Delhi HC reiterates necessary factors to be considered before making a person vicariously liable for offences by company under S. 138 NI Act - The Daily Guardian
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Delhi HC reiterates necessary factors to be considered before making a person vicariously liable for offences by company under S. 138 NI Act

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plea in Delhi High Court seeking repatriation of 56 pregnant nurses

In a latest, learned, laudable and landmark judgment titled Gopala Krishna Mootha vs The State Govt of NCT of Delhi & Anr in CRL.M.C. 2082/2021 & CRL.M.A. 14016/2021 delivered as recently as on February 21, 2022 has reiterated the various necessary factors to be kept in mind before making a person vicariously liable for offences committed by a company under Section 138 of the Negotiable Instruments Act, 1881. All the courts in similar such cases must pay heed to what the Delhi High Court has held in this leading case. The Apex Court also has earlier in its various judgments laid down similarly various such factors which we see in this learned judgment also.

To start with, this brief, brilliant, balanced and bold judgment authored by a single Judge Bench of Justice Subramonium Prasad of Delhi High Court first and foremost puts forth in para 1 that, “The petitioner seeks quashing of Criminal Complaint No.5799/2020 titled as Chetan Sharma v. India Ahead News Pvt. Ltd. & Ors. which is a complaint filed under Section 138 of the Negotiable Instruments Act (in short ‘NI Act’). The petitioner also seeks to quash order dated 03.02.2021 passed by the learned Trial Court issuing summons to the petitioner herein.”

To put things in perspective, the Bench then specifies in para 2 that, “The respondent No.2 herein filed a complaint under Section 138 read with Section 142 of the NI Act before the Court of learned Metropolitan Magistrate, Saket Court with the following averments.

i. The respondent No.2/complainant was appointed as the CFO of the India Ahead News Private Ltd. which is engaged in the business of running a TV news channel.

ii. It is alleged in the complaint that the petitioner herein and the accused No.2 – Goutham Mootha, who is the son of the petitioner herein, are the directors of India Ahead News Pvt. Ltd. and they are responsible for the day to day affairs of the company and they are running the TV channel and actively controlling all the operations of the company.

iii. It is stated in the complaint that the complainant was taken in service by the respondent No.1 at a fixed salary of Rs.10,00,000/- per month plus GST less TDS (to be deposited by the company under the Income Tax Act) along with monthly expenditure and reimbursement of Rs.1,50,000/- per month. It is stated that a stake of 10 per cent was also assured to the complainant herein.

iv. It is stated that in the year 2019, the salaries of staff including the complainant started getting delayed and even the statutory obligations like the PF, ESI etc. were not being fulfilled by the company. It is stated that since the dues and the arrears of salary were mounting up, at the request of Goutham Mootha (son of the petitioner herein), the complainant herein offered to take a salary cut.

v. It is stated that it was decided that the company would be paying a sum of Rs.32,00,000/- plus GST from 01.01.2020 to 31.05.2020 and reimbursement of Rs.5,00,000/-.

vi. It is stated that the complainant herein was given the following cheques of a total amount of Rs.39,56,000/-:- Cheque No.63 dated 25.08.2020 for a sum of Rs.17,28,000/- drawn on Andhra Bank, Sector 18, Noida. Cheques No.64 dated 26.08.2020 for a sum of Rs.17,28,000/- drawn on Andhra Bank, Sector 18, Noida. Cheque No.65 dated 26.08.2020 for a sum of Rs.5,00,000/- drawn on Andhra Bank, Sector 18, Noida.

vii. It is stated that the cheques were for payment of arrears of salary.

viii. It is stated that the cheques were presented for encashment through Andhra Bank, Sector B, Pkt 1, DAV Public School Campus, Vasant Kunj, New Delhi, which is the bank of the complainant and the cheques were returned with remark “insufficient fund”.

ix. It is stated that the cheque No.63/2020 dated 25.08.2020, cheque No.65/2020 dated 26.08.2020 drawn on Andhra Bank, Sector-18, G B Nagar, Noida-201301 were returned on 28.8.2020 and cheque No. 64/2020 dated 26.08.2020 drawn on Andhra Bank, Sector-18, G B Nagar, Noida-201301 was returned on 29.08.2020 due to insufficient funds.

x. It is stated that legal notice dated 02.09.2020 was issued in compliance to the mandate of Section 138 of the NI Act demanding payment. However, instead of making the payment, a reply dated 17.09.2020 was received by the complainant. Since, the money was not paid, the instant complaint was filed on 03.02.2021.

xi. The complaint came up for hearing on 23.01.2021. Since there was nothing on record to show that the accused No.2 & 3 are the directors of the company, the complainant was directed to place on record the Master Data of the company. The Master Data of the company was filed. The evidence by way of affidavit was filed by the complainant. After the pre-summoning evidence, summons were issued on 03.02.20221. The said order and the complaint has been challenged before this Court.”

As it turned out, the Bench then discloses in para 3 that, “When the matter came up for hearing, this Court felt that an attempt can be made to settle the disputes between the parties and the matter was sent to mediation. Unfortunately, despite several sittings, no settlement could be arrived at.”

Most remarkably, the Bench then lays bare in para 6 that, “The factors which are necessary to be kept in mind before making a person vicariously liable for the offences committed by the company under Section 138 of the N.I. Act have been succinctly laid down by the Apex Court in a number of judgments, and are as follows:-

(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction.

(ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company.

(iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.

(iv) Vicarious liability on the part of a person must be pleaded and proved and not inferred.

(v) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.

(vi) If the accused is a Director or an officer of a company who signed the cheques on behalf of the company then also it is not necessary to make specific averment in complaint.

(vii) The person sought to be made liable should be in charge of and responsible for the conduct of the business of the company at the relevant time. This has to be averred as a fact as there is no deemed liability of a Director in such cases. (Refer Gunmala Sales Private Limited v. Anu Mehta & Ors., 2015 (1) SCC 103; National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal, (2010) 3 SCC 330; S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2005) 8 SCC 89; S.M.S. Pharmaceuticals Ltd. v. Neeta Bhalla, (2007) 4 SCC 70; Saroj Kumar Poddar v. State (NCT of Delhi), (2007) 3 SCC 693; N.K. Wahi v. Shekhar Singh, (2007) 9 SCC 481; N. Rangachari v. BSNL, (2007) 5 SCC 108; Paresh P. Rajda v. State of Maharashtra, (2008) 7 SCC 442; K.K. Ahuja v. V.K. Vora, (2009) 10 SCC 48).”

It is worth noting that the Bench then envisages in para 8 that, “Admittedly, there are only two directors of the company. As laid down by the Apex Court, specific averments have been made that accused, who are the Directors of the company and are responsible for the day-to-day affairs and acts of the company and had been conducting the same by being present and actively controlling all the operations on site at the office on a day-to-day basis from the start of the operation of the channel. The Apex Court in Ashutosh Ashok Parasrampuriya & Anr. v. Gharrkul Industries Pvt. Ltd. & Ors., (2021) SCC OnLine SC 915 has observed as under:-

“23. In the light of the ratio in S.M.S. Pharmaceuticals Ltd. (supra) and later judgments of which a reference has been made what is to be looked into is whether in the complaint, in addition to asserting that the appellants are the Directors of the Company and they are incharge of and responsible to the Company for the conduct of the business of the Company and if statutory compliance of Section 141 of the NI Act has been made, it may not open for the High Court to interfere under Section 482 CrPC unless it comes across some unimpeachable, incontrovertible evidence which is beyond suspicion or doubt or totally acceptable circumstances which may clearly indicate that the Director could not have been concerned with the issuance of cheques and asking him to stand the trial would be abuse of process of Court. Despite the presence of basic averment, it may come to a conclusion that no case is made out against the particular Director for which there could be various reasons.

24. The issue for determination before us is whether the role of the appellants in the capacity of the Director of the defaulter company makes them vicariously liable for the activities of the defaulter Company as defined under Section 141 of the NI Act? In that perception, whether the appellant had committed the offence chargeable under Section 138 of the NI Act?

25. We are concerned in this case with Directors who are not signatories to the cheques. So far as Directors who are not the signatories to the cheques or who are not Managing Directors or Joint Managing Directors are concerned, it is clear from the conclusions drawn in the afore-stated judgment that it is necessary to aver in the complaint filed under Section 138 read with Section 141 of the NI Act that at the relevant time when the offence was committed, the Directors were in charge of and were responsible for the conduct of the business of the company.

26. This averment assumes importance because it is the basic and essential averment which persuades the Magistrate to issue process against the Director. That is why this Court in S.M.S. Pharmaceuticals Ltd. (supra) observed that the question of requirement of averments in a complaint has to be considered on the basis of provisions contained in Sections 138 and 141 of the NI Act read in the light of the powers of a Magistrate referred to in Sections 200 to 204 CrPC which recognise the Magistrate’s discretion to take action in accordance with law. Thus, it is imperative that if this basic averment is missing, the Magistrate is legally justified in not issuing process.” (emphasis supplied).”

To be sure, the Bench then hastens to add in para 9 that, “It is not the case of the petitioner herein that he is a non-executive director. The petitioner is a full-time director. The complaint read as a whole indicates that at the time of cheques being issued by the company and returned by the bank, the son of the petitioner and the petitioner were the only directors of the company and were responsible for the conduct of the business of the company. This Court is, therefore, not inclined to interfere with the order dated 03.02.2021 issuing summons to the petitioner herein.”

Needless to say, the Bench then points out in para 10 that, “The latest judgments of the Supreme Court in Ashutosh Ashok Parasrampuriya & Anr. v. Gharrkul Industries Pvt. Ltd. & Ors., (2021) SCC OnLine SC 915, squarely covers the present case. It is for the petitioner to establish in trial that he was not responsible for the conduct of the business of the company owing to his age and the mere ipse dixit of the petitioner that he is 80 years of age and is unable to manage the affairs of the company cannot be accepted at this stage and the complaint cannot be quashed on that basis.”

For sake of clarity, the Bench then remarks in para 11 that, “The observations made by this Court is limited to the issue as to whether the complaint should be quashed or not because of the fact that the complaint does not state the exact role of the petitioner in the conduct of the business of the company. Needless to state, it is always open for the petitioner to substantiate his assertion that he was not responsible for the conduct of the business of the company by leading evidence which should be considered on its own merits without being influenced by the observations made in this order.”

Finally, the Bench then holds in para 12 that, “The petition is dismissed with the above observations. Pending application(s), if any, stand disposed of.”

In short, the single Judge Bench of Justice Subramonium Prasad of Delhi High Court has very elaborately spelt out the relevant causes for dismissing the petition of the petitioner. It has cited ably the relevant judgments also of the Apex Court in this regard. Very rightly so!

‘(i) The primary responsibility is on the complainant to make specific averments as are required under the law in the complaint so as to make the accused vicariously liable. For fastening the criminal liability, there is no presumption that every Director knows about the transaction. (ii) Section 141 does not make all the Directors liable for the offence. The criminal liability can be fastened only on those who, at the time of the commission of the offence, were in charge of and were responsible for the conduct of the business of the company. (iii) Vicarious liability can be inferred against a company registered or incorporated under the Companies Act, 1956 only if the requisite statements, which are required to be averred in the complaint/petition, are made so as to make the accused therein vicariously liable for offence committed by the company along with averments in the petition containing that accused were in charge of and responsible for the business of the company and by virtue of their position they are liable to be proceeded with.’

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NCLT BAR ASSOCIATION’S PLEA CHALLENGING 3-YEAR TENURE OF NCLT MEMBERS IN JUNE: A PLEA IN SUPREME COURT

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The Supreme Court in the case National Company Law Tribunal Bar Association Vs Union Of India observed in a petition filed by the NCLT Bar Association challenging the notification of the Ministry of Corporate Affairs fixing the tenure of the members of National Company Law Tribunal as 3 years, while adjourning the hearing.

It was being argued before the court that the discharge of full five years is necessary for Tribunals to functions effectively and efficiently and by the time the members achieve the required knowledge, efficiency and expertise and a term of three years is very short as one term will be over.

On April 5, a notice is being issued on the petition to the Centre by the bench comprising of Justice L Nageswara Rao.

Further it was argued that the Notification is contrary to the judgments passed by the Supreme Court in Madras Bar Association v. Union of India & Anr. (2010) and Madras Bar Association v. Union of India & Anr. (2021) The Court held that the term of members should be 5 years. It was also being observed in the Madras Bar Association Case in which the Supreme Court observed that a longer term was necessary to ensure independence and the Court disapproved the shorter term.

It was being argued by the Association that the said notification is contrary as according to Section 413 of the Companies Act, 2013 which clearly prescribes the term of members for 5 years and even also the early expiration of the tenure will create a void and will add to the pendency of cases before Tribunals.

The Committee is considering all aspects of the matter including the verification report, assessment of suitability etc As on June 20, one of the members is due to retire and it was being submitted by Solicitor General the matter can be considered on June 15.

Solicitor General Tushar Mehta submitted that a meeting was held by the committee On April 20.

The term prescribed by Companies Act, 2013 is 5 years was being submitted before the court by Senior Advocate Tushar Malhotra, Appearing for the Petitioner.

The Bench comprising of Justice DY Chandrachud and the Justice Bela M Trivedi observed deferred the hearing to June 15 as the bench was being told that a committee chaired by the Chief Justice of India and consisting of Justice Surya Kant and the Secretary of the MCA is holding a meeting to deliberate on the term of 23 NCLT members appointed in 2019 by the Solicitor General of India.

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UNDER COMMERCIAL COURTS ACTS, SC ORDERS EXCLUDING PERIOD FROM 15.03.2020 TILL 28.02.2022 AS PRESCRIBED UNDER THE ACT

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The Supreme Court in the case Babasaheb Raosaheb Kobarne vs Pyrotek India Private Limited observed with respect to the limitation prescribed under the Commercial Courts Act, 2015. The Court observed that for the purposes of limitation the period from 15.03.2020 till 28.02.2022 is also applicable.

In an order dated 10.01.2022, The Supreme Court had issued the following directives:

It is directed from 15.03.2020 till 28.02.2022 the period shall extend stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings and the order dated 23rd March, 2020 is restored and in continuation of the subsequent orders dated 8th March 2021, 27th April 2021 and 23rd September 2021.

It shall become available with effect from 1st March 2022 Consequently, the balance period of limitation remaining as on 3rd October 2021, if any

In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply and in cases where the limitation during the period between 15th March 2020 till 28th Feb 2022, would have expired all persons shall have a limitation period of 90 days from 01.03.2022, notwithstanding the actual balance period of limitation remaining.

The Sections which prescribe the outer limits i.e., within which the court or tribunal can condone delay and the period(s) of limitation for instituting proceeding includes Section 12 A of the Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and as prescribed Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996 including the termination of proceedings and any other laws and it is further being clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods, The court observed while referring to the case Centaur Pharmaceuticals Pvt. Ltd. And Anr. v. Stanford Laboratories Pvt. Ltd

Therefore, the bench directed the Trial Court to take on record the written statement filled by the appellant-respondent.

The Commercial Courts Act, 2015 being a Special Law, the said order shall also be applicable with respect to the limitation prescribed under the Commercial Courts Act, 2015 also and the period from 15.03.2020 till 28.02.2022, in the view of this matter and for the purposes of limitation as may be prescribed under any General or SPECIAL LAWS shall have to be excluded as may be prescribed under any General or SPECIAL LAWS with respect to all quasi-judicial or judicial proceedings.

The Bench comprising of Justice MR Shah and the Justice BV Nagarathna observed while allowing the appeal filled by the defendant the purpose of filing the written statement and ought to have permitted to take the written statement on record as the High Court ought to have excluded the aforesaid period.

In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply and in cases where the limitation during the period between 15th March 2020 till 28th Feb 2022, would have expired all persons shall have a limitation period of 90 days from 01.03.2022, notwithstanding the actual balance period of limitation remaining.

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Supreme Court expresses disapproval of judicial officer for not releasing accused despite order granting bail

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The Supreme Court in the case Gopal Verma v State of UP observed the recently deprecated act of a judicial officer on the release of the accused despite Court’s order of directing his release against whom FIR was registered u/s 498A, 304B of IPC and section 3/4 of Dowry Prohibition Act.

Since October, 2020 the appellant has been in custody and the bench had granted bail to the accused after being apprised of the fact that the charge of the accused was as under Sections 304B and 498A, Indian Penal Code, 1860

In December, 2021, the charge sheet was filed and as yet only one witness had been examined whereas the prosecution had cited 64 witnesses, the counsel argued before the Court.

the bench while considering criminal appeal assailing Allahabad High Court’s order of refusing to grant bail to the accused on 17.05.202, the bench granted bail to the appellant on terms and conditions to the satisfaction of the Trial court and upon hearing learned counsel for both the parties.

The bench comprising of Justice SK Kaul and the justice MM Sundresh while observing in their order said:

the appellant was not released and that should have been the matter of concern by the trial court as from December 2021, only one witness has been examined rather than what is sought to be raised ad the bench have no hesitation in adding those provisions to the order but don’t appreciate the conduct of the judicial officer whereby despite the orders of this Court.

on the pretext that while the order mentions the charges under Sections 304B and 498A, IPC it does not mention Sections 3/4 of the Dowry Prohibition Act, The Judicial Officer refused to release the accused.

The bench further added that the bench has no hesitation in adding those provisions to the order but the conduct of the judicial officer won’t be appreciated despite the order of this courts the appellant was not released.

Further the court added that only one witness has been examined by the trial Court from December 2021 and that should have been the matter of concern rather than what is sought to be raised by the trial Court.

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The Unresolved Issue of AMP Expenses in Transfer Pricing – India

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One of the most perplexing yet significant concepts within the Transfer Pricing Dispute Resolution is with regards to the Advertisement, Marking and Promoting (AMP) Expenses that are drawn by the Indian Entities of a company for the products of its foreign Associate Entity. This concept has been surrounded by controversy and confusion since its inception within the practice and study of Transfer Pricing and this is because of the absence of any statutes or regulations dealing with it and its jurisprudence is built purely on the judicial precedents that have been delivered by the Tribunals and High Courts, however, interestingly even the courts appear to have a tough time dealing with issues pertaining to AMP expenses.

The origin of this dispute can be traced back to the United States Tax Court in the case of United States v. DHL Corporation, after the introduction of the US Regulations of 1968 which introduced an important concept pertaining to “Developer Assister Rules” as per which the entity which has incurred the AMP Expenses (Developer) would be treated as the economic owner of the brand which is being marketed even though it might not be its legal owner, and the legal owner of the Brand i.e., the Assister need not pay any compensation for the use of the brand by the developer. These regulations were grounded on the notion of equitable ownership of a brand on the basis of the fiscal expenditure and the risk incurred by them, and the legal ownership of the brand has not to be taken as one of the criteria for ascertaining who would be considered as the developer of the Brand or the intangible property in question.

However, it is pertinent to consider that the Transfer Pricing Rules in America create a clear distinction between “Routine” and “Non-Routine” expenditure, which is essential to understand the issue of the monetary remuneration that is given to the domestic associated entity for marketing intangibles. In DHL, the court framed the Bright Line Test (BLT) which created a distinction between the routine and non-routine expenses that were incurred by the companies. According to the Bright Line Test, it is necessary to ascertain the non-routine expenses that have been incurred i.e., for marketing purposes in contrast to the routine expenses that the incurred by the brand’s distributor for product promotion while ascertaining the economic ownership of the intangible in question.

The issue pertaining to AMP expenses was first dealt with in the case of Maruti Suzuki India Ltd. v. Additional Commissioner of Income Tax [(2010) 328 ITR 210] before the Delhi High Court, where the Bench held that the Advertisement, Marketing and Promoting Expenses will be considered as an international transaction only in cases where it exceeds the costs and expenses that have been incurred by comparable domestic entities which are similarly situated. However, the Delhi High Court’s judgement was remanded following which it was challenged before the Honourable Supreme Court in Maruti Suzuki v. Additional Commissioner of Income Tax [2011] 335 ITR 121 (SC) where it was overturned by the Apex Court.

In LG Electronics India Pvt. Ltd. v Assistant Commissioner of Income Tax [(2013) 140 ITD 41 (Delhi) (SB)], the Delhi Bench of the ITAT referred to the precedent by the Delhi High Court in Maruti Suzuki and held that the as per Chapter X of the Income Tax Act, 1961 the Assessing Officer has the right to make an adjustment for Transfer Pricing vide application of the Bright Line Test in issues pertaining to the AMP expenses that have been drawn by the Indian Entity, since this would fall within the ambit of an international transaction, and this would be deduced from the proportionally higher AMP expenses that were incurred by the Domestic Entity in contrast to two similarly situated domestic entities. The Revenue’s understanding that the AMP expenses which are incurred by the Domestic Associated Entity will inevitably result in a benefit to the Foreign Associated Entity in terms of increasing its brand value along with the lack of lack adequate compensation to the latter for the same, is the primary reason behind its attempt to bring all expenses pertaining to advertising, marketing and promotion within the ambit of the country’s Transfer Pricing Laws, thus it takes the job of applying an Arm’s Length Prince on such transactions which are used for AMP and the test that is most widely employed for this purpose is the Bright Line Test which used by the court in the case of LG Electronics, where it looked at the Bright Line, which is a line drawn within the total expenditure for the purposes of AMP which signified the average spending for the same purpose by comparable entities and any amount which would exceed the line would be considered as an international transaction which would represent the expenses that were drawn by the domestic entity for the building the brand value of the Foreign Associated Entity’s product.

The precedent in Sony Ericsson proved to be a gamechanger wherein the court went to the extent of overruling all of the abovementioned judgements with regards to whether AMP Expenses by the Domestic Entity would be considered as an internal transaction. In this case, the court did not face any issues in determining whether it would constitute an international transaction since the entities had submitted that the international between the Foreign Associated Entity and the Domestic Entity also included the money for the purposes of AMP. While the Revenue had relied on the precedent in LG Electronics to show cause for their application of the Bright Line Test in determining the part of the expenses towards AMP that would be considered as an international transaction. However, the court reject the Revenue’s submissions and reasoning while holding that the Bright Line Test did not have legislative or statutory backing and thus the precedent in LG Electronics was overruled with regards to the use and applicability of the Bright Line Test for ascertaining international transactions since this would be considered as an outcome of judicial legislation.

After the precedent in Sony Ericsson there has been a drastic change in the judicial approach towards issues pertaining to AMP expenses within the realm of transfer pricing. However, since the Court has failed to elaborate upon what would constitute an international transaction in Sony Ericsson, the courts and tribunals have gone back to the phase of drowning in confusion to deal with cases pertaining to AMP expenses and have struggled with determining a proper method for the same.

A transfer pricing adjustment can only be made when it has met the statutory framework of highlighting the existence of an international transaction, determination of the price and fixing an ALP in compliance with Section 92 C of the Income Tax Act. While the element of the international transaction was not disputed in all of the aforementioned cases, the primary issue was with regards what would constitute an international a transaction. The definition of an international transaction as per the Income Tax Act includes the parties to have an agreement between themselves for such a transaction and a shared understanding with regards to the transaction and its purpose. In LG Electronics and other cases prior to Sony Ericson, the primary criteria that were adopted by the courted in ascertaining international transactions and unsaid understanding, were on the basis of proportionally higher expenses with reference to comparable i.e. the courts had adopted the Bright Line Test which had been deemed incompatible with the Income Tax Act of 1961

At a glance at most of the cases pertaining to this issue, the Revenue has resorted to proving the existence of international transactions on the basis of the Bright Line Test, and most of the revenue’s judgements also fail to highlight or prove the same, otherwise except for the unique cases in which the Assessee Domestic Associated Entity and the Foreign Associated Entity had a written agreement between the two of them. This issue is purely because of the lack of any regulatory or statutory provisions within the Income Tax Act, and this was also brought to attention by the court in Maruti Suzuki(2011). In the absence of Statutory provisions and the inability to apply the Bright Line Test because of the precedent in Sony Ericsson, it becomes impossible for the revenue in such cases, especially in the absence of a written or express agreement between the Domestic and Foreign Associated Entities, where it is forced to assess the Domestic Entity’s subjective intentions however this method was also rejected in Maruti Suzuki(2011).

While the decision in Sony Ericsson has left the Revenue and Courts baffled with regards to the method, they should use to ascertain international transactions in matters pertaining to AMP expenses, hopefully, this will finally come to a conclusion since it is currently being heard by the Country’s Apex Court. It is of the utmost importance for the Apex Court to elaborate upon the method and procedure that must be followed by the revenue in determining cases pertaining AMP expenses and issue guidelines for the same.

The origin of this dispute can be traced back to the United States Tax Court in the case of United States v. DHL Corporation, after the introduction of the US Regulations of 1968 which introduced an important concept pertaining to “Developer Assister Rules” as per which the entity which has incurred the AMP Expenses (Developer) would be treated as the economic owner of the brand which is being marketed even though it might not be its legal owner, and the legal owner of the Brand i.e., the Assister need not pay any compensation for the use of the brand by the developer. These regulations were grounded on the notion of equitable ownership of a brand on the basis of the fiscal expenditure and the risk incurred by them, and the legal ownership of the brand has not to be taken as one of the criteria for ascertaining who would be considered as the developer of the Brand or the intangible property in question.

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INSURANCE COMPANY SHOULD NOT SEEK DOCUMENTS WHICH ARE BEYOND THE CONTROL OF INSURED TO FURNISH, SAYS SUPREME COURT WHILE SETTLING CLAIM

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The Supreme Court in the case Gurmel Singh vs Branch Manager, National Insurance Co. Ltd observed that due to circumstances which is beyond the insured control and which the insured is not in a position to produce while settling the claims, the insurance company need not be too technical and ask for documents.

While settling the claim, it is found that the insurance companies are refusing the claim on flimsy grounds and/ or technical grounds further which the insured is not in a position to produce due to circumstances beyond his control, While settling the claims, the insurance company should not be too technical and ask for the document As the insurance company ought not to have become too technical and ought not to have refused to settle the claim on non­ submission of the duplicate certified copy of certificate of registration as due to the circumstances beyond his control, the appellant could not produce on payment of huge sum by way of premium and the Truck was stolen, once there was a valid insurance. As the appellant was asked to produce the documents which are beyond the control of the appellant to produce and furnish those documents.

An amount of Rs. 12 lakhs along with interest @ 7 per cent from the date of submitting the claim, the appellant is entitled to the insurance and to pay the litigation cost of Rs. 25,000 to the appellant, the court held while allowing the appeal.

the insurance company has become too technical while settling the claim and the insurance company has acted arbitrarily, observed by the court in this case.

As when an appellant produced the registration particulars which has been provided by the RTO and further the appellant had produced the photocopy of certificate of registration and was just being solely on the ground that the original certificate of registration i.e., which has been stolen is not produced and the non-settlement of claim can be said to be deficiency in service. Therefore, the Insurance companies are refusing the claim on flimsy grounds and/or technical grounds, the facts and circumstances of the case. Furthermore, the appellant had tried his best to get the duplicate certified copy of certificate of registration of the Truck. the insurance company must have received the copy of the certificate of registration, even at the time of taking the insurance policy and getting the insurance.

the appellant has not produced either the original certificate of registration or even the duplicate certified copy of certificate of registration issued by the RTO, mainly on the ground the insurance company has not been settled in an appeal before the Apex Court. The bench further noted that the photocopy 5 of certificate of registration and other registration particulars as provided by the RTO, was being produced by the appellant.

The bench comprising of Justice MR Shah and the justice BV Nagarathna observed and contended that, in many cases, it is found that the insurance companies are refusing the claim on flimsy grounds and/or technical grounds.

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Supreme Court seeks response of Union and states on plea for guidelines to prevent sexual harassment of students in schools

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The Supreme Court in the case Nakkheeran Gopal v UOI & Or’s observed that any kind of harassment including the sexual harassment being carried out at educational institutions The Court while allowing the writ petition issued a notice seeking protection of children.

The plea stated that there is a vicarious liability upon the State Government to implement any law for the well-being and also for the protection of the children in their respective states.

the petition states that to implement any law for the well-being of children and also for the protection of the children in their respective states, it is the responsibility of the State Government and the plea further mentioned that it the vicarious liability of the State Government and It will be considered the lapse on the part of the State Government if there is Any lapse on the part of the educational institution as it remains a crucial department in the State Government With respect to the relevant organization, including Educational Institution, stated in the plea before the court.

The petitioner argued that till date no specific mandate or the law or the guidelines have been issued by the respective States and inspire of alarming rate in the offence against the children especially at school premises.

The petition further states with this regard that children can also themselves be coerced into becoming tools in furtherance of illegal and dangerous activities and under this circumstance the Increased online time can lead to grooming and both online and offline exploitation.

It is essential to ensure the constitutional right to dignity of children provided under Article 21 of the Constitution of India, while protecting children against sexual abuse when they are exposed to predators, which is compromised, stated by the petitioner in the plea.

The petition states that it indicates immediate concerns and measures for intervention are of paramount significance and further the court stated that this calls for the implementation of legislative actions and community-based interventions through virtual media to prevent a further rise in the statistics and to ensure child protection and when the safety of the children is at stake especially at educational institutions which is supposedly to be the safest shelter, and that too during this tough time. As it is necessary to Protecting the basic rights of children and is of utmost concern as otherwise there will be a posting of a substantial threat to the future and this would leave a regressive impression.

It is the fundamental right of the children under Constitution of India to engage and study in an environment when he/ she feels safe from any kind of emotional or physical abuse and is free, further being argued in the petition.

The bench comprising of Justice Indira Banerjee and the Justice CT Ravikumar observed and sought responses of the Union and the States for guidelines for the educational institutions for the protection of the children and also for the enforcement of the fundamental rights of Children at the educational institutions.

It is essential to ensure the constitutional right to dignity of children provided under Article 21 of the Constitution of India, while protecting children against sexual abuse when they are exposed to predators, which is compromised, stated by the petitioner in the plea.

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