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Showing 61 to 80 of 694 Records
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2006 (7) TMI 686
MODVAT credit - fraudulent availment of credit on invalid documents - Rule 4 of the Cenvat Credit Rules, 2002 - waiver of pre-deposit - Held that: - after waiving pre-deposit, we set aside the impugned order and allow the appeals filed by the appellants with consequential relief, if any.
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2006 (7) TMI 685
Issues:
Appeal against setting aside of penalty by Commissioner (Appeals) - Availment of Modvat credit on capital goods - Sale of item without preparing Central Excise invoice - Failure to reverse credit amount - Imposition of penalty under Cenvat Credit Rules.
Analysis:
The case involved an appeal by the Revenue against the setting aside of a penalty by the Commissioner (Appeals) in a matter related to the availment of Modvat credit on capital goods by the respondents. The Anti-Evasion Branch of Central Excise observed that the respondents had received capital goods from a supplier and subsequently sold one item without preparing a Central Excise invoice and failing to reverse the credit amount availed on that item. The adjudicating authority confirmed the duty demand, interest, and imposed a penalty on the respondents. On appeal, the Commissioner (Appeals) set aside the penalty amount based on case laws, noting that the mistake in not reversing the credit was due to lack of communication and not mala fide intention. The Commissioner found that the respondents had voluntarily reversed the credit along with interest before the show cause notice was issued.
In the appeal, the Revenue relied on various judgments but the Commissioner found them not directly relevant to the issue. The Commissioner highlighted the decision of the Larger Bench in the case of Machino Montell (I) as directly relevant. Additionally, the Tribunal's decision in the case of Rashtriya Ispat Nigam Limited, which was confirmed by the Supreme Court, was cited in favor of the assessee. The Commissioner concluded that there were no merits in the appeal filed by the department and dismissed the appeal accordingly. The judgment emphasized the importance of communication and voluntary corrective actions taken by the respondents in reversing the credit amount, leading to the dismissal of the appeal by the Revenue.
This detailed analysis of the judgment showcases the key issues involved, the arguments presented by both sides, the relevant case laws considered, and the ultimate decision rendered by the Commissioner, providing a comprehensive understanding of the legal proceedings and outcome in this case.
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2006 (7) TMI 684
Issues Involved:
1. Applicability of the Payment of Gratuity Act, 1972 to railway employees.
2. Interpretation of Section 2(e) of the Payment of Gratuity Act, 1972.
3. Applicability of Railway Services (Pension) Rules, 1993 to the respondent.
4. Binding nature of the decision in Pritam Singh's case.
5. Relevance of the Fifth Pay Commission's recommendations.
Issue-wise Detailed Analysis:
1. Applicability of the Payment of Gratuity Act, 1972 to railway employees:
The respondent, a retired Station Master, claimed gratuity benefits under the Payment of Gratuity Act, 1972 (the 1972 Act), similar to those received by another employee, Pritam Singh. The Tribunal and the High Court initially ruled in favor of the respondent, directing the payment of gratuity as per the 1972 Act. However, the Supreme Court concluded that the respondent's case was governed by the Railway Services (Pension) Rules, 1993 (the 1993 Rules), not the 1972 Act.
2. Interpretation of Section 2(e) of the Payment of Gratuity Act, 1972:
Section 2(e) of the 1972 Act defines 'employee' and excludes those holding civil posts under the Central Government and governed by other gratuity rules. The Supreme Court emphasized that railway employees, being Central Government employees covered under the 1993 Rules, are excluded from the 1972 Act's purview. The High Court's interpretation, which failed to recognize this exclusion, was deemed erroneous.
3. Applicability of Railway Services (Pension) Rules, 1993 to the respondent:
The 1993 Rules, specifically Rule 70, govern the payment of gratuity to railway employees. The Supreme Court highlighted that the respondent's gratuity calculation should align with these rules, which provide a distinct method for computing retirement benefits, including the inclusion of dearness pay as per the Fourth Pay Commission's recommendations.
4. Binding nature of the decision in Pritam Singh's case:
The Tribunal and the High Court relied heavily on the Pritam Singh case, where the Tribunal had granted gratuity benefits under the 1972 Act. However, the Supreme Court clarified that the Pritam Singh decision did not consider the exclusionary clause in Section 2(e) of the 1972 Act and was rendered per incuriam. Therefore, it did not constitute a binding precedent.
5. Relevance of the Fifth Pay Commission's recommendations:
The respondent contended that the Fifth Pay Commission's interim report, recommending 90% dearness allowance for retirees between 1.4.1995 to 31.12.1995, should apply to him. However, the Supreme Court noted that the respondent retired on 31.1.1995, and the Fifth Pay Commission's recommendations were effective prospectively from 1.4.1995. Thus, these recommendations were inapplicable to the respondent's case.
Conclusion:
The Supreme Court set aside the impugned judgment, ruling that the respondent's gratuity entitlement was governed by the 1993 Rules, not the 1972 Act. The appeal was allowed, and no costs were awarded.
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2006 (7) TMI 683
The High Court Karnataka heard an appeal by the Revenue against the assessee T. Parthasarathy regarding the classification of land sale as long term or short term capital gain. The court noted the death of the assessee and the lack of legal representatives, leading to the appeal being abated with no costs.
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2006 (7) TMI 682
Issues:
Reduction of redemption fine and penalty on imported used tyres due to undervaluation and contravention of import policy.
Analysis:
The appeal was against an order that reduced the redemption fine and penalty imposed on the respondent for importing used tyres with undervalued goods, which were restricted under the Export-Import policy 2005. The adjudicating authority proposed loading the value of the goods, which the respondent accepted. The authority then allowed redemption of the confiscated goods upon payment of a fine and imposed a penalty. The Commissioner (Appeals) further reduced the fine and penalty, leading to the revenue's appeal. Despite notice, the respondent did not appear, and no adjournment request was made.
The Tribunal found that the value of the goods had already been loaded by over 250% of the value declared in the bill of entry. The Commissioner (Appeal) acknowledged the contravention of the law and the liability for confiscation and penal action but noted the lack of malicious intent on the appellant's part. The goods' description matched the bill of entry, and the loading of value lacked any reason or justification. The Commissioner (Appeal) referenced a previous judgment to support the decision.
The Tribunal affirmed the Commissioner (Appeal)'s decision, stating that it was in line with established law. Consequently, the department of revenue's appeal was dismissed, as no merits were found in their arguments.
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2006 (7) TMI 681
Issues involved: Determination of service tax liability for the activity of providing training on High Performance Liquid Chromatography Systems.
Summary:
The appeal arose from an Order-in-Original confirming service tax on the appellants for providing 'Commercial Training and Coaching Services' to clients for technology usage. The Commissioner categorized the activity as 'Consulting Engineer' services under section 65(25) of the Finance Act, 1994. The appellants argued that their training service was not 'Consulting Engineer' but fell under 'Commercial Training and Coaching' services effective from 1-7-2003. Despite the Assistant Commissioner dropping proceedings, the Commissioner upheld the tax demand. The appellants contended that their training did not involve engineering advice or consultancy, citing a Ministry's Instruction to support their position.
Upon hearing both parties, the Tribunal found that training individuals on complex machinery did not constitute 'Consulting Engineer' services as claimed by the appellants. They were not providing engineering advice or consultancy. The Tribunal referenced various judgments to support their decision, emphasizing that the training activity did not fall under the 'Consulting Engineer' category. The Tribunal granted full waiver of pre-deposit based on the prima facie nature of the case and relevant legal precedents. Consequently, the Commissioner's order was set aside, and the appeal was allowed with any necessary relief.
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2006 (7) TMI 680
Method of accounting - business of construction of multi-storied buildings - liability to pay the L&DO charges - HELD THAT:- In the present case initially upto and including the assessment year 1988-89 the Assessing Officer accepted the assessee’s method of computing the profits i.e., the project completion method, and completed the assessments on that basis. For the first time in the assessment year 1989-90 he switched to the percentage of completion method presumably because he found that the assessee had handed over possession in respect of 54 flats out of the total 86 flats constructed by it and had received sale consideration of ₹ 2,02,24,253. In the assessment years 1990-91 and 1991-92 the Assessing Officer accepted the project completion method as the basis of computing the profits of the business, thereby making a departure from his own stand taken in the assessment year 1989-90. We are unable to approve of this action of the Assessing Officer.
As already noted the decision taken in the initial year to compute the profits of the assessee’s business under a particular method has to be given effect to in all the years till the project is completed. Any departure for some of the years fall in between will distort the entire picture. The assessments in such a case may not be fair to the assessee as well as the Department. It is not in dispute that the assessee has shown the entire profits from the construction in the return for the assessment year 1992-93. This is consistent with its stand. In these circumstances, we direct the Assessing Officer to compute the income of the assessee under the project completion method. The entire profits are assessable in the assessment year 1992-93. The Income-tax authorities were not justified in assessing the sale price of ₹ 2,02,24,253 in respect of the 54 flats in the assessment year 1989-90. We direct accordingly and allow the first two grounds filed by the assessee in the appeal for the assessment year 1989-90.
Liability to pay the L&DO charges - We agree with the points raised by the learned Senior DR on the basis of the agreement entered into between the assessee and the flat purchasers. We accordingly uphold the disallowance of the liability for both the years. However, we find force in the alternative contention of the assessee raised by way of additional ground, which has already been admitted by the Tribunal. The amount has merely been collected by the assessee, but it does not form part of the sale price of the flats. Therefore, we direct exclusion of the amount collected by the assessee at the rate of ₹ 90 per sq. ft. from the flat purchasers for both the years under consideration. The deduction on account of liability to L&DO charges has been claimed by the assessee only because the amount of ₹ 90 per sq. ft. has been included in the receipts. If the deduction is not allowable on the ground that the assessee is not liable to pay the L&DO charges, for the same reason the amount collected cannot also be assessed as part of the receipts of the business. We accordingly accept the additional ground for both the years directing the Assessing Officer to exclude the amount collected by the assessee from the flat owners as charges L & DO from the assessment.
In the result, both the appeals are partly allowed.
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2006 (7) TMI 679
The Bombay High Court upheld the Project Completion Method used by a construction company for filing tax returns, as approved by the Income Tax Appellate Tribunal. No errors were found in the method, and the court stated there was no question of law to be considered. The judgment referred to previous Division Bench decisions supporting this stance. All applications were disposed of accordingly.
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2006 (7) TMI 678
Issues:
Challenge to correctness of assessment orders under Sec. 12-A of the Karnataka Sales Tax Act, 1957 based on interpretation of relevant provisions and notifications.
Analysis:
The appellant, a dealer under the Karnataka Sales Tax Act, challenged the order of the learned Single Judge regarding assessment orders made by the first respondent under Sec. 12-A of the Act. The appellant argued that entry-11 of the Second Schedule Part-C exempted Chemical Fertilizers and chemical Fertilizer mixtures from tax if they had not already suffered tax. The appellant relied on a notification issued by the State Government exempting Chemical Fertilizers under Sec. 6-B of the Act. The appellant contended that the exemption notification applied to Chemical Fertilizer mixtures as well, as they had not already suffered tax, as explicitly mentioned in the notification. The Division Bench in a previous case held that Chemical Fertilizer mixtures are one product and their use is different, justifying invoking powers under Sec. 22-A to set aside orders granting exemption. The appellant argued that this interpretation was contrary to the Act's intent, specifically Entry No. 11 Part-C of the Second Schedule.
The Court noted that the right of appeal is a substantive statutory right under the Act, allowing the appellate authority to re-examine facts and material to pass a different order. The Court declined to admit the appeal, stating that the finding by the first respondent was correct, and conflict in Division Bench decisions was not grounds for entertaining a writ petition. The Court emphasized that pure questions of law could be brought before the court in accordance with the Act's scheme. The appellant was advised to approach the Appellate Authority to avail the alternative remedy within the prescribed limitation period of 180 days under Sec. 20(2) of the KST Act.
In conclusion, the Court agreed with the Single Judge's decision and granted the appellant liberty to file an appeal before the Appellate Authority within four weeks. The Court highlighted that the Appellate Authority had no power to condone delays in filing time-barred appeals. The Writ Appeal was disposed of with all legal contentions of the parties kept open for consideration by the Appellate Authority.
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2006 (7) TMI 677
Issues:
- Applicability of Service Tax under Consulting Engineer services for technology transfer
- Interpretation of Collaboration Agreement for technical services
- Comparison with relevant case laws
- Scope of services under the Collaboration Agreement
- Categorization of services under Scientific and Technical Consultancy Services
Analysis:
1. Applicability of Service Tax under Consulting Engineer services for technology transfer:
The appeal was filed against a demand for Service Tax by the Revenue on the grounds that the appellant rendered services of a Consulting Engineer during a technology transfer collaboration agreement. The original authority confirmed the demand, but the appellants argued that they only transferred technology under the agreement and did not provide Consulting Engineer services. The Commissioner (Appeals) upheld the original order, stating that Technical Consulting Services fall under Consulting Engineering Services.
2. Interpretation of Collaboration Agreement for technical services:
The Collaboration Agreement between the appellant and an Indian company was for Technical Services, involving a lump sum payment. The learned Advocates cited various case laws to support their argument that payments for transfer of technology do not fall under Consulting Engineer services for Service Tax purposes.
3. Comparison with relevant case laws:
The case laws cited by the Advocates highlighted instances where payments for technical services and technology transfer were not considered liable for Service Tax under Consulting Engineer services. These cases provided precedents for the argument that the appellant's situation should not be taxed under Consulting Engineer services.
4. Scope of services under the Collaboration Agreement:
The Revenue argued that the scope of services in the Collaboration Agreement included Consulting Engineer services based on a specific clause. However, the Tribunal determined that the services provided by the appellant fell under Scientific and Technical Consultancy Services, as clarified by the Commissioner (Appeals) as well.
5. Categorization of services under Scientific and Technical Consultancy Services:
The Tribunal concluded that the services provided by the appellant were correctly categorized as Scientific and Technical Consultancy Services, which were brought under the tax net at a later date than the period in question. As a result, no Service Tax could be levied under Consulting Engineers for the relevant period. The appeal was allowed with consequential relief granted.
In conclusion, the judgment clarified the distinction between Consulting Engineer services and Scientific and Technical Consultancy Services in the context of technology transfer agreements, providing a favorable decision for the appellant based on the specific categorization of services and relevant case laws.
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2006 (7) TMI 676
The Supreme Court dismissed a Civil Appeal due to an inordinate delay of 645 days in filing it. Insufficient cause was shown to condone the delay.
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2006 (7) TMI 675
Issues:
Applicability of Para 8(a) of Section XV to scraps generated from capital goods.
Analysis:
The judgment dealt with the issue of whether scraps generated from capital goods fall under the definition of waste and scrap as per Para 8(a) of Section XV. The appellants had removed such scraps, and the Revenue contended that these scraps should be covered under the said provision. However, the Tribunal referred to several rulings, including Commissioner of Central Excise, Jaipur-II vs. Birla Corporation Ltd., Rajasthan Spg. and Wvg. Mills Ltd. vs. Commissioner of Central Excise, Southern Agrifurane Industries Ltd. vs. Commissioner of Central Excise, and Ballarpur Industries Ltd. vs. Commissioner of Central Excise, which held that worn-out scraps not further used do not fall within the definition of waste and scrap.
The Tribunal, after hearing both sides, concluded that the issue at hand was indeed covered by the aforementioned judgments. Therefore, the impugned order was set aside, and the stay application along with the appeal were allowed, with consequential relief if any. The decision was made in accordance with the ratio of the cited judgments, highlighting the importance of precedent and consistency in legal interpretation. This case underscores the significance of established legal principles and the application of past rulings to determine the outcome of current disputes.
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2006 (7) TMI 674
Issues:
Challenge to the judgment of the Division Bench of the Allahabad High Court dismissing the First Appeal against the Award passed by a Motor Accident Claims Tribunal.
Detailed Analysis:
1. Multiplier and Interest Rate Dispute:
The Tribunal awarded compensation to the claimants, calculating the loss of dependency and applying a multiplier of 22 along with an interest rate of 12%. The Corporation challenged the correctness of the award, arguing that the multiplier and interest rate were high. The High Court dismissed the appeal, upholding the Tribunal's decision. The appellant contended that the multiplier of 22 was excessive given the deceased's age, and the interest rate of 12% was also deemed high. In contrast, the respondents argued that the multiplier and interest were correctly applied, and the awarded amount was minimal, thus no interference was warranted.
2. Principles for Compensation Calculation:
The Supreme Court highlighted principles from previous cases regarding the calculation of compensation in fatal accident actions. The measure of damages awarded to dependents is the pecuniary loss resulting from the deceased's death. The calculation involves determining the deceased's earnings, personal expenses, and estimating the dependency loss. Two methods were identified for compensation calculation: the multiplier method and the Nance method. The multiplier method factors in the loss of dependency, the deceased's age, and the expected capital sum that would yield the multiplicand annually. The selection of multiplicand and multiplier considers various contingencies and uncertainties affecting the dependency.
3. Multiplier Application and Adjustment:
The Court discussed the application of multipliers in compensation calculations, emphasizing the need to adjust the multiplier based on prevailing interest rates. Reference was made to cases where multipliers were determined based on banking interest rates. The appropriate multiplier was assessed considering factors like age and earning capacity. In this case, the Court found the multiplier of 22 adopted by the Tribunal to be indefensible, suggesting a revised multiplier of 13 based on the deceased's age. By recalculating the compensation with a monthly loss of dependency at Rs. 2,000, the revised award amount was determined to be Rs. 3,37,000, along with additional amounts for love and affection and funeral expenses.
4. Final Decision:
Based on the principles discussed and the recalculated compensation amount, the Supreme Court allowed the appeal to the extent of adjusting the multiplier and interest rate. The revised compensation of Rs. 3,37,000 was awarded to the claimants, with an interest rate of 9% from the date of filing the claim petition. No costs were imposed in this decision. The judgment serves as a comprehensive analysis of the factors involved in determining compensation in fatal accident cases, emphasizing the need for a balanced approach considering various contingencies and economic factors.
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2006 (7) TMI 673
Issues:
Interpretation of Notification No. 5/94-C.E. (N.T.), dated 1-3-1994 regarding Modvat credit entitlement.
Analysis:
The judgment dealt with the interpretation of Notification No. 5/94-C.E. (N.T.), dated 1-3-1994, specifically focusing on the entitlement of Modvat credit on inputs received from a 100% EOU. The question raised was whether the assessee was entitled to avail Modvat credit despite the restrictions laid down in the notification. The Notification restricted the credit of duty to the extent equal to the additional duty leviable on the goods under Section 3 of the Customs Tariff Act, 1975. The issue arose due to conflicting views by different Benches of the Appellate Tribunal, leading to a Reference to the Larger Bench of the CEGAT, which ruled in favor of the assessee's right to avail of Modvat credit.
The respondent's counsel argued that under Section 35G of the Central Excise Act, an application concerning the rate of duty or the value of goods for assessment cannot be entertained by the High Court. The Court concurred that the question raised indeed pertained to the rate of duty to be applied, falling within the ambit of Section 35G. Consequently, the Court held that it lacked jurisdiction to entertain the appeal, resulting in its dismissal. The judgment emphasized that the applicant could pursue the matter by initiating appropriate proceedings before the Apex Court to address the raised question regarding Modvat credit entitlement under the notification.
In conclusion, the High Court of BOMBAY dismissed the appeal, citing lack of jurisdiction to address the question raised concerning the entitlement of Modvat credit under Notification No. 5/94-C.E. (N.T.), dated 1-3-1994. The judgment highlighted the need for the applicant to pursue the matter further by approaching the Apex Court for resolution.
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2006 (7) TMI 672
Issues:
1. Classification of 'EVA Footwear' for tax purposes.
2. Classification of 'Walkie Chappals' for tax purposes.
Issue 1: Classification of 'EVA Footwear' for tax purposes
The appellant, a footwear manufacturer, sought clarification on the tax liability of 'EVA Footwear' under different schedule entries. The Third Schedule initially classified it as 'Plastic Footwear' at 4% tax rate until 6.6.2005, then under Entry 64 from 7.6.2005. The Authority ruled EVA Footwear to be taxed at 12.5% from 7.6.2005, citing non-compliance with Single Mould requirement. The appellant argued that the Single Mould theory was not applicable as per clear statutory entries. The court agreed, noting the subsequent amendment introducing Single Mould. Thus, the court accepted the appellant's argument, setting the tax rate for EVA Footwear at 4% from 1.4.2005 to 6.6.2005 and as 'Moulded Plastic Footwear' from 7.6.2005.
Issue 2: Classification of 'Walkie Chappals' for tax purposes
The appellant contended that 'Walkie Chappals' should be classified as 'Plastic Footwear' for the period from 1.4.2005 to 6.6.2005 due to the material used in manufacturing. The Authority had classified it differently, leading to the appeal. The court examined the material composition, noting the use of Man-made Fabric with plastic coating for the upper portion. Based on this, the court agreed with the Authority's classification, rejecting the appellant's argument. Consequently, the court dismissed the appellant's contention regarding the classification of 'Walkie Chappals'.
In conclusion, the High Court partially allowed the appeal, setting the tax rate for 'Walkie Chappals' as per the Authority's classification and adjusting the tax rate for 'EVA Footwear' in line with the statutory entries. The judgment clarified the tax liability of the footwear products based on their composition and the relevant schedule entries, providing a clear interpretation of the law in this context.
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2006 (7) TMI 671
Issues:
Challenge to the judgment quashing the detention order under the Tamil Nadu Prevention of Dangerous Activities Act, 1982.
Analysis:
The judgment in question pertains to an appeal challenging the quashing of a detention order under the Tamil Nadu Prevention of Dangerous Activities Act, 1982. The order of detention was passed against the respondent, identified as a "Goonda," due to his involvement in activities prejudicial to public order. The High Court quashed the detention order on the grounds that the Detaining Authority did not provide a forwarding letter or an additional affidavit along with the order of remand, as required. However, it was established that the order of remand was indeed brought to the notice of the Detaining Authority by the Sponsoring Authority before passing the detention order. The absence of a forwarding letter or additional affidavit was deemed a hyper-technicality by the appellants, rendering the quashing of the detention order unsustainable.
The Supreme Court found that there was no dispute regarding the production of the order of remand before the Detaining Authority and that the High Court's insistence on a forwarding letter or additional affidavit was baseless. It was emphasized that the Sponsoring Authority had presented the necessary material to the Detaining Authority, making the quashing of the detention order unwarranted. Consequently, the Supreme Court set aside the High Court's order, ruling in favor of the appellants.
Furthermore, the Supreme Court addressed the issue of whether the respondent should surrender to serve the remaining period of detention due to the passage of time. Citing previous judgments, the Court highlighted that the State must assess whether the impact of the acts leading to the detention order still persists and decide on the necessity of the detenu serving the remaining detention period. The State was directed to make a decision within two months on whether the detenu should be sent back for detention based on the ongoing relevance of the objectionable acts. The Court emphasized that the mere passage of time should not be a sole determinant and that the decision should be based on the circumstances and impact of the detenu's actions.
In conclusion, the appeal was allowed, the High Court's order was set aside, and the State was directed to evaluate the need for the detenu to serve the remaining detention period based on the current circumstances.
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2006 (7) TMI 670
Power Of High Court u/s 482 of the CrPC - offence punishable u/s 302 - non- compliance of the mandatory provisions of Section 173 of the CrPC - Whether the High Court while exercising its appellate jurisdiction u/s 374(2) r/w Section 386 of the CrPC could direct further investigation of the case against the persons whom the High Court felt should have been included in the challan on the basis of the materials on record available before the appellate court? - HELD THAT:- The High Court while, exercising its revisional or appellate power, may exercise its inherent powers. Inherent power of the High Court can be exercised, it is trite, both in relation to substantive as also procedural matters. In respect of the incidental or supplemental power, evidently, the High Court can exercise its inherent jurisdiction irrespective of the nature of the proceedings. It is not trammeled by procedural restrictions in that;
(i) power can be exercised suo motu in the interest of justice. If such a power is not conceded, it may even lead to injustice to an accused.
(ii) Such a power can be exercised concurrently with the appellate or revisional jurisdiction and no formal application is required to be filed therefor.
(iii) It is, however, beyond any doubt that the power u/s 482 of the CrPC is not unlimited. It can inter alia be exercised where the Code is silent where the power of the court is not treated as exhaustive, or there is a specific provision in the Code; or the statute does not fall within the purview of the Code because it involves application of a special law. It acts ex debito justitiae. It can, thus, do real and substantial justice for which alone it exists.
We have noticed hereinbefore that the jurisdiction of the learned Magistrate in the matter of issuance of process or taking of cognizance depends upon existence of conditions precedent therefor. The Magistrate has jurisdiction in the event a final form is filed (i) to accept the final form; (ii) in the event a protest petition is filed to treat the same as a complaint petition and if a prima facie case is made out, to issue processes; (iii) to take cognizance of the offences against a person, although a final form has been filed by the police, in the event he comes to the opinion that sufficient materials exist in the case diary itself therefor; and (iv) to direct re- investigation into the matter.
Similarly, the power of the Sessions Judge to summon a person to stand trial with the other accused in exercise of its jurisdiction u/s 319 of the CrPC is also limited inasmuch as from the evidences of the witnesses, it must clearly be found that the proceedee had a role to play in the commission of an offence.
So far as inherent power of the High Court is concerned, indisputably the same is required to be exercised sparingly. The High Court may or may not in a given situation, particularly having regard to lapse of time, exercise its discretionary jurisdiction. For the said purpose, it was not only required to apply its mind to the materials on records but was also required to consider as to whether any purpose would be served thereby.
Hence, we are of the opinion that before issuing the impugned directions, the High Court should have given an opportunity of hearing to the Appellants herein.
Thus, the impugned judgment is set aside and the matter is remitted to the High Court for consideration of the matter afresh. The High Court shall issue notice to the Appellants herein as also the State and pass appropriate orders as it may deem fit and proper and in accordance with law. The appeals are allowed.
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2006 (7) TMI 669
Challenged the Order passed by High Court - construing the agreement dated 25.9.1983 to be a Bank Guarantee decreed the suit directing Appellant to to deposit the value of contract with interest @ 14% per annum - Contract of Pentagon terminated by the cooperative society by a notice - claim raised - Bank Guarantee thereafter invoked by the cooperative society - HELD THAT:- The document (Bank Guarantee/Indemnity), in our opinion, constitutes a document of indemnity and not a document of guarantee as is clear from the fact that by reason thereof the Appellant was to indemnify the cooperative society against all losses, claims, damages, actions and costs which may be suffered by it. The document does not contain the usual words found in a bank guarantee furnished by a Bank as, for example, "unequivocal condition", "the cooperative society would be entitled to claim the damages without any delay or demur" or the guarantee was "unconditional and absolute" as was held by the High Court.
The High Court, thus, misread and misinterpreted the document as on scrutiny thereof, it had opined that it was a contract of guarantee and not a contract of indemnity. The document was executed by the Bank in favour of the cooperative society. The said document indisputably was executed at the instance of Pentagon.
We have hereinbefore noticed the surrounding circumstances as pointed out by Mr. Naphade as contained in Clauses 15.2.4 and 15.2.5 of the contract vis-‘-vis the letters exchanged between the parties dated 6.4.1985, 11.4.1985, 16.4.1985 leading to execution of the document dated 07.09.1985 by the First Appellant in favour of the cooperative society.
We are, however, unable to accept the submissions of the learned Senior Counsel that the bank guarantee must be construed in the light of other purported contemporaneous documents. A contract indisputably may be contained in more than one document. Such a document, however, must be a subject matter of contract by and between the parties. The correspondences referred to hereinbefore were between the cooperative society and Pentagon. The said correspondences were not exchanged between the parties hereto as a part of the same transaction. The Appellant understood that it would stand as a surety and not as a guarantor.
The High Court proceeded on the basis that Section 92 of the Evidence Act would be attracted in the instant case but despite the same it referred to the oral evidence so as to find out the purported circumstances surrounding the transaction, which in our view, was not correct.
However, in this case, we have no doubt in our mind that the document in question constitutes a contract of indemnity and not an absolute or unconditional bank guarantee. The High Court, therefore, erred in construing the same to be an unconditional and absolute bank guarantee.
Thus, the impugned judgment cannot be sustained which is set aside accordingly. The decree of the trial court is restored. The appeal is allowed with costs.
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2006 (7) TMI 668
Accrual of commission income - Agency agreement with Satellite Television Asian Region Advertising Sales BV - non-resident company - change in the method of accounting from mercantile to cash system - Whether the commission income, as per the agreement, accrued when the advertisement solicited were telecast or when the sum was realized or collected from its clients - Deductibility of advertisement expenses - Difference of opinion between learned members -
Whether, the commission income under the agreement dt. 31st May, 1994 accrued to the assessee when it was received by it from its clients as held by the JM or accrued at the time of acceptances of the solicited advertisement by the Principal though could be assessed in the year in which such advertisement was telecast as held by the AM ?
Whether, the assessee is entitled to deduction of advertisement expenses amounting to ₹ 9,03,02,000 for asst. yr. 1998-99 and ₹ 9,38,05,000 for asst. yr. 1999-2000 under s. 37 of the IT Act, 1961?
Third Member - HELD THAT:- The learned JM in his proposed order further observed that as per settled legal position income accrues when an enforceable debt is created in favour of the assessee; in other words, when a right to receive income is acquired. For the aforesaid proposition, reliance was placed on the decision of the Hon'ble Supreme Court in the case of E.D. Sassoon & Co. Ltd. & Ors. [1979 (5) TMI 3 - SUPREME COURT] . However, where right to receive is inchoate, it would accrue on the date when such right becomes absolute. In other words, if accrual of income depends on happening of any event or fulfilment of a condition, then income will accrue on happening of that event or fulfilment of the condition. The learned JM, in this connection, relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Shri Goverdhan Ltd. [1968 (1) TMI 2 - SUPREME COURT].
According to the learned JM, the assessee had no right to receive commission till the happening of such contingency as right to retain commission is dependant upon payment of invoice amount to the assessee. Once invoice amount was received by the assessee, the right to retain commission would accrue immediately irrespective of the remittance to the non-resident. Thus, payment by the clients was a condition precedent for accrual of income, which has been provided in the agreement to ensure the recovery of the amount. The learned JM also observed that effect of cl. 8 of the agreement was that assessee would never get any commission where invoice amount is not paid by the clients. The date of remittance to the Principal would be irrelevant and the claim of the assessee could not be rejected because date of accrual coincided with the date of payment. The learned JM accordingly held that orders of lower authorities were not sustainable.
The learned JM observed that decision of Supreme Court in the case of Seth Pushalal Mansingkha (P) Ltd. vs. CIT (supra) does not help the assessee. The learned JM has reproduced the relevant observations of the apex Court at pp. 22 and 23 of his proposed order. The learned JM also rejected the contentions of the assessee that income cannot accrue to it unless income has accrued to the Principal. The learned JM also did not agree with the assessee that approval granted by the RBI to the assessee to remit amounts to its Principal had nothing to do with accrual of income. Reasons for aforesaid findings are given by the learned JM in paras 24 and 25 of his proposed order. It has been held by learned JM that decision of Supreme Court in the case of Morvi Industries Ltd. vs. CIT[1971 (10) TMI 5 - SUPREME COURT] relied upon by learned Departmental Representative was in no way in conflict with the view, which was being taken in this case.
The learned AM did not agree with the view taken by the learned JM. He first referred to the grounds of appeal raised by the assessee. He observed that assessee was obliged under law to follow mercantile system of accounting. The learned AM in his proposed order further noted that under the agreement dt. 31st May, 1994, the assessee had treated advertising commission as accrued at the time when time spots were aired and, therefore, change in system was sought to be made under the same agreement by giving new interpretation to cl. 8 of the agreement. According to the learned AM, change in accounting policy was aimed to reduce tax liability for the assessment years under consideration. The learned AM also observed that assessment in this case was to be made on the income as earned against traditional concept of actual receipt from right to receive.
In the view of the learned AM, "contractual obligations of the assessee comes to an end and once the client's requisition forwarded by the assessee is accepted by Principal, at this very point, assessee becomes eligible for its commission, i.e., a legally enforceable debt has been created in favour of assessee because the sale of time spots is completed, and the commission receivable by the assessee is also ascertainable on the basis of number of time spots sold at the rate accepted by the Principal and the client." Ascertainment or quantification of a debt will not affect accrual of income.
Learned AM observed that the assessee had no contractual obligation to make efforts to realize amounts from clients as it would have caused implications and the assessee is not getting any money from Principal on this score. Thus, role of assessee under the agreement is "limited to receive the amount paid by the clients. In nutshell, the assessee is under no obligation to realize the amount from the clients". After referring to certain other clauses, the learned AM refers to the more important cl. 8 providing for retention of commission by the assessee. In respect of above clauses, the learned AM has observed "Thus cl. 8 does not, in any way, dilute the right of the assessee to receive the commission which has already accrued to the assessee upon its having solicited the advertisements for the Principal".
The learned AM thereafter referred to the new agreement entered into between the assessee and its Principal w.e.f. 1st April, 1999 and the relevant clauses of the agreement have been reproduced. After perusal of different clauses, the learned AM observed that the above agreement materially altered and widened in the Representation Agreement than the agreement existing at the material time. The responsibility of collecting of advertisement revenue from clients has been specifically included in the scope of work and other duties in this regard like maintenance of records regarding amount due from clients, periodical reporting of the same to owner have also been included in the new agreement. No such responsibilities are listed in the agreement dt. 31st May, 1994. So it can be safely stated that the assessee was not liable for realization of amounts from clients and in substance the only role assigned to the assessee was to receive money from clients as per the instructions of the Principal. The learned AM in para 5.9 of his proposed order discussed in detail and was of the view that change made by the assessee in accounting policy relating to accrual of commission income was not justified and liable to be rejected. In subsequent para the learned AM discussed in detail how assessee was not justified in changing accounting policy relating to accrual of commission.
Learned AM noted the activities of the assessee. He held that advertisement expenses incurred by the assessee were not incurred wholly and exclusively for the purpose of business. It was also not correct on the part of the assessee to claim that reasonableness of expenses could not be examined by the Revenue authorities. Assessee was also not justified in claiming that increase in business resulted on account of advertisements carried on by the assessee. There could be several factors like quality and contents of programmes and not advertisements, which are responsible for increase in business. The assessee was further not able to show that advertisement expenditure was incurred on account of any commercial expediency. On the basis of the decision of the Hon'ble Supreme Court in E.D. Sassoon J. David & Co. (P) Ltd. [1979 (5) TMI 3 - SUPREME COURT] the learned AM evolved the positive and negative steps to be applied to determine whether expenditure was incurred for the purpose of business and was admissible in law. On application of above tests, the learned AM held that expenditure incurred by the assessee was not deductible.
It is nobody's case that assessee is following cash system of accounting. There is further no dispute that under the above system, income is liable to be taxed as soon as assessee has right to receive the income. Likewise expenditure under the system is to be allowed on the basis of liability to pay. Actual payment is not relevant. There is further agreement that aforesaid question has to be determined with reference to provisions of ss. 4 and 5 of the IT Act.
According to the assessee, commission income under the agreement could accrue to the assessee as per cl. 8 of the agreement which provided that the agent (assessee) shall be entitled to retain 15 per cent of net invoice amount paid by clients as commission. So the case of the assessee as accepted by the learned JM in the proposed order is that income cannot accrue under the agreement unless assessee is in a position to exercise his right to retain 15 per cent of net invoice amount paid by assessee's Principal clients. The stand of the Revenue, as supported by proposed order of learned AM is that income would accrue to the assessee as soon as advertisements are solicited by the assessee for Principal. Both the parties agree that agreement between the assessee and its Principal is to be read as a whole to determine its legal implication.
Having regard to terms and conditions of the agreement between the assessee and its Principal, it is difficult to agree with the observations quoted above. It is nowhere provided that assessee would be entitled to receive its commission even if advertisements solicited by the assessee are not telecast or amount is not realized by the assessee's Principal. There is no clause in the agreement which would indicate that commission would accrue to the assessee as soon as advertisements are solicited by the assessee. The learned AM or learned Departmental Representative during the course of hearing could not show me any provision or case law under which right to receive commission could be said to have accrued in favour of assessee as soon as advertisements are solicited/booked by the assessee.
In the agreement there are further steps to be taken and advertisements solicited are required to be sent for approval by the Principal. The Principal under the agreement is not only to approve the advertisement solicited by the assessee but also to raise invoices within 30 days from the date on which advertisement is so telecast. The Principal has also to issue instructions to the client to make payment thereof to its agent (assessee). The assessee is further obliged to collect all the sums due to its Principal. It is not possible to ignore all the abovementioned clauses of the agreement and hold that assessee acquires right to receive income as soon as advertisements are solicited by the assessee and that other situations provided in the agreement relate only to "future uncertainties, difficulties and delays" and these would have no effect on the accrual of income. Other clauses cannot be understood to be relating to relinquishment of income after its accrual.
Undisputedly s. 23A was attracted if aforesaid sum of ₹ 70,895, i.e., the share income of assessee-company from partnership was taken into account. The contention of the assessee was that meeting of board of directors to declare dividend was held on 17th May, 1951 and by that time books of account of the firm were not made up nor share of profit was known. Therefore, income of ₹ 70,895 had not accrued to the assessee.
The share income accrues to the partner as soon as the previous year of the firm comes to a close. It is immaterial that exact amount of profit is not known on the close of the year (31st March in the cited case). Whenever the profit is worked out, it would be the profit as on 31st March and liable to be taken in assessment year immediately following the previous year. Therefore, having regard to the facts involved in Goverdhan Ltd. (supra), no support can be derived by the Revenue from the decision.
I find that there is no dispute about the genuineness of the expenditure incurred by the assessee. There can further be no dispute that expenditure incurred by the assessee on advertisement made had direct nexus with earning of income by the assessee. It is possible that expenditure on advertisement might have also benefited the Principal of the assessee but on above ground, the expenditure incurred by the assessee could not be disallowed. The assessee clearly incurred expenses wholly and exclusively for purposes of its business and, therefore, was entitled to deduction of expenditure claimed in computing its income. The learned JM has given sound reasons for allowing expenditure in question. On facts of case, it is not possible for me to agree with learned AM on any of the reasons given by him to disallow the expenditure in question.
Thus, I agree with the order proposed by the learned JM. The addition made for alleged accrual of income and disallowance of expenditure claimed on advertisement, in my opinion, is not justified.
Majority Decision - The Hon'ble President, Tribunal, as Third Member, vide order dt. 13th July, 2006, has agreed with the view of the JM on both the points. Therefore, in accordance with the majority opinion, the issues arising out of the above points are decided in favour of the assessee by holding that'(i) commission would accrue to the assessee either on the date of receipt of commission, i.e., when the commission is collected by the assessee or on the date of payment by the clients directly to the Principal as the case may be; and (ii) assessee would be entitled to deduction in respect of advertisement expenses.
In the result, the appeal of the assessee for asst. yr. 1997-98 is allowed while the appeals of the assessee for the asst. yrs. 1998-99 and 1999-2000 are partly allowed. On the other hand, the appeal of the Revenue for the asst. yr. 1999-2000 is dismissed and appeal for asst. yr. 1998-99 is partly allowed.
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2006 (7) TMI 667
The Appellate Tribunal CESTAT NEW DELHI dismissed the appeal regarding service tax calculation for photographic services, citing a previous decision in favor of revenue. The appeal was dismissed as the cost of material was deemed to be included in the service tax calculation.
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