Supreme Court

Rajasthan State Electricity Board, Jaipur v. The DY. Commissioner of Income Tax(assessment) & Anr.

MANU/SC/0333/2020

19.03.2020

Direct Taxation

Demand For Additional Tax Can Be Made Only If Assessee Intended To Evade Tax

Present appeal has been filed by the Assessee challenging the Division Bench judgment of the High Court by which Civil Special Appeal filed by the Revenue has been allowed upholding the demand of additional tax under Section 143(1-A) of the Income Tax Act, 1961.

Referring to Circular No.549 dated 30.10.1989 of Central Board of Direct Taxes, it is submitted that, 20% additional tax sought to be imposed under Section 143(1-A) of 1961 Act is in the nature of penalty and can be levied only when the Assessee had intentionally sought to file an incorrect return. It is submitted that, such additional tax could only become payable in case where Assessee was assessed to an income for the purpose of tax and could not apply where there was no income or there was loss.

The amendments brought by Finance Act, 1993 with retrospective effect i.e. from 01.04.1989 are fully attracted with regard to assessment in question i.e. for assessment year 1991-92. The substituted subsection (1-A) makes it clear that where the loss declared by an Assessee had been reduced by reason of adjustments made under sub-section(1)(a), the provisions of sub-section (1-A) would apply.

The Commissioner of Income Tax while rejecting the revision petition of the Petitioner has taken the view that whenever adjustment is made, additional tax would be charged @ 20% of the tax payable on such excess amount. The excess amount refers to the increase in the income and by implication the reduction in loss where even after the addition there is negative income. Whether there should be levy of additional tax in all circumstances and cases where loss is reduced, is the question to be answered in the present case.

Present Court in K.P. Varghese v. ITO, held that provisions of Section 143(1-A) should be made to apply only to tax evaders. This Court in the above case upheld the constitutional validity of Section 143(1-A) (as inserted by the Finance Act, 1993) subject to holding that Section 143(1-A) can only be invoked where it is found on facts that the lesser amount stated in the return filed by the Assessee is a result of an attempt to evade tax lawfully by the Assessee.

In facts of present case, even after dis-allowing 25% of the depreciation, the Assessee in the return remained in loss and the 100% depreciation was claimed by the Assessee in the return due to a bonafide mistake. By Taxation Laws (Amendment) Act, 1991, the depreciation in the case of Company was restricted to 75% which due to oversight was missed by the Assessee while filing the return. The Commissioner of Income Tax by deciding the revision petition has also not made any observation to the effect that 100% depreciation claimed by the Assessee was with intend to evade payment of tax lawfully payable by the Assessee, rather the Commissioner in his order has observed that whenever adjustment is made, additional tax has to be charged @ 20% of the tax payable on such excess amount.

It is true that while interpreting a Tax Legislature the consequences and hardship are not looked into but the purpose and object by which taxing statutes have been enacted cannot be lost sight. This Court while considering the very same provision, its object and purpose and while upholding the provision held that the burden of proving that the Assessee has attempted to evade tax is on the Revenue which may be discharged by the Revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it.

In the present case, not even whisper, that claim of 100% depreciation by the Assessee, 25% of which was disallowed was with intend to evade tax. Present Court cannot mechanically apply the provisions of Section 143(1-A) in the facts of the present case and in view of the categorical pronouncement by this Court in Commissioner of Income Tax, Gauhati vs. Sati Oil Udyog Limited and another, where it is held that, Section 143(1-A) can only be invoked when the lesser amount stated in the return filed by the Assessee is a result of an attempt to evade tax lawfully payable by the Assessee. Mechanical application of Section 143(1-A) in the facts of the present case was uncalled for. The judgment of the Division Bench of the High Court as well as demand of additional tax is set aside. Appeal allowed.

Relevant

K.P. Varghese v. ITO, Commissioner of Income Tax, Gauhati vs. Sati Oil Udyog Limited and another

Tags : Demand Additional tax Legality

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High Court of Jharkhand

Tata Motors Ltd. v. The State Of Jharkhand

MANU/JH/0144/2020

19.03.2020

Sales Tax/VAT

When State action is not within competence of State Legislature, present Court has to strike down the action of State Legislature, which was beyond its legislative competence

In the present writ application, the challenge is to the vires of Section 9 (5) of the Jharkhand Value Added Tax Act, 2005, ('JVAT Act'), which was subsequently brought, by way of amendment, made in the year 2011. Retrospective effect given to this provision with effect from 1st April, 2010, is also under challenge in the present writ application.

Learned counsel for the Petitioner Company, challenging the legislative competence of the State Legislature, in bringing Section 9(5) in the JVAT Act, has submitted that under Entry 54 of List-II of Seventh Schedule of the Constitution of India, the State Legislature is empowered to make law, for levying taxes on the sale or purchase of goods, other than newspapers, subject to the provisions of Entry 92 A of List I, but the State Legislature is not empowered to make any addition in the list of taxable sales or purchase as given under Article 366(29A) of the Constitution of India, so as to treat any transaction as sale or purchase by a deeming fiction, which actually was not a sale or purchase.

The law is well settled in this regard right from State of Madras Vs. Gannon Dunkerley & Co., (Madras) Ltd., in the year 1959, Bharat Sanchar Nigam Ltd. & Anr. Vs. Union of India & Ors., and State of Rajasthan and Anr. Vs. Rajasthan Chemists Association, in the year 2006, wherein the Hon'ble Apex Court concluded that, in order to levy tax on sale, the transactions must fall within any of the clauses of Article 366 (29A) of the Constitution of India, or within the meaning of the Sales of Goods Act, 1930 for the purpose of levy of sales tax. In absence thereof, the Provincial Legislature cannot, in the purported exercise of its power to levy tax on sales or purchases of goods, tax even such transactions, which are not sales or purchases, by merely enacting that they shall be deemed to be sales or purchases by the dealers.

In the present case, the State Government has exceeded its legislative competence and has in that effort, treated the trade discounts / incentives as taxable transactions, treating them to be sale by a deeming fiction by bringing sub-Section (5) in Section 9 of the JVAT Act, and has thus sought to make such transactions taxable, which are in addition to the transactions described under Article 366(29A) of the Constitution of India, which the State Government could not do, and admittedly, prior to bringing of Section 9(5) of the JVAT Act, into the Statute Book, such transactions were never being subjected to tax under the JVAT Act. In fact, Explanation III of Section 2(xlviii) of the JVAT Act, defining 'Sale price', clearly states that sale price shall not include the cash discount, if shown separately, and allowed by the dealer in the ordinary course of trade practice. In spite of the fact that JVAT Act is no more in force, after coming into force of the GST regime, but the fact remains that the transactions, during the JVAT regime, are claimed to be taxed after the amendment made in the year 2011, which were not subjected to any tax, prior to the amendment of the JVAT Act in the year 2011.

By bringing Section 9(5) in the JVAT Act into the Statute Book, the dealers have been put to a disadvantageous position, which was not there, prior to the amendment made in the year 2011, and this putting the dealers into a disadvantageous position was not within the legislative competence of the State Legislature. No doubt, had this amendment in the JVAT Act been within the legislative competence of the State Legislature, there was no scope of any interference therein by this Court. But this is a clear case where the State Legislature was not having the legislative competence to give the expression "sale of goods" an extended meaning and to enlarge its legislative field to cover those transactions for taxing, which did not properly conform to the elements of sale of goods within the Sales of goods Act, or under Article 366(29A) of the Constitution of India, and were not satisfying the four conditions of sale, as given in State of Madras Vs. Gannon Dunkerley & Co., (Madras) Ltd.

Though it is well settled that, this Court should not interfere into the fiscal legislations, and the laws, relating to economic activities should be viewed with greater latitude than the laws touching civil rights, and even if there are possibilities of abuse, that cannot in itself be a ground for invalidating the legislation. Since the State action is not within the competence of the State Legislature, this Court has no option, but to strike down the action of the State Legislature, which was beyond its legislative competence.

Section 9(5) of the JVAT Act, brought into force by amendment in the JVAT Act in the year 2011, is beyond the legislative competence of the State Legislature, and the same is ultra vires Article 246(1) of the Constitution of India, and cannot be sustained in the eyes of law. Accordingly, sub-Section (5) of Section 9 of the JVAT Act, as it stood with effect from 1.4.2010 to 30.06.2017 in the Statute Book, is hereby, held to be ultra vires. Present writ application succeeds, and is accordingly, allowed.

Tags : Trade discount Provision Legality

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Supreme Court

Subodh Kumar and Ors. Vs. Commissioner of Police and Ors.

MANU/SC/0311/2020

17.03.2020

Service

A candidate has a right to be considered under 'rule in force', there is no absolute application that vacancies are to be filled invariably by law existing on date, when vacancy arises.

The Appellants are the Constables/Head Constables (Male) serving in Delhi Police and are members of the Delhi Police (Appointment & Recruitment) Rules, 1980. Some of them later got promoted to the post of Assistant Sub-Inspector during pendency of the appeal.

The grievance of the Appellants is that, the amendments which has been made under Rule 7 and Rule 27A of the Rules, 1980 vide notification dated 13th March, 2013 have deprived and made them ineligible to participate against 10% out of the 50% quota reserved for direct recruitment to be filled up from the serving personnel (constables, head constables and ASI) is arbitrary and violative of Article 14 & 16 of the Constitution of India, 1950.

The controversy was raised in reference to the amendment made under Rule 7 and Rule 27A of the Rules, 1980 against 10% out of 50% quota reserved for direct recruitment to the post of Sub-Inspectors (Executive)-Male. Indisputedly, either of the Appellant was not eligible to participate in the selection process which was initiated by the Respondents pursuant to an advertisement dated 16th March, 2013 followed with Corrigendum dated 9th April, 2013 held for the post of Sub-Inspector (Executive) but few of them were permitted to participate under the interim order of the Tribunal.

It is a settled law that, prescribing of any age limit for a given post, as also deciding the extent to which any relaxation can be given, if an age limit is prescribed, are essentially the matters of policy. It is always open for the Government or the appointing authority while framing rules, to prescribe such age limits or to prescribe the extent to which any relaxation can be given. Prescription of such limit or the extent of relaxation to be given, cannot ordinarily be termed as arbitrary or unreasonable. Just because the amendment under notification dated 13th March, 2013 has curtailed the chances of the Appellants to take part in the selection process, it cannot lead to an inference that the Rule is arbitrary or unreasonable as prayed for.

It is equally a settled proposition of law that a candidate has a right to be considered under the existing rules, which implies the 'rule in force' on the date the consideration took place. There is no Rule of universal or absolute application that vacancies are to be filled invariably by the law existing on the date, when the vacancy arises. The requirement of filling up earlier year vacancies under the old Rules is interlinked with the candidate having acquired a right to be considered for promotion.

The four significant changes which have been made under the amendment notification dated 13th March, 2013 envisage that while giving due opportunity to the in-service candidates for participating against 10% out of the 50% quota reserved for direct recruitment to compete in the self-same selection process on the same standards and yardsticks except giving some advantage in relaxation of upper age limit for a fair consideration in the process of selection and scaling the upper age limit indeed may reduce the number of serving personnel holding the post of Constable/Head Constable/ASI in competing with the candidates in the open selection. But that in itself cannot be regarded as unconstitutional or arbitrary, it may not be construed to be a fast track promotion to the serving personnel reserving right of in-service personnel for their promotion against 50% quota separately reserved under the scheme of Rules, 1980. There is no reason to interfere with the impugned judgment. The appeal is accordingly dismissed.

Tags : Promotion Permissible age Reduction

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High Court of Delhi

Unnati Bhardwaj and Ors. Vs. K.P. Sharma

MANU/DE/0807/2020

13.03.2020

Criminal

Power under Section 482 of the CrPC cannot be exercised for upsetting concurrent findings of two courts below in absence of any perversity

The Petitioners have filed the present petition under Section 482 of the Code of Criminal Procedure, 1973 (CrPC) with the prayers to allow the present petition and quash the impugned order passed by the Additional Session Judge as well as the summoning order passed by the Metropolitan Magistrate. Further, prayer is to quash the complaint, pending in the Court of Metropolitan Magistrate.

The Respondent herein had instituted a criminal complaint under Section 200 of CrPC for commission of offence punishable under Section 500 of Indian Penal Code, 1860 (IPC) read with Section 120-B IPC against the Petitioners herein. Since the Respondent was given a clean chit in the GC enquiry by his department, so he preferred the complaint before the Magistrate in which the Petitioners have been summoned as accused.

All the contentions raised by the Petitioners in the present petition cannot be decided under the proceedings under Section 482 of CrPC as this court under Section 482 of the CrPC shall not upset the concurrent findings of the two courts below in the absence of any perversity and the Petitioners cannot be allowed to initiate a second revision petition in the garb of Section 482 of CrPC. The defence as raised by the Petitioners in the petition requires evidence, which cannot be appreciated, evaluated or adjudged in the proceedings under Section 482 of CrPC and the same can only be proved in the Court of law.

Reliance can be placed upon "State of Madhya Pradesh Vs. Yogendra Singh Jadon & Anr."., decided by the Hon'ble Supreme Court on January 31, 2020 in which it has been held that "the power under Section 482 of the CrPC cannot be exercised where the allegations are required to be proved in Court of law". Therefore, this Court finds that, no special case has been made out for this Court to exercise extraordinary jurisdiction under Section 482 of CrPC. There is no miscarriage of justice or illegality in the approach adopted by the two Courts below nor any such has been pointed by the Petitioners. The prayers are untenable in law. Hence, this Court does not deem it appropriate to issue notice to the Respondent. The petition is, therefore, dismissed.

Tags : Powers Complaint Quashing of

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High Court of Delhi

Angul Energy Limited Vs. Union of India and Ors.

MANU/DE/0815/2020

13.03.2020

Insolvency

A Corporate Debtor would not be liable for any offence committed prior to commencement of CIRP and would not be prosecuted, if a resolution plan has been approved by Adjudicating Authority

The Petitioner has filed the present petition impugning an order, whereby the Trial Court had taken cognizance of the offences punishable under the Companies Act, 2013; offences punishable under the Companies Act, 1956 and certain offences under the Indian Penal Code, 1860. The Petitioner also impugns the summons issued by the learned ASJ to the Petitioner. The Petitioner also prays that the compliant filed by the Serious Fraud Investigation Office, be quashed.

It is stated in terms of the Insolvency and Bankruptcy Code, 2016 ('IBC'), a financial creditor of the Petitioner (then known as 'Bhushan Energy Limited') had initiated the Corporate Insolvency Resolution Process (CIRP) by filing a petition before the National Company Law Tribunal (NCLT). The said petition was admitted. Thereafter, Tata Steel Limited had submitted a Resolution Plan with respect to the Petitioner (then known as 'Bhushan Energy Limited'), which was approved by the Committee of Creditors and the NCLT. Pursuant to the same, 99.9% of the Petitioner's equity capital was acquired by Tata Steel BSL Limited.

In terms of the Resolution Plan, the management of the Petitioner Company has been taken over by new promoters, who are not connected with the previous management. The learned counsel appearing for the Petitioner submits that, in terms of Section 32A of the IBC, as inserted by Section 10 of the Insolvency of Bankruptcy Code (Amendment) Ordinance, 2019; the Petitioner is required to be discharged from the aforesaid proceedings.

It is clear from the express language of the Section 32A (1) of the IBC that, a Corporate Debtor would not be liable for any offence committed prior to commencement of the CIRP and the corporate debtor would not be prosecuted, if a resolution plan has been approved by the Adjudicating Authority.

In the present case, there is no dispute that a resolution plan has been approved by the Adjudicating Authority (NCLT) and in the circumstances, there is much merit in the contention that, the Petitioner cannot be prosecuted and is liable to be discharged.

The petition is, accordingly, allowed and the impugned order and the impugned summons are set aside. The impugned compliant against the Petitioner, is also set aside. It is clarified that this order will not affect the prosecution of the erstwhile promoters or any of the officers who may be directly responsible for committing the offences in relation to the affairs of the Petitioner Company.

Tags : Complaint Cognizance Quashing of

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL

C.P. Yogshwara and Ors. Vs. Union of India and Ors.

MANU/NL/0193/2020

13.03.2020

Company

When affairs of Company are being conducted in manner prejudicial to public interest, Tribunal is empowered to replace the existing Management

The Union of India moved a Petition under Sections 401/397/398 read with Section 408 of the Companies Act, 1956 (now Section 241(2) read with Section 242 of the Companies Act, 2013). It also sought relief under Section 388B of the Companies Act, 1956 for appointment of the Government Nominated Directors and the control of the affairs and management of the Company Megacity Bangalore Developers & Builders Limited (MBDBL).

The National Company Law Tribunal by impugned order came to a considered opinion that, Union of India made out a case so as to interfere in the affairs of the Company with suitable orders so as to protect the property of the Company; to protect the interest of stakeholders of the Company and to ensure that the Company follow statutory compliances etc. The Tribunal also formed opinion that the existing management should not be continued and should be replaced by the New Directors to be nominated by the Union of India as per law.

Appellants, Shareholders of the Company have challenged the decision on the ground that the Tribunal misdirected itself by granting the relief under Section 388B of the Companies Act, 1956. The learned Counsel for the Appellants submitted that, in absence of corresponding provision to Section 388B in the new Companies Act, 2013, no such relief can be granted, since it was clearly not the intention of the statute to vest powers on the Government to replace the Board of Directors.

It appears that Central Government through Ministry of Corporate Affairs on the basis of the report of the Registrar of Companies, Karnataka referred to non-filing of the statutory returns for the year 2006-07 and consequently depriving legitimate rights of the Members. It is not in dispute that the matter was investigated by the Serious Fraud Investigation Office (SFIO), which filed report.

The investigation by the SFIO clearly shows that the aforesaid Company was conducting its business in the manner, which was prejudicial to the public interest. It was also against the interest of the stakeholders of the Company and the Company was not filing its statutory returns under the existing management.

Section 465 of the Companies Act, 2013 relates to 'Repeal of certain enactments and savings' including the Companies Act, 1956. The Central Government is also empowered in sub-Section (1) of Section 434 for transfer of matters, proceedings including proceedings before the Company Law Board were transferred to the Tribunal.

The Central Government is empowered under Section 241(2) of the Companies Act, 2013 to file application in cases, if it is of the opinion that the affairs of the Company are being conducted in a manner prejudicial to public interest. The Tribunal in terms of Section 242 of the Companies Act, 2013, if of the opinion, that the Company's affairs or/are being conducted in a manner prejudicial to the public interest and to wind up the Company would unfairly prejudice member or members, but that otherwise the facts would justify the making of a winding-up order on the ground that it was just and equitable that the Company should be wound up, it (Tribunal) with a view to bring to an end the matters complained of, make such order as it thinks fit.

Even in absence of Section 388B of the Companies Act, 1956, with a view to bring an end of the matters complained of, the Tribunal is empowered to pass similar order relying on Sections 241 & 242 of the Companies Act, 2013 as was empowered under Section 388B of the old Act. The investigation against the Appellants reveals that, the irregularities were committed by the Directors/Management of the company and for the said reason, criminal action was also taken against the Directors.

In view of the fact that the affairs of the Company are being conducted in the manner prejudicial to the public interest as noticed from the report of the SFIO, it is held that, the Tribunal is empowered to replace the present Management and to replace it with Directors nominated under the control and management by the Central Government. No interference is called for. The Appeal is dismissed.

Tags : Report Public interest Management Replacement

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