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Bombay HC: Commission payments are allowable as business expenditures

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Title: The Indian Hume Pipe Co. Ltd. v. Commissioner of Income Tax

Decided on:  31st AUGUST, 2023.

+ INCOME TAX APPEAL NO.744 OF 2002

CORAM: G.S. KULKARNI & JITENDRA JAIN, JJ.

Facts of the Case:

This appeal consolidates disputes arising from assessment years 1986-87, 1987-88, and 1988-89, centered around a common order by the Income Tax Appellate Tribunal on January 18, 2002. The appellant, a listed limited company, specializes in manufacturing and selling R.C.C. Pipes and Steel Pipes used for water supply and drainage systems. The appellant’s return of income for the assessment year 1986-87 was selected for scrutiny assessment. The main issue revolves around the disallowance of commission payments made to various parties, amounting to Rs. 26,90,104.

Issues:

  1. Whether the commission payments made by the appellant to various parties should be treated as allowable business expenditures?
  2. Whether the Tribunal’s conclusion that the commission agents did not provide services justifying the payment of commission is based on valid and relevant material and is legally sustainable?

Contentions:

The appellant contends that the commission payments should be allowed as business expenditures, as they were made based on legally binding agreements with commission agents who rendered services to assist the appellant in securing contracts and recovering payments. The appellant points out that these commission agents were unrelated to the company and confirmed the receipt of the commissions. They argue that their case is consistent with prior assessment years and cite relevant case laws to support their contention.

On the other hand, the respondent revenue argues that the appellant failed to provide concrete evidence demonstrating the services provided by the commission agents. They assert that the Assessing Officer’s and Tribunal’s findings are based on factual analysis and should not be questioned under Section 260A of the Income Tax Act. The respondent revenue also raises the issue of the reasonableness of the expenditure, highlighting the Revenue’s role in assessing whether the commission payments were genuinely made for business purposes.

Decision:

After a comprehensive analysis, the Court finds that both the Assessing Officer and the Tribunal were unjustified in partially disallowing the commission payments. They noted that by allowing partial payments, both authorities had implicitly acknowledged the commission agents’ services. The Court further emphasized that the Revenue’s inconsistent stance and its involvement in determining the quantum of expenditure were not permissible under the Income Tax Act.

The Court ruled in favor of the appellant, emphasizing that the choice to engage commission agents for tendering and payment follow-ups is a business prerogative. They reiterate that commercial expediency should be viewed from the business’s standpoint and not from the Revenue’s perspective. Consequently, the Court allows the appellant’s appeal, emphasizing that the Revenue should maintain consistency in its approach. The decision serves as a precedent for the validity of commission payments made in commercial transactions, upholding the principles of business expediency and consistency.

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Written by- Aparna Gupta, University Law College & Dept. of Studies in Law

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Bombay High Court: Unjustified delay in submitting hard copies of appeal can attract order with costs

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Title: Kailash Patil v. Vasant S. Jadhav

Decided on: 31st AUGUST, 2023

SECOND APPEAL NO.301 OF 2023

CORAM: JITENDRA JAIN, J

Facts:

The case pertains to three appeals filed under Section 58 of the Real Estate (Regulation and Development) Act, 2016 (“RERA Act”). These appeals challenge the order of the Maharashtra Real Estate Appellate Tribunal, Mumbai (“Appellate Tribunal”) in relation to certain complaints filed by allottees against a developer/promoter. The Regulatory Authority had previously passed an order against the developer, prompting the filing of these appeals. The appellant developer had filed Appeal Nos. 301 of 2023, 303 of 2023, and 311 of 2023 online within the stipulated timeframe, challenging the order of the Regulatory Authority. However, the developer failed to file the required hard copies of the appeals and attachments within the prescribed time.

Issues:

Whether the Appellate Tribunal’s rejection of the appeals and subsequent dismissal of the restoration application were justified due to the developer’s failure to submit hard copies of the appeals and attachments?

Contentions:

The appellant developer’s main contention is that the procedural irregularity of not submitting hard copies should not deprive them of the opportunity to seek substantial justice through the appeals. They assert that the delay in complying with procedural formalities should not overshadow their right to present their case. Furthermore, the developer argues that the legal provisions and regulations led to a bonafide belief that hard copies were not required after filing online appeals. They propose that the restoration application be allowed, and the appeals be restored, subject to certain terms and conditions, including the payment of costs.

On the other hand, the respondents, who are allottees of the residential project, argue that the developer’s delay tactics and lack of diligence should not be rewarded. They emphasize that the appellant developer has failed to provide possession of the flats for over a decade, and they view the delay in the restoration application as a further attempt to prolong the resolution of their grievances. The respondents contend that the developer’s lack of diligence and accountability should be taken into account when deciding whether to restore the appeals.

Decision:

After careful analysis, the Court acknowledges that the delay in filing hard copies of the appeals was a procedural error but underscores that it shouldn’t be an insurmountable obstacle to pursuing the appeals.

The Court criticized the developer for not diligently pursuing their appeals and notes that the delay of more than 1000 days in seeking restoration of the dismissed appeals is a serious concern. However, it also recognizes the developer’s bonafide belief regarding the requirement of hard copies due to the legal provisions and regulations.

As a result, the Court allows the restoration of the appeals but imposes certain conditions. The developer is directed to deposit a specified sum as costs and make payments to the respondents within a stipulated timeframe. The hard copies of the appeals are to be submitted, and the appeals are to be restored for hearing. The decision makes it clear that the developer should not seek adjournments and emphasizes that the restoration is being granted as a last chance.

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Written by- Aparna Gupta, University Law College & Dept. of Studies in Law

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Bombay HC: Occupant rather than an owner of the insured car entitled to compensation

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Bombay HC: Occupant rather than an owner of the insured car entitled to compensation

Title: Bharti W/o Sunil Dhat and Ors. v. Navnath Dagdu Dhat and Ors.

Decided on: 28th AUGUST, 2023.

+ FIRST APPEAL NO.749 OF 2020

CORAM: S. G. CHAPALGAONKAR, J

Facts of the Case:

The appellants, original claimants, were aggrieved by the judgment and award issued on 19.09.2019 by the Motor Accident Claims Tribunal, Beed. They had filed a claim seeking compensation under Section 166 of the Motor Vehicle Act for the accidental death of Sunil Navnath Dhat. The accident occurred when the deceased was a passenger in a car driven by respondent no. 2, which collided with a roadside tree. The claimants contended that the accident was due to the negligence of the driver. They further claimed that the deceased was an engineering graduate and a government contractor with substantial income.

Issues:

Whether the deceased, as a passenger in the car owned by his father, can be considered an owner for the purpose of claiming compensation?

Whether the insurer is liable to pay compensation for the death of the deceased?

Contentions:

The appellants asserted that the car involved in the accident was insured under a private car package policy. This type of policy covers not only liability to third parties but also extends coverage to occupants of the insured vehicle. According to the claimants, the Tribunal wrongly concluded that the deceased, being a passenger in the car owned by his father, should be considered an owner for the purpose of compensation claims.

 The appellants emphasized that the deceased was an engineering graduate and a government contractor with multiple construction projects. They argued that he had a significant income and was the primary breadwinner for the family. This supported their claim for compensation. The claimants contended that the deceased’s status as an occupant of the insured car should entitle them to claim compensation, regardless of his family relationship with the car owner.

The respondent no.3-insurer, represented by Mr. Kadethankar, argued that since the car was owned by the father of the deceased, the deceased should be treated as having stepped into the shoes of the owner. This meant that the deceased was not a third party and could not claim compensation under Section 166 of the Motor Vehicle Act. The insurer emphasized that the private car package policy had specific terms and conditions, including a premium that covered occupants’ risks up to a certain limit (Rs. 1,00,000 each). They maintained that their liability was confined to the terms of the contract, and any expansion of this liability would be contrary to the agreement.

Decision:

The Bombay High Court deliberated on the matter and made the following key points:

  • Circulars issued by Tariff Advisory Committee (TAC) and Insurance Regulatory and Development Authority (IRDA) mandating insurance coverage for occupants of private cars under package policies.
  • The car in question was insured under a package policy, and thus the insurer was liable for the occupant’s death.
  • The deceased’s status as an occupant rather than an owner of the insured car, despite being a family member, entitles the claimants to compensation.

The Bombay High Court allowed the appeal, quashed the previous judgment and award, and ruled that the respondents were jointly and severally liable to pay compensation to the claimants for the accidental death of the deceased. The compensation amount was determined based on various factors, including income, future prospects, and deductions, and the court ordered the insurer to pay the specified compensation along with interest.

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Written by- Aparna Gupta, University Law College & Dept. of Studies in Law

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Justice Served: Bombay High Court Upholds Detention Order Under MPDA Act

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Title: Mohsin Anwar Khan @ Shaikh v. Commissioner of Police, Pune & Ors.

Decided on: 30th AUGUST, 2023

CRIMINAL WRIT PETITION(STAMP) NO. 7365 OF 2023

CORAM: REVATI MOHITE DERE & GAURI GODSE, JJ.

Facts:

This case involves a petition filed to challenge a detention order issued against the petitioner. The order, dated February 24, 2023, was passed by the Commissioner of Police, Pune, under the Maharashtra Prevention of Dangerous Activities of Slumlords, Bootleggers, Drug Offenders, Dangerous Persons, Video Pirates, Sand Smugglers, and Persons engaged in Black-marketing Essential Commodities Act, 1981 (MPDA Act). The order was based on allegations from a Criminal Case (CR) registered on November 4, 2022, against the petitioner for offenses under various sections of the Indian Penal Code, Maharashtra Police Act, and Arms Act. The petitioner was accused of threatening and assaulting individuals with weapons. The detaining authority also relied on in-camera statements from witnesses regarding incidents in October 2022.

Issues:

  1. Whether there was a delay in issuing the detention order, rendering it invalid?
  2. Whether the in-camera statements were valid due to the time gap between incidents and the date of the order?

Contentions:

The petitioner claimed that the order was delayed as the incidents and in-camera statements were several months before the detention order. However, the government’s response detailed the steps taken to verify the statements and scrutinize the proposal. The court found that the order was issued within a reasonable timeframe, considering the events and verification process. The petitioner argued that the allegations were individual and not a threat to public order. The detaining authority asserted that the petitioner’s actions caused fear and terror among the public, justifying the detention. The court analyzed the incidents mentioned and concluded that they created a public order issue due to the petitioner’s intimidating and threatening actions. The state opposes this, arguing that the petitioner’s actions, including assaults, extortion, and threats, created fear and a sense of terror within the community, thus posing a risk to public order.

The petitioner also argues that the witnesses against them in the CR have a history of animosity, undermining the credibility of their statements. The state, on the other hand, stands by the witnesses’ testimonies, stating that they provide a valid basis for the detention.

The petitioner questioned the authenticity of in-camera statements. The government explained the procedural steps taken to verify the statements’ genuineness. The court acknowledged that the statements were recorded while the petitioner was in custody and found the process satisfactory in establishing the validity of the statements.

Decision:

The court dismissed the petitioner’s claims, ruling that there was no undue delay in issuing the detention order. The court also held that the allegations against the petitioner were of public order concern due to the intimidating and threatening nature of the incidents. The court upheld the reliability of the in-camera statements, finding the verification process sufficient. Consequently, the petition was rejected, and the detention order remained in effect.

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Written by- Aparna Gupta, University Law College & Dept. of Studies in Law

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Bombay HC dismissed an appeal for reinstatement due to failure to prove seniority over other teachers

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Title: Janabai Nivrutti Saune v. Dharmveer Shambhuraje and Ors.

Decided on: 25.08.2023

+ WRIT PETITION NO. 11554 OF 2022

CORAM: SANDEEP V. MARNE, J.

Facts of the Case:

The petitioner was aggrieved by the judgment and order issued on January 6, 2022, by the School Tribunal in Pune. The petitioner had appealed against her termination from service, which was effective from February 6, 2020. The tribunal allowed the appeal, stating that her termination was against the law, but instead of reinstating her, it directed the management to pay her six months’ salary as compensation. The petitioner was dissatisfied with the denial of reinstatement relief and filed a petition.

The petitioner held educational qualifications of H.S.C. and D.Ed. She was appointed as an Assistant Teacher on January 1, 2013. Subsequently, her services were terminated on August 8, 2017, and she challenged the termination through an appeal. The tribunal partially allowed the appeal, setting aside the termination and directing her reinstatement.

Issues:

The main issues were whether the petitioner’s termination was justified, whether the principle of seniority was violated, and whether her termination contradicted the reservation provisions for Backward Class employees.

Contentions:

The petitioner’s counsel argued that the management had not followed the “last come first go” principle in her termination and that her seniority was higher than that of certain other teachers. The petitioner’s seniority claim was based on a communication dated July 14, 2014, which the court found unsuitable for determining seniority. The petitioner also relied on Rule 26 of the Maharashtra Employees of Private Schools (Conditions of Services) Rules, 1981, claiming that seniority should be observed when effecting retrenchment.

The respondent’s counsel contended that the petitioner was the junior-most Undergraduate Teacher and thus justly terminated. The other teachers were Graduate Teachers in a higher pay scale. They also argued that the petitioner’s appointment was against a reserved post for the Special Backward Class (S.B.C.) category, but since no posts were reserved for S.B.C. in the reservation roster, her termination was valid.

Decision:

The court found that the petitioner failed to prove her seniority over other teachers and that the communication she relied upon was not indicative of seniority. It also noted that the respondent’s claim that the petitioner was the junior-most Undergraduate Teacher was correct. The court determined that Rule 26 did not apply as there was no departure from the principle of seniority. It concluded that the petitioner’s reliance on Rule 27(e) was unfounded due to the absence of reserved posts for the S.B.C. category. Lastly, the court rejected the petitioner’s claim of non-payment of salary since 2013, as it wasn’t raised as an independent issue earlier.

In conclusion, the court found no grounds for interfering with the tribunal’s order and dismissed the petition, stating that the tribunal’s decision was correct and legally sound.

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Written by- Aparna Gupta, University Law College & Dept. of Studies in Law

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