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2008 (3) TMI 711
Issues Involved:
1. Jurisdiction of Industrial Courts regarding dismissal orders by Life Insurance Corporation of India.
2. Whether the respondent, a Development Officer, qualifies as a "workman" under the Industrial Disputes Act, 1947.
3. Justification of the Industrial Tribunal's interference with the quantum of punishment.
Summary:
1. Jurisdiction of Industrial Courts:
The primary issue was whether the jurisdiction of the Industrial Courts is ousted concerning an order of dismissal passed by the Life Insurance Corporation of India (LIC), a Corporation constituted under the Life Insurance Corporation Act, 1956. The Supreme Court held that the 1956 Act does not contain any provision ousting the jurisdiction of the Civil Court or the Industrial Court. It was emphasized that any provision taking away the jurisdiction of a Court shall be strictly construed, and a presumption arises against the ouster of jurisdiction. The Court concluded that the jurisdiction of the Industrial Court must be held to be ousted only when the remedy sought by the workman is premised on a right under industrial laws in conflict with the right granted to an employee or agent of LIC.
2. Whether the Respondent is a "Workman":
The respondent, appointed as a Development Officer, was subjected to departmental proceedings and dismissed from service. An industrial dispute was raised, and the Industrial Tribunal adjudicated the matter. The Supreme Court referred to previous judgments, including S.K. Verma Vs. Mahesh Chandra, which held that a Development Officer is a "workman" within the meaning of Section 2(s) of the Industrial Disputes Act. The Court reiterated that the respondent, being a Development Officer, qualifies as a "workman," thus falling under the purview of the Industrial Disputes Act, 1947.
3. Justification of Industrial Tribunal's Interference:
The Industrial Tribunal, while acknowledging the principles of natural justice in the domestic enquiry, found the punishment of dismissal too harsh given the nature of the charges and the respondent's admission. The Tribunal ordered reinstatement without back wages, considering the respondent's carelessness rather than deliberate misconduct. The Supreme Court upheld the Tribunal's decision, emphasizing that negligence by itself may not constitute misconduct unless the consequences are irreparable or the resultant damage is significant. The Court also noted that the respondent had already suffered being out of service for over 20 years, and all lower courts had ruled in his favor. Therefore, the Supreme Court dismissed the appeal, affirming the Tribunal's decision to reinstate the respondent without back wages.
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2008 (3) TMI 710
Issues Involved:
1. Whether the rental income derived from shops and godowns should be assessed as business income or income from house property.
2. Whether the assessee can be considered the owner of the property for tax purposes despite not owning the land.
Summary:
Issue 1: Assessment of Rental Income
In Tax Case No. 19 of 1987, the assessee-company derived income from subletting shops and claimed it as business income. The Assessing Officer disagreed, but the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal held that the rental income should be assessed as business income. The Tribunal concluded that the lease was for market development, and the lessee could not be considered the owner of the building. The Tribunal referred the question of law u/s 256(1) of the Income-tax Act, 1961, to the High Court.
In Tax Case No. 36 of 1987, the assessee-company leased land, constructed godowns, and let them to the Food Corporation of India. The Assessing Officer and Commissioner of Income-tax (Appeals) assessed the rental income as income from house property. However, the Tribunal held it as business income, stating the assessee was a lessee, not the owner. The High Court initially ruled in favor of the revenue, but the Supreme Court remitted the matter back for reconsideration.
In Tax Case Nos. 66, 67 & 68 of 1987, the assessee derived rental income from Puja Bazar and claimed it as business income. The Commissioner of Income-tax (Appeals) disagreed, but the Tribunal ruled in favor of the assessee. The Tribunal referred the question of law to the High Court.
In Misc. Appeals 560 and 567 of 2000, the assessee rented godowns to the Food Corporation of India and claimed the rental income as business income. The Assessing Officer and Deputy Commissioner of Income-tax (Appeals) disagreed, but the Tribunal ruled in favor of the assessee. The revenue appealed, and the High Court considered whether the rental income should be treated as business income or income from house property.
Issue 2: Ownership for Tax Purposes
The High Court examined whether the assessee could be considered the owner of the property for tax purposes. It concluded that the assessee, in actual physical control and receiving rental income in their own right, should be deemed the owner for tax purposes. This view was supported by the Supreme Court's judgment in CIT v. Podar Cement (P.) Ltd. [1997] 226 ITR 625.
Conclusion:
The High Court concluded that the rental income derived by the assessee should be assessed as business income, not income from house property. The references were answered in the affirmative, in favor of the assessee, and the revenue's appeals were dismissed.
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2008 (3) TMI 709
Departmental proceeding against Inspector of the Railway Protection Force - suspension on the allegation that he made excess delivery of scrap - Full Bench of High Court held that Rule 153(8) is unreasonable and hence unconstitutional and accordingly it struck down Rule 153(8) - HELD THAT:- It is well settled that ordinarily in a domestic/departmental inquiry the person accused of misconduct has to conduct his own case vide N. Kalindi and others vs. M/s. Tata Locomotive and Engineering Co.[1960 (3) TMI 54 - SUPREME COURT]. Such an inquiry is not a suit or criminal trial where a party has a right to be represented by a lawyer. It is only if there is some rule which permits the accused to be represented by someone else, that he can claim to be so represented in an inquiry vide Brook Bond India vs. Subba Raman 1961 (11) LLJ 417.
Similarly, in Cipla Ltd. and others vs. Ripu Daman Bhanot and another[1999 (4) TMI 622 - SUPREME COURT] it was held by this Court that representation could not be claimed as of right. This decision followed the earlier decision Bharat Petroleum Corporation Ltd. vs Maharashtra General Kamgar Union [1998 (12) TMI 616 - SUPREME COURT] in which the whole case law has been reviewed by this Court.
Following the above decision it has to be held that there is no vested or absolute right in any charge-sheeted employee to representation either through a counsel or through any other person unless the statute or rules/standing orders provide for such a right. Moreover, the right to representation through some one, even if granted by the rules, can be granted as a restricted or controlled right. Refusal to grant representation through an agent does not violate the principles of natural justice.
In the present case, Rule 153(8) only provides for assistance to a charge-sheeted employee by an agent. Thus, a restricted right of representation has been granted by Rule 153(8). Even if no right of assistance had been granted by the rules, there would be no illegality or unconstitutionality. How then can it be said that when a restricted right is granted, the said restricted right is unconstitutional.
We, therefore, respectfully disagree with the Full Bench impugned judgment of the High Court and we are of the view that Rule 153(8) is constitutionally valid.
Hence, the appeal stands allowed. The impugned judgment of the High Court is set aside. There shall be no order as to costs.
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2008 (3) TMI 708
Issues involved: Challenge to judgment of Punjab and Haryana High Court dismissing Civil Writ Petition No. 6622 of 2005 regarding Award dated 13.1.2005 passed by Labour Court, Jalandhar.
Background: Respondent appointed as a Gardner on 2.2.1989, services terminated on 25.1.1997. Matter referred to Labour Court u/s 10(1)(C) of Industrial Disputes Act, 1947. Labour Court held termination illegal, awarded reinstatement with 50% back wages.
Issue 1 - Lack of Reasoning in High Court's Order: Appellant challenges High Court's non-reasoned order, citing lack of clarity in factual position. High Court's order merely referenced paragraph 8 of the Award without providing adequate reasoning. Appellant argues that High Court failed to consider various contentious questions, including appellant's classification as an industry.
Issue 2 - Necessity of Reasons in Judgments: Supreme Court emphasizes the importance of reasons in judicial orders for clarity and transparency. Absence of reasons renders judgment unsustainable. Court cites previous cases highlighting the fundamental nature of giving reasons in administrative and judicial decisions.
Conclusion: Supreme Court sets aside High Court's order, remits the matter for fresh consideration with a directive to provide a reasoned judgment. No opinion expressed on case merits. Appeal allowed without costs.
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2008 (3) TMI 707
Judgment passed by the High Court in exercise of the powers u/s 100 of the CPC - No "Substantial question of law" Involved - Test for determining, Question of law raised in the case is Substantial or Not - HELD THAT:- The phrase "substantial question of law", as occurring in the amended Section 100 is not defined in the Code. The word substantial, as qualifying "question of law", means of having substance, essential, real, of sound worth, important or considerable. It is to be understood as something in contradistinction with technical, of no substance or consequence, or academic merely. However, it is clear that the legislature has chosen not to qualify the scope of "substantial question of law" by suffixing the words "of general importance" as has been done in many other provisions such as Article 133(1)(a) of the Constitution. The substantial question of law on which a second appeal shall be heard need not necessarily be a substantial question of law of general importance.
In Guran Ditta v. T. Ram Ditta [1928 (4) TMI 2 - PRIVY COUNCIL], the phrase 'substantial question of law' as it was employed in the last clause of the then existing Section 100 (since omitted by the Amendment Act, 1973) came up for consideration and their Lordships held that it did not mean a substantial question of general importance but a substantial question of law which was involved in the case.
This Court laid down the following test as proper test, for determining whether a question of law raised in the case is substantial as quoted in Sir Chunilal's case[1962 (3) TMI 77 - SUPREME COURT].
The general rule is that High Court will not interfere with concurrent findings of the Courts below. But it is not an absolute rule. Some of the well recognized exceptions are where (i) the courts below have ignored material evidence or acted on no evidence; (ii) the courts have drawn wrong inferences from proved facts by applying the law erroneously; or (iii) the courts have wrongly cast the burden of proof. When we refer to 'decision based on no evidence', it not only refers to cases where there is a total dearth of evidence, but also refers to any case, where the evidence, taken as a whole, is not reasonably capable of supporting the finding.
Thus, we set aside the impugned judgment of the High Court and remit the matter to it for fresh consideration. The Second Appeal can be only maintained after formulating substantial question of law, if any and not otherwise. We make it clear we have not expressed any opinion on the question as to whether any substantial question of law is involved or not.
The appeal is allowed to the aforesaid extent without any order as to costs.
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2008 (3) TMI 706
Disallowance on deduction u/s 80-IA - primarily engaged in the hiring of marriage palace and the activity of catering and manufacture of food was only incidental - major income by way of rental charges for the banquet hall/marriage palace - not constituting an "industrial undertaking" within the meaning of u/s 80-IA - Incurred expenditure on foreign travel of its director his sons for studies in abroad - concealed the particulars of its income? - Levy penalty u/s 271(1)(c) or Disallowed expenditure - HELD THAT:- The fact that the assessee did not prefer a claim for AY 1993-94 does not hit the bona fides of the instant claim for the reason that for AY's 1994-95 to 1996-97 the assessee had claimed such deduction although such assessments were completed in a summary manner under s. 143(1) of the Act. Furthermore, the AO, in the original assessment proceedings finalized, allowed the claim of the assessee in principle. Therefore, factually speaking, to say that the claim of the assessee made in the return of income was patently wrong and devoid of bona fides would be a misnomer. It is indeed a different matter that such a claim has ultimately not been found to be strictly in accord with law but the factum of the assessee having disclosed full particulars and the claim made for bona fide considerations cannot be disputed.
In fact we have perused the order of the Tribunal in the assessee's case, rendered in connection with the s. 263 proceedings, and find that the invoking of s. 263 by the CIT was entirely on the basis of the judgment of the Hon'ble Supreme Court in the case of Indian Hotels Co. Ltd.[2000 (8) TMI 5 - SUPREME COURT], which, according to the CIT rendered the assessment as erroneous in view of the fact that the assessee was not eligible for s. 80-IA benefits. Therefore the plea of the Revenue that the claim of the assessee was wrong even without the help of the Supreme Court judgment in the case of Indian Hotel Co. Ltd. (supra) and therefore it constituted concealment, in our view, is neither the facet which is the basis of the disallowance and nor can it be investigated at this stage. Therefore having regard to the manner in which the claim of the assessee has been denied, we do not find that the bona fides of the assessee can be doubted.
The claim was based on the judgment of a High Court, although it is undeniable that a contrary view was possible. So however in such a situation when there is a divergence of opinion amongst the High Courts and in the absence of a decision of the jurisdictional High Court or the Supreme Court on such issue, the claim of the assessee made in the return of income cannot be labelled as non-bona fide. The denial of deduction on account of a subsequent judgment of the Supreme Court would not constitute concealment or furnishing of inaccurate particulars within the meaning of s. 271(1)(c) of the Act. In the result following the ratio of the judgment of the Supreme Court in the case of Dilip N. Shroff [2007 (5) TMI 198 - SUPREME COURT] we find justification for the CIT(A) having deleted the penalty.
In the instant case apart from the fact that the claim of the assessee was based on the audit report of chartered accountant, it also emerges that such claim has been accepted by the AO himself during the original assessment proceedings. Therefore the claim cannot be termed as mala fide. The ratio of the decision of the jurisdictional High Court in the cases of Manoj Ahuja [1984 (1) TMI 35 - PUNJAB AND HARYANA HIGH COURT] and Deep Tools (P) Ltd.[2004 (8) TMI 52 - PUNJAB AND HARYANA HIGH COURT] squarely applies herein also. Therefore on this aspect also we affirm the decision of the CIT(A).
In the result for the AY 1997-98 the appeal of the Revenue is dismissed.
Disallowance sustained on expenditure - foreign travel of its director - Penalty under s. 271(1)(c) - HEDL THAT:- We find no justification for the imposition of penalty for the reason that there is no case made out by the AO that the claim for expenditure reflected any falsity. In fact, the purpose of the travel has been fully explained and the same has not been rejected as false or lacking in bona fides. Merely because there is difference of opinion as regards the allowability of the claim, the same would not constitute "concealment" or "furnishing of inaccurate particulars" within the meaning of s. 271(1)(c) of the Act. In our view the CIT(A) has correctly deleted the penalty.
Resultantly, the appeals of the Revenue for 1997-98 and 1998-99 are dismissed.
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2008 (3) TMI 705
Jurisdiction of High court u/s 100 CPC - re-examining questions of fact - Pleas not made in the plaint - how a question of law relating to section 41 - Suit for permanent injunction - Restraint from interfering with the ownership and possession of the Plaintiff - HELD THAT:- The High Court while reversing the decision of the first appellate court, examined various aspects relating to title and recorded findings relating to title. It held that gifting a property to a daughter or sister by way of 'Pasupu Kumkumam", could be done orally and did not require a registered instrument. Even though there was no independence evidence of oral gift except the assertion to Rukminibai (which was denied by Damodar Rao), the High Court, held that there was an oral gift in her favour. It also accepted the evidence of PW3 and PW5 and plaintiffs, that Damodar Rao negotiated for the sale of the plots representing that they belonged to his sister Rukminibai and that he attested the sale deeds as a witness and identified the Rukminibai as the executant before the Sub-Registrar and therefore, section 41 of TP Act came to the aid of plaintiffs and Damodar Rao was estopped from denying the title of his sister. The High Court in a second appeal arising from a suit for an injunction, could not have recorded such findings, in the absence of pleadings and issue regarding title.
We are therefore of the view that the High Court exceeded its jurisdiction under section 100 CPC, firstly in re-examining questions of fact, secondly by going into the questions which were not pleaded and which were not the subject matter of any issue, thirdly by formulating questions of law which did not arise in the second appeal, and lastly, by interfering with the well reasoned judgment of the first appellate court which held that the plaintiffs ought to have filed a suit for declaration.
We are conscious of the fact that the suit was filed in the year 1978 and driving the plaintiffs to a fresh round of litigation after three decades would cause hardship to them. But the scope of civil cases are circumscribed by the limitations placed by the rules of pleadings, nature of relief claimed and the court fee paid. The predicament of plaintiffs, was brought upon themselves, by failing to convert the suit to one for declaration even when the written statement was filed, and by not seeking amendment of issues to include an issue on the question of title. In the absence of a prayer of declaration of title and an issue regarding title, let alone the pleadings required for a declaration of title, the parties cannot be said to have an opportunity to have a full-fledged adjudication regarding title.
We, therefore, allow this appeal, set aside the judgment of the High Court and dismiss the suit. Nothing stated herein or by the courts below shall be construed as expression of any opinion regarding title, in any future suit for declaration and consequential reliefs that may be filed by the Appellants, in accordance with law. Parties to bear their respective costs.
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2008 (3) TMI 704
Issues involved: Refund claim of redemption fine and penalties, application of doctrine of unjust enrichment.
Summary:
The appeals were directed against an order confirming additional Customs Duty liability, redemption fine, and penalty on imported Blank Video Cassettes. The Tribunal had earlier ruled in favor of the appellants, leading them to file a refund claim. The adjudicating authority rejected the claim, citing lack of evidence and time bar. The Ld. Commissioner (Appeals) upheld the rejection based on unjust enrichment. The appellant argued that unjust enrichment does not apply to redemption fine and penalties, as they were paid during the proceedings. The Ld. SDR contended that the doctrine of unjust enrichment applies to all refund claims. The Tribunal found that the appellants had succeeded in their appeal and that the rejection of the refund claim for redemption fine and penalty was incorrect based on precedent. Referring to a previous case, the Tribunal ordered the refund of redemption fine and penalty without delay, as the issue was the same. Consequently, the impugned orders were set aside, and the lower authorities were directed to refund the redemption fine and penalty to the appellant.
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2008 (3) TMI 703
Additions u/s 68 - unexplained cash credits - royalty payment - prior period expenses u/s 36(1)(vii).
Additions u/s 68 - unexplained cash credits - credit balances as were appearing in the accounts of these parties were in the form of opening balances coming from earlier years - HELD THAT:- The five amounts in question represented the purchases made by the assessee on credit. There is no dispute that the assessing officer had accepted the purchases, sales as also the trading results disclosed by the assessee. Thus, in view of the decision of Hon'ble Allahabad High Court in the case of CIT v. Pancham Dass Jain (supra), we hold that provisions of Section 68 are not attracted to amounts representing purchases made on credit. We therefore hold that the Commissioner (Appeal) was fully justified in deleting the addition.
In the instant case, the assessee had filed confirmation letter of M/s Awadh Wood Products, R.K. Perfumers and Tanu Enterprises before the CIT(A). There is no material on record to controvert the contents of these confirmation letters, which are available on the assessee’s paper book. In the instant case, we have already observed that the provisions of s. 68 are not attracted to amounts representing purchases made on credit.
Therefore, we do not find any infirmity in the findings of CIT(A) on this issue and accordingly, we uphold her view. Consequently, we dismiss ground No. 1 of Revenue’s appeal.
Addition on royalty payment - From the observations of the AO in the case of Shri K.N. Singh Patel, it is clear that he has duly shown this royalty payment in his IT return on which he is duly assessed to tax. Learned counsel for the assessee stated that Shri K.N. Singh Patel has closed his business activities and allowed the use of his brand name "Har Singar" to the assessee for which royalty was payable to him. In our view, the AO was not justified in stating that the payment made to Shri K.N. Singh Patel was unjustified and totally unreasonable.
Thus, considering the entire facts of the case and also the material available on record, we hold that the CIT(A) has rightly deleted the addition made by the AO. We therefore dismiss this ground of appeal also.
Addition on prior period expenses - HELD THAT:- We do not find any infirmity in the findings of CIT(A) on this issue. The amount in question allegedly treated as prior period expenditure, was actually a write off of the bad debt and therefore could not be treated as prior period expenditure in view of the provisions of s. 36(1)(vii) of the IT Act, 1961. There is no dispute that the amount in question has been written off during the period relevant to assessment year under consideration, and, therefore, we hold that the learned CIT(A) was justified in allowing a relief to the assessee.
In the result, both the appeals are dismissed.
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2008 (3) TMI 702
Issues Involved:
1. Factors for determining the price of levy sugar under Section 3(3C) of the Essential Commodities Act, 1955.
2. Impact of Clause 5A of the Sugarcane Control Order, 1966 on the price of levy sugar.
3. Relevance of State Advisory Price (SAP) in determining the price of levy sugar.
4. Judicial review and compliance with previous Supreme Court judgments.
Detailed Analysis:
1. Factors for Determining the Price of Levy Sugar:
The core issue is the factors that the Central Government must consider under Section 3(3C) of the Essential Commodities Act, 1955, for determining the price of levy sugar. The relevant factors include:
- The minimum price fixed for sugarcane by the Central Government.
- The manufacturing cost of sugar.
- The duty or tax paid or payable.
- Securing a reasonable return on the capital employed in the business of manufacturing sugar.
The judgment emphasizes that these factors are mandatory and must be substantially complied with when determining the price of levy sugar.
2. Impact of Clause 5A of the Sugarcane Control Order, 1966:
The introduction of Clause 5A in the Sugarcane Control Order, 1966, mandated the payment of an additional price to sugarcane growers over and above the statutory minimum price (SMP). The judgment reiterates the importance of taking this additional price into account when determining the price of levy sugar. The Court noted that the Central Government had not consistently considered this additional price, leading to disputes.
The Court referenced previous cases, including Malaprabha-I, which held that the additional price under Clause 5A must be included in the cost of production for determining the price of levy sugar. The Court further clarified that both the SMP and the additional price are relevant factors under Section 3(3C).
3. Relevance of State Advisory Price (SAP):
The judgment also addresses the relevance of the State Advisory Price (SAP) fixed by state governments. The SAP, which is often higher than the SMP, must be considered when determining the price of levy sugar. The Court noted that the SAP is a statutory price and impacts the overall cost of sugar production.
The Court emphasized that ignoring the SAP would lead to an incomplete and inaccurate determination of the levy sugar price. The judgment cited the Constitution Bench's decision in UP Coop. Cane Unions Federations, which held that the SAP must be considered under clauses (b) and (d) of Section 3(3C).
4. Judicial Review and Compliance with Previous Supreme Court Judgments:
The judgment underscores the role of judicial review in ensuring compliance with statutory requirements and previous Supreme Court judgments. The Court noted that the Central Government had not fully complied with the directions issued in Malaprabha-I and Malaprabha-II, which mandated considering the additional price under Clause 5A and the SAP.
The Court criticized the Central Government's reluctance to implement these judgments and emphasized that the courts have the power to intervene when statutory requirements are not met. The judgment also highlighted the importance of purposive construction to ensure that the legislative intent and statutory provisions are effectively implemented.
Conclusion:
The Supreme Court concluded that the Central Government must re-fix the price of levy sugar by considering all relevant factors, including the additional price under Clause 5A and the SAP. The judgment allowed the appeals filed by Mahalakshmi Sugar Mills Co. Ltd. and Govind Nagar Sugar Ltd., and dismissed the appeals filed by the Union of India. The Court directed the Central Government to comply with its directions and re-fix the price of levy sugar for the parties involved in the case.
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2008 (3) TMI 701
The High Court of Rajasthan dismissed two appeals relating to income tax assessments for the years 1990-91 and 1991-92. The judgment was based on a previous decision of the court and no distinguishing features were found to warrant interference. The appeals were dismissed accordingly.
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2008 (3) TMI 700
Issues involved:
The appeal under s. 27A of the Wealth-tax Act, 1957 regarding the rejection of the claim of complete partition u/s 20 of the WT Act.
Summary:
Issue 1: Assessment of Wealth-tax and claim of complete partition under s. 20 of the WT Act
The petitioner was assessed to wealth-tax by the Asstt. CWT under s. 17 of the Act, who rejected the claim of complete partition of the HUF. The AO held that while there had been a partition, it did not meet the requirements of a complete partition as per s. 20 of the Act. The AO relied on the decision in Kalloomal Tapeswari Prasad (HUF) vs. CIT and concluded that as there was only a partial partition, s. 20A of the Act was not applicable.
Issue 2: Appeal before CIT(A) and subsequent Tribunal decision
The assessee-appellant appealed before the CIT(A), who determined that there had indeed been a complete partition. The CIT(A) directed the AO to proceed on the basis of a complete partition. The Revenue challenged this decision before the Tribunal, which held that there was only a partial partition based on the facts presented. The Tribunal set aside the CIT(A)'s order and reinstated the AO's decision under s. 20 of the Act.
Issue 3: Challenge to Tribunal's decision before High Court
The appellant contested the Tribunal's decision, arguing that the Tribunal failed to provide adequate reasons for rejecting the claim of complete partition. The High Court observed that the Tribunal did not sufficiently analyze the facts and reversed the decision without proper justification. As the Tribunal is the highest fact-finding authority, it must fulfill its obligations when reversing a factual order, especially when the appellant is adversely affected.
Conclusion:
The High Court set aside the Tribunal's order and directed a remittance for proper adjudication in accordance with the law, emphasizing the lack of discussion on the factual matrix and absence of an opinion on the case's merits. The appeal was allowed with no order as to costs.
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2008 (3) TMI 699
Issues:
1. Appropriation of rebate claim against income tax dues under Central Excise Act.
2. Jurisdiction of Assistant Commissioner to appropriate funds.
3. Interpretation of provisions of Central Excise Act and Income Tax Act.
Analysis:
Issue 1: The Assistant Commissioner sanctioned the rebate claim to the respondent but appropriated it against income tax dues based on a notice from the tax recovery officer. The Commissioner (Appeals) allowed the appeal, stating that the rebate claim under the Central Excise Act cannot be used to discharge liabilities under the Income Tax Act. The Assistant Commissioner's failure to cite relevant provisions of the Central Excise Act was highlighted, leading to a remand for reconsideration.
Issue 2: The Assistant Commissioner's decision to appropriate the rebate claim against income tax dues raised questions about the authority to do so under the Central Excise Act. The Commissioner (Appeals) emphasized the need for proper consideration of provisions under the Central Excise Act, specifically Section 11, which empowers officers to recover sums due to the government. The appellate authorities sought a reevaluation of the matter by the Commissioner (Appeals) to ensure compliance with the legal framework.
Issue 3: The interpretation of provisions from both the Central Excise Act and the Income Tax Act played a crucial role in this case. The Commissioner (Appeals) clarified that the rebate claim under the Central Excise Act cannot be utilized to settle liabilities under the Income Tax Act. This interpretation highlighted the distinct nature of obligations under each statute and the necessity to adhere to the specific legal requirements governing such transactions.
In conclusion, the judgment emphasized the importance of correctly applying the provisions of the Central Excise Act and the Income Tax Act concerning the appropriation of funds and rebate claims. The decision to remand the matter for fresh consideration by the Commissioner (Appeals) aimed to ensure a thorough review of the legal aspects involved and to reach a well-founded conclusion in accordance with the relevant statutory provisions.
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2008 (3) TMI 698
Issues:
Non-compliance with Section 35F of the Central Excise Act in filing an appeal before the Commissioner (Appeals).
Analysis:
The appeal was filed against an order by the Commissioner (Appeals) that dismissed the appeal due to non-compliance with Section 35F. The appellant had deposited the demanded duty and penalty during the pendency of the appeal, as noted by the Commissioner (Appeals) himself. However, the Commissioner (Appeals) held that the deposits should have been made before filing the appeal, overlooking the specific requirement of Section 35F. The Commissioner (Appeals) relied on a Supreme Court judgment under the Customs Act, but it was noted that the judgment did not mandate predeposit before filing the appeal, similar to the provisions of Section 35F.
The Appellate Tribunal set aside the impugned order and directed the lower appellate authority to consider the appeal on its merits. The appellant had complied with the predeposit requirement under Section 35F, and thus, the appeal was allowed by way of remand for a fresh consideration in accordance with the law and principles of natural justice.
In conclusion, the Tribunal found that the Commissioner (Appeals) had not properly examined the provisions of Section 35F and misinterpreted the Supreme Court judgment. The Tribunal emphasized the importance of complying with the predeposit requirement under Section 35F and ordered a remand for a fair consideration of the appeal on its merits.
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2008 (3) TMI 697
Issues involved: Appeal u/s 260A of the Income-tax Act, 1961 against ITAT order for assessment year 2000-01. Proposed substantial questions of law: 1. Treatment of unabsorbed depreciation for deduction u/s 80HHC. 2. Exclusion of Sales Tax and Central Sales Tax from total turnover for deduction u/s 80HHC. 3. Exclusion of Service Charges of dyeing and knitting from total turnover for deduction u/s 80HHC.
Issue 1: Unabsorbed Depreciation for Deduction u/s 80HHC
The revenue's appeal raised the question of whether unabsorbed depreciation of earlier years should be reduced from business profits computed for deduction u/s 80HHC. The counsel for the revenue acknowledged that this issue had already been decided against the revenue by the Supreme Court in the case of CIT v. Shirke Construction Equipments Ltd. The court noted that in determining business profits for deduction u/s 80HHC, unabsorbed business losses of earlier years should be set off u/s 72. Consequently, as per the precedent, no substantial question of law remained for determination, leading to the dismissal of the appeal.
Issue 2: Exclusion of Sales Tax and Central Sales Tax from Total Turnover
The second question raised was whether Sales Tax and Central Sales Tax should be excluded from the total turnover of the assessee when computing deduction u/s 80HHC. The counsel for the revenue conceded that this question had been answered against the revenue and in favor of the assessee by a judgment of the court in the case of CIT v. Vardhman Polytex Ltd. Therefore, based on the previous ruling, this issue was also resolved in favor of the assessee.
Issue 3: Exclusion of Service Charges of Dyeing and Knitting from Total Turnover
The final question pertained to whether Service Charges of dyeing and knitting should be excluded from the total turnover of the assessee for deduction u/s 80HHC. The counsel for the revenue admitted that this question had been decided against the revenue and in favor of the assessee by the court in the case of Nahar Spinning Mills Ltd. v. CIT. Given the precedent set by the court's previous ruling, the issue was resolved in favor of the assessee. Consequently, with all substantial questions of law having been addressed and resolved by previous judgments, the appeal was dismissed.
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2008 (3) TMI 696
Issues Involved:
1. Validity of Block Assessment under Section 158BD.
2. Legality of Notice Issued under Section 158BC.
3. Timeframe for Issuing Notice under Section 158BD.
4. Use of Third-Party Statements in Assessments.
5. Levy of Surcharge on Tax.
Detailed Analysis:
1. Validity of Block Assessment under Section 158BD
The assessee challenged the validity of the block assessment under Section 158BD, arguing that no undisclosed income was found during the search. The Tribunal noted that no incriminating material relating to the assessee was found during the search at Manoj Aggarwal's premises. The transactions recorded in the documents found were already disclosed in the assessee's regular books of account. The Tribunal cited several precedents, including CIT vs. Ravi Kant Jain and CIT vs. Jupiter Builders, which held that block assessments should be based on documents found during the search. The Tribunal concluded that the assessment under Section 158BD was invalid as it was not based on any undisclosed income found during the search.
2. Legality of Notice Issued under Section 158BC
The assessee argued that the notice under Section 158BC was invalid as it failed to provide the statutory period for filing the return. The Tribunal found that the assessee had availed more than the statutory period for filing the return, and the assessment was made based on the return filed. Therefore, this ground was rejected.
3. Timeframe for Issuing Notice under Section 158BD
The assessee contended that the notice under Section 158BD was issued beyond a reasonable period, rendering it invalid. The Tribunal referred to the Gujarat High Court's decision in Khandubhai Vasanji Desai & Ors. vs. Dy. CIT, which emphasized that notices should be issued within a reasonable time, ideally within 60 days. In this case, the notice was issued 83 days after the assessment order in Manoj Aggarwal's case, which was deemed unreasonable. The Tribunal held that the notice was invalid due to the delay, making the subsequent assessment null and void.
4. Use of Third-Party Statements in Assessments
The Tribunal noted that the AO extensively used Manoj Aggarwal's statements without providing the assessee an opportunity to cross-examine him. Citing the principle of natural justice, the Tribunal held that evidence cannot be used against a person without allowing them to confront it. The Tribunal referenced a similar case where the Delhi Bench of the Tribunal deleted an addition based on such statements, which was upheld by the High Court. Consequently, the Tribunal found the assessment invalid due to reliance on third-party statements without cross-examination.
5. Levy of Surcharge on Tax
The assessee challenged the levy of surcharge on the tax amount. However, since the Tribunal quashed the assessment order, this issue was rendered moot and was not adjudicated.
Conclusion:
The Tribunal allowed the assessee's cross-objection, quashing the assessment order under Section 158BD due to invalid notice and improper reliance on third-party statements. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision that the income should be assessed in the hands of NITS and not the assessee.
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2008 (3) TMI 695
Issues involved: Interpretation of penalty provisions u/s 76 and u/s 78 of the Finance Act in cases of delayed Service Tax payment.
Case Details:
1. ST/279/2007 - M/s.Tidewater Shipping Private Ltd. Vs. CST, Bangalore
- Impugned Order: RA No. 62/2007 dated 29.05.2007
- Penalty: Rs. 100/- for everyday u/s 76, Rs. 7,12,000/- u/s 78
- Date of payment of tax & interest: 28.05.2005
- Date of issue of SCN: 30.05.2005
2. ST/249/2007 - Mr. Madhusudan Balaji Vs. CST, Bangalore
- Impugned Order: RA No. 41/2007 dated 23.03.2007
- Penalty: Rs. 100/- for everyday u/s 76, Rs. 5,00,000/- u/s 78
- Date of payment of tax & interest: 19.03.2005
- Date of issue of SCN: 29.03.2005
3. ST/290/2007 - M/s. JBC ImpexVs. CST, Bangalore
- Impugned Order: RA No. 44/2007 dated 27.03.2007
- Penalty: Rs. 100/- for everyday u/s 76, Rs. 1,000/- u/s 77
- Date of payment of tax & interest: Prior to 30.10.2004
- Date of issue of SCN: 02.03.2005
4. ST/397/2007 - M/s. Macro Services Vs. CCE(A), Mangalore
- Impugned Order: OIA No. 193/2007 dated 29.08.2007
- Penalty: Rs. 51,004/- u/s. 76, Rs. 1,000/- u/s 77, Rs. 51,004/- u/s 78
- Date of payment of tax & interest: 30.06.2006
- Date of issue of SCN: 23.08.2006
Judgment Summary:
The Advocates argued that early payment of duty and interest before the Show Cause Notice eliminates the need for penalty, citing relevant case laws. Conversely, the SDR contended that there was no bona fide belief for non-payment, indicating tax evasion. However, upon review, the bench found that the appellants, upon realizing the oversight, promptly paid the Service Tax even before the issuance of the Show Cause Notice, as evidenced in the provided table. Referring to Section 73(3) of the Finance Act and a Board's Circular, it was established that penalty proceedings cannot be initiated if the tax and interest are paid voluntarily or upon departmental insistence. Consequently, the bench concluded that the penalties imposed were unwarranted, especially in cases where the appellants settled their dues before any formal notice. Thus, the impugned orders were set aside, and the appeals were allowed with any necessary relief.
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2008 (3) TMI 694
Computing the book profit u/s 115JA - Addition u/s 201(1A) for delay in deposit of TDS - Disallowed amount received as duty drawback and profit on sale of REP license u/s 80-IA and u/s 115JA - Eligibility for deduction u/s 35 or u/s 37 - contribution made to Ranbaxy Science Foundation(RSF) and Ranbaxy Community Health Care Society(RCHCS) - Sale of scrap will form part of total turnover for computing deduction u/s 80HHC - provision for bad and doubtful debts - proportionate lease rent on oak wood barrels.
Computing the book profit under s. 115JA made addition under s. 201(1A) for delay in deposit of TDS - HELD THAT:- In the case of Harshad Shantilal Mehta vs. Custodian & Ors.[1998 (5) TMI 25 - SUPREME COURT] observed that tax, penalty and interest are different concepts under the IT Act, 1961. It was held that the definition of 'tax' under s. 2(43) of the IT Act, 1961 does not include penalty or interest. According to the Hon'ble Court, neither penalty nor interest can be considered tax under s. 11(2)(a) of the IT Act [sic-Special Court (Trial of offences) Relating to Transactions in Securities Act, 1992].
It may be pointed out that the ld DR has not been able to show any contrary authority. Hence, following the above authorities, we hold that the learned CIT(A) was not justified in upholding the addition made by the AO in respect of payment of interest under s. 201(1A) while computing book profit under s. 115JA of the IT Act. The issue is, therefore, decided in favour of the assessee. In the result, ground is allowed.
Disallowed amount received as duty drawback and profit on sale of REP license u/s 80-IA and u/s 115JA - On going through the order of the Tribunal rendered in AY 1996-97 in assessee's own case, it is found that the Tribunal has considered similar arguments and after following the decision of Hon'ble Delhi High Court in the case of Britannia Industries Ltd. [2005 (10) TMI 30 - SUPREME COURT] held that the assessee is not eligible for deduction in respect of duty drawback and profit on sale of REP licenses.
In the case of CIT vs. Ritesh Industries Ltd.[2004 (9) TMI 36 - DELHI HIGH COURT], categorically held that amount of duty drawback cannot be regarded as income derived from industrial undertaking.
Thus, the issue has to be decided against the assessee. Ground Nos. A2 and B3 are therefore rejected.
Eligibility for deduction u/s 35 or u/s 37 - contribution made to Ranbaxy Science Foundation and Ranbaxy Community Health Care Society - establish community based scientific research for control of various endemic diseases - Assessee company, therefore, is directly concerned with the activities of these two organizations, although the organizations have a separate entity of their own. It is true that these organizations have been exempted under s. 11 or under s. 80G but the fact remains that the assessee company is incurring heavy expenditure in maintaining these institutions for its own business purposes and is being directly benefited by their activities.
The provisions made by the assessee company cannot be said merely for carrying out philanthropic objects, rather the contributions are directly aimed for promoting business of the assessee company and also for advertising its name because various conferences and workshops are conducted under the banner of the Ranbaxy Laboratories (P) Ltd. Thus, on examination of the nexus between the activities of the foundation and society and those of the assessee company.
The issue regarding contribution to various foundations and societies has been considered by various Courts in relation to allowability of deduction of expenditure. In the case of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT [1996 (10) TMI 2 - SUPREME COURT], after making reference to various decisions, allowed the claim of the assessee
In the case of Mahindra & Mahindra Ltd. vs. CIT [2003 (1) TMI 71 - BOMBAY HIGH COURT], High Court allowed deduction of expenditure incurred by the assessee in making initial contribution to the approved superannuation fund to an educational society, which was running school for children of employees, as business expenditure under s. 37. It was held that the amount should be allowed as business expenditure because it was incurred predominantly for staff welfare.
Therefore, it is clear that even if there is no statutory obligation on the part of the assessee to incur the expenditure, but the expenditure has been incurred to bring goodwill to the assessee or is for the purpose of promoting its business then such expenditure is to be allowed as business expenditure. In view of the above, we uphold the claim of the assessee and allow ground No. 5.
Deduction u/s 80HH/80-IA - profits derived from goods manufactured on loan license basis - manufacture of drugs and pharmaceuticals - HELD THAT:- It was pointed out by the learned counsel for the assessee that in earlier year i.e. AY 1991-92 in assessee's own case the Tribunal has confirmed the order of the learned CIT(A) in setting aside the issue and in directing the AO to consider the claim of the assessee. Both the sides agreed before us that the same course should be adopted in this assessment year also. It could not be pointed out as to what happened to the directions of the Tribunal and what is the final outcome.
Since position could not be ascertained and further since neither the AO nor the learned CIT(A) have considered the relevant facts nor carried out further examination or inquiry we consider it proper to restore the matter back to the file of AO to decide the issue afresh after examining all relevant aspects and as per law, of course, after providing opportunity of being heard to the assessee. Consequently, order of the learned CIT(A) is set aside and the ground is allowed for statistical purposes.
Sale of scrap will form part of total turnover for computing deduction u/s 80HHC - we have gone through the order of the Tribunal rendered in assessee's own case for AY 1996-97, wherein after considering various authorities it has been held that sale of scrap is not to be included in total turnover for the purposes of computing deduction u/s 80HHC. The ld DR has not been able to point out any decision of jurisdictional High Court in favour of the Revenue. As the issue stands covered in favour of the assessee by the earlier decisions of the Tribunal in the case of the assessee itself, respectfully following the same, we uphold the claim of the assessee and allow the ground in assessee's favour. Ground is allowed.
In the result, assessee's appeal stands partly allowed as indicated above.
Computation of book profit under s. 115JA - provision for bad and doubtful debts - In the case of CIT vs. HCL Comnet Systems & Services[2007 (5) TMI 203 - DELHI HIGH COURT], the assessee had made provision for bad and doubtful debts in its P&L a/c for AY1997-98. The Hon'ble High Court while dismissing the appeal, held as under: ''there was no reason why a bad and doubtful debt claimed by the assessee could not be treated as an ascertained liability. If the debts that were bad and doubtful should have been written off, then cl. (c) of the Explanation to s. 115JA would become completely inoperative and otiose, which was not the intention of the legislature."
Thus, the issue is decided in favour of the assessee. Ground fails.
Exclude the proportionate lease rent on oak wood barrels leased to M/s Khodey Distillery Ltd. - On going through the order of the Tribunal in the case of Crosslands Research Lab Ltd. (supra), it is found that the order of the learned CIT(A) has been affirmed wherein the total cost of wooden barrel worked out. Consequently, the view taken by the learned CIT(A) in the present appeal for present assessment year which is based on the order of the learned CIT(A) in the case of Crosslands Research Lab Ltd. for AY 1995-96 is fully justified. Accordingly, order of the learned CIT(A) on the issue in question is upheld. Ground fails.
In the result, assessee's appeal is partly allowed, in the manner as indicated above and the appeal filed by the Revenue is dismissed.
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2008 (3) TMI 693
... ...
... ... ..... Tripathi, ASG., Mr. V.Rama Subramanium, Adv., Ms. Vismai Rao, Adv., Mr. B.V. Balaram Das,Adv. ORDER Delay condoned. Dismissed on the facts of the case.
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2008 (3) TMI 692
Adjustment of cash seized at the time of search against the advance tax liability - completion of assessment u/s 153A - Interest charged u/s 234B and 234C - HELD THAT:- After going through the old provisions of law and the new provisions of law of s. 132B and cl. (d) of s. 158BC, it is amply clear that whatever the amount has been seized by the Department that has to be treated against any pending demand including penalty and against the demand of the block period of which the assessment has to be completed.
As per the old provisions of law, the AO has to wait (sic) the order under s. 132(5) and then the order under s. 158BC. However, taking into the difficulties of the assessee in mind, the legislature has amended the provisions of s. 132B as well as cl. (d) of s. 158BC.
Even as per the amended provisions of law, there is no requirement to seek any request from the assessee for adjustment. However, in the present case, the assessee has requested to adjust the remaining cash seized during the search against the tax liability of the assessee. Therefore, in our considered view the Department has to adjust the amount seized at the time of search towards the advance tax, etc., from the date when the amount was seized. It is incorrect on the part of the AO, who has taken into consideration the adjustment from the date of assessment. It is a matter of commonsense that once the amount is lying with the Department that has to be adjusted; otherwise that amount where will be adjusted and in which account the Department will keep the amount. The seizure of the amount is for the' obvious reason that the same has to be adjusted against any demand raised against the assessee or against any demand which is pending before the date of search.
Therefore, we direct the AO to adjust the remaining cash seized by the Department from the date of seizure because if any amount is to be adjusted against any liability the date of payment of that liability shall be the date of seizure and not the date of adjustment and/or the date of order. The AO is therefore, directed to modify his order accordingly.
Rate of interest under ss. 234A and 234B has to be applied - The rate of tax (sic-interest) is mentioned under the respective sections. It is also clearly mentioned that what rate is to be charged from which date and upto which date and what rate has to be charged from the date of amendment. Therefore, the AO is directed to ascertain the factual date that upto which date the current rate of interest is to be charged. The AO will also allow opportunity to the assessee for applicability of current rate of interest. We order accordingly.
In the result, the appeals filed by the assessee are allowed in part.
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