Competition Commission of India Finds Hyundai, Reva and Premier to be in Contravention of the Competition Law

The Competition Commission of India (‘the Commission’), in its order dated 27.7.15 has found 3 Car Companies, namely, Hyundai Motor India Ltd. (Hyundai), Mahindra Reva Electric Car Company (P) Ltd. (Reva) and Premier Ltd. (Premier) to be in contravention of the provisions of the Competition Act, 2002 (‘the Act’). The instant order is in continuation of Commission’s main order in the same case dated 25.08.2014 vide which the Commission had inter alia imposed penalties on fourteen out of the seventeen car companies under Section 27 of the Act.

The order against Hyundai has remained pending pursuant to the writ petition filed by it in the Madras High Court challenging the jurisdiction of the Commission. In regards, Reva and Premier, the order remained pending because of the applications filed by them requesting for striking out of their names from the array of parties. Accordingly, the Commission decided to pass a separate order against these three car companies after affording them reasonable opportunity to make their submissions in respect of the findings of the Director General (DG) in its investigation.

After taking into account the findings of the DG and the detailed submissions by these three car companies, the Commission found their conduct to be in violation of the provisions of section 3(4) of the Act with respect to their agreements with local Original Equipment Suppliers (OESs) and agreements with authorized dealers whereby they imposed absolute restrictive covenants and completely foreclosed the aftermarket for supply of spare parts and other diagnostic tools. Further the Commission found that the said car companies, who were found to be dominant in the aftermarkets for their respective brands, abused their dominant position under section 4 of the Act. The car companies were found to be indulging in practices resulting in denial of market access to independent repairers as the latter were debilitated to provide services in the aftermarket for repair and maintenance of cars for want of genuine spare parts. Further, these car companies were also found to be using their dominant position in the market for spare parts and diagnostic tools to protect their market for repair services, thereby distorting fair competition.

The Commission has prescribed the same corrective measures to Hyundai, Reva and Premier as were prescribed in the main order dated 25.08.2014 to infuse competition in the after sales market in the automobile sector. To reiterate, the order directed the car companies to cease and desist from indulging in conduct which has been found to be in contravention of the provisions of the Act. The car companies were also directed to adopt appropriate policies which shall allow them to put in place an effective system to make the spare parts and diagnostic tools easily available in the open market to customers and independent repairers. Further, the Commission directed the car companies to not to put any restrictions or impediments on the operation of independent repairers/garages.

The Commission imposed a penalty calculated at the rate of 2% of its average turnover on Hyundai amounting to Rs. 420.2605 crores (Rupees Four Hundred and Twenty Crores, Twenty Six Lakhs and Five Thousand only) which is to be deposited within 60 days of receipt of the order. Considering the mitigating factors that worked in favour of Reva and Premier, the two car companies were absolved from paying monetary penalty.

Detailed order can be seen at Commission’s website www.cci.gov.in

'Walt Disney' didn't abuse its dominance by requiring release of its movies in India only via Digital Cinema platform

K SERA SERA DIGITAL CINEMA (P.) LTD. V. DIGITAL CINEMA INITIATIVES, LLC [2015] 57 TAXMANN.COM 443 (CCI)

Where informant filed complaint against ‘Digital Cinema Initiatives’ and ‘Walt Disney Company India’ (‘Opposite Parties’) for releasing their movies in India only through Digital Cinema Initiatives (DCI) compliant servers and projectors and DCI compliant format was found to be better than non-DCI compliant format, Opposite parties s had not contravened sections 3 and 4 of Competition Act, 2002 (‘the Act’)

Facts:

• The informant was a Digital Cinema Service provider. Its business mainly involved digital projection and screening of films in India through a specific technology known as its proprietary Sky Cinex Technology.
• The informant filed complaint against opposite parties alleging that they had entered into an anti-competitive agreement amongst themselves to release their movies in India in digital form only through Digital Cinema Initiatives (DCI) compliant servers and projectors.

The Competition Commission of India held as under:

• It was found that DCI compliant server was better than non-DCI compliant format, as far as quality and security were concerned
• The Informant failed to show that the alleged conduct of opposite parties was likely to have appreciable adverse effect on the competition
• Since no material was placed on record to infer anti-competitive agreement as envisaged under section 3 of the Act and the opposite parties were not dominant in the relevant market, no case of contravention of sections 3 and 4 of the Act was made out against them.

Credit of foreign TDS can't be denied even against tax levied on corresponding income eligible for section 10A relief

BLUE STAR INFOTECH LTD. V. ACIT [2015] 57 taxmann.com 386 (Mumbai - Tribunal)

Assessee qualified for tax relief under article 23 of DTAA between India and Japan in respect of income that has been subjected to tax in Japan even if such income was exempt in India under Section 10A

Facts

• The assessee filed its return wherein credit of tax deducted at Japan was claimed in respect of its income covered under Section 10A.
• The Assessing Officer (AO) rejected assessee's claim holding that the income on which the assessee was charged to tax in Japan was not chargeable to tax in India being exempt under the provisions of section 10A and, therefore, assessee was not eligible to claim credit for the tax deducted in Japan.
• On appeal, Order passed by AO was confirmed by CIT(A). Aggrieved by the order of CIT(A), assessee filed the instant appeal before the tribunal.

The Tribunal held in favour of assessee as under:

• The profits and gains to which the provisions of section 10A apply are not excluded from total income and instead 'a deduction of such profits and gains…..' shall be allowed from the total income of the assessee. It means 'total income' must first be determined from which deduction under section 10A shall be allowed. Therefore, it could not be said that the profits and gains to which section 10A applies are not charged to tax in India.
• As income that has been subjected to tax in Japan was also chargeable to tax in India (although exempted under Section 10A), assessee was qualified for tax relief under article 23 of DTAA between India and Japan.

Service Charges Collected by Restaurants/Hotels/Eateries Retained by the Restaurants/Hotels/Eateries and are Not ‘Service Tax’ Imposed by the Government

Some restaurants/hotels/eateries besides charging for the food and beverages are also charging ‘service charges’ in their bills. The proceeds of the ‘service charges’ are retained by the restaurants/hotels/eateries. 

Some of the consumers have a misapprehension that these ‘service charges’ are being collected by the restaurant on behalf of the Government as tax. 

It is clarified that these ‘service charges’ collected by the restaurants/hotels/eateries are retained by the restaurants/hotels/eateries and are not ‘service tax’ imposed by the Government. 

It is further clarified that effective service tax rate in respect of services provided in relation to serving of food or beverage by a restaurant, eating joint or mess having the facility of air–conditioning or central air-heating in any part of the establishment is 5.6% (14% of 40%) of the total amount charged.

No denial of section 11 relief to hospital just because it didn't provide concessional treatment to poor patients

ITO V. NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE [2015] 57 taxmann.com 333 (Pune - Tribunal)

Section 11 exemption could not be denied to a hospital on the ground that it didn’t provide concessional treatment to poor patients as there is no provision under Income-tax Act which would disentitle assessee to claim exemption on this ground.

Facts:

• Assessee-trust, running a multi-specialty hospital, claimed exemption of income under section 11 of the Income-tax Act (‘Act’).
• Assessing Officer (AO) denied exemption on ground that assessee was earning profit from its activity and it had failed to provide concessional treatment to poor patients.
• On appeal, the CIT(A) reversed the findings of the AO and allowed exemption to the assessee. Aggrieved by the order of CIT(A), the AO filed the instant appeal before the Tribunal.

The Tribunal held in favour of assessee as under:

• The CBDT in its Circular No. 11, dated 19-12-2008 had clarified that where the purpose of trust or institution is relief to the poor, education or medical relief, it would constitute charitable purpose, even if it incidentally involves carrying on the commercial activities
• In the instant case, assessee was engaged in carrying on objects of providing medical relief to people at large which has been recognised as charitable activity under the Act. Therefore, exemption under section 11 could not be denied merely because surplus was generated from such activities
• Further, there is no provision under the Act which would disentitle assessee to claim exemption on the ground that it did not provide concession to poor patients and, therefore, this could not be a ground to disallow exemption under section 11.

e-Verification of Income Tax Returns – User Manual

CBDT vide Notification No. 2/2015 prescribes  Electronic Verification Code (EVC) for electronically filed Income Tax Return as an alternative mode of verification. EVC would verify the identity of the person furnishing the return of income. 

The Manual Covers   e-Verification of Income Tax Returns in following Circumstances and provides 3 to 4 Option in each such Circumstances.

1.  e-Verification while uploading a return (Non – NetBanking)

2.  e-Verification of an already uploaded return (Non – NetBanking)

3.  e-Verification while uploading a return through NetBanking Login

 

1.  e-Verification while uploading a return (Non – NetBanking)

1 Upload Return – Click Submit

2 The Return is uploaded (Pending for e-Verification)

3 Four e-Verification options provided – Taxpayer can choose any one of the options provided to e-Verify the return.

• Option-1 – “I already have an EVC and I would like to Submit EVC”
• Option-2 – “I do not have an EVC and I would like to generate an EVC”
• Option-3 – “I would like to generate Aadhaar OTP to e-Verify my return”
• Option-4 – “I would like to e-Verify later! I would like to send ITR-V”

Option 1 – “I already have an EVC and I would like to Submit EVC”

Step 1: Provide the EVC in the text box – Click Submit.

Step 2: Download the Acknowledgement (No Further action required).

Option 2 – “I do not have an EVC and I would like to generate an EVC”

Two options are provided – Taxpayer can choose any one of the options if they do not have an EVC

i. Generate EVC through NetBanking.

ii. Generate EVC to registered Email Id and Mobile Number.

Generate EVC through NetBanking:

Step 1: Login to e-Filing Portal through NetBanking. Step 2: Click on e-Verify return.

Generate EVC to registered Email Id and Mobile Number:

Step 1: Enter the EVC sent to your registered Email Id ! Mobile Number and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 3 – “I would like to generate Aadhaar OTP to e-Verify my return”

Pre-requisite: Taxpayer’s PAN and Aadhaar should be linked.

If Aadhaar is not linked, click on Link Aadhaar button and link the Aadhaar.

Step 1: Enter the Aadhaar OTP sent to your Mobile Number registered with Aadhaar and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 4 – “I would like to e-Verify later! I would like to send ITR-V”

Step 1: Click on Continue -> Download ITR-V

Step 2: Submit ITR-V to CPC, Bangalore.

 

2.  e-Verification of an already uploaded return (Non – NetBanking)

1 Click e-Verify Return under e-file.

2 Uploaded returns (120 Days) which are yet to be e-Verified are displayed in a table.

3 Click on e-Verify (for the return already uploaded)

4 Three e-Verification options provided – Taxpayer can choose any one of the options provided to e-Verify the return.

• Option-1 – “I already have an EVC and I would like to Submit EVC”
• Option-2 – “I do not have an EVC and I would like to generate an EVC”
• Option-3 – “I would like to generate Aadhaar OTP to e-Verify my return”

Option 1 – “I already have an EVC and I would like to Submit EVC”

Step 1: Provide the EVC in the text box – Click Submit.

Step 2: Download the Acknowledgement (No Further action required).

Option 2 – “I do not have an EVC and I would like to generate an EVC”

Two options are provided – Taxpayer can choose any one of the options if they do not have an EVC

i. Generate EVC through NetBanking.

ii. Generate EVC to registered Email Id and Mobile Number.

Generate EVC through NetBanking:

Step 1: Login to e-Filing Portal through Ne Banking. Step 2: Click on e-Verify return.

Generate EVC to registered Email Id and Mobile Number:

Step 1: Enter the EVC sent to your registered Email Id / Mobile Number and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 3 – “I would like to generate Aadhaar OTP to e-Verify my return”

Pre-requisite: Taxpayer’s PAN and Aadhaar should be linked.

If Aadhaar is not linked, click on Link Aadhaar button and link the Aadhaar.

Step 1: Enter the Aadhaar OTP sent to your Mobile Number registered with Aadhaar and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

 

3.  e-Verification while uploading a return through NetBanking Login

1 Login to e-Filing through NetBanking

2 Upload Return -> Click Submit

3 The Return is uploaded (Pending for e-Verification)

4 Three e-Verification options provided – Taxpayer can choose any one of the options provided to e-Verify the return.

• Option-1 – “I would like to e-Verify my return now”
• Option-2 – “I would like to generate Aadhaar OTP to e-Verify my return”
• Option-3 – “I would like to e-Verify later! I would like to send ITR-V”

Option 1 – “I would like to e-Verify my return now”

Step 1: Click on “I would like to e-Verify my return now” -> Click Continue

Step 2: Download the Acknowledgement (No Further action required).

Option 2 – “I would like to generate Aadhaar OTP to e-Verify my return”

Pre-requisite: Taxpayer’s PAN and Aadhaar should be linked.

If Aadhaar is not linked, click on Link Aadhaar button and link the Aadhaar.

Step 1: Enter the Aadhaar OTP sent to your Mobile Number registered with Aadhaar and Submit to e-Verify return.

Step 2: Download the Acknowledgement (No Further action required).

Option 3 – “I would like to e-Verify later! I would like to send ITR-V”

Step 1: Click on Continue – Download ITR-V

Step 2: Submit ITR-V to CPC, Bangalore.

Note: User who has already uploaded the return and opts to e-Verify the existing return can use the above mentioned options other than Option 3.

How to e-file return using EVC without sending signed copy of ITR-V?

Taxpayers filing return of income electronically (without digital signatures) are required to send the signed copy of ITR-V acknowledgement to the CPC, Bengaluru within 120 days of uploading the return. From the Assessment Year 2015-16, an option is given to the taxpayer to file return of income via ‘Electronic Verification Code’ (‘EVC’). In that case, taxpayers shall not be required to send the signed copy of ITR-V to CPC, Bengaluru.

The procedures and modes of filing of return through EVC has been notified by the CBDT. Thus, taxpayers can now file their return without worrying about sending copy of ITR-V acknowledgment to the CPC, Bengaluru. The new procedure is as under:

I. Verification of person via EVC

EVC means a code generated for the purpose of electronic verification of the person furnishing the return of income. EVC will be a unique number linked to assessee’s PAN. It cannot be used for filing return of income of any other PAN. One EVC can be used to validate one return, irrespective, of assessment year or type of return.

EVC generated via Adhaar Card will be valid only for 10 minutes and in any other case, it will be valid for 72 hours.

II. Who cannot file return via EVC?

• Persons, whose accounts are required to be audited under Section 44AB;

• Political parties filing their return of income in ITR-7; and

• Companies.

III. Modes of generating EVC

Taxpayers can generate EVC by any of the four modes specified hereunder:

• Through Net-Banking : Banks registered with Income-tax Dept.are providing direct access to the e-filing website to their account holders. By clicking on e-filing option account holder will be redirected to the e-filing website where he can generate the EVC using “e-File” menu.

EVC generated will be sent to the registered e-mail id and mobile number of taxpayer, which can be used to verify income-tax return.

• Through Aadhaar Number : Taxpayers can link their Aadhaar Number with their PAN on e-filing website to generate the EVC. Aadhaar Number can only be linked if the PAN database (i.e., name, DOB and gender) are similar to data available with UIDAI for his Aadhaar number.

Once the Aadhaar Number is linked to PAN, ‘one time password’ (‘OTP’) will be generated by UIDAI and sent to the taxpayer’s mobile number registered with UIDAI. This Aadhaar based OTP will be the EVC and can be used to verify the income-tax return.

• Through ATM : All taxpayers can generate EVC through ATM only if ATM card of taxpayer is linked to PAN validated bank account and bank is also registered with the Income-tax department. Taxpayer can access ATM of registered bank using his Debit/Creditcard andthereafter he/she needs to selectoption of “Generate EVC for Income Tax Return Filing” on ATM screen. The bank will communicate this request to e-filing website which will generate EVC and send the EVC to assessee on his registered mobile number.

• Through E-filing Website of Income-tax Dept. : Assessee can also generate EVC by using e-filing website of Income-tax Dept. (i.e., www.incomeindiaefiling.gov.in). However, this facility is available only to the assessee’s having total income of Rs. 5 Lakhs or below and who are not claiming Income-tax refund. To use this facility, assessee can visit the e-filing website and select the option ‘Generate EVC’ from e-File menu. EVC generated will be sent to the registered email ID and mobile number.

Clearances of intermediate parts by job-worker to its principal has to be valued as per general rule of valuation

Commissioner of Central Excise, Pune v. Mahindra Ugine Steel Co. Ltd. (2015) 57 taxmann.com 299 (Supreme Court)

Clearances of 'motor vehicles parts' manufactured by job-worker for use in manufacture of 'motor vehicles' by principals, would be valued as per rule 11 and valuation rules 8 and 9 cannot apply thereto.

• Assessee, a job-worker, was manufacturing motor vehicle parts for use by principal in manufacture of motor vehicles
• Assessee and principal were related in terms of section 4(3)(b)(i) viz. interconnected undertaking.
• Department sought valuation of 'parts' under rule 8 or proviso to rule 9 as captively consumed goods.
• Assessee claimed valuation as per rule 11 at 'cost of materials plus job-work charges' treating assessee/job-worker's premises as deemed factory gate.

Supreme Court held in favour of assessee as under:

• Since parts were not captively consumed by assessee-jobworker or on his behalf in production or manufacture of other articles, hence, rule 8 was inapplicable.
• Rule 9 and consequently, proviso to rule 9, was inapplicable Since assessee and principal were interconnected undertaking related in terms of section 4(3)(b)(i). This is because rule 9 mentions relationship that is visualised in sub-clauses (ii) to (iv) only and excludes clause (i). Further, since main rule 9 is not attracted, question of applicability or proviso thereto does not arise.
• Once it was concluded that above rules is not applicable in the case of the assessee, it is rule 11 only which becomes applicable as that is residuary provision for arriving at the value of any excisable goods which are not determined under any other rule.

Even refund of excess self-assessment tax paid by assessee would be entitled to interest

CIT V. PUNJAB CHEMICAL & CROP PROTECTION LTD. [2015] 57 taxmann.com 283 (Punjab & Haryana High Court)

Assessee would be entitled to interest under section 244A(1)(b) on amount of refund which was deposited by it by way of self-assessment tax under section 140A

The issue that arose before the High Court was as under: 

Whether assessee was entitled to interest on the amount of refund arising due to excess self-assessment tax paid by it?

The Punjab and Haryana High Court held in favour of assessee as under-

• Section 244A deals with the grant of interest on refund of any amount of tax which becomes due to the assessee in terms of the provisions of Act. 
• Clauses (a) and (b) of sub-section (1) of section 244A deal with two different situations. Clause (a) deals with refund of taxes which have been paid under section 115WJ or collected at source under section 206C or paid by way of advance tax or treated as paid under section 199. Clause (b) deals with refund of taxes in any other case.
• It was clear that assessee’s case would not fall under clause (a) of section 244. However, revenue contends that cause (b) is confined to situations where the tax refund has been paid in terms of a notice of demand issued by the Assessing Officer under section 156.
• It was held that once self-assessment tax so paid gets adjusted against the tax determined by the Assessing Officer upon assessment, it takes the imprint of a tax paid in pursuance notice of demand issued under section 156.
• Section 244A was inserted in the statute as a measure of rationalization to ensure that the assessee is duly compensated by the Government, by way of payment of interest for monies legitimately belonging to the assessee and wrongfully retained by the Government.
• The tax deducted at source, advance tax and also tax paid by way of self-assessment, after its adjustment in the tax liability of the assessee loses its original character and becomes tax paid in pursuance of the liability. Therefore, assessee was entitled to interest under section 244A(1)(b) on excess self-assessment tax paid by it.

Note:

Even after this verdict this issue is not resolved as judiciary differs on this issue. The Delhi High Court in the case of CIT v. Engineers India Ltd.[2015] 55 taxmann.com 1 (Delhi) denied to grant interest on excess self-assessment tax paid by assessee.

Assessing Officer to transfer VAT collected on activation of SIM cards to Service Tax Department – such transaction is a service and not sales

Idea Cellular Ltd. v. Union of India (2015) 57 taxmann.com 293 (Punjab & Haryana High Court)

Haryana VAT - Where collection of VAT from assessee was without authority of law and Service Tax department had raised service tax demand upon assessee for period for which Assessing Authority had levied and collected VAT, Assessing Authority was to be directed to transfer amount of VAT to Service Tax department.

• Assessing Authority collected VAT from assessee pursuant to assessment orders on premise that activation of SIM cards was a sale.
• Assessee approached State of Haryana for refund of amount of VAT on ground that activation of SIM card was a service and not a sale.
• The Assessing Authority dismissed the assessee's representation for refund of the amount of VAT on the grounds that the assessee did not challenge its liability before the Assessing Authority, it did not file any appeal against the assessment orders, and as the assessee had charged VAT from its customers, the amount could not be refunded.

High Court held in favour of assessee as under:

• Supreme Court in Bharat Sanchar Nigam Ltd. v. Union of India (2006) 3 STT 245 held that activation of SIM cards is a 'service' and not a 'sale'. The assessee is, therefore, liable to pay service tax on the activation of SIM cards and not VAT.
• Since Supreme Court had clearly held that VAT could not be collected on activation of SIM cards, levy and collection of VAT was without authority of law and violative of article 265 of Constitution.
• The Union of India has raised a demand for service tax for the period for which the State of Haryana has levied and collected VAT. If the assessee is called upon to pay VAT and service tax, it would be the case of double taxation.
• In view of the aforesaid, the revenue was to be directed to transfer the amount of VAT collected from the assessee to the Service Tax department of the Union of India.

No section 80QQB relief on royalty received for writing a cookery book as it wasn’t earned in exercise of profession

Mrs. Pratibha A. Kothavale v. DCIT [2015] 57 taxmann.com 257 (Mumbai - Tribunal)

Facts:

• Assessee received royalty for writing a cookery book on which she claimed deduction under Section 80QQB.
• The Assessing officer (AO)disallowed deduction on ground that coking was not an 'art' and was a 'skill'.
• Further, the CIT(A) sustained the disallowance made by AO for the reasons that firstly, according to requirement of Section 80QQB, such income should have been earned in the exercise of the profession and secondly, the cookery does not come in the definition of "art". The aggrieved-assessee filed the instant appeal before the Tribunal.

Tribunal held in favour of revenue as under:

• "Profession includes vocation" as per the definition of profession given under Section 2(36) of income-tax Act. There should be some special qualification of a person apart from skill and ability which are required for carrying on any activity which could be considered as "profession". This could be education in a particular system either in the college or university or it may be through experience.
• In the instant case, the Ld. Counsel for assessee submitted that assessee did not write any other book before or after release of cookery book. Further, no particulars had been placed on record to show that assessee was specially qualified apart from skill and ability to write book.
• There was also no material available on record to show that assessee was having education in the field of cookery either in the college or university or even by experience. Thus, there was no material on record to suggest that the assessee had qualified the parameters laid down for considering particular activity as a professional activity.
• Income earned by assessee as royalty could not be said to be have been earned"in exercise of her profession". Thus, non-fulfillment of such condition would disentitle the assessee to claim deduction under Section 80QQB.

Sum Received in lieu of relinquishment of right to sue 'Coca-Cola' was capital receipt

Satyam Food Specialities (P.) Ltd. v. DCIT [2015] 57 taxmann.com 194 (Jaipur - Tribunal)

Consideration received on relinquishment of right to sue is not taxable under section 28; it is a capital receipt.

Fact: 

• The assessee-company entered into a franchisee soft drink bottling agreement with Cadbury Schweppes Beverages India (P) Ltd. (CSBIPL) to sell its soft drinks. CSBIPL transferred its soft drink brands to Coca Cola. Coca Cola refused to encourage sale of cold drink sold by assessee to avoid competition to its own products.
• Assessee suffered huge losses, thus filed a complaint under Monopolies and Restrictive Trade Practices Act (MRTP) before the MRTP Commission. Thereafter, the assessee and coca cola had entered into a settlement agreement through which the assessee had transferred its bottling business assets as well as immovable property to Coco Cola against a consideration.
• Assessee submitted that the entire compensation received was in lieu of withdrawing the right to sue against Coca Cola and was patently a capital receipt. But Assessing Officer treated the compensation as revenue in nature under section 28(ii)(c) and taxed accordingly.
• CIT (Appeals) held that provisions of section 28(va) were applicable and not section 28(ii)(c).Consequently the part of compensation indicated by Assessing Officer was held taxable under section 28(va). Aggrieved-assessee filed instant appeal before tribunal.

Tribunal held in favour of assessee as under: 

• All the clauses of the agreement between the assessee and coca colareflect that the real intent, objective and purpose of the payment of compensation as per settlement agreement was to ensure withdrawal of all the pending litigation by assessee, from various forums instituted for breach of terms or conditions.
• The dominant consideration for compensation being surrendering the right to sue; its neither in lieu of surrender of any agency or agreement for non-competition and thus, the compensation neither fell in the ambit of section 28(ii)(c) nor under section 28(va).
• Assessee had vehemently denied having anywhere admitted that part of the compensation was for non-competition. The compensation in question was meant, intended and paid for withdrawal of aforesaid litigation instituted by assessee which could have resulted in many adverse consequences for the reputation of Coca Cola besides entailing huge cost and efforts of litigation.
• Thus, the impugned amount was a capital receipt hence not liable to Income-tax.

Competition Appellate Tribunal dismisses complaint of Adidas against Nike as latter had taken permission of ICC to use Sachin’s name on T-shirts

ADIDAS INDIA MARKETING (P.) LTD. V. NIKE INDIA (P.) LTD. [2015] 56 TAXMANN.COM 344 (Competition Appellate Tribunal)

Where pursuant to sponsorship agreement with International Cricket Association Nike was permitted to use names of cricketers including Sachin Tendulkar on its sports products for purpose of advertising, it could not be said that Nike had violated separate agreement between Adidas and Tendulkar entered for advertising Adidas sports product; unfair trade practice could not be alleged

Facts:

• The complainant-company Adidas and the respondent-company Nike were engaged in business of manufacturing, distributing and selling quality footwear, sports equipments and other products and were competitors in the market.
• The Complainant's brand, i.e., Adidas was endorsed by Cricketer Sachin Tendulkar pursuant to an agreement between both parties.
• Later on, Nike signed an agreement for sponsorship and supply of footwear, apparel and related cricketing accessories with International Cricket Association and sold T-shirts bearing names of various members of Indian Cricket Team including Sachin Tendulkar’s
• Accordingly, Adidas filed complaint alleging unfair and restrictive trade practice indulged by Nike.

The Competition Appellate Tribunal held as under:

• Since sponsorship and licence agreement entered between Nike and Cricket association permitted former to use name of members of cricket team for purpose of advertising in different ways, same did not amount to unfair trade practice.
• The products such as T-shirts and Tees manufactured by Nike did not violate agreement entered between Adidas and Tendulkar; hence, Nike could not be held to have indulged in any unfair trade practice and, thus, complaint was to be dismissed.

Assessee can be prosecuted anytime when exonerated in penalty proceedings on ground of limitation and not on merits

Superintendent (Prosecution) Central Excise & Customs Department v. Ashok Leyland Ltd. (2015) 56 taxmann.com 309 (Rajasthan High Court)

Where exoneration in adjudication/penalty proceedings is not on merits but on ground of limitation, assessee-accused cannot take shelter thereof to avoid prosecution proceedings; since there is no time-limit for launching prosecution, same can be launched despite recovery/penalty becoming time-barred.

Facts:

• Department initiated prosecution proceedings for wrongful credit.
• Revisional court discharged assessee on ground that penalty proceedings were decided in its favour and department's appeal thereagainst before High Court was dismissed.
• Department argued that penalty was dropped on ground of limitation and not on merits and appeal before High Court was dismissed for non-appearance; hence, same cannot be relied upon in criminal matters, where there is no time-limitation.

High Court held in favour of revenue as under:

• Proceedings for recovery of duty with penalty and prosecution/ punishment are separate proceedings. For recovery, there is time-limit of 1 year/5 years in section 11A, but, for prosecution there is no time-limit in section 9.
• In this case, despite arguments on merits, adjudication/recovery/penalty was dropped on ground of limitation and not on merits and appeal thereagainst was dismissed on ground of non-appearance and not on merits.
• Since exoneration in adjudication/penalty proceedings is not on merits, assessee-accused cannot take shelter thereof to avoid prosecution proceedings. Since there is no time-limit in section 9, prosecution proceedings can be launched despite recovery/penalty becoming time-barred. Hence, prosecution was valid.

No Transfer Pricing adjustment by treating share application money as loan to Associated Entity merely due to delay in issuance of shares

ADITYA BIRLA MINACS WORLDWIDE LTD. V. DCIT [2015] 56 taxmann.com 317 (Mumbai - Tribunal)

Share application money could not be treated as loan amount merely because there was delay in issuance of shares by subsidiary in name of assessee, particularly when cause for delay was duly explained by assessee

Facts

• The assessee advanced certain sum to its subsidiaryat Philippines, in the form of share application money. However, shares were not allotted till two subsequent years and subsidiary continued to use those funds.
• TPO was of the view that the share application money was actually in the nature of loan as there was considerable delay in issuance of shares by subsidiary in name of assesse. Accordingly, TPO made addition to assessee’s income by determining the arm's length interest rate on the said transaction.
• Commissioner (Appeals)confirmed the addition made by TPO. Aggrieved by the order, assessee filed the instant appeal before the tribunal.
• On appeal, the assessee submitted that the delay was due to obtaining necessary approval from the Securities and Exchange Commission, Phillipines and finally, the shares were issued as per the share certificate, which had been produced by the assessee as additional evidence before the tribunal.

The tribunal held in favour of assessee as under-

• Though there was delay in issuance of shares against the share application money given by the assessee to its subsiary, however, the assessee had duly explained the cause of delay and it was not a deliberate delay for using the money by subsidiary in the garb of share application money
• Since share certificates were not before the authorities below, for limited purpose of considering the said certificates, the issue was remanded to Assessing Officer/TPO to consider the same. 
• As far as the re-characterization of the share application money as loan was concerned, the High Court in the case of DIT, International Taxation v. Besix Kier Dabhol S.A. [2012] 26 taxmann.com 169 (Bom.) had considered an identical issue and held that there were at the relevant time and even on relevant day no thin capitalization rules in force to consider debt as an equity.
• Accordingly, subject to verification of the share certificates by the Assessing Officer, the share application money could not be treated as loan amount merely because there was a delay in issuance of shares by the subsidiary in the name of the assessee, particularly when cause for delay was duly explained by assessee.

Government issues ordinance to allow filing of complaint on cheque bouncing at place where payee maintains the account

Recently, there had been a dispute relating to the place of jurisdiction for filing complaint against dishonouring of cheque. The dispute arose mainly in those cases where complaint was filed in jurisdiction of that Court where cheque was presented even if drawer-bank was located in different jurisdiction. 

The Supreme Court in case of Dashrath Rupsingh Rathod v. State of Maharashtra [2014] 49 taxmann.com 497 (SC) cleared air on this issue and it interpreted provisions of Negotiable Instrument Act relating to place of jurisdiction for filing complaint. It ruled that complaint for dishounouring of cheque can be filed only at territorial jurisdiction of that Court where cheque is dishonoured by bank on which it is drawn. 

Various stakeholder expressed difficulties on Supreme Court’s verdict with regard to the legal interpretation regarding place of jurisdiction in case of dishonouring of cheque. In order to address the difficulties of stakeholders the Government has issued Negotiable Instrument (Amendment) Ordinance, 2015 (‘NI Ordinance, 2015’).

The NI Ordinance, 2015 provides that the offence of cheque dishonour shall be enquired into and tried only by a court within whose local jurisdiction –

• the bank branch of the payee (viz, the place where the payee presents the cheque for payment) is situated, if the cheque is delivered for collection through an account; or
• the branch of the drawee bank where drawer maintain the account is situated, if the cheque is presented for payment by the payee or holder in due course otherwise through an account.

Further, all cases arising out of Section 138* which are pending in any court before the commencement of the Negotiable Instruments (Amendment) Ordinance, 2015 shall be transferred to the court having jurisdiction as per revised position. Also, in case of more that one prosecution filed by the same payee against the same drawer of cheques is pending before different courts, upon bringing the said fact to the notice of court, such court shall transfer the case to the court having jurisdiction under norms. *The Section 138 of the Negotiable Instrument Act, 1881 (‘NI Act’) deals with the offence relating to cheque dishonour for insufficiency, etc., of funds in the drawers account on which the cheque is drawn for the discharge of any legally enforceable debt or other liability. The section 138 of the NI Act provides for penalties in case of dishonour of cheques due to insufficiency of funds in the account of the drawer of the cheque.