Bharat Battery plea upheld

LEGAL DIGEST

The Supreme Court last week ruled that once a disputing party invoked Section 11 (6) of the Arbitration and Conciliation Act and moved the court for appointment of an arbitrator, the opposite party could not invoke the terms of the contract and appoint its own arbitrator.

In this case, the central government and Bharat Battery Manufacturing Co Ltd had differences over price variation in the contract. Despite the company's notices, the government did not appoint an arbitrator. So the firm moved the Delhi High Court.

The government then appointed an officer of the law ministry as its sole arbitrator, purportedly following the provisions of the contract. The high court later appointed a retired judge as an arbitrator. This was challenged by the government as violation of the contract.

The Supreme Court dismissed the government's appeal observing that "once a petition is filed by one party seeking appointment of an arbitrator, the other party cannot resurrect a clause of the agreement dealing with the appointment of the arbitrator."

Dispute sent to arbitration

A three-judge bench of the Supreme Court has sent the dispute between Asian Thermal Insulation Ltd and Bridge & Roof Co Ltd to arbitration. Asian Thermal was dissatisfied with the judgment of the high court and therefore moved the apex court.

After long arguments, the two parties agreed to nominate their respective arbitrators. The chief justice of the high court will nominate a retired high court judge as the presiding arbitrator.

Verdict on Hindustan Coca Cola set aside

The Supreme Court last week set aside the judgment of the Delhi High Court and held that Hindustan Coca Cola Beverage Pvt Ltd had not defaulted in deducting tax at source in respect of warehousing charges paid to Pradeep Oil Corporation.

The soft drink major had entered into an agreement with Pradeep Oil for use of premises for storage purposes and had paid warehousing charges after deducting tax at source at the rate of 2 per cent.

However, tax authorities maintained that it should have deducted tax at 20 per cent as against 2 per cent under Section 194C. This was because warehousing charges were in the nature of rent as defined in explanation to Section 194-I of the Act.

This view was upheld by the high court. The Supreme Court noted that Pradeep Oil had since paid the tax due and even otherwise, a CBDT circular of 1997 had absolved the firm from tax liability.

Cos to pay TDS on loans taken

The Supreme Court last week ruled that a company was obliged to deduct tax at source on interest paid by it for loans availed of by it and repaid by it with interest for the benefit of the directors of the company.

The income tax appellate tribunal had held that there was no such obligation on the company in the case involving Century Building Industries Ltd. In a batch of appeals moved by the Commissioner of Income Tax against such rulings, the Supreme Court decided in favour of the revenue department, setting aside the tribunal's ruling.

Staff can revoke VRS before acceptance

The Supreme Court last week ruled that an employee who applies for voluntary retirement scheme can revoke it before the management accepts it. In this case, Food Corporation of India vs Ramesh Kumar, the employee applied for VRS on September 13.

He withdrew his offer on Sept 27. Despite his withdrawal, his offer was accepted on November 9. He challenged his retirement in the Punjab and Haryana High Court. It quashed the order of the corporation. The latter moved the apex court, which upheld the high court view.

Madras HC decision set aside

The Supreme Court has rejected the claim of certain textile mills for income tax deduction on account of "modernisation and replacement expenses".

Setting aside the Madras High Court judgment in the case of Saravana Spinning Mills and others, the apex court stated that replacement of the parts in those cases constituted substitution of an old asset by a new asset and therefore the expenditure incurred on it did not constitute "current repairs" eligible for tax exemption.