Even Pricewaterhouse Coopers Ltd, with worldwide reputation, can make a ‘silly’ computing error in filing income tax returns, and it got relief only from the Supreme Court last week after eight years of litigation. In its statement, the firm claimed a deduction towards payment of gratuity for some of its employees. Though it was accepted by the assessing officer, after a few years, the error was discovered and the assessment was reopened. The firm immediately filed a revised return and paid the tax due. However, the authorities initiated penalty proceedings demanding penalty at the rate of 300 per cent. The tribunal and its appellate body rejected the pleas of the firm, stating the high-calibre organisation was not expected to make a ‘silly’ mistake. On appeal, the Calcutta high court maintained that the concealment of income need not be wilful as in a criminal prosecution, as this was a civil matter. Allowing the appeal, the Supreme Court stated that the “expertise of the firm has little or nothing to do with the inadvertent error”. It was a bona fide human error, “which we are all prone to make”, and the imposition of penalty was not justified, the judgment observed.
Interest on delayed payment
The Supreme Court held last week that when an arbitration contract clearly bars payment of interest in a situation of non-payment or delayed payment, the arbitrator cannot award interest for the period of arbitration. However, the arbitrator or the court can grant interest from the date of award till the date of payment. The court stated so while modifying the order of the Uttarakhand high court in the dispute between Tehri Hydro Development Corporation and Jai Prakash Associates. In this case, there was a clear term in the agreement for building certain works in the hydro project that the contractor would not claim interest for delay in payment, either interim or final or on any amount lying in deposit by way of guarantee. However, the arbitrator granted interest. This part of the award was set aside in this appeal.
Protection of depositor’s interest
The Pondicherry Protection of Interests of Depositors in Financial Establishments Act, 2004 is similar to the Acts in Tamil Nadu and Maharashtra and since the latter two have been held to be valid in earlier judgments of the Supreme Court, the Pondicherry legislation is also valid. The court declared this while dismissing the appeal of New Horizon Sugar Mills which had availed of credit facilities from Indian Bank. The mills defaulted, starting a series of litigation involving several parties. The court rejected the challenge to the validity of the Pondicherry Act and observed that it was meant to protect the interests of depositors who stand to lose their investments on account of the diversion of the funds collected by PNL Nidhi Ltd for the benefit of the sugar mill, which is owned by two persons who are directors of PNL Nidhi. The court noted that the latter company had changed its name five times and added that this is a case “where funds have been collected from the gullible public to invest in projects other than those indicated by the front company.”
Ex parte consumer court order quashed
The Supreme Court last week set aside the ruling of the National Consumer Commission in a dispute between Kanpur Development Authority and a successful bidder of a plot because the order against it was passed without hearing him. He had moved the UP Consumer Commission alleging deficiency in service and it had issued notice to the authority, but the notice was not served on it. The commission, however, passed an ex parte order against the authority. It appealed to the national commission without success. But the Supreme Court found that no notice was served and therefore asked the national commission to find out whether the notice was properly served.
Copyright violator to pay penalty
The Delhi high court last week imposed punitive damages of Rs 5 lakh on an event manager of Bangalore and restrained it from organizing any event involving live performance in respect of lyrics, musical score the copyright which are held by the Indian Performing Right Society. The society consists of authors, composers and publishers of various literary and musical works and claims to be administering public performance/ communication to public rights in terms of the Copyright Act. It was alleged that Ad Venture Communication India played musical works of Indian and foreign artistes without its permission. Justifying the current trend of imposing punitive damages, the court said: “A soft view while awarding damages would be wholly misplaced and uncalled for. If the damages awarded against such persons are token in nature and do not pinch the infringer that would only encourage the infringer to repeat such acts in future at the cost of some other copyright holder.”
