Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 9, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
Highlights / Catch Notes
GST
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Jurisdiction - Post GST audit - notice issued for Central Excise and Service Tax Audit for the period from 2013-14 to 2017-18 - Section 174(2)(e) of CGST Act, 2017 - The notice cannot be said to have been issued acting without jurisdiction - petition dismissed.
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Initiation of certain proceedings under Chapter V of the Finance Act, 1994 - transition to GST Regime - Section 174 of CGST Act 2017 - stay granted.
Income Tax
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Jurisdiction of Addl. CIT to act as an AO - the Addl. CIT in the absence of a valid order u/s 120(4)(b) as well as section 127(1) of the Act could not have exercised powers of an Assessing Officer to pass the impugned assessment order.
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Capitalization of interest u/s.36(1)(iii) - Unlike, section 37 which expressly excludes an expense of a capital nature, section 36(1)(iii) emphasizes is the user of the capital and not the user of the asset which case into existence as a result of borrowed capital
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Taxability of Bogus purchase - Estimation of profit - in cases where purchases are not proved with necessary evidences, only profit element embedded on those purchases needs to be taxed.
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Application of income - once the AO u/s 11(3A) allow the assessee to apply the income for such other charitable or religious purposes, as is specified in the application, which is in conformity with the objects of the trust- benefit u/s 11(2) allowable and no addition permissible u/s 11(3)
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Reassessment notice u/s 148 - after four years of the assessment u/s 143(3) - allowabllity of carry forward the losses when return filed u/s 139(4) - petitioner is not guilty of not disclosing fully and truly all material facts - notice quashed
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Levy of penalty u/s 271B - violation to get accounts audited u/s 44AB - The word ‘relevant’ qualifying the words ‘assessment or other order’ in section 275(1)(a) has to be read in a broad, rather than in a narrow, sense, in keeping with the purpose and need for the said exclusion. In the present case, the quantum of turnover is fundamental to the levy of penalty - order within limitation
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Disallowance u/s. 14A - recording of satisfaction - AO before invoking Rule 8D has issued SCN to the assessee. The AO after considering the reply of assessee negated the same giving reasons and thereafter made disallowance under Rule 8D. AO has recorded his satisfaction as envisaged u/s. 14A(3)- disallowance upheld
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Penalty u/s 271(1)(c) - tax payable as per the MAT u/s 115JB - no penalty imposable under normal provision when the tax liability has been fastened on the assessee under the special provisions of Section 115JB
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Provisional attachment of Bank Accounts and properties - undisclosed foreign investment - exercise of powers u/s 132(9B) - while granting the relief, we must bear in mind that the approximate tax, interest and penalty liability which the Department has computed, firstly even the basis of maximum penalty which is impossible, secondly the same is in realm of possibilities.
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Penalty u/s 271E - violation u/s 269T - Section 275(1)(c) which would govern the present contest - statutory authority concerned, is restrained from passing any order of penalty beyond the expiry of a financial year in which a original proceeding has been completed or within six months from the end of the month in which a penalty proceeding has been initiated, whichever expires later.
Customs
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100% EOU - EPCG scheme - If the permission from the Customs and the final exit from the Development Commissioner were obtained either through fraud or collusion, then all Officers who were involved in so colluding or sanctioning fraudulent permissions also should have been investigated and put to notice.
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Interpretation of statute - Power of refund authority to rectify error committed by the importer - Section 154 of the Customs Act, 1962 - clerical error or arithmetical error could be rectified suo motu u/s 154
Corporate Law
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Specific act or act of commission or omission on the part of each Director quantifying the loss to the Company - merely because of inaction on the part of the Directors as a general allegation, no ground to hold the respondents guilty of misfeasance or fraud
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Petition u/s 241 alleging the acts of oppression and mismanagement - petitioner has alleged that he has not received any notice of the meeting after a period of 9 years when even the annual return or necessary Form was filed by the company in the same year with the portal of the Ministry of Corporate Affairs - hopelessly time barred and dismissed.
Indian Laws
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The meaning of the expression ‘habitually resident’ is similar in meaning to ‘ordinary resident’
IBC
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Procedure while deciding appeal - Notification dated 24.05.2017 - having held that the appeal is not maintainable, the appellate Tribunal should not have adjudicated upon either the limitation aspect of the case or the merits of the particular Scheme before it.
Service Tax
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CENVAT Credit - input services - retention of part payment of input services - Rule 4 (7) of Cenvat Credit Rules - irrespective of retention, the amount was paid at the end of stipulated period after the completion of the project - Credit allowed.
Central Excise
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Valuation - Validity of SCN - The Appellate Tribunal has misread the subject show cause notice. Hence, the conclusion reached on such erroneous basis cannot be sustained.
Case Laws:
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GST
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2019 (4) TMI 523
Initiation of certain proceedings under Chapter V of the Finance Act, 1994 - transition to GST Regime - Section 174 of CGST Act 2017 - whether any fresh proceeding under the 1994 Act for scrutiny, inspection or audit, if commenced after omission of the said Act is prima-facie legally valid or not? - Held that:- The expression instituted in sub-clause(e) would imply the proceeding which stood already instituted at the time of repeal or omission of the 1994 Act. In such circumstances, we choose to follow the course taken by the Hon ble High Courts of Gujarat and Delhi and direct status quo to be maintained till the next date of hearing so far as the proceeding which form the subject matter of the present writ petition is concerned. Matter shall be listed for hearing on 7th May, 2019 at 2:15 p.m.
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2019 (4) TMI 522
Jurisdiction - notice issued for Central Excise and Service Tax Audit of its unit for the period from 2013-14 to 2017-18 - Section 174(2)(e) of Central Goods and Services Tax Act, 2017 - Held that:- The provision incorporated in the Constitution Act, 2016 as aforesaid, in no manner, restrict the operation of the provisions of Section 174(2) incorporated in CGST Act beyond the period of one year, which provides that repeal of the Acts specified in sub-section (1) of Section 174 and the amendment of the Finance Act, 1994 to the extent mentioned in sub-section (1) or Section 173, as the case may be, shall not amongst others affect an investigation, enquiry or verification (including scrutiny and audit), assessment proceedings, adjudication or other legal proceeding or recovery of arrears etc., and all such proceedings may be instituted, continued or enforced as if the Act had not been so amended or repealed. The impugned notice issued by the Assistant Commissioner, CGST, Audit Circle, Udaipur cannot be said to have been issued acting without jurisdiction - petition dismissed.
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Income Tax
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2019 (4) TMI 521
Liability of directors of private company in liquidation u/s 179 - HELD THAT:- SLP dismissed is dismissed. We, however, make it clear that any observation made in the order recalling the earlier judgment shall not be treated as expression of any opinion and the High Court shall decide the writ petition on merits.
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2019 (4) TMI 520
Disallowance u/s. 40A(2)(b) - excess remuneration to directors - disallowance u/s. 14A - valuation of closing stock - profit earned on the sale for shares shall be treated as capital gain instead of business income - Addition u/s 145A - HELD THAT:- We are not inclined to entertain this petition under Article 136 of the Constitution of India. The Special Leave Petition is, accordingly, dismissed.
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2019 (4) TMI 519
Sale of agriculture land as plotted land - taxable as business income or capital gains - the assessee itself has developed residential plots and then sold it to individual buyers - HELD THAT:- SLP dismissed.
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2019 (4) TMI 518
Provisional attachment of Bank Accounts and properties - undisclosed foreign investment - exercise of powers u/s 132(9B) - search proceedings - case of the petitioner is that he does not have any taxable income. He is a second account holder in bank accounts maintained at U.K. His son is a permanent resident of U.K. who earns sizable income. The balance in the accounts does not belong to the petitioner. The petitioner has inherited sizable funds and properties from which he makes investments - HELD THAT:- Department has virtually prevented the petitioner for accessing his own funds in the bank accounts which would undisputedly cause great difficulty to the petitioner in meeting his day to day expenses, to meet with special requirements for medical attention for himself and his aged mother. While, therefore, without harming the interest of the Revenue, we would like to give limited relief to the petitioner against such action of the Department. Refereeing to valuation report of the Government registered valuer showing the approximate value of these flats at ₹ 10.81 Crores and 6.34 Crores respectively. Going by this valuation, combined value of the flats would be in excess of ₹ 17 Crores. We have also required the petitioner to state that the said immovable properties are unencumbered. Thus while maintaining the attachment of the two immovable properties of the petitioner, his bank accounts can be released from attachment. Even if the Department were to succeed substantially in its present stand, the petitioner’s tax, interest and possible penalty liabilities are unlikely to exceed the valuation of the two immovable properties Attachment of the petitioner’s two immovable properties is not disturbed. The petitioner is prevented from selling, transferring, creating any charge or encumbrances on the said two immovable properties till the present litigation is over or without leave of the Court.
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2019 (4) TMI 517
Application of income - income accumulated u/s 11(2) - assessee was enjoying an order u/s 11(3A)which was in force - HELD THAT:- We do not think that there is any error, illegality, impropriety or purversity in the order passed by the Tribunal, especially in view of the provisions contained u/s 11(3A) that once the Assessing Officer allow the assessee to apply the income for such other charitable or religious purposes, as is specified in the application, which is in conformity with the objects of the trust, then the provisions of Section 3 shall apply, as if the purpose specified by such assessee will be deemed to be a purpose specified in the notice given to the Assessing Officer u/s 11(2A) - no substantial question of law
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2019 (4) TMI 516
Stay of the recovery of demand - Disallowance of TDS credit - Revenue states that she has been instructed to make a statement before this Court that if this Court proposes to grant any stay of the recovery of demand, the same shall be on condition of the Applicant depositing 50% of the demand notice - HELD THAT:- There is substance in the submission made by the learned Counsel for the Applicant. The Applicant is a Government of India Undertaking. Substantial amount of TDS claimed by the Applicant, is disallowed by the Revenue. Such amount is already lying deposited with the Revenue. We are inclined to grant unconditional stay for recovery of demand, pursuant to the Order dated 10.12.2018. It is ordered accordingly.
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2019 (4) TMI 515
Reassessment notice u/s 148 - after four years of the assessment u/s 143(3) - carry forward the losses will not be allowable as return filed 139(4) - HELD THAT:- Notice u/s 148 has been issued solely on the ground that the petitioner had not filed return within the due date as mentioned u/s 139(1) claiming carry forward and set off of business loss. Section 139(4) of the Income Tax permits an assessee to file the Income Tax Return by the end of the assessment year or before completion of assessment, whichever is earlier. In the present case, the return has been filed before end of the assessment year that is on the last date of the assessment year. The same was permissible. It cannot be said that it was failure on the part of the petitioner to disclose the true and correct facts or that an income chargeable to tax has escaped assessment by reasons of failure on the part of the assessee to file return u/s 139 or in response to notice issued u/s 142(1) or Section 148 nor the petitioner is guilty of not disclosing fully and truly all material facts. The assessment as observed supra for the year 2011-2012 has been made u/s 143(3) and the Assessing Officer has considered the case of the petitioner and held the petitioner entitled for carry forward of the loss. Mere change of opinion cannot be a ground to reopen the assessment - notice u/s 148 is quashed and set aside
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2019 (4) TMI 514
Penalty u/s 271E - violation u/s 269T - limitation to pass penalty order u/s 275(1) - rectification order passed u/s 154 can extend limitation - HELD THAT:- As foundation for the proceedings lies not in any order passed on a statutory appeal or revision, it is the stipulations present in Section 275(1)(c) which would govern the present contest. A plain reading of the provisions would confirm that the statutory authority concerned, is restrained from passing any order of penalty beyond the expiry of a financial year in which a proceeding which has led to the penalty proceeding has been completed or within six months from the end of the month in which a penalty proceeding has been initiated, whichever expires later. A plain reading of various circumstances discussed u/s 275 of ‘the Act’ would confirm that a plea of a pending proceeding u/s 154, does not suffice for explaining a delay in passing the final order because this situation does not find mention in either of the situations discussed. The entire proceedings initiated for imposition of penalty under Section 271E for alleged violation of Section 269(T) is barred by limitation as prescribed u/s 275(1)(c) - Decided in favour of assessee.
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2019 (4) TMI 513
Levy of penalty u/s 271(1)(c) - addition under the head “kitti Scrap Sale" - non specification of charge - defective notice - Whether the assessee has concealed ''particulars of income" or assessee has furnished "inaccurate particulars of income"? - Held that:- Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.
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2019 (4) TMI 512
Disallowance u/s 14A - interest free funds available with the assessee is more than investment in tax free securities - HELD THAT:- In the case of CIT and Another Vs. Microlabs Ltd. [2016 (4) TMI 219 - KARNATAKA HIGH COURT] we examine the amount of interest free funds available with the assessee and compare it with investment in tax free securities. We find that assessee was having interest free own funds in the form of share capital and reserves and surplus. In addition to that, the assessee is also having fund in the form of CCDs on which no interest is being paid by the assessee. If we add up these two amounts, it is seen that total interest free funds available with the assessee is of as against the investment in tax free securities of ₹ 51,76,46,752/-. Hence interest free funds available with the assessee is more than investment in tax free securities. Disallowance u/s. 14A r.w.r. 8D(2)(iii) being 0.5% of average investment - there is no infirmity in the order of CIT (A) in that regard because learned AR of the assessee has also fairly conceded in that regard. This disallowance u/s. 14A r.w.r. 8D(2)(iii) of IT Rules, 1962 being 0.5% of average investment is upheld and accordingly, ground no. 2(c) is rejected.
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2019 (4) TMI 511
Penalty u/s 271(1)(c) - treatment to loss on sale of wheat - claiming the speculative loss as business loss - any proof of mensrea? - HELD THAT:- A.O on coming to a finding that the assessee intentionally claimed the loss on sale of wheat as a business loss without establishing anything about the movement of goods which shows that the transaction of purchase and sales of wheat is speculative in nature and provisions of Section 45(3) applies thereon and the loss arising from which transaction without delivery of goods falls under the category of speculation loss and the same can be adjusted/carry forward to be adjusted against speculative profit only. The transaction of purchase and sale of wheat revenue authorities have not pointed out any mistake, error or anomaly in the genuineness of the transaction with regard to the quantity of goods, amount of purchase and sale, details of the party with whom the transaction has been carried out. In nutshell assessee has not concealed any particulars relating to the alleged transaction for both the assessment years. Where assessee’s mensera is not proved and there is no furnishing of inaccurate particulars of transactions, whether the penalty is leviable u/s 271(1)(c) of the Act needs to be adjudicated. In the case of Krishna Soya Product Pvt. Ltd vs. DCIT [2017 (9) TMI 1801 - ITAT INDORE] adjudicating the similar type of issue of levy of penalty u/s 271(1)(c) in respect of treating the loss on trading of commodity exchange treated as business loss but was held to be as speculative loss by the revenue authorities the penalty levied u/s 271(1)(c) was deleted by the Tribunal Levying the penalty u/s 271(1)(c) on the alleged transaction of purchase and sale of wheat because the assessee has bonafidely treated the loss as business loss and disclosed all necessary details relevant to the transaction in the books of accounts and further for the alleged transaction two divergent views were possible thereby the alleged loss could be treated as a business loss or speculation loss. Thus delete the penalty levied u/s 271(1)(c) - Decided in favour of assessee.
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2019 (4) TMI 510
Power of Addl. CIT to pass assessment order - Jurisdiction of Addl. CIT to act as an AO - absence of a valid order u/s 120(4)(b) as well as section 127(1) - admission of Additional Ground - HELD THAT:- We follow the decision of the Tribunal in Tata Sons Ltd. [2016 (10) TMI 1228 - ITAT MUMBAI] and hold that in the facts of the present case, the Addl. CIT in the absence of a valid order u/s 120(4)(b) as well as section 127(1) of the Act could not have exercised powers of an Assessing Officer to pass the impugned assessment order. Accordingly, the impugned assessment order is annulled/quashed.
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2019 (4) TMI 509
Capitalization of interest u/s.36(1)(iii) - addition to capital WIP from the date of sanction of loan as against disallowance made for the whole year in the assessment order - HELD THAT:- Hon’ble Supreme Court in the matter of DCIT v/s. Core Healthcare Ltd. [2008 (2) TMI 8 - SUPREME COURT OF INDIA] wherein it is held that interest on borrowed capital to be allowed and makes no distinction between money borrowed to acquire a capital or a revenue asset and section 36(1)(iii) requires that assessee must borrow capital and the purpose of the borrowing must be for business which is carried on by the assessee in the year of account. Unlike, section 37 which expressly excludes an expense of a capital nature, section 36(1)(iii) emphasizes is the user of the capital and not the user of the asset which case into existence as a result of borrowed capital. The legislature has, therefore. made no distinction in section 36(1)(iii) between “capital borrowed for a revenue purpose” and “capital borrowed for a capital purpose”. An assessee is entitled to claim on borrowed capital provided that capital is used for business irrespective of what may be the result of using the capital which the assessee has borrowed. Further, the words “actual cost” do not find place in section 36(1)(iii) of the Act. In this case, assessee has taken loan from Bank/financial institution and paid interest and the same is reflecting in the balance-sheet of the assessee. Therefore, we are of the opinion that relief should be granted to the assessee/appellant. Levy of penalty u/s.271(1)(c) and charging of interest u/s.234-A, 234-B, 234-C & 234-D - HELD THAT:- We have granted relief to the assessee. Therefore, we do not want to adjudicate separately.
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2019 (4) TMI 508
Disallowance u/s. 14A - mandation of recording of satisfaction as envisaged u/s. 14A(2) and (3) as pre-condition before making any disallowance under Rule 8D - HELD THAT:- It is a well settled law that road to Rule 8D passes through section 14A(2) and (3) of the Act. Thus, recording of satisfaction as envisaged u/s. 14A(2) and (3) is a mandatory pre-condition before making any disallowance under Rule 8D. The law has been laid down in an unambiguous manner in the case of Godrej & Boyce Manufacturing Company Limited Vs. Deputy Commissioner of Income Tax & Anr. [2017 (5) TMI 403 - SUPREME COURT OF INDIA]. The manner of recording of satisfaction has not been laid down either under the Act or the Rules. The manner of recording satisfaction by the AO whether it conforms to the provisions of section 14A is a subjective assessment. The basic requirement is that the AO should express in his satisfaction the reasons for disagreeing with assessee qua suo-moto non disallowance/insufficient disallowance of expenditure incurred towards earning income exempt from tax. In the present case, the Assessing Officer before invoking the provisions of Rule 8D has issued show cause to the assessee. The assessee gave detailed reply citing various decisions. The Assessing Officer after considering the reply of assessee negated the same giving reasons and thereafter made disallowance under Rule 8D. After perusal of the assessment orders for the impugned assessment years, it is satisfied that the AO has recorded his satisfaction as envisaged u/s. 14A(3). No merit in the submissions and grounds raised by the assessee assailing the invoking of provisions of section 14A. - Decided against assessee.
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2019 (4) TMI 507
Penalty u/s 271(1)(c) - tax payable as per the MAT u/s 115JB - penalty imposed based on various disallowances made in normal computation - HELD THAT:- A reference to the decision in the case of Nalwa Sons Investments Ltd. (2010 (8) TMI 40 - DELHI HIGH COURT) has been made on behalf of the assessee which squarely covers the issue in favour of the assessee. The subsequent amendment to the Explanation (4) of Section 271(1)(c) also suggests the purport of the existing provisions as applicable in the relevant assessment year. Therefore, we find merit with the appeal of the assessee. AO is accordingly directed to delete the penalty imposed under normal provision when the tax liability has been fastened on the assessee under the special provisions of Section 115JB - Appeal of the Revenue is dismissed.
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2019 (4) TMI 506
Assessment u/s 153A - assessee had claimed deduction u/s.80IA(4) in the return of income filed u/s.139 - proof of incriminating material found in search - HELD THAT:- No incriminating material was found during the course of search and seizure action carried out by the Department against the assessee for the assessment year 2005-06.In the return of income filed u/s.139 of the Act, the assessee had claimed deduction u/s.80IA(4) of the Act, hence assessment for assessment year 2005-06. The assessment under regular provisions was completed in the case of the assessee and claim of the assessee was accepted by the Assessing Officer. There was no pending assessment when search and seizure action was carried out by the Department. It is a well settled law that when there is no incriminating material, no addition can be made where original assessments have not abated. The Hon'ble Jurisdictional High Court in the case of CIT Vs. Continental Warehousing Corporation (Nhava Sheva) [2015 (5) TMI 656 - BOMBAY HIGH COURT] has held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search. As decided in M/S. MURLI AGRO PRODUCTS LTD.[2010 (10) TMI 1052 - BOMBAY HIGH COURT] once it is held that the assessment finalized has attained finality, then the deduction allowed under section 80 HHC as well as the loss computed under the assessment dated 29-12-2000 would attain finality. A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the I.T. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153 A proceedings.- Decided in favour of assessee
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2019 (4) TMI 505
Deduction u/s 80(P)(2) - Interest income earned by the assessee from the deposits made with SBI, Neyveli - addition made towards interest income earned by the assessee with Cuddalore District Central Co-operative Bank - HELD THAT:- CIT(A) has held that when the assessee society parked its funds temporarily in another co-operative society and earned interest which was ultimately used for providing credit to members the activities are related and are in the spirit of encouraging the co-operative sector. Since the Department also accepted the observations of the CIT(A) and not disputed in appeal before the Tribunal, we find no infirmity in the order passed by the CIT(A) on this issue. Whereas, since the assessee is not entitled to claim deduction on the interest income earned from the investments made in the scheduled bank, the CIT(A) has rightly confirmed the addition of interest income earned from SBI, Neyveli. Thus, the ground raised by assessee stands dismissed for the assessment years under consideration. Deduction under section 80(P)(2)(a)(i) - Held that:- Assessee society is not granting any loan to general public and only extending credit facility to its members. Thus, we find no reason to interfere with the order passed by the ld. CIT(A). Hence, the ground raised by the Revenue stands dismissed for both the assessment years under consideration.
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2019 (4) TMI 504
Levy of penalty u/s 271B - violation to get his accounts audited u/s 44AB - Bar of limitation for imposing penalties - HELD THAT:- In the present case, the quantum of turnover is fundamental to the levy of penalty. This is as the turnover, a subject matter of dispute in the quantum proceedings, is a given as far as the penalty proceedings are concerned, so that it ought not to, on facts and common principles, be proceeded with without first resolving the same. The legislative intent must be the foundation of any interpretative exercise CIT v. Baby Marine Export [2007 (3) TMI 206 - SUPREME COURT]. The word ‘relevant’ in section 275(1)(a) would, in our view, imply an order which becomes relevant on account of the issue under appeal in quantum proceedings being relevant for the purpose of levy of penalty under Chapter XXI of the Act. The other decisions mentioned in the written submissions, though not relied upon or referred to during hearing, have also been though perused. The decision in Subodh Kumar Bhargava v. CIT [2008 (11) TMI 45 - HIGH COURT DELHI] is on the meaning of the words ‘whichever period expires later’, which has no bearing or is not relevant in the present case; the penalty being admittedly in time w.r.t. s. 275(1)(a). Again, there is no dispute that the time limitation is mandatory, as held in CIT v. Chhajer Packaging & Plastics (P.) Ltd. [2007 (9) TMI 213 - BOMBAY HIGH COURT] that being the very premise of the instant appeal. The impugned penalty order is not barred by time. The assessee has not made out any case on the merits of the levy of penalty; the turnover/gross receipt under question having been held in the appellate proceedings to be of the assessee. - Decided against assessee.
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2019 (4) TMI 503
Penalty levied u/s.271(D) - violation of provisions of Sec.269SS - deposits were received from Sri Muthukumaran Medical College & Research Institute (SMMCH & RI) otherwise than by way of crossed-cheque or demand draft - CIT(A) had come to conclusion that is only journal entry and therefore, the provisions of Sec.269SS are not attracted - HELD THAT:- There is nothing on the record to show that the copies of the journal entry were furnished before the Assessing Officer and also the Ld.CIT(A) had not examined the basis on which these journal entry was passed. Further, the Ld.CIT(A) had not examined the crucial aspect whether these two organizations viz., Sri Muthukumaran Medical College & Research Institute (SMMCH & RI) & Arulmigu Meenakshi Amman College of Engineering (AMACE) are part of the respondent-assessee are a different entities and also failed to examine whether deposits are originally accepted in cash in the case of Arulmigu Meenakshi Amman College of Engineering (AMACE). In our considered opinion, these facts would be crucial to decide whether journal entry were passed as a cover up exercise in order to avoid the penal consequences of accepting deposits in cash. Therefore, we remand the matter to the file of Assessing Officer for fresh adjudication in accordance with law after affording due opportunity of being heard to the respondent-assessee - Appeal filed by the Revenue is partly allowed for statistical purpose
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2019 (4) TMI 502
Disallowance u/s 14A read with rule 8D - HELD THAT:- Assessee filed evidence of borrowings of the current year and the preceding year to demonstrate that the borrowings were for special purposes and claimed that they were utilised towards those purposes. We note that Hon`ble Bombay High Court in the case of HDFC BANK LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX [2016 (3) TMI 755 - BOMBAY HIGH COURT] held that in a situation where own funds or interest free funds exceeded the amount of relevant investment, it may be presumed that the investment was from own funds. Therefore, ld CIT(A) following the judgment of Bombay High Court in the case of HDFC BANK LTD (supra), deleted the addition. In respect of Rule 8D (2) (iii), we note that Coordinate Bench of ITAT Kolkata in the case of REI Agro Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA] has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(ii) & (iii) of the Rules also confired by HC [2014 (4) TMI 713 - CALCUTTA HIGH COURT]. Therefore, we direct the assessing officer to compute the disallowance under Rule 8D (2) (iii) taking into account the dividend bearing securities only. We allow both the appeal filed by the assessee for statistical purposes.
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2019 (4) TMI 501
Rectification u/s 254(2) - excessive salary to the Secretary of the society - Argument in MA that FCRA guidelines do not apply to our Society and no specification of Rules to utilized only 50% of the foreign contribution to meet administrative expenses and decision of the Hon’ble Supreme Court is not applicable, - HELD THAT:- As per the Charter for Associations who have been granted registration or prior permission under FCRA, 2010, it has been clearly stated that “Not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the Association”. In this case, the point is 10% of the amount earmarked for charitable purposes was given to Shri M. Krishna Kumar as salary, who is the Secretary in excess of what may be reasonably paid for such services as defined in section 13(2)(c). Considering the qualification, experience, etc. the CIT(A) allowed 50% of the disallowance of salary paid to the Secretary, which was confirmed by the Tribunal. Thus, we find no mistake apparent on the face of the order passed by the Tribunal. Therefore, the petition filed by the assessee stands dismissed. The administrative expenses work out to 95.4% which “is a clear violation of Foreign Contribution Regulation Rules 2011, wherein it is defined that not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the Association”, which was repeated in Tribunal order at page 6 para 6, which is a rectifiable mistake. Accordingly, we replace the sentence with same terminologies that “The above claim of the assessee is a clear violation as per the Charter for Associations, who have been granted Registration or prior permission under FCRA,2010 that not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the Association”. Not more than 50% of the foreign contribution shall be defrayed to meet administrative expenses of the association. What constitutes 'administrative expenses' has been defined in Rule 5 of the Foreign Contribution (Regulation) Rules, 2011 (FCRR, 2011). Once these facts are not in dispute, we are of the considered opinion that the Tribunal has rightly followed the decision of the Hon’ble Supreme Court in the case of Maddi Venkatraman and Co. Pvt. Ltd. [1997 (12) TMI 3 - SUPREME COURT] to reverse the findings of the ld. CIT(A) and restore that of the Assessing Officer. Thus, the petition filed by the assessee is partly allowed.
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2019 (4) TMI 500
Rectification u/s 254(2) - non-satisfaction or disagreement of the parties to the litigation, with the reasoning given by the Tribunal in its order - HELD THAT:- Commissioner Of Income-Tax vs Ramesh Electric And Trading Co [1992 (11) TMI 32 - BOMBAY HIGH COURT] power of rectification under section 254(2) of the Income-tax Act can be exercised only when the mistake which is sought to be rectified is an obvious and patent; mistake which is apparent from the record, and not a mistake which requires to be established by arguments and a long drawn process of reasoning on points on which there may conceivably be two opinions. Failure by the Tribunal to consider an argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment and under such circumstances the Tribunal has no jurisdiction under section 254(2) to pass the second order.
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2019 (4) TMI 499
Rectification of mistake u/s 254 - mistake apparent on record - contrary statement in affidavit & u/s 131 - AO has failed to provide statement of Mr. Neelamegan and opportunity to cross examine - use of credit cards by third party - HELD THAT:- Everybody is known to the fact that no credit card can be used by a third party as signature of the card holder is mandatory while using credit card in the swiping machine. Since the assessee was very much aware of the above facts, which was elaborately narrated in the grounds of appeal as well as written submissions filed before this Tribunal on 04.06.2018, we do not find any merits that the above statement warranting any cross examination. By no stretch of imagination, it could be accepted that with the permission of the assessee, Shri Neelamegan has used the credit card, because, while using the credit card, the signature of card holder is essential and no evidence was placed on record to establish by way of producing copies of swiping machine receipts duly putting signature [forgery] of the assessee by Shri Neelamegan either before the Assessing Officer or before the CIT(A) or even before the Tribunal and moreover, no supporting evidence was placed on record along with the Declaration cum Affidavit filed before the Tribunal on 20.07.2018 to affirm the statements made in the affidavit. Thus, the assessee has not established with evidence that Shri Neelamegan has used the credit card of the assessee. Shri Neelamegan has deposed wrong statement in the affidavit, which was contrary to the statement recorded under section 131 of the Act and therefore, the Tribunal has not taken into account of the same in its order dated 16.08.2018. Thus, we find no mistake apparent on the face of the order passed by the Tribunal - Decided against assessee.
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2019 (4) TMI 498
Reopening of assessment u/s 147 - whether AO can travel beyond the subject matter of the reasons recorded for reopening the assessment if no addition qua alleged reasons was made? - HELD THAT:- When undisputedly the AO has not made any addition qua the income alleged to have escaped assessment as per reasons recorded, he had no jurisdiction to make reassessment on other items for which reopening was not initiated. When the AO has accepted the explanation made by the assessee as to the alleged escapement of income and has not made any addition there on, initiation of proceedings qua other subjects has ceased to survive. So, we are of the considered view that other additions made by the assessee which were not the subject matter of the reasons recorded, are not sustainable. So, Ground determined in favour of the assessee. Addition on substantive basis - unexplained income taken in the form of share application money - HELD THAT:- Protective addition has been deleted by the CIT(A) wide impugned order which has been challenged by the Revenue by way of filing cross appeal. But again for the sake of repetition, we are of the considered view that since items of these additions were not subject matter of the reasons recorded / reopening, the addition per se cannot survive, as has been held by Hon’ble Delhi high court in Ranbaxy Laboratories Ltd. [2011 (6) TMI 4 - DELHI HIGH COURT ]. Consequently, Grounds determined in favour of the assessee
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2019 (4) TMI 497
Taxability of Bogus purchase - Estimation of profit - AO alleged that Maharashtra Sales Tax Department, investigation proved that certain parties were involved in providing accommodation entries without actual business - notices issued to parties u/s. 133(6) were returned un-served - ex-party order - HELD THAT:- on perusal of findings of the lower authorities where it was categorically observed that the assessee could able to file only purchase bill and payment proof for such purchases through proper banking channel. The assessee neither could controvert the findings of fact recorded by the lower authorities in the backdrop of clear finding of sales-tax authorities that those parties are involved in providing accommodation entries. The assessee was not able to file complete details as required by the AO except purchase bill and payment proof. Further, the assessee could not able to produce the parties in person before the AO for examination. Under these facts, it is difficult to accept the arguments of the assessee that purchases from the above parties are genuine which are supported by evidences. When the purchases are considered to be bogus and also when the assessee is not able to prove the purchases to the satisfaction of the AO, what needs to be taxed – whether the total amount of alleged bogus purchases or only a profit element embedded on those purchases is a question of fact. The Courts and Tribunals in number of cases have come to the conclusion that in cases where purchases are not proved with necessary evidences, only profit element embedded on those purchases needs to be taxed. The Hon’ble Gujarat High Court in the case of COMMISSIONER OF INCOME-TAX-I VERSUS SIMIT P SHETH [2013 (10) TMI 1028 - GUJARAT HIGH COURT] has held that no uniform yardstick can be applied for estimation of profit and it depends upon facts of each case. The co-ordinate bench of ITAT, Mumbai Benches in several cases have taken a consistent view and directed the AO to estimate profit ranging from 5% to 12.5% depending upon facts of each case - AO to adopt a profit percentage of 12.5% on the alleged bogus purchases
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2019 (4) TMI 460
Attachment of immovable properties situated at Mumbai - income tax liability - recovery proceedings - valuation of property far exceeds any possible income tax liability which may arise even if the petitioner’s all legal contentions were to be negatived - HELD THAT:- As submitted that keeping such properties under attachment, the petitioner’s bank accounts may be released. Department may file reply before the next date of hearing. He may also indicate the possible approximate liability of the tax which may arise in case of the petitioner. The petitioner shall file an affidavit declaring that the two immovable properties exclusively belong to him and that the same carry no encumbrances.
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Customs
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2019 (4) TMI 496
Interpretation of statute - Power of refund authority to rectify error committed by the importer - Section 154 of the Customs Act, 1962 - Held that:- With regard to the power under Section 154 of the Act, the first appellate authority held that unless the error is committed by the Department, the same cannot be rectified. The assessee filed appeal before the Tribunal. The Tribunal after considering the submissions made by the assessee and the Revenue, took note of Section 154 of the Act, the decision of the Delhi Tribunal in the case of Cannon India Pvt. Ltd., vs. CC, [2006 (2) TMI 396 - CESTAT, NEW DELHI], the decision of the Mumbai Tribunal in the case of Goa Shipyard vs. CC., ACC Sahar, [2005 (8) TMI 277 - CESTAT, MUMBAI] and held that clerical error or arithmetical error could be rectified suo motu under Section 154 of the Act and refund could be allowed to importer as a consequence of correction of clerical error under Section 154 of the Act, when the importer had not filed refund claim under Section 27 of the Act. A reading of Section 154 of the Act gives us an impression that clerical or arithmetical error which has occurred in orders passed by the Government Board or any officers of that Department, or errors arising from such order due to accidental slip or omission alone can be corrected. However, what is to be borne in mind is the procedure prescribed for amendment of bills of entry or for amendment of export documents which are documents originating from the exporter or importer. However, so far as the orders to be passed under the provisions of the Act is concerned, the power to correct the same can vest only with the authorities. Therefore, Section 154 of the Act specifically deals with such a power. In the instant case, the assessee cannot correct the order, but the fact remains, an invoice which did not form part of the bill of entry was inadvertently included, assessed to tax and tax was also paid. The same invoice was subject matter of another bill of entry which was assessed to tax and tax was cleared. Therefore, the error is apparent on the face of the order. The direction, finding rendered by the Tribunal that the assessee is entitled to refund of excise duty paid is set aside and the matter is remanded to the Assessing Officer to consider the appellant's request, take note of the facts and exercise power under Section 154 of the Act and proceed to pass orders in accordance with law - Appeal allowed by way of remand.
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2019 (4) TMI 495
Grant of Regular Bail - smuggling - foreign currency - reliability of statements - Held that:- In the present case, admittedly, petitioner was arrested on 17-7-2018 at the Jaipur International Airport. Petitioner was found in possession of foreign currency with Indian currency value to the tune of Rupees thirty five lacs fifty thousand and twenty six. Son of the petitioner was arrested in November, 2017 and was found in possession of foreign currency with Indian currency value to the tune of Rupees ninety six lacs twenty four thousand and twelve. So far as the petitioner is concerned, he is not an accused along with his son in the case registered against the son of the petitioner in November, 2017. Arpit Jain son of the petitioner is not an accused in the present case. Hence, it would be a debatable issue as to whether the amount recovered from the son of the petitioner in another criminal case can be clubbed with the present recovery from the petitioner. The said aspect can be gone into by the Trial Court during trial. Petitioner be admitted to bail subject to satisfaction of the Trial Court - petition allowed.
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2019 (4) TMI 494
Imposition of penalty u/s 112 and 114AA of FA - Forgery - import licences were forged - the entire effort of the revenue was to establish the appellants’ guilt or role based upon adverse statement recorded by few ex-employees - Held that:- The premises of M/s. Alliance Strategies Limited yielded - during search - rubber stamps, which were apparently used to create documents. These forged documents found their way to other vendors, who purchased the equipments and exported them. The version of the employees was that forgery did take place in whatever way, was done at the behest of the superior officers. If any grievance was of the appellants with respect to their role, it was open to them to disclose on the basis of the material either existing or sourced in the course of proceedings from the DoT that the documents were not forged. As far as the issue as to whether the forgeries were carried on by the appellants or at their behest or they had no role would concern, that is the subject matter of criminal proceedings; to which this Court would not like to comment on them, as it may cause prejudice to the appellants. This Court is of the opinion that no question of law arises in the present petition - petition dismissed.
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2019 (4) TMI 493
Rectification of mistake - time limitation - Held that:- Insofar as the request for reconsidering the invocation of extended period of limitation is concerned, the application for rectification of mistake reiterates the findings of the adjudicating authority which have already been considered by the Tribunal while issuing the final order. Hence, there is no error apparent on record. Application of ROM dismissed.
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2019 (4) TMI 492
Refund of SAD - N/N. 102/2007-CUS dated 14.9.2007 as amended by Notification No. 93/2008- CUS dated 01.8.2008 - time limitation - respondent in this case have imported the goods and filed a claim for refund of SAD after a period of one year - Held that:- This bench in the case of COMMISSIONER OF CUSTOMS HYDERABAD VERSUS M/S. SREE KRISHNA ENTERPRISES [2017 (6) TMI 883 - CESTAT HYDERABAD] had followed the judgment of the Hon’ble High Court of Bombay in the case of CMS Info Systems [2017 (1) TMI 786 - BOMBAY HIGH COURT] and hold that the limitation of time specified in the notification applies. The impugned order is unsustainable and needs to be set aside - Appeal allowed - decided in favor of Revenue.
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2019 (4) TMI 491
Rectification of mistake - typographical error or not - Held that:- It is not found that the said letters do not indicate that there was putrefiable organic matter in the consignment which was inspected. The consignment was first visually examined by the APPCB on 24.02.2006 in the customs area and gave a prima facie view that it contains bottles, cans, tins and some sort of dust and are low grade material. Subsequently, on permission the consignment was cleared but with a condition that there would be segregation in the appellant's factory by APPCB - there seems to be typographical error which has crept in - The first error which was sought to be rectified by the learned counsel is rectified and the application for rectification to that extent is disposed of. When it is undisputed that in the case in hand there is presence of non-fibrous material, the consignment is liable for confiscation - there is no error apparent on the face of the records, in the case in hand upholding the redemption fine and reducing the penalty imposed. The application filed by the appellant/applicant is rejected.
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2019 (4) TMI 490
100% EOU - EPCG scheme - debonding of unit - the appellant sought permission from the Development Commissioner VSEZ to debond from 100% EOU scheme and switch to Export Promotion Capital Goods (EPCG) Scheme in terms of para 6.18 (e) of Foreign Trade Policy 2004-2009 - suppression of facts - Held that:- There is nothing on record to show fraud and that the officers being aware of the legal provisions and that the appellant has allegedly not fulfilled the NFE requirements, have fraudulently permitted them to switch over to EPCG Scheme. Otherwise the concerned Officers who would have been put to notice for the fraud. There is nothing on record to show that appellants have suppressed any facts or misstated facts. If the permission from the Customs and the final exit from the Development Commissioner were obtained either through fraud or collusion, then all Officers who were involved in so colluding or sanctioning fraudulent permissions also should have been investigated and put to notice. If there was no evidence of fraud or collusion, then there is no case for the demand. The impugned order demanding customs and central excise duties invoking extended period of limitation and proposing confiscation of the goods and imposing of penalties is without any merit and the same needs to be set aside - Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 489
Benefit of N/N. 20/2006-Cus., dated 1-3-2006 at Sl. No. 52 - Import of consignment of “germinated oil palm seeds” - change in classification - classification under Tariff Heading No. 1209 29 90 of Customs Tariff Act, 1975 or not - Held that:- The Commissioner (Appeals) has passed the impugned order as per law with adequate deliberation regarding the provisions of notification and the Tariff Entries - appeal dismissed - decided against appellant.
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Corporate Laws
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2019 (4) TMI 488
Specific act or act of commission or omission on the part of each Director quantifying the loss to the Company - directors guilty of misfeasance or fraud in terms of Section 543 of the Act of 1956 - Power of Tribunal to assess damages against delinquent directors - HELD THAT:- This Court finds that the BIFR had declared the Company in liquidation as a sick unit on 01/08/1994 and had referred the matter to this Court for winding up and an order was passed for winding up of the Company in liquidation on 12/08/1999. The instant company application moved by the Official Liquidator is solely based on the report prepared by the Chartered Accountant dt. 13/07/2004. The Chartered Accountant was examined. Neither in his affidavit nor during the course of crossexamination, he has pinpointed of any particular misfeasance or fraud committed by a particular Director of the Company in liquidation. As noticed, the power under Section 543 of the Act of 1956 is to be exercised by the Court wherein the Court is vested with the jurisdiction to examine conduct of the past or present Director, Manager or any other officer of the Company who is found to be guilty of any misfeasance or breach of trust. Thus, such proceedings have to be treated in the nature of quasi criminal proceedings. Misfeasance is not to be imputed to a Director unless he has dishonestly acted or abstained from acting any conflict with his plain duty. Such allegation must be pointedly put up by the Official Liquidator in the application moved under Section 543 of the Act of 1956. There has to be a positive and specific evidence and pleadings in support of the individual Director of a nature contemplated by the Section. From the documents which have come on record, pleadings of the parties as well as the submissions which have been recorded, this Court has been unable to find a specific allegation as against a particular Director apart from the general allegations of the loss caused to the Company which is difficult to be pinpointed on a particular individual Since there is no detailed narration of a specific act or act of commission or omission on the part of each Director quantifying the loss to the Company nor the Official Liquidator has been able to show any intentional act on the part of a particular Director in causing loss to the Company, merely because of inaction on the part of the Directors as a general allegation, this Court does not find any ground to hold the respondents guilty of misfeasance or fraud in terms of Section 543 of the Act of 1956.
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2019 (4) TMI 487
Oppression and mismanagement - allotment of 90000 shares and consequently appellant's shareholding has come down from 50% to 5% - scope of passing special resolution - HELD THAT:- Special resolution can be passed only in the AGM or EOGM where all the shareholders will have a say. That is so, even if the shares have to be issued as Employees Stock Option in terms of Section 62(1)(b), a special resolution is envisaged under the law. Therefore, in case shares are not issued under Section 62(1)(a), the law envisaged that special resolution is must whenever the shares are to be issued under Section 62(1)(b) or 62(1)(c). No such material has been produced or pleaded before this Tribunal that the special resolution has been passed. Neither any material has been placed before the Tribunal that the fair price has been determined on the basis of the registered valuer. It is noted that the allotment has been done at the face value of ₹ 10/-. In the absence of fair value it cannot be determined that the ₹ 10/- is the fair value of the equity share. We are of the opinion that compliance of Section 62(1)(c) ensures that the allotment is done to any person at a price which is not prejudicial to the interest of other shareholder or to the interest of the company. Though enough has been pleaded to justify allotment of 90000 shares to 2nd respondent but not a single evidence has been pleaded or produced to show that the compliance of Section 62(1)(c) has been done. NCLT has not dealt with this issue and completely ignored the legal provision applicable on the date of issue of the shares. In view of the position, allotment of 90000 shares to 2nd respondent cannot be held to be validly done. We are of the opinion that the exercise carried out is not only illegal but oppressive to the appellant. As the company is ongoing it would not be in the interest of the company or in the interest of shareholder to be wound up. Petition allowed in part.
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2019 (4) TMI 486
Oppression and mismanagement - no notice of any annual general meeting was given to the petitioner since the year 2002 and that the affairs of the company are being run in a fraudulent and oppressive manner - company is hiding the business transactions and has taken major decisions after the year 2002, including regularisation and change of designation of the directors - as contended that the petitioners maintained complete silence for more than 20 years in relation to the affairs of the company and suddenly woke up from their slumber in August, 2005 only with a view to grab the property of the company - Limitation Act, 1963 applicability - HELD THAT:- Section 433 of the Act says that provisions of the Limitation Act, 1963, shall as far as may be, apply to the proceedings or appeals, before the Tribunal or the Appellate Tribunal, as the case may be. As decided in Esquire Electronics v. Netherlands India Communications Enterprises Ltd. [2016 (10) TMI 1107 - NATIONAL COMPANY LAW TRIBUNAL] for the petitions based on such allegations, article 113 of the Schedule to the Limitation Act would apply and the period would be three years from the date when right to sue accrues. It was further held that section 5 of the Limitation Act with regard to condonation of delay would not apply to the proceedings before the Tribunal as it is the original court of jurisdiction and the petitions before it under sections 241 and 242 are in the nature of suits. The adjudication by the Tribunal would result into passing of a decree which is executable by virtue of sections 424 and 425. Tribunal rightly held that the decisions in the petition under sections 397 and 398 of the Act, are enforceable like decree and for all purposes, is suit within the meaning of Code of Civil Procedure. It was also affirmed that article 113 of the Limitation Act, providing a period of three years would be attracted. The petitioner has attached copy of notice of the extraordinary general meeting proposed to be held on June 30, 2009 annexure P10, for service to all the members of the company. The petitioner has simply alleged that he has not received any notice of the meeting after a period of 9 years when even the annual return or necessary Form was filed by the company in the same year with the portal of the Ministry of Corporate Affairs. In Part III of the petition, it is stated that the instant petition is not barred by limitation or laches as the effect of oppression and mismanagement and other fraudulent acts are of continuous nature and this is occurring on the day-to-day basis. The petitioner did not specify in this paragraph as to when he acquired the knowledge of the allotment of additional shares or increase in the capital. In the absence thereof, it can be safely deduced that the petitioner was well aware of the increase in the share capital decided by respondent No. 1-company soon after it was resolved in the year 2009 itself. The instant petition is found to be hopelessly time barred and therefore, deserved to be dismissed. In view of the aforesaid finding, we also reject the prayer made by the petitioner in the application filed under section 244 of the Companies Act, 2013 for waiver of the eligibility conditions in filing the petition under section 241 of the Act, having rendered infructuous.
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Service Tax
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2019 (4) TMI 485
Proof of service of order - Held that:- There is no proof of service of the impugned order dated 9 December 2010 upon the Petitioner. Accordingly, there is no question of this order being treated as some sort of precedent in any later cases - Rule is made absolute in the aforesaid terms.
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2019 (4) TMI 484
Rectification of mistake - Held that:- The amount of entire demand, as was confirmed, stands already paid, that too without protest. This amounts to admission. Procedural law of limitation cannot supersede the substantial law of admission. Hence, irrespective there was found no wilful malafide intent on part of appellant to evade duty but fact remains is that the liability remained suppressed till it was noticed by Department. It is thereafter that the liability was discharged by the appellant. There is no error apparent on record - Application for ROM dismissed.
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2019 (4) TMI 483
Imposition of penalty u/s 78 of FA - service tax alongwith interest before issue of SCN - bonafide financial hardship - Held that:- Penalty on the allegation of deliberate delay and on the failure of the appellant is imposable u/s 76 of the Finance Act - Penalty u/s 78 is attracted in case of any short levy etc. on account of fraud, collusion, wilful mis-statement or suppression of facts including the contravention of the provisions of the Act or rules - such facts are not available in the facts of the present case - penalty set aside - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 482
Condonation of delay in filing appeal - power of Commissioner (Appeals) to condone delay - Time limitation - Cable Operator Service - Held that:- There is no denial on part of the appellant about the scrutiny of the records and also about the demand as has been proposed vide the impugned show cause notice though it is an argument that even the show cause notice was not received by the appellant. From Order-in-Original also it is apparent that the order of confirming demand has been announced only due to lack of evidence, as was to be tendered by the appellant. There is no sufficient cause shown by the appellant even for delay in obtaining the copy of the order. On the other hand Department has tendered documentary proof of the service of the order at the place of the appellant, the acknowledgement due thereof and above all, the admission that of on behalf of the appellant that the said order was received by the wife of the appellant - Commissioner (Appeals) is justified while denying the time extension even of 30 days as mentioned in Section 35 (Proviso) of Central Excise Act. There is no infirmity in the order under challenge. Otherwise also, no reasonable or sufficient cause of delay of 6 years is observed - appeal dismissed.
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2019 (4) TMI 481
Refund of service tax - service tax paid under mistake of law - applicability of provisions of Section 11B of Central Excise Act - Held that:- The limitation period prescribed u/s 11 B of the Central Excise Act is not applicable to the refund claims for service tax paid under mistake of law. As the Section 11 B is applicable only qua the deposit of duty of excise and where the amount is deposited under mistake i.e. due to non-leviability or exemption, the said payment cannot be clothed with the description of duty of excise - Commissioner (Appeals) has committed an error while confirming the findings about the impugned refund to be barred by limitation, in view of Section 11B of Central Excise Act. Principles of natural justice - Held that:- Admittedly the appellant herein is the service recipient and paid, under a mistake, a duty under reverse charge mechanism. Normally, it is the service provider, who has to pay the service tax, as a recipient of services, when it is the obligation of the appellant to discharge the service tax, the question of recovering the same from service provider does not arise. As such, there is no question of the impugned refund to be hit by the issue of unjust enrichment. Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 480
CENVAT Credit - input services - retention of part payment of input services - Rule 4 (7) of Cenvat Credit Rules - Held that:- Rule 4 (7) of CCR stands amended w.e.f. 1st April, 2011 and after the said amendment taking of Cenvat Credit is not linked with the payment of invoice to the service provider but it is linked with the invoice/bill/challan of input service. Though the grievance of the Department seems that irrespective, the payment was still to be made within 3 months, but we observe that since the respondent had paid the entire Service Tax on which they were liable for taking the credit i.e. on the amount as mentioned in the Bill/invoice, they were entitled to avail credit. The circular No. 122/03/2010- ST dated 30th April, 2010 further clarifies the situation that the Service Tax paid is allowed as credit - The circular therefore clarifies that the credit taken would be equivalent to the amount that is paid as Service Tax. There is a clear recitation that irrespective of retention, the amount was paid at the end of stipulated period after the completion of the project. Till date, there is nothing on record to rebut the aforesaid findings. Credit cannot be denied - appeal dismissed - decided against Revenue.
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2019 (4) TMI 479
Rectification of mistake - Held that:- In the preamble of the order it is mentioned that appearance for assessee is by Mr. Jitender Motwani, Advocate. It is a typographical error. The appearance for the assessee is by Mr. V.S. Sudhir and Mr. P. Venkat Prasad, Chartered Accountants. The same may be indicated in the preamble of the Final Order No. A/31277/2018 dated 05.10.2018. Application for rectification of mistake is disposed of.
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2019 (4) TMI 478
Valuation - inclusion of amount received by the appellant by sale of scrap on completing repairs and maintenance of the compressors - repair and maintenance service - difference of opinion - Held that:- There being contrary view expressed by coordinate bench of same strength these matters be referred to Hon ble President to come to a conclusion as to whether the issue needs to referred to Larger Bench, if be so, for constitute Larger Bench to decide the issue as to whether the ratio laid down by Shapoorji Pallonji Co. Ltd. [2016 (12) TMI 729 - CESTAT MUMBAI], is correct or the ratio laid down by S.B. Shellers [2018 (12) TMI 258 - CESTAT ALLAHABAD]. Matter referred to Larger Bench.
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Central Excise
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2019 (4) TMI 477
Valuation - Validity of SCN - SCN challenged on the solitary ground that the same was vague having failed to specifically mention that the respondent valued their goods, transferred to other units, at a value lesser than the value as per CAS-4 Standards - Held that:- The Appellate Tribunal has misread the subject show cause notice. Hence, the conclusion reached on such erroneous basis cannot be sustained. The matter will now proceed before the Tribunal for consideration afresh on its own merits in accordance with law. Needless to observe that all consequential steps taken on the basis of the stated show cause notice will be subject to the final view taken by the Tribunal in the remanded proceedings - appeal allowed.
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2019 (4) TMI 476
Clandestine removal - Interpretation of statute - Whether Rule 25 (1) (b) can be read in isolation without reading Rule 25 (1) (d) - Whether the iron bars weighing into tons could it be judged only with the estimation without actually weighing the same? - Held that:- To attract the provisions of Rule 25 (1) (b) mens rea is not required to be proved and it has been held by the Supreme Court in case of Zunjarrao [1999 (8) TMI 142 - SUPREME COURT OF INDIA] that the word liable used both in Rule 173 Q and Section 11 AC make such unaccounted goods liable to confiscation as well as penalty. The interpretation of word liable has been given by the Supreme Court that the interpretation of the provision is that not only offending goods liable to confiscation but shall be liable to penalty up to the amount specified in the Rule. It has held that levy of penalty is not discretionary but the amount of penalty is discretionary. When provisions of Section 11 AC are read with provisions of Rule 25, it is apparent that in view of admitted unaccountable goods being found, a panchnama was prepared in presence of the authorized signatory who signed without protest, authorities were well within their jurisdiction to confiscate such unaccounted goods and they could have been redeemed only on payment of duty and penalty and to that extent the order of appellate Tribunal does not suffer from any infirmity - appeal dismissed - decided against appellant.
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2019 (4) TMI 475
Distribution of CENVAT Credit - whether the appellant a Public Sector Undertaking, has violated the provisions of Rule 7(d) of Cenvat Credit Rules, 2004 by distributing the cenvat credit of their Central Sales office an ISD and also by their Head Office at ISD, wherein 100% of the cenvat credit is transferred to the appellant unit located at Debari based zinc smelter? - revenue neutrality. Held that:- The unit has not done any illegality in distributing more credit to a particular unit, as Rule 7 provides ‘may’ which has been amended subsequently w.e.f. 1.4.2016 to the effect ‘shall’ distribute - on the issue of Revenue neutrality also, the show cause notice is bad in law - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 474
Clandestine manufacture and removal - confiscation of the goods which was seized after the searches made at the appellant's factory and various other premises including trading premises - Held that:- The entire duty for the manufactured goods during the said period stands paid by the appellant alongwith the interest and penalty to the extent of 15% and the same has been concluded by the department there is no legality and propriety of the order which has been passed by the learned Commissioner (Appeals) - further the CBEC has also clarified the same in its Circular F. No. 137/46/2015 - Service Tax dated August 18, 2015. Appeal allowed - decided in favor of appellant.
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2019 (4) TMI 473
CENVAT Credit - invoices issued prior to six months - Rule 4 (7) of CCR - applicability of NN dated 11/07/2014 - due to clerical oversight CENVAT credit entries in the CENVAT account could not be made immediately - Held that:- Similar issue arose before this Tribunal, in the coordinate Bench decision in the case of M/s VOSS EXOTECH AUTOMOTIVE PVT. LTD. V/s CCE, PUNE-I [2018 (3) TMI 1048 - CESTAT MUMBAI] wherein it had been held that the said provision amendment has got only prospective effect and no retrospective effect can be given, and accordingly for the goods and invoices received prior to 1st September, 2014/ 11th July 2014 the Cenvat Credit can be taken being a vested right. The said Proviso inserted by N/N. 21/2014 will have prospective effect only. Thus, CENVAT CREDIT taken by the appellant is held to be in order - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 472
Process amounting to manufacture - respondent herein mixes bitumen with polymers and additives which is used for asphalting National High Way - Held that:- Hon’ble Apex Court in the judgement of A ONE LAMINATORS PVT. LTD. & OTHERS VERSUS COMMISSIONER OF CENTRAL EXCISE [2011 (7) TMI 24 - DELHI HIGH COURT] were considering the very same issue in respect of very same assessee. Since the matter has already attained finality in the hands of the Apex Court, there is no merits in the appeal filed by the Revenue - appeal dismissed.
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2019 (4) TMI 471
CENVAT Credit - fake invoices - credit availed without actual receipt of goods - Held that:- The documentary evidence on record in the form of the current account books statements, shows that zinc ingots were duly received into appellants' factory as the receipt has duly been recorded in the said statement - also the statement of Shri Amit Gupta has not been fully considered by the adjudicating authority. The subsequent part thereof reveals that all the Cheques drawn in the name of supplier of inputs have been en-cashed by the supplier and thus the fact that the financial transaction stands duly completed/ has miserably been ignored by the adjudicating authority below. The Department has failed to produce any other document to falsify the said GR. No doubt, the Department is not supposed to establish a fact with mathematical precision, as has been impressed upon by the adjudicating authority below, but simultaneously the onus to falsify the document of the appellant still rests upon the Department and the adjudication cannot be decided merely based on the presumptions. It is also apparent from the record that appellants have purchased the goods from the registered dealer. When it is so, then it is the liability of the Department to make an enquiry about the genuineness of the supplier. No such enquiry is apparent on record - Once there is no evidence for the alleged availment of irregular credit, and for cenvatable invoice allegedly being bogus, per contra the evidence reflects the regular purchase of goods under proper invoices with the payment of appropriate amount of Central Excise Duty, there remains no genuine and legal basis for holding the alleged suppression or misrepresentation of the facts on the part of the appellant that too with an intention to evade payment of duty. Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 470
Rectification of mistake - error apparent on the face of record or not - Held that:- The interest liability upheld by the Tribunal seems to be an error from the face of the records - Rectification of Mistake application stands disposed of.
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2019 (4) TMI 469
100% EOU - Exemption in case only indigenous raw material was used by a 100% EOU for manufacture of products which are sold in the DTA - Benefit of N/N. 08/97-CE dated 01.03.1997 and 23/2003-CE dated 31.03.2003 - this show cause notice pertains to demand of customs duty denying the entire benefit of exemptions available to 100% EOU on the ground that they have not fulfilled the export obligations as required - Held that:- There is strong force in the arguments of the learned counsel that the issue of their entitlement to the benefit of customs exemption notifications as a 100% EOU needs to be decided first and if they are not eligible for the benefit of these exemptions then the question of benefits under excise exemption notifications applicable to 100% EOUs which are the issues in dispute in the present appeals become infructuous. Matter remitted back to the original authority to decide the show cause notice dated 22.06.2001 demanding customs duty on the capital goods and raw materials imported by the appellant - appeal allowed by way of remand.
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2019 (4) TMI 468
Classification of goods - Potassium Sulphate - Mono Ammonium Phosphate - whether classified under Chapter 28 or under chapter 31 of Central Excise Tariff Act, 1985 or otherwise? - Held that:- The samples of the said product have been subjected to chemical test in the Fertilizer Testing Laboratory, Pune, Government of Maharashtra, wherein the test result revealed that the tested products were fertilizers since these products satisfied the parameters prescribed under Fertilizer Control Orders - Further, in the impugned order the Learned Commissioner (Appeals) took into consideration other evidences like the use of the said product by the buyers namely, M/s. RCF Ltd., wherein it has been informed by M/s. RCF that the same are used as fertilizers. Besides the Learned Commissioner (Appeals) during the course of hearing obtained a report from the Field formation about the classification of the product, which were tested to be fertilizers in the Govt. laboratory. In the report, the jurisdictional Assistant Commissioner has informed that the products merit classification under Chapter 31 of Central Excise Tariff Act, 1985. Even though in the grounds of appeal, the Revenue has claimed that the test reports cannot be relied upon since the samples were not drawn in the presence of the officers of the Department, we do not understand as to why department has not independently drew samples before and during issue of periodical demand notices of the respondent from time to time - In absence of any contrary test report, we do not find merit in not accepting the test report of the Fertilizer Testing Laboratory, Pune Govt. of Maharashtra that products in question are fertilizers. Appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2019 (4) TMI 467
Application for withdrawal of appeal - recovery of Arrears of Tax, Interest, Penalty or Late Fee - Held that:- The appellants want to avail of the benefit of the Maharashtra Ordinance No. V of 2019 dated 06th March, 2019 passed by the Government of Maharashtra i.e. Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Ordinance, 2019, we allow the appellants to withdraw the appeals - appeal dismissed as withdrawn.
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2019 (4) TMI 466
Validity of pre-assessment notice - it is contended that the assessment proposed is barred under Section 25 (1) of the Kerala Value Added Tax Act, 2003 - KVAT Act - Held that:- The only question considered was regarding validity of Section 174 of the Kerala State Goods and Services Tax Act and that the ground raised in the present writ petition challenging the pre-assessment on the basis of bar of limitation under Section 25 (1) of the KVAT Act, was not considered - the matter need to be remitted for fresh consideration and disposal by the Single Judge - appeal allowed by way of remand.
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2019 (4) TMI 465
Validity of assessment order - time limitation - it is contended that the assessment was completed beyond the limitation period stipulated under section 25(1) of the Kerala Value Added Tax Act - Held that:- The writ petition is restored on the files of this Court. The matter shall be posted before the single judge, dealing with the subject as per the roster, for a fresh decision, on the question of challenge against the assessment on the ground of bar of limitation.
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2019 (4) TMI 464
Principles of natural justice - pre-assessment notice - it is contended that the the pre-assessment notice was not adverted to in a proper manner and the assessing authority had failed to give any reasoning for discarding the contentions raised in the objections - Held that:- The non consideration of the objections will definitely vitiate the order of assessment. It is not a case as if the assessee had failed to submit any objections. When the assessment authority had accepted the objections and reproduced the contentions thereof, it is obligatory on the part of the authority to consider those objections on merits and to state sufficient reasons for repelling those contentions. It is not a question of violating principles of natural justice; but it is a question which go deep into the sustainability of the assessment itself. When the assessing authority had accepted the objections which was filed on a subsequent date, which is evident from the assessment order itself, it contemplates an obligation on the part of the assessing authority to have afford an opportunity of personal hearing to the assessee, especially when the appellant had made a specific request in Ext.P2 objections for affording an opportunity for personal hearing. The 1st respondent is directed to pass fresh orders of assessment based on the objections already submitted by the appellant, after affording an opportunity of personal hearing to him - petition allowed by way of remand.
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2019 (4) TMI 463
Principles of natural justice - it is contended that the Deputy Commissioner becomes functus officio once he exercises the power vested under Section 17(7) - Held that:- The writ petition ought to have been considered on merits based on the contentions raised relating to Section 17(7) of the KGST Act. But it was dismissed only based on another judgment, which relates to the question of the legality of Section 174 of the KGST Act. Therefore we are inclined to remit the matter to the Single Judge for a fresh consideration and disposal. The writ petition is restored back on the files of this court.
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2019 (4) TMI 459
Principles of natural justice - reply to pre-assessment notice not given by petitioner - on the very same day when the petitioner had submitted its reply (after lapse of stipulated period), the authority passed the impugned order - Held that:- Indeed, the petitioner received the Ext.P9 notice on 30.05.2018. And the notice required the petitioner to submit its reply in seven days; it also provided an opportunity of hearing to the petitioner on 11.06.2018. As has been rightly contended by the learned Government Pleader, within the time stipulated the petitioner has not replied to the notice nor has its representativs appeared for personal hearing. If the petitioner's grievance remains that the assessing authority has not considered the petitioner's reply in proper perspective, then it can be said that its an aspect of adjudication, or the lack of it, on merits. By no stretch can can it be called a lapse on the part of the authorities in following the principles of natural justice. The petitioner can avail efficacious alternative remedy if it wishes - Petition dismissed - decided against petitioner.
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Indian Laws
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2019 (4) TMI 462
Maintainability of Arbitral application before High Court - Interpretation of statute - Section 2(1)(f)(i) of Arbitration and Conciliation Act, 1996 - international commercial arbitration - meaning of habitually resident in, any country other than India - whether the arbitration is an international commercial arbitration by reason of one of the parties, viz. the Applicant, being an individual who is a habitual resident in any country other than India? The principal legal submission or defense raised by the Respondent is that the Applicant is ex facie a person habitually resident in a country other than India and therefore the present arbitration is an international commercial arbitration, and in view of Section 11(12)(a) of the Act, an application under Section 11 of the Act would only lie to the Hon’ble Supreme Court to the Hon’ble Chief Justice of India or a designate of the Hon’ble Chief Justice of India, and not before this Court. Held that:- The present issue as to maintainability of the Applicant before this Court arises because of the provisions of sub-section 12 of Section 11, which states that where the arbitration is an international commercial arbitration, an application under sub-sections (4) to (6) would lie to the Hon’ble Supreme Court. It would be necessary to consider the definition of international commercial arbitration and in particular sub-clause (i). From a plain reading of the definition it is clear that an arbitration will be an international commercial arbitration where at least one of the parties to it is an individual who is a national of, or habitually resident in, any country other than India.It is clear from the definition that the legislature has used two distinct expressions viz. “national” and “habitual resident”. These two expressions are separated by the expression “or”, which means they have been used disjunctively. Therefore, if even one of the parties to the arbitration satisfies the requirement of being a national of, or habitual resident in, any country other than India, it would be an international commercial arbitration. The Applicant cannot read one stray sentence out of context to support its contention that if parties are nationals of India then even if they are habitually resident outside India, the provision would not apply. It is very clear that the last sentence of paragraph 19 also deals with a situation where the parties are companies and the judgment was not dealing with a situation of individuals. The meaning of the expression ‘habitually resident’ is similar in meaning to ‘ordinary resident’. This has also been noted in a judgment of a Division Bench of this Court in the case of Hasmukh v. Union of India [2010 (10) TMI 226 - BOMBAY HIGH COURT] where the Court was considering a preliminary objection as to the maintainability of an Appeal under Section 35 of the Foreign Exchange Management Act, 1999. In the present case, the Applicant habitually resides in Dubai. This is clear from the pleadings, documents and the undisputed facts. The Applicants address in the Applications is shown as an address in Dubai. All the Applications expressly states that the Applicant is a Non-Resident Indian, who is currently residing and working in Dubai. The Applicant receives his remuneration in USD in a bank in Dubai. The Agreements under which arbitration has been invoked also disclose that the Applicant is residing in Dubai, and this position is noted as of the Agreement dated 18th October 2011 and is obviously continuing till the filing of the Application in 2017 - The fact that the Applicants family lives in India does not change the position that even if it is primarily for the reason of the Applicants work or employment, he is and has for quite a few years habitually resided in Dubai. His intention is clearly to be in Dubai, and it cannot be said that his presence there is merely casual or temporary. In the facts of the present case, both the quality of his residence, the purpose of his residence and the duration of residence in Dubai, make it clear that he habitually resides in Dubai. The proposed arbitral proceedings in the present case would constitute an international commercial arbitration and therefore the Applications under Section 11 of the Act are not maintainable in this Court under the provision of Section 11(12)(a) of the Act - application dismissed.
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2019 (4) TMI 461
Smuggling - Methamphetamine/Pseudo Ephedrine - NDPS Act - extension of period of remand of the case - Section 36-A(4) of the NDPS Act - Held that:- It is beyond cavil that the 180th day fell on 13.12.2017, because, the first remand was on 16.06.2017. It is true that the DRI had not completed the investigation as on 13.12.2017. However, the Investigating Officer had filed an application for extension of time on 06.12.2017, in which, the Special Public Prosecutor has also signed. Perhaps, realising the mistake that the petition should not have been filed by the Investigating Officer, the Special Public Prosecutor himself filed a report on 11.12.2017. In this case, the remand extension of the petitioners/accused was made on 05.12.2017 and it was extended for a further period of 15 days upto 18.12.2017. The 180th day was to expire at 12.00 midnight of 13.12.2017. Had the Special Public Prosecutor not filed the extension Report or the complaint, the accused would have been entitled to be released on default bail only on 14.12.2017 on their coming forward to furnish bail, even though they may be physically absent before the Court. It be open to the Special Public Prosecutor to reveal the contents of the case diary or the case file in his Report under Section 36-A(4) of the NDPS Act? If he does that, will it not alert the suspects, over whom, surveillance would have been mounted by the Investigating Agency? In this case, samples which were drawn were sent by the Special Court to the Customs Laboratory, Chennai and the report dated 26.07.2007 received from said laboratory showed that the samples answered positive for Ketamine Hydrochloride, which substance also falls within the ambit of the NDPS Act - it cannot be stated that the Report of the Special Public Prosecutor under Section 36-A(4) of the NDPS Act is perfunctory or it does not satisfy the requirements of law. The orders passed by the Special Court, assailing the correctness of which, these two petitions are filed, are upheld - the criminal revision and the criminal original petition stand dismissed.
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