 crores in favor of the petitioner. Alternatively, the petitioner sought a direction to place Rs. 1.33 crores in a secure account until the rights and liabilities of the parties were adjudicated in the arbitral proceedings. The petitioner alleged that the respondent withheld payment despite the completion of work to satisfaction and receiving payment from the PWD.
2. Allegations of Suppression of Material Facts:
The respondent contested the petition, raising preliminary objections that the petitioner suppressed material facts, including filing a similar petition under Section 17 of the Act before the Arbitral Tribunal, which was dismissed on 8.9.2001. The petitioner did not challenge this order and filed the present petition without disclosing these facts. The court noted that suppression of facts or misleading facts by a party seeking equitable relief could disentitle the party from such relief.
3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA):
The respondent argued that the petitioner's claims were premature and that the respondent, being declared a sick unit under SICA, was protected under Section 22 of the Act, which bars distress proceedings or restraint orders against sick companies. The court cited the Supreme Court's interpretation of Section 22 of SICA, emphasizing that the properties of a sick industrial company should not be subjected to coercive action until the BIFR disposes of the reference made under Section 15 of SICA. The court held that the present proceedings seeking interim relief fell within the description of "distress or the like thereof" and were barred under Section 22 of SICA without the consent of the board or appellate authority.
4. Prima Facie Case for Pre-award Attachment:
The court examined whether the petitioner made a prima facie case for pre-award attachment, noting that such orders are drastic and should be exercised with utmost care and caution. The court highlighted that the petitioner must prove that the defendant is about to dispose of or remove property to obstruct or delay execution of any decree. The respondent argued that the petitioner had already been paid more than the contract value and that the respondent had counterclaims against the petitioner. The court found that the claims and counterclaims were still under adjudication by the Arbitral Tribunal, making the petition premature. The court referenced the Arbitral Tribunal's earlier decision to decline similar relief under Section 17 of the Act.
Conclusion:
The court concluded that the petitioner failed to disclose material facts and that the proceedings were barred under Section 22 of SICA. Additionally, the petitioner did not make a prima facie case for pre-award attachment. Consequently, the petition was dismissed, and the ad-interim ex-parte injunction order dated 25.9.2003 was vacated.
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