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Showing 361 to 380 of 664 Records

• 2006 (11) TMI 364
  
  Issues Involved:
  
  1. Deduction u/s 80HHC after deducting unabsorbed depreciation.
  2. Reduction of loss from export of trading goods from the deduction claimed from the profit on export of manufactured goods.
  3. Inclusion of export incentives in the business profits for computing deduction u/s 80-IA.
  4. Levy of interest u/s 234B and 234C on tax payable u/s 115JA.
  
  Summary:
  
  Issue 1: Deduction u/s 80HHC after deducting unabsorbed depreciation
  
  The assessee contested the deduction u/s 80HHC after deducting unabsorbed depreciation of Rs. 52,41,254. The Tribunal dismissed this ground, citing the decisions of the Hon'ble Supreme Court in IPCA Laboratory Ltd. v. Dy. CIT [2004] 266 ITR 521 and the Hon'ble Bombay High Court in Synco Industries Ltd. v. Assessing Officer [2002] 254 ITR 6082, which were against the assessee.
  
  Issue 2: Reduction of loss from export of trading goods from the deduction claimed from the profit on export of manufactured goods
  
  The assessee did not press this ground during the hearing. Consequently, the Tribunal dismissed ground No. 2 as not pressed.
  
  Issue 3: Inclusion of export incentives in the business profits for computing deduction u/s 80-IA
  
  The assessee argued that export incentives should be considered as profits derived from the business of an industrial undertaking for computing deduction u/s 80-IA. The Tribunal referred to the decision in CIT v. Sterling Foods [1999] 237 ITR 5791, where it was held that profits from the sale of import entitlements are not profits derived from an industrial undertaking. Thus, the Tribunal concluded that export incentives cannot be treated as profits derived from the business of an industrial undertaking and dismissed ground No. 3.
  
  Issue 4: Levy of interest u/s 234B and 234C on tax payable u/s 115JA
  
  The additional ground raised by the assessee concerned the levy of interest u/s 234B and 234C on tax payable u/s 115JA. The Tribunal examined the provisions of section 115JA and the applicability of sections 234B and 234C. It concluded that the total income computed u/s 115JA is liable for advance tax and interest for defaults or deferment in payment of advance tax. The Tribunal upheld the Assessing Officer's action in charging interest under sections 234B and 234C, referencing the decision of the Hon'ble Karnataka High Court in Jindal Thermal Power Co. Ltd. v. Dy. CIT [2006] 286 ITR 182. The additional ground was dismissed.
  
  Conclusion:
  
  The appeal filed by the assessee was dismissed in its entirety.

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• 2006 (11) TMI 363
  
  Issues involved: Whether interest charged under sections 234B and 234C on taxes levied under section 115JA of the Income-tax Act is justified.
  
  Summary:
  1. The case concerns the justification of charging interest under sections 234B and 234C on taxes levied under section 115JA of the Income-tax Act.
  
  2. The ld. CIT(A) held that the Assessing Officer is not justified in charging interest under sections 234B and 234C on the book profits computed under section 115JA.
  
  3. The decision of the Hon'ble Supreme Court in CIT v. Kwality Biscuits Ltd. upheld that interest cannot be levied under sections 234B and 234C on book profit computed under section 115J due to the timing of computation and audit requirements.
  
  4. The ld. Departmental Representative argued that all provisions of the Income-tax Act, including sections 234B and 234C, are applicable to the assessee under section 115JA based on sub-section (4) of section 115JA.
  
  5. Section 115JA deems a specified percentage of book profit as total income and does not cover assessment procedures, making other Income-tax Act provisions applicable.
  
  6. Provisions related to advance tax and interest for defaults apply to assessees under section 115JA due to the absence of collection and recovery mechanisms in section 115JA.
  
  7. The total income computed under section 115JA is liable for advance tax and interest under sections 234B and 234C, as per the provisions of the Income-tax Act.
  
  8. The liability for advance tax and interest for defaults or deferment applies to assessees under section 115JA, similar to the provisions for section 115JB as per judicial precedents.
  
  9. The decision is supported by the judgment in Jindal Thermal Power Co. Ltd. v. Dy. CIT, which imposed liability for advance tax under section 115JB, similar to section 115JA.
  
  10. The provisions of section 115JA(4) and section 115JB(5) necessitate the payment of advance tax and interest under sections 234B and 234C for total income computed under these sections.
  
  11. The Assessing Officer's action in charging interest under sections 234B and 234C is confirmed, and the Department's appeal is allowed based on the above considerations.

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• 2006 (11) TMI 362
  

  Quantification of the disallowance - Expenditure incurred in relation to income not includible in total income - HELD THAT:- Section 14A clearly makes a distinction between exempt income and taxable income. It treats both of them as separate classes for computation of income after allocation of expenditure relating thereto and mandates that no deduction in respect of any expenditure shall be allowed against taxable income which is incurred in relation to exempt income. The underlying object is to compute both the exempt income and taxable income correctly, which is possible only after the expenditure incurred in relation thereto is allocated to them. In other words, section 14A bars the deduction of expenditure incurred in relation to exempt income out of taxable income, as this would have the effect of artificially inflating the exempt income and thereby deflating the taxable income.

  The procedure for computation of disallowance has now been provided in sub-sections (2) and (3) of section 14A of the Income-tax Act. It is no longer open to the Assessing Officer to apply his discretion in computing the disallowance or make ad hoc disallowance under section 14A. Substantive provisions are contained in sub-section (1) of section 14A prohibiting deduction in respect of expenditure incurred in relation to exempt income while procedural provisions regarding computation of the aforesaid disallowance are contained in sub-sections (2) and (3) thereof. Sub-sections (2) and (3) seek to achieve the underlying object of section 14A(1) that any expenditure incurred in relation to exempt income should not be allowed deduction. It is fairly well-settled by a catena of decisions that procedural provisions apply to all pending matters and that the rule against retrospectivity does not hit them.

  Thus, we hold that the provisions for quantification of disallowance as contained in sub-sections (2) and (3) of section 14A are procedural and therefore apply to all pending matters. It is no longer open to the Assessing Officer to make disallowance according to his own discretion or on ad hoc basis. He is statutorily required to compute the disallowance in the manner provided by sub-sections (2) and (3) of section 14A. We therefore set aside the orders passed by the CIT(A) and the Assessing Officer in this behalf and restore the matter to the Assessing Officer for a fresh examination and decision in the light of the provisions of section 14A including sub-sections (2) and (3) thereof, in accordance with law.

  Hence, the appeal filed by the Department is treated as allowed for statistical purposes.

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• 2006 (11) TMI 361
  
  Issues:
  1. Confirmation of levy of interest under section 234A and 234B by the Assessing Officer.
  2. Failure to appreciate the submission of the appellant regarding the applicability of certain judgments.
  3. Observations by CIT(A) regarding the tenability of the appeal under section 154.
  
  Issue 1:
  The appeal challenged the confirmation of interest under sections 234A and 234B by the Assessing Officer. The appellant argued that no interest was payable as the tax on returned income, together with interest under sections 234B and C, totaled to an amount higher than the tax paid. The appellant claimed entitlement to credit for self-assessment tax despite a delayed payment, asserting that no tax was due on the filing deadline.
  
  Issue 2:
  The appellant contended that the CIT(A) failed to appreciate the relevance of certain judgments, including the Delhi High Court's decision in Dr. Prannoy Roy v. CIT. The appellant argued that the case fell within the scope of section 154 due to erroneous tax charging on the returned income, citing precedents from the Supreme Court and the High Court.
  
  Issue 3:
  The CIT(A) deemed the appeal untenable, stating that relief could not be claimed under section 154 and the chargeability was uncertain. The appellant argued that since the returned income was fully accepted, there could be no quantum appeal. However, due to erroneous tax charging, the appellant believed the case fell within the purview of section 154 for rectification.
  
  The judgment analyzed the interpretation of "advance tax" under sections 234A and 234B of the Income-tax Act. It addressed the question of whether a payment made after the due date for advance tax could still be considered as advance tax. The Tribunal emphasized that once the advance tax was paid, regardless of the timing, it should be treated as such for interest calculation purposes. The decision highlighted the purpose of interest charges as compensation for delayed self-assessment tax payment, not as a penal measure for late submission. Citing the Delhi High Court's ruling in Dr. Prannoy Roy, the Tribunal directed the Assessing Officer to credit the amount paid as advance tax while calculating interest under section 234A.
  
  The appeal was allowed in favor of the appellant based on the interpretation of advance tax payments and the application of relevant legal precedents.

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• 2006 (11) TMI 360
  

  Grant relief for Deduction u/s 80RR - Income by way of performing his skills as an artist or as an actor - addition on receipt of Versa car from Maruti Udyog Ltd. - services for sale promotion of the company’s new product ‘Versa Car’ - HELD THAT:- The assessee in this case has not provided any particulars when exactly the car was delivered. Therefore, the Assessing Officer has relied on the insurance certificate to bring the value of the car at Rs. 6,34,734 as part of his professional income. In our view the Assessing Officer is perfectly justified in bringing the same to tax as his professional income in the year in question as the assessee has not acknowledged the receipt towards rendering the services as per the agreement which itself was entered into on 10-1-2005 with Maruti Udyog Ltd. Thus, the assessee has in all probability received the car during the year under consideration. In absence of contrary evidences brought on record by the assessee and the Department is justified in bringing the same as part of the professional income of the assessee in the year in question and we decline to interfere.

  In our opinion, the provisions of deductions are mainly beneficial provisions and have to be construed in a manner that achieves the intention of the Legislature as made out in the circular from time to time and also the legislative amendments that are made to the sections in order to widen the scope of the persons falling under the relevant section. In the case of Harsha Bhogle v. Assessing Officer [2002 (5) TMI 201 - ITAT BOMBAY-F] the Tribunal went into the objects and intention of section 80RR of the Act and it was observed that Harsha Bhogle, mainly performed on television and such activities were not making any contribution to the greater understanding of our country and its culture abroad although it was augmenting the foreign exchange resources of our country but that is not enough to claim tax deduction u/s 80RR of the Act, whereas if one were to look into the contents of the KBC programme, the programme itself is so designed wherein actor is required to make the programme very interesting and imaginative and has definitely contributed greater understanding of our country and its culture abroad.

  The programme of KBC was not only watched in India but all over the globe and mainly dealt with Indian history, its geography, rich cultural heritages, its mythological stories, its constitution and legal system and its rich resources. Even on this account, the activities of Shri Amitabh Bachchan are clearly distinguishable to that of a television presenter and T.V. commentator of Cricket matches as was held in the case of Harsha Bhogle.

  The assessee has produced before us some of the literatures on KBC programme which we have already reproduced elsewhere in our order. We are, therefore, of the opinion that the assessee is an artist while he received the disputed income within the meaning of section 80RR of the Act. We, therefore, direct the Assessing Officer to grant relief of deduction u/s 80RR of the Act.

  In the result, the appeal filed by the assessee is partly allowed while the appeal filed by the revenue is dismissed.

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• 2006 (11) TMI 359
  
  Issues Involved:
  1. Jurisdiction of the Assessing Officer to reopen the assessment.
  2. Inclusion of Rs. 10,00,000 as income in the reassessment.
  
  Detailed Analysis:
  
  1. Jurisdiction of the Assessing Officer to Reopen the Assessment:
  
  The assessee challenged the jurisdiction of the Assessing Officer to reopen the assessment. The CIT(A) upheld the jurisdiction of the Assessing Officer to reopen the assessment. However, the assessee did not press this issue during the hearing before the Tribunal, leading to the rejection of the cross-objection.
  
  2. Inclusion of Rs. 10,00,000 as Income in the Reassessment:
  
  Assessing Officer's Findings:
  The Assessing Officer based the reassessment on diaries seized from S.K. Jain, which indicated that the assessee had received Rs. 10,00,000. The assessee, in a statement under section 131, did not deny the receipt but claimed the money was handled by his election agent, Kamal Singh, and was used for election expenses. The Assessing Officer concluded that the money was received personally by the assessee and brought it to tax as income.
  
  CIT(A)'s Decision:
  The CIT(A) deleted the addition of Rs. 10,00,000 on several grounds:
  - No direct mention of Rs. 10 lakhs in the diary or S.K. Jain's statement.
  - The money was used for election expenses, not for personal gain.
  - The Assessing Officer selectively relied on parts of the assessee's statement.
  - The burden of proving the receipt as income was on the Assessing Officer, which was not met.
  - The receipt lacked the characteristics of income, as there was no quid pro quo or personal benefit derived by the assessee.
  
  Department's Appeal:
  The Department contended that:
  - The diary entry and the assessee's statements reasonably inferred the receipt of Rs. 10 lakhs.
  - The CIT(A) erred in criticizing the reliance on the assessee's statement.
  - The receipt should be taxable under section 56 as "income from other sources."
  - The use of money for election expenses does not negate it being the assessee's income.
  
  Assessee's Defense:
  The assessee argued that:
  - The receipt was not necessarily income and lacked the common ingredients of income.
  - At the relevant time, the assessee was a political worker with no public office, and there was no quid pro quo.
  - The money was not used for personal gain or to acquire assets.
  - Politics is a service to the community, not a profession or business.
  - The burden to prove the receipt as income was on the Assessing Officer, which was not met.
  - Section 56(2)(v) regarding gifts from non-relatives applied only from 1-4-2005, and thus, the receipt could not be taxed under this provision for the year in question.
  
  Tribunal's Decision:
  The Tribunal upheld the CIT(A)'s decision, concluding that:
  - The money was received by Kamal Singh for election expenses, not personally by the assessee.
  - The burden to prove the receipt as income was on the Department, which was not met.
  - The receipt did not constitute income as it did not result in personal gain or advantage for the assessee.
  - A mere saving in expenditure does not constitute income.
  
  Conclusion:
  The Tribunal dismissed both the Department's appeal and the assessee's cross-objection, upholding the CIT(A)'s decision to delete the addition of Rs. 10,00,000 from the assessment.

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• 2006 (11) TMI 358
  
  Issues Involved:
  1. Charging of interest u/s 234B and 234C in respect of income computed u/s 115JA of the Income-tax Act.
  
  Summary:
  
  Issue 1: Charging of Interest u/s 234B and 234C in respect of income computed u/s 115JA

  The assessee contested the charging of interest u/s 234B and 234C on income computed u/s 115JA. The Assessing Officer (A.O.) levied interest, citing the Gauhati High Court's decision in Assam Bengal Carriers Ltd. v. CIT, which held that interest under these sections is applicable even when provisions of section 115J are invoked. The CIT(A) upheld the A.O.'s decision.

  The assessee argued that sections 115J and 115JA are substantively the same, and the Supreme Court's decision in CIT v. Kwality Biscuits Ltd., which held that interest under sections 234B and 234C is not chargeable on income computed u/s 115J, should apply to section 115JA as well. The assessee also referenced the Kerala High Court's decision in CIT v. Appollo Tyres Ltd., which supported this view.

  The Tribunal examined the provisions of sections 234B and 234C, which pertain to the payment of advance tax and the consequences of failing to do so. It noted that section 115JA, like section 115J, involves computing book profits after the close of the financial year, making it impractical for the assessee to estimate advance tax liability accurately during the year.

  The Tribunal referred to the Karnataka High Court's decision in Kwality Biscuits Ltd. v. CIT, which held that interest under sections 234B and 234C could not be charged on income computed u/s 115J, as the liability could only be determined after the financial year ended. This decision was affirmed by the Supreme Court.

  The Tribunal acknowledged the contrary view of the Punjab & Haryana High Court in CIT v. Upper India Steel Mfg. & Engg. Co. Ltd., which held that advance tax provisions apply to income computed u/s 115JA. However, it emphasized that the Supreme Court's affirmation of the Karnataka High Court's decision in Kwality Biscuits Ltd. takes precedence.

  The Tribunal concluded that the rationale for non-charging of interest under sections 234B and 234C, as laid down by the Karnataka High Court and affirmed by the Supreme Court, applies equally to section 115JA. It held that the assessee cannot be penalized for failing to pay advance tax on income computed u/s 115JA, as the liability can only be ascertained after the financial year ends.

  In light of the principle established by the Supreme Court in CIT v. Vegetable Products Ltd., which favors the interpretation beneficial to the assessee when two reasonable constructions of a taxing provision are possible, the Tribunal decided in favor of the assessee. It reversed the lower authority's order and held that no interest u/s 234B and 234C is chargeable on income computed u/s 115JA.

  Conclusion: The appeal of the assessee is allowed.

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• 2006 (11) TMI 357
  

  Computation of Long term capital gain - reference to DVO u/s 55A - agricultural land - estimation of the fair market value - assessee is an "individual" in status - HELD THAT:- Nothing has been said by the DVO in respect of this sale instance except merely saying that it is not substantiated by any evidence nor submitted for examination before him. He has also stated that the sale instance has been highly valued and cannot be compared with assessee’s land. We are unable to agree with the DVO. The entire land of about 1,75,000 sq. yds. fell to the share of late Shriman Bawa Maharaj Singhji and on his death on 24-8-1982, his children succeeded to the land. There was also a family settlement on 15-1-1992 under which land admeasuring 19,133 sq. yds. in Plot Nos. 1199, 1120, 1201 etc., Plot No.1169 measuring 1,384 sq. yds. in all and a 44 per cent share in 1,365 sq. yds. of land fell to the share of the assessee and Bawa Abhai Singh, each having 50 per cent share. If a part of the entire holdings of late Shriman Bawa Maharaj Singhji, when sold on 24-3-1981, could fetch a price of Rs. 828 per sq. yd., we do not see why this sale instance cannot form the basis of the estimate of the fair market value of the assessee’s land as on 1-4-1981. We are afraid that the DVO has not attached due importance and weight to this sale instance and has brushed it aside unreasonably.

  In our view, there is no justification for adopting the fair market value of the land as on 1-4-1981 at Rs. 19,96,000 being 50 per cent of the estimated value of Rs. 39.92 lakhs as per the DVO. Taking into consideration all the circumstances and the factors stated elaborately in the two valuation reports filed by the assessee and having regard to the huge potential of the land for being converted into residential use and being fully aware of the fact that as on 1-4-1981, the land has not been officially converted into non-agricultural use, we are of the view that a reasonable estimate of the fair market value would be that estimated by the registered valuer at Rs. 1,42,53,000 on the basis of the sale instance dated 24-3-1981 of a part of the lands originally owned by late Shriman Bawa Maharaj Singhji.

  No strong grounds have been made out by the income-tax authorities or the DVO as to why this figure cannot be adopted as a fair estimate of the value. The assessee’s valuation being supported by the aforesaid report, we hold that the same requires to be accepted and the computation of the capital gains may be made on that basis.

  In the result, the assessee’s appeal is partly allowed with no order as to costs.

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• 2006 (11) TMI 356
  
  Issues Involved:
  1. Taxability of enhanced compensation and interest received against security.
  2. Deduction under sections 54B and 54F of the Income-tax Act, 1961.
  3. Distinction between conditionally and unconditionally received compensation and interest.
  
  Issue-wise Detailed Analysis:
  
  1. Taxability of Enhanced Compensation and Interest Received Against Security:
  
  The primary issue revolves around whether the enhanced compensation and the interest received against security are liable to tax in the year of receipt. The revenue argued that, based on the Delhi Special Bench decision in Dy. CIT v. Padam Prakash (HUF) [2006] 10 SOT 1, enhanced compensation should be taxed on a receipt basis regardless of whether it is received conditionally or unconditionally. The interest on such compensation should be assessed on an accrual basis from year to year unless it is finally determined.
  
  The assessee countered by citing the Madras High Court decision in CWT v. T. Girijammal [2006] 284 ITR 482, which held that additional compensation and interest are not taxable until they attain finality from higher court decisions. The Tribunal must consider the hierarchy of judicial decisions, prioritizing the Supreme Court and High Court rulings over Tribunal decisions.
  
  The Tribunal confirmed that the Special Bench decision in Padam Prakash (HUF) is binding and that enhanced compensation is taxable in the year of receipt. Interest on enhanced compensation is taxable when the compensation issue attains finality, in line with the Supreme Court decision in CIT v. Hindustan Housing & Land Development Trust Ltd. [1986] 161 ITR 524. Consequently, the revenue's appeal on enhanced compensation was allowed, and the appeal on interest was dismissed.
  
  2. Deduction Under Sections 54B and 54F of the Income-tax Act, 1961:
  
  The revenue's third ground concerned the CIT(A)'s allowance of deductions under sections 54B and 54F based on the actual receipt of enhanced compensation. The Tribunal noted that the revenue did not make submissions on this ground. Given the decision on the taxability of enhanced compensation, the Tribunal held that deductions under sections 54B and 54F are consequential and disposed of this ground accordingly.
  
  3. Distinction Between Conditionally and Unconditionally Received Compensation and Interest:
  
  The assessee's cross-objection emphasized that the distinction between conditionally and unconditionally received compensation and interest is immaterial as long as the dispute regarding the amount exists. The Tribunal, following its findings on the revenue's appeal, dismissed the cross-objection, noting that the grounds had become infructuous.
  
  Conclusion:
  
  The Tribunal concluded that enhanced compensation is taxable in the year of receipt, and interest on such compensation is taxable when the compensation issue attains finality. Deductions under sections 54B and 54F are consequential to this decision. The distinction between conditionally and unconditionally received amounts was deemed immaterial in light of the binding Special Bench decision. The revenue's appeal was partly allowed, and the assessee's cross-objection was dismissed.

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• 2006 (11) TMI 355
  

  Apology - Held that:- Appeal allowed. As the affidavit of apology appears to be honest and genuine. The High Court ought to have accepted the apology tendered by the appellant instead of directing the Revenue Secretary of the Central Government and the C.B.E.C, New Delhi to take appropriate action as they - hus set aside the observations made by the High Court and allow the appeal to the said extent.

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• 2006 (11) TMI 354
  

  Appeal filed - Commissioner of Customs (Appeals) - Appeal was barred by limitation - no reason why the Revision Authority should have entered upon the merits of the case when the Order impugned before it could be sustained on other grounds of limitation.

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• 2006 (11) TMI 353
  

  Whether the appellant was liable to implement the order of the appellant-Board dated 19-4-1994? - Direction was further given to issue consequential orders on the basis of decision taken on 12-4-1994 and 30-4-1994 to make necessary payments as expeditiously as possible

  Held that:- Appeal dismissed. The High Court’s view that the decision taken on 30-4-1994 has to be given effect to cannot be faulted. As rightly submitted by learned counsel for the respondents non-confirmation of minutes does not have any effect on the decision taken at the earlier meeting.

  Pursuant to the orders passed by this Court, Rs. 500 lakhs have been paid to the respondents and Rs. 300 lakhs have been deposited pursuant to the order dated 2-5-2006. The amount has been deposited with the Registry of this Court to be invested in fixed deposit. Let this amount be released to the respondents with interest accrued thereon. The respondents shall be entitled to interest at the rate of 7.5 per cent from the date of Division Bench’s judgment, i.e., 15-12-1998 after adjustment of the amounts paid and the interest elements so far as relatable to the payment. The balance amount shall be paid within a period of three months from today.

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• 2006 (11) TMI 352
  
  Issues Involved:
  1. Winding up petitions under sections 433(e), (f), and 434 read with section 439 of the Companies Act, 1956.
  2. Counter-claims raised by the respondent companies.
  3. Examination of the principles of law regarding winding up petitions and counter-claims.
  
  Detailed Analysis:
  
  1. Winding up petitions under sections 433(e), (f), and 434 read with section 439 of the Companies Act, 1956:
  
  The petitioner filed two Company Petitions for winding up of the respondent companies, R. K. Imports and German Homoeopathic Distributors, due to non-payment of dues for supplied homeopathic medicines amounting to euros 34,804.78 and euros 1,428,483.64 respectively. The respondent companies did not dispute the placement of orders, supplies, invoices, and the amount due but raised counter-claims against the petitioner.
  
  2. Counter-claims raised by the respondent companies:
  
  A. Counter-claim towards payment of commission of euros 219,243.45:
  
  The respondent companies claimed commission based on an agreement dated June 24, 1998, which they argued was extended by tacit understanding. The court found this counter-claim to be genuine and substantial, supported by prima facie evidence.
  
  B. Repurchase of stock:
  
  The respondent companies claimed euros 350,017 for repurchase of stock under clause 9 of the agreement. The court rejected this claim due to lack of prima facie evidence and failure to specify the three-months requirement as per the agreement.
  
  C. Counter-claim on account of expenses incurred on labelling:
  
  The respondent companies claimed euros 260,000 for labelling expenses. The court found the claim for the year 2001 at euros 75,000 to be genuine but rejected the balance amount as not bona fide.
  
  D. Counter-claim of euros 932,500 towards compensation due to WHO red alert on eye drops:
  
  The court found the claims inflated and excessive with no supporting documents. However, it allowed a set-off of euros 182,500, including euros 100,000 for getting CMS done.
  
  E. Reimbursement for supplies made in 2003-04:
  
  The respondent companies claimed euros 975,000 for supplies misdescribed as made in Germany but manufactured in Czechoslovakia. The court rejected this claim as belated and without substantial evidence.
  
  F. Damages/compensation for breach of contract:
  
  The respondent companies claimed euros 1,850,000 for various breaches, including illegal termination and bad faith. The court found these claims exorbitant and without substantial basis, rejecting them as not bona fide.
  
  G. Other counter-claims:
  
  The court rejected claims for a debit note of euros 30,463.01 and frozen commission of euros 52,815.37 due to lack of details and supporting documents.
  
  3. Examination of the principles of law regarding winding up petitions and counter-claims:
  
  The court referred to well-settled principles from Supreme Court judgments, including Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd., which state that a winding-up petition will not be allowed if the debt is bona fide disputed and the defence is substantial. The court emphasized that counter-claims must be genuine, substantial, and supported by prima facie proof.
  
  Conclusion:
  
  The court concluded that the counter-claims amounting to euros 476,243.45 were genuine and substantial. The debt due by R. K. Imports was less than the counter-claims, leading to the dismissal of the winding-up petition against them. However, the debt due by German Homoeopathic Distributors exceeded the counter-claims, leading to the admission of the winding-up petition against them, with a deferment for publication of citations and appointment of a provisional liquidator for two months to allow payment of the outstanding amount.

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• 2006 (11) TMI 351
  
  Issues:
  1. Recall application filed due to lack of knowledge about winding up order.
  2. Company's financial status and history of debts.
  3. Rejection of reference to BIFR and AAIFR.
  4. Indebtedness to IFCI and pending claims.
  5. Non-payment of liabilities by the company.
  6. Failure to provide statement of affairs and possession of assets to Official Liquidator.
  7. Allegations of misleading the court and BIFR for avoiding liquidation.
  
  Analysis:
  
  1. The judgment revolves around a recall application filed by a company (in liquidation) due to lack of knowledge about the winding-up order. The company claimed that it was not served with summons or notices, and highlighted its efforts towards rehabilitation and ongoing manufacturing activities.
  
  2. The financial status of the company was discussed, including its debts to various banks and financial institutions. The history of accumulated losses, reference to BIFR, and rejection of the appeal by AAIFR were crucial factors in assessing the company's financial health.
  
  3. The rejection of references to BIFR and AAIFR, along with the timeline of events leading to the winding-up order, demonstrated the legal complexities and challenges faced by the company in seeking rehabilitation.
  
  4. The company's indebtedness to IFCI, pending claims decreed by DRT, Chandigarh, and the lack of payment towards liabilities were significant points considered in the judgment.
  
  5. The court noted the company's failure to pay its liabilities, the non-filing of statement of affairs, and the absence of cooperation in the winding-up proceedings, indicating a lack of transparency and compliance with legal obligations.
  
  6. Allegations of misleading the court and BIFR, failure to provide statements of affairs, and concerns regarding asset possession were raised against the ex-directors, emphasizing the need for accountability and adherence to legal procedures.
  
  7. The judgment concluded that the ex-directors' efforts were not bona fide, and they were accused of misleading the court and BIFR to avoid liquidation. The recall application was rejected, costs were imposed, and strict directives were issued regarding the submission of statements of affairs and assets to the Official Liquidator.

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• 2006 (11) TMI 350
  
  Issues Involved:
  1. Winding-up order and appointment of Official Liquidator.
  2. Filing of Statement of Affairs under Section 454 of the Companies Act, 1956.
  3. Non-compliance and penalties under Section 454(5) of the Companies Act, 1956.
  4. Resignation of Directors and their liability to file the Statement of Affairs.
  5. Exemption of certain directors from liability.
  
  Issue-wise Detailed Analysis:
  
  1. Winding-up Order and Appointment of Official Liquidator:
  The company, Modi Carpets Limited, was ordered to be wound up by the High Court of Allahabad on 21-12-1993, based on the recommendation of the Board for Industrial and Financial Reconstruction (BIFR). The Official Liquidator attached to the Court was appointed as the Liquidator of the company.
  
  2. Filing of Statement of Affairs under Section 454 of the Companies Act, 1956:
  The Official Liquidator filed Company Application No. 4 of 1998 under Section 454 of the Companies Act, 1956, to compel the ex-directors of the company to file the 'Statement of Affairs' within 21 days from the date of the winding-up order, as required by law. Notices were issued to the ex-directors, but the Statement of Affairs was not filed, leading to the application for penal proceedings.
  
  3. Non-compliance and Penalties under Section 454(5) of the Companies Act, 1956:
  The Court issued notices to the ex-directors to show cause why penal proceedings should not be initiated against them for non-compliance with Section 454(5). Despite repeated notices and opportunities, the Statement of Affairs was not filed timely, and the Court considered the implications of this non-compliance.
  
  4. Resignation of Directors and Their Liability to File the Statement of Affairs:
  One of the ex-directors, B.K. Modi, claimed to have resigned on 7-2-1992, prior to the winding-up order. He argued that he should not be held liable for filing the Statement of Affairs. The Court examined the resignation letter and Form 32 filed with the Registrar of Companies, which indicated that the Board of Directors had requested B.K. Modi to continue as a director. The Court concluded that even if B.K. Modi had resigned, he could still be required to submit the Statement of Affairs as an 'officer' of the company under Section 454(2)(a) read with Section 2(30) of the Companies Act, 1956.
  
  5. Exemption of Certain Directors from Liability:
  The Court exempted Shailendra Swaroop, an alternate director, from liability as he ceased to be a director on 26-5-1992, before the winding-up order. However, the Court did not exempt B.K. Modi, despite his resignation claim, as the Statement of Affairs was eventually filed by Sapan Kumar Bandhopadhyaya, Manager (Accounts). The Court considered whether B.K. Modi's failure to file the Statement of Affairs was 'without reasonable excuse' and concluded that given the circumstances, his failure was not without reasonable excuse, and he was discharged from liability.
  
  Conclusion and Orders:
  The Court discharged B.K. Modi from his liability to file and verify the Statement of Affairs under Section 454 of the Companies Act, 1956, considering the facts and circumstances, including his resignation and the eventual filing of the Statement of Affairs by another officer. The applications by B.K. Modi were disposed of accordingly, and the Court refrained from expressing any opinion on the liability of S.K. Modi as it was not part of the present order.

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• 2006 (11) TMI 349
  

  Whether the banks or financial institutions having elected to seek their remedy in terms of DRT Act, 1993 can still invoke the NPA Act, 2002 for realizing the secured assets without withdrawing or abandoning the O.A. filed before the DRT under the DRT Act?

  Whether recourse to take possession of the secured assets of the borrower in terms of section 13(4) of the NPA Act comprehends the power to take actual possession of the immovable property?

  Whether ad valorem court fee prescribed under Rule 7 of the DRT (Procedure) Rules, 1993 is payable on an application under section 17(1) of the NPA Act in the absence of any rule framed under the said Act?

  Held that:- Answer the above three questions in the affirmative that is in favour of the banks/FIs (secured creditors) and, accordingly, the borrower’s appeal/I.A. in this Court stands dismissed whereas the appeal/I.A. filed by the banks/FIs stands allowed with no order as to costs.

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• 2006 (11) TMI 348
  
  Issues Involved:
  1. Jurisdictional conflict between the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, and the Companies Act, 1956.
  2. Validity of the impugned order passed by the District Magistrate, Champawat.
  3. Rights of the petitioner over the property purchased through auction proceedings.
  
  Issue 1: Jurisdictional Conflict
  
  The petitioner sought a writ to quash an order by the District Magistrate, Champawat, which restrained him from alienating the property he purchased through auction proceedings. The conflict arose as the Official Liquidator, acting under the Companies Act, requested possession of the property. The petitioner argued that the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, overrides the Companies Act. The court analyzed the provisions of both acts and referred to the Allahabad Bank case, emphasizing the overriding effect of the Recovery Act. The court held that the District Magistrate's action, based on the Companies Act order, was not valid, and the petitioner's property rights should be upheld.
  
  Issue 2: Validity of the Impugned Order
  
  The District Magistrate's order was challenged on the grounds that it was passed without notice or hearing to the petitioner. The respondents, including the Official Liquidator, defended the order as necessary to protect the property. However, the court found that the Recovery Act's provisions, having overriding effect, should prevail. The court quashed the impugned order, emphasizing that the District Magistrate should not interfere with the petitioner's property rights except as per the law.
  
  Issue 3: Rights of the Petitioner
  
  The petitioner participated in an auction and acquired property, which the Official Liquidator later sought to take possession of. The court noted that the petitioner was in physical possession of the property and had acquired it through a valid auction process. The court upheld the petitioner's rights over the property, directing that the respondents should not interfere with his property rights except as per the law. The court's decision favored the petitioner, affirming his ownership rights over the purchased property.
  
  In conclusion, the High Court of Uttarakhand ruled in favor of the petitioner, highlighting the overriding effect of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, over the Companies Act, 1956. The impugned order by the District Magistrate was quashed, and the petitioner's property rights were upheld, emphasizing that any interference should be in accordance with the law.

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• 2006 (11) TMI 347
  
  Issues: Recovery of loan amount with interest, dispute over signature authenticity, liability of surety, evidence presented, costs, decree against respondents.
  
  Recovery of Loan Amount with Interest:
  The official liquidator filed a claim application seeking the recovery of a loan amount with interest from a company in liquidation. The loan was given to respondent No. 1 with respondent No. 2 acting as a surety. While respondent No. 1 did not contest the claim, respondent No. 2 disputed signing any of the loan documents. The claim application detailed the loan agreement, promissory note, and other relevant documents to establish the claim amount and interest due.
  
  Dispute Over Signature Authenticity:
  Respondent No. 2 contested the claim by denying the authenticity of the signatures on the loan documents. He presented various personal documents to show that his signatures on the disputed documents did not match his usual signature. The official liquidator failed to provide concrete evidence proving that respondent No. 2 had indeed signed the loan documents, shifting the burden of proof onto the applicant.
  
  Liability of Surety and Evidence Presented:
  The court analyzed the evidence presented by both parties regarding the authenticity of signatures and the surety's liability. Despite discrepancies in signatures and lack of conclusive evidence from the official liquidator, the court found that the burden of proof rested with the applicant to establish that respondent No. 2 had executed the surety documents. As respondent No. 2 substantially substantiated his denial of signing the documents, the claim against him was dismissed.
  
  Costs and Decree Against Respondents:
  The court ruled in favor of the official liquidator against respondent No. 1, directing the payment of the loan amount with interest and costs. However, the claim against respondent No. 2 was rejected. The court declined to award costs in favor of respondent No. 2, considering the circumstances. The decree was granted against respondent No. 1, with liberty given to the official liquidator to include the decreed claim in misfeasance proceedings.
  
  In conclusion, the court decreed the claim against respondent No. 1 for the loan amount with interest and costs, while dismissing the claim against respondent No. 2 due to insufficient evidence proving his liability as a surety. The judgment highlighted the importance of providing concrete evidence to establish claims and the burden of proof in cases involving disputed signatures and surety obligations.

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• 2006 (11) TMI 346
  

  Maintainability of Compliant - Dishonour of cheque - appointment of Official Liquidator/Liquidator - whether a complaint u/s 138 of the Negotiable Instruments Act can be filed against the company and/or its Managing Director/Director after the winding up of the said company? - HELD THAT:- In the instant case itself, account was closed by the Official Liquidator and that was the reason for dishonour of cheque. It is also to be borne in mind that after the winding up orders and the taking over of the affairs of the company by the Official Liquidator since erstwhile Directors cease to be the Directors as on the date of presentation of the cheque, they are not incharge of day-to-day affairs of the company. Offence is committed u/s 138 of the Act only on the dishonour of the cheque and issuance of notice for demand to pay the amount. As on that date, no such notice could be issued to the company which was in liquidation and the creditors are now to be paid as per the scheme of the Companies Act. Therefore, liability on them also cannot be fastened u/s 141 of the Negotiable Instruments Act.

  Here is a complaint u/s 138 of the Negotiable Instruments Act filed before an ordinary Criminal Court/Magistrate. Therefore, the governing section would be section 138 of the Negotiable Instruments Act which deals with "offence" and not "transaction". It is held in number of cases that the cause of action for filing of the complaint arise only after the notice of dishonour of the cheque is given and payment is not made within 15 days of the receipt of the said notice. Therefore, date on which cheques were handed over would have no bearing and it is only when the cheque is presented for payment and is dishonoured and even after notice of dishonour is given and payment is not made by the drawer of the cheque within 15 days of the receipt of this notice, cause of action for filing of complaint would arise. In the instant case when the cheque was presented and the notice of dishonour was given the company had already been wound up.

  Hence, complaint u/s 138 of the Negotiable Instruments Act cannot be filed as on the date of presentation of the cheque the company was in liquidation and cannot be stated to have committed any offence. Even second and third accused (petitioners herein) were not the Incharge of the day-to-day affairs and conduct of the business of the company on that date. No doubt there are allegations of cheating as well and the complaint is u/s 420 r/w section 120B of the IPC as well. It would have reference to the date when the cheques were issued with intent to cheat and complaint to that extent may be maintainable if prima facie case under these provisions is made out. However, the summoning orders dated 29-7-2000 would show that the cognizance of the alleged offence is taken only after section 138 of the Negotiable Instruments Act and not u/s 420 r/w section 120B of the IPC. Since complaint u/s 138 of the Negotiable Instruments Act is not maintainable if filed after the winding up of the company, summoning order issued is bad in law.

  The petition is accordingly allowed and the summoning order is set aside. The complaint would, thus, warrant dismissal and it is ordered to be dismissed.

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• 2006 (11) TMI 345
  
  Issues Involved:
  1. Interim Injunction
  2. Competing Business
  3. Fiduciary Duty
  4. Disclosure of Pending Proceedings
  5. Jurisdiction of Company Law Board
  
  Summary:
  
  1. Interim Injunction:
  The plaintiff filed I.A. No. 8363 of 2006 u/s Order 39, rules 1 and 2, Code of Civil Procedure, seeking to restrain defendant Nos. 1 to 3 from carrying on competing business, dealing with the plaintiff's customers, and transferring or creating third-party rights in the assets of defendant Nos. 4 and 5. The court noted that the law of interim injunction requires the plaintiff to establish a prima facie case, balance of convenience, and irreparable loss and injury.
  
  2. Competing Business:
  The plaintiff alleged that defendant Nos. 1 to 3, who were directors of the plaintiff, siphoned off funds and diverted business to set up competing businesses, M/s. USK Exports Pvt. Ltd. (defendant No. 4) and M/s. USK Trading Pvt. Ltd. (defendant No. 5). The plaintiff claimed that these actions caused monetary loss and damage to the plaintiff.
  
  3. Fiduciary Duty:
  The plaintiff argued that defendant Nos. 1 to 3 owed a fiduciary duty to the plaintiff and were obliged to carry on business activities for the plaintiff's benefit. The plaintiff contended that these defendants breached their fiduciary duties by diverting orders and siphoning off funds to the competing businesses.
  
  4. Disclosure of Pending Proceedings:
  The court noted that the plaintiff failed to disclose the pending proceedings before the Company Law Board, specifically C.P. No. 110 of 2005 and C.A. No. 39 of 2006, which sought similar reliefs. The court emphasized that it was the plaintiff's duty to disclose these material particulars.
  
  5. Jurisdiction of Company Law Board:
  The court highlighted that the jurisdiction of the Company Law Board u/s 397 of the Companies Act is concurrent with that of civil courts. The court observed that the issues raised in the present suit were already under consideration before the Company Law Board, which had reserved its judgment after hearing arguments.
  
  Conclusion:
  The court dismissed I.A. No. 8363 of 2006, vacating the ex parte injunction granted on July 31, 2006, and noted that the plaintiff's failure to disclose the pending proceedings before the Company Law Board and the similarity of reliefs sought in both forums were sufficient grounds to deny interim relief.

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