Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 22, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
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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TDS u/s 194C(2) - payments made to the labourers through the Sardars/Munshis - the provision of section 194C do not apply to the payments/expenditures incurred by the assessee. - AT
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Undisclosed profit from unaccounted sales - CIT(A) was fair and reasonable while applying the G.P. Rate at 20% on the undisclosed sales. - AT
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Addition u/s 68 - no person will gift 50% of his capital to a person with whom he has no relationship, blood relation or friendship. - onus is on the assessee to prove genuineness - AT
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Retraction of statement - nothing has been brought on record by the assessee to substantiate its stand as to how it was prevented in making retraction immediately after survey & the retraction was made after a gap of almost 5 months. - AT
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Reopening of assessment - Any inference not backed by material would only be a conjecture or surmise. Thus no merit in the Revenue's case qua denial of claim u/s.10A on account of contravention of section 10A(2)(iii) - AT
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Roads, flyovers, bridges etc. constructed and owned by the assessee and utilized in its business of providing infrastructure would constitute plant and would be entitled to depreciation. - AT
Customs
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If the goods were not intercepted, the same would have been cleared without claiming the ownership as the actual owner of the goods viz. digital cameras and wrist watches. Therefore, the goods are liable for confiscation - AT
Corporate Law
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Arbitration procedures - right to appointment of Arbitrator - the respondent had forfeited its right to appoint the arbitrator after the expiry of statutory period. - HC
Service Tax
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Cross-objections filed before Commissioner (Appeals) against service tax demand - whether be treated as an appeal filled? - Held No - AT
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Recovery of service tax while appeal is pending before tribunal - recovery notice published in Daily News Paper ‘Dainik Bhaskar’ dated 28-1-2012 - writ petition dismissed. - HC
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First appellate authority rejected the appeal for non-compliance with the pre-deposit of 25% - the appellant is directed to deposit 25% of the service tax liability confirmed by the adjudicating authority. - AT
Central Excise
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Exemption under Notification No.6/2002 to the goods manufactured at site of the construction for use in the construction work at such site and the goods supplied for use by the Railways, cannot be denied. - AT
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Maintainability of settlement application – Despite the assessee informing the Commissioner, that it had paid the filing fee and would file the settlement application within a week, the Commissioner proceeded to pass an order in utter haste. - HC
Case Laws:
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Income Tax
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2013 (5) TMI 511
Non deduction of TDS on freight charges - addition was made invoking section 40(a)(ia) - Tribunal disposed of the appeal on the ground that addition could not have been following the decision of Merilyn Shipping and Transports Vs. Addl. CIT. [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] - Held that:- As already delivered in CIT, Kolkata-XI Vs. Crescent Export Syndicates (2013 (5) TMI 510 - CALCUTTA HIGH COURT) holding that the views expressed in the case of Merilyn Shipping & Transports were not acceptable. That is one reason why the matter should be remanded to the Tribunal. Another reason for remanding the matter to the Tribunal is that the finding of facts recorded by the CIT (Appeal) was not tested by the Tribunal.
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2013 (5) TMI 510
Disallowance u/s 40(1)(ia) - whether provisions of section 40(a)(ia) are applicable only to the amount which is shown as payable on the date of balance-sheet or to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year - Whether Merilyn Shipping & Transports case [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] concludes the correct law in stating that section 40(a)(ia) would be applicable only to expenditure which is payable as on March 31 of every year and can not be invoked to disallow amount which have already been paid during the previous year? - Held that:- There is no ambiguity in the Section and term 'payable' cannot be ascribed narrow interpretation as contended by assessee. Had the intentions of the legislature were to disallow only items outstanding as on 31st March, then the term 'payable' would have been qualified by the phrase as outstanding on 31st March. However, no such qualification is there in the section and, therefore, the same cannot be read into the section as contended by the assessee. The terms “payable” and “paid” are not synonymous. Word “paid” has been defined in Section 43(2) of the Act to mean actually paid or incurred according to the method of accounting, upon the basis of which profits and gains are computed under the head “Profits and Gains of Business or Profession”. In contrast, term “payable” has not been defined. The word “payable” has been described in Webster’s Third New International Unabridged Dictionary as requiring to be paid: capable of being paid: specifying payment to a particular payee at a specified time or occasion or any specified manner. In the context of section 40(a)(ia), the word “payable” would not include “paid”. The provisions of section 40(a)(ia) are applicable not only to the amount which is shown as payable on the date of balance-sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year. In the result the question is decided in favour of revenue and against the assessee. On examining the correctness of the majority views in the case of Merilyn Shipping it can be concluded that the main thrust of the majority view is based on the fact "that the Legislature has replaced the expression "amounts credited or paid" with the expression 'payable' in the final enactment”. Comparison between the pre-amendment and post amendment law is permissible for the purpose of ascertaining the mischief sought to be remedied or the object sought to be achieved by an amendment. But the same comparison between the draft and the enacted law is not permissible. Nor can the draft or the bill be used for the purpose of regulating the meaning and purport of the enacted law. It is the finally enacted law which is the will of the legislature. Tribunal realized the meaning and purport of Section 40(a)(ia) correctly when it held that in case of omission to deduct tax even the genuine and admissible expenses are to be disallowed. But they sought to remove the rigour of the law by holding that the disallowance shall be restricted to the money which is yet to be paid. What the Tribunal by majority did was to supply the casus omissus which was not permissible and could only have been done by the Supreme Court in an appropriate case. Reference in this regard may be made to the judgment in the case of Bhuwalka Steel Industries vs. Bombay Iron & Steel Labour Board [2009 (12) TMI 697 - SUPREME COURT]. The position prevailing prior to the amendment introduced in Section 40(a) would certainly be a relevant factor. However, the proceedings in the Parliament, its debates and even the speeches made by the proposer of a bill are ordinarily not considered as relevant or safe tools for interpretation of a statute. The language used in the draft was unclear and susceptible to giving more than one meaning. By looking at the draft it could be said that the legislature wanted to treat the payments made or credited in favour of a contractor or sub-contractor differently than the payments on account of interest, commission or brokerage, fees for professional services or fees for technical services because the words "amounts credited or paid" were used only in relation to a contractor or sub-contractor. This differential treatment was not intended. Therefore, the legislature provided that the amounts, on which tax is deductible at source under Chapter XVII-B payable on account of interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services or to a contractor or sub-contractor shall not be deducted in computing the income of an assessee in case he has not deduced, or after deduction has not paid within the specified time. The language used by the legislature in the finally enacted law is clear and unambiguous whereas the language used in the bill was ambiguous. For the reasons discussed above, the majority views expressed in the case of Merilyn Shipping & Transports are not acceptable. The appeal is, thus, allowed in favour of the revenue.
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2013 (5) TMI 502
Non-deduction of TDS u/s 194C(2) - disallowance u/s 040(a)(ia) - payments made to the labourers through the Sardars/Munshis of each group of daily labourers whose total payments for each of them are below Rs.50000/- - CIT deleted the additions - assessee is a Civil Contractor filed return of income claiming deduction u/s 80P being a cooperative society - Held that:- The claim made by the assessee on the total turn over amounting to Rs.35,90,188/- was when the labour charges were paid by the assessee were claimed at Rs.24,57,947/- were considered specifically for the sardars who were to identify the labourers being paid less than Rs.50,000/- each was acceptable to the authorities below. It cannot be considered for disallowance u/s 40(a)(ia) to identify the deduction of tax at source u/s 194C in so far as it cannot be said that the sardars are to be subjected to deduction of tax at source only on part of their payments to the labourers whom they have identified. The authorities below therefore have not been able to establish the issue raised for disallowance u/s 40(a)(ia), in so far as, the provision of section 194C do not apply to the payments/expenditures incurred by the assessee. No hesitation in directing the AO to delete the disallowance - In favour of assessee.
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2013 (5) TMI 501
Undisclosed profit from unaccounted sales - CIT(A) by applying G.P. Rate of 20% deleted the addition of Rs. 5,14,196/- out of total addition of Rs. 14,71,796/- - assessment completed by AO u/s 153A - Undisclosed debtors addition deleted by CIT(A) - Held that:- AO while determining the profit on undisclosed income of the assessee clubbed the undisclosed sales recorded in the books of account and also applied the average G.P. Rate of six years where the G.P. Rate declared was less than average G.P. Rate and where reverse was the position, the G.P. Rate of the said relevant year was applied to determine the undisclosed income. Thus the said action of the AO was not justified. CIT(A) rightly observed that the recorded sales should not have been included in the unaccounted sales for determining undisclosed profit. Also as only few expenses relating to undisclosed sales were found recorded in the books of account and apart from those expenses, various other expenses were incurred by the assessee which was evident from the statement of employees of the assessee whose salary was not found to be recorded in the seized documents, they have stated in their statements that 35 to 40 labourers were also working at the mines. The expenses relating to workers alongwith other expenses were found recorded in the seized documents but the other expenses recorded in the books of account were very meagre for the unrecorded sales. Therefore, CIT(A) was justified in observing that the G.P. Rate on the recorded sales in various years applied by the AO and net profit rate as claimed by the assessee were not correct for determining the undisclosed profit on the unrecorded sales & was fair and reasonable while applying the G.P. Rate at 20% on the undisclosed sales. CIT(A) was also justified in giving the set off to the undisclosed income of preceding year and the year under consideration for unrecorded debtors because nothing was brought on record to substantiate that undisclosed income was utilized by the assessee elsewhere other than the undisclosed / unrecorded trading activities. We therefore, do not see any merit in this appeal of the Department. Against revenue.
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2013 (5) TMI 500
Quantum of capital gains being taxed - whether CIT (A) erred in confirming the reduction of the FMV as on 01.04.1981 as against the certified FMV adopted by the appellant - addition confirmed by invoking the provisions of section 50C - Held that:- As seen from the letter dated 02.05.2009 assessee had objected to the adoption of the District Valuation Officer's report for revising the assessment under section 155 but agreed for adopting the report on sale consideration subject to non levy of interest or penalty. Therefore, the DR's objection on assessee accepting the valuation as on 01.04.1981 is not correct. Assessee has rightly contested the same. As submitted by the learned Counsel, AO lacks jurisdiction for referring the FMV under section 55A wherein the Valuation determined by the DVO is less than the FMV declared by assessee. See Smt. Sarla N. Sakraney v. ITO [2010 (7) TMI 832 - ITAT MUMBAI] & HIABEN JAYANTILAL SHAH Versus INCOME-TAX OFFICER AND ANOTHER [2008 (4) TMI 292 - GUJARAT HIGH COURT] wherein held reference by the Assessing Officer to the DVO under section 55A for valuation of FMV of the property as on 1-4-1981 is not valid for the reasons that FMV declared by the assessee as per Government registered valuer's report was more than the FMV as estimated by the DVO. Since determination of the FMV as on 1-4-1981 was based on the report of the DVO, the same is held to be invalid. Consequently, estimation of the FMV of the property as on 1-4-1981 as made by the assessee is directed to be accepted - In favour of assessee.
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2013 (5) TMI 499
Rectification of Mistakes - miscellaneous applications filed against tribunal order - unaccounted cash credits confirmed by ITAT as identity of creditors or their creditworthiness not proved - as per assessee Tribunal committed factual mistake in not considering the confirmation, PAN & also did not consider the oral submission that the initial burden is discharged - Tribunal also failed to appreciate the ratio laid by the cases relied upon by the AR - Held that:- None of the judgements cited by the A.R. is rendering any help to the assessee in the present case & the Tribunal had considered all the facts and have given sufficient reasoning for its decision. It is also seen that wherever, the tribunal had not followed the decision cited before it, the facts were duly discussed and those judgements were distinguished on the basis of facts. As decided in Shia Dawoodi Bohra Jamat (2010 (4) TMI 859 - Gujarat High Court) it was held that mere citing of judgement of Hon'ble Apex Court or of any other High Court is not sufficient without specifying how they were applicable to the facts of the case. Hence, the decision of the Tribunal in the impugned order for distinguishing any judgement cited before it on the basis of difference in facts, stands approved by Hon'ble Gujarat High court as per this decision and hence, there is no merit in this contention that the decision cited before the Tribunal should be followed on the basis of ratio laid down in the decision without examining and comparing the facts of the cited case and the case in hand before the tribunal. Also regarding gift tribunal has decided this issue after considering all the facts and the decision and concluded that the assessee could not show that there is any relationship of the assessee with the donor and there is any occasion for the gift because as per the theory of preponderance of probabilities, gift could not be established as genuine because no person will gift 50% of his capital to a person with whom he has no relationship, blood relation or friendship. See Abhai Devilal Rathod Vs DCIT (2010 (6) TMI 497 - ITAT, AHMEDABAD) wherein held that in respect of gift, the assessee is required to discharge this onus of submitting complete details of gift before the A.O. such as identity of the donor, creditworthiness,genuineness of transaction, Occasion, relationship of the donor and donee & evidence of natural love and affection and merely because money is claimed to have been transferred through banking channel, it cannot be inferred that genuineness of the gift has been established. Against assessee.
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2013 (5) TMI 498
Transfer pricing adjustment - segmental Transactional Net Margin Method analysis adopted by the Appellant rejected & entity level approach adopted by dept. - Disallowing the deduction claimed under section 10B - Held that:- Based on the audited report for the purpose of claim of deduction under section 10A & 10B the assessee furnished segmental accounts with reference to each of the activity undertaken by the assessee company therefore, when assessee has submitted segmental reports, with out rejecting them the AO was not correct in adopting the entity level approach of making the transfer pricing adjustments. Unable to support the TPO's weighted average method of arriving at the profit margins, which is not supported by any methodology prescribed or Rules prescribed. Further, in arriving at the segment-wise profit margin, the AO does not give any information except the percentage of profit in two columns against the company's names. There is no analysis of each company's business activity, why they are selected as comparable and what are the functions of the company, operating margins, etc. There is no discussion, whatsoever, in TPO's order as to why the comparables of the assessee are rejected or why other comparables are accepted. Thus, the approach of the TPO cannot be verified by any data available on record. DRP did not address this issue except rejecting the objections on the reason that the assessee did not furnish any details. The assessee is opposing selection of comparables by the TPO. Therefore it is the responsibility of the TPO to furnish necessary details. The onus cannot be shifted to the assessee when it is contending that proper data is not available in public domain in this regard. Therefore, the issue is to be set aside to the file of the AO for obtaining fresh TP report after doing proper analysis and verifying the rules and guidelines in this regard. Treatment of software expenditure as capital expenditure - Held that:- AO examined the nature of software and determined that purchase of software, whose life is more than two years, is considered as capital and disallowed only an amount of ₹ 5,67,500/-. Thus there is no need to disturb the findings of the AO who examined the same consequent to the direction of the DRP and restricted the disallowance to the above amount. Therefore, the ground is rejected. The AO is, however, directed to allow the depreciation as applicable, if not allowed. Non-granting of depreciation on the written down value (WDV) of software expenses disallowed in earlier years - Held that:- The DRP has already directed the AO on this issue, who is bound to allow depreciation consequent to capitalization of software purchases in earlier years. It seems that the AO has not given effect to this direction of the DRP thus the AO agains directed to allow the depreciation on software expenditure disallowed as capital expenditure in earlier years by working out the WDV. This ground is considered allowed. Adjustments under section 145A - adjustments in the opening stock by the relevant amount of unutilised Modvat credit of last year denied - Held that:- Both the parties fairly admitted that this issue is to be restored to the file of the AO consequent to the direction given in earlier years as relying on Mahaveer Almn Ltd (2007 (11) TMI 41 - HIGH COURT, DELHI) considering the decision in the case of CIT v. Ahmedabad New Cotton Mills Co. Ltd. [1929 (11) TMI 1 - PRIVY COUNCIL] that a mistake in the method of valuation cannot be rectified by refusing the valuation of closing stock only but the valuation of opening and closing stock had to be revised. In the case of Mahalaxmi Glass Works Pvt Ltd., (2009 (4) TMI 182 - BOMBAY HIGH COURT) the issue related to closing stock valuation of adjustment of unutilized modvat credit. The Tribunal allowed the adjustment. Therefore, the issue is covered in favour of the assessee by this decision - thus direct the AO to make necessary adjustments in the opening stock by the relevant amount of unutilised Modvat credit of last year. With these directions, the grounds are considered allowed. Disallowance of entire loss incurred by Kalwe unit - whether eligible for deduction under section 10B under section 14A and not allowing carry forward of loss - reopening of assessment - Held that:- AO has while reopening the assessment ex facie proceeded on the erroneous premise that section 10B is a provision in the nature of an exemption. Plainly, section 10B as it stands is not a provision in the nature of an exemption but provides for a deduction. Prior to the substitution of the provision was in the nature of an exemption but after the substitution it now stands provides for a deduction consequently, it is evident that the basis on which the assessment has sought to be reopened is belied by a plain reading of the provision. AO was plainly in error in proceeding on the basis that because the income is exempted, the loss was not allowable. All the four units of the assessee were eligible under section 10B. Three units had returned a profit during the course of the assessment year, while the Crab Stick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income. In these circumstances, the basis on which the assessment is sought to be reopened is contrary to the plain language of section 10B.Thus provisions of section 14A are not attracted in the case of the unit suffering losses eligible for deduction under section 10B and further the assessee is entitled to set off of loss of STP unit under section 10B against other business income - in favour of the assessee.
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2013 (5) TMI 497
Unexplained investment u/s 69 B - search u/s 132 - Held that:- Revenue made the additions only based on the two agreements found at the time of search. There are no other evidences coming forth to establish that the assessee would have paid over and above the amount mentioned in the registered documents. There was no evidence to show that the assessee had purchased the land through the middleman. Though, there were two agreements, there was nothing to substantiate that they were acted upon. Mr. Natvarsingh Admar who is supposed to be the middleman had confirmed before the revenue authorities in his statement u/s 131 dated 24-11-2011 that the agreements executed were not acted upon and they were cancelled.The registered documents suggest only the facts that the land was purchased by all the assessees directly from the farmers at the rates specified therein.There was no evidence whatsoever to suggest that there was payment of on-money or to suggest that the market value of the land purchased by the assessees was over and above shown in the registered documents. In fact, all the documents were executed at the Jantry Value. AO had also not referred the matter to the Valuation Officer to establish that the value of the land purchased by the assessees was below the market value or had not made any enquiries with the owners of the land who sold the land to the assessees in order to establish that the assessee had paid amount over and above the value shown in the registered documents, thus it is apparent that the revenue had made addition only on the basis of surmises and conjunctions that the assessee would have paid Rs.2,80,000/- per bigha. The onus thrusts upon the revenue to prove its stand is not met as decided in K. P. Varghese Vs ITO (1981 (9) TMI 1 - SUPREME Court). It is pertinent to note the decision of CIT Vs Naresh Khattar HUF (2003 (1) TMI 77 - DELHI High Court) wherein held that inference has to be drawn on the totality of the circumstance and not on any single fact while making addition u/s 69B. In favour of assessee.
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2013 (5) TMI 496
Deduction u/s. 80IB - CIT(A) allowed the claim - Held that:- As decided in assessee's earlier year cases [2010 (7) TMI 831 - ITAT AHMEDABAD] wherein held that there was no evidence with the A.O. through which it could be demonstrated that the machinery was transferred from old unit to new unit. There was no iota of evidence to say that it was a case of "splitting up of the old business. The old unit was closed down way back in the year 1998 and the new unit had come up in the year 2002 and an entirely new building was constructed with the deployment of new technology to manufacture new type of telephone instrument. The assessee has successfully demonstrated that the new unit was set up with the substantial investment in plant and machinery. On account of these facts no force in the grounds of the Revenue, hence dismissed. Against revenue. Addition on account of additional income made during the course of survey proceedings U/s. 133A - deduction u/s 80IB disallowed - Held that:- A specific question was asked to the assessee with respect to the investments in reply to which the assessee has given the break-up of expenditure under various heads namely furniture, repairing and renovation of factory premises and external shed. The assessee vide his retraction has only retracted its answers to question No.23 and 26 & has not retracted the answers given to all the other questions and thus has made retraction on selective basis. Further nothing has been brought on record by the assessee to substantiate its stand as to how it was prevented in making retraction immediately after survey & the retraction was made after a gap of almost 5 months. The assessee vide its answer to question No.26 has stated the source of investments to be unaccounted income other than his business income. Further since the income is not derived from the business as submitted by assessee the assessee is not entitled to deduction u/s. 80IB on the same. Against assessee.
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2013 (5) TMI 495
Reopening of assessment - as per CIT assessee had wrongly claimed exemption u/s. 10A as apparent from the balance-sheet of the Noida Unit, the said Unit had no plant and machinery of its own - Held that:- Revenue's case is based on presumption alone. The assessee, right from the time of responding to the audit query in August, 2010, i.e., when this aspect was taken up by the Revenue for the first time, has continuously maintained that the gold ornaments for its Mumbai and Delhi branches are got made from Karigars on job work basis. That the Noida unit is it's only manufacturing facility, whereat, apart from some nominal labour charges, expenses in the form of wages and electricity stand incurred. Further, the entire machinery of the Delhi unit was transferred to the Noida unit, and the same was used for the first time only at the 'transferee' unit the transferor (Delhi) unit being a trading unit. The Revenue brings nothing on record to meet or rebut this clarification, which is consistent with the disclosure made per the return, as well as the assessee's accounts. Nothing on record to support the finding of the CIT(A) that the manufacturing activity was being undertaken at the Delhi unit. Rather, if so, that would imply a change in the nature of the operations at the Delhi unit after the transfer of its entire machinery to the Noida unit in October, 2003. As such, its accounts should bear and reflect the said change, i.e., pre and post 01.10.2003 when the machinery gets transferred. No such case is made out by the Revenue at any stage while the operations of the Delhi unit appear to continue in the same manner. Continuing further, it may well be that the machinery was used by the Delhi unit prior to 01.07.2003, when the assessee firm comes into existence. Nothing has been brought on record by the Revenue to the effect that the nature of the activity at the Delhi unit had witnessed a change after 01.07.2003 or roundabout. Rather, the only inference, in the absence of any adverse or contrary material or finding, would be of a continuity of operations. The fact that the address of the Delhi branch, as stated in the purchase bills of machinery which is at variance with its actual address, as evidenced from other materials, viz. invoices and letter-head, etc. further buttress the assessee's claim that the machinery was delivered at the address stated in the purchase bills of machinery, and continued to be kept there till its transfer, so that it was never put to use after its purchase and prior to its transfer. The inference by the CIT(A) that the machinery could not have been purchased for the Noida unit, which perhaps was not even in conception in May, 2003, is not without merit however, the question is not the idea with, or the purpose for, which the machinery was initially purchased, but whether it was, prior to its transfer to the Noida unit, used for any purpose, and toward which find no material. It may well be that the machinery was initially purchased for the Delhi unit, and the idea of the SEZ unit cropped up later, on the formation of the partnership. Any inference not backed by material would only be a conjecture or surmise. Thus no merit in the Revenue's case qua denial of claim u/s.10A on account of contravention of section 10A(2)(iii) - appeals by the assessee allowed.
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2013 (5) TMI 494
Adjustment to arm's length price - downsliding adjustment of ALP made by the TPO and sustained by the DRP - assessee company is a 'Joint Venture (74:26) between ABP Private Limited, part of the ABP Group and STAR News Broadcasting Limited, wholly-owned subsidiary of the STAR Group - Held that:- Find nowhere either in the agreement or in the submissions made before the revenue authorities that the assessee had to pay more in non prime time slot to off-set the deficit of revenue transferred to Star TV in prime time slots. From the rate card the assessee had to make the payment of Rs. 15,10,22,365/- in the financial year, against which the assessee was able to make the payments of Rs. 10,00,22,000/- only. Except for a clause prescribing an interest @ 9% on shortfall, there are no penalty clauses, which could create pressure or insinuate the assessee to fall back on non prime time slots to recover the shortfalls in payment to be made as per agreed rate card. Since the agreement is also silent, thus cannot accept that the assessee could utilize the basket of ad-slots and aggregate the same for achieving the target. Submissions of the AR cannot be accepted that the aggregation could be allowed because, the payments were being made for same channel and same functions, i.e. ad-space, the difference between them only being prime time slot and non prime time slot. Since there was no justification for higher payment made by the assessee as compared to the third party payments, the adjustment as suggested by the TPO and sustained by the DRP, accordingly is fair and reasonable and does not call for any disturbance.
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2013 (5) TMI 493
Addition of interest income - CIT(A) deleted the addition - Held that:- There is no dispute that the assessee has already commenced its business and it is also not disputed that the assessee had earned interest from bank deposits temporarily made out of borrowed funds which has not been utilized in the business. CIT(A) has also allowed this issue following his own order for immediately preceding year i.e. for assessment year 2007-08, which has been confirmed by the Tribunal considering the decision of CIT Vs. Jhunjhunwala Vanaspati Limited [2008 (4) TMI 270 - HIGH COURT ALLAHABAD] and CIT Vs. Varun Shipping Co. Ltd., [2008 (9) TMI 591 - Bombay High Court]. In favour of assessee. Depreciation on road - Held that:- This issue is also decided by the Tribunal for assessment year 2007-08 allowing the appeal as relying on case of CIT Vs. M/s Noida Toll Bridge Co. Ltd. [2012 (11) TMI 556 - ALLAHABAD HIGH COURT] & Maharashtra State Road Development Corporation Limited [2008 (4) TMI 704 - ITAT MUMBAI] to held that depreciation is allowable on roads. The Tribunal has held that roads, flyovers, bridges etc. constructed and owned by the assessee and utilized in its business of providing infrastructure were tools of its trade and essential adjuncts to its business and not merely a setting in which business was carried on and, therefore, would constitute plant and would be entitled to depreciation. In favour of assessee. Disallowance of the debenture issue expenses - Held that:- Assessee has not claimed any interest but has claimed on account of various other expenditure on debenture issues. As the debentures issues are loan, and, therefore, whether it is convertible or non- convertible, does not militate against the nature of the debenture, being loan, and, therefore, the expenditure incurred would be admissible as revenue expenditure - allow this issue in favour of the assessee.
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2013 (5) TMI 492
Advances of interest free loan - whether entitled to deductions u/s 36(1)(iii) - penalty imposed - Held that:- Tribunal has set aside the penalty on addition inter alia for the reasons that such additions were made on account of judgment of Abhishek Industries Ltd. case(2006 (8) TMI 123 - PUNJAB AND HARYANA High Court) and it does not establish that the assessee has either concealed its income or furnished inaccurate particulars of income. Therefore, the claim of the Assessee cannot be said to be concealment of income, which may attract penalty. In respect of addition as bad debts expenses in the profit and loss account filed with the return of income Tribunal found that when the assessee has disclosed the particulars in the return of income and withdrawn his claim of expenditure being made because of an inadvertent mistake and offered the same as additional income, there is no justification to hold that the assessee has furnished inaccurate particulars of income. Therefore, the order of penalty was set aside.
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2013 (5) TMI 491
Royalty - FTS - Taxability of the amount of Euro paid by Gujarat Narmada Valley Fertilizers Company Ltd (GNFC) for technical documentation/engineering, etc to a denamrk company - AO and DRP not accepted the claim of the assessee regarding the non taxability - assessee is a leading chemical technology company in Denmark entered into an agreement with Gujarat Narmada Valley Fertilizers Company Ltd (GNFC) for supply of equipments along with associated materials as per the specific design and technical data. Held that:- The authorities below have decided the issue by treating the payment as fee for technical services, however, the crucial fact of having two separate agreements for the year under consideration has not been considered and further the provisions of DTAA have also not been considered. Since decision in the case of Ishikawajma-Harima Heavy Industries Ltd (2007 (1) TMI 91 - SUPREME COURT) wherein held that for the purpose of taxability, the entire contract shall not be considered to be an integrated one so as to make the appellant to pay tax in India as well as the retrospective amendment in section 9 has not been considered in the earlier years, therefore, the issue has to be decided on the basis of the facts of the year under consideration. Since certain crucial aspects and facts have not examined by the authorities below therefore, in the interest of justice, remit this issue to the record of the AO for deciding the same after considering all the relevant facts as well as the decisions on the point.
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Customs
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2013 (5) TMI 490
Confiscation orders - Held that:- Admittedly, the goods have been declared by M/s. Montu Enterprises while filing the Bill of Entry for 440 cartons of various toys but on intelligence goods examined the container was containing 263 cartons of digital cameras and 150 cartons of wrist watches were found. If the goods were not intercepted, the same would have been cleared without claiming the ownership as the actual owner of the goods viz. digital cameras and wrist watches. Therefore, the goods are liable for confiscation - impugned order of confiscation confirmed but redemption fine & penalties as considered on higher side thus reduced accordingly.
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2013 (5) TMI 489
Filling of appeal in proper format - appellate authority has dismissed the stay petition and appeals filed by the appellant on the ground that appeals have been filed belatedly. held that - The only question that arises is whether the appellant has correctly filed the appeal or not. If that be so, I find that the decisions of this Tribunal in the case of M/s. AT & T Communication Services India Pvt. Limited - [2007 (5) TMI 498], Nova Petrochemicals Limited [2009 (6) TMI 734] and Maruti Udyog Limited [2009 (1) TMI 264] will squarely cover the issue as it is not in dispute that the appeals were filed in time. Accordingly, the first appellate authority should consider the stay petition and appeals on merits and dispose of the same with a speaking order.Appeals allowed by way of remand.
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Corporate Laws
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2013 (5) TMI 488
Winding up petition - Default in payment of licence fees - Arrears accumulated - Kolkata T.V. Bengali news television channel run by a company, R.P. Techvision (I) Pvt. Ltd operates from an area of about 10,000 sq. ft. in a premises numbered as 119, Park Street, Kolkata- 16 building called “White House”. The owner of the property is Calcutta Business Centre.Xenitis Info Tech Ltd. occupied this area on or from 1st December, 2005, as a licensee of Calcutta Business Centre but unable to pay licence fee - Held that:- It is quite undisputed and reasonably clear that the company in liquidation was and thereafter R.P. Techvision is more or less a trespasser on the property. The licence has been terminated or at any rate it has expired. No higher right was even claimed by R.P. Techvision. Now, how is the property used? It is of no use for the purpose of carrying on the winding up of the company. The company has a lot of equipments, apparatus, accessories and other moveable items in it, which are undoubtedly its assets. They could easily be housed in a lesser space in a less expensive locality. If R.P. Techvision was not there, the Official Liquidator would have been in possession thereof. He would have been, had he retained the property, in all probability, been liable to pay Rs. 6.14 lacs per month as occupation charges to Calcutta Business Centre. Now, the Official Liquidator does not have to pay these occupation charges. It is paid in a round about way. R.P. Techvision is making payment to the Official Liquidator who is handing it over to Calcutta Business Centre. Somebody else is occupying the property in place of the Official Liquidator and paying occupation charges directly to the landlord. The Official Liquidator cannot and even if he be permitted by the Court will get nothing, if he tries to assign his rights of a trespasser in favour of somebody else. R.P. Techvision cannot remain on the property. The Official Liquidator has to disclaim the property or this Court has to pass orders for eviction of R.P. Techvision and delivery of vacant possession to the Official Liquidator. He has to do so for another reason. Being a statutory authority, the Official liquidator is duty bound to give back the property, over which the company in liquidation has no rights, to its owner. If that is the order there would be no real business to sell. There cannot be sale of any “going concern” as directed by the Supreme Court. Hence, there would be breach of its order. Nonetheless the Supreme Court has preserved the right of the landlord in the eviction proceedings. The mandate of the Supreme Court would be carried out if R.P. Techvision is allowed to remain on the property, for a limited period of time not be later than 31st May, 2014. The Official Liquidator should advertise sale of the “business as a going concern” by stipulating that any buyer of the business would have to vacate the premises 119, Park Street, Kolkata – 16 by that date. The time to publish the advertisement by the Official Liquidator is peremptorily fixed as, by 15th June 2013.A letter for direction for confirmation of sale of the business and assets of the company in liquidation should be filed by the Official Liquidator, peremptorily by 31st July, 2013. If R.P. Techvision is the successful buyer they should find another place to do the same business after 31st May, 2014. Any other buyer should do likewise. Upto 31st May, 2014 or till the property becomes vacant, whichever is earlier the occupier of the property would pay to Calcutta Business Centre, occupation charges @ 6.14 lacs per month, through the Official Liquidator, as is being done now. The Official Liquidator is directed to handover vacant possession of the property to Calcutta Business Centre by 15th June, 2014 or within 15 days of the property becoming vacant, whichever is earlier. After expiry of 31st May, 2014 any occupier would be liable to be evicted from the premises by the Official Liquidator by use of police force.The buyer would have to obtain the licence to operate from any other property after expiry of 31st May, 2014.
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2013 (5) TMI 487
Arbitration procedures - right to appointment of Arbitrator - Held that:- No concrete prima-facie evidence to show that after the receipt of notice from the petitioner in order to invoke the arbitration, there were any serious discussions and suggestions made by the respondent with regard to balance payment claimed by the petitioner. No doubt, there are some documents which would suggest that the meetings were attended by the representatives of the petitioner but there is no direct material which may establish about the discussion of balance amount claimed by the petitioner, though prior to issuance of notice minutes of the meeting held on 19th November, 2012 have been produced where decision on payment to the implementing Agency was taken. In view of the settled law of Datar Switchgears v. Tata Finance Ltd. [2000 (10) TMI 873 - SUPREME COURT OF INDIA] it is clear that the respondent had forfeited its right to appoint the arbitrator after the expiry of statutory period. The discretion of appointment of sole arbitrator is now left with the Court. Thus, the appointment of Sh.J.K.Roy, Member (Technology) – Retd., Department of Telecommunications is not a valid appointment in accordance with law. Thus, the prayer made in the petition is allowed. In view of the above, Hon’ble Mr.Justice R.C.Lahoti, Former Chief Justice of India (R/o B-56, Sector 14, Noida, U.P., Mob.No.9868858999) is appointed as sole Arbitrator to adjudicate the disputes between the parties as mentioned in this petition.
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Service Tax
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2013 (5) TMI 512
Cross-objections filed before Commissioner (Appeals) against service tax demand - whether be treated as an appeal filled? - Held that:- Favour in the argument of DR that assessee has not been able to show any provision of law indicating that cross-objection can be filed before Commissioner (Appeals), in lieu of the statutory appeal. If such cross-objections are held to be appeals filed before Commissioner (Appeals), the period of limitation prescribed under law would get circumvented and as such such cross-objections cannot be held to be appeals. As the appellant have not challenged the confirmation of demand of ₹ 2.33 lakhs approximately,they should be directed to deposit the same within a period of eight weeks. At submitted that assessee have already deposited an amount of ₹ 75,000/- The said deposit made by them would be adjusted towards the deposit of ₹ 2.35 lakhs.
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2013 (5) TMI 506
Services received from overseas commission agents - import of service - business auxiliary service - held that:- it was held that levy of service tax on a person who is resident in India and who receives services from service provider abroad who does not have an office in India is not sustainable prior to 18.4.06. - decided in favor of assessee.
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2013 (5) TMI 505
Recovery of service tax while appeal is pending before tribunal - recovery notice published in Daily News Paper ‘Dainik Bhaskar’ dated 28-1-2012 - held that:- it is clear that it is only a general notice issued to all parties/service providers to deposit the amount of due service tax/penalty/interest. The adjudicating authority has passed an order against petitioner demanding a sum of Rs. 1,64,499/- along with interest and penalty. The said order has been upheld by the Commissioner of Appeals. Petitioner has further filed an appeal before the Appellate Tribunal along with stay application and next date fixed by the Tribunal is 2-4-2012. A period of seven days was given in the notice dated 28-1-2012, but no property of petitioner has been attached and put to an auction. The writ petition was filed on 16-2-2012. The matter is already fixed before the Tribunal on 2-4-2012. If petitioner has any urgency in the matter, then a prayer should have been made before the Appellate Tribunal itself for early hearing of the stay application, instead of filing the present writ petition before this Court. - writ petition dismissed.
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2013 (5) TMI 504
Refund of service tax paid on Courier agency service used for export of goods - export of documents and samples - held that:- the transportation of documents and samples by courier service are admitted as taxable service to claim refund but the condition of realisation of export proceeds for claiming the refund is laid only in respect of transportation of goods and not in respect of documents or samples as they do not fetch any export proceeds. It is also evident from the notification that documentary proof to the extent that courier service had been used to export such documents and samples alone is sufficient to claim refund. In the instant case, the appellant had already produced Shipping bill and Airway bill to prove that courier service had been utilized to export goods, documents and samples which is an admitted fact by the Lower Adjudicating Authority. - Refund allowed.
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2013 (5) TMI 503
First appellate authority rejected the appeal for non-compliance with the pre-deposit of 25% of the amount of service tax confirmed by the adjudicating authority. - held that:- the appellant may be covered under the services which has been classified by the lower authorities site formation and clearance, excavation and earth moving and demolition services. - the said works contract specifically talks about exclusion of extraction of lignite work from the scope of the work which has been given to the appellant. But the said lignite extraction was to be done subsequently. These are prima-facie views. - Commissioner was fair enough to direct the appellant to deposit an amount of 25% of the service tax liability confirmed by the adjudicating authority. We do not find that the said order is unreasonable. Accordingly, the appellant is directed to deposit 25% of the service tax liability confirmed by the adjudicating authority.
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Central Excise
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2013 (5) TMI 486
Demand of credit/interest/penalty - Inflation of production of Scrap by issuing bogus invoices – Revue appeal against Commissioner (Appeals) who set aside the cenvat credit demand of Rs. 87,106/- Held that:- There is no infirmity in the Commissioner (Appeals) order which is based upon the Tribunal vide judgment reported in [2009 (4) TMI 750 - CESTAT, NEW DELHI] as the same was challenged by the department before the Hon’ble Punjab & Haryana High Court, matter still pending and this order has not been stayed. Appellant appeal against Commissioner (Appeals)’s order upholding the cenvat credit of Rs. 20,409/- and equal Penalty – Held that:- On records wherein it has been stated that the factory was not in operation since May 2000 and neither any finished goods nor any scrap had been sold since May 2000. From this statement it is clear that no material could have been received from appellants. Thus, no infirmity in the Thus the appeals filed by appellant as well as by the department against the impugned order are dismissed.
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2013 (5) TMI 485
Denial of Cenvat credit - differential excise duty paid by the manufacturer subsequent to clearance of the goods based on a certificate issued by the officer. During that time, there was no specific provision in Central Excise Rules enabling the appellant to take CENVAT credit based on such certificate which got rescinded prior to that date. Therefore, Revenue proceeded against the respondent. - Held that:- Hon’ble Supreme Court affirmed the decision of the Madras High Court as reported in CCE Vs Home Ashok Leyland Ltd. [2007 (3) TMI 257 - SUPREME COURT OF INDIA] since the matter is no longer res integra, there is no merit in the appeal filed and same is rejected.
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2013 (5) TMI 484
Demand of duty - eligibility for claiming the benefit of Notification No. 6/2002 - As per Revenue that premises at which the goods were manufactured was not site of construction and accordingly, the appellants were not entitled for benefit. - Held that:- Issue has already been settled by the Tribunal in the case of Prestress (I) Pvt Ltd Vs CCE Bhavnagar reported in [2008 (12) TMI 553 - CESTAT, NEW DELHI] wherein the Tribunal has held that exemption under Notification No.6/2002 to the goods manufactured at site of the construction for use in the construction work at such site and the goods supplied for use by the Railways, cannot be denied. Thus, impugned order is set aside and the appeal is allowed.
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2013 (5) TMI 483
Cenvat Credit on Bagasse - waste or by product - case of the Revenue that the appellants are liable to pay 10% of the price of bagasse as the appellants were availing credit in respect of common inputs used in the manufacture of the goods cleared on payment of duty as well as nil rate of duty - Held that:- As decided in Balram Chini Mills Ltd. vs. Union of India and others [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] bagasse generated from crushing of sugarcane is neither manufactured goods nor manufactured final product, but it is a residue /waste, hence it cannot be recorded as final product exempt from duty. In favour of assessee.
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2013 (5) TMI 482
Maintainability of settlement application – u/s 32E – As per department that an order of adjudication is made on the date on which the adjudicating authority dispatched it to the assessee and since the date of dispatch was after the filing of the settlement application, the application was maintainable - Held that :- The object of Section 32E is to enable an assessee to come before the Settlement Commission with a clean, complete and candid disclosure and with a payment of the excise duty with interest. A literal construction of the words “before adjudication” would defeat the purpose and intent of Parliament. As this case itself shows, the Commissioner proceeded in undue haste, without waiting for the supply of documents to the assessee and even after being informed that the assessee was in all probably moving the Settlement Commission during the course of the week. The majority of the Settlement Commission was of the view that there was no reason for the assessee not to have filed a settlement application before 13 January 2011. What this view clearly misses is that proceedings before the adjudicating officer were pending. Assessee was still to obtain copies of the documents which were relied upon in the show cause notice. Despite the assessee informing the Commissioner, that it had paid the filing fee and would file the settlement application within a week, the Commissioner proceeded to pass an order in utter haste. Therefore the settlement application which was filed by the assessee before the date of the dispatch of the order of adjudication is maintainable before the Settlement Commission. The settlement application shall accordingly stand restored to the file of the Settlement Commission for further disposal in accordance with law. Thus, the petition is allowed.
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CST, VAT & Sales Tax
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2013 (5) TMI 508
Whether the power of review conferred on the 4th respondent Tribunal under Section 60(7) of the KVAT Act takes in the power to review an 'interim' order of the Tribunal, is the point for consideration.- held that:- Since clause (b) of sub-section (4) of Section 60, obviously, is in respect of an order passed by the lower authority and not by the Tribunal, it is not an order which enables invocation of power to review under sub-section (7) of Section 60. Coming to the factual position available in the case in hand, the dispute is with regard to fixation of liability, the extent and sustainability of which are under challenge. It was after considering the appeal, that the Tribunal passed the interim order by way of Ext.P2 directing to satisfy a portion of the said liability, to the extent as specified therein, so as to avail the benefit of interim stay during the pendency of the appeal. This is by virtue of the discretion exercised by the concerned authority with reference to the actual facts and figures and with proper application of mind. This does not constitute any 'error apparent on the face of the record' or otherwise to have called for a review, invoking the power and jurisdiction of the Tribunal under section 66 or under Section 60(7) of the KVAT Act. This Court finds that the challenge raised against Ext.P7 order passed by the Tribunal is devoid of any merit. None of the grounds raised in this writ petition does serve the purpose. The writ petition fails and it is dismissed accordingly.
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Indian Laws
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2013 (5) TMI 509
Grant of family pension - whether a second wife has no legal status to claim family pension? - Held that:- The answer to this question is in negative, as the second wife has no legal status. According to Hindu Law, the marriage during living spouse is void, and gives no status to the second wife, though children born from such marriage get benefits at par with the legitimate children. Furthermore, it may be noticed, that family pension is available to the widow of a person during her lifetime, therefore widow will always be the first wife, as there cannot be two widows for a person, as law does not recognize two wives after coming into force of Hindu Marriage Act. Therefore no error with the impugned order, declining family pension to the petitioner. Thus merely because pensionary benefits were settled in favour of petitioner, which in fact were to be paid to the children, who gave no objection for release of retirement benefits to her, cannot entitle her to claim family pension also.
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2013 (5) TMI 507
Correctness and sustainability of the proceedings pursued by the respondent Bank, particularly, by issuing Ext.P1 notice under Section 13(2) of the SARFAESI Act, is under challenge - The point to be considered is whether the writ petition is maintainable before this Court. The petitioner had availed a loan from the erstwhile Lord Krishna Bank Ltd, other similarly situated persons, including the partners of the firm had also availed some loans. It is brought on record that, in the course of the proceedings, Lord Krishna Bank was taken over by the Centurion Bank of Punjab Ltd. , which Bank itself was later got amalgamated with the present respondent Bank - HDFC Bank Ltd, by the passage of time. Held that - In view of the law declared by the Apex Court in Mardia Chemicals Limited v. Union of India [2004(4) TMI 294], this Court observed that, no writ petition was maintainable and the party, if at all aggrieved, was to approach the DRT. In view of the law declared by the Apex Court as mentioned hereinbefore and so also in view of the verdicts passed by this Court by way of Exts.P4 and P5, both by Single Bench and the Division Bench, it is not open for this Court to have the alleged cause of action entertained on merits. In the above circumstances, this Court finds that no interference is warranted. Writ petition fails and it is dismissed accordingly.
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