Experts CornerTarun Jain (Tax Practitioner)

Introduction

The very fact that a tax is recognised as a transaction tax on a conceptual basis implies that there must be a transaction to begin with in order to levy such a tax. Admittedly goods and services tax (GST), introduced in India in 2017, is one such tax. It is hinged upon the existence of a supply which has been legislatively defined to essentially refer to a transaction between two persons. A key element for the levy of GST is existence of “consideration”. Albeit there are certain circumstances in which consideration is not necessary and by way of a legal fiction is “deemed” to exist. In all other cases, however, consideration must flow from the recipient of the supply to the supplier in order for the transaction to be exigible to tax. Thus is introduced within the GST realm an important aspect of the law of contract, the “privity of consideration” doctrine. This post examines the nuances of the doctrine to explore its interplay under the GST law and explore its increasing application to address intricate issues which may arise owing to the peculiarities of “consideration”.

Privity of consideration: Not a sine qua non for a valid contract unlike privity of contract

Under the law of contract, privity between parties to the contract (i.e. privity of contract) is a necessity. “It is an elementary principle of English law known as the ‘doctrine of privity’ that contractual rights and duties only affect the parties to a contract, and this principle is the distinguishing feature between the law of contract and the law of property.”1 The same legal position exists under the Contract Act, 1872 (ICA). Pollock & Mulla, describing this doctrine, state “a contract cannot confer rights or impose obligations arising under it on any person except the parties to it. No one but the parties to a contract can be entitled under it or bound by it. This principle is known as that of privity of contract”.2

By contrast, privity of consideration is not a requirement for valid contract. This is on account of the definition of “consideration” set out in Section 2(d) of the ICA which permits the consideration for a contract to flow from a third party. It states that “when, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise”. In other words, for a contract to come into existence, it is not necessary that the consideration for the contract must necessarily come from the parties to the contract; the consideration can flow even from any other person. This aspect was resounded by the Delhi High Court, inter alia observing that “in India, whereas privity of contract is a must to create a jural relationship, privity of consideration is not essential and pertaining to a contract, consideration may flow to a contracting party from a third party, but at the instance of the other contracting party.”3

Even though there has been a proposal to amend this legal position,4 nonetheless “under the Act, the consideration for an agreement may proceed from a third party, but it does not follow that the third party can sue on the agreement”.5

Privity of consideration under GST laws: Exploring the interplay

The relevance of the aforesaid discussion under the law of contracts qua transaction taxes is brought out from the following consequences flowing from the privity doctrine:6

“The doctrine has two aspects. The first aspect is that no one but the parties to the contract are entitled under it. Contracting parties may confer rights or benefits upon a third party in the form of a promise to pay, or to perform a service, or a promise not to sue (at all or in circumstances covered by an exclusion or a limitation clause). But a third party on whom such right or benefit is conferred by contract can neither sue under it nor can rely on defences based on the contract.

The second aspect of the doctrine is that parties to a contract cannot impose liabilities on a third party. A person cannot be subject to the burden of a contract to which he is not a party. It is the counterpart of the proposition that a third person cannot acquire rights under a contract. This rule, for example also bars a person from being bound by an exemption clause contained in a contract to which it is not a party, so that a contract between A and B cannot impose a liability upon C.”

For our purpose, this summation of the legal position brings forth two aspects which may be relevant for transaction tax perspective. First, a contract between A and B can cause a benefit to flow from A to C. Second, in a contract between X and Y, the consideration to X can flow from Z (upon insistence of Y) even though Z is not a party to the contract. Let us exemplify these aspects in form of illustrations.

Illustration 1-A. A, a philanthropist executes a contract with B, a renowned NGO. Under the contract, B will carry out free evening teaching classes in identified areas to all daily wagers and their children, who are collectively referred as C. In turn, A shall compensate B for carrying out the teaching activity.

Having noted the contract law propositions, let us transpose them in transaction tax domain. For this purpose, it is imperative to take note of the legal provisions of the GST laws. The provisions of the Central Goods and Services Tax Act, 2017 (CGST Act) carry specific stipulations to this end. Section 2 of the CGST Act inter alia defines a “recipient” and “supplier” in the following terms:

(93) “recipient” of supply of goods or services or both, means — (a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration; (b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and (c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied;

* * *

(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied.

Let us apply the aforesaid statutory stipulations in the illustration. Theoretically, there can be two versions on its treatment under the GST law. The first version supports the view that there is only one supply in this situation. The second version, however, moots two supplies in this illustration.

  • In the first version, A will be the recipient, as A is liable to pay for the service which B is supplying and accordingly B will be the supplier. In this version, C is a third party to the contract and thus at best a beneficiary.

  • However, second version opines that there are two supplies; the first supply being between A and B and the second supply being occasioned when B undertakes teaching to C. Accordingly to this version, B is the supplier in both supplies. However, the recipient is A (who pays for the supply) in the first supply. In the second supply C is the recipient in terms of Section 2(93)(c) of the CGST Act, which specifically identifies “where no consideration is payable for the supply of a service, the person to whom the service is rendered” is construed as the recipient of the service.

The dichotomy in the two versions under the GST law is best reconciled when the privity of consideration doctrine from contract law perspective is introduced in this scenario. The doctrine of privity of consideration clearly demystifies that there is only one contract in this situation where only A and B are the parties to the contract. The doctrine of privity of consideration is clearly able to delineate that C, even though it gets benefit from the contract between A and B, is at best a third party and thus only a beneficiary which reveals that there is no second supply.

Illustration 1-B. Let us take another illustration on similar lines. Here, P is a pauper litigant. Q is a legal aid society which empanels counsels willing to act pro bono of which R is a member. In view of P approaching Q, R represents P before the court for which R is compensated by Q.

Even in this illustration, theoretically, there can be two versions on its treatment under the GST law. The first version supports the view that there is only one supply in this situation. The second version, however, moots two supplies in this illustration.

  • In the first version, R is the service provider (of legal services) and Q is the service recipient as Q is the person liable to pay for the service which R is supplying. In this version ,P is a third party to the contract, thus, at best a beneficiary.

  • However, second version opines that there are two supplies; the first supply being between R and Q and the second supply being occasioned when R undertakes to represent P. Accordingly to this version, R is the supplier in both supplies. However, the recipient is Q (who pays for the supply) in the first supply. In the second supply P is the recipient in terms of Section 2(93)(c) of the CGST Act, similar to Illustration 1-A.

Similar to Illustration 1-A, the dichotomy amongst the two versions under the GST law in this illustration is best reconciled by the doctrine of privity of consideration. Here R has agreed to represent P on account of the contract between R and Q in terms of which Q has recommended and paid for R to represent P. Thus, the contract is between R and Q and the doctrine of privity of consideration explains why R is representing P in this situation and there is no independent transaction between R and P and there is no separate supply by R to P.

Admittedly both the above illustrations are qua philanthropic activities. However, that fact alone does not take them out of the purview of tax legislations as it is now virtually well established that mere absence of profit motive is not sufficient to ward-off tax liability.7 In any case, there is nothing in these illustrations which cannot accommodate purely commercial transactions, and thus the relevance of doctrine of privity of consideration cannot be overemphasised in the realm of GST law.

Illustration 2. X is a start-up entity which has launched a new product. X is desirous of having a wide user base for its product. X contracts with Y, a marketing company, to make the product popular by getting at least 10,000 users sign up on X‘s website and order one product each. Y would charge marketing fee from X if Y is successful in this assignment. Through intensive marketing, Y is able to successfully get the requisite number of users sign up on X’s website and order the products. These users are collectively referred to as Z. Thus, Y charges the marketing fee from X.

Even though it may be fairly obvious as to who is the supplier and who is the recipient in this illustration from a GST perspective, the doctrine of privity of consideration nonetheless confirms the analysis. By applying the doctrine of privity of consideration, it is clear that the contract is between X and Y where the consideration to X flows from Z (through activities of Y) even though Z is not a party to the contract. Thus, X is the recipient and Y is the supplier. This is so, notwithstanding the conspicuous absence of “consideration” element in the definition of “supplier” under the CGST Act.

The aforesaid illustration has a real life parallel. In the year 2016, owing to demonetisation being announced by the Government, there were difficulties for certain users to carry the cash required to be paid, for crossing a toll bridge. In order to obviate such difficulties, the Ministry permitted users to cross the bridge without making any payment during a particular period. In lieu of the loss suffered by the toll operator on this account, the Ministry compensated the toll operator. The services by way of toll were specifically exempt under the service tax law. However, when the payments were made by the Ministry to the toll operator, certain tax officers sought to levy service tax on the payment made by the Ministry to the toll operator, on the premise that the payments represented an independent service by the toll operator to the Ministry. To address the issue, the Tax Board issued a circular8 clarifying that the activity carried out by the toll operator (i.e. allowing use of the road) remained the same and it was only because the toll operator received the consideration from the Ministry that it permitted the users to use the road without payment of the toll by them. Thus, there was no change in the contract (between the toll operator and user of road) and only the flow of consideration changed. Inter alia the following conclusions were drawn in the circular:

“The service that is provided by toll operators is that of access to a road or bridge, toll charges being merely a consideration for that service. On Ministry of Road Transport and Highways of India (MoRTH)/National Highways Authority of India (NHAI’s) instructions, for the period 8-11-2016 to 1-12-2016 this service of access to a road/bridge was continued to be provided without collection of consideration from the actual user of service. Consideration came from the project authority. The fact that for this period, for the same service, consideration came from a person other than the actual user of service, does not mean that the service has changed.”

Thus, even though the circular did not make specific reference to the doctrine of privity of consideration, it nonetheless gave effect to it in practice by (a) acknowledging that consideration can flow from a third person which is not a party to the contract; and (b) accepting that flow of consideration from a third party does not change the nature of transaction between the parties to a contract. The logic underlying this circular has been extended even to GST laws,9 which clearly reveals the importance of appreciating the finer nuance of doctrine in transaction tax space, including GST.

Conclusion

The aforesaid analysis has multiple implications. First, it reveals how tax law does not operate in isolation. Instead, the contours of tax law are intrinsically interwoven with many other laws, including the law of contract. Second, there can be innate difficulties in applying the tax law on a literal paradigm, which difficulties can be smoothened by taking recourse to relevant doctrines under other laws. Third, in the specific context of the privity of consideration paradigm, the discussion clearly highlights that under GST, determining the existence of a transaction on the basis of the flow of consideration may not reveal the correct legal position given the explicit recognition of third-party consideration under the Indian law. In such view of the matter, the doctrine of privity of consideration may be gainfully employed to decipher the real contracting parties (which often gets clouded when the appraisal is from the perspective of consideration flow), and thus GST can be levied on the correct transaction instead of chasing artificial constructs. The invocation of the substance of this doctrine, as illustrated by the circular, vindicates this analysis.


†Tarun Jain, Advocate, Supreme Court of India; LLM (Taxation), London School of Economics

1. P.S. Atiyah, Atiyah’s Introduction to the Law of Contracts, (3rd Edn., 1981) p. 265, as quoted in P. Ramanatha Aiyar’s, Advanced Law Lexicon, (5th Edn., 2017) p. 4077. The same Lexicon also quotes G.H. Treitel, The Law of Contract, (8th Edn., 1991) p. 538 to state “the doctrine of privity means that a person cannot acquire rights or be subject to liabilities arising under a contract to which he is not a party. It does not mean that a contract between A and B cannot affect the legal rights of C indirectly”.

2. Pollock & Mulla, Indian Contract & Specific Relief Act, (12th Edn., 2010) p. 102. Elaborating further, the authors state that the “doctrine of privity may involve any (or more) of the four questions: (i) can a person enforce a contract to which he is not a party? (ii) can a person set up a defence based on the terms of a contract to which he is not a party in order to answer a claim brought by a person who is a party to the relevant contract? (iii) can a contracting party set up a defence based on the terms of his own contract in order to answer a claim brought by a person who is not a party to the relevant contract? (iv) can a contracting party enforce his own contract against a person who is not a party to the relevant contract?”

3. Paam Antibiotics Ltd. v. Sudesh Madhok, 2011 SCC Online Del 4911: (2012) 186 DLT 652. See also, Krishna Devloor v. N. Madhavi, 2013 SCC Online AP 160: AIR 2013 AP 138: which inter alia explains this legal position in the following terms; “Mere payment of money by one individual to another, does not, by itself, bring about the transaction of a particular description. It is only when there exists unity of opinion, or what is commonly known in the realm of contracts, as consensus ad idem, that it can be treated as a consideration of the contract of a particular description. The money can certainly constitute the consideration, in a given transaction. However, it is only when it is paid by one, to another, with a specific understanding, that it is the consideration for a contract, that the contract can be said to have come into existence. The money paid for one purpose, cannot be treated as consideration for another. Even if a person pays the amount to another, with an idea that it is the consideration for purchase of an item of property, law would recognise such event, if only the person who paid the amount establishes that the one, who received it, was also of the same idea and understanding.”

4. See, 13th Report of the Law Commission of India (1958). In Para 16, the Law Commission had noted the following:

“That a rigid adherence to the doctrine of privity is bound to cause hardship is obvious. The present state of law in India is not quite uncertain and the particular exceptions which have been acknowledged by case law and statutes do not cover all cases of hardship and thus enhance the bewilderment of the layman. As we anticipated in our Report on the Specific Relief Act, the better course would be to adopt a general exception to cover all cases of contracts conferring benefit upon third parties and dispense with the particular instances where the rule of privity should not apply. We consider the recommendations of the Law Revision Committee best suited for the purpose, and recommend that a separate section be incorporated on the lines thereof.”

5. Pollock & Mulla, Indian Contract and Specific Relief Act, (12th Edn., 2010) p. 103. For English law on the subject, see Dunlop Pneumatic Tyre Co. v. Selfridge & Co., 1915 AC 847 inter alia observing that “My Lords, in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as, for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor’s request. These two principles are not recognised in the same fashion by the jurisprudence of certain continental countries or of Scotland, but here they are well established. A third proposition is that a principal not named in the contract may sue upon it if the promisee really contracted as his agent. But again, in order to entitle him so to sue, he must have given consideration either personally or through the promisee, acting as his agent in giving it.” (per Viscount Haldane L.C.) See also, Scruttons Ltd. v. Midland Silicons Ltd. 1962 AC 446: (1962) 2 WLR 186: (1962) 1 All ER 1, etc.

6. Pollock & Mulla, Indian Contract and Specific Relief Act, (12th Edn., 2010) p. 106.

7. See generally, State of T.N. v. Port of Madras, (1999) 4 SCC 630. In any case, in a transaction tax (unlike income tax), there would ordinarily be no difference between commercial activities and non-profit driven activities.

8. Circular No. 212/2/2019-Service Tax dated 21-5-2019.

9. Refer, Circular No. 178/10/2022-GST dated 3-8-2022, relevant at Paras 8-8.1.

Case BriefsSupreme Court

Supreme Court: Dealing with an important question relating to appellate jurisdiction of the High Courts under Section 260A of the Income Tax Act, 1961 (the Act) against judgments of Income Tax Appellate Tribunals (ITAT), the bench of UU Lalit, S. Ravindra Bhat and PS Narasimha*, JJ has held that appeals against every decision of the ITAT shall lie only before the High Court within whose jurisdiction the Assessing Officer who passed the assessment order is situated.

Interestingly, Section 260A is open-textual and does not specify the High Court before which an appeal would lie in cases where Tribunals operated for plurality of States. Hence, as Benches of the ITAT are constituted to exercise jurisdiction over more than one state, each state having a separate High Court, question arose as to which of the High Court is the appropriate Court for filing appeals under Section 260A. The Supreme Court observed that the decision of the High Court of Delhi in the case of Seth Banarsi Dass Gupta v. Commissioner of Income Tax, 1978 SCC OnLine Del 43, wherein it was held that the appropriate High Court would be the one where the Assessing Authority is situated, continuous to hold the field.

However, due to a difference of opinion between the Punjab and Haryana High Court and the Delhi High Court, a further question arose before the Supreme Court relating to the jurisdiction of the High Court consequent upon administrative order of transfer of a ‘case’ under Section 127 of the Act from one Assessing Authority to another Assessing Officer located in a different State.

The Punjab & Haryana High Court took the view that such a transfer would not change the principle laid down in Seth Banarasi Dass Gupta. However, the Delhi High Court in CIT v. Sahara India Financial Corporation Ltd, 2007 SCC OnLine Del 1762 and CIT v. Aar Bee Industries Ltd, 2013 SCC OnLine Del 2356 has held that an administrative order of transfer of cases will also have the consequence of transferring even the jurisdiction of the High Court.

The Supreme Court, however, reversed the judgments of Delhi High Court on this aspect and held that the appellate jurisdiction of the High Court stands on its own foundation and cannot be subject to the exercise of executive power to transfer a ‘case’ from one Assessing Officer to another Assessing Officer.

“Even if the case or cases of an assessee are transferred in exercise of power under Section 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the order, shall continue to exercise the jurisdiction of appeal. This principle is applicable even if the transfer is under Section 127 for the same assessment year(s).”

The Court further observed that if it is the accepted principle to determine the jurisdiction of a High Court under Section 260A of the Act on the basis of the location of the Assessing Officer who assessed the case, then, by the strength of the very same logic, upon transfer of a case to another Assessing Officer under Section 127, the jurisdiction under Section 260A must be with the High Court in whose jurisdiction the new Assessing Officer is located.

Stressing on the ‘need for order’ and consistency in decision making, the Court noted that a decision of a High Court is binding on subordinate courts as well as tribunals operating within its territorial jurisdiction. It is for this very reason that the Assessing Officer, Commissioner of Appeals and the ITAT operate under the concerned High Court as one unit, for consistency and systematic development of the law.

The Court also explained that the decisions of the High Court in whose jurisdiction the transferee Assessing Officer is situated do not bind the Authorities or the ITAT which had passed orders before the transfer of the case has taken place. This creates an anomalous situation, as the erroneous principle adopted by the authority or the ITAT, even if corrected by the High Court outside its jurisdiction, would not be binding on them.

“The legal structure under the Income Tax Act commencing with Assessing Officer, the Commissioner of Appeals, ITAT and finally the High Court under Section 260A must be seen as a lineal progression of judicial remedies. Culmination of all these proceedings in question of law jurisdiction of the High Court under Section 260A of the Act is of special significance as it depicts the overarching judicial superintendence of the High Court over Tribunals and other Authorities operating within its territorial jurisdiction.”

[Commissioner of Income Tax v. ABC Papers Ltd, 2022 SCC OnLine SC 1036, decided on 18.08.2022]


*Judgment by: Justice PS Narasimha


For Revenue: ASG N. Venkatraman

For Assessee: Advocate Rohit Jain

Case BriefsSupreme Court

Supreme Court: In an important ruling of Goods and Service Tax (GST), the bench of  KM Joseph* and Hrishikesh Roy, JJ has directed that, in order to also ensure that the successful tenderer pays the tax due and to further ensure that, by not correctly quoting the GST rate, there is no tax evasion, in all Government contracts, a copy of the document, by which, the contract is awarded containing all material details shall be immediately forwarded to the concerned jurisdictional Officer. Further, for effective compliance of the direction, the tenderers must, in their bids, indicate the details of their Assessing Officers.

The Court was deciding the case where the Railway has invited e-tenders for procurement of turbo wheel impeller balance assembly. According to the Notice Inviting Tender (NIT), the bidders were directed to specify the percentage of local content of the material being offered, in accordance with the ‘Make in India’ Policy. In terms of the said Policy, preference would be given to those projects, which have at least 50 per cent local content ordinarily, such purchase preference being limited to a margin of 20 per cent.

The writ petitioner knocked the door of the Court. It was submitted that the Council has declared in the Code that as far as the product is concerned, the rate has been shown as 18 per cent. The further case of the writ petitioner is that, neither the NIT nor the bid documents, mention the relevant Harmonised System of Nomenclature (HSN Code) applicable to the product. It has sabotaged the preservation of the level playing field. This is for the reason that while the writ petitioner honestly revealed the correct GST rate, whereas other bidders showed the GST rate at a far lower rate. This has distorted the tendering process

The High Court was of the opinion that if the GST value is to be added in the base price, to arrive at the total price, and it is used to determine the inter se ranking in the selection process, it was the duty of the State to clarify the HSN Code. It is further found that, mentioning of the HSN Code in the tender document itself, will resolve ‘all disputes’ relating to fairness and transparency, by providing a level playing field in the true spirit of Article 19(1)(g) of the Constitution of India.

When the matter reached the Supreme Court, the State contended that that it was the responsibility of the bidders to quote the HSN number and GST rate. Since the liability to pay the tax is on the successful tenderer (supplier) and Sections 59 and 60 of the Goods and Service Tax Act casts the burden on the tenderers to file return, self-assess and pay the tax, it is the jurisdictional officer relevant to the supplier who can make the proper classification. The State would stand in the shoes of a purchaser. It cannot therefore be expected to find out the HSN Code and announce it so as to bind the tenderers or fetter the power of jurisdictional officer of the supplier.

The Supreme Court was of the opinion that, in the name of producing a level playing field, the State, when it decides to award a contract, cannot be obliged to undertake the ordeal of finding out the correct HSN Code and the tax applicable for the product, which they wish to procure. This is, particularly so when the State is not burdened with the liability to pay the tax. The liability to pay tax, in the case at hand, was squarely on the supplier. There are adequate safeguards and Authorities under the GST Regime must best secure the interests of the Revenue.

“The liability to pay tax under the GST regime is on the supplier. He must make inquires and make an informed decision as to what would be the relevant HSN Code applicable to the items and the rate of tax applicable.”

The Court further explained that though, for determining the local content, the HSN Code of the item, for the purpose of custom duty, is to be found, it may not justify the writ petitioner from contending that the HSN Code for the GST must be included in the tender conditions. The liability to pay the tax under the GST regime is with the supplier unless it falls under Section 9(3) of the GST Act. Further, the State cannot declare a GST rate and make it binding on the bidder.

The Court, hence, refused to hold that in view of the Make in India policy as contained in the order dated 15.06.2017, there is duty to declare the HSN code in the tender and what is more, make the tenderers quote the rate accordingly.

[Union of India v. Bharat Forge Ltd, 2022 SCC OnLine SC 1018, decided on 16.08.2022]


*Judgment by: Justice KM Joseph


For UOI: ASG N. Venkataraman,

For writ petitioner: Advocate Amar Dave

For Second Respondent: Advocate Girdhar Govind

Case BriefsSupreme Court

Supreme Court: The bench of MR Shah* and BV Nagarathna, JJ has rejected the view taken by the Karnataka High Court and ITAT, Bangalore that the requirement of furnishing a declaration under Section 10B (8) of the Income Tax Act, 1961 (IT Act) is mandatory, but the time limit within which the declaration is to be filed is not mandatory but is directory. The Court held that the assessee shall not be entitled to the benefit under Section 10B (8) of the IT Act on noncompliance of the twin conditions as provided under Section 10B (8) of the IT Act.

In the case at hand, when the assessee submitted its original return of income under Section 139(1) of the IT Act on the due date i.e. 31.10.2001, it specifically stated that it is a company and is a 100% export-oriented unit, entitled to claim exemption under Section 10B of the IT Act and therefore no loss is being carried forward. However, thereafter the assessee filed the revised return of income under Section 139(5) of the IT Act on 23.12.2002 and filed a declaration under Section 10B (8) which admittedly was after the due date of filing of the original return under Section 139(1), i.e., 31.10.2001.

The ITAT as well as the High Court held that for claiming the so-called exemption relief under Section 10B (8) of the IT Act, furnishing the declaration to the assessing officer is mandatory but furnishing the same before the due date of filing the original return of income is directory. Aggrieved by the decision, the Revenue approached the Supreme Court.

The Supreme Court observed that the High Court and ITAT is erroneous and contrary to the unambiguous language contained in Section 10B (8) of the IT Act which provides that  “where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of Section 10B may not be made applicable to him, the provisions of Section 10B shall not apply to him for any of the relevant assessment years”.

Hence, for claiming the benefit under Section 10B (8), the twin conditions of furnishing the declaration to the assessing officer in writing and that the same must be furnished before the due date of filing the return of income under sub-section (1) of Section 139 of the IT Act are required to be fulfilled and/or satisfied. Both the conditions to be satisfied are mandatory.

It cannot be said that one of the conditions would be mandatory and the other would be directory, where the words used for furnishing the declaration to the assessing officer and to be furnished before the due date of filing the original return of income under subsection (1) of section 139 are same/similar.”

The Court also considered the facts that in the case at hand the assessee filed its original return under Section 139(1) and not under Section 139(3). The revenue submitted that the revised return filed by the assessee under Section 139(5) can only substitute its original return under Section 139(1) and cannot transform it into a return under Section 139(3), in order to avail the benefit of carrying forward or set-off of any loss under Section 80 of the IT Act.

Agreeing with the Revenue’s submission, the Court explained,

“The assessee can file a revised return in a case where there is an omission or a wrong statement. But a revised return of income, under Section 139(5) cannot be filed, to withdraw the claim and subsequently claiming the carried forward or setoff of any loss. Filing a revised return under Section 139(5) of the IT Act and taking a contrary stand and/or claiming the exemption, which was specifically not claimed earlier while filing the original return of income is not permissible. By filing the revised return of income, the assessee cannot be permitted to substitute the original return of income filed under Section 139(1) of the IT Act.”

Therefore, it was held that claiming benefit under Section 10B (8) and furnishing the declaration as required under Section 10B (8) in the revised return of income which was much after the due date of filing the original return of income under Section 139(1) of the IT Act, cannot mean that the assessee has complied with the condition of furnishing the declaration before the due date of filing the original return of income under Section 139(1) of the Act.

Ruling in favour of the Revenue, the Court held that for claiming the benefit under Section 10B (8) of the IT Act, the twin conditions of furnishing a declaration before the assessing officer and that too before the due date of filing the original return of income under Section 139(1) are to be satisfied and both are mandatorily to be complied with.

Setting aside the judgment of High Court and ITAT, the Court held that the assessee shall not be entitled to the benefit under Section 10B (8) of the IT Act on noncompliance of the twin conditions as provided under Section 10B (8) of the IT Act.

[CIT v. Wipro Ltd., 2022 SCC OnLine SC 831, decided on 11.07.2022]


*Judgment by: Justice MR Shah


Counsels

For Revenue: ASG Balbir Singh

For Assessee: Senior Advocate S. Ganesh

Uttarakhand High Court
Case BriefsHigh Courts

Uttaranchal High Court: The division bench of Sanjaya Kumar Mishra, acting C.J., Ramesh Chandra Khulbe, J., held in the writ petition is maintainable, as the cancellation of GST registration affects the rights of livelihood enshrined under Article 21 of the Constitution of India.

The division bench observed that in absence of a GST registration number, a professional cannot raise a bill which affects the chances of getting employment or executing works. Such denial of registration, therefore, affects the right of livelihood that is violative of Article 21 of the Constitution. If the situation so prevailing continues, then it will not only amount to a violation of Article 21 but also the right to life of a citizen of this country.

Facts:

The petitioner is a working mason/ painting professional who applied for GST registration and the registration no. was allotted to him but, hee failed to file his return for a continuous period of six months which was mandatory under the Uttarakhand Goods and Services Tax Act, 2017. Hence, his registration got canceled on 21-09-2019.

The petitioner preferred an appeal before the First Appellate Authority which got dismissed on the grounds of delay. Thereafter, a writ petition was filed which was also dismissed as not maintainable by the Single Judge. It was observed in the writ petition that an alternative remedy of appeal was available to the petitioner under Section 107 of the Uttarakhand Goods and Services Tax Act, 2017. Aggrieved by the order of the Single Judge, the petitioner filed this intra court appeal.

The appellant argued that the High Court can exercise its jurisdiction even in cases where alternative and efficacious remedies are available. It was also argued that the Statute does not provide any prohibition against the exercise of the writ jurisdiction under Article 226 by the High Court.

Issue:

1. Whether a writ petition is maintainable when the limitation period provided for filing an appeal is not extendable?

2. Whether the Assistant Commissioner of GST, whose order is challenged in this case, is an adjudicating authority, or not?

Analysis & Observation:

The Court observed that the law made by the Parliament regarding appeals is very strict. It was pointed out that the law does not grant the First Appellate Authority to extend the limitation beyond one month after the expiry of the prescribed limit due to which the petitioner is put to hardship and left with no remedy.The Court noted that a notice was given on the website regarding the cancellation of GST registration which was not sufficient and a personal notice was supposed to be given. . The Court while allowing the appeal and remanding the matter back said that the petitioner is a semi-skilled labourer and now-a-days bills for any work executed for a private player or, even for the Government agency, are drawn on-line. In most cases, the payments are made direct to the bank on production of the bill with the GST registration number. In the absence of GST registration number, a professional cannot raise a bill. So, if the petitioner is denied a GST registration number, it affects his chances of getting employment or executing works. Such denial of registration of GST number, therefore, affects his right to livelihood. The Court relied on Radha Krishan Industries vs State of Himachal Pradesh, (2021) 6 SCC 771,

wherein it was held that a Commissioner is not an adjudicating authority, hence an appeal will not lie against the orders passed by him under Section 107 of the Uttarakhand Goods and Services Tax Act, 2017. The Court, hence, set aside the order by learned Single Judge and held that the learned Single Judge has committed error by holding that the writ petition is not maintainable.

[Vinod Kumar v. Commissioner Uttarakhand State 2022 SCC OnLine Utt 777, decided on 20-06-2022]

AAR GST
Case BriefsTribunals/Commissions/Regulatory Bodies

   

Appellate Authority for Advance Ruling, Punjab: Arun Narayan Gupta Chief Commissioner, CGST Commissionerate, and Kamal Kishor Yadav, Commissioner of State Tax held that the distribution of match tickets to related persons for the promotion of business attracts GST.

The factual background of the case

The appellant entered into a Franchise Agreement in April 2008 with the Board of Control for Cricket in India (BCCI) to establish and operate a cricket team in the Indian Premier League (IPL) under the title of ‘Punjab Kings’. The Appellant intended to distribute match tickets free of cost as a goodwill gesture for the promotion of business. These tickets were distributed without any consideration by the Appellant. The Appellant approached the Authority for Advance Ruling, Punjab (AAR Punjab) to clarify the treatment of GST liability on the supply of complimentary tickets.

AAR Punjab held the act of Appellant of issuing complimentary tickets displayed an act of forbearance. Aggrieved with the judgment the Appellant filed an appeal under Section 99 of the Punjab GST Act and Central Good and Services Act, 2017 (CGST) before the Appellant Authority of Advance Ruling to seek advance ruling for the following:

  • Whether the activity of providing “Complimentary tickets” by the appellant falls within the definition of supply under the Punjab GST Act, 2017 /CGST Act, 2017?

  • Whether the appellant would be required to pay tax on such complimentary tickets?

Analysis and Decision

The Bench stated that the two key elements that are required to be present for any activity or transaction to fall within the ambit of supply are “consideration” as well as “furtherance of business”. Therefore, the Bench opined that if any activity or transaction mentioned in Schedule II of the CGST the same has to fulfill the two key parameters i.e., presence of “consideration” as well as “furtherance of business” for it to be treated as supply under the Act.

The Bench observed that even for the consideration in the form of payment in kind, it should not be vague or illusory and there should be an element of reciprocity, and the expression “exempt supply” as defined under the CGST means the supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under Section 11, or under Section 6 of the Integrated Goods and Services Tax Act, 2017 and includes the non-taxable supply.

Therefore, the Bench held that the activity of providing complimentary tickets is an exempt supply, and there shall be no availment of Input Tax Credit according to Section 17 (2) of the CGST.

Hence, complimentary tickets provided by the Appellant fall within the ambit of supply on account of Schedule I of the CGST, and the Appellant would be liable to pay tax on the same.

[KPH Dream Cricket Pvt. Ltd., 01/AAAR/CGST/KPH/2022, decided on 01-06-2022]

AAR GST
Case BriefsTribunals/Commissions/Regulatory Bodies

   

Tamil Nadu Authority for Advance Ruling: T.G. Venkatesh, Additional Commissioner of GST & Central Excise, and K. Latha, Joint Commissioner of State Tax has held that the contracts relating to solid waste management and removal of legacy waste dumped at bio-mining sites, except Bio-CNG are exempted from GST.

Factual Background of the case

The applicant is in the bio-waste management sector and does all types of waste management like collection and transportation, manpower supply, bio-mining, micro composting center, and bio- CNG gas.

An application was filed by the applicant, before the Tamil Nadu Authority for Advance Ruling to seek an Advance Ruling on the following:

  • Whether contracts received from various city corporations and a municipality towards solid waste management are exempted from GST?

  • Whether contracts received from various city corporations and a municipality towards the removal of legacy waste dumped at dump sites through Bio-Mining process is exempted from GST?

Analysis and Decisions

The Bench referred to the definition of ‘pure services' as defined under Sl. No.3 of Notification 12/2017- C.T. (Rate) dated 28-06-2017. According to the definition, “Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to the Central Government, State Government or Union territory or local authority or a governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243-G of the Constitution or in relation to any function entrusted to a Municipality under Article 243-W of the Constitution.

In the light of the above definition, the Bench gave the following decision-

A. Removal of Legacy waste

The Bench observed that removal of legacy waste and reclamation of land is a process whereby the accumulated legacy solid waste is segregated, and the dump site is cleared to reclaim the lands for better usage. Therefore, the Bench held that the contracts received from various city corporations and municipalities towards the removal of legacy waste dumped at the site through the bio-mining process are pure services rendered to local authority and such act is being entrusted to a municipality under Art. 243-W of the Constitution. Hence, such contracts are eligible for exemption from GST.

B. Micro-composting and labour services

The Bench observed that the applicant, to carry out the activity of removal of legacy waste, needs to maintain micro compost centers and employ labourers and operators in order to carry out the service. Therefore, the bench held that contracts entered into for Maintenace of micro-composting and labour contracts for collection of solid waste are ‘pure services' rendered to local authorities and are activities rendered to local authorities and entrusted to the municipality under Art. 243-W of the Constitution.

C. Production of Bio-CNG

Further, the Bench opined that conversion of wet waste into BIO-CNG does not fall under the pure services as the applicant needs to set up a separate plant and machinery and structure as a new product is being produced and no service is being rendered to a local authority or the Government. Therefore, the bench held that the contract on Bio-CNG does not qualify as pure services. Hence, it was not eligible for GST exemption.

[Srinivas Waste Management Services Pvt. Ltd., Or, No. 23/AAR/2022, decided on 30-06-2022]

Case BriefsSupreme Court

Supreme Court: The bench of MR Shah* and Sanjiv Khanna, JJ has reversed the ruling of Customs, Excise & Service Tax Appellate Tribunal, Delhi (CESTAT) wherein it was held that the services rendered by a “Consulting Engineer” were not subjected to service tax.

Background

In the case at hand, a Chinese Government Company Sepco Electric Power Construction Corporation entered into a contract with Bharat Aluminium Co. Ltd. (BALCO) for providing “Design Engineering Services” and “Project Management & Technical Services”. In terms of the said agreement, it rendered “Consulting Engineer Services” to BALCO.

Pursuant to the CESTAT order, the question that fell for consideration before the Supreme Court was regarding the scope of definition of “consulting engineer” under Section 65(31) of the Finance Act, 1994, specifically as to whether a “body corporate” is covered within its sweep prior to the amendment in 2005.

It is important to note that post 2005, the definition of “consulting engineer” under Section 65(31) has been amended and now it specifically includes a “body corporate”. Therefore, as such, with respect to the proceedings post amendment 2005, there will be no difficulty. After the amendment, any “body corporate”, a service provider providing the services as “consulting engineer” is liable to pay the service tax.

Analysis

Under the Finance Act, 1994, the definition of “consulting engineer” in Section 65(31) covers services provided to a client by a professionally qualified engineer or an engineering firm consisting of professionally qualified engineers. The taxable attribute is that the services must be rendered in a professional capacity.

Prior to amendment 2005, by a Circular/Trade Notice dated 4.7.1997, the definition of “consulting engineer” under the Finance Act, 1994 was specifically explained and as per the said Trade Notice, “consulting engineer” means any professionally qualified engineer or engineering firm who, either directly or indirectly, venders any advice, consultancy or technical assistance in any manner to a client in one or more disciplines of engineering. It also further clarified that “consulting engineer” shall include self-employed professionally qualified engineer who may or may not have employed others to assist him or it could an engineering firm – whether organised as a sole proprietorship – partnership, a private or a Public Ltd. company.

Also, in many places under the Finance Act, 1994, the Parliament/Legislature has used the word “person” (Sections 68, 69 and 70). At this stage, Section 3(42) of the General Clauses Act, 1897 is also required to be referred to, considered and applied. The word “person” includes any company or association or body of individuals, whether incorporated or not.

Hence, it could be seen that it was never the intention of the legislation to exclude a “body corporate” from the definition of “consulting engineer” and from the “service tax net”.

Further, if it is held otherwise, in that case, it would remove all companies providing technical services, advice or consultancy to their clients from the service tax net, while any such services rendered by an individual or a partnership firm would continue to remain taxable. That does not seem to be an intention on the part of the legislature to exclude the “body corporate” from the definition of “consulting engineer”. There does not seem to be any logic to exclude “body corporate” from the definition of “consulting engineer”.

If the submission on behalf of the respondent is accepted and the “body corporate” is excluded from the service tax, in that case, it would not only lead to absurdity but also would create two different classes providing the same services. That cannot be the intention of the legislature to create two separate classes providing the same services and to exclude one class.”

Ruling on facts

Applying the aforementioned law to the case at hand, the Court held that the respondent, being a service provider providing consultancy engineering services, was/is liable to pay the service tax for such services being “consulting engineer” within the definition of Section 65(31) of the Finance Act, 1994 and therefore and thereby liable to pay the service tax under Section 66 r/w Section 68 of the Finance Act, 1994.

[Commissioner of Central Excise v. Sepco Electric Power Construction Corporation, 2022 SCC OnLine SC 833, decided on 11.07.2022]


*Judgment by: Justice MR Shah

Counsels

For Revenue: Additional Solicitor General of India Balbir Singh

For Respondent: Advocate P.K. Sahu

Karnataka High Court
Case BriefsHigh Courts

Karnataka High Court: Suraj Govindaraj, J. dismissed the petition as being devoid of merits.

The facts of the case are such that petitioner 1 is a registered association of the advertising agencies, in the business of advertisement on the advertisement hoardings licensed by respondent 2 Hubballi Dharwad Mahanagara Palike and are also registered as dealers under S. 22 of the Karnataka Value Added Taxes Act. The petitioners 2 to 6 are the members of the petitioner 1. A demand notice was issued upon the petitioners to make payment of advertisement tax as regards advertisement hoardings used by them. The instant petition was filed under A 226 and 227 of the Constitution of India seeking issuance of writ to set aside the demand notice and writ of prohibition to the respondents not to meddle with the advertisement displays and hoardings of the petitioners.

Counsel for petitioners submitted that on the enactment of Goods and Services Tax Act the authority of the respondents to either levy or collect advertisement tax is ousted. The respondents have collected the advertisement tax in terms of Section 134 of the Karnataka Municipal Corporations Act, 1976. The power under Section 134 of the KMC Act flows from Entry 54, List II of Schedule VII of the Constitution of India. The entry 54 having been deleted the said power is divested. Thus, there could be no demand for advertisement tax post the enactment of GST Act and deletion of Entry 54.

Counsel for respondents Mr GI Gachchinmath submitted that the power of respondent 2 to collect the advertisement tax continues under Section 134 of KMC Act. In the decision relied upon by the counsel for the petitioner, said power had been deleted, whereas no such deletion has occurred in the KMC Act.

The Court observed that in the entire transaction of GST, the petitioners are only a collecting agency who collects the GST payable on the service rendered and deposits the same with the authorities, the incidence of tax, i.e., GST being on the services rendered or goods supplied, the obligation of payment being on the person availing the service and or receiving the goods. The incidence of GST is on the service rendered by the petitioner to its clients and has nothing to do with respondent 2-HDMC. The transaction with HDMC is the permission and or license granted by the HDMC to put up hoarding and or use a hoarding either on the land belonging to the HDMC and or on land belonging to a private party.

The Court further observed that there are two distinct transactions. The incidence of tax on both transactions are different. The first transaction is the permission by respondent No.2-HDMC to put up a hoarding or advertisement to use their hoarding for the purpose of advertisement, as regards which respondent No.1-HDMC charges the fee or advertisement tax. The second transaction is on the petitioners making use of the hoarding to display advertisements of its clients towards which the petitioners charge their client which is a supply of services or goods as regards which the GST is liable to be paid. Both the transactions being independent and distinct the incidence of both the GST and advertisement fee being on two distinct transactions inasmuch as the GST not being charged by the respondent 1- HDMC and advertisement free not being charged by the GST authorities.

The Court thus held “there is no conflict between the power to levy GST under GST Act and power of Municipal Corporation to levy advertisement fee or advertisement tax under Section 134 of the Karnataka Municipal Corporations Act.” [Hubballi Dharwad Advertisers Association v. State of Karnataka, Writ Petition No. 104172 of 2021, decided on 21-04-2022]


Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsSupreme Court

Supreme Court: In the case where the constitutionality of two Central Government notifications related to levy of Integrated Goods and Services Tax (IGST) was under scanner, the 3-judge bench of Dr. DY Chandrachud*, Surya Kant and Vikram Nath, JJ has held that since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act.

The Court observed that,

“If Indian shipping lines continue to be taxed and not their competitors, namely, the foreign shipping lines, the margins arising out of taxation from GST would not create a level playing field and drive the Indian shipping lines out of business.”

Issue

Whether an Indian importer can be subject to the levy of Integrated Goods and Services Tax (IGST) on the component of ocean freight paid by the foreign seller to a foreign shipping line, on a reverse charge basis?

Discussion

It was argued before the Court that the transaction between the foreign exporter and the respondents is already subject to IGST under Sections 5 of the IGST Act read with Sections 3(7) and 3(8) of the Customs Tariff Act as “supply of goods”. An additional levy of IGST on imported goods, that is on the supply of transportation service, by designating the importer as the recipient would amount to double taxation.

The Court explained that any Ocean Freight transaction involves three parties- the foreign exporter, the Indian importer and the shipping line. The first leg of the transaction involves a CIF contract, wherein the foreign exporter sells the goods to the Indian importer and the cost of insurance and freight are the responsibility of the foreign exporter. In other words, the foreign exporter is liable to ensure that the goods reach their place of destination and the Indian importer pays the transaction value to the exporter. The second leg of the transaction involves an agreement between the foreign exporter and the shipping line (whether foreign or Indian) for providing services for transport of goods to the destination, i.e., in the territory of India.

On the first leg of the transaction, between the foreign exporter and the Indian importer, the latter is liable to pay IGST on the transaction value of goods under Section 5(1) of the IGST Act read with Section 3(7) and 3(8) of the Customs Tariff Act. Although this transaction involves the provision of services such as insurance and freight it falls under the ambit of ‘composite supply’.

The Union Government had, however, submitted that the impugned levy is on the second leg of the transaction, which is a standalone contract between the foreign exporter and the foreign shipping line. Thus, the contract between the foreign exporter and the foreign shipping line- of which the Indian importer is not a party- cannot be deemed to be a part of ‘composite supply’.  The Court, however, refused to agree with the submission and observed,

“The Union of India cannot be heard to urge arguments of convenience – treating the two legs of the transaction as connected when it seeks to identify the Indian importer as a recipient of services while on the other hand, treating the two legs of the transaction as independent when it seeks to tide over the statutory provisions governing composite supply.”

This observation was made in reference to the fact that the Court had agreed to Union of India’s submission to hold that when the place of supply of services is deemed to be the destination of goods under Section 13(9) of the IGST Act, the supply of services would necessarily be “made” to the Indian importer, who would then be considered as a “recipient” under the definition of Section 2(93)(c) of the CGST Act. The supply can thus be construed as being “made” to the Indian importer who becomes the recipient under Section 2(93)(c) of the CGST Act.

Stating that the Court is bound by the confines of the IGST and CGST Act to determine if this is a composite supply, the Court said that it would not be permissible to ignore the text of Section 8 of the CGST Act and treat the two transactions as standalone agreements.

The Court explained that the supply of service of transportation by the foreign shipper forms a part of the bundle of supplies between the foreign exporter and the Indian importer, on which the IGST is payable under Section 5(1) of the IGST Act read with Section 20 of the IGST Act, Section 8 and Section 2(30) of the CGST Act. Hence, to levy the IGST on the supply of the service component of the transaction would contradict the principle enshrined in Section 8 and be in violation of the scheme of the GST legislation.

It was, hence, held that while the impugned notifications are validly issued under Sections 5(3) and 5(4) of the IGST Act, it would be in violation of Section 8 of the CGST Act and the overall scheme of the GST legislation.

Conclusion

(i) The recommendations of the GST Council are not binding on the Union and States for the following reasons:

(a) The deletion of Article 279B and the inclusion of Article 279(1) by the Constitution Amendment Act 2016 indicates that the Parliament intended for the recommendations of the GST Council to only have a persuasive value, particularly when interpreted along with the objective of the GST regime to foster cooperative federalism and harmony between the constituent units;

(b) Neither does Article 279A begin with a non-obstante clause nor does Article 246A state that it is subject to the provisions of Article 279A. The Parliament and the State legislatures possess simultaneous power to legislate on GST. Article 246A does not envisage a repugnancy provision to resolve the inconsistencies between the Central and the State laws on GST. The ‘recommendations’ of the GST Council are the product of a collaborative dialogue involving the Union and States. They are recommendatory in nature. To regard them as binding edicts would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST. It is not imperative that one of the federal units must always possess a higher share in the power for the federal units to make decisions. Indian federalism is a dialogue between cooperative and uncooperative federalism where the federal units are at liberty to use different means of persuasion ranging from collaboration to contestation; and

(c) The Government while exercising its rule-making power under the provisions of the CGST Act and IGST Act is bound by the recommendations of the GST Council. However, that does not mean that all the recommendations of the GST Council made by virtue of the power Article 279A (4) are binding on the legislature’s power to enact primary legislations;

(ii) On a conjoint reading of Sections 2(11) and 13(9) of the IGST Act, read with Section 2(93) of the CGST Act, the import of goods by a CIF contract constitutes an “inter-state” supply which can be subject to IGST where the importer of such goods would be the recipient of shipping service;

(iii) The IGST Act and the CGST Act define reverse charge and prescribe the entity that is to be taxed for these purposes. The specification of the recipient – in this case the importer – by Notification 10/2017 is only clarificatory. The Government by notification did not specify a taxable person different from the recipient prescribed in Section 5(3) of the IGST Act for the purposes of reverse charge;

(iv) Section 5(4) of the IGST Act enables the Central Government to specify a class of registered persons as the recipients, thereby conferring the power of creating a deeming fiction on the delegated legislation;

(v) The impugned levy imposed on the ‘service’ aspect of the transaction is in violation of the principle of ‘composite supply’ enshrined under Section 2(30) read with Section 8 of the CGST Act. Since the Indian importer is liable to pay IGST on the ‘composite supply’, comprising of supply of goods and supply of services of transportation, insurance, etc. in a CIF contract, a separate levy on the Indian importer for the ‘supply of services’ by the shipping line would be in violation of Section 8 of the CGST Act.

[Union of India v. Mohit Minerals Pvt. Ltd., 2022 SCC OnLine SC 657, decided on 19.05.2022]


*Judgment by: Justice Dr. DY Chandrachud


Counsels

For UOI: ASG N Venkataraman

For respondent: Senior Advocates V Sridharan, Harish Salve, Arvind Datar, Vikram Nankani and Advocate Uchit Sheth

For intervenors: Advocate Rajesh Kumar Gautam

Legal RoundUpWeekly Rewind


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With regard to contempt, the Court observed that, 

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Income Tax Appellate Tribunal
Case BriefsTribunals/Commissions/Regulatory Bodies

Income Tax Appellate Tribunal, Chandigarh (ITAT): The Coram of Sanjay Garg (Judicial Member) and Annapurna Gupta (Accountant Member) examined the issue as to the taxability of the amount of gift received by the assessee from his ‘HUF’.

An appeal was preferred by the assessee against the Principal Commissioner of Income Tax against revision order passed under Section 263 of the Act, whereby the PCIT had set aside the assessment order passed by the Assessing Officer with a direction to make the assessment afresh under Section 143(3) read with Section 147 of the Income Tax Act.

Factual Background

The assessee had filed his return of income declaring an income of Rs 14,32,982 and the assessment was completed by the Assessing Officer under Section 143(3) of the Act accepting the returned income.

Subsequently, the assessing officer reopened the assessment under Section 147 read with Section 148 on the ground that the assessee during the year under consideration had received a gift of Rs 5,90,000 from the Hindu Undivided Family.

In the opinion of the Assessing Officer, since the amount of said gift was more than Rs 50,000, hence the same was exigible to tax as ‘income from other sources’ under Section 56(2)(vii) of Income Tax Act.

PCIT while invoking his jurisdiction under Section 263 of the Act, set aside the order passed by the Assessing Officer, held that HUF does not fall in the definition of relative in the case of an ‘individual’ as provided in the explanation to clause (vii) to Section 56(2).

Though, the definition of a relative in the case of a ‘HUF’ has been extended to include any member of the ‘HUF’, yet, in the said extended definition, the converse case is not included that is to say in the case of an individual, the ‘HUF’ has not been mentioned in the list of relatives.

Thus, PCIT formed a view that though a gift from a member to the ‘HUF’ was not exigible to taxation as per the provisions of Section 56(2)(vii) of the Act, however, a gift by the HUF to a member exceeding a sum of Rs 50,000 was taxable.

To claim an exemption under Section 10(2) of the Act, the member ‘HUF’ must receive any amount for consideration out of the income of the ‘HUF’. That since the assessee had received the aforesaid amount of Rs 5,90,000/- without consideration, hence, the same was not tax-exempt.

Further, the PCIT set aside the order of the Assessing Officer and directed the AO to make the assessment afresh.

On being aggrieved with the order of the PCIT, the assessee filed the appeal.

Analysis, Law and Decision

Coram expressed that the order of the Assessing Officer cannot be said to be erroneous and therefore, the PCIT wrongly exercised jurisdiction under Section 263 of the Act and the same cannot be held to be justified.

Assessee had taken a plea that the gifts had been received by the assessee out of the income of the ‘HUF’ and that the same was exempt under Section 10(2) of the I.T. Act. It was noted that there was no rebuttal or denial either in the order of the Assessing Officer or in the order of the PCIT in respect of the contention of the assessee that the amount in question was received out of the income of the HUF. In view of the said, the assessee was entitled to exemption under Section 10(2) of the Act.

In case an individual member throws his elf-acquired property into a common pool of ‘HUF’, the ‘HUF’ or other members of the ‘HUF’ do not have any pre-existing right in the self-acquired property of a member. If such an individual member throws his own/self-earned or self-acquired property in common pool, it will be an income of the ‘HUF’, however the same will be exempt from taxation as the individual members of the ‘HUF’ have been included in the meaning of ‘relative’.

In view of the above, the HUF had not been included in the definition of relative in explanation to Section 56(2) (vii) as it was not so required whereas in case of HUF, members of the HUF find mention in the definition of ‘relative’.

Hence, the amount received by the assessee from the ‘HUF’ , being its members, was a capital receipt in his hands and was not exigible to income tax.[Pankil Garg v. Pr. CIT, Karnal; 2019 SCC OnLine ITAT 13321, decided on 17-7-2019]

Case BriefsHigh Courts

Delhi High Court: The Division Bench of Manmohan and Dinesh Kumar Sharma, JJ., expressed that just because the scholarship advertisement was published in the Urdu language, does not mean that it was targeted at students belonging to a particular community only.

Appellant’s Counsel submitted that the Income Tax Tribunal while passing the impugned order overlooked the fact that the Assessing Officer had found that the Respondent-assessee had given merit-cum-scholarship/financial assistance to candidates predominantly belonging to a particular religious community which is violative of Section 13(1)(b) of the Act. He further stated that the advertisement for an educational scholarship was published by the assessee in Urdu language and, that too, in one newspaper only.

Primary Issue


Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in allowing the appeal of the assessee ignoring the fact that the assessee had paid most of the scholarship amount to the students of a particular religious community which was a clear violation of Section 13(1)(b) of the Income Tax Act, 1961?

Analysis and Decision


High Court found that the Commissioner of Income Tax (Appeal) and Tribunal gave a concurrent finding of fact that the benefit of scholarship to the poor and needy students was not confined to students of a particular community and a perusal of the list submitted by the assessee showed that the benefit had been granted to students from all communities without any discrimination.

The Bench expressed that,

 “…just because advertisement was published in Urdu language and that too in one newspaper, it cannot be presumed that it was targeted at the students belonging to a particular community only.”

Adding to the above, Court stated that undoubtedly, the principle of res judicata and estoppel are not applicable in taxation matters.

Stating that consistency of approach must be maintained, High Court held that no substantial question of law arose in the present appeals. [Commr. Of Income Tax {Exemption) v. Hamdard National Foundation (India), 2022 SCC OnLine Del 979, decided on 6-4-2022]


Advocates before the Court:

For the Appellant: Abhishek Maratha, Sr. Standing Counsel.

For the Respondent: Salil Aggarwal, Sr. Advocate with Madhur Aggarwal and Uma Shankar, Advocates

Case BriefsSupreme Court

Supreme Court: The bench of UU Lalit and S. Ravindra Bhat*, JJ has held that whether corporate death of an entity upon amalgamation per se invalidates a tax assessment order ordinarily cannot be determined on a bare application of Section 481 of the Companies Act, 1956 (and its equivalent in the 2013 Act), but would depend on the terms of the amalgamation and the facts of each case.

Facts Background

The Court was deciding an appeal against the order of the Delhi High Court rejecting the appeal, by the revenue and affirming the order of the Income Tax Appellate Tribunal (ITAT) which quashed the assessment order against the assessee Mahagun Realtors Private Limited (MRPL).

MRPL, a real estate company, amalgamated with Mahagun India Private Limited (MIPL) on 01.04.2006. The Assessing Officer (AO), issued an assessment order on 11.08.2011, assessing the income of ₹ 8,62,85,332/- after making several additions of ₹ 6,47,00,972/- under various heads. The assessment order showed the assessee as “Mahagun Relators Private Ltd, represented by Mahagun India Private Ltd”.

It was argued before the Court that the assessment framed in the name of amalgamating company which was ceased to exist in law, was invalid and untenable in terms of Section 170(2) of the Income Tax Act, 1961.

Analysis

Section 170 of Income Tax Act, inter alia, provides that where a person carries on any business or profession and is succeeded (to such business) by some other person (i.e., the successor), the predecessor shall be assessed to the extent of income accruing in the previous year in which the succession took place, and the successor shall be assessed in respect of income of the previous year in respect of the income of the previous year after the date of succession.

Further, there are not less than 100 instances under the Income Tax Act, wherein the event of amalgamation, the method of treatment of a particular subject matter is expressly indicated in the provisions of the Act. In some instances, amalgamation results in withdrawal of a special benefit (such as an area exemption under Section 80IA) – because it is entity or unit specific. In the case of carry forward of losses and profits, a nuanced approach has been indicated. All these provisions support the idea that the enterprise or the undertaking, and the business of the amalgamated company continues. The beneficial treatment, in the form of set-off, deductions (in proportion to the period the transferee was in existence, vis-à-vis the transfer to the transferee company); carry forward of loss, depreciation, all bear out that under the Act, (a) the business-including the rights, assets and liabilities of the transferor company do not cease, but continue as that of the transferor company; (b) by deeming fiction through several provisions of the Act, the treatment of various issues, is such that the transferee is deemed to carry on the enterprise as that of the transferor.

The amalgamation of two or more entities with an existing company or with a company created anew was provided for, statutorily, under the old Companies Act, 1956, under Section 394 (1) (a). Section 394 empowered the court to approve schemes proposing amalgamation, and oversee the various steps and procedures that had to be undertaken for that purpose, including the apportionment of and devolution of assets and liabilities, etc.

Reading Section 394 (2) of the Companies Act, 1956, Section 2 (1A) and various other provisions of the Income Tax Act together, the Court reached to the conclusion that despite amalgamation, the business, enterprise and undertaking of the transferee or amalgamated company- which ceases to exist, after amalgamation, is treated as a continuing one, and any benefits, by way of carry forward of losses (of the transferor company), depreciation, etc., are allowed to the transferee. Therefore, unlike a winding up, there is no end to the enterprise, with the entity. The enterprise in the case of amalgamation, continues.

The Court observed,

“Amalgamation, thus, is unlike the winding up of a corporate entity. In the case of amalgamation, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues – enfolded within the new or the existing transferee entity. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. It is, therefore, essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action or the complaint does not per se cease – depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall.”

Ruling on facts

The Court specifically noticed that, in the present case,

  • The amalgamation was known to the assessee, even at the stage when the search and seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group.
  • A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT.
  • Even the affidavit before the Supreme Court was on behalf of the director of MRPL.
  • The assessment order painstakingly attributed specific amounts surrendered by MRPL, and after considering the special auditor’s report, brought specific amounts to tax, in the search assessment order.

The Court was, hence, of the opinion that all the aforementioned points clearly indicated that the order adopted a particular method of expressing the tax liability. The AO, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home Décor Pvt. Ltd.).

“The mere choice of the AO in issuing a separate order in respect of MRPL, in these circumstances, cannot nullify it.”

Right from the time it was issued, and at all stages of various proceedings, the parties concerned (i.e., MIPL) treated it to be in respect of the transferee company (MIPL) by virtue of the amalgamation order – and Section 394 (2). Furthermore, it would be anybody’s guess, if any refund were due, as to whether MIPL would then say that it is not entitled to it, because the refund order would be issued in favour of a non-existing company (MRPL).

Having regard to all these reasons, the Court held that the conduct of the assessee, commencing from the date the search took place, and before all forums, reflects that it consistently held itself out as the assessee.

[Principal Commissioner of Income Tax v. Mahagun Realtors (P) Ltd, 2022 SCC OnLine SC 407, decided on 05.04.2022]


*Judgment by: Justice S. Ravindra Bhat


Counsels

For Petitioner: Advocate Raj Bahadur Yadav

For respondents: Advocate Kavita Jha

Legal RoundUpSupreme Court Roundups

 

“Women are subject to a patriarchal mindset that regards them as primary caregivers and homemakers and thus, they are burdened with an unequal share of family responsibilities. Measures to ensure substantive equality for women factor in not only those disadvantages which operate to restrict access to the workplace but equally those which continue to operate once a woman has gained access to the workplace.”

Justice Dr. DY Chandrachud

SK Nausad Rahaman v. Union of India

2022 SCC OnLine SC 297


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EXPLAINED


Which law to prevail if provisions of Bihar Public Works Contracts Disputes Arbitration Tribunal Act, 2008 are in conflict with the Arbitration and Conciliation Act, 1996?

Can step-children claim property right in mother’s mehar after her death? Does a registered mehar deed become unenforceable for being nominal?

Can employees appointed for fixed period in temporary unit be absorbed/regularised by creating supernumerary posts?

Compensation under Section 4 of Employee’s Compensation Act, 1923 to be awarded from the date of accident or the date of Commissioner’s order? 

Can voluntary retiree seek retrospective promotion as a matter of right? 

Can State discriminate between persons having experience in home State from those having experience in other States? Is there any intelligible differentia?


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Interchangeability of unfilled posts of SC/ST category can be done only by the department concerned, not by appointing authority

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How will the higher Court know why review jurisdiction was exercised? Courts must mention what was that error apparent on the face of the record

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Supreme Court Cases


2022 SCC Vol. 1 Part 2

In this part, read a very pertinent decision of the Supreme Court, Amazon.com NV Investment Holdings LLC v. Future Retail Ltd.2021 SCC OnLine SC 557 wherein while holding that an award passed by Emergency Arbitrator is enforceable under the Arbitration and Conciliation Act, 1996, a Division Bench of R.F. Nariman and B.R. Gavai, JJ. has ruled in favour of Amazon in the infamous Future-Amazon dispute. It has been held that the interim award in favour of Amazon, passed by the Emergency Arbitrator appointed under the Arbitration Rules of the Singapore International Arbitration Centre is enforceable under the Indian Arbitration Act.

2022 SCC Vol. 1 Part 3

In this part read the Supreme Court decision in Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd.,(2022) 1 SCC 401, wherein the Court while the Adjudicating authority has the authority to disapprove the resolution plan approved by the Committee of Creditors (CoC), it cannot modify the same.

2022 SCC Vol. 2 Part 1

In this part read a very important matter, wherein a relative committed rape on the prosecutrix and none of the family members believed her and in fact beat her up when she narrated the incident, Supreme Court found it unfortunate that even the sister-in-law (Jethani) and mother-in-law though being women did not support the prosecutrix. [Phool Singh v. State of Madhya Pradesh, 2021 SCC OnLine SC 1153]

2022 SCC Vol. 2 Part 2


Case BriefsSupreme Court

Supreme Court: The bench of UU Lalit and S. Ravindra Bhat*, JJ has held that the declaration under the Income Declaration Scheme (IDS) cannot lead to immunity from taxation in the hands of a non-declarant.

The Court explained that the objective of Income Declaration Scheme (IDS), introduced by Chapter IX of the Finance Act, 2016, was to enable an assessee to declare her (or his) suppressed undisclosed income or properties acquired through such income. It is based on voluntary disclosure of untaxed income and the assessee’s acknowledging income tax liability. This disclosure is through a declaration (Section 183 of the Income Tax Act) to the Principal Commissioner of Income Tax within a time period, and deposit the prescribed amount towards income tax and other stipulated amounts, including penalty.

Facially, Section 192 of the Income Tax Act affords immunity to the declarant: “…nothing contained in any declaration made under section 183 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty…” Therefore, the protection given, is to the declarant, and for a limited purpose.

The assessee, in the case at hand, is a private limited company and had filed return of income for the AY 2010-11 on 25.9.2010. The return was accepted under section 143(1) of the Act without scrutiny.

The assessment was re-opened after search proceedings conducted in the case of one Shirish Chandrakant Shah, an accommodation entry provider in Mumbai, it was observed that huge amounts of unaccounted moneys of promoters/directors were introduced in closely held companies of the assessee’s group.

Further, the reasons to believe also stated that the chairman of M.R. Shah Group, during the statement- recorded under Section 132(4), disclosed that Garg Logistics Pvt. Ltd. had declared ₹ 6.36 crores as undisclosed cash utilized for investment in the share capital of the assessee, M.R. Shah Logistics Pvt. Ltd. through various companies. The assessee company’s chairman voluntarily  disclosed the statements made by Garg Logistics under Section 132 of the Act, about the declaration by Garg Logistics P Ltd, under the Income Declaration Scheme (IDS).

It can be seen that in the present case, the declarant was Garg Logistic Pvt Ltd and not the assessee. The Court, hence, held that the assessee could not claim immunity in the present case.

[Deputy Commissioner of Income Tax v. M. R. Shah Logistics Pvt. Ltd., 2022 SCC OnLine SC 365, decided on 28.03.2022]


*Judgment by: Justice S. Ravindra Bhat


For Assessee: Advocate Guru Krishnakumar

Case BriefsSupreme Court

Supreme Court: In the instant appeals, the Market Committees located in Rajasthan raised their grievance over the decision of CESTAT that respective Market Committees are liable to pay service tax under the category of ‘renting of immovable property service’ for the period upto 30.06.2012. The Division Bench of M.R. Shah* and B.V. Nagarathna, JJ., while observing that in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain and is capable of determining defined meaning; dismissed the appeals and held that on and after 01.07.2012, such activities carried out by the Agricultural Produce Market Committees is placed in the Negative List. If the intention was to exempt such activities of the Market Committees from levy of service tax, then there was no necessity to place such activity of the Market Committees in the Negative List. Therefore, it can be safely said that that, the Market Committees were not exempted from payment of service tax on such activities.

Facts: Krishi Upaj Mandi Samitis (Agricultural Produce Market Committees) were established in Rajasthan under the provisions of Rajasthan Agricultural Produce Markets Act, 1961. The committees regulate sale of agricultural produce in the notified markets. They charged “market fee” for issuing license to traders, agents, factory/storage, company or other buyers of other agricultural produce. They also rented out the land and shops to traders and collect allotment fee/lease amount for such land/shop.

The Revenue was of the view that the appellants are liable to pay the service tax on the services rendered by them by renting/leasing the lands/shops. The same was challenged by the appellants. However CESTAT noted that with the introduction of Negative List Regime of taxation w.e.f. 01.07.2012, the services in question were excluded from the tax liability and therefore the appellant(s) being an Agricultural Produce Market Committee was/were excluded from tax liability on and after 01.07.2012; i.e. Market Committees are not liable to service tax for the period after 01.07.2012, however CESTAT held that Market Committees are liable to pay service tax under the category of “renting of immovable property service” for the period upto 30.06.2012.

The grievance of the appellants was centered around Circular No.89/7/2006 dated 18.12.2006. As per the Circular, activities performed by the sovereign / public authorities under the provisions of law being mandatory and statutory functions and the fee collected for performing such activities is in the nature of a compulsory levy as per the provisions of the relevant statute and it is deposited into the Government Treasury, no service tax is leviable on such activities. Paragraph 3 of the Circular, specifically clarifies that if such authority performs a service, which is not in the nature of a statutory activity and the same is undertaken for consideration, then in such cases, service tax would be leviable, if the activity undertaken falls within the ambit of a taxable service.

Contentions: The counsels for the appellants Prakul Khurana and Ms. Divyasha Mathur, submitted before the Court that the activity of allotting shops/premises/spaces to traders and brokers by the respective Market Committees for the purpose of storage and/or marketing of agricultural produce is in the nature of a statutory activity as mandated under S. 9 of Rajasthan Agricultural Produce Markets Act, 1961 and, therefore, the Market Committees are exempted from payment of service tax on such services as per Circular. They further contended that the fees collected by the respective Market Committees on renting/leasing the land/shop will be deposited in the Market Committee Fund and the same shall be ultimately used for the betterment of the market area, thus when the Market Committees are the public authorities under the 1961 Act and when they perform the statutory duty / function of allotment/renting/leasing of land/shop, then such Market Committees are entitled to the exemption provided under the 2006 Circular.

The counsel for the respondent, Nisha Bagchi submitted before the Court that the activities of allotment/renting/leasing of the shop/shed/platform/land cannot be said to be a mandatory statutory activity and therefore, the Market Committees are not exempted from service tax as per 2006 Circular. She further argued that as per the language used in the legislation, S. 9 of the 1961 Act, is an enabling provision and does not cast a mandatory duty over the Market committees to allot/rent/lease the shop/land/platform.  Therefore the activities of renting/leasing by the Market Committees to the traders cannot be said to be a statutory activity, hence the market committees are not entitled to claim any exemption under the 2006 circular. The respondents further contended that exemption notification should be strictly construed and given meaning according to legislative intent and that the statutory provisions providing for exemption have to be interpreted in light of the words employed in them and there cannot be any addition or subtraction from the statutory provisions.

Observation: Perusing the 2006 Circular, the Court noted that language used is clear and unambiguous. Applying the principles of interpretation of statutes, the Court observed that, “It is settled law that the notification has to be read as a whole. If any of the conditions laid down in the notification is not fulfilled, the party is not entitled to the benefit of that notification. An exception and/or an exempting provision in a taxing statute should be construed strictly and it is not open to the court to ignore the conditions prescribed in the relevant policy and the exemption notifications issued in that regard”.

The Court observed that the contention of the appellants stating that the activity of rent/lease/allotment of shop/land/platform/space is a statutory activity and the Market Committees are performing their statutory duties under S. 9 hence the entitlement to exemption, holds no substance.

After carefully perusing the words used in S. 9, the Court stated that the activity cannot be said to be a mandatory statutory activity as contended by appellants since the fee collected is not deposited into the Government Treasury; it will go to the Market Committee Fund and will be used by the market committees. Thus such a fee collected cannot have the characteristics of the statutory levy/statutory fee. Thus, under the1961 Act, it cannot be said to be a mandatory statutory obligation of the Market Committees to provide shop/land/platform on rent/lease. “If the statute mandates that the Market Committees have to provide the land/shop/platform/space on rent/lease then and then only it can be said to be a mandatory statutory obligation otherwise it is only a discretionary function. If it is discretionary function, then, it cannot be said to be a mandatory statutory obligation/statutory activity. Hence, no exemption to pay service tax can be claimed”.

[Krishi Upaj Mandi Samiti v. Commissioner of Central Excise and Service Tax, 2022 SCC OnLine SC 224, decided on 23-02-2022]


*Judgment by: Justice MR Shah


Sucheta Sarkar, Editorial Assistant has put this report together

Legal RoundUpSupreme Court Roundups

“No doubt, that a Judicial Officer while discharging his/her duties, is expected to be independent, fearless, impassionate and non-impulsive. But a Judicial Officer is also a human being. A Judicial Officer is also a parent. He/she could be a father or a mother. “

X v. High Court of MP

2022 SCC OnLine SC 171


STORY OF THE MONTH


Harassed, transferred, left with no choice but to resign: Read how this MP District Judge won half the battle in alleged sexual harassment case as SC orders her reinstatement

The resignation by the petitioner was on account of exasperation and frustration actuated by a thought, that injustice was being meted out to her by the very Institution of Judiciary.

The Court observed that,

“… in a gruesome battle between a mother and a Judicial Officer, the Judicial Officer lost the battle to the mother.”

Read more…


UNMISSABLE STORIES


Fraudulent Trading| SEBI must disclose all relevant material, including Investigation Report, to noticee except certain sensitive information

“If the report of the investigation authority under Regulation 9 has to be considered by the Board before satisfaction is arrived at on a possible violation of the regulations, the principles of natural justice require due disclosure of the report.”

Read more…

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Supreme Court rejects default bail plea of Rahul Modi, MD of Adarsh Group

“Filing of the charge-sheet within stipulated period is sufficient compliance u/s 167 of CrPC.”

Read more…

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Amazon-Future-Reliance Dispute| SC allows Future Group to approach Delhi HC for continuation of merger deal with Reliance Group

The 3-judge bench of NV Ramana, CJ and AS Bopanna and Hima Kohli, JJ has granted liberty to Future Retail Limited (FRL) to approach the Delhi High Court by filing an application seeking continuation of the NCLT proceedings beyond the 8th Stage i.e. Meeting of Shareholders and creditors.

Read more…

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Section 498A IPC| Husband’s relatives cannot be forced to undergo trial in absence of specific allegations of dowry demand

“A criminal trial leading to an eventual acquittal also inflicts severe scars upon the accused.”

Read more…

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Supreme Court furthers SOP for evidence recording via video-conferencing in cases related to child victims/witnesses of human trafficking

“It is well known that our country is a technological powerhouse and if we are unable to take advantage of the resources available with us and fully utilise the benefits of technology through computers and the internet for the benefit of children, our status as a technological powerhouse would be in jeopardy and would remain only on paper.”

Read more…

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POCSO Offenders Deserve No Leniency; “A Message Must Be Conveyed To The Society At Large”

“Cases of sexual assault or sexual harassment on the children are instances of perverse lust for sex where even innocent children are not spared in pursuit of such debased sexual pleasure.”

Read more…

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Bullet Train Project: Even Republic of India can’t deviate from terms and conditions of a fully foreign funded contract; SC sets aside Delhi High Court verdict

Japan International Cooperation Agency (JICA) has invested Rs.1 lakh crores in the Bullet Train Project.

Read more…


EXPLAINERS



MORE STORIES


Not mandatory to register partition document only detailing how the properties are to be dealt with in future

The Court was deciding a case where the panchayatdars had passed an award in the form of a resolution in relation to a family property.

Read more…

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Lok Adalat Award cannot be a basis for redetermination of the compensation under Section 28A of the LA Act

An Award passed under Section 19 of the 1987 Act is a product of compromise. Sans compromise, the Lok Adalat loses jurisdiction.

Read more…

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Applications under Section 156 (3) Cr.P.C. being filed only to harass other; Filing of affidavit a must

In a case where the Magistrate had passed an order under Section 156(3) CrPC even in absence of an affidavit duly sworn by the complainant, the bench of BR Gavai* and Krishna Murari, JJ that many a times the applications under Section 156 (3) of the Cr.P.C. are filed in a routine manner without taking any responsibility only to harass certain persons and hence, such applications are to be supported by affidavits.

Read more…

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Minor penalties, without cumulative effect, are still a proof of tainted service record; Benefit of Selection Grade can’t be claimed as a right

In a case where a former employee of Rajasthan State Road Transport Corporation sought benefit of Selection Grade, 7 years after his compulsory retirement, the bench of Dr. DY Chandrachud and Surya Kant, JJ has held that the grant of the Selection Grade is not a matter of right and is subject to the stipulated terms and conditions which, in the present case, included a clean and untainted service record.

Read more…

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Merely writing “cancelled” on registered power of attorney wouldn’t make it null and void

The Division Bench of K.M. Joseph* and Pamidighantam Sri Narasimha, JJ., held that mere writing the word “cancelled” or drawing a line would not render Power of Attorney null and void as there must be cancellation and it must further be brought to the notice of the third party at any rate.

Read more…

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Law passed by legislature is good law till it is declared unconstitutional by a Court

The Supreme Court held that, the Manipur Legislature was not competent to introduce a saving clause in the Repealing Act 2018.

Read more…

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Consent decree cannot be modified/ altered unless the mistake is a patent or obvious one

“Even assuming there is a mistake, a consent decree cannot be modified/ altered unless the mistake is a patent or obvious mistake. Or else, there is a danger of every consent decree being sought to be altered on the ground of mistake/ misunderstanding by a party to the consent decree.”

Read more…

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IBC Amendment, 2018; Supreme Court elaborates conditions for disqualification of Resolution Professional under S. 29A(h) of IBC

“…what is required to earn a disqualification under the said provision is a mere existence of a personal guarantee that stands invoked by a single creditor, notwithstanding the application being filed by any other creditor seeking initiation of insolvency resolution process subject to further compliance of invocation of the said personal guarantee by any other creditor.”

Read more…

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Compassionate Appointment cannot be denied to children born from the second wife of a deceased employee

“A policy cannot discriminate against a person only on the ground of descent by classifying children of the deceased employee as legitimate and illegitimate and recognizing only the right of legitimate descendant.”

Read more…

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No Corporation/Planning Authority can be compelled to acquire an unusable or unsuitable land and be compelled to pay compensation to landowners

“Once by operation of law, the reservation is deemed to have lapsed, it is lapsed for all purposes and for all times to come.”

Read more…

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Default/Delay in payment of EPF by employer: Mens rea or actus reus not an essential element for imposing civil penalty/damages

The bench of Ajay Rastogi and Abhay S. Oka, JJ has held that any default or delay in the payment of EPF contribution by the employer under the Employees Provident Fund & Miscellaneous Provisions Act, 1952 is a sine qua non for imposition of levy of damages under Section 14B and mens rea or actus reus is not an essential element for imposing penalty/damages for breach of civil obligations/liabilities.

Read more…

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Advocate an officer of the Court; May be appointed by CMM/DM to assist in execution of order passed under Section 14(1) of SARFAESI Act

The Court was called upon to decide whether the past practice followed by most of the courts across the country in recognising the power of the CMM/DM to appoint an advocate as a commissioner to assist him in merely taking possession of the secured assets and documents relating thereto and to forward the same to the secured creditor, needs to be discontinued as being prohibited owing to insertion of sub-Section (1A) of Section 14 of SARFAESI Act?

Read more…

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Benefit conferred on one or a set of people, without legal basis or justification, cannot multiply and be relied upon as a principle of parity

“A principle, axiomatic in this country’s constitutional lore is that there is no negative equality.”

Read more…

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Is independent suit questioning a compromise decree maintainable or one has to approach the same Court which recorded the compromise to challenge it? SC answers

“If clever drafting of the plaint has created the illusion of a cause of action, the court will nip it in the bud at the earliest so that bogus litigation will end at the earlier stage.”

Read more…

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Bank Employees misappropriate funds. Confession by one leads to mild penalty; No evidence against another leads to dismissal! SC directs reinstatement

“A reading of the disciplinary authority’s order reveals that his past record of minor misconduct played a major role in determining his guilt, despite lack of evidence, and the extreme penalty of dismissal.”

Read more…

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Section 138 NI Act| Prima-facie indication as to complaint by a company through an authorised employee having knowledge of the case enough for Magistrate to take cognizance

The 3-judge bench of NV Ramana, CJ and AS Bopanna* and Hima Kohli, JJ has held that when the complainant/payee for a complaint filed under Section 138 of NI Act is a company, an authorized employee can represent the company. Such averment need not be in any particular manner and prima facie material is sufficient for the Magistrate to take cognizance and issue process.

Read more…

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SC discusses law on compensation for injurious affection; Summarises items under S. 23(1) of LA Act to be considered by court while determining compensation

“Railway line is not like a roadway. Roads can take diversion easily, but not railway lines.”

Read more…

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Can sale pursuant to a public auction, be set aside at the instance of strangers to the auction proceeding? SC decides

if there was any error in the decision-making process adopted by the authority, the remedy available was to question the sale deed in an appropriate proceeding available under the law and not by filing a petition under Article 226 of the Constitution of India”.

Read more…

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Financier-in-possession of a motor/transport vehicle liable to pay tax under U.P. Motor Vehicles Taxation Act, 1997

While dealing with the scope of Section 12 of the U.P. Motor Vehicles Taxation Act, 1997, bench of MR Shah* and BV Nagarathna, JJ has held that a financier of a motor vehicle/transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements.

Read more…

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Chased and killed in the mid night much after the altercation, even after the deceased reached his house. Cold blooded murder or  culpable homicide not amounting to murder? SC decides

In a case relating to murder versus culpable homicide legal controversy, the Division Bench of M.R. Shah* and B.V. Nagarathna, JJ., held that the Uttaranchal High Court had erred in observing that the case would fall under Fourth exception to Section 300 IPC and had failed to properly appreciate the multiple injuries sustained by the deceased.

Read more…

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Bank entitled to withhold payment where Bond holder’s title is clouded as fraudulent

“Shylock has received their promised pound of flesh but they seem to want more”

Read more…

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Is unstamped Arbitration Agreement enforceable?

Supreme Court holds question being pending before larger Bench will not hinder arbitration proceedings unless issue indicates existence of deadwood.

Read more…

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Economic Offence| 25 crores siphoned off by forging documents and misusing KYCs of employees; SC cancels Delhi HC’s order granting bail to the suspect

Mere non-misuse of liberty cannot be a ground to confirm the bail order otherwise not sustainable in law.

Read more…

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5-year moratorium on new Pharmacy Colleges: Chh HC’s interim order directing PCI to consider application for affiliation stayed; Matter to be disposed of in 4 weeks

Supreme Court imposed a stay on the Chattisgarh High Court’s interim order directing the PCI to permit the respondents to submit their application required for the necessary permission and approval and also for grant of necessary affiliation for the academic session 2022-23.

Read more…

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Post Poll Violence| Anticipatory Bail to Mamta’s Banerjee’s Election Agent SK Supiyan in murder case; Must fully cooperate in the probe

The Court made clear that the pre-arrest bail is liable to be cancelled if it is found that the appellant is not cooperating for the investigation.

Read more…

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By purchasing power at higher rate, Andhra Pradesh DISCOMS have acted contrary to public interest

“Every action of a State is required to be guided by the touch¬stone of non-arbitrariness, reasonableness and rationality. Every action of a State is equally required to be guided by public interest. Every holder of a public office is a trustee, whose highest duty is to the people of the country.”

Read more…

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Whether lotteries being res extra commercium takes away CCI’s Jurisdiction to entertain anti-competition activities relating to lotteries? SC decides

“A simple aspect of anti-competitive practices and cartelisation had got dragged on for almost ten years in what appears to be a mis-application by the High Court of the interplay of the two Acts, i.e., the Competition Act and the Regulation Act.”

Read more…

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“Debt arising out of advance payment for supply of goods or services is an operational debt”; SC allows operational creditor to initiate CIRP

“…no doubt that a debt which arises out of advance payment made to a corporate debtor for supply of goods or services would be considered as an operational debt.”

Read more…

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SC sets aside HC order for applying test of criminal proceedings to departmental proceedings

“No case for interference either on law or on moral grounds”

Read more…


IN OTHER NEWS


Supreme Court invites applications seeking conferment of designation of Senior Advocates


SUPREME COURT CASES 

[An overview of the cases reported in the latest volumes of SCC]


2021 SCC Vol. 9 Part 3

In Part 3 of Volume 9, read this very interesting decision, where the Election Commission of India (EC) had sought a direction.

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2021 SCC Vol. 10 Part 1

In Part 1 Volume 10 of 2021, read Supreme Court’s decision in Supertech Ltd. v. Emerald Court Owner Resident Welfare Assn.(2021) 10 SCC 1, wherein the Court made an observation that “illegal constructions have to be dealt with strictly to ensure compliance with the rule of law.”

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2021 SCC Vol. 10 Part 2

In this part, read three really interesting Articles along with some very carefully analysed decisions of the Supreme Court by our editors.

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2021 SCC Vol. 10 Part 3

This part has a very interesting decision from the Supreme Court, wherein the Court issued “general uniform direction” of deduction of 15 per cent of the annual school fees for the academic year 2020-2021 in lieu of unutilised facilities/activities and not on the basis of actual data school-wise.[Indian School v. State of Rajasthan, (2021) 10 SCC 517].

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2021 SCC Vol. 10 Part 4

Evidence Law, Arbitration Law, Service Law and many more interesting decisions covered in this part covering some very pertinent laws.

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2022 SCC Vol. 1 Part 1

In 2022 SCC Volume 1 Part 1, read a very significant decision of Supreme Court wherein it made a very pertinent observation with regard to arbitral awards,

“There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention …”

[Delhi Airport Metro Express (P) Ltd. v. DMRC, 2021 SCC OnLine SC 695]


 

Case BriefsSupreme Court

Supreme Court: While dealing with the scope of Section 12 of the U.P. Motor Vehicles Taxation Act, 1997, bench of MR Shah* and BV Nagarathna, JJ has held that a financier of a motor vehicle/transport vehicle in respect of which a hire-purchase, lease or hypothecation agreement has been entered, is liable to tax from the date of taking possession of the said vehicle under the said agreements.

The Court further explained that only in a case, which falls under sub-section (2) of Section 12 and subject to surrender of the necessary documents as mentioned in sub-section (2) of Section 12, the liability to pay the tax shall not arise, otherwise the liability to pay the tax by such owner/operator shall continue.

What Section 12 of the U.P. Motor Vehicles Taxation Act, 1997 state?

Section 12 provides for non-use of vehicle and refund of tax.

As per Section12(1) when any person who has paid the tax in respect of a transport vehicle, proves to the satisfaction of the Taxation Officer in the prescribed manner that the motor vehicle in respect whereof such tax has been paid, has not been used for a continuous period of one / month or more since the tax was last paid, he shall be entitled to a refund of an amount equal to one-third of the rate of quarterly tax or one twelfth of the yearly tax, as the case may be payable in respect of such vehicle for each thirty days of such period for which such tax has been paid.

However, Section 12(2) provides that where the operator or, as the case may be, the owner of a motor vehicle, does not intend to use his vehicle for a period of one month or more he shall, before the date the tax or additional tax, as the case may be is due, surrender the certificate of registration, the token, if any, issued in respect of the motor vehicle and the permit, if any, to the Taxation Officer of the region where the tax or additional tax was last paid and on such surrender, no tax or additional tax under Act, 1997 shall be payable in respect of such vehicle for each complete calendar month of the period during which the vehicle remains withdrawn from use and the aforesaid documents remain surrendered with the Taxation Officer.

As per proviso to sub-section (2) of Section 12 in case such vehicle is found plying during the period when its documents as mentioned in sub-section (2) of Section 12 remain surrendered with the Taxation Officer, such owner or operator, as the case may be, shall be liable to tax and additional tax as if the documents were not surrendered and shall also be liable to penalty equivalent to five times of the tax and additional tax.

Analysis

Going by the scheme of the U.P. Motor Vehicles Taxation Act, 1997, the Court observed that in respect of a transport vehicle, the tax is to be paid in advance as monthly tax or yearly tax, as the case may be, and only thereafter such vehicle shall be put to use.

The owner or operator has to first pay the tax in advance and thereafter if the transport vehicle is not used for a continuous period of one month or more since the tax was last paid, he may have to apply for the refund, which may be granted subject to compliance of the necessary requirements as per first proviso to Section 12 and subject to satisfaction of the Taxation Officer that the transport vehicle has not been used for a continuous period of one month or more since the tax was last paid.

The Court made it clear that there is only one eventuality where no tax or advance tax under the Act, 1997 shall be payable namely under sub-section (2) of Section 12, where the operator or, as the case may be, the owner of a motor vehicle, does not intend to use his vehicle for a period of one month or more, he shall, before the date the tax or additional tax, as the case may be, is due, surrender the certificate of registration, the token, if any, issued in respect of the motor vehicle and the permit, if any, to the Taxation Officer of the region where the tax or additional tax was last paid and only on such surrender, no tax or additional tax under Act, 1997 shall be payable in respect of such vehicle for each completed calendar month of the period during which the vehicle remains withdrawn from use and the aforesaid documents remain surrendered with the Taxation Officer.

If, after the payment of tax, the vehicle is not used for a month or more, then such an owner may apply for refund under Section 12 of the Act, 1997 and has to comply with all the requirements for seeking the refund as mentioned in Section 12, and on fulfilling and/or complying with all the conditions mentioned in Section 12(1), he may get the refund to the extent provided in sub-section (1) of Section 12, as even under Section 12(1), the owner / operator shall not be entitled to the full refund but shall be entitled to the refund of an amount equal to one-third of the rate of quarterly tax or one twelfth of the yearly tax, as the case may be, payable in respect of such vehicle for each thirty days of such period for which such tax has been paid. However, only in a case, which falls under sub-section (2) of Section 12 and subject to surrender of the necessary documents as mentioned in sub-section (2) of Section 12, the liability to pay the tax shall not arise, otherwise the liability to pay the tax by such owner/operator shall continue.

The Court, hence, upheld the Allahabad High Court judgment wherein it was held that a financier-in-possession of the transport vehicle is liable to pay tax under the U.P. Motor Vehicles Taxation Act, 1997.

[Mahindra and Mahindra Financial Services v. State of UP, 2022 SCC OnLine SC 219, decided on 22.02.2022]


*Judgment by: Justice MR Shah


Counsels

For appellant: Advocate Prashant Kumar

For State: Senior Advocate Garima Prasad

Legal RoundUpSupreme Court Roundups

“Merit is not solely of one‘s own making. The rhetoric surrounding merit obscures the way in which family, schooling, fortune and a gift of talents that the society currently values aids in one‘s advancement.”

Neil Aurelio Nunes v. Union of India, 2022 SCC OnLine SC 75


STORY OF THE MONTH


“Reservation is not at odds with merit”; Here’s why SC upheld OBC reservation in NEET PG and UG Admissions in AIQ quota

In a detailed judgment, the bench of Dr. DY Chandrachud and AS Bopanna, JJ has upheld the Constitutional validity of the reservation for OBC candidates in the AIQ seats for PG and UG  medical and dental courses and noticed that while an open competitive exam may ensure formal equality where everyone has an equal opportunity to participate, however, widespread inequalities in the availability of and access to educational facilities will result in the deprivation of certain classes of people who would be unable to effectively compete in such a system.

Read more…


UNMISSABLE STORIES


COVID-19/Omicron surge yet again forces Supreme Court to extend period of limitation for filing of cases

After the Supreme Court Advocates-on-Record Association approached the Court in light of the spread of Omicron, the new variant of the COVID-19 and the drastic surge in the number of COVID cases across the country, the 3-judge bench of NV Ramana, CJ and L. Nageswara Rao and Surya Kant, JJ restored the order dated 23.03.2020 and directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi judicial proceedings.

Read more

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PM Modi Security Lapse: “War of words no solution”; SC appoints Committee headed by Justice Indu Malhotra to look into the matter

After a massive security lapse that left Prime Minister Narendra Modi stuck on a highway in Punjab for 20 minutes on January 5, 2022, the 3-judge bench of NV Ramana, CJ and Surya Kant and Hima Kohli, JJ has formed a committee to be chaired by Justice Indu Malhotra, former Supreme Court Judge.

Read more…

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NEET 2021-22: Supreme Court allows Counselling with 27% Quota for OBCs and 10% Quota for EWS in All India Quota

 Considering the urgent need to commence the process of Counselling, the bench of Dr. DY Chandrachud* and AS Bopanna, JJ, has directed that counselling on the basis of NEET-PG 2021 and NEET- UG 2021 shall be conducted by giving effect to the reservation as provided by the notice dated 29 July 2021, including the 27 per cent reservation for the OBC category and 10 per cent reservation for EWS category in the All India Quota seats.

Read more…

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Suspension of 12 Maharashtra BJP MLAs for one year “grossly illegal”; worse than expulsion, disqualification or resignation

In a big relief to the 12 BJP MLAs who were suspended by the Maharashtra Legislative Assembly, by resolution dated 05.07.2021, for a period of 1 year due to “indisciplined and unbecoming behavior resulting in maligning the dignity of the House”, the 3-judge bench of AM Khanwilkar*, Dinesh Maheshwari and CT Ravikumar, JJ has held that the said resolution is unconstitutional, grossly illegal and irrational to the extent of period of suspension beyond the remainder of the concerned (ongoing) Session.

Read more…

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“Can’t allow Devas and its shareholders to reap the benefits of their fraudulent action”; SC upholds NCLAT’s order to wind up Devas  

“If the seeds of the commercial relationship between Antrix and Devas were a product of fraud perpetrated by Devas, every part of the plant that grew out of those seeds, such as the Agreement, the disputes, arbitral awards etc., are all infected with the poison of fraud.”

Read more…

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Arcelor Mittal Nippon Steel India Limited to pay the purchase tax of Rs. 480 Crores as SC sets aside Gujarat HC verdict

In a major blow to Essar Steel Limited, now Arcelor Mittal Nippon Steel India Limited), the bench of MR Shah* and Sanjiv Khanna, JJ has set aside the Gujarat High Court verdict wherein it was held that Essar was entitled to the exemption from payment of purchase tax as per the Notification dated 05.03.1992, which was issued under Section 49(2) of the Gujarat Sales Tax Act, 1969. As a result Essar will now have to pay the purchase tax of Rs.480.99 crores.

Read more…

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Dowry Death| Woman meting out cruelty to another woman deserves no leniency. Mother-in-law must protect daughter-in-law, not harass her: SC

“Being a lady, the appellant, who was the mother-in-law, ought to have been more sensitive vis-à-vis her daughter-in-law.”

Read more…

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Can Demand of Money for Construction of a House be Treated as a Dowry Demand? SC answers in a 2002 case where a 5-months pregnant woman set herself on fire

“A push in the right direction is required to accomplish the task of eradicating this evil which has become deeply entrenched in our society.”

Read more…

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Pension is not a bounty; Lack of financial resources no excuse for taking away vested rights by way of retrospective amendments

The bench of Ajay Rastogi and Abhay S. Oka, JJ has held that an amendment having retrospective operation which has the effect of taking away the benefit already available to the employee under the existing rule indeed would divest the employee from his vested or accrued rights and that being so, it would be held to be violative of the rights guaranteed under Articles 14 and 16 of the Constitution.

Read more…

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Cal HC had no jurisdiction to quash CAT Principle Bench’s transfer order in Alapan Bandhopadhyay Case, holds SC, based on this Constitution Bench Law holding ground since 1997

The 2-judge bench of AM Khanwilkar and CT Ravikumar, JJ has reiterated the position laid down by the Constitution Bench in L. Chandra Kumar v. Union of India, (1997) 3 SCC 261, that any decision of such a Tribunal, including the one passed under Section 25 of the Administrative Tribunals Act, 1985 could be subjected to scrutiny only before a Division Bench of a High Court within whose jurisdiction the Tribunal concerned falls.

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EXPLAINERS



MORE STORIES


“Not a case of lack of promotional opportunities”; No financial upgradation to employee refusing regular promotion for personal reasons

The bench of R. Subhash Reddy and Hrishikesh Roy*, JJ has held that if a regular promotion is offered but is refused by the employee before becoming entitled to a financial upgradation, she/he shall not be entitled to financial upgradation only because she/he has suffered stagnation.

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Life cannot be breathed into the stillborn charge memorandum; SC holds where prior approval is the rule the defect cannot be cured by post-facto approval

“What is non-existent in the eye of the law cannot be revived retrospectively.”

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Cheque gets deposited to the account of account holder with strikingly similar name. Bank blames customer. Read why SC was “surprised” at NCDRC’s ruling

In an interesting case where one SBI account holder was left with a balance of Rs. 59/- only in his account due to the existence of another bank account with strikingly similar name in the same branch, the bench of Sanjiv Khanna and Bela M. Trivedi*, JJ has set aside the “highly erroneous” impugned order passed by the National Consumer Disputes Redressal Commission solely relying upon the suo-moto report called for from SBI during the pendency of the revision application.

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Reservation in promotion: The 6 issues settled by Supreme Court on collection of quantifiable data on inadequacy of representation

The 3-judge bench of L. Nageswara Rao*, Sanjiv Khanna and BR Gavai has answered 6 crucial questions in relation to quantifiable data showing inadequacy of representation in promotional posts.

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Delinquent employee doesn’t have an absolute right to be represented in departmental proceedings by the agent of his choice

In a case where the Rajasthan High Court had permitted the respondent employee who is facing disciplinary proceedings to represent through ex-employee of the Bank, the bench of MR Shah* and Sanjiv Khanna, JJ has interpreted Regulation 44 of the Rajasthan Marudhara Gramin Bank (Officers and Employees) Service Regulation, 2010 read with clause 8.2 of the Handbook Procedure to hold that the delinquent employee has no absolute right to avail the services by ex-employee of the Bank as his DR in the departmental proceedings.

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COVID-19| A Biological Weapon? Most misconceived! SC rules it is for the elected Government to take necessary action if any

While addressing a petition making bizarre claim that virgin Coconut Oil can dissolve Covid-19 virus, the Division Bench of Sanjay Kishan Kaul and M.M. Sundresh, JJ., held that it cannot let every person who believes that he has some solution to the virus, to come up in a petition under Article 32 of the Constitution.

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High Court’s Revisional jurisdiction under Section 401 Cr.P.C re power to reverse acquittal. SC answers important questions

“Though the High Court has revisional power to examine whether there is manifest error of law or procedure etc., however, after giving its own findings on the findings recorded by the court acquitting the accused and after setting aside the order of acquittal, the High Court has to remit the matter to the trial Court and/or the first appellate Court, as the case may be.”

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P&H HC directs State to provide sports quota of 3% in Government Medical/Dental Colleges instead of 1% provided in policy decision. Such mandamus impermissible, holds SC

Explaining the scope of writ jurisdiction, the bench of MR Shah* and BV Nagarathna, JJ has held that the State Government’s action taking a policy decision to prescribe a particular percentage of reservation/quota for a particular category of persons, cannot be interfered with by issuance of a writ of mandamus, directing the State Government to provide for a particular percentage of reservation for a particular category of persons other than what has been provided in the policy decision taken by the State Government.

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Person with 54% disability pinned to the ground, throttled by neck and consequently killed by strangulation; SC cancels HC order granting bail to the accused

Finding the order of the High Court cryptic and casual, de hors coherent reasoning, the Bench invoked the latin maxim “cessante ratione legis cessat ipsa lex” to hold that “reason is the soul of the law, and when the reason of any particular law ceases, so does the law itself”.

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Civil Court has no jurisdiction in dispute relating to property governed by the Haryana (Control of Rent & Eviction) Act, 1973: SC

The Court was deciding the dispute relating to suit property situated within the municipal limits of Kaithal which is governed by the Haryana (Control of Rent & Eviction) Act, 1973.

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Traffic blockage due to agitation, failure to deliver consignment within validity period of e-way bill; SC imposes cost of Rs. 59000 on Sales Tax Officer for illegally imposing penalty

“When the undeniable facts, including the traffic blockage due to agitation, are taken into consideration, the State alone remains responsible for not providing smooth passage of traffic.”

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Whether adoption of parent Government Resolution by an undertaking leads to automatic adoption of subsequent modifying resolutions?

“There are limitations or qualifications to the applicability of the doctrine of ‘equal pay for equal work’.”

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State ‘exclusivity’ for disallowance of certain fee, charge, etc. is to be viewed from the nature, not the number of undertakings on which the levy is imposed

The Division Bench of R. Subhash Reddy* and Hrishikesh Roy, JJ., held that to determine State Monopoly for disallowance of certain fee, charge, etc. in the case of State Government Undertakings the aspect of ‘exclusivity’ has to be viewed from the nature of undertaking on which levy is imposed and not on the number of undertakings on which the levy is imposed.

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Failure to provide occupancy certificate a deficiency in service under the Consumer Protection Act and also a continuing wrong

The bench of Dr. DY Chandrachud* and AS Bopanna, JJ has held that failure on the part of the builder to provide occupancy certificate is a continuing breach under the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act 1963 and amounts to a continuing wrong.

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Whether charitable education institutions exempted from levy of electricity duty under Maharashtra Electricity Act, 2016? Supreme Court interprets

The Division Bench comprising of M. R. Shah* and Sanjiv Khanna, JJ., reversed the impugned order of the High Court whereby the High Court had held that education institutions run by charitable societies are exempted from payment of electricity duty.

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Non-consideration for subsequent preference post after being declared ineligible for first post preference: Is it unjust? Supreme Court answers

While addressing the issue as to whether a candidate is entitled to claim appointment on a subsequent post in his preference list after having being considered for his first preference and being declared not suitable for the said post due to non-fulfilment of physical requirements, the Division Bench of Dr Dhananjaya Y Chandrachud and A.S. Bopanna*, JJ., replied in negative.

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“Democratic interests cannot be judicially aborted to preserve unfettered freedom to conduct business, of the few”; Govt. decision to ban MTTs in PPE products ensures adequate PPE in India: SC

“This Court must be circumspect that the rights and freedoms guaranteed under the Constitution do not become a weapon in the arsenal of private businesses to disable regulation enacted in the public interest.”

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Order de hors reasoning cannot result in grant of bail! SC holds informant has a right to assail bail orders bereft of reasons before a higher forum

“It would be only a non speaking order which is an instance of violation of principles of natural justice. In such a case the prosecution or the informant has a right to assail the order before a higher forum.”

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Scrap picker beaten to death; incident recorded in CCTV: State failed to protect victim’s rights by not challenging Guj HC’s order releasing accused on bail; SC cancels bail

In a case where a scrap picker was beaten to death and the Gujarat High Court had released one of the accused on bail despite the entire incident been recorded in the CCTV footages and the mobile phone, the bench of MR Shah and BV Nagarathna, JJ has cancelled the bail and has observed that by not filing the appeals by the State against the impugned judgments and orders releasing the accused on bail in such a serious matter, the State has failed to protect the rights of the victim.

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Gift deed by an old illiterate woman: SC approves not legalistic but holistic approach by lower courts to determine validity of deed. HC’s verdict set aside

In an issue relating to the alleged gift deed by an old illiterate woman, the bench of MR Shah and Sanjiv Khanna*, JJ has held that when a person obtains any benefit from another, the court would call upon the person who wishes to maintain the right to gift to discharge the burden of proving that he exerted no influence for the purpose of obtaining the document.

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No more uncertainty over fixation of percentage of reservation for OBC and SC/ST candidates; SC interprets Section 3 Second Proviso of CEI Act, 2006

The bench of L. Nageswara Rao and Hima Kohli, JJ has held that the formulae for fixing the percentage of reservation for the SC and ST candidates and for determining the percentage of seats to be reserved for OBC candidates under the second proviso of Section 3 of the Central Educational Institutions (Reservation in Admission) Act, 2006, ought to be gathered from the same source and any other interpretation would lead to uncertainty.

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3-year old raped and strangulated to death; Read why Supreme Court commuted Death Sentence to life imprisonment

The Fast Track Court, Raigarh had convicted the appellant for the offences punishable under Sections 363, 366, 376(2)(i), 377, 201, 302 read with Section 376A of the Penal Code, 1860 and Section 6 of the POCSO Act, 2012 and vide the same judgment and order, the appellant was sentenced to death for the offence punishable under Section 302 of the IPC. Subsequently, vide the impugned judgment and order, the High Court had confirmed the death penalty.

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Mere recommendation of the SP at the initial stage not sufficient to claim a right for promotion: SC explains Punjab Police Rules, 1934

In a case where a Constable’s name was recommended by the Superintendent of Police but the same was dropped down by the Inspector General of Police for promotion under the 10% quota of outstanding performance for inclusion in the B-I List for promotion to the post of Head Constable in the year 2004, the bench of KM Joseph and PS Narsimha, JJ has held that mere recommendation of the SP at the initial stage is not sufficient to claim a right for promotion.

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No scaling down of sentence to 10 years as per NDPS Act for man sentenced to 26 years in prison by Mauritius SC for being in possession of over 150 gms of heroin

In a case where a man was arrested in Mauritius after being found to be in possession of 152.8 grams of heroin and was sentenced to 26 years in prison by the Supreme Court of Mauritius, the bench of L. Nageswara Rao and BR Gavai has upheld the Central Government’s decision rejecting the request for scaling down the sentence from 26 years to 10 years and has found it to be in accordance with the provisions of the Repatriation of Prisoners Act, 2003 and the agreement entered into between India and Mauritius.

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No Pensionary Benefits To WALMI Employees; Employees Of Autonomous Bodies Can’t Claim Benefits On A Par With Government Employees As Matter Of Right

“… the employees of the autonomous bodies cannot claim, as a matter of right, the same service benefits on par with the Government employees.”

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Whether the term “school children” includes university students while interpreting Government Memo exempting buses carrying school children from Passengers Tax? SC clarifies

While holding that the term “school children” will include college and university as well while interpreting government memo exempting passengers tax in respect of Stage Carriage (buses) owned by educational institution and used for the transportation of children to and from such institutions, the Division Bench of Dinesh Maheshwari and Vikram Nath, JJ., remarked,

“It gets perforce reiterated that the broad expression “children”, obviously, refers to the students taking instructions in educational institutions, irrespective of their class or standard or level.”

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CASES REPORTED IN SCC


2021 SCC Vol. 9 Part 1

Ranging from Arbitration, Service Law to Family Law, this Volume 9 Part 1 brings in some very carefully and expertly analysed Judgments

2021 SCC Vol. 9 Part 2

In this part read a very interesting decision expertly analysed by our editors. Supreme Court ruled that the trustees are required to

SCC Snippets

Are Clients Or Courts Bound By Lawyer’s Statements Or Admissions As To Matters Of Law Or Legal Conclusions?