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2006 (9) TMI 508
Issues involved:
The issue involves determining whether the 'khair' wood sold by the dealer is considered as 'timber' and taxable as such for the assessment year 1983-84.
Summary of Judgment:
Facts and Background:
M/s. Panwar Timber, a registered dealer, was taxed at four percent for inter-State sale of 'khair' wood to M/s. Mahesh Wood Products (P) Limited. The additional demand included penalty and interest under relevant sections of the Central Sales Tax Act, 1956 and the Punjab General Sales Tax Act, 1948. Appeals were filed but were dismissed by the authorities, including the Sales Tax Tribunal, Punjab.
Legal Analysis:
The Tribunal examined whether 'khair' wood falls under the definition of 'timber'. It was held that 'timber' is wood used in house construction, while 'khair' is primarily used for katha preparation. Reference was made to judgments from the Orissa High Court and the Supreme Court, emphasizing interpreting words in their popular sense.
Arguments:
The assessee argued that 'khair' wood should be considered 'timber' based on definitions from the Himachal Pradesh Private Forest Act, 1954 and the Webster Universal Dictionary. They also cited a Supreme Court case regarding the classification of eucalyptus wood.
Court's Decision:
The Court considered common parlance and commercial understanding to determine that 'khair' wood and 'timber' are distinct commodities. Judicial decisions supported the view that 'khair' wood is raw material for katha and not equivalent to timber. The Court rejected the argument that 'khair' wood could be used for construction purposes, holding that in common parlance, 'khair' wood is not treated as timber. The question was answered against the assessee and in favor of the Revenue.
Conclusion:
The Court held that 'khair' wood is different from timber for tax purposes, based on common parlance and commercial usage. The reference was disposed of accordingly.
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2006 (9) TMI 507
Issues:
Interpretation of Notification No. S.O. 50/PA. 46/48/S. 5/82 for concessional rate of tax on purchase of cotton by a textile mill established after December 1, 1979.
Detailed Analysis:
The petitioner, a registered dealer under the Punjab General Sales Tax Act, 1948, sought direction for reference regarding the availability of concessional tax rate on cotton purchase under Notification No. S.O. 50/PA. 46/48/S. 5/82. The petitioner purchased cotton during the first year of mill operation in 1984-85 and paid tax at two percent based on the mentioned notification. However, the Assessing Authority rejected the claim, stating the benefit was available only till November 30, 1984, leading to additional tax demand. This decision was upheld in subsequent appeals, prompting the petitioner to approach the High Court.
The core issue revolved around the interpretation of the notification dated December 2, 1982. The notification provided a concessional rate of purchase tax on cotton for textile mills established after December 1, 1979, for a period of five years subject to specific conditions. The authorities contended that the five-year period commenced from December 1, 1979, as per the notification's date. However, the court disagreed, emphasizing that the benefit was linked to the date of establishment of the textile mill — any date on or after December 1, 1979. The court highlighted that the language of the notification clearly supported this interpretation, and the exemption period should start from the establishment date.
Given the circumstances of the case where the textile mill was established after December 1, 1979 and commenced production before the cut-off date, the court ruled in favor of the assessee. The court concluded that the date of establishment of the mill should be considered as the starting point for availing the exemption, which could extend up to five years from that date. Consequently, the court answered the question in favor of the assessee and against the Revenue, emphasizing the importance of interpreting legal provisions based on their plain language and intent.
This detailed analysis highlights the key aspects of the judgment, focusing on the interpretation of the notification and its application to the specific case of the petitioner seeking concessional tax rates on cotton purchase for a textile mill established after December 1, 1979.
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2006 (9) TMI 506
Issues Involved:
Assessment of sales tax on seized goods, estimation of turnover, burden of proof on the assessee, liability of tax on the importer, determination of tax liability based on disclosed turnover.
Analysis:
The case involved a revision filed against the judgment of the Sales Tax Tribunal regarding the assessment of sales tax on seized Indian-made foreign liquor. The assessee, a dealer in liquor, was found in possession of liquor during a raid by the Excise Department. The authorities seized the liquor and auctioned it for Rs. 48,000. Subsequently, the sales tax department imposed tax based on an estimation that the assessee might have engaged in clandestine activities resulting in a turnover of Rs. 6,00,000.
The first appellate authority reduced the estimated turnover to Rs. 1,00,000 based on specific evidence from the Excise Department. The second appellate authority, i.e., the Sales Tax Tribunal, further reduced the turnover to Rs. 50,000 and determined the tax at 26%. The Tribunal dismissed the appeal by the Revenue Department and partly allowed the appeal by the assessee.
The High Court analyzed the burden of proof on the assessee regarding the import of liquor and liability of tax. It was noted that there was no evidence that the liquor was imported by the assessee. The burden of proof shifted to the department to establish tax liability. The Court found that the disclosed turnover of Rs. 48,000 from the auction was the only basis for determining tax liability, as there was no evidence of other clandestine activities by the assessee during the year.
The Court upheld the Tribunal's decision, stating that there was no evidence to suggest additional clandestine activities by the assessee. The judgment favored the assessee, dismissing the revision filed by the Revenue Department. The Court concluded that the Tribunal's decision was sound, and the tax liability was rightly determined based on the disclosed turnover of Rs. 48,000.
In conclusion, the High Court dismissed the revision, deciding in favor of the assessee against the Revenue department. The judgment highlighted the importance of evidence in determining tax liability and upheld the Tribunal's decision based on the disclosed turnover.
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2006 (9) TMI 505
Issues involved:
1. Quashing of order passed by the Value Added Tax Tribunal on appeal of the assessee.
2. Surrender of income and stock during a survey conducted by the income-tax department.
3. Assessment by the sales tax department based on surrendered stock and discrepancy in trading account.
4. Addition of income in gross turnover by the Assessing Authority.
5. Tribunal's decision to re-examine the matter and remand it to the Assessing Authority.
6. Applicability of the judgment in Girdhari Lal Nannelal v. Sales Tax Commissioner, M.P.
7. Maintainability of writ petition in light of alternative remedy of appeal or revision under the Punjab Value Added Tax Act, 2005.
Comprehensive Analysis:
1. The petition was filed to quash the order passed by the Value Added Tax Tribunal on appeal of the assessee. The petitioner, engaged in the resale of electric and electrical goods, surrendered income and stock during a survey by the income-tax department. The sales tax department considered the surrendered stock in the assessment, noting a discrepancy in the trading account. The Assessing Authority added the surrendered income to the gross turnover, creating an additional demand including a penalty. The appellate authority and Tribunal affirmed the decision.
2. The Tribunal decided to re-examine the matter and remand it to the Assessing Authority after observing that the surrender of stocks before the income-tax authorities could not be the sole basis for assessment, citing the judgment in Girdhari Lal Nannelal v. Sales Tax Commissioner, M.P. The Supreme Court in the mentioned case highlighted the need to show that the acquisition of money by the assessee resulted from transactions liable to sales tax, not from other sources.
3. The petitioner's counsel argued against the remand, citing the apex court's judgment in Girdhari Lal Nannelal's case. However, the court emphasized the necessity to determine if the acquisition of money by the assessee was from transactions subject to sales tax. The counsel was also reminded of the provisions of section 68 of the Punjab Value Added Tax Act, 2005, allowing appeals or revisions to the High Court against Tribunal orders.
4. The court, considering the circumstances, found no grounds to interfere with the Tribunal's decision to remand the matter for fresh assessment by the Assessing Authority. Consequently, the writ petition was dismissed due to the availability of an alternative remedy through appeal or revision under the 2005 Act.
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2006 (9) TMI 504
Issues involved: Interpretation of tax rates for bakery margarine under different entries of the Kerala General Sales Tax Act.
Summary:
The High Court of Kerala addressed the question of whether bakery margarine should be taxed at a concessional rate as edible oil under item 17A of a specific notification, or at a higher rate under entry 90 of the First Schedule to the Kerala General Sales Tax Act. The court analyzed the definitions of edible oils and margarine under the relevant schedules and notifications. While edible oil includes refined or hydrogenated oils, the court noted that the bakery margarine in question was specifically intended for use in the bakery and confectionery industry, as indicated by the manufacturer's instructions. The court distinguished between the general use of edible oils for cooking purposes and the specific purpose of the bakery margarine. Despite arguments about the presence of vitamins and additives in both bakery margarine and hydrogenated oils like vanaspathi, the court concluded that the bakery margarine did not qualify as edible oil under the notification. The court overturned the Tribunal's decision and upheld the assessment of bakery margarine at a higher tax rate of eight percent under entry 90 of the First Schedule to the KGST Act, 1963.
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2006 (9) TMI 503
Issues:
Challenge to judgment and order regarding exemption from sales tax under the Industrial Policy of Assam, 1986 and the Assam Industries (Sales Tax Concessions) Act, 1986 based on the plea of promissory estoppel.
Detailed Analysis:
Exemption from Sales Tax under Industrial Policy of Assam, 1986:
The writ appeals challenged a judgment regarding exemption from sales tax under the Industrial Policy of Assam, 1986, which provided incentives for new units and existing units undertaking expansion, modernization, or diversification. The scheme included sales tax exemption on raw materials and finished products for a specified period. The Assam Industries (Sales Tax Concessions) Act, 1986 was enacted to regulate sales tax concessions to industries, but it did not provide for exemption as per the 1986 Scheme. The appellants claimed entitlement to sales tax exemption based on the Scheme's promise, invoking the plea of promissory estoppel.
Promissory Estoppel and Legal Duty:
The central issue revolved around the plea of promissory estoppel raised by the writ appellants. The learned single judge rejected this plea, emphasizing that promissory estoppel could not override statutory provisions or the lawful duties of authorities. It was held that the doctrine of promissory estoppel could not prevent authorities from performing their legal obligations conferred by the statute. The court agreed with the single judge that post the Act's commencement, the plea of promissory estoppel could not compel the government to fulfill promises contrary to the statute.
Precedent and Interpretation of Law:
The Revenue contended that a Division Bench precedent established that promissory estoppel could not be invoked against actions ultra vires to the statute. The appellants argued against the applicability of this precedent, highlighting discrepancies in the interpretation of the Assam Industries (Sales Tax Concessions) Act, 1986 and 1987. The court clarified the factual position in a review petition, reaffirming the Division Bench's stance that the government was not bound by promissory estoppel in this context.
Final Decision and Dismissal of Writ Appeals:
The court found no compelling reasons to interfere with the impugned judgments, holding that the issues raised were conclusively addressed by the precedent established in Doson Chemicals' case. Consequently, the batch of writ appeals challenging the exemption from sales tax under the Industrial Policy of Assam, 1986 and the Assam Industries (Sales Tax Concessions) Act, 1986 failed and was dismissed. No costs were awarded considering the circumstances of the case.
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2006 (9) TMI 502
Whether judgment rendered by a Division Bench of the Madras High Court dismissing the Habeas Corpus Writ Petition filed by A. Geetha wife of Anandaraj @ Anand @Anandan,('Detenu') was correct?
Held that:- It has to be noted that whether prayer for bail would be accepted depends on circumstances of each case and no hard and fast rule can be applied. The only requirement is that the detaining authority should be aware that the detenu is already in custody and is likely to be released on bail. The conclusion that the detenu may be released on bail cannot be ipse-dixit of the detaining authority. On the basis of materials before him, the detaining authority came to the conclusion that there is likelihood of detenu being released on bail. That is his subjective satisfaction based on materials. Normally, such satisfaction is not to be interfered with. On the facts of the case, the detaining authority has indicated as to why he was of the opinion that there is likelihood of detenu being released on bail. It has been clearly stated that in similar cases orders granting bail are passed by various courts. Appellant has not disputed correctness of this statement.
As the second respondent has filed an additional affidavit indicating that on verification of the registered post register for central zone, it has been noticed that no representation either from the detenu or on his behalf was received through registered post between 25.9.2005 and 30.9.2005. In view of the aforesaid, we find no substance in this appeal and the same is accordingly dismissed.
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2006 (9) TMI 500
Issues:
Challenge to assessment order based on lack of opportunity to produce purchase list, reliance on clarification by Commissioner of Commercial Taxes, violation of principles of natural justice by not providing opportunity to furnish documents.
Analysis:
The petitioner challenged the assessment order dated July 4, 2006, claiming that there was a request for time to produce the purchase list, which was not granted. The petitioner also relied on a clarification issued by the Commissioner of Commercial Taxes in 1999, alleging non-compliance. The High Court heard the Special Government Pleader who argued that the objections were filed by the dealer and considered during assessment. The Government Pleader contended that the petitioner should have pursued the statutory remedy of appeal instead of directly approaching the court. The court noted that there was no evidence of a specific request to produce the purchase list, and the objections were indeed considered. The court emphasized that the assessing authority has the discretion to deal with matters independently and the petitioner could challenge the assessment order through the statutory appeal process.
The court addressed the petitioner's claim of violation of natural justice by not providing an opportunity to furnish documents. It was observed that there was no record of such a request being made, leading to the dismissal of this contention. The court highlighted that the assessing authority has the right to independently handle the matter, and if the assessee is dissatisfied, they can appeal the decision. The court referenced a Supreme Court decision emphasizing that the High Court should not interfere with the assessment process, as the assessing authority has the jurisdiction to conduct assessments as deemed appropriate.
Ultimately, the court dismissed the writ petition, stating that the petitioner had not exhausted the statutory appeal remedy before approaching the court. The court found no merit in the petition and ordered the return of the original assessment order to enable the petitioner to pursue the appeal remedy. The judgment emphasized the importance of following the statutory appeal process and not bypassing it to seek redress directly from the court.
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2006 (9) TMI 499
Issues Involved:
1. Entitlement to relief under Rule 29(xii) of the Punjab General Sales Tax Rules, 1949.
2. Interpretation of "used" or "consumed" in the context of manufacturing under Rule 29(xii).
3. Whether furnace oil qualifies as an essential commodity in the manufacturing process.
Detailed Analysis:
1. Entitlement to Relief Under Rule 29(xii):
The primary issue was whether the assessee was entitled to relief under Rule 29(xii) of the Punjab General Sales Tax Rules, 1949, for the purchase value of furnace oil used in manufacturing iron and steel goods. The Tribunal had initially allowed the deduction, but the revisional authority later disallowed it, arguing that the furnace oil was not directly used as raw material.
2. Interpretation of "Used" or "Consumed" in Manufacturing:
The court examined the terms "used" or "consumed" in the context of Rule 29(xii). It relied on several precedents, including the Supreme Court's interpretation in cases like Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. Belgaum Borough Municipality and J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur, to establish that "used" or "consumed" should be understood broadly. The court noted that these terms encompass any process integrally connected with the ultimate production of goods, not just the final act of consumption.
3. Furnace Oil as an Essential Commodity:
The court considered whether furnace oil, used in the manufacturing process, could be classified as an essential commodity. The assessee argued that furnace oil was crucial for manufacturing steel products, and without it, production was not feasible. The court agreed, citing various judgments, including Indian Farmers Fertiliser Co-operative Ltd. v. Collector of Central Excise, Ahmedabad, and Collector of Central Excise, New Delhi v. Ballarpur Industries Ltd., which supported the view that materials integral to the manufacturing process, even if not present in the final product, qualify for tax deductions.
Conclusion:
The court concluded that furnace oil is a primary and essential commodity in the manufacturing process of iron and steel goods. The deduction under Rule 29(xii) was deemed applicable as the furnace oil had been "used" or "consumed" in manufacturing. The question was answered in favor of the assessee, granting them the relief claimed under Rule 29(xii) of the Punjab General Sales Tax Rules, 1949.
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2006 (9) TMI 498
Determination of Arms Length Price Held that:- The assessee shared profit in the ratio of 50:50 both on the payments made by it and the receipts of freight from its AEs - Revenue could not controvert finding that the functions performed, assets employed and risk undertaken in both the AEs is same - The assessee paid certain sum to its AEs abroad for doing the work similar to which it did for which it received freight revenue from its AEs thus, in both the situations the total receipts are taken on one hand, from which all the expenses incurred in connection with the transportation of cargo in both the countries are excluded - The remaining amount is distributed between the entity of origin country and the entity of destination country in equal share - the assessee has earned/paid revenue from/to its AEs in the same proportion, thus, the transactions have been recorded at arm's length price and there was no justification for making such addition Relying upon ACIT vs. M/s Agility Logistics Pvt. Ltd. [2013 (9) TMI 645 - ITAT MUMBAI] - there is no reason to interfere in the order Decided against Revenue.
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2006 (9) TMI 497
Issues:
Declaration of provisions of section 14 of the Punjab Value Added Tax Act, 2005 as ultra vires to section 15(c) of the Central Sales Tax Act, 1956.
Analysis:
The writ petition sought a declaration that the provisions of section 14 of the Punjab Value Added Tax Act, 2005 were ultra vires to the provisions of section 15(c) of the Central Sales Tax Act, 1956. The petitioner contended that credit of tax paid on paddy should be allowed as input tax credit (ITC) when calculating the tax payable on rice procured from it. The petitioner had purchased rice extracted from paddy on which purchase tax had already been paid. The Department initially clarified that ITC would be available on the sale of rice if the paddy had suffered tax, but later withdrew this clarification, disallowing the petitioner's claim for ITC on the sale of rice.
The petitioner argued that the provisions of section 15(c) of the Central Act should override the State law based on the provisions of article 286 of the Constitution of India and the language of section 15 of the Central Act itself. The court noted that the State of Punjab agreed to allow set-off of tax paid on paddy when rice is sold, provided certain conditions were met, in accordance with section 15(c) of the Central Sales Tax Act, 1956. The court held that section 15(c) of the Central Act must be given effect to from the date of enforcement of the PVAT Act on April 1, 2005. The petitioner was granted liberty to seek the benefit of this provision before the appropriate authority. Any orders inconsistent with the court's decision were deemed non est, and fresh orders were to be passed in line with the court's order.
In conclusion, the court disposed of the writ petition by upholding the petitioner's contention regarding the applicability of section 15(c) of the Central Act over the State law, allowing the petitioner to seek the benefit of set-off of tax paid on paddy when selling rice, subject to specified conditions.
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2006 (9) TMI 496
Issues:
1. Claim for subsidy under the West Bengal Industrial Promotion Scheme, 1994 for manufacturing sodium petroleum sulphonate (SPS) as detergent.
2. Rejection of subsidy claim by the authority based on the use of SPS by the purchaser for manufacturing rust preventive oil and cutting oil.
3. Judicial review of the authority's decision regarding the classification of SPS as detergent.
Analysis:
Issue 1:
The appellant, a small-scale industrial unit manufacturing SPS, claimed subsidy under the 1994 scheme for detergent manufacturers. The Directorate of Cottage and Small Scale Industries and Central Excise classified SPS as detergent. The authority rejected the subsidy claim based on the purchaser's use of SPS for purposes other than detergent production. The single Judge held that the authority had the power to decide the matter and concluded that SPS was used as a lubricating agent, not detergent. The appellant failed to provide evidence to prove SPS was detergent.
Issue 2:
The appellant argued that SPS should be considered detergent for subsidy purposes as it met the criteria under the Customs Tariff Act and commercial parlance definitions. The court referred to apex court decisions emphasizing the importance of goods' exact definition or commercial identity for classification. SPS was found to meet the definition of detergent in various dictionaries and commercial usage, making it eligible for subsidy under the 1994 scheme.
Issue 3:
The court found that the authority erred in relying solely on the purchaser's statement regarding SPS use, as the component could have multiple applications. The authority's failure to consider the appellant's entitlement to subsidy under the existing policy framework was noted. The court held that the authority's decision was subject to judicial review as it did not align with the scheme's provisions. The order rejecting the subsidy claim was quashed, directing the authority to reconsider the application within a specified timeframe.
This judgment highlights the importance of accurate classification of goods for subsidy eligibility, the need for authorities to adhere to policy frameworks, and the scope of judicial review in administrative decisions.
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2006 (9) TMI 495
Sales tax created u/s 24 - Tamil Nadu General Sales Tax Act, 1959 - charge for payment of arrears - binding on the bona fide purchaser for value or not - whether the appellant is a bona fide purchaser without notice of the charge u/s 24(1) - HELD THAT:- In this case there is absolutely no evidence on the side of the plaintiffs to discharge the initial burden. That being so the contention of the learned counsel for the appellant that the plaintiffs have discharged their initial burden cannot be accepted. But on the other hand P.W. 1 in his cross examination has categorically admitted that he did not enquire T. P. Narayanasamy about the sales tax arrears. Therefore, the omission on the part of the plaintiffs to enquire with their vendors regarding their sales tax arrears amounts to negligence on their part and also it will amount to willful abstention. In this case the plaintiffs had the means of obtaining the necessary information and the plaintiffs with prudent caution might have obtained knowledge of the charge and therefore the failure on their part to make necessary enquiries with their vendors will amount to willful abstention or gross negligence and therefore it could be held that the plaintiffs have constructive notice.
We have to point out that the fact that the plaintiffs marked exhibit A-46 through D.W. 7 will itself show that they had knowledge about the sales tax arrears of their vendors. It is not the case of the plaintiffs anywhere that exhibit A-46 was obtained by them from their vendors or from some other source after filing of the suit. Therefore, we have to hold that the plaintiffs are not bona fide purchasers without notice.
The learned single Judge after considering at length the contents of exhibits A-46, B-15, B-24, B-25, B-26, B-27 and B-36 has rightly observed that the conclusion of the Trial Court that S.V. Traders was proprietory concern cannot be sustained and the Trial Court failed to consider the material portions and the documents placed by the defendants in the form of documents. The learned single Judge has also rightly observed that a perusal of the pleadings of both the parties as well as the evidence clearly shows that the plaintiffs were very well aware of the sales tax arrears from 1973-74 and knowing fully well they have purchased the property from T.P. Narayanasamy.
The learned Judge on a perusal of the entire oral and documentary evidence has further held that T.P. Narayanasamy and his son T.N. Subash in order to escape from the tax liability after knowing that there was a default committed by them and a charge has been created as per section 24 of the Act, with the fraudulent intention sold the only property in favour of the plaintiffs. Therefore, we see no reason to interfere with the findings recorded by the learned single Judge and we concur with the findings.
In the result, the letters patent appeal fails and the same is dismissed.
However, there will be no order as to costs. Consequently, the connected CMP is closed.
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2006 (9) TMI 494
Whether High Court of Madhya Pradesh at Indore was correct in affirming the judgment of conviction and sentence dated 3.4.2001 passed by the Special Judge, Indore under Section 8 of the Narcotics Drugs and Psychotropic Substances Act, 1985 (for short "the NDPS Act")?
Held that:- Why everything was left to be done by PW-5 alone is a mystery. Why Shri Bajpai and Inspectors attached to the Bureau had not been examined has not been explained. The genesis of the occurrence was obtaining of secret information from the informer. Concededly the informer gave full particulars thereof only to Ms. Sabiha Khatun. She was, therefore, the only competent witness to prove the contents of Ex. P/16. A document as, is well known, does not prove itself. The contents are required to be proved by the maker thereof. Ms. Sabiha Khatun alone could have proved the correctness or otherwise of the contents of the said document. It was all the more necessary as PW-5 conceded that all conversations between Ms. Sabiha Khatun and the informer did not take place in his presence.
Appellant is entitled to benefit of doubt. The appeal is allowed. He is directed to be set at liberty unless wanted in any other case.
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2006 (9) TMI 493
Whether High Court was correct making modification of its order dated 01.07.2005 substituted Mr. Justice P. Chenna Keshav Reddy, former Chief Justice of Andhra Pradesh and Gauhati High Court as the Presiding Arbitrator in place of Mr. Justice Y. Bhaskar Rao?
Held that:- The said finding of the High Court is self contradictory inasmuch as if the Presiding Arbitrator is a retired Judge of the High Court and one of the arbitrators is a retired Chief Justice of the High Court, the member of hierarchy is upset. Even otherwise, there does not exist any such provision in law which requires that if one of the arbitrators is a retired Judge the Presiding Arbitrator also has to be a retired Judge. The parties have entered into a contract after fully understanding the import of the terms so agreed to from which there cannot be any deviation. The Courts have held that the parties are required to comply with the procedure of appointment as agreed to and the defaulting party cannot be allowed to take advantage of its own wrong.
The pleadings before the Arbitral Tribunal are not complete and written statement is yet to be filed by the appellant as the appellants have raised their objections with respect to the appointment before the arbitration proceedings which has been duly recorded by the Arbitral Tribunal in the orders passed by them. In view of the order now passed setting aside the appointment of the Presiding Arbitrator by the High Court, the appointment of the Presiding Arbitrator as per the procedure contemplated under the contract agreement has to be followed and IRC (Ministry of Shipping, Road Transport and Highways, R.K. Puram, New Delhi should be approached. The parties are at liberty to approach the Arbitrators for any further interim directions. Appeal allowed by setting aside the order passed by the High Court
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2006 (9) TMI 492
Appointment of Arbitrator
Held that:- Although in terms of the arbitration agreement contained in Clause 25 of the contract, ordinarily the arbitrator appointed by the Managing Director should act as arbitral tribunal in respect of the disputes and differences between the parties to the contract; in this case, the Appellants must be held to have waived their right as they consented to the appointment of Shri Bhattacharya as an arbitral tribunal. The High Court having appointed the arbitral tribunal on consent, it is, in our opinion, not open to the Appellants now to contend that no such concession was made.
Prima facie also it does not appear that the allegations contained in the said application were supported by an affidavit. In that view of the matter, no credence to the averments contained therein cannot be given. Furthermore, it is not a case where this Court should exercise its discretionary jurisdiction. For the reasons aforementioned, this appeal is dismissed.
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2006 (9) TMI 491
Issues:
Levy of tax on the sale of rice under the Tamil Nadu General Sales Tax Act, imposition of penalty by assessing officers despite pending waiver proposal, applicability of Section 12(3)(b) and Section 16-B of the Act, contention of no intention to suppress turnover by petitioners, concealment of turnover, necessity of penalty imposition, and quashing of demand notice.
Analysis:
The judgment pertains to a dispute regarding the levy of tax on rice sales under the Tamil Nadu General Sales Tax Act. Initially exempted, rice became taxable at 2% from 27.03.2002, then exempt again from 28.10.2002. The issue involves the assessment and payment of tax during this period spanning two assessment years. Assessing officers imposed penalties under Section 12(3)(b) despite pending waiver proposals. Petitioners argued against penalty citing the Commissioner's instructions to assess and submit waiver proposals simultaneously.
The petitioners relied on Section 12(3)(b) Explanation (i) and Section 16-B of the Act, contending penalties shouldn't apply when assessments were based on filed returns and best judgment. The respondents' counter affidavit mentioned that demands were raised but became unenforceable due to waiver proposals. The court noted the absence of turnover concealment in the accounts and accepted the petitioners' stance that penalties were unjustified. The Assessing Officer's reliance on turnover without finding concealment supported this view.
The court emphasized that penalties were unwarranted given the absence of turnover concealment and the Commissioner's directive to assess and propose waivers concurrently. The judgment quashed the demand notices imposing penalties, clarifying that the waiver's fate rested with the government. The ruling didn't opine on the waiver's outcome. Ultimately, the court disposed of the writ petitions without costs, emphasizing the inapplicability of penalties in the given circumstances.
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2006 (9) TMI 490
Statutory requirements contained in Section 141 of the Negotiable Instruments Act had not been complied with - Held that:- Appeal allowed. It is necessary to specifically aver in a complaint under Section 141 that at the time the offence was committed, the person accused was in charge of, and responsible for the conduct of business of the company. This averment is an essential requirement of Section 141 and has to be made in a complaint. Without this averment being made in a complaint, the requirements of Section 141 cannot be said to be satisfied.
Merely being a director of a company is not sufficient to make the person liable under Section 141 of the Act. A director in a company cannot be deemed to be in charge of and responsible to the company for the conduct of its business. The requirement of Section 141 is that the person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a director in such cases -
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2006 (9) TMI 489
Issues Involved:
1. Addition of Rs. 16,88,76,463 due to change in the method of valuation of stock-in-trade.
2. Classification of shares held as stock-in-trade versus capital assets.
3. Consideration of explanations, submissions, and evidence by lower authorities.
4. Levy of interest under section 234A/B/C of the Income-tax Act.
5. Initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act.
6. Initiation of penalty proceedings under section 271E of the Income-tax Act.
Issue-wise Detailed Analysis:
1. Addition of Rs. 16,88,76,463 due to change in the method of valuation of stock-in-trade:
The primary issue involves the disallowance of the assessee's claim of Rs. 16,88,76,463 due to a change in the method of valuation of the closing stock from cost to cost or market value, whichever is lower. The Assessing Officer (AO) noted that the assessee had revalued its shares, particularly those of Core Healthcare Limited, and claimed a substantial loss. The AO rejected this revaluation, asserting that the shares were held as capital assets, not stock-in-trade, and that pledging the shares with banks indicated they were investments. The Commissioner of Income-tax (Appeals) upheld the AO's decision, citing the lack of bona fide change and the distortion of real business income. However, the Tribunal found that the change in valuation method was bona fide and aligned with accounting standards, particularly Accounting Standard No. 1, which emphasizes prudence. The Tribunal noted that the assessee had consistently treated the shares as stock-in-trade since April 1, 1995, and had followed the new valuation method in subsequent years. The Tribunal concluded that the change was legitimate and deleted the addition made by the AO.
2. Classification of shares held as stock-in-trade versus capital assets:
The AO and the Commissioner of Income-tax (Appeals) classified the shares as capital assets, arguing that the pledging of shares with banks indicated they were held as investments. The Tribunal disagreed, noting that the assessee had consistently treated these shares as stock-in-trade since 1995, and the Revenue had accepted this classification in previous and subsequent years. The Tribunal emphasized that the AO could not reclassify the shares as capital assets merely because they were pledged, especially when the assessee had the right to trade them with the bank's permission.
3. Consideration of explanations, submissions, and evidence by lower authorities:
The assessee argued that the lower authorities had not properly considered its explanations, submissions, and evidence, which constituted a breach of natural justice. The Tribunal reviewed the materials on record and found that the assessee's explanations regarding the change in valuation method were bona fide and aligned with recognized accounting principles. The Tribunal also noted that the assessee had disclosed the change in its audited accounts and had consistently followed the new method in subsequent years.
4. Levy of interest under section 234A/B/C of the Income-tax Act:
Both parties agreed that the issue of interest under sections 234A, 234B, and 234C was consequential. The Tribunal directed the AO to recompute the interest in accordance with the law based on the income finally assessed after giving effect to its order.
5. Initiation of penalty proceedings under section 271(1)(c) of the Income-tax Act:
The Tribunal did not provide a separate analysis for this issue, indicating that it was not a primary focus of the appeal. However, the deletion of the addition of Rs. 16,88,76,463 would likely impact the basis for any penalty proceedings under section 271(1)(c).
6. Initiation of penalty proceedings under section 271E of the Income-tax Act:
Similar to the previous issue, the Tribunal did not separately address this matter. The outcome of the primary issue would influence the initiation of penalty proceedings under section 271E.
Conclusion:
The Tribunal allowed the appeal, deleting the addition of Rs. 16,88,76,463 and directing the AO to recompute interest under sections 234A, 234B, and 234C based on the revised income. The Tribunal emphasized the legitimacy and consistency of the assessee's change in the method of valuation and upheld the classification of shares as stock-in-trade.
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2006 (9) TMI 488
Issues Involved:
1. Deletion of Rs. 30 lakhs addition under section 69 and its taxability under section 45 as surrender of lease rights.
2. Classification of lease rights as capital assets and the applicability of capital gains tax.
3. Applicability of section 69 for unexplained investment.
4. Determination of cost of acquisition for lease rights and its tax implications.
Issue-wise Detailed Analysis:
1. Deletion of Rs. 30 lakhs Addition under Section 69 and its Taxability under Section 45:
The Revenue contended that the Commissioner of Income-tax (Appeals) erred in deleting the Rs. 30 lakhs addition under section 69, arguing it was taxable under section 45 as surrender of lease rights. The assessee maintained that the land in question was agricultural and not a capital asset under section 2(14), thus not attracting capital gains tax. The Commissioner of Income-tax (Appeals) concluded that the Rs. 30 lakhs received was for the surrender of lease rights and not from unexplained sources, thus not taxable under section 69.
2. Classification of Lease Rights as Capital Assets and Applicability of Capital Gains Tax:
The Revenue argued that lease rights are capital assets, and their transfer should be taxed under capital gains. The assessee countered that the land was agricultural and beyond 8 kms from the nearest municipality, thus not a capital asset. The Commissioner of Income-tax (Appeals) agreed with the assessee, citing that the land was agricultural and not a capital asset, hence no capital gains tax was applicable.
3. Applicability of Section 69 for Unexplained Investment:
The Assessing Officer treated the Rs. 30 lakhs as unexplained investment under section 69 due to the absence of consideration in the release deed. However, the Commissioner of Income-tax (Appeals) found no evidence to support that the amount was from unexplained sources, relying on the director's statement under section 132(4) that it was received for surrendering lease rights.
4. Determination of Cost of Acquisition for Lease Rights and Its Tax Implications:
The assessee argued that there was no cost of acquisition for the lease rights, referencing the Supreme Court decision in CIT v. B. C. Srinivasa Setty, which held that gains from assets with no determinable cost of acquisition are not taxable. The Commissioner of Income-tax (Appeals) upheld this view, noting that the amendment to section 55(2) in 1995, which provided for a nil cost of acquisition, was not applicable for the assessment year 1992-93.
Conclusion:
The Tribunal upheld the Commissioner of Income-tax (Appeals)'s decision, dismissing the Revenue's appeal. It confirmed that the Rs. 30 lakhs received for surrendering lease rights in agricultural land was not taxable under section 69 or as capital gains, as the land was not a capital asset and the cost of acquisition for the lease rights could not be determined. The cross-objection by the assessee was also dismissed.
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