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February, 2008 Dear Reader, We are once again with you with our monthly newsletter. As usual, in this newsletter, we have incorporated latest judgements, circulars etc. We have covered many subjects in this newsletter. You may select only those subjects in which you are interested by clicking the relevant following subjects : - |
Thanking you, manager@laws4india.com Arbitration & Conciliation Act Civil Procedure Code Hong Kong Company had employed Indian national stipulating that terms of the contract should be interpreted in accordance with Hong Kong laws. The employee after tendering his resignation was found to be informing potential customers that he represents the Korean Company and had registered a domain name similar to that of the company. The company filed a Suit in Delhi High Court for damages. Supreme Court held that the clause in international contract does not bar Indian Court. Laxman Prasad V. Prodigy Electronics (2008) 1 SCC 618.
Constitution of India Co-operative Society obtained various loans aggregating to Rs.16,29,000/- from State Government Banks. On failure to repay same, recovery proceedings were initiated. The Society filed various writs of vexatious nature indulging in abuse of process of law to thwart recovery proceedings. Supreme Court imposed penalty of Rs.50,000/- under Art. 18,17,2(d) & h. Udyami Evam Khadi Sanastha V. U.P. State (2008) 1 SCC 560.
Contract Act 1872 Contract for charter was made between Bharat Petroleum & Great Eastern Shipping in 1997 for period of 2 years under certain terms and conditions. It was extended upto 01-09-1998 under new charter but without fixing up new terms and vessels were hired even upto 31-08-1999. The Shipping Company called on Bharat Petroleum to pay balance amount of Rs.4.4 Crore. Supreme Court held that an offer is not accepted by mere silence. However, the offeree’s silence coupled with conduct in the form of positive act constitute acceptance. Therefore, the charter did not get extinguished. Bharat Petroleum V. Great Eastern Shipping (2008) 1 SCC 503. Contract Act 1872 Bank guarantee was given by supplier of goods to the purchaser. Purchaser made part payment for goods supplied and purchaser insisted that if supplier should furnish bank guarantee, payments will be made. Supreme Court held that bank guarantee is always unconditional and beneficiary is entitled to realize such a bank guarantee. Vinitee Electronics V. HCL Info system (2008) 1 SCC 544. Contract Act 1872 U.P. State Financial Corporation took over possession of borrower’s plant and machinery of the industrial concern. Thus it becomes bailee and has to act as trustee. During the said possession, innumerous thefts of items of plant and machinery took place Borrower’s writ to seek stay of recovery proceedings and recovery of possession was admitted by Supreme Court. High Court was directed to pass appropriate orders. Everest Wools P. Ltd. V. U.P. Fin Corp. (2008) 1 SCC 643
Central Excise Under Rule 57-A read with Rules 57C and 57CC of Central Excise Rules 1944, credit of Modavet duty is admissible to inputs used in both dutiable as well as exempted goods when no separate account has been maintained CCE V Focus Alloys Forgings Ltd. (2008) 12 STT 369 P & H
Bad Debt Assessee Company advanced down payment of Rs.9 Lakhs to another Company for purchase of premises. The transactions could not be gone through but the other company did not return the money. After waiting for 3 years, assessee wrote off the amount as bad debt. A.O. and CIT(A( did not allow the claim holidng it as capital loss. ITAT held that non-recovery of the amount is business loss as asset had not been purchased. High Court upheld the view of CIT(A) as the amount had been advanced for purchase of capital asset. CIT Vs. R.G. Sec. Ent. 166 Taxman 161 Del. Income from Business Where income is attached to immovable property it does not necessarily form income from house property. Main intention is exploitation of immovable property by way of commercial activity. Assessee Company had developed shopping mall business centres on property owned by it and let out to various users by providing host of services/facilities/amenities. Income derived is income from business. PFH Mall & Retail Management V. ITO 110 ITD 337 Kol. Income from House property Company purchased a property, divided it into 17 stalls and allotted them to members. Vide tripatriate agreement between the company, the members and a bank the stalls were let out to the Bank at Rs.7/- per sft. out of which Rs.1/- to the company and Rs.6/- to the members. It was held that this is a case for lifting the Corporate Veil and Company is liable to pay tax on property income @ Rs.7/- per sft. as income from house property. ITO V. Janata Bazaar & Stores, 110 ITD 330 Mum. Interest After the order of Tribunal, A.O. is duty bound to charge interest u/s. 234 B upto the date of original order of assessment passed by him and not upto the date of re-assessment order passed by him in pursuance of order of Tribunal. Freight Sup. Consultants P. Ltd. V. ITO 110 ITD 377 Delhi. Share Application Assessee Company raised share capital of Rs.1.78 Crore from 111 shareholders. A.O. issued notice u/s. 133(6) to all. Two denied to have made share application and refused to file confirmation letters. An addition of Rs.2,90,000/- relating the said two was upheld. A-One Housing Complex V. ITO 110 ITD 361 Del. Valuation Property had been acquired prior to 01-04-1981 and assessee opted for value of the property as on 01-04-1981 at Rs.1,21,00,000/- as per Registered Valuation Officer Report, Tribunal held that A.O. can take assistance of DVO when he feels that FMV returned by the assessee on the basis of Registered Valuer’s report is more than FMV as per his estimate. ICBI India V. JCIT 166 Taxman 120 Bangalore. Depreciation Non-resident company had acquired shares of Indian company prior to 01-04-1981 and sold them in A.Y. 2000-01. A.O. held that it cannot adopt FMV as on 01-04-1981 as being non-resident it was required to compute the capital gains in terms of foreign currency conversion as per first proviso to Sec.48 and it could not simultaneously avail of benefit of FMV as on 01-04-1981. ITAT held that benefit u/s.55(2)(b)(i) is available to the Co. Sanghvi Movers P. Ltd. V. DCIT 110 ITD 1 Pune. Exports Deduction u/s. 80HHE should be allowed for export of Computer Software sales by considering turnover of each unit separately, where business of each unit is separate and where assessee maintains independent and separate books of accounts for export and domestic. Total Turnover of entire business should not be taken into account. Datamatics Ltd. V. ACIT 110 ITD 24 Mum. Capital Gains Non-resident company had acquired shares of Indian company prior to 01-04-1981 and sold them in A.Y. 2000-01. A.O. held that it cannot adopt FMV as on 01-04-1981 as being non-resident it was required to compute the capital gains in terms of foreign currency conversion as per first proviso to Sec.48 and it could not simultaneously avail of benefit of FMV as on 01-04-1981. ITAT held that benefit u/s.55(2)(b)(i) is available to the Co. Alcan Inc. V. DDI 101 ITD 15 Mum. Industrial Undertaking Amendment brought in Sec.80-IB (iv)(d) w.e.f. 01-04-2005 restricting the construction of commercial area in housing project to five percent or 2000 sq.ft. is prospective in nature. An assessee who had constructed 9790 sft (9.3% of total area) in A.Y. 2003-04/2004-05 is not disentitled to deduction. Arun Excells V. ACIT 166 Taxman 53 Chennai. Penalty Assessee had claimed and was allowed depreciation on assets leased by it to BSAL which assets had been purchased from BSAL only Assessee had received lease rent from BSAL. Survey operation conducted on BSAL revealed that the said assets never existed. Assessee surrendered the amount representing depreciation. Penalty was levied u/s.271(1)(c). The same was deleted accepting assessee’s plea that it was not aware that it had unwittingly become party to a fraudulent scheme BPL Sanyo V DCIT 166 Taxman 90 Bang Trib Interest on Compensation Interest on compensation awarded during land acquisition proceedings is assessable on year to year basis so that entire amount of interest could not be assessed in the year of receipt. Konkan Barge Bldrs. V ITO 166 Taxman 217 Bombay Assessment Section 43-B has no application reg. receipt of service tax collection that the assessee is obliged to pay over to the Govt. in the absence of debit of such amount in the P & L a/c. or claim for deduction of such amount. CIT V Noblel & Hewit 166 Taxman 48 Delhi. Exports Even if interest received from customers on a/c. of delay in payment is assessed as business income it is to be reduced there from for the purpose of calculation of relief admissible u/s.80HHC. CIT V Malwa Cotton SPG Mills 166 Taxman 457 P & H Penalty From reading of the asst order it was not possible to infer that any satisfaction existed for the A.O. nor did it was arrived at to initiate penalty proceedings u/s.271(1)(c). The penalty imposed under the circumstances cannot be sustained. CIT V Edward Life Science 166 Taxman 489 Delhi Search Silver bars were seized during search in 1971 and were retained. They were released in 1984 to the assessee. There is no question of paying interest on the value thereof for the period of retention as silver bars are not cash for the purpose of Section 132B(4). Puranmal V Union of India 166 Taxman 452 Delhi. Valuation Valuation report received after the passing of the asst. order becomes part of the record. CIT(A) can take account of the same and utilise the information contained therein. ICBI India Ltd. V JCIT 166 Taxman 123 Bang. Trib. Capital Gains Assessee had inherited certain shares on the death of her husband A.O. and CIT (A) gave the benefit of indexation from the date of acquisition in the hands of her husband ITAT held that there cannot be one date for the purpose of computing the period of holding and another date for indexing the cost. Indexation should start from the date of holding by the previous owner. Kamal Mishra V ITO (2008) 19 SO T 251 Delhi. Cash Credit Assessee received gifts of Rs.2 lakhs, 10 lakhs and 1 lakh by a/c. payee cheques from three persons not related to her Assessee also received gifts of two immovable properties of value of Rs.22 lakhs and Rs.40 lakhs. ITAT deleting the additions held that gift can be made to strangers and no occasion is required for giving gift. People give donation / gifts to persons held by them in personal esteem and best persons to explain the said feelings are the donors. Ms. Mayavati V DCIT CC I (2008) 19 SOT 460 Delhi. House Property A lessee cannot be deemed to be the owner for WT purposes if the terms of lease is less than 12 years and legal ownership would remain unaffected in such a case. An asset must be owned either by legal owner under general rule or by deemed owner u/s.4(8)(b). Voltas Ltd. V Asst CWT(2008) 19 SOT 542 Mum SB Interest Tax Interest earned by assessee bank on dated Government Securities is not liable to be assessed u/s. 2(7) r/w. Sec.4. CIT V. Corporation Bank 166 Taxman 388 SC. Securities and Exchange Board of India Service Tax Assessee was providing coaching and training in business management and fashion technology to students and was covered under the category of vocational training or coaching service. Benefit of Notification No.9/2003-ST 20-06-03 cannot be denied to him on the ground that it is not registered with AICTE as Vocational Institute. Ligan & Leigh College V. JCST (2008) 12 STT 157 CESTAT Bang. Service Tax When a foreign concern transfers technical know-how, such transfer of service cannot come within the scope of “Consulting Engineering Services. His appeal was allowed. Volvo India V. CST 2008 12 STT 199 CESTAT Bang. Service Tax – Penalty An assurance had been given by Dept. there would be no coercive measure of law if the service provider came forward seeking registration before 30-11-2004. The assessee got itself registered on 25-03-2004. Hence the penalty levied u/s.76 and confirmed by Commissioner was deleted. Golden Security Service V CCCE (2008)12 STT 243 Kol-Cestal Service Tax Air Transport of Goods The Govt. had exempted the said service from tax vide notification No.28 / 2004 – ST dt.17-9-2004. The exemption was withdrawn but was once again granted vide Notification No.29/2005-ST dt. 15-07-2005. Assessee’s plea that the exemption restored on 15-07-2005 has retrospective effect and operated between 17-9-2004 and 15-7-2005 was not accepted. The services rendered by the assessee during this interval was liable to service tax. Malaysia Airlines V Com. of Service Tax(2008) 12 STT 245 (Chennai Cestat) Service Tax – Cargo Handling Service Assessee’s above business included, unitization strapping, packaging of customers’ goods at their premises. The term “packing of cargo” occurring in the definition of cargo handling services’ cover the above activities and liable to tax ITW India Ltd. V CCE (2008) 12 STT 249 Kol Cestat Service Tax-Courier Agency Service The peripheral service like sorting, stuffing and sealing of bills and invoices can be said to fall within the ambit of above services. However due to possibility of different interpretation made by the assessee penalty was reduced from Rs.1,06,000/- to Rs.50,000/- Harsh Marketing V CCE (2008) 12 STT 255 Mum. Cestat Service Tax – proprietory concern Assessee was providing services of processing loan applications for commercial vehicles and received commission from banks. Commissioner (Appeals) deleted the penalty on the ground that being sole proprietory concern he was not liable for tax. Tribunal held that the term ‘concern” would cover company, partnership and sole proprietorship CCE V R.S. Financial Services (2008) 12 STT 257 N-Delhi (Estate) Service Tax - Business Auxiliary Services Assessee supplied large number of computers to an Elec. Co & was receiving hire charges. Apart from that assessee provided services related to computer Billing. Billing Services do not come within the purview of business auxiliary service but related to Information Technology, services which is excluded from business auxiliary service and not liable to tax. Bellary Computers V CCE (2008) 12 STT 261 Bang Cestat Service Law Departmental proceedings were going on against certain union leaders for use of shameful abuses and murderous assault within bank premises. The order of High Court staying the said proceedings on the ground that criminal proceedings were going on is not proper. I.O.B Vs. P. Ganesan (2008) 1 SCC 650 Service Law While submitting application for the post of Fireman appellant had not disclosed about his involvement in criminal case u/s. 294(b) IPC, though he was acquitted. Cancellation of his appointment is held justified as it is a uniformed service. R. Radhakrishnan Vs. D. G. of Police (2008) 1 SCC 660 Service Law Relevant rules prescribed that DPC should be convened annually. Where respondent became eligible in 2000 but vacancy arose in 2002, it is not necessary to hold DPC in 2000 when there was no vacancies. Meghalaya Ele. Board Vs. Thuleshwar (2008) 1 SCC 671. Service Tax-Interest Foreigner having no office in India is providing consulting engineering services to State Elc. Board vide contract which cast the service tax liability on the Board albeit with the liability of the said foreigner. Service tax remained unpaid. In view of the contractual obligation the board is liable to pay the interest on delayed payment. Kerala St. Ele. Board V CCE (2008) 1 SCC 780 Service Tax Assessee Co was receiving rent and operations cum maintenance charges separately from tenants housed in its building complex attached with common facilities. Assessee claimed that common facilities and shared areas are not part of immovable properties and therefore amount collected in respect of the same was not taxable. Since lease deed has been entered into with each tenant and maintenance fee was being charged on similar manner, operation and maintenance fee pertain to immovable property and liable to Service Tax. Tidel Park Ltd. V Com of Service Tax (2008) 12 STT 370 Chennai CESTAT Service Tax Assessee is consulting engineer and paid royalty to foreign collaborator. Dept treated it as consulting engineer’s service and levied tax. Tribunal held that royalty payment made to foreign collaboration for technical know how is not liable to service tax. Amara Raja Batteries V CCE (2008) 12 STT 376 Bang CESTAT Service Tax Clearing agent had collected on behalf of principal commission on which service tax had been paid by principal. Assessee had been reimbursed by the principal expn. incurred by him on loading / unloading coolie cartage freight etc. The collections are not liable to be added in assessable value of clearing and forwarding agency service. U. M. Thariath & Co. V CCE (2008) 12 STT 378 Bank CESTAT CRPC 1973 While granting anticipatory bail u/s. 438-2(ii), Court should impose condition that accused should make himself available for interrogation by Police Officer when required. For failure to do so it is open to the State to move Court for cancellation of bail. State of Punjab V. Ravinder Singh (2008) 1 SCC 564. C.P.C. 1908 Order 23 Rule 1 (4) of CPC lays down that where a plaintiff withdraws a suit without the permission of the Court, he is precluded from instituting fresh suit in respect of the same subject matter. But, this provision applies only to suits. An application u/s. 25-0(1) is not a suit and the provision will not apply. Sarva Shramik Sangatania V. Maharashtra Stet (2008) 1 SCC 494. CRPC 1973 Power to grant Anticipatory u/s. 438 is extraordinary in character and should be sparingly used and granted for limited period. When accused surrenders before Court on expiry of limited period anticipatory bail, his application for regular bail should be disposed of the same day. Naresh Kumar Yadav V. Ravinder Kumar (2008) 1 SCC 632. CR.P.C.1973 Accused is based in Delhi Jail. Trial is being held in Patna vide Video Conference facilities provided to accused to oversee the proceedings. Trial will go on u/s.273 & 317 even if the facilities could not be provided at some stage. Rajesh Ranjan Yadav V CBI (2008) 1 SCC 667 Motor Vehicles Act 1988 Driver had valid license to ply only light motor vehicle. The bus driven by him was hit by roadways bus and was damaged. The said bus is not entitled to claim damages from insurer. New India Assurance V Prabulal (2008) 1 SCC 690
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