Brief case: Danish firm not liable to pay tax

A weekly selection of key court orders

The Supreme Court has ruled a global telecommunications facility provided by a Danish shipping firm to its agents in this country was an integral part of the business and cannot be taxed in India as fees for technical service under the Indo-Danish Double Taxation Avoidance Agreement. The court thus upheld the view of the Bombay High Court and dismissed the appeal of the revenue authorities in its judgment, Director of Income Tax vs AP Moller Maersk. The tax department had assessed 20 per cent on the foreign firm. The high court had held utilisation of the Maersk Net Communication System by its three agents in India was an automated software-based communication system which did not require the company to render any technical services. It was merely a cost-sharing arrangement between the company and its agents to efficiently conduct its shipping business. Upholding the view, the Supreme Court further said payments made by agents were nothing but reimbursement of the cost to the company for using the Maersk Net and not fee for technical services as claimed by the tax authorities. 

 
JSW consortium wins suit on bids
 
The Supreme Court last week set aside the judgment of the Orissa High Court and allowed the appeal of a consortium led by JSW Infrastructure Ltd while dismissing the writ petition of a rival consortium comprising of Kakinada Seaports Limited, Bothra Shipping Service Ltd and MBG Commodities Ltd. In a global bid called by Paradip Port Trust for mechanisation of two berths on build-operate-transfer basis for 30 years, the JSW consortium emerged successful. Then the rival consortium objected to the award, as according to the policy guidelines, it would create monopoly. The high court accepted the objection on its interpretation of the guidelines. While quashing the high court judgment, the Supreme Court stated there would be no monopoly as ruled by the high court as there were five other private players operating at the port. It added the decision of the port trust was not arbitrary and the courts would be reluctant to enter into contractual disputes.

 

Insurer told to pay in road deaths case
 
If a vehicle causes accident due to the driver’s negligence, the insurer of the owner must pay compensation first, and then it can recover the amount from the owner. This “pay and recover” rule was reiterated in two cases by the Supreme Court, benefitting two widows whose husbands died in an accident in Jorhat due to the driver’s fault. Manuara Khatun and Mamoni Saikia were awarded Rs 25 lakh and Rs 24 lakh, respectively, by the motor vehicle accident claims tribunal. It ruled that since the deceased persons were “gratuitous passengers” the insurer was not liable and the owner should pay. The Gauhati High Court dismissed the appeals of the widows for higher compensation while holding that the insurer was not liable to pay. On appeal, the Supreme Court ruled the benevolent “pay and recover” rule will apply in this case. So United India Insurance Co must pay the compensation first, and then recover the amount from the owner. 

 
Arbitrator guilty of non-disclosure
 
An arbitration award would be void if one party unilaterally starts proceedings and the arbitrator passes an ex parte order against the opposite party. The award would be invalid also if the arbitrator does not disclose that he is dealing with another arbitration involving one party, the Delhi High Court stated in its judgment last week in the case, Alupro Building Systems Pvt Ltd vs Ozone Overseas Ltd. In this case, Alupro got a contract of works from Delhi Metro and it ordered materials from Ozone with advance payments. After some time, it received notice from the arbitrator about certain claims made by Ozone. Alupro challenged the jurisdiction of the arbitrator arguing that there was no arbitration agreement and unilateral invocation of arbitration was violative of the Arbitration and Conciliation Act. Ozone contended that the invoices contained the arbitration clause and they were signed by the representative of Alupro. The arbitrator gave an award in favour of Ozone and also charged his fees from Alupro. Quashing the award, the high court stated the arbitration proceedings without notice to Alupro was opposed to the fundamental policy of law. Moreover, the arbitrator did not disclose his role as arbitrator in which Ozone was a party. This again violated the norms set by the Act, which emphasised independence and impartiality of the arbitrator. 

 
Trademark clashes with corporate name
 
In a trademark dispute, where a party is found to be using a registered trademark of one as the corporate name of another, there is no infringement if the products or services are dissimilar; no injunction can be granted. This interpretation of Section 29 of the Trade Marks Act was given by the full bench of the Bombay High Court last week in its judgment in the case, Cipla Ltd vs Cipla Industries Ltd. In this case, Cipla pharmaceutical company alleged that the other company, dealing in soap dishes, photo frames and ladders, infringed the trademark by adopting its long-standing registered name. The full bench was constituted because there were some doubts about the high court’s earlier judgment in a similar case, Raymond Ltd vs Raymond Pharmaceuticals Ltd. The high court decided the legal question in the Cipla case without deciding the dispute between Cipla and the other. 

 
Heady battle over whisky brands
 
The Delhi High Court last week set aside its earlier order in the trademark dispute between Allied Blenders & Distillers and R K Distilleries and stated it has jurisdiction to hear the suit. A single-judge bench had rejected the petition of Allied Blenders, makers of Officer’s Choice, expressing the whisky major’s apprehension that the rival, with the brand name Regular Choice, would enter the Delhi market. He had ruled that since the office of Allied Blenders was in Mumbai, Delhi High Court could not take up the plea for injunction. Regular Choice was currently sold only in Andhra Pradesh. Reversing that view, the division bench ruled that since the cause of action could arise in Delhi also, the petition could be heard in Delhi. The judgment explained that when there is an “imminent threat” of R K Distilleries launching its brand under the same mark in Delhi, cause of action, based on such apprehension, could arise. It need not depend on where the registered office of the company is situated.