No sec. 11 relief to trust constituted for development of cities as it had turned into a huge profit-making unit
IT: Where predominant object of assessee-trust was profit making, exemption under section 11 was rightly denied
AHMEDABAD, NOV 07, 2014: THE issue before the Bench is - Whether when the assessee is under investigation, Revenue is legally right in collecting cheque payments towards future tax demand in order to protect its own interest. NO is the verdict.
Facts of the case
The assessee is a trading company. The assessee filed the present petition on the ground that the Revenue without passing any assessment order and ordering a definite tax demand, had recovered three cheques totaling to Rs.3,08,50,688 from the assessee. The Counsel of the assessee urged the court to direct the Revenue to return the said cheques to the assessee. Whereas the Counsel of the Revenue submitted that the adjudication proceedings were already initiated and show-cause notices were also issued, thus to protect the interest of the Revenue, it had found on investigation that the assessees would be liable to pay the amount of Rs.3,08,50,688/- including the penalty. Therefore, in the larger public interest, the cheques were recovered. However, there was no final assessment order or provisional assessment order passed.
The HC held that,
++ it is required to be noted that the Department has recovered the cheques totaling to Rs.3,08,50,688/- from the assessees towards the future tax demand and/or liability of the assessees. However, it is required to be noted that as such the assessment proceedings are not completed and neither any provisional assessment order nor final assessment order has been passed against the assessee crystallizing the tax demand. The identical question came to be considered by the Division Bench of this Court and the Division Bench vide order dated 14.2.2014 passed in SCA No.959/2014, has quashed and set aside the action on the part of the Department collecting the cheques from the assessees without passing any final assessment order either provisional and/or final assessment order crystallizing the tax demand;
++ in view of the reasons stated above, the present petition succeeds in part and the action of the Department in collecting the cheques totalling to Rs.3,08,50,688/-, as mentioned in para-32(B) of the petition, without passing any final assessment order and/or without passing any provisional assessment order and without crystallizing the tax demand, is hereby quashed and set aside and the Department is hereby directed to return the aforesaid cheques to the assessees, forthwith. As the adjudication proceedings are already initiated, the same may be concluded in accordance with law and on merits. It will also be open for the Department to pass provisional assessment order, if permissible under the law. The amount of Rs.10 lacs deposited by the assessees pursuant to the interim order passed by this Court, the Registry is directed to return the same to the assessees by way of A/c payee cheque, without prejudice to the rights of the department of the final assessment and/or provisional assessment.
COMPANY CASES
Offences and prosecution --Offence by company--Directors--Relief from liability--Limitation--Loans to directors--Failure by director to disclose interest--Court to take cognisance of offence within one year from date of commission of offence--Show-cause notice issued beyond period of one year--Directors to be excused under section 633(2)--Failure to maintain proper books of account and failure to disclose information--No relief from liability--Companies Act, 1956, ss. 209(1), (3)(b), 217(3), 292(1)(e), 295, 297, 633(2)-- Sudhir Rai v. Registrar of Companies, West Bengal
(Cal) . . . 1
(Cal) . . . 1
Scheme of arrangement --Demerger--Demerger of cement division--Objection by creditor to method of valuation--Valuer appointed by court adopting same method--Other secured and unsecured creditors and equity shareholders voting in favour of scheme--No basis to support allegation that valuation intended to cheat some creditors--Private dispute between objector and company not ground to refuse sanction to scheme--Scheme to be sanctioned--Companies Act, 1956, s. 391-- SKS Ispat and Power Ltd., In re (Bom) . . . 7
Scheme of arrangement or compromise --Scheme with secured debenture holders--Scheme by shareholder--Scheme providing for rescheduling of secured debentures to ensure that all debenture holders are paid fully and in orderly fashion without impairing continuance of operations of company--Company having substantial assets to cover claims of debenture holders--Managing director of company undertaking to abide by scheme--Scheme sanctioned--Companies Act, 1956, ss. 391, 394-- Analog Financial Services P. Ltd., In re (Mad) . . . 15
Secured creditor --Enforcement of security interest--Arbitration--Reference of dispute to arbitration--Borrowings from housing finance company governed by National Housing Bank Act, 1987 and not registered under 2002 Act--Lender initiating action before civil court invoking arbitration clause in loan agreements between parties--Merger of lender with its sister concern registered under 2002 Act--Sister concern initiating proceedings under 2002 Act after merger--Proceedings not maintainable--2002 Act not to govern transactions outside its purview when entered into--Arbitration and Conciliation Act, 1996, s. 8--National Housing Bank Act, 1987--Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, s. 13-- Deccan Chronicles Holdings Ltd. v. Union of India (AP) . . . 85
Winding up --Avoidance of transfer--Agreement to sell property of company and part payment made--Transaction not completed and fresh memorandum of understanding entered into after winding up proceedings initiated--Amounting to variation of terms of first agreement and disposition of property--Transaction hit by section 536(2)--Failure to file application within period of limitation--Application dismissed--Companies Act, 1956, s. 536(2)-- Jaypee Trading Co. Ltd. v. Official Liquidator (Cal) . . . 35
----Grounds for winding up--Inability to pay debts--Debenture bonds issued under trust deeds--Failure to pay bondholders--Company unable to pay its debt as and when they fell due and in state of insolvency--All criteria required for its winding up satisfied--No dispute about debt due and payable by company--Company to be wound up--Companies Act, 1956, ss. 433(e), 439(1)(b)-- Bank of New York Mellon v. Zenith Infotech Ltd. (Bom) . . . 53
----Grounds for winding up--Inability to pay debts--Trust deeds executed with covenant for unconditional payment--Failure to pay bondholders--Trustee for holders of debentures deemed to be creditor within meaning of section 439(1)(b)--No dispute about debt due and payable by company--Admission of petition, proper--Company engaged in sensitive business--Appointment of administrator instead of provisional liquidator--Proper--Companies Act, 1956, ss. 433(e), 439(1)(b)-- Zenith Infotech Ltd. v. Bank of New York Mellon (Bom) . . . 41
----Petition for winding up--Application to refer dispute to arbitration--Cannot be entertained--Unwilling party cannot be compelled to submit to jurisdiction of arbitrator--Arbitration and Conciliation Act, 1996, s. 8--Companies Act, 1956, s. 433-- Empee Sugars and Chemicals Ltd. v. Paharpur Cooling Towers Ltd. (AP) . . . 28
----Petition for winding up--Petition by creditor--Trustee for holder of debentures--Deemed creditor--Petition for winding up by such trustee maintainable--Companies Act, 1956, ss. 433(e), 439(1)(b)-- Zenith Infotech Ltd. v. Bank of New York Mellon (Bom) . . . 41
----Petition for winding up--Procedure--Advertisement--Affidavit of service of advertisement--Rules 24 and 30 are procedural in nature--Defects curable can be cured by further directions from court--Advertisement of admission of petition published in Official Gazette on October 10, 2013 and petition heard on November 11, 2013--Sufficient compliance with rule 24--Delay in filing affidavit condoned--Petition heard and company ordered to be wound up--Companies (Court) Rules, 1959, rr. 7, 24, 30, 31-- Bank of New York Mellon v. Zenith Infotech Ltd. (Bom) . . . 53
No disallowance for cash payment on insistence of seller as payment proof proved genuineness of transaction
IT : Where assessee made payment in cash on insistence of seller and there was no doubt about genuineness of payment, no disallowance could be made under section 40A(3)
Sum received under VRS was exempt as it didn't exceed Rs. five lakhs and VRS was in accordance with Rule 2BA
IT: Where voluntary retirement scheme launched by 'K' Ltd. satisfied all requirements of Rule 2BA of 1962 Rules, assessee being employee of 'K' Ltd., was entitled to claim exemption of Rs. Five lakh under section 10(10C) towards retirement benefits received under said scheme
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