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• 2008 (8) TMI 1049
  

  1. ISSUES PRESENTED and CONSIDERED

  The Supreme Court of India considered the following core legal questions in this judgment:

  (A) Whether the interest received by the assessee on the sale of securities should be taxed under the head 'interest on securities' or 'Income from Business'?

  (B) Whether the provisions of section 40A(5) of the Income Tax Act, 1961, should apply only to the portion of expenditure apportioned under 'profits and gains of business or profession' and not to the expenditure apportioned under 'interest on securities'?

  (C) Whether, when apportioning expenses deductible from interest on securities for banking companies under section 20(1)(i) of the Income Tax Act, 1961, the expenses admissible under sections 30, 31, 36, and 37 are subject to restrictions imposed by sections 40A(3), 40A(5), and 44C?

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue (A): Taxation of Interest on Securities

  Relevant legal framework and precedents: The High Court relied on its previous judgment in Citibank N.A. v. CIT and the case of British Bank of the Middle East v. CIT. The Revenue did not appeal these judgments, which were accepted by the court.

  Court's interpretation and reasoning: The Supreme Court noted that the Revenue had not filed an appeal against the earlier judgments, which had decided in favor of the assessee. The court referenced the case of C.K. Gangadharan & Another vs. Commissioner of Income Tax, which stated that the Revenue is not barred from filing an appeal in other cases if there is a just cause.

  Key evidence and findings: The absence of an appeal by the Revenue in similar past cases was pivotal in deciding this issue.

  Application of law to facts: The court applied the principle that the Revenue's acceptance of previous judgments without appeal indicated a lack of just cause to contest the current case.

  Treatment of competing arguments: The Additional Solicitor General did not present reasons for the Revenue's failure to appeal, leading to a decision against the Revenue.

  Conclusions: The court decided in favor of the assessee, affirming the High Court's ruling that the interest should be taxed under 'interest on securities.'

  Issue (B): Application of Section 40A(5)

  Relevant legal framework and precedents: Section 40A(5) deals with disallowance of certain expenditures beyond a specific limit, having an overriding effect on other sections related to income computation.

  Court's interpretation and reasoning: The court agreed with the High Court's interpretation that section 40A(5) operates as a complete code and cannot be read into section 20(1)(i) regarding apportionment of expenses.

  Key evidence and findings: The High Court's reasoning that section 40A has an overriding effect and is a complete code was crucial.

  Application of law to facts: The court applied the principle that section 40A(5) should not be applied to expenses apportioned under 'interest on securities.'

  Treatment of competing arguments: The Department's argument to restrict expenses under a formula was rejected based on the overriding nature of section 40A.

  Conclusions: The court upheld the High Court's decision, ruling in favor of the assessee.

  Issue (C): Restrictions on Deductible Expenses

  Relevant legal framework and precedents: Similar to issue (B), this issue involved the interpretation of sections 30, 31, 36, 37, and the restrictions under sections 40A(3), 40A(5), and 44C.

  Court's interpretation and reasoning: The court concurred with the High Court's view that section 40A's overriding effect precludes its application to section 20(1)(i) for apportioning expenses.

  Key evidence and findings: The High Court's reasoning that section 40A's provisions are not applicable to section 20(1)(i) was central.

  Application of law to facts: The court applied the principle that section 40A's restrictions do not apply to expenses apportioned under 'interest on securities.'

  Treatment of competing arguments: The Department's attempt to apply restrictions was dismissed due to the overriding nature of section 40A.

  Conclusions: The court ruled in favor of the assessee, affirming the High Court's decision.

  3. SIGNIFICANT HOLDINGS

  Preserve verbatim quotes of crucial legal reasoning:

  "Section 40A refers to expenses/payments not deductible in certain circumstances... Therefore, the provisions of section 40A have an overriding effect over the provisions of any other section by providing that section 40A will have effect, notwithstanding anything to the contrary contained in any other provisions relating to computation of income under the head 'Profits and gains of business'."

  Core principles established: The overriding nature of section 40A in the context of income computation under 'Profits and gains of business' and the non-applicability of its restrictions to section 20(1)(i).

  Final determinations on each issue: The court dismissed the appeals, ruling in favor of the assessee on all issues, and ordered that parties bear their own costs, waiving previously imposed costs.

  ---

• 2008 (8) TMI 1048
  
  In the Supreme Court of India case citation 2008 (8) TMI 1048 - SC, the revenue appealed against the High Court's decision dated April 10, 2003, in Income Tax Reference No.191 of 1997, which favored the assessee. The Supreme Court addressed three key legal questions:
  
  1. Deductible Expenditure Apportionment: The Court affirmed the High Court's ruling that expenses under Sections 30, 31, 36, and 37, related to "interest on securities" for banking companies, are not restricted by Sections 40A(3), 40A(5), and 44-C of the Income Tax Act, 1961. This was consistent with the Supreme Court's order in Civil Appeal No. 1533 of 2006.
  
  2. Interest on Securities: The Court upheld the High Court's decision that interest paid for the broken period on the purchase of securities should be treated as revenue expenditure in the purchase year, aligning with the Court's order in Civil Appeal No. 1549 of 2006.
  
  3. Interest on Sticky Advances: The Court agreed with the High Court that interest on sticky advances credited to a memorandum account is not taxable, referencing the precedent set in UCO Bank vs. CIT, 237 ITR 889.
  
  The Supreme Court dismissed the revenue's appeal, confirming the High Court's rulings in favor of the assessee on all three questions. Each party is to bear its own costs.

  ---

• 2008 (8) TMI 1047
  
  In the Supreme Court of India case citation 2008 (8) TMI 1047 - SC, the Revenue appealed against the Bombay High Court's decision regarding the assessment year 1982-83. The High Court had ruled in favor of the assessee on three questions:
  
  1. Apportionment of Salary and Perquisites: The High Court held that salary and perquisites paid by the assessee bank to its employees should be apportioned under Section 21 of the Income Tax Act, applying Section 40A(5) only to the portion considered under Section 28. This decision was affirmed by the Supreme Court, referencing its order in Civil Appeal No. 1533 of 2006.
  
  2. Interest on Sticky Loans: The High Court, following the Supreme Court's judgment in UCO Bank vs. CIT (237 ITR 889), directed the assessing officer to determine the interest includible in total income on sticky loans based on a CBDT Circular. The Supreme Court upheld this decision, ruling in favor of the assessee.
  
  3. General Question: The Court deemed this question as general and not requiring an answer.
  
  The Supreme Court dismissed the appeal, with each party bearing their own costs.

  ---

• 2008 (8) TMI 1046
  
  In the Supreme Court of India case citation 2008 (8) TMI 1046 - SC Order, the revenue appealed against the High Court's decision favoring the assessee for the assessment years 1985-86 and 1986-87. The Supreme Court addressed two primary questions:
  
  1. The first question concerned whether the interest on bad and doubtful debts is taxable despite the Supreme Court's decision in State Bank of Travancore (158 ITR 102), considering the CBDT circular dated 9/10/1984. The High Court ruled in favor of the assessee, supported by the precedent set in UCO Bank vs. Commissioner of Income Tax (237 ITR 889). The Supreme Court affirmed this decision, siding with the assessee.
  
  2. The second question involved the deletion of additions made for interest paid on the broken period of Government Securities held by the assessee. The Supreme Court also ruled in favor of the assessee, referencing its order in Civil Appeal No.1549 of 2006.
  
  The Supreme Court dismissed the appeal, with each party bearing its own costs, thereby upholding the High Court's decision in favor of the assessee on both questions.

  ---

• 2008 (8) TMI 1045
  

  1. ISSUES PRESENTED and CONSIDERED

  The core legal question addressed in this judgment is whether the interest earned by a bank on the sale of securities should be assessed as "Income from Business" or as "Interest on Securities" for the assessment years 1985-86 and 1986-87. This question was initially answered by the High Court in favor of the assessee, and the Supreme Court was tasked with reviewing this decision.

  2. ISSUE-WISE DETAILED ANALYSIS

  Relevant Legal Framework and Precedents:

  The legal framework involves the interpretation of the Income Tax Act concerning the classification of income derived from securities by a bank. The precedents considered include previous decisions by the Bombay High Court in the assessee's own case and the case of British Bank of the Middle East vs. CIT. Additionally, the Supreme Court referenced its own decision in C.K. Gangadharan & Another vs. Commissioner of Income Tax, Cochin, which addressed the circumstances under which the revenue can appeal decisions.

  Court's Interpretation and Reasoning:

  The Supreme Court noted that the High Court had relied on its previous rulings, which were not contested by the revenue through special leave petitions, indicating an acceptance of those decisions. The Court highlighted that the revenue is not barred from appealing in similar cases if there is a just cause, as elaborated in C.K. Gangadharan. However, in this instance, the revenue did not present any justifiable reasons for appealing the High Court's decision.

  Key Evidence and Findings:

  The key finding was that the High Court had consistently ruled in favor of the assessee in similar cases, and the revenue had not previously challenged these rulings. The Supreme Court found no new evidence or arguments presented by the revenue to warrant a different outcome.

  Application of Law to Facts:

  The application of law involved determining the nature of income from securities. The High Court's decision, which was upheld, classified the income as "Income from Business," aligning with the bank's operational context and previous judicial interpretations.

  Treatment of Competing Arguments:

  The Supreme Court acknowledged the revenue's right to appeal in different cases but emphasized the need for a just cause. In this case, the revenue failed to articulate any new or compelling reasons to challenge the High Court's consistent rulings.

  Conclusions:

  The Supreme Court concluded that, in the absence of justifiable reasons from the revenue, the High Court's decision should be affirmed. The interest earned by the bank on the sale of securities was correctly assessed as "Income from Business."

  3. SIGNIFICANT HOLDINGS

  Preserve Verbatim Quotes of Crucial Legal Reasoning:

  "Merely because in some cases the revenue has not preferred appeal that does not operate as a bar for the revenue to prefer an appeal in another case where there is just cause for doing so or it is in public interest to do so or for a pronouncement by the higher court when divergent views are expressed by the Tribunals or the High Courts."

  Core Principles Established:

  The judgment reinforces the principle that the revenue must provide justifiable reasons when appealing decisions in similar cases, particularly when previous decisions have not been contested.

  Final Determinations on Each Issue:

  The Supreme Court dismissed the revenue's appeal, affirming the High Court's decision that the interest earned by the bank on the sale of securities is assessable as "Income from Business." The judgment underscores the necessity for consistency and just cause in the revenue's appellate actions.

  ---

• 2008 (8) TMI 1044
  
  In the Supreme Court of India case, citation 2008 (8) TMI 1044 - SC Order, the bench consisting of Justices Ashok Bhan and V. S. Sirpurkar addressed two primary legal questions. The first question was whether the High Court correctly applied Section 40A(5) of the Income Tax Act only to the portion of salary and perquisites expenses apportioned under 'Profits and Gains of Business' and not to those under 'Interest on Securities'. The second question was whether the interest received by the assessee bank from the sale of securities should be taxed as 'interest on securities' rather than 'profits and gains from business'.
  
  The Supreme Court, referencing its reasoning in Civil Appeal No. 1533 of 2006, ruled in favor of the assessee on both questions, thereby dismissing the appeal and allowing each party to bear its own costs.

  ---

• 2008 (8) TMI 1043
  
  In the Supreme Court case cited as 2008 (8) TMI 1043 - SC, Justices Ashok Bhan and V. S. Sirpurkar presided over the appeals. The central legal issue was whether, in apportioning deductible expenses from interest on securities for a banking company under Section 20(1)(i) of the Income Tax Act, 1961, the expenses allowable under Sections 30, 31, 36, and 37 are subject to the limitations imposed by Sections 40A(3), 40A(5), and 44C. The Court resolved this issue in favor of the assessee, ruling against the Revenue. As a result, the appeals were dismissed, and each party was ordered to bear its own costs. The decision was consistent with the reasoning provided in the Court's earlier order in Civil Appeal No. 1533 of 2006.

  ---

• 2008 (8) TMI 1042
  

  1. ISSUES PRESENTED and CONSIDERED

  The Supreme Court of India considered the following core legal questions in this judgment:

  A. Whether the High Court was correct in holding that deductible expenditures under Section 20(1)(i) for banking companies are not subject to restrictions under Sections 40A(3), 40A(5), and 44C of the Income Tax Act, 1961?

  B. Whether the interest received by the Assessee Bank upon the sale of securities should be taxed under 'interest on securities' rather than 'income from Business'?

  C. Whether interest paid for the broken period on securities that form part of the stock-in-trade at the end of the accounting year should be considered part of the cost price of the securities?

  D. Whether broken period interest paid on securities bought during the year, which remain unsold at the end of the year, should be allowed as a deduction in the computation of income?

  E. Whether expenses should be apportioned between 'interest on securities' and 'profits and gains of business', and if Section 40A(5) should apply only to the portion of expenses apportioned under 'Profit & Gains of Business'?

  F. Whether, while computing business income, only the part of Head Office expenses remaining after apportionment to interest on securities should be added back before allowing deduction under section 44C?

  G. Whether the restrictions under Section 44C apply only to business income and not to interest on securities?

  2. ISSUE-WISE DETAILED ANALYSIS

  Issue A:

  • Legal Framework and Precedents: The relevant sections of the Income Tax Act, 1961, particularly Sections 20(1)(i), 40A(3), 40A(5), and 44C, were considered.
  • Court's Interpretation and Reasoning: The Court followed the High Court's interpretation that the deductible expenditures for banking companies under Section 20(1)(i) are not constrained by the restrictions of Sections 40A(3), 40A(5), and 44C.
  • Key Evidence and Findings: The Court relied on precedents set in the assessee's own case and other related cases.
  • Application of Law to Facts: The Court applied the legal principles to affirm the High Court's decision favoring the assessee.
  • Treatment of Competing Arguments: The Court dismissed the revenue's arguments based on established precedents.
  • Conclusions: The question was answered in the affirmative, supporting the High Court's decision.

  Issue B:

  • Legal Framework and Precedents: The classification of income under the Income Tax Act was examined, particularly distinguishing between 'interest on securities' and 'income from Business'.
  • Court's Interpretation and Reasoning: The Court agreed with the High Court's interpretation that the interest should be classified under 'interest on securities'.
  • Key Evidence and Findings: The decision was based on past judgments in the assessee's favor.
  • Application of Law to Facts: The Court applied the legal framework to the facts, supporting the classification as 'interest on securities'.
  • Treatment of Competing Arguments: The Court rejected the revenue's contention, citing consistent judicial precedents.
  • Conclusions: The question was answered affirmatively, favoring the assessee.

  Issue C:

  • Legal Framework and Precedents: The treatment of broken period interest in stock-in-trade was analyzed.
  • Court's Interpretation and Reasoning: The Court distinguished previous judgments and upheld the High Court's decision that broken period interest is not part of the cost price.
  • Key Evidence and Findings: The Court referenced the American Express International Banking Corporation case.
  • Application of Law to Facts: The Court applied the legal principles to affirm the High Court's decision.
  • Treatment of Competing Arguments: The Court dismissed the revenue's arguments, relying on established case law.
  • Conclusions: The question was answered in favor of the assessee.

  Issue D:

  • Legal Framework and Precedents: The deductibility of broken period interest was examined under the Income Tax Act.
  • Court's Interpretation and Reasoning: The Court upheld the High Court's view that such interest is deductible.
  • Key Evidence and Findings: The Court relied on the American Express case and other precedents.
  • Application of Law to Facts: The Court applied the legal framework to support the High Court's decision.
  • Treatment of Competing Arguments: The Court rejected the revenue's position, citing consistent judicial precedents.
  • Conclusions: The question was answered affirmatively, supporting the assessee.

  Issue E:

  • Legal Framework and Precedents: The apportionment of expenses between different heads of income was considered.
  • Court's Interpretation and Reasoning: The Court agreed with the High Court's interpretation that Section 40A(5) applies only to the business portion.
  • Key Evidence and Findings: The Court relied on the assessee's previous case decisions.
  • Application of Law to Facts: The Court applied the legal principles to affirm the High Court's decision.
  • Treatment of Competing Arguments: The Court dismissed the revenue's arguments based on established precedents.
  • Conclusions: The question was answered in the affirmative, supporting the assessee.

  Issue F:

  • Legal Framework and Precedents: The treatment of Head Office expenses under Section 44C was analyzed.
  • Court's Interpretation and Reasoning: The Court upheld the High Court's decision that only remaining expenses should be added back.
  • Key Evidence and Findings: The Court relied on precedents in the assessee's favor.
  • Application of Law to Facts: The Court applied the legal framework to affirm the High Court's decision.
  • Treatment of Competing Arguments: The Court dismissed the revenue's arguments, citing consistent judicial precedents.
  • Conclusions: The question was answered affirmatively, supporting the assessee.

  Issue G:

  • Legal Framework and Precedents: The applicability of Section 44C to different income heads was examined.
  • Court's Interpretation and Reasoning: The Court agreed with the High Court's interpretation that Section 44C applies only to business income.
  • Key Evidence and

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• 2008 (8) TMI 1041
  
  Issues Involved:
  
  1. Applicability of the right of private defence.
  2. Examination of whether the right of private defence was exceeded.
  3. Evaluation of evidence and injuries on the accused and deceased.
  4. Determination of the burden of proof regarding the right of private defence.
  5. Analysis of the High Court's findings and conclusions.
  
  Issue-wise Detailed Analysis:
  
  1. Applicability of the Right of Private Defence:
  
  The primary issue was whether the accused exercised the right of private defence under Section 96 of the Indian Penal Code (IPC). The High Court had accepted the plea of self-defence, stating that the right should not be construed narrowly as it serves a social purpose. However, the Supreme Court emphasized that the right of private defence is a question of fact, determined by the circumstances of each case. The accused need not explicitly plead self-defence; the court can consider it if the circumstances indicate its legitimate exercise. The burden of proof lies on the accused to demonstrate that the right was exercised, either through direct evidence or by extracting facts from prosecution witnesses.
  
  2. Examination of Whether the Right of Private Defence was Exceeded:
  
  The Supreme Court scrutinized whether the accused exceeded the right of private defence. Sections 100 and 101 of the IPC define the extent of this right, allowing for the causing of death if there is a reasonable apprehension of death or grievous hurt. The Court noted that the right of private defence is defensive, not retaliatory or retributive, and should not be used as a pretext for aggression. The Court found that while there might have been an initial exercise of the right, it was exceeded, leading to the conviction of the accused under Section 304 Part I IPC, with a custodial sentence of eight years.
  
  3. Evaluation of Evidence and Injuries on the Accused and Deceased:
  
  The evidence presented included the injuries sustained by the deceased and the accused. The trial court found the evidence of the eyewitnesses credible, but the High Court accepted the plea of self-defence, citing the injuries on the accused. The Supreme Court, however, noted that the injuries on the accused were superficial and did not warrant the extent of force used. The Court highlighted that the prosecution is not required to explain minor injuries on the accused if the evidence against them is clear and cogent.
  
  4. Determination of the Burden of Proof Regarding the Right of Private Defence:
  
  The burden of proof for establishing the right of private defence lies with the accused, as per Section 105 of the Indian Evidence Act. The accused must show a preponderance of probabilities in their favour. The Court emphasized that the right of private defence cannot be based on conjecture and must be supported by material evidence. The High Court's conclusion that the right was exercised without sufficient material was found to be legally untenable by the Supreme Court.
  
  5. Analysis of the High Court's Findings and Conclusions:
  
  The Supreme Court critiqued the High Court's judgment for relying on surmises and conjectures. The High Court had concluded that the injuries on the accused were not satisfactorily explained and that the right of private defence was exercised. However, the Supreme Court found that the High Court misinterpreted the evidence, particularly the nature of the injuries and the weapon used. The Supreme Court held that the High Court's shifting of the onus onto the prosecution was without legal basis, as the accused failed to substantiate their plea of private defence with credible evidence.
  
  In conclusion, the Supreme Court allowed the appeals to the extent of convicting the accused under Section 304 Part I IPC, imposing a custodial sentence of eight years, and directed the respondents to surrender to custody to serve the remainder of their sentence.

  ---

• 2008 (8) TMI 1040
  
  Issues Involved:
  1. Contravention of sections 9(1)(d), 8(3), and 8(4) read with section 64(2) of the Foreign Exchange Regulation Act, 1973.
  2. Validity of confessional statements and their retraction.
  3. Status of Rajnikant Kedia as a non-resident.
  4. Abetment in mis-declaration of imported goods.
  5. Quantum of penalty imposed.
  
  Issue-wise Detailed Analysis:
  
  1. Contravention of sections 9(1)(d), 8(3), and 8(4) read with section 64(2) of the Foreign Exchange Regulation Act, 1973:
  The appellant was held guilty of making a payment of Rs. 36,00,000 to D.C. Shah on behalf of Rajnikant Kedia, a non-resident, without the permission of the RBI, thus violating section 9(1)(d). Additionally, the appellant was found to have abetted M/s. Varun International Trading Corporation in mis-declaring goods under sections 8(3) and 8(4) read with section 64(2). The mis-declaration involved under-invoicing the value, quantity, and quality of imported dyes.
  
  2. Validity of Confessional Statements and Their Retraction:
  The appellant argued that his confessional statement was involuntary, given under coercion, and promptly retracted. However, the Tribunal found no evidence supporting the claim of coercion. The retraction was deemed an afterthought, unsupported by documentary evidence. The Tribunal cited Supreme Court precedents, asserting that retracted confessional statements could be used as substantive evidence if corroborated by other evidence. In this case, the appellant's retracted statement was corroborated by statements from co-noticees and documentary evidence, thus deemed valid.
  
  3. Status of Rajnikant Kedia as a Non-Resident:
  The appellant contended that Rajnikant Kedia was not a non-resident during the relevant period. However, the Tribunal found that Kedia had an NRE account, which can only be maintained by a person resident outside India. There was no evidence that Kedia had applied to redesignate his NRE account as a resident account. Thus, the Tribunal concluded that Kedia was a non-resident during the relevant period.
  
  4. Abetment in Mis-Declaration of Imported Goods:
  The appellant was charged with abetting M/s. Varun International and others in mis-declaring the imported goods. The Tribunal referred to the definition of 'abetment' under section 107 of the Indian Penal Code, which includes instigation, conspiracy, or intentional aid. The Tribunal found that the appellant had actively facilitated the mis-declaration by making payments and purchasing the goods, knowing the nature of the deal. This active complicity established the charge of abetment.
  
  5. Quantum of Penalty Imposed:
  The Tribunal found the penalty of Rs. 1,89,000 commensurate with the gravity of the offense. The appellant's argument that the burden of proof was not met was dismissed. The Tribunal emphasized that in economic offenses, the burden of proof need not reach mathematical precision. The evidence provided established a high degree of probability that justified the penalty. The pre-deposited amount was ordered to be appropriated towards the penalty.
  
  Conclusion:
  The Tribunal confirmed and upheld the adjudication order, finding the charges under sections 9(1)(d), 8(3), and 8(4) read with section 64(2) of the Foreign Exchange Regulation Act, 1973, fully proved against the appellant. The appeal was dismissed, and the penalty was deemed appropriate for the offense.

  ---

• 2008 (8) TMI 1039
  
  Issues:
  Violation of FER Act, 1973 - Failure to realize and repatriate outstanding export products - Vicarious liability of appellant - Quantum of penalty.
  
  Analysis:
  
  Violation of FER Act, 1973:
  The appeal was against an adjudication order imposing a penalty for the failure to realize and repatriate export proceeds, contravening sections 18(2) and 18(3) r/w section 68 of FER Act, 1973. The appellant argued that he was not responsible for the affairs of the noticee company during the relevant time, citing the Companies Act and a Supreme Court decision. The respondent contended that the appellant, as an executive director, was involved in export decisions. The tribunal noted the appellant's role in the company before 1997, supported by a letter, and emphasized the burden of proof on the appellant under the Evidence Act.
  
  Vicarious Liability of Appellant:
  The tribunal discussed the concept of "officer who is in default" under the Companies Act and the vicarious liability provision in section 68 of the FER Act. It highlighted that the appellant was an officer of the noticee company during the relevant period, emphasizing that the court will not interpret statutes with reference to unrelated laws. The tribunal rejected the appellant's argument that he was not responsible for the company's conduct, as the show cause notice clearly stated his role in the company's day-to-day business.
  
  Quantum of Penalty:
  Regarding the quantum of penalty, the tribunal found it neither excessive nor harsh considering the amount involved in the contravention. The tribunal dismissed the appeal, upholding the penalty imposed. The appellant was directed to deposit the balance amount of the penalty within a specified period, failing which the Enforcement Directorate could realize it in accordance with the law.
  
  In conclusion, the tribunal dismissed the appeal, upholding the penalty imposed on the appellant for the violation of the FER Act, 1973. The decision was based on the appellant's vicarious liability and involvement in the company's affairs during the relevant period, as established by evidence presented. The tribunal found the penalty amount reasonable and directed the appellant to fulfill the payment within the stipulated timeframe to avoid further enforcement actions.

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• 2008 (8) TMI 1038
  
  Issues:
  Violation of provisions of Section 9(1)(d) r/w 68(1) of the Foreign Exchange Regulation Act, 1973.
  
  Analysis:
  1. The appeals were filed against an Adjudication Order imposing penalties for contravention of FERA provisions. The appellants made partial payment as per Tribunal's order.
  
  2. The charge was for making unauthorized payments to M/s. DFCL on behalf of M/s. Image Securities LLC without RBI permission. The appellants sought consultancy services for NRI investment promotion in Tamil Nadu.
  
  3. Evidence showed no substantial service by M/s. DFCL, and incriminating documents were found during a search. Payments were made to DFCL on behalf of Image Securities LLC without RBI approval.
  
  4. The defense argued the payments were independent, not violating FERA. However, evidence indicated a connection between DFCL and Image Securities LLC, with payments made for services not rendered.
  
  5. Section 9(1)(d) of FERA prohibits payments to persons outside India without RBI permission. The new agreement with DFCL was an attempt to circumvent legal obligations.
  
  6. Confessional statements and documents proved the connection between DFCL and Image Securities LLC, despite attempts to argue independence.
  
  7. The Memorandum of Understanding between DFCL and Image Securities LLC couldn't override FERA provisions. Payments were made for services by Image Securities LLC, not DFCL.
  
  8. The manager of DFCL's statements confirmed the appellants' involvement in unauthorized payments for services not rendered.
  
  9. The defense claimed technical violation without mens rea, citing a Supreme Court judgment. However, penalties apply regardless of intention for contraventions of statutory obligations.
  
  10. Despite income tax deductions, the evidence established a violation of FERA provisions. The appellants were found guilty, but the penalty amount was reduced by 50% for fairness.
  
  In conclusion, the appellants were found guilty of contravening FERA provisions by making unauthorized payments. The defense arguments were refuted based on evidence, leading to a partial reduction in the penalty amount imposed. The judgment emphasized strict compliance with regulatory mechanisms under FERA, even in cases of technical violations without mens rea.

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• 2008 (8) TMI 1037
  
  The appeal was filed against an adjudication order imposing a penalty of Rs. 25,000 for contravention of the FER Act. The appellant did not appear despite multiple notices. The appellant did not comply with the pre-deposit order and the appeal was dismissed for failure to make the required deposit.

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• 2008 (8) TMI 1036
  
  Issues Involved:
  1. Alleged contravention of Section 9(1)(b) and Section 9(1)(d) of the Foreign Exchange Regulation Act (FERA), 1973.
  2. Voluntariness and admissibility of the appellant's admissional statement.
  3. The impact of the retraction of the admissional statement.
  4. The requirement of corroborative evidence.
  5. The burden of proof on the Enforcement Directorate.
  6. Denial of cross-examination of Jagdish Prasad Karel.
  7. Quantum of penalty imposed.
  
  Issue-wise Detailed Analysis:
  
  1. Alleged Contravention of Section 9(1)(b) and Section 9(1)(d) of FERA, 1973:
  The appellant was penalized for paying Rs. 12,98,800 to Devkinandan Karel on the instructions of Dilip Shah of Bangladesh, which was considered a violation of Section 9(1)(b) and Section 9(1)(d) of FERA, 1973. The penalty imposed was Rs. 4,00,000 for the contravention of Section 9(1)(b) and Rs. 3,00,000 for the contravention of Section 9(1)(d).
  
  2. Voluntariness and Admissibility of the Appellant's Admissional Statement:
  The appellant argued that his admissional statement was made under threat, duress, and coercion. However, the Tribunal found no evidence on record to support these allegations. It was emphasized that the voluntary nature of any statement made before Enforcement authorities is a sine qua non for its admissibility. The Tribunal referred to the Supreme Court's observations in K.T.M.S. Mohd. v. Union of India, which stressed that the burden is on the maker of the statement to establish that it was obtained through improper means.
  
  3. The Impact of the Retraction of the Admissional Statement:
  The Tribunal noted that the retraction of the admissional statement does not automatically render it inadmissible. The retracted confession can still form the basis of conviction if found to be voluntary and true. The Tribunal cited K.I. Pavunny v. Assistant Collector (HQ), Central Excise Collectorate, where the Supreme Court held that a retracted confession could be relied upon if corroborated by other evidence.
  
  4. The Requirement of Corroborative Evidence:
  While the appellant relied on Mohtesham Mohd. Ismail v. Spl. Director, Enforcement Directorate, which emphasized the need for corroboration, the Tribunal found that the factual position in the present case did not necessitate stricter application of this rule. The Tribunal referred to Naresh J. Sukhawani v. Union of India, where the Supreme Court held that corroboration is not always necessary if the admissional statement is voluntary and true.
  
  5. The Burden of Proof on the Enforcement Directorate:
  The appellant argued that the Enforcement Directorate failed to prove the case beyond a reasonable doubt. However, the Tribunal noted that while the burden of proof is on the Enforcement Directorate, it does not need to be stretched to mathematical precision. The Tribunal referred to Collector of Customs v. D. Bhoormull, which stated that the prosecution is not required to prove its case with absolute certainty, but rather to a degree that a prudent person would believe in the existence of the fact in issue.
  
  6. Denial of Cross-Examination of Jagdish Prasad Karel:
  The appellant's demand for cross-examination of Jagdish Prasad Karel was denied. The Tribunal cited Transmission Corporation of AP Ltd. v. Ramakrishna Rice Mills, which held that the demand for cross-examination must be supported by sound reasons, and its denial does not necessarily violate the principles of natural justice.
  
  7. Quantum of Penalty Imposed:
  The Tribunal found that the amount involved in the contravention was more than the quantum of penalty imposed. It did not consider the penalty to be excessive or harsh. The Tribunal referred to Chairman, SEBI v. Sriram Mutual Fund, where the Supreme Court emphasized that penalties under statutory regulations should be imposed to secure strict compliance without requiring proof of mens rea.
  
  Conclusion:
  The Tribunal sustained and maintained the adjudication order, dismissing the appeal for lack of merits. The appellant was directed to deposit the remaining penalty amount within a week from the date of receipt of the order, failing which the respondent could recover the same in accordance with the law.

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• 2008 (8) TMI 1035
  
  Issues:
  Challenge to adjudication order for contravention of Section 18(2) read with 18(3) FER Act regarding failure to repatriate export proceeds.
  
  Analysis:
  The Appellate Tribunal for Foreign Exchange considered an appeal challenging an adjudication order imposing a penalty of Rs. 3,50,000 on the appellant for not taking reasonable steps for repatriation of export proceeds, as required by Section 18(2) read with 18(3) of the FER Act. The appellant had already pre-deposited the penalty amount. The Tribunal proceeded with the final disposal of the appeal on merits.
  
  The Tribunal heard arguments from both parties and reviewed the Show Cause Notice issued to the appellant, alleging failure to repatriate export proceeds. The legal obligation of an exporter under Section 18(2) read with 18(3) of the FER Act was emphasized, stating that if payment for exported goods is not received within the prescribed period, it is presumed that the exporter did not take reasonable steps to receive the payment.
  
  The Tribunal examined the concept of "reasonable" steps required from exporters, citing legal definitions that highlight the need for fairness and suitability in the given circumstances. The Tribunal analyzed the specific export transactions of the appellant, focusing on three sets of Goods Received Intimations (GRIs) with varying outcomes in terms of payment realization.
  
  The Tribunal found that while some GRIs were realized or pending with the RBI for write-off or extension requests, three GRIs remained unrealized. The appellant's argument regarding pending requests for write-off or extension was not considered sufficient to absolve the appellant of the failure to repatriate proceeds. Consequently, the Tribunal held the appellant guilty of contravening Section 18(2) read with 18(3) concerning the price of the three GRIs.
  
  In its decision, the Tribunal partly allowed the appeal, reducing the penalty imposed on the appellant to Rs. 1 lakh from Rs. 3,50,000. The Tribunal directed that the penalty amount could be adjusted against the pre-deposited sum, with any remaining amount to be returned to the appellant by the Enforcement Directorate within two weeks from the date of the order.

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• 2008 (8) TMI 1034
  
  Issues Involved:
  
  1. Contravention of Section 8(1) FER Act, 1973.
  2. Contravention of Section 9(1)(a) and Section 19(1)(e) FER Act, 1973.
  3. Contravention of Section 9(1)(f)(i) FER Act, 1973.
  4. Principles of natural justice and service of Show Cause Notices.
  5. Validity of retracted statements and their impact on the judgment.
  
  Detailed Analysis:
  
  1. Contravention of Section 8(1) FER Act, 1973:
  
  The appellant was alleged to have "otherwise acquired and thereafter transferred US dollars 62,793" to the bank account of M/s Greenland Corporation, Japan, and failed to offer the same for sale within three months of his return to India in April 1984, violating Section 8(1) FER Act, 1973 (Show Cause Notice No. T-4/36-B/86-(SCN-IV)). Additionally, he was accused of maintaining an account with M/s Greenland Corporation where Japanese Yen 7236950 was debited without RBI's permission and failing to surrender Japanese Yen 7236950 and US dollars 20,000 within three months of his return to India (Show Cause Notice No. T-4/36-B/86-(SCN-V)).
  
  2. Contravention of Section 9(1)(a) and Section 19(1)(e) FER Act, 1973:
  
  The appellant was penalized for making payments of US dollars 99539.60 and Singapore dollar 762 to different persons without RBI's permission and for holding JCP bonds of US dollars 10000 even after acquiring the status of a person resident in India (Show Cause Notice No. T-4/36-B/86-(SCN-VIII)). This was seen as a contravention of Section 9(1)(a) and Section 19(1)(e) FER Act, 1973.
  
  3. Contravention of Section 9(1)(f)(i) FER Act, 1973:
  
  The appellant was found to have received Rs. 16,26,500 as consideration and in lieu of payment of US dollars 75000 and Singapore dollar 61663.40 from persons resident outside India, which was a violation of Section 9(1)(f)(i) FER Act, 1973 (Show Cause Notice No. T-4/36-B/86-(SCN-VII)).
  
  4. Principles of Natural Justice and Service of Show Cause Notices:
  
  The appellant argued that the Show Cause Notices were not served on him, violating principles of natural justice. However, the Tribunal found that the notices were sent to the address provided by the appellant, fulfilling the legal duty of the Enforcement Directorate. The service by affixation under Rule 10(c), Adjudication Proceedings and Appeal Rules, 1974, was deemed an accepted and recognized mode of service under the Foreign Exchange Regulation Act, 1973. Thus, the Tribunal dismissed the claim of violation of natural justice.
  
  5. Validity of Retracted Statements and Their Impact on the Judgment:
  
  The appellant's statements recorded by the Customs Department and the Enforcement Directorate were retracted. The Tribunal noted that retracted statements could still be considered if not proven to be made under threat or coercion. The Tribunal cited several judgments, including K.T.M.S. Mohd. v. UOI and K.I. Pavunny v. Assistant Collector (HQ), to emphasize that retracted confessions could be used as evidence if found voluntary and true. The Tribunal concluded that the appellant's statements were voluntary and true, and the retraction did not benefit the appellant. The burden of proof on the Enforcement Directorate under Section 59(2) FER Act was considered met without requiring mathematical precision, as per the observations in Collector of Customs, Madras v. D. Bhoormull.
  
  Conclusion:
  
  The Tribunal upheld the penalties imposed on the appellant for contraventions of various sections of the FER Act, 1973, dismissing the arguments regarding the appellant's residential status, principles of natural justice, and the validity of retracted statements. The appeal was disposed of on merits, affirming the adjudication order.

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• 2008 (8) TMI 1033
  
  Issues Involved:
  1. Contravention of section 9(1)(f)(i) read with section 68(1) of the Foreign Exchange Regulation Act, 1973.
  2. Validity and voluntariness of admissional statements.
  3. Burden of proof and standard of evidence required.
  4. Appropriateness of the penalty imposed.
  
  Issue-wise Detailed Analysis:
  
  1. Contravention of section 9(1)(f)(i) read with section 68(1) of the Foreign Exchange Regulation Act, 1973:
  The appellants were accused of over-invoicing four export consignments, resulting in the receipt of US dollars 64184 from a foreign buyer, M/s. Hezmans, Netherlands, and making a payment of Rs. 25,00,000 in return. The adjudicating authority imposed penalties of Rs. 12,00,000 on the appellant-company and Rs. 2,00,000 on the Director. The appellants argued that the prices in the invoices were correct and not over-invoiced, citing market conditions and negotiations conducted by a middleman, Rajesh Shroff. However, the tribunal found that the admissional statements of Rajesh Shroff and the appellant-Director provided clear evidence of over-invoicing and the subsequent return of the differential amount.
  
  2. Validity and voluntariness of admissional statements:
  The appellants claimed that their admissional statements were made under coercion and threat. However, the tribunal noted that there was no evidence to support these claims. The tribunal referred to several Supreme Court judgments, including K.T.M.S. Mohd. v. Union of India, Naresh J. Sukhwani v. Union of India, and State (NCT) Delhi v. Navjot Sandhu alias Afsan Guru, which emphasized that voluntary statements made to enforcement authorities are admissible unless proven to be obtained through coercion or threat. The tribunal concluded that the admissional statements were voluntary and true, as there was no proof of coercion.
  
  3. Burden of proof and standard of evidence required:
  The tribunal discussed the burden of proof in quasi-criminal proceedings, citing the Supreme Court judgment in Collector of Customs v. D. Bhoormull. It was noted that the burden of proof on the enforcement agency does not require mathematical precision but should establish a degree of probability that a prudent person may believe in the existence of the fact in issue. The tribunal found that the evidence presented, including the admissional statements and the circumstances of the case, met this standard.
  
  4. Appropriateness of the penalty imposed:
  The tribunal considered the amount involved in the contravention and concluded that the penalties imposed were not excessive or harsh. The tribunal referred to the Supreme Court judgment in Chairman, SEBI v. Sriram Mutual Fund, which emphasized the importance of imposing penalties to ensure strict compliance with the law. The tribunal upheld the penalties of Rs. 12,00,000 on the appellant-company and Rs. 2,00,000 on the Director, finding them appropriate given the nature and amount of the contravention.
  
  Conclusion:
  The tribunal dismissed the appeals, upholding the adjudication order and the penalties imposed. The appellants were directed to deposit the remaining penalty amounts within a week, failing which the respondent could recover the amounts in accordance with the law.

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• 2008 (8) TMI 1032
  
  Issues Involved:
  1. Contravention of Section 29(1)(b) read with 49(1), 72(3), and 58 of the Foreign Exchange Regulation Act (FERA).
  2. Non-compliance with Para 10C.21 of the Exchange Control Manual (ECM) of RBI.
  3. Legality of increasing the penalty amount without an appeal or revision by the Enforcement Directorate.
  4. Applicability of statutory directions and the interpretation of statutes.
  5. Authority of the Tribunal to enhance penalties.
  
  Issue-wise Detailed Analysis:
  
  1. Contravention of Section 29(1)(b) read with 49(1), 72(3), and 58 of the Foreign Exchange Regulation Act (FERA):
  The appellants were penalized for purchasing shares of Steel Authority of India without taking delivery, thus violating Section 29(1)(b) of FERA. The Tribunal noted that the appellant company, an Overseas Corporate Body registered in Mauritius, had purchased shares on credit without taking delivery, which contravened the conditions prescribed under Para 10C.21 of the ECM. Despite the appellants' argument that the broker failed to deliver the shares, the Tribunal held that the non-resident person (appellant company) failed to take delivery, thus violating the general condition under Para 10C.21(c)(v).
  
  2. Non-compliance with Para 10C.21 of the Exchange Control Manual (ECM) of RBI:
  The Tribunal emphasized that Para 10C.21(c)(v) of the ECM mandates that overseas persons must take delivery of the shares if purchased. The appellants argued that no specific period for delivery was prescribed and that the ECM did not contain statutory directions. However, the Tribunal rejected this argument, stating that a legal duty was created, and the reasonable time for performance of this duty could be inferred. The Tribunal also noted that the appellants failed to produce the RBI's approval, leading to an adverse inference against them.
  
  3. Legality of increasing the penalty amount without an appeal or revision by the Enforcement Directorate:
  The Tribunal addressed the argument that the penalty amount could not be increased in the absence of an appeal or revision by the Enforcement Directorate. The Tribunal held that it had the authority to suo moto examine the legality, propriety, and correctness of any adjudication order under Section 52(4) of the FERA. The Tribunal emphasized that undue sympathy in imposing inadequate penalties could undermine the economic well-being of the country and that the quantum of penalty must create a deterrent effect.
  
  4. Applicability of statutory directions and the interpretation of statutes:
  The Tribunal discussed the interpretation of statutes, emphasizing that the provisions of Section 29(1)(b) of FERA clearly prohibit the purchase of shares in India by any person residing outside India without RBI permission. The Tribunal noted that the appellants failed to produce the RBI's permission, and thus, the violation was clearly made out. The Tribunal also referred to various judgments to support the principle that statutory provisions should be interpreted plainly and unambiguously.
  
  5. Authority of the Tribunal to enhance penalties:
  The Tribunal referred to the definitions of "modify" in Black's Law Dictionary and Prem's Judicial Dictionary, concluding that it had the authority to increase the penalty even in the absence of an appeal or revision by the Enforcement Directorate. The Tribunal imposed a penalty of Rs. 2 crores each against the two appellants, which was roughly double the amount involved in the contravention. The Tribunal justified this increase to ensure that the penalty had a deterrent effect and to avoid perpetuating injustice.
  
  Conclusion:
  The appeals were dismissed, and the penalties against both appellants were increased to Rs. 2 crores each. The appellants were ordered to deposit the penalties within a week from the receipt of the order, failing which the Enforcement Directorate could recover the same in accordance with the law.

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• 2008 (8) TMI 1031
  
  Issues Involved:
  1. Contravention of provisions of section 9(1)(a), 9(1)(c), and 9(1)(e) of the Foreign Exchange Regulation Act, 1973.
  2. Admissibility and relevance of evidence and documents.
  3. Burden of proof regarding the non-residential status of N.C. Rangesh.
  4. Alleged procedural lapses and fairness of the adjudication process.
  5. Quantum of penalty imposed.
  
  Issue-wise Detailed Analysis:
  
  1. Contravention of Provisions of Section 9(1)(a), 9(1)(c), and 9(1)(e) of FERA, 1973:
  The appellants were charged with acknowledging a debt, placing a sum of Rs. 12,00,000 to the credit of N.C. Rangesh, a person resident outside India, and making payments of Rs. 1,26,000 and Rs. 90,000 towards interest without any general or special exemption from the Reserve Bank of India. The judgment confirms that the appellants took a loan of Rs. 12,00,000 from N.C. Rangesh and repaid it, acknowledging the debt and making payments to a person resident outside India, thus violating section 9(1)(a), 9(1)(c), and 9(1)(e).
  
  2. Admissibility and Relevance of Evidence and Documents:
  The appellants argued that the documents recovered from M/s. Micam Leather Exports Ltd. were not admissible as they were not jointly proceeded against for the same cause of action. However, the tribunal found that the documents and statements from third parties were admissible and relevant, as they established the non-residential status of N.C. Rangesh and the association between the appellants and N.C. Rangesh.
  
  3. Burden of Proof Regarding the Non-Residential Status of N.C. Rangesh:
  The tribunal emphasized that the burden of proving the non-residential status of N.C. Rangesh was on the respondent, which was adequately discharged through various documents and statements. The appellants' contention that they were unaware of N.C. Rangesh's non-residential status was not accepted, given their long association and the evidence on record.
  
  4. Alleged Procedural Lapses and Fairness of the Adjudication Process:
  The appellants claimed that the adjudication process was unfair, as they were not allowed to cross-examine third parties, and the show-cause notice was vague. The tribunal dismissed these claims, stating that the appellants were given full opportunity to appear before the Enforcement Directorate but deliberately avoided it. The show-cause notice was found to be specific, detailing the violations and charges against the appellants.
  
  5. Quantum of Penalty Imposed:
  The tribunal upheld the penalties imposed on M/s. Associated Builders and Developers and H. Ameer, finding them commensurate with the gravity of the offense. However, the penalty against K.M. Riyasuddin was reduced to 50% of the original amount, considering his role as an agent of the other appellants. The appeals of M/s. Associated Builders and Developers and H. Ameer were dismissed, while the appeal of K.M. Riyasuddin was partly allowed.
  
  Conclusion:
  The tribunal confirmed the contraventions of section 9(1)(a), 9(1)(c), and 9(1)(e) of FERA, 1973, by the appellants, upheld the penalties imposed on M/s. Associated Builders and Developers and H. Ameer, and reduced the penalty on K.M. Riyasuddin. The pre-deposited amount was ordered to be appropriated towards the penalty.

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• 2008 (8) TMI 1030
  
  Issues Involved:
  1. Validity of the order dated 31.12.2007 by Additional District Magistrate, Kanpur Nagar.
  2. Validity of the revision order dated 25.02.2008 by Chief Controlling Revenue Authority, U.P. Allahabad.
  3. Deficiency of stamp duty and imposition of penalty under Section 33/47-A of the Indian Stamp Act.
  4. Determination of market value of the property at the time of sale deed execution.
  
  Detailed Analysis:
  
  1. Validity of the Order Dated 31.12.2007 by Additional District Magistrate, Kanpur Nagar:
  The petitioner challenged the order dated 31.12.2007, which imposed a stamp deficiency of Rs. 8,36,300/-, interest of Rs. 5,26,869/-, and a penalty of Rs. 6,831/-, totaling Rs. 13,70,000/-. The Additional District Magistrate relied on an ex-parte inspection report by the DIG (Registration) Kanpur Nagar, which indicated a deficiency in stamp duty. The petitioner argued that the market value was not correctly determined as per the date of the sale deed execution, and reliance on the circle rate was misplaced.
  
  2. Validity of the Revision Order Dated 25.02.2008 by Chief Controlling Revenue Authority, U.P. Allahabad:
  The petitioner also contested the revision order dated 25.02.2008, which upheld the Additional District Magistrate's decision. The petitioner claimed that both authorities failed to conduct a proper inquiry to ascertain the market value of the property on the date of the sale deed and unjustly relied on the circle rate.
  
  3. Deficiency of Stamp Duty and Imposition of Penalty under Section 33/47-A of the Indian Stamp Act:
  The petitioner purchased the property on 21.07.2004, paying Rs. 1,03,300/- as stamp duty based on a market value of Rs. 10,32,920/-. The land was agricultural at the time of purchase and later converted to industrial use on 25.11.2004. The authorities imposed a deficiency based on an ex-parte inspection conducted on 09.10.2006, which the petitioner argued was not a valid basis for determining the market value.
  
  4. Determination of Market Value of the Property at the Time of Sale Deed Execution:
  The court emphasized that the market value should be determined based on the property's status and value at the time of the sale deed execution, not on subsequent changes or circle rates. The court referred to several precedents, including Ram Khelawan v. State of U.P. and Kishore Chandra Agarwal v. State of U.P., which established that the market value should be determined using general principles akin to those in land acquisition cases, not merely on circle rates or ex-parte reports.
  
  Conclusion:
  The court quashed the orders dated 31.12.2007 and 25.02.2008, directing the authorities to reassess the market value of the property as of the date of the sale deed execution. The reassessment should be conducted in accordance with the law, considering the property's status at the time of the sale, and not relying solely on circle rates or ex-parte reports. The matter was remitted back for fresh determination within two months from the presentation of the certified copy of the court's order. The writ petition was allowed and disposed of accordingly.

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