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2014 (8) TMI 1258
Revision u/s 263 - Computation of undisclosed income of the block period - case of the assessee falls in provisions of section 158BB(1)(ca), which is according to the amendment by Finance Act, 2002 wherein such income is to be included in the block assessment order - HELD THAT:- Return for the assessment year 2002-03 filed on 01.09.2004 declaring income was non-est, but it was regularized by the AO by issuing notice u/s. 148 of the IT Act and the income declared therein was accepted vide assessment order dated 29.03.2006 u/s. 143(3)/148 and income declared for assessment year 2002-03 was accepted.
Equally it is also a fact that the assessee while filing the non-est return on 01.09.2004 declaring income had deposited only Rs. 5,71,000/- as advance tax on 14.03.2002. Admittedly, no other advance tax has been paid by the assessee. According to the Income-tax Act, advance tax could be paid latest by 15.03.2002 for the assessment year 2002-03. Therefore, the letters written by the assessee later on for adjustment of tax from the seized cash etc. could not be construed as payment of advance tax for the remaining amount.
The assessee in the computation of income filed with the return of income also made the same request that since the assessee is not in a position to liquidate the present demand of tax, therefore, requested the department for adjustment of the cash seized by the department for payment of tax. Such request would also not absolve the assessee from making payment of advance tax in accordance with the IT Act before expiry on 15.03.2002.
Thus, considering the facts of the case in the light of the decision of Hon’ble Supreme Court in the case of A.R. Enterprises [2013 (1) TMI 345 - SUPREME COURT], we are of the view that the assessee could be given benefit of such income, to be considered as disclosed income, on which he has paid the advance tax of Rs. 5,71,000/- and the same could not be considered as undisclosed income within the meaning of section 158BB.
CIT was, therefore, not justified in directing the AO to include entire income in the block assessment order. We accordingly set aside the order of the ld. CIT u/s. 263 to the extent that the AO shall not consider such income as undisclosed income in block period, on which the assessee had paid advance tax.
AO shall make necessary computation/determination of such disclosed income on which the advance tax is paid after giving reasonable and sufficient opportunity of being heard to the assessee.
The disclosed income in proportion to which advance tax has been paid shall be excluded from the addition to be made in the block assessment order and whatever undisclosed income is left or determined thereafter will be added in the block assessment. The AO, thereafter shall make necessary amendment in the order u/s. 143(3)/148 dated 29.03.2006 and shall reduce the undisclosed income from the computation of income which has been added in the block assessment order. The impugned order u/s. 263 to that extent is modified accordingly.
Appeal of the assessee is partly allowed.
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2014 (8) TMI 1257
Rejection of registration u/s 12AA - assessee has mobilized all the resources under its control for construction of the massive building for the medical college and hospital - According to assessee since the trust was established for the purpose of education and the medical college was in fact started after getting approval from the MCI, the assessee is entitled for registration u/s 12AA - HELD THAT:- This Tribunal is of the considered opinion that the activities of the trust was not carried out in accordance with the object of the trust. The assessee trust administer and manage the so-called medical college in a commercial manner with profit motive.
The assessee trust gone to the extent of entering into agreement for offering employment and admission for medical education and collects money. It is to be remembered that admission in any educational institution including medical college has to be made only on merit basis.
Therefore, entering into agreement for admission in medical college after collecting money is not only inhuman but also against the scheme of the Constitution as held by the Apex Court in Mohini Jain’s case [1992 (7) TMI 330 - SUPREME COURT].
This Tribunal is of the considered opinion that there is no genuineness in the activity of the assessee trust and it exist only for profit motive to administer and manage the medical college in a commercial manner, therefore, it is not entitled for registration as a charitable institution u/s 12AA. This view of the Tribunal is fortified by the decision of this bench of the Tribunal in Travancore Educational Society [2015 (6) TMI 547 - ITAT COCHIN] Appeal of the assessee stands dismissed.
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2014 (8) TMI 1256
Seeking extension of period of complying with the requirements of the Companies Act, 2013 and Clause 41 of the Listing Agreement for publication of the audited financial results for the year ended 31st March, 2014 and for the quarter ended 30th June, 2014, at least by a further period of 30 days - HELD THAT:- By an order dated 05.08.2014, this Court had set aside the orders dated 16.06.2014 passed by the National Stock Exchange Limited and the Bombay Stock Exchange Limited and remanded the matter for being considered afresh subject to the petitioner complying with clause 41 of the Listing Agreement within three weeks from that date. The petitioners now state that they are unable to comply with clause 41 of the Listing Agreement as they still did not have a quorum for holding a Board Meeting as the application for security clearance of the third Director was furnished on 25.08.2014.
Conclusion - The time period for complying with Section 41 of the Listing Agreement is extended by a further period of four weeks. However, it is clarified that the same does not in any manner indicate that the delay caused by the petitioner is condonable and the respondents shall be at liberty to take an independent view on the question of default committed by the petitioner.
Application disposed off.
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2014 (8) TMI 1255
Appellants liability to pay a non-compete fee to the public shareholders of the target company as to be paid to the outgoing promoters of the target company which is being taken over by the appellants - scope of Regulation 20(8) of the Takeover Code - HELD THAT:- It is nobody’s case that the valuation of the shares by the appellants was detrimental to the interests of the shareholders, except to the extent that the shareholders in the public offer were denied the benefit of the non-compete fee paid to the Bangur group. There is no allegation that the valuation of the shares was not in conformity with Regulation 20(5) of the Takeover Code.
Splitting the non-compete agreement between the appellants and 5 members of the Bangur group on the one hand and 15 members of the Bangur group on the other - There is absolutely no indication given in the non-compete agreement that it is severable or that there was any intention to split it into two or more distinct parts.
The absurdity resulting in splitting-up the non-compete agreement can be better appreciated from a hypothetical example. What if the Tribunal had partially agreed with the appellants and held that the non-compete agreement was valid in respect of say ten or twelve of the promoter entities instead of five. This could happen if the genuineness of the non-compete agreement is examined in relation to each promoter entity, as has been done by SEBI. Does it not, therefore, mean that the non-compete agreement has to be split in twenty ways to decide whether it is genuine or sham in respect of five or ten or twelve of the promoter entities. Can this be said to be a reasonable construction of the non-compete agreement? - We are afraid that this surely cannot be the correct way of reading the non-compete agreement and that is why we are of the view that the Tribunal committed a fundamental flaw in holding only a part of the non-compete agreement as a sham. Tribunal should have either held the entire non-compete agreement as a sham or it ought to have held the entire non-compete agreement as a genuine agreement. The question of a half-way house simply does not arise.
Two events that have occurred since the non-compete agreement was entered into on 29th March, 2011. Firstly, the non-compete period of three years has expired, in a sense rendering this exercise academic. Secondly, the Takeover Code has been repealed with effect from 23rd October, 2011 and substituted by the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The new Takeover Code does away with the concept of a separate non-compete fee, the amount being included in the offer price in terms of Regulation 8 thereof.
We are of the view that the appeal deserves to be allowed and accordingly it is allowed. The directions and orders passed by SEBI and the Securities Appellate Tribunal are set aside.
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2014 (8) TMI 1254
Sanction of Scheme of Amalgamation - Sections 391 to 394 of the Companies Act, 1956 - locus of Creditor (Objector) to raise any objection to the Scheme - jurisdiction of the court to delve deep into the commercial aspects of the Scheme or the commercial wisdom of the shareholders and creditors.
Whether the Objector has no locus to raise any objection to the Scheme of Amalgamation? - HELD THAT:- There is merit in the submission made by the Learned Counsel on behalf of the Petitioner that though the Petitioner/Transferee Company does not accept any liability to the Objector or even their status as a creditor, as of now, the entire claim of the Objector has been adjudicated and the adjudicated amount has been fully adjusted/secured. In such circumstances, the Objector has no locus to raise any objection to the Scheme of Amalgamation - for a creditor to object to a Scheme of Amalgamation, he must first cross the threshold of prima facie satisfying the Court that there is a debt due to him. In the present case, the claim of the Objector has, at the first instance been adjudicated by a court of competent jurisdiction and the adjudicated amount stands fully paid or secured. According to the Learned Counsel for the Objector, the Objector has filed a Cross Appeal against the decree of the Small Causes Court. Such Appeal if filed, would be considered on its own merits by the Small Causes Court. But the fact remains that as on date there is an adjudication of the claim of the Objector, which is fully adjusted and/or secured.
Jurisdiction of the court to delve deep into the commercial aspects of the Scheme or the commercial wisdom of the shareholders and creditors - HELD THAT:- It would be beyond the jurisdiction of the Company Court considering a Petition for sanction of a Scheme of Amalgamation to analyze the accounts of the Companies in depth, unless something manifestly illegal or malafide is brought to the notice of the Court. In the present case, nothing of that sort has been brought to the notice of this Court. In fact, the Transferee Company has responded to each of the objections raised and on considering the said responses, it is found that the objections raised by the Objector are devoid of merit. The Court, while considering the Petition for sanction of a Scheme, has only a supervisory role. In exercise of such power, the Court has neither the expertise nor the jurisdiction to delve deep into the commercial aspects of the Scheme or the commercial wisdom of the shareholders and creditors - The statements produced by the Transferee Company disclose that the Transferee Company has accumulated losses, whereas neither of the Transferor Companies has any accumulated losses. The financial position of the Transferee Company is not in any manner prejudiced by the amalgamation, but in fact, becomes stronger.
Sanction of the scheme - HELD THAT:- The various objections raised by the Objector do not make out any ground for declining sanction to the Scheme under Sections 391 to 394 of the Companies Act, 1956. As stated herein above, these are not the issues which the Court can investigate in depth. In any case, the Petitioner Company has given explanations to the accounting issues, which appear to me to be bonafide and plausible. An overwhelming majority of the Shareholders have approved the Scheme. Though individual notices were issued, no other Creditor has objected to the Scheme. The adjudicated claim of the Objector also stands adjusted / secured - The Objector has not made out any case to establish that the Scheme is malafide or not in public interest or that it will adversely affect the interests of the Creditors.
Conclusion - It is found that the Scheme is in any manner malafide, or that it in any way prejudices the rights of the Creditors of the Transferee Company. It is not found that the Scheme to be unjust or unfair to the Objecting Creditor nor does it adversely affect the interest of the other Creditors. The Scheme is not violative of any provisions of law and is not contrary to public policy.
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2014 (8) TMI 1253
Addition on account of sale consideration - sale of one SRA project - as argued MOU itself is not genuine because it has been challenged before the arbitrator -as mentioned that the sale agreement was fraudulently executed and similarly the Deed of dissolution was also fraudulently obtained - HELD THAT:- Assuming for the sake of argument that the MOU is not a void document, it relates to the sale of SRA project. In our understanding of municipal laws, around 29 to 30 permissions/No Objection Certificates are required before the commencement of the project from the State Government/local authorities.
There is not even a single evidence which could show that the local authorities have granted/sanctioned permission to the assessee. The entire assessment has been made only on the basis of this MOU which firstly is a invalid document and secondly it does not give any clue in respect of the commencement of the SRA project. There is no other cogent material evidence brought on record to show that the assessee has actually received the consideration nor any such document was found during the course of the search proceedings. The entire addition is made on the basis of assumptions/presumptions, such addition cannot be sustained. We, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition.
Taxation of income shown by the partner who has taken over the business of the assessee firm - There is no cogent material evidence on record to show that the assessee has taken permission from various local authorities in respect of the said project, even the payment schedule in the agreement show that Rs. 50 lakhs only has been received on 5.4.2007. As mentioned hereinabove, the firm was dissolved on 14.5.2007 and the entire business was taken over by one of the partners.
We fail to understand how the entire consideration has been taxed in the hands of the assessee when the business has been taken over by one of the partners. Only Rs. 50 lakhs has been received on 5.4.2007 i.e. before the date of dissolution, only to this extent, the assessee can be made liable to pay the tax and that too when this amount has not been shown as income subsequently by the partner who has taken over the business of the dissolved firm. We restore this issue to the files of the AO for the limited purpose of verification of Rs. 50 lakhs, whether this income has been shown by the partner who has taken over the business of the assessee firm and if it is taxed in the hands of the partner, then the same cannot be taxed in the hands of the firm. In respect of the balance addition we do not find any evidence to justify this addition which is accordingly deleted.
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2014 (8) TMI 1252
Classification of service - Business Auxiliary Service or not - services rendered by the Respondent to the Income Tax Department of issuance of PAN card - service rendered in relation to a sovereign function - HELD THAT:- The Registrar (Judicial)/Registrar, High Court, Original Side, Bombay to ensure that the original record in relation to this Appeal is summoned from the Tribunal and offered for inspection of the parties. This paper book is treated sufficient for the purpose of admission of this Appeal. However, the Registry must further ensure preparation of complete paper book in accordance with the Rules.
The Registry in the first instance must send intimation of admission of this Appeal enclosing therewith a copy of this order so as to enable the Tribunal to act accordingly.
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2014 (8) TMI 1251
Imposition of penalty on NSE - Abuse of dominant position by NSE - violation of Section 4 of the Competition Act, 2002 on the part of NSE or not - introducing predatory pricing by waiving transaction fee altogether in the newly established Currency Derivatives Segment (CD) - also alleged that NSE was using its dominance in the non-CD segments to enter into and protect its position in the CD Segment and was also causing denial of market access by promoting MCX SX, Financial Technologies of India Ltd. (FTIL) from offering its software ODIN for the use of its CD Segment.
HELD THAT:- The CCI has thoroughly discussed all the arguments, which were placed before it. The appreciation of the material put before the CCI is quite satisfying. The uncertainty in the application of law was also pressed into service like it was done before the CCI. The CCI is agreed upon in its observations about these aspects. It was tried to be said that there were benefits of zero pricing and that there was no denial of market access. The CCI is agreed upon, for the reasons given for rejecting these contentions and for the same reasons, these contentions are rejected. Much was made about penalty levied @ 5% of the average turnover.
The case of M/s. Excel Crop vs. CCI [2017 (5) TMI 542 - SUPREME COURT] was pressed into service to suggest that the relevant turnover should alone be considered for the sake of penalty. All these arguments of relevant turnover should fall to the ground in the wake of finding that the relevant market in this case IS the services of stock exchange in all the segments. In M/s. Excel Crop's judgment, there were well defined distinct markets and it was a multi-commodity company. That is not a case here.
Then, it was pointed out that the relevant turnover on account of the zero transaction fees policy was also zero. So, it was asked to adopt a notional turnover figure. It is pointed out that the NSE was making tons of profits from the relevant market on account of its services in the other segments. Therefore, there can be no justification for taking any lenient view, nor is it necessary to consider the concept of notional turnover figure, when the turnover of the NSE is well available on the basis of Annual Reports. The contention that the turnover for the CD segment should be the relevant turnover is rejected. Enough reasons to hold that the whole turnover of NSE should be taken into consideration, in view of the finding on the relevant market. The order of CCI in this behalf need not be modified.
As regards, the other remedies imposed, the NSE has submitted that it should not be required to maintain segment wise account as in a multi-product firm, it is difficult to apportion shared based fixed costs and further that AS 17 does not requires the maintaining of segment wise accounts. In view of finding that the relevant market is the services of Stock Exchange, in all the segments it will not be necessary to maintain segment wise accounts. This direction by the CCI is not approved and is ordered to be deleted.
There are no merits in the Appeal - Accordingly, the Appeal is dismissed.
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2014 (8) TMI 1250
Addition u/s 40A(3) - assessee has made cash payments over and above Rs. 20,000/- towards purchases - HELD THAT:- Before us, referring to copy of return and 44AB report counsel submits that return along with audit report was furnished and details regarding cash purchases were furnished before the AO. On hearing both the parties, we are of the considered view that this issue has to be re-examined afresh in detail with reference to the findings given by the AO and also submissions of the assessee's counsel and also with reference to evidences produced before us. In the circumstances, we remit this issue to the file of the AO, who shall examine the issue afresh in accordance with law, after providing adequate opportunity to the assessee.
Disallowance u/s 40(a)(ia) - non-deduction of tax at source by the assessee in respect of transport charges - CIT following the decision of Merilyn Shipping and Transport [2012 (3) TMI 402 - ITAT VISAKHAPATNAM] held that since the payments were not outstanding and they were all paid before the end of accounting year, no disallowance u/s 40(a)(ia) - HELD THAT:-We are of the view that this matter should be examined by the AO in the light of the latest decisions of various High Courts on this issue. Thus, we remit this issue also back to the file of the AO to decide it afresh in the light of the latest decisions of various High Courts, after providing adequate opportunity to the assessee.
Appeal of the Revenue is allowed for statistical purposes.
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2014 (8) TMI 1249
Disallowance u/s 14A r.w.r. 8D - Primary contention raised by the assessee is that AO had not recorded his non-satisfaction on its claim that no expenditure was incurred by it for earning tax free income - HELD THAT:- What we note is that assessee had not made any disallowance by itself u/s 14A in its return of income. During the course of assessment through its letter dated 26/7/2011 it did raise a contention on these lines, and relevant part has been reproduced by us at para six above. It had given a break-up of the interest as well, claiming a part thereof to be for its business, leaving a balance on which it was undecided. A reading of the above reply itself would show that assessee was not convinced by its own stand that no expenditure was incurred in relation to the money put in tax free investment.
Even in a case where the AO rejects the claim of the assessee that no expenses were incurred to earn the exempt income, it is not mandatory for him to invoke the method of calculation prescribed by Rule 8D(2) of the Rules and is free to make the disallowance on any reasonable basis. The plea of the assessee that applying the Rule 8D blindly by the AO will lead to absurd results, in our view, is without any basis because while examining the claim of the assessee regarding expenditure incurred in earning the exempt income including a claim that no expenses were incurred, the AO is bound to take note of such absurdities and refrain from invoking the method of disallowance of expenses as prescribed by Rule 8D(2) of the Rules. In other words, it is only when no reasonable and proper parameters for making disallowance can be arrived at, that resort to Rule 8D(2) can be had by the AO. Rule 8D(2) will thus be a last resort when it becomes impossible to arrive at a just conclusion on the amount of expenses that has to be disallowed as attributable or incurred in earning exempt income.
Here on the other hand, it is a disallowance under rule 8D(2)(ii) and not 8D(2)(iii). Assessee has raised no grievance on the disallowance under rule 8D(2)(iii), either before CIT(A) or us. Hence, this case in our opinion, will not be of help to the assessee.
Interest free own funds were there to cover the investments - Assessee has not been able to show that no part of the working capital loans raised by it at Bangalore, were used for making tax free investment. On the other, it is by itself not sure whether any part of the working capital was used for such investment. Thus, its claim that interest free own funds alone were used for making tax free investments is oppugnant to the admission before the CIT(A). The often quoted principle viz. “alligus contaria non-est audientus” has to apply. As for the decision of HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] relied on by the AR, in the first place it was a Bank and investments were made out of pooled funds. Here on the other hand, by assessee's own admission at least a part of its investment had gone out of the working capital loan, and hence not pooled funds. Hence, in our opinion this contention also has no merits.
Bifurcation of gross interest is required to be made between those directly attributable to business and those not so attributable, before applying Rule 8D, does in our opinion, needs attention - Clearly interest expenditure not attributable to any particular income or receipt can be considered for apportionment under rule 8D(2)(ii). Nevertheless, the assessee had given submissions supporting its claim that part of interest was on term loans & working capital directly relatable to its business only before CIT(A). Neither CIT(A) nor AO had verified the work out furnished by the assessee. Therefore, the aspect of quantification of disallowance required to be made under 8D(2)(ii) does require a fresh look by the AO. Hence we set aside the orders of the lower authorities for the limited aspect of the quantification of disallowance required under rule 8D(2)(ii) and remit it back to the AO, for working it out afresh after hearing the assessee.
Interest addition - no interest was charged on loans and advances given by it - HELD THAT:- There cannot be any dispute that at least share capital and reserves are own funds of the assessee.
Not only had assessee own funds, well covering the loans and advances, but in the previous year the advances had gone down. In none of the earlier assessment year viz. by 2003-04, 2004-05,2005-06,2006-07,2007-08 & 2008-09 were any disallowance for interest on loans for non-business purpose made.
As for the decision of the Hon'ble P & H High Court in Abhishek Industries Ltd [2006 (8) TMI 123 - PUNJAB AND HARYANA HIGH COURT] this was followed by the very same High Court, while confirming a similar disallowance in the case of Munilal Sales Corpn [2006 (10) TMI 89 - PUNJAB AND HARYANA HIGH COURT] Hon'ble Apex Court reversed the latter [2008 (2) TMI 19 - SUPREME COURT] and hence judgment in Abhishek Industries Ltd., will not further revenue's case any way. On the other hand, assessee is well supported by the decision of Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] as well as Hon'ble Gujarat High Court in the case of Raghuvir Synthetics Ltd [2013 (7) TMI 806 - GUJARAT HIGH COURT] We thus, do not find any reason to interfere with the order of the CIT(A) in this regard. In the result, ground 4 of the revenue is dismissed.
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2014 (8) TMI 1248
Penalty u/s 271(1)(c) - deficit of tax and shortage of cash noticed in survey proceedings - respondent accepted those figures and filed revised returns and offered to pay tax - Certain adjustments were also sought on the basis of the sales that have taken place during the relevant period - respondent stated that it did not have any intention to conceal any source of income and that it accepted the two items pointed out in the course of survey, only with a view to purchase peace.
HELD THAT:- The exercise to be undertaken by an AO in the proceedings u/s 271(1)(c) is somewhat typical. For all practical purposes, he has to follow a method different from the one, which he adopts while passing the order of assessment. The very fact that a return submitted by the assessee is required to be processed by an Assessing Officer discloses that the facts and figures mentioned in the return are subject to scrutiny and verification. Many a time, the understanding of an assessee about a particular issue may not be correct and the finding of the Assessing Authority on such assessment may result in either adding some additional items of income or disallowing certain deductions.
The mere fact that the return filed by an assessee was found to be not acceptable and certain additions of income had to be made or deductions had to be disallowed, may some times give an impression that the assessee was not truthful. That, however, cannot be a ground to brand him as one who has concealed his income from the Department.
Before the Act came to be amended in the year 1964, the word 'deliberate' existed in Section 271(c) of the Act. The deletion of that word certainly had changed the complexion of the provision. All the same, it is not to the effect that every discovery of inaccuracy in the facts and figures furnished by an assessee can be treated as concealment per se and thereby, attracting penalty u/s 271(c) - Much would depend upon the facts and circumstances of the concerned case. It is only when the Assessing Officer is able to establish that there was an intention on the part of the assessee to conceal an item of income, though not deliberate, that the occasion to levy penalty would arise.
The discussion that was undertaken by the Assessing Authority in the instant case proceeded on the line that once the respondent did not dispute the facts and figures noticed in the survey, it can be inferred that there was a concealment of the corresponding income. It is difficult to accept such a broad proposition. It has already been mentioned that, in his explanation, the respondent stated that though he had explanation for the facts alleged against him, he did not choose to press the same into service, lest there be any friction with the Department. That, however, was treated almost as a total surrender by the respondent.
The readiness on the part of the assessee to accept the facts and figures noticed in the survey, with the objective of avoiding further complication in the matter or to purchase peace, cannot be treated as unconditional acceptance of the allegation or accusation against him much less does it basis for levy of penalty.
If every variation that is noticed in the course of assessment is to be treated as concealment, the very computation of the income tax and the exercise to be undertaken thereunder, undergoes substantial change, which the Parliament may not have intended. At any rate, the Commissioner was convinced on the facts that there was no act on the part of the respondent. It is only when the conclusions at the level of the Commissioner who happens to be the last authority on the facts are shown to be perverse or without any basis, that an occasion would arise for the Tribunal or for that mater, this Court to interfere with the same. Decided against revenue.
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2014 (8) TMI 1247
Refund of amount paid under protest - Constitutionality of imposts - cess - tax - Challenge to Validation Act - HELD THAT:- This Court in UNION OF INDIA VERSUS SOLAR PESTICIDE PVT. LTD. [2000 (2) TMI 237 - SUPREME COURT] once again had to deal with the question "whether the doctrine of unjust enrichment is applicable in respect of raw material imported and consumed in the manufacture of a final product is a question which arises for consideration in these appeals".
In substance, this Court held that a person who passes on the burden of tax to some other person, either directly or indirectly is not entitled to claim the refund of tax, the levy and/or collection of which by the State is declared to be illegal or unconstitutional - the existence or otherwise of such a provision makes no difference for the correctness of the above stated principle of law Any person carrying on the activity of manufacture of goods utilising some raw material which had already suffered some tax would normally include both the tax component and the cost of such raw material into the cost of the final product and pass on the same to the consumer of the manufactured product.
There are no reason to interfere with the impugned judgment under appeal - The appeal is dismissed.
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2014 (8) TMI 1245
Dishonour of Cheque - conviction of accused - adequate sentence imposed or not - HELD THAT:- In Suganthi Suresh Kumar v. Jagdeeshan, [2002 (1) TMI 1284 - SUPREME COURT], this Court was considering the propriety of inadequate sentence imposed by courts on the accused charged under Section 138 of the NI Act. This Court expressed displeasure about courts imposing a flea-bite sentence on the accused.
Again, in R. Vijayan v. Baby and Anr. [2012 (6) TMI 519 - SUPREME COURT] this Court considered the same question. This Court also examined the need to award compensation to the complainant. This Court was of the opinion that the traditional view that the criminal proceedings are for imposing punishment on the accused, either punishment or fine or both, and there is no need to compensate the complainant, particularly if the complainant is not a victim in the real sense, but is a well-to-do financier or financing institution, gives rise to difficulties and complications. This Court further observed that in those cases where the discretion to direct payment of compensation is not exercised, it causes considerable difficulty to the complainant, as invariably, by the time the criminal case is decided, the limitation for filing civil cases would have expired - This Court further observed that the direction to pay compensation by way of restitution in regard to the loss on account of dishonour of the cheque should be practical and realistic which would mean not only the payment of the cheque amount but interest thereon at a reasonable rate.
The impugned order needs to be modified - the Respondent-accused sentenced to undergo simple imprisonment for a period of six months for offence under Section 138 of the NI Act - Considering the fact that the cheque amount is Rs. 6,19,488/-, the Respondent-accused is directed to pay compensation of Rs. 10,00,000/- to the Appellant. In default of payment of compensation, the Respondent-accused will have to undergo simple imprisonment for a period of six months.
Appeal disposed off.
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2014 (8) TMI 1244
Seeking release of vehicle - evasion of tax - creation of fictitious firm with intent to evade tax - HELD THAT:- As per the detailed order passed by the Chairman, VAT Tribunal, Punjab it has been observed that the transaction has been duly recorded in account books and in the original books could have been produced. The petitioner is a registered dealer and the nature of transaction can be decided by the said assessing authority if the matter is referred to him and on referring the matter the assessing authority can assess the matter. Even if the transaction is to get oil from Sangria to Amritsar, even then no attempt to evade the tax due under the Act has been established because in case of interstate transaction, the tax was to be collected by the Rajasthan State.
In the present case after going through the orders passed by the Chairman, Value Added Tax Tribunal, Punjab, Chandigarh, the continuation of the proceedings in the FIR would amount to process of Court. Consequently, FIR under Section 420, 406, 467, 468, 471, 201, 120-B of the Indian Penal Code, at Police Station Lambi District Muktsar Punjab are quashed along with subsequent proceedings arising out of the qua the petitioners.
Appeal allowed.
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2014 (8) TMI 1243
Charge memo issued to CIT(A) - disciplinary actions on allegations of mala fide against an officer exercising quasi-judicial powers - as alleged CIT (Appeals), had allowed certain appeals without properly appreciating the facts or going through the records - Secret Note was forwarded for examination to Director of Income Tax (Vigilance), who in the reports stated that out of nineteen appellate orders passed by the CIT(Appeals/respondent and inspected by him, irregularities were noticed in six appellate orders - Whether Tribunal had erred in holding that the Articles of Charge were not sustainable since they were based on quasi-judicial orders passed by the respondent in his capacity as CIT (Appeals)?
HELD THAT:- In the present case, a plain reading of the Articles of Charge as well as the statement of imputations clearly indicate that the sole basis for making the charges is the correctness of the decisions rendered by the respondent while he was acting as CIT (Appeals)
HELD THAT:- The gravamen of the charges levelled against the respondent are not based on his conduct. Although it has been alleged that certain decisions rendered indicate a lack of devotion to duty, but a bare perusal of the statement of imputation and the Articles of Charge indicate that the gravamen of the charges is only that the respondent had rendered decisions which, according to the Revenue, were erroneous. This is certainly not the basis on which the proceedings for misconduct can be commenced against a officer who is charged with a quasi-judicial function.
As decided in KK. DHAWAN [1993 (1) TMI 255 - SUPREME COURT]there was a specific allegation that the Officer had completed the assessment “apparently with a view to confer to undue favour upon the assessee’s concern”. The test laid down by the Supreme Court in that case must be read in the context of the facts placed before the Court. Although, the Court had held that where an officer had acted in a manner which would reflect upon his reputation for integrity or good faith or devotion to duty, a disciplinary action could be initiated. However, an act of an Officer which would reflect on his devotion to duty must be read in the context of his conduct and not the correctness of the decisions rendered by him in a multi-tiered appellate structure. The conduct of an officer must be alleged to be one, which reflects recklessness or complete disregard for the function that he is performing. Mere erroneous decisions on account of a mistake of law or facts, cannot be the basis of commencing proceedings for misconduct.
The decision in the case of K.K. Dhawan (supra) cannot be read to mean that misconduct proceedings can be commenced, alleging lack of devotion of duty, in cases where the decisions rendered by quasi-judicial authority are alleged to be erroneous. There has to be something more than mere allegation of erroneous decisions to charge an employee for misconduct; the conduct of an employee must be alleged to be reckless or for motives. In absence of such imputations, a charge made solely on the basis of a decision rendered by a quasi-judicial authority would not be sustainable.
The petitioner’s contention that the tribunal erred in relying on the statement of law in Nagarkar (supra) as the law stated by the Supreme Court in that case is no longer good law, also cannot be accepted.
It is also necessary to bear in mind that a CIT (Appeals), essentially has to decide the cases based on the contentions canvassed before him. Proceedings before a CIT (Appeals) are adversarial proceedings and are bound to be decided in favour of one or the other party. It is necessary to ensure that a CIT (Appeals) or any other quasi-judicial authority is not put under any pressure in discharging his functions. The idea that the Government could commence disciplinary proceedings if, the decisions were rendered against the department, would be pernicious to the effectiveness of the role that is required to be performed by the CIT (Appeals).
We concur with the reasoning of the Tribunal that a quasi-judicial authority is to act without fear and levelling charges which are based solely on the decisions rendered by the quasi-judicial authority would certainly instill fear in the minds of the officers and, thus, cannot be permitted. No reason to interfere with the decision of the Tribunal
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2014 (8) TMI 1242
Permission to applicant bank to remain outside the winding up proceedings for enforcing its security interest in the secured assets of the Company (in liquidation) - permission to applicant bank to sell the secured assets of the Company (in liquidation) under the provisions of the Securitisation And Reconstruction of the Financial Assets and Enforcement of Security Interest Act, 2002 - permission to applicant bank to proceed with the sale by e-auction fixed on 28.3.2014 - HELD THAT:- The provisions of SARFAESI especially section 13 and proviso there under are required to be read along with provision of Section 37 and other provisions and bare reading of the provision of Section 37 would make it incumbent upon all the concerned to accept that the provision of SARFAESI Act are not to be treated as interrogation of any provision of law, including Companies Act. Therefore bear-in-mind provision of Section 37 and its mandate which has been embedded in the very Special Act the submission of counsel for the bank and sole bidder is required to be viewed. The submission in respect of Section 13(9) that the only obligation upon the agency invoking SARFAESI provisions in respect of the company in liquidation is for reserving the funds from the sale proceeds, to meet with the liability of the company qua its workmen, is to say the least inadequate and truncated reading of the provisions without any reference to the detailed provisions of the Companies Act as well as the SARFAESI Act and the Rules. The proviso of Companies Act is not to be brushed aside and the Companies Act cast an obligation upon all the concerned to see to it that the company in liquidation and its assets are to be treated in a manner so as to satisfy the larger segment.
The provision of making reserve or providing for reserve from the sale proceeds cannot be said to be an unfettered license in SARFAESI Act to deal with the property which may not be commensurate with commercial prudence and tenets flowing there from. The Court hasten to add here that the provision of section 13 (9) of SARFAESI Act and proviso thereto are to be read bear-in-mind that the agency invoking SARFAESI Act in a case of company under liquidation will take all the care and precaution to see to it that the provisions of SARFAESI Act are completely complied with, and it may not in any manner violate principles of Company Law - The Court is in full agreement with the counsels of the applicants that in a given case when there is proper justification for the secured creditor who is sought to invoke SARFAESI Act shall take precedence over all other creditors and essentially when it has chosen to remain outside the proceedings of winding-up. But that also will not absolve that agency of observing minimal of principle of reasonableness in dealing with the property.
The secured creditor even if is permitted to remain outside the winding up proceedings, cannot be permitted to ignore or over look the interest of other creditor so as to deprive them of their right to realise the dues. Ofcourse the secured creditors are to be given priority than unsecured creditors but that in itself would not cloth the secured creditor with power to sale property for song.
The Court, therefore is of the considered view that the bank is required to be directed to issue fresh advertisement after obtaining fresh valuation in consultation with Official Liquidator, and make it clear in the advertisement itself that the company is in liquidation, that the bank shall after fresh valuation prepared of the entire property in consultation with the Official Liquidator, fix the reserve price, which shall not be less than Rs.6,25,00,000/- as it is in bank’s own assessment for offering finance on this very property. In any manner if the valuation is more than Rs.6,25,00,000/- then the bank is at liberty to fix appropriate reserve price / upset price also.
Application disposed off.
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2014 (8) TMI 1241
Right to statutory bail - Interpretation of statute - proviso to sub-Section 2 of Section 43D of the Unlawful Activities (Prevention) Act, 1967 - interplay of sub-Section 2 of Section 173 of the Code of Criminal Procedure, 1973 with sub-Section 8 thereof - HELD THAT:- The undisputed legal position on which neither side was at variance is that for offences under the Unlawful Activities (Prevention) Act, 1967 investigation can be conducted by the National Investigating Agency and the provisions of the Code of Criminal Procedure, 1973 would apply concerning investigation as also cognizance of offences by Courts, but as modified by the applicable provisions of the Unlawful Activities (Prevention) Act, 1967. The cognizance of reports had to be by the Designated Courts constituted as per law under the NIA Act.
The centre of gravity of the first argument concerns the first proviso to sub-Section 2 of Section 43D of the Unlawful Activities (Prevention) Act, 1967. It reads: Provided further that if it is not possible to complete the investigation within the said period of ninety days, the Court may if it is satisfied with the report of the Public Prosecutor indicating the progress of the investigation and the specific reasons for the detention of the accused beyond the said period of ninety days, extend the said period up to one hundred and eighty days - Now, as a matter of fact, when the 90 days period of detention was about to expire, pleading that the investigation was still in progress, an application was filed contents whereof have been reproduced in paragraph 3 by us for detention to be extended up to 180 days and along with the application a report of the learned Public Prosecutor was filed.
The report of the Public Prosecutor makes a reference to the application prepared by the Investigating Officer. It also records that the learned Public Prosecutor has perused the case diary. The report highlights that a large number of call details and e-mails as also IDs of suspects have to be collected. It records that the investigation is voluminous and lengthy.
The contention that the report was prepared first and the application later on for the reason in the application it was written that the report of the Public Prosecutor was separately attached and therefore it has to be inferred that the report of the Public Prosecutor could not be based on the contents of the application, would presume that reference of one document in the other would make the existence of one antithetical to the existence of the other. The argument is fallacious.
It is trite that every investigation needs to be completed without unnecessary delay as per the mandate of sub-Section 1 of Section 173. Under sub-Section 2 as soon as the investigation is completed the report has to be forwarded to the Magistrate empowered to take cognizance of the offence. The contents of the report have to be as per sub-clauses (a) to (h) of sub-Section 2 - Now, an investigation would be complete if the Investigating Officer is able to gather all the facts, information and evidence as also is able to identify the accused and the requirements of sub-clause (a) to (d) are complied with in respect to the contents of the report. But sub-Section 8 of Section 173, which begins with a non-obstinate clause with a deeming provision interwoven, permits further investigation in respect of an offence after a report under sub-Section 2 has been furnished to the Magistrate.
To put it pithily the mandate of the law would be that if within the statutory period prescribed by law within which a charge sheet has to be filed, if the same is not filed the accused would be entitled to statutory bail; and the charge sheet being the report of the investigation forwarded as per sub-Section 2 of Section 173 of the Code of Criminal Procedure, 1973. The right to statutory bail would terminate with the filing of the charge sheet. The charge sheet filed has to be treated as the report of investigation. The further investigation under sub-Section 8 of Section 173 of the Code of Criminal Procedure supplements the charge sheet already filed and is not to be confused with the report of the investigation contemplated by sub-Section 2 of Section 173 of the Code of Criminal Procedure, 1973.
Appeal dismissed.
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2014 (8) TMI 1240
Eligibility of deduction u/s 80P - income earned by a co-operative credit society to provision of credit facilities to its members - whether the Assessee is a cooperative bank or not? - HELD THAT:- The deposits so accepted are used by the Assessee co-operative society for lending or investment. Even out of the deposits so received, the loans have been given to the members of the society in accordance with the objects as enumerated above. Thus, in our opinion, condition no.1 does stand satisfied and it can be said that the Assessee society was carrying on banking business as it was accepting deposits from the persons who were not members.
The authorised representative took the plea that the assessee has not obtained banking licence. In our opinion it is not necessary that the cooperative society should have a banking licence as per the definition under the Income Tax Act for carrying on banking business. If licence is not obtained it may be an illegal banking business under the other statute. What we have to see whether the nature of the business carrying on by the assessee is a banking business or not. The Income Tax in our opinion is not concerned whether the banking business carried on by the assessee is legal or illegal. The income has to be assessed u/s 14 of the Income Tax Act under the same head even if the nature of the business is illegal. If we look into the bye-laws which consists of fund of the society, we noted that the types of the deposits which the assessee has accepted as per bye-laws are the same as are being accepted during the course of the carrying out the banking activities.
So far as the second condition is concerned, there is no dispute that the paid up share capital and reserves in the case of the Assessee is more than Rs. 1 lac. Therefore, the Assessee satisfies the second condition.
So far as the third condition is concerned, we noted that Sec. 16 of The Karnataka State Co-operative Societies Act, 1959 permits admission of any other co-operative society as a member.
In case the rules and bye-laws of the other co-operative society provides otherwise, the co-operative society may not be admitted as a member of the co-operative society. The person, as per sub-section (2), must be qualified for becoming member not only u/s 16(1) but also as per the rules and bye-laws of the co-operative society. We cannot read sub-section (2) in the manner that the rules and bye-laws cannot permit the admission of any other cooperative society as a member of the co-operative society. Had that been the intention of the legislature, they would have not used the words “this Act, rules and bye-laws” in sub-section (2).
Thus we hold that the Assessee has to be regarded to be a primary co-operative bank as all the three basic conditions are complied with, therefore, it is a co-operative bank and the provisions of Sec. 80P(4) are applicable in the case of the Assessee and Assessee is not entitled for deduction u/s 80P(2)(a)(i). We, therefore, confirm the order of the CIT(A) not allowing deduction u/s 80P(2)(a)(i) to the assessee. Appeal filed by the assessee is dismissed.
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2014 (8) TMI 1239
Maintainability of petition - availability of alternative remedy of appeal - Section 45 of the HP VAT Act, 2005 - HELD THAT:- Petition dismissed with liberty to the petitioner to file an appropriate application before the Appellate Authority within 15 days' time from today.
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2014 (8) TMI 1238
Deduction u/s 80P(2)(a)(i) - Claim denied as assessee was not advancing loans for agricultural purposes only, so, it did not fall under the definition of ‘Primary Agricultural Credit Society’, but it was a cooperative bank - As per AO assessee was not advancing loans for agricultural purposes only, so, it did not fall under the definition of ‘Primary Agricultural Credit Society’, but it was a cooperative bank carrying on banking business and was not entitled for deduction u/s 80P as provided in section 80P(4) - HELD THAT:- As in the present case, it is not clear as to whether the assessee is a ‘primary agricultural credit society’ doing business of providing financial accommodation to its members only for agricultural purposes or it is a ‘cooperative bank’ doing banking business.
In the present case, AO quoted the submissions of assessee that somewhere he stated that the assessee –society was a bank carrying on banking business and somewhere he stated that the assessee society was a ‘primary agricultural credit society’, but AO had not given a concrete finding on the basis of the evidence available on the record that the assessee society was a ‘cooperative bank’ carrying on banking business.
It also appears that the decision of Jayalakshmi Mahila Vivododeshagala Souharda Sahakari Ltd. [2012 (8) TMI 185 - ITAT PANAJI] was not brought to the notice of neither the AO nor the Ld. CIT(A). In the present case, it is also not clear what happened to the order of the Ld. CIT(A) for the A.Y. 2007-08 which has been followed by the Ld. CIT(A) while deciding the issue for the year under consideration. We therefore, in the absence of clear facts available on the record, deem it appropriate to set aside this issue back to the file of the Assessing Officer to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of hearing to the assessee.
Appeal of the assessee is allowed for statistical purposes.
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