Jurisdiction of NGT - Whether orders passed by the National Green Tribunal are without jurisdiction being beyond the purview of Sections 14, 15 and 16 of the National Green Tribunal Act, 2010? - HELD THAT:- Whether NGT has jurisdiction to entertain a particular cause is a question which depends on the facts of each case. To find out as to whether NGT has jurisdiction to entertain a case, the case set up before the Tribunal has to be looked into to answer the question - the submission of the learned Counsel for the State that the Tribunal exceeded its jurisdiction Under Sections 14 and 15 in entertaining the application O.A. No. 73 of 2014 is rejected.
Whether provisions of Mines and Minerals Development Regulation Act, 1957 are applicable in Tribal areas within the State of Meghalaya, included in Sixth Schedule of the Constitution? - HELD THAT:- When under a Parliamentary enactment, State has been given some statutory obligations, there is no lack of jurisdiction in the State to frame policy to give effect to or implement the jurisdictions conferred on the State by Parliamentary enactments. It is true that Mining Policy to be framed by the State has to confine to the jurisdiction conferred on it as per the MMDR Act, 1957 and the Rules framed thereunder - A perusal of the entire Policy documents indicate that Policy has been framed by the State as per the Act, 1957 and Minerals (Concession) Rules, 1960.
The Government of Meghalaya has also made a request to the Government of India in the year 2015 for issuance of Presidential notification under Para 12A(b) of Sixth Schedule for exempting State of Meghalaya from certain provisions of the MMDR Act, 1957. After several deliberations, the Union of India has communicated through its O.M. dated 12.03.2019 that it is not possible to accede to the request of the Government of Meghalaya for issuance of Presidential notification under Para 12A(b) of Sixth Schedule - there is nothing in Sixth Schedule of the Constitution which in any manner exclude the applicability of Act, 1957 in the Tribal areas of Hills District of State of Meghalaya.
Whether for mining the minerals from privately owned/community owned land in hills districts of Meghalaya, obtaining a mining lease is a statutory requirement under the MMDR Act, 1957 and the Mineral Concession Rules, 1960? - HELD THAT:- In exercise of the power Under Section 57 of Mines Act, 1952 a new set of regulations has been framed, namely, Coal Mines Regulations, 2017. Regulation 2(r) defines "District Magistrate". The Regulations contain various regulatory provisions with regard to mines. Chapter II deals with returns, notices and records. Chapter IV deals with Inspectors and Mine Officials. The Regulations contain several regulatory provisions which need to be followed while working a mine by the owner or his agent. The enforcement of Mines Act, 1952 and the Regulations, 2017 have to be ensured in the public interest by the state of Meghalaya - A notification dated 14.09.2006 was issued by the Ministry of Environment and Forests in exercise of power Under Section 3(3) of the Environment Protection Act, 1986. Section 3 of the Act, 1986 which provided for requirements of prior environmental clearance with regard to projects enumerates therein. Schedule to the notification listed the projects or activities requiring prior environmental clearance. "Mining of minerals" included at Item No. 1(a) but even for mining project requirement of minimum 5 hectares area was required for applicability of the project.
While implementing statutory regime for carrying mining operations in the Hills District of the State of Meghalaya, the State of Meghalaya has to ensure compliance of not only MMDR Act, 1957 but Mines Act, 1952 as well as Environment (Protection) Act, 1986.
Whether under the MMDR Act, 1957 and Mineral Concession Rules, 1960, it is the State Government, who is to grant lease for mining of minerals in privately owned/community owned land or it is the owner of the minerals, who is to grant lease for carrying out mining operations? - HELD THAT:- As per the statutory provisions contained in Rules, 1960 especially Chapter V, a mining lease for minerals, which belongs to a private owner or a community owner, it is not the State Government, which is entitled to receive any application or grant any mining lease, but it is the private owner or community owner, who is entitled to grant a lease for mining minerals owned by them.
Whether the State of Meghalaya has any statutory control over the mining of coal from privately owned/community owned land in hills districts of State of Meghalaya? - HELD THAT:- The State is well aware of its statutory obligation which is reflected in Mining Policy of 2012 and Draft Guidelines, 2015 but still before this Court their contention that no mining lease is to be obtained for privately owned/community owned land in Hills District of State of Meghalaya is unacceptable and not in a good spirit. Our country being governed by the Constitution of India all the States are to implement Parliamentary Acts in true spirit and in the present case the State having been advised time and again by Comptroller and Auditor General and being well aware of its statutory obligation as noticed above it comes ill from the State to contend before this Court that there is no requirement of mining lease for winning the minerals - the State of Meghalaya has jurisdiction and power to ensure that no mining of coal should take place except when a mining lease granted under Mineral Concession Rules, 1960, Chapter V.
Whether the power to allot land for mining purposes is vested in Autonomous District Councils? - HELD THAT:- Para 9(1) confines to the licences or leases of minerals granted by government of the State. Schedule VI which constitute the District Councils and Regional Councils enumerates their powers. Para 9 refers to licences or leases for extraction of minerals granted by the Government of the State. Para 9 only deals with share of the royalties to District Councils as agreed upon between the Government of the State and the District Councils - paragraph 12(A)(a) itself contemplates that any law made by District Council or Regional Council which is repugnant to any law of the State shall be void. Thus, the status of law made by District Council or Regional councils has to give way to the law made by the State. There can be no doubt that District Council and Regional Council cannot make any law which may be repugnant to the provisions of the Parliamentary Act.
District Council does not have any power to make any law with regard to grant of mining lease. The mining leases for winning the major minerals has to be granted in accordance with 1957 Act and Mineral Concession Rules, 1960.
Whether the order of National Green Tribunal dated 17.04.2014 directing for complete ban on mining is unsustainable? - Whether the complete ban on mining of coal in the State of Meghalaya as directed by NGT deserved to be vacated/modified in the interest of State and Tribunals? - HELD THAT:- The manner in which the mining is being carried out by the tribals cannot be approved which is clearly in violation of statutory regime under 1957 Act and 1960 Rules but in event the mining is carried out by tribals or their assignees as per the provisions of 1957 Act and 1960 Rules, there can be no objections in carrying such mining under the Regulation and control of State of Meghalaya. We thus clarify that in event mining operations are undertaken by the tribals or other owners of hills districts of Meghalaya in accordance with mining lease obtained from the State of Meghalaya as per 1957 Act and Mineral Concessions Rule, 1960, the ban order dated 17.04.2014 of the tribunal shall not come in its way of carrying mining operations. The ban order is for the illegal coal mining which was rampant in the State of Meghalaya and the ban order cannot be extended to valid and legal mining as per 1957 Act and 1960 Rules.
Whether NGT had any jurisdiction to constitute committees to submit reports, to implement the orders of NGT, to monitor storage/transportation; of minerals and to prepare action plan for restoration of environment? - Whether the NGT committed error in directing for constitution of fund, namely, Meghalaya Environment Protection and Restoration Fund? - HELD THAT:- NGT could have passed any order or direction to secure ends of justice which power especially conferred by Rule 24, direction to constitute Fund is thus also saved under such power.
Whether NGT by constituting Committees has delegated essential judicial powers to the Committees and has further encroached the constitutional scheme of administration of Tribal areas Under Article 244(2) and Article 275(1) and Schedule VI of the Constitution? - HELD THAT:- The powers of the District and Regional Councils are enumerated under paragraph 3. In the directions of the Tribunal to constitute committee for transportation of extracted minerals or for preparing time bound action to deal with the restoration of environment and to ensure its implementation, there is no interference in the powers of the District or Regional Councils. Action plan for restoration of environment is consequence of Tribunal finding out that an unregulated coal mining has damaged environment and has caused the pollution including water pollution - The District and Regional Councils are free to exercise all their powers and the committee constituted by the Tribunal is only concerned with the Environmental degradation and illegal coal mining. The committees' report or direction of the Tribunal in no manner encroaches upon the administration of Tribal areas by the District and Regional Councils.
Whether direction to deposit Rs. 100/- crores by the State of Meghalaya by order dated 04.01.2019 of NGT impugned in C.A. No. 2968 of 2019 is sustainable? - HELD THAT:- The amount, which has been directed by NGT to be deposited by State of Meghalaya is neither a penalty nor a fine imposed on the State. The amount has been directed to be deposited for carrying out steps regarding restoration of environment. We further agree with the submission of the learned Counsel for the Appellant that the said amount cannot be said to be amount of damages to be paid by the State - There are force in the submission of the learned Counsel for the Appellant that State of Meghalaya has very limited source of revenue and putting an extra burden on the State of Meghalaya to make payment of Rs. 100 Crores from its own financial resources and budgetary amount may cause great hardship to the State of Meghalaya. Ends of justice be served in modifying the direction of NGT dated 04.01.2019 to the extent that State is permitted to transfer an amount of Rs. 100 Crores from the amount lying in the MEPRF to the Central Pollution Control Board. The Central Pollution Control Board as directed by the Tribunal (NGT) shall utilise the aforesaid amount of Rs. 100 Crores only for restoration of the environment - appeal allowed in part.
Whether NGT's order dated 31.03.2016 that after 15.05.2016 all remaining coal shall vest in the State of Meghalaya is sustainable? - HELD THAT:- The mining of coal in contravention of Section 4(1) invites penalties as enumerated in Section 21. The present is not a case where any kind of penalty has been imposed on the miners except that the amount of royalty as payable on mining of coal is being collected by the State as penalty. It is true that the State Government has power Under Section 21(5) to recover from such person the minerals so raised, or, where such material has already been disposed of, the price thereof, and may also recover from such person, rent, royalty or tax, as the case may be, but it is for the State Government to exercise its power Under Section 21(5) by way of penalty - coal extracted and lying in open after 15.05.2016 was not automatically vested in the State and the owner of the coal or the person who has mined the coal shall have the proprietary right in the mineral which shall not be lost.
Whether assessed and unassessed coal which has already been extracted and lying in different Districts of Meghalaya be permitted to be transported and what mechanism be adopted for disposal of such coal? - HELD THAT:- The expenses of transportation shall be borne by the State of Meghalaya, Coal India Ltd. or by both, which expenses shall be deductible from the price received of the coal. The State of Meghalaya shall be entitled to royalty and payment towards MERP Fund as well as taxes out of the price of the coal. After deduction of cost of transportation, the payment of royalty and payment to MERP fund and taxes plus 10% of value of the coal to be given to Coal India Ltd. for the above exercise, balance amount shall be disbursed to the owner of the coal towards its price, which disbursement shall be the responsibility of the State. The Coal India Ltd. after taking its expenses for transportation with 10% of price of the coal shall remit the entire amount to the State and it is for the State after deducting the royalty and payment to the MERP Fund and taxes to pay back the balance of the amount to the owner.
The coal, which has been seized by the State in illegal transportation or illegal mining for which different cases have been registered by the State, is not to be dealt with as directed above. The said seized coal shall be dealt by the State in accordance with Section 21 of the Act, 1957 and on being satisfied, the State can take a decision to recover the entire quantity of coal so illegally raised without lawful authority and the said cases has to be separately dealt with in accordance with law.
Application filed by different applicants seeking order of transportation of the different quantities stand disposed of.
Disallowance of claim of expenditure on repairs and maintenance of building, plant and machinery - As per AO expenditure incurred on Office building and Hotel is capital in nature, since the same would not qualify as current repairs within the meaning of sec. 30/31 of the Income-tax Act - HELD THAT:- Having heard the rival contentions, we are of the view that this issue requires fresh examination at the end of the AO, since the nature of work carried on by the assessee would determine the character of the expenditure. If the expenditure has resulted in creations of new asset, undisputedly the same shall be treated as capital expenditure. On the contrary, if the expenditure has been incurred to maintain/replace an existing asset, then the same may be treated as revenue expenditure. We notice that the assessee has furnished the details of expenditure, but did not furnish the details of nature of expenditure, which shall determine the character of expenditure. Accordingly, as stated earlier, this issue requires to be examined at the end of AO. Accordingly, we set aside the order passed by ld CIT(A) on this issue and restore the same to the file of the AO. Since the Revenue has not challenged the decision rendered by the ld CIT(A), the relief granted by the first appellate authority shall remain intact.
Admission of additional claim - Setting of loss suffered in passenger service fee/service component against the business income - HELD THAT:- We noticed that the claim of the assessee has not been examined by the AO, since the said claim was made for the first time before the ld CIT(A) by the assessee. Though the decision rendered by Hon’ble Supreme Court in the case of Goetze India Ltd. [2006 (3) TMI 75 - SUPREME COURT] stated that the additional claim can be made by filing a revised return only, yet the Hon’ble Supreme Court has made it clear that the same will not impinge upon the power of the Tribunal to admit additional claims. Accordingly, we admit the claim of the assessee.
As AR submitted that, by applying the same analogy, the assessee may not be entitled for deduction of loss suffered under this head, but sought an opportunity to explain its stand before AO. Since this issue has not been examined by the AO, we deem it proper to restore it to the file of the AO for examining it afresh. Accordingly, we set aside the order passed by ld CIT(A) on this issue and restore the same to the file of the AO.
Disallowance of Community development expenses - As submitted that these expenses were incurred on community development of nearby villages around airport area, which needs to be developed for the purpose of development of Airport business. Accordingly it was claimed that the above said expenditure was allowable u/s 37(1) - HELD THAT:- There is no dispute that this expenditure has been incurred under the head ‘corporate social responsibility’. However, we noticed from the decisions relied on by the assessee to support its claim that the Hon’ble High Court has appreciated the connection between the expenditure and the business use, i.e., those assessees were able to demonstrate the connection between the expenditure incurred and its use for the business of the assessee. In the instant case, though the assessee has furnished details of expenditure, it has not demonstrated the connection between the expenditure and the business advantage to the assessee. Further, as stated earlier, the nature of payment as well as the nature of expenditure incurred by GMR Varalaskhmi Foundation require examination.
In the interest of natural justice, the assessee may be provided with one more opportunity to explain its case before the AO. Accordingly, we set aside the order passed by the CIT(A) on this issue and restore the same to the file of the AO for examining this issue afresh in the light of the decision rendered by Hon’ble Karnataka High Court [2013 (7) TMI 451 - KARNATAKA HIGH COURT]
Disallowance of payment made towards delayed deposit of service tax and VAT by treating the same as penalty in nature - HELD THAT:- The issue under consideration is related to interest paid delayed payment of service tax. There is no dispute that the amount paid as service tax is allowable as deduction. Hence the decision rendered by Hon’ble Supreme Court in the case of Bharath Commerce and Industries Ltd. [1998 (3) TMI 2 - SUPREME COURT] will not apply to the facts of the present case. On the contrary, the claim of the assessee gets support from decision rendered in the case of Lakmandas Maturdas [1997 (12) TMI 16 - SUPREME COURT] and Kaypee Mechanical India Pvt. Ltd. [2014 (4) TMI 829 - GUJARAT HIGH COURT] Accordingly, we set aside the order passed by ld CIT(A) and direct the AO to delete the disallowance of interest paid on delayed remittance of service tax and VAT.
Appeal filed by the assessee is treated as allowed for statistical purposes.
Call notice to the Petitioners to pay the final call money - HELD THAT:- When a Petition is pending and when this Bench has already dealt with the said issue, the Respondents are not expected to proceed further by giving a call notice. Whereby these Respondents are hereby directed not to proceed with in respect to the shares allotted in the year 2015 until further orders, with a peremptory direction to these respondents to file reply within 15 days hereof, failing which, this Company Petition will be decided looking at the averments and the material placed by the Petitioner.
List this matter on 19.07.2019 for filing reply by other Respondents within 15 days thereof.
The Supreme Court in 2019 (7) TMI 1954 - SC Order, with Hon'ble Mr. Justice S.A. Bobde and Hon'ble Mr. Justice B.R. Gavai presiding, condoned the delay and issued notice.
Disallowance u/s 14A r.w.r. 8D - expenses for earning dividend - HELD THAT:- As relying on Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] contention of assessee that no disallowance under section 14A of the Act can be made in respect of investment in the shares of the subsidiary for strategic investment, are rejected.
In our opinion, there is no error in the order of the lower authorities in making disallowance under section 14A of the Act read with Rule 8D of Income Tax Rules, 1962. - Decided against assessee.
Validity of reopening of assessment u/s 147 - Bogus purchases - assessee’s contention that no notice was issued u/s. 143(2) - HELD THAT:- The assessee did not file fresh return of income in response to notice u/s. 148 of the Act and the assessment was completed without issuing notice u/s.143(2) of the Act. See MS. MALVIKA ARUN SOMAIYA [2008 (9) TMI 947 - BOMBAY HIGH COURT]
In view of the above discussion and the judicial pronouncements hold that in the absence of issue and service of notice u/s. 143(2) of the Act, the reassessment made by the Assessing Officer u/s. 143(3) r.w.s. 147 of the Act is void ab-initio and is a nullity. Thus, the reassessment order is quashed. - Decided in favour of assessee.
Estimation of income - Bogus purchases - HELD THAT:- In the present case, it is undisputed that no notices were issued u/s 133(6) to the two parties from whom the alleged bogus purchases were made and, thus, the Assessing Officer failed to take the enquiry further. Once, the purchases are held to be genuine, no additions can be made. We note that the Ld. CIT (A) has not given any cogent reason for sustaining the disallowance to the tune of 2% except for an observation that it was a possible situation that the assessee could have purchased rough diamonds from a third party in the grey market and had ended up getting bills for purchase from M/s Dharam Impex and M/s Maniprabha Impex Pvt. Ltd. Thus, this sustenance of 2% is based only on assumptions and surmises by the Ld. CIT (A) and there is nothing on record to establish the said observation of the Ld. CIT (A). Therefore, in view of the facts of the case, we are unable to concur with the findings of the lower authorities and we deem it fit to set aside the order of the Ld. CIT (A) and direct the deletion of the sustenance of 2% of the alleged bogus purchases. Appeal of assessee allowed.
Validity of Reopening of assessment u/s 147 - default on non issue of notice on correct/new address - AO had the knowledge of change of address and also had known the correct address, but, for the reasons best known to him, the notices were sent to the old address after the period of limitation - AO has resorted to service of notice by affixture at the old address after notice u/s.148 of the Act was returned unserved on the assessee - HELD THAT:- The issuance of notice u/s.148 of the Act is a question of jurisdiction and not a procedural aspect. By issuing a valid notice within the prescribed time limit, only the Assessing Officer gets the jurisdiction to re-open the assessment. In the cases before us, the notices u/s.148 of the Act, though were issued on the last day of the relevant assessment year, were never served on the assessee.
Even after the assessee have brought to the notice of Assessing Officer that the notices have not been served on them, no steps have been taken by the Department to rectify the said defect. Therefore,we hold that the notice u/s.148 of the Act is invalid and consequently, the assessments are also invalid. The reliance of the CIT (A) on the provisions of section 292B is also not sustainable, because the defect is not a procedural defect but is a jurisdictional one. In the result, the appeals of both the assessees are allowed.
Dishonor of Cheque - admission of signatures - compounding of offences - Section 45 and Section 73 of the Evidence Act read with Section 311 of Criminal Procedure Code - HELD THAT:- It means that the petitioner has admitted that he has issued the cheque, but for Rs. 2,50,000/- and has admitted his signatures on the cheque. So, when he has admitted the signatures on the negotiable instrument, no fruitful purpose will be served by sending the same to the handwriting expert. It is further to be noted that he has admitted his signatures on the cheque, in these circumstances, this Court finds that there is no reason to inherent jurisdiction under Section 482 of the Criminal Procedure Code, as the orders passed by the learned trial Court as well as by the learned Revisional Court are in accordance with law. So, these needs no interference.
Reopening of assessment u/s 147 - undisclosed capital gain - DIT(Investigation) received an information that the assessee had sold a land - revised capital gain filed in response to 148 notice - HELD THAT:- AO has not referred any information which has goad him to form a belief that the income has escaped the assessment. He has just narrated details of transaction and thereafter observed that the assessee shown a capital gain which in his assumption far less on such transaction. In order to eliminate his apprehension or suspicion, he reopened the assessment. But he is not authorized to reopen on such assumption. He has to form his concrete opinion demonstrating the escapement of income. Had he visualized the return filed by the assessee, probably he would not have formed the opinion. Therefore, reopening of the assessment is not in accordance with law, and we quash the reassessment.
Capital gain computation - FMV determination - We find that the assessee has calculated long term capital by taking cost of acquisition as on 1.4.1981 on the basis of registered valuer’s report. In the case of CIT Vs. Gauranginiben S. Shodhan, Indl [2014 (2) TMI 78 - GUJARAT HIGH COURT] has observed that if value declared by an assessee as on 1.4.1981 is more than the fair market value assumed by the AO for making a reference to the DVO, then he cannot make a reference under section 55A.
In the present case, with help of DVO’s report, the ld.AO wants to reduce the cost of acquisition which he cannot do. The second aspect which probably may arise is that section 55A has been amended w.e.f. 1.7.2012 and the assessment proceedings was in seisin when this amendment came. Report of the DVO was of July 17, 2016. Therefore, its cognizance can be taken, but this aspect has also been considered in the case of Shri Babulal S. Solanki [2019 (6) TMI 1680 - ITAT AHMEDABAD] wherein by relying upon the judgment of Hon’ble Bombay High Court [2014 (1) TMI 764 - BOMBAY HIGH COURT], it has been held that this aspect is applicable on the transaction which has taken place after 1.7.2012. In the present case, the assessee has transferred his land on 8.7.2011.
Since the assessee has transferred his land prior to 1.7.2012, even the amended proviso is not applicable on merit also. Addition by reducing the cost of acquisition on the basis of DVO’s report cannot be made. In view of the above discussion, we allow the appeal of the assessee and quash the re-assessment order.
Benefits of regular pay scale - principle of prospective overruling of judgment - HELD THAT:- It is well established principle of law that the principle of prospective overruling of judgment, does not apply except where, it is specifically mentioned.
Where the rights of a party has been considered and declared, then the said proceedings cannot be reopened on the ground that the judgment on the basis of which, the rights were declared, has been overruled.
It is clear that the judgment passed by the Supreme Court in the case of RAM NARESH RAWAT VERSUS ASHWINI RAY AND ORS. [2016 (12) TMI 1882 - SUPREME COURT] would apply in the present case as the order passed by the Labour Court has been challenged. It is not a case where the petitioners have tried to reopen a case which has already been finalized. Accordingly, it is held that the respondent is only entitled for minimum pay scale without any increment as provided by the Supreme Court in the case of Ram Naresh Rawat.
The Labour Court has awarded the pay scale w.e.f. 1.7.1988. Accordingly, it is held that the respondent shall be entitled for the minimum pay scale without any increment w.e.f. 1.7.1988.
Dishonor of cheque - rebuttal of presumption - submission is that a presumption runs against the signatory of the cheque even if the contents were not filled in by him - HELD THAT:- The petitioners as accused persons facing trial on a criminal charge are entitled to raise all defences available to them in law and prove facts as may be sufficient to rebut the effect of the presumption that may be invoked by the opposite side. At the same time, in a criminal case arising out of a private complaint, it is not proper to seek reference to such mater for opinion by Government Examiners of Questioned Documents, who are otherwise overloaded with their work arising out of the police cases.
The Metropolitan Magistrate will facilitate opportunity to the hand- writing expert that may be engaged by the petitioners for examining and taking photographs of the questioned documents in the court and thereafter give reasonable time for his opinion to be brought on record. At the same time, caution is administered that the needful will have to be done within one month from today by the petitioners and no undue indulgence for enlargement of time for opinion to be brought on record will be taken.
Disallowance u/s.14A r.w.r. 8D- Scope of amended / substituted Rule 8D - CIT(A) in directing AO to make the disallowance u/s 14A @ 1% of the average value of investment as per the amended / substituted Rule 8D of the I.T. Rules as against the claim of the assessee that no disallowance in this case is attracted u/s 14A of the Act except the amount suo motu disallowed by the assessee - HELD THAT:- The issue is covered by the various decisions of the Hon'ble High Courts including that of the Hon'ble Jurisdictional High Court in ‘Bright Enterprises Ltd. [2015 (11) TMI 342 - PUNJAB & HARYANA HIGH COURT] and also with the decision of Hero Cycles (P) Ltd [2015 (11) TMI 1314 - SUPREME COURT] wherein, it has been held that if assessee has own funds / interest free funds available with it to make investment, the presumption will be that investment made by the assessee is out of own funds. The issue is also squarely covered by the recent decision of the Hon'ble Supreme Court in ‘CIT (LTU) Vs. Reliance Industries Ltd. [2019 (1) TMI 757 - SUPREME COURT]. In view of the above, no disallowance out of interest expenditure is warranted u/s 14A of the Income Tax Act.
Application of the substituted provisions of Rule 8D w.e.f. 6.2.2016 by the Ld. CIT(A) is concerned, the issue has been settled by the Hon'ble Supreme court in the case of ‘CIT Vs. Essar Teleholdings Ltd., [2018 (2) TMI 115 - SUPREME COURT] wherein, it has been held that the amended rule 8D of the I.T. Rules is applicable prospectively.
Administrative expenditure incurred for making the investment - HELD THAT:- As we find that assessee during the year had made investment in four companies. The rest of the investments were old investments. There is no churning of the portfolios or to say repetitive investments. The assessee suo motu has disallowed a sum of Rs. 1 lacs in this respect. The Assessing Officer has not recorded his satisfaction that how the suo motu disallowance of Rs. 1 lac made by the assessee on account of administrative expenditure was not justified or correct vis-a-vis the accounts of the assessee and the investment made. In view of this, we do not find any justification on the part of the Assessing Officer in enhancing the suo motu disallowance made by the Assessing Officer on this issue.
We restrict the disallowance u/s 14A of the Act in this case to the extent of suo motu disallowance made by the assessee of Rs. one lac.
Maintainability of civil suit u/s 9 of the Civil Procedure Code - suit barred by the provisions of Section 430 of the Companies Act, 2013 or not - HELD THAT:- Admittedly, the disputed property was purchased by the defendant-respondent no.1-Company in its own name which is in accordance with the provisions of Section 187 of the Act. Whatsoever may be the nature of the alleged Minutes of the Meeting dated 10.2.2016, but it relates to the affairs of the defendant-respondent-Company which may be complained under Section 241(1)(a) of the Act 2013 by making application before the Tribunal. Under Clause (e) and Clause (f) of sub-Section 2 of Section 242, the Tribunal has the power to terminate, set aside or modify any agreement, howsoever, arrived at between the Company and the Managing Director or any other Director or Manager, upon such terms and conditions as may in the opinion of the Tribunal be just and equitable in the circumstances of the case. The Tribunal has power to terminate, set aside or modify any agreement between the Company or any person other than those referred to in Clause (e). A class of member or members, depositor or depositors may also apply to the Tribunal in the circumstances mentioned in sub-section 1 of Section 245 of the Act.
The alleged Minutes of the Meeting drawn by the Directors plaintiff-appellant and the defendant-respondent no.2, dated 10.2.2016 relating to property held by the Company in its own name under Section 187 of the Act fall within the powers of the Tribunal conferred under Section 242 of the Act. Section 430 of the Act specifically provides that no Civil Court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under the Act or any other law for the time being in force.
Under Section 9 of the C.P.C. civil court shall have jurisdiction to try all suits of a Civil nature excepting suits of which their cognizance is either expressly or impliedly barred. Thus, the Civil Court shall have jurisdiction to try all types of suits unless the same is ousted, expressly or by necessary implication - The question of ouster of a jurisdiction of a Civil Court needs to be construed having regard to the Scheme of the Act as also the object and purport it seeks to achieve. A plea of bar to jurisdiction of a civil court has to be considered having regard to the contentions raised in the plaint.
The crux of the conclusion is that the jurisdiction of Civil Court is excluded in cases where the matter in dispute is required under the Act 2013 to be determined by the Tribunal. If a matter fall outside the jurisdiction of the Tribunal under the Act 2013, the civil court shall have jurisdiction under Section 9 of the Civil Procedure Code - The Scheme of the Act 2013, exhaustively provides for all matters relating to a Company and its conduct and affairs. Jurisdiction has been exhaustively provided in such matters to Tribunal which is a specialised body constituted under the Act. The matters for which jurisdiction has not been conferred upon the Tribunal, has been provided specifically. In this regard reference may be had to Section 37 of the Act which provides for filing of a suit in certain circumstances. The case of the plaintiff-appellant is not covered by Section 37 of the Act.
The question framed is answered in affirmative by holding that under the facts and circumstances of the case the suit filed by the plaintiff-appellant was not maintainable under Section 9 of the Civil Procedure Code as it was barred by the provisions of Section 430 of the Companies Act 2013 - appeal dismissed.
Assessment against a non-existing entity - Amalgamation scheme Conceived - HELD THAT:- As informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. It has been held that the basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Hon'ble Supreme Court Maruti Suzuki India Limited [2019 (7) TMI 1449 - SUPREME COURT] also observed that participation in the proceedings by the assessee in the circumstances cannot operate as an estoppel against law. It was also held that this position holds the field in view of their judgment in the case of Spice Enotainment delivered on 02.11.2017.
In the case on hand it is undoubtedly the assessment was made by the Assessing Officer on SIPSPL the amalgamating company which was amalgamated with STSPL w.e.f 01.10.2011 and accordingly ceased to exist thereafter. Therefore, when the assessment was made on an non existing entity the said assessment is void ab-initio and nullity in the eye of law. Assessment framed against a non-existing entity goes to the root of the matter and it is not a procedural irregularity but a jurisdictional defect and there cannot be any assessment against a non-existing entity or a dead person. Therefore, the decision of the Hon'ble Supreme Court in the case of Pr.CIT v. Maruti Suzuki India Limited (supra) squarely applies to the facts of the assessee’s case. Respectfully following the decision of the Hon'ble Supreme Court, we hold that the assessment made by the Assessing Officer in the name of the amalgamating company i.e. SIPSPL dated 24.01.2014 u/s. 143(3) r.w.s. 144C(13) of the Act for the A.Y.2009-10 is void ab-initio and bad in law. Hence the assessment order is a nullity in the eye of law and the same is quashed. The additional ground raised by the assessee is allowed.
Recovery of dues alongwith the interest - credit facilities availed by unlawful means, conspiracy and deceit - allegation is that modus operandi of Nirav Modi a luxury diamond jewellery designer and others (the Economic Offenders/the fraudsters) made fraudulent and unauthorized transactions with the applicant which is one of the largest Public Sector Banks in India in collusion and connivance with the applicant's employees - misuse of NOSTRO account of the applicant bank - Order VI Rule 4 of the Code of Civil Procedure, 1908.
HELD THAT:- The applicant has made the averments demonstrating and indicating financial irregularities, dishonest and fraudulent transaction that have taken place in the affairs of the applicant Bank. The number of diamond import Firms are associated with Nirav Modi who have orchestrated a massive financial fraud. The fraud perpetrated by Nirav Modi is of a very huge magnitude which cannot be ignored or overlooked.
The judicial pronouncement in the case of NIMMAGADDA PRASAD VERSUS CENTRAL BUREAU OF INVESTIGATION [2013 (5) TMI 920 - SUPREME COURT] is remembered where the Hon'ble Supreme Court observed that the economic offence having deep-rooted conspiracies and involving huge loss of public funds needs to be viewed seriously and considered as a grave offence affecting the economy of the country a whole and thereby posing serious threats to the financial health of the country.
Fraudulent debt is a debt or not - HELD THAT:- Undoubtedly, the debt would include fraudulent debt obtained by the debtor in collusion and connivance with the bank employees. The issuance of LOUs is clearly the business activity of the applicant bank. The essence of the definition of debt under section 2(g) is the existence of the liability which is claimed to be due by the applicant which is legally recoverable - The amount claimed by the applicant though fraudulent in nature is a debt within the provisions of the 1993 Act. The liability arisen out of the unauthorized LOUs issued during the course of business activity of the applicant bank constitutes "debt". This Tribunal therefore, has the jurisdiction to entertain and try the present application.
Nirav Modi and Nirav Modi Firms, partners, Nirav Modi Companies, trust, beneficiaries have taken financial benefits for the purpose of business and by utilizing the bank money for the business. The benefits so taken in a fraudulent manner, still such a person can be said to be a debtor of the bank. Defendant nos. 1 to 16 though have not signed and executed the loan and security documents have enjoyed the benefit of the amount under the LOUs are nevertheless, debtor as per the judicial pronouncement. Defendant nos. 1 to 16 cannot escape the liability to repay the debt in any manner whatsoever. Defendant nos. 1 to 16 were the ultimate beneficiaries in getting the financial assistance though in fraudulent manner, cannot escape the repayment of the liability to the applicant - the law laid down by the Hon'ble Calcutta High Court in the case of State Bank of India [2002 (7) TMI 820 - CALCUTTA HIGH COURT], is relied upon, that debt includes fraudulent debt and whether the debt is fraudulent or not can very well be ascertained before this Tribunal. The LOUs were issued during the course of business activity undertaken by the applicant. The LOUs may have been issued fraudulently but the applicant's business activity of issuing LOUs is permissible by virtue of the law in force.
There is no dispute that the LOUs were issued by the delinquent employees from their Mid Corporate Branch, Brady House, Fort, Mumbai. There is also no dispute that the LOUs were issued by the delinquent employees in collusion and connivance with Nirav Modi and Nirav Modi Group from time to time as set out in the original application. There is also no dispute that Nirav Modi and Nirav Modi Group are the recipient of the LOUs. The transactions though fraudulent in nature is covered by the definition of "debt" as provided under section 2(g) of the 1993 Act. The amount under the unauthorized LOUs is due and payable by defendant nos. 1 to 16. Thus, the jural relationship between the debtor and creditor is established by the applicant bank.
In the present law suit Nirav Modi and Nirav Modi Group have admitted the issuance of LOUs in the communication made by them. Understood thus, the LOUs were issued by the delinquent employees during the course of business activities undertaken by the applicant bank - the applicant is well within its right to file the application for the legally recoverable debt. This Tribunal has the exclusive jurisdiction under Section 17 of the 1993 Act to entertain and try the present application.
Admission of Liability - HELD THAT:- The communication addressed by Nirav Modi and the balance sheets amounts to unequivocal admission of the documents as well as the quantum of the liability more particularly stated in the balance sheet of defendant nos. 1 to 3 - The averments made in the pleading clearly demonstrate that the admission of liability made by defendant nos. 1 to 3 in their respective balance sheet and the written communications made by Nirav Modi. All the documents read together constitutes unequivocal admission. In view of the admission of liability also, the applicant is entitled for the issuance of recovery certificate.
Acquisition of properties - HELD THAT:- The applicant has pleaded that it is very likely that defendant nos. 1 to 16 may have purchased and acquired the movable and/or immovable properties worldwide from the proceeds of the fraudulent debt. These properties may have been acquired in the name(s) of other person(s) or Firms or Companies or its Subsidiaries or Entities affiliated, owned and controlled by Nirav Modi. The statements and averments also find place in the Complaint filed by the Enforcement Directorate before the City Civil & Sessions Court - the applicant is therefore, fully justified in seeking orders and reliefs in this regard also. Accordingly, the order for attachment of the properties and to recover the claim made by the applicant, are granted.
Claim of Interest - HELD THAT:- The applicant has claimed relief for interest at the rate of 14.30% per annum with monthly rest. The prayer is contrary to the pleading as regards monthly rest - interest is granted at the rate of 14.30% per annum from 30th June, 2018 till payment/realization.
Upon careful scrutiny and the examination of the Original Application, analyzing the evidence and giving due weightage to the documentary evidence adduced by the applicant, it is concluded there is no reason to disbelieve the claim made by the applicant bank.
Assessment of trust - Carry forward of excess expenses over next years - benefit of the deficit for earlier years against the income of subsequent year - whether the trust has incurred deficit due to excess spending on the object of the trust during the particular year and whether excess expenditure incurred in earlier years or in the current year by the trust could be allowed to be set off against the income of subsequent year by invoking Section 11? - HELD THAT:- The issue is no longer res integra. The Hon’ble Gujarat High Court in CIT vs. Shri Plot Shwetamber Murti Pujak Jain Mandal [1993 (11) TMI 17 - GUJARAT HIGH COURT] has rendered decision favourable to the assessee on the very issue. The Hon’ble Gujarat High Court has held that there is nothing in the language of Section 11(1)(a) of the Act to indicate that the income from trust property should have been applied for charitable or religious trusts only in the year in which such income has arisen.
The expenditure incurred in an earlier year can be met out of the income of the subsequent year and utilization of such income for meeting the expenditure of the earlier year would amount to such income being applied for charitable or religious trusts -income derived from Trust property has to be computed on commercial principles and consequently deficit arising out of expenditure over income for the previous year should, therefore, be set off against surplus of income over expenditure relating to the subsequent year. Similar view has been expressed in CIT vs. Maharana of Mewar Charitable Foundation [1986 (7) TMI 56 - RAJASTHAN HIGH COURT] and CIT vs. Matriseva Trust [1999 (3) TMI 34 - MADRAS HIGH COURT] - Whatever little controversy might be existing has been put to rest by the recent decision of the Hon’ble Supreme Court in the case of CIT(Exemption) vs. Subros Education Society [2018 (4) TMI 1622 - SC ORDER]. Hence, the CIT(A) in our view has correctly applied the law as evolved by the judicial precedents. In the absence of any infirmity in the order of the CIT(A), we decline to interfere therewith. - Decided against revenue.
Reopening of assessment u/s 147 - exercise of jurisdiction by correct AO - AO not issuing the notice u/s 143(2) which is mandatory for completing the assessment under the provisions of Act - HELD THAT:- Since the notice u/s 148 was not served on the assessee, the assessee did not have the opportunity to object to the same before the AO and therefore, has raised it before the CIT (A) for the first time. Since, the exercise of jurisdiction is a legal issue and if it is not exercised by the right person, the assessment is liable to be set aside, and on going through the assessment order before us, we find that the CIT (A) had not adjudicated the issue, we deem it fit and proper to remand the issue to the file of the CIT (A), with a direction to verify whether the AO who has completed the assessment had jurisdiction over the assessee. The CIT (A) shall decide the issue in accordance with law and also after taking into consideration the judicial precedents on the issue after affording the assessee a fair opportunity of hearing and if it is found that the AO had no jurisdiction over the assessee, the assessment shall be declared as null and void. Appeal of the assessee is treated as allowed for statistical purposes.
Sales tax subsidy - Nature of receipt - revenue or capital receipt - CIT-A held scheme of sales tax subsidy granted to the assessee to be for setting up of or for expanding existing industries in the developing region of Maharashtra - HELD THAT:- The main objective of the scheme was to intensify and accelerate the process of dispersal of industries from developed areas and for development of under-developed regions of Maharashtra. It is clear from the scheme that IPS incentive was granted not for carrying on day-to-day business of the unit more profitably but to provide impetus to the process of dispersal of industries to backward areas. The plant of the assessee falls in Group C, which also includes Khed, which is outside the Pune Metropolitan Region. In the present case the sales tax payment is only an yardstick to determine the quantum of incentive and cannot be construed as to mitigate the operational cost of the business.
In view of the above factual scenario we uphold the order of the Ld. CIT(A). Facts being identical and the grounds of appeal being same, our decision for AY 2011-12 applies mutatis mutandis to AY 2012-13.
Corporate social responsibility expenses - allowable business expenses u/s 37(1) - expenses as explained by the assessee before the AO were mainly related to expenses incurred on construction of school building, devasthan/temple, drainage, barbed wire fencing, education schemes and distribution of clothes etc. voluntarily - HELD THAT:- We are of the considered view that the Ld. CIT(A) has rightly allowed u/s 37(1) the expenses claimed by the assessee. Moreover, the decision in Jindal Power Ltd. [2016 (7) TMI 203 - ITAT RAIPUR] is applicable to the instant case. Accordingly, we dismiss the above grounds of appeal.
Application for suspension of sentence - Section 389 of Cr.P.C. - HELD THAT:- Upon a consideration of the arguments advanced on behalf of the appellants and having regard to the facts and circumstances of the case, including the fact that appellants No.2 & 3 were on bail during the trial. This court is of the opinion that it is a fit case for suspending the sentence awarded to the accused-appellants No.2 & 3.
Accordingly, the application for suspension of sentence filed under Section 389 Cr.P.C. is allowed and it is ordered that the substantive sentences passed by the Learned Special Judge NDPS Act Cases No.1, Chittorgarh vide judgment dated 16.01.2018 in Session Case No.45/2013 against the appellants-applicants 1. Nepal Singh Meena S/o Karulal Meena 2.Mohd. Israfil S/o Sarifur Rehman shall remain suspended till final disposal of the aforesaid appeal and they will be released on bail, provided they execute a personal bond in the sum of Rs.1,00,000/- with two sureties of Rs.50,000/- each to the satisfaction of the learned trial Judge for their appearance in this court on 09/08/2019 and whenever ordered to do so till the disposal of the appeal on the conditions indicated.
The learned trial Court shall keep the record of attendance of the accused-applicant(s) in a separate file.
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