SUPREME COURT

• LABOUR AND INDUSTRIAL

Krishan Singh Vs. Executive Engineer, Haryana State Agricultural Marketing Board, Rohtak (Haryana) (Decided on 12.03.2010) MANU/SC/0166/2010

Labour and Industrial - Adjudication of labour dispute - Discretion of Labour Court - Interference by High Court - Section 11 A of Industrial Disputes Act, 1947 - High Court set aside Award of Labour Court allowing reinstatement of Appellant - Whether the High Court was right in setting aside the Award of the Labour Court directing reinstatement of the appellant with 50% back wages and directing instead payment of compensation?

Held, Section 11A of the Act clearly provides that where an industrial dispute relating to the discharge or dismissal of a workman has been referred to a Labour Court, Tribunal or National Tribunal for adjudication and, in the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal, as the case may be, is satisfied that the order of discharge or dismissal was not justified, it may, by its award, set aside the order of discharge or dismissal and direct re-instatement of the workman on such terms and conditions, if any, as it thinks fit, or give such other relief to the workman including the award of any lesser punishment in lieu of discharge or dismissal as the circumstances of the case may require. Wide discretion is, therefore, vested in the Labour Court while adjudicating an industrial dispute relating to discharge or dismissal of a workman and if the Labour Court has exercised its jurisdiction in the facts and circumstances of the case to direct re-instatement of a workman with 50% back wages taking into consideration the pleadings of the parties and the evidence on record, the High Court in exercise of its power under Articles 226 and 227 of the Constitution of India will not interfere with the same, except on well- settled principles laid down by this Court for a writ of certiorari against an order passed by a Court or a Tribunal. In the present case, the High Court should not have modified the Award of the Labour Court directing re-instatement of the appellant with 50% back wages and instead directed payment of compensation of Rs. 50,000/- to the appellant.

• CIVIL

Indore Municipal Corporation and Anr. v. Dr. Hemalata and Ors (Decided on 24.02.2010) MANU/SC/0133/2010

Civil - Residential-cum-commercial building construction - Sanction of - Use questioned thereof - Authorities(Municipal Corporation) sanctioned construction of a residential-cum-commercial building to Respondents - Subsequently, sanctioning authorities also granted permission for commercial use of building but as per the sanctioned building maps only - Initially no objection made by the Appellants but upon the completion of substantial construction, when Respondents applied for a service certificate, the Appellant authorities held that an order for the sanction of the development/construction plan for commercial use is against the rules and regulations - Writ petition filed challenging the same allowed by Single Judge of the High Court and upheld by Division Bench - Hence this appeal Whether the direction by the Appellant for conversion of the premised to residential-cum-commercial use was justified?

Held, Fact that the sanction is for a residential-cum-commercial purpose is neither disputed by the Respondents nor they have ever claimed that they will use the building contrary to the permissible user. In the present case, Even before the completion of the construction and obtaining of occupation certificate, Appellant assumed that the Respondent is likely to violate the sanctioned user-assumption of violation of the Rules by Appellant is unwarranted and premature-Appellant entitled to take action only if, after the issue of occupancy certificate there is any violation of sanctioned use and not before that. Appeal dismissed. 

• DIRECT TAXATION

Assst. C.I.T., Vadodara v. Elecon Engineering Co. Ltd. (Decided on 26.02.2010) MANU/SC/0139/2010

Direct Taxation - 'Roll over premium charge' incurred for foreign currency loan - Allowbility of deduction under Section 36(1)(iii) of the Income Tax Act, 1961- Assessment year 1986-87- The A.O. disallowed the deduction under Section 36(1)(iii) to the 'roll over premium charges' paid by the assessee in respect of foreign exchange forward contracts to Citibank - Assessee preferred an appeals before the High Court - High Court by the impugned order ,allowed the deduction under Section 36(1)(iii) of the said Act and ruled against the capitalization of the roll over charges -Hence present civil appeals-Whether in the present case, the capitalization of the roll over charges paid in respect of foreign currency under S 43 A is justified- Whether Roll over premium charges by assessee are entitled to Deduction u/ss. 36(1)(iii) and 37?

Held, The exchange differences are required to be capitalized if the liabilities are incurred for acquiring the fixed asset, like plant and machinery. The fact that whether the purpose of the loan is to finance the fixed asset or working capital is the question which one needs to answer and in order to ascertain that purpose, the facts and circumstances of the case, including the relevant loan agreement and the correspondence between the parties concerned are required to be looked into. In the present case, of the loan taken by the assessee was to finance the purchase of plant and machinery which is a fixed asset-Hence, Roll over premium charges by assessee are not entitled to Deduction u/ss. 36(1)(iii) and required to be capitalized in view of Section 43A of the Act. Appeal by Revenue Allowed

Direct Taxation - 'Roll over premium charge' incurred for foreign currency loan - applicability of Section 43A of the Income Tax Act, 1961- Income Tax Act, 1961, Sections 43A - Assessment year 1986-87- Assessee procured a foreign currency loan by entering into a forward contracts with Citibank for delivery of the required foreign currency on the stipulated dates under the contract for installment- Whether in the present case, the capitalization of the roll over charges paid in respect of foreign currency under S 43 A is justified?

Held, during the relevant assessment years, the year end liability of the assessee had to be considered-Section 43A applied to the entire liability remaining outstanding at the year end, and it was not restricted merely to the installments actually paid during the year. Also, it cannot be said that roll over charge has nothing to do with the fluctuation in the rate of exchange. In the present case, the Notes to the Accounts for the year ending 31st December, 1986 clearly establishes existence of adverse fluctuations in the exchange rate which made the assessee opts for forward cover and which made the assessee pays roll over charges. Roll over charges paid/ received in respect of liabilities relating to the acquisition of fixed assets should be debited/ credited to the asset in respect of which liability was incurred. However, roll over charges not relating to fixed assets should be charged to the Profit & Loss Account- Thus, the roll over charge was required to be capitalized in view of Section 43A of the Act.

• COMMERCIAL

State of Kerala and Anr v. B. Six Holiday Resorts (P) Ltd. and etc. (Decided on 13.01.2010) MANU/SC/0173/2010

Commercial - Liquor licence - Non-grant of FL-3 Licence under the Foreign Liquor Rules framed under the Akbari Act due to amendment of Foreign Liquor Rules - Challenge thereto - Akbari Act and Rules 8C and 13(3) of Foreign Liquor Rules and Foreign Liquor (Amendment) Rules, 2002 - Whether an application for grant of FL-3 Licence should be considered with reference to the Rules as they existed when the application was made or in accordance with the Rules in force on the date of consideration?

Held, where the Rule require grant of a licence subject to fulfillment of certain eligibility criteria either to safeguard public interest or to maintain efficiency in administration, it follows that the application for licence would require consideration and examination as to whether the eligibility conditions have been fulfilled or whether grant of further licences is in public interest. Where the applicant for licence does not have a vested interest for grant of licence and where grant of licence depends on various factors or eligibility criteria and public interest, the consideration should be with reference to the law applicable on the date when the authority considers applications for grant of licences and not with reference to the date of application. The State has exclusive privilege of manufacture and sale of liquor, and no citizen has a fundamental right to carry on trade or business in liquor, the applicant did not have a vested right to get a licence. Where there is no vested right, the application for licence requires verification, inspection and processing. In such circumstances it has to be held that the consideration of application of FL-3 licence should be only with reference to the rules/law prevailing or in force on the date of consideration of the application by the excise authorities, with reference to the law and not as on the date of application. Consequently the direction by the High Court that the application for licence should be considered with reference to the Rules as they existed on the date of application cannot be sustained.

Commercial - Liquor licence - Amendment of Foreign Liquor Rules - Challenge thereto - Akbari Act and Rules 8C and 13(3) of Foreign Liquor Rules and Foreign Liquor (Amendment) Rules, 2002 - Whether the amendment to Rule 13(3) of Foreign Liquor Rules substituting the last proviso is valid?

Held, If on account of the fact that sufficient licences had already been granted or in public interest, the State takes a policy decision not to grant further licences, it cannot be said to defeat the Rules. It merely gives effect to the policy of the State not to grant fresh licences until further orders. If the State on a periodical re-assessment of policy changed the policy, it may amend the Rules by adding, modifying or omitting any rule, to give effect to the policy. If the policy is not open to challenge, the amendments to implement the policy are also not open to challenge. When the amendment was made on 20.2.2002, the object of the newly added proviso was to stop the grant of fresh licences until a policy was finalized. A proviso may either qualify or except certain provisions from the main provision; or it can change the very concept of the intendment of the main provision by incorporating certain mandatory conditions to be fulfilled; or it can temporarily suspend the operation of the main provision. Ultimately the proviso has to be construed upon its terms. Merely because it suspends or stops further operation of the main provision, the proviso does not become invalid. The challenge to the validity of the proviso is therefore rejected.

HIGH COURT

• CIVIL

BOMBAY HIGH COURT

Kum Shweta Santalal Lal & Ors v. The State of Maharashtra, through its Secretary, Social Welfare, Cultural Affairs, Sports Department, Mantralaya, Mumbai and Ors (Decided on 03.03.2010) MANU/MH/0167/2010

Civil - Benefits of reservation in the State of migration - Entitlement of migrant thereto - Maharashtra Scheduled Tribes (Regulation of Issuance and Verification of Certificate Rules, 2003 - Bench constituted for hearing and disposing of matter on law relating to entitlement of benefits of reservation to migrants belonging to Scheduled Caste and Scheduled Tribes in the State of Migration - Hence, present reference - Whether a person who was not ordinarily resident as on the date of the relevant Presidential Notification in the area that now constitutes the State of Maharashtra will be entitled to the benefit of reservation in the State?

Held, if a person migrates to a geographical area forming part of another State after the date of Presidential Notification, such a person will be treated as a migrant, so also, the children of such migrants born after the date of Presidential Notification will be entitled to the benefits of reservation in the State where their parents were ordinarily resident. Therefore, in case of a migrant belonging to a Scheduled Caste, not ordinarily resident as on 10.3.1950 in the area that now constitutes the State of Maharashtra and in a case of S.T., considering Rule 5, on 6.9.1950, would not be entitled to benefits of reservation as S.C./S.T. in the State of Maharashtra. They and their progeny will continue to get the benefits of reservation in the State of origin. Reference answered accordingly.

• INTELLECTUAL PROPERTY RIGHTS

DELHI HIGH COURT

Mount Everest Mineral Water Ltd. v. Bisleri International Pvt. Ltd. and Ors. (Decided on 22.02.2010) MANU/DE/0410/2010

Intellectual Property Rights - Trademarks - Application for rectification of registration of trademark - Appearance of Registrar in legal proceedings - Content of deposition or statement made by Registrar or his duly authorised subordinate - Scope thereof - Section 98 of Trademarks Act, 1999

Held, the appearance or statement as the case may be could be for the purposes of explaining matters with particular reference to the case in which the application for rectification is filed or it could be about the general practice followed by the Trade Marks Registry. Where his opinion on the general practice of the Trade Marks Registry is sought, he is expected to depose on such practice de hors the lis between the parties. The Registrar while appearing in proceedings under Section 98 TM Act 1999 will remain neutral and objective. In the instant case, the contents of the statement made by the Senior Examiner indicate that it was not confined to the record of the case or to the general practice of the Trade Marks Registry in like cases. It went far beyond. Therefore, statement dated 9th September 2008 of the Senior Examiner is directed to be taken off the records of the three rectification applications. Writ petition is accordingly allowed.

BOMBAY HIGH COURT

H.R. Irani v. Life Insurance Corporation of India and Anr. (Decided on 10.02.2010) MANU/MH/0093/2010

Property - Procedure for eviction - Issue of notice of eviction - Leading of evidence - Section 5 of Public Premises (Eviction of Unauthorised Occupant) Act, 1971 (PP Act) - Petitioner-tenant was issued notice of eviction by Respondent No. 1 for alleged unauthorized construction in tenanted premises - Estate Officer called upon Petitioner to tender evidence first in respect of matter - Same challenged by Petitioner - Whether Petitioner entitled to lead evidence first

Held, under the special law being the PP Act, the party doing the unlawful act of putting up illegal construction such as the Petitioner or the party in lawful occupation of such premises such as the Petitioner, is issued a notice to show cause against the order of eviction, the Petitioner is required under the notice itself to produce the evidence in support of the cause shown. Consequently, the order of the Estate Officer calling upon the Petitioner to tender evidence first, is correct and does not suffer from any infirmity . It is in terms of Section 5 of the PP Act . The Petitioner must lead her evidence to show cause to the notice issued upon her.

TRIBUNAL

• DIRECT TAXATION

M/Section Seagate Singapore International v Director of Income Tax (International Taxation)II, New Delhi (AAR) (Decided on 25.02.2010) MANU/AR/0007/2010

Direct taxation - Permanent Establishment -Article 5(1) and 5(8) - India-Singapore Double Taxation Avoidance AgreementWhether the applicant which operates through ISPs such as YCH in India can be said to have a Permanent Establishment Article 5(1) or 5(8) of the India-Singapore Double Taxation Avoidance Agreement in relation to the activity of delivering goods through a customs bonded warehouse owned and operated by an independent service provider in India.

Held, the profits derived by the applicant from its business in India will be taxable in India under the I.T. Act or under Article7 (1) of the India-Singapore DTAA, only if it carries on business through a PE located in India but not otherwise. In the present case, the Agreement between YCH/warehouse and applicant provides that the warehouse space has to be at a specified location given by applicant. The obligation to make adequate space available to store the applicant's products is cast on YCH. The Agreement also speaks of inventory control apart from storage, handling, repacking etc. Moreover, the applicant's agent or representative has a right to enter the warehouse for the purposes of physical inventory, inspection, audit, repackaging etc. Even the security requirements as stipulated by the applicant are required to be provided at the place. By merely outsourcing the operations leading to supplies of products, it cannot be said that the applicant does not carry on any business in India from a fixed place. The ground realities cannot be disregarded. The question whether the person carrying on business operations on behalf of or pursuant to the instructions of the applicant is a dependent or independent agent is not very material in considering the applicability of Article5.1. The business of the applicant at a fixed place is being carried on through the media of the warehouse provider who can also be characterized as service provider. Thus, the demarcated space in the warehouse of ISP constitutes the fixed place of business within the meaning of Article5.1 of DTAA. The question is answered partly in the affirmative by holding that the applicant has a PE in India within the meaning of Article 5.1.