Compulsory pre-emptive buying held illegal

In a collaboration agreement between the holder of land and the developer, there need not exist a sale of the property. The income tax authorities cannot assume there is a transfer and order compulsory pre-emptive purchase under Section 269UD of the Income Tax Act. This provision intends to prevent tax evasion by undervaluation of property. In this judgment delivered by the Supreme Court last fortnight, Unitech Ltd vs Union of India, the building company had an agreement with Vidarbha Engineering Industries, lessee of land received from the Nagpur Improvement Trust, to raise a commercial complex. The builder will get 78 per cent of the developed area and the lessee will retain 22 per cent as consideration. The revenue authorities issued a show cause notice to Unitech accusing it of undervaluation of property. The Bombay High Court dismissed the challenge of Unitech, leading to the appeal. The Supreme Court stated that the tax authority as well as the high court made decisions on wrong premises. The judgment asserted that "the transaction cannot be construed as a sale, lease or a licence." It underlined that there was no evidence to conclude that Vidarbha Engineering had "transferred" 78 per cent of the built-up area to Unitech and retained 22 per cent. Unitech received only the right to possess the land to construct the project. "The order of tax authority thus suffers from gross perversity," the Supreme Court remarked.

After arbitration, witness has no role

After an award is passed in an arbitration, there cannot be any examination or cross-examination of witnesses in court on an allegation of legal misconduct by the arbitrator. The court can only examine the records of the arbitration proceedings, the Supreme Court has stated in its judgment, Cochin Shipyard Ltd vs Apeejay Shipping Ltd. "Examination of any witness in court is impermissible to substantiate legal misconduct on the part of the arbitrator. It is because it must be palpable from the proceedings," the court said. In this case, the government undertaking agreed to build a ship for Apeejay. Disputes arose between them which were referred to arbitration by a retired Supreme Court judge. The shipyard moved the civil judge to execute the award of 2009. Apeejay then wanted to examine the arbitrator and the general manager (GM) on its allegation that the arbitrator was guilty of legal misconduct (not moral misconduct, which is different in law). The judge rejected it. The Kerala High Court also rejected the demand, but allowed the GM to be examined along with the records of arbitration. The shipyard, therefore, moved the Supreme Court against the demand for examination of witness. It ruled that the examination should be only of the evidence on record and not of witnesses through oral examination.

Petrol pumps away from highways

The Supreme Court has ruled that the guidelines set by the Indian Road Congress regarding the distance to be maintained between a petrol station and the median of the road should be followed even if it is not specifically mentioned in the tender advertisement. In this case, Indian Oil Ltd vs Arti Devi, two applicants for retail outlets had land near highways. According to the guidelines, the outlet should be 1,000 metres away from the state/national highway in urban areas and 300 metres in rural areas. The applications were rejected because the lands were within the prohibited distance. They moved the Madhya Pradesh High Court, which allowed their pleas because the tender ads did not cite this rule and the guidelines were not mandatory. It only said that the applicants shall fulfil PWD rules. IOL appealed to the Supreme Court, which held the high court wrong. The ad specified that PWD rules shall be followed and PWD had adopted the guidelines.

Road victim has choice in making claim

When several persons are guilty of causing a road accident leading to death or injury, the claim for compensation can be made against each,or all of them. The claimant has a choice. The persons liable can later sue each other for their share of liability after paying the amount to the claimant. This rule was reiterated in the case, Kamlesh vs Attar Singh, by the Supreme Court. A speeding car hit an equally negligent tempo killing a passenger in the latter. His widow, mother and three minor children sued the drivers of both vehicles, the owner of the car and its insurance company. The tribunal found that they were all guilty of 'composite negligence' and they should pay Rs 5.81 lakh to the family. The tempo driver appealed to the Punjab & Haryana High Court, which set aside the award made by the tribunal. The family appealed to the Supreme Court and it restored the order of the tribunal, stating that the high court had not assessed the evidence properly.

Double-duty benefit for small-scale industries

The Supreme Court has dismissed the appeal of the Commissioner of Central Excise and granted benefit to small-scale industries (SSI), which also do job work for third parties and put their brand names on the products. In this judgment, CCE vs Nebulae Health Care Ltd, the SSI fulfilled conditions for exemptions under notifications. However, in addition to manufacturing goods on their own account, it also produced goods for others on job work basis with their brand names. It paid excise duty on such products and also availed of Modvat/Cenvat credit. The authorities maintained that the SSI cannot enjoy both benefits. The question arose whether availing of the Modvat/Cenvat credit benefit in respect of branded goods of third parties manufactured by the assessee firm on job work basis disentitled them from availing of the benefit under the notifications. The court said they can avail of the latter benefits

Exim policy change prospective

The Supreme Court has ruled that the government cannot amend its export-import policy to take away rights already accrued to exporters under a specific scheme. A special scheme related to their performance was announced in 2004 to boost exports by giving incentives on some items. Later it was amended by removing certain items. This spawned a rash of petitions in various high courts, which took different stands, especially Bombay and Gujarat high courts. All the parties appealed to the Supreme Court. In its common judgment, DGFT vs Kanak Exports, the court stated the government can decide policy. However, if the government realised that the earlier policy was "ill-considered" it was free to withdraw it but it could do so only prospectively, but not from a back date. "Duty credit entitlement cannot be snatched from exporters by making the amendment retrospectively."