[No.229]

Supreme Court

• Criminal Law

Ashok Kumar Chaudhary and Ors. vs. State of Bihar (Decided on 05.05.2008)

Non-examination of independent witnesses as incident occurred at a public place - Whether evidence of those closely related to victim to be discarded as being "highly interested" and prone to false implication of the Accused.

On the question of credit-worthiness of the evidence of relatives of the victim, it is well settled that though the Court has to scrutinize such evidence with greater care and caution but such evidence cannot be discarded on the sole ground of their interest in the prosecution. Merely because a witness happens to be a relative of the victim of the crime, he/she cannot be characterized as an "interested" witness.

Delay in lodging of FIR - Whether fatal to prosecution case

Mere delay in lodging FIR not by itself fatal to the case of prosecution. However, the Court obliged to take notice and examine whether any explanation for the delay has been offered and if yes, whether satisfactory or not. Incase of no satisfactory explanation, an adverse inference may be drawn against the prosecution, and where delay properly and satisfactorily explained; the prosecution case cannot be made inadmissible merely due to delay in lodging of FIR.

• Tax Laws

Income Tax

R and B Falcon (A) Pvt. Ltd. vs. Commissioner of Income Tax (Decided on 06.05.2008)

Benefit of the FBT exemption under section 115WB(3) - Whether transportation cost incurred by the employer in providing transportation facility for movement of offshore employees from their residence in home country to the place of work and back liable to Fringe Benefit Tax (FBT)

To obtain the benefit of exemption under Section 115 WB(3), the expenditure must be incurred on the employees directly for the purposes mentioned therein, namely, they are to be provided transport from their residence to the place of work or such place of work to the place of residence. Any expenditure incurred for any other purpose, namely, other than for their transport from their residence to the place of work or from the place of work to the place of residence would not attract the exemption provision. Further, for invoking the exemption there is no requirement under said Section that the employees should be based in India.

Sales Tax

Commissioner of Trade Tax, U.P. vs. Associated Distributors Ltd. (Decided on 05.05.2008)

Applicability of tax rate on the sales of Bubble-gum - Whether Bubble-gum taxable as an unclassified good or a confectionery item - UP Sales Tax Act

As per the ratio held in Pappu Sweets and Biscuits & Anr. v. Commissioner of Trade Tax, U.P., Lucknow MANU/SC/0638/1998, if properly comprehended Bubble-gum in the common parlance cannot be construed as Mithai (Sweetmeat). Applying common parlance test items of confectionery would not be construed as sweetmeat (mithai). 'Bubble-gum' thus taxable as an unclassified good.

Difference in language of notification - Whether official language of State to be applicable - State of Uttar Pradesh

Official language of the State of Uttar Pradesh is Hindi and if any difference is found between the notifications in English and Hindi, the notification issued in Hindi would be applicable.

• Law of Tort

Union of India (UOI) vs. Prabhakaran Vijaya Kumar and Ors. (Decided on 05.05.2008)

Strict Liability - Death after falling on to the railway track and running over by train - 'Accidental falling of a passenger from a train carrying passengers' whether an 'untoward incident' as defined in Section 123(c) of the Railways Act

Legally it makes no difference as to whether the deceased was actually inside the train or was only trying to get into the train when fell down. In either case it amounts to 'accidental falling of a passenger from a train carrying passengers', hence an 'untoward incident' as defined in Section 123(c) of the Railways Act. Section 124A lays down strict liability or no fault liability in case of railway accidents. Thus, if a case comes within the purview of Section 124A it is wholly irrelevant as to who was at fault.

High Courts

• Tax Laws

Direct Taxation

Allahabad High Court

Sri Banarsi Prasad Vs. Commissioner of Income Tax (29.02.2008) MANU/UP/0056/2008

Burden of Proof under Section 68 of the I.T. Act, 1961 - Whether extended on the assessee to establish the nature and source of the amount in the case of cash credits in the assessee's books in the names of close relatives

Section 68 of the Act may be divided into two parts. The first part requires the assessee to explain the sum found credited in the books of the assessee about the nature and source thereof. This part only requires the assessee to disclose the source from which the money has been received by the assessee and not require the assessee to disclose the source of that source. The second part of Section 68 of the Act consists of offering an explanation, which is "satisfactory" in the opinion of the Income Tax Officer. However, what explanation would be "satisfactory" would depend upon the facts and circumstances of each case. Generally, depending upon the facts and circumstances, when the credits have been received by an assessee from close relatives, the explanation to be furnished under Section 68 would be extended to require the assessee to disclose the facts necessary to establish the "capacity" of the creditor in order to qualify as "satisfactory".

Madras High Court

Dynavision Limited rep. by its Managing Director P. Vijayakumar Reddy Vs. The Income Tax Appellate Tribunal, Madras Bench A and Ors. (Decided On: 09.04.2008) MANU/TN/0526/2008

Difference in opinion of Third Member on any point - Whether Ultra vires the provisions of Section 255(4) of the Income Tax Act - Petitioner sought calling of records relating to the order passed by Third Member

Section 255(4) of the Income Tax Act makes it clear that whenever the members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority. If the members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal. The order of reference to the Third Member shall contain the difference of opinion between the Members of the Bench. The President or the Third Member has no right to go beyond the scope of reference and they have to consider only the difference of opinion stated by the Members of the Bench. Section 255(4) does not vest such power with the President or the Third Member. Third Member must confine himself to the order of reference. Therefore, he has no right to enlarge, restrict and modify and/or formulate any question of law on his own on the difference of opinion referred to by the Members of the Tribunal.

Sales Tax/VAT

Allahabad High Court

Anand Gramodyog Samiti Vs. State of U.P. and Ors. (27.02.2008) MANU/UP/0062/2008

Exemption from Trade Tax — Whether “exhaust fans, water lifting pumps and ceiling fans” covered under the item "Blacksmithy" to get exempted from trade tax under U.P. Exemption Notification dated 31.8.1985 or Notification dated 1.10.1994

Blacksmithy has not been specified in the exemption Notification. Understanding the word 'Blacksmithy' as in common parlance would mean the objects, which are normally manufactured by a Blacksmith. Electronics items such as exhaust fans, ceiling fans and water-lifting pumps are not manufactured by Blacksmiths. Thus, the same are not considered as goods covered under the item "Blacksmithy" to get exemption from trade tax under U.P. Exemption Notification dated 31.8.1985 or Notification dated 1.10.1994

• Criminal Law

Kerala High Court

Narayanan @ Kuttani Vs. State of Kerala (12.02.2008) MANU/KE/0017/2008

Cap on Maximum Sentence - Is there a cap on the maximum sentence that can be imposed under Section 125(3) of the Code of Criminal Procedure?

Language of Section 125(3) of the Code of Criminal Procedure Makes it evidently clear that a defaulter can be sentenced for the whole or any part of each month's maintenance remaining unpaid to imprisonment for a period which may extend to one month or until the payment is sooner made. Thus if there is one month's default, there can be one month's imprisonment. Further, under Section 125(2) of Cr. P.C. if an order has been passed for payment of maintenance from the date of the petition and that order obliges payment of maintenance for a period exceeding 12 months, certainly the maximum sentence that can be imposed would be such number of months for which maintenance remains unpaid and there is no cap on the maximum sentence that can be imposed under Section 125 (3) of Cr. P.C. Further, the first proviso to Section 125(3) is also not intended to stipulate any cap on maximum sentence that can be imposed for default in payment of maintenance, but it is intended only to ensure that the application for recovery must be made within one year of the date on which the amount becomes due.

Delhi High Court

Mani Shandly and Anr. v. The State and Anr. (Decided On: 11.04.2008) MANU/DE/0627/2008

Non appearance on date fixed for hearing – Non-Bailable Warrants issued — Cancellation sought on the ground of wrong noting of date.

The trial court must take into consideration the important aspects such as the past conduct of the accused, the nature of offence or the failure to appear in pursuance to the order of summoning. The present case is one of bailable offences and the Petitioners appeared in pursuance to the summons issued and continued to appear but were absent on one date. The trial court at the stage of issuance of NBWs did not record any reasons for taking this extreme step and thus the order was in violation of the direction. It is clearly provided that when issuance of summons or bailable warrants would suffice, there is no necessity to issue NBWs as it involves interference with personal liberties of persons.

Order passed beyond the provisions and in violation of mandatory provisions – Whether sustainable or not

Every criminal court is a creature of Criminal Procedure Code. It has to remain within its precincts and cannot afford to traverse beyond it. Curtailment of any person's liberty with the sledge of hammer does not comport with judicial discretion vested by the provisions of Criminal Procedure Code in the criminal court. More absolute power the court enjoys more circumspective and sparing use of it is expected. Absolute power does not admit element of arbitrariness.

• Intellectual Property Rights

Delhi High Court

Archie Comic Publications, Inc. Vs. Purple Creations Pvt. Ltd. and Ors. (Decided on 22.04.2008) MANU/DE/0635/2008

Jurisdiction of Court - Determination of - Suit filed for permanent injunction, infringement of trademark, damages etc. against the defendants

If the Court does not have jurisdiction to entertain the suit on the basis of the averments made in the plaint as originally filed, then the plaintiff's application under Order 6 Rule 17 would not be maintainable and cannot be entertained. The result would be that the defendants' application under Order 7 Rule 10 would have to be allowed and the plaint would have to be directed to be returned to the plaintiff for filing before the competent Court.

Notifications & Circulars

• Direct Tax

CBDT Circular No. 4/2008 dated 28.04.2008 - Clarification on Deduction of Tax at Source (TDS) on Service Tax Component on Rental Income u/s. 194-I of the Income Tax Act

Pursuant to clarification sought on as to whether TDS provisions under section 194-I of the Income Tax Act will be applicable on the gross rental amount payable (inclusive of service tax) or net rental amount payable (exclusive of service tax), it has been mentioned that Service tax paid by the tenant doesn't partake the nature of "income" of the landlord. The landlord only acts as a collecting agency for Government for collection of Service Tax. Therefore it has been decided that tax deduction at source (TDS) under sections 194-I of Income Tax Act would be required to be made on the amount of rent paid/payable without including the service tax.

• Indirect Tax

Customs

CBEC Customs Notification No. 59/2008 Dated 05.05.2008 - Rescinds Notification No. 55/2001-Customs dated the 16th May, 2001

The Central Government rescinded the notification No. 55/2001-Customs, dated the 16th May, 2001 pertaining to exemption of cut and polished diamonds falling within Chapter 71 of the First Schedule to the Customs Tariff Act, 1975 when re-imported into India after certification/ grading by the laboratories / agencies mentioned in condition (iv), in terms of paragraph 8.13(b) of the Export & Import Policy, from the whole of duty of customs leviable thereon which is specified in the said First Schedule, and from the whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act, subject to fulfillment of conditions, specified therein.

CBEC Customs Notification No. 58/2008 Dated 01.05.2008 - Rescinds Notification No. 59/2007-Customs, Dated the 30th April, 2007

The Central Government rescinded the notification No. 59/2007-Customs dated 30th April, 2007, except as respects things done or omitted to be done before such rescission pertaining to import of vitrified and porcelain tiles, other than vitrified industrial tiles, falling under Chapter 69 of the First Schedule to the Customs Tariff Act, 1975, originating in, or exported from, the People's Republic of China and United Arab Emirates (UAE) and imported into India.

CBEC Customs - Non Tariff Notification No.40/2008-Customs (N.T.) Dated 02.05.2008 amending Notification No. 36/2001-Cus (N.T.), dated, the 3rd August 2001

The Notification amended the Notification No. 36/2001-Cus.(NT) fixing tariff values in respect of the imported goods of the description as specified therein and falling under Chapter or heading or sub-heading No. of the First Schedule to the Customs Tariff Act, 1975.

Excise

Excise - Non Tariff Notification No. 22/2008-N.T. Dated 02.05.2008 on Central Government's Order under section 5B of the Central Excise Act, 1944

The Central Government passed an order that where an assessee has paid duty of excise on metallised plastic film, falling under Chapter 39 (hereinafter referred to as final product),the CENVAT credit taken or utilized, of the duty or tax or cess paid on inputs , capital goods and input services used in the making of the said final product, shall not be required to be reversed, irrespective of the fact that the process of metallization of duty-paid film was held as not amounting to manufacture by the Supreme Court in Civil appeal Nos. 3224-3225 of 1998 with C.A. No. 5716 of 1998, decided on the 12th February,2004 in the case of M/s Metlex(I) Pvt. Ltd. Vs Commissioner of Central Excise, New Delhi, subject to the conditions specified therein.

• Reserve Bank of India

A.P. (DIR Series) Circular No.41 Dated 28.04.2008 Foreign Investment in Commodity Exchanges - Amendment to the Foreign Direct Investment Scheme

It has been decided to allow foreign investment in Commodity Exchanges subject to the conditions, viz. i) There would be a composite ceiling of 49% Foreign Investment, with a FDI limit of 26% and an FII limit of 23%; ii) FDI will be allowed with specific approval of the Government; iii) The FII purchases in equity of Commodity Exchanges will be restricted only to the secondary markets; iv) Foreign Investment in Commodity Exchanges would also be subject to compliance with the regulations issued, in this regard, by the Forward Market Commission.

Circular No. DBOD.BP.BC.82/21.04.048/2007-08 Dated 08.05.2008 - Prudential Norms on Asset Classification Pertaining to Advances - Infrastructure projects under implementation and involving time overrun

RBI decided to modify Prudential Norms on Asset Classification Pertaining to Advances in respect of infrastructure projects to tackle the issue of time overrun in the projects under implementation. Accordingly, it was decided that in case infrastructure projects are financed by banks, date of completion should be spelt out clearly at the time of financial closure of the project and account should be treated as sub-standard if date of commencement of commercial production extends beyond a period of two years (as against the current norm of one year).

RBI Press Release No. 2007-2008/1419 Dated 06.05.2008 -RBI Seeks Public Comment on Norms for Branch/Liaison Offices in India by Foreign Entities

Presently, a person resident outside India requires prior approval of the RBI for establishing branch/liaison offices in India under the Foreign Exchange Management Act. It was proposed by the RBI to delegate certain powers to authorised dealers regarding extension of validity period of liaison offices of foreign entities and closure of their branch/liaison offices in India from July 1, 2008 onward and RBI has also proposed to place in public domain eligibility criteria and procedural guidelines for establishment of branch and liaison offices by foreign entities in India in order to achieve transparency. RBI has issued two Draft circulars incorporating the proposed Norms for Branch/Liaison Offices in India by Foreign Entities and same is placed for public Comment.

• Capital Market

SEBI Circular No. MRD/DoP/SE/Cir-13/2008 dated 05.05.2008 - Comprehensive Risk Management Framework for the Cash Market

SEBI has, from time to time placed various risk management measures to address the risks involved in the cash and margining of institutional trades in the cash market and in order to improve the efficiency of the use of the margin capital by market participants and to start with cross margining across cash and derivatives markets it has been decided that initially Cross margin facility will be available for institutional trades and same will also be available to positions in cash market having corresponding off-setting positions in the stock futures market, VaR margin shall not be levied on the cash market position to the extent of the off-setting stock futures market position. The F&O positions will remain unchanged and Extreme Loss Margin and Market to Market Margin shall continue to be levied on the entire cash market position.

In order to Implement the above decision Stock Exchanges advised to place in adequate systems, issue the indispensable guidelines and make amendments to the relevant bye-laws, rules and regulations. Simultaneously, Stock Exchanges are instructed to bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and communicate implementation of the provisions through Monthly Development Report to SEBI

SEBI Circular No. SEBI/IMD/CIR No.4/124477/08 dated 02.05.2008 -Notification on Real Estate Mutual Fund Schemes and Initial Issue Expenses

SEBI (Mutual Funds) Regulations, 1996 has been amended by the SEBI to permit mutual funds to launch Real Estate Mutual Fund Schemes (REMFs). It is clarified vide this circular that a real estate mutual fund scheme can invest in real estate assets in the cities mentioned in List of Million Plus Urban Agglomerations/Cities or List of Million Plus Cities which appear in Census Statistics of India (2001) at www.censusindia.gov.in.

•  Labour and Employment

Notification No. SO1036(E) Dated 29.04.2008 declared specified Industry to be Public Utility Service for the Purpose of Industries Disputes Act, 1947

The Central Government based on the public interest declared that the service in the industry engaged in the 'Processing or Production of Fuel Gases (Coal Gas, Natural Gas and the like)' as Public Utility Service, covered by item 29 of the First Schedule to the Industrial Disputes Act, 1947, to be a Public Utility Service for the purposes of the said Act. Accordingly the Central Government declared with immediate effect the said industry to be a Public Utility Service for the purpose of the said Act for a period of six months.

• Press Information Bureau

PIB Release dated 05.05.2008 on Amendments Proposed to the Prevention of Food Adulteration Rules 1955

The Government of India, Ministry of Health & Family Welfare, Department of Health issued a draft notification proposing amendment to the standards of milk products under Prevention of Food Adulteration Rules, 1955. This notification has been published in Part II, Section 3, Sub-section (i) of the Gazette of India (Extraordinary) vide G.S.R. 208(E) dated 25.3.2008. The amendment proposed to permit use of some more food additives in cheese, processed cheese, processed cheese spread, yoghurt, ice-cream, kulfi, dried ice-cream mix, frozen desserts, milk ice, milk lollies, ice candy and chhana/paneer, to revise the standards of ice-cream, kulfi, chocolate ice-cream or softy ice-cream, dried ice-cream mix or frozen dessert or confection, frozen dessert or frozen confection, milk ice or milk lollies and to lay down standards of full cream chakka and full cream shrikhand. The microbiological parameters are also proposed for milk and milk products at manufacturing level.

A time period for sixty days has been given for sending objections/suggestions.

• Telecom Regulatory Authority of India (TRAI)

Press Release No.48/2008 dated 07.05.2008 TRAI Issues Consultation Paper on Carrier Selection to Provide Choice of long Distance Carriers for National and International Calls to the Consumers

Telecom Regulatory Authority of India (TRAI), today issued a consultation paper on Carrier Selection including possibilities of allowing long distance service providers to issue calling cards. When implemented carrier selection offers customer the capability of selecting the long distance carrier for their STD/ISD calls.

Press Release No.47/2008 Dated 05.05.2008 Consultation Paper on Mobile Virtual Network Operator (MVNO)

TRAI released a consultation paper on Mobile Virtual Network Operator (MVNO). The Consultation Paper discusses the various issues relating to the introduction of MVNO in India like, Concept and definition of MVNO, different MVNO Models, need and timing for entry of MVNO, regulatory approaches, spectrum sharing, Licensing and Regulatory issues such as Eligibility, Scope of service, License Fees, Obligations, FDI, Tariff, Quality of Service etc and international scenario. It also discusses the possible business strategies of the MVNOs such as offering services with low price, focusing on specific customer segment, offering differentiated Value Added Services and International clustering.

• IRDA Approves JV of Canara, OBC and HSBC Insurance

The Canara bank, HSBC Insurance (Asia-Pacific) and Orient Bank of Commerce (OBC) have been given the approval from the Insurance Regulatory and Development Authority (IRDA) for the life insurance joint venture. With the approval of IRDA a project team already have been established in Gurgoan to build a significant operational sales support capability to serve the immense distribution reach of the shareholders. The major share of 51% will be with Canara bank and where HSBC and OBC will have 26 per cent and 23 per cent share respectively.

• Banks surge in Mobile Banking

The largest bank of India State Bank of India (SBI) with the other major banks is planning to start with M-banking (Mobile Banking). According to a survey Mobile banking is being considered as necessities rather than a business proposition. With the major Indian bank piloting multiple M-banking applications, the other banks like ICICI Bank and HDFC Bank have already started with M-banking activities. In this year's annual monetary policy Reserve Bank of India (RBI) has also included need to formalise mobile-based banking and payments.

• Airtel aims at MTN shares

Sunil Mittal chairman of Bharti Airtel is trying to meet the Azmi Mikati, CEO of vehicle M1 to win over their confidence before he puts his bid offer for MTN. The Mikati family has 11% shares in MTN, as they founded Investcom, which was taken over by MTN two years ago through a cash-cum-share offer to create the biggest mobile operator in Africa and the Middle East.

• LIC wants to lower down its holding in IFCI

The Life Insurance Company of India (LIC) wants to dilute its stake in International Finance Corporation Institution (IFCI) from 11.39 per cent to 8.39 per cent, the level it was at prior to conversion of debt into equity earlier this year. The non-banking finance company is awaiting for legal opinion from the government to know the exact legal provisions of the Companies act.

Judgments

Service Laws

• Airbus UK Ltd v. M G Webb (Decided on 07.02.2008)

Prior written warning - Whether considered for dismissing an employee for doing same misconduct of neglecting his duties, even if given 12 months back?

Question of expiration of a written warning is irrelevant, if the employee had been caught again for the same misconduct of neglecting his duties. In such case, prior written warning for the same misconduct is still relevant and can be considered for dismissing the employee for doing the same misconduct even if the warning has been given 12 months back.

Warnings to other emploees invovled - Whether considered as disparate treatment of employees if the other employees also invovled in same misconduct?

When the other employees involved in the same misconduct have clean previous records, giving final warnings as a penalty to these employees has not been considered as disparate treatment of employees involved.

Company Laws

• McGrath v. Riddell (Decided on 09.04.2008)

Amount collected in winding up proceedings - Whether transferable from the country in which insolvant company has branch office (England) to the country in which the company has its principle office (Australia)?

There was nothing prejudicial to public policy in the Australian statutory provisions relating to insolvency. Under the insolvency scheme applicable to the principal winding up (i.e. in Australia) there would be a significant class of preferential creditors who would not have priority under the English insolvency scheme was not sufficient reason to justify a refusal to transfer the amount collected in winding up proceedings to Australia. The Australia's inclusion as a relevant country in the matter was evidence that English law accepted the Australian insolvency scheme. Thus, the amount collected in winding up proceedings is transferable from England to Australia.

News

• Reason of high oil price linked to demand in India and China by US

In Washington President George Bush linked India's food habits to the rising global prices of commodities, in his remarks regarding the crude oil price crossing USD 120 per barrel. Now United States partly attributed the surge in oil futures to the increased demand in India and China. Clearing Bush's statement about Indians having "higher living standards", the White House Deputy Spokesman Scott Stanzel said it is a good thing as countries are developing and their standards of living are increasing. However, he apparently did not talked about the Bush's point that Indian food habits were contributing to spiralling prices of commodities, which in turn, were worsening the global food crisis. He also stressed that it was important for the United States to become less dependent on foreign sources of energy. On focusing domestic exploration he talked about building refineries.

• US federal court damaged by bomb blast

The entrance and the lobby of the building of San Diego's US federal court in southern California was damaged after a bomb explosion. The explosion took place around 1:40 am on Sunday in which no one was hurt. The two on-duty guards inside the building called authorities after which in minutes the FBI, police and Firefighters arrived. The paper San Diego Union Tribune quoted FBI special agent in-charge said that the cause is believed to have been a bomb or bombs that detonated at once and caused a single explosion, which was placed outside the main entrance just before the blast. Authorities would take information and investigate on it from the security cameras outside the building. They are also interviewing the two guards.