Legal News & Views

CIT vs. M/s Dawoodi Bohara Jamat (Supreme Court) A charitable and religious trust which does not benefit any specific religious community is not hit by s. 13(1)(b) & is eligible to claim exemption u/s 11 On facts, the objects of the assessee are not indicative of a wholly religious purpose but are collectively indicative of both charitable and religious purposes. The fact that the said objects trace their source to the Holy Quran and resolve to abide by the path of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in color. The objects reflect the intent of the trust as observance of the tenets of Islam, but do not restrict the activities of the trust to religious obligations only and for the benefit of the members of the community. In judging whether a certain purpose is of public benefit or not, the Courts must in general apply the standards of customary law and common opinion amongst th

Alkaben B. Patel vs. ITO (ITAT Ahmedabad) (Special Bench) The term “month” in s. 54E, 54EA, 54EB & 54EC does not mean “30 days” but the “calendar month”. So, the expression “within a month” means “before the end of the calendar month” Sections 54E, 54EA & 54EB require the investment to be made “within a period of six months after the date of such transfer”. The subtle question is that whether the word “month” refers in this section a period of 30 days or it refers to the month only. The term ‘month’ is not defined in the Income-tax Act. Therefore, its meaning has to be understood as per the General Clauses Act, 1897 which defines the word “month” to mean a month reckoned according to the British calendar. In Munnalal Shri Kishan Mainpuri 167 ITR 415 (All) it was held in the context of limitation u/s 256(2) that the word ‘month’ refers to a period of 30 days and, therefore, the reference to “six months” in s. 256(2) is to “six calendar months” and not “180 days”. On some oc

CIT vs. Mitesh Impex (Gujarat High Court) Non-claiming of s. 80-IB deduction in return is no bar for claiming it before CIT(A) (i) The word “manufacture” implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinct name, character or use. The assessees would put the imported material to series of manual and mechanical processes and through such exercise so undertaken, bring into existence entirely new, distinct and different commodities which are marketable. Thus, the Tribunal, in our opinion, correctly came to the conclusion that this process amounted to manufacturing; (ii) Though the assessee did not raise a claim in the return for deduction u/s 80IB & 80HHC, it was entitled to raise the claim before the CIT(A) for the first time. If a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position,

Government of West Bengal Finance (audit) Department “Nabanna” Mandirtala, Howrah – 711 102 No. 2026-F(Y) Dated: 08.04.2014 MEMORANDUM It has been brought to the notice of Finance Department that some State Government departments / offices / State PSU’s are disqualifying bidders simply because they have incurred losses or have applied for / are undergoing corporate debt restructuring (CDR). Financial soundness is judged on the basis of net worth and turnover and hence there is no scope to render a bidder ineligible simply because the bidder failed to earn profit in some years. All the departments / offices / PSU’s of the State Government are requested to review their bidding criteria to check that such undesirable financial criterion, i.e., disqualifying an otherwise eligible entity simply because it has incurred loss, or because it has applied for or is undergoing CDR, is not included in the eligibility conditions of a bidder. Sd/- H. K. Dwivedi Principal Secretary to th

The Thane District Consumer Redressal Forum has pulled up the New India Assurance Company for refusing to accept an insurance claim of a businessman on the grounds that rainwater and not flood water had destroyed his goods. Citing that the insurance company's defense to refuse claim on such technical grounds as unjust, the forum has directed the company to pay a compensation of Rs 20,000 and insurance of Rs 8.46 lakh at six per cent interest to Ajay Shivnani of M/s Satyam Distributors. His goods were destroyed in heavy rains in 2009. In his complaint, Shivnani told the forum that he took an insurance of Rs 15 lakh for goods stored in a warehouse between May 26, 2009 and May 25, 2010. Shivnani said despite his attempts to shift the goods to dry area, heavy rains on October 4 and 5, 2009 destroyed a huge chunk of goods estimated to be worth Rs 11.74 lakh. The complainant immediately informed the insurance company, which on October 6, sent their investigator Surendra Kumar Kalra

Since May 2011, when the merger control provisions of India's Competition Act, 2002 came into force, all mergers or acquisition of shares and assets that are above specified asset/turnover thresholds have to be notified to the Competition Commission of India (CCI) for pre-merger scrutiny. The CCI may either approve the transaction or impose structural or behavioural remedies to ensure that the transaction, when consummated, does not cause any anti-competitive harm in any Indian market. In extreme cases, the CCI is even empowered to block a transaction. Given the relative nascence of the Indian merger control regime, some transactional parties are uncomfortable about subjecting their transactions to the wide-ranging powers vested in the CCI, even though the regulator has been proactive in listening to and meeting the various needs of Indian industry. The CCI has not structurally modified a single notified transaction to date, besides completing the pre-merger scrutiny within 30 d

The Punjab and Haryana high court has made it clear that private schools in Punjab cannot refuse to comply the mandatory regulations under the Right of Children to Free and Compulsory Education (RTE) Act, 2009 merely on the grounds that the state-run schools are also not maintaining that standard. "There can be no quibble with the proposition that standards of government schools need improvement. It does not imply that the private schools are not to comply with the mandate where they recover effectively more fee than is charged in the government schools," held a division bench headed by Chief Justice Sanjay Kishan Kaul. The orders were passed by the bench after dismissing a plea filed by Punjab Private School Organization, an umbrella organization of all private schools of the state. RTE Act had made laid out more stringent conditions for the recognition of private schools in Punjab and all existing schools were required to submit an application for grant of recognition

Allowing a petition, a division bench comprising of Sadhna S. Jadhav, J held that a son is entitled to maintenance from his father even after attaining the age of maturity. In the present case, the petitioner's parents were divorced and permanent custody of the child was given to the mother. The petitioner had filed the application on the grounds that it is the obligation of the father to maintain him as he is studying and fully dependent upon his mother. The Counsel for the petitioner had argued that divorce between the parents should not disentitle the child from pursuing his further studies and making himself capable to earn a decent living. The Counsel placed reliance on the judgment of the Supreme Court in the case of Kirti Malhotra vs. M.K. Malhotra 1995 Supp (3) SCC 522 to demonstrate that the petitioner would be entitled to maintenance during the period he is seeking education. The father opposed the application on the ground that as the son had attained majority age he is

The Supreme Court ruled last week that State Bank of India (SBI), Overseas Branch, Mumbai, was wrong in debiting the account of an exporting firm after a long delay of two and a half years on the ground that it was wrongly deposited in the account. When the firm moved the Bombay High Court with the complaint, it dismissed it on the ground that it would not interfere in contractual matters in a writ petition. The firm, Metro Exporters Ltd, therefore appealed to the Supreme Court. SBI argued that the amount credited to the firm did not belong to it but it exclusively belonged to the bank. The amount was deposited in the firm's account by mistake and hence it could be recovered debiting its account. It is a 'normal' practice and was done in good faith, it was argued. Rejecting the contention, the judgment emphasised that the exporter should not suffer for the mistake committed by the bank. Article referred: http://www.business-standard.com/article/opinion/wrong-debiting-of-

Gujarat High Court rules Sarfaesi Act amendment unconstitutional, clips powers of other regulators of NPA classification The Reserve Bank of India has now become the sole regulator of borrowing and lending in the country. The Gujarat High Court in a ruling on Thursday took away powers to determine whether asset is NPA or not and the period of non-payment that would make an asset NPA from all regulators except the RBI. A division bench headed by Chief Justice Bhaskar Bhattacharya has ruled that a 2005 amendment to in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests (Sarfaesi) Act, 2002 was illegal, unconstitutional and contrary to the object of the Act. The amendment which defines NPA under section 2(1)(O) classified different institutions (60 in total) under two groups – those under the purview of the RBI and those regulated by other agencies. A petition moved by a borrower through advocate Vishwas Shah and Masoom Shah had challen

The AP High Court has made it clear that an employer should take into account the period of suspension of an employee, if suspended for any reason, for the purpose of calculating the total period of service for determining his pensionary benefits. Justice B Chandra Kumar has recently allowed a writ petition by one V Rama Rao by revising the earlier order of the court to the effect that the period of suspension of an employee shall be counted for determining the pensionary benefits. The judge, however, made it clear that the petitioner who was suspended from service by the SBI authorities, shall not be entitled for any monetary benefits for the suspension period, except the subsistence allowance in accordance with the rules. In June last year, the court while disposing of petitioner’s case has directed the bank to consider the latter’s case as to whether he was entitled for pension or other retiremental benefits and to pass appropriate orders within six weeks. In the present ca

Several consumers have voiced grievances about LIC not paying benefits in accordance with the terms of its Bal Vidya policy. Here is a case of a consumer who fought for his rights. Background: A child's education is a responsibility and a duty for every conscientious parent. The cost of education is high, and parents have to budget for this expense. The Life Insurance Corporation (LIC) has a Bal Vidya policy whose objective is to help parents meet the increasing costs of education. Case Study: Darshak Mahesh Shah had taken LIC's Bal Vidya policy (without profit) for the education expenses of his son, Dhrumil. The policy, with a sum insured of Rs 1 lakh, was taken on July 15, 2002, benefits under which were to become available from July 15, 2006 onwards , and continue for 18 years till July 15, 2024. An amount of 1% of the sum insured would be paid every month from July 15, 2006 to June 15, 2010; then 2% of the sum insured would be paid monthly from July 15, 2010 to June 15

The state consumer disputes redressal commission has held that compensation cannot be given under the Consumer Protection Act to those involved in sale and purchase of shares, which are commercial transactions. Relying on several judgments that reiterate the above view, the Goa state consumer disputes redressal commission has reversed the order of the North Goa district consumer forum which awarded damages to a couple, who lost money in share trading through a stock broker. In its recent order, commission president N A Britto and member Jagdish Prabhudesai observed that, "The Consumer Protection Act is not for entertaining or compensating speculative transactions or losses". The order follows an appeal by Mumbai-based stock broker India Infoline Limited against an order of the North Goa district consumer forum, which awarded damages to Panaji-resident Vaman Nagesh Usapkar and his wife. They had claimed that they suffered a loss of 1,72,020 which they sought to recove

Background: When similarly situated aggrieved consumers collectively file a complaint, would it be considered a joint complaint or a representative complaint? Some consumer fora are also confused between the two concepts. Many fora refuse to accept a joint complaint unless an application is made seeking permission to do so. This procedure is not correct. The National Commission has differentiated the two concepts in some of its judgments. When a joint complaint is filed, the relief sought would be applicable only to those who have collectively filed the complaints. Since all these persons are parties to the dispute, no permission is required to file the joint complaint. But when one or more consumers file a representative complaint, the relief sought is on behalf of all. So, the judgement which is passed in a representative complaint would also bind those who are not a party to the proceedings. Since the judgment would affect unnamed consumers, the forum's permission is requir

Only one-fourth of an accident victim’s income should be deducted towards personal expenses while fixing compensation if the victim’s family consists of more than four members, the Madras HC has held. Applying the theory prescribed by the SC in the Sarala Verma case, a division bench of justices S Rajeswaran and S Vaidyanathan gave the ruling while enhancing the compensation awarded by a lower court from `19.07 lakh to `24 lakh. Vijayan, husband of Jaya, met with an accident in Cuddalore in  2011. He later succumbed at a hospital. Jaya and daughters Uma Devi, Soniya Devi and Saranya Devi moved the Motor Accidents Claims Tribunal seeking `41 lakh as compensation. The tribunal, however, awarded them only `19.07 lakh by an order dated October 19, 2012. It deducted one-third of the victim’s income towards personal expenses and quantified `18.72 lakh under ‘loss of dependency’.  It awarded no compensation under the ‘loss of marriage’ head. While Vijayan’s family moved the HC cont

Besides injuries, other factors such as shock, pain, fear, trauma and agony of an accident victim too should be taken into account to determine compensation package, a motor accident claims tribunal said, awarding Rs 2.6 lakh compensation to a schoolgirl. The matter relates to a road accident involving P Jasmin of Korrukkupet. On October 1, 2010, Jasmin, who was five years old then, was travelling in an autorickshaw in north Chennai when the vehicle dashed against a lorry. The girl was thrown off the vehicle and two fingers on her right hand had to be removed. Her father moved the tribunal seeking compensation from the vehicle owner C Sri Ram of Sowcarpet and its insurer United India Insurance. The insurance company refuted compensation claims on the ground that the autorickshaw's fitness certificate expired a month before the accident, and its policy coverage too had expired. "The alleged injuries were superficial" and "the quantum of compensation sought was ex

Deciding a divorce case of an NRI couple, the Punjab and Haryana high court has ruled that any judgment passed by a court of another country in a matrimonial dispute would not be considered "conclusive" in relation to the same matrimonial dispute pending before an Indian court. The court has held that couples who have tied the knot in India and migrated to foreign lands would be governed by Indian laws only and the matrimonial decree passed by a foreign court would be binding only if the orders are passed as per the Hindu Marriage Act (HMA). A single bench headed by Justice Rajiv Narain Raina had passed these orders while dismissing a petition filed by one Rupak Rathi, who had challenged the divorce petition filed by his wife Anita Chaudhary as the couple had already got divorce in a UK court on the grounds of "irretrievable breakdown" of marriage. Dismissing Rathi's petition, Justice Raina held, "Since irretrievable breakdown of marriage is not avai

The Reserve Bank of India (RBI) has come down heavily on banks for charging different interest rates to customers with similar profiles, saying such discrimination cannot be accepted. To study credit pricing, RBI had formed a working group headed by Anand Sinha, former deputy governor of the central bank. The panel’s report, made public on Thursday, has suggested stringent norms to make loan pricing more transparent. “The working group recommends the spread charged to an existing customer cannot be increased except on account of deterioration in the customer’s credit risk profile,” RBI said. Often, banks offer lower interest rates, especially on home loans, to new customers, while old customers continue to pay high rates. The committee has said while banks raise interest rates across the board immediately after a rate rise, they tend to resist a cut in interest if the monetary policy is accommodative. Acknowledging factors such as competition and customer relationship are take

The Supreme Court on Wednesday held that credibility of a dying declaration comes under "suspicion" if it is not in the "actual words" of the victim and has been dictated by somebody else. "Sanctity is attached to a dying declaration because it comes from the mouth of a dying person. "If dying declaration is recorded not directly from the actual words of the maker but as dictated by somebody else, in our opinion, this by itself creates a lot of suspicion about credibility of such statement and the prosecution has to clear the same to the satisfaction of the court," a bench of justices R M Lodha and Shiva Kirti Singh said. The bench set aside the verdict of Karnataka High Court in a 2002 murder case. The High Court had earlier reversed the lower court verdict acquitting three accused in the case. Upholding the lower court verdict, the apex court considered "over-writing about the time" and insertion of two names by "different

The Gujarat high court quashed an FIR registered by Naroda police for infringement of copyright while booking a person for sale of automobile spare parts. The court junked the criminal complaint saying that automobile parts cannot be treated as works of art for which Copyright Act can be invoked. Last year, the Naroda police had registered an FIR against a shop owner, Hasmukh Panchal, who dealt in duplicate parts of Hyundai cars. The police booked him under sections 63 and 65 of the Copyright Act after one Prakash Goswami, who claimed to be an investigating officer of IPR Vigilance (India) Ltd, alleged that Panchal was involved in sale of duplicate parts of Hyundai cars. Panchal moved the high court to get the FIR quashed. He submitted that Goswami, who had no authorization and assignment from the company, had ransacked his office with help of the police and taken away moveable objects. The state government had even tried to defend the FIR but it could not show how the allegations

High courts not to go into facts In a tenancy dispute, the issue whether the landlord genuinely requires his property for his personal use is a question of fact and it should be decided on evidence by the trial court. The high court cannot go into the evidence and take its own decision on questions of facts unless law was involved, the Supreme Court ruled last week in the case, Kalpesh Shah vs Manhar Auto Stores. A lower court had ordered eviction of the tenant, but the Bombay High Court reversed it, analysing the facts of the case. The Supreme Court stated that the high court wrongly interfered with the finding of facts by the court below. Tax benefit for charitable trusts The Supreme Court has held that a charitable institution established for the benefit of any particular religious community or caste will not be eligible for income tax exemption under Section 11 and 12 of the Income Tax Act. But if such an institution based on religious tenets serves other communities as well,

The Supreme Court ruled that when a court passes a money decree against an insurance company, the amounts paid will go first to satisfy the interest part and then towards the principal amount. It set aside the judgment of the Andhra Pradesh High Court which had put the priority in reverse order. In this case, V Kala Bharathi vs Oriental Insurance Co, the motor vehicle accident claims tribunal had awarded Rs 98 lakh as compensation for the death of an engineering graduate in a road accident. Both the legal heirs and the insurance company carried appeals, first to the single judge and then to the division bench. Meanwhile, the insurer was ordered to pay amounts pending the final decision. When the case was finally disposed of, the dispute arose over payment of interest. The executing court took the view that the amount deposited by the insurer from time to time during the litigation should be adjusted first towards the interest component and thereafter towards the amount decreed. On

Secured creditor cannot take over possession of the secured asset with the lessee under a valid lease A large batch of appeals moved by tenants of properties mortgaged to banks was heard by the Supreme Court. In these 75 cases, led by Harshad Govardhan vs International Assets Reconstruction Ltd, the property owners who had taken loans did not repay the amounts leading to Sarfaesi proceedings. The major issue in the present case was whether a mortgagee of a previously leased out property (unknown to the creditor) claim possession of the property upon the failure of the mortgagor in clearing his debts within the stipulated time. The bench comprising of Hon'ble Justice A. K. Patnaik and Hon'ble Justice Gopala Gowda,primarily ruled that without the determination of a valid lease, the possession of the lessee is lawful and such lawful possession of a lessee was to be protected by all courts and tribunals. Discussing the primary need of determining the lease, the Court required

"Mere advance payment as per agreement does not create liability where no goods delivered" A cheque issued as advance payment for purchase of goods, if it bounces, cannot be cause for filing criminal case under Section 138 of the Negotiable Instruments Act. In this case, Indus Airways Ltd vs Magnum Aviation Ltd, the airways issued post-dated cheques to the other company as advance payment towards orders for spare parts. Later the deal was cancelled and the payment was stopped. The seller company filed complaint against the airways and a Delhi magistrate issued summons to the purchasers. On appeal, the Delhi High Court ruled against the purchaser ruling that the post-dated cheques were issued against a liability. Quashing the judgment, the Supreme Court stated last week that the cheques were not issued against a liability. "If a cheque is issued as advance payment for purchase of goods and for any reason the order is not carried out either because of its cancellation o

The Supreme Court held last week that when a motor vehicle requisitioned by the government for public purpose meets with an accident and kills a person, it is not the registered owner, but the government which is liable to compensate the dependants. In this case, Purnya Kala Devi vs State of Assam, the Gauhati High Court ruled that the registered owner, the insurer or driver or any of them was liable to pay. The widow and four children appealed to the Supreme Court. It held that the definition of 'owner' in the Motor Vehicles Act included a person "in possession of the vehicle either under an agreement of lease, hypothecation or hire purchase". The court emphasised that the intention of the law-makers was that a person who is in "control or possession" of the vehicle should be deemed to be the owner for purpose of compensation. Article referred: http://www.business-standard.com/article/opinion/one-fire-doesn-t-lead-to-insolvency-114041300639_1.html

The Supreme Court has allowed the appeal of the railways against the judgment of the Madras High Court which had asked it to pay interest on the amount withheld from a contracting firm and deposited in the high court. The high court had appointed an arbitrator in the dispute between the railways and the contracting firm. The award went against the railways. The high court had asked the railways to pay interest to the firm on the refund. The railways appealed to the Supreme Court. In the appeal case, Union of India vs Concrete Products & Constructions, the Supreme Court ruled that under the terms of the contract the railways shall be entitled to withhold the amount, and also have a lien on it, deposited as security. The contractor cannot claim any interest or damages for retention of the amount under lien, the judgment stated quoting the contract. Article referred: http://www.business-standard.com/article/opinion/interest-payable-on-tds-refund-114033000786_1.html

The Supreme Court, last week, set aside the judgment of the Calcutta High Court and reiterated that in a cheque bounce case, the directors can be prosecuted only if it is specifically alleged that they were "in charge of and responsible for the conduct of the business" of the firm. In this case, Mannalal vs state of West Bengal, a few directors of Heritage Herbs Ltd which promised land as investment, were prosecuted when three cheques issued by the chairman of the firm bounced. Meanwhile, the chairman died and therefore the rest of the directors were impleaded in the case under section 138 of the Negotiable Instruments Act. The magistrate summoned them. They appealed to the high court, arguing that there were no specific allegations against them in the original complaint. The high court rejected the contention. On appeal, the Supreme Court quashed the prosecution of the directors. Article referred: http://www.business-standard.com/article/opinion/interest-payable-on-tds

The Supreme Court has ruled that the income tax department is liable to pay interest on the refund of tax made to resident deductor companies. A large number of appeals moved by the government against various orders of the high courts were dismissed with the observation that "the state, having received the money without right and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances". In one typical case, Union of India vs Tata Chemicals Ltd, the company had sought the assistance of two technicians from Haldor Topsoe, Denmark. The foreign company charged Tata for services and reimbursement of expenses. Tata deducted 20 per cent tax before remitting the amounts to the Danish firm. On reimbursement amount, there was a dispute and, therefore, Tata moved the appellate forum, arguing it was not income. The authority agreed and directed refund on the reimbursement part. But interest was not paid. The company claimed i