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Tax litigation in India

As per the litigation trend in courts, it appears that the government is adamant to pursue several litigations pertaining to transitional credit. Despite a settled position in law that credit is a vested right, there are several restrictions imposed on its transition, including restriction to transition cesses, imposition of timelines to transition, restriction to make multiple revisions. The government, in this regard, has placed itself into an unnecessary conundrum.

Kamal Sawhney



Tax certainty is the foundational principle of a conducive tax jurisdiction. Uncertainty is bound to arise in any tax jurisdiction – whether it be issues arising out of legislation, implementation or interpretation. But what makes a tax jurisdiction stand out as conducive to businesses in comparison to others is the efficiency and effectiveness of its dispute resolution mechanism. No business would be comfortable to invest huge amounts in a tax jurisdiction where 8-10 years is the average period for conclusion of a tax dispute. Clear tax policy and a non-adversarial tax administration is a pivotal factor for any country to be considered as a preferred tax jurisdiction. Therefore, the situation of tax litigation becomes relevant.

India, as we know, is infamous as a complex tax jurisdiction and for huge pendency of tax litigation. If we look at the statistics of the pending cases, the numbers have only increased over the years. In Direct Tax domain itself, the pendency of cases at various appellate levels has increased from 3.86 lacs cases as of 2016 (as per the CBDT Committee Report dated 05.09.2016 on Litigation Management) to 4.83 lacs cases as of 2020 (as per Finance Minister’s Speech on Union Budget 2020-2021). In the Indirect Tax domain, the Government claims that the ‘Sabka Vishwas Scheme’ has helped resolving around 1.9 lacs cases and reduced the litigation pendency by 60% but one cannot lose sight of the litigation generated from the scheme itself.

Pendency of cases is a quantitative aspect. It is equally important to test our progress qualitatively as a tax jurisdiction. While the Indian tax judiciary has contributed tremendously to the jurisprudence in the international tax discipline, but our tax judiciary is still plagued with futile and repetitive issues that makes it evident that we have not matured as a tax administration.

The Government’s vision towards rising the ranks on the Ease of Doing Business List and the resolve to foster a non-adversarial tax regime to attract more investment in the economy is not consistent with the adversarial mindset of the tax authorities on the implementation front and to some extent, even with the tax policies and legislation. This is also one of the reasons why several efforts of the Government, from time to time, towards reducing tax litigation and towards speedy disposal of pending litigation have failed. What India most crucially requires is a change in the mindset of its Tax Authorities. Courts have rightly and consistently pointed out that a tax litigation is not equivalent to a lis or dispute between two parties in a civil litigation. The tax authorities and the taxpayers are not adversaries in a civil litigation, rather tax litigation, including appeals, is merely an administrative act of adjusting the taxpayer’s tax liability. This difference ought to be understood and practiced in the right spirit by the tax authorities.

There are certain issues in both direct and indirect tax domains discussed below which are worth highlighting to understand where the Government and the tax authorities have failed us as a tax jurisdiction.

Failure on the Tax Policy Front

The goods and services tax (GST) regime which was introduced in India with effect from 01st July, 2017 with the objective to achieve simplification in the existing tax regime, widening of tax base, and most importantly, to mitigate the cascading effect of various indirect taxes by way of subsuming different kinds of indirect legislations. With the above introduction, it was promised by the Government of India that this is a one stepforward towards improving the ease of doing business in India. However, even after 3 years since implementation, GST in India still seems very far from achieving most of the stated objectives and its avowed promises to businesses.

Even the flexibility to undertake business activities freely within the boundaries of the country is not completely available under the GST regime on account of mandate to obtain separate registrations for operations in different States and treating the said registrations as distinct persons for the purposes of GST. While this may have been necessary to implement elimination of cascading effect of taxes, the legislature failed to comprehend that there may be business situations where a particular business entity might want to close operations in a particular State and shift its focus to their business in another State. To cater to this scenario, the extant provisions of law does not provide for a mechanism to transfer to input tax credit available to an entity registered in one State to another registration of the same entity in a different State. This leads to a situation where the input tax credit of one State is bound to lapse, despite there being a vested right in the said credit. In this regard, in a recent ruling by Andhra Pradesh Authority of Advance Ruling, it has been held that when a business of a company registered in one State is transferred as a ‘going concern’ to its registration in another State, the business will also be permitted to transfer the unutilized input tax credit as well. However, it still needs to be seen whether a similar position may be adopted where business decides to close its operations in a particular State, leaving aside the fact that the said ruling is itself prone to challenge in appeal by the Government.

Unnecessary Blocking of Capital

Under the direct tax domain, the most common dispute between the tax authorities and the taxpayers is on the possession of the disputed tax demand. Supreme Court, High Court and even Departmental Circulars have consistently maintained the legal position that where an addition/disallowance is covered in the favour of the taxpayer by the appellate orders in taxpayer’s own case or by the decisions of jurisdictional High Court or Supreme Court, the tax authorities ought not to recover such demand. Despite clear legal position, it is a recurring issue for the taxpayers where stay applications are rejected, coercive recovery is made and even legally entitled refunds for other assessment years are adjusted against such irrecoverable demand. When such kind of recovery becomes regular, year after year, in both the domains – direct and indirect tax, the businesses are drained of their limited pool of working capital and the impact is such that in many cases, the businesses have to fall back upon their foreign parent entity.

If we specifically discuss about the GST regime, although one of the stated and primary objectives was to eliminate cascading effect of taxes, there have been several artificial restrictions around availment of input tax credit, despite the input expenditure being arguably in relation to one’s business. Further, the credit of input taxes are being provisionally allowed, and notices are being issued to the businesses on account of mis-match on the portals. Despite the businesses make payment of taxes to their suppliers, the credit is being denied on account of failure on the part of the suppliers to report such supplies on the GST portal. While the purpose of implementation of such matching criteria under GST can be fathomed, it also needs to be appreciated that the businesses have almost negligible control over their suppliers who work independently, and the mismatch may be on account of several factors beyond their real control. The availability of their free capital to the businesses is severely hampered on this account.

Further relevant to highlight is the consistent position of our country that domestic taxes should not be exported out of country. However, in many scenarios, even in cases of export of goods and services which are zero-rated supplies under the GST regime, the businesses are not able to claim refund of taxes which form part of the said supplies. This is on account of creation of notional place of supplies to eliminate a particular transaction from the category of ‘export’ despite earning foreign exchange on the transaction. Apart from this, a further restriction to seek refund on export has been imposed by way of recent amendment made to Rule 89(4) of the CGST Rules to provide for a notional value to the ‘turnover of zero-rated supply of goods’.

Futile and Long Drawn Litigation Approach of the Government

The litigation cost incurred by businesses in India are also considerably high. As per the litigation trend in courts, it appears that the Government is adamant to pursue several litigations pertaining to transitional credit. Despite a settle position in law that credit is a vested right, there are several restrictions imposed on its transition, including restriction to transition cesses, imposition of timelines to transition, restriction to make multiple revisions. The Government, in this regard, has placed itself into an unnecessary conundrum. Credit, after all, is tax paid to the government and in line with the stated principles of elimination of cascading effect of taxes, credit should not be denied. The position adopted by the Government dilutes the stated objectives of GST and is increasing litigation for businesses. Even in respect of the amnesty scheme introduced for settling the legacy disputes under erstwhile indirect tax laws, the executive function of the Government has been rejecting the declarations filed by the businesses on several technical and procedural grounds. In some cases pending before High Courts, the designated committee have rejected to allow the adjustment of predeposits made in pursuant to the interim orders of the Tribunal despite a express sanction under the Scheme, or rejected on the grounds of non-filing of separate declarations for multiple SCNs covered in a single pending appeal before the Tribunal. Such a position has unnecessarily taken away the very purpose of amnesty i.e., to reduce litigation. The said trend shows the mindset of the Government to deviate from the clearly stated objective of putting an end to lengthy litigation and on the contrary, is adding to the burden of High Courts which are already crumbling under heavy pendency.

Another futile litigation is on the taxpayer’s struggle to obtain its legally entitled refunds after getting an addition deleted in appeal. In case a tax addition is deleted in appeal, the authority is mandated as per law to give effect to the appellate order and issue the resulting refunds to the taxpayer. This is a clear statutory mandate but despite such mandate, there is a regular litigation against the inaction of the tax authorities in not giving effect to appellate orders and issuing consequential refunds. The tax authorities have acted perversely to the extent where on one hand they do not give effect to the appellate orders, due to which a demand is reflected instead of refunds, and on the other hand, the authorities adjust the same non-existent demand with refunds determined for the taxpayer in other assessment years. Such litigation friendly tax administration creates a highly discouraging business environment.

Biased and Unilateral Approach of the Executive Function

The administration of GST regime by the executive has also been biased in favour of the revenue ever since its introduction. In this scenario, while the law has been entirely transformed, the executive has always been against the businesses, which is leading to a situation which is not conducive to do business in the country. For illustration purposes, it may be worthy to refer to the anti-profiteering law under the GST regime which has been administered in a manner contrary to a long line of judgments where it was held that there should be sufficient guidelines within the law for its administration, more so when such legal regime entails civil consequences, and in the absence thereof, the said law would itself fail. Despite there being complete absence of any mechanism prescribed under the law for computation of profiteering, the authorities have been acting whimsically in computing profiteering amounts against businesses, leading to complete arbitrariness in the claims made against the businesses. With the long periods of anti-profiteering investigations preferred by the authorities, the businesses have been forced to keep their sale prices constant despite an actual verifiable increase in their cost. Further, the executive has been adamant to impose further levies on the businesses under the garb of anti-profiteering provisions despite a demonstrable transfer of benefits accruing to the business on account of GST implementation or on account of reduction in rate of taxes under the GST regime. The said implementation is arguably a clear violation of the fundamental rights to do business as enshrined in the Indian Constitution and is also contrary to the freedom to earn profits from one’s business, which stands severely curtailed.

Failing Alternative Dispute Mechanism under the Income Tax Act

Finance Act 2009 introduced an alternative dispute resolution mechanism under the Income Tax Act for foreign companies and transfer pricing assessments in order to facilitate expeditious disposal of disputes on a fast track basis. Under the alternate route, Appellate Commissioner level was replaced by the Dispute Resolution Panel (DRP) which is constituted by a collegium of three Commissioners of Income Tax. In order to further align the DRP route with the Government’s intent to minimise litigation, further amendment was made vide Finance Act 2016 to prohibit the tax department from filing appeals against the assessment orders passed in pursuance of the DRP directions.

If the ground reality be witnessed, taxpayers expect relief from DRP only in case the disputed addition is favourably decided by appellate orders in taxpayer’s own case for other assessment years and such appellate order has attained finality. If such appellate order has further been appealed by the department, a relief cannot be expected even in that situation. A major reason is that the DRP does not recognises itself as a quasi-judicial appellate body and considers itself not bound by the principle of judicial precedents. With the Revenue’s right to appeal against DRP directions being taken away, further decline was witnessed in taxpayer favouring DRP directions in order to keep the issues alive in appeal. Surprisingly, DRP has even mentioned this as a reason for not giving relief in some of its directions.

This was not the case with the Appellate Commissioner route, not to this extent at least. If a favourable order is obtained by the taxpayer before the appellate commissioner, major litigation can be reduced at the tribunal level because the Revenue would not be able to appeal in many cases wherein the tax effect is less than INR 50 lacs, as per the existing CBDT Circular. On the other hand, under the DRP route, with higher number of unfavourable DRP directions, taxpayers’ appeals are bound to travel to the tribunal where the average pendency period is much higher than at the Appellate Commissioner level.

Launched as a speedier remedy, DRP has instead become merely an extension of assessment proceedings. The only apparent benefit to a taxpayer is that it reaches the Tribunal stage faster than earlier, but that benefit is insignificant because the time advantage, when compared to the time taken in disposal of appeals before Appellate Commissioners, is very minimal.

Hasty approach in introducing new taxes creates uncertainty, attracts litigation and hinders investment

Further relevant to highlight is the hasty approach of the Government in introducing the Equalisation Levy for taxing the digital economy. It is not denied that the digital economy in-effect is failing the existing nexus/ business connection rules in the domestic income tax law and the permanent establishment (‘PE’) rules in the bilateral tax treaties thereby avoiding imposition of tax on income in the source countries. The need to tax the digital economy is legitimate. However, taking unilateral tax positions on the untapped income and denying existing treaty benefits will adversely affect the digital economy.

OECD/G-20 countries had recommended in their report that measures like ‘Equalisation Levy’ may be introduced in domestic laws but subject to existing tax treaty obligations. The levy is clearly a short-term measure to compensate for the Government’s inability to impose tax on the digital economy as per the existing income tax provisions. But keeping the levy outside the purview of the Income Tax Act amounts to an indirect violation of the existing tax treaty obligations. Following are some of the conceivable adverse consequences on the digital economy which has the potential to attract huge litigation as well as investment attrition in the sector:

  1. Denial of treaty benefits to the foreign taxpayers which will lead to double taxation on the same income in India as well as their resident country
  2. Seeks to tax even extra-territorial transactions wherein both the e-commerce operator and the user of the services could be non-residents but the user either subscribes to the services or procures the services even once using an Indian IP address;
  3. Absence of clarity on the computation the tax base for the levy;

In addition to the above, the widened scope of the levy has been introduced during the Covid-19 Pandemic when the businesses are already bleeding. It was practically impossible for the taxpayers to even comply with certain preliminary requirements of obtaining a PAN and an Indian Bank Account due to the restricted functioning of the Embassies and the Government Departments. Despite this situation and the constant requests from the Industry for extension, the date for deposit of first instalment of the levy, i.e., July 7 was not extended by the Government. The taxpayers are bound to be noncompliant and knock the doors of the Courts to avoid any adverse implications due to delay.

Concluding Remarks

 A cumulative impact of the above issues, inter alia, on the businesses is to take a direct hit at the decision to continue such business operations in India. While India has one of the largest pool of readily available and cheap resources for facilitating business activities, there is no real sense of ease of doing business in India, as compared to several other jurisdictions including Singapore, which has a stateof-the-art infrastructure coupled with transparent regulations, rule-following and market-based economy. The mention of Singapore is very relevant today because India is consistently losing out to Singapore on major investments. Majority multinationals today prefer Singapore for setting up their holding companies. Even Indian Start-ups are setting up their headquarters in Singapore.

If we compare the direct tax regime, the highest corporate tax rate goes up to 30% in India which reaches merely 17% in Singapore. The tax on capital gains and dividend income is Nil in Singapore. This itself makes Singapore the most conducive tax jurisdiction for setting up holding companies and owning IP and other intangibles.

If we compare the indirect tax regime, while India has chosen to implement a varied rate of taxation coupled with an online compliance system, with tax rates going as high as 28%, Singapore chose to implement a similar online compliance system with a unified taxing regime fixed at 7%.

While cost of compliance and tax rates are important factors for making Singapore a tax efficient jurisdiction, even in terms of political and economic stabilities, rule of law, global integration, Singapore stands well above India.

Therefore, a major overhaul is required in the Government’s approach to achieve the position of a conducive tax jurisdiction and a preferred investment destination for multinationals. Hon’ble CJI Shri S.A. Bobde, at the 79th foundation day celebrations of Income Tax Appellate Tribunal, while referring to the ancient tax laws in India, said the following which is relevant to this issue: “Tax should be collected from people like honey bee draws nectar from flowers without harming it”. This line says a lot about the role of the Government and the tax administration and the approach it should adopt of ensuring facilitation of conducive environment for business and not destruction of the same.

 Kamal Sawhney is a Partner at PDS Legal. He is an Arguing Counsel before the Supreme Court of India and High Courts.

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Legally Speaking

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.

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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.

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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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Gujarat HC Quashes Reinstatement Order: Industrial Dispute Act| Person Working In The Capacity Of ‘Consultant’ Cannot Be Deemed ‘Workman’



The Gujarat High Court In the case Santram Spinners Limited v/s Babubhai Magandas Patel observed and has struck down the order of the Labour Court which had held that the Respondent-workman was entitled to reinstatement along with 20% back wages in the Petitioner-institute. Thus, the High Court, after perusing, Form No. 16A which pertains to Tax Deducted at Source, concluded that the Respondent was being paid consultant fees and not a salary and the same had been ignored by the Labour Court.

The bench comprising of Justice Sandeep Bhatt noted that the Respondent had raised an industrial dispute, inter alia, claiming that he was working in the company of the Petitioner as a Technical Maintenance In-Charge while the respondent earning a salary of INR 9,000 per month. Thereafter, it was alleged by him that he was terminated orally in 1997. Consequently, the Labour Court ruled in his favour and ordered reinstatement and back wages.

It was submitted by the petitioner that the Respondent did not fall within the definition of the term ‘workman’ in Sec 2(s) since he was employed as a Maintenance Consultant, receiving consultant fees and not a salary and the respondent had failed to produce any documentary evidence such as TDS statement, appointment letter, bills to bolster his contention.

Further, it was also averred by the petitioner that the relevant documentary evidence was absent. It was stated that Form 16A was produced to show that if the Respondent was a consultant, then there was no need to deduct TDS. It was observed that the Form No. 26K was disagreed by the Labour Court, which was produced by the Company to show that the tax was deducted from fees for technical or professional services.

The bench comprising of Justice Bhatt firstly observed that the Respondent had admitted that he had no evidence with him to prove that he was working as a ‘workman’ in the Company of the Petitioner that his salary was fixed at INR 9,000 per month. It was stated by the Manager of the Company that the Respondent was rendering services as a consultant raising his Vouchers/bills regularly and being paid through cheque. As per the Bench, there was ‘ample evidence’ to prove that that the Respondent was employed as a technical consultant.

Justice Bhatt stated that it is pertinent to note that the learned Labour Court has committed gross error in holding that those documents are complicated and thus, the learned Labour Court has also erred in giving findings that since TDS is deducted by the petitioner company and therefore, the respondent is workman, who is serving in the petitioner institute and in my opinion, this finding of the learned Labour Court is against the settled proposition of law and is highly erroneous.

Therefore, the High Court affirmed that there was no evidence that the Respondent had been working for more than 240 days during the year preceding termination.

Accordingly, the High Court struck down the award of the Labour Court.

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The Gujarat High Court in the case Gujarat Insecticides Ltd. & 1 other(s) v/s Presiding Officer & 2 others observed and has reiterated that a person working in “supervisory” capacity cannot raise an industrial dispute under the Industrial Disputes Act, 1947.

The bench comprising of Justice AY Kogje observed and further made it clear that while deciding whether such person is a workman or not, the Labour Court ought to carefully consider the evidence placed on record and there is no exhaustive list of work to differentiate between the management employee and the Workman.

In the present case, the Petitioner Company averred that the Respondent was working in the non-workman category and engaged in the ‘supervisory category’ and was drawing salary of more than INR 1600. Therefore, the dispute was not an industrial dispute within Section 2(s) of the Act, 1947.

It was insisted by the Respondent that he had worked with the company as a Maintenance Engineer and the duties assigned to him were of the nature of a workman’s duties as per the ID Act. The respondent was wrongly terminated by way of termination and without any procedure established by law and as such, was entitled back wages.

It was observed that the high court took into consideration the Respondent’s appointment letter and witness depositions regarding the nature of work performed by him to conclude that the Respondent in Grade-9 was indeed discharging duty of Maintenance Engineer. It was also specified by the depositions that the hierarchical grading in the petitioner-company as per which, the employees above Grade-7 were of the Management Cadre.

The High Court observed that the Labour Court has completely disregarded this evidence, which according to this Court is most relevant for the purpose of deciding the status of workman and the Labour Court has proceeded that the petitioner-company ought to have produced evidence in the nature of whether the respondent-workman has sanctioned any leave, sanctioned any overtime or prepared any gate passes for employees to go home or has made any ordered or Appointment dismissal. Thus, when the Labour Court, instead of referring to this evidence already on record to establish the nature of work of the respondent and has decided to chase the evidence which is not on record and then on the basis that such evidence not being on record, it was concluded that in the definition of workman, the workman will be covered, this is where, in the opinion of the Court, perversity has crept in.

Accordingly, the bench quashed the impugned order. Therefore, seeing the passage of time, it was held by the High Court that the allowances paid u/s 17B of the Act should not be recovered by the Petitioner company.

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Legally Speaking




The Court while dealing with a case related to 2020 Delhi riots, a city Court has called for sensitisation of investigating officers (IOs) on making the photos obtained from digital sources as admissible in evidence by filing a certificate under section 65B of Indian Evidence Act, 1872.

The bench comprising of Additional Sessions Judge Pulastya Pramachala observed and thus ordered that whenever, photographs are filed from digital sources it is needless to say that a certificate under Section 65-B of I.E. Act, is must to make those photographs admissible for the purpose of evidence. However, all the IOs are required to be sensitized this respect as well and it is high time to control the casual and callous approach of any IO.

It was also observed that court expressed displeasure over “casually prepared site plans” by stating that preparation of the same were not even expected in cases triable by the Metropolitan Magistrates.

Adding to it, the Judge stated that unfortunately this kind of site plan has been filed in such a serious case involving session triable case. Moreover, from the documents filed on the record, the court find that certain photographs have been placed, but without any certificate under Section 65-B of Indian Evidence Act.

In the present case, the court was dealing with an FIR registered on the complaint of one Salim Khan wherein it was stated by him that his spare parts and barber shop shop was looted and was put on fire during riots.

It was admitted by one of the accused Dharmender that his involvement in the matter and he, with other co-accused was seen carrying the carton of Rooh Afzah from the warehouse of a complainant in another FIR.

The Court stated that a serious re-look over the quality of evidence/documents place on the record in the case, is required by senior officer with all serious attention.

Further, the court added that in this case the ld. DCP (North East) is requested to go through the records and to submit his report, if the prosecution is to be carried on, on the basis of other materials and same site plan as placed on the record.

As in future, the Special Public Prosecutor undertook to be much careful.

Accordingly, the Court listed the matter for further hearing on August 17.

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