Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 16, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
News
Notifications
Highlights / Catch Notes
Income Tax
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Since assessee has incurred the expenditure on issue of convertible debenture, which is directly related to the expansion of capital base of the company, such expenditure is to be treated as capital expenditure. - AT
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AO cannot mechanically apply the provisions of Rule 8D for the purpose of disallowance u/s 14A of the Act. In our opinion, the same could be used only as a last resort only in the event of the AO not able to make a fair substitution of the disallowance figure as contemplated u/s 14A(2) of the Act. - AT
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In the given circumstances, the CIT(A) could not have question the maintainability of the application of the Assessee before the DIT(E) u/s. 264 of the Act. - AT
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Penalty u/s. 271(1)(c) - just because no explanation has been offered by the assessee during the penalty proceedings the Ld. AO cannot automatically proceed to levy penalty as admittedly penalty proceeding is independent of assessment proceedings. - AT
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Levy of penalties u/s. 271B and 271F - non filing of tax audit report and non filing of return in time - It is very unlikely that they would remain silent with regard to discharge of their statutory obligations by placing reliance on their erstwhile Accountant as claimed by the assessee - penalty confirmed - AT
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Penalty u/s 271(1)(c) - The show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. - No penalty
Customs
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Import of soda ash against Duty Free Import Authorization (DFIA) Scheme - Re-validation - various restrictions introduced by the impugned Notification No 31 dated 01.08.2013, DGFT Circular dated 02.08.2013, Public Notice No 35 dated 30.10.2013 and DGFT Notification dated 21.08.2014, could not be made applicable to imports effected under the subject DFIAs. - HC
Corporate Law
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Ingenuine demat account holder - getting excessive number of shares in an irregular manner - The transfer of shares did not comply with the requirements of the provision of either Section 13 or Section 2(i) of the SCRA. Therefore, the off market trading indulged into by the Respondents was rightly held to be per se illegal by the Whole Time Member. - SC
Indian Laws
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Dishonour of cheques - proceedings were initiated under the Negotiable Instrument Act - Counter complaint was filing against the complainant u/s 411 read with Section 120 (B) of the Indian Penal Code, 1860 - complaint filed by the complainant is clearly misconceived and is abuse of process of the Court. - SC
Service Tax
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Demand of interest and penalty - VCES, 2013 - Credit of payment made before introduction of scheme was not given - The impugned letter dated 03.12.2015, to the extent the petitioner was called upon to pay ₹ 1,99,183/-, is set aside. It is made clear that this order shall not preclude the respondents from initiating action to levy interest and impose penalty on the amount paid by the petitioner during November 2007 to March 2008 (i.e for ₹ 22,135/-) in accordance with law - HC
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Levy of penalty u/s 77 & 78 of the Finance Act, 1994 - validity of invocation of Section 80 by learned Commissioner (Appeals) for setting aside penalties while confirming the demand of service tax on import of services under reverse charge - when the situation is revenue-neutral, the aspect of malafide fails. - No penalty - AT
Central Excise
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Recovery of refund claim - whether refund already granted by the adjudicating authority can be recovered by issuing a show cause notice, without filing appeal challenging the order of adjudicating authority sanctioning the refund? - Held No
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Admittedly, excise duty is leviable on goods manufactured and if there is no manufacturing activity involved, as held by the lower authorities, for the purpose of denying the benefit of exemption notification, how the excise duty can be confirmed by applying the full rate of the same value of activity. Even as per the Revenue there is no manufacture and if that be so, no excise duty demand can stay. - AT
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Claim of refund - valuation - whether refund of VAT and interest received from the banks are not liable to be tax as duty of excise - any amount paid by the appellant shall be deposit made by them with the department although, the same has not paid under protest - refund allowed - AT
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Cenvat Credit - input service credit on Courier services and record keeping charges service - period of December’ 2013 to November’ 2014 - credit allowed - AT
Case Laws:
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Income Tax
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2016 (7) TMI 621
Disallowance of debenture issue expenses - revenue or capital expenditure - Held that:- It emerges out from the record that the assessee had incurred expenditure for issuance of fully convertible debenture. It has claimed 1/10th of the expenditure. In this year, such expenditure was claimed at ₹ 11,63,048/-. The ld.CIT(A) has allowed this claim of the assessee. Expenditure incurred on issue of convertible debenture is a capital expenditure. It cannot be allowed as deduction. Similar view has been taken in the case of Torrent Pharmaceuticals Ltd. Vs. ACIT, (2015 (1) TMI 706 - GUJARAT HIGH COURT). Since assessee has incurred the expenditure on issue of convertible debenture, which is directly related to the expansion of capital base of the company, the Hon’ble High Court held that such expenditure is to be treated as capital expenditure. The ld.counsel for the assessee was unable to controvert this contention of the ld.DR - Decided against assessee Addition being EMI residual income - Held that:- In the case before us, whatever be certainty of the assessee realizing the profits in future as a result of this arrangement, these profits can only be brought to tax when these actually accrue and arise and that stage comes only when the recoveries are made from the individual borrowers. It is also not in dispute, in the light of the categorical finding given by the CIT(A), that the related incomes are brought to tax in subsequent period when these income accrue and arise. As for the reference to Hon’ble Supreme Court’s judgment in the case of CIT Vs Shiv Prakash Janak Raj & Co Pvt Ltd [1996 (9) TMI 5 - SUPREME Court ], that was a case in which accrual had admittedly taken place. That is not the situation before us. In these circumstances, we see no infirmity in the well reasoned conclusion arrived at by the CIT(A) in deleting the addition - Decided in favour of assessee. Disallowance of deduction under section 36(1)(viii) - Held that:- Perusal of section along with clause (e) no where reveals that the assessee is bound to maintain the account for five years, otherwise the Legislature would provide the deduction after completion of 5 years of such loan account. It only puts a condition about the nature of account. An assessee is entitled for deduction for the purpose of this section from the first year itself. The meaning construed by us can be further fortified by considering section 155 of the Income Tax Act. Under this section AO has been empowered to withdraw certain deduction to an assessee. For example investment allowance is being granted to an assessee u/s.32A in respect of ship and such ship was transferred before expiry of eight years in violation to the conditions, then u/s.155 it will be construed that such allowance was granted wrongly. Similarly, a provision has been made to withdraw number of such other benefits given under the Act. But, this section does not talk withdrawal of deduction granted u/s.36(1)(vii) of the Act. Therefore, we are of the view that the ld.Revenue authorities have erred in construing the meaning of clause (e) to section 36(1)(viii) of the Income Tax Act. We remit this issue to the file of the AO with a direction that he will verify the details of finance accounts, and if there is no change in the character of accounts i.e. their life span is more than five years, which continues even after assignment, then, interest income from those accounts upto the date of assignment would qualify for deduction under section 36(1)(viii) of the Act in the hands of the assessee. Denial of claim under section 36(1)(viii) - Held that:- The assessee has sold import entitlement, and in that context, it was construed that such income was not “derived” from industrial undertaking. In the present case, income derived by the assessee is from long term finance i.e. interest income. It was reduced by virtue of written off of certain debts which has direct nexus with the income derived by the assessee. This year, these entries have been reversed by recovery of this bad debt. Thus, nexus is available. The AO is not justified to exclude the amount of bad debts recovered by the assessee for calculating the claim under section 36(1)(viii) of the Act. With regard to EMI residual considering the finding of the AO, in the light of the discussion made by the ITAT in the Asstt.Year 2000-01 and 2001-02 extracted supra, we are of the view that the income from EMI residual offered for taxation is an income which represents difference of interest charged by the assessee for the services rendered by it for collecting EMI etc. on behalf of the HDFC. It is not linked with long term finance. Therefore, this income will not form part of the eligible profit derived from long term finance for the purpose of calculating 40% of the amount to claim deduction under section 36(1)(viii) of the Act.
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2016 (7) TMI 620
Disallowance u/s 14A - apportionment of expenses - Held that- We find that the total expenses debited to profit and loss account is ₹ 2,28,25,154/- and out of this, direct expenses of consultancy and professional charges amounting to ₹ 1,96,48,885/- for earning consultancy income i.e taxable income would be automatically out of the purview of computing disallowance u/s 14A of the Act. The remaining common expenses of ₹ 31,76,269/- have to be apportioned between taxable and non-taxable income. We find that the ratio of apportionment adopted by the assessee at 45.5% in the income component is very fair and accordingly direct the Learned AO to disallow ₹ 14,45,202/- being 45.5% of ₹ 31,76,269/- u/s 14A of the Act to meet the ends of justice. We hold that the Learned AO cannot mechanically apply the provisions of Rule 8D for the purpose of disallowance u/s 14A of the Act. In our opinion, the same could be used only as a last resort only in the event of the AO not able to make a fair substitution of the disallowance figure as contemplated u/s 14A(2) of the Act. In any case, the provisions of the Act would always prevail over the Rules as admittedly the Rules are only subordinate piece of legislation and are meant only to support the Act. Rules could act only as a guiding force to effectively implement the provisions of the Act. If the manner so contemplated in the Act fails, then as a last resort, the AO should go to Rules for making disallowance u/s 14A . Hence we hold that the Learned AO has got sufficient powers to substitute the disallowance figure at ₹ 14,45,202/- in terms of section 14A(2) of the Act itself and hence Rule 8D need not be followed in the facts of the instant case. - Decided partly in favour of assessee.
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2016 (7) TMI 619
Entitlement to exemption u/s 11 - AO denied exemption u/s 11 on the ground that there was violation by the assessee of the provision of section 13(1)(c ) and section 13(2)(g) - maintainability of the application of the Assessee before the DIT(E) u/s.264 - whether here was no power under the Act under which an assessee can withdraw an appeal filed before CIT(A)? - Held that:- The CIT considered the petition u/s 264 of the Act and passed an order dated 28.11.2011. At the time of hearing before CIT(A), Jalpaiguri on 10.01.2013 the assessee again brought to the notice of the CIT(A) of the facts with regard to the petition u/s 264 of the Act and the order passed by CIT u/s 264 of the Act. The CIT was also informed that pursuant to the order u/s 264 of the Act the AO has also passed an order giving effect dated 29.12.2011. The CIT(A)-XIV, Kolkata, if he had desired to exercise his powers of enhancement ought to have informed the Assessee that he wishes to exercise powers of enhancement and therefore the request for withdrawal of the appeal would not be acceded to. This is because the period of limitation for filing an application for revision u/s.264 of the Act in terms of Sec.264(3) is one year from the date on which the order sought to be revised was communicated to the Assessee. The order of assessment in the present case was passed on 29.12.2010. The period of limitation would therefore end by 29.12.2010. In the given circumstances, the CIT(A) could not have question the maintainability of the application of the Assessee before the DIT(E) u/s.264 of the Act. The effect of the order dated 28.11.2011 is that the order of the AO dated 29.12.2010, ceased to exist and got merged with the order of the DIT(E) passed u/s.264 of the Act. On the date when CIT(A) came to decide the appeals the orders of assessee has already been revised by CIT u/s 264 of the Act and thereby the appeal before CIT(A) were rendered incompetent. In the given facts and circumstances the CIT(A) ought not to have exercised his appellate jurisdiction on the appeal filed by the assessee. As we have already observed that when CIT(A) cannot question the jurisdiction of CIT u/s 264 of the Act on the ground that there was violation of the provision of section 264(4)(c) of the Act. We are of the view that in the light of the above conclusions the question whether the assessee can withdraw an appeal filed before CIT(A), becomes academic, since the appeal before CIT(A) itself was incompetent. We, therefore hold that the order passed by CIT(A) has to be cancelled as incompetent and superfluous, in view of the order of CIT u/s 264 of the Act. In view of the above conclusions the other contentions put forth before us are not taken into consideration. - Decided in favour of assessee.
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2016 (7) TMI 618
Penalty u/s. 271(1)(c) - addition towards the film Annaya Attachar - Held that:- Trial Balance prepared up to 10.02.2005 admittedly contained substantial balance towards sundry creditors advance received from sundry debtors which are admittedly not revenue receipts unless proved otherwise. It is not the case of the Ld. AO that the sundry creditors reflected thereon and advance received from the customers (sundry debtors) are non-existent liabilities and bogus in nature. This can be proved from the very fact that the Ld. AO had not made any separate addition thereon in respect of those two items. Moreover, we find that the Balance Sheet has been prepared up to 31.03.2005 which has been completely ignored by the Ld. AO and also by the Ld. CIT(A) wherein all the deficiencies pointed out by the Ld. AO have been properly rectified and there is no need to make any addition towards film of Annaya Attachar in the assessment. However, the assessee is not in appeal before us on the quantum addition. We also find that the total cost of production including the printing cost and publicity cost of the film Annaya Attachar has been accepted by the Ld. AO without making any addition thereon. We are also in agreement with the argument of Ld. AR that just because no explanation has been offered by the assessee during the penalty proceedings the Ld. AO cannot automatically proceed to levy penalty as admittedly penalty proceeding is independent of assessment proceedings. Under these circumstances, we have no hesitation in directing the Ld. AO to cancel the penalty levied in respect of the addition towards the film Annaya Attachar. Apropos the film Cheeta, we find that an addition has been made only on estimate basis. Hence, we have no hesitation in cancelling the penalty levied on the same and we direct the AO accordingly. Penalty levied on the addition made towards cash balance, we find that the assessee has filed Balance Sheet up to 31.03.2005 which has not been properly considered by the Ld. AO and the cash balance found on the date of survey have been duly explained in the said Balance Sheet filed before the Ld. AO up to 31.03.2005. Hence, there is no case of any concealment of income or furnishing of inaccurate particulars of income on the part of the assessee. Accordingly, we have no hesitation in deleting the penalty levied in respect of the said addition. - Decided in favour of assessee.
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2016 (7) TMI 617
Levy of penalties u/s. 271B and 271F - non filing of tax audit report and non filing of return in time - Held that:- We find that reasons for delay adduced by the assessee does not constitute a good and reasonable cause. It is very unlikely that the assessee being a company would be controlled by the Board of Directors who had not bothered to understand whether the income tax return of the company has been filed in time. It is very unlikely that they would remain silent with regard to discharge of their statutory obligations by placing reliance on their erstwhile Accountant as claimed by the assessee. In view of the aforesaid facts and circumstances and respectfully following the decision of the Hon’ble Kerala high Court in the case of Metro Agencies, [2013 (10) TMI 658 - KERALA HIGH COURT ], we do not find any reason to interfere in the order passed by the Ld. CIT(A). - Decided against assessee.
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2016 (7) TMI 616
Penalty u/s 271(1)(c) - Held that:- The show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. - Decided in favour of assessee
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2016 (7) TMI 615
Addition on account of unaccounted stock - ITAT deleted addition - Whether the Appellate Tribunal was right in shifting the burden of proof of payment of unaccounted stock found during the course of search and seizure proceedings on the Department? - Held that:- Tribunal has not committed any error while passing the impugned order. In that view of the matter, both the issues are answered in favour of the assessee and against the department.
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2016 (7) TMI 614
Revision u/s 263 - Held that:- CIT did not make any specific observation as to how the order of the AO is erroneous and prejudicial to the interest of Revenue as it is a condition precedent to invoke the jurisdiction under section 263 of the Act. Therefore, in the absence of such observation, the impugned order before us is not in accordance with law. - Decided in favour of assessee
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2016 (7) TMI 613
Disallowance made u/s 14A - Held that:- No disallowance u/s 14 A of the Act need to be made by invoking the provisions of Rule 8D(2) of the Rules as the investments admittedly are business expediency investments and strategic investments. Since the investments were held to be business expediency investments, there is no case for making any disallowance by adopting Rule 8D(2)(iii) of the Rules also - Decided against revenue Disallowance on account of depreciation - Held that:- We find that the action of the ld AO in trying to disturb the opening Written Down Value (WDV) attributable to the cost of land and thereby trying the disallow the depreciation component thereon is not appreciated , as, if at all, the ld AO has got any grievance on the impugned issue, then he should have reopened the assessment for the Asst Year 2007-08 ( i.e. the year in which land on which windmill was installed was purchased) and disallowed the depreciation thereon in that year. He cannot unilaterally disallow the depreciation based on the opening written down value. Assessee is entitled to entire amount claimed as depreciation on windmill. - Decided against revenue Disallowance made on account of advertisement expenses - assessee produced the copy of the bill of M/s Adsun Advertising Agency and CIT(A) deleted the addition - DR argued that the bill of M/s Adsun Advertising Agency was never subjected to verification by the ld AO and accordingly prayed for setting aside of this issue to the file of the ld AO - Held that:- In the facts and circumstances, we deem it fit and appropriate, to set aside this issue to the file of the ld AO , to decide the same in the light of evidences submitted by the assessee in this regard. - Decided in favour of revenue for statistical purposes. TDS u/s 194C - non deduction of tds on advertisement material expenses - Held that:- We find from the details and the bills submitted the assessee had only made payments for purchase of materials and had admittedly not supplied the materials to the job worker and hence the same would not fall under the definition of ‘work’ as per section 194C of the Act.Hence there is no violation of section 194C warranting any disallowance u/s 40(a)(ia) of the Act. - Decided in favour of assessee Addition being notional interest @ 13.5% on trade advance - Held that:- As already held while dealing with the issue of disallowance u/s 14A that the assessee is having sufficient own funds at its disposal which would easily cover the advance given to the wife Smt Kala Devi Jain in the sum of ₹ 7,00,000/- also. Hence there is no question of charging any notional interest thereon on the said advance presumed to have been given out of own funds. Hence the addition made is directed to be deleted. - Decided in favour of assessee Disallowance towards staff welfare expenses - Held that:- The assessee has made gifts of ₹ 5,100/- each to two of its employees on the occasion of the marriage in their families in order to maintain harmonious relation with the staff members. We hold that there is no personal element involved therein and has been incurred in the ordinary course of his business. We hold that the said expenditure is only in the nature of staff welfare and is squarely allowable as a deduction. Accordingly, we have no hesitation in directing the ld AO to delete this addition - Decided in favour of assessee
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2016 (7) TMI 612
TDS u/s 194C - non deduction of tds - Disallowance u/s 40(a)(ia) - Held that:- We find that the expenses incurred is only towards promotion of business of the assessee and does not fall under the definition of ‘work ‘as defined in 194C of the Act. Hence there is no obligation to deduct tax at source in terms of section 194C of the Act. Accordingly we direct the ld. AO to delete the disallowance made u/s 40(a)(ia) of the Act. - Decided in favour of assessee Addition towards notional rental income from house property - Held that:- We find that the assessee has got three properties out of which one is used for self occupation, one is used for business purpose and the other is claimed to be used partly for business and partly for residence. The ld. AO had rightly determined the fair market value in respect of the said property in accordance with the provisions of the Act. We find that the assessee had not disputed the determination of the quantum of fair market rent in respect of the properties either before us or before the lower authorities. We find that the revenue is justified in making this addition which is in accordance with the provisions of the Act. Hence we do not find any reason to interfere with the orders of the lower authorities. - Decided against assessee
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2016 (7) TMI 611
Reopening of assessment - whether there was an obligation on the part of the assessee to deduct tax at source in terms of seciton 194C? - Held that:- As already seen while concluding the original assessment proceedings the issue of TDS on dyeing and printing charges was raised by the assessee and in the order passed u/s 143(3) of the Act dated 28.12.2007 no addition whatsoever was made u/s 40(a)(ia) of the Act for non deduction of tax at source. Thus it is clear that the question as to whether dyeing and printing charges paid by the assessee had to suffer TDS in the hands of the assessee, who is an individual is deemed to have been considered by the AO and order of assessment was already passed accepting the claim of the assessee that such TDS obligation had not extended to the assessee, who is an individual. From the reasons recorded by the AO u/s 148 of the Act it is clear that without any new material coming to the possession of the AO had merely a change of opinion, reassessment proceedings have been initiated by the AO. Such a course is not permissible as held by the Hon’ble Supreme Court in the case of CIT vs M/s. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ). We are of the view that the provision of section 194C (2) of the Act apply to a contractor and not to a person such as the assessee who was a trader in art silk fabricss. When the provision of section 194C(2) of the Act are not attracted the question of invoking the proviso to section 194C(2) does not arise. As rightly contended by the ld. Counsel for the assessee individuals whose total sales, gross receipts or turn over from the business if it exceeds the monetary limit specified u/s 44AB of the Act during the financial year immediately preceding the financial year in which a sum is credited or paid the account of the contractor is covered u/s 194C (1)(k) of the Act which admittedly came into effect only from 01.06.2007 - Decided in favour of assessee
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2016 (7) TMI 610
Addition of consideration of tax depreciation of 5% on motor cars used exclusively for hire for the purpose of fringe benefit tax - CIT(A) deleted the addition - Held that:- We find that the assessee has paid FBT in respect of expenses incurred for vehicles which are used for office purposes as well as the expenses incurred for cars used by employees in the course of their performance of duties. However, with regard to the expenses incurred wholly and exclusively for maintenance and running of tourist cars for car rental business , no FBT is paid as the said cars were never used by the employees. In this regard, it would be relevant to understand the intention behind introduction of provisions of FBT u/s 115W to 115WL w.e.f. 1.4.2006 by the Finance Act, 2005. We find that the said provision were introduced where the benefits are usually enjoyed collectively by the employees and cannot be attributed to individual employees then the same shall be taxed in the hands of the employer. In the memorandum explaining the bill , it has been pointed out that the rationale for levying FBT on the employer lies in the inherent difficulty in isolating the personal element where there is collective enjoyment of such benefits and attributing the same directly to the employee. We find that the car expenses incurred for the transport business, the maintenance of such cars are separately accounted for as those car expenses have no nexus or relation to any benefit which can be even said to have been collectively enjoyed by the employees and therefore the expenses incurred on such account do not attract the levy of FBT. It is not the case of the revenue that the employees were allowed to enjoy any benefit directly or indirectly from such transport services. We find from the observations of ld CITA supra that the assessee had duly bifurcated the motor cars used for hire and that not used for hire separately in the depreciation schedule itself. - Decided against revenue.
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2016 (7) TMI 609
Reopening of assessment - non offering of truck income - non deduction of tds u/s 194C - Held that:- With regard to the first reason recorded by the AO namely not offering truck income to the extent of ₹ 67,600/-, the assessee had declared income from lorry plying of ₹ 50,000/- under the head “income from Basanti Automobiles”. Income u/s 44AE of the Act has been taken in the capital account. Therefore the assessee had declared income from truck plying in the original return of income. This factual position is not being disputed by the AO. Besides the above, there was no tangible material based on which the AO came to a conclusion that income from truck plying was not offered to tax by the Assessee in the original return of income. In fact the factual assertion in the letter dated 22.6.2011 that the Assessee owned three vehicles and that these were used in the business of plying trucks on hire is without any basis and is purely a surmise of the AO. As far as the second reason recorded by the AO is concerned it relates to the carriage inward charges in the business of wholesale dealing in potato seeds. As already observed that the AO examined the carriage inward account in the original assessment proceedings and did not think it fit that there was any violation of section 40(a)(ia) of the Act. It can thus be seen that this issue on which the AO initiated reassessment proceedings had been duly considered by the AO while concluding the proceedings u/s 143(3) of the Act. As during the course of original assessment, it is seen that no query regarding Tax deduction at source from transport payment has been made. Consequently no examination regarding disallowance u/s 40(a)(ia) has been made. Similarly other heads under for which assessments were reopened were not touched upon by the assessing officer during the original assessment. When in the original assessment proceeding the assessing officer has not examined the issue at all, no opinion was formed, the principle of change of opinion cannot apply. Further this is a case where the assessment has been reopened within 4 years of the end of the assessment year. Therefore the re-assessment proceeding cannot be treated as invalid on the ground that full and true disclosure of material fact was made in the original proceeding - Decided in favour of assessee
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2016 (7) TMI 608
Capital investment subsidy ,Interest subsidy and Electricity subsidy received from Govt. of West Bengal under Incentive Scheme 2000 - Whether such receipt could be brought to tax as a capital or revenue receipt with corresponding impact on the allowance of depreciation? - Held that:- Keeping in view the objects of the West Bengal Incentive Scheme 2000 we hold that the capital subsidy is to be treated as capital receipt. Consequentially the assessee need not reduce the same from the cost of the asset for the purpose of claiming depreciation. We hold accordingly. Similarly, we hold that the interest subsidy and Electricity subsidy should also be treated as capital receipt. We direct the Learned AO to grant the additional depreciation on the actual cost of asset before reducing subsidy in terms of section 32(1)(iia) of the Act.
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2016 (7) TMI 607
Addition under section 69C - addition on the basis of the report provided by the State Sales Department and the statements of the parties, as recorded by the Sales Tax Department - Held that:- As find from the record that though the assessee has provided documentary evidences, these documents have not been considered by the authorities below and they made the addition only on the basis of statement of a third person, without giving any opportunity to the assessee. Therefore, in view of this legal and factual aspect, feel that if the assessee be given opportunity before the AO to substantiate its case, it will meet the ends of justice and no prejudice would be caused to the revenue - Decided in favour of assessee by way of remand.
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2016 (7) TMI 606
Penalty u/s. 271(1)(c) - assessment was made u/s 144 - unaccounted sale consideration - Held that:- We are of the considered view that the assessee has not furnished inaccurate particulars of income and there are no findings of the Assessing Officer and the CIT (Appeals) that the details furnished by the assessee in his return are found to be inaccurate or erroneous or false. Under these circumstances, in our view the penalty in dispute is totally unwarranted and deserve to be deleted. Accordingly, we delete the penalty in dispute made u/s. 271(1)(c) of the I.T. Act and quashed the orders of the authorities below on the issue in dispute and allow the appeal filed by the assessee.
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2016 (7) TMI 605
Addition u/s.68 - non genuine share application by director - Held that:- It is not the case that the concession was about true legal position of law and not of facts. We further find that CIT(A) while upholding the addition has noted that the director of the applicant shareholder had admitted the share application made by them to be non genuine and it is not the case of the assessee that the statement was recorded at the back of the assessee and was not made available to the assessee. On the contrary, AO has noted that the after the statement of the director of the applicant was made available to the director of the assessee, the director of the assessee offered the amount of share capital as its income. Considering the totality of the facts, we are of the view that in the present case, no interference to the order of ld.CIT(A)is called for. - Decided against assessee.
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2016 (7) TMI 604
Penalty levied u/s 271(1)( c ) - exemption u/s 54F denied - whether for the purpose of calculating the date of purchase, the date of allotment is to be considered, or the date of registration? - Held that:- This aspect has been duly considered in various decisions, as relied on by the assessee. In these decisions, it is the date of allotment, which has been held to be the relevant date for the purpose of calculating the date of purchase. That being so, the factum of assessee‟s contention being that she had purchased the flat on 30.4.2003, which remains unsupported, but for the affidavit of the seller, would not be decisive so far as regards the levy of concealment penalty. It is an issue on which the assessee entertains a particular belief, which is not the belief of the taxing authorities and which view, being judicial supported, as above, cannot be said to be an implausible or impossible view. As such, it is a debatable issue, on which, concealment penalty, in my considered opinion, is not leviable. - Decided in favour of assessee.
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2016 (7) TMI 603
Disallowance u/s.14A - Held that:- In view of the decision of Hon’ble Delhi High Court in the case of Joint Investments (P.) Ltd. vs. CIT (2015 (3) TMI 155 - DELHI HIGH COURT ), we direct that the disallowance u/s.14A in the present case be restricted to ₹ 55,604/-, being the exempt income earned by the assessee. Revision u/s 263 - taxability of the amount received by the assessee as partner of the firm, its share on the revaluation of the assets of the firm in which it was a partner - CIT(A) held that no part of amount received by the assessee on its retirement from the firms is taxable in its hands as short term capital gain - Held that:- We find that Ld CIT(A) by a well reasoned and speaking order and after referring to various decisions of Supreme Court and High Courts has decided the issue in favour of the assessee. We also find that in case of the other partners, wherein against the order passed by CIT u/s 263 wherein he had held that act of the AO of those respective assessees of considering the amounts received by them on revaluation of assets of the firm to be capital receipt, to be as erroneous and prejudicial to the interest of the Revenue. The Coordinate Bench of Tribunal had held that order of AO to be a proper and logical in view of various decisions of Apex Court and High Courts. Before us, Revenue has not placed any material on record to controvert the findings of ld.CIT(A). In view of the aforesaid facts and in the absence of any contrary binding decision placed by Revenue, we are of the view that no interference to the order of CIT(A) is called for - Decided against revenue
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Customs
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2016 (7) TMI 628
Import of soda ash against Duty Free Import Authorization (DFIA) Scheme - Re-validation - exemption of anti-dumping duty - Reassessment of the ex-bond Bill of Entry - goods imported under the above pending clearance at ICD Ludhiana, with the petitioner unwilling to clear the goods without being extended the benefit of the DFIA scheme and the Customs authorities and the authorities under the Directorate General of Foreign Trade (DGFT) unwilling to extend, to the petitioner, the benefit of the said Scheme. Held that:- various restrictions introduced by the impugned Notification No 31 dated 01.08.2013, DGFT Circular dated 02.08.2013, Public Notice No 35 dated 30.10.2013 and DGFT Notification dated 21.08.2014, could not be made applicable to imports effected under the subject DFIAs. This would also flow from the principle of promissory estoppel, inasmuch as, at the time of issuance of the DFIAs, it was held out by the respondent to the DFIA holders as well as, consequently, to the transferees thereof, that all benefits accruing under the said DFIAs read with the then existing FTP, HOP and DGFT Circulars etc would be available thereunder. It was on the basis of this promise, as held out by the respondent, that the petitioner invested considerable amounts in purchasing the said DFIAs from the original holders thereof in the belief that import benefits available to the said DFIAs at the time of issuance thereof would not be denied to it merely by erroneously applying the restrictions which were introduced thereafter. To the said extent, therefore, the impugned Notifications, Public Notice and Circulars, insofar as they make the restrictive conditions incorporated therein applicable to all imports made thereafter, even under DFIAs issued prior thereto, cannot sustain. The Commissioner of Customs, ICD Ludhiana, is directed to allow exemption of basic customs duty in respect of the import of Soda Ash by the petitioner by debiting the DFIA licence under Bill of Entry no. 7080616 dated 16.10.2014. - The prayer for granting exemption, so far as antidumping duty is concerned, is rejected - Decided partly in favor of petitioner.
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Corporate Laws
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2016 (7) TMI 624
Ingenuine demat account holder - getting excessive number of shares in an irregular manner - undue benefit - Held that:- We do not find any substance in the submissions made on behalf of the respondents to the effect that the price of the shares of Jet Airways India Ltd. paid by the respondents to the demat account holders was reasonable. Even according to the submission made by the learned counsel, value of the said shares, during the said period varied from ₹ 1172/- to ₹ 1339/- and in such circumstances, nobody would believe that all the demat account holders would sell their shares at the same rate, viz. ₹ 1170/- per share to the respondents. These transactions are, therefore, definitely of fishy nature. The transfer of shares did not comply with the requirements of the provision of either Section 13 or Section 2(i) of the SCRA. Therefore, the off market trading indulged into by the Respondents was rightly held to be per se illegal by the Whole Time Member. The submission made to the effect that the Tribunal is a final fact finding authority cannot be disputed. According to the learned counsel, the facts found by the SAT should not be disbelieved by this Court. However, for coming to a definite conclusion contrary to the findings arrived at by the lower authority, the appellate authority, in the instant case, the SAT, ought to have recorded specific reasons for arriving at a different conclusion, but we do not find any sound reason for coming to a different conclusion in the impugned order. On the other hand, we find detailed discussion for coming to a particular conclusion in the order, which was passed by the Whole Time Member of the SEBI and therefore, we do not see any reason for the SAT to disturb the said finding without mentioning any strong and justifiable reason for coming to a different conclusion. The Whole Time Member of the SEBI has very meticulously examined the aforestated facts and in our opinion he has rightly come to the conclusion that the dealings of the respondents were not fair and were in violation of the Act as well as the Regulations.
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2016 (7) TMI 623
Scheme of arrangement - Held that:- In response to the notice issued by this Court, the Official Liquidator, in his Affidavit in Reply stated that the affairs of the Petitioner Companies are not conducted in a manner prejudicial to the interest of its members and they may be dissolved without the process of winding up. In view of the above discussion, the observations made by the Regional Director having been addressed and the Official Liquidator having opined that the affairs of the petitioner company have not been conducted in the manner prejudicial to the interest of its members or to the public interest, in the opinion of this court it does not appear to be any impediment to the grant of sanction to the Scheme of Arrangement, in as much as from the material on record and on perusal of the Scheme, the scheme appears to be fair and reasonable and is not violative of any of public policy. The arrangement under the proposed scheme appears to be in the interest of the companies and its members and creditors and, therefore deserves to be sanctioned. Accordingly, the Scheme as proposed by the petitioner companies is hereby sanctioned. The same shall be binding upon all the equity shareholders, preference shareholders, secured creditors, unsecured creditors of the petitioner Companies and all other agencies, departments and authorities of the Central, State and any other local authorities.
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Service Tax
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2016 (7) TMI 639
Construction services - structure predominantly for use as an educational institution or clinical establishments - claim of exemption under Notification No.25/2001 ST dated 20/6/2012 - principles of natural justice - Held that:- Materials relied upon by the petitioner indicate that the petitioner has raised certain valid contentions especially in regard to the penalty that had been imposed under Section 76 as well as under Section 78. That apart, he claims benefit under a notification by which according to him, the work for two specified years are to be exempted. The materials placed on record would already indicate that the petitioner was not given an opportunity for hearing. Under normal circumstances, when a request has been made, the authorities are bound to provide a haring to ventilate his grievance. When such an opportunity has not been given, it amounts to violation of the principles of natural justice and therefore I am of the view that Ext.P4 is liable to be set aside on the ground of violation of the principles of natural justice. Hence a fresh opportunity is to be granted to the petitioner to defend the proceedings pursuant to the show cause notice issued against him. - Decided in favor of petitioner.
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2016 (7) TMI 638
Demand of interest and penalty - VCES, 2013 - Credit of payment made before introduction of scheme was not given - Service Tax Voluntary Compliance Encouragement Scheme (VCES) - Held that:- While the tax dues declared by the petitioner was for a sum of ₹ 3,77,150/-, they paid 50% thereof i.e. Rs,1,88,575/- on 31.12.2013 and an additional sum of ₹ 1,66,260/- on 28.06.2014 prior to the cut off date prescribed under the scheme i.e 30.06.2014. The aforesaid payments were made after introduction of the scheme and prior to the cut off date. The petitioner had paid only ₹ 22,135/- prior to the introduction of the scheme. The clarification issued by the Central Board of Excise and Customs would have enabled the respondents to levy interest and impose penalty only for the amount paid by the petitioner towards tax dues prior to enactment of the scheme. Their power to levy interest and impose penalty was, therefore, only on ₹ 22,135/- paid by the petitioner during November 2007 to March 2008, and not for the remaining amount paid by them after the scheme was introduced. The impugned letter dated 03.12.2015, to the extent the petitioner was called upon to pay ₹ 1,99,183/-, is set aside. It is made clear that this order shall not preclude the respondents from initiating action to levy interest and impose penalty on the amount paid by the petitioner during November 2007 to March 2008 (i.e for ₹ 22,135/-) in accordance with law. - Decided partly in favor of petitioner.
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2016 (7) TMI 637
Levy of penalty u/s 77 & 78 of the Finance Act, 1994 - validity of invocation of Section 80 by learned Commissioner (Appeals) for setting aside penalties while confirming the demand of service tax on import of services under reverse charge - Held that:- It is only with introduction of Section 66A of the Finance Act, 1994 there was clarity and the judicial decisions as stated supra brought in clarity only from 2009 onwards. It cannot therefore be stated that there was a malafide intention on the Respondents part. The contention of the respondent that there was no malafide as it is a revenue-neutral situation should not be lost sight of. This is a case where the tax paid by the Respondent is eligible for credit for themselves. It is, therefore, very clear that when the situation is revenue-neutral, the aspect of malafide fails. - No penalty - Decided against the revenue.
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Central Excise
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2016 (7) TMI 636
Recovery of refund claim - whether refund already granted by the adjudicating authority can be recovered by issuing a show cause notice, without filing appeal challenging the order of adjudicating authority sanctioning the refund? - Held that:- When no appeal was filed against order under Section 11B, the department cannot take recourse to Section 11 A. See Commissioner of Customs & Central Excise Vs Panyam Cements & Mineral Industries Ltd (2016 (4) TMI 688 - MADRAS HIGH COURT) - Decided in favour of assessee.
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2016 (7) TMI 635
Applicability of notification no.108/95 granting exemption to the goods manufactured by the assessee who have supplied to projects approved by Government of India and financed by World Bank or any other international organization - Held that:- Both the sides agree that the issue is no more res integra and stands settled by various decisions of the Tribunal. Reference is made to the Tribunals decision in the case of Commissioner of Customs and Central Excise Kanpur vs. Jyoti Capsules(2009 (10) TMI 746 - CESTAT NEW DELHI) as also to a latest decision in the case of Commissioner of Central Excise Jaipur Vs Mahindra & Mahindra (2015 (9) TMI 1145 - CESTAT NEW DELHI). It was held that the supplies made for the project financed by International Development Association would earn the exemption in terms of notification no. 108/95-CE.
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2016 (7) TMI 634
Manufacture - eligibility of notification Notification no. 23/2003-CE dated 31.02.2003 - concessional rate of duty - both the authorities have held that the activity of the appellant does not amount to manufacture - duty of excise demand - Held that:- Though the ld. Advocate for the appellant have contested that the activity adopted by them amounts to manufacture in terms of the law declared by the Tribunal in the case of Unitech International Ltd. Vs. UOI (2012 (10) TMI 499 - CESTAT, AHMEDABAD ), but we are of the view that if even if as per the stand adopted by the Revenue, as regards the activity not amounting to manufacture is accepted by us, we really fail to understand as to how the duty of excise can be confirmed against the appellant. Admittedly, excise duty is leviable on goods manufactured and if there is no manufacturing activity involved, as held by the lower authorities, for the purpose of denying the benefit of exemption notification, how the excise duty can be confirmed by applying the full rate of the same value of activity. Even as per the Revenue there is no manufacture and if that be so, no excise duty demand can stay.
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2016 (7) TMI 633
Claim of refund - valuation - whether refund of VAT and interest received from the banks are not liable to be tax as duty of excise - refund claim was rejected on the ground that the duty was not paid under protest - Held that:- It is an admitted fact of this miscellaneous income by way of refund of VAT and interest received from the banks, the appellant is not liable to pay duty as these are not manufactured items and the assessee liable to be paid duty on the goods manufactured by them. As observed that the appellant was not required to pay duty, therefore, on pointing out by the audit team, any amount paid by the appellant shall be deposit made by them with the department although, the same has not paid under protest. In these circumstances, it is held that the amount paid by the appellant is not the duty and is only deposit. The revenue has no right to retain the said amount with them therefore, the appellant is entitled for refund claim to the amount deposit by them with the department. - Decided in favour of assessee.
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2016 (7) TMI 632
Input service credit denied on Courier services and record keeping charges service - period of December’ 2013 to November’ 2014 - Held that:- The appellant has explained the uses of courier services for procurement for small engineering items, raw material, testing equipment. As the usage has not been contravened by tangible evidence by the revenue. In that circumstances the courier services have been availed by the appellant are related to the manufacturing activity therefore the appellant has rightly availed the cenvat credit on courier services charges. With these observations, the cenvat credit availed by the appellant is allowed by setting aside the impugned order for taking the cenvat credit on courier services charges. With regard to record keeping charges find that these records are the part of accounting and auditing to the appellant and accounting or auditing service forms the part of Rule 2(I) of cenvat credit Rules, 2004. Therefore, the record keeping charges are entitled as input service in the facts and circumstances of the case. Therefore, cenvat credit to the appellant on record keeping charges allowed - Decided in favour of assessee.
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2016 (7) TMI 631
Irregular credit on MS Beam, MS Channels, MS Sections, TMT bars, HR sheets, HR coils, welding electrodes - extended period of limitation invoked - suppression of fact - Held that:- Undisputedly the appellant has furnished returns (ER-1) and also filed details of the credit availed. There is no provision/column in the ER-1 return to mention the prupose/place of use of inputs/capital goods. When returns are filed, it is for the proper officer to conduct scrutiny of the returns and inform the assessee about defects. If the assessee disputes a show cause notice can be issued within the normal period. In the present case Revenue has not stated what prevented the proper officer from conducting scrutiny of returns and issuing show cause within normal period. The Commissioner (Appeals), in my view has rightly applied the judgment rendered by Hon’ble Apex Court in the case of Continental Foundation Jt Venture Vs CCE, Chandigarh-1 [2007 (8) TMI 11 - SUPREME COURT OF INDIA ] wherein held that mere omission to give correct information is not suppression of facts Revenue has miserably failed to establish the allegation of suppression of facts. In such circumstances, the demand raised invoking extended period is unsustainable. - Decided in favour of assessee.
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2016 (7) TMI 630
Eligibility to Cenvat Credit availed on the service tax paid on advertising charges - Held that:- Cenvat Credit can be availed at one unit. - Decided in favour of assessee
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2016 (7) TMI 629
Denial of credit availed on TMT Rebar Coils, TMT Rebar and cement - time barred demand - Held that:- It is seen that the period involved is July 2009. The show-cause notice is dated 01/04/2013, which is beyond the normal period. From the records, as find no evidence to establish that appellant suppressed facts with intent to evade payment of duty. The findings of Commissioner(Appeals) is that appellant ought to have ensured whether credit is admissible before availing credit. This does not amount to suppression. Further the show-cause notice relies upon ER-1 returns filed by appellant. This again established, that appellant disclosed necessary details in ER-1 returns. All these prove that appellant is not guilty of suppression. Therefore the extended period is not invokable. Demand is unsustainable being time-barred. - Decided in favour of assessee
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CST, VAT & Sales Tax
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2016 (7) TMI 627
Rate of tax - Classification - nature of machinery used for works contract - motor vehicle - oil cooler for backho loader / oil cooler for wheel loader / oil cooler for soil compactors - scope of entry No.35 of notification issued under section 5(2) of the Gujarat Value Added Tax Act? - various types of oil coolers were principally used in chain mounted equipments and other equipments used for cutting of iron and steel sheets etc. Held that:- Quite apart from the plain interpretative process which would lead us to this conclusion, we must give due importance to the very entry no.35 which is coined in an inclusive phraseology. Machinery including parts and accessories are brought within this entry. Now that by virtue of amendment with effect from 15.2.2010, the term 'machinery' itself is made to exclude a machinery in form of motor vehicle or attached or mounted to a motor vehicle, its parts and accessories which were hither to included in the term 'machinery' for the purpose of entry no.35, would automatically stand ejected out of such entry. Post 15.2.2010 therefore, the assessee's claim for inclusion of its oil coolers which are used for the purpose of motor vehicle must fail. To that extent the judgement of the Tribunal is reversed. The questions are answered accordingly. Tax appeal is dismissed. - Decided against the revenue.
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2016 (7) TMI 626
Rate of tax on supply of LPG in cylinders - domestic supply versus commercial supply - Held that:- The appellants are not doing any such activity, but are manufacturing gas and supplying it to HPCL. In such circumstances, the exemption could not have been claimed by the appellants before us. Once the underlying facts and which are undisputed have been correctly noted and appreciated, then, merely because some certificate issued by HPCL has not been taken into account will not enable us to interfere with the order of the Tribunal. Any Trade Circular and as is clarified therein, cannot control the interpretation of the exemption clause or the Schedule entry which carves out the same. - Decided against the appellant.
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2016 (7) TMI 625
Challenge to the Auction process of the attached property - recovery of arrears under the A.P.General Sales Tax Act, 1957 (APGST) of a partnership firm in which her husband was a partner - Held that:- As it is not in dispute that the two firms, in which the petitioner’s husband was a partner, had defaulted in payment of tax arrears and the subject property, which was sought to be put to auction, belonged to the deceased, we see no reason to direct the attachment order to be lifted notwithstanding failure to issue a notice prior thereto. It would suffice if the notice in Form Nos.7 and 7A, and its publication in the Gazette, are alone set aside. The order of attachment shall continue to remain in force and shall be lifted in case the petitioner in W.P.No.17118 of 2006 pays the amounts due within one month from today. In case the petitioner fails to do so, it would then be open to the respondents to thereafter initiate proceedings afresh to put the subject property to sale by way of auction in accordance with the procedure prescribed under the Act. - Decided partly in favor of petitioner / owener. M/s. Jain Irrigation System Pvt. Ltd. (the petitioner in W.P.No.42433 of 2015) deposited the sale consideration pursuant to the auction conducted by the respondents earlier. The amount, so deposited, shall be refunded to them forthwith. It is open to M/s. Jain Irrigation System Pvt. Ltd. (the petitioner in W.P.No.42433 of 2015) to initiate appropriate legal proceedings for recovery of the interest, which they are entitled to receive for the sale consideration deposited by them pursuant to the auction held by the respondents.
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Indian Laws
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2016 (7) TMI 622
Dishonour of cheques - proceedings were initiated under the Negotiable Instrument Act - Counter complaint was filing against the complainant u/s 411 read with Section 120 (B) of the Indian Penal Code, 1860 - Held that:- As the dispute between the parties is purely of civil nature and the complaint filed by the respondent No.2 is an attempt to avoid obligation arising out of dishonour of cheques issued by the complainant. We, however, do not express any final opinion about the merits of the complaints filed by the appellants for dishonour of cheques which are said to be still pending. We are satisfied that the complaint filed by the complainant is clearly misconceived and is abuse of process of the Court. The High Court has not considered the merits of the contentions raised in the petition for quashing as noticed from the operative part of the order of the High Court.We, accordingly, allow this appeal and quash the proceedings in the complaint case filed by the respondent No.2.
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