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2010 (7) TMI 1217
Issues Involved:
1. Sustaining addition u/s 69 on the basis of circle rate in terms of provisions of section 50C.
2. Legality of presumption about unexplained investment.
3. Applicability of deeming provisions of section 50C for the purpose of section 69.
Summary:
Issue 1: Sustaining Addition u/s 69 Based on Circle Rate
The assessee contested the CIT(A)'s decision to sustain the addition u/s 69 based on the circle rate, arguing that section 50C's provisions, which pertain to the computation of capital gains, should not apply to section 69. The CIT(A) had directed the Assessing Officer to verify the actual investment based on the circle rates and consider any difference as undisclosed investment u/s 69.
Issue 2: Legality of Presumption about Unexplained Investment
The CIT(A) observed that the Assessing Officer's addition of Rs. 35,90,000/- u/s 69B was based on a valuation report from SIDBI, which was not provided to the appellant for comments. The CIT(A) noted that section 69B requires material evidence to establish undisclosed investment, and reliance on estimated valuation without supporting evidence is not justified. The CIT(A) also referenced several judicial pronouncements supporting this view.
Issue 3: Applicability of Deeming Provisions of Section 50C
The Tribunal referred to the decision in ITO Vs. Harley Street Pharmaceuticals Ltd., which held that the fiction created u/s 50C for substituting actual consideration with the value determined by the Registrar for stamp duty purposes is restricted to the computation of capital gains and cannot be extended to the buyer for the purpose of section 69. The Tribunal concluded that sections 69 and 69B cannot be invoked unless specific evidence of non-disclosure of investment is presented, which was not the case here.
Conclusion:
The Tribunal held that the provisions of section 50C are applicable only for the computation of capital gains in the case of the transferor and not for the buyer. Without specific evidence of non-disclosure of investment, no addition could be made to the income of the assessee u/s 69 or 69B. Consequently, the appeal was allowed.
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2010 (7) TMI 1216
Issues involved: Petition for quashing Judgment and Order u/s Article 227 of Constitution of India, rejection of applications under Section 138 of Negotiable Instruments Act, appeal against order of learned Sessions Judge, Jalgaon.
Judgment Summary:
Issue 1: Quashing of Judgment and Order
The petitioner filed a petition under Article 227 of the Constitution of India seeking to quash the Judgment and Order passed by the learned Sessions Judge, Jalgaon, confirming the order of the JMFC, Jalgaon in a case under Section 138 of the Negotiable Instruments Act. The petitioner, the original accused, alleged discrepancies in the handwriting on the cheque and sought examination by a Handwriting Expert. The applications filed by the petitioner were rejected by the courts, leading to the present writ petition. The High Court found no perversity or arbitrariness in the orders passed by the lower courts and dismissed the petition.
Issue 2: Examination by Handwriting Expert
The petitioner sought to send the cheque in question to a Handwriting Expert to verify the contents and signature. The courts noted that the petitioner's delay in requesting examination of the signature raised suspicions about the petitioner's claims. The learned Sessions Judge observed that failure to seek opinion on the signature, which was crucial to the case, was a significant omission. The courts emphasized the need to expedite the case, as filing multiple applications could be seen as a tactic to delay proceedings. Ultimately, the courts upheld the rejection of the applications and the dismissal of the petition.
Issue 3: Decision and Directions
The High Court dismissed the writ petition, finding it without merit. The court directed the JMFC, Jalgaon to proceed with the case expeditiously and independently, without being influenced by the observations made in the judgment. The ruling affirmed the lower courts' decisions and emphasized the importance of timely and relevant submissions in legal proceedings.
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2010 (7) TMI 1215
Issues involved:
The judgment involves the following Issues:
1. Challenge to the assessee's status as AOP instead of a firm and disallowance of salary and interest paid to partners.
2. Sustaining specific disallowances for different assessment years.
3. Charging of interest u/s 234B & 234C.
Issue 1: Challenge to assessee's status as AOP and disallowance of salary and interest:
The assessee firm was constituted with a partnership deed containing a clause allowing partners to apply for liquor licenses in their individual names, which would be considered as the firm's business. The AO disputed the firm's genuineness due to licenses being in partners' names. The CIT(A) upheld this decision, but the ITAT held that the firm complied with the amended law from 1-4-1994, where registration only required a certified copy of the partnership deed. The ITAT also cited the U.P. Excise Law policy supporting the formation of a partnership firm for liquor business. Therefore, the firm was eligible for registration u/s 184/185 and entitled to deductions u/s 40(b) for salary and interest paid to partners.
Issue 2: Specific disallowances for different assessment years:
The AO made ad hoc disallowances without proper justification for various expenses like shop, misc., traveling, telephone expenses, license fee, rent, vehicle running, and repairs. The CIT(A) partly confirmed these disallowances, citing excessive expenditure and self-made vouchers. However, the ITAT found that if the assessee's books were properly maintained and produced, ad hoc disallowances without valid reasons were not justified. Therefore, the ITAT deleted the ad hoc disallowances upheld by the CIT(A) for all the assessment years in question.
Issue 3: Charging of interest u/s 234B & 234C:
The charging of interest u/s 234B & 234C was deemed consequential in nature and did not require further discussion.
In conclusion, the ITAT allowed the assessee's appeals on the grounds of challenging the status as AOP, specific disallowances, and interest charges. The judgment emphasized compliance with the amended law for registration and the lack of justification for ad hoc disallowances, leading to a favorable decision for the assessee.
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2010 (7) TMI 1214
Issues involved: Disallowance of speed money amounting to Rs. 14,02,508.
Summary:
Issue 1: Disallowance of speed money
The assessee paid Rs. 1,40,25,087 as speed money to labourers at New Mangalore Port Trust (NMPT) through vouchers over and above regular payments. The Assessing Officer disallowed 20% of the payments amounting to Rs. 28,05,017, considering it not genuine. The ld. CIT(A) restricted the disallowance to 10% based on the decision in M/s. Konkan Marine Agency case. The Hon'ble ITAT allowed the appeal in favor of the assessee. The ld. AO agreed that such speed money payment is a trade practice for smooth functioning. The ld. CIT(A) upheld the decision, stating that speed money payments are not illegal and are incurred in the ordinary course of business.
Issue 2: Appeal by Revenue
The Revenue appealed against the order of the ld. CIT(A) regarding the disallowance of speed money. The ld. DR argued that the speed money payments were excessive and should be upheld. However, the Tribunal upheld the decision of the ld. CIT(A) based on the precedent set by the Hon'ble High Court of Karnataka, stating that such payments are for business consideration and not illegal.
In conclusion, the appeal filed by the Revenue was dismissed by the Tribunal, upholding the decision of the ld. CIT(A) to restrict the disallowance of speed money to 10% instead of 20%.
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2010 (7) TMI 1213
Issues Involved:
1. Disallowance of vehicle expenses and depreciation.
2. Addition u/s 69B of the Act.
Summary:
1. Disallowance of Vehicle Expenses and Depreciation:
The first issue in the assessee's appeal concerns the disallowance of Rs.9,58,836/- out of vehicle expenses and Rs.5,00,705/- out of depreciation of the vehicle, aggregating to Rs.14,59,541/-. The assessee, engaged in the diamond business, argued that high safety for movement of goods and personnel necessitated these expenses. The Assessing Officer (A.O.) disallowed 10% of the total vehicle expenses and depreciation, amounting to Rs.22,56,867/-. The learned CIT(A) confirmed the principle of disallowance but reduced the quantum to Rs.17,56,163/-. The Tribunal noted that the Fringe Benefit Tax (FBT) paid by the assessee did not justify the entire vehicle expenses as a fringe benefit to employees. Following the precedent set in the assessee's own case for the Assessment Year 2005-06, the Tribunal remanded the issue back to the A.O. for fresh adjudication. Accordingly, ground No.1 was allowed for statistical purposes.
2. Addition u/s 69B of the Act:
The next issue is the addition of Rs.80,49,540/- u/s 69B. The A.O. noted that the assessee purchased shares of Ocean Crown Diamond P. Ltd. at Rs.2500 per share, while the value as on 31st March 2006 was Rs.5407/- per share. The A.O. made an addition of Rs.5,08,69,593/- based on the difference in value. The learned CIT(A) reduced this addition to Rs.80,49,540/- after considering a valuation report that determined the value at Rs.2960/- per share. The Tribunal emphasized that for invoking section 69B, there must be conclusive evidence that the assessee paid more than recorded in the books. The Tribunal found no such evidence and noted that the shares were purchased from a related person at a negotiated price. The Tribunal concluded that the addition u/s 69B was not justified and deleted the addition sustained by the learned CIT(A), thereby allowing the assessee's appeal and dismissing the Revenue's appeal.
Conclusion:
In the result, the assessee's appeal was allowed, and the Revenue's appeal was dismissed. The order was pronounced on 30th July 2010.
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2010 (7) TMI 1212
Issues involved:
The issue involves the dismissal of a private complaint under Section 138 of the Negotiable Instruments Act by the learned Magistrate due to the absence of the complainant during the recording of the sworn statement.
Summary:
Issue 1: Dismissal of complaint without recording sworn statement
The revision petitioner filed a private complaint under Section 138 of the Negotiable Instruments Act. The complainant was absent during the recording of the sworn statement, leading to the dismissal of the complaint by the learned Magistrate. The petitioner contended that the complainant was ill on the scheduled dates and did not file any application before the Magistrate. The petitioner argued that the Magistrate should not dismiss the complaint without recording the sworn statement and could have sent a notice to the complainant before dismissal.
Judgment:
The Court noted that under Section 190(1)(a) of the Cr.P.C., the Magistrate must receive the complaint and then examine the complainant and witnesses under Section 200 for recording the sworn statement. The Magistrate may take cognizance of the offense or dismiss the complaint under Section 203 after considering the oath of the complainant and witnesses. While there is no specific provision for dismissing the complaint due to the absence of the complainant before recording the sworn statement, the Court held that the Magistrate can close the complaint if the complainant is absent on scheduled dates. This closure does not amount to acquittal of the accused. Considering the interests of justice and the complainant's illness, the Court set aside the order of dismissal and directed the complainant to appear before the Magistrate within four weeks.
Conclusion:
The High Court of Madras allowed the criminal revision petition, setting aside the dismissal of the complaint under Section 138 of the Negotiable Instruments Act due to the complainant's absence during the recording of the sworn statement. The Court emphasized the importance of giving the complainant a chance to present their case and directed the complainant to appear before the Magistrate within a specified period.
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2010 (7) TMI 1211
Issues Involved:
1. Whether the deduction admissible under Explanation (iv) to Section 115JB(2) towards profit exempt under Section 80HHC should be quantified with reference to the profits as per accounts duly adjusted under various clauses to the Explanation of Section 115JB or with reference to the normal computation under the chapter 'Profits and Gains of Business or Profession'.
Detailed Analysis:
The Question of Law:
The primary issue is whether the Income Tax Appellate Tribunal was justified in holding that the deduction admissible under Explanation (iv) to Section 115JB(2) towards profit exempt under Section 80HHC should be quantified with reference to the profits as per accounts duly adjusted under various clauses to the Explanation of Section 115JB and not with reference to the normal computation under the chapter 'Profits and Gains of Business or Profession'.
The Facts:
The assessee, engaged in the manufacture and processing of meat and meat products, filed its return of income for Assessment Year 2003-04 declaring a nil income after setting off unabsorbed depreciation of earlier years. The assessee computed its book profits for the purposes of Section 115JB at Rs. 55.41 lacs and deducted from the book profits the profits eligible for deduction under Section 80HHC of Rs. 2.14 Crores. The Assessing Officer, however, computed the eligible deduction under Section 80HHC at Rs. 90,46,441/- by adopting a figure of Rs. 4,00,75,199/- as the adjusted profit of business. The Commissioner (Appeals) and the Tribunal upheld the assessee's method of computation.
The Statutory Context:
Section 115JB provides that if the income tax payable on the total income as computed under the Act is less than a specified percentage of its book profits, such book profits shall be deemed to be the total income of the assessee. Explanation 1 to Section 115JB defines "book profit" and includes a reduction for the amount of profits eligible for deduction under Section 80HHC.
Submissions:
- Revenue's Argument: The deduction under Section 80HHC should be computed under sub-section (3) of Section 80HHC, and the computation must be made in accordance with the provisions of Section 80HHC.
- Assessee's Argument: The deduction should be based on the net profits as reflected in the Profit and Loss Account and not on the basis of the provisions of Section 80HHC.
Legislative History:
- Section 115J: Introduced to deal with zero tax but highly profitable companies, requiring every company to pay a minimum corporate tax on the profits declared in its accounts.
- Section 115JA: Introduced with effect from 1 April 1997, initially without a provision for reducing the profits eligible for deduction under Section 80HHC from the net profits.
- Section 115JB: Enacted with effect from 1 April 2001, providing a similar provision in clause (iv) of Explanation 1 for reducing the amount of profits eligible for deduction under Section 80HHC.
Interpretation of Section 115JB:
The legislative intent behind Section 115JB and its predecessors was to ensure that highly profitable companies pay a minimum tax. The reduction for profits eligible for deduction under Section 80HHC must be computed in accordance with sub-sections (3) or (3A) of Section 80HHC.
CBDT Circulars:
The circulars dated 4 May 1990 and 21 February 1994 were issued in the context of Section 115J and cannot control the meaning of clause (iv) of Explanation 1 to Section 115JB.
Judgments of Kerala and Madras High Courts:
- Kerala High Court: Held that the computation of net profits for the purpose of estimating export profits under Section 80HHC for allowing a deduction under Section 115J should not be made in the ordinary manner of computing income from business or profession.
- Madras High Court: Held that the Assessing Officer was not entitled to touch the profit and loss account prepared by the assessee and the book profits should be the basis for taxation.
The Ambit of Deeming Fiction:
Section 115JB creates a deeming fiction where the book profits shall be deemed to be the total income of the assessee if the income tax payable on the total income is less than a stipulated percentage of its book profits. The Assessing Officer is required to effect increases and reductions from the net profits as maintained in the profit and loss account in accordance with Explanation 1 to Section 115JB.
Conclusion:
The Tribunal was not justified in holding that the amount to be reduced under clause (iv) of Explanation 1 to Section 115JB in respect of the profits eligible for deduction under Section 80HHC should be computed with reference to the net profits in the profit and loss account and not according to the profits of the business computed under the head of profits and gains of business or profession. The question of law is answered in favor of the Revenue and against the assessee. The appeal is disposed of with no order as to costs.
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2010 (7) TMI 1210
Title: Supreme Court of India dismisses special leave petition
Summary: The Supreme Court of India, comprising the Chief Justice, Justice K.S. Radhakrishnan, and Justice Swatanter Kumar, dismissed a special leave petition after hearing the petitioner's counsel, Mr. B. Bhattacharya, ASG, Mr. Naresh Kaushik, Adv., Mr. Rohit Sharma, Adv., and Mr. B.V. Balaram Das.
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2010 (7) TMI 1209
Issues Involved:
1. Sole Evidence of Prosecutrix
2. Test Identification Parade
3. Discrepancies and Inconsistencies in Depositions of Witnesses
4. Injury on the Person of the Prosecutrix
5. Determination of Age
6. Evidence of Rustic/Illiterate Villager
Detailed Analysis:
Sole Evidence of Prosecutrix:
The court emphasized that the testimony of a prosecutrix in a sexual assault case holds significant weight and does not require corroboration unless there are compelling reasons. The court cited several precedents, including State of Maharashtra v. Chandraprakash Kewalchand Jain and State of U.P. v. Pappu @ Yunus, which affirmed that the evidence of a prosecutrix is sufficient for conviction if it is reliable and credible. The court concluded that the prosecutrix's consistent statements and the lack of evidence of consent supported the conviction.
Test Identification Parade:
The court noted that while a Test Identification Parade (TIP) can corroborate a witness's identification of the accused, it is not substantive evidence. The substantive evidence is the identification made in court. The court referenced State of H.P. v. Lekh Raj and Malkhan Singh v. State of M.P., emphasizing that TIP is primarily an investigative tool and not mandatory for conviction. The absence of TIP in this case did not discredit the prosecution's case.
Discrepancies and Inconsistencies in Depositions of Witnesses:
The court acknowledged minor discrepancies in the prosecutrix's statements but deemed them immaterial. It cited State of Rajasthan v. Om Prakash and State of U.P. v. M.K. Anthony, which held that minor contradictions that do not affect the core of the prosecution's case should not lead to the rejection of evidence. The court concluded that the discrepancies did not undermine the credibility of the prosecutrix's testimony.
Injury on the Person of the Prosecutrix:
The court held that the absence of physical injuries on the prosecutrix does not negate the occurrence of rape, especially if the prosecutrix is a minor. Citing Gurcharan Singh v. State of Haryana and Devinder Singh v. State of Himachal Pradesh, the court noted that the lack of injuries might indicate non-resistance due to fear or timidity. The medical examination corroborated the prosecutrix's account of non-consensual intercourse.
Determination of Age:
The court considered the medical evidence provided by Dr. Rupa Lalwani, who opined that the prosecutrix was between 12 and 14 years old based on physical examination. The court noted that the non-production of the Radiological Test report did not warrant an adverse inference against the prosecution, as the defense did not question the Investigating Officer on this matter. The court upheld the finding that the prosecutrix was a minor, making consent irrelevant under Section 114A of the Indian Evidence Act.
Evidence of Rustic/Illiterate Villager:
The court recognized that the prosecutrix's background as an illiterate, rustic villager might affect her ability to provide a precise account of the incident. Citing Dimple Gupta (minor) v. Rajiv Gupta, the court held that this background should not discredit her testimony. The court found her statements credible despite minor inconsistencies, given her socio-economic status and lack of education.
Conclusion:
The Supreme Court upheld the conviction of the appellant, finding no merit in the appeal. The court affirmed the lower courts' judgments, emphasizing the reliability of the prosecutrix's testimony, the irrelevance of minor discrepancies, and the adequacy of the medical evidence. The appeal was dismissed, and the appellant's conviction and sentence were maintained.
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2010 (7) TMI 1208
Issues Involved:
1. Quashing of criminal proceedings u/s 482 of the Criminal Procedure Code.
2. Legality of the seizure and confiscation of black Jaggery under the A.P. Excise Act, 1968.
3. Exercise of inherent powers by the High Court.
Summary:
1. Quashing of criminal proceedings u/s 482 of the Criminal Procedure Code:
The Supreme Court addressed the appeal by the State of Andhra Pradesh against the High Court's decision to quash criminal proceedings in Crime No. 288/2002-03. The High Court had allowed the petition filed u/s 482 of the Code by the respondents and quashed the proceedings initiated against them. The Supreme Court emphasized that the exercise of power u/s 482 of the Code is an exception and not the rule, and should be used sparingly and with caution. The Court reiterated that inherent powers are meant to prevent abuse of the process of the court and to secure the ends of justice, but should not be used to stifle legitimate prosecution.
2. Legality of the seizure and confiscation of black Jaggery under the A.P. Excise Act, 1968:
The case involved the seizure of 5,040 kgs of black Jaggery, which was found to be fit for fermentation producing alcohol unfit for consumption. The Deputy Commissioner of Prohibition and Excise, Karimnagar, confiscated the Jaggery, and this order was upheld by the Commissioner of Prohibition and Excise. The Supreme Court noted that the prosecution had ample evidence, including a laboratory analysis report, to prove that the Jaggery was intended for the manufacture of illicit liquor. The Court held that the High Court was not justified in quashing the proceedings when the material on record disclosed the commission of an offence under the A.P. Excise Act.
3. Exercise of inherent powers by the High Court:
The Supreme Court cited several precedents, including State of A.P. v. Golconda Linga Swamy and Anr. and R.P. Kapur v. State of Punjab, to explain the scope and limitations of the High Court's inherent powers u/s 482 of the Code. The Court emphasized that the High Court should not ordinarily embark upon an enquiry into the reliability of evidence or the sustainability of accusations, as these are matters for the trial court. The Court concluded that the High Court's interference at the threshold was not warranted in this case, as the complaint did disclose the commission of an offence.
Conclusion:
The Supreme Court set aside the High Court's judgment quashing the FIR in Crime No. 288/2002-03, stating that the interference by the High Court at the threshold was not justified. The Court clarified that it had not expressed any opinion on the merits of the case and that it was for the prosecution to establish its charge beyond reasonable doubt during the trial. The State's appeal was allowed.
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2010 (7) TMI 1207
Issues Involved:
1. Circumstantial Evidence and Chain of Events
2. Motive for the Crime
3. Credibility of Witnesses
4. Statement of the Accused under Section 313 Cr.P.C.
5. Medical Evidence and Cause of Death
Issue-Wise Detailed Analysis:
1. Circumstantial Evidence and Chain of Events:
The prosecution's case was based on circumstantial evidence as there were no eyewitnesses to the occurrence. The Supreme Court reiterated the settled principle that an accused can be convicted on circumstantial evidence if the prosecution proves a complete chain of events and circumstances beyond reasonable doubt, pointing towards the involvement and guilt of the accused. The Court cited the case of Sharad v. State of Maharashtra, which laid down five conditions for a case based on circumstantial evidence to be fully established. These include the necessity for circumstances to be fully established, consistent only with the hypothesis of guilt, of a conclusive nature, excluding every other hypothesis, and forming a complete chain of evidence.
2. Motive for the Crime:
The appellant contended that there was no motive for the crime, suggesting it was a case of suicide. However, the Court noted that the deceased had left her earlier husband and was living with the appellant, who faced social embarrassment due to their living arrangement. The villagers had protested against their cohabitation, providing a plausible motive for the appellant to commit the crime. The Court emphasized that while motive is not absolutely essential for securing a conviction, it can be a significant factor when established. The Court referenced Bhimapa Chandappa Hosamani v. State of Karnataka, highlighting that failure to prove motive is not fatal if the evidence is otherwise convincing.
3. Credibility of Witnesses:
The prosecution examined four witnesses, including the Investigating Officer and the doctor who conducted the postmortem. The Court found the testimonies of the prosecution witnesses credible and consistent. The most crucial witness, PW3 Dr. Bidhu Bhushan Singh, confirmed that the deceased had been throttled before being burnt. The appellant's failure to examine Bhola Babu, whom he claimed had helped him, further weakened his defense. The Court noted that the testimony of PW1, who saw the deceased in a burnt condition, was truthful and consistent with the prosecution's case.
4. Statement of the Accused under Section 313 Cr.P.C.:
The appellant's statement under Section 313 Cr.P.C. was scrutinized, where he admitted that the deceased was his wife and had died of burn injuries but claimed it was a suicide. The Court emphasized that the purpose of Section 313 is to provide the accused an opportunity to explain incriminating evidence. The appellant's denial of the murder and his claim of suicide were disbelieved by the Court, as his explanation was inconsistent with the medical evidence and other circumstances. The Court highlighted that the statement under Section 313 can be used to test the veracity of the accused's claims but cannot be the sole basis for conviction.
5. Medical Evidence and Cause of Death:
The medical evidence played a crucial role in establishing the cause of death. PW3 Dr. Bidhu Bhushan Singh's postmortem report indicated that the deceased had died due to asphyxia caused by throttling, followed by burn injuries. The Court noted that the medical evidence was consistent with the prosecution's case and excluded the possibility of suicide. The presence of injuries such as a protruding tongue, swollen larynx, and trachea, and a fractured skull further corroborated the prosecution's theory of murder followed by an attempt to burn the body to destroy evidence.
Conclusion:
The Supreme Court found no infirmity in the judgments of the Trial Court and the High Court, which had both convicted the appellant based on the established chain of circumstantial evidence, credible witness testimonies, and consistent medical evidence. The appeal was dismissed, upholding the conviction and sentence of the appellant for the offences under Sections 302 and 201 of the IPC.
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2010 (7) TMI 1206
Issues Involved:
1. Applicability of section 2(22)(e) of the Income Tax Act.
2. Addition towards share trading loans.
3. Disallowance on account of V-SAT charges, lease line, and transaction charges.
4. Addition on account of interest to SEBI.
Summary:
1. Applicability of section 2(22)(e) of the Income Tax Act:
The first common ground raised in these appeals pertains to section 2(22)(e) of the Act. The AO noticed that the assessee received loans from its sister concerns, YSPL and NFSPL, and treated these loans as deemed dividends u/s 2(22)(e). The CIT(A) confirmed the addition of Rs. 35,00,000/- from YSPL but deleted the addition of Rs. 14,00,000/- from NFSPL, stating that the latter was given in the ordinary course of business where lending money is a substantial part of the business. The ITAT, referencing the jurisdictional High Court's decision in Universal Medicare, held that section 2(22)(e) applies only to shareholders. Since the assessee company is not a shareholder of YSPL and NFSPL, the addition of Rs. 35,00,000/- was deleted.
2. Addition towards share trading loans:
The AO noticed that the assessee declared loans from trading (speculation in shares) amounting to Rs. 14,11,994/- but did not apportion expenses incurred for speculation activities. The AO estimated Rs. 1,00,000/- towards share trading activities, which was confirmed by the CIT(A). The ITAT upheld this addition, stating that expenses related to speculation transactions must be considered, and the assessee did not furnish any details to dispute the AO's estimate.
3. Disallowance on account of V-SAT charges, lease line, and transaction charges:
The AO made an addition of Rs. 2,92,328/- for payments made on account of V-SAT, lease line, and transaction charges, citing non-deduction of tax at source. The CIT(A) deleted the addition, observing that these charges are reimbursement for infrastructure and trading facilities provided by the stock exchange and do not fall under fees for technical services. The ITAT confirmed this decision, referencing the case of Kotak Securities Ltd. and CIT Vs. Bharati Cellular Ltd.
4. Addition on account of interest to SEBI:
The AO disallowed Rs. 30,984/- on the ground that it was a prior period payment. The CIT(A) deleted the addition, noting that the liability to pay interest to SEBI arose during FY 2004-05 under the SEBI Interest Liability Regularization Scheme, 2004. The CIT(A) relied on the Supreme Court decision in Mahalaxmi Mills Co. Vs. CIT, which held that interest payable on cess partakes the character of cess itself and is thus allowable on the basis of actual payment u/s 43B. The ITAT upheld this deletion.
Conclusion:
The appeal of the revenue is dismissed, and the appeal of the assessee is partly allowed.
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2010 (7) TMI 1205
Issues Involved:
1. Disproportionate assets and integrity doubts.
2. Denial of legal assistance during departmental enquiry.
3. Evaluation of evidence and factual findings.
4. Applicability of Government Servant Conduct Rules, 1985.
5. Procedural fairness and natural justice.
Issue-wise Detailed Analysis:
1. Disproportionate Assets and Integrity Doubts:
The appellant, Dinesh Chandra Pandey, was accused of possessing disproportionate assets compared to his known sources of income. Specifically, his bank account balance increased significantly from Rs. 2170.01 to Rs. 35036.92 between January 1984 and May 1985, which raised doubts about his integrity. The appellant's explanation that the deposits were from agricultural income was found unconvincing by the enquiry officer, leading to a conclusion that the deposits were likely from illicit gains.
2. Denial of Legal Assistance During Departmental Enquiry:
The appellant's request to engage a legal practitioner for assistance in the departmental enquiry was denied by the High Court. The relevant rule, Rule 14(8) of the 1966 Rules, allows a government servant to take assistance from another government servant but not a legal practitioner unless the presenting officer is a legal practitioner or the disciplinary authority permits it. The Supreme Court held that the term "may" in the rule is directory and not mandatory, meaning it is at the discretion of the disciplinary authority to permit legal assistance. The presenting officer was an Additional District Judge, not a legal practitioner, and thus the denial of legal assistance was deemed appropriate.
3. Evaluation of Evidence and Factual Findings:
The appellant contended that the enquiry officer and the courts failed to appreciate the evidence properly. However, the Supreme Court noted that the appellant did not provide sufficient evidence to substantiate his claim of agricultural income. He failed to produce witnesses or documents to support his defense. The Court emphasized that the appellant's conduct, such as not disclosing his true income in property returns and providing vague explanations, did not support his case. The findings of the enquiry officer, disciplinary authority, and the High Court were upheld as they were based on substantial evidence.
4. Applicability of Government Servant Conduct Rules, 1985:
The respondents argued that the appellant's actions amounted to misconduct under the Government Servant Conduct Rules, 1985. The rules mandate government servants to fully disclose all properties and income sources. The appellant's failure to provide a convincing explanation for the disproportionate assets and his vague property returns were seen as violations of these rules.
5. Procedural Fairness and Natural Justice:
The appellant claimed that the denial of legal assistance violated principles of natural justice. The Supreme Court, however, held that the denial did not cause any prejudice to the appellant. The appellant could have sought assistance from a fellow judicial officer but chose not to. The Court found that the enquiry was conducted fairly and in accordance with the rules. The appellant's claim that the enquiry was biased due to previous enmity with an advocate was not substantiated with evidence.
Conclusion:
The Supreme Court dismissed the appeal, finding no merit in the appellant's arguments. The Court upheld the findings of the enquiry officer and the disciplinary authority, concluding that the appellant failed to provide a satisfactory explanation for his disproportionate assets and that the denial of legal assistance was justified. The appeal was dismissed without any order as to costs.
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2010 (7) TMI 1204
Issues Involved:
1. Whether the cheque was issued in discharge of any debt or liability.
2. Applicability of Section 138 of the Negotiable Instruments Act to cheques issued as security deposits.
3. Validity of the process issued by the trial court under Section 138 of the Negotiable Instruments Act.
Summary:
1. Whether the cheque was issued in discharge of any debt or liability:
The Petitioner argued that the cheque was not issued in discharge of any debt or liability but as a security deposit, making Section 138 of the Negotiable Instruments Act inapplicable. The Respondent contended that the cheque was deposited in lieu of a refundable security deposit for the due performance of the contract, thus constituting "other liability."
2. Applicability of Section 138 of the Negotiable Instruments Act to cheques issued as security deposits:
Section 138 of the Negotiable Instruments Act stipulates that a cheque must be issued for the discharge of any debt or other liability. The court highlighted that if a cheque is issued only as security for the performance of a contract and not towards the discharge of any debt or liability, the offence under Section 138 is not made out. The court cited precedents such as *Travel Force v. Mohan N. Bhave* and *M.S. Narayana Menon alias Mani v. State of Kerala* to support this interpretation. The court concluded that the cheque in question was issued as a security deposit at the time of entering into the contract and not for the discharge of any existing debt or liability.
3. Validity of the process issued by the trial court under Section 138 of the Negotiable Instruments Act:
The court found that the cheque was issued as a security deposit and not towards the discharge of any debt or liability. The court noted that the cheque was undated when issued and a date was inserted long after disputes had arisen between the parties. The court emphasized that the cheque was not presented to the drawee bank within six months from the date it was actually drawn, as required by the proviso (a) to Section 138. The court concluded that the complaint did not make out a criminal case to issue the process under Section 138, and forcing the accused to undergo trial would be a misuse of the court's process.
Conclusion:
The petition was allowed, and the order passed by the learned Metropolitan Magistrate to issue process under Section 138 was quashed. The court ruled that no case to issue process under Section 138 was made out, and the rule was made absolute accordingly.
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2010 (7) TMI 1203
The Supreme Court of India dismissed a special leave petition (SLP) as not pressed for refund of balance amount, allowing petitioner to approach High Court. Another SLP was dismissed after condoning delay.
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2010 (7) TMI 1202
Issues involved:
1. Disallowance of liability for damaged goods.
2. Disallowance of depreciation on non-compete territory rights.
Issue 1: Disallowance of liability for damaged goods
The appeal was filed by the revenue against the order of the Learned Commissioner of Income Tax(Appeals)-XI, Ahmedabad dated 19-3-2008. The ground of appeal was related to the addition made on account of disallowance of liability for damaged goods amounting to Rs. 1,64,57,674/-. The Appellate Tribunal noted that the Learned Commissioner of Income Tax(Appeals) had deleted the disallowance following the orders of the Tribunal in the assessee's own case for Assessment Year 2005-06. The Tribunal found that the disallowance made by the Assessing Officer was not justified as the actual expenses were furnished by the assessee, and only a specific amount should have been disallowed. The Tribunal directed the Assessing Officer to re-examine the issue in light of the previous decisions and allowed the appeal for statistical purposes.
Issue 2: Disallowance of depreciation on non-compete territory rights
The assessee claimed depreciation of Rs. 64,59,961/- on non-compete territory rights at the rate of 25%. The Assessing Officer disallowed the claim as necessary details were not furnished by the assessee to verify the correctness of the claim. The assessment was re-opened under section 147 of the Income Tax Act, 1961. The assessee had filed a Special Leave Application before the Gujarat High Court challenging the notice under section 148 for the Assessment Year 2002-03. The High Court granted interim relief to the assessee. The Learned Commissioner of Income Tax (Appeals) observed that the matter was sub-judice with the High Court and directed the Assessing Officer to decide the issue in light of the final decision of the High Court. The Tribunal upheld the decision of the Commissioner as the issue was similar to previous years and no distinguishing features were pointed out by the Revenue. The appeal of the Revenue was treated as partly allowed for statistical purposes.
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2010 (7) TMI 1201
Issues Involved:
1. Disallowance of expenses claimed under the head 'liquidated damages'.
2. Claim of bad debts.
3. Disallowance of legal expenses.
4. Disallowance of claim under the head 'foreign exchange fluctuations'.
5. Deduction of MAT credit for the purpose of calculation of interest u/s 234B.
6. Reduction of amount allowed u/s 80IA by decreasing the net profit.
7. Disallowance of amount claimed as current repairs.
Summary:
1. Disallowance of Expenses Claimed Under the Head 'Liquidated Damages':
The first issue in the appeals filed by the revenue relates to the disallowance of expenses claimed under the head 'liquidated damages'. The assessee made a provision for liquidated damages, which the Assessing Officer disallowed, stating that the liability had not crystallized during the relevant years. However, the CIT(A) granted relief based on the decision of the ITAT Hyderabad Special Bench in the assessee's own case, which held that the claim for damages arose at the point of breach. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere.
2. Claim of Bad Debts:
The assessee's claim of bad debts was disallowed by the Assessing Officer due to a lack of evidence showing the debts had become irrecoverable. However, the CIT(A) allowed the claim, referencing the Supreme Court's decision in TRF Ltd Vs. CIT, which stated that it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. The Tribunal upheld the CIT(A)'s decision.
3. Disallowance of Legal Expenses:
The Assessing Officer disallowed legal expenses incurred in connection with the de-merger of KCP Ltd and the eviction of illegal occupation on certain land. The CIT(A) allowed the claim, stating that the expenses were revenue in nature and related to the recovery of amounts due from KCP Sugars & Industries Ltd. The Tribunal upheld the CIT(A)'s decision.
4. Disallowance of Claim Under the Head 'Foreign Exchange Fluctuations':
The assessee claimed losses due to foreign exchange fluctuations on loans given to its sister concern. The CIT(A) allowed the claim for certain years, while disallowing it for others. The Tribunal set aside the issue to the Assessing Officer for examination, directing correlation of the foreign exchange loss/gain to specific assets.
5. Deduction of MAT Credit for the Purpose of Calculation of Interest u/s 234B:
The issue relates to whether MAT credit should be deducted from the tax liability while calculating interest u/s 234B. The CIT(A) allowed the deduction, referencing decisions from various High Courts. The Tribunal upheld the CIT(A)'s decision.
6. Reduction of Amount Allowed u/s 80IA by Decreasing the Net Profit:
The Assessing Officer reduced the net profit by the commission paid to directors for calculating the deduction u/s 80IA. The CIT(A) confirmed this action, stating that the commission is part of business expenses. The Tribunal upheld the CIT(A)'s decision.
7. Disallowance of Amount Claimed as Current Repairs:
The assessee claimed expenses as current repairs, which the Assessing Officer disallowed, treating them as capital expenditure. The CIT(A) confirmed the disallowance. The Tribunal set aside the issue to the Assessing Officer, directing an opportunity for the assessee to explain its case.
Conclusion:
The appeals of the revenue for assessment years 2002-03, 2003-04, and 2006-07 are dismissed. The appeals of the revenue for assessment years 2001-02, 2004-05, and 2005-06, and the appeal of the assessee for the assessment year 2006-07 are treated as partly allowed. The appeal of the assessee for the assessment year 2005-06 is treated as allowed.
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2010 (7) TMI 1200
Issues involved: Appeal against acquittal u/s 138 of Negotiable Instruments Act based on lack of proper service of demand notice and failure to establish legally recoverable debt.
Summary:
Issue 1: Lack of proper service of demand notice
The trial court convicted the respondent-accused u/s 138 of Negotiable Instruments Act based on dishonored cheques and legally enforceable debt. However, the appellate judge acquitted the accused due to improper service of demand notice and lack of evidence establishing a legally recoverable debt. The appellate judge also doubted the authenticity of the cheques and the absence of account books proving the debt, following the precedent set by the Apex Court.
Issue 2: Legally recoverable debt and time-barred transaction
The Apex Court's decision emphasized the initial presumption in favor of the complainant in cases u/s 138. The Sessions Judge considered the cheques drawn in 1999 but presented in 2004 as a time-barred transaction, leading to the acquittal of the accused. The appellant cited a different Apex Court judgment regarding post-dated cheques, arguing that the period for presenting such cheques starts from the date written on them.
Issue 3: Presumption in favor of holder of the cheque
The judgment highlighted the presumption in favor of the holder of the cheque, even if written by a third party. The court rejected the respondent's claim of no legally recoverable debt, considering past cases where the respondent was directed to make payments to the complainant. The trial court's order was upheld, modifying the imprisonment to a fine amount to be paid by the respondent within three months to avoid imprisonment.
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2010 (7) TMI 1199
Issues involved: The judgment involves the issue of property tax exemption for a charitable hospital under Section 123(e) of the Coimbatore City Municipal Corporation Act and the relevance of documents submitted by the petitioner to support their claim.
Summary:
1. The petitioner, a Public Charitable Trust, sought a writ of certiorarified mandamus to challenge the respondent Corporation's proceedings demanding property tax exemption for their hospital buildings used for charitable purposes.
2. The petitioner established a hospital with aid of donations, claiming exemption under Section 123(e) of the Act. Despite submitting relevant documents, the respondent rejected the exemption request, leading to the writ petition.
3. The petitioner argued that the hospital qualifies as a charitable institution for exemption, supported by the Income Tax Act provisions. They contended that the respondent did not consider the submitted documents, warranting the order to be set aside.
4. The respondent contended that the hospital did not meet the charitable criteria and received substantial income, questioning the audit of financial statements. They argued that the rejection of exemption was justified due to lack of relevant documents.
5. The petitioner highlighted their charitable objectives and compared their case to other exempted trusts, emphasizing the importance of the Income Tax Act exemption as evidence of their charitable nature.
6. The Court analyzed Section 123(e) of the Act, emphasizing the need to establish the hospital's charitable status for property tax exemption, requiring a decision based on available facts.
7. The Court noted the importance of material submitted by the petitioner for exemption consideration, emphasizing the need for the respondent to conduct premises inspection for property tax exemption decisions.
8. The judgment emphasized the significance of Income Tax Act exemption in proving charitable activities and directed the respondent to reconsider the exemption issue, requiring the petitioner to provide necessary documents and allowing for premises inspection.
9. The writ petition was allowed, setting aside the impugned order and remanding the matter to the respondent for fresh consideration, with specific instructions for document submission, inspection, and decision-making process.
10. The petitioner was granted liberty to file a comprehensive representation within three weeks, and the respondent was directed to decide on the matter within six weeks, considering the legal precedent cited in the judgment.
11. The writ petition was allowed with no costs, and connected miscellaneous petitions were closed accordingly.
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2010 (7) TMI 1198
Issues Involved:
1. Invocation of urgency clause under Section 17(1) and dispensation of summary enquiry under Section 5A of the Land Acquisition Act, 1894.
2. Justification for dispensing with the enquiry under Section 5A.
3. Existence of structures and buildings on the land and the request for release of land from acquisition under Section 48.
4. Validity and legality of the acquisition notifications.
Detailed Analysis:
1. Invocation of Urgency Clause and Dispensation of Summary Enquiry:
The appellants contended that the invocation of the urgency clause under Section 17(1) and the dispensation of the summary enquiry under Section 5A for the public purpose of developing a residential colony were unjustified. They argued that the development of a residential colony does not necessitate such urgency and that there were no exceptional circumstances to justify the extraordinary power exercised by the State. The State and Gorakhpur Development Authority (GDA) justified the urgency clause, citing the need for housing for various income groups and the substantial progress made in the development of the land.
2. Justification for Dispensing with Enquiry under Section 5A:
The Court examined whether the impugned notifications invoking the urgency clause and dispensing with the enquiry under Section 5A were legal and valid. It was noted that the power of eminent domain allows the State to acquire private property for public use, but this power must be exercised with caution, especially when it involves bypassing the enquiry under Section 5A, which confers a valuable right on the landowner. The Court cited several precedents emphasizing that the urgency must be of such a nature that it justifies eliminating the summary enquiry under Section 5A. The Court found that in the present case, the State failed to justify the urgency that warranted the elimination of the enquiry under Section 5A, as there was a significant delay between the initial proposal and the issuance of the notifications.
3. Existence of Structures and Buildings:
The appellants argued that their land should be released from acquisition under Section 48 as they had constructed residential houses before the issuance of the notifications. The respondents countered that the structures were erected after the notification under Section 4(1). The Court noted that since the existence of structures on the land at the relevant time was disputed, it was not appropriate to issue a direction for the release of the land. However, the Court granted the appellants liberty to make a representation to the State authorities under Section 48(1) for the release of their land, which the State Government must consider in accordance with the law and State policy.
4. Validity and Legality of the Acquisition Notifications:
The Court concluded that the dispensation of the enquiry under Section 5A was not justified and thus, the impugned notifications suffered from legal infirmity. However, considering that a significant portion of the landowners had accepted compensation and substantial development work had already been completed, the Court decided not to invalidate the acquisition proceedings. The Court emphasized that the exceptional power under Section 17 should not be routinely invoked and must be justified with clear and urgent necessity.
Conclusion:
The appeals were dismissed, but the appellants were given the liberty to make representations under Section 48(1) for the release of their land. The State Government was directed to consider such representations in accordance with the law and State policy within three months of receipt. No costs were awarded.
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