The Supreme Court has ruled deduction on account of payment of bonus to the employees of a company is allowable while computing the business income. Though this position is clear in Section 36 of the Income Tax Act, another section mandates that certain deductions would be allowed only on "actual payment". In this case, Shasun Chemicals and Drugs versus CIT, there was labour unrest during the assessment years over bonus and the employees did not accept it for some time. Therefore, the company made the payment to the trust to comply with the requirement of Section 43B, which makes it clear that deduction in respect of bonus would be allowed only on actual payment. The assessing officer took the view that as the payment was not made by the company to the employees directly in cash, it was not allowable. This became a point of dispute and the Income Tax Appellate Tribunal ruled in favour of the company. However, the Madras High Court found justification in the stand taken by the assessing officer. The Supreme Court quashed the high court judgment.
Payment adequate for Reliance pipeline
The Supreme Court has rejected the plea of Surat farmers whose land was used for laying pipelines for Reliance Gas Transportation, invoking the Petroleum and Minerals Pipelines Acquisition Act. The court stated in the judgment, Laljibhai vs State of Gujarat, that the compensation was adequate as the whole right to property was not taken over, but only the right to lay underground pipeline. The court also rejected the argument that the land was used for non-agricultural purpose by a private corporation. The judgment explained that Reliance was conducting an "activity of highest national importance" and in these days of private-public cooperation, the expression "corporation" should be given a wider meaning to include private sector. The court found fault with the Act on two counts: It does not specify the time within which compensation must be paid, and no judicial experience is prescribed for the competent authority.
Demolition order of Goa joint upheld
Secret ballot in union rivalry
Verification of membership of trade unions in Maharashtra is not required to be done by secret ballot, the Supreme Court stated in the judgment, Moil Mazdoor Sangh vs Moil Kamgar Sanghatan, dealing with claims by rival unions against a ruling of the Bombay High Court. The high court had held that verification by secret ballot would be derogatory to the code of discipline. The Supreme Court ruled that the procedure laid down in the state Recognition of TUs Act must be followed. However, the court clarified that in other states, the question of secret ballot will follow the laws prevailing there.
Judicial review of coal mine bids
In tenders involving highly complex technical subjects requiring understanding of the nature and purpose of the work, the courts should follow the principle of restraint. Stating that, the Supreme Court last week dismissed the appeal of Montecarlo against the rejection of its bid by NTPC for development of three coal mines in Odisha. NTPC found that Montecarlo did not have the experience of drilling for blasting purpose. The court stated that when there is arbitrariness or malafide in the allotment of public largesse, judicial intervention would be called for, but not in a commercial transaction like this.
Tender for cycles for school girls
The Rajasthan High Court followed the same approach while dismissing the challenge to the tender floated by the Directorate of Secondary Education for providing 300,000 bicycles to school girls to promote their education. The earlier tender process was cancelled and according to the new financial criteria the bidder must have Rs 200 crore sales turnover in each of the past three years. This was opposed in the case Seth Industrial Corporation vs State of Rajasthan. It was argued that the new stringent condition violated the provisions of the Rajasthan Transparency in Public Procurement Act, which emphasised that the seven procuring entity shall have the responsibility and accountability to provide fair and equitable treatment to bidders. The new rule narrowed down the number of competitors. The high court rejected the argument and reiterated the principle that the terms of invitation to tender could not be open to judicial scrutiny because the invitation to tender is in realm of contract. The award of a contract is essentially a commercial transaction which must be determined on the basis of considerations that are relevant to it.
Sanction to prosecute official
The Supreme Court ruled last week that in a case of corruption by a public servant, even if different authorities held different views, it is no reason to deny sanction for prosecution under the Prevention of Corruption Act. In this case, Vivek Batra vs Union of India, an Indian Revenue Service officer was found by CBI to have disproportionate assets and indulged in benami dealings. When the case was referred to the authorities for sanction to prosecute him, there was difference of opinion between the Finance Ministry and the Central Vigilance Commission (CVC) in the administrative notings. He argued that even the Department of Personnel had opined that a warning to him would be sufficient. It was further submitted that the earlier Finance Minister had referred the matter back to the CVC, which recommended sanction. Grant of the successor Finance Minister could not be said to be valid, it was argued. Rejecting the contentions, the court ruled that the Finance Minister was the sanctioning authority and his decision to grant sanction at the instance of CVC was valid.
Payment adequate for Reliance pipeline
The Supreme Court has rejected the plea of Surat farmers whose land was used for laying pipelines for Reliance Gas Transportation, invoking the Petroleum and Minerals Pipelines Acquisition Act. The court stated in the judgment, Laljibhai vs State of Gujarat, that the compensation was adequate as the whole right to property was not taken over, but only the right to lay underground pipeline. The court also rejected the argument that the land was used for non-agricultural purpose by a private corporation. The judgment explained that Reliance was conducting an "activity of highest national importance" and in these days of private-public cooperation, the expression "corporation" should be given a wider meaning to include private sector. The court found fault with the Act on two counts: It does not specify the time within which compensation must be paid, and no judicial experience is prescribed for the competent authority.
Demolition order of Goa joint upheld
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The Supreme Court has upheld the order of the National Green Tribunal which had ordered the demolition of a restaurant, bar and pub in Goa. It had violated the coastal regulation zone restrictions. It started as a garage but expanded into a larger establishment. The tribunal asked the collector to demolish the complex and imposed Rs 20 lakh as cost in the case, Anil Hoble vs Kashinath. The owner appealed to the Supreme Court arguing that he had been granted permission by the authorities for the expansion. The court rejected the contention and asserted that any permission granted by the state or municipal authorities violating the rules and judicial pronouncement would be of no avail.
Secret ballot in union rivalry
Verification of membership of trade unions in Maharashtra is not required to be done by secret ballot, the Supreme Court stated in the judgment, Moil Mazdoor Sangh vs Moil Kamgar Sanghatan, dealing with claims by rival unions against a ruling of the Bombay High Court. The high court had held that verification by secret ballot would be derogatory to the code of discipline. The Supreme Court ruled that the procedure laid down in the state Recognition of TUs Act must be followed. However, the court clarified that in other states, the question of secret ballot will follow the laws prevailing there.
Judicial review of coal mine bids
In tenders involving highly complex technical subjects requiring understanding of the nature and purpose of the work, the courts should follow the principle of restraint. Stating that, the Supreme Court last week dismissed the appeal of Montecarlo against the rejection of its bid by NTPC for development of three coal mines in Odisha. NTPC found that Montecarlo did not have the experience of drilling for blasting purpose. The court stated that when there is arbitrariness or malafide in the allotment of public largesse, judicial intervention would be called for, but not in a commercial transaction like this.
Tender for cycles for school girls
The Rajasthan High Court followed the same approach while dismissing the challenge to the tender floated by the Directorate of Secondary Education for providing 300,000 bicycles to school girls to promote their education. The earlier tender process was cancelled and according to the new financial criteria the bidder must have Rs 200 crore sales turnover in each of the past three years. This was opposed in the case Seth Industrial Corporation vs State of Rajasthan. It was argued that the new stringent condition violated the provisions of the Rajasthan Transparency in Public Procurement Act, which emphasised that the seven procuring entity shall have the responsibility and accountability to provide fair and equitable treatment to bidders. The new rule narrowed down the number of competitors. The high court rejected the argument and reiterated the principle that the terms of invitation to tender could not be open to judicial scrutiny because the invitation to tender is in realm of contract. The award of a contract is essentially a commercial transaction which must be determined on the basis of considerations that are relevant to it.
Sanction to prosecute official
The Supreme Court ruled last week that in a case of corruption by a public servant, even if different authorities held different views, it is no reason to deny sanction for prosecution under the Prevention of Corruption Act. In this case, Vivek Batra vs Union of India, an Indian Revenue Service officer was found by CBI to have disproportionate assets and indulged in benami dealings. When the case was referred to the authorities for sanction to prosecute him, there was difference of opinion between the Finance Ministry and the Central Vigilance Commission (CVC) in the administrative notings. He argued that even the Department of Personnel had opined that a warning to him would be sufficient. It was further submitted that the earlier Finance Minister had referred the matter back to the CVC, which recommended sanction. Grant of the successor Finance Minister could not be said to be valid, it was argued. Rejecting the contentions, the court ruled that the Finance Minister was the sanctioning authority and his decision to grant sanction at the instance of CVC was valid.