The growing cost of litigation and arbitration and consumption of time due to overcrowded court lists led to a search for quicker dispute resolution processes all across the world. Mediation is one such process which is often attempted to amicably settle the disputes before litigation or arbitration.
In the third edition of the international conference on the ‘Arbitration in the Era of Globalization’, the Hon’ble Chief Justice of India, Mr S. A. Bobde observed that ‘time is ripe to devise comprehensive legislation which contains compulsory pre-litigation mediation’ to contain the increasing pendency of disputes before different courts in India.
At present, section 12-A of the Commercial Courts Act, 2015 (‘Act’) inserted vide the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018 (section 11) and augmented by the Commercial Courts (Pre-institution Mediation and Settlement) Rules, 2018 (‘PIMS Rules’) & (hereinafter collectively referred as ‘the existing law’) provide the principal statutory framework for mediation of ‘commercial disputes’ in India.
However, this existing law suffers from infirmities and is insufficient to act as a cure for the issue of pendency of ‘commercial disputes’ in the Indian courts. In the present article, the author examines the loopholes in the existing mediation law and suggests possible plugs thereto. These infirmities and redressal thereof may be noted as follows:
At the outset, it is pertinent to note that for any mode to amicable resolve the disputes (ex. negotiation and mediation), participation of both the parties is quint-essential. However, as already pointed out by the Hon’ble Chief Justice of India above, the existing law does not mandate the participation of the opposite party in the pre-litigation mediation. Section 12A(1) of the Act only obliges the Plaintiff to invite the opposite party for the mediation. However, the opposite party is not obliged to even respond to the request of the Plaintiff [Rule 3(4) of the PIMS Rules]. Thus, unarguably, the existing law lacks the indispensable element of the participation of both parties and should be amended to mandate participation.
Mandated ‘reasonable’ or ‘best efforts’
Moving forward, it may be noted that merely obliging the parties to participate does not bring forth the best possibilities of an amicable settlement in a pre-litigation mediation. Thus, once the parties are tabled together by necessitating their participation, they must be obliged to employ ‘reasonable’ or ‘best efforts’ to mediate the dispute. However, the existing law, as above-noted does not call upon the parties to employ any effort in the process of mediation except for a notice of invitation by the plaintiff. Given the huge pendency, the existing law thus should be amended to oblige both the parties to exercise their ‘reasonable efforts’ at least. This will ensure active participation of the parties and enhance the possibilities of success of ‘compulsory pre-litigation mediation’.
However, it has often been observed that the parties often excuse themselves of the obligation to mediate before approaching the Court based on bare statements in the court of law, like, a resolution of the dispute through mediation is not possible or they have applied their ‘best efforts’ to mediate but they could not resolve the dispute through mediation. Consideration of these bald statements as gospel truth reduces the mandate to mediate and the mandate to employ the ‘reasonable’ or ‘best efforts’ to a mere formality. In such circumstances, it becomes essential for the legislature to enact a robust enforcement mechanism to compel the parties to actively participate in the pre-litigation mediation process.
In light of the afore-said, the author suggests the following points to enable due compliance with the pre-litigation process by the parties:
i. Evidence of ‘reasonable’ or ‘best efforts’: Foremost, the party averring due compliance in the mediation process must produce some prima facie evidence to show that they employed their mandated efforts to resolve the dispute. This will refrain the parties from winking at the process of mediation on afore-noted bare averments.
Admittedly, the evidence of ‘best efforts’ will vary depending on the facts and circumstances of a case. However, generally, it may include minimal documents like unilateral or bilateral communications, meetings happened between the parties, the minutes of such meetings, copy of the notice(s) exchanged along with their postal or e-delivery reports, and likewise.
ii. Penalty for non-employment of mandated efforts: The existing law, does not impose any penalty on the party who does not participate in the pre-litigation mediation [see Rule 3, PIMS Rules]. Thus, non-initiation or non-participation of a party in the orelitigation mediation process should entail some penalty. Else, all the above-amendments would lack any biting teeth. The penalty may be in terms of litigation costs, fines, higher court fee, etc. This may desist the parties from treating the legislative mandate as their handmaid.
iii. Incentives: Imposition of penalties on a party in default, is one way to make the parties comply with the mandate of the legislature. Additionally, the party(s) duly complying with the process can be incentivized in different ways. For example, the Court may reduce the payment of court fee by a certain percentage.
iv. Sensitization: Lastly, real participation only comes with sensitization of people to the process of mediation. Once people are sensitized, there would be a little need for the mandate of mediation and imposition of penalties. As of today, the use of the existing law and the inclination of the people to the process of mediation is majorly in a dormant state. Thus, the parties, the advocates, the judges, and lastly, the people of India as a whole, should be sensitized to the process of mediation and its advantages like cheap, speedy, and confidential.
Access to courts for urgent, interim reliefs
Further, presently, section 12-A(1) of the Act, provides that a plaintiff may directly approach the Court and file a suit which contemplates the need for an ‘urgent interim relief’. Given the fact that parties in ‘commercial disputes’ often plead for ‘urgent interim reliefs’, exemption from pre-litigation mediation on this ground, makes the process to be easily by-passed, particularly, when the existing law does not have any comprehensive definition of the phrase ‘urgent interim reliefs’.
Admittedly, a water-tight definition or deletion of the term are not viable options as both have inherent limitations. On the one hand, urgency varies as per the facts and circumstances of each case and thus cannot be defined or is not desirable to be defined and on the other hand, there are often circumstances wherein parties genuinely require ‘urgent interim reliefs’ which if not granted, would make the whole process of mediation and also litigation fruitless.
In such a situation, the author suggests that in cases where a plaintiff contemplates the need of an ‘urgent interim relief’ he must be allowed to apply to the Court only for an order of ‘interim relief’ sans filing of the suit. The provision should neither bar the parties from approaching the court nor should it excuse a party from mediating the dispute. If this approach is not adopted, on the one hand, the remedy of the party may get defeated and on the other hand, the mandate of the mediation may become hollow, considering that parties will often plead ‘urgent interim relief’ and recuse from the pre-requisite mediation.
v. Participation of the advocates
The legislature may also oblige the advocates of the respective parties to initiate and actively facilitate the mediation between the parties. This is because once a dispute has occurred, the advocates hold a pivotal position in the dispute resolution process and they can suggest the legal standing of the parties and merits of mediation. Additionally, at the pre-litigation stage, the intent to litigate is often in a dormant stage and the dispute may often be reconciled by the involvement of party counsels.
In closing, the author accedes that a ‘compulsory prelitigation mediation’ would be a potent tool for reduction of pendency of litigation in India. The amendments in the above-discussed terms in the existing law are a need of the hour. In wake of the pandemic, COVID-19, the proceedings in the courts of India are nearly at a halt, except for urgent matters. New filings and the issue of pendency of commercial disputes is likely to further proliferate once the normalcy resumes after the pandemic.
However, a law to regulate the process of mediations, sans the above suggestions, would in the opinion of the author be only a mirage of the solution to the issue of pendency of ‘commercial disputes’ in the Indian courts. Merely mandating the mediation process would not act as a cure to the issue of pendency of commercial disputes where the time and confidentiality is often of much essence vis-à-vis other disputes.
On the contrary, it will merely protract the access to justice before the courts and the success of the process would depend only on a hit and trial method, where some parties may employ their bona fide efforts out of their volition whereas others may not. In the opinion of the author, it is only an amendment or a comprehensive legislation aligning with these abovediscussed points which can help to resolve the ever-growing issue of the pendency of ‘commercial disputes’ in India.
Adv. Pareekshit Bishnoi is an advocate based in Delhi.
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GUJARAT HC GRANTS RELIEF TO PHARMACY DIPLOMA HOLDERS
The Gujarat High Court in the case Oza Nikun Dashrathbhai v/s State Of Gujarat observed and has come to the rescue of D.Pharm students who were denied registration as ‘Pharmacist’ by the State Pharmacy Council on the ground that they have not undertaken training from medical stores approved the Pharmacy Practice Regulations, 2015.
The Single bench comprising of Justice AS Supehia observed and noted that the Pharmacy Council of India has not approved any medical store under the Regulation for the purpose of imparting practical training of Diploma to the students in Pharmacy Course like the present petitioners.
It was observed that the petitioners cannot be faulted for the action of the respondent authorities in not approving the medical stores under regulation 4.4 of the Regulation of 2015 and hence, no option was there to the petitioner to take their training from the respective medical stores.
It was claimed by the petitioner’s student that the State Council was not registering them as Pharmacists despite having undertaken the necessary training of 500 hours for three months from the respective medical stores.
Further, it was observed that the State had admitted that all documents of the Petitioners were genuine, however, the registration was denied solely for the aforesaid reason. Further, one of the governmental circulars had clarified that the process for granting approval of Chemist/ Pharmacy and Druggist will be notified through the online mode. But the same was targeted only at “prospective students” .
It was noted by the High Court that in order to avoid hardship to current students, who had already undergone or undergoing the D.Pharm course while taking the practical training under the Pharmacy, Chemist and Druggist licensed under the Drugs and Cosmetics Act, 1940, as per precedence students will be considered for the registration, provided the students had undergone the D.Pharm course in an institution approved under PCI under section 12 of the Act.
Accordingly, the High Court directed the State Council to register the Petitioners as Pharmacists within three months.
BASICS, LEGISLATIONS AND NEED FOR A NEW LAW TO DEAL WITH 5G SPECTRUM TECHNOLOGY
Much like the evolution of humankind over the millennia, the inventions by humans have also evolved with the progress and advances in technology. Right from the invention of the telephone by Graham Bell to the present day wonder phone ; the cellular or mobile phone.
Cellular mobile technology has also benefited greatly from such advances, Think back to the first generation of mobile phones and connectivity options offered and you think of large phone instruments and only voice enabled phones.
Segue to the present day and we have now arrived at the threshold of a major revolution in cellular technology: the 5G network.
What is the 5G network technology? Simply expressed, it is an advancement of technology, but to put it in better terms, what this means is that with higher usage of mobile phones, which have morphed into office equipment or entertainment consoles due to their ease of usage and accessibility, this new technology has the capability of transmitting data at higher speeds, without any perceptible delay ( which is known as low latency in technical terms), which even the current 4G network could not perhaps address.
What are the laws governing 5G network technology? At present, there are no specific regulations or laws that govern this technological advance and it would thus be governed by the existing bouquet of legislations and rules, which are;
Indian Telegraph Act, 1885: This legislation regulates the telecommunication sector, empowering the government to put up infrastructure and licensing of infrastructure.
The Indian Wireless Telegraphy Act, 1933: This legislation regulates the usage of wireless telegraphs in the country.
Telecom Regulatory Authority of India Act, 1997: This act was put into place in order to regulate and settle telecom disputes and an authority know as Telecom Regulatory Authority of India was setup under the legislation . The initial role of the authority was to look into disputes in the sector , its scope was however, expanded to regulate the sector in the country, which in the context of the mobile or cellular technology also includes the grant of licences.
Information Technology Act, 2000: As the name suggests, this act governed information technology, but was later amended in 2008 to include telecom service industry.
Apart from this the guidelines issued by the Government under these enactments would hold the field. Allocation of spectrum would be based upon technical evaluations carried out before granting licences.
What are the requirements to be fulfilled by the applicant telecom companies to obtain 5G spectrum licence? The company must hold a Cellular Mobile Telephone Service Licence or Unified Access Service Licence , Unified Licence with permission/authorisation for access services for the service area for which it has bid for (the region that it has bid for).
Apart from this, the additional or subsidiary conditions that have to be met are:
The company that bids for licenses must have a net worth of Rs. 100 crores for the service area that it has bid for amongst other ancillary requirements.
The stance of the Government: The stance of the Government as reflected on its website https://dot.gov.in/5g-india-2020 is that “ The 5G technology has been conceived as a foundation for expanding the potential of the Networked Society. A digital transformation brought about through the power of connectivity is taking place in almost every industry. The landscape is expanding to include massive scale of smart things to be interconnected. Therefore, the manner in which future networks will cope with massively varied demands and a business landscape will be significantly different from today.
The economic benefits from the 5G technology are also quite immense. As per the OECD (Organization for Economic Cooperation and Development) Committee on Digital Economic Policy, it has been stated that 5G technologies rollout will help in Increasing GDP, Creating Employment, Digitizing the economy.
For India, 5G provides an opportunity for industry to reach out to global markets, and consumers to gain with the economies of scale. Worldwide countries have launched similar Forums and thus, India has joined the race in 5G technologies.
The Government gave the go ahead for 5G spectrum trials as reported on the website,https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=1715927,which stated that-The Department of Telecommunications (DoT), Government of India, approved permissions to Telecom Service Providers (TSPs) for conducting trials for use and applications of 5G technology. The applicant TSPs include Bharti Airtel Ltd., Reliance JioInfocomm Ltd., Vodafone Idea Ltd. and MTNL. These TSPs have tied up with original equipment manufacturers and technology providers which are Ericsson, Nokia, Samsung and C-DOT. In addition, Reliance Jio Infocomm Ltd. will also be conducting trials using its own indigenous technology.
The permissions have been given by DoT as per the priorities and technology partners identified by TSPs themselves. The experimental spectrum is being given in various bands which include the mid-band (3.2 GHz to 3.67 GHz), millimetre wave band (24.25 GHz to 28.5 GHz) and in Sub-Gigahertz band (700 GHz). TSPs will also be permitted to use their existing spectrum owned by them (800 MHz, 900 MHz, 1800 MHz and 2500 MHz) for conduct of 5G trials.
The duration of the trials, at present, was for a period of 6 months. This includes a time period of 2 months for procurement and setting up of the equipment.
The permission letters specify that each TSP will have to conduct trials in rural and semi-urban settings also in addition to urban settings so that the benefit of 5G Technology proliferates across the country and is not confined only to urban areas.
The TSPs are encouraged to conduct trials using 5Gi technology in addition to the already known 5G Technology. It will be recalled that International Telecommunications Union (ITU) has also approved the 5Gi technology, which was advocated by India, as it facilitates much larger reach of the 5G towers and Radio networks .The 5Gi technology has been developed by IIT Madras, Centre of Excellence in Wireless Technology (CEWiT) and IIT Hyderabad.
The objectives of conducting 5G trials include testing 5G spectrum propagation characteristics especially in the Indian context; model tuning and evaluation of chosen equipment and vendors; testing of indigenous technology; testing of applications (such as tele-medicine, tele-education, augmented/ virtual reality, drone-based agricultural monitoring, etc.);and to test 5G phones and devices.
5G technology is expected to deliver improved user experience in terms of data download rates (expected to be 10 times that of 4G), up to three times greater spectrum efficiency, and ultra low latency to enable Industry 4.0. Applications are across a wide range of sectors such as agriculture, education, health, transport, traffic management, smart cities, smart homes, and multiple applications of IOT (Internet of Things).
DoT has specified that the trials will be isolated and not connected with the existing networks of TSPs. Trials will be on non-commercial basis. The data generated during the trials shall be stored in India. TSPs are also expected to facilitate the testing of the indigenously developed use cases and equipment as part of the trials. One hundred applications/ use cases selected by DoT after conducting the recent Hackathon on 5G applications can also be facilitated in these trials.
Pursuant to the above, trials were carried out successfully, and ultimately, the spectrum auction took place recently and the 5G network is set to be rolled out soon. This is of course, the offering of the network to subscribers for their usage as provided by telecom operators.
Captive usage of 5G spectrum: With huge interest being shown by some business entities for captive consumption of the spectrum, the Government has on 10th August,2022 undertaken to examine the demand for the same. Captive Non-Public Network (CNPN), or in other words, in-house network, in layman terms will help those entities who wish to avail of the same, to have easier and faster in- house capability, thus boosting its efficiency while providing a dedicated platform, different from the one provided to telecom operators. Different as a result of one customer or subscriber who will avail the same directly from the Department of Telecommunications.
Litigatin on 5G- A litigation against the rollout of the 5G spectrum was initiated before the Delhi High Court on the possible environmental hazards , which came to be dismissed.
At present, there is possibly no other litigation pending or initiated as regards the 5G spectrum rollout, maybe due to the freshness or infancy of the same. If there is any future litigation as regards the same, it would in all probablity be in the realm of awarding of spectrum as a larger issue. Another aspect of any probable litigation would be as regards awarding of Captive Non Public Network (CNPN) or captive usage, but that is likely to be litigation almost like the one that we see in the realm of contracts.
The way forward: As mentioned midway in this article, there is no specific law dealing with spectrum technology and the same is governed by the various enactments mentioned above. The pressing requirement is possibly to have a single law dealing with this area, instead of the bouquet of laws holding the field, which will pave the way for smoothening of the sector and help both the Government and parties in the sector to have a level playing field and do away with the uncertainties associated with various laws governing the field which could result into chaos as compared to a single special legislation which would look at existing and future requirements. A specific law is indeed the need of the hour.
AN ANALYSIS OF UNIFORM CIVIL CODE
UNIFORM CIVIL CODE
Uniform civil code in general words means “One Nation, One Law”
Uniform civil code: The word is comprised of two words “uniform” and “civil code”
UNIFORM MEANS EQUALLY APPLICABLE ON EVERYONE
Civil code means collection of laws governing personal relationships between people. Few examples of civil code are contracts, property and marriage related laws.
The debate for uniform civil code started back in 1835 with the report of second law commission. During this time Britishers felt the need to unify various personal laws.
The concept of uniform civil code is embodied under article 44 of the Indian constitution in chapter IV (DPSP). The article states that: Uniform civil code for the citizens: The state shall endeavour to secure for the citizens a uniform civil code throughout the territory of India.
The words incorporated in article 44 imply that the state shall make great effort to implement Uniform civil code throughout the country.
Although directive principles of state policy are not enforceable in a court of Law, it obligates the state to apply the principles in implementation of laws.
The implementation of Uniform civil code was included by the Bhartiya Janta party in its manifesto during 2019 Lok Sabha election. Removal of Article 370 from constitution of India is the major step towards this agenda. India is a diverse country with various religions and various personal laws governing these religions with implementation of UCC all the religions will be governed by one uniform civil code which will reduce the dominance of personal laws over society.
UNIFORM CIVIL CODE AND PERSONAL LAWS
Implementation of UCC has been a matter of dispute from long time because in country like India religious domination plays a crucial role and majority would prefer their dominance over others religions with its personal religious laws. The idea to integrate people of different religions under one civil law can only be possible if it’s for common good rather than for preservation of custom.
Custom as a source of law gives more importance to personal religious laws rather than one uniform law and if custom will be the focus behind this one unified civil law it will dominate one majority religion over minorities. The centre of attraction behind the uniform law should be Justice rather than antediluvian antifeminist customs.
It was contended during the debates of the constituent assembly that uniform civil code infringes the right to religion guaranteed under part III of the constitution of India.
In the case of John Vallamattom v. Union of India(MANU/SC/2003) it was held that directive principles incorporated under Article 44 do not infringe article 25 (freedom of religion) in any way. In addition to this clause (2) of article 25 saves secular activities associated with religious practices from the right available under clause (1) that empowers the state to regulate or restrict them.
Judicial pronouncements and article 25
The necessity of implementation of Unified Civil Code has been often recommended by Supreme Court. In the case of Nikhil soni v. Union of India the court stated unambiguously that trough a practice can be religious in nature but if may not constitute vital component of that religion.
UCC: THE DEBATE OF CONSTITUENT ASSEMBLY
The speech was given against the motion by several Muslim leaders when it was enacted. It was claimed that it violates fundamental right of religion. Dr. B.R Ambedkar even mentioned, “We have a uniform and COMPLETE CRIMINAL CODE OPERATING THROUGHOUT THE COUNTRY. Which is contained in the penal code and the criminal procedure code. this country also has a civil code which is uniform in its content and applicable throughout the country. The only division in which civil law has not invaded is marriage and succession. It is this little corner which we have not been able to invade so far.
UNIFORM CIVIL CODE IN GOA
Uniform civil code is contained under part IV of the Indian Constitution therefore not enforceable but Goa is the only state which has implemented Uniform civil code in its territory.
The Apex court in Jose Paulo coutinho v. Maria Luiza Valentina Pareira stated that the Uniform civil code of Goa is an ideal for applicability of uniform laws on different religions. However the personal laws in Goa are not uniform in all aspects.
Uniform civil code & elimination of gender biasness
The concept of Uniform civil code is highly associated with elimination of gender bias; every personal law is strongly prejudiced against women in some way or the other. The personal laws are highly patriarchal and male dominant in nature. No personal law is ideally suited to become a model for UCC.
Personal laws are mainly derived their authority and source from customs, but the combined effort of legislature and judiciary have played a major role towards achievement of UCC through legislations and precedents.
Electricity connection cannot be denied only because dispute regarding ownership of land is pending: Gujarat High Court
The bench of Justice Supehia noted that the Petitioners were owners of the concerned agricultural land for which electricity was sought. However, it was observed that the electricity was denied on the ground that the Petitioners were illegally occupying Government land.
The Gujarat High Court in the case Yogesh Lakhmanbhai Chovatiya v/s PGVCL Through the Deputy Manager observed and has clarified that occupiers of a land cannot be denied electricity connection only because a dispute regarding ownership of the land is pending.
The bench comprising of Justice AS Supehia observed and referred to a division bench judgment stating that right and title and ownership or right of occupancy has no nexus with grant of electrical connection to a consumer.
In the present case, the petitioner current occupiers of the land and submitted that they were denied an electricity connection only because the land that they were occupying was in the name of the Government. However, the proceedings were initiated by the Mamlatdar against them u/s 61 of the Gujarat Land Revenue Code for removal of encroachment. Further, to bolster their contention, it was relied by the petitioner on an order of the High Court and Sec 43 of the Electricity Act, 2003 which mandates the supply of electricity to any occupier or owner of premises.
The Petitioners could be said to be ‘occupier’ of the land in question and the connection could not be denied by the Respondent.
The bench of Justice Supehia noted that the Petitioners were owners of the concerned agricultural land for which electricity was sought. However, it was observed that the electricity was denied on the ground that the Petitioners were illegally occupying Government land.
Further, the bench of Justice Supehia concluded while perusing Sec 43 that the provision stipulated that the licensee shall supply electricity to those premises where the application had been filed by the owner or the occupier. Consequently, a reference was made to the order of the Division Bench of the High Court in LPA No. 91/2010 wherein it was observed:
The Court stated that such power being not vested under the law with the company and as the company cannot decide the disputed question of right and title and this court is of the view that ownership or right of occupancy has no nexus with grant of electrical connection to a consumer.
While keeping in view of the aforesaid provisions, it was directed by Justice Supehia that the Respondent-Company to supply electricity connection to the Petitioners in the premises of the property at the earliest in accordance with the list maintained by the name containing the names of the Petitioners in the list.
ANALYSIANG SECTION 194R OF THE INCOME TAX ACT
Recently, Section 194 R was inserted by the Finance Act 2022, which came into effect on July 1st, 2022. CBDT made certain recommendations via Circular 12 from the day of the addition of this section, it has become highly debatable. Before touching the issues of this section, we need to understand the legal provision of section 194 R.
In simple terms, the new section mandates a person who is responsible for providing any benefit or perquisite to a resident to deduct tax at source at 10% of the value or aggregate value of such benefit or perquisite before providing such benefit or perquisite. The benefit or perquisite may or may not be convertible into money, but it must result from such resident’s business or professional activities. As per this section, tax will be deducted by business or profession on any benefits or perquisites of a person who is residing in India. The benefit or perquisite can be in the form of cash or kind, or partially in cash and partially in kind. Tax deduction will be 10 percent if the aggregate value doesn’t exceed INR 20,000. In such a case, tax will not be deducted. Such conditions will not be applicable in If the turnover of business doesn’t exceed INR One Crore, If the turnover of the profession doesn’t exceed INR fifty lakhs, For instance, if a person is a sales agent and he exceeds the target allotted by the company and receives a new car worth INR 5, 00,000/-the value of INR 5,00,000 will be taxed under the head of Profit.
The intention of this section is to expand the scope of deducting tax on benefits or perquisites and to increase transparency in the reporting of benefits and perquisites received by an individual. Because this particular incentive is in kind rather than cash, recipients of such kinds of transactions do not include it in their income tax return. As a result, inaccurate income information is provided. Such an incentive or bonus in kind ought to ideally be reported as income under the 1961 Income-tax Act (ITA). Also, according to Section 28(iv) of the ITA, any benefit or perk received from a business or profession, whether convertible into money or not, must be reported as business income in the hands of the receiver. Now Section 194(R) gives the right to the payee to deduct the amount, whether in cash or kind, arising out of business promotion.
The terms “benefits and perquisites” are not defined under the IT act. If they receive any such perquisites or incentives, whether in cash or in kind, they must deduct TDS. In cases where the benefit is wholly in kind, the person providing such a benefit or perquisite is required to pay TDS on the value of such benefit or perquisite out of his own pocket. In this case, benefits and perquisites are determined as per the value of the purchased price and manufactured price. However, no taxes to be deducted u/s 194R on sales discount, cash discount, or rebate are allowed to customers.
In the matter of ACIT Vs Solvay Pharma India Ltd, the court held that free samples provided by the pharmaceutical company for promotion purposes would be taxable income. As such, free samples cannot be treated as a freebie. The complimentary sample of medication serves solely to demonstrate its effectiveness and to win the doctors’ confidence in the high quality of the pharmaceuticals. Again, this cannot be regarded as gifts given to doctors as they are intended to promote the company’s goods. The pharmaceutical corporation, which manufactures and markets pharmaceutical products, can only increase sales and brand recognition by hosting seminars and conferences and educating medical professionals about recent advances in therapeutics and other medical fields. Since there are daily advancements in the fields of medicine and therapy taking place throughout the globe, it is crucial for doctors to stay current in order to give accurate patient diagnosis and treatment. The main goal of these conferences and seminars is to keep doctors up to date on the most recent advancements in medicine, which is advantageous for both the pharmaceutical industry and the doctors treating patients. Free medication samples provided to doctors by pharmaceutical corporations cannot be considered freebies in light of the aforementioned value.
Hence, under such circumstances, for such a sales effort, the pharmaceutical company may deduct its expenses. The promotion would, however, be taxable income in the hands of the receiver, and the pharmaceutical company would need to deduct TDS on it.
Another question that pops up is that in the case of gifts and perks received on special occasions like birthdays, marriages, and festivals, under such circumstances, Section 194R will only be applied if they arise out of business or profession.
As we know, we are heading towards digitalisation. There are many social media influencers who are playing a crucial role in marketing strategy. Income received by an influencer is calculated by deducting expenditure incurred on their business. Filming costs, such as cameras, microphones, and other equipment; subscription and software licencing fees; internet and communication costs; home office costs, such as rent and utilities; office supplies; business costs, such as travel or transportation costs; and others are examples of what can be written off as a social media influencer. To illustrate how Section 194 R will be applicable in such a situation, let’s consider Nandini is a social media influencer. She received an offer from a company for product promotion in another city. She charged her fee of Rs 88,000 and the travel expense incurred by her was Rs 25,000. Here, the company will reimburse her travel expenses. So, the travel expenditure incurred by the company is covered under the benefits and perquisites provided to Nandini. Hence, TDS is to be deducted under section 194R at the rate of 10%, i.e., Rs 2500 is deductible from the fees payable to Nandini.
There is no further requirement to check whether the amount is taxable in the hands of the recipient or under which section it is taxable. The Supreme Court took the same view in the case of PILCOM vs. CIT in reference to the deduction of tax under Section 194E. It was held by the Hon’ble Supreme Court that tax is to be deducted under section 194E at a specific rate indicated therein, and there is no need to see the taxability under DTAA or the rate of taxability in the hands of the non-resident.
In the matter of ACIT Vs Solvay Pharma India Ltd, the court held that free samples provided by the pharmaceutical company for promotion purposes would be taxable income. As such, free samples cannot be treated as a freebie. The complimentary sample of medication serves solely to demonstrate its effectiveness and to win the doctors’ confidence in the high quality of the pharmaceuticals. Again, this cannot be regarded as gifts given to doctors as they are intended to promote the company’s goods. The pharmaceutical corporation, which manufactures and markets pharmaceutical products, can only increase sales and brand recognition by hosting seminars and conferences and educating medical professionals about recent advances in therapeutics and other medical fields. Since there are daily advancements in the fields of medicine and therapy taking place throughout the globe, it is crucial for doctors to stay current in order to give accurate patient diagnosis and treatment.
GUJARAT HIGH COURT: WRIT PETITION FILED AGAINST PRIVATE UNIVERSITY NOT MAINTAINABLE, REMEDY FOR ALLEGED ARBITRARY TERMINATION LIES UNDER CIVIL LAW.
The Gujarat High Court in the case Shambhavi Kumari v/s Sabarmati University & 3 other(s) observed and has declined to intervene in a writ petition seeking reinstatement with full back wages and benefits filed by an Assistant Professor against a private university, Sabarmati University.
The bench comprising of Justice Bhargav Karia observed and has clarified that the dispute regarding termination was ‘in the realm of a private contract’ and therefore, held that if on the part of the respondent, there is an alleged arbitrary action, the same would give cause to the petitioner to initiate civil action before the Civil Court but in the facts of the present case, the writ petition would not be maintainable against the private educational institution governed by the Gujarat Private Universities Act, 2009.
In the present case, the petitioner was given a three months’ notice starting August 2013, allegedly without any reason. Consequently. Earlier, an application was filled by the petitioner before the Gujarat Affiliated Colleges Service Tribunal and thereafter, withdrew the application to file the writ before the High Court.
It was contested by the respondents that the petition was not maintainable on the ground that the University was a private University and did not fall within the term ‘State’ under Article 12 of the Constitution of India. Therefore, the employment conditions of the Petitioner would not bring her services within the realm of ‘duty or public function.’
It was observed that the petitioner, per contra, insisted that the University was established under the Gujarat Private Universities Act, 2009. However, Universities were established to provide quality and industry relevant higher education and for related matters and hence, it could not be said that the Universities were not performing public duty. It was directed by the State Government and pervasive control over the functioning of it as was mentioned in Sec 31-35 of Chapter VI of the Act. Reliance was placed on Janet Jeyapaul vs. SRM University and ors. where the Top Court had held that the writ petition was maintainable against the deemed university and whose functions were governed by the UGC Act, 1956.
The bench of Justice Karia, while taking stock of the contentions referred to Mukesh Bhavarlal Bhandari and ors vs. Dr. Nagesh Bhandari and ors where the Coordinate Bench of the High Court in similar circumstances had reiterated that merely because the activity of the said research institute ensures to the benefit of the Indian public, it cannot be a guiding factor to determine the character of the Institute and bring the same within the sweep of ‘public duty or public function.
It was observed that the High Court also rejected the reference to Janet Jeyapaul since in the instant case and held that in the realm of a private contract, the Petitioner termination was to be decided.
Further, it was observed that it is not necessary to go into the merits of the case with regard to the issue of show-cause notice for providing an opportunity of hearing resulting into breach of principle of natural justice and weather the action of the respondent University is unfair or not because all such disputes essentially are in the realm of private contract.
Accordingly, the bench dismissed the petition.
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