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Showing 421 to 440 of 920 Records
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2010 (7) TMI 816
Issues:
Enforcement of consent order dated February 27, 2008, interim reliefs sought by Ramesh group against Suresh group, interpretation and implementation of paragraphs 17 and 24 of the consent order.
Analysis:
The applicants, Ramesh group, sought enforcement of a consent order dated February 27, 2008, passed by the Company Law Board under sections 397/398 of the Companies Act, 1956. The order settled properties between Ramesh group and Suresh group, family members of Piyarelall Agarwal, who were conducting joint family businesses. Disputes led to company petitions filed for oppression and mismanagement. The consent order was challenged by Suresh group in a section 10F appeal before the Calcutta High Court, which interpreted the order on March 22, 2010. The current applications aimed to enforce specific paragraphs of the consent order and sought interim reliefs to prevent dealing with Suresh group properties until resolution.
The main contention revolved around the liabilities and indemnity clauses outlined in paragraphs 17 and 24 of the consent order. Ramesh group argued that Suresh group should bear liabilities up to March 31, 2006, and both groups should indemnify each other for business actions. Ramesh group calculated various amounts totaling Rs. 38,20,60,692.37, seeking restraint orders against Suresh group to prevent dealing with properties or risk rendering the consent order fruitless. They relied on legal precedents to support the enforceability of consent orders by the Company Law Board.
On the other hand, Suresh group's counsel contended that the order was not a money decree, and the liabilities were declaratory, suggesting that a suit might be necessary to determine the actual amounts owed. They cited legal cases to argue that the clauses in question did not automatically entitle Ramesh group to immediate relief. The Board acknowledged the validity of both arguments but emphasized the need to interpret the consent order accurately to determine enforceability.
The Board referred to the principles established in previous cases, highlighting the distinction between attachment and injunction proceedings. It noted that without a clear interpretation of the liabilities and indemnities, no immediate relief could be granted against Suresh group properties. The Board emphasized the importance of proving the claims and calculations before deeming them as decreed amounts. As the parties had completed pleadings, the Board directed them to present arguments in the main application to interpret the consent order effectively.
Ultimately, the Board concluded that the interim reliefs sought by the applicants were not granted at that stage. The decision was based on the need for a definitive interpretation of the consent order and the lack of proven claims and calculations to support immediate relief against Suresh group properties. The Board highlighted the parallel obligations on both parties and the necessity for a comprehensive understanding of the consent order before granting any relief.
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2010 (7) TMI 815
Oppression and mismanagement - Whether in this case, the petitioners could make out a case for any relief on the ground of equity and even if the petitioners failed to make out a case under section 397 still they are entitled to any relief under section 402 of the Companies Act, 1956?
Held that:- There is substance in the submission of learned counsel for the respondent that for such relief there is no fact foundation in the entire company petition nor such declaration, as sought by the petitioner in the petition, could have been given by the Company Law Board and there is no prayer of the petitioner that respondent No. 3, Shri T.N. Unni be removed from the board of directors.From the above discussions, it is clear that the petitioners miserably failed to make out any case under section 397 of the Companies Act, 1956.
No reason to hold that the company, whose shareholding in other companies could have affected and the company in its wisdom found that the company should contest the appeal wherein the petitioner was under an obligation to implead the company as party in the company petition and appeal then the company should not have put forward its own case before the court. The act of the company cannot be condemned to the extent of holding that the company committed wrong and for that wrong the other director and respondents are liable.
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2010 (7) TMI 814
Issues:
1. Whether the Company Law Board can pass an interim relief when the High Court set aside its order as a non-speaking order?
2. Whether the dispute in the current petition is directly in issue in a case already pending before the Company Court, and if the petitioners can file under sections 397 and 398 of the Companies Act, 1956?
3. Whether the order of the Company Court in the pending case governs the reliefs sought by the petitioners?
Analysis:
1. The High Court set aside the Company Law Board's order as non-speaking but did not bar the Board from issuing a fresh order with reasons. The petitioners sought reliefs afresh, indicating the Board's competence to pass an order. The Board can act within its jurisdiction despite the High Court's decision.
2. The respondents filed a suit in the Company Court seeking removal of the first petitioner as director and other reliefs, but the petitioners did not seek any relief in that suit. As the issues and reliefs differ between the pending case and the current petition, the Board's jurisdiction is not ousted. The petitioners' right to remedy their grievances before the Board is valid.
3. The relief sought in the pending case does not address the reduction of the petitioners' shareholding, which is the crux of the current petition. As the issues and reliefs differ, the Board's jurisdiction under sections 397/398 is not affected. The petitioners' filing before the Board is deemed appropriate.
4. Precedents cited by the respondents do not apply to the current case as the issues and nature of grievances differ. The Board's jurisdiction remains intact, and the petitioners are entitled to seek relief for their grievances, especially regarding the change in shareholding.
5. The Board found that the disputes in the current petition are not identical to those in the pending case before the Company Court. Given the significant changes in shareholding and potential for exploitation in the company, the Board's role is to protect both parties' interests until a comprehensive verdict is reached. The Board must ensure its orders do not conflict with those of the High Court or Company Court.
6. Considering the above reasons, the application by the respondents lacks merit and is therefore dismissed by the Board.
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2010 (7) TMI 813
Winding up - Circumstances in which a company may be wound up - Held that:- in fact the interest of the workers would also be gravely prejudiced and jeopardised, if the respondent is permitted to continue incurring huge liabilities. It is always open for the appropriate parties to make applications to revive the respondent-company. This would be in the greater interest of the workmen and other employees. In the circumstances, the company petition is made absolute in terms of prayer clauses (a) and (b).
The operative part of this order is stayed up to October 31, 2010. However, till the official liquidator takes possession of the property, the respondent-company shall not dispose of, alienate, encumber, part with possession of or create any third party right, title or interest in respect of the assets of the company, except payment of wages of the employees and workers of the company and statutory dues
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2010 (7) TMI 812
Settlement scheme - Held that:- By the impugned orders, the Company Law Board has only enforced the settlement between the parties thereto. If any of the other parties are aggrieved by the transactions, including on the basis of their being contrary to the articles of association of the company, they must adopt independent proceedings which would be decided on their own merits. The applicants in Appeal No. 12 are at liberty to adopt separate/independent proceedings for the redressal of their grievance in respect of the said settlement, including on the basis of article 10. The question whether the company ought to register a transfer pursuant to the said settlement and orders or not is a matter which does not arise in the present appeals.
I am not inclined to interfere with the order of costs of ₹ 50,000 for more than one reason. The Company Law Board rightly came to the finding that the appellants tried to wriggle out of a settlement. The manner in which they sought to do so does not warrant any interference with the order of the Company Law Board. Further, no question of law arises in this regard. Appeal dismissed.
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2010 (7) TMI 811
Issues:
- Application under section 403 of the Companies Act, seeking permission to proceed with a joint development agreement.
- Company petition filed alleging oppression and mismanagement.
- Dispute over sale deeds and joint development agreements.
- Ownership stake and allegations of property stripping.
- Legal proceedings initiated by creditors.
- Execution of joint development agreement and its implications.
- Compliance with interim orders and transparency.
- Permission to proceed with the joint development agreement.
Analysis:
1. Application under Companies Act:
The judgment deals with an application under section 403 of the Companies Act, seeking permission to proceed with a joint development agreement. The applicant, a real estate developer, sought approval for a joint development agreement entered into with the company. This issue involves the interpretation of relevant provisions of the Companies Act and Company Law Board Regulations.
2. Allegations of Oppression and Mismanagement:
The company petition filed alleged oppression and mismanagement by certain respondents, leading to disputes over sale deeds and joint development agreements. The petitioner sought to set aside various transactions and direct an investigation into the company's affairs. This issue raises concerns regarding corporate governance, shareholder rights, and legal remedies available under the Companies Act.
3. Ownership Stake and Property Stripping:
The petition highlighted disputes over ownership stake in the company and allegations of property stripping through sale deeds. The petitioner claimed a higher stake in the company compared to what was admitted by the contesting parties. This issue involves assessing the validity of property transactions and the duty of directors towards the company and its shareholders.
4. Legal Proceedings and Creditors' Claims:
The judgment noted that legal proceedings had been initiated by creditors against the company before the Debts Recovery Tribunal. This issue raises questions about the company's financial health, creditor rights, and the impact of such proceedings on the company's operations and management.
5. Joint Development Agreement Execution:
The execution of the joint development agreement was a key aspect of the case. The agreement was entered into to facilitate the development of the company's land and discharge liabilities. The parties involved presented arguments regarding the fairness and legality of the agreement. This issue involves contract law, property rights, and commercial considerations.
6. Compliance and Transparency:
The judgment emphasized the importance of compliance with interim orders and maintaining transparency in the proceedings. The parties were required to provide detailed information and ensure that all transactions were conducted transparently. This issue underscores the significance of procedural fairness and disclosure in legal proceedings.
7. Permission to Proceed:
Ultimately, the judgment allowed the application, permitting the applicant to proceed with the joint development agreement. Certain directions were issued to ensure transparency and safeguard the interests of the company and its stakeholders. The decision was based on considerations of the company's best interests and the circumstances surrounding the agreement.
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2010 (7) TMI 810
Winding up petition - Held that:- As bona fide dispute has been raised in this matter against the claim of the petitioner and it is not the case where the claim is admitted. I do not think it would be equitable to direct winding up of the company in the facts of the present case. The petition shall stand dismissed. However, it shall be open to the petitioner to apply before the appropriate legal forum if they are so advised for reagitating their claim. If any action is instituted, then the petitioner shall be entitled to take defence contemplated in section 14 of the Limitation Act, 1963, having regard to the fact that this matter was pending before this court since the year 2004
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2010 (7) TMI 809
Issues:
1. Application filed under section 403 read with section 10E and section 188(5) of the Companies Act, 1956 and regulation 44 of the Company Law Board Regulations, 1991 seeking to dispense with the circulation of a statement to shareholders in an annual general meeting.
Analysis:
The case involved an application filed by a company seeking to dispense with the circulation of a statement to shareholders in an annual general meeting. The statement in question contained defamatory allegations and was intended to secure needless publicity regarding averments made in a company petition. The applicant argued that the statement aimed to lower the esteem of the company and its independent directors among the public. Respondent Nos. 1 and 2 contended that the statement was a true representation of facts and aimed to guide public shareholders, denying any defamatory intent. The Company Law Board has the authority to restrain the circulation of a statement if it is satisfied that the rights conferred by the relevant section are being abused for defamatory purposes.
The disputed statement mainly referred to the appointment of a director and the increase of remuneration for the managing director. The applicant argued that the statement mirrored the allegations in the company petition and was an attempt to impeach the integrity of independent directors. The Board found that the statement, if circulated, would lower the esteem of the company among the public. The Board concluded that respondent Nos. 1 and 2 were abusing the provision under section 188 of the Companies Act to secure unnecessary publicity for defamatory matter. Despite the decision, respondent Nos. 1 and 2 retained the opportunity to present their views in the proposed annual general meeting. The application filed by the company was deemed maintainable, and the Board directed the company not to circulate the impugned statement to the shareholders.
In summary, the judgment addressed the abuse of rights to circulate a statement under the Companies Act, emphasizing the need to prevent defamation and unnecessary publicity. The Board's decision highlighted the importance of upholding the company's reputation and the integrity of its directors, ultimately ruling in favor of the applicant to prevent the circulation of the defamatory statement to shareholders.
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2010 (7) TMI 808
Issues involved:
The judgment deals with the issue of disallowance of higher depreciation at 50% on Plant and Machinery used in texturising and twisting of yarn.
Summary:
The only issue in this appeal is the denial of higher depreciation at 50% to the assessee on its Plant and machinery used in texturising and twisting of yarn. The assessee claimed the higher rate of depreciation based on the Textile Upgradation Fund Scheme (TUFS) rules. However, the Assessing Officer (A.O.) disallowed the higher rate, stating that the machinery was not used for weaving or processing of cloth as required by the rules. The Commissioner of Income Tax (C.I.T.) upheld the A.O.'s decision, emphasizing that the rules clearly specify higher depreciation for machinery used in weaving, processing, and garment sectors, not for yarn production processes like texturising and twisting. The C.I.T. referred to a Supreme Court decision emphasizing strict interpretation of incentive provisions. The Appellate Tribunal, considering similar cases, allowed the assessee's claim, stating that texturising and twisting activities are part of processing in the textile industry, thus qualifying for higher depreciation.
In support of their arguments, the assessee referred to previous judgments where higher depreciation was allowed for similar activities. The Departmental Representative (D.R.) argued that the assessee's case was different as they were solely engaged in yarn manufacturing without weaving activities. However, the Tribunal found the D.R.'s distinction artificial, stating that texturising and twisting are part of processing in the textile industry. The Tribunal concluded that the rules encompass processing activities beyond just weaving and processing of cloth, thus allowing the assessee's claim for higher depreciation.
Therefore, the appeal filed by the assessee was allowed, granting them the benefit of higher depreciation at 50% on their Plant and Machinery used in texturising and twisting of yarn.
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2010 (7) TMI 807
Search and Seizure - Determination of transaction value - Normal value versus transaction value – Held that:- For all the clearances after 1-7-2000, the value has to be determined based on each transaction. Therefore, the differential duty should be confined only to the evidences available on record - period prior to 1-7-2000, the Commissioner has to decide the normal price for each variety of goods and he can adopt the same for all the clearances. It does not mean that the invoice value has to be accepted. The normal price has to be determined based on the evidence available - matter remanded to the Commissioner
Undervaluation - Charge of undervaluation based only on the principle of preponderance of probability - extrapolation – Held that:- In the cases cited extrapolation of a finding in respect of an offending transaction was applied to other transactions in view of the concrete evidence in the case examined - undervaluation of excisable goods is as serious a charge as clandestine removal - Differential duty can be demanded only where undervaluation is established - There could be cases where the facts of one case of undervaluation and the pattern involved are such that extrapolation is safe and justified - facts highlighted by the Commissioner do not justify such a course of action. As undervaluation cannot be ruled out and is likely to have taken place as is apparent from the price lists, chits and IOM seized - case remanded to the Commissioner for fresh adjudication
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2010 (7) TMI 806
Capital gain – sale of agriculture land - assessee had claimed deduction under s. 54F of the IT Act - assessee had claimed to have purchased the residential plot – construction was in progress and was not complete and in view thereof, the benefit of exemption claimed under s. 54F of the Act was rejected by the authorities below – Held that:- Where the assessee had invested the consideration received on sale of original asset in the purchase of the plot of land and started construction though not completed, the assessee had complied with the provisions of s. 54F of the Act and hence was entitled to the benefit of exemption claimed - AO directed to allow the claim of the assessee in respect of the benefit of exemption claimed under s. 54F of the Act – in favor of assessee
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2010 (7) TMI 805
Drawback claim - supplementary Drawback Claims under Rule 15 of Drawback Rules - claims rejected as time-barred – Held that:- During such time-periods nobody stops his business activities and one has to make alternative arrangements for smooth functioning of their official work. Govt. does not find this plea of personal/ busy schedule of the respondent as a valid reason so as to bind the Customs Authorities to act as per the convenience of individual exporter - revision application of revenue thus succeeds
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2010 (7) TMI 804
Penalty - Cenvat Credit - contravention of the provisions of Rule 9(2) - Held that:- Appellants have taken cenvat credit on the strength of invoices against which the goods received in the factory of the appellants physically - as per Rule 9(2) ibid provides that if concerned officer is satisfied that the goods have been received in the factory then for the contravention of non mention of vehicle number is not to be held as contravention as per rule - Penalty set aside
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2010 (7) TMI 803
TDS u/s 195 - Disallowance u/s 40A(a)(i)(A) - assessee has not deducted withholding tax on fees for technical services as per the provisions of DTAA - as submitted appellant was not the beneficial owner of Fees for Technical services and therefore the provision of DTAA does not apply - whether the assessee can be asked to do impossible Act, i.e., to deduct tax for the past period? -
HELD THAT:- We find that by amendment in the Finance Act, 2007, the Legislature inserted the explanation retrospectively with retrospective effect from 1-6-1976 to section 9(2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003-04 and it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 31-3-2004, when the obligation to deduct TDS was not on the assessee during that period.
The provision of section 9 provides for situations where income is deemed to accrue or arise in India to a non-resident. We find that the Legislature vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses (v), (vi) and (vii ) in sub-section (1) for income by way of interest, royalty or fees for technical services respectively and the intention of introducing the source rule was to bring to tax interest, royalty and fees for technical services, by creating a legal fiction in section 9, even in cases where services are provided outside India as long as they are utilized in India but the Hon’ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Ltd. [2007 (1) TMI 91 - SUPREME COURT] held that despite the deeming fiction in section 9, for any such income to be taxable in India, there must be sufficient territorial nexus between such income and the territory of India.
In view of the above facts and legal position, whether the assessee can be asked to do impossible Act, i.e., to deduct tax for the past period. With the insertion of the explanation retrospectively by the Finance Act, 2007 with retrospective effect from 1-6-1976 to section 9(2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003-04, it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 31-3-2004, when the obligation to deduct TDS was not on the assessee during that period. The argument canvassed by the Ld. counsel on the basis of a legal Maxim lex non cogit ad impossibilia, meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform. This Maxim is accepted by different courts of this country, including the Hon’ble Supreme Court in the case of Krishnaswamy S. Pd. v. Union of India [2006 (2) TMI 75 - SUPREME COURT].
At the relevant point of time it was impossible on the part of the assessee to deduct tax on the income of non-resident. Admittedly, up to the insertion of explanation vide Finance Act, 2007, the assessee was under bona fide belief not to deduct tax and accordingly he acted as per law. Accordingly we allow the appeal of assessee. In the result, assessee’s appeal is allowed.
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2010 (7) TMI 802
Issues Involved:
1. Deletion of addition of Rs. 1,32,32,609 assessed as short-term capital gains u/s 50 of the Income-tax Act, 1961.
2. Computation of short-term capital gains for the sale of machinery and plant of the Paper Division.
3. Interpretation of "block of assets" and its impact on the computation of capital gains.
Summary:
Issue 1: Deletion of Addition of Rs. 1,32,32,609 Assessed as Short-term Capital Gains u/s 50
The revenue's grievance was that the CIT(A) erred in deleting the addition of Rs. 1,32,32,609 assessed as short-term capital gains u/s 50 of the Income-tax Act, 1961, as the assessee-company sold the entire machinery and plant of the Paper Division. The original assessment included this amount as short-term capital gains, which was confirmed by CIT(A). However, the Tribunal restored the proceedings to the Assessing Officer, who again included this amount in the fresh assessment. The CIT(A) deleted this addition in the subsequent appeal, leading to the revenue's current appeal.
Issue 2: Computation of Short-term Capital Gains for the Sale of Machinery and Plant of the Paper Division
The revenue argued that the Paper Division was an independent business with separate books of account, and thus, the provisions of section 50 were applicable for computing short-term capital gains. The CIT(A) had earlier confirmed this view, stating that the assets of one unit should not be grouped with assets of other units for computing capital gains. The assessee contended that all assets with the same depreciation rate across different divisions should form one block of assets, and the computation should consider the actual cost of any asset acquired during the previous year.
Issue 3: Interpretation of "Block of Assets" and Its Impact on the Computation of Capital Gains
The assessee argued that section 2(11) defines "block of assets" as a group of assets with the same depreciation rate, without distinguishing between different divisions. The Tribunal noted that section 50(1) provides for the computation of capital gains by deducting the written down value of the block of assets and the actual cost of any asset acquired during the previous year. The Tribunal referred to various cases, including CIT v. Express Newspapers Ltd. and decisions of the Mumbai Benches of the Tribunal, which supported the view that the cost of new assets should be deducted even if they were not used for business in the year of sale.
Conclusion:
The Tribunal concluded that the assessee's interpretation of section 50 was correct. The sale value of the machinery and plant of the Paper Division was Rs. 2,38,65,025, while the cost of additions to other divisions was Rs. 2,19,59,261. Deducting this amount resulted in nil short-term capital gains. Thus, the capital gains on the transfer of the entire machinery and plant of the Paper Division amounted to nil and were not liable to be taxed u/s 50. The appeal was dismissed.
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2010 (7) TMI 801
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Disallowance u/s 40(a)(ia) - HELD THAT:- The due date of filing the return in the present case is 30-9-2007. The assessee in the present case has deducted tax in the month of March, 2007 and it has paid the said TDS before the due date of filing the return.; Therefore, the disallowance cannot be made u/s 40(a)( ia) as there is no default on the part of the assessee of non-deduction or non-payment of TDS in accordance with the said provision. The disallowance has wrongly been upheld by the CIT(A) and the same deserves be deleted. Accordingly the disallowance is deleted.
In the result, the appeal filed by the assessee is allowed.
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2010 (7) TMI 800
Disallowance u/s 40(a)( ia) - contract for transportation of goods -TDS u/s 194C(3) - We are of the considered view that the learned CIT(A) ought to have considered the appeal’s adjudication on the facts as enumerated by the AO. The very requesting forms were incorporated by the AO, therefore’, clinches the issue in favour of the assessee, the assessee was riot to be assessed as a sub-contractor. The truck owners in their’ relevant certification on Form No. 15-I declared for non-deduction of tax at source for not owning more than two heavy goods carriage trucks during the financial year. Fortified with these forms, the assessee was able to furnish Form No. 15J under the third proviso to clause (i) of sub-section (3) of section 194C for the asst. yr. 2006-07. As per certificate from the office of CIT(TDS), Kolkata, dated 23-4-2009, acknowledging submission of Form 15J to his office on 29-6-2006 vide receipt No. 2139, this procedure would have settled the issue in his favour. Therefore, the issue involved being legal is considered relying on the Apex Court’s decision in the case of National Thermal Power Co. Ltd. v. CIT [1996 (12) TMI 7 - SUPREME COURT]
In the result, appeal of the assessee is allowed on the additional ground and the sum of Rs. 61,63,280 disallowed u/s 40(a)( ia) is directed to be deleted.
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2010 (7) TMI 799
Issues Involved:
1. Deletion of penalty imposed under section 271(1)(c) of the Income-tax Act, 1961.
2. Whether the penalty was rightly levied by the Assessing Officer on various additions and disallowances.
Issue-wise Detailed Analysis:
1. Deletion of Penalty Imposed under Section 271(1)(c):
The revenue appealed against the deletion of the penalty of Rs. 93,70,000 imposed by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961. The Tribunal initially upheld the deletion based on the decision in CIT v. Prithipal Singh Co. [1990] 183 ITR 69, which was further upheld by the Supreme Court. However, the Punjab and Haryana High Court set aside the Tribunal's order, citing the Supreme Court's subsequent judgment in CIT v. Gold Coin Health Food (P.) Ltd. [2008] 304 ITR 308, and remanded the matter to the Tribunal for reconsideration.
2. Validity of Penalty for Specific Additions and Disallowances:
a. Addition of Rs. 11,668 on Account of Purchases:
The Tribunal found that the assessee failed to substantiate the claim that the purchase was part of the items sold to Nuchem Weir Ltd. The explanation was deemed not bona fide, and the assessee did not disclose all relevant particulars. Therefore, the penalty on this addition was sustained, and the Commissioner of Income-tax (Appeals)'s order was set aside.
b. Addition of Rs. 65,622 on Account of Provision for Doubtful Debts:
The Tribunal noted that the provision for doubtful debts was a debatable issue before the insertion of the Explanation to section 36(1)(vii) by the Finance Act, 2001. The claim was disclosed in the accounts, and the assessee discharged its burden under Explanation 1 to section 271(1)(c). Thus, the penalty on this item was rightly deleted by the Commissioner of Income-tax (Appeals).
c. Addition of Rs. 29,25,207 on Account of Loss on Sale of Shares:
The Tribunal found that the assessee's claim to set off long-term capital loss against business income was not bona fide and contrary to section 71 of the Act. The claim was made knowingly and not withdrawn voluntarily but after detection by the Assessing Officer. The penalty on this item was justified, and the Commissioner of Income-tax (Appeals)'s order was reversed.
d. Addition of Rs. 9,26,060 on Account of Earlier Year Liability:
The Tribunal held that the assessee's claim for deduction of earlier year liability no longer required was not bona fide. The claim was made consciously without any basis, and the explanation was not acceptable. The penalty on this item was justified, and the Commissioner of Income-tax (Appeals)'s order was reversed.
e. Addition of Rs. 48,000 on Account of Rent Receivable:
The Tribunal found that the assessee disclosed the rental income only after queries from the Assessing Officer. The conduct was not bona fide, and the disclosure was not voluntary. The penalty on this item was justified, and the Commissioner of Income-tax (Appeals)'s order was reversed.
f. Addition of Rs. 6,629 on Account of Excess Depreciation Claimed:
The Tribunal noted that the disallowance of depreciation was consequential to the rectification of earlier years' assessment orders. This was not material for penalty under section 271(1)(c). The penalty on this item was rightly deleted by the Commissioner of Income-tax (Appeals).
Conclusion:
The Tribunal upheld the penalty for the additions of Rs. 11,668, Rs. 29,25,207, Rs. 9,26,060, and Rs. 48,000, reversing the Commissioner of Income-tax (Appeals)'s order. However, the penalty for the addition of Rs. 65,622 and Rs. 6,629 was rightly deleted by the Commissioner of Income-tax (Appeals). The revenue's appeal was partly allowed.
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2010 (7) TMI 798
Issues Involved:
The judgment involves issues related to business promotion expenses disallowance, turnover suppression, and delay in making payments of employees' State insurance contributions.
Business Promotion Expenses Disallowance:
The assessee had returned a total income for the assessment year, but the Assessing Officer made a three-way addition, including disallowance of business promotion expenses. The Commissioner of Income-tax (Appeals) modified this addition after considering the net profit conceded by the assessee. The revenue challenged this modification, arguing that the Commissioner did not appreciate the evidence gathered and erred in determining the taxable income.
Turnover Suppression:
The assessing authority made an addition towards turnover suppression, which the Commissioner found should only include the income element attributable to the turnover. The revenue contested the modification granted by the Commissioner, claiming that the assessee suppressed sales and the profit element should be taxed. The Commissioner's decision to limit the quantum addition was upheld by the tribunal, stating that the profit element alone could be taxed in case of turnover suppression.
Delay in Payments of Employees' State Insurance Contributions:
An addition was made under section 43B for the delay in making payments of employees' State insurance contributions. The judgment did not specifically address this issue in detail but mentioned it as part of the overall assessment.
The tribunal dismissed the appeal filed by the revenue and the cross-objection filed by the assessee, upholding the Commissioner's decision on the modifications and additions made. The judgment highlighted the importance of recognizing income under uncertain circumstances and the need for proper reconciliation of accounts to determine taxable income accurately.
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2010 (7) TMI 797
Issues Involved:
1. Disallowance of severance cost as revenue expenses.
2. Disallowance of market research study expenses.
3. Disallowance of carry forward of business losses and unabsorbed depreciation.
4. Penalty u/s 271(1)(c).
Summary:
1. Disallowance of Severance Cost as Revenue Expenses:
The first grievance of the assessee was that the CIT(A) erred in confirming the disallowance of Rs. 93,91,706 claimed as revenue expenses on severance cost. The Assessing Officer (AO) disallowed the claim, reasoning that the business had ceased operations and the severance costs were for closure, not running the business, thus not allowable u/s 37. The Tribunal, however, held that if the business activity was not totally closed but merely suspended, severance costs are allowable. The assessee had only suspended manufacturing but continued trading, thus the severance costs were deemed allowable.
2. Disallowance of Market Research Study Expenses:
The second issue was the disallowance of Rs. 9,77,025 and Rs. 14,75,191 incurred on market research study. The AO treated these expenses as capital in nature, arguing they were for developing a new product. The Tribunal, however, found that the expenses were for understanding market conditions to enhance existing business operations, not for creating a new product. Thus, these expenses were considered revenue in nature and allowable.
3. Disallowance of Carry Forward of Business Losses and Unabsorbed Depreciation:
The third issue involved the disallowance of carry forward of business losses and unabsorbed depreciation amounting to Rs. 34,87,18,783. The AO disallowed the claim, stating the business had ceased operations, thus not meeting the conditions u/s 32(2), 72(2), and 73(3). The Tribunal noted that the assessee had only suspended manufacturing and continued trading, thus the business was not closed. The Tribunal remanded the issue back to the AO for re-adjudication, emphasizing the need for proper opportunity for the assessee to present its case.
4. Penalty u/s 271(1)(c):
The AO levied a penalty u/s 271(1)(c) on the disallowed severance cost and market research expenses. The CIT(A) confirmed the penalty on the severance cost but deleted it for the market research expenses. The Tribunal, having deleted both disallowances in the quantum appeal, held that no penalty was sustainable.
Result:
1. ITA No. 2422/Del/2007 is allowed for statistical purposes.
2. ITA No. 2168/Del/2009, the appeal of the assessee is allowed.
3. ITA No. 2735/Del/2009, the appeal of the revenue is dismissed.
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9911796707
