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2010 (5) TMI 925
Issues involved: Application for order u/s 391(2) of Companies Act, 1956 regarding amalgamation of wholly owned subsidiary with parent Holding Company.
Summary:
The applicant, Nirma Limited, sought an order declaring that as the parent Holding Company in the proposed Amalgamation of Nirma Consumer Care Limited, its wholly owned subsidiary, separate proceedings under Section 391(2) of the Companies Act, 1956, were not necessary. The applicant argued that since it held the entire share capital of the subsidiary and no new shares would be issued, the capital structure and rights of existing shareholders would remain unaffected. The applicant relied on past court orders and decisions to support its position. After considering the arguments and precedents, the Court held that separate proceedings were not required for the Holding Company in this case. The application was allowed with no costs.
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2010 (5) TMI 924
Addition u/s 68 - Gift received by the assessee from his brother in USA - Deemed unexplained income of partnership - creditworthiness of the donor - HELD THAT:- We have considered the issue. Without going into the legalities of the addition made by the A.O. u/s 68, we are of the opinion that there was no case for treating the gift received by the assessee from his brother in USA as unexplained income of the assessee. As seen from the facts available on record the assessee’s brother is also partner in various firms in India and he has substantial capital towards his credit in India. The assessee’s brother is also filing returns in India on the profits from firms and other incomes earned in India.
As seen from the bank account furnished the assessee has large amount of credit as opening balance which was ignored by the A.O. in coming to the conclusion that the credits are only to the extent of US$16,500/- whereas the gift was to the extent of US $35,000. The opening credit of the month itself was about US $27,466. In view of these facts, we are of the opinion that the donor has creditworthiness to gift the amount to his brother and accordingly, the order of the CIT(A) is upheld.
In the result, appeal of the Revenue is dismissed.
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2010 (5) TMI 923
Issues Involved:
1. Validity of the assessment order under Section 153A.
2. Ownership and taxability of the unaccounted money found in the bank accounts.
Detailed Analysis:
1. Validity of the Assessment Order under Section 153A:
The primary issue was whether the assessment orders issued under Section 153A were valid. The assessee argued that the notice under Section 153A was invalid because no search was conducted on the assessee individually, and no search warrant was served on the assessee or the Trust. The Commissioner of Income Tax (Appeals) upheld the notice under Section 153A, stating that the search was conducted in the name of the appellant in the bank premises, thereby validating the notice.
The Tribunal examined the facts and found that the search warrant was issued in the name of "K. M. Shah Charitable Trust, Mansukhbhai K. Shah," and not in the individual capacity of the assessee. The Tribunal noted that the search was conducted in the bank premises where the Trust had accounts, and the warrant was served on the bank manager, not on the assessee. The Tribunal concluded that since the search warrant was not executed in the individual name of the assessee, the proceedings under Section 153A were invalid and bad in law. The Tribunal relied on the decision of the Allahabad High Court in CIT vs. Smt. Vandana Verma, which held that assessments could not be framed in an individual capacity if the warrant was issued in joint names.
2. Ownership and Taxability of the Unaccounted Money:
The second issue was whether the unaccounted money found in the bank accounts belonged to the assessee individually or to the Trust. During the survey, the assessee admitted that the money deposited in the Trust's bank accounts was his personal money. However, he later retracted this statement, claiming that the money belonged to the Trust. The Tribunal noted that the money was deposited in the Trust's bank accounts and was not reflected in the Trust's books. The Tribunal also observed that the amount seized from the bank accounts was adjusted towards the Trust's advance tax liability and not the assessee's individual liability.
The Tribunal concluded that there was no independent or corroborative evidence to prove that the money belonged to the assessee individually. The Tribunal held that the statement made by the assessee during the survey did not have evidentiary value as it was not made under oath, and the assessee had retracted the statement. The Tribunal relied on the decision of the Madras High Court in CIT vs. S. Khader Khan Son, which held that statements recorded during a survey under Section 133A do not have evidentiary value and cannot be the basis for addition.
The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals), who had concluded that the money belonged to the Trust and not to the assessee individually. Consequently, the Tribunal allowed the assessee's appeals and dismissed the departmental appeal, confirming that the amount seized belonged to the Trust and not to the assessee in his individual capacity.
Conclusion:
The Tribunal quashed the proceedings under Section 153A against the assessee in his individual capacity, holding them invalid and bad in law. It also concluded that the unaccounted money found in the bank accounts belonged to the Trust and not to the assessee individually, thereby dismissing the departmental appeal and allowing the assessee's appeals.
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2010 (5) TMI 922
Issues Involved:
The issue involves determining the territorial jurisdiction of the criminal courts in Delhi to entertain and decide a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881.
Details of the Judgment:
Issue 1:
The petitioner argued that the criminal courts in Delhi lack territorial jurisdiction to decide the complaint under Section 138 of the Negotiable Instruments Act, as the petitioner is based in Ladakh and the bank issuing the dishonored cheque is in Panchkula, Haryana.
Issue 2:
Respondent No. 1 contended that payments by the petitioner were credited in their Delhi account, invoices were issued from Delhi, and negotiations for goods supply took place in Delhi, establishing Delhi's jurisdiction.
Issue 3:
Respondent No. 1 stated that negotiations for goods supply took place in Delhi, and the goods dispatched were subject to Delhi jurisdiction, raising a factual dispute on the location of the debt accrual and dishonored cheque delivery.
Issue 4:
Referring to legal precedents, the judgment highlighted the elements required for conviction under Section 138 of the Act, emphasizing the importance of proving the dishonored cheque, notice of payment demand, and failure to pay within the stipulated period.
Issue 5:
Examining territorial jurisdiction in criminal cases, the judgment referred to Code of Criminal Procedure sections and emphasized that the offense under Section 138 involves a series of acts that may occur in different localities, allowing flexibility in determining the place of trial.
Issue 6:
The judgment differentiated the present case from legal precedents, emphasizing that the place of issue of the legal notice did not determine Delhi's jurisdiction, and factual disputes necessitate oral evidence and cross-examination.
Issue 7:
The judgment rejected the petitioner's argument that only the complaint and pre-summoning affidavit should determine jurisdiction, citing legal precedents allowing additional evidence to establish territorial jurisdiction even after summoning.
Conclusion:
The High Court dismissed the petition, clarifying that it took a prima facie view, and highlighted the need for the trial court to examine disputed factual questions regarding territorial jurisdiction.
Note:
The judgment emphasizes the complexity of determining territorial jurisdiction in cases involving multiple acts in different localities, highlighting the need for thorough examination and consideration of all relevant evidence.
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2010 (5) TMI 921
Issues Involved:
1. Whether the development agreement dated 05.11.1997 resulted in a "transfer" u/s 2(47) of the Income-tax Act.
2. Determination of the relevant assessment year.
3. Liability of the appellant to pay tax on her share or the entire capital gain.
4. Valuation of the transferred asset.
5. Eligibility for exemption u/s 54.
Summary:
1. Whether the development agreement dated 05.11.1997 resulted in a "transfer" u/s 2(47) of the Income-tax Act:
The Tribunal examined whether the development agreement dated 05.11.1997 constituted a "transfer" as per Section 2(47)(v) of the Income-tax Act. The assessee argued that the provisions of Section 53A of the Transfer of Property Act were not satisfied as possession was not handed over, nor was any consideration received at the time of the agreement. However, the Tribunal, relying on the decision of the Hon'ble Bombay High Court in Chaturbhuj Dwarkadas Kapadia, held that the development agreement resulted in a transfer of property in the year it was executed, i.e., the assessment year 1998-99.
2. Determination of the relevant assessment year:
The Tribunal concluded that the relevant assessment year for the capital gains arising from the development agreement was 1998-99, as the agreement was executed on 05.11.1997. This decision was based on the legal proposition that the year of chargeability in the case of development agreements is the year in which the contract was executed.
3. Liability of the appellant to pay tax on her share or the entire capital gain:
The Tribunal noted that the AO did not recognize the Memorandum of Agreement between the assessee and her children, assessing the entire capital gains in the hands of the assessee. However, since the CIT(A) had changed his stand regarding the assessability of rental income in the assessee's own case, the Tribunal set aside the issue of whether the assessee is liable to pay tax on the entire capital gains or only on her 25% share, remitting it back to the CIT(A) for fresh consideration.
4. Valuation of the transferred asset:
The Tribunal upheld the CIT(A)'s determination of the consideration for the transfer at Rs. 34.68 lakhs, based on the SRO rates applicable to the constructed areas and deductions for unfinished construction. The Tribunal found the CIT(A)'s calculation reasonable and did not interfere with his decision on this issue.
5. Eligibility for exemption u/s 54:
The Tribunal agreed with the CIT(A) that the assessee was not eligible for exemption u/s 54, as the entire building was let out for commercial purposes, and thus, the character of the property remained "commercial." The Tribunal upheld the CIT(A)'s decision to reject the claim for exemption u/s 54.
Conclusion:
The appeal of the assessee was partly allowed for statistical purposes, with the issue of liability to pay tax on the entire capital gains or only on her share being remitted back to the CIT(A) for fresh consideration. The Tribunal upheld the CIT(A)'s decisions on the other issues.
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2010 (5) TMI 920
Issues Involved:
1. Illegal transfer of shares.
2. Illegal appointment of a director.
3. Increase in authorized share capital.
4. Allotment of additional shares.
5. Removal of a director.
6. Maintainability of the petition.
Analysis of the Judgment:
1. Illegal Transfer of Shares:
The petitioner alleged that the transfer of 100 shares by Respondent No. 2 to Respondent No. 3 on 21/03/2007 was illegal and done without notice or consent of the petitioner, violating the Articles of Association. The court found discrepancies in the documents provided by the respondents, indicating that the transfer was not conducted properly and was intended to manipulate control within the company.
2. Illegal Appointment of a Director:
The petitioner argued that the appointment of Respondent No. 3 as an additional director on 21/03/2007 was done without notice to the petitioner. The court noted inconsistencies in the dates of appointment in various forms and returns, suggesting that the appointment was not validly conducted. The court concluded that the appointment was made clandestinely and without proper notice.
3. Increase in Authorized Share Capital:
The petitioner contended that the increase in authorized share capital from Rs. 1,00,000 to Rs. 5,00,000 on 20/08/2007 was done without following due process and without notice. The court found that the documents provided by the respondents were fabricated, and the increase in share capital was not conducted in accordance with the law. The court held that the increase was invalid.
4. Allotment of Additional Shares:
The petitioner alleged that the allotment of 40,000 additional shares to Respondent Nos. 2 and 3 on 01/09/2007 was done without notice, reducing the petitioner's shareholding from 95% to 19%. The court found that the notices for the meetings were not properly served, and the allotment was made with the intent to marginalize the petitioner. The court held that the allotment was illegal and constituted an act of oppression.
5. Removal of a Director:
The petitioner claimed that the removal of Respondent No. 4 as a director on 18/12/2007 was illegal as no special notice under Section 284 of the Companies Act was served. The court found that the removal was done without proper notice and in violation of the statutory provisions. The court held that the removal was invalid and constituted an act of oppression.
6. Maintainability of the Petition:
The respondents argued that the petition was barred by limitation, res judicata, and estoppel, and was filed without proper authority. The court rejected these objections, noting that the acts of oppression and mismanagement were continuing and the petition was filed within a reasonable time after the petitioner became aware of the acts. The court also found that the petition was filed with proper authority, despite discrepancies in the documents.
Conclusion:
The court dismissed the petition on the grounds that the petitioner had approached the court with unclean hands, having fabricated documents and suppressed material facts. The court held that both parties were guilty of misconduct and had failed to act in the best interest of the company. The court directed that all interim orders remain in force until 26/06/2014 to allow the petitioner to appeal the judgment.
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2010 (5) TMI 919
Issues Involved:
1. Appointment of an Arbitrator u/s 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996.
2. Jurisdiction of the High Court to entertain the petition.
3. Existence and validity of the Arbitration Agreement.
4. Whether the claim is a live issue or a dead one.
Summary:
1. Appointment of an Arbitrator u/s 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996:
The petitioner sought the appointment of an Arbitrator for adjudication of disputes under Sections 11(5) and 11(6) of the Arbitration and Conciliation Act, 1996. The disputes arose from agreements involving the development of a hotel project and changes in shareholding patterns.
2. Jurisdiction of the High Court to entertain the petition:
The respondent contended that the dispute involved International Commercial Arbitration, and thus, the jurisdiction to appoint an Arbitrator vested in the Chief Justice of India alone. The High Court of Andhra Pradesh had initially appointed an Arbitrator, but this order was set aside by the Supreme Court, which allowed the withdrawal of the original application under Section 11(6).
3. Existence and validity of the Arbitration Agreement:
The parties agreed that there was an Arbitration Agreement (Clause 41 of the agreement dated 19th January 2004). However, the respondents argued that the agreement had worked itself out and no live issue subsisted. The petitioner countered that disputes regarding the termination of his association with Varsha and the validity of agreements creating rights in the "Progressive Group" were still unresolved and required arbitration.
4. Whether the claim is a live issue or a dead one:
The Court examined whether the claim was a dead one or if a live issue still existed. It was determined that there were disputes between the parties that could not be resolved without evidence. The Court found that the Arbitration Agreement was clear and encompassed the disputes raised by the petitioner. The Arbitrator, under Section 16 of the Act, could rule on his own jurisdiction, including the existence or validity of the Arbitration Agreement.
Conclusion:
The petition was allowed, and Mr. Justice M. Jagannadha Rao, a former Judge of the Supreme Court, was appointed as the sole Arbitrator to adjudicate the claims/disputes, subject to his consent. The Arbitrator was directed to deal with the matter uninfluenced by previous observations made by the High Court of Andhra Pradesh or the Supreme Court. The petition was disposed of with no order as to costs.
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2010 (5) TMI 918
Issues involved:
The issues involved in the judgment are the validity of decrees and transactions related to a suit land, the authority of a power of attorney to transfer property through a consent decree, and the legal implications of the actions taken by the parties involved.
Issue 1 - Validity of Decrees and Transactions:
The plaintiffs filed a suit seeking a declaration that certain decrees and a sale deed related to the suit land were illegal, null, void, and not binding on their rights. They alleged that the defendant, in connivance with another party, obtained decrees and conducted transactions unlawfully. The defendants, on the other hand, claimed that the decrees and transactions were valid and based on a family settlement. The trial court partly decreed the suit in favor of the plaintiffs, declaring the decrees illegal and void. The first appeal against this decision was dismissed.
Issue 2 - Authority of Power of Attorney:
The main contention in the appeal was whether the power of attorney holder had the authority to transfer the suit property through a consent decree. The appellant argued that the power of attorney allowed for compromises, although it did not specifically mention transferring property through a decree. The court emphasized that the powers granted in a power of attorney must be strictly construed, and if a specific power is not conferred, it cannot be exercised. It was concluded that the transfer of property through a consent decree was beyond the scope of the power of attorney, making the decree illegal.
Conclusion:
The court dismissed the appeal, stating that no substantial question of law was involved. The judgment highlighted the importance of strictly interpreting the powers granted in a power of attorney and concluded that the transfer of property through a consent decree was not authorized. The appeal was thus dismissed, upholding the decision of the lower courts regarding the validity of the decrees and transactions related to the suit land.
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2010 (5) TMI 917
Issues Involved:
1. Constitutional validity of Article 243-D(6) and Article 243-T(6) enabling reservations for backward classes in local self-government.
2. Constitutional validity of Article 243-D(4) and Article 243-T(4) enabling reservation of chairperson positions in local self-government.
Issue-wise Detailed Analysis:
1. Constitutional Validity of Article 243-D(6) and Article 243-T(6):
The petitioners challenged the validity of these articles, arguing that they enable reservations for backward classes without clear guidance on identifying beneficiaries or the quantum of reservations. They contended that such reservations do not meet the test of 'reasonable classification' and are inconsistent with the intent of the Constitution's framers. The respondents defended these provisions, asserting that they aim to ensure substantive equality and fair representation of backward classes in local self-government.
The Court held that Articles 243-D(6) and 243-T(6) are constitutionally valid as they are enabling provisions allowing State Legislatures to reserve seats and chairperson posts for backward classes. Concerns about disproportionate reservations should be addressed through specific challenges against State Legislations. The Court emphasized that these provisions form a distinct constitutional basis for affirmative action, different from the reservation policies in education and employment.
2. Constitutional Validity of Article 243-D(4) and Article 243-T(4):
The petitioners argued that reserving chairperson posts amounts to cent-per-cent reservation, violating the equality clause. They contended that the reservation of such executive positions could lead to reservations at higher levels of government, undermining the principles of democracy and universal adult franchise.
The respondents countered that the reservation of chairperson posts is a measure of protective discrimination, essential for empowering weaker sections at the local level. They argued that the frame of reference for these reservations is the entire pool of chairperson positions across the state, not individual posts, and that these reservations are necessary to ensure effective representation and leadership opportunities for marginalized groups.
The Court upheld the constitutional validity of Article 243-D(4) and Article 243-T(4), stating that chairperson positions in local self-government cannot be equated with solitary posts in public employment. The reservation of these positions is intended to empower weaker sections and ensure their adequate representation in local governance. The Court rejected the analogy with higher levels of government, emphasizing the unique context and objectives of local self-government.
Conclusion:
The Court concluded that:
1. The nature and purpose of reservations in local self-government differ from those in higher education and public employment, forming a distinct constitutional basis for affirmative action.
2. Articles 243-D(6) and 243-T(6) are constitutionally valid, enabling State Legislatures to reserve seats and chairperson posts for backward classes. Concerns about disproportionate reservations should be addressed through specific challenges against State Legislations.
3. The upper ceiling of 50% vertical reservations for SC/ST/OBCs should not be breached in local self-government, except to safeguard Scheduled Tribes' interests in Scheduled Areas.
4. The reservation of chairperson posts as contemplated by Articles 243-D(4) and 243-T(4) is constitutionally valid and necessary for empowering weaker sections at the local level.
The writ petitions were disposed of with these observations.
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2010 (5) TMI 916
Issues Involved:
1. Misleading Announcements and Inflated Profits
2. Off-loading of Shares by Promoters
3. Penalties Imposed on Promoters
4. Compliance with Summons
Summary:
1. Misleading Announcements and Inflated Profits:
The company, listed on the Bombay Stock Exchange, made public announcements that were misleading in material particulars, leading to an increase in the price of its scrip. The financial results for the quarters ending June 30, 2003, and September 30, 2003, were inaccurate, with inflated profits due to the lack of provision for tax payment. Notes appended to these results contained price-sensitive information, some of which were misleading or exaggerated. For instance, the company falsely claimed to have doubled its production capacity by acquiring two units, whereas it had only entered into an understanding with existing spinning units.
2. Off-loading of Shares by Promoters:
Following the misleading announcements, the price of the company's scrip rose significantly. Promoters and associated entities off-loaded their shares during this period, unduly enriching themselves. The whole time member found that the textile company, an associate of the appellant, was involved in these transactions. Despite the appellant's contention that they had sold their stake in the textile company in 2002, evidence showed that Arun Panchariya, a promoter, signed delivery instruction slips on behalf of the textile company in 2003, indicating a continued connection. The misleading announcements and subsequent off-loading of shares by promoters were established, constituting a serious irregularity and manipulation of the scrip's price.
3. Penalties Imposed on Promoters:
Adjudication proceedings were initiated against the promoters for their involvement in the misleading announcements and off-loading of shares. A total penalty of Rs. 40 lacs was imposed on seven members of the Panchariya group. The adjudicating officer noted that the promoters and related entities sold over 18 crore shares, realizing proceeds over Rs. 12 crores, and manipulated the scrip, causing losses to genuine investors. The penalties included Rs. 32 lacs for misleading announcements and manipulation, Rs. 2 lacs on Satish Panchariya for non-compliance with summons, and Rs. 1 lac on Arun Panchariya for the same reason.
4. Compliance with Summons:
The tribunal found that Satish Panchariya and Arun Panchariya had substantially complied with the summons issued during the investigations. Consequently, the penalties of Rs. 2 lacs and Rs. 1 lac imposed on them for non-compliance were set aside. In all other respects, the impugned orders were upheld.
Additional Observations:
The tribunal noted a peculiar feature where the company included non-accounting, price-sensitive information in the notes to its financial results. This practice, claimed to be common among listed companies, was questioned by the tribunal, suggesting that the Securities and Exchange Board of India (SEBI) should examine whether such announcements should be made in this manner.
Conclusion:
The appeals were disposed of with no order as to costs, upholding the penalties for misleading announcements and manipulation while setting aside penalties for non-compliance with summons.
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2010 (5) TMI 915
... ...
... ... ..... pta, Kunal Bahri, B. V. Balaram Das For the Respondent(s) Ajay Vohra, Kavita Jha, Akansha Aggarwal ORDER Delay condoned. The special leave petition is dismissed.
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2010 (5) TMI 914
Issues Involved:
1. Provisional attachment of properties under Section 5 of the Prevention of Money Laundering Act, 2002.
2. Involvement in a scheduled offence.
3. Bona fide purchase of shares.
4. Proceeds of crime.
5. Settlement with SEBI.
Issue-wise Detailed Analysis:
1. Provisional Attachment of Properties:
The appeal challenges the Adjudicating Authority's order confirming the provisional attachment of properties under Section 5 of the Prevention of Money Laundering Act, 2002. The appellant argued that the conditions under Section 5(1)(a) & (b) of the Act, which require the person in possession of proceeds of crime to be charged with a scheduled offence, were not met. The Tribunal noted that if the financial gain from the sale of shares is deemed proceeds of crime, the attachment proceedings would be valid.
2. Involvement in a Scheduled Offence:
The appellant contended that he was not involved in any scheduled offence under the Act. The Tribunal examined the definitions under Sections 2(u) and 2(y) of the Act, which define "proceeds of crime" and "scheduled offence." The appellant argued that the CBI did not find evidence of his involvement in the forgery and other offences committed by the key operators. The Tribunal found that the appellant was not charged with any scheduled offence and thus, the attachment order was void ab initio.
3. Bona Fide Purchase of Shares:
The appellant claimed to be a bona fide purchaser of shares in good faith for consideration. He argued that the transactions of purchase and sale of IDFC shares were legal and did not involve any contravention of the law. The Tribunal noted that the appellant provided complete details of the transactions, including ledger accounts, bank accounts, demat accounts, balance sheets, and income tax returns. The Tribunal found the appellant's contentions convincing and held that he was a bona fide purchaser of the shares.
4. Proceeds of Crime:
The Tribunal examined whether the financial gain from the sale of shares constituted proceeds of crime. The Tribunal noted that the CBI, in its charge sheet, found no evidence of the appellant's knowledge of the forgery and other offences committed by the key operators. The CBI also stated that the appellant purchased the shares in a legal manner. The Tribunal found that the appellant's financial gain from the sale of shares did not constitute proceeds of crime and thus, he was not involved in money laundering.
5. Settlement with SEBI:
The appellant settled the proceedings initiated by SEBI by remitting a sum of Rs. 9,62,40,761, which included disgorgement and settlement charges. The Tribunal noted that the actions initiated by SEBI were not scheduled offences under the Act. The Tribunal found that the settlement with SEBI did not imply admission of guilt and did not affect the appellant's case under the Prevention of Money Laundering Act.
Conclusion:
The Tribunal allowed the appeal, setting aside the Adjudicating Authority's order confirming the attachment. The Tribunal held that the appellant was a bona fide purchaser of the shares, and the financial gain from the sale of shares did not constitute proceeds of crime. Consequently, the appellant was not covered under the provisions of the Prevention of Money Laundering Act.
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2010 (5) TMI 913
Issues Involved:
1. Disallowance of liquidated damages.
2. Inclusion of excise duty and sales tax in total turnover for deduction u/s 80HHC.
3. Exclusion of certain incomes from business profits for deduction u/s 80HHC.
Summary:
1. Disallowance of Liquidated Damages:
The issue pertains to the deletion of disallowance of liquidated damages amounting to Rs. 42,06,346/-. The Assessing Officer (AO) disallowed the amount, considering it as a penalty not incurred wholly and exclusively for business purposes. The CIT(A) deleted the disallowance, referencing prior decisions in favor of the appellant for similar issues in earlier assessment years. The Tribunal upheld the CIT(A)'s decision, noting that the liquidated damages were a normal business expense due to delays in delivery, which were inherent in the appellant's business operations. The Tribunal referenced the case of Sardar Prit Inder Singh v/s. CIT, which supported the claim that such damages are allowable as business expenditure.
2. Inclusion of Excise Duty and Sales Tax in Total Turnover for Deduction u/s 80HHC:
The AO included excise duty of Rs. 2,99,66,653/- and sales tax of Rs. 1,20,95,809/- in the total turnover for calculating deduction u/s 80HHC. The CIT(A) directed the AO to exclude these amounts, following the Supreme Court decisions in Laxmi Machine Works and Catapharma India. The Tribunal upheld the CIT(A)'s decision, citing the Special Bench of the Tribunal in IFB Agro Industries Ltd. and the Supreme Court's ruling that excise duty and sales tax are not includible in the "total turnover" for the formula in Section 80HHC(3).
3. Exclusion of Certain Incomes from Business Profits for Deduction u/s 80HHC:
The AO excluded interest income of Rs. 3,94,774/-, GST set off of Rs. 12,98,202/-, write-off payment received of Rs. 1,15,767/-, and technical drawings income of Rs. 28,00,156/- from business profits for deduction u/s 80HHC. The CIT(A) included these incomes in business profits, referencing prior favorable decisions for the appellant. The Tribunal upheld the inclusion of GST set off and write-off payment received, referencing the case of Mazda Controls Ltd. For interest income, the Tribunal directed the AO to verify if borrowed funds were used for earning interest and to allow net interest income for deduction. Regarding technical drawings income, the Tribunal found it integral to the appellant's business and upheld its inclusion in business profits.
Conclusion:
The appeal of the revenue was partly allowed, with specific directions for the AO regarding interest income verification and confirmation of the inclusion of other incomes in business profits for deduction u/s 80HHC. The Tribunal's decision was signed, dated, and pronounced on May 21, 2010.
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2010 (5) TMI 912
Issues Involved:
1. Legality of Summons Issued u/s 14 of the Central Excise Act, 1944.
2. Petitioner's Non-appearance and Authorization of Senior Manager.
3. Department's Justification for Summoning the Managing Director.
4. Applicability of Circulars and Judicial Precedents.
Summary:
1. Legality of Summons Issued u/s 14 of the Central Excise Act, 1944:
The petitioner, Managing Director of M/s Aryan Ispat Power Pvt. Ltd., challenged the summons issued to him by the Central Excise authorities u/s 14 of the Central Excise Act, 1944, as arbitrary and illegal. The court examined Section 14, which empowers Central Excise Officers to summon any person for evidence or document production necessary for an inquiry.
2. Petitioner's Non-appearance and Authorization of Senior Manager:
The petitioner, citing old age and health issues, authorized the Senior Manager (Finance) to appear on his behalf, arguing that the Senior Manager was well-versed with the company's excise matters. The petitioner contended that his personal appearance was unnecessary as the company had cooperated fully by providing documents and statements through authorized representatives.
3. Department's Justification for Summoning the Managing Director:
The Department argued that the summons were part of an investigation into alleged excise duty evasion. They contended that the Managing Director's presence was necessary for clarifications and that the Senior Manager could not answer queries related to operational activities. The Department emphasized that the petitioner had not appeared despite multiple summonses, indicating a lack of cooperation.
4. Applicability of Circulars and Judicial Precedents:
The petitioner relied on a circular (C.B.E. & C Letter F.No.208/122/89-CX.6 dated 13.10.1989) instructing that Managing Directors should not be summoned unless absolutely necessary. The court noted that the circular, though issued in a different context, emphasized that summons should not be used to harass top management. Judicial precedents from the Calcutta High Court and the Supreme Court were cited, highlighting that directors not involved in day-to-day operations should not be unnecessarily summoned.
Conclusion:
The court found no specific reason for the petitioner's personal appearance, as the Department could not demonstrate that he possessed any crucial documents or information. The court directed the petitioner to provide a Board resolution ratifying the authorization of the Senior Manager and an affidavit undertaking that the authorized persons would cooperate fully. If the petitioner complied, his personal appearance would be dispensed with; otherwise, the Department could proceed with the summons.
Disposition:
The writ petition was disposed of with the above directions.
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2010 (5) TMI 911
Issues Involved:
1. Rejection of books of account by the Assessing Officer.
2. Estimation of net profit at 10% of purchase price.
3. Addition of Rs. 2,50,000/- towards unexplained capital.
4. Addition of Rs. 6,50,000/- towards unexplained unsecured loans.
5. Request for benefit of telescoping.
Issue-wise Detailed Analysis:
1. Rejection of Books of Account by the Assessing Officer:
The Assessing Officer (AO) rejected the books of account on the grounds that the assessee did not maintain proper sale bills and stock registers, which are essential for verifying the exact details of sales. The AO invoked the provisions of section 145 of the Income Tax Act to estimate the income, as the books of account were not reliable.
2. Estimation of Net Profit at 10% of Purchase Price:
The AO estimated the net profit at 20% of the stock put to sale, citing the normal margin of profit derived by wine dealers as per the Andhra Pradesh Beverages Corporation Limited (APBCL) rate structure. However, the Commissioner of Income Tax (Appeals) [CIT(A)] reduced this estimation to 10%, considering the rampant practice of selling liquor above the Maximum Retail Price (MRP) and other violations. The Tribunal, however, directed the AO to estimate the net profit at 5% of total purchases, net of all expenditure, following the precedent set in a similar case (Gudla Mothilal Vs. ITO).
3. Addition of Rs. 2,50,000/- Towards Unexplained Capital:
The AO added Rs. 2,50,000/- towards unexplained capital, as the assessee failed to provide documentary evidence to substantiate the source of this capital. The CIT(A) upheld this addition, noting that the confirmation letters provided by the assessee lacked necessary details such as the date of advancing the loan and proof of agricultural income of the creditors.
4. Addition of Rs. 6,50,000/- Towards Unexplained Unsecured Loans:
The AO added Rs. 6,50,000/- towards unexplained unsecured loans, as the assessee's confirmation letters from creditors were found to be insufficient. These letters did not specify the dates of the loans, and there was no evidence to prove the creditors' financial capacity. The CIT(A) upheld this addition, and the Tribunal also found the confirmation letters to be stereotyped and lacking essential details, thus agreeing with the lower authorities.
5. Request for Benefit of Telescoping:
The assessee requested the benefit of telescoping, arguing that the income estimated in the earlier years should be deemed available for the current year's investments. The CIT(A) rejected this claim due to the lack of evidence linking the earlier estimated income to the current year's investments. However, the Tribunal directed the AO to verify the additions made in the immediately preceding year and provide appropriate relief if the deemed income was available for the current year's investments.
Conclusion:
The Tribunal partly allowed the appeal, directing the AO to estimate the net profit at 5% of total purchases and to verify the availability of deemed income from the preceding year for the purpose of granting telescoping benefits. The additions towards unexplained capital and unsecured loans were upheld due to insufficient evidence provided by the assessee.
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2010 (5) TMI 910
Issues involved: Application for registration u/s 12A(a) of the Income-tax Act, 1961 as a public charitable institution, refusal of registration, condonation of delay for filing appeal.
Registration under Section 12A(a): The appeal was filed against the order rejecting the application for registration under S. 12A(a) of the Act by the DIT (E), Hyderabad. The Andhra Pradesh Housing Board sought registration as a public charitable institution for tax exemption. The Board submitted necessary documents and information, but further details were requested during processing. The DIT (E) examined the eligibility of the Board for registration and refused it. The Board appealed against this decision, seeking condonation of a 1013-day delay in filing the appeal.
Condonation of Delay: The delay in filing the appeal was attributed to miscommunication due to a change in the Chief Accountant position. The Board also cited a subsequent judgment as a reason for the delay. However, the Tribunal found that the reasons provided were not sufficient to justify the delay. The Board's negligence and lack of genuine cause for the delay were emphasized. The Tribunal referred to legal precedents to support the decision not to condone the delay, highlighting the importance of filing within the stipulated time. The Board's appeal was dismissed due to the uncondoned delay, and the Tribunal declined to address the merits of the case.
Conclusion: The Tribunal dismissed the appeal of the assessee due to the uncondoned delay in filing the appeal, emphasizing the importance of adhering to the limitation period. The decision was based on the lack of sufficient cause for the delay, as demonstrated by the Board's negligence and failure to provide a valid reason for the delay. The Tribunal's decision was in line with legal principles regarding the condonation of delay in filing appeals.
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2010 (5) TMI 909
Issues involved:
The issue involved in this case is the prayer for a court-monitored investigation into the 2G spectrum scam by the CBI or an SIT to uncover the involvement of various parties, including senior officers, middlemen, and private entities.
Details of the judgment:
1. Allegations and Importance of the Issue:
The Petitioner emphasized the public importance of the issue and the need for monitoring the investigation due to perceived unfairness. The basic prayer was to monitor the ongoing investigation by the CBI.
2. Status of CBI Investigation:
The Additional Solicitor General confirmed that the CBI is currently investigating the matter, and there was no reason to doubt the agency's motives.
3. Legal References:
The Petitioner cited the Vineet Narain case, while the Additional Solicitor General referred to the Kunga Nima Lepcha case to support their arguments during the hearing.
4. Reproduction of Key Paragraphs:
The judgment reproduced paragraphs from a previous decision to highlight the importance of specific legal principles and the limitations of the court's jurisdiction in initiating investigations.
5. Court's Decision:
Based on the legal principles discussed, the Court declined to exercise its extraordinary jurisdiction to direct the monitoring of the CBI investigation. The writ petition was dismissed, and no costs were awarded.
This summary provides a detailed overview of the issues, arguments presented, legal references, and the ultimate decision of the court in the case involving the 2G spectrum scam investigation.
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2010 (5) TMI 908
The Supreme Court of India ordered that an amount of Rs. 50 crores be pre-deposited by the corporate wing of the Central Government. The Assessing Officer can proceed with assessment proceedings, but no recovery should be made until further orders. Interlocutory applications are disposed of, and civil appeals are scheduled for final hearing on August 31, 2010.
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2010 (5) TMI 907
Involuntary administration of scientific techniques - narcoanalysis, polygraph examination and the Brain Electrical Activation Profile (BEAP) test - improving investigation in criminal cases - involves tensions between the desirability of efficient investigation and the preservation of individual liberties - Implications of permitting the use of techniques - fundamental rights to all citizens - Whether the results gathered from the impugned tests amount to `testimonial compulsion', thereby attracting the prohibition of Article 20(3) - HELD THAT:- we are of the view that the results obtained from tests such as polygraph examination and the BEAP test should also be treated as `personal testimony', since they are a means for `imparting personal knowledge about relevant facts'. Hence, our conclusion is that the results obtained through the involuntary administration of either of the impugned tests (i.e. the narcoanalysis technique, polygraph examination and the BEAP test) come within the scope of `testimonial compulsion', thereby attracting the protective shield of Article 20(3).
Whether the involuntary administration of the impugned techniques is a reasonable restriction on `personal liberty' as understood in the context of Article 21 of the Constitution? The theory of interrelationship of rights mandates that the right against self-incrimination should also be read as a component of `personal liberty' under Article 21. Hence, our understanding of the `right to privacy' should account for its intersection with Article 20(3). Furthermore, the `rule against involuntary confessions' as embodied in Sections 24, 25, 26 and 27 of the Evidence Act, 1872 seeks to serve both the objectives of reliability as well as voluntariness of testimony given in a custodial setting. A conjunctive reading of Articles 20(3) and 21 of the Constitution along with the principles of evidence law leads us to a clear answer.
We must recognise the importance of personal autonomy in aspects such as the choice between remaining silent and speaking. An individual's decision to make a statement is the product of a private choice and there should be no scope for any other individual to interfere with such autonomy, especially in circumstances where the person faces exposure to criminal charges or penalties. It is our considered opinion that subjecting a person to the impugned techniques in an involuntary manner violates the prescribed boundaries of privacy. Forcible interference with a person's mental processes is not provided for under any statute and it most certainly comes into conflict with the `right against self-incrimination'.
However, this determination does not account for circumstances where a person could be subjected to any of the impugned tests but not exposed to criminal charges and the possibility of conviction. In such cases, he/she could still face adverse consequences such as custodial abuse, surveillance, undue harassment and social stigma among others.
Whether the act of forcibly subjecting a person to any of the impugned techniques constitutes `cruel, inhuman or degrading treatment', when considered by itself - we must also highlight some practical concerns that strengthen the case against the involuntary administration of the tests in question. Firstly, the claim that the results obtained from these techniques will help in extraordinary situations is questionable. All of the tests in question are those which need to be patiently administered and the forensic psychologist or the examiner has to be very skilful and thorough while interpreting the results.
In a narcoanalysis test the subject is likely to divulge a lot of irrelevant and incoherent information. The subject is as likely to divulge false information as he/she is likely to reveal useful facts. Sometimes the revelations may begin to make sense only when compared with the testimony of several other individuals or through the discovery of fresh materials.
In a polygraph test, interpreting the results is a complex process that involves accounting for distortions such as `countermeasures' used by the subject and weather conditions among others.
In a BEAP test, there is always the possibility of the subject having had prior exposure to the `probes' that are used as stimuli. All of this is a gradually unfolding process and it is not appropriate to argue that the test results will always prove to be crucial in times of exigency. It is evident that both the tasks of preparing for these tests and interpreting their results need considerable time and expertise.
the compulsory administration of the impugned techniques violates the `right against self- incrimination'. This is because the underlying rationale of the said right is to ensure the reliability as well as voluntariness of statements that are admitted as evidence. This Court has recognised that the protective scope of Article 20(3) extends to the investigative stage in criminal cases and when read with Section 161(2) of the CrPC it protects accused persons, suspects as well as witnesses who are examined during an investigation.
The test results cannot be admitted in evidence if they have been obtained through the use of compulsion. Article 20(3) protects an individual's choice between speaking and remaining silent, irrespective of whether the subsequent testimony proves to be inculpatory or exculpatory. Article 20(3) aims to prevent the forcible `conveyance of personal knowledge that is relevant to the facts in issue'. The results obtained from each of the impugned tests bear a `testimonial' character and they cannot be categorised as material evidence.
We are of view that forcing an individual to undergo any of the impugned techniques violates the standard of `substantive due process' which is required for restraining personal liberty. Such a violation will occur irrespective of whether these techniques are forcibly administered during the course of an investigation or for any other purpose since the test results could also expose a person to adverse consequences of a non-penal nature. The impugned techniques cannot be read into the statutory provisions which enable medical examination during investigation in criminal cases, i.e. the Explanation to Sections 53, 53-A and 54 of the Code of Criminal Procedure, 1973.
Such an expansive interpretation is not feasible in light of the rule of `ejusdem generis' and the considerations which govern the interpretation of statutes in relation to scientific advancements. We have also elaborated how the compulsory administration of any of these techniques is an unjustified intrusion into the mental privacy of an individual. It would also amount to `cruel, inhuman or degrading treatment' with regard to the language of evolving international human rights norms. Furthermore, placing reliance on the results gathered from these techniques comes into conflict with the `right to fair trial'. Invocations of a compelling public interest cannot justify the dilution of constitutional rights such as the `right against self-incrimination'.
Therefore, We hold that no individual should be forcibly subjected to any of the techniques in question, whether in the context of investigation in criminal cases or otherwise. Doing so would amount to an unwarranted intrusion into personal liberty. However, we do leave room for the voluntary administration of the impugned techniques in the context of criminal justice, provided that certain safeguards are in place. Even when the subject has given consent to undergo any of these tests, the test results by themselves cannot be admitted as evidence because the subject does not exercise conscious control over the responses during the administration of the test. However, any information or material that is subsequently discovered with the help of voluntary administered test results can be admitted, in accordance with Section 27 of the Evidence Act, 1872. T
he National Human Rights Commission had published `Guidelines for the Administration of Polygraph Test (Lie Detector Test) on an Accused' in 2000. These guidelines should be strictly adhered to and similar safeguards should be adopted for conducting the `Narcoanalysis technique' and the `Brain Electrical Activation Profile' test. The text of these guidelines has been reproduced.
The present batch of appeals is disposed of accordingly.
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2010 (5) TMI 906
Issues Involved:
1. Legality of the search and seizure operation.
2. Validity of the arrest under Section 24 and 27A of the NDPS Act.
3. Jurisdiction of the Special Judge, NDPS Cases.
4. Petitioner's claim of false implication and torture.
5. Legality of continued judicial custody and remand orders.
6. Petitioner's request for habeas corpus and other reliefs.
Detailed Analysis:
1. Legality of the Search and Seizure Operation:
On 24th September 2009, a search operation was conducted at the petitioner's residence by the Directorate of Enforcement, resulting in the recovery of Rs. 12,50,000 in Indian currency and some foreign currency. The petitioner was interrogated and his statements were recorded under Section 67 of the NDPS Act on 5th and 6th December 2009. The petitioner alleged that the officials, unable to find incriminating material, sought to implicate him under the PML Act, leading to another search on 5th December 2009 by the NCB and Directorate of Enforcement.
2. Validity of the Arrest under Section 24 and 27A of the NDPS Act:
The petitioner was arrested on 6th December 2009 under Sections 24 and 27A of the NDPS Act, which pertain to external dealings in narcotic drugs and financing illicit traffic. The respondents alleged the petitioner's involvement in financing narcotic drug activities globally. The petitioner denied these allegations, claiming no recovery of drugs or money linked to such activities.
3. Jurisdiction of the Special Judge, NDPS Cases:
The petitioner challenged the jurisdiction of the Special Judge, NDPS Cases, arguing that as a Non-Resident Indian residing in Dubai, the provisions of Sections 24 and 27A of the NDPS Act were inapplicable. The court noted that Section 24 deals with unauthorized external trade in narcotic drugs, and Section 27A pertains to financing illicit traffic. The court observed that the definition of "illicit traffic" under Section 2(viiia) is broad, covering various activities, including financing. The court found that the material collected indicated a possible role of the petitioner in financing illicit traffic, thus falling within the jurisdiction of the Special Judge.
4. Petitioner's Claim of False Implication and Torture:
The petitioner alleged false implication and torture during custody, claiming he was forced to sign blank papers and dictated statements. However, the court did not delve into these claims in detail, focusing instead on the jurisdictional issue and the legality of the remand orders.
5. Legality of Continued Judicial Custody and Remand Orders:
The petitioner was remanded to judicial custody by the Special Judge, NDPS, with the remand extended periodically. The court noted that the Special Judge had given detailed reasons for the remand, considering the allegations and material presented by the prosecution. The petitioner had not challenged these remand orders through appropriate legal channels but instead filed the present writ petition.
6. Petitioner's Request for Habeas Corpus and Other Reliefs:
The petitioner initially sought a writ of habeas corpus for release from custody and quashing of proceedings under Sections 24 and 27A of the NDPS Act. However, during the preliminary hearing, the petitioner confined the writ petition to challenging the arrest memo on jurisdictional grounds. The court, after hearing arguments, concluded that the proceedings were not ex-facie without jurisdiction and dismissed the writ petition, granting the petitioner liberty to challenge the remand orders through proper legal channels.
Conclusion:
The court dismissed the writ petition, upholding the jurisdiction of the Special Judge, NDPS Cases, and the legality of the remand orders. The petitioner was advised to challenge the remand orders through appropriate legal proceedings if desired. No orders as to costs were made.
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