Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
October 20, 2012
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Once the A.O. proceed to make block assessment under section 158BC based on material gathered during the search under section 132, he cannot proceed to make reassessment under section 147 on the basis of same material - AT
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Transfer Pricing Adjustment - when a quasi judicial authority like the DRP deals with a lis u/s 144C, then, it is obligatory on its part to give cogent reasons for the decision. - AT
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Provision for remuneration of whole time directors – Enhanced directors remuneration – claim of assessee was allowable - AT
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Interest earned on deposits and advances made for the new unit being established - it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. - HC
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Unexplained purchase u/s 69C - Section 69C clearly refers to the “source of the expenditure” and not to the expenditure itself - AT
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Penalty u/s 271(1)(c) - The absence of due care does not mean that the assessee was guilty of furnishing inaccurate particulars to conceal his income - HC
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Deduction u/s 10B – Domestic sale of scrap - it has to be included in the total turnover of the assessee and cannot be reduced from the business profits of the assessee while computing the deduction u/s 10B. - AT
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Depreciation on leased asset - in case the said lease rent is assessed under the head ‘income from other sources, then assessee is eligible for depreciation u/s 57(ii) - AT
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When in the opinion of the CIT (A) the appeals are not maintainable against the order u/s 200A and the appeals have been dismissed by him as not maintainable, there is no question of giving effect to the order of CIT (A) that A.O.should give appeal effect to these orders within two months of the receipt of the order. - AT
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Tax Deduction at Source on Gas Transportation Charges paid by the purchasers of Natural gas to the sellers of gas. - Purchase and sale of gas. Transportation of gas is only a part of the entire sale transaction - Circular
Customs
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Corrigendum Order F.No.437/09/2012-Cus.IV dated 17th April, 2012 - Notification
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Corrigendum Notification No. 49/2012-Customs - Regarding Mega/ Ultra Mega power projects. - Notification
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Rate of exchange of conversion of each of the foreign currency with effect from 19th October, 2012 - Notification
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In view of the fact that the threatened arrest of the petitioner is based on the allegation of customs violations, it would be appropriate for the State Government to obtain the comments of the Settlement Commission before any final order is passed. - SC
DGFT
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Amendments in Appendix 5 - Pre Shipment Inspection Agencies (PSIA) - Public Notice
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SION for new product “Aluminium Beverage Cans” under Engineering Product Group. - Public Notice
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Amendment in Para 2.64 of the Handbook of Procedures Vol I(RE 2012)/ 2009-14 – Dispensing with the submission of physical copy of RCMC by the exporters. - Public Notice
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SION for new product “Copper Based Pre-alloyed Powder R-800” under Engineering Product Group. - Public Notice
FEMA
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SAFEMA - illegal flat - The title in the subject flat is deemed to have vested in the Central Government on or about 08.12.2003 when the first notice under Section 6(1) was issued and served on one of the vendors. - SC
Corporate Law
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Quality of XBRL filing certified by Professional members. - Circular
Indian Laws
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GUIDANCE NOTE ON MAINTENANCE OF COST ACCOUNTING RECORDS FOR CONSTRUCTION INDUSTRY INCLUDING REAL ESTATE AND PROPERTY DEVELOPMENT ACTIVITY
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OECD “Better Policies” Series
Service Tax
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Activity of installation of solar system falls under the category of ‘Erection, Installation and Commissioning Service’ - AT
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Condonation of Delay - management, maintenance or repair of roads - Held that:- In view of the amendment by Finance Act, 2012, No Service tax shall be levied or collected in respect of management - AT
Central Excise
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Duty paying documents – disallowance of cenvat credit - When the receipt of the goods was not questioned nor delivery of the seller is questioned, the Show Cause Notice lost its foundation. - AT
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Proof of Export – Since original AR-4 were not submitted by respondent in some cases, the demand of Rs. 2,20,83,368.71 was rightly confirmed by the adjudicating authority - CGOVT
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Amendment in Notification No. 64/95-Central Excise, dated 16/03/1995 - Extend excise duty exemption to Long Range Surface to Air Missile (LR-SAM) - Notification
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Corrigendum Notification No. 34/2012 - Central Excise, dated 10/09/2012 - Regarding Mega/Ultra mega power projects. - Notification
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Central Government hereby declares that the provisions of section 28AAA of the Customs Act, 1962 (5 of 1962) - Regard to like matters in respect of the duties imposed by section 3. - Notification
Case Laws:
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Income Tax
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2012 (10) TMI 542
Corpus donation - misapplication of corpus fund - Exemption of divided income and the interest income u/s 10(34) and 10(15)denied - assessee trust is registered u/s 12A r.w.s 12AA - Held that:- A conjoint reading of provisions of Indian Trust Act, 1882 leads to inescapable conclusion that the primary object of the trustees is to protect the interest of the trust. In order to discharge this responsibility, the trustees are entitled to take appropriate decisions in the interest of trust. If the revenue's contention is to be accepted then it would imply that since a charitable trust is bound to keep its investments in the securities specified u/s 11(5) then it should not have accepted the shares. In our opinion, too much deliberation is not required to reject this contention of the revenue. Therefore, this objection is devoid of any merit because there is no restriction on accepting shares by a charitable institution. The only restriction is to be found in section 13(1)(d) as per which the assessee charitable trust is required to hold its investments in the modes as prescribed u/s 11(5). The proviso (iia) to section 13(1)(d)(iii) entitles an assessee trust to hold the shares for a maximum period of one year before which it has to be converted into the modes of investment as prescribed in section 11(5). There is no dispute that income of the corpus fund could be utilized towards the objects of the trust. The only objection is that corpus could not be depleted. This objection of department cannot be sustained particularly because the conditions contemplated u/s 11(1)(d) stand satisfied when a voluntary donation is received with a specific direction that they shall form part of the corpus of the trust. No further condition is prescribed in the Act on utilization of corpus fund. Considering provision of Sec.11, 12 & 13 the revenue's contention cannot be accepted that assessee had adopted a colourable device by first accepting the shares and then selling these shares. The assessee's conduct was well within statutory provisions and, therefore, cannot be branded as colourable device. The trustee is bound to conduct himself in the best interest of trust. Therefore, both the conducts viz receiving the shares as a gift from the private trust towards its corpus and its liquidation in terms proviso (iia) to sub-section 13(1)(d)(iii) was fully justified. Revenue's submission that by selling the shares, the assessee has violated section 11(1)(d) suffers from the basic fallacy in not recognizing that by selling the shares, the assessee merely converted one form of investment into another viz. money only. The assessee only realized the market value of shares and, therefore, we fail to appreciate how there was any violation of section 11(1)(d) particularly when the donor, while gifting the shares as corpus donation, never imposed any condition that the shares could not be sold. Only the form of asset was changed from share to cash but the original corpus donation remained as it is in the hands of trust - in favour of assessee.
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2012 (10) TMI 541
Reassessment proceedings u/s 147 - block assessment - cash has been requisitioned under section 132A dated 30.06.1998 (block period 01.04.1988 to 04.06.1998) - Held that:- On a plain reading of provisions of Chapter XIV-B of the Act, it becomes apparent that once a provision has been made for assessment under Chapter XIV-B of the Act, no other provision of the Act shall be applicable, but if there is no provision made in Chapter XIV-B of the Act, all other provisions of the Act shall apply to assessment made under Chapter XIV-B of the Act - the stage of impugned assessment is not an assessment made under section 147/148 after completion of block assessment but it is a case of original block assessment itself. As decided in CIT v. Peer Chand Ratan Lal Baid HUF [2009 (5) TMI 474 - GAUHATI HIGH COURT ] notice under section 148 is required to be issued for the purpose of proceedings under the Chapter XIV of the Act whereas in the case under consideration, the A.O. initiated proceedings under section 147 by issuing notice under section 148 for the A.Y. 1999-2000 which is a part of block period assessment and there was no original block period assessment. Under the facts and circumstances, the action taken by the A.O. is not in accordance with law. The material based on which the A.O. reopened the regular assessment is the material pertained to requisition under section 132A and such material is subject to only block assessment. As decided in Ramballabh Gupta Versus Assistant Commissioner of Income-Tax And Others.(2005 (8) TMI 99 - MADHYA PRADESH HIGH COURT ) wherein it has been held that the A.O. does not have jurisdiction to issue notice under section 148 in respect of those 6 Assessment Years which falls within the exclusive jurisdiction of section 153A. Thus once the A.O. proceed to make block assessment under section 158BC based on material gathered during the search under section 132, he cannot proceed to make reassessment under section 147 on the basis of same material - in favour of assessee.
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2012 (10) TMI 540
Reopening of assessment - assessment was not completed u/s 143(3) - AY 2001-02 - Held that:- No much force in the argument of assessee against reopening especially keeping in view the fact that assessment in the assessment year 2001-02 was not completed u/s 143(3) of the Act and the AO had no chance to look into the details of claim made by the assessee. As decided in ACIT Versus Rajesh Jhaveri Stock Brokers P. Limited [2007 (5) TMI 197 - SUPREME COURT] states that Failure to take steps u/s 143(3) will not render the AO powerless to initiate reassessment proceedings when initiation u/s 143(1) has been issued, reopening of the case in assessment year 2001-02 was justified - against assessee. Reopening of assessment - on the basis of report by an audit party - AY 2003-04 - Held that:- Relying on Commissioner of Income-Tax Versus P. V. S. Beedies Pvt. Limited [1997 (10) TMI 5 - SUPREME COURT] that there can be no dispute that audit party is entitled to point out factual error or omission in the assessment and Hon'ble Court further held that reopening of assessment on the basis of factual error pointed out by the audit part is permissible under the law - against assessee. Disallowance of maintenance expenses and depreciation on electrical installation - assessee had already enjoyed deduction u/s 24(1) - Held that:- Assessee had rented a part of its building and had also entered into a separate agreement for providing maintenance services - the objection of the AO that assessee had already enjoyed deduction u/s 24(1) in respect of depreciation on electrical equipments is not correct. However the disallowance of Rs.14,06,505/- being expenses incurred on building repairs/partition etc. was justified in view of the fact that the assessee had already enjoyed deduction u/s 24(1) against income from house property. Therefore, CIT(A) has rightly allowed the claim of assessee in respect of depreciation and had rightly upheld the disallowance on account of building repairs etc. Deduction under section 10B - disallowance as no new activity was started at new unit at Gurgaon - assessee company was claiming deduction u/s 80HHE on its existing business - Held that:- The assessee though originally was operating from Delhi but had purchased separate land and had constructed building thereon at Plot No.27, Sector-18, Electronic City, Gurgaon and had obtained registration under STPI as a 100% export oriented unit.The building was equipped with computers and other necessary equipments before the financial year 2000-01 as is evident from bills of purchase of computers. Though invoices of computers are addressed to assessee’s address at Delhi but installation reports which are attached with purchase bills mentions that these were installed at Gurgaon i.e. the address where the assessee had claimed to have set up new unit.The assessee, during the course of assessment proceedings also submitted Copy of registration certificate under ESI Act 1948,PF Act, allotment letter for TAN from IT Department,Copy of Form D of Shop & Commercial Establishment Act, 1958,Copy of license for providing bounded warehouse & Copy of agreement with Software Technology Park of India which clears all doubt hat assessee had set up a new unit at Gurgaon which was duly registered as 100% export oriented unit. Electric installation should not be considered for calculation of total value of plant & machinery is not correct in view of the fact that definition of plant & machinery includes in itself electric installation, office equipment and or vehicles. The contention of DR that electric installations carried different rates of depreciation as compared to plant & machinery does not carry any weight as mere classification for depreciation purposes cannot alter the nature of electric installations which indeed is part of plant & machinery - The objection raised by the Dr that assessee had rented the building and therefore was not in a possession of the same also do not carry any force in view of the fact that lease agreement was entered in for 50% of total covered area and balance 50% was available with the assessee to carry on its business - in favour of assessee.
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2012 (10) TMI 539
Additions on Deemed dividend - beneficial shareholder or registered shareholder - Held that:- A.O brought to tax profit of Rs.2,50,000/- received by the assessee HUF in terms of provisions of section 2(22)(e) without recording his specific findings as to whether the conditions stipulated in the said section were fulfilled. The CIT(A) while accepting that the AO did not record any findings regarding the nature of transaction, concluded that the amount was in the nature of loan or advance. Since the company M/s D.N. Kansal Securities (P) Ltd. in which the assessee had 12 % shareholding, reflected accumulated profit less than profit of Rs. 2,50,000/- CIT(A) while observing that the assessee has declared undisclosed income, uphold the findings of A.O in bringing to tax the amount of Rs.2,50,000/-. neither even analyzing the issues in the light of provisions of sec.2(22)(e) or nor attempted to ascertain as to whether HUF is the beneficial shareholder or registered shareholder. Section 250(6) mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision, thus in view of the foregoing, especially when the CIT(A) have not passed a speaking order, consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the aforesaid issues, afresh - in favour of assessee for statistical purposes.
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2012 (10) TMI 538
Unaccounted investment in jewellery - assessee submitted copy of bill by way of additional evidence - CIT(A) deleted the addition - Held that:- CIT(A) admitted the said additional evidence without recording any reasons in her order, in terms of rule 46A(2) of the IT Rules,1962 nor verified even the genuineness of the said additional evidence. CIT(A) has not even identified the circumstances under which the assessee was prevented by any sufficient cause in submitting the aforesaid documents before the AO. The genuineness of the said expenditure nowhere seems to have been examined by the CIT(A) nor allowed any opportunity to the AO to examine the genuineness of bills submitted by the assessee. Thus in the interest of justice and fair play the findings of the CIT(A) are vacated and restore the issues raised back to CIT's file, with the directions to follow the mandate in terms of Rule 46A of the IT Rules, 1962 after allowing sufficient opportunity to both the parties - in favour of revenue for statistical purposes.
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2012 (10) TMI 537
Retraction of surrendered income - Disallowance of creditors - additional evidence under Rules 46A regarding confirmation of 23 creditors - CIT(A) deleted the addition - Held that:- Though the assessee relied upon a decision of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala [1971 (9) TMI 64 - SUPREME COURT] where it was observed that an admission is an extremely important piece of evidence but it can not be said that it is conclusive and that it is open to the person who made the admission to show that it is incorrect, there is no such dispute with this proposition of law. In the instant case, neither before the ld. CIT(A) nor even before us, the ld. AR attempted to show as to how the surrender was incorrect and what prompted the assessee to file appeal without even retracting the surrender. Even after surrender of the amount, the assessee approached the ld. CIT(A) and furnished additional evidence in terms of rule 46A of the IT Rules,1962. There is nothing in the impugned order as to why the assessee offered the amount to tax suo motu and then preferred the appeal. Nothing to suggest as to whether or not the CIT(A) examined the genuineness of additional evidence submitted by the assessee nor the AO seems to have been asked to verify its genuineness. In these circumstances, it can be concluded that the CIT(A) admitted additional evidence submitted by the assessee in its application under rule 46A of the IT Rules,1962, without following the procedure prescribed therein, thus in the interest of justice vacate the findings of the CIT(A) and restore the issues back to his file, with the directions to follow the mandate in terms of Rule 46A of the IT Rules, 1962 - in favour of revenue for statistical purposes.
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2012 (10) TMI 536
Transfer Pricing Adjustment - arm’s length price of the international transaction entered by the appellant with its associated enterprises - Held that:- As decided in VODAFONE ESSAR LTD. versus DISPUTE RESOLUTION PANEL-II and ORS [2011 (12) TMI 22 - DELHI HIGH COURT] when a quasi judicial authority like the DRP deals with a lis u/s 144C, then, it is obligatory on its part to give cogent reasons for the decision. DRP has passed its order by just relying on the findings recorded by the A.O./TPO, without considering the various objections raised before it by the assessee. A perusal of the DRP order shows that it is a short order passed in general terms on both the issues involved, i.e., arm’s length price u/s 92CA(3) and excess depreciation on computer accessories and peripherals. The objections raised by the assessee before the ld. DRP have not been discussed in detail - Remit this matter to the file of the DRP, to be decided afresh in accordance with the law by passing a speaking order on affording adequate and proper opportunity of hearing to the assessee
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2012 (10) TMI 535
No reasonable and proper opportunity of hearing allowed - addition to income - Held that:- As per the affidavit filled by the assessee for non-appearance on 16.12.2008 as case was to be attended by the assessee’s CA & that however, the said CA neither attended the proceedings before the AO, nor informed the assessee that he would not be appearing on 16.12.2008 as if the assessee had been informed in this regard, he would have surely attended the proceedings. As before the CIT (A), the assessee’s new counsel inspected the appeal record in the office of the CIT (A), where from, it came to knowledge that the first notice dated 10.02.2010 for 10.03.2010 was sent by speed post on 12.02.2010 and the same was received back unserved in the office of the CIT (A) and that the second and final notice dated 09.04.2010 for 23.04.2010 was sent by speed post on 10.04.2010 and the same had also been received back in the office of the CIT (A) on 21.04.2010, as available from the appeal record, thus, both the notices issued from the office of the CIT (A) remained unserved and the assessee did not at all come to know of the dates of hearing before the Ld. CIT (A). Thus it can be concluded that the assessee was prevented by reasonable cause from attending the proceedings, both before the AO as well as before the CIT (A) - remit this matter to the file of the AO to be decided afresh - in favour of assessee for statistical purposes.
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2012 (10) TMI 534
Provision for various expense transfer to Sister concern - Assessee company had debited an amount towards cost of project in progress including provision for various expenses – Certain sums is stated to have been spent by the Assessee’s sister concern – Held that:- No detailed examination of the expenditure incurred by Assessee’s sister concern submitted in support of the claim amount. We are also of the view that so far as the amount spent by the Assessee itself is concerned, from 01.4.2004 to 31.12.2005, it has successfully discharged its onus in filing corroborative evidence hereinabove. In order to ensure appropriate compliance with the directions of the co-ordinate Bench remit the case back to the assessing authority. Issue remand back to AO
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2012 (10) TMI 533
Disallowance of provision for remuneration of whole time directors – Enhanced directors remuneration – Assessee shown enhanced amount as payable to three directors – Remuneration payable to were enhanced by way of resolution and approved by CG – AO argued that any provision for increase in remuneration of Directors would be void, if it was not approved by the CG u/s 198, 309, 310 and 314 of Company Act. 1956 - Held that:- There is no finding by the Revenue that remuneration claimed by assessee was not commensurate with the service rendered by the said persons. Especially so since assessee had received the approval from Central Government on 19.04.05. Admittedly assessee had finalized its account only thereafter. Directors concerned had worked for the assessee and remuneration was indeed payable and it became a crystallized liability. Since such approval clearly mentioned that it had retrospective effect viz. from the date of expiry of the earlier approval, it will relate to back to the date of expiry of the earlier approval. We are of the opinion that claim of assessee was allowable. Issue decides in favour of assessee Disallowance of provision of PF on enhanced remuneration of directors – Held that:- The issue requires a fresh look by the AO, since the date on which the amount was remitted has not been verified. Issue remand back to AO.
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2012 (10) TMI 532
Disallowance of interest expense u/s 36(1)(iii) - Assessee had paid 18% interest to its related parties on the loans received from relatives - Assessee had received interest only at the rate of 10% -11% from two parties – Interest free loan has been given to two parties – Held that:- As if there was no material to indicate that moneys were advanced out of borrowed funds, the presumption would always be that moneys were advanced out of own funds. As it is to pick out few of the loans given by the assessee and make a comparison of the interest rate, will not be appropriate. There is nothing on record to show that the amounts given by the assessee as loan were coming out of interest bearing funds. - Decided in favor of assessee.
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2012 (10) TMI 531
Determination of arm's length price - Architectural services - Contention of Assessee was that directions issued by the DRP is not justified in treating the international transactions entered into between Appellant and its Associated Enterprises as sham and concluding the arm's length price as Nil in respect of service charges paid to its Associated Enterprises. Held that:- As the assessee has not filed the requisite information before the DRP due to inadvertence. The requisite information asked for by the DRP has been filed by the assessee belatedly after completion of hearing. Information was filed on 23rd Sept. 2010 though the assessment was completed on 20-9-2010. Consideration of the requisite information filed by the assessee is important to come to a conclusion on the issue in dispute by the DRP - remit the issue back to DRP to consider the same in the light of the evidences - appeal is treated as allowed for statistical purpose.
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2012 (10) TMI 530
Search and seizure - additions u/s 68 - held that:- assessee has filed confirmation letters and the creditors are genuine and have explained their sources. Further, all the amounts have been received through banking channels and two of them were paid back through cheques. If the Assessing Officer had any doubt with respect to the genuineness of the transactions, he should have enquired the creditors, which he failed to do. - no addition - in favor of assessee. Taxability of interest in the hands of partners - held that:- . Even the capital account does not have any credit under the head ‘interest’. Interest paid to partners, which has been disallowed in the hands of the partnership firms cannot be assessed in the hands of the partners.
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2012 (10) TMI 529
Disallowance u/s 14A of the Act - Held that:- The section only permits the Assessing Officer, in an indivisible business consisting partly of taxable activities and partly of tax-free activities, to identify expenditure, if any, incurred in relation to the earning of non-taxable income and disallow it. The section cannot be taken beyond this to attribute, by some yardstick, every item of expenditure which has no apparent connection or nexus with the earning of tax free, to the earning of tax-free income - appeals of the revenue are dismissed. Loss on Sale of Shares -short term capital loss to be set off against the long term capital gain - Held that:- Loss on sale of shares of Lanco Net Ltd. are not in accordance with the business activities of the assessee and hence not allowable as capital loss and same cannot be adjusted against capital gains - Order of the CIT(A) is confirmed - Ground of appeal of the assessee is dismissed. Disallowance of legal and professional fees - deduction u/s 80IA. - The assessee contended that he had computed profits of the undertaking and has also filed certificate of the auditor in respect of the eligible undertaking and has maintained proper Books of A/c as required to compute profits - set aside this issue to the file of the Assessing Officer for reconsidering the profitability of the eligible undertaking on the basis of the workings furnished by the assessee, after giving reasonable opportunity to the assessee to put forward its case - appeal of the assessee is treated as allowed for statistical purposes.
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2012 (10) TMI 528
Reassessment - After completion of assessment u/s 143(3), a notice us/ 148 was issued reopening the assessment u/s 147 - claim u/s 80HHC - held that:- Re-opening has been made on the self same materials which are already available on record at the time of assessment u/s 143(3). Therefore, reopening of assessment made on the basis of very same material amounts to change of opinion. Further, the assessee has disclosed all material facts fully and truly, therefore reopening of assessment could not have been made beyond four years from the end of the assessment year in dispute i.e., 2004-05. - Decided in favor of assessee.
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2012 (10) TMI 527
Whether assessee is covered by principles of mutuality and hence, TDR premium received by the Society is not taxable – alleged that TDR premium payment is made by only those members availing the additional FSI – Held that:- consideration has flowed from the members of the Society to the Society which is a Co-operative Housing Society as consideration for allowing the use of extra FSI. The principles of mutuality would apply – TDR premium received by the Society is not taxable
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2012 (10) TMI 526
Short-term capital gains – deduction of liaison charges paid from STCG - sites, which were the subject matter of the sale, were in the occupation of slum dwellers - whether they were in occupation of all the sites or only those sites, which resulted in the short-term capital gains – Held that:- Assessee has paid the money by way of account payee cheque to one Mr. B.G. Koshy to clear the slum dwellers, which amount has been acknowledged by him - slum dwellers were in possession of the land, which resulted in short-term capital gains - no material on record to show that the said contention of the assessee is wrong, misleading or deliberately made with an intention to evade tax - laison charges refers to only short-term capital gains – in favor of assessee
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2012 (10) TMI 525
Payment of rent to group concerns - excessive amount u/s 40A(2) - assessee contended that no two properties can be compared with each other, unless they are identical in respect of the location, the facilities available and the period of tenancy, etc. - held that:- the rent paid by the appellant company in respect of all the five properties were reasonable, thereby warranting no disallowance. Disallowance of interest - interest-free rent deposits – held that:- Once it is established that there was nexus between the expenditure and purpose of business [which need not necessarily be the business of the assessee itself] the revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits. - the deposits were made for taking the premises on rent which was necessitated by business expediency and' are based on marked rent. - in favour of the assessee
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2012 (10) TMI 524
Interest earned on deposits and advances made for the new unit being established - Revenue OR Capital receipt - Held that:- As decided in INDIAN OIL PANIPAT POWER CONSORTIUM LIMITED, NEW DELHI Versus INCOME TAX OFFICER [2009 (2) TMI 32 - DELHI HIGH COURT] when the interest was received by the assessee towards interest paid for fixed deposits & when the borrowed funds could not be immediately put to use for the purpose for which they were taken, the receipt is “inextricably linked” to the setting up of the project, it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. The Tribunal and the lower authorities fell into error in holding that the interest earned on fixed deposit of amounts borrowed, which is the subject matter of the present appeal, would have to be treated as revenue receipt as the funds invested by the assessee company and the interest earned were inextricably linked with the setting up of the power plant. It may be added that the Tribunal has not found that the deposits made as margin monies were not limited to the construction activity connected to the expansion of the business by way of setting up of a new power generation plant - in favour of assessee.
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2012 (10) TMI 523
Income from surrender of tenancy rights - Tenancy rights vested with the firm or with the partners - The partners on receipt of their shares in surrender of tenancy rights, invested the same in NABARD Bonds. - Held that:- if there was a partnership firm, then under all circumstances, it is the firm which shall be taxed and not the partners, as not only Partnership is a separate legislation but in the Income Tax Act, it is a distinct entity in section 2(23) and 2(31)(iv). It is the persons, legal heirs, who have continued to hold the tenancy rights and have used the name of the business only for the sake of convenience, which had been continuance from the pre partition days. Moreover, none of the partners, at no point of time have ever introduced his/her share in the tenancy as capital in the accounts of the firm. The individuals were, thus correct, who had not only taken the compensation for surrender of tenancy rights and deposited the same in NABARD Bonds - Deletion of addition made by CIT(A) at Rs. 2,50,00,000/- as long term capital gain on account of compensation received from M/s. Veera &. Gala Developers on surrender of tenancy rights is right - order of the CIT(A)is sustained - Decided in favor of assessee.
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2012 (10) TMI 517
Unexplained purchase u/s 69C - disallowance of 100% of expenditure and depreciation - CIT(A) deleted the addition - Held that:- As decided in COMMISSIONER OF INCOME TAX-V Versus M/S RADHIKA CREATION [2010 (4) TMI 100 - DELHI HIGH COURT] Section 69C clearly refers to the “source of the expenditure” and not to the expenditure itself - No material as such was found during the search and seizure operations and it is only in the special audit directed by the Assessing Officer, who was unable to find any material at the time of search, that the authenticity of the expenditures were doubted. In this case the fact that all the sales made by the assessee stood recorded in the assessee’s books of account, which included the sales and purchase vouchers and stock registers maintained by the assessee on a day-to-day basis. These books of account were duly produced before the AO who examined them, on examination, no negative observation thereagainst was recorded. Most of the customers were assessed to income-tax. Sales were made against the opening stock. The purchases made during the year and the sales were but conversion of stock. The profit therefrom had already been taxed. The sale transactions were got confirmed by the Assessing Officer on a test check basis but more inquiries were made - Thus source of the expenditure incurred in purchases is obviously explained - Decided in favour of assessee.
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2012 (10) TMI 516
Self-contradictory order of CIT(A)'s - dismissal of revenue appeal as not appealable u/s 246A and simultaneous direction to AO at appeal effect should be given within two months of the receipt of the order - Held that:- As decided in Air India Limited case [2012 (10) TMI 494 - ITAT, DELHI] when in the opinion of the CIT (A) the appeals are not maintainable against the order u/s 200A and the appeals have been dismissed by him as not maintainable, there is no question of giving effect to the order of CIT (A) that A.O.should give appeal effect to these orders within two months of the receipt of the order. As assessee has pointed out that there were certain mistakes committed by the A.O. while taking the view that there was delay in deposit of TDS where he submitted that there is no delay in the deposit of the TDS by the assessee. Thus the proper course for the assessee would have been to file the rectification petition under Section 154 requesting the AO to modify the order passed u/s 201(1A).
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2012 (10) TMI 515
Non deduction of TDS - Disallowance u/s 40(a)(ia) - Held that:- As decided in Shri Piyush C. Mehta Versus The ACIT Mumbai [2012 (4) TMI 349 - ITAT MUMBAI] following the decision in CIT, KOL-XI, KOL Versus VIRGIN CREATIONS [2011 (11) TMI 348 - CALCUTTA HIGH COURT] Amendment to the provisions of Sec. 40(a)(ia) by the Finance Act, 2010 is retrospective from 1.4.2005. Consequently, any payment of tax deducted at source during previous years relevant can be made to the Government on or before the due date for filing return of income u/s.139(1) of the Act. If payments are made as aforesaid, then no deduction u/s. 40(a)(ia) can be made. As in the present case assessee has deducted TDS on an amount of Rs.66,29,926/- out of deductible amount of Rs.73,65,220/- and paid the same on 4th of August, 2008 as per copy of TDS challans which is well within the due date for filing of the return as provided under sec. 139(1) - in favour of assessee.
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2012 (10) TMI 514
Penalty u/s 271(1)(c) - ITAT deleted the levy - Held that:- The findings of the Tribunal on the assessment was not on the ground of treating the claim as not bona fide. The assessment on the consumption of bottles made on the ground of alleged non-existence of two firms was rejected by the Tribunal by rendering a finding that the suppliers were very much in existence. On the 2% addition made to the bottles sent direct to the factory without entering into the books of accounts and on the price difference, the Tribunal ultimately sustained the addition to the extent of 25%. Going by the quantum appeal order agreeing with the assessee's contention that the additions made were not in respect of lack of bona fides, but on the circumstances stated in the order of the Tribunal. The absence of due care does not mean that the assessee was guilty of furnishing inaccurate particulars to conceal his income - the computation error based on the tax audit report was only an inadvertence; this would not raise a presumption against the assessee that the explanation was lacking in bona fides. As the assessee gave an explanation on each of the four heads, which was accepted by the CIT(A) & for inland flight charges the assessee had explained the circumstances under which the provision was sustained and further proof was produced before the CIT (Appeals) - no hesitation in confirming the order of the Tribunal, thereby rejecting the Revenue's appeal - in favour of assessee.
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2012 (10) TMI 513
Unexplained purchase u/s 69C - Disallowance of expenditure and depreciation - CIT(A) deleted the addition - Held that:- As decided in ACIT, Versus /s Blue Luxury Impex Pvt. Ltd., (Formerly known as Alfa Engitech (P) Ltd.][2012 (7) TMI 467 - ITAT DELHI] section 69C clearly refers to the “source of the expenditure” and not to the expenditure itself. As in this case books of account were duly produced before the AO who examined them, on examination, no negative observation there against was recorded by the Assessing Officer. Complete names and addresses of the parties to whom the goods were sold were available with the Assessing Officer. The sale transactions were got confirmed by the Assessing Officer on a test check basis. No more inquiries were made. The assessee’s books of account were audited books of account. The tax audit report was on record. The auditors had not made any negative observation therein. Thus, source of the expenditure incurred in purchases is obviously explained - Decided in favour of assessee.
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2012 (10) TMI 512
Provision for Rehabilitation and eviction of illegal encroachments - Capital v/s Revenue - Held that:- The question as to whether there is a 'real income which has accrued to the assessee is dealt in State Bank of Travancore Vs. CIT, (1986 (1) TMI 1 - SUPREME COURT) that the concept of real income is applicable in judging whether there has been income or not. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income which does not materialized. This principle is applicable whether the accounts are maintained on cash system or under mercantile system. If the accounts are maintained under the mercantile system, what has to be seen whether income can be said to have been really accrued to the assessee company. Tribunal is not correct that merely because a meager sum is received, the entire amount is to be treated as income and same treatment is to be given in other assessment years. What was to be seen as to which Government Department is remitting the amount. From the details furnished, it is obvious that some of the Departments have never made any payment on the application of “real income” theory and taking a realistic view, it is held that no income has accrued merely because proforma advices were raised, that too, at the instance of the CAG of India - restore this issue back to the Assessing Officer to examine the matter afresh - in favour of assessee for statistical purposes. Disallowance of retired medical benefit scheme - Held that:- CIT (A) rejected the additional evidence filed by the assessee which comprised an actuarial valuation report. The CIT (A) rejected this evidence, even though it was held that the provision for rehabilitation and eviction of illegal encroachments, as claimed by the assessee, needed to be allowed in view of various judicial pronouncements. In his remand report, AO himself agreed that the expenditure was an allowable expenditure. Thus remit this issue to the file of the Assessing Officer to examine the actuarial report and to re-decide the issue on the basis thereof. Disallowance of u/s 40 (a)(ia) - Held that:- As decided in Deputy Commissioner of Income-tax - 11(2) Versus Chandabhoy & Jassobhoy [2011 (7) TMI 956 - ITAT MUMBAI] the provisions of Section 40(a)(ia) can be invoked only in the event of non-deduction of tax, but not for lesser deduction of tax - in favour of assessee. Prior period income - expenditure netted off against prior income - Held that:- Though the assessee has disclosed much more income of the prior period & the prior period income offered by the assessee was more than the prior period expenses claimed in the year under consideration AO has assessed the prior period income and disallowed prior period expenses. He cannot adopt different yardstick for assessing the income and allowing the expenditure - in favour of assessee.
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2012 (10) TMI 511
Invisible loss - Process Loss - Assessee had made a claim for “staking loss” in the process of consumption of cotton – AO made addition for the loss in the respective assessment years - Assessee had worked out the raw material consumption based on the opening quantities, purchased quantities and closing quantities – Held that:- Consumption in excess of industrial norms could be due to production efficiency or inefficiency levels of the units. There is no rule that every unit manufacturing cotton yarn should have same standard of production. None of these factors were considered by the lower authorities. Issue remit back to the file of AO to compare it with industrial standards and corroborate it with further evidence if at all any adverse conclusion is to be drawn on the consumption of material claimed by the assessee. Issue remand back to AO
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2012 (10) TMI 510
Deduction u/s 10B – Domestic sale of scrap - Total export turnover was 99.68 % of the total turnover - Domestic sales of scrap was 0.32 % of the total turnover – AO argued that proceeds of scrap sales are not realized in convertible foreign exchange as per Sec. 10(3) – Held that:- The domestic turnover was less than 25 % of the total sales of the assessee and therefore, the conditions of the second proviso to sub- section (1) of section 10B are fully satisfied. Therefore, respectfully following the decision of the Hon'ble Jurisdictional High Court in the case of Savvy Systems (India) Limited. (2006 (11) TMI 154 - MADRAS HIGH COURT), that assessee entitled for deduction u/s 10B. In favour of assessee Deduction u/s 10B – Sale of scrap - Whether sale proceeds of scrap could be reduced from the eligible profits u/s 10B – AO reduced the receipt from scrap sales from the business profits and treated it as income from other sources - Held that:- As the sale of scrap is part and parcel of the business receipt of the assessee. That being so, it has to be included in the total turnover of the assessee and cannot be reduced from the business profits of the assessee while computing the deduction u/s 10B. Issue in favour of assessee
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2012 (10) TMI 509
Disallowance of depreciation on leased asset - Assessee did not use the auto corners for its business purposes, but leased out the same - Shown the lease income under the head ‘business income’ and thereby claimed depreciation on the same – AO disallow the same on ground that leasing out of assets is not the business of the assessee – Held that:- As leasing of auto corners by the assessee is not treated as its business then also depreciation is allowable u/s 57(ii). We find that none of the lower authorities has given its finding in respect of allowability of depreciation on auto corners u/s 57(ii). It is not discernible whether the lease rent received by the assessee was assessed under the head ‘business income’ or under the head ‘income from other sources’. In our considered opinion, if the relevant lease rent derived from leasing of auto corners is assessed under the head ‘business income’ then assessee is eligible for depreciation u/s 32 and in case the said lease rent is assessed under the head ‘income from other sources, then assessee is eligible for depreciation u/s 57(ii). Remand back to AO – In favour of assessee TDS u/s 40(a)(ia) - JV was dated 10.6.2008 for commission payment on which TDS deducted and paid to the credit of the Central Government on 5.7.2008 – Deduction allowed in A.Y 2009-10 or 2008-09 – Held that:- As the method of accounting employed is mercantile. Therefore, the expenditure for which liability accrued to the assessee on or before 31.3.2008 is allowable to the assessee in assessment year 2008-09 irrespective of the date of entry made in the books of account. We find that both the lower authorities have not examined as to the date on which such commission became payable by the assesse. Issue remand back to AO
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2012 (10) TMI 508
Validity of notice issued u/s 148 - Reopening of assessment u/s 147 – AO made assessment u/s 143(3) and pass order on 28.02.2006 - AO issued notice u/s.148 dt.19.3.2008 after recording reason – Assessee contended that no reopening lie on a mere change of opinion when an issue had been decided in the original assessment made u/s 143(3) - AO has reason to believe that due to some inherent defect in the assessment, the income chargeable to tax had been under assessed or assessed at too low rate or excessive relief was granted - Held that:- The reopening of assessment based on the materials already considered and adjudicated would amount to reviewing the assessment order by re-appreciating the material already on record, which is not contemplated u/s.147. That initiation of reassessment proceedings by the AO is not valid as he has initiated reassessment proceedings only on re-appreciation of material already considered and thus it is a mere change of opinion. Therefore, action of AO to issue notice u/s.148 is not valid. In favour of assessee
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2012 (10) TMI 507
Assessment u/s 144 – Arbitrary addition - AO made assessment u/s 144 on the basis of material on record - Assessee furnished all the relevant bills and vouchers along with the details of expenses before the CIT(A) the in support of the entries in the books of accounts shown before the AO – Assessee contended that additions made under the various heads of expenses are not only arbitrary but also unjustified - Held that:- The AO while completing the best judgement, assessment u/s.144 has made very arbitrary additions on each and every items of expenses debited in the P&L account, without assigning any proper reasons. Even during the course of the remand proceedings, he has failed to examine the details and evidences in the form of bills and vouchers and rather has objected to findings of the CIT(A) for admitting the fresh evidence filed by the assessee. Once the CIT(A) in his power has admitted the additional evidence on record, the AO was required to examine the evidences rather than challenging the CIT(A)’s power for admission of additional evidence. Issue in favour of assessee
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2012 (10) TMI 494
Rectification of mistake - Self-contradictory order of CIT(A)'s - rejection of appeal by CIT(A) and giving directions given by the CIT(A) to AO - Held that:- When in the opinion of the CIT (A) the appeals are not maintainable against the order u/s 200A and the appeals have been dismissed by him as not maintainable, there is no question of giving effect to the order of CIT (A) that A.O.should give appeal effect to these orders within two months of the receipt of the order. As in the grounds of appeal, the assessee has pointed out that there were certain mistakes committed by the A.O. while taking the view that there was delay in deposit of TDS where he submitted that there is no delay in the deposit of the TDS by the assessee. Thus in view of the above, the proper course for the assessee would have been to file the rectification petition under Section 154 requesting the AO to modify the order passed u/s 201(1A).
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Customs
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2012 (10) TMI 554
Denial of grant of licences to to act as Customs House Agent - change in procedures - old regulation v/s new regulation - Held that:- Those who had cleared the examinations under the regulations issued in the year, 1984, would be eligible for the grant of licence, subject to their fulfilling the other conditions of eligibility, as the actions already taken under the earlier regulations issued in the year, 1984, had been saved by the new regulations issued in the year 2004. Therefore, the petitioner is eligible for the grant of Customs House Agents Licence, as he had passed the written, as well as the oral examination under Regulation 9 of the Customs House Agents Licensing Regulations, 1984 held prior to the coming into force of the new regulations in the year, 2004 - direction to the department to issue the necessary certificate granting the Customs House Agents Licence to the petitioner - against department.
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2012 (10) TMI 553
Misdeclaration in the Bill of Entry – confiscation – redemption fine - appellants noticed that the supplier had given two invoices - But the Appellant while authorising the CHA to file Bill of Entry had given only one invoice to the Customs House Agent which resulted in wrong declaration in the quantity of the goods and the value of the goods – Held that:- an error in filing Bill of Entry which error was detected before taking delivery of goods and Customs Act provides for correction of such errors as may be seen from Section 149 of the Customs Act - It to be a case of genuine mistake and ordered that there was no case for confiscation of the goods and therefore redemption fine imposed set aside - appeal filed by Revenue is rejected
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2012 (10) TMI 552
Siphoning foreign currency to the abroad by overvaluing the imported goods – Held that:- Siphoning of money to foreign country was dropped by the FERA against the applicants, therefore, the charge of siphoning of money is not sustainable. Mis-declaration - applicant submits that in this case it is an admitted fact that the importer had declared the goods as per the invoice raised by the foreign supplier and on examination it was found that the goods were not as per the description in the invoice/bill of entry – Held that:- Applicants proceeded the matter with foreign supplier, who admitted the fault that the some other goods had been supplied wrongly to the importer - charge of mis-declaration of goods is also not sustainable against the applicants - applicants have made out a case for 100% waiver of pre-deposit of penalty
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2012 (10) TMI 505
Smuggling - vessel was carrying High Speed Diesel (HSD) from Muscat & Captain was not holding any legal documents for import of the said diesel oil into India - S.L.P. against detention order on non-application of mind - Held that:- It is true that though the detenu was granted bail on 12.04.2005, for the reasons best known to him, he did not avail such benefit and continued to be in jail on the date of the detention, i.e., 03.05.2005. It is true that this aspect has not been mentioned in the detention order, however, on the other hand, it is not in dispute that the grounds of detention which forms part of the Detention Order dated 03.05.2005 clearly mention the details about the bail order dated 12.04.2005 and non-availing of the same on the date of detention order, i.e., 03.05.2005. As the Detaining Authority was aware of the grant of bail and clearly stated the same in the grounds of detention, the contra arguments made by the appellant rejected. The Detaining Authority was conscious that the detenu was having the order of bail in his hand, it is presumed that at any moment, it would be possible for him to come out and indulge in prejudicial activities of all relevant aspects and passed the impugned order of detention in order to prevent the appellant from abetting the smuggling of goods in future. It is the subjective satisfaction of the Detaining Authority whether the order of detention is to be invoked or not. Keeping the writ petition pending after hearing the parties and compelling the detenu to wait for 5 months to know the result of his petition, cannot be accepted. We request all the High Courts to give priority for the disposal of the matters relating to personal liberty of a citizen, particularly, when the detention period is for one year or less than a year and, more so, after hearing the parties, the decision must be known to the affected party without unreasonable delay.
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2012 (10) TMI 504
Fear of likely order of preventive detention - Held that:- in view of the fact that the threatened arrest of the petitioner is based on the allegation of customs violations, it would be appropriate for the State Government to obtain the comments of the Settlement Commission before any final order is passed. If the detention of the petitioner is being considered only on the basis of the recommendations of the Customs Department, the State of Maharashtra is directed, to seek the comments of the Settlement Commission, before passing any order of preventive detention against the petitioner.
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Corporate Laws
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2012 (10) TMI 551
Prosecution of Nominee Director - Winding up Proceedings u/s 454 - Held that:- It is not for the Official Liquidator to adopt a pick and choose policy; he is a statutory body and must maintain transparency. As decided by Court in case of [Jamna Datwani v. Official Liquidator 2012 (3) TMI 160 - DELHI HIGH COURT] No prosecution has been launched against the appellant as He is only acting to represent the Bank and is not actively involved in working and day to day affairs of co. like attending Meetings,access to Books etc. Held that:- Appellant being only a nominee Director of the Bank and had resigned four years prior to the date of initiation of the winding up proceedings. She had no access to the records of the company and admittedly not having signed even a single document on behalf of the company, no useful purpose would be served in continuing with the prosecution - No Criminal poceeding can be initiated against her - prayer made in the application is allowed and She is accordingly discharged - in favour of appellant.
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2012 (10) TMI 503
Scheme of Amalgamation - meeting of Secured Creditors of the Transferee Company not held - Held that:- In view of the written consents/NOC given by all the Equity Shareholders of the Transferor Company-4, the requirement of convening meeting of Equity Shareholders of the Transferor Company-4 is dispensed with. There are no Secured and Unsecured Creditors in the Transferor Company-4 therefore, the requirement of convening meeting of Secured and Unsecured Creditors of the Transferor Company-4 does not arise - scheme of amalgamation allowed.
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FEMA
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2012 (10) TMI 506
SAFEMA - notice in respect of illegal flat to assessee and his wife holding 50 per cent share in the subject property - whether appellants who purchased the subject flat during pendency of forfeiture proceedings are entitled to an opportunity to prove that they are transferees in good faith for adequate consideration ? - Held that:- Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) came into effect from 05.11.1975 provides for forfeiture of illegally acquired properties of smugglers and foreign exchange manipulators. Where the competent authority is satisfied that some of the properties referred to in the show-cause notice are illegally acquired it shall declare that such property shall, subject to the provisions of this Act, stand forfeited to the Central Government free from all encumbrances. Section 8 provides that burden of proving that property specified in the notice served under Section 6 is not illegally acquired property shall be on the person affected. Admittedly, SAFEMA was applicable to both vendors here. One of the vendors, a detenu, who was covered by Section 2(2)(b), was issued notice way back on 8.12.2003 under Section 6(1) of SAFEMA. The other vendor, wife of the detenu, was also issued notice under Section 6(1) in 2004 once it transpired that she held 50% share in the said flat. Both vendors were served with notices under Section 6(1) before transaction of sale in favour of the appellants. After the issuance of notices under Section 6(1) of SAFEMA to the vendors, the transaction of sale in favour of the appellants has to be ignored by virtue of Section 11 and on passing of the order of forfeiture under Section 7, the sale in favour of the appellants had become null and void. The order of forfeiture dated 23.06.2005 under Section 7 of SAFEMA relates back to the issuance of first notice under Section 6(1) to one of the vendors. In respect of a transfer after issuance of notice under Section 6, the property referred to therein, the holder cannot set up plea that he is a transferee in good faith or a bona fide purchaser for adequate consideration. Such plea is not available to a transferee who has purchased the property during pendency of forfeiture proceedings - the protection given to a bona fide sale under Section 2(2)(e) would not extend to a sale made subsequent to the issuance of notice under Section 6 and in violation of Section 11 of SAFEMA. The title in the subject flat is deemed to have vested in the Central Government on or about 08.12.2003 when the first notice under Section 6(1) was issued and served on one of the vendors. The vendors ceased to have any title in the subject flat on the date of transfer i.e. 10.02.2005. They had no transferable right. The appellants cannot claim any right in the flat.
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Service Tax
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2012 (10) TMI 558
Payment of service tax by using cenvat credit - Goods Transport Agencies (GTA) - period of dispute from April 2007 to February 2008 - Held that:- Explanation to Rule 2(p) output service means any taxable service provided by the provider of taxable service, to a customer, client, subscriber, policy holder or any other person, as the case may be, and the expressions provider and provided shall be construed accordingly as omitted with effect from 19.4.2006, i.e., prior to the period of dispute. The definition of output service itself was amended with effect from 1.3.2008, i.e., after the period of dispute. Thus when the respondent was paying service tax on GTA service, they were doing so on an output service and, therefore, they were entitled to utilise CENVAT credit for payment of such tax. The definition of person liable for paying service tax and the definition of provider of taxable service given under Rule 2 (q) & (r) respectively seem to be supportive of this argument. As decided in COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH Versus M/s NAHAR INDUSTRIAL ENTERPRISES LTD and Others [2010 (5) TMI 608 - PUNJAB AND HARYANA HIGH COURT] there is no legal bar to the utilisation of Cenvat credit for the purpose of payment of service tax on the GTA services - the service tax was paid out of the Cenvat credit on GTA services and, hence, the assessee were well within their right to utilize the Cenvat credit for the purpose of payment of service tax - in favour of assessee.
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2012 (10) TMI 557
Vocational Training - Benefit of exemption Notification No. 24/2004 – alleged that they are an institute and they are-providing professional coaching in the fields of Fashion Technology, Graphic Art, Media Communication and Digital Communication – Held that:- Appellants are an Institute providing Vocational Training Courses to various students like fashion designing, graphic arts, media communication and digital communication etc. These courses are only vocational course and not an academic course and they are covered by the exemption under Notification No. 24/2004-ST dated 10.9.2004 and not required them to get registered with Service Tax department - appellant was entitled for benefit of exemption Notification No. 24/2004
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2012 (10) TMI 556
Waiver of the pre-deposit – construction of residential construction – sub contractor – Held that:- Period involved in this case is of 2005-2006, 2007-2008 wherein, undisputedly the appellant has been considered as the sub contractor - Prior to 23-8-2007, there was a Board’s circular which indicated that the sub contractors need not discharge service tax liability if the main contractor is discharging the Service tax liability - subsequent to 23-8-2007, though the circular may be pressed into service for the purpose of demand of the Service tax, issue is a contentious one - show cause notice as well as both the orders have not given bifurcation of the amount of the Service tax liability that amount arises on the appellant after 23-8-2007 and also there is a question of limitation – waiver of pre-deposit allowed
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2012 (10) TMI 521
Confirmation of service tax liability - Held that:- Service tax liability has been fastened on assessee without indicating the details that under which category of services the service tax liability has arisen. The adjudicating authority has dwelled upon the definition of four different categories in his findings but has not clearly come to any conclusion. Remand the matter back to the adjudicating authority to reconsider the issue afresh - in favour of assessee by way of remand.
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2012 (10) TMI 520
Erection, Installation and Commissioning Service - appellants are clearing the solar system through dealers also and the dealers further sell it to the customers and charge certain amount for installation – Held that:- Activity of installation of solar system falls under the category of ‘Erection, Installation and Commissioning Service’ Quantification of service component – Held that:- Matters remanded back to the original adjudicating authority to consider the records, documents for computation of service components in the activity of the appellants and pass appropriate orders in accordance with law
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2012 (10) TMI 519
Condonation of Delay - Held that:- In view of the amendment by Finance Act, 2012, No Service tax shall be levied or collected in respect of management, maintenance or repair of roads, during the period on and from the 16th day of June, 2005 to the 26th day of July, 2009 (both days inclusive) - impugned order is set aside and the appeal is allowed.
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2012 (10) TMI 500
Business auxiliary service v/s business support service - Held that:- This Court has no jurisdiction to entertain this appeal under section 35G of the Central Excise Act, 1944 as decided in C.C.E., MANGALORE Versus MANGALORE REFINERIES & PETROCHEMICALS LTD. [2010 (9) TMI 756 - KARNATAKA HIGH COURT]as an order passed by the Appellate Tribunal relating to the determination of any question having relation to the rate of duty of excise or to the value of goods for the purposes assessment lies to the Supreme Court under Section 35L(b) the Act and not to the High Court under Section 35(G). Thus need to be adjudicated by the Apex Court under section 35L.
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Central Excise
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2012 (10) TMI 550
Non payment of Pre - deposit - Held that:- SLP dismissed - in the interest of justice one more opportunity granted to the petitioners to make the requisite deposit within two weeks from today on receipt of which appeal shall be revived and disposed of on merits. No further time shall be granted for the said purpose.
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2012 (10) TMI 549
Duty paying document - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers - demand on the ground that the appellants have availed credit on the invoices issued by Simandhar which do not find mention in the RG-23D register maintained by Simandhar – alleged that when the duty paid goods supplied by the ship breakers did not cross the Gujarat Border, the dealers at Bhiwandi/Mumbai could not have received the said duty paid goods physically and consequently they could not have delivered the same to the appellants There is a difference of opinion arose between the Members, therefore the matter is placed before the Hon'ble Vice President/HOD for appointing a 3 rd Member to decide the issue - Whether the appellants have correctly availed CENVAT credit of duty on the basis of invoices issued by the dealers in the facts and circumstances of the case as held by the Member - Whether the demands are barred by limitation in the facts and circumstances or not.
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2012 (10) TMI 548
Demand of excess credit availed on capital goods along with interest and penalty – alleged that assessee took 100% of Cenvat credit in the first financial year – Held that:- As per the provision of Rule 4(2)(b) of the CCR, 2004 and assessee is entitled to 100% of Cenvat credit in the year in which the capital goods, which are under heading 6804 of the First Schedule of the Excise Tariff Act - appellant has taken Cenvat credit only on those goods which are falling under heading 6804 of the First Schedule of the Excise Tariff Act. Therefore the appellants are entitled for 100% of the Cenvat credit as per the provision of Rule 4(2)(b) of the Cenvat Credit Rules, 2004 - order is set aside, appeal is allowed
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2012 (10) TMI 547
Duty paying documents – disallowance of cenvat credit - alleged that appellant had availed Modvat credit on the basis of invoices without serial number, details of manufacturer as required under Rule 57GG read with Notification No. 32/94-C.E. (N.T.), vehicle numbers, the details of supplier and manufacturers as required by both Notification & Circular dated 18-8-1994 – Held that:- Authorities could not find non-receipt of the goods in the premises of the appellant. When they took only two months for issuance of Show Cause Notice they did not make any enquiry at the supplier’s end. When the receipt of the goods was not questioned nor delivery of the seller is questioned, the Show Cause Notice lost its foundation. In absence of any allegation of non-receipt of the goods and also for any allegation of non-delivery of the goods, the appellant succeeds – credit allowed – demand set aside
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2012 (10) TMI 546
Demands - extended period of limitation - clearance to their sister concern was not disclosed to the Revenue – Held that:- No mala fide can be attributed to the appellants - clearance were admittedly being effected on the basis of Central Excise invoices - no suppression or mis-statement with intent to evade payment of duty can be attributed to the appellants - notice is clearly barred by limitation – in favor of assessee
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2012 (10) TMI 545
Rebate claim and drawback – Held that:- Rebate has been claimed along with duty Drawback and both cannot be sanctioned simultaneously - notices to show cause was adjudicated vide orders disallowing the rebate and the amount already sanctioned was to be recovered - applicant has already taken the benefit of drawback and the allowing rebate of duty would amount to double benefit. As such rebate claim cannot be allowed in these cases
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2012 (10) TMI 544
Demand - Proof of Export – alleged that no proof of export submitted within 6 months from the date of export – Held that:- while the handling/submission of duplicate copy of impugned AR-4s has been made as optional but that of original copy has been clearly made as responsibility of the exporter only. In case of any lapse/non-observance of any rule/procedure, the exporter (respondent herein) was not only responsible but had always been at liberty to agitate the matter in writing as per law there and then. He cannot now (or later on) hold the department responsible for not handing, following and submitting at due right time, the relevant original copy of impugned AR-4s of this case. It is clearly a lapse/non-compliance on the part of the respondents herein - Since original AR-4 were not submitted by respondent in some cases, the demand of Rs. 2,20,83,368.71 was rightly confirmed by the adjudicating authority. – against assessee
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2012 (10) TMI 543
Manufacture - Extended period of limitation – alleged that appellant manufactures spare parts and also procures them from the market and clear them as if they have manufactured the same – Held that:- Mere fixation of logo on the goods by supplier of raw materials who does not have even the requisite machines to manufacture the goods, cannot make him manufacturer - they do not have the necessary infrastructure to manufacture the bought-out spare parts - question of invocation of extended time-limit for imposition of penalty does not arise
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2012 (10) TMI 502
Demand of duty in respect of molasses - clandestinely removed - Molasses stored in kuchcha pit - rejection of remission application - Held that:- Revenue is simply proceeding on the ground that it cannot be believed that molasses were intact during 14 months of the period irrespective of stored in katcha pits, but lost the same within a period of 4 months. As sale of molasses is controlled by UP Sheera Niyantran Adhiniyam, 1964 and manufacturer again cleared the goods beyond the State Supervision and Promotion by the State Controller of Molasses. It is found that there is absolutely no evidence on record reflecting upon clandestine removal of the goods. It has been held in number of decisions that where the molasses are stored in katcha pits and are unfit for consumption their destruction has to be allowed as decided in U.P. STATE SUGAR & CANE DEVELOPMENT CORPN. LTD. Versus CCE, ALLAHABAD [2007 (2) TMI 473 - CESTAT, PRINCIPAL BENCH, NEW DELHI] - as in thus case it has to be held that Molasses were destroyed or damaged on account of weather conditions and rainy season, the remission has to be granted in such a case - in favour of assessee.
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2012 (10) TMI 501
Benefit of the reduced penalty u/s 11AC - 30 days from the communication of the original order OR date of receipt of the order - Held that:- As decided in CCE&C v. Harish Silk Mills [2010 (2) TMI 494 - GUJARAT HIGH COURT] if duty amount with interest is not paid in time and even reduced penalty of 25% of duty amount is not paid in time and option is not given to respondent assessee, such option should be given to assessee and period of 30 days would commence from the date of giving such option. No illegality is committed by the Tribunal in giving option to the Assessee under the Proviso to section 11AC as the benefit of payment of reduced penalty can be availed by the assessee at the appellate stages also and it is not the import of the said provision that such benefit can be availed of only within 30 days from the communication of original order - in favour of assessee.
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2012 (10) TMI 499
What is the rate at which additional duty of customs (CVD) is to be levied - goods cleared by the appellant’s EOU to the Domestic Tariff Area – Held that:- Additional duty of customs shall be reckoned on the effective rate and not tariff rate - duty leviable under Section 3 of the Central Excise Act is to be calculated after giving effect to the exemption notifications. Therefore, goods produced in EOUs/EPZs cannot be charged to duty at Tariff rate - in favour of assessee
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2012 (10) TMI 498
Benefit of exemption Notification No. 39/2001-C.E. – whether the petitioner had made investment in plant and machinery in excess of Rs. 20 Crores or not; and whether the commercial production had actually commenced or not - allegations of irregularities and impropriety in the previous round of show cause notice and hearing proceedings – Held that:- From the very documents on record, admitted facts and circumstances and materials which were available before the previous committee, it was impossible to come to the conclusion that the petitioner had in fact made investment in plant and machinery in excess of Rs. 20 Crores, and further that the commercial production had commenced before 31st December 2005 - power of the respondents therefore to make thorough inquiry into the declarations made by the manufacturer cannot be curtailed - petition is dismissed.
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2012 (10) TMI 497
Rebate claim - whether reversal of equal amount of cenvat credit availed on inputs/capital goods under Rule 3(4) of Cenvat Credit Rules, 2002 is to be treated as payment of duty for the purpose of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), - Held that:- Amount reversed under Rule 3(4) of Cenvat Credit Rules, 2002 when inputs are removed as such, is to be treated as payment of duty of excise for the purpose of Rule 18 of Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), - Circular No. 283/1996 dated 31st December, 1996 has held that amount paid under Rule 57F(1)(ii) of Central Excise Rules, 1944 (which is analogous to the Cenvat Credit Rules, 2002/Cenvat Credit Rules, 2004) on export of inputs/capital goods by debiting RC 23A Part II would be eligible for rebate - denial of rebate on the ground that the duty has been paid by reversing the credit cannot be sustained.” Rejection of the rebate claims – Held that:- All the above clearances were made vide proper Central Excise Invoices, ARE-1s and other particulars submitted to the jurisdictional Central Excise Office. The goods were examined under Central Excise supervision and duty payment was also certified by Central Excise as per endorsements on the ARE-1s. The assessments/value of clearances were stated to be proper “transaction value” and due duty was calculated/paid as above - such clearances of “used” capital goods from the factory of their uses which is other than the factory of manufacture of said capital goods when exported are eligible for rebate
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2012 (10) TMI 496
Penalty – assessee stopped paying duty on the ground that it is not excisable to tax. However, after the department noticed the default and brought to their notice, they have paid the duty and the interest even before the issue of a show cause notice – Held that:- Assessee has paid the duty with interest even prior to issue of show cause notice. If that is so, the authorities had no jurisdiction to initiate proceedings at all and consequently, the question of payment of penalty would not arise at all
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2012 (10) TMI 495
Waiver of pre-deposit – cenvat credit - alleged that Jammu unit actually cleared what was an input which was not excisable; the Jammu unit paid duty in the guise of clearing DFMO with the fraudulent intent to claim a refund in terms of Notification 56/2002-C.E. and to enable the Taloja unit to avail of Cenvat credit – Held that:- During the period April 2005 to December 2006 (which also covers the period of dispute in the present Case), the Jammu unit manufactured DFMO out of Crude Menthol Oil and had correctly paid duty and taken a refund under the exemption notification - during period in dispute, the Jammu unit cleared Crude Menthol Oil without subjecting it to the process of manufacture – pre-deposit waived
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CST, VAT & Sales Tax
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2012 (10) TMI 522
Refund claim – Validity of revision proceedings - independent opinion - held that:- it was not a revision initiated on the basis of any application filed by an aggrieved party namely the Deputy Commissioner but initiation of a Revisional proceeding by the Joint Commissioner by forming his own opinion and satisfaction to exercise suo motu power vested under Section 46(4) of the BFT Act on the basis of the materials on record. - decided against the assessee. Limitation - power of drawing up a revisional proceeding by exercising suo motu power – Held that:- Power cannot be exercised by the revisional authority indefinitely - such extra ordinary power i.e. suo motu power of initiation of revisional proceeding has to be exercised within a reasonable period of time - powers have been exercised within about three years of time in some cases and in some cases soon after the expiry of three years period - Three years period cannot be said to be a very long period and power was exercised within a reasonable period of time. - Decided in favor of assessee. Whether the order passed by the Joint Commissioner setting aside the revised assessment order is proper and could be maintained, as the said order was passed during the pendency of the writ petition in the High Court – Held that:- Order was passed while the respondent was fighting out the litigation in the High Court and therefore, it was not possible for the assessee to give his entire focus and attention and also to give full concentration to the aforesaid proceeding pending before the Joint Commissioner. The learned counsel appearing for the appellant also could not dispute the fact that the respondent was somewhat handicapped in contesting the aforesaid matter very effectively before the Joint Commissioner - matter remited to the Joint Commissioner once again to hear the parties
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Indian Laws
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2012 (10) TMI 555
Breach of the fundamental right to life under Article 21 of the Constitution - writ of mandamus to the respondents to conduct an investigation into the mysterious disappearance of their husbands/sons who were on board Jupiter - UOI was guilty of violation of the right to life and was liable for compensation to the petitioners - Held that:- Right to life and personal liberty guaranteed under Article 21 of the Constitution is only available against the State and that Article 21 was not intended to afford protection to life and personal liberty against violation by private individuals - Jupiter-6 was carrying the flag of Saint Vincent and the Grenadines, although it had on its board some Indian seafarers. The Director General of Shipping has issued M.S. Notice 26 of 2002, which lays down the procedure with regard to marine casualty investigation involving Indian citizens on board foreign flag vessels. It is provided in para 2 of Notice that the onus of conducting the investigation into the marine casualty lies with the flag State or the coastal State within whose territorial sea the casualty has occurred. Para 4 of M.S. Notice 26 of 2002, however, states that for the purpose of effective casualty investigation, it is imperative that the Maritime Administration of the State, whose nationals are involved in the marine casualty, by virtue of being ship’s crew, is required to be invited to take part in the marine casualty investigation, as a substantially interested State, by the State conducting the investigation. Thus, respondent nos. 1, 2 and 3 became aware of the casualty for the first time when they received the communication dated 10.10.2005 about the incident from respondent no.4 and the Surveyor Incharge-cum-Deputy Director General of Shipping by letter dated 19.10.2005 requested Saint Vincent and the Grenadines to carry out the investigation into the casualty as Indian nationals were part of the crew of Jupiter-6. On these facts, it is difficult to hold that the Union of India was guilty of violation of the right to life and was liable for compensation to the petitioners. In the present case, Jupiter-6 was a ship bearing the flag of Saint Vincent and the Grenadines and was also covered by insurance and the insurers have deposited Forty Thousand Dollars (40,000 Dollars) for each deceased officer seafarer and Twenty Five Thousand Dollars (25,000 Dollars) for each deceased non-officer seafarer. 40,000 Dollars is equivalent to Rs.18,14,800/- and 25,000 Dollars is equivalent to Rs.11,34,250/- as mentioned in the report of Registrar (J). It is difficult to hold that the aforesaid amount of compensation is not adequate in the absence of sufficient materials produced to show the age, income of the seafarers and all other factors which are relevant for determination of compensation in the case of death of seafarers (officers and non-officers). Thus respondent nos.3 and 4 can also not to be directed to pay the compensation as per the Collective Bargaining Agreements in the absence of any materials placed before the Court to show that the respondent nos. 4 and 5 were bound by the Collective Bargaining Agreements. Taking note of the additional affidavit filed on behalf of respondent nos. 1, 2 and 3 proposing for setting up an Indian Maritime Casualty Investigation Cell and for amending the 2005 Rules have been indicated. It will be enough to recommend to the respondent no.1 to expedite the proposals which have been under consideration of the Government and to take immediate steps to amend the Merchant Shipping Act, 1958 and the Rules 2005 in a manner they deem proper to ensure that the life of seafarers employed in different ships in high seas are made more secure and safe and in case of loss of life, their kith and kin are paid adequate amount of compensation - direction to the Registrar (J) to expedite the payment of compensation to the legal heirs of the victims in accordance with the orders passed in this case as early as possible, in any case, within a period of four months from today. The compensation received by the legal heirs of the Indian seafarers on board Jupiter-6 will be without prejudice to their claim for higher compensation in any appropriate proceedings.
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2012 (10) TMI 518
First time offenders - Charged for possession of brown sugar falling under the head "commercial quantity" - Narcotic Drugs and Psychotropic Substances Act, 1985 - Rigorous Imprisonment & Fine - prosecution - Held that:- As both the appellants are first time offenders and there is no past antecedent about their involvement in offence of like nature on earlier occasions. It is also not disputed by the State that as on date, the appellants had served nearly 12 years in jail. Thus as decided in BALWINDER SINGH Versus ASSTT. COMMISSIONER, CUSTOMS & CENTRAL EXCISE 2005 (2) TMI 127 - SUPREME COURT OF INDIA), while confirming the conviction, the sentence is reduced to 10 years from 15 which is the minimum prescribed sentence under the relevant provisions of the NDPS Act. The order of payment of fine of ₹ 1.5 lakhs each is also upheld Term of imprisonment in default of payment of fine - Held that:- It is clear that clause (b) of sub-section (1) of Section 30 of the Code authorizes the Court to award imprisonment in default of fine up to 1/4th of the term of imprisonment which the Court is competent to inflict as punishment for the offence. However, considering the circumstances placed on behalf of the appellants-accused, that they are very poor and have to maintain their family, it was their first offence and if they fail to pay the amount of fine as per the order of the Additional Sessions Judge, they have to remain in jail for a period of 3 years in addition to the period of substantive sentence because of their inability to pay the fine causing serious prejudice will be caused not only to them but also to their family members who are innocent. Therefore, if default of payment of fine of ₹ 1.5 lakhs persists, the appellants shall undergo RI for 6 months instead of 3 years.
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