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2009 (12) TMI 1033
Issues involved: Challenge to transfer order u/s 127(1) of the Income-tax Act, 1961 due to lack of reasons provided by the Commissioner of Income-tax-1, Indore.
Issue 1: Lack of reasons for transfer order
The petitioners challenged the transfer order u/s 127(1) of the Income-tax Act, 1961, issued by the Commissioner of Income-tax-1, Indore, regarding the assessment proceedings of Dr. Ashok Sharma and his wife Aparna Sharma. The petitioners contended that the order lacked any reasons for the transfer, despite detailed objections filed by the assessee in response to a show-cause notice. The petitioners argued that the transfer orders were in violation of the mandatory provisions of section 127(1) of the Act.
Decision: The High Court noted that the transfer order was devoid of any reasons for the transfer, which is a requirement under the law. The Court emphasized that the reasons provided by the Transferring Authority should have a clear connection to the proposal of transfer and should be self-explanatory. As the impugned order was found to be cryptic and non-speaking, lacking any valid reasons, the Court allowed the petition and quashed the order, giving the Commissioner the option to issue a fresh order under section 127(1) of the Act, if deemed necessary and in compliance with the law.
Final Decision:
The High Court, after considering the arguments presented by both parties, ruled in favor of the petitioners due to the lack of valid reasons provided in the transfer order u/s 127(1) of the Income-tax Act, 1961. The Court emphasized the importance of providing clear and relevant reasons for such transfers, as mandated by the law. Consequently, the Court allowed the petition and annulled the transfer order, granting the Commissioner the opportunity to issue a new order in accordance with the legal requirements.
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2009 (12) TMI 1032
Option to switch over to pension scheme instead of continuing under the Contributory Provident Fund Scheme - Retired railway employee pension scheme - Information of the availability of option - Whether the respondent was entitled to exercise an option to switch over pension scheme, beyond the stipulated last date, that to twenty two years after retirement and receipt of the retirement dues under the Contributory Provident Fund Scheme? - HELD THAT:- In this case, the facts that the employee was in service of the Railways itself before and at the time of retirement and was working as the Head of the Department and was receiving all communications relating to option for being circulated to all employees in his department. Therefore, the question of respondent not being aware of the option does not arise.
The respondent chose not to exercise the option and continued to remain under the Contributory Provident Fund Scheme, and more important, received the entire PF amount on his retirement. In fact, as noticed, in his application before the Tribunal the respondent refers to all the options. He is careful to say that he was not 'intimated' about the contents of the last order relating to extension of the option, but does not say that he was unaware of the order extending the benefit of option.
The respondent consciously chose not to exercise the option as he admittedly thought that receiving a substantial amount in a lump sum under the provident fund scheme (which enabled creation of a corpus for investment) was more advantageous than receiving small amounts as monthly pension under the pension scheme. In those days (between 1957 when the pension scheme was introduced and 1976 when the respondent retired) the benefits under the provident fund scheme and pension scheme were more or less equal; and there was a general impression among employees that having regard to average life expectancy and avenues for investment of the lump sum PF amount, it was prudent to receive a large PF amount on retirement rather than receive a small pension for a few years (particularly as there was a ceiling on the pension and as dearness allowance was not included in the pay for computing the pension).
Having enjoyed the benefits and income from the provident fund amount for more than 22 years, the respondent could not seek switch over to pension scheme which would result in respondent getting in addition to the PF amount already received, a large amount as arrears of pension for 22 years (which will be much more than the provident fund amount that will have to be refunded in the event of switch over) and also monthly pension for the rest of his life. If his request for such belated exercise of option is accepted, the effect would be to permit the respondent to secure the double benefit of both provident fund scheme as also pension scheme, which is unjust and impermissible.
The validity period of the option to switch over to pension scheme expired on 31.12.1978 and there was no recurring or continuing cause of action. The respondent's representation dated 8.10.1998 seeking an option to shift to pension scheme with effect from 1976 ought to have been straight away rejected as barred by limitation/delay and laches.
Even on merits, the application has to fail. In Krishena Kumar v. Union of India [1990 (7) TMI 366 - SUPREME COURT] , a Constitution Bench of this Court considering the options given to the Railway employees to shift to pension scheme, held that prescription of cut off dates while giving each option was not arbitrary or lacking in nexus. This Court also held that provident fund retirees who failed to exercise option within the time were not entitled to be included in the pension scheme on any ground of parity.
Therefore, the respondent who did not exercise the option available when he retired in 1976, was not entitled to seek an opportunity to exercise option to shift to the pension scheme, after the expiry of the validity period for option scheme, that too in the year 1998 after 22 years.
Claim on the basis of guarantee of equality - When a person is refused a benefit to which he is not entitled, he cannot approach the court and claim that benefit on the ground that someone else has been illegally extended such benefit. If he wants, he can challenge the benefit illegally granted to others. The fact that someone who may be not entitled to the relief has been given relief illegally is not a ground to grant relief to a person who is not entitled to the relief.
The appeal is therefore allowed and the orders of the Tribunal and the High Court are set aside and the original application of the respondent before the tribunal is dismissed.
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2009 (12) TMI 1031
Issues Involved:1. Ad interim maintenance and accommodation for wife and child. 2. Appeal against the order of the learned Magistrate. 3. Right of residence in matrimonial home. Summary:1. Ad Interim Maintenance and Accommodation for Wife and Child:Both criminal revision petitions, one by the wife and another by the husband, challenge the orders dated 1st February 2008 by the learned JMIC, Gurgaon, which dismissed the wife's application for her own ad interim maintenance and accommodation in the matrimonial home but granted Rs. 10,000/- for the minor child. The learned Additional Sessions Judge dismissed the wife's appeal on the ground of limitation and upheld the maintenance for the child. 2. Appeal Against the Order of the Learned Magistrate:The wife filed an appeal u/s 29 of the Protection of Women from Domestic Violence Act, 2005, against the JMIC's order, claiming she was unemployed and entitled to maintenance. The husband's appeal sought a reduction in the Rs. 10,000/- maintenance for the child, citing limited resources. The learned Additional Sessions Judge dismissed both appeals, leading to the revision petitions in the High Court. 3. Right of Residence in Matrimonial Home:The husband contended that the wife had no right to stay in a property jointly owned by him and his mother, offering alternative accommodation or property division. The wife argued that the property was benami in the mother's name and cited an undertaking by the husband to not dislodge her forcibly. The Court found the property to be 'shared accommodation' and upheld the wife's right to reside there. Judgment:The Court set aside the learned Additional Sessions Judge's dismissal of the wife's appeal on the ground of limitation, noting a liberal approach should be adopted for condonation of delay. However, it did not remand the matter for reconsideration, directing the learned Magistrate to expedite the main matter. The husband's revision petition was dismissed, with the Court finding no merit in his challenge to the interim maintenance and right of residence orders. The Court emphasized that these arrangements are interim and should not be varied at this stage. The Court directed the learned Trial Judge to expedite the matter, clarifying that the opinions expressed should not be treated as an expression on the merits of the case.
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2009 (12) TMI 1030
Issues involved: Appeal against the order of Ld. CIT(A) Meerut dated 6.7..2009 in an appeal against the order levying penalty u/s 271D of the Income Tax Act 1961.
Summary:
Issue 1: Challenge to canceling the penalty levied u/s 271D of the Act
The appellant, an agriculturist, purchased agricultural land for &8377; 14,40,000 in cash, funded by temporary loans from family members. The assessing officer imposed a penalty u/s 271D for violating section 269SS. The appellant argued the loans were due to genuine reasons, such as family relations and urgent need for money. Ld. CIT (A) ruled that no unaccounted money was involved, and the loans were not to evade tax. The penalty was deemed not applicable due to reasonable cause under section 273B.
Issue 2: Interpretation of sections 269SS, 271D, and 273B
Penalty u/s 271D applies when a person contravenes section 269SS by accepting loans exceeding &8377; 20,000 in cash. However, section 273B provides for no penalty if reasonable cause is proven. In this case, the loans from family members were seen as assistance rather than formal loans, given the urgent need for cash to purchase agricultural land. The genuine intent of the appellant and the nature of the transactions led to the confirmation of the Ld. CIT (A) order.
Conclusion:
The appeal against canceling the penalty u/s 271D was dismissed, as the loans from family members for purchasing agricultural land were considered genuine and not for tax evasion purposes. The order of Ld. CIT (A) was upheld based on the reasonable cause under section 273B.
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2009 (12) TMI 1029
Issues involved: Appeal against disallowance of interest on delayed payment of rebate claims u/s 11BB of Central Excise Act, 1944.
Factual Matrix and Appeal Process:
The petitioner, a pharmaceutical company, filed a writ petition appealing the disallowance of interest on delayed payment of rebate claims by the Ministry of Finance. The initial denial of rebate claims by the Assistant Commissioner of Central Excise, Ujjain, was overturned by the Ld. Commissioner (Appeals-II), Central Excise, Indore. Subsequently, the petitioner claimed interest on delayed payment, which was rejected by the Assistant Commissioner, but allowed by the Ld. Commissioner (Appeals-I). The Revenue appealed this decision to the Customs, Excise & Service Tax Appellate Tribunal, which dismissed the appeal for lack of jurisdiction. The matter was then taken up by the Ministry of Finance, which set aside the Ld. Commissioner's order and disallowed the interest claim.
Interpretation of Section 11BB:
The key question was whether the petitioner was entitled to interest on delayed payment of rebate claims u/s 11BB of the Act. The Supreme Court's interpretation clarified that interest is payable only after three months from the date of the refund application, not from the date of deposit. The Court rejected the petitioner's argument for equitable interest, citing the specific statutory provision. The Court referred to previous judgments emphasizing that interest can only be awarded based on statutory provisions, agreements, or equitable considerations with a mandatory written demand.
Conclusion:
The Court, bound by the Supreme Court's interpretation of Section 11BB, found no merit in the petitioner's claim for interest on delayed payment of rebate claims and dismissed the writ petition. No costs were awarded in this matter.
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2009 (12) TMI 1028
Issues Involved:
1. Summoning of petitioners to face trial u/s 415/409/34/120B IPC.
2. Allegations of criminal breach of trust and cheating.
3. Disputed letter dated 1st March, 2008.
4. Vicarious liability of company directors and employees.
5. Prima facie case against individual petitioners.
Summary:
1. Summoning of Petitioners to Face Trial u/s 415/409/34/120B IPC:
The petitions challenge the order of the learned Metropolitan Magistrate dated 27th September, 2008, summoning the petitioners to face trial u/s 415/409/34/120B IPC based on a complaint alleging criminal breach of trust and cheating.
2. Allegations of Criminal Breach of Trust and Cheating:
The respondent alleged that after opening a Demat account with India Infoline Ltd., the company falsely claimed an outstanding debit of Rs. 10.48 crores, whereas the correct amount was Rs. 10,22,77,522/-. The company allegedly misappropriated Rs. 25,22,477.53 by making a false demand and failed to transfer shares to the complainant's Demat account, instead selling the shares and misappropriating the proceeds.
3. Disputed Letter Dated 1st March, 2008:
The bone of contention is a letter dated 1st March, 2008, purportedly written by Shri Bhuwneshwar Mishra, Trustee of the respondent, requesting the company to clear a debit balance by selling shares. The respondent denies the authenticity of this letter, claiming it was neither written by Mishra nor authorized by the Trust.
4. Vicarious Liability of Company Directors and Employees:
The court noted that the complaint did not allege that any specific director or officer of India Infoline Ltd. forged the letter or conspired to commit the alleged offences. The entrustment of shares was to the company, not to individual directors or officers. The court emphasized that the Penal Code does not contemplate vicarious liability for directors or employees unless explicitly provided by statute.
5. Prima Facie Case Against Individual Petitioners:
The court found that the complaint lacked specific allegations or factual evidence against individual petitioners constituting offences u/s 406 and/or 415/420 IPC. General allegations without factual foundation are insufficient to prosecute directors or employees. The court cited precedents emphasizing the need for definite allegations and statutory provisions for vicarious liability.
Conclusion:
The court set aside the impugned order summoning the individual petitioners for offences u/s 415/409/34/120B IPC, but allowed the trial to proceed against India Infoline Ltd. under other sections of IPC. The parties were directed to appear before the learned Magistrate on 21st December, 2009.
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2009 (12) TMI 1027
Issues Involved:
1. Validity of the Family Settlement and its requirement for registration.
2. Entitlement to temporary injunction and balance of convenience.
3. Impact of non-signature by all co-sharers on the Family Settlement.
Summary:
1. Validity of the Family Settlement and its requirement for registration:
The appellant challenged the Family Settlement dated 8th February 1967, arguing it was a Deed of Partition requiring registration u/s 17 of the Registration Act, 1908. The High Court held that the document was a Memorandum of Partition, recording a previous oral partition, and thus did not require registration. The Supreme Court upheld this view, noting that the document was a Memorandum and not an actual Deed of Partition, and hence, did not necessitate registration.
2. Entitlement to temporary injunction and balance of convenience:
The appellant sought a temporary injunction to prevent the respondents from dealing with the property, arguing that no partition by metes and bounds had occurred. The Trial Court and High Court denied the injunction, reasoning that a partition had been effected and the Family Settlement had been acted upon. The Supreme Court agreed, emphasizing that the balance of convenience and irreparable injury favored the respondents, who had already acquired rights and would suffer loss if development was halted. The Court noted that the appellant was protected by the High Court's order, which allowed construction but restrained alienation or transfer of the property.
3. Impact of non-signature by all co-sharers on the Family Settlement:
The appellant contended that the Family Settlement was invalid as not all co-sharers, specifically Sau. Pratibha, had signed it. The Supreme Court acknowledged that a Family Settlement must be accepted unanimously to be binding. However, it noted that the appellant had acted upon the Settlement by executing sale deeds, thus estopping them from challenging its validity. The Court held that the Settlement had been accepted and acted upon by the parties, making it binding despite the non-signature of one co-sharer.
Conclusion:
The Supreme Court dismissed the appeal, directing the Trial Court to dispose of the suit within a year and restraining the co-sharers from creating third-party rights or transferring their shares during the pendency of the suit. The Court emphasized the need for expeditious resolution and maintained the High Court's interim order allowing construction but preventing alienation.
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2009 (12) TMI 1026
The High Court of Bombay dismissed the appeal in favor of the revenue based on a previous full bench judgment in the case of Plastiblends India Limited Vs. Additional Commissioner of Income Tax. No costs were awarded.
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2009 (12) TMI 1025
Issues involved: Revenue appeal against deletion of penalty u/s 271D of the I.T. Act by CIT(A) for AY 2005-06.
Summary:
1. The revenue appealed against the deletion of a penalty of Rs. 1,00,00,000 u/s 271D of the I.T. Act by CIT(A).
2. None appeared for the assessee during the hearing, leading to an ex-parte hearing.
3. The AO noted discrepancies in the source of investment for a building construction, leading to the penalty imposition.
4. CIT(A) decided in favor of the assessee based on different judgments, prompting the revenue's further appeal.
5. The Revenue argued that the amount received was a loan, not share application money, and CIT(A) did not address this factual aspect.
6. Tribunal found that the amount was not share application money due to lack of authorized share capital increase, reversing CIT(A)'s decision and restoring the penalty.
7. The appeal of the revenue was allowed, and the penalty order was reinstated.
8. The order was pronounced on the same day as the hearing.
This judgment highlights the importance of correctly identifying the nature of financial transactions to determine the applicability of penalties under the Income Tax Act.
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2009 (12) TMI 1024
Issues Involved:
1. Entitlement to gratuity under the Payment of Gratuity Act, 1972.
2. Validity of the option for pension in lieu of gratuity.
3. Applicability of exemption under Section 5 of the Payment of Gratuity Act.
4. Jurisdiction of the Controlling Authority under Section 7 of the Payment of Gratuity Act.
5. Comparison of benefits under the Pension Scheme and the Payment of Gratuity Act.
Detailed Analysis:
1. Entitlement to Gratuity under the Payment of Gratuity Act, 1972:
The primary issue was whether retired employees of the appellant bank were entitled to payment of gratuity under the Payment of Gratuity Act, 1972. The court emphasized that gratuity is a statutory right under Section 4(1) of the Act, which cannot be waived or taken away except through an exemption granted by the appropriate Government under Section 5 of the Act. The court noted that the appellant bank did not succeed in obtaining such an exemption.
2. Validity of the Option for Pension in Lieu of Gratuity:
The bank contended that employees who opted for the pension scheme voluntarily were not entitled to gratuity. The court rejected this argument, stating that pension and gratuity are separate retiral benefits and one does not exclude the other. The court cited precedents emphasizing that statutory rights like gratuity cannot be waived by private agreements or options exercised by employees.
3. Applicability of Exemption under Section 5 of the Payment of Gratuity Act:
The court discussed that the power to exempt an establishment from the provisions of the Act lies with the appropriate Government, which must be convinced that the employees are receiving benefits not less favorable than those under the Act. The bank's failure to obtain such an exemption meant it could not unilaterally decide that its pension scheme was more beneficial.
4. Jurisdiction of the Controlling Authority under Section 7 of the Payment of Gratuity Act:
The court examined the role of the Controlling Authority, noting that it is responsible for determining the amount of gratuity payable and resolving disputes related to gratuity claims. However, the Controlling Authority does not have the jurisdiction to decide whether the terms of gratuity under any award or agreement are more beneficial than those under the Act. This jurisdiction lies exclusively with the appropriate Government under Section 5.
5. Comparison of Benefits under the Pension Scheme and the Payment of Gratuity Act:
The court dismissed the bank's argument that the pension scheme was more beneficial than the gratuity payable under the Act. The court clarified that the comparison should be between the terms of gratuity under any award or agreement and the gratuity payable under the Act, not between pension benefits and gratuity. The court found that the bank's pension scheme did not provide for gratuity, and thus, employees were entitled to claim gratuity under the Act.
Conclusion:
The Supreme Court dismissed the appeal, affirming that retired employees were entitled to gratuity under the Payment of Gratuity Act, 1972, irrespective of their option for pension. The court emphasized that statutory rights under welfare legislation cannot be waived by private agreements or options and that the appropriate Government's exemption is necessary to relieve an employer from the obligation of paying gratuity. The court also set aside the order of the Controlling Authority, stating it lacked jurisdiction to compare pension benefits with statutory gratuity rights. The judgment applies to employees who retired between January 1, 1986, and October 31, 1992.
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2009 (12) TMI 1023
Issues Involved:
1. Deletion of addition under Section 40(a)(i) of the Income Tax Act, 1961.
2. Classification of transponder hire charges as royalty.
3. Obligations under Section 195 for tax deduction at source.
4. Application of Double Taxation Avoidance Agreement (DTAA) provisions.
5. Discrimination under DTAA Article 26(3).
Issue-wise Detailed Analysis:
1. Deletion of Addition under Section 40(a)(i) of the Income Tax Act, 1961:
The revenue challenged the deletion of an addition of Rs. 20,62,32,621 under Section 40(a)(i) by the Commissioner of Income Tax (Appeals). The assessing officer had disallowed the transponder hire charges paid by the assessee to foreign companies, arguing that these payments were subject to tax deduction at source under Section 195, which the assessee failed to do. The Commissioner of IT (Appeals) ruled in favor of the assessee, stating that the payments did not fall under the definition of royalty or fees for technical services as per Section 9(1)(vi) of the Act.
2. Classification of Transponder Hire Charges as Royalty:
The assessing officer classified the payments as "royalty" under Explanation 2 to Section 9(1)(vi) of the Act, asserting that the foreign companies provided scientific knowledge, experience, or skill in satellite communication. The Commissioner of IT (Appeals) disagreed, referencing a prior Tribunal decision in the case of Raj Television Net Works Ltd., which held that transponder hire charges do not constitute royalty or fees for technical services. However, the Tribunal later noted that the Special Bench in the case of New Skies Satellites N.V. v. Assistant Director of Income-tax (International Taxation) held that payments for using a transponder process fall under the definition of royalty.
3. Obligations under Section 195 for Tax Deduction at Source:
The assessing officer argued that the assessee was obligated to deduct tax at source for payments made to non-residents under Section 195. The assessee contended that the payments were not taxable in India as the recipients had no permanent establishment in India and the services were rendered outside India. The Tribunal emphasized that the payer must determine the taxability of the payments and deduct tax accordingly. The Tribunal found that the payments to M/s. Menon Ltd., U.K., and M/s. Rimsat, U.S.A., were indeed royalty payments, thus requiring tax deduction at source.
4. Application of Double Taxation Avoidance Agreement (DTAA) Provisions:
The assessee invoked the DTAA between India and the USA, and India and the UK, arguing that the provisions of Article 26(3) of the DTAA neutralized the rigour of Section 40(a)(i). The Tribunal acknowledged that DTAA provisions could override domestic tax laws if they were more beneficial to the assessee. The Tribunal noted that similar issues had been addressed in the cases of Millennium Infocom Technologies Ltd. and Herbalife International India P. Ltd., where the DTAA provisions were found to neutralize the application of Section 40(a)(i).
5. Discrimination under DTAA Article 26(3):
The assessee argued that Section 40(a)(i) was discriminatory as it applied only to non-residents, contrary to Article 26(3) of the DTAA, which mandates non-discriminatory treatment. The Tribunal agreed that the DTAA provisions aimed to prevent discrimination and that the assessee could benefit from these provisions. However, since this argument was not raised before the lower authorities, the Tribunal remitted the issue back to the assessing officer to examine the applicability of the DTAA provisions and their impact on the case.
Conclusion:
The Tribunal allowed the revenue's appeal for statistical purposes and remitted the issue back to the assessing officer to examine the applicability of the DTAA provisions. The assessee's appeal was dismissed as not pressed. The Tribunal held that the payments were "royalty" and subject to tax deduction at source, but the assessee could potentially benefit from the DTAA provisions, which needed further examination by the assessing officer.
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2009 (12) TMI 1022
Issues Involved:
1. Legality of permissions granted by the Reserve Bank of India (RBI) to foreign law firms under Section 29 of the Foreign Exchange Regulation Act, 1973.
2. Requirement for foreign law firms to enroll as advocates under the Advocates Act, 1961 to carry out liaison activities in India.
3. Definition of 'practising the profession of law' under the Advocates Act, 1961.
Detailed Analysis:
1. Legality of Permissions Granted by RBI:
The petition questioned whether the RBI's permissions to foreign law firms (respondents No.12 to 14) to establish liaison offices in India were legal under Section 29 of the Foreign Exchange Regulation Act, 1973. The court noted that the foreign law firms applied to RBI between 1993 and 1995 to open liaison offices in India. The RBI granted these permissions with specific conditions, such as not undertaking any trading or commercial activities and not earning any income in India.
The court observed that the liaison activities described by the foreign law firms included coordination and communication between their head offices and clients, which inherently involved providing legal services. The court concluded that these activities were professional rather than commercial or industrial, and thus, the permissions granted under Section 29 of the 1973 Act were inappropriate. The court emphasized that professional activities are distinct from commercial activities, citing the Apex Court's decision in M.P. Electricity Board V/s. Shiv Narayan.
2. Requirement for Enrollment as Advocates:
The second issue was whether foreign law firms could carry out liaison activities in India without being enrolled as advocates under the Advocates Act, 1961. The court examined Sections 29, 30, and 33 of the 1961 Act, which collectively establish that only advocates enrolled under the Act are entitled to practice the profession of law in India.
The court held that the term 'practising the profession of law' includes both litigious and non-litigious matters. Therefore, foreign law firms engaging in non-litigious legal activities in India must be enrolled as advocates under the 1961 Act. The court rejected the argument that the 1961 Act only applies to litigious matters, stating that the Act's purpose is to regulate all legal practitioners to maintain high standards of professional conduct.
3. Definition of 'Practising the Profession of Law':
The court clarified that 'practising the profession of law' encompasses a wide range of activities, including giving legal advice, drafting documents, and providing other legal assistance. The court cited various judgments to support this interpretation, including decisions from the New York Court of Appeals, the Supreme Court of South Carolina, and the Supreme Court of Western Australia.
The court also referred to the Advocates Act, 1961, and the Bar Council of India Rules, which regulate the conduct of advocates in both litigious and non-litigious matters. The court emphasized that the 1961 Act aims to ensure that all legal practitioners, whether engaged in court practice or chamber practice, adhere to high professional standards.
Conclusion:
The court concluded that the RBI's permissions to foreign law firms under Section 29 of the 1973 Act were unjustified because the activities carried out by these firms were professional rather than commercial. The court further held that foreign law firms must be enrolled as advocates under the Advocates Act, 1961, to practice law in India, including non-litigious matters. The court directed the Central Government to expedite its decision on the issue of foreign law firms practicing in India.
The petition was disposed of with no order as to costs.
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2009 (12) TMI 1021
Issues:
1. Valuation of closing stock based on unutilized Modvat credit
2. Treatment of late payment of employees' contribution to PF
Valuation of Closing Stock:
The appeal was filed by the department against the order of CIT(A) regarding the deletion of an addition on account of unutilized Modvat credit affecting the closing stock valuation and profits of the assessee for the assessment year 2004-05. The Assessing Officer required the assessee to explain why the amount of &8377; 27,47,258 should not be added back to the value of closing stock as per section 145A of the Income-tax Act, 1961. The assessee contended that excise duty was only added to the closing stock of finished goods, not raw material or work-in-progress. The CIT(A) accepted the assessee's submission, stating that the method of accounting for excise duty would not affect the profit. However, the tribunal found that the Assessing Officer had not fully applied section 145A and remitted the matter back for re-examination to ascertain any necessary disallowance under the Act.
Late Payment of Employees' Contribution to PF:
The second ground of the appeal concerned the addition of &8377; 1,78,244 on account of late payment of employees' contribution to PF, deemed as income u/s 2(24)(x) of the Income-tax Act. The Assessing Officer disallowed the late payments, but the CIT(A) allowed remittances made within the grace period as per PF Rules, except for a sum of &8377; 9,033. The tribunal upheld the CIT(A)'s decision, stating that deductions could be claimed for remittances made within the grace period allowed under the relevant statutes. Therefore, the appeal of the revenue was partly allowed for statistical purposes.
Conclusion:
The tribunal directed a re-examination of the valuation of closing stock in relation to unutilized Modvat credit and upheld the allowance of deductions for late payments of employees' contribution to PF made within the grace period. The decisions were based on the provisions of the Income-tax Act and relevant case law interpretations.
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2009 (12) TMI 1020
Issues involved:
The issue involves the applicability of SSI exemption u/s Notification No. 8/2003 dated 01.03.2003 for the year 2005-06, specifically regarding the reversal of CENVAT Credit balance on inputs when opting for the exemption.
Summary:
Issue 1: Applicability of SSI exemption and reversal of CENVAT Credit balance on inputs
The respondents, engaged in manufacturing M.S. Pipes fittings, opted for SSI exemption under Notification No. 8/2003 dated 01.03.2003 for the year 2005-06. The Revenue alleged that the appellant was required to pay in cash an amount equivalent to the CENVAT Credit attributable to input, as there was a balance quantity of finished goods and materials in progress. The lower appellate authority allowed the appeal filed by the respondent, citing a previous judgment. The Revenue contended that the facts were different from the cited case and the impugned order should be set aside. However, the Advocate for the respondents referred to a Tribunal decision and a High Court ruling supporting the exemption from reversing CENVAT Credit balance when opting for SSI exemption.
Issue 2: Interpretation of Rule 9(2) of Cenvat Credit Rules
The Advocate for the respondents argued that Rule 9(2) cannot undermine the indefeasibility of Modvat Credit and that the CENVAT Credit taken on inputs should be determined and debited from the credit balance, without lapsing or recalling Modvat credit already utilized correctly. The Tribunal and the High Court rulings supported this interpretation, emphasizing that in the case of SSI exemption, there is no requirement to reverse the CENVAT Credit balance.
Judgment:
After considering the arguments from both parties, the Tribunal found that the case of the respondent was similar to the precedent set by the Punjab & Haryana High Court. The Tribunal upheld the decision that when opting for SSI exemption, the assessee is not obligated to reverse the CENVAT Credit balance. Consequently, the appeal filed by the Revenue was rejected, and the impugned order was upheld.
*(Dictated and pronounced in Court)*
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2009 (12) TMI 1019
Issues involved: Petition for directing respondent to decide application, lodge prosecution u/s 35-A and 35-B of Bombay Money Lenders' Act, stay arbitration proceedings.
Decision on Petition for Directing Respondent to Decide Application:
The petitioner sought direction for respondent No.1 to decide the application at Annexure-D forthwith regarding the respondent's license status under the Bombay Money Lenders' Act. The petitioner alleged non-production and non-obtaining of license by the respondent, which constitutes an offense u/s 35-A and 35-B of the Act. The High Court directed respondent No.1 to consider the application within four weeks, emphasizing that this decision would address the petitioner's grievance effectively.
Decision on Lodging Prosecution u/s 35-A and 35-B of Bombay Money Lenders' Act:
The petitioner requested prosecution against respondent No.1 for the alleged offense of not having the required license u/s 35-A and 35-B of the Bombay Money Lenders' Act. Despite the petitioner's claims and reliable sources indicating the lack of a license, no action had been taken by the authorities. The High Court did not delve into the merits of the matter but directed respondent No.1 to decide the pending application first, which would potentially lead to addressing the petitioner's concerns.
Decision on Staying Arbitration Proceedings:
The case stemmed from a loan transaction where disputes arose between the petitioner and respondent No.3, leading to arbitration proceedings. During the arbitration process, certain orders were passed by the City Civil Court, Ahmedabad, affecting the petitioner's rights over certain properties. The High Court did not intervene in the arbitration proceedings but emphasized the importance of resolving the pending application related to the respondent's license status before proceeding further. The Court's focus was on ensuring a fair consideration of the petitioner's concerns before any further actions were taken in the arbitration process.
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2009 (12) TMI 1018
Issues Involved:
1. Allotment of Government Land to Political Parties.
2. Alienation of Land by A.P. Housing Board.
3. Validity of G.O. Ms. No.76 and Sale Deed.
4. Powers of Government under Section 79 of the A.P. Housing Board Act.
5. Cancellation of Sale Deed.
6. Earlier Allotments to Political Parties.
7. Exercise of Discretionary Jurisdiction under Article 226.
8. Delay and Laches.
9. Locus Standi of the Petitioner.
Issue-wise Detailed Analysis:
1. Allotment of Government Land to Political Parties:
The judgment notes that the practice of allotting government land to recognized political parties for establishing their party offices is common in several states and at the Centre. However, the court did not examine whether such allotment at a nominal value violates Article 14 of the Constitution, as the pleadings were insufficient and other recognized political parties were not respondents in the writ petition.
2. Alienation of Land by A.P. Housing Board:
The court examined whether the land belonging to the A.P. Housing Board could be alienated under G.O. Ms. No.76 dated 25.11.2005 for the construction of a political party's state headquarters without adhering to statutory conditions and procedures prescribed under the A.P. Housing Board Act, 1956. The court found that the Board, a statutory body, did not have the power to sell or lease land not comprised in a sanctioned housing scheme.
3. Validity of G.O. Ms. No.76 and Sale Deed:
The petitioner challenged G.O. Ms. No.76 as arbitrary, illegal, ultra vires the provisions of the Act, and in violation of Article 14 of the Constitution. The court held that the sale deed executed by the Board in favor of the third respondent was a consequence of the impugned G.O. and was ultra vires Section 45 of the Act, as the land was not situated in an area comprised in a sanctioned housing scheme.
4. Powers of Government under Section 79 of the A.P. Housing Board Act:
The court examined whether the government could issue directions to the Board under Section 79(1) to alienate its land. The court concluded that Section 79(1) does not empower the government to issue directions for purposes alien to the Act and that such directions must be necessary or expedient for carrying out the purposes of the Act. The impugned G.O. was found to be ultra vires Section 79(1).
5. Cancellation of Sale Deed:
The court addressed whether a sale deed registered under the Indian Stamp Act and the Indian Registration Act could be challenged in writ proceedings. It held that since the sale deed was executed contrary to statutory provisions and was a void document, it could be declared invalid by the court.
6. Earlier Allotments to Political Parties:
The court rejected the argument that earlier allotments to other political parties justified the impugned allotment. It held that illegal or unwarranted orders could not be the basis for issuing a writ compelling the authority to repeat the illegality.
7. Exercise of Discretionary Jurisdiction under Article 226:
The court emphasized that it would not exercise its jurisdiction under Article 226 except in larger public interest. It noted that the power under Article 226 is discretionary and should be exercised to promote justice and public interest, not merely to correct errors of law.
8. Delay and Laches:
The court considered the delay in challenging G.O. Ms. No.76 and found that the petitioner had approached the court without undue delay, as the land was still vacant and no third-party rights had arisen. It held that respondents could not rely on delay and laches to defend ultra vires acts.
9. Locus Standi of the Petitioner:
The court addressed the issue of the petitioner's locus standi and concluded that the petitioner, a registered society working for slum dwellers' rights, had sufficient interest in the matter. It rejected the argument that the petitioner was acting for extraneous reasons and held that the petition was in the nature of a class action.
Conclusion:
The court declared G.O. Ms. No.76 dated 25.11.2005 and the sale deed executed by the A.P. Housing Board in favor of the third respondent as ultra vires Sections 45 and 79(1) of the A.P. Housing Board Act, 1956, and consequently quashed them. The writ petition was allowed without costs.
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2009 (12) TMI 1017
Issues Involved:1. Maintainability of the appeal before the High Court. 2. Bonafide requirement of the son of Respondent No.1. 3. Amendment of pleadings and introduction of additional evidence. 4. Definition of "landlord" u/s 3(iii) of the Rajasthan Premises (Control of Rent & Eviction) Rent Act, 1950. Summary:1. Maintainability of the Appeal:Ms. Shobha contended that the appeal in the High Court was not maintainable under Order 43 Rule 1 CPC against an order passed either under Order 6 Rule 17 or Order 41 Rule 27 CPC. However, Mr. Keshote argued that under the amended provisions of clause (u) of Rule 1 of Order XLIII, effective from 1st February, 1977, an appeal against an order of remand under Rule 23-A of Order XLI CPC is maintainable. The Court concluded that the appeals before the High Court were maintainable and rightly entertained. 2. Bonafide Requirement:Ms. Shobha argued that Subhash Paliwal did not fall within the definition of "landlord" as defined in Section 3(iii) of the 1950 Act, and hence the suit for eviction for the bonafide need of his son was not maintainable. However, the Court noted the petitioners' own admission in their written statement that Subhash Paliwal and Gopal Paliwal were their landlords and that they had been paying rents to them. The Court held that the petitioners were estopped from taking such objection under Section 116 of the Evidence Act. 3. Amendment of Pleadings and Introduction of Additional Evidence:Ms. Shobha submitted that the High Court erred in interfering with the reasoned judgment of the First Appellate Court, which allowed the amendment of the written statement and the introduction of additional evidence. She cited various precedents emphasizing the liberal approach towards amendments. However, the Court found that the petitioners were aware of the Will but did not mention it in their written statement and only sought its introduction at the appellate stage to prolong the disposal of the appeal. The Court held that the petitioners' attempt to introduce a new story was of little consequence due to their admission of paying rents to the respondents. 4. Definition of "Landlord":Ms. Shobha argued that Subhash Paliwal did not fall within the description of "landlord" in the Act. However, the Court concluded that in view of the petitioners' admission of paying rents to the respondents, this argument held little weight. The Special Leave Petition was dismissed with no order as to costs.
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2009 (12) TMI 1016
Issues involved: Appeal filed by Revenue against CIT(A) order regarding treatment of casual membership fees as business income u/s 143(3) of IT Act for AY 2006-07.
Summary:
1. The Revenue contended that CIT(A) did not treat casual membership fees as business income.
2. Assessee company registered u/s 12A with main activity to promote Golf. AO observed casual members not eligible for privileges, treated fees as business income. CIT(A) allowed claim, considering casual members as associate members, satisfying requirements of Section 2(15) of the Act.
3. Tribunal noted club's entitlement to admit casual members as per articles of association, using golf course like permanent members. AO's decision to treat fees as business income was unfounded as club maintained required records and had been recognized as not for profit motive.
4. Promotion of sports and games considered charitable purpose u/s 2(15) of IT Act. Association promoting sports can claim exemption u/s 11, even without approval u/s 10(23) for sports associations.
5. Tribunal found AO's decision lacked merit, upheld CIT(A) order. Revenue's appeal dismissed.
*Decision:* Revenue's appeal dismissed by Tribunal on 21st December, 2009.
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2009 (12) TMI 1015
Issues Involved:
1. Maintainability of the appeal under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996.
2. Prima facie case for obtaining interim order of injunction.
3. Specific performance of the contract.
4. Enforcement of negative stipulation in the contract.
5. Appointment of receiver.
Issue-wise Detailed Analysis:
1. Maintainability of the Appeal:
The respondent contended that the appeal is not maintainable under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996, as the impugned order is not an interim measure within the meaning of Section 9 of the Act. The court, however, determined that an interim order of injunction, whether passed ex parte or otherwise, falls within the ambit of Section 9 and is appealable under Section 37(1)(a). The court referred to the Full Bench decision in Akmal Ali, which held that an ex parte order of temporary injunction is appealable under Order 43, Rule 1(r) of the Code of Civil Procedure.
2. Prima Facie Case for Interim Injunction:
The court analyzed whether the respondent had made out a prima facie case for obtaining an interim order of injunction. It was noted that the contract between the parties involved a contingent contract, dependent on the removal of shops located outside the suit land. The court observed that the contract was inherently determinable and, therefore, not specifically enforceable under Section 14(1)(c) of the Specific Relief Act. Consequently, the court held that the respondent had not established a prima facie case for the grant of an interim injunction.
3. Specific Performance of the Contract:
The court examined whether the contract was specifically enforceable. It was noted that the contract involved the transfer of immovable property and the construction of a multi-purpose complex. The court found that the contract was contingent upon the removal of shops on Zoo Road, which was not within the control of the appellants. The court concluded that the contract was not specifically enforceable as it was inherently determinable and had become impossible to perform due to the non-fulfillment of the contingent condition.
4. Enforcement of Negative Stipulation:
The respondent argued for the enforcement of the negative stipulation in the contract, which prevented the appellants from transferring the suit land to any third party. The court held that Section 42 of the Specific Relief Act allows for the enforcement of negative stipulations only if the affirmative agreement is enforceable. Since the contract was not specifically enforceable, the court found that the negative stipulation could not be enforced. The court emphasized that granting an injunction to enforce the negative stipulation would indirectly compel specific performance of the contract, which is not permissible.
5. Appointment of Receiver:
The respondent sought the appointment of a receiver to manage the suit property. The court held that since the contract was not specifically performable and the disputes remained only for determining liabilities, the appointment of a receiver was not warranted. The court concluded that the application under Section 9 was misconceived and not tenable in law.
Conclusion:
The appeal was allowed, and the impugned order dated 24.2.2009 was set aside. The court held that the respondent had not made out a prima facie case for the grant of an interim injunction, the contract was not specifically enforceable, and the enforcement of the negative stipulation was not permissible. The application for the appointment of a receiver was also found to be unwarranted.
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2009 (12) TMI 1013
Issues Involved:
1. Application for permission to transfer properties.
2. Application for interim injunction to restrain alienation of assets.
3. Application for direction not to place agenda for transferring assets in AGM.
Detailed Analysis:
1. Application for Permission to Transfer Properties (C.A. No. 1000 of 2009):
- Applicant's Case: K. Periasamy Gounder entered into a Memorandum of Understanding (MOU) with Kothari Industrial Corporation Ltd. (the Company) to discharge secured loans in exchange for transferring properties in Trichy, Coimbatore, and Mumbai. Payments totaling Rs. 9.37 crores were made towards one-time settlements with several banks.
- Respondent's Case: The Company confirmed the facts and claimed no legal impediment to selling its properties. Kotak Mahindra Bank (the petitioning creditor) opposed, citing ongoing proceedings under the SARFAESI Act and a prohibitive order by the Debt Recovery Tribunal (DRT).
- Court's Findings: The properties in question were encumbered to the State Bank of India and other banks. The Company failed to disclose ongoing injunctions and status quo orders. The transaction was found to lack bona fides and honesty, aiming to outwit creditors like the State Bank of India and ICICI Bank. The Company also did not seek prior approval from the Court before entering into the MOU.
- Decision: The application was dismissed due to lack of bona fides and the intention to outwit creditors.
2. Application for Interim Injunction to Restrain Alienation of Assets (C.A. No. 1740 of 2009):
- Applicant's Case: Kotak Mahindra Bank sought an injunction to prevent the Company from alienating shares of Glenworth Estate Ltd. and Adderley Estate Ltd., which were transferred to wholly-owned subsidiaries and then to third parties.
- Respondent's Case: The Company claimed the transfers were completed in 2005, making the application infructuous.
- Court's Findings: The Company suppressed material facts and violated status quo orders. The transfer deeds were executed and presented for registration, claiming exemption from stamp duty based on subsidiary status, which ceased shortly after the transfers.
- Decision: The application for injunction was not granted, but the Company was directed to furnish full particulars of the transactions and file certified copies of the transfer deeds.
3. Application for Direction Not to Place Agenda for Transferring Assets in AGM (C.A. No. 1741 of 2009):
- Applicant's Case: Kotak Mahindra Bank sought a direction to prevent the Company from placing any agenda before the AGM regarding the transfer of assets.
- Respondent's Case: The Company stated that the statutory notices for the AGM had already been issued and there was no agenda for transferring assets.
- Court's Findings: The Company's statement was recorded.
- Decision: The application was closed based on the Company's statement.
Conclusion:
- C.A. No. 1000 of 2009: Dismissed due to lack of bona fides and intention to outwit creditors.
- C.A. No. 1740 of 2009: Disposed of with directions to furnish transaction details and file certified copies of transfer deeds.
- C.A. No. 1741 of 2009: Closed, recording the Company's statement that there was no agenda for transferring assets in the AGM.
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