SUPREME COURT

• CONSTITUTIONAL LAWS

A. K. Behra v. Union of India and Anr. and P.K. Gaikwad v. Union of India and Ors. (Decided on 06.05.2010) MANU/SC/0366/2010

J.M Panchal J.

Administrative Tribunals - Abolition of the post of Vice-Chairman - Sections 8(2), 12 and 12(2) Administrative Tribunal (Amendment) Act, 2006 - Sections 12 Administrative Tribunals Act, 1985 - Article 323A Constitution of India, 1950 - Whether the abolition of the post of Vice-Chairman, which was in existence since inception of the Administrative Tribunals, is unconstitutional because it would create anomalous situation in the structure as well as administration of the Tribunals if any High Court Judge is appointed as Member of the Tribunal ?

Held, Parliament under Article 323A of the Constitution has right to change the conditions of service of Members of the Administrative Tribunals by enacting a law for equating Members of the Tribunal with Judges of High Court for the purposes of pay and superannuation. By abolition of the post of the Vice-Chairman no anomalous situation is sought to be introduced in the structure as well as functioning and administration of the Tribunals - A retired High Court Judge would be eligible for appointment as Member of the Tribunal and on such appointment would be eligible to all the facilities as a Judge of the High Court . Chairman of the Tribunal is normally a retired Chief Justice of the High Court and very rarely a retired Judge is appointed as Chairman of the Tribunal. Petitioner failed to establish that by upgrading the status of the Administrative Member of the Tribunal to that of a High Court Judge a particular provision of the Constitution is infringed. Thus, abolition of the post of Vice-Chairman except for the purposes of Section 12 of the Act would not create anomalous situation in the structure as well as administration of the Tribunal, if any High Court Judge is appointed as a Member has no substance . Petition dismissed

Constitutional validity of Section 12(2) of Administrative Tribunal (Amendment) Act, 2006 - Whether Section 12(2) of the amending Act enables the appropriate Government to nominate one of the Members of the Tribunal to perform financial and administrative functions destroys independence of the Tribunal which is a Judicial Forum and, therefore, the said provision should be regarded as unconstitutional

Held, As per Section 12 of the Amended Act, the Chairman of the Tribunal has to exercise all financial and administrative powers over the Benches and for effective and better administration of the Benches of the Tribunal located in different and far flung States of the country. Decentralisation of financial and administrative powers to tackle local needs and problems, in favour of a Member of Tribunal, for effective administration of the Tribunals, cannot be regarded as destroying the basic feature of the Constitution, namely independence of judiciary - Designation of the Vice-Chairman by the Central Government under Section 12(2) of the Act would obviously be in concurrence with the Chairman-Further, Chairman only recommend to the Government as to designate which Member of the Tribunal as Vice-Chairman - Designation as Vice-Chairman would not entitle the Member so designated to any special benefits in service conditions. The said provision an enabling provision, which is clear from the use of the expression "may" in the said provision and the only purpose of the said provision is to help the Chairman in discharge of his administrative functions as the Benches of the Tribunal are situated in different parts of the country. Thus, Section 12(2) is not unconstitutional. Petition Dismissed

Extension of Terms of members of administrative Tribunal - Sections 8,10A, Administrative Tribunal (Amendment) Act, 2006 - Whether Section 10A, which restricts the total term of the Member of the Administrative Tribunal to ten years should be regarded as unconstitutional ?

Held, for performing duties as a Member of the Tribunal more efficiently, Section 8 of the Act was earlier amended in the year 1987 and provision was made fixing term of office of Chairman, Vice-chairman and Members at five years period- but by present amendment of 2006, provision is made for extension of term of office by a further period of five years. The Government has decided to provide for extension in term of office so that the member can effectively contribute to speedy disposal of cases, on merits after gaining expertise in the service jurisprudence and having good grip over the subject. Thus, the provisions of Section 8 fixing maximum term of office of the chairman at sixty eight years and of a Member of the Tribunal at 10 years, cannot be regarded as unconstitutional because concept of security of tenure does not apply to such appointments. The said provision cannot be assailed as arbitrary having effect of jeopardising security of tenure. Court fails to appreciate as to how the amended provisions restricting the total tenure of a Member of the Tribunal to ten years would be unconstitutional and it is neither arbitrary nor illegal . Petition Dismissed.

Justice Dalveer Bhandari

Administrative Tribunals - Abolition of the post of Vice-Chairman - Effect of newly inserted Section 10A Administrative Tribunals (Amendment) Act, 2006 - Sections 8(2), 12 and 12(2); Administrative Tribunals Act, 1985 - Whether newly inserted Section 10A of the Act which creates a hostile discrimination in the matter of conditions of service between the members of the Tribunal appointed before and after 19th February, 2007 inasmuch as "conditions of service" of a High Court Judge have been granted to members appointed after the said date while the same have been denied to other members appointed before it ?

Held, Amended Section 10A is clearly discriminatory and violative of basic principles of equality. Section 10A of the amended Act is declared discriminatory, unconstitutional and ultra vires of the Constitution so far as it does not provide uniform pay scales and service conditions on the basis of amended and unamended rules. All the members of the Tribunal would be entitled to get the same pay scales and service conditions from June 2010 - Petition allowed

Constitutional validity of newly inserted Section 12(2) Administrative Tribunal (Amendment) Act, 2006 - Whether Section 12(2) of the amended Act enabling the appropriate Government to nominate one of the Members of the Tribunal to perform financial and administrative functions destroys independence of the Tribunal which is a Judicial Forum and, therefore, the said provision should be regarded as unconstitutional ?

Held ,under Section 12(2) of the amended Act, the entire power of designating Vice-Chairman has been usurped by the appropriate government. It disturbes the separation of powers principle as the power pertaining to judicial functioning of the Tribunal which was earlier exercised by the judiciary has been usurped by the executive. Thus, the newly inserted Section 12(2) is per se untenable and consequently declared null and void. Petition allowed

• CRIMINAL LAWS

Niranjan Panja v. State of West Bengal (Decided on 14.05.2010) MANU/SC/0386/2010

Circumstantial evidence - Whether Conviction can be based on the theory of last seen together and discovery at the instance of accused - Section 27 of Indian Evidence Act, 1872?

Held, prosecution failed establish the time of death and any conclusive evidence to prove that deceased was last seen in the company of accused. Hansua allegedly produced by the accused never saw the light of the day nor had the witness identified the same. Prosecution had also not given any explanation whatsoever about the disappearance of this weapon. Conviction set aside. Appeal allowed.

• COMMERCIAL LAWS

Smt. Monika Gupta v. Union of India (UOI) and Ors. (Decided on 13.05.2010) MANU/SC/0385/2010 

Selection of LPG Distributor - Award of marks - Selection Committee interviewed the Appellant and the Appellant was placed in first place - Respondent No.4 alleging failure of Selection Committee to award marks for infrastructure approached High Court - At the instance of High Court Respondent No. 2 cancelled the selection list decided to prepare fresh list - Wheteher the High Court was justified in dismissing directing cancellation of selection list and preparation of fresh list ?

Held, Respondent No. 4 had neither given any indication in the application form about the availability of land for godown and/or showroom and nor she annexed any document to show that she had secured lease of land or the godown and the showroom necessary for operating LPG distributorship. Selection Committee had rightly awarded zero marks to her under the heading infrastructure . Appeal allowed.

HIGH COURT

• DIRECT TAXATION

BOMBAY HIGH COURT

Vanita Vishram Trust v. Chief Commissioner of Income Tax & Anr. (Decided on 06.05.2010) MANU/MH/0550/2010

Direct taxation - Grant of approval - Denial of - Petitioner a public charitable trust, registered under the Bombay Public Trusts Act, 1950 - Main object for which it had been constituted stated to be education of women - Until Assessment Year 2004 - 05, it was allowed exemption under Sections 10(22) and 10(23C)(vi) in addition to Section 11 but denied for 2005- 06 to 2007 - 08 and 2008 - 09 to 2010 - 11 on two grounds - firstly, on perusal of the objects enlisted in Trust Deed, it was found to exist for objects of a varied in nature - secondly the balance sheet and other financial statements showed that it had surplus which was invested in making additions to the assets and increasing bank deposits - Hence instant Petition - Whether the petitioner trust was entitled for approval under Section 10(23C)(vi) of the Income Tax Act, 1961? - Section 10(23C)(vi), Income Tax Act, 1961.

Held, a holistic reading of the object clause would establish beyond doubt that the sole purpose for the establishment of the Petitioner was to further the cause of education amongst women belonging to a particular class, as stated therein. The fact that the Trust exists solely for educational purposes is evidenced from the assessment orders for Assessment Years 2000 - 01 and 2006 - 07, copies of which form a part of the record before the Court. The record of these proceedings also contains a judgment of a Division Bench of this Court dated 29 June 2005 in a Reference under Section 256(1) to which the Petitioner was the applicant. The Division Bench observed that merely because a certain surplus arose from the operations of the Trust, it could not be held that the institution was run for the purpose of profit, so long as no person or individual was entitled to any portion of the profit and the profit was utilized for the purpose of promoting the objects of the institution. The income of the Trust was, therefore, held to be exempt under Section 10(22). The Division Bench followed the decision of the Supreme Court in Aditanar Educational Institution vs. Additional. The Division Bench also observed that if the Trust exists solely for educational purposes and conducts an educational institution, the fact that it had other objects would not disentitle it to the exemption so long as the activity carried out by it in that assessment year was that of running an educational institution and not for profit

While concluding the case the Court distinguished the judgment of the Uttarakhand High Court in Commissioner of Income Tax vs. Queens' Educational Society which was relied on by the Respondent, while denying the approval, and also recorded reservations about the correctness of the statement of legal principle in the judgment of the Uttarakhand High Court.

• SERVICE TAX

ANDHRA PRADESH HIGH COURT

Trent Limited, Mumbai v. Union of India and Ors. (Decided on 07.06.2010) MANU/AP/0070/2010

Writ petition - Retrospectivity of the provisions - Renting of immovable property for commercial purpose - on the basis of the provisions of Section 65(105) as amended by the Finance Act, 2010 - not to initiate any coercive steps for recovery of service tax on renting of immovable property-Whether Section 65(105) has been given retrospective efficacy qua Section 77 of the Finance Act, 2010 ?

Held -On the prima-facie analysis, the respondents are directed not to initiate any coercive steps for recovery of the service tax on the renting of immovable property by the petitioners, on the basis of the provisions of Section 65(105) as amended by the Finance Act, 2010, for the period 1st June, 2007 to 1st April, 2010. Petitioner shall,be liable to pay the applicable service tax as per the provisions of Section 65(105) for the period subsequent to 1st April, 2010 .

TRIBUNAL

• DIRECT TAXATION

DCIT v. M/s. Indo American Jewellery (ITAT Mumbai) (Decided on 31.05.2010)

Transfer pricing - TNM Method - Assessee company engaged in business of manufacturing and export of plain and studded jewellery mainly to US and UK - Return filed by Assessee - Rejected by TPO and addition of Rs.3,39,63,606 made by the Assessing Officer - CIT (A) disallowed said addition - Hence present Appeal - Whether Assessing Officer was justified in making said addition on account of disallowance of arms length under Section 92C(4) of the Act ? - Section 92C (4), Income tax Act, 1961.

Held, there is no dispute to the fact that the Assessee during the relevant assessment year has entered into international transactions with four AEs. We find the Assessee in the instant case has adopted TNM method. We find the split financials provided by the Assessee were rejected by the TPO on the ground that allocation of manufacture expenses like employees remuneration, rent, etc., the allocation key used is sales whereas according to the TPO the ideal allocation key in this case could have been - number of employees, space utilised, etc. We find while rejecting the method adopted by the Assessee, the TPO conducted fresh search to find companies in the comparable business as that of the Assessee. However, we find those comparables as selected by the TPO cannot be compared with that of the Assessee.

Further the AEs have earned meager profit or incurred losses as compared to the profit of the Assessee and, therefore, the submission of the Assessee that there was no transfer of profit by the Assessee outside India finds merit. It has been held by various judicial pronouncements that unless proper method is followed, comparables are chosen and selected after doing a proper FAR study as well as adjustments are made to the extent possible it would be unfair to summarily reject the transfer pricing analysis made by the Assessee. We find in the instant case the Assessing Officer/TPO has not made out a case to establish that the comparables used by the Assessee deserve to be rejected.

We find merit in the submission of the learned counsel for the Assessee that the operating profit/sales of the Assessee at 3.56 per cent being higher than the industry margin, therefore, the transactions between the Assessee and its AEs are at arms length. In the result, the Appeal filed by the Revenue is dismissed.