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2011 (5) TMI 1157
Issues Involved: 1. Voluntary resignation from party membership. 2. Compliance with procedural rules and principles of natural justice. 3. Allegations of bias and mala fide actions by the Speaker. 4. Scope of judicial review of the Speaker's order under the Tenth Schedule of the Constitution.
Detailed Analysis:
1. Voluntary Resignation from Party Membership: The primary issue was whether the appellants voluntarily gave up their membership of the Bharatiya Janata Party (BJP). The appellants had written to the Governor expressing their disillusionment with the functioning of the government led by the Chief Minister and withdrew their support. The Speaker concluded that this act, coupled with their conduct, indicated they had voluntarily given up their membership, thus attracting disqualification under paragraph 2(1)(a) of the Tenth Schedule. However, the appellants argued that they did not leave the party but only withdrew support from the government led by the Chief Minister, and were willing to support any other BJP-led government.
2. Compliance with Procedural Rules and Principles of Natural Justice: The appellants contended that the Speaker violated Rules 6 and 7 of the Karnataka Legislative Assembly (Disqualification of Members on Ground of Defection) Rules, 1986, by not giving them the mandated seven days to respond to the show-cause notices. Instead, they were given only three days, which they argued was insufficient and denied them a fair opportunity to present their case. The Speaker argued that the rules were directory, not mandatory, and that the appellants had filed detailed replies, indicating no prejudice was caused. However, the court found that the Speaker's actions did not meet the twin tests of natural justice and fair play.
3. Allegations of Bias and Mala Fide Actions by the Speaker: The appellants alleged that the Speaker acted in hot haste and with bias to disqualify them before the trust vote scheduled for 11th October 2010. The court noted that the Speaker's conduct, including not providing the appellants with the affidavits of K.S. Eswarappa, M.P. Renukacharya, and Narasimha Nayak, and preponing the deadline for submitting replies, indicated a partisan approach. The Speaker's reliance on these affidavits without giving the appellants an opportunity to respond was seen as a denial of natural justice.
4. Scope of Judicial Review of the Speaker's Order: The court reaffirmed that the Speaker's order, while final under paragraph 6 of the Tenth Schedule, is subject to judicial review on grounds of violation of constitutional mandates, mala fides, non-compliance with natural justice, and perversity. The court found that the Speaker's order did not meet the required standards of fairness and impartiality, and thus warranted judicial intervention.
Conclusion: The court set aside the Speaker's order disqualifying the appellants and the majority judgment of the High Court upholding the Speaker's decision. The court allowed the appeals, emphasizing the need for adherence to principles of natural justice and fair play in disqualification proceedings under the Tenth Schedule.
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2011 (5) TMI 1156
Issues Involved: 1. Penalty under Section 271D for violation of Section 269SS due to alleged cash loans. 2. Enhancement of penalty from Rs. 3,50,000/- to Rs. 23,50,000/- for transactions through bearer cheques.
Detailed Analysis:
1. Penalty under Section 271D for violation of Section 269SS due to alleged cash loans:
The assessee, a construction firm, was subjected to a search under Section 132 of the Income Tax Act on 18-10-2003, where documents related to financial transactions, many in cash, were found and seized. The search also covered the partners and associate concerns of the assessee group. Prior searches on 29-7-2003 in the case of Shri B.H. Shah revealed blank cheques amounting to Rs. 1,01,00,000/- belonging to the assessee and its group concerns.
The Assessing Officer (A.O.) noted that these cheques were handed over to Shri B.H. Shah for amounts borrowed by various persons, including the assessee, and were due for repayment or renewal. The A.O. found a violation of Section 269SS and levied a penalty under Section 271D, stating that the cheques amounting to Rs. 95,50,000/- represented unaccounted cash loans taken in violation of Section 269SS. Shri B.H. Shah admitted that these cheques were security for cash loans advanced by him, returned upon loan repayment, with interest received in cash. The A.O. presumed the assessee borrowed Rs. 95,50,000/- in cash and levied a penalty of Rs. 99,00,000/- in total, including Rs. 3,50,000/- for loans obtained through bearer cheques.
The CIT (A) deleted the penalty of Rs. 95,50,000/- but enhanced the penalty for bearer cheques to Rs. 23,50,000/-. The Revenue opposed the deletion, citing Shri B.H. Shah's statement. The assessee argued that the penalty was based on presumption without concrete evidence and that they were not given an opportunity to cross-examine Shri B.H. Shah, violating principles of natural justice.
Upon review, it was found that the cheques were issued as security for the entire Sneh group, and no concrete evidence indicated the assessee received Rs. 95,50,000/- in cash. The penalty was imposed based on presumption, and the CIT (A) rightly deleted it. The Tribunal upheld this deletion, stating that general statements from third parties cannot justify penalties without concrete evidence.
2. Enhancement of penalty from Rs. 3,50,000/- to Rs. 23,50,000/- for transactions through bearer cheques:
The A.O. initially imposed a penalty of Rs. 3,50,000/- for loans taken via bearer cheques, which violated Section 269SS. The CIT (A) enhanced this penalty to Rs. 23,50,000/-, a figure not disputed by either party. The assessee argued that they were under the bona fide impression that accepting loans by cheques complied with Section 269SS and that ignorance of law can be a reasonable cause, citing the Bombay High Court's decision in CIT Vs. Schell International.
The Tribunal reviewed the case, noting that the assessee's practice of taking loans through bearer cheques was genuine and recorded in the books of accounts. The assessee was unaware that this violated Section 269SS, a point not raised by auditors. The Tribunal referenced several legal precedents, including the Supreme Court's observation that ignorance of law can be a defense under certain circumstances.
In conclusion, the Tribunal found that the assessee's ignorance of the specific legal provisions constituted a reasonable cause under Section 273B, justifying the deletion of the enhanced penalty. The appeal of the Revenue was dismissed, and the appeal of the assessee was allowed.
Result: - The penalty of Rs. 95,50,000/- under Section 271D was rightly deleted. - The enhanced penalty of Rs. 23,50,000/- was deleted due to the assessee's bona fide impression and ignorance of the law.
Pronounced in the open court on 20th May 2011.
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2011 (5) TMI 1155
Issues involved: 1. Addition on account of managerial services 2. Deletion of addition of travelling expenses for personal use 3. Disallowance of vehicle maintenance expenses
Addition on account of managerial services: The appeal by the Revenue for assessment year 2006-07 arises from the order of the ld. CIT (Appeals)-I, New Delhi. The assessing officer disallowed an amount paid by the Assessee company for freight forwarding functions done by UTI Network Inc. outside India, considering them as managerial services covered under Section 9(1)(vii) of the Income-tax Act, 1961. On appeal, it was argued that these services were commercial in nature and not managerial. The ld. CIT (Appeals) agreed, stating that the services were not taxable in India under Section 195 of the Act. Therefore, the addition was deleted.
Deletion of addition of travelling expenses for personal use: The assessing officer disallowed a portion of travelling expenses for personal use of vehicles by Directors and employees. The ld. CIT (A) observed that the disallowance was made due to non-maintenance of log books, but since the Assessee had paid Fringe Benefit Tax on the total expenditure, no further disallowance was warranted. The deletion of the addition was upheld as the expenses were incurred for business purposes.
Disallowance of vehicle maintenance expenses: The assessing officer disallowed a portion of vehicle maintenance expenses twice, once as part of total expenses and then separately. The ld. CIT (A) deleted the disallowance, noting that the Assessee had already paid Fringe Benefit Tax on the expenses. As the expenses were incurred for business purposes and FBT was paid, no further disallowance was justified. The addition made by the assessing officer was accordingly deleted.
The appeal filed by the Revenue was dismissed, and the order was pronounced on 13th May, 2011.
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2011 (5) TMI 1154
Issues Involved: 1. Contempt of Court by the Petitioner NGO and its officials. 2. Abuse of the process of law by filing petitions under the guise of public interest. 3. Making irresponsible remarks against the Gujarat High Court. 4. Filing petitions with ulterior motives to cause industrial imbalance.
Summary:
1. Contempt of Court by the Petitioner NGO and its officials: The Court issued a show-cause notice to the Petitioner NGO and its Secretary, Shri B.K. Sharma, for contemptuous behavior. Despite an unconditional apology and withdrawal of allegations, the Court questioned the bona fides of the apology, emphasizing that an apology in contempt actions must be bona fide and demonstrate actual repentance. The Court cited precedents to highlight that contemptuous acts causing serious damage to the justice administration system are unforgivable and must be addressed to maintain the dignity of the Court.
2. Abuse of the process of law by filing petitions under the guise of public interest: The Court found that Shri B.K. Sharma abused the process of law by filing petitions against a business rival under the guise of public interest. The petitions aimed to create impediments in the establishment and operation of asbestos-related industrial units, despite these units operating lawfully. The Court noted that such actions were intended to settle business rivalries rather than genuine public interest concerns.
3. Making irresponsible remarks against the Gujarat High Court: Shri B.K. Sharma made irresponsible remarks against the Gujarat High Court, stating that it "failed to apply its mind" in a judgment that had attained finality. The Court found this behavior contemptuous and noted that such remarks were made without justifiable cause, further undermining the dignity of the judicial system.
4. Filing petitions with ulterior motives to cause industrial imbalance: The Court observed that the petitions filed by Shri B.K. Sharma were intended to secure a ban on asbestos activities to increase the demand for cast and ductile iron products, benefiting a rival industrial group. This ulterior motive was evident from the repeated filing of petitions and incorrect affidavits, which aimed to cause industrial imbalance and financial loss to the asbestos industry.
Conclusion: The Court held that the contemners' actions undermined the dignity of the justice delivery system and prejudicially affected the rights of third parties. The Court sentenced Shri B.K. Sharma to simple imprisonment till the rising of the Court, imposed a fine of Rs. 2,000/- and a cost of Rs. 1,00,000/- to be paid to the S.C. Legal Services Committee. Additionally, the Registrar of Societies, Government of NCT of Delhi, was directed to take action against the contemner-society, Kalyaneshwari, and submit a report within six weeks.
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2011 (5) TMI 1153
Issues Involved: 1. Promissory Estoppel 2. Legality of Administrative Guidelines 3. Discrimination in Subsidy Disbursement 4. Validity of Industrial Policies and Relevant Rules 5. State's Obligation to Fulfill Promises
Issue-wise Detailed Analysis:
1. Promissory Estoppel: The court emphasized that the State of Punjab had repeatedly admitted its liability to pay subsidies and incentives to industrial units under the Industrial Policies of 1996 and 2003. The principle of promissory estoppel was held applicable, meaning that the State, having made promises that induced the petitioner-industries to act and invest, could not later deny those promises. The court cited the Supreme Court's rulings in *U.P. Power Corporation Ltd. v. Sant Steel and Alloys P. Ltd.* and *Union of India v. Anglo-Afghan Agencies*, noting that the government must abide by its commitments to maintain public faith and good governance.
2. Legality of Administrative Guidelines: The court found that administrative guidelines issued by the State government, which altered the original Industrial Policies and relevant rules, could not legally deny the benefits already accrued to the petitioner-industries. The guidelines and orders impugned in the writ petitions were deemed illegal, contrary to the Industrial Policies, and without jurisdiction. The court held that substantive rights of the petitioner-industries could not be taken away by such executive instructions, which lacked legal force.
3. Discrimination in Subsidy Disbursement: The petitioner-industries argued that the State had discriminately paid subsidies to some favored units while denying the same to others, including the petitioners. The court agreed, noting that the respondents had admitted their liability to pay subsidies but had not released the amounts on untenable grounds such as closure of units and non-availability of funds. The plea of discrimination was upheld, and the court directed the State to release the subsidies to the petitioner-industries.
4. Validity of Industrial Policies and Relevant Rules: The court affirmed that the Industrial Policies of 1996 and 2003, along with the relevant rules, had the force of law as envisaged under Article 13(3) read with Articles 154 and 162 of the Constitution of India. The policies and rules were intended to promote industrial growth and provide various incentives, subsidies, and tax exemptions. The court held that the State could not unilaterally alter these policies and rules to the detriment of the petitioner-industries.
5. State's Obligation to Fulfill Promises: The court ruled that the State and its officers were legally duty-bound to fulfill their promises made under the Industrial Policies. The State's failure to release the promised subsidies and incentives was deemed a violation of the principle of promissory estoppel. The court directed the respondents to release the amounts due to the petitioner-industries within six months, failing which the petitioners would be entitled to interest at the rate of 6% per annum on the accrued benefits.
Conclusion: The court accepted all the writ petitions, set aside the impugned guidelines and orders, and directed the State to release the subsidies and incentives to the petitioner-industries within six months. The judgment reinforced the principle of promissory estoppel and held that the State could not deny the benefits promised under the Industrial Policies and relevant rules.
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2011 (5) TMI 1152
Issues involved: Appeal against CIT(A)'s order treating income as long term capital gain instead of income from business for assessment year 2007-08.
The Appellate Tribunal ITAT Kolkata, in the case for assessment year 2007-08, addressed the appeal filed by the Department against the order of CIT(A)- XII, Kolkata. The Department contested the treatment of income as long term capital gain instead of income from business. Both parties acknowledged that the issue had been previously addressed in the assessee's own case for assessment year 2005-06 by ITAT Kolkata. The Tribunal noted that CIT(A) had followed the Tribunal's order in the assessee's previous case and directed the Assessing Officer to treat the income as long term capital gain. Consequently, the Tribunal upheld CIT(A)'s decision, finding no fault in the treatment of income. As a result, the revenue's appeal was dismissed, and the order was pronounced on 11.05.2011.
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2011 (5) TMI 1151
Issues Involved: 1. Justification of the mandatory interim relief granted by the Division Bench. 2. Appropriateness of the Single Judge's discretion in granting limited interim relief. 3. Examination of family settlement and contributions to the property purchase. 4. Determination of the correct interlocutory arrangement.
Detailed Analysis:
1. Justification of the Mandatory Interim Relief Granted by the Division Bench: The appeal challenges the Division Bench's judgment, which granted full interim relief to Respondent No. 1, making the Notice of Motion absolute in terms of prayers (a), (b), and (c). The Appellants argued that the Division Bench's order amounted to granting a decree at the interlocutory stage, which was not justified. The Supreme Court noted that the Division Bench was persuaded by the fact that the conveyance of the property was in the name of the Respondent and that the Powers of Attorney had been revoked. However, the Supreme Court emphasized that the learned Single Judge had already considered these factors and exercised discretion appropriately by granting limited relief. The Supreme Court concluded that the Division Bench's interference was not necessary and set aside its order, restoring the order of the learned Single Judge.
2. Appropriateness of the Single Judge's Discretion in Granting Limited Interim Relief: The learned Single Judge granted limited interim relief, allowing the development and construction work to continue while ensuring that the sale proceeds were deposited in the joint bank account and used only for paying off liabilities related to the property. The Supreme Court upheld this decision, noting that the learned Single Judge had considered all relevant aspects and provided a well-reasoned order. The Supreme Court highlighted that the learned Single Judge's order was in the interest of both parties and the flat purchasers, and it did not arbitrarily or perversely exercise discretion.
3. Examination of Family Settlement and Contributions to the Property Purchase: The dispute centered around the rights to a property being developed, with Respondent No. 1 claiming exclusive ownership and the Appellants disputing this claim. The Appellants contended that the property was purchased with significant contributions from Appellant No. 1 and that a family settlement had taken place, which was supported by their sisters. The Supreme Court noted that these claims required examination on evidence and could not be conclusively determined at the interlocutory stage. The learned Single Judge had acknowledged the need to examine these claims and granted limited relief accordingly.
4. Determination of the Correct Interlocutory Arrangement: The Supreme Court emphasized that the correct interlocutory arrangement should balance the interests of both parties and preserve the status quo until the trial. The learned Single Judge's order allowed the development to continue while ensuring that the sale proceeds were used for property-related liabilities. The Supreme Court found this arrangement reasonable and justified, as it did not preclude the Appellants from establishing their claims at trial. The Supreme Court reiterated the principles for granting interim mandatory injunctions, emphasizing that such injunctions should be granted only in exceptional cases where the status quo has been altered, and the interests of justice demand restoration.
Conclusion: The Supreme Court allowed the appeal, set aside the Division Bench's order, and restored the order of the learned Single Judge. The Court clarified that it had not made any observations on the merits of the rival claims and confined itself to the interlocutory arrangement. The parties were directed to bear their own costs.
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2011 (5) TMI 1150
The Gujarat High Court dismissed the revenue's appeal against CESTAT's judgment, which held that courier services qualify as input services under Rule 2(l) of the Cenvat Credit Rules, 2004. The court ruled in favor of the assessee based on similar previous cases.
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2011 (5) TMI 1149
Issues involved: Revision against order granting permission to travel abroad, abuse of process of law, denial of permission based on family members being British passport holders and proclaimed offenders.
For the first issue, the petitioner filed a revision petition against the order granting permission to the respondent no. 2 to travel abroad. The petitioner alleged that the respondent no. 2's family members, including the husband and parents-in-law, were British passport holders and some were declared proclaimed offenders, raising concerns that allowing the respondent no. 2 to travel abroad might result in the entire family settling outside India. The learned Additional Sessions Judge upheld the permission granted by the Magistrate, stating that the property claimed by the respondent no. 2 was undervalued and insufficient to ensure her return. The Judge referred to various legal precedents and approved the Magistrate's decision.
Regarding the abuse of process of law issue, the petitioner filed a petition under Section 482 Cr.P.C. challenging the orders of both the Magistrate and the Additional Sessions Judge. The Court noted that the petitioner's attempt was essentially a second revision, which is not permissible under Section 397(2) Cr.P.C. The Court observed that the petitioner's objections seemed motivated by vendetta rather than genuine concerns. The Court emphasized that being a British passport holder, like the respondent no. 2, should not be a ground to deny travel permission, especially when she had roots in India, was employed, and held Indian citizenship as well.
The denial of permission based on family members being British passport holders and proclaimed offenders was addressed by the Court, highlighting that the respondent no. 2's situation was different from cases involving violations of statutory provisions like FERA or FEMA. The Court emphasized that the matter stemmed from a matrimonial dispute and should not be equated with white-collar crimes. The Court dismissed the petition under Section 482 Cr.P.C., stating that there was no merit for interference and clarified that the opinion expressed should not be construed as a judgment on the case's merits.
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2011 (5) TMI 1148
Issues Involved: 1. Addition of Rs. 58,75,300/- on account of alleged interest accrued on sticky loans. 2. Addition of Rs. 8,58,000/- being amortization of the investment. 3. Addition of Rs. 62,665/- being the contribution to Jila Sahakari Sangh. 4. Deduction claim of Rs. 7,12,500/-.
Summary:
1. Addition of Rs. 58,75,300/- on account of alleged interest accrued on sticky loans: The assessee argued that no income can be accounted for in respect of interest on doubtful advances, following the RBI guidelines and the Supreme Court judgment in UCO Bank vs. CIT. The AO contended that u/s 36(1)(viia) of the Income-tax Act, 1961, the assessee must account for all accrued income. The CIT(A) confirmed the addition, citing the CBDT circular dated 9.10.1984, which mandates that interest on doubtful debts credited to a suspense account is taxable for the initial three years. The Tribunal agreed with the CIT(A), noting that the relevant assessment year is 2007-08, and thus, the interest accrued on doubtful advances is taxable.
2. Addition of Rs. 8,58,000/- being amortization of the investment: The assessee claimed amortization of the premium paid on government securities as an expense. The Tribunal found that there is no provision in the Income-tax Act, 1961, for allowing part of the cost of investment as an expense. The securities are treated as investments, not stock-in-trade, and thus, the premium paid cannot be debited to the profit and loss account. The Tribunal upheld the lower authorities' decision to disallow the amortization.
3. Addition of Rs. 62,665/- being the contribution to Jila Sahakari Sangh: The AO declined the deduction claim, applying Section 40(ii) Explanation. The Tribunal found that this provision is not applicable as it pertains to tax levied on profits and gains of business. The contribution is a statutory payment required u/s 43(2B) of the M.P. Coop. Societies Act and is thus allowable as a deduction. The Tribunal directed the AO to allow the deduction, referencing a similar decision in Burhanpur Mandi Samiti.
4. Deduction claim of Rs. 7,12,500/-: The assessee's representative conceded that the CIT(A) had already given directions regarding this deduction. The Tribunal did not provide further details on this issue.
Conclusion: The appeal was allowed in part, with the Tribunal dismissing the grounds related to the addition of interest on sticky loans and amortization of investment, while allowing the deduction for the contribution to Jila Sahakari Sangh. The issue of the Rs. 7,12,500/- deduction was acknowledged as already addressed by the CIT(A).
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2011 (5) TMI 1147
Issues Involved: 1. Age of the prosecutrix. 2. Voluntariness of the prosecutrix's actions. 3. Role of co-accused (A.2 and A.3). 4. Reliability of evidence and documents.
Summary:
1. Age of the Prosecutrix: The primary issue was determining the age of the prosecutrix, Shankari (PW.4). The prosecution presented multiple documents, including a birth certificate from the Municipality and a school certificate, both indicating her date of birth as 30.3.1984, making her 14 years old at the time of the incident. The defense argued that Shankari was about 18 years old based on a radiological test report by Dr. K. Gururaj (PW.20). However, the court relied on the birth certificate and school records, which were admissible u/s 35 of the Indian Evidence Act, 1872, and corroborated by the testimony of Shankari's mother, Parimala (PW.15). The court concluded that Shankari was a minor at the time of the incident.
2. Voluntariness of the Prosecutrix's Actions: The defense contended that Shankari voluntarily went with A.1, Murugan @ Settu, as she was in love with him and wanted to marry him. They presented a letter (Ex. D-1) written by Shankari expressing her love for A.1 and stating that she left with him willingly. However, the court found that the letter did not hold significant weight against the documentary evidence proving her minority.
3. Role of Co-Accused (A.2 and A.3): The trial court convicted A.2 and A.3 u/s 366 r/w 109 IPC. The High Court modified their conviction to u/s 363 r/w 109 IPC, reducing their sentence to two years of rigorous imprisonment. The Supreme Court upheld this modification, finding no reason to interfere with the High Court's decision.
4. Reliability of Evidence and Documents: The defense questioned the reliability of the birth certificate and school records, arguing that the name of the prosecutrix was not mentioned in the birth certificate and that her parents were unsure about her exact age. The court dismissed these arguments, stating that the birth certificate and school records were made ante litem motam and were thus reliable. The court also referenced previous judgments (e.g., Mohd. Ikram Hussain v. State of U.P., AIR 1964 SC 1625) to support the admissibility and probative value of such documents.
Conclusion: The Supreme Court dismissed the appeals, affirming the convictions and sentences of the appellants. The court emphasized the reliability of the documentary evidence proving the prosecutrix's minority and found no merit in the defense's arguments regarding voluntariness and the roles of the co-accused. The appellants were ordered to surrender within 30 days to serve the remaining part of their sentences.
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2011 (5) TMI 1146
Issues involved: The issues involved in this case include the disallowance of estimated expenses and the application of commission rates on cheque/draft discounting business.
Disallowed Expenses: The appellant, an individual, filed appeals against the order of the ld. CIT(A) upholding the disallowance of 20% of estimated expenses for the assessment years 2001-2002 to 2005-06. The AO had disallowed a portion of expenses and estimated income based on the commission rates applied. The appellant contended that expenses claimed at 40% were fair and should be allowed. However, both the ld. CIT(A) and the Tribunal upheld the AO's decision, considering the appellant's admission of earning income through commission at an average rate of 0.20% and the lack of separate vouchers for expenses.
Commission Rates on Cheque/Draft Discounting Business: Regarding the application of commission rates on cheque/draft discounting business, the appellant argued that a rate of 0.08% should be applied for business conducted under the name of M/s. Sahyadari Textiles. The appellant provided evidence, including bank statements and certificates, to support the claim that only genuine business activities were conducted under this name. The Tribunal found merit in the appellant's arguments, noting the lack of evidence supporting the higher commission rate applied by the AO. Consequently, the Tribunal directed the AO to re-calculate the income by applying a commission rate of 0.125% for the cheque/draft discounting business conducted under the name of M/s. Sahyadari Textiles.
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2011 (5) TMI 1145
Issues involved: Interpretation of judgment in M.C. Mehta (Taj Trapezium Matter) Vs. Union of India, cancellation of petitioner's license based on said judgment.
In the judgment, the court considered whether the ratio of the judgment in M.C. Mehta (Taj Trapezium Matter) Vs. Union of India applies to the case. The original judgment was passed concerning industries in the Taj Corridor causing pollution affecting the quality of life, including the Taj Mahal. The court noted that the Supreme Court did not restrain individuals from conducting coal business in the area. The cancellation of the petitioner's license was solely based on the M.C. Mehta judgment. The court held that since this was the only ground for cancellation, the impugned order was null and void. Consequently, the order was quashed and set aside.
The court allowed the writ petition in accordance with the prayer clauses, which requested the quashing of the impugned order and restraining the respondents from taking any action against the petitioner based on the order. The court disposed of the writ petition and stay application accordingly.
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2011 (5) TMI 1144
Issues involved: Appeal against order of CIT u/s 263 for assessment year 2005-06.
Summary:
Issue 1: Challenge to CIT's order u/s 263. The assessee appealed against the CIT's order u/s 263, contending that the order was bad in law and on facts.
Issue 2: Conditions for invoking powers u/s 263. The assessee argued that both conditions, i.e., assessment order being erroneous and prejudicial to revenue, must be fulfilled for invoking powers u/s 263.
Issue 3: Lack of show cause notice. The assessee claimed that no show cause notice was issued for initiating proceedings for the assessment year.
Issue 4: Initiation of proceedings by CIT. The CIT was criticized for initiating proceedings for verification without any error or prejudice to revenue.
Issue 5: Substitution of opinion. The CIT was accused of ignoring the contention that proceedings u/s 263 cannot be used to substitute the AO's opinion.
Issue 6: Addition of loan and share capital. The CIT directed the AO to add amounts on account of fresh loans and share capital, which was contested by the assessee.
The assessee, a private limited company engaged in garment manufacturing and exporting, had its assessment finalized u/s 144. The CIT directed the AO to add amounts on account of unexplained loan and share capital, as the genuineness and identity of the sources were not established by the assessee. The ITAT held that the CIT's initiation of proceedings u/s 263 was justified, as the AO had not considered the issue earlier and no explanation was provided. However, to ensure justice, the ITAT modified the direction to allow the assessee an opportunity to be heard and submit details. The appeal was partly allowed, sustaining the order u/s 263 with the mentioned modification.
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2011 (5) TMI 1143
Issues involved: The judgment deals with the issue of revocation of registration u/s.12AA of the Income-tax Act, 1961 based on the amended provisions of Section 2(15) and the interpretation of whether the activities of the assessee trust, involving microfinance business, qualify as charitable for exemption u/s.11 of the Act.
Summary:
Issue 1: Revocation of registration u/s.12AA The appeal was against the order of the Commissioner of Income-tax u/s.12AA(3) revoking the registration of the assessee trust. The Commissioner held that the trust, engaged in microfinance business, was no longer eligible for exemption u/s.11 due to amended provisions of Section 2(15). The trust argued that the Commissioner's objection was premature and ill-founded, as the nature of its activities remained charitable. The trust contended that the surplus generated from interest income was utilized for charitable purposes, and the Commissioner misinterpreted the proviso to exclude such surplus from tax exemption. The trust cited precedents where microfinance activities were considered charitable. The Tribunal held that the Commissioner had wrongly linked interest earnings to non-charitable activities, and the trust's activities were indeed charitable, directing the Commissioner to grant registration to the trust.
Issue 2: Nature of activities and surplus identification The Department argued that earning interest was not a charitable activity and that the trust's activities resembled financial business rather than charitable work. The Department supported the Commissioner's decision to revoke the trust's registration based on the amended proviso. However, the Tribunal found merit in the trust's argument that interest income was not surplus from non-charitable activities but part of the funds utilized for charitable purposes. The Tribunal noted that the trust had received grants for charitable work and managed its surplus in line with its charitable objectives. The Tribunal concluded that the trust's activities were indeed charitable, and the registration should not have been revoked.
Conclusion: The Tribunal allowed the appeal filed by the assessee, directing the Commissioner to grant registration to the trust and cancel the impugned order of revocation.
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2011 (5) TMI 1142
Issues Involved: Appeal against CIT (Appeals) order for assessment year 2006-07. Grounds of appeal: 1. Deletion of addition of interest on investment in shares u/s 14A. 2. Deletion of addition of interest on debit balance of partners u/s 36(1)(iii).
Issue 1 - Interest on Investment in Shares u/s 14A: The assessee firm, engaged in manufacturing Hawai Chappals, contested the addition of Rs.18,00,081 on interest paid for investments in Lakhani India Limited shares u/s 14A. The ITAT referred to the Godrej & Boyce case where it was held that disallowances u/s 14A should be on a reasonable basis. The ITAT noted the CIT (A) relied on the S.A. Builders Limited case, stating no disallowance if interest-free advances are from capital or profits. The ITAT set aside previous orders to calculate disallowances reasonably.
Issue 2 - Interest on Debit Balance of Partners u/s 36(1)(iii): Regarding the deletion of Rs.3,25,674 addition on interest on partners' debit balance u/s 36(1)(iii), the ITAT upheld the CIT (A) decision based on the Abhishek Industries Limited case. It was observed that there was no interest debited on partners' credit balance, and no nexus between borrowed funds and non-business use. Consequently, the ITAT sustained the CIT (A) order and dismissed the revenue's appeal on this ground.
Conclusion: The ITAT partly allowed the revenue's appeal for statistical purposes, emphasizing no fault in the CIT (A) orders regarding both issues. Ground no.3, being general, did not require adjudication. The judgment was pronounced on May 27, 2011.
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2011 (5) TMI 1141
Issues Involved:
1. Jurisdiction of the District Registrar under Section 45B of the Kerala Stamp Act. 2. Jurisdiction of the Kerala Lok Ayukta to adjudicate the matter. 3. Validity of the Lok Ayukta's report and the subsequent appeal.
Summary:
1. Jurisdiction of the District Registrar under Section 45B of the Kerala Stamp Act: The first Respondent purchased 45 cents of land for Rs. 1,00,000/-, but the Sub Registrar doubted the valuation and referred the case to the District Registrar. The District Registrar, exercising power u/s 45B(2) of the Kerala Stamp Act, 1959, determined the real value as Rs. 2,00,000/- and ordered the first Respondent to remit the deficit stamp duty and registration fee.
2. Jurisdiction of the Kerala Lok Ayukta to adjudicate the matter: The first Respondent complained to the Kerala Lok Ayukta, which declared the District Registrar's decision null and void, stating the Registrar had no jurisdiction. The Lok Ayukta's report, styled u/s 12(1) of the Kerala Lok Ayukta Act, 1999, was challenged by the State on the grounds of jurisdiction.
3. Validity of the Lok Ayukta's report and the subsequent appeal: The High Court noted that the Lok Ayukta's jurisdiction is defined u/s 7 of the Kerala Lok Ayukta Act, 1999, which involves investigating actions taken by public servants involving "grievance" or "allegation" as defined in Sections 2(h) and 2(b). The Court found that the complaint did not contain any "allegation" or "grievance" within the meaning of the Act, and the District Registrar's actions, even if erroneous, did not amount to "mal-administration."
Conclusion: The High Court allowed the appeal, setting aside the Lok Ayukta's report and the judgment under appeal. The Court also provided the first Respondent the opportunity to approach the appellate authority within thirty days if aggrieved by the District Registrar's proceedings.
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2011 (5) TMI 1140
Issues involved: Appeal against deletion of expenses like VSAT, Leaseline, and Transaction charges u/s 194J and 194C of the I.T. Act for Assessment Year 2006-07.
Summary: The Revenue appealed against the deletion of expenses by the Learned CIT(A) regarding VSAT, Leaseline, and Transaction charges. The assessee argued that these charges were reimbursement payments for infrastructure and trading facilities provided by the Stock Exchange, not for technical services. The ITAT Mumbai Bench decision in a similar case supported the view that Stock Exchanges do not provide technical or managerial services, and the fees paid by members are not for technical services. The Tribunal upheld the CIT(A)'s decision, stating that the charges were for use of facilities, not technical services, and therefore not subject to TDS. The Tribunal also ruled in favor of the assessee regarding transaction charges, following a Mumbai Tribunal decision that transaction fees were for using Stock Exchange facilities, not for technical or managerial services. Consequently, the disallowance of expenses was deleted u/s 40(a)(ia), and the Revenue's appeal was dismissed.
The judgment emphasized that payments to Stock Exchanges were for using facilities, not for technical services, as Stock Exchanges do not provide technical or managerial services to members. The Tribunal interpreted the provisions of s. 194J strictly, stating that there was no clear obligation to deduct tax at source for transaction fees. Therefore, the provisions of s. 40(a)(ia) were not applicable, and the disallowance was deleted based on the Kotak Securities case. The decision highlighted that transaction fees were for facility use, not technical or managerial services, and thus not subject to TDS. Following the Kotak Securities case, the disallowance of expenses was deleted u/s 40(a)(ia).
In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the expenses, as the charges were for using Stock Exchange facilities, not for technical services. The judgment clarified that transaction fees were not for technical or managerial services, based on the Kotak Securities case, and therefore not subject to TDS. The appeal filed by the Revenue was dismissed based on these findings.
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2011 (5) TMI 1139
Issues involved: Allegation of non-settlement of disputes u/s 18 of the Credit Information Companies (Regulation) Act, 2005.
Judgment Summary:
Issue 1: Allegation of non-settlement of disputes u/s 18 of the Credit Information Companies (Regulation) Act, 2005.
The petitioner alleged that the respondents failed to settle disputes based on his application u/s 18 of the Act. The petitioner, a director of a company, was shown as a guarantor for a loan default by an employee. The petitioner sought settlement through arbitration by the Reserve Bank of India.
Issue 2: Obligations of Credit Information Bureau (India) Ltd. under the Act.
The petitioner argued that the Credit Information Bureau (India) Ltd. is obligated to record accurate information as a credit information company regulated by the Act.
Issue 3: Failure of Reserve Bank of India to appoint an arbitrator.
The petitioner contended that the Reserve Bank of India failed to appoint an arbitrator as required by the Act, leading to the non-resolution of disputes between the petitioner and the Credit Information Bureau (India) Ltd.
Issue 4: Status of entities under the Act.
LIC Housing Finance Ltd. was identified as a credit institution under the Act, required to be a member of a credit information company. Credit Information Bureau (India) Ltd. was recognized as a credit information company registered under the Act.
Issue 5: Dispute resolution mechanism u/s 18 of the Act.
The Act provides for arbitration to settle disputes among credit information companies, credit institutions, borrowers, and clients. The Reserve Bank of India is mandated to appoint an arbitrator for such disputes.
Separate Judgment: The High Court directed the Reserve Bank of India to decide on the petitioner's application within four weeks, treating it as a reference u/s 18(1) of the Act. The decision was to be communicated to all concerned parties, thereby disposing of the petition.
This summary provides a detailed overview of the judgment, addressing each issue involved in the legal dispute.
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2011 (5) TMI 1138
Issues involved: Appeal against deletion of addition under compensatory afforestation expenses, treatment of NPV as capital expenditure, and treatment of closing stock for subsequent year.
Deletion of addition under compensatory afforestation expenses: The Revenue appealed against the deletion of an addition of Rs.81,38,28,655 made by the AO under compensatory afforestation expenses. The CIT(A) held that the amount spent could not be considered as creating an asset with enduring benefit, thus not capital expenditure. The Tribunal supported this decision based on previous rulings and found no infirmity in the decision.
Treatment of NPV as capital expenditure: The CIT(A) held that the payment of NPV does not bring enduring benefit to the assessee, despite long-term benefits from raising minerals from the land. The Tribunal upheld this decision, stating that compensatory afforestation is revenue in nature and does not create a capital asset.
Treatment of closing stock for subsequent year: The CIT(A) held that the value of closing stock should be taken as the opening stock for the subsequent year, based on a previous ruling in the assessee's own case. The Tribunal affirmed this principle, finding no issue with the decision.
The learned DR could not provide any material to counter the findings of the CIT(A) on both issues. As the issues were covered in favor of the assessee by previous Tribunal orders, the appeal of the Revenue was dismissed.
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