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2009 (12) TMI 930
Issues involved:
Sanction of Court u/s 391 to 394 of Companies Act 1956 for Scheme of Arrangement involving multiple companies and shareholders.
Judgment Details:
Issue 1: Sanction of Court for Scheme of Arrangement
The Court heard the Counsel for the parties seeking sanction u/s 391 to 394 of the Companies Act 1956 for a Scheme of Arrangement involving several companies and their respective shareholders. Separate petitions were filed by different companies before various High Courts for appropriate directions.
Issue 2: Effect of Non-Receipt of Approvals
Clause 5.4 of the Scheme of Arrangement outlined the consequences if the Scheme is not sanctioned by all relevant authorities. It specified that the Scheme would stand implemented without demerger in such cases, with certain provisions invalidated while the rest of the Scheme remains in force.
Issue 3: Compliance and Affidavits
The Petitioner confirmed compliance with all requirements as per Court directions and filed necessary affidavits. The Petitioner also undertook to fulfill all statutory requirements under the Companies Act, 1956 and related rules.
Issue 4: Regional Director's Affidavit
The Regional Director filed an affidavit highlighting various aspects, including foreign investment, necessary approvals, and tax considerations. The Regional Director expressed no objections to the Scheme, stating it does not appear prejudicial to shareholders or the public.
Issue 5: Rejoinder by Petitioner
The Petitioner submitted a rejoinder addressing the Regional Director's contentions. It clarified aspects related to share transfers, foreign exchange transactions, and compliance with regulatory authorities, emphasizing no change in shareholding or foreign exchange transactions.
Issue 6: Fairness and Compliance
The Court found the Scheme fair, reasonable, compliant with the law, and not against public policy. No opposition from concerned parties was noted, and all statutory compliances were fulfilled, leading to the approval of the Company Petition.
Issue 7: Court Order and Clarifications
The Court made the Company Petition absolute, subject to approval by the Delhi High Court for the Transferee's petition. The Order's sanction was specific to the Petitioner in Maharashtra and would not affect Orders from other High Courts involved in the sanction process.
Issue 8: Costs and Dispensation
The Petitioner was directed to pay costs to the Regional Director, and filing of the drawn-up order was dispensed with. All relevant authorities were instructed to act on the Order along with the Scheme and authenticated minutes from the Company Registrar, High Court (O.S.), Bombay.
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2009 (12) TMI 929
Agricultural land or capital asset u/s 2(14) - Conversion of the agricultural land for non-agricultural residential purpose - survey u/s.133A - whether the land sold by the assessee was agricultural in nature or not - HELD THAT:- Assessee has produced certificate from the competent authorities that during these years assessee had used the land for growing ragi. In the absence of contrary evidence, the evidence adduced by the assessee coupled with the Village Accountant's certificate, we have to come to a reasonable presumption that the assessee's assertion that the land was used for some kind of agricultural activity, is to be accepted.
It is not disputed that in the revenue records, the entry is not changed, it continues as agricultural land. According to the revenue, the intention and purpose of the sale is for the use of Tibetan Childrens' Village for the setting up of educational institutions and other related purposes. According to the assessee, the land in his hands had retained the agricultural character till the date of sale, for the reason that the assessee was doing agricultural activity. We have hereinabove mentioned that the department had estimated the agricultural income for 2004-05 and estimated the agricultural income of the group. Therefore, it is difficult to come to the conclusion that in the hands of the assessee, the character of the land had changed.
Merely because the original owners had made application to change the character of the land from agricultural to non-agricultural and certificate was issued to that effect. Even for the revenue, there is no case that the land has been used for the intended purpose.
The previous owner made an application for conversion, obtained the permission, but with the condition that the land should be used for the intended purpose within two years, otherwise the original character of the land, i.e., agricultural nature, would be restored. Then the assessee or the subsequent purchased has to pay penalty and make a further application to obtain permission to revive the land for intended purpose. The assessee has not done this even according to the revenue. This was done by the subsequent purchaser i.e., Tibetan Childrens' Village, which compels to conclude that what the assessee held at the time of sale was agricultural land. It is true the facts is on border line, but the evidence produced before us in the form of RTC showing agricultural income etc., is in assessee's favour.
Secondly, In the instant case of the assessee also what was paid by the assessee was agricultural revenue. The non-agricultural revenue was paid by the subsequent purchaser after making an application for the second time to revive the nature of the land, which is evidenced by the letter which was written to the Secretary, Manchanayakanahally Gram Panchayat by the Tibetan Childrens' Village.
In the result, appeal by the assessee on this ground is allowed.
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2009 (12) TMI 928
Issues Involved:
1. Allegations against the petitioner.
2. Petitioner's defense.
3. Consideration of bail application.
4. Economic offenses and their impact.
5. Previous judgments and their relevance.
Summary:
1. Allegations against the petitioner:
The petitioner was arrested by CBI on 8th April 2009 and charged u/s 420/467/468/471/511 IPC and Section 13(2) read with 13(1)(d) of the Prevention of Corruption Act, 1988. He, along with nine co-accused, was involved in defrauding Punjab National Bank of Rs. 1,46,71,000/- and attempting to defraud the bank of Rs. 2,72,38,000/- using forged cheques. Specifically, two forged cheques amounting to Rs. 51.65 lakhs and Rs. 55.06 lakhs were deposited in the account of M/s Bahubali Marketing Pvt. Ltd., where the petitioner and his wife were directors. The petitioner and his wife withdrew Rs. 38 lakhs through self cheques, and Rs. 60.61 lakhs were transferred to M/s Analytical Impex Ltd.
2. Petitioner's defense:
The petitioner claimed that his co-accused S.K. Bhargav, a Chartered Accountant, requested him to supply fabric to M/s Sahara India Finance Corporation Ltd. and provided the cheques. The petitioner alleged that he delivered material worth Rs. 10 lakhs and later transferred the remaining funds to M/s Analytical Impex Ltd. upon Bhargav's request. The petitioner argued that the Rs. 38 lakhs withdrawn in cash were handed over to Bhargav.
3. Consideration of bail application:
The court noted that it is not appropriate to analyze the defense in a bail application. It emphasized that no purchaser would give such a huge advance without a purchase order, and the refund would typically be made by cheque, not cash. The petitioner continued to enjoy the fruits of the alleged crime, and nothing had been refunded to the bank despite knowing the cheques were forged.
4. Economic offenses and their impact:
The court highlighted the gravity of economic offenses, quoting the Supreme Court in State of Gujarat vs. Mohanlal Jitamalji Porwal and Anr. and Ram Narain Popli vs. CBI, which emphasized the severe impact of economic crimes on the community and the economy. The court also referred to Champakbhai Amirbhai Vasava vs. State of Gujarat, noting that serious offenses by bank employees affect public confidence in banks. The court stressed that economic offenses need to be viewed seriously and those involved should not be granted bail lightly.
5. Previous judgments and their relevance:
The court distinguished the present case from Ashok Dhingra vs. N.C.T. of Delhi, where bail was granted after five months in custody, noting that the present case involved public funds. It also referred to M.M. Cooperative Bank Limited vs. J.P. Bhimani & Another, where bail was granted based on an offer to repay a significant amount, which was not comparable to the petitioner's offer to pay Rs. 5 lakhs. In Suresh Chandra Ramanlal vs. State of Gujarat, bail was granted on medical grounds with a condition to deposit Rs. 40 lakhs. The court noted that co-accused Nipun Bansal, who retained a lesser amount, was still in custody.
Conclusion:
The court concluded that the petitioner should not be granted bail at this stage due to the serious nature of the economic offense and the significant amount of public funds involved. The bail application was dismissed, with observations made solely for the purpose of dealing with the contentions raised by the petitioner, without prejudice to the trial's outcome.
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2009 (12) TMI 927
Revision u/s 263 - as per CIT assessment order passed by AO u/s 143(3)/153A in respect of assessment year 1999-2000 is erroneous and prejudicial to the interest of the Revenue because of the reason that certain issues, highlighted in the said order, were not considered at the time of framing of the issues - assessment order has been set aside with direction to the AO to frame the assessment afresh after affording the assessee an opportunity of being heard and after making proper enquiries and verifications
HELD THAT:- In the present case, various correspondence and documents which are referred to by the learned senior counsel appearing for the petitioner indicate that Mr. A.L. Mehta had been writing time and again that income had escaped assessment and, therefore, the matter should be looked into.
The argument of the respondents is that the CBDT had wanted the matter to be examined and never intended that the orders are to be passed in one particular manner only. It was pointed out that no such directions were given by the CBDT to the respondent No.4 directing him to pass an order under Section 263 of the Act, necessarily reopening the assessments. He was called upon to examine the matter. The Commissioner passed detailed order under Section 263 of the Act, which depicts his independent mind, and various observations made in this order are not at the dictates of any authority. It was for this reason that submission of learned senior counsel for the petitioner was not that any such specific direction was given. Attempt was to demonstrate that the CBDT had “almost dictated the line of action” to the respondent No.4 making him virtually impossible to exercise independent judgment and unfettered discretion in discharge of his statutory function under Section 263 of the Act. It is not necessary for us to give any authoritative pronouncement on this aspect in the facts of this case. Reason is simple and obvious.
ASG, as noted above, as conceded that an opportunity shall be granted to the petitioner for making its submissions on the merits of the case by the Commissioner and thereafter fresh order would be passed. For this reason alone, once we proceed to set aside the impugned order, the effect would be that the concerned Commissioner will have to go into this issue afresh for considering the submissions of the petitioner, which would necessarily involve application of his independent mind. This, coupled with the fact that the Commissioner who passed the order is no more the concerned officer, i.e. the respondent No.4, the matter will have to go to another office discharging the duties in the capacity of respondent No.4. In these circumstances, the very basis of the submission that the impugned order was passed on the dictated lines of CBDT vanishes.
Present Commissioner/respondent No.4, while exercising his powers under Section 263 of the Act, shall look into the matter with independent mind without being influenced by the observations made in the impugned order. While doing so, he shall have regard to the submissions that would be made by the petitioner pleading that it is not a case for exercising powers under Section 263 of the Act. We also permit the petitioner to raise the plea that Mr. Mehta is not a whistleblower, but is a disgruntled person being an ex-employee of the petitioner, who has been fabricating and filing false and frivolous complaints against the petitioner.
Assessment completed under monitoring/supervision – Not amenable to revision u/s 263 - case of the petitioner is that the assessment under Section 153A of the Act was completed under the monitoring of the ACIT/ CIT/CCIT/CBDT and, therefore, such an order could not be regarded as erroneous, much less prejudicial to the interest of the Revenue - HELD THAT:- As contented an assessment order is passed under the monitoring of the Commissioner, the successor Commissioner could not set aside the assessment on the ground that the assessment order was passed without application of mind.
Since the matter has to be considered afresh by the Commissioner, even this contention can be raised by the petitioner before the said Commissioner and the Commissioner, while passing the order, shall specifically deal with this contention.
WP is allowed and the impugned order passed by the CIT respondent No.4 is hereby set aside. However, liberty is granted to the respondent No.4 to appropriately deal with the matter and pass fresh order after giving opportunity of being heard to the petitioner on various points canvassed before us or which it intends to raise at the time of fresh hearing.
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2009 (12) TMI 926
Case: S.H. Kapadia and Aftab Alam, JJ. dismissed the special leave petition in Supreme Court Citation: 2009 (12) TMI 926 - SC Order.
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2009 (12) TMI 925
Issues involved: Disallowance of interest on interest-free advances.
Summary:
The appeal was filed against the order of the Ld. CIT(A) upholding the disallowance of interest amounting to Rs. 211,512. The assessee, engaged in the business of manufacturing cotton polyester made-ups, had given interest-free advances to certain concerns. The AO disallowed the interest as no interest was charged from the parties, citing a decision of the Hon'ble Punjab and Haryana High Court. The CIT(A) affirmed the disallowance, stating that the advances were not for business purposes, referring to relevant court decisions.
The assessee contended that the advances were trade advances and no disallowance of interest was warranted. The counsel referred to various court decisions to support the claim that the parties were not related to the assessee. However, the DR argued that the parties were related, and interest-free advances were given despite incurring interest on funds obtained. The Tribunal noted that the assessee failed to provide evidence that the advances were trade advances, especially when interest-bearing funds were obtained.
The Tribunal found that the assessee did not substantiate that the advances were for business purposes or commercial expediency. Without evidence supporting the purpose of the advances, and with the advances remaining outstanding for a significant period, the disallowance of interest was deemed justified. The Tribunal held that the case laws cited by the assessee were not applicable to the facts of the case, as they did not establish a valid reason for the interest-free advances. Consequently, the appeal was dismissed, upholding the order of the CIT(A).
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2009 (12) TMI 924
Issues involved: Interpretation of provisions of Prevention of Food Adulteration Act, 1954 regarding import of food items, authority of central food laboratory to advise customs, statutory obligation of customs officer to permit clearance of goods.
Summary:
The petitioner imported Black Matpe Whole and presented bills of entry to the customs officer. The central food laboratory found mineral matter in excess of the specified limit but the Plant Quarantine Station recommended unconditional release. The customs officer withheld clearance based on the laboratory's advice. The petitioner filed petitions under art.226 challenging this decision.
Interpretation of Provisions:
- Section 2(ia)(m) of the Act: Defines when an article of food shall be deemed adulterated, allowing for natural causes beyond human control.
- Section 2(xiia) of the Act: Defines "primary food" as produce of agriculture or horticulture in natural form.
- Section 5 of the Act: Prohibits import of adulterated or misbranded food, with exceptions for natural causes beyond human control.
Court's Decision:
The central food laboratory's advice did not deem the goods adulterated. As per s.5 of the Act, import of non-adulterated primary food is not prohibited. The laboratory's role is to provide opinion, not advise customs on import permission. The customs officer had no authority to withhold clearance based on the laboratory's advice. The officer is statutorily obligated to permit clearance of goods.
Conclusion:
The court allowed the petitions, directing the customs officer to permit clearance of the goods within a week and allowing the petitioner to clear the goods within 48 hours of paying assessed duty. No costs were awarded.
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2009 (12) TMI 923
Issues involved: The applicants sought to be included as parties in a judgment passed by the High Court, claiming they were necessary parties due to being successful bidders at an auction conducted by the Income Tax Department. The main issue was whether the applicants should be allowed to review and recall the order passed by the High Court in a specific civil application.
Judgment Summary:
1. The applicants filed two applications seeking to review and recall an order passed by the High Court in a civil application. They argued that as successful bidders at an auction conducted by the Income Tax Department, they should have been parties in the main petition. The applicants contended that the petitioner was aware of their interest in the property and should have impleaded them. They referred to provisions of the Income Tax Act to support their claim that the petition should not have been entertained without their involvement. They also cited previous court decisions to strengthen their argument.
2. The original petitioner and the Income Tax Department opposed the applications, stating that the sale had not been completed, and no sale certificate had been issued to the applicants. They argued that the dispute primarily concerned the petitioner and the Income Tax Department, not the applicants.
3. The Court acknowledged the legal principles cited by both parties but found that they were not directly applicable to the current case. The Court noted that the issues raised by the applicants regarding the interpretation of certain provisions were debatable and did not fall within the scope of a review. Additionally, the Court emphasized that until the sale was confirmed and a certificate issued, the applicants were merely offerers and not directly affected parties in the dispute.
4. Considering the facts and circumstances, the Court concluded that the applications for review were not justified. Therefore, both applications were rejected, and no costs were awarded.
Separate Judgement: No separate judgment was delivered by the judges in this case.
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2009 (12) TMI 922
Quantum of redemption fine and penalty - Revenue's contention is that the margin of profit is 20 per cent to 22 per cent and thus, the redemption fine and penalty, are on the lower side - Held that: - the value was enhanced by the Department based on Chartered Engineer's Certificate. The Commissioner (Appeals) relied upon the Tribunal's decision in the case of Navpad Enterprises and Ors. [2008 (3) TMI 604 - CESTAT, BANGALORE] by which redemption fine and penalty of 10 per cent and 5 per cent, respectively were imposed - appeal dismissed - decided against Revenue.
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2009 (12) TMI 921
The High Court of Allahabad dismissed the writ petition as the petitioner has an alternative remedy to file a revision before the Central Government. (2009 (12) TMI 921 - Allahabad High Court)
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2009 (12) TMI 920
Issues Involved:
1. Absorption of researchers under the CSIR scheme.
2. Validity of the 15-year service requirement.
3. Reasonableness of the cut-off date.
4. Discretionary power of relaxation by the Director General, CSIR.
5. Application of the doctrine of legitimate expectation.
Comprehensive Issue-wise Analysis:
1. Absorption of Researchers Under the CSIR Scheme:
The appeals were against a judgment by the High Court, which set aside the Central Administrative Tribunal's order and directed the appellants to consider the absorption of respondents under the CSIR scheme by relaxing the length of experience requirement. The High Court also directed that breaks in service should be considered similarly to other researchers who had been absorbed.
2. Validity of the 15-Year Service Requirement:
The scheme required researchers to have 15 years of continuous research experience for absorption. The High Court found this condition arbitrary, given that the ordinary tenure of researchers (JRF/SRF/RA/SRA) was a maximum of 13 years. The Supreme Court, however, noted that the 15-year requirement was reasonable and had a basis, as the Tribunal itself had earlier directed the formulation of a scheme for researchers with 15 years of service.
3. Reasonableness of the Cut-off Date:
The cut-off date for eligibility under the scheme was fixed at 2.5.1997, coinciding with the date of dismissal of a special leave petition. The High Court deemed this unreasonable, suggesting it should have been the date of the scheme's issuance. The Supreme Court held that fixing a cut-off date is within the employer's discretion and is not arbitrary if it has a rational nexus with the scheme's purpose. The choice of 2.5.1997 was justified and not arbitrary.
4. Discretionary Power of Relaxation by the Director General, CSIR:
Clause 9 of the scheme granted the Director General, CSIR, the power to relax conditions except for educational qualifications. The High Court criticized the Director General's refusal to consider relaxation for candidates with less than 15 years of service as arbitrary. The Supreme Court, however, emphasized that the discretion to grant relaxation must be exercised judiciously and within the scheme's framework. The Director General's policy decision not to relax the 15-year requirement was not arbitrary.
5. Application of the Doctrine of Legitimate Expectation:
The respondents argued that they had a legitimate expectation of absorption based on earlier Tribunal and High Court directions. The Supreme Court clarified that legitimate expectation must be based on clear and consistent past practice or an express promise. The doctrine did not apply here as the scheme was framed in compliance with Articles 14 and 16 of the Constitution, and the respondents did not have a legal right to absorption.
Conclusion:
The Supreme Court found that the High Court erred in its judgment by misinterpreting the scheme's provisions and the discretionary powers of the Director General, CSIR. The 15-year service requirement and the cut-off date were upheld as reasonable and non-arbitrary. The appeals were allowed, and the High Court's judgment was set aside, with no order as to costs.
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2009 (12) TMI 919
The Appellate Tribunal CESTAT CHENNAI dismissed the appeal as not maintainable due to the absence of required COD clearance. The appellant, a State Govt. unit, was granted liberty to apply for restoration upon obtaining the necessary COD clearance later on.
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2009 (12) TMI 918
Issues involved: Appeal against the order of the Income Tax Appellate Tribunal regarding assessment years 1994-95 and 1997-98.
Issue 1: Replacement of machinery parts - Revenue expenditure or not?
The Tribunal followed the Division Bench judgment in Commissioner of Income-tax Vs. Janaki Ram Mills Limited. The Supreme Court remanded the matter to the Commissioner - Appeals to decide uninfluenced by the Janaki Ram Mills decision, giving directions in Ramraju Surgical Cotton Mills. The Supreme Court in another case remitted the matter for de novo consideration in light of the judgment in Sri Mangayarkarasi Mills Private Limited, stating that the judgment does not lay down the law across the board. The High Court was directed to consider the tests laid down in other cases while disposing of the matter on merits.
Issue 2: Bringing into existence of a new asset - Revenue expenditure or not?
The Supreme Court remitted the matter for de novo consideration in light of the judgment in Sri Mangayarkarasi Mills Private Limited, stating that the judgment does not lay down the law across the board. The High Court was directed to consider the tests laid down in other cases while disposing of the matter on merits.
In conclusion, the appeals were allowed with no order as to costs, and the matter was remitted back to the Commissioner of Income-tax (Appeals) to follow the directions given by the Supreme Court. The appeals were disposed of accordingly, and the connected miscellaneous petitions were closed.
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2009 (12) TMI 917
Airport Service - user fee - The facts and circumstances of the case and the evidence clearly prove beyond doubt that the users fee collected is only for enhancing the revenue of the Airport and not for any service rendered to outgoing international passengers - the decision in the case of COMMISSIONER, CENTRAL EXCISE Versus COCHIN INTERNATIONAL AIRPORT LTD. [2009 (7) TMI 120 - KERALA HIGH COURT] contested, where it was held that no service tax is payable for the users fee collected by the respondent - Held that: - the decision in the above case upheld - SLP dismissed - decided against Revenue.
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2009 (12) TMI 916
Issues:
Challenge to Circular dated 30.06.2008 as ultra-vires SEZ Act, SEZ Rules, Customs Act, and Constitution of India; Direction sought to not levy export duty on iron and steel products procured from DTA suppliers for SEZ operations; Challenge to Notification No.66/08 & 77/08 - Cus regarding DTA supplies to SEZ.
Analysis:
The petitioners filed two petitions under Article 226 of the Constitution seeking a declaration that the impugned Circular dated 30.06.2008 is ultra-vires the SEZ Act, SEZ Rules, Customs Act, and certain Articles of the Constitution. They also requested a direction to not impose export duty on iron and steel products procured from DTA suppliers for SEZ operations, challenging Notification No.66/08 & 77/08 - Cus related to DTA supplies to SEZ.
The Court issued a rule on 01.12.2008 returnable on 17.12.2008, with Mr. P.S. Champaneri, learned Assistant Solicitor General appearing for the respondents. Mr. Hardik P. Modh, representing the petitioners, argued that the issue aligns with a previous decision by the Court in Special Civil Application No.9656 of 2008 and urged for similar relief in the present petitions. Mr. Champaneri did not distinguish between the previous case and the current petitions but mentioned the respondents' intention to appeal to the Apex Court.
After considering arguments from both sides and reviewing the petitions, the Court found that the issue in the present petitions was akin to the one addressed in Special Civil Application No.9656 of 2008. In the earlier case, the Court had ruled that levying export duty on goods supplied from DTA to SEZ was unjustified, absolving petitioners from paying such duty on such movements.
Consequently, the Court allowed the present petitions to the extent mentioned above, making the rule absolute without costs. Responding to Mr. Champaneri's request, the Court stayed the operation, implementation, and execution of the order for four weeks from the date of the judgment.
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2009 (12) TMI 915
Issues involved:
The judgment involves issues related to the reversal of orders by the Income Tax Appellate Tribunal without proper discussion of findings, estimation of gross profit, rejection of books of accounts, and jurisdictional matters.
Reversal of CIT (Appeals) Order:
The appellant filed a Tax Appeal under Section 260A of the Income-tax Act, 1961 questioning the reversal of the CIT (A) order by the Income Tax Appellate Tribunal without adequate discussion of findings. The Tribunal's decision to estimate gross profit at 2% and reject the books of accounts was also contested.
Estimation of Gross Profit:
The appellant's case involved an addition of Rs. 2,53,44,285/- as an estimation of gross profit, which was reduced by the CIT (A) to Rs. 9,57,432/-. The Tribunal further revised the gross profit estimation to 2%, differing from the Assessing Officer's 2.46% and the CIT (A)'s decision.
Rejection of Books of Accounts:
The Tribunal confirmed the rejection of the appellant's books of accounts, despite the Assessing Officer favoring the appellant in the remand report. Comparative cases cited by the Assessing Officer were deemed irrelevant as they were not applicable to the appellant's situation.
Jurisdictional Matters:
The appellant argued that the Tribunal failed to consider the reasoning of the CIT (Appeals) while granting substantial reduction in gross profit estimation. Citing legal precedents, the appellant requested a remand to the Tribunal for a fresh decision in accordance with the law.
Court's Decision:
After reviewing the orders and legal precedents, the Court found that the Tribunal did not adequately consider the CIT (A)'s reasoning for reducing the gross profit estimation. The lack of independent reasoning and discussion led the Court to quash the Tribunal's order and remand the case for a fresh decision with specific reasons for any disagreement with the CIT (A)'s findings.
Conclusion:
The Court allowed the appeal to the extent of remanding the case to the Tribunal for a reevaluation of the issues with proper consideration of the CIT (A)'s findings and a requirement for a speaking order to be passed by the Tribunal.
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2009 (12) TMI 914
The Allahabad High Court dismissed a writ petition seeking to quash orders rejecting duty drawback claims due to discrepancy in destination of goods. Authorities found the goods were sent to Dubai instead of Masco, Russia as stated in the shipping bill, leading to penalty on the petitioners. No errors were pointed out in the impugned orders. The writ petition was dismissed.
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2009 (12) TMI 913
The High Court of Kerala dismissed the Writ Appeal filed by an eye hospital against sales tax assessment and penalty orders for non-payment of tax on the sale of certain items. The court relied on a Division Bench decision in COMTRUST EYE HOSPITAL V. ADDL. SALES TAX OFFICER, (2007) 1 K.L.T. 682 to make its decision. The appellant was given two weeks to file a statutory appeal or revision against the assessment and penalty orders.
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2009 (12) TMI 912
Disallowance u/s 35D - fee paid to Registrar of Companies for increasing authorized share capital - HELD THAT:- This issue is squarely covered against the assessee by the decision of the Hon’ble Apex Court in the case of Punjab State Industrial Development Corporation Ltd. [1996 (12) TMI 6 - SUPREME COURT]. In this case it was held that amount paid by the company to ROC as filing for enhancement of capital base of company cannot be allowed as revenue expenditure. Respectfully following the precedent, we uphold the order of the ld. CIT(A) on this issue and decide the issue against the assessee.
Disallowance of expenditure on acquisition of fire extinguishers - Nature of expenses - CIT(A) confirm the disallowance upholding that the expenditure was capital in nature - HELD THAT:- We find that expenditure on fire extinguishers did not bring into existence any asset or an advantage which is enduring benefit of trade so as to be classified in capital field. It is meant to be utilized in the event of accident/occurring of any fire as a preventive measure.
What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future.” Examining the present issue on the touchstone of above exposition, we do not see any reason why the expenditure should not be allowed as revenue expenditure - Decide the issue in favour of the assessee.
Expenditure for club services - CIT(A) upholding that the expenditure for club services as expenditure not for the purpose of business but is of personal nature - HELD THAT:- As we are of the opinion that use of club services for the promotion of business in the modern age cannot be denied. Further the expenditure in comparison with the turnover of the assessee is a very miniscule amount. For assessment year 2002-03 ld. CIT(A) himself deleted the half of the disallowance.
Furthermore the proposition that these expenditure incurred by the assessee company are personal in nature is not sustainable on the anvil of Sayaji Iron Engg and Company [2001 (7) TMI 70 - GUJARAT HIGH COURT]. In this case it was held that “when the vehicles belonging to assessee company are used by its directors for personal or other purposes, it would be wrong to hold that vehicles are personally used by company because a limited company by its very nature cannot have any ‘personal use’ of cars by directors.”
Advertisement and publicity expenses - nature of expenditure that provide benefit of enduring nature and need to be amortised over a period of 5 years and in rejecting the claim of the assessee that it is a revenue expenditure allowable in entirety in the current year itself - HELD THAT:- The nature of expenditure does not fall under the ambit of preliminary expenses as envisaged u/s 35D. When the expenditure was incurred and there is nexus between the expenditure and the assessee’s business, we do not see any reason whey the entire expenditure should not be allowed in full during the concerned year
The case law in Salora International [2008 (8) TMI 138 - DELHI HIGH COURT] supported the case that when expenditure has actually been incurred and there was direct nexus between the expenditure and assessee business, the expenditure has to be allowed in full and not deferred by spreading over certain number of years. Therefore, it is clear that it was assessee’s claim that certain expenditure on advertisement were actually expenditure u/s 35D. Hence, we set aside the orders of authorities below and decide the issue in favour of the assessee.
Disallowance on account of commission paid to Direct Selling Agents and stamping fee - Spreading over of expenses - as per AO assessee has been financing the hire purchase of vehicles and homes etc. and the period of such financing is ranging from less than one year to more than one year upto 5 years and in view of the fact that the financing is spread over a period of five years allowed only 1/3rd of this expenditure and disallowed 2/3rd thereof - HELD THAT:- Neither of the authorities below have disputed either to nature of services rendered by agents or how the liability to pay the commission is computed. It has also not disputed that how the brokerage is payable and is linked to what. The only case made out by the revenue is that expenditure should be spread over a certain period of time. In our opinion, there is no cogency in the case made out by the revenue. It is an accepted position that assessee’s treatment in its accounts books is not determinative of the actual nature of the transaction. It is also admitted that there is nexus between the expenditure and the assessee’s business. Under such circumstances, there is no reason why the expenditure incurred would not be allowed as a whole.
Thus we find that expenditure which have been made in the concerned years were paid to the selling agents for sourcing the customers from whom the assessee had generated the income by way of granting of loan finances. The amount paid as commission is not refundable in any circumstances. Undisputedly income in this regard has been accounted for in the current years also - we find that the expenditures on commission and stamping fee have to be allowed in full in the impugned assessment years as deferral of the same over a number of year is not sustainable.
Leasehold Improvement expenses - whether allowable revenue expenses? - As per AO in the earlier years also the assessee company has done lease hold improvements but has capitalized the same and claimed 10% deprecation on it - HELD THAT:- We find that the ld. CIT(A) has given a categorically finding that the assessee has duly produced all the necessary details and that the assessee has duly identified the capital portion of the expenditure incurred and the amount on the improvements expenses which were of revenue in nature. We also find that it is a settled law that powers and duties of the CIT(A) are co-terminus with that of AO. Hence, in our considered opinion, there is no need to interfere with the finding of the ld. CIT(A). Accordingly, we uphold the same.
In the result, the appeals filed by the assessee are allowed and appeals filed by the revenue are dismissed.
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2009 (12) TMI 911
Clandestine removal - forged copies of Central Excise invoices along with challans-cum-proforma invoices evidencing clearances of goods by the appellants - Held that: - It is a case where Department has failed to made out a case against the appellants with corroborative evidences, which could have been done by them easily by verifying the fact of clandestine removal from the transporters as well as buyers of the appellants - no investigation was done about the productions made in the appellant’s factory for excess production and its removal without payment of duty - appeal allowed - decided in favor of appellant.
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