CASE LAWS
2016-TIOL-232-SC-MISC-LB
VIVEK NARAYAN SHARMA Vs UoI: SUPREME COURT OF INDIA (Dated: December 16, 2016)
Reserve Bank of India Act, 1934 - Sections 7,17, 23, 24, 26(2), 29 & 42 - Constitution of India - Articles 14, 19, 21, 32 & 300(A).
Keywords: demonetized currency - transfer petition - right to withdraw - grant of extension of use & District Cooperative Banks.
Whether the question of whether RBI has powers to restrict District Cooperative Banks from exchanging demonetised currency notes involves a larger question of law and requires extensive hearing by a larger bench - YES: SC
The petitioners had filed an appeal before the Apex Court against the constitutionality of several provisions of the RBI Act which were invoked to place restrictions on District Cooperative Banks to accept deposits or exchange of demonetized currency of Rs.500/- and Rs.1000/-. It was contented that the District Cooperative Banks, were not directly under the control of the RBI but within the purview of NABARD. The dispensation provided by NABARD was, according to the Attorney General, not in conformity with the strict regime provided under the provisions of Banking Regulation Act, 1949 and the RBI Act, 1934.
The Attorney General on instructions submitted that the policy of replacement of legal tender notes as applicable to Public Sector Banks and other Banks will be applied even in the case of District Cooperative Banks for exchange of demonetized currency with the legal tender currency. We accept the assurance given by Attorney General in this behalf.
The Apex Court held that,
+ the first point whether the decision of the Authority to forbid the District Cooperative Banks from accepting deposits and exchanging demonetized notes, may require detailed hearing. It is only upon acceptance of challenge to that decision, that the bar placed on the District Cooperative Banks can be lifted. We are not inclined to suspend that bar as an interim measure. This is especially when the decision is the outcome of financial policy which the respondents claim to have adopted on the basis of experience. In particular, an apprehension has been expressed about the possibility of demonetized notes being converted or exchanged without proper audit, control or supervision;
+ reverting to the second aspect, of District Cooperative Banks being precluded from utilizing the demonetized notes deposited with them between 11th to 14th November 2016 (when it was so permitted by the Reserve bank of India), Attorney General has invited our attention to the written instructions received by him from the Under Secretary to the Government of India dated 14th December 2016. For that purpose, suitable Notification can be issued by the Competent Authority within two days. We commend to the Competent Authority to do so; (See Notification no. S.O.4086(E) dated 17 December 2016)
Regarding grant of extension for use of old Rs 500 and Rs 1000 notes
+ in our opinion, whether the exemption period should be extended or not must be best left to the judgment of the Government of the day with a hope that the Government will be responsive and sensitive to the problems encountered by the common man. Accordingly, we decline to issue any interim direction to the Government in the matter of extending the period of exemption and leave it open to the Government to take appropriate decision in that behalf, as may be advised.
Regarding denial of right to withdraw the prescribed amount of Rs.24,000/- per week per account holder
++ in spite of Notification issued by RBI permitting such withdrawal, it was submitted that if the Government has issued such Notification after due consideration, it is obliged to ensure that its commitment made under the said Notification is implemented without any exception. The ground reality, however, contends counsel, is that the Banks are refusing to pay full amount of Rs.24,000/- per account holder per week on the ground of non-availability of enough volume of legal tender currency. As per the contentions put forth by the Attorney General, the Government has already made it amply clear that it would take around 50 days time to streamline the cash flow. That period is still not exhausted. Thus, we may commend to the Authorities to fulfill their commitment made in terms of the stated Notification permitting withdrawal of Rs.24,000/- per account holder of the Bank per week to the extent possible and review that decision periodically and take necessary corrective measures in that behalf. In our opinion, besides the observations made hitherto, no other direction can be given at this stage by way of an interim relief;
Regarding transfer of petitions filed by UOI
++ it would be just and proper to withdraw all the Writ Petitions/proceedings pending in different High Courts across the country and to be heard by this Court along with the Writ Petitions which are already pending in this Court raising same or similar issues, to avoid multiplicity of hearing and conflicting decisions on the same subject matter. Accordingly, we issue notice in the respective Transfer Petitions and by way of interim direction, stay the further proceedings of the Writ Petitions/proceedings in the concerned HC. We further direct that if any other Writ Petitions/proceedings are pending in any High Court, further hearing of those matters shall also remain stayed in terms of this order. We further direct that no other Court shall entertain, hear or decide any Writ Petition/proceedings on the issue or in relation to or arising from the decision of the Government of India to demonetize the old notes of Rs.500/- and Rs.1000/-, as the entire issue in relation thereto is pending consideration before this Court in the present proceedings. We make it clear that petitioners before the HC(s) or any other Court in India in respect of proceedings already instituted on the subject matter under consideration before this Court, will be free to intervene in the Writ Petitions pending consideration before this Court on the subject matter of demonetization of old currency notes of Rs.500/- and Rs.1000/-, if so advised.
Case referred to larger bench
2016-TIOL-231-SC-IT
PR CIT Vs OMAXE BUILDHOME PVT LTD: SUPREME COURT OF INDIA (Dated: December 14, 2016)
Income Tax - Section 80IB
Keywords: Construction - eligible housing project - real estate & common facilities
The assessee is engaged in the business of real estate development. It had claimed deduction u/s 80IB in relation to two of housing projects. The AO disallowed the said deduction on the ground that the whole project was required to be compliant with Section 80IB(10) and an eligible part of the project could not be severed from the ineligible part for admitting the benefits u/s 80IB.
On appeal, CIT(A) held that this housing project was separable from the project that consisted of 11 towers which was as not eligible for benefit u/s 80IB. The CIT(A) held that since both the housing schemes were separated by roads and had separate common facilities, they constituted separate housing projects. On further appeal, Tribunal and the High Court both concurred with the findings of CIT(A).
On appeal, the SC held that,
++ the decision of the High Court that a real estate development which on a standalone basis is complete in all respects would constitute a housing project for the purpose of Section 80IB.
Revenue's appeal dismissed
2016-TIOL-3046-HC-MAD-CX
CCE Vs VASU CHEMICALS: MADRAS HIGH COURT (Dated: November 23, 2016)
Central Excise - Clearances - Interest on duty and penalty u/section 11AB and 11AC introduced with effect from 28.09.1996 - Levy of interest on duty and imposition of penalty on clearance effected prior to the effective date, rightly rejected - No reason to interfere with the impugned order. (Para 6)
Revenue appeal dismissed
2016-TIOL-3045-HC-P&H-IT
PR CIT Vs BHARAT HEAVY ELECTRICALS LTD: PUNJAB AND HARYANA HIGH COURT (Dated: December 9, 2016)
Income tax - Sections 194C, 194J & 201
Keywords - contractual payment - human intervention - rendering of technical services & supply of equipment
During the subject year, a TDS inspection was conducted u/s 133A on the assessee, wherein the AO found that the assessee had made payments to five contractors in respect of various contracts and deducted tax in respect thereof u/s 194C. The AO however noted that all the contracts involved the provision of professional and technical services which fall within the ambit of the provisions of Section 194J and not under Section 194C. He held that the contracts were not only for the erection and installation work, but also for the commissioning, testing and trial operation of the various equipments and other related machinery and that under the terms of the contract it is the duty of the contractor to provide all types of labour, supervisors, engineers, inspectors, measuring and testing equipments, testing and commissioning for the execution of the project as per the specifications of the respondent. The contractors were, therefore, providing technical services to the assessee which attract the provisions of Section 194J. He accordingly held the assessee to be in default u/s 201(1A) for having failed to deduct the tax at source.
On appeal, the CIT(A) construed the provisions of the contract and came to the conclusion that it was in the nature of a contract for work and labour to be carried out under the supervision of the respondent's officers and employees. He was of the opinion that merely because technical personnel are employed in the execution of the contract it does not follow that the contract is one for technical services. The ITAT confirmed these findings of CIT(A).
On appeal, the HC held that,
Whether payment made to a contractor would fall within the domain of Section 194J, if such payment was not for rendering any technical services and the contractual stipulations are to ensure that the equipment supplied by contractor is of the requisite specifications - NO: HC
++ The various contracts entered into between the assessee and the contractors are identical. Clause 1 provides that the contractors are to execute the work of erection, testing, commissioning and trial operation of power cycle piping, boiler and LP piping packages for units in Haryana and in accordance with and subject to the terms and conditions contained in the contract and the document incorporated therein such as the instructions to tenderers, General Conditions of Contract and Special Conditions. A rate schedule is also for the material and not for the supply of any technical services. There is a schedule for the deployment of manpower. Many of them we will assume are technical personnel. What is important is that the schedule is one of deployment of these personnel at the site for executing the work, namely, the work of erection, testing, commissioning and trial operation. In other words, their services were not engaged per-se for the benefit of the assessee. They were in fact engaged by the contractor itself for its own benefit for executing the contract as required by the terms and conditions thereof. The Special Conditions of Contract enumerate the list of major tools and plants to be provided by the contractor at its own cost. There is no reference to the contract being for one of providing technical services. The contract read as a whole, therefore, is for the purposes set out in clause 1 thereof itself, namely, erecting, commissioning, testing and trial operation of the said equipment in accordance with and subject to the terms and conditions of the contract. Further, the input is not to enable the assessee to run the machinery on its own, but to enable the contractor to supply the requisite equipment. Moreover, the labour, employees, tools and tackles are not supplied under the contract, but for the purpose of executing the contract as per the contractual stipulations;
Whether non-application of Section 194C on a contractal payment, would by itself provides for deemed application of Section 194J - NO: HC
++ Revenue's counsel relied upon the provision that only electricians with certain qualifications and licenses shall be employed by the contractor. However, this is a contractual stipulation insisted upon by the assessee to ensure that the equipment supplied by the contractor is of the requisite quality and specifications. It is to ensure that the contractor complies with its obligations under the contract. It does not provide for the provision of technical assistance to the assessee. The contract entered into between the assessee and each of the contractors, therefore, did not involve the supply of professional or technical services at least within the meaning of Section 194J. The consideration paid under the contracts, therefore, was not for the professional or technical services rendered by the contractors to the assessee. Section 194J is, therefore, not applicable to the present case. Further, it is not that if a contract does not fall within the ambit of Section 194C, it must be deemed to fall within the ambit of Section 194J. Sections 194C and 194J are independent provisions. In view of our finding that the contract does not fall within Section 194J, the dismissal of the appeal would follow in any event. As the assessee has accepted that it falls within Section 194C and has complied with its obligations thereunder, this court refrain from deciding the issue as to whether it falls within Section 194C.
Revenue's appeal dismissed
