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​Update from Managing Partner


1) Compensation would be recoverable from accused even if imprisonment for default has taken place: SC


 When compensation is ordered as payable for an offence committed under section 138 of Negotiable Instrument Act, and in default thereof, a jail sentence is prescribed and undergone, compensation is still recoverable


SUPREME COURT OF INDIA,  Kumaran  v.  State of Kerala


​Section 138 of the Negotiable Instruments Act, 1881, read with sections 357, 421 and 431 of the Code of Criminal Procedure, 1973 - Dishonour of cheque for insufficiency of funds, etc. - Whether when compensation is ordered as payable for an offence committed under section 138 of 1881 Act, and in default thereof, a jail sentence is prescribed and undergone, compensation is still recoverable - Held, yes


​2) Coal India Limited (CIL)  abused its dominant position by imposing discriminatory conditions in Fuel Supply Agreement


COMPETITION COMMISSION OF INDIA,  Madhya Pradesh Power Generating Co. Ltd.  v.  South Eastern Coalfields Ltd.


Section 4 of the Competition Act, 2002 - Prohibition of abuse of dominant position - Informations were filed by power utilities companies against SECL and CIL alleging contravention of section 4 in matter of supply of non-coking coal -


Whether CIL through its subsidiaries operated independently of market forces and enjoyed dominance in relevant market of sale of non-coking coal to thermal power producers and sponge iron manufacturers in India - Held, yes

Whether CIL did not evolve/draft/finalize clauses of FSAs through a mutual bilateral process and same were imposed upon buyers without seeking/considering their inputs in any effective manner - Held, yes


Whether since there was no mechanism for non-power sector for review of declared grade of coal, there was a contravention of provisions of section 4(2)(a)(i) on issue of grade review for non-thermal power buyers as terms were patently discriminatory in nature - Held, yes


Whether since OPs were acting in contravention of provisions of section 4(2)(a)(i) for imposing unfair/discriminatory conditions through FSAs and indulging in unfair/discriminatory conduct in matter of supply of non-coking coal, they were directed to cease and desist from indulging in said conduct - Held, yes


​3) Arms  Length Pricing (ALP) of guarantee commission to be measured at 0.27 per cent in case guarantee was given to bank on behalf Associate Enterprises (AE)


​IN THE ITAT HYDERABAD BENCH 'A',  Deputy Commissioner of Income-tax, Circle - 16(1), Hyderabad  v.  Lanco Infratech Ltd.



I.Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustment/Adjustment - Interest) -  Whether where assessee advanced loans to its AE situated in Singapore, rate of interest was to be determined on basis of rate prevailing in Singapore where loan had been consumed; and not to be determined on basis of rate prevailing in India - Held, yes - Whether therefore, there was no need for any adjustment on this account, as assessee had already received interest which was more than Singapore prime lending rate - Held, yes In favour of assessee

II.Section 92C, read with section 92B, of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments/Adjustments- Corporate guarantee)Assessee provided corporate guarantee to foreign banks in order to enable said banks to provide loans to its Associate Enterprises (AE) located in Singapore and Australia - It contended that corporate guarantee did not fall within scope of term 'international transaction' even after insertion of Explanation to section 92B by Finance Act, 2012 as it did not have any bearing on assessee's profits, income, losses or assets - TPO considering provision of corporate guarantee as an international transaction, applied CUP as most appropriate method and used SBI rates on loans - He applied arm's length guarantee fee at 2 per cent - Whether corporate guarantee provided by assessee would fall within scope of term 'international transaction' after insertion of Explanation to section 92B by Finance Act - Held, yes - Whether however, considering decision given in case of Asian Paints Ltd. v. Addl. CIT [2014] , TPO was to consider only 0.27 per cent as guarantee commission on amount involved - Held, yes - Whether assessee's contention that corporate guarantee fee was to be considered proportionately with period it availed, couldn't be accepted as guarantee fee was one-time fee paid at beginning and, therefore, on corporate guarantees provided during year, rate was to be applied - Held, yes, Partly in favour of assessee

III.Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments/Adjustments- Mobilization advances) -  Whether where assessee was not charging any interest from AEs and non-AEs for providing mobilization advances regarding an EPC contract and also not paying any interest on amounts received by it from main contractor, adjustment under TP provisions was not warranted - Held, yes, In favour of assessee




 RAJGOPAL

05 June   2017




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