Supreme Court

Berger Paints India Ltd. v.  C.I.T., Delhi-V

MANU/SC/0319/2017

28.03.2017

Direct Taxation

Premium collected by Company on its share capital cannot be claimed as deduction

Appellant is a Limited Company engaged in business of manufacture and sale of various kinds of paints. For Assessment Year 1996-1997, Appellant (Assessee) filed income tax return and declared total income. Return was then processed by Assessing Officer("A.O."). A.O. was of view that, expression "capital employed in business of Company" did not include "premium amount" received by Appellant on share capital. A.O. accordingly calculated allowable deduction under Section 35D of Income Tax Act, 1961. Commissioner of Income Tax allowed deduction claimed by Appellant of entire amount under Section 35D of Act. Revenue, felt aggrieved, filed appeals before Tribunal. Tribunal held that, premium collected by Appellant-Company on share capital did not tantamount to "capital employed in business of Company" within meaning of Section 35D(3) of Act. Appellant-Company filed appeals before High Court. By impugned judgment/orders, High Court dismissed Appeals and affirmed orders of Tribunal.

High Court correctly explains true meaning of expression employed in Sub-Section 3(b) of Section 35D read with Explanation (b) of Act, calling no interference in appeals. Supreme Court while agreeing with view of High Court opined that, "premium amount" collected by Company on its subscribed issued share capital is not and cannot be said to be part of "capital employed in business of Company" for purpose of Section 35D(3)(b) of Act and hence, Appellant-Company was rightly held not entitled to claim any deduction in relation to amount received towards premium from its various shareholders on issued shares of Company.

Supreme Court observed that if intention of Legislature were to treat amount of "premium" collected by Company from its shareholders while issuing shares to be part of "capital employed in business of Company", then it would have been specifically said so in Explanation(b) of Sub-section(3) of Section 35D of Act. It was, however, not said. Further, non-mentioning of words does indicate legislative intent that, Legislature did not intend to extend benefit of Section 35D of Act to such sum.

Companies Act provides in its Schedule V-Part II (Section 159), a Form of Annual Return, which is required to be furnished by Company having share capital every year. Column III of this Form, which deals with capital structure of company, provides breakup of "issued shares capital breakup". This column does not include in it "premium amount collected by Company from its shareholders on its issued share capital". This is indicative of fact that, such amount is not considered a part of capital unless, it is specifically provided in the relevant section.

Section 78 of Companies Act, 2013 which deals with "issue of shares at premium and discount" requires a Company to transfer amount so collected as premium from shareholders and keep same in a separate account called "securities premium account". It does not anywhere says that, such amount be treated as part of capital of Company employed in business for one or other purpose, as case may be, even under Companies Act. Accordingly, Supreme Court dismissed the Appeals.

Relevant

Section 35D of Income Tax Act,1961, Section 78 of Companies Act, 2013

Tags : Assessment Deduction Entitlement

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Supreme Court

Krishnegowda and Ors. v. State of Karnataka

MANU/SC/0321/2017

28.03.2017

Criminal

Accused is entitled to benefit of doubt, when there is contradiction between medical and ocular evidence and latches in investigation

Ratio: Accused is presumed to be innocent until his guilt is proved beyond reasonable doubt

Instant appeals arise out of a common judgment wherein High Court has set aside order of acquittal passed by Trial Court and convicted the Accused. Accused were convicted under Section 302 read with Section 34 and 324 read with Section 149 of Indian Penal Code, 1860. It is submitted that, High Court based its conclusion by ignoring several material factors and hence, impugned judgment needs to be set aside. Issue that falls for consideration is whether High Court was justified in reversing order of acquittal passed by Trial Court.

High Court has failed to understand fact that, guilt of Accused has to be proved beyond reasonable doubt and this is a classic case where at each and every stage of trial, there were lapses on part of investigating agency and evidence of witnesses is not trustworthy, which can never be a basis for conviction. Basic principle of criminal jurisprudence is that, Accused is presumed to be innocent until his guilt is proved beyond reasonable doubt.

Generally in criminal cases, discrepancies in evidence of witness is bound to happen because there would be considerable gap between date of incident and time of deposing evidence before Court, but if these contradictions create such serious doubt in mind of Court about truthfulness of witnesses and it appears to Court that there is clear improvement, then it is not safe to rely on such evidence. In case on hand, evidence of eyewitnesses is only consistent on aspect of injuries inflicted on deceased but on all other factors, there are lot of contradictions which go to root of matter.

All eyewitnesses were relatives and prosecution failed to adduce reliable evidence of independent witnesses for incident which took place on a public road in broad day light. Although, there is no absolute Rule that, evidence of related witnesses has to be corroborated by evidence of independent witnesses, it would be trite in law to have independent witnesses, when evidence of related eyewitnesses is found to be incredible and not trustworthy. Minor variations and contradictions in evidence of eyewitnesses will not tilt benefit of doubt in favour of Accused but when contradictions in evidence of prosecution witnesses proves to be fatal to prosecution case, then those contradictions go to root of matter and in such cases Accused gets benefit of doubt.

It is duty of Court to consider trustworthiness of evidence on record. As said by Benthem, "witnesses are eyes and ears of justice". In facts on hand, evidence of witnesses is filled with discrepancies, contradictions and improbable versions which led to irresistible conclusion that, evidence of witnesses cannot be a basis to convict Accused.

It is settled law that, mere latches on part of Investigating Officer itself cannot be a ground for acquitting Accused. If that is basis, then every criminal case will depend upon will and design of Investigating Officer. Courts have to independently deal with case and should arrive at a just conclusion beyond reasonable doubt basing on evidence on record. Once there is a clear contradiction between medical and ocular evidence coupled with severe contradictions in oral evidence, clear latches in investigation, then benefit of doubt has to go to Accused.

Supreme Court observed that, High Court has brushed aside vital defects involved in prosecution case and in a very unconventional way convicted Accused. Court should always make an endeavor to find truth. A criminal offence is not only an offence against an individual but also against society. There would be failure of justice, if innocent man is punished. Court should be able to perceive both sides i.e. prosecution as well as defence. Judgment of High Court set aside and order of acquittal passed by Trial Court re-affirmed.

Tags : Conviction Evidence Credibility

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High Court of Delhi

Bhim Shankar Thakur and Ors. v. Delhi University and Ors.

MANU/DE/0822/2017

27.03.2017

Education

A candidate would forfeit claim of admission, if he fails to produce original certificates at specified date and time

In instant case, Appellants in both Letter Patent Appeals were denied admission into LL.B. Course by Delhi University on ground that, they failed to submit original degree of qualifying examination as was required by University. Single Judge dismissed their writ petitions relying upon judgment titled Rahul Kumar Singh v. University of Delhi & Others, wherein it was held that, it was mandatory for candidates to report with documents in original at specified date and time for counselling failing which, they will forfeit their claim for admission.

In Rahul Kumar Singh, learned Single Judge had analyzed relevant clauses of Notification of Delhi University and opined that, reading of clauses show that all candidates who have been invited for counselling and do not report for same, would forfeit their right. Candidates have to also produce relevant documents. Degree of qualifying examination has also to be produced in Original. In case, degree has not been issued by concerned University, then a Provisional Certificate has to be produced with proof that, Degree has not been issued."

Mere absence of a specific clause in information bulletin that, a successful candidate would forfeit his claim for admission, if he fails to produce the original certificates, does not make any difference. High Court was also of view that, plea of Appellants that even after last date fixed for admissions, Appellants could have been allowed admission, since original documents are now ready cannot be accepted since, it is mandatory for all students to satisfy minimum attendance prescribed by University to qualify to appear for examinations. Fact that, even by date of filing of writ petitions, admissions for Academic Year 2016-17 were closed as per University's notice dated 22nd September, 2016, Single Judge had rightly declined to entertain writ petitions.

Relevant

Rahul Kumar Singh v. University of Delhi & Others

Tags : Admission Denial Validity

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High Court of Punjab and Haryana

Praneet v. State of Punjab and Ors.

MANU/PH/0142/2017

24.03.2017

Service

Court can interfere with departmental authority’s decision, if inquiry is not conducted in a fair manner by following rules of natural justice

Ratio: Inquiry has to be conducted in a fair manner by following rules of natural justice

Instant writ petition has been preferred seeking to challenge findings of inquiry report and for writ in nature of certiorari to quash impugned order by which punishment of stoppage of one increment with cumulative effect has been imposed by Respondent No. 1. On basis of irregularities in voter list pertaining to village Mubarak which includes delay in sending record to office of State Election Commission, amongst another charge, Petitioner was served with a Memo. Petitioner submitted a detailed reply and brought factual aspect of matter to notice of authorities. Thereafter, a charge sheet was issued to the Petitioner at instance of State Election Commission, and Commissioner, Jalandhar was appointed as an Inquiry Officer who submitted his report to Chief Secretary. Petitioner submitted that, punishment has been imposed after an inordinate delay of five years on completion of inquiry. Questions that requires to be decided in instant writ petition are, whether there is a delay in imposition of penalty after conclusion of the inquiry and the effect thereof; and whether there is violation of Rules 8(23)(i) and 24 of the Punjab Civil Services (Punishment and Appeal) Rules, 1970.

Rule 8 of the Punjab Civil Service (Punishment and Appeal) Rules 1970 lays down procedure for imposition of major penalty upon a delinquent officer, which clearly makes it mandatory for a procedure to be followed in holding of inquiry. Rule 8(23)(i) of Rules stipulates that, after inquiry has been completed a report is to be prepared which shall contain articles of charge and statement of imputation of misconduct or misbehaviour, include defence of government employee in respect of each article of charge and thereafter give a finding on each article of charge and reasons thereof. Language in rule is mandatory and cannot be deviated from. Inquiry report notices charges that have been levelled against Petitioner, and then notices contentions of Petitioner in written statement against the charges levelled against him, and thereafter inquiry officer proceeded to hold that, charges stood proved against Petitioner.

This Court cannot sit as a Court of appeal over findings given in inquiry report or on matter of punishment imposed upon a delinquent officer. However, as held in the case of High Court of Judicature at Bombay versus Shashikant S. Patil, interference with decision of a departmental authority can be permitted in exercise of jurisdiction under Article 226 of the Constitution of India, (i) if such authority had held proceedings in violation of principles of natural justice or in violation of statutory regulations prescribing mode of inquiry; and (ii) if a decision of authority is vitiated by consideration extraneous to the evidence and merits of the case or if conclusion made by authority on very face of it is wholly arbitrary or capricious that no reasonable person could have arrived at such a conclusion.

There is no discussion of statement and evidence as produced before inquiry officer in inquiry report. Therefore, inquiry report is faulty. In instant case, Inquiry Officer has acted in an arbitrary manner while illegally ignoring evidence before him and, therefore, if inquiry report is based on no consideration of evidence, it cannot be sustained in law.

Section 128 of Punjab State Election Commission Act, 1994, provides immunity to Election Commission or any person acting under directions of Election Commission from any suit or legal proceedings in case any act is done in good faith. Categorical stand herein is that, Petitioner was not on receipt of communication issued by State Election Commission not to make additions and deletions in voters list without prior approval and acted in good faith to update voter lists which issue has not been dealt with by Inquiry Officer, thus drawing a presumption in favour of delinquent officer. Statements of witnesses have not been dealt with as well.

Admittedly, Petitioner was served with a memo regarding irregularities in electoral rolls on 10th August, 2004. Thereafter, it was proposed to hold a regular inquiry by order dated 7th October, 2005 and inquiry officer submitted his report on 01st July, 2008 and eventually by impugned order, major penalty was imposed of stoppage of one increment with cumulative effect. Despite inquiry having been completed on 1st July, 2008, punishment came to be imposed after a period of 5 years. There is no explanation forthcoming as to why matter was not concluded in a reasonable time frame. A similar matter came up for consideration before this Court in a Rajender Kumar Sood Junior Engineer versus State of Punjab, where Single Bench held that 'such a long delay leads to conclusion that, proceedings against Petitioner must have been dropped.

In instant case, there has been an inordinate delay in imposing punishment. State is expected to act in a fair manner which would necessarily mean to act in accordance with law and with promptitude. In case, there is a delay in issuance of a charge sheet, Courts are known to have stepped in to rescue of delinquent officer. It is also well settled that a person would be denied relief in case, he does not approach Courts in time by applying law of limitation and invoking the principles of delay and latches. Therefore, delay in imposing punishment after an inordinate delay of 5 years and thereby keeping Damocles' sword hanging, is certainly not warranted, when coupled with fact that, inquiry is vitiated.

High Court opined that, inquiry report suffers from vice of being in violation of Rule 8(23)(i) of Punjab Civil Service (Punishment and Appeal) Rules 1970 as there is no discussion of evidence produced on record by Petitioner and findings are contrary to evidence on record. Inquiry report itself is vitiated and any punishment thereto would be unsustainable.

Relevant

State of U.P. vs. Saroj Kumar SinhaMANU/SC/0082/2010

Tags : Punishment Imposition Legality

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Customs, Excise and Service Tax Appellate Tribunal

Prism Cement Ltd. V.  C.C.E. & S.T., Bhopal

MANU/CE/0218/2017

24.03.2017

Excise

Immovability of goods is not a criteria for denying credit

Appellant is engaged in manufacture of cement. For manufacturing of cement, Appellant requires electricity which is used at various stages of production for conversion of raw material into final products for which Appellant entered into an agreement with Madhya Pradesh Poorva Kshetra Vidyut Vitran Company (Vidyut Company) for supply of electricity to Appellant’s manufacturing plant. Appellant also engaged Contractor for undertaking entire work of erection of dedicated Transmission line from Sitpura Sub-station to Appellant’s manufacturing factory. Appellant availed Cenvat Credit of main components of transmission line like towers or pylons made up of MS duly galvanized, aluminum conductors, insulators and was other hardware like clamp, vibration dampers, cable connectors, etc. Revenue authorities were of view that, availment of Cenvat Credit of cement, cables, etc used for erection/construction of transmission line is incorrect and coming to such conclusions, issued show cause notice for reversal of said ineligible Cenvat Credit. Adjudicating authority confirmed demand raised with interest and also imposed penalties on ground that, transmission line which is erected is immovable property and they do not appear to be capital goods or inputs used or in relation to manufacture of Appellant's final product, Vidyut Company is an independent legal entity and on construction of these transmission lines, they are property of said Vidyut Company and transmission line or parts thereof have no integral relation co-extensive with process of manufacture of Appellant final products.

It is undisputed that, transmission line which is laid is for exclusive and dedicated use of Appellant. It also cannot be disputed that, electricity is prime/essential requirement in manufacturing of cement. Items used for laying down dedicated transmission line were duty paid and duty paying documents are in name of Appellant. Adjudicating authority holding Cenvat Credit is not eligible only on ground that these goods are immovable is against law as settled by High Court of Gujarat in case of Mundra Ports and Special Economic Zone Ltd. Vs. CCE wherein it was held that, immovability of goods is not a criteria for denying the credit. In yet another case of Singhal Enterprises Pvt. Ltd. Vs. CC Raipur, this Tribunal applying ratio of user test on structural items used in fabrication of support structure allowed Cenvat Credit of duty paid on such structural items.

Adjudicating authority has also held that, transmission lines which is laid down by Appellant is bringing electricity from Sitpura which is situated 32 kms away from factory premises and is not within factory premises hence, Cenvat Credit is inadmissible. Similar issue cropped up before Tribunal in case of CCE Chennai Vs. Pepsico India Holdings Ltd. In that case, Respondent therein availed Cenvat Credit on PVC pipes which are used for drawing water from the well situated away from factory premises. Therein, Tribunal held that, since PVC pipes are used exclusively for drawing water and supplying it to factory of Respondent therein, Cenvat Credit cannot be denied. In view of facts and circumstances of present case and judicial pronouncements as relied upon, impugned order is set aside and appeal allowed.

Relevant

Mundra Ports and Special Economic Zone Ltd. Vs. CCE, Singhal Enterprises Pvt. Ltd. Vs. CC RaipurMANU/CE/0356/2016
 : CCE Chennai Vs. Pepsico India Holdings Ltd. MANU/CC/0174/2000

Tags : Cenvat Credit Denial Validity

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High Court of Himachal Pradesh

Rajiv Bhatia v. Indusind Bank Ltd. and Ors.

MANU/HP/0106/2017

23.03.2017

Arbitration

“Venue of Arbitration proceedings” need not essentially be a place where “seat of arbitration” is located”

In facts of present case, pursuant to award passed by Arbitrator in favour of Respondent/decree holder, an execution petition was filed before Court below. Petitioner primarily raised two objections; one with regard to territorial jurisdiction of Arbitrator and other with regard to amounts paid by him from time to time having not been accounted and reflected in statement of accounts by Respondent. Objections filed by Petitioner, have been dismissed and warrants of attachment of his property have been issued. Moot question in present case is whether by referring the matter for arbitration at Chennai, has Respondent violated territorial jurisdiction and conferred the same to an authority, which practically had no jurisdictional authority to adjudicate such claim.

Clause 23(c) of Loan agreement provides that "venue of Arbitration proceedings shall be at Chennai."It is not that, seat of Arbitrator is at Chennai, rather it is only venue of jurisdiction that is at Chennai. There is a marked difference between 'venue of arbitration' and 'seat of arbitration'. It is only seat of arbitration which will give territorial jurisdiction and not venue of jurisdiction. "Seat" is place where court or arbitration is located, which will have territorial jurisdiction with regard to case or in matter, whereas, "venue" is place where arbitral tribunal sits to hold arbitration proceedings and this place need not essentially be place "where seat of arbitration is located".

There is a difference between venue and seat and that merely because arbitrator choose to hold arbitration at a venue, which is different than seat of Arbitration where Court situate, it cannot be said that, Arbitrator has exercised jurisdiction not vested in it.

Another contention of Petitioner that, amounts paid by him from time to time have not been accounted and reflected in statement of accounts by decree holder, these matter are not open to challenge in execution petition as executing Court is bound by decree/award of Arbitrator and cannot go beyond it and were required to be adjudicated before the learned Arbitrator.

Relevant

ABC Laminart Pvt. Limited vs. A.P. Agencies, Salem, MANU/SC/0001/1989
: AIR 1989 SC 1239 and Patel Roadways Limited vs. Prasad Trading Company, MANU/SC/0280/1992
: 1991 (4) SCC 270

Tags : Award Execution Jurisdiction

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