R115
R115
R115
TH
5 NATIONAL
7 SEPTEMBER
THE 2ND KIIT UNIVERSITY
MOOT 2014
COURT COMPETITION, 2014
5TH 7TH SEPTEMBER 2014
BEFORE THE HONBLE HIGH COURT OF BOMBAY
The Writ Petition Filed Before The High Court Is Not Maintainable ................................ 1
A. Existence of an efficacious alternative remedy would bar the institution of the writ ........ 1
i. The petitioner did not exercise the prescribed course of action ...................................... 1
ii. Appeal under s.246, I-T Act is the adequate remedy ..................................................... 2
B. There is no infringement of fundamental rights ................................................................. 2
II. The Consideration Under The License Agreement Constitutes Royalty. .............................. 3
A. The transaction does not come under the purview of the Singapore-India DTAA............ 3
i. Zeon is not a resident of Singapore under Sec. 2 of the Singapore Income Tax Act,
1948..................................................................................................................................... 3
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15
OF
AND
PRACTICE
OF INCOME
2014)
LAW OF WRITS (6 ED. 2006)
2009)
ROBERT BOND, SOFTWARE CONTRACTS 65 (4th ed. 2010)
SIR KIM LEWISON, THE INTERPRETATION OF CONTRACTS 309 (5th ed. 2011)
FOREIGN CASES
Calcutta Jute Mills Co. Ltd. v. Nicholson, (1876) 1 TC 83
STATUTE
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INDIAN CASES
ACIT v. Banswara Syntex, 272 ITR 642
14
14
14
10
Baywest Power and Energy P Ltd v. ACIT, (2009) 296 ITR 532 (Mad)
15
10
10
14
11
Canara Sales Corpn Ltd v. CIT, (1989) 176 ITR 340 (Kar).
11
Chandra Lakshmi Tempered Glass Co Pvt Ltd v. ACIT (1997) 225 ITR 199 (HP)
14
14
13
12
10
13
CIT v. McLeod & Co. Ltd., (1982) 134 ITR 674 (Cal)
14
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12
15
CIT v. Peirce Leslie & Co. Ltd., (1997) 227 ITR 759 (Mad)
14
12
15
12
CIT v. Samsung Electronics Co. Ltd., (2011) 345 ITR 494 (Kar)
12
11
Express Hotels (P) Ltd v. State of Gujrat, (1989) AIR 1949 (SC)
Federation of Hotel and Restaurant v. Union of India, (1990) AIR 1637 (SC)
Fisher Xomox Sanmar Ltd v. ACIT, (2007) 294 ITR 620 (Mad)
14
GKN Driveshafts (India) Ltd. v. Income Tax Officer and Ors., 259 ITR 19 (SC)
13
15
10
Hindustan Aluminum Corporation Ltd v. ITO, (2002) 254 ITR 370 (Cal)
14
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11
14
Institute of Chartered Financial Analysts of India v ACIT, (2002) 256 ITR 115
(AP)
ITO v Lakhmani Mewal Das (1976) 103 ITR 437 (SC)
10
10
12
15
13
10
J. K. Jute Mills Company Limited v. State of Uttar Pradesh and Anr., (1962)
14
Jagneswar Day and Bibah Ranjan Day v. ITO ,(1998) 233 ITR 416 (Gau)
Kapur Sons Steels Pvt Ltd v. ACIT, (2004) 266 ITR 478 (P&H)
14
15
10
14
Lucent Technologies Hindustan Ltd. v. The Income Tax Officer, (2005) 92 ITD
366 (Bang)
M/s. Brown & Sharp INC v. DCIT, (2014) 160 TTJ (Delhi)
14
Mewar Textile Mills ltd v. Union of India, AIR (1955) Raj 114
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12
14
12
11
11
Parashuram Pottery Works Co. Ltd. v. ITO, (1977) 106 ITR 1 (SC)
11, 14
14
14
14
Radha Rani Holdings (P) Ltd. v. Additional Director of Income Tax, (2007) 16
14
14
14
14
14
14
Sable Waghire Trust v. Achyuta Rao, (1999) 240 ITR 688 (Bom)
SAK Industries Pvt Ltd v. Deputy Commissioner of Income Tax New Delhi,
(2012) 210TAXMAN85(Delhi)
Sales Tax Officer v. Uttareswari Rice Mills, (1973) 89 ITR 6 (SC)
13
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12
Shahdara Saharanpur Light Railway Co Ltd v. CIT, (1994) 208 ITR 882 (Cal)
11
Sir Bansilal and Co. v Prabhu Dayal, ITO (1990) 185 ITR 287 (Bom)
Sterlite Industries Ltd. v. ACIT, 305 ITR 339; Mangilal v. ITO, 325 ITR 507
UAE Exchange Centre v. Union of India, (2009) 223 CTR (Del) 250
Union of India v. Azadi Bachao Andolan, (2003) 263 ITR 706 (SC)
3, 4
14
14
CBDT CIRCULAR
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13
The manufacturing company filed income tax return without delays, and for AY 03-04
and 04-05, assessment order was passed under S. 143(3) of the Income Tax Act, 1961 (ITA or
Act) . For AY 2005-06, the assessment was completed under S. 143(1) and for AYs 2006-07,
07-08, 08-09, it was completed under S. 143(3) of the ITA. The assessing officer had accepted
the returns and the transaction with Zeon in the above AYs. On July 4, 2014, the assessing
officer sent a notice to Cheetah & Chetak Private Limited under S. 148 and disallowed the
deduction claimed for payments made for these AYs and sort to recover INR 50 lacs from the
assesse. The reason cited was that payments made by the manufacturer constituted royalty
under S. 9 of the Act, and tax should have been withheld at rate of 25% for all these years while
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THE WRIT PETITION FILED BEFORE THE HIGH COURT IS NOT MAINTAINABLE
It is submitted that the writ filed in the High Court is not maintainable as there existed an
efficacious alternative remedy [A]. Further, the writ is not maintainable on account of non
contravention of any fundamental right. [B]
A. Existence of an efficacious alternative remedy would bar the institution of the writ
(2.)
alternative remedy2 in a statute. Further, the writ remedy cannot be used as an alternative
remedy3 or as means to adjudge any factual inconsistencies4 as done in appellate courts5. In the
case of Madhya Pradesh v. ITO6 the Supreme Court has held that, when there existed an
adequate alternative remedy, then the writ petition would be dismissed by the court in limine.
The petitioners, in the case at hand, had did not exercise the proper course of action [i] provided
by the alternative remedies [ii] before filing the writ petition.
i. The petitioner did not exercise the prescribed course of action
(3.)
In the case of GKN Driveshafts (India) Ltd.7, the Supreme Court laid down the proper
course of action to be taken by the assessee upon being served a notice under S.148 of the
Income Tax Act, 1961 (hereinafter I-T Act). The Supreme Court laid down that the assessee is
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in appeal and revision as provided in the I-T Act9With respect to notice issued under S. 148, the
Court will not address the question of limitation, as it can be raised only before the necessary tax
authorities.10 Further, the High Court cannot adjudge the sufficiency of the reasons at the stage of
the notice11 and any writ to this regard is dismissed. The petitioners filed the writ on receipt of
the notice under S. 148, without exercising the remedy available in the governing statute.
Therefore, it is submitted that on the existing of an alternate remedy12 the validity of a notice
under S.148 cannot be challenged by way of a writ petition and it should be dismissed.
B. There is no infringement of fundamental rights
(5.)
fundamental right and therefore it is submitted that the writ petition to this regard cannot be
maintainable.
(6.)
It is humbly submitted by the Respondents that the writ filed by the petitioner is not
maintainable due to the existence of an adequate alternative remedy and there is no violation of
any fundamental right in the enactment of the legislation introduced by way of amendment.
KANGA & PALKHIVALAS, THE LAW AND PRACTICE OF INCOME TAX 1125 (10 ed. 2014).
Income Tax Act, 1961 S. 246; Harbhajan Singh v. Bansal, ITO (1999) 235 ITR 431; Jagneswar Day and Bibah
Ranjan Day v. ITO ,(1998) 233 ITR 416 (Gau); Kapur Sons Steels Pvt Ltd v. ACIT, (2004) 266 ITR 478 (P&H).
10
Chandra Lakshmi Tempered Glass Co Pvt Ltd v. ACIT (1997) 225 ITR 199 (HP); Chandi Ram v. ITO (1997) 225
ITR 611 (Raj).
11
Trivandrum Club v. ADIT (Exemption), (2002) 256 ITR 61 (Ker); Hindustan Aluminum Corporation Ltd v. ITO,
(2002) 254 ITR 370 (Cal).
12
Fisher Xomox Sanmar Ltd v. ACIT, (2007) 294 ITR 620 (Mad); Ajanta Pharma Ltd v. ACIT, (2007) 295 ITR 218
(Bom); Baywest Power and Energy P Ltd v. ACIT, (2009) 296 ITR 532 (Mad).
9
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It is humbly submitted that the consideration for the license agreement constitutes royalty
under Sec. 9(1)(vi) because the parties to the agreement are not governed by the DTAA between
Singapore and India (hereinafter DTAA S-I) [A]. Additionally, the consideration is royalty
under Sec. 9(1)(vi) of the I-T Act [B].
A. The parties do not come under the purview of the Singapore-India DTAA
(8.)
It is settled law that where India has entered into a treaty for avoidance of double taxation
as also in respect of purposes referred to in Section 90 of the I-T Act, the contracting parties are
governed by the provisions of the treaty.13 The DTAA S-I applies only to the residents of the
contracting state.14 It is submitted that the transaction does not come under the purview of the
DTAA S-I as Zeon is not a resident of Singapore under Sec. 2 of the Singapore Income Tax Act,
1948 [i]. Moreover, the lack of a Tax Residency Certificate (hereinafter TRC) has necessary
significance on the determination of its residence [ii].
i. Zeon is not a resident of Singapore under Sec. 2 of the Singapore Income Tax Act, 1948.
(9.)
Under Sec. 2 of the Singapore Income Tax Act, 1948 of Singapore, a company is a
resident as when the control and management of whose business is exercised in Singapore15.
Control and management is not the same as carrying out business operations of a company. 16
Control and management does not refer to the control and management of the day to day affairs
of the business conducted through agents, employees or servants.17 It refers to the head and
brain which directs all the financial, management and general affairs of the company. 18 The
13
Union of India v. Azadi Bachao Andolan, (2003) 263 ITR 706 (SC).
Article 1, DTAA S-I.
15
Section 2(Resident)(b), Income Tax Act, (1948). (Singapore).
16
LAW OF INCOME TAX, SAMPATH IYER, 1384 (11th Ed. 2011); K.R. SAMPATH, ARTICLEWISE ANALYSIS OF INDIAS
DOUBLE TAXATION AVOIDANCE AGREEMENTS 245 (1D ed. 2013).
17
Narottam and Pereira Ltd v. CIT, (1953) 23 ITR 454 (Bom).
18
De Beers Consolidated Mines Ltd v. Howe, (1906) 5 TC 198 (HL).
14
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19
Narottam and Pereira Ltd v. CIT, (1953) 23 ITR 454 (Bom).; Cesena Co. Ltd. v. Nicholson, (1876) 1 TC 83;
Calcutta Jute Mills Co. Ltd. v. Nicholson, (1876) 1 TC 83; Imperial Continental Gas Association v. Henry
Nicholson, (1876) 1 TC 138; London Bank of Mexico v. Apthorpe, (1891) 3 TC 143; Sao Paulo Railway Co. Ltd. v.
Carter, (1896) 3 TC 198; Noble Ltd (BW) v. Mitchell, (1926) 11 TC 372.
20
Page 1, Moot Problem.
21
Hindustan Petroleum Corporation Ltd. v. Assistant Director of Income Tax, (2010) 36 SOT 120 (Mum).
22
Union of India v. Azadi Bachao Andolan, (2003) 263 ITR 706 (SC).
23
Additional Director of Income Tax v. R. Liners Ltd., (2014) 61 SOT 3 (Mum); Radha Rani Holdings (P) Ltd. v.
Additional Director of Income Tax, (2007) 16 SOT 495 (Delhi); UAE Exchange Centre v. Union of India, (2009)
223 CTR (Del) 250.
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CIT v. Samsung Electronics Co. Ltd., (2011) 345 ITR 494 (Kar); ROBERT BOND, SOFTWARE CONTRACTS 65 (4th
ed. 2010).
25
Page 2, Moot Problem. Clause 2(d) of the License Agreement.
26
RICHARD MORGAN, MORGAN & BURDEN ON COMPUTER CONTRACTS 79 (8th ed. 2009); SIR KIM LEWISON, THE
INTERPRETATION OF CONTRACTS 309 (5th ed. 2011).
27
Page 2, Moot Problem. Clause 2(h) of the License Agreement.
28
Page 2, Moot Problem, Clause 2(f)(i) of the Licese Agreement.
29
Samsung Electronics v. CIT, ITA 131/2010 (Del).
30
Page 1, Moot Problem.
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31
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with
the
legislatures
discretion
with
respect
to
enactment
of
taxing
40
statutes. Accordingly, if the general operation of the statute discharges the burden of taxation
with a reasonable degree of equality, the constitutional mandate is satisfied.41 It is therefore
submitted that explanation 4 of S. 9(1)(vi) of the I-T Act sufficiently establishes the conditions
for validity as per the constitutional principles.
d. Explanation 4 does not violate article 19(1)(g) of the Constitution of India
(23.) It is further submitted that the mere fact that the imposition of a tax leads to diminution of
profits of individuals does not amount to a violation of rights under Article 19(1)(g) of the
Constitution42.Additionally, a challenge of the validity of a tax statute on grounds of violation of
fundamental rights entail an extremely high burden of proof. In the facts of the case at hand, no
unreasonableness or arbitrariness in any manner whatsoever has been meted out as a
38
J. K. Jute Mills Company Limited v. State of Uttar Pradesh and Anr., (1962) IILLJ 580 All.
Mewar Textile Mills ltd v. Union of India, AIR (1955) Raj 114; AMIT DHANDHA, NS BINDRA'S INTERPRETATION
th
OF STATUTES 245 (11 ed. 2010).
40
Meenakshi v. State of Karnataka, (1983) AIR 1283 (SC).
41
Hoechst Pharmaceuticals Ltd. v. State of Bihar (1983) AIR 1019 (SC); State of Kerela v. Aravind Ramakant
Modawadakar, (1999) 7 SCC 400.
42
Express Hotels (P) Ltd v. State of Gujrat, (1989) AIR 1949 (SC); Federation of Hotel and Restaurant v. Union of
India, (1990) AIR 1637 (SC).
39
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43
Anglo French Textile Co. Ltd., (1953) 23 ITR 101 (SC); CIT v R.D. Aggarwal & Co., (1965) AIR 1526.
Explanation 2(c) to Sec. 9(1), I-T Act, 1961.
45
Pg. 1, Moot Problem.
46
Gutal Trading In re, 278 ITR 643 (AAR).
47
M/s. Brown & Sharp INC v. DCIT, (2014) 160 TTJ (Delhi).
44
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48
Nirmalkumar Ashok Kumar v Gopi, (1991) 187 ITR 329 (Bom); Sir Bansilal and Co. v Prabhu Dayal, ITO (1990)
185 ITR 287 (Bom).
49
ITO v Lakhmani Mewal Das (1976) 103 ITR 437 (SC); ITO v Mahadeo Lal Tulsyan (1978) 111 ITR 25 (Cal).
50
ITO v. Ramnarain Bhojnagarwalla, (1976) 103 ITR 797 (SC).
51
Birla VXL Ltd. v. ACIT, (1996) 217 ITR 1 (Guj).
52
Kumar Kamal Singh (Maharaj) v. CIT, (1959) 35 ITR 1 (SC); Bikram Kishore (Maharaja) v. Province of Assam,
(1949) 17 ITR 220 (Cal); Bansilal Abirchand Firm (RB) v. CIT, (1964) 53 ITR 536 (Bom); CIT v. Bansilal
Abirchand Firm (RB), (1968) 70 ITR 220 (Cal).
53
Income Tax Act, 1961, S.9(1)(vi).
54
Para 16, Arguments Advanced.
55
Explanation 4 to Income Tax Act, 1961, Sec. 9(1)(vi).
56
Hari Babu v. CIT, (1974) 96 ITR 118 (All).
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64
Calcutta Discount Co Ltd v. ITO, (1961) 41 ITR 191 (SC); Shahdara Saharanpur Light Railway Co Ltd v. CIT,
(1994) 208 ITR 882 (Cal).
65
Income Tax Act, 1961, S. 147.
66
Canara Sales Corpn Ltd v. CIT, (1989) 176 ITR 340 (Kar).
67
Mukhtiar Singh Sandhu v. ITO, (1986) 160 ITR 526 (P&H); CIT v. Balvantrai S Jain, (1969) 72 ITR 59 (Bom);
ITO v. Calcutta Chromotype Pvt Ltd, (1974) 97 ITR 55; Also see SAMPATH IYENGAR, LAW OF INCOME TAX 567 (12
ed. 2012).
68
Page 1, Moot Problem.
69
Para 18, Arguments Advanced.
70
Page 3, Moot Problem.
71
Proviso 2, S. 147, Income Tax Act, 1961.
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SAMPATH IYENGAR, LAW OF INCOME TAX (12 ed. 2012), page 10203; KANGA & PALKHIVALAS, THE LAW AND
PRACTICE OF INCOME TAX (10 ed. 2014) page 2203-04; Also see Narayan v. ITO, 35 ITR 388 (SC); CIT v. Pratap,
41 ITR 421 (SC); CIT v. Robert, 48 ITR 177 (SC).
73
CIT v. Thayaballi Mulla Jeevaji Kapasi, (1967) 66 ITR 147 (SC); CIT v. Mintu Kalita, (2002) 253 ITR 334
(Gau); Sasikumar (PN) v. CIT, (1988) 170 ITR 80 (Ker).
74
CIT v. Mahaliram Ramjidas, (1940) 8 ITR 442 (PC); Sales Tax Officer v. Uttareswari Rice Mills, (1973) 89 ITR
6 (SC).
75
PAGE 3, Moot Problem.
76
Chandra Lakshmi Tempered Glass Co Pvt Ltd v. ACIT, Supra note 10; Chandi Ram v. ITO, Supra note 9.
77
Income Tax Act, 1961, S. 246; Also see GKN Driveshafts (India) Ltd. v. Income Tax Officer and Ors., 259 ITR
19 (SC).
78
Sahib Ram Giri v. ITO, Supra note 4; Precot Mills Ltd. v. CIT 273 ITR 347; Dinesh Chand Jain v. Dy CIT, Supra
note 4.
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CIT v. McLeod & Co. Ltd., (1982) 134 ITR 674 (Cal).
Parshuram v. Trivedi 100, ITR 581; VK Const v. CIT, 215 ITR 26; Indian Herbs v. DCIT, 212 ITR 425.
91
Rajamma v. ITO, 152 ITR 657; Burmah Oil v. ITO, 165 ITR 264.
92
119 BMR ADVISORS, MANAGING TAX DISPUTES IN INDIA, (1st Ed. 2013).
93
CIT v. Ranoli Investment, 235 ITR 433; Bennett Coleman v Damle, 157 ITR 812.
94
Para 19, Arguments Advanced.
95
Krishnaswamy S. Pd v Union of India (2006) 281 ITR 305 (SC).
96
Gwalior Rayon v. CIT, 140 ITR 832; CIT v. Nestle India, 243 ITR 435; ITO v. Gujarat Narmada, 247 ITR 305.
90
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