Monday, May 6, 2013

CA lost his membership for having two wives; ‘Bigamy’ comes within the meaning of moral turpitude

Moral turpitude means anything contrary to honesty, modesty or good morals. It means vileness and depravity. As the appellant married another woman, while the first marriage was subsisting, and acted contrary to the law and against expectation of his "estranged wife", the offence of bigamy had been committed within the meaning of "moral turpitude"
In the instant case, matrimonial dispute arose between the appellant, a qualified Chartered Accountant, and his wife, which had resulted in granting of divorce decree by the first Additional Family Court, Chennai. The said divorce decree was confirmed by Madras High Court. On a complaint by his estranged wife, under Section 21 of the Chartered Accountants Act, 1949, appellant's name was removed from the Register by the ICAI on the grounds of bigamy charges.   The appellant contended that the allegation of bigamous marriage would not come within the meaning of moral turpitude. Therefore, the disqualification attached to Section 8 of the Act would have no application to the facts of his case. Thus, appellant filed the instant writ to quash the order passed by the ICAI.
The HC dismissed appellant’s writ with following observations:
  1. The appellant and his estranged wife were Hindus, governed under the provisions of the Hindu Marriage Act, 1955. Section 17 of the Act states that marriage between two Hindus is void if two conditions are satisfied, viz., (a) the marriage is solemnized after the commencement of the said Act, and (b) at the date of such marriage, either party has a husband or wife living and the provisions of Sections 494 and 495 shall apply accordingly. Thus, it is evident that if a Hindu marries with a person having a spouse living or he or she has a spouse alive and, marries any person, he would be liable for bigamy charges.
  2. The expression "moral turpitude" isn’t defined anywhere. But it means anything done contrary to justice, honesty, modesty or good morals. It implies depravity and wickedness of character or disposition of the person charged with the particular conduct. If the individual charged with a certain conduct he owes a duty, either to another individual or to the society in general, to act in a specific manner. If he acts contrary to it and does so knowingly, his conduct might be held to be due to vileness and depravity.
  3. In fact, the conviction of a person in a crime involving moral turpitude and impeaches upon his credibility as he would be deemed to have indulged in shameful, wicked and base activities. The offence of bigamy comes within the meaning of "moral turpitude". The appellant had married another woman, while the first wife was alive, he had acted contrary to the law and to expectation of his "estranged wife";
  4. The appellant had attracted disqualification by operation of law, viz., Section 8 of the Chartered Accountants Act, 1949, due to his committing an offence involving moral turpitude. For the foregoing reasons, the writ appeal was dismissed - P. Mohanasundaram v. President, ICAI [2013] 33 80 (Madras)

Transportation of passengers via ropeway isn’t covered under tour operator’s service

Leasing of a ropeway installed by Municipal Board and operating it to entertain tourists by carrying them from road to hills and back doesn't amount to Tour Operator's services

In the instant case the assessee had leased a ropeway installed by Municipal Board and was engaged in operating it to entertain tourists by carrying them from road to hills and back. The Department sought to levy service tax on the assessee under Tour Operator's services.

The Tribunal held in favour of assessee as under:

1) By a licence deed, the assessee was allowed to operate the ropeway. In terms of section 65(115) to call a person as "Tour Operator" he should be either a planner of tour or an organizer or arranger thereof. So, scheduling tour brings the service provider to the category of tour operator. Meaning of the term "tour" is given by section 65(113) of the Act. "Tour" means journey from one place to another, irrespective of distance from such place;

2) The tourists are not governed by any planning, scheduling, organising or arranging for their journey and are not dependent on the licensee-assessee for such planning, scheduling, organizing or arranging for their tours but only avail the facility of ropeway provided by assessee-licensee during working hours on payment of fees prescribed in licence deed. They are not beneficiaries of any planning, scheduling or arranging of tours, since tour to be taxable has to follow activities enumerated under section 65(115);

3) Accordingly, the assessee had not acted as "tour operator" within the meaning of Section 65(115) for which the taxing entry 65(105)(n) thereof was not attracted. Consequently, the assessee was not liable to service tax - SHAIL SHIKHAR ASSOCIATES V. COMMISSIONER OF CENTRAL EXCISE [2013] 32 269 (New Delhi - CESTAT) (TM)

HC upholds transfer of order under sec. 127 for co-ordinated investigation; recommends US like ‘restatement of law’

Order of transfer of cases under section 127(2) is administrative and not quasi-judicial merely because assessee is required to be heard before the order is passed. The word 'coordinated investigation' is not vague. It has a definite meaning. The transfer order can’t be set aside merely on the ground that the transfer has been done on vague terms.

In the instant case, following issues arosed before Chattisgarh HC:

A. Whether the power of transfer under Section 127(2) of the Income Tax Act, 1961 is not a judicial power?

B. Order of transfer under sec. 127(2) can’t be passed when there is denial of reasonable opportunity to the assessees?

C. Whether the word 'co-ordinated investigation' is vague and the transfer order can be set aside merely on the ground that the transfer has been done on vague terms?

Deliberating on these issues, the HC held as under:

1) Section 127(2) of the Act provides that transfer can be done only if opportunity is afforded to an assessee and after recording reasons. But merely for this reason it cannot be said to be quasi-judicial in nature;

2) The transfer order does not decide the rights of the parties in the assessment;

3) The ultimate order deciding the right is the order of the assessment which decides the basis and the tax to be paid. This order is a judicial order. The transfer order is merely for administrative reason and it cannot be said that nature of power is judicial;

4) It was not disputed that the search took place in the premises of Mahamaya group of companies, as well as residential and official premises of its directors and its employees, at different places, where incriminating documents were seized;

5) The documents were inter-connected and affected the assessment of the parties. It was necessary to see their overall effect on the assessments. It could only be done after analyzing and investigating into all the documents found at different places and not separately, for which a co-ordinated investigation was necessary. Thus, the words 'coordinated investigation' were not vague;

6) The notice had indicated the reason for transfer as 'centralisation' for 'co-ordinated investigation'. It was for this reason that order for transfer were made. There was no denial of reasonable opportunity to the assesses.

In addition to the aforesaid findings, the HC also recommended adoption of US-like 'restatement of law'

The submissions raised by the party should have been considered before arriving at the decision. But more often than not, there was an insistence on dealing with every case that was cited. Perhaps, such insistence, even if the decisions were inapplicable or irrelevant, was misplaced. It might not be proper to record in the judgement that a counsel had cited irrelevant, or inapplicable, or overruled, or already distinguished case. It would be of real help to our jurisprudence if we also adopted an approach similar to the US, about 'Restatement of Indian law' – CIT V. UNION OF INDIA [2013] 32 320 (CHHATTISGARH)

Pune ITAT allowed claim of jeweller for business loss incurred due to confiscation of its silver stock

In the instant case, during search conducted in the business premises of assessee, a jeweller, certain stock of silver was confiscated by customs officials. Assessee claimed deduction on account of loss occurred due to confiscation of silver in relevant assessment year. Said claim was disallowed by the AO as well as the CIT(A).

The Tribunal held in favour of assessee as under:

The business loss on account of confiscation could be claimed and allowed in the year in which the assessee prima facie loses the hope for recovery of the goods. Thus, the assessee’s claim of loss was crystallized in the year under consideration when assessee received the order of CEGAT. Therefore, the loss incurred due to confiscation of silver stock was to be allowed as assessee was in the business of silver trade and loss had been suffered during the course of its business - RAJMAL LAKHICHAND v. ACIT [2013] 32 248 (Pune - Trib.)

CBDT mandates e-filing of audit report and return with 5 lacs income; no more ITR 1 if Sec. 10 benefit exceeds 5k

Audit report to be filed electronically; threshold limit for e-filing of return reduced to Rs. 5 lakhs; return can’t be filed in ITR-1 if assessee earns exempt income which exceeds 5,000.
Income-tax (3rd Amendment) Rules, 2013 redefines the conditions and eligibility to choose from a variety of Income-tax return forms. In addition, certain important amendments are also being brought in, which are as follows:

1) Return in ITR 1 can’t be filed if assessee incurs losses under the head ‘Income from other sources’.

2) Return in ITR 1 can’t be filed if assessee claims tax relief or has any income which is exempt under Chapter III i.e. section 10, 10A, 10AA, etc.

3) Return in ITR 4S can’t be filed if assessee claims tax relief or has any income which is exempt under Chapter III i.e. section 10, 10A, 10AA, etc.

4) Mandatory e-filing of audit reports.

5) Mandatory e-filing of return if income exceeds Rs. 5,00,000 or if assessee claims tax relief.

Prosecution in ST matters can’t be continued if assessee has been acquitted in adjudication proceedings on merit

If assessee has been exonerated on merits in adjudication proceedings from charge of misrepresentation and suppression, criminal prosecution on same set of facts and circumstances cannot be allowed to be continued

The Department initiated adjudication proceedings and criminal prosecution against the assessee alleging wilful misrepresentation and under-valuation. In adjudication proceedings, Tribunal held in favour of assessee on merits. The Assessee filed a writ petition challenging continuance of prosecution proceedings. Department made an application that assessee's writ petition was premature on ground that it had challenged order of Tribunal.

The High Court quashed the criminal proceeding against the assessee with the following observations:

1) Application filed by Department seeking rejection of writ petition on ground of being pre-mature was a gross abuse of the processes of law;

2) Although there is no automatic closure or quashing of the criminal complaint, in the event, there is a favourable verdict in the departmental or the adjudicatory proceedings in favour of an accused but in case the adjudicatory proceedings culminate into a favourable order in favour of the accused on merits and the criminal complaint is in sum and substance based on the same facts then, obviously, it would be a gross abuse of the processes of law to continue with the criminal complaint;

3) Mere contemplation by Department to assail the order of Tribunal before the Apex Court or before any other appellate forum where they have a right to do so, couldn’t result in deferring the decision in the present petition;

4) Since the assessee had been exonerated in the departmental adjudicatory proceedings regarding both the allegations of mis-declaration and under-valuation, there was no point in continuing with the criminal trial as it was resulting in abuse of the process of law - Dinesh Aggarwal v. DRI [2013] 32 337 (Delhi)

Input service distributer may distribute credit of ST even if it has been paid prior to registration

There is no restriction under CENVAT Credit Rules with regard to period for availing CENVAT credit of service tax paid; hence, Input Service Distributor (‘ISD’) may distribute credit of service tax paid prior to its registration as ISD

The assessee had registered itself as ISD with effect from 04.10.2008. Thereafter, it had distributed the credit of service tax paid on common input service to its various units in respect of services received during the period February, 2008 to October, 2008. The department denied Cenvat credit on ground that the services were received prior to registration as ISD and the taxes were also paid on those services prior to that date.

The Tribunal held in favour of assessee as under:

1) There was no restriction under the CENVAT Credit Rules, 2004, with regard to the period for availing CENVAT credit of service tax paid. In other words, a manufacturer/input service provider could avail CENVAT credit of the service tax paid irrespective of any time limitation;

2) The only condition to be satisfied was that they should have paid the service tax prior to availing the credit. So long as this condition was satisfied, there was no time limit prescribed in the Rule within which the CENVAT credit had to be taken. If that be so, there was no reason why in the case of input service distributor alone, a restriction should be placed with respect to availment of CENVAT credit, i.e., input service distributor was permitted to distribute only taxes paid on or after registration. Such a restriction was totally unwarranted and was not provided for in the law;

3) Hence, credit was held validly distributed - Dagger Forst Tools Ltd. v. Commissioner of Central Excise [2013] 32 353 (Mumbai - CESTAT)

Arithmetic Mean of ALPs to be determined even if actual price exceeds one of the ALPs determined by TP method

Proviso to section 92C(2) requiring calculation of arithmetical mean of multiple ALPs (more than 1 ALP) determined as per Most Appropriate Method doesn’t become inapplicable where one of the ALPs determined as per Most Appropriate Method is less than the price indicated by assessee

In the instant case, the most appropriate method, as accepted by both, the assessee and revenue, was the Transactional Net Margin Method. The dispute that arose was with regard to the following observation of the Tribunal:

Where one of the prices determined by the most appropriate method is less than the price as indicated by the assessee. Then there would be no need to adopt the process of taking the arithmetical mean of all the prices arrived at through the employment of the most appropriate method.

The High Court held as under:

1) When more than one price is thrown up by the most appropriate method, the statute requires that the arm's length price shall be taken to be the arithmetical mean of such prices. This is the plain and simple meaning of the proviso to section 92C(2) of the said Act;

2) The Tribunal was wrong in holding that if one profit level indicator of a comparable, out of a set of comparables, was lower than the profit level indicator of the taxpayer, then the transaction reported by the taxpayer was at an arm's length price;

3) The proviso to section 92C(2) is explicit in that where more than one price is determined by most appropriate method, the arm's length price would be taken to be the arithmetical mean of such prices – CIT v. Mentor Graphics ( Noida) (P.) Ltd. [2013] 32 300 (Delhi)