TaxTMI Login
Just a moment...
By creating an account you can:
of 42
of 42
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of 42 of 42
All Daily Newsletter
of 42 of 42All Daily Newsletter
Note
Bookmark
Share
https://www.taxtmi.com/ne...
Dis-allowance u/s 40A(2)(b) on ground that both average manufactured cost and selling rate is less than the purchase rate of the assessee - assessee submitted that under business exigencies, purchases were made to tied over the crisis in the subsequent months when the raw material availability becomes very poor - Held that:- CIT(A) had rightly deleted the addition by comparing the purchase price paid by the assessee with the market price prevalent at the time of purchase, keeping in view the fact that the materials were supplied on FOR and the appellant had saved notional interest on working capital for a period of about 8 months - Decided in favor of assessee.
Legal expenses incurred for increase in authorized share capital of the company - capital vs revenue expenditure - Held that:- Expenditure incurred for increase in the share capital of the company after commencement of business is not a capital expenditure but a regular business expenditure of revenue nature - Decided in favor of assessee.
Addition made on account of illegal transportation and illegal stock - survey - assessee contended that additions are based upon surmises and assumptions without placing any corroborating material and observations purely on the basis of third party reports the findings which were also stayed by the higher authorities - Held that:- Following the Tribunal order in the case of M/s JP Stone Crushers (P) Ltd. v. DCIT based upon identical facts, issues involved on these points in this appeal are restored back to the file of the Assessing Officer for fresh adjudication after taking into account the final outcome of survey.
Dis-allowance u/s 40(a)(ia) - non-deduction of tax at source - Revenue contending hiring of machine and equipments as transportation contract - AY 2005-06 - Held that:- From the facts of the case it is established that agreement was for lease of dumpers/JCB only and there was no agreement for executing any work or contract and hence cannot be classified as works contract or a service contract. See DCIT v. Satish Aggarwal & Co [2008 (11) TMI 322 (Tri)] - Decided in favor of assessee.
Deduction u/s 80IB - dis-allowance on ground that it was not claimed in the original return of income - Held that:- If an assessee under a mistake, misconception or not being properly instructed is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes are collected. Matter restored to the file of the Assessing Officer - Decided in favor of assessee for statistical purposes.
Dis-allowance u/s 40A(2)(b) on ground that both average manufactured cost and selling rate is less than the purchase rate of the assessee - assessee submitted that under business exigencies, purchases were made to tied over the crisis in the subsequent months when the raw material availability becomes very poor - Held that:- CIT(A) had rightly deleted the addition by comparing the purchase price paid by the assessee with the market price prevalent at the time of purchase, keeping in view the fact that the materials were supplied on FOR and the appellant had saved notional interest on working capital for a period of about 8 months - Decided in favor of assessee.
Legal expenses incurred for increase in authorized share capital of the company - capital vs revenue expenditure - Held that:- Expenditure incurred for increase in the share capital of the company after commencement of business is not a capital expenditure but a regular business expenditure of revenue nature - Decided in favor of assessee.
Addition made on account of illegal transportation and illegal stock - survey - assessee contended that additions are based upon surmises and assumptions without placing any corroborating material and observations purely on the basis of third party reports the findings which were also stayed by the higher authorities - Held that:- Following the Tribunal order in the case of M/s JP Stone Crushers (P) Ltd. v. DCIT based upon identical facts, issues involved on these points in this appeal are restored back to the file of the Assessing Officer for fresh adjudication after taking into account the final outcome of survey.
Dis-allowance u/s 40(a)(ia) - non-deduction of tax at source - Revenue contending hiring of machine and equipments as transportation contract - AY 2005-06 - Held that:- From the facts of the case it is established that agreement was for lease of dumpers/JCB only and there was no agreement for executing any work or contract and hence cannot be classified as works contract or a service contract. See DCIT v. Satish Aggarwal & Co [2008 (11) TMI 322 (Tri)] - Decided in favor of assessee.
Deduction u/s 80IB - dis-allowance on ground that it was not claimed in the original return of income - Held that:- If an assessee under a mistake, misconception or not being properly instructed is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes are collected. Matter restored to the file of the Assessing Officer - Decided in favor of assessee for statistical purposes.
Deduction u/s 80HH & 80I - whether extracting stones and then cutting them into the required size and weight, can be held as 'manufacturing activity' - assessee, engaged in the business of excavating stone boulders of specific size and weight - Held that:- Present is a case where boulders are cut to different sizes and weights. The nature and character of the boulders remain the same and from the facts which are brought on the record as noticed by the Tribunal, it cannot be said that the assessee was engaged in any manufacturing activity so as to enable him to take the benefit of deduction u/s 80-HH and 80-I - Decided in favor of Revenue.
Deduction u/s 80HH & 80I - whether extracting stones and then cutting them into the required size and weight, can be held as 'manufacturing activity' - assessee, engaged in the business of excavating stone boulders of specific size and weight - Held that:- Present is a case where boulders are cut to different sizes and weights. The nature and character of the boulders remain the same and from the facts which are brought on the record as noticed by the Tribunal, it cannot be said that the assessee was engaged in any manufacturing activity so as to enable him to take the benefit of deduction u/s 80-HH and 80-I - Decided in favor of Revenue.
Validity of Valuation proceedings referred to DVO, once the assessment u/s 143(3) was completed – reference made to DVO by AO on the basis of his opinion that the valuation as on 01.04.1981 provided by assessee was on the higher side leading to reduction in capital gains – assessment completed without waiting for the report from the DVO on ground of assessment getting time barred – assessment reopened u/s 147 on getting valuation report from the DVO after the completion of the assessment – Held that:- Reference to the DVO does not become invalid on the completion of the assessment proceedings before the receipt of the valuation report and that after the receipt of the valuation report after completion of the assessment proceedings, the report would become part of the record which may enable the income tax authorities to take action as permissible under the Act, such as Section 147, Section 263, appellate power under Section 250 or Section 251 etc.
If any action is taken by the departmental authorities on the basis of the report of the DVO received after the completion of the assessment, such action will be open to challenge by the petitioner and it is at that point of time that the Court may be called upon to examine the validity of the action taken by the revenue authorities. That stage has not yet arisen in the present case. Writ petition dismissed.
Validity of Valuation proceedings referred to DVO, once the assessment u/s 143(3) was completed – reference made to DVO by AO on the basis of his opinion that the valuation as on 01.04.1981 provided by assessee was on the higher side leading to reduction in capital gains – assessment completed without waiting for the report from the DVO on ground of assessment getting time barred – assessment reopened u/s 147 on getting valuation report from the DVO after the completion of the assessment – Held that:- Reference to the DVO does not become invalid on the completion of the assessment proceedings before the receipt of the valuation report and that after the receipt of the valuation report after completion of the assessment proceedings, the report would become part of the record which may enable the income tax authorities to take action as permissible under the Act, such as Section 147, Section 263, appellate power under Section 250 or Section 251 etc.
If any action is taken by the departmental authorities on the basis of the report of the DVO received after the completion of the assessment, such action will be open to challenge by the petitioner and it is at that point of time that the Court may be called upon to examine the validity of the action taken by the revenue authorities. That stage has not yet arisen in the present case. Writ petition dismissed.
Notional sales tax/ sales tax subsidy received under the schemes by the Government - Capital receipt vs Revenue Receipt - Held that:- Following decision of ITAT in assessee’s own case [2003 (10) TMI 255 (Tri)] it is held that claim for treatment of notional sales tax is capital receipt, thus not liable to tax. Further, CIT(A) has rightly held that it is not necessary to go into the alternative plea of the assessee as claiming the notional sales tax as deductible u/s 43B - Decided in favor of assessee.
Interest on borrowed funds - dis-allowance of interest being interest referable to interest free loans and advances given to subsidiary companies - Held that:- High Court in the case of Reliance Utilities & Power Ltd.(2009 (1) TMI 4 (HC)), has held that if interest free funds available to an assessee is sufficient to meet its investment, it can be presumed that the investments were made from the interest free funds available with the assessee. Therefore, considering the fact that the assessee had its own funds more than the loans given to its subsidiaries and also in the absence of any nexus establishing that the interest bearing borrowed funds were given as interest free to its subsidiaries, we hold that the dis-allowance of interest is not justified - Decided in favor of assessee.
Dis-allowance u/s 14A of estimated expenses out of administrative expenses being expenditure incurred in relation to earning the exempt income u/s 10(33) and 10(23G) - Held that:- Assessee's own funds are far in excess than the investments made by the assessee giving exempt income, the dis-allowance of the interest is not justified as it has to be presumed that the investments had come from the interest free funds available with the assessee - Decided in favor of assessee.
Deduction u/s 80HHC - exclusion of gross interest or net interest - Held that:- 90% of net interest expenses have to be considered while computing deduction u/s 80HHC. See ACG Associated Capsules Pvt. Ltd. vs. DCIT(2012 (2) TMI 101 (SC)) - Decided in favor of assessee.
Exclusion of profit allowed as deduction u/s 80IA/ 80IB with reference to all(exporting and non-exporting) units while arriving at deduction u/s 80HHC - assessee contended that exclusion should be restricted to export units with reference to which claim u/s 80 HHC is worked out - Held that:- When the deduction u/s 80 HHC is to be considered, it is to be allowed in proportion to export turnover to the total turnover of an undertaking and accordingly that proportion of the deduction allowed u/s 80 HHC is to be considered and reduced while allowing deduction u/s 80 IA of those three exporting units subject to the condition that total deduction will not exceed the eligible profits of the undertaking. Hence, we hold that the entire deduction allowed u/s 80 IA / 80 IB should not be reduced while computing deduction u/s 80 HHC. On the other hand, the claim of export profits of these three units u/s 80 HHC should be reduced while allowing deduction u/s 80 IA in proportion of export turnover to total turnover - Decided in favor of assessee.
Deduction u/s 80HHC - inclusion of excise duty and sales tax in the turnover - Held that:- Excise duty and sales tax has to be excluded from the total turnover for the purpose of computing deduction u/s 80 HHC - Decided in favor of assessee.
Computation of deduction u/s 80 HHC under the provisions of section 115JB with reference to the profits as worked out on the basis of adjusted book profits - Held that:- Deduction under chapter VIA of I.T Act has to be worked out not on the basis of regular income tax profits but it has to be worked out on the basis of the adjusted book profits in a case where section 115JA/115JB is applicable. See DCIT vs. Syncome Formulations (India) Ltd. [2007(3) TMI 288 (Tri)]
Dis-allowance of expenses on account of traveling of spouse of executives - Held that:- Since assessee has not been able to establish that above expenses pertaining to wives/family members of the executives was necessary for the purpose of the business,hence such expenditure is dis-allowed - Decided against the assessee.
Non-compete Agreement - assessee together with its subsidiaries sold substantial number of shares held by it in L&T and entered into agreement containing restrictive covenant for a minimum period of five years - SEBI guide for treating 25% of the sale consideration, towards consideration for accepting such restrictive covenant - AY 02-03 - Held that:- Part of the sale consideration received by the assessee on sale of shares has rightly been considered towards receipt on account of restrictive covenant and same is in the nature of capital receipt not taxable under the Act prior to AY 2003-04. Same has become taxable under clause (va) to section 28 w.e.f. 1/4/2003.
Transfer pricing - dis-allowance u/s. 92C of ₹ 1.85 crores out of the charter hire charges paid to its associate enterprise - Held that:- Neither the assessee, nor the TPO, nor the AO, or the Commissioner (Appeals) has followed any of the method prescribed in the Act and Rules, for arriving at the ALP. However, both the parties agree that the “CUP” method should be followed. In absence of comparable transactions, we set aside the issue to the file of the AO for the limited purpose of re—computing the arm’s length price by taking the date available in the public domain.
Transfer pricing - dispute regarding working of 'Cost plus' method followed by TPO - Held that:- A perusal of the workings clearly demonstrates that the TPO has taken 50% of total cost and whereas the assessee has taken the actual cost relating to charter hire activity. This has made a difference to the calculation of cost. Actuals have to be taken to arrive at the correct cost and only then cost plus method can be applied. Cost plus method does not contemplate estimation of cost. When actual figures are replaced in the calculation made by the TPO, then, no adjustment is called for as the payment is at arm’s length price - Decided in favor of assessee.
Depreciation - restriction of depreciation claimed - assessee didn't claimed depreciation in earlier years thus claimed depreciation on WDV whereas Revenue after considering depreciation for earlier years reduced WDV, thereon restricted depreciation - Held that:- Claim of depreciation prior to insertion of clause 5 to section 32(1), inserted w.e.f. 1/4/2002 as applicable from A.Y 2002-03, was optional and depreciation could not be thrust upon the assessee. Therefore, the WDV of the assets as on 31/3/2001 has to be taken for considering the depreciation to be allowed to the assessee. We hold that AO while giving effect to this order will consider the WDV as on 31/3/2001 and allow the depreciation claim accordingly - Decided in favor of assessee.
Pre-operative expenses - Held that:- Pre-operative expenses in question have been incurred for the purpose of business of the assessee and the expenditure was incurred for expansion of its existing activities. Hence, these preoperative expenses represent revenue expenditure incurred for the purpose of business and be allowed as deduction u/s 37
MAT - Revenue contending adding back of provision for doubtful debts while computing profits u/s 115JB - Held that:- Considering amendment made by the finance (No.2) Act 2009 with retrospective effect from 1/4/2001 by inserting clause “ i ” in Explanation -1 to section 115JB the issue is to be decided against the assessee and thus addition made by AO is restored.
Notional sales tax/ sales tax subsidy received under the schemes by the Government - Capital receipt vs Revenue Receipt - Held that:- Following decision of ITAT in assessee’s own case [2003 (10) TMI 255 (Tri)] it is held that claim for treatment of notional sales tax is capital receipt, thus not liable to tax. Further, CIT(A) has rightly held that it is not necessary to go into the alternative plea of the assessee as claiming the notional sales tax as deductible u/s 43B - Decided in favor of assessee.
Interest on borrowed funds - dis-allowance of interest being interest referable to interest free loans and advances given to subsidiary companies - Held that:- High Court in the case of Reliance Utilities & Power Ltd.(2009 (1) TMI 4 (HC)), has held that if interest free funds available to an assessee is sufficient to meet its investment, it can be presumed that the investments were made from the interest free funds available with the assessee. Therefore, considering the fact that the assessee had its own funds more than the loans given to its subsidiaries and also in the absence of any nexus establishing that the interest bearing borrowed funds were given as interest free to its subsidiaries, we hold that the dis-allowance of interest is not justified - Decided in favor of assessee.
Dis-allowance u/s 14A of estimated expenses out of administrative expenses being expenditure incurred in relation to earning the exempt income u/s 10(33) and 10(23G) - Held that:- Assessee's own funds are far in excess than the investments made by the assessee giving exempt income, the dis-allowance of the interest is not justified as it has to be presumed that the investments had come from the interest free funds available with the assessee - Decided in favor of assessee.
Deduction u/s 80HHC - exclusion of gross interest or net interest - Held that:- 90% of net interest expenses have to be considered while computing deduction u/s 80HHC. See ACG Associated Capsules Pvt. Ltd. vs. DCIT(2012 (2) TMI 101 (SC)) - Decided in favor of assessee.
Exclusion of profit allowed as deduction u/s 80IA/ 80IB with reference to all(exporting and non-exporting) units while arriving at deduction u/s 80HHC - assessee contended that exclusion should be restricted to export units with reference to which claim u/s 80 HHC is worked out - Held that:- When the deduction u/s 80 HHC is to be considered, it is to be allowed in proportion to export turnover to the total turnover of an undertaking and accordingly that proportion of the deduction allowed u/s 80 HHC is to be considered and reduced while allowing deduction u/s 80 IA of those three exporting units subject to the condition that total deduction will not exceed the eligible profits of the undertaking. Hence, we hold that the entire deduction allowed u/s 80 IA / 80 IB should not be reduced while computing deduction u/s 80 HHC. On the other hand, the claim of export profits of these three units u/s 80 HHC should be reduced while allowing deduction u/s 80 IA in proportion of export turnover to total turnover - Decided in favor of assessee.
Deduction u/s 80HHC - inclusion of excise duty and sales tax in the turnover - Held that:- Excise duty and sales tax has to be excluded from the total turnover for the purpose of computing deduction u/s 80 HHC - Decided in favor of assessee.
Computation of deduction u/s 80 HHC under the provisions of section 115JB with reference to the profits as worked out on the basis of adjusted book profits - Held that:- Deduction under chapter VIA of I.T Act has to be worked out not on the basis of regular income tax profits but it has to be worked out on the basis of the adjusted book profits in a case where section 115JA/115JB is applicable. See DCIT vs. Syncome Formulations (India) Ltd. [2007(3) TMI 288 (Tri)]
Dis-allowance of expenses on account of traveling of spouse of executives - Held that:- Since assessee has not been able to establish that above expenses pertaining to wives/family members of the executives was necessary for the purpose of the business,hence such expenditure is dis-allowed - Decided against the assessee.
Non-compete Agreement - assessee together with its subsidiaries sold substantial number of shares held by it in L&T and entered into agreement containing restrictive covenant for a minimum period of five years - SEBI guide for treating 25% of the sale consideration, towards consideration for accepting such restrictive covenant - AY 02-03 - Held that:- Part of the sale consideration received by the assessee on sale of shares has rightly been considered towards receipt on account of restrictive covenant and same is in the nature of capital receipt not taxable under the Act prior to AY 2003-04. Same has become taxable under clause (va) to section 28 w.e.f. 1/4/2003.
Transfer pricing - dis-allowance u/s. 92C of ₹ 1.85 crores out of the charter hire charges paid to its associate enterprise - Held that:- Neither the assessee, nor the TPO, nor the AO, or the Commissioner (Appeals) has followed any of the method prescribed in the Act and Rules, for arriving at the ALP. However, both the parties agree that the “CUP” method should be followed. In absence of comparable transactions, we set aside the issue to the file of the AO for the limited purpose of re—computing the arm’s length price by taking the date available in the public domain.
Transfer pricing - dispute regarding working of 'Cost plus' method followed by TPO - Held that:- A perusal of the workings clearly demonstrates that the TPO has taken 50% of total cost and whereas the assessee has taken the actual cost relating to charter hire activity. This has made a difference to the calculation of cost. Actuals have to be taken to arrive at the correct cost and only then cost plus method can be applied. Cost plus method does not contemplate estimation of cost. When actual figures are replaced in the calculation made by the TPO, then, no adjustment is called for as the payment is at arm’s length price - Decided in favor of assessee.
Depreciation - restriction of depreciation claimed - assessee didn't claimed depreciation in earlier years thus claimed depreciation on WDV whereas Revenue after considering depreciation for earlier years reduced WDV, thereon restricted depreciation - Held that:- Claim of depreciation prior to insertion of clause 5 to section 32(1), inserted w.e.f. 1/4/2002 as applicable from A.Y 2002-03, was optional and depreciation could not be thrust upon the assessee. Therefore, the WDV of the assets as on 31/3/2001 has to be taken for considering the depreciation to be allowed to the assessee. We hold that AO while giving effect to this order will consider the WDV as on 31/3/2001 and allow the depreciation claim accordingly - Decided in favor of assessee.
Pre-operative expenses - Held that:- Pre-operative expenses in question have been incurred for the purpose of business of the assessee and the expenditure was incurred for expansion of its existing activities. Hence, these preoperative expenses represent revenue expenditure incurred for the purpose of business and be allowed as deduction u/s 37
MAT - Revenue contending adding back of provision for doubtful debts while computing profits u/s 115JB - Held that:- Considering amendment made by the finance (No.2) Act 2009 with retrospective effect from 1/4/2001 by inserting clause “ i ” in Explanation -1 to section 115JB the issue is to be decided against the assessee and thus addition made by AO is restored.
Dis-allowance 40(a)(i) on payment of hiring charges for transponder by assessee(Mauritius company), to foreign companies on the ground that no tax has been deducted at source by the assessee u/s 195 - Revenue contending such hiring charges to be Royalty - DTAA between India and USA - Held that:- As we have held that there is no PE, the question of a claim being made and disallowing such a claim for expenditure u/s. 40(a)(i) does not arise. However on merits it is held that issue stands covered in favour of the assessee by the decision of High Court in the case of Asia Satellite Communication Co. Ltd. Vs. DIT(2011 (1) TMI 47 (HC)) wherein it is held that payment made by the telecast operators situated abroad to the assessee which was also a non-resident did not represent income by way of royalty as defined in Explanation 2 to section 9(1)(vi).
Further, in the case of DIT Vs. Guy Carpenter & Co. Ltd.(2012 (5) TMI 31 (HC)) it was held that to “make available” technical knowledge, mere provisions of service was not enough and the payer had to be enabled to perform services himself. The department’s argument that the amendments by the Finance Act, 2012 changes the position is not acceptable, since there is no change in the DTAA between India and USA and the DTAA prevails where it is favorable to the assessee;
Even otherwise as the payment is made from one non-resident to another non-resident outside India on the basis of contract executed outside India, section 195 will not apply to such cases as held by in the case of Vodafone International Holdings B.V.(2012 (1) TMI 52 (SC)).
Further, as prior to the insertion of Section 40(a)(i) in AY 2004-05, payments to a resident did not require TDS. Under the non-discrimination clause in the DTAA, the dis-allowance u/s 40(a)(i) in the case of non-residents cannot be made. See Herbalife International (2006 (2) TMI 220 (Tri)).
Aforesaid view squarely apply in respect of payments made to Advanced Satellite( UK based company) for equipment and technical fees. As there is no change in the DTAA between India and UK, we have to hold that no dis-allowance can be made u/s 40(a)(i). No dis-allowance can be made in view of the nondiscrimination clause also.
Dis-allowance u/s 40(a)(i) in respect of payments made to LMB(Mauritius) Ltd. for purchase of programmes - revenue contending the same to be payment for grant of broadcasting right - Held that:- Following proposition laid down in case of CIT vs B. Suresh (2009 (3) TMI 4 (SC)) and others it is held that that there is a sale of programmes, section 195 cannot be invoked in case of purchases. Further, it is a payment by a non-resident to another non-resident and as nondiscrimination clause also applies.
Dis-allowance 40(a)(i) on payment of hiring charges for transponder by assessee(Mauritius company), to foreign companies on the ground that no tax has been deducted at source by the assessee u/s 195 - Revenue contending such hiring charges to be Royalty - DTAA between India and USA - Held that:- As we have held that there is no PE, the question of a claim being made and disallowing such a claim for expenditure u/s. 40(a)(i) does not arise. However on merits it is held that issue stands covered in favour of the assessee by the decision of High Court in the case of Asia Satellite Communication Co. Ltd. Vs. DIT(2011 (1) TMI 47 (HC)) wherein it is held that payment made by the telecast operators situated abroad to the assessee which was also a non-resident did not represent income by way of royalty as defined in Explanation 2 to section 9(1)(vi).
Further, in the case of DIT Vs. Guy Carpenter & Co. Ltd.(2012 (5) TMI 31 (HC)) it was held that to “make available” technical knowledge, mere provisions of service was not enough and the payer had to be enabled to perform services himself. The department’s argument that the amendments by the Finance Act, 2012 changes the position is not acceptable, since there is no change in the DTAA between India and USA and the DTAA prevails where it is favorable to the assessee;
Even otherwise as the payment is made from one non-resident to another non-resident outside India on the basis of contract executed outside India, section 195 will not apply to such cases as held by in the case of Vodafone International Holdings B.V.(2012 (1) TMI 52 (SC)).
Further, as prior to the insertion of Section 40(a)(i) in AY 2004-05, payments to a resident did not require TDS. Under the non-discrimination clause in the DTAA, the dis-allowance u/s 40(a)(i) in the case of non-residents cannot be made. See Herbalife International (2006 (2) TMI 220 (Tri)).
Aforesaid view squarely apply in respect of payments made to Advanced Satellite( UK based company) for equipment and technical fees. As there is no change in the DTAA between India and UK, we have to hold that no dis-allowance can be made u/s 40(a)(i). No dis-allowance can be made in view of the nondiscrimination clause also.
Dis-allowance u/s 40(a)(i) in respect of payments made to LMB(Mauritius) Ltd. for purchase of programmes - revenue contending the same to be payment for grant of broadcasting right - Held that:- Following proposition laid down in case of CIT vs B. Suresh (2009 (3) TMI 4 (SC)) and others it is held that that there is a sale of programmes, section 195 cannot be invoked in case of purchases. Further, it is a payment by a non-resident to another non-resident and as nondiscrimination clause also applies.
Discounting charges vs Interest - assessee paid a sum of Rs. 3.97 crores to its associate concern in Singapore, on account of discounted charges for getting the export sale bills discounted - AO contended the same to be interest within the ambit of section 2(28A) and disallowed the expenditure u/s 40(a)(ia) on ground of non-deduction of tax at source u/s 195 - High Court relying on Circular No.65 dated 2.09.1971, Circular No.674 dated 22.03.1993 & Vijay Ship Breaking (2008 (10) TMI 6 (SC)) held that as the discounting charges were not in respect of any debt incurred or money borrowed and were merely discount of the sale consideration on sale of goods, it was not “interest” u/s 2(28A) and there was no obligation to deduct TDS thereon - Held that:- Special Leave Petition against the order of High Court stand dismissed - Decided in favor of assessee.
Discounting charges vs Interest - assessee paid a sum of Rs. 3.97 crores to its associate concern in Singapore, on account of discounted charges for getting the export sale bills discounted - AO contended the same to be interest within the ambit of section 2(28A) and disallowed the expenditure u/s 40(a)(ia) on ground of non-deduction of tax at source u/s 195 - High Court relying on Circular No.65 dated 2.09.1971, Circular No.674 dated 22.03.1993 & Vijay Ship Breaking (2008 (10) TMI 6 (SC)) held that as the discounting charges were not in respect of any debt incurred or money borrowed and were merely discount of the sale consideration on sale of goods, it was not “interest” u/s 2(28A) and there was no obligation to deduct TDS thereon - Held that:- Special Leave Petition against the order of High Court stand dismissed - Decided in favor of assessee.
Deduction u/s 80IA(4)(iii) - the assessing officer concluded that the assessee could not fulfil the conditions attached to the approval granted by the Ministry as well as CBDT for the Industrial Park - minor variation in construction cannot alter the fact that assessee made investment in developing the Industrial Park and also we cannot hold that the area so developed is not sufficient to locate the minimum number of three industrial units as specified in the approval by Ministry of Commerce, Government of India - Assessing Officer has opined that even if the assessee had not let out or used all of such 1,50,718 sq. ft. for approved industrial purposes during the year, it cannot be denied that all of such area had been developed as per the approval of the Central Government and was fit to be used for the specified industrial purposes - Held that: while the assessee has received such approval and notification, the same has not been withdrawn till date for contravention of any of the conditions, even though there is a specific provision for withdrawal, in case the Central Government finds that the conditions prescribed therein have not been adhered to - Decided in favor of the assessee
Deduction u/s 80IA(4)(iii) - the assessing officer concluded that the assessee could not fulfil the conditions attached to the approval granted by the Ministry as well as CBDT for the Industrial Park - minor variation in construction cannot alter the fact that assessee made investment in developing the Industrial Park and also we cannot hold that the area so developed is not sufficient to locate the minimum number of three industrial units as specified in the approval by Ministry of Commerce, Government of India - Assessing Officer has opined that even if the assessee had not let out or used all of such 1,50,718 sq. ft. for approved industrial purposes during the year, it cannot be denied that all of such area had been developed as per the approval of the Central Government and was fit to be used for the specified industrial purposes - Held that: while the assessee has received such approval and notification, the same has not been withdrawn till date for contravention of any of the conditions, even though there is a specific provision for withdrawal, in case the Central Government finds that the conditions prescribed therein have not been adhered to - Decided in favor of the assessee
Reassessment - Validity of notice - Deduction u/s 80HHC - Undisclosed income - the AO in the block assessment has doubted the genuineness of the purchases from the parties mentioned in the 148 notice and also doubled the sales treating the same as bogus - Held that: A.O. in his reasons recorded for re-opening of the assessment for the impugned assessment year has again referred to the block assessment order wherein it has been held that the assessee was not entitled to deduction u/s 80HHC as the entire purchase and sales are bogus in A.Y. 1999-2000 and 2000-01 - it as an attempt on the part of revenue to, somehow or other, re-open the proceedings and more particularly the block assessment proceeding which they could not successfully support and sustain right up the Tribunal - Decided in favor of the assessee
Regarding reassessment proceeding - Held that: A.O. re-opened the assessment on the ground that purchase of diamonds/jewellery from the sister concerns namely M/s Galaxy Exports, M/s Kunal Exports and M/s Prime Star Exports were found to be bogus, hence, he has reason to believe that income has escaped assessment - It has been held in a number of decisions that when there is no reason recorded or the reasons recorded are wrong/absurd or irrelevant the re-assessment proceedings based on such no reason or absurd or irrelevant reason is invalid - Appeal is allowed
Reassessment - Validity of notice - Deduction u/s 80HHC - Undisclosed income - the AO in the block assessment has doubted the genuineness of the purchases from the parties mentioned in the 148 notice and also doubled the sales treating the same as bogus - Held that: A.O. in his reasons recorded for re-opening of the assessment for the impugned assessment year has again referred to the block assessment order wherein it has been held that the assessee was not entitled to deduction u/s 80HHC as the entire purchase and sales are bogus in A.Y. 1999-2000 and 2000-01 - it as an attempt on the part of revenue to, somehow or other, re-open the proceedings and more particularly the block assessment proceeding which they could not successfully support and sustain right up the Tribunal - Decided in favor of the assessee
Regarding reassessment proceeding - Held that: A.O. re-opened the assessment on the ground that purchase of diamonds/jewellery from the sister concerns namely M/s Galaxy Exports, M/s Kunal Exports and M/s Prime Star Exports were found to be bogus, hence, he has reason to believe that income has escaped assessment - It has been held in a number of decisions that when there is no reason recorded or the reasons recorded are wrong/absurd or irrelevant the re-assessment proceedings based on such no reason or absurd or irrelevant reason is invalid - Appeal is allowed
TDS u/s 194C - Liability of Individual / HUF - receipt from its cable network subscribers - Disallowance u/s 40(a) (ia) - Circular No.715 dated 8/08/1995 - applicability of provisions of sub-section (2) of section 194C of the Act. - held that:- In the case of the assessee since the assessee paid the amount to M/s. Devshree Network Pvt. Ltd. For giving cable transmission, therefore, the assessee is a "person responsible for paying the sum in question to the contractor". The contractor in this case thus would be M/s. Devshree Network Pvt. Ltd. For applying the provisions of section 194 C (1) of the IT Act the contract should be between the contractor and the parties as per the list given from (a) to (j) of section 194 C (1) of the IT Act as per the provisions applicable to the assessment year under appeal in which sub-clause (k) being the individual do not find mention. Thus, in the assessment year under appeal, the contract between the contractor and individual would not cast any obligation on the individual to deduct TDS on the payment made to the contractor. Since in this case, payment is made by the assessee to M/s. Devshree Network Pvt. Ltd. for providing cable transmission, therefore, no other person is involved in the transaction/oral contract. Thus, the assessee did not act as a sub-contractor in this case.
Assessee is not liable to deduct TDS - Decided in favor of assessee.
TDS u/s 194C - Liability of Individual / HUF - receipt from its cable network subscribers - Disallowance u/s 40(a) (ia) - Circular No.715 dated 8/08/1995 - applicability of provisions of sub-section (2) of section 194C of the Act. - held that:- In the case of the assessee since the assessee paid the amount to M/s. Devshree Network Pvt. Ltd. For giving cable transmission, therefore, the assessee is a "person responsible for paying the sum in question to the contractor". The contractor in this case thus would be M/s. Devshree Network Pvt. Ltd. For applying the provisions of section 194 C (1) of the IT Act the contract should be between the contractor and the parties as per the list given from (a) to (j) of section 194 C (1) of the IT Act as per the provisions applicable to the assessment year under appeal in which sub-clause (k) being the individual do not find mention. Thus, in the assessment year under appeal, the contract between the contractor and individual would not cast any obligation on the individual to deduct TDS on the payment made to the contractor. Since in this case, payment is made by the assessee to M/s. Devshree Network Pvt. Ltd. for providing cable transmission, therefore, no other person is involved in the transaction/oral contract. Thus, the assessee did not act as a sub-contractor in this case.
Assessee is not liable to deduct TDS - Decided in favor of assessee.
Whether Interest u/s 28AA of Customs Act, 1962 for delay in payment of duty can be levied on demand of duty raised on review of earlier order wherein provisional assessments were finalized - whether Tribunal was justified in dropping demand of interest - Held that:- In present case, Apex court on 14.08.1996 imposed demand of duty by reviewing its earlier order dated 09.09.1991. Assessee discharged such liability, however, Revenue levied interest u/s 28AA on account of delayed payment of duty. Tribunal rightly concluded that finalization of provisional assessments are governed by Section 18 and Section 28AA would have no application as no duty has been determined u/s 28(2). Further, no notice u/s 28(1) to recover any short levy or non levy of duty was issued. Consequently no cause to recover any duty under sub section (2) of Section 28 would arise. Therefore Section 28AA of the said Act would have no application to present facts.
Tribunal has only held that interest is not recoverable under the provisions of the said Act and has not allowed appeal of assessee on the ground that no show cause notice for demand of interest was issued - Appeal dismissed
Whether Interest u/s 28AA of Customs Act, 1962 for delay in payment of duty can be levied on demand of duty raised on review of earlier order wherein provisional assessments were finalized - whether Tribunal was justified in dropping demand of interest - Held that:- In present case, Apex court on 14.08.1996 imposed demand of duty by reviewing its earlier order dated 09.09.1991. Assessee discharged such liability, however, Revenue levied interest u/s 28AA on account of delayed payment of duty. Tribunal rightly concluded that finalization of provisional assessments are governed by Section 18 and Section 28AA would have no application as no duty has been determined u/s 28(2). Further, no notice u/s 28(1) to recover any short levy or non levy of duty was issued. Consequently no cause to recover any duty under sub section (2) of Section 28 would arise. Therefore Section 28AA of the said Act would have no application to present facts.
Tribunal has only held that interest is not recoverable under the provisions of the said Act and has not allowed appeal of assessee on the ground that no show cause notice for demand of interest was issued - Appeal dismissed
Violation of companies act - oppression and mismanagement – company did not convene AGM - petitioners are seeking permission to sell the assets of the company and distribute the sale proceeds to the shareholders in proportion to their shareholding in the company – Held that:- aberrations in the conduct of AGM and non-compliance of statutory filings itself would not amount to an act of oppression. The alleged default from 2001 is raised only as a ground to challenge the sale deed. Even assuming that there is no Board of directors or if the Board of directors is not lawful Board or if the managing director is not a lawful managing director, the petitioners can get the same resolved by calling a general meeting of the company and get the directors appointed in the place of the retiring directors. Instead of doing that the only resolution in the requisition notice dated 19th November, 2006 is to wind up the company, and sell the assets and share the spoils which are not for the interest of the company, but for personal interests which cannot be entertained under sections 397 and 398 of the Act.
Violation of companies act - oppression and mismanagement – company did not convene AGM - petitioners are seeking permission to sell the assets of the company and distribute the sale proceeds to the shareholders in proportion to their shareholding in the company – Held that:- aberrations in the conduct of AGM and non-compliance of statutory filings itself would not amount to an act of oppression. The alleged default from 2001 is raised only as a ground to challenge the sale deed. Even assuming that there is no Board of directors or if the Board of directors is not lawful Board or if the managing director is not a lawful managing director, the petitioners can get the same resolved by calling a general meeting of the company and get the directors appointed in the place of the retiring directors. Instead of doing that the only resolution in the requisition notice dated 19th November, 2006 is to wind up the company, and sell the assets and share the spoils which are not for the interest of the company, but for personal interests which cannot be entertained under sections 397 and 398 of the Act.
Maturity proceeds/redemption amounts under section 205C of the Companies Act - Investment in bonds with an option of premature redemption – petitioner applied for redemption of their bonds - respondent No. 1 refused to make the payment and informed the petitioner that they had exercised the call option for early redemption in 2001 - As the petitioner did not submit the bond certificates respondent No. 1 transferred the maturity proceeds/redemption amounts under section 205C of the Companies Act, 1956 to the Ministry of Corporate Affairs – Held that:- petitioner is aggrieved because she did not stake her claim for refund within seven years. She did not inform change of address and, therefore, could not be communicated and informed about the premature redemption. The petitioner also did not bother to read the terms and conditions of allotment including the early redemption clause. These are serious lapses on the part of the petitioner
Applicability of act – Held that:- Act deal with the deposits or promissory notes. There is no such limitation or prohibition in the Act. The Act itself is a principal enactment and not a delegated legislation
Retrospective effect – Held that:- contention of the petitioner that section 205C has been given retrospective effect has no merit. The aforesaid section was introduced by Companies (Amendment) Act, 1999 with effect from 31st October, 1998. The call option was exercised by the respondent in January, 2001 and the bonds became due and payable in July 2001. The contention of the petitioner that they were not aware of this provision also does not merit acceptance. writ petition dismissed
Maturity proceeds/redemption amounts under section 205C of the Companies Act - Investment in bonds with an option of premature redemption – petitioner applied for redemption of their bonds - respondent No. 1 refused to make the payment and informed the petitioner that they had exercised the call option for early redemption in 2001 - As the petitioner did not submit the bond certificates respondent No. 1 transferred the maturity proceeds/redemption amounts under section 205C of the Companies Act, 1956 to the Ministry of Corporate Affairs – Held that:- petitioner is aggrieved because she did not stake her claim for refund within seven years. She did not inform change of address and, therefore, could not be communicated and informed about the premature redemption. The petitioner also did not bother to read the terms and conditions of allotment including the early redemption clause. These are serious lapses on the part of the petitioner
Applicability of act – Held that:- Act deal with the deposits or promissory notes. There is no such limitation or prohibition in the Act. The Act itself is a principal enactment and not a delegated legislation
Retrospective effect – Held that:- contention of the petitioner that section 205C has been given retrospective effect has no merit. The aforesaid section was introduced by Companies (Amendment) Act, 1999 with effect from 31st October, 1998. The call option was exercised by the respondent in January, 2001 and the bonds became due and payable in July 2001. The contention of the petitioner that they were not aware of this provision also does not merit acceptance. writ petition dismissed
Satisfaction of Rule 4A of Service Tax Rules, 1994 in respect of disputed invoices and bills - Held that:- The appellate order does not demonstrate the extent to which examination is done - as if the allegation was that there was non-compliance to Rule 4A, it was necessary to examine the manner and extent of departure to the Rule when applied to the concerned invoice/bill - as examination done by the first appellate authority was not complete, the matter is sent back to satisfy him regarding requirement of Rule 4A.
Satisfaction of Rule 4A of Service Tax Rules, 1994 in respect of disputed invoices and bills - Held that:- The appellate order does not demonstrate the extent to which examination is done - as if the allegation was that there was non-compliance to Rule 4A, it was necessary to examine the manner and extent of departure to the Rule when applied to the concerned invoice/bill - as examination done by the first appellate authority was not complete, the matter is sent back to satisfy him regarding requirement of Rule 4A.
Waiver of pre-deposit - assessees took credit on the strength of ineligible documents, namely, invoices not containing their registration number – Held that:- other particulars such as name and address of service receiver (customers of the assessees), value of taxable service etc. are available with invoices and therefore prima facie non-mention of the Service tax registration number of the assessees on the documents on the media for advertisement of the assessee’s products is not sufficient to deny credit which is substantive right. waive pre-deposit granted
Waiver of pre-deposit - assessees took credit on the strength of ineligible documents, namely, invoices not containing their registration number – Held that:- other particulars such as name and address of service receiver (customers of the assessees), value of taxable service etc. are available with invoices and therefore prima facie non-mention of the Service tax registration number of the assessees on the documents on the media for advertisement of the assessee’s products is not sufficient to deny credit which is substantive right. waive pre-deposit granted
Reduction of penalty - appellant provided taxable service of maintenance, repair and expenses. Expenses reimbursed was held to be taxable - taxability of the transaction - assessee has discharged tax liability before adjudication - appeals are disposed of remanding the matter to the original authority
Reduction of penalty - appellant provided taxable service of maintenance, repair and expenses. Expenses reimbursed was held to be taxable - taxability of the transaction - assessee has discharged tax liability before adjudication - appeals are disposed of remanding the matter to the original authority
Availability of CENVAT Credit of Service Tax paid in respect of services relatable to the Effluent Treatment Plant - CENVAT Credit denied on procedural aspect that various items on which the same can be availed was not having registration number of the service provider – Held that:- it is not clear from the impugned order of the Commissioner (Appeals) that as to whether the same is denied on the ground of procedural lapses or on the ground that the duty does not stand deposited by the service provider with the department, issue of non-payment of Service Tax by service provider was raised in the Audit. Whether this was the audit of present appellant or of the service provider is not clear, matter is remanded to Commissioner (Appeals), for fresh consideration, appeal is disposed off
Availability of CENVAT Credit of Service Tax paid in respect of services relatable to the Effluent Treatment Plant - CENVAT Credit denied on procedural aspect that various items on which the same can be availed was not having registration number of the service provider – Held that:- it is not clear from the impugned order of the Commissioner (Appeals) that as to whether the same is denied on the ground of procedural lapses or on the ground that the duty does not stand deposited by the service provider with the department, issue of non-payment of Service Tax by service provider was raised in the Audit. Whether this was the audit of present appellant or of the service provider is not clear, matter is remanded to Commissioner (Appeals), for fresh consideration, appeal is disposed off
Revision applications - rebate claims - rebate claims were rejected by the Divisional Assistant Commissioner on the basis of the fact that raw materials were directly sent to the job workers from the suppliers end without bringing it first to the applicants premises – Held that:- rebate of duty paid on materials will be admissible as per verified input output norms. The contention of the applicant that the approved formula of manufacture/input-output ratio is for the purpose of procurement of raw materials and has nothing to do with sanction of rebate claim is not legally sustainable in view of the above said provision of notification. The consumption of raw materials as per approved/declared input-output norms is required to be taken for computing rebate of duty involved in the materials used in the manufacturing of export goods. Government notes here that lower authorities have correctly followed the prescribed/laid down conditions in respect of export goods herein and sanctioned the rebate claims as per laid down guidelines, revision applications are rejected
Revision applications - rebate claims - rebate claims were rejected by the Divisional Assistant Commissioner on the basis of the fact that raw materials were directly sent to the job workers from the suppliers end without bringing it first to the applicants premises – Held that:- rebate of duty paid on materials will be admissible as per verified input output norms. The contention of the applicant that the approved formula of manufacture/input-output ratio is for the purpose of procurement of raw materials and has nothing to do with sanction of rebate claim is not legally sustainable in view of the above said provision of notification. The consumption of raw materials as per approved/declared input-output norms is required to be taken for computing rebate of duty involved in the materials used in the manufacturing of export goods. Government notes here that lower authorities have correctly followed the prescribed/laid down conditions in respect of export goods herein and sanctioned the rebate claims as per laid down guidelines, revision applications are rejected
Whether Cenvat Credit of service tax paid in respect of GTA services availed by assessee, can be used for payment of service tax - period involved April, 2006 to September, 2006 - Held that:- Tribunal in the case of Shree Rajasthan Syntex (2011 (8) TMI 265 (Tri)) held that recipient of services from the GTA on payment of service tax gets covered by output service definition as appearing in Rule 2(p) of the Rules. As such, we find that deletion of explanation with effect from 18.4.06 from Rule 2(p) of the Cenvat Credit Rules, 2000 would not make much difference. Therefore, Cenvat credit can be utilised towards payment of Service Tax in respect of services received from Goods Transport Agency inasmuch as by a deemed fiction of law service recipient is held to be output service provider - Decided in favour of assessee. – Decided in favor of assessee.
Whether Cenvat Credit of service tax paid in respect of GTA services availed by assessee, can be used for payment of service tax - period involved April, 2006 to September, 2006 - Held that:- Tribunal in the case of Shree Rajasthan Syntex (2011 (8) TMI 265 (Tri)) held that recipient of services from the GTA on payment of service tax gets covered by output service definition as appearing in Rule 2(p) of the Rules. As such, we find that deletion of explanation with effect from 18.4.06 from Rule 2(p) of the Cenvat Credit Rules, 2000 would not make much difference. Therefore, Cenvat credit can be utilised towards payment of Service Tax in respect of services received from Goods Transport Agency inasmuch as by a deemed fiction of law service recipient is held to be output service provider - Decided in favour of assessee. – Decided in favor of assessee.
Demand of duty by classifying the products under Heading 84.38 not under 84.33 – goods are to be classified as excisable and have wrongly availed the benefit of SSI exemption notifications - Revenue contended that Chapter Heading 84.33 does not cover Tea Sorting Machine and Tea Extractor Machine manufactured by assessee – Held that:- The Assistant Commissioner has rightly held that the classification list effective from 1.4.95 was duly approved by the proper officer and similar classification lists/declarations were filed by the respondent for the periods under question - the show-cause notice itself was silent as to whether the machineries were cleared for some purposes other than tea industry – the assessee had been paying the duty under the same Chapter Heading by availing the benefit of Notification and the Department did not raise any objection, so far as the approved Classification List effective from 01.04.95 – rightly held that when classification lists are filed and approved allegation of suppression or willful mis-statement in order to invoke extended period for demand is not sustainable - adjudicating authority cannot alter the classification accepted by the Assistant Commissioner who is the proper officer under Central Excise Law to finalize classification – against revenue.
Demand of duty by classifying the products under Heading 84.38 not under 84.33 – goods are to be classified as excisable and have wrongly availed the benefit of SSI exemption notifications - Revenue contended that Chapter Heading 84.33 does not cover Tea Sorting Machine and Tea Extractor Machine manufactured by assessee – Held that:- The Assistant Commissioner has rightly held that the classification list effective from 1.4.95 was duly approved by the proper officer and similar classification lists/declarations were filed by the respondent for the periods under question - the show-cause notice itself was silent as to whether the machineries were cleared for some purposes other than tea industry – the assessee had been paying the duty under the same Chapter Heading by availing the benefit of Notification and the Department did not raise any objection, so far as the approved Classification List effective from 01.04.95 – rightly held that when classification lists are filed and approved allegation of suppression or willful mis-statement in order to invoke extended period for demand is not sustainable - adjudicating authority cannot alter the classification accepted by the Assistant Commissioner who is the proper officer under Central Excise Law to finalize classification – against revenue.
Export - acts of commission and omission were imputed against the appellant - penalty - appeal, the challenge to the order of the Tribunal is on the ground that though the Tribunal has specifically taken note of the statements made by the appellant in para 28 of the impugned order but the statements are not dealt with and no conclusions/findings are arrived at by the CESTAT qua the appellant - violation of natural justice – Held that:- appellant herein had issued airway bills; he had acted as an agent of the 5 concerns which were owned by Shri Tejwant Singh; he played his role on specific instructions of Shri Tejwant Singh; and he was dealing with the Customs Officers in respect of export of these very goods. The Tribunal is thus categorical that the appellant was connected with the procurement of the goods by the exporters and there were other statements and sufficient material to implicate the appellant, no merit in these appeals accordingly dismissed
Export - acts of commission and omission were imputed against the appellant - penalty - appeal, the challenge to the order of the Tribunal is on the ground that though the Tribunal has specifically taken note of the statements made by the appellant in para 28 of the impugned order but the statements are not dealt with and no conclusions/findings are arrived at by the CESTAT qua the appellant - violation of natural justice – Held that:- appellant herein had issued airway bills; he had acted as an agent of the 5 concerns which were owned by Shri Tejwant Singh; he played his role on specific instructions of Shri Tejwant Singh; and he was dealing with the Customs Officers in respect of export of these very goods. The Tribunal is thus categorical that the appellant was connected with the procurement of the goods by the exporters and there were other statements and sufficient material to implicate the appellant, no merit in these appeals accordingly dismissed
Denial of Claim of exemption u/s. 5(1)(vi) of the W.T. Act - AO denied exemption as claim has not been made in the return – Held that:- As assessee has wrongly shown the plot measuring 336 Sq. Meter in the return of wealth inadvertently as taxable it is not chargeable to wealth tax as per provisions of section 5(1)(vi) as the plot of land is of area comprising of 500 Sq. meter or less – exemption cannot be ignored even if the assessee has not made any claim of exemption in the return of wealth - since the assessee made claim before the first appellate authority who did not decide this issue and agreed with the finding of the AO the matter requires re-consideration for factual verification and decision in accordance with law - restore the issue to file of CWT(A) with the direction to decide the issue in accordance with law as observed – in favour of assessee for statistical purpose. .
Denial of Claim of exemption u/s. 5(1)(vi) of the W.T. Act - AO denied exemption as claim has not been made in the return – Held that:- As assessee has wrongly shown the plot measuring 336 Sq. Meter in the return of wealth inadvertently as taxable it is not chargeable to wealth tax as per provisions of section 5(1)(vi) as the plot of land is of area comprising of 500 Sq. meter or less – exemption cannot be ignored even if the assessee has not made any claim of exemption in the return of wealth - since the assessee made claim before the first appellate authority who did not decide this issue and agreed with the finding of the AO the matter requires re-consideration for factual verification and decision in accordance with law - restore the issue to file of CWT(A) with the direction to decide the issue in accordance with law as observed – in favour of assessee for statistical purpose. .
Negotiable Instruments Act – Blank Cheque - dishonor of cheque - co-extensive liability of the guarantor and the principle debtor - petitioner contended that guarantor cannot be prosecuted under section 138 of the Act without taking any action against the principal borrower. Blank cheques had been handed over by the petitioner to the respondent No. 1 towards security which have been misused - Held that:- Petitioner has not denied his signatures on the cheques. Once he has admitted his signatures on the cheque he cannot escape his liability on the ground that the same has not been filled in by him. When a blank cheque is signed and handed over, it means that the person signing it has given implied authority to the holder of the cheque, to fill up the blank which he has left. A person issuing a blank cheque is supposed to understand the consequences of doing so. He cannot escape his liability only on the ground that blank cheques had been issued. - petition is dismissed
Bare perusal of the provision clearly shows that the section commences with the words "Where any cheque". The use of word "any" assumes significance here. It shows that for whatever reason if a cheque is drawn on an account maintained by the drawer with its bank, in favour of any person for the discharge of "any debt" or other liability, the ingredients of offence under section 138 of the Act gets attracted in case cheque is returned dishonoured for insufficiency of funds and the cheque amount is not paid within the statutory period despite service of notice.
Negotiable Instruments Act – Blank Cheque - dishonor of cheque - co-extensive liability of the guarantor and the principle debtor - petitioner contended that guarantor cannot be prosecuted under section 138 of the Act without taking any action against the principal borrower. Blank cheques had been handed over by the petitioner to the respondent No. 1 towards security which have been misused - Held that:- Petitioner has not denied his signatures on the cheques. Once he has admitted his signatures on the cheque he cannot escape his liability on the ground that the same has not been filled in by him. When a blank cheque is signed and handed over, it means that the person signing it has given implied authority to the holder of the cheque, to fill up the blank which he has left. A person issuing a blank cheque is supposed to understand the consequences of doing so. He cannot escape his liability only on the ground that blank cheques had been issued. - petition is dismissed
Bare perusal of the provision clearly shows that the section commences with the words "Where any cheque". The use of word "any" assumes significance here. It shows that for whatever reason if a cheque is drawn on an account maintained by the drawer with its bank, in favour of any person for the discharge of "any debt" or other liability, the ingredients of offence under section 138 of the Act gets attracted in case cheque is returned dishonoured for insufficiency of funds and the cheque amount is not paid within the statutory period despite service of notice.
Don't have an account? Register Here
of 42
TaxTMI 
