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Showing 41 to 60 of 76 Records
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1965 (4) TMI 96
Issues:
1. Challenge to assessment order under Article 226 of the Constitution.
2. Discrepancy in reported turnover and determined taxable turnover.
3. Lack of proper opportunity for the assessee to defend the reported turnover.
4. Errors in the assessment process by the assessing authority.
5. Judicial duty of assessing authority in tax assessment proceedings.
Analysis:
The judgment dealt with a petition challenging an assessment order under Article 226 of the Constitution. The petitioner reported a turnover of Rs. 7,09,935.28, but the assessing officer determined the taxable turnover to be Rs. 15,42,415.33, citing omissions in the stock books recovered during an inspection. The difference in turnover was primarily due to errors in the assessment process. The petitioner had filed an appeal against the order, which was pending, but argued that the assessment was flawed due to errors and lack of a proper opportunity to defend the reported turnover.
The Court acknowledged that generally, interference with an assessment order while an appeal is pending is discouraged. However, in this case, the Court found significant errors in the assessment process that warranted intervention. The errors were related to the calculation of omitted items in the stock books, leading to a substantial overestimation of the suppressed turnover. The Court emphasized the quasi-judicial nature of assessment proceedings and the duty of the assessing authority to thoroughly scrutinize materials independently. In this case, the assessing authority failed to fulfill this duty, as evident from the erroneous inclusion of amounts without proper scrutiny.
Furthermore, the Court noted that the petitioner was not provided a reasonable opportunity to defend the reported turnover, as crucial information was presented on the day of the assessment order, leaving no adequate time for explanation. The Court emphasized the importance of providing the assessee with sufficient time and access to relevant documents to present a defense. Ultimately, the Court concluded that the assessment order was vitiated by apparent errors and, therefore, quashed the order, allowing the petition with costs.
In summary, the judgment highlighted the importance of a fair and meticulous assessment process in tax matters, emphasizing the duty of the assessing authority to conduct assessments independently and provide the assessee with adequate opportunities to defend their reported turnover. The Court's decision to quash the assessment order was based on the significant errors in the assessment process and the lack of a proper opportunity for the petitioner to address the discrepancies, despite an appeal being pending.
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1965 (4) TMI 95
Issues Involved:
1. Maintainability of a single petition challenging multiple assessment orders.
2. Allegations of bias against the assessing officer.
3. Validity of assessment orders and compliance with appellate directives.
4. Jurisdictional limits and statutory exceptions.
5. Alternative remedy and maintainability of the writ petition.
Issue-wise Detailed Analysis:
1. Maintainability of a Single Petition Challenging Multiple Assessment Orders:
The petitioner filed a single petition under Article 226 of the Constitution to quash four assessment orders for the assessment years 1960-61 and 1961-62 under the U.P. Sales Tax Act and the Central Sales Tax Act. An objection was raised regarding the maintainability of a single petition challenging multiple orders. The Division Bench held that one writ petition cannot challenge multiple assessment orders pertaining to different years or statutes. Consequently, the petitioner filed additional sets of court fees to regularize the defect, effectively treating the petition as four separate writ petitions.
2. Allegations of Bias Against the Assessing Officer:
The petitioner alleged bias against Sri V.D. Singh, the Assistant Sales Tax Officer, due to an altercation on 10th August 1962, leading to a criminal prosecution initiated by Mr. Singh. The petitioner was acquitted, but an appeal against the acquittal was pending. The petitioner claimed that Mr. Singh's actions, such as putting wrong dates on the account books and threatening prosecution, demonstrated personal bias. The court referred to the principles governing bias, emphasizing that justice must not only be done but must also appear to be done. The court found that Sri V.D. Singh had a personal bias against the petitioner, rendering the assessment orders null and void.
3. Validity of Assessment Orders and Compliance with Appellate Directives:
The petitioner challenged the validity of the assessment orders, claiming they were passed in violation of appellate directives. The Assistant Commissioner (Judicial) had set aside the initial assessment orders and remanded the cases for fresh assessments, directing a detailed inquiry into the petitioner's business. However, Sri V.D. Singh passed the assessment orders without conducting any further inquiry. The court found that the assessment orders were substantially a repetition of the previous orders and were based on the same materials, thus violating the appellate directives.
4. Jurisdictional Limits and Statutory Exceptions:
The petitioner argued that Sri V.D. Singh's jurisdictional limit was Rs. 40,000, and he could not assess a dealer at a higher figure. After remand, Mr. Singh assessed the petitioner at Rs. 60,000 for the assessment year 1962-63, which was within his revised jurisdictional limit. The respondent contended that the doctrine of bias is excluded in cases of necessity where only one officer has jurisdiction. However, the court found that other officers had the authority to act as the assessing authority, and the Commissioner could transfer cases to another officer. Hence, the principle of statutory exception was not applicable.
5. Alternative Remedy and Maintainability of the Writ Petition:
The respondent argued that the petitioner had an alternative remedy of appeal. However, the court held that an alternative remedy is not an absolute bar to the maintainability of a writ petition, especially where there is a patent denial of justice. Bias is an illegality affecting jurisdiction, and the superior court can issue certiorari to correct such errors. The court cited U.P. State v. Mohd. Nooh, emphasizing that the superior court can intervene even if an appeal was available but not pursued. The court found that the petitioner made a just case for interference.
Conclusion:
The petition was allowed, and the assessment orders dated 18th March 1964, for the assessment years 1960-61 and 1961-62 under the U.P. Sales Tax Act and the Central Sales Tax Act, were quashed. The consequential notices of demand were also set aside. The petitioner was entitled to costs.
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1965 (4) TMI 94
Issues:
Interpretation of the Central Sales Tax Act regarding transactions between states, applicability of tax on goods sold from one state to another, constitutional implications of taxation on inter-state transactions, and the legislative intent behind taxing statutes.
Analysis:
The judgment pertains to four references made under the Central Sales Tax Act, raising questions regarding the taxation of sales between states, specifically focusing on transactions between Amritsar and Jammu and Kashmir. The main issue revolves around whether the movement of goods between states should attract sales tax under the Act. The petitioner's argument challenges the applicability of the Act to Jammu and Kashmir, contending that sales from Amritsar to Jammu and Kashmir should not be taxed. However, the court rejects this argument, emphasizing that the legislative intent of taxing statutes is to ensure uniform taxation and social welfare. The judgment highlights the importance of interpreting tax laws in line with legislative intent and practical objectives, aiming for equitable distribution of tax burdens.
The judgment also addresses constitutional aspects, including Articles 301 to 304 of the Constitution and Article 286, in the context of inter-state sales taxation. The court dismisses the petitioner's claims of discrimination, asserting that exempting certain inter-state transactions from tax would lead to inequality. Additionally, the argument that the sales in question should be treated as exports is refuted, with the court emphasizing the constitutional framework and the legislative scope of the Central Act.
Furthermore, the judgment discusses the interpretation of the term "State" under the Central Act, highlighting that the State where the movement of goods terminates is not relevant for tax liability determination. The court emphasizes the need to interpret tax laws in a manner that ensures uniform taxation and upholds the legislative purpose. The judgment cites a previous decision by the Madras High Court to support the tax imposition on inter-state sales, further reinforcing the rejection of the petitioner's arguments.
In conclusion, the court rules in favor of the Revenue, upholding the tax imposition on sales between Amritsar and Jammu and Kashmir under the Central Sales Tax Act. The judgment underscores the importance of interpreting tax statutes in alignment with legislative intent and ensuring equitable tax distribution for social welfare.
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1965 (4) TMI 93
Whether the sales with respect to which sales tax amounting to Rs. 54,375-5-0 was levied were outside the State and were therefore exempt under Article 286(1)(a) of the Constitution as it then was? - Held that:- Appeal allowed case remitted. The proper course for the disposal of this appeal is to call for a finding from the Sales Tax Officer on the question.
It is also necessary to call for a finding on the question whether the writ petition was within three years of the date on which the mistake first became known to the respondent so that a suit on that date for refund would not be barred under Article 96 of the Limitation Act, 1908. The papers will be sent to the Agricultural Income-tax and Rural Sales Tax Officer, Quilon, for findings on these two questions. The Sales Tax Officer should submit his findings within three months of the receipt of the order by him. It will be open to the respondent to give evidence to substantiate its case on both these points. After findings on these questions are received, the appeal will be listed before any Constitution Bench as early as possible for final disposal.
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1965 (4) TMI 91
Whether under section 5(2)(a)(ii) of the Bengal Finance (Sales Tax) Act, 1941 (Bengal Act VI of 1941) the furnishing of the declaration forms issued by the purchasing dealers was a condition for claiming the exemption thereunder?
Held that:- Appeal dismissed. This Court held that the said mandatory provision was inconsistent with section 5(2)(a)(ii) of the Orissa Sales Tax Act; and to avoid that conflict it reconciled both the provisions by holding that the rule was only directory and, therefore, it would be enough if it was substantially complied with. The said provisions may afford a guide for amending the relevant provisions of the Act and the Rules made thereunder, but do not furnish any help for construing them.
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1965 (4) TMI 78
Issues Involved:
1. Limitation period for filing the application under section 155 of the Companies Act.
2. Maintainability of the application under section 155 of the Companies Act.
3. Validity of the forfeiture of shares by the company.
4. Authority of the State of Rajasthan to file the application under section 155 of the Companies Act.
Issue-wise Detailed Analysis:
1. Limitation Period for Filing the Application under Section 155 of the Companies Act:
The primary contention was whether the application was time-barred under Article 181 of the Indian Limitation Act, 1908. The appellant's counsel argued that Article 181, being a residuary article, applied to all applications not covered elsewhere in the Limitation Act. The respondent's counsel countered that Article 181 applied only to applications under the Code of Civil Procedure, based on the principle of ejusdem generis. The court referred to the Privy Council's decision in Hansraj Gupta v. Dehra Dun-Mussorie Electric Tramway Co. Ltd., which impliedly approved the view that Article 181 applied only to applications under the Code of Civil Procedure. The Supreme Court's observations in Sha Mulchand & Co. Ltd. v. Jawahar Mills Ltd. were also considered, which reinforced that Article 181 governed only applications under the Code of Civil Procedure. Consequently, the court held that Article 181 did not apply to the application under section 155 of the Companies Act, and there was no other provision to render the application time-barred.
2. Maintainability of the Application under Section 155 of the Companies Act:
The appellant argued that the application under section 155 was not maintainable due to the involvement of complicated questions of fact and law, which required a regular suit. The court, however, found no substance in this objection, noting that there was no dispute on the relevant facts. The main question was whether the appellant had the authority to forfeit the shares and whether the register of members could be rectified. The court concluded that it had the power to order rectification under section 155 and that the learned company judge did not exceed his jurisdiction in entertaining and deciding the application.
3. Validity of the Forfeiture of Shares by the Company:
The appellant contended that the forfeiture of shares was justified due to the breach of contract by the State of Rajasthan. The court examined Articles 29 and 34(A) of the company's Articles of Association, which dealt with the forfeiture of shares for non-payment of calls or instalments. It was found that these articles were inapplicable to the shares allotted in consideration of the monopoly grant, as there was no requirement for the grantor to pay any call or instalment. The court further referred to the Deed of Covenant, which provided for arbitration in case of disputes, and concluded that the appellant had no authority to unilaterally forfeit the shares. The forfeiture was thus deemed void.
4. Authority of the State of Rajasthan to File the Application under Section 155 of the Companies Act:
The appellant faintly argued that the shares were allotted to the erstwhile Kotah State, and the respondent (State of Rajasthan) could not file the application. The court dismissed this contention, citing Article 295 of the Constitution of India, which vested all rights of the Kotah State in the State of Rajasthan. The company's resolution dated 24th November 1951, also acknowledged the devolution of title in the shares to the present Government of Rajasthan.
Conclusion:
The court dismissed the appeal, upholding the learned company judge's order directing the company to register the State of Rajasthan's name regarding the disputed shares upon payment of the prescribed transmission fee. The arguments advanced by the appellant were found to be untenable, and the appeal was dismissed with costs.
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1965 (4) TMI 77
Issues Involved:
1. Confirmation of the alterations of the memorandum of association of the company.
2. Whether the company's investment business is independent or ancillary.
3. Whether the proposed new business objects can be conveniently and advantageously combined with the existing business.
4. The financial position and liabilities of the company.
5. The appropriateness of the company's name given its cessation of insurance business.
Issue-wise Detailed Analysis:
1. Confirmation of the alterations of the memorandum of association of the company:
The petition under section 17 of the Companies Act, 1956, was filed by the New Asiatic Insurance Company Limited for confirmation of alterations to its memorandum of association. The alterations were proposed to change the company's objects, including the addition of new business activities such as engineering, metallurgy, textiles, and import/export, among others. The court noted that the special resolution for these alterations was passed unanimously at an extraordinary general meeting.
2. Whether the company's investment business is independent or ancillary:
The petitioner argued that the investment business carried on by the company was independent and not ancillary to its main objects. The court referred to the case of Standard General Assurance Co. Ltd., where it was held that the investment business was independent and not merely ancillary to the insurance business. The court accepted this view, noting that the company's investment activities, which included dividends, interest, and profits from the sale of investments, were substantial and constituted an independent business.
3. Whether the proposed new business objects can be conveniently and advantageously combined with the existing business:
The court considered whether the new business activities proposed could be conveniently and advantageously combined with the existing investment business. It was emphasized that the new business should not be destructive of or inconsistent with the existing business. The court referred to several precedents, including Ambala Electric Supply Co. Ltd. and Modi Spinning and Weaving Mills Co. Ltd., which supported the notion that new business activities could be added if they were capable of being conveniently and advantageously combined with the existing business. The court concluded that the new business activities proposed by the company were not inconsistent with or destructive of the existing investment business.
4. The financial position and liabilities of the company:
The court reviewed the financial position of the company, noting that its assets exceeded liabilities by over Rs. 39 lakhs and that satisfactory arrangements had been made for settling all pending liabilities. The company's financial position was deemed strong, and it had sufficient working capital to undertake new business activities.
5. The appropriateness of the company's name given its cessation of insurance business:
The court noted that the company had ceased to carry on insurance business and that the use of the word "insurance" in its name was incongruous. The petitioner had already applied to the Central Government for a change of name. The court directed that the order confirming the alterations would not take effect until the company's name was changed.
Conclusion:
The court allowed the petition to the extent of confirming the alterations related to the business of engineers, metallurgists, textiles, and import/export. The alterations related to other business activities were not accepted as there was no prospect of these being started in the near future. The court also directed that the order confirming the alterations would not take effect until the company's name was changed. The parties were left to bear their own costs.
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1965 (4) TMI 64
Issues Involved:
1. Priority of claims between first mortgage debenture-holders and the Government.
2. Validity and effect of the debenture trust deed and mortgage deed.
3. Nature of the security created by the debenture trust deed.
4. Rights of secured creditors in the winding-up of an insolvent company.
5. Applicability of the State Aid to Industries Act and the Transfer of Property Act.
Detailed Analysis:
1. Priority of Claims Between First Mortgage Debenture-Holders and the Government:
The primary issue was to determine the priority between the first mortgage debenture-holders of Guntur Vegetable Oil Industries Ltd., under liquidation, and the Government, which had subsequently lent money to the company and secured it by a mortgage deed. The court held that the debenture-holders, being the first mortgagees, had priority over the Government's claim.
2. Validity and Effect of the Debenture Trust Deed and Mortgage Deed:
The debenture trust deed dated February 10, 1947, created a mortgage over the company's properties, including land, buildings, and machinery, both present and future. The Government contended that no effective or valid mortgage was created in favor of the debenture-holders and that their subsequent mortgage should take precedence. However, the court found that the debenture trust deed did create a valid mortgage and that the Government's mortgage was subject to this prior charge.
3. Nature of the Security Created by the Debenture Trust Deed:
The debenture trust deed created both a specific charge on the land and a floating charge on all the company's undertakings and assets. The court emphasized that a specific charge takes precedence over a floating charge and that the debenture-holders had a specific charge on the land and buildings, which included any future additions. The Government's mortgage, executed later, was therefore subordinate to this specific charge.
4. Rights of Secured Creditors in the Winding-Up of an Insolvent Company:
The court referred to the Indian Companies Act and the Transfer of Property Act to clarify the rights of secured creditors. It was noted that in the winding-up of an insolvent company, the rights of secured creditors are determined by the law of mortgages, not company law. The court reiterated that the first mortgagee has priority over subsequent mortgagees, and this principle applied to the debenture-holders' claim.
5. Applicability of the State Aid to Industries Act and the Transfer of Property Act:
The Government's loan was granted under the Madras State Aid to Industries Act, which required the loan to be secured by a mortgage or floating charge subject to existing encumbrances. The court found that the Government's mortgage was expressly subject to the prior mortgage created by the debenture trust deed. The Transfer of Property Act's provisions on accession and priority of charges further supported the debenture-holders' claim, as the buildings and machinery added after the initial mortgage were considered part of the mortgaged property.
Conclusion:
The court concluded that the debenture-holders, having a specific charge created by the debenture trust deed, had priority over the Government's subsequent mortgage. The Government's claim did not qualify for preferential payment under section 230 of the Indian Companies Act, as it did not fall under the category of revenue, taxes, cesses, or rates. Consequently, the debenture-holders were entitled to be paid in full before the Government could claim any portion of the sale proceeds from the liquidation. The appeal by the State of Andhra Pradesh was dismissed with costs awarded to the contesting respondents.
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1965 (4) TMI 63
Issues Involved:
1. Cancellation of share allotment to the executive director and her removal from the board.
2. Recovery of remuneration paid to the executive director.
3. Cancellation of share allotment to the managing director's son.
4. Invalidity of the technical director's appointment.
5. Appointment of a committee of shareholders to manage the company's affairs.
6. Illegal transfer and non-transfer of shares.
7. Non-payment of dividends.
8. Excess remuneration paid to directors.
9. Lack of notice for the general body meeting.
10. Alleged forgery of signatures.
11. Validity of the resolution admitting a partner to the managing agency firm.
Detailed Analysis:
1. Cancellation of Share Allotment to the Executive Director and Her Removal from the Board:
The petition sought to cancel the allotment of 50 shares to the executive director and remove her from the board, alleging oppression and mismanagement. The court found that the directors had acted in a high-handed and unreasonable manner, but did not specifically address the cancellation of the executive director's shares in this order.
2. Recovery of Remuneration Paid to the Executive Director:
The petitioners demanded the recovery of remuneration paid to the executive director from August 15, 1960. The court did not find sufficient grounds to grant this relief in the current proceedings.
3. Cancellation of Share Allotment to the Managing Director's Son:
The petitioners sought to cancel the allotment of 60 shares to the managing director's son, Harsha P. Karmarkar. The court noted irregularities in the transfer of shares but did not grant this relief in the current proceedings, suggesting it should be pursued in separate proceedings for rectification of the register.
4. Invalidity of the Technical Director's Appointment:
The petitioners questioned the validity of the technical director's appointment. The court did not specifically address this issue in the judgment.
5. Appointment of a Committee of Shareholders to Manage the Company's Affairs:
The petitioners requested the appointment of a committee of shareholders to manage the company's affairs. The court found no justification for this relief, except for addressing the high-handedness in dealing with the payment of dividends and transfer of shares.
6. Illegal Transfer and Non-Transfer of Shares:
The court found that the non-transfer of shares under the will of late M.R. Patny was high-handed and unreasonable. The directors had acted in a discriminatory manner by refusing to transfer some shares while transferring others under the same will. The court directed the directors to transfer the shares held by M.R. Patny in terms of his will.
7. Non-Payment of Dividends:
The petitioners alleged that dividends declared for the year 1961-62 were withheld. The court found that the directors had credited the dividends to the petitioners but had unreasonably withheld the transfer of shares, which was deemed oppressive.
8. Excess Remuneration Paid to Directors:
The court examined the allegation of excess remuneration paid to directors. It found that some excess amounts were received apart from the remuneration as director's fees, but there was insufficient material to conclude that the excess amount did not pertain to any legitimate claims by the directors.
9. Lack of Notice for the General Body Meeting:
The petitioners claimed they did not receive notice for the general body meeting held on September 28, 1962. The court found no evidence to support this claim, as none of the petitioners provided evidence, and it could not infer that no notice was given.
10. Alleged Forgery of Signatures:
The petitioners alleged forgeries of M.R. Patny's signatures from 1959 onwards. The court found no credible evidence to support these allegations and noted that the petitioners did not inform M.R. Patny of these alleged forgeries during his lifetime.
11. Validity of the Resolution Admitting a Partner to the Managing Agency Firm:
The petitioners raised an additional ground that the resolution admitting Jaikumar M. Patny as a partner of the managing agency firm was void. The court did not specifically address this issue in the judgment.
Conclusion:
The petition was partly allowed. The court directed the directors to transfer the shares held by M.R. Patny in terms of his will. Other reliefs sought by the petitioners, such as the cancellation of share allotments and the appointment of a committee of shareholders, were not granted in these proceedings. The parties were directed to bear their own costs. Company Applications Nos. 82 and 126/64 were allowed, while Company Application 83/64 was dismissed as not pressed.
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1965 (4) TMI 54
Issues Involved:
1. Status of plaintiffs as subscribers to the memorandum of association.
2. Validity of plaintiffs' removal from the directorship.
3. Compliance with share qualification requirements for directors.
Detailed Analysis:
1. Status of Plaintiffs as Subscribers to the Memorandum of Association:
The main question in the appeal was whether the District Munsiff was right in his view that the plaintiffs were subscribers to the memorandum of association of the first defendant and were among the members of its first board of directors. The plaintiffs claimed they subscribed to the memorandum and articles of association, thus becoming directors. The defendants argued that only defendants Nos. 3 and 4 signed the memorandum and articles due to a name change objection from the Registrar, and the plaintiffs never subscribed to the declaration or agreed to take shares.
The court held that subscribing to a memorandum implies an agreement to form a company and take shares, which the plaintiffs did not do. The plaintiffs' signatures on other pages did not make them subscribers to the declaration, which is the vital part of the memorandum. The court concluded that the plaintiffs were not subscribers to the memorandum and thus not members or directors of the company.
2. Validity of Plaintiffs' Removal from the Directorship:
The plaintiffs argued they were improperly removed from directorship and that the communication to the Registrar of Companies was illegal and ultra vires. The defendants contended that the plaintiffs expressed their unwillingness to continue and were removed by a resolution on March 5, 1959, which was notified to the Registrar.
The District Munsiff found that the plaintiffs were not validly removed and had not expressed unwillingness to continue as directors. However, the High Court concluded that since the plaintiffs were not subscribers to the memorandum, their removal was not relevant to their status as directors.
3. Compliance with Share Qualification Requirements for Directors:
The plaintiffs were required to hold at least fifty shares to qualify as directors. The plaintiffs claimed they tendered the balance of share money, but the second defendant evaded receipt. The defendants argued that the plaintiffs did not apply for or remit the required amount for shares.
The court noted that the plaintiffs did not comply with section 270 of the Companies Act, 1956, which requires directors to obtain their qualification shares within two months of appointment. The plaintiffs did not apply for the requisite shares, as evidenced by the company's general body meeting on February 19, 1959. Therefore, the plaintiffs did not meet the share qualification requirements.
Conclusion:
The appeal was allowed, and the suit was dismissed with costs throughout. The court held that the plaintiffs were not subscribers to the memorandum of association, were not validly appointed as directors, and did not comply with the share qualification requirements.
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1965 (4) TMI 53
Whether the allotment of the 2,000 shares and the several loans in the names of Ramnath and Narayandas were not genuine transactions, and that the parties did not intend that the allottees would be the holders of the shares or that Narayandas and Ramnath would be liable to repay the loans?
Held that:- We are satisfied that the allotment of the 2,000 shares was intended to be operative and the allottees became the owners of the shares. We are also satisfied that the loans to Ramnath and Narayandas were intended to be operative, and the company did not give any assurance to them that they would not be called upon to repay the loans.
The allotment of the 2,000 shares to the nominees of Narayandas in the meeting of the directors of the company held on May 25, 1946, was not void. In view of the fact that Narayandas was not entitled to vote on the allotment and alter exclusion of his vote there was no quorum, the allotment was irregular, and the company was entitled to avoid the allotment. Instead of avoiding the allotment, the company has chosen to affirm it. The allotment is, therefore, valid and binding on the allottees. For all the reasons, we hold that the allotment is valid, and there is no failure of consideration. Appeal dismissed.
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1965 (4) TMI 52
Whether section 49E is subject to the insolvency rules contained in the Companies Act?
Held that:- Section 49E can be reconciled with sections 228 and 229 by holding that section 49E applies when insolvency rules do not apply. Accordingly, agreeing with the High Court, we hold that the Income-tax Officer was in error in applying section 49E and setting off the refund due. The Commissioner was equally in error in affirming this order.
At any rate, there is an error apparent on the face of the orders and the High Court was quite right in exercising its jurisdiction under article 226. Appeal dismissed.
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1965 (4) TMI 51
Issues Involved:
1. Retention of proceeds collected from past members.
2. Balance order against contributories who have not fully paid.
3. Refund of amounts collected from past members.
4. Recovery from preference shareholders.
Detailed Analysis:
1. Retention of Proceeds Collected from Past Members:
The official liquidator questioned whether he could retain the proceeds of the calls already made on the past members, even though it had been wrongly collected from them. The court examined the substantive provisions of the Companies Act, 1956, particularly Section 426, which outlines the liability of past members. The court noted that the liability of past members arises only if the existing assets plus the contributions from present members are insufficient to pay the company's debts and liabilities. Since the assets were sufficient to meet all debts and costs, there was no need for contributions from past members. Therefore, the court concluded that the retention of these proceeds was not justified.
2. Balance Order Against Contributories Who Have Not Fully Paid:
The court considered whether it could enforce the order dated September 4, 1959, further by passing a balance order against the contributories who have not paid in full or in part. Given the sufficiency of the company's assets to cover its debts and liabilities, the court found no justification for additional contributions from past members. The finality of the prior orders under Sections 473 and 483 of the Companies Act was acknowledged, but the court decided not to enforce further contributions from past members.
3. Refund of Amounts Collected from Past Members:
The court addressed whether the amount of Rs. 9,005.84 collected from past members should be refunded to them. Citing precedents such as Brett's case and In re City of London Insurance Company Ltd., the court emphasized that the liability of past members arises only after exhausting the assets and contributions of present members. Since the assets were sufficient, the court ruled that the collected amount should be refunded to the past members. The court decided to refund the available cash on hand, Rs. 3,431.93, proportionally to the past members based on their contributions.
4. Recovery from Preference Shareholders:
The official liquidator proposed recovering Rs. 7 per share from the preference shareholders to make up for the insufficient funds to refund the past members. However, the court noted that the orders dated September 4, 1959, and September 25, 1959, had become final and could not be altered. Therefore, it was not possible to order the preference shareholders to repay any portion of the capital they had received. The court did not find it necessary to take steps to recover any amount from the preference shareholders.
Conclusion:
The court concluded that the prior orders directing contributions from past members were not justified due to the sufficiency of the company's assets. Consequently, the court decided to refund the available cash to the past members proportionally and not to enforce further contributions from them. Additionally, the court ruled out recovering any amount from the preference shareholders. The costs of the application were to come out of the estate.
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1965 (4) TMI 24
Whether the Bombay High Court was right in holding that the suit filed by the appellant, Kamala Mills Ltd., against the respondent, the State of Bombay, was incompetent?
Held that:- If the jurisdiction conferred on the appropriate authority falls under the first category, then its finding that a particular transaction is taxable under the relevant provisions of the Act would be a finding on a collateral question of fact, and it may be permissible to a party aggrieved by the said finding to contend that the tax levied on the basis of an erroneous decision about the nature of the transaction is without jurisdiction. If, however, the appropriate authority has been given jurisdiction to determine the nature of the transaction and proceed to levy a tax in accordance with its decision on the first issue, then the decision on the first issue cannot be said to be a decision on a collateral issue, and even if the said issue is erroneously determined by the appropriate authority, the tax levied by it in accordance with its decision cannot be said to be without jurisdiction. Appeal dismissed.
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1965 (4) TMI 23
Whether the High Court acted improperly in refusing to investigate a plea raised by the company that in issuing a notice under section 34(1)(a) of the Income-tax Act the Income-tax Officer acted without jurisdiction and for a colourable purpose?
Held that:- As in the present case, the claim made is that the Income-tax Officer had no power to issue the notice under section 34, and that the power is exercised not for any legitimate purpose for which it may be used, but for the purpose of making a fishing enquiry and to review a previous order passed in favour of the company, a rule upon the Income-tax Officer to show cause why the order should not be set aside and an opportunity to the authority whose action was challenged either to accept or deny the facts alleged and to set out such other material facts as have a bearing on the question, was at least called for.
The order of the High Court ought to be set aside and the proceeding remanded with the direction that rule be issued to the Income-tax Officer and the petition be tried
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1965 (4) TMI 22
Whether the assessee, Messrs. Shah Jethaji Phulchand, can be granted registration under section 26A of the Indian Income-tax Act on the basis of the deed made on November 20, 1950, for the assessment year 1953-54 and/or 1954-55 ?
Held that:- As no fatal defect has been pointed out by the learned counsel for the appellant. Accordingly we hold that the assessee-firm is entitled to be registered, and agreeing with the High Court, we answer the question in the affirmative. Appeal dismissed.
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1965 (4) TMI 21
Whether on the facts and in the circumstances of the case what the assessee received in the relevant years is assessable to tax and whether section 34 of the Income-tax Act could be invoked in regard to the years 1947-48, 1948-49 and 1950-51 ?
Held that:- What the assessee received in the relevant years of account was not assessable to tax. It is unnecessary to record, as already observed, a finding on the second branch of the question, viz., whether section 34 of the Income-tax Act could properly be invoked in regard to those receipts. Appeal allowed.
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1965 (4) TMI 20
Whether the two sums of ₹ 42,148 in the assessment year 1953-54 and ₹ 77,138 in the assessment year 1954-55 were deductible in computing income, profits and gains from the assessee's business assessable to tax ?
Held that:- The appellant-company is a commercial undertaking. It does business of the supply of electricity subject to the provisions of the Act. As a business concern its real profit has to be ascertained on the principles of commercial accountancy. As a licensee governed by the statute its clear profit is ascertained in terms of the statute and the schedule annexed thereto. The two profits are for different purposes---one is for commercial and tax purposes and the other is for statutory purposes in order to maintain a reasonable level of rates. For the purposes of the Act, during the accounting years the assessee credited the said amounts to the " Consumers' Benefit Reserve Account ". They were a part of the excess amount paid to it and reserved to be returned to the consumers. They did not form part of the assessee's real profits. So, to arrive at the taxable income of the assessee from the business under section 10(1) of the Act, the said amounts have to be deducted from its total income. Appeal allowed.
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1965 (4) TMI 19
Whether the amount described as premium in the lease deed is really rent and, therefore, a revenue receipt?
Held that:- There is no material placed before us, either direct or circumstantial, to displace the description given in the lease deed to the said amounts as premium and to hold that they are not in fact premium but only rent. Appeal dismissed.
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1965 (4) TMI 18
Whether the assessee, Mohandas Sadhuram, can be granted registration under section 26A of the Indian Income-tax Act, on the basis of the partnership deed made on April 1, 1952, for the assessment year 1953-54 and on the basis of the said deed read with the supplementary deed on April 1, 1953, for the assessment year 1954-55?
Held that:- The partnership deed, reasonably construed, only confers benefits of partnership on the two minors and does not make them full partners. The guardian has agreed to certain clauses in order to effectuate the decision of the major members to confer the benefits of the said partnership to the minors. Accordingly, we hold that the income-tax authorities should not have declined to register the firm. We may mention that the supplementary deed dated April 1, 1953, has not been included in the statement of the case, but it is common ground that nothing turns on any of the clauses in the supplementary deed.
Accordingly, agreeing with the High Court, we hold that the firm is entitled to be registered under section 26A of the Income-tax Act, and the answer to the question referred is in the affirmative. Appeal dismissed.
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