Taxation Law - Income Tax Act - Transfer Pricing – Selection of Most Appropriate Method – RPM vs. TNMM – ITAT’s Decision Upheld – The Revenue challenged the ITAT’s finding that Resale Price Method (RPM) was the correct method for determining the arm’s length price (ALP) of the assessee's international transactions, arguing that Transactional Net Margin Method (TNMM) should have been applied – The assessee, a pure distributor of solar products, purchased goods from its Associate Enterprise (AE) and resold them without any value addition – The Court held that RPM is the preferred method for distribution activities where no significant value is added to the goods before resale – Held: ITAT correctly applied RPM, and the High Court found no substantial question of law requiring interference [Paras 12-14].

Transfer Pricing – Aggregation of Transactions – Purchase Price and Warranty Cost Claim are Unrelated – The Revenue argued that the warranty cost claim and reimbursement of expenses should be aggregated with the purchase of solar products, justifying the application of TNMM – The Court rejected this argument, holding that the warranty cost was reimbursed by the AE and was not an additional service provided by the assessee – Held: Transactions were not inextricably linked and should not be clubbed together for transfer pricing purposes [Paras 13-14].

Functional Profile – Distributor vs. Manufacturer – RPM Confirmed as the Appropriate Method – The assessee acted as a pure distributor and did not engage in manufacturing or value addition – The Court emphasized that RPM is the most suitable method for distributors who simply purchase and resell goods without modification – Citing Burberry India Pvt. Ltd. (2024) and Matrix Cellular (2018), the Court reiterated that TNMM is more appropriate for value-adding entities, not for distribution businesses – Held: ITAT correctly applied established jurisprudence in selecting RPM over TNMM [Paras 15-16].

Income Tax – No Substantial Question of Law – High Court Declines to Interfere with ITAT’s Findings – The Court held that the Revenue’s appeal did not raise a substantial question of law, as ITAT’s decision was based on settled legal principles and factual appreciation – Held: The ITAT's order was well-reasoned, and the High Court found no grounds to interfere under Section 260A of the Income Tax Act [Paras 19-20].

Decision: Appeal Dismissed – The High Court upheld the ITAT’s order and dismissed the Revenue’s appeal – ITAT correctly determined RPM as the most appropriate method for benchmarking the assessee’s international transactions – No costs awarded [Paras 19-20].
 

Public Interest Litigation – Locus Standi – Bona Fide of Petitioner in Question – The petitioner, an investigative journalist, sought cancellation of a contract awarded to MEIL on the ground that it submitted fraudulent bank guarantees from Euro Exim Bank, which is not recognized by the Reserve Bank of India – The respondents argued that the petitioner had a personal vendetta due to prior civil and criminal disputes with MEIL and had suppressed material facts about these disputes – Held: A petitioner in a PIL must come with clean hands, and suppression of relevant litigation history indicates a lack of bona fide intention – PIL dismissed [Paras 5-7, 25].

Scandalizing the Court – Social Media Posts by Petitioner – Contempt of Court Avoided – The petitioner published tweets making allegations against government authorities and the High Court – The Court noted that the tweets amounted to scandalizing the judiciary, but since the petitioner deleted them within five days on legal advice, no contempt proceedings were initiated – Held: The tweets were inappropriate and undermined the integrity of the judicial process, but the Court exercised judicial magnanimity in not initiating contempt proceedings [Paras 23, 28].

Suppression of Material Facts – Failure to Disclose Prior Litigation – The petitioner failed to disclose multiple pending civil and criminal cases against MEIL, including defamation suits, FIRs, and financial disputes – The Bombay High Court Public Interest Litigation Rules, 2010, require full disclosure of relevant litigation – Held: Non-disclosure of material facts and failure to comply with procedural requirements justified dismissal of the PIL without examining its merits [Paras 24-26].

Judicial Review of Government Contracts – Scope of PIL – The Court reiterated that judicial intervention in government contracts should be limited to cases involving clear arbitrariness, corruption, or mala fide actions – The bank guarantees issued by Euro Exim Bank had been authenticated by scheduled banks, and the petitioner failed to establish any illegality – Held: A PIL cannot be used as a tool for personal vendettas or business rivalries [Paras 14-15].

Decision: PIL dismissed. No costs imposed.
 

Partnership Law – Bar Under Section 69(2) – Suit Maintainable as Firm Was Registered Before Filing – The trial court dismissed the suit, holding that the appellant firm was not registered at the time of filing, making the suit non-maintainable under Section 69(2) of the Partnership Act. The High Court examined Exhibit-8, a memorandum from the Registrar of Firms, proving the firm's registration before the suit was filed. The Court held that the bar under Section 69(2) applies only if the firm is unregistered on the date of filing, not at the time of transactions. Held: Suit maintainable, as the firm was duly registered before filing [Paras 30-42].

Limitation – Cause of Action Arose on Denial of Payment – Suit Filed Within Time – The respondent argued that the transactions occurred between 2005 and 2007, and the suit filed in 2010 was barred. The Court ruled that the limitation period starts from the date of denial of payment, not from the transaction date. Since the respondent partially admitted the claim and denied balance payments on August 1, 2008, the suit filed on June 5, 2010, was within the three-year limitation period. Held: Suit is not barred by limitation [Paras 26-29].

Admissibility of Additional Evidence – Certified Copies from Registrar of Firms Allowed – The appellant sought to introduce certified copies of firm registration records under Order XLI Rule 27 CPC to corroborate Exhibit-8. The Court held that these were public documents admissible under Sections 65 and 74 of the Evidence Act. The additional evidence did not create a new right but merely corroborated an existing document, thus meeting the test for admission. Held: Additional evidence admitted in appeal [Paras 31-40].

Validity of Respondent’s Written Statement – Procedural Defect Rendered It Invalid – The respondent’s written statement was filed by a director (D.W.1) in his personal capacity without stating he was acting on behalf of the company, nor was it stamped with the company seal. Under Order XXIX Rule 1 CPC, pleadings for a company must be signed and verified by an authorized person. The respondent failed to cure this defect or provide proper authorization. Held: Respondent’s written statement is procedurally defective and not valid in law [Paras 61-65].

Proof of Monetary Claim – VAT Adjustments and Purchase Register Confirm Transactions – The appellant relied on Exhibit-4 series (bills and challans) and Exhibit-7 series (respondent’s purchase register) to prove supply of goods. The respondent failed to produce VAT return records, despite adjusting VAT for the disputed transactions. Under Section 114(g) of the Evidence Act, adverse inference was drawn against the respondent for withholding crucial documents. Held: Transactions sufficiently proved, and appellant entitled to recover dues [Paras 43-52].

Respondent’s Defense of Fraudulent Collusion – No Evidence Against Ex-Director – The respondent alleged collusion between the appellant and its former director, Tarak Nath Mitra. However, D.W.1 (respondent’s own witness) admitted that no complaint, criminal case, or internal action was ever taken against Tarak. The Court found this defense to be an afterthought to avoid liability. Held: No evidence of fraudulent collusion; defense rejected [Paras 53-56].

Decision: Appeal Allowed – Trial Court Judgment Set Aside. The High Court held that the appellant’s suit was maintainable as the firm was registered before filing. The suit was within limitation, as the cause of action arose on August 1, 2008. Additional evidence from the Registrar of Firms was admissible. The respondent’s written statement was invalid, affecting its defense. The appellant sufficiently proved the monetary claim.

The respondent is directed to pay ₹24,36,105/- (Rupees Twenty-Four Lakh Thirty-Six Thousand One Hundred Five Only) with 6% interest per annum from June 5, 2010, until realization. The amount must be paid within 90 days, failing which execution proceedings will be allowed. Stay granted for four weeks to allow the respondent to appeal [Paras 77-82].
 

Service Law - Distance Education Degree – Validity for Public Service Commission Appointments – The petitioner obtained an M.A. (English) degree from Annamalai University via distance education in 2015-2017 – The Kerala Public Service Commission (KPSC) rejected her application for the post of Scheduled Caste Development Officer, citing that Annamalai University’s distance education programs after 2015 were not approved by the University Grants Commission (UGC) – Held: In light of the Madras High Court's ruling in University Grants Commission v. Annamalai University, students enrolled in Annamalai University’s distance education programs in 2015-16 are protected – KPSC’s rejection was unwarranted [Paras 6-7].

UGC Notification and Its Impact – Application of Judicial Precedents – The KPSC relied on a 2022 UGC public notice cautioning against admissions to Annamalai University’s distance education courses – The Court observed that the Madras High Court had clarified that students who enrolled in 2015-16 were unaffected by later restrictions – Held: KPSC must allow the petitioner to proceed in the selection process, subject to the final outcome of pending litigation before the Supreme Court [Paras 7-9].

Recognition of Degree – Equivalence Certificate from Calicut University – The petitioner presented an equivalency certificate from the University of Calicut recognizing her M.A. (English) degree as equivalent to its own – The Court ruled that such certification further strengthened her eligibility – Held: A recognized university’s equivalency certificate should be given due consideration in public employment matters [Paras 4-5].

Interim Relief – Participation in Selection Process Allowed – The Court permitted the petitioner to participate in the ongoing selection process, provided the final appointment remains subject to the Supreme Court’s ruling on the Madras High Court’s decision – Held: The selection process should proceed without prejudice to the pending Supreme Court case [Paras 10].

Decision: Petition allowed. KPSC directed to allow the petitioner to participate in the selection process, subject to the final outcome of the Supreme Court case.
 

Taxation Law – Transfer Pricing – International Transaction with Overseas Branches – Valid Reference to TPO – Petition Dismissed – Axis Bank contended that transactions between head office and foreign branches were not international transactions requiring ALP benchmarking – Held: In view of deeming fiction under Section 92F and judicial precedent, foreign branches treated as separate enterprises – Reference valid [Paras 37–44, 51].

CBDT Instruction No. 3/2016 – Procedural Compliance – Satisfaction and Approval Found Proper – Petitioner claimed breach of Instruction due to lack of speaking order – Held: Assessing Officer passed detailed speaking order and recorded satisfaction regarding income impact – Principal Commissioner validly approved reference – No procedural breach [Paras 17–24, 30–35].

Natural Justice – Reasonable Opportunity Given – No Prejudice Shown – Petitioner alleged denial of hearing due to late-night notice – Court held: Petitioner submitted objections which were duly considered and addressed by a speaking order – No breach of natural justice [Paras 16, 24, 29–30].

Taxability – Global Income and Credit – Deeming Fiction Upheld – Petitioner argued no tax impact due to global income consolidation – Court rejected, holding: Tax credit mechanisms and differential tax rates may affect revenue; transactions must be benchmarked to avoid base erosion [Paras 40–44, 51].

Premature Challenge – Maintainability of Writ – Rejected – Respondent contended petition was premature since TPO had not yet passed final order – Court held that since all legal issues had been raised and heard, writ was maintainable though ultimately dismissed on merits [Paras 36–38].

Decision: Writ Petition dismissed – Reference to TPO held valid – Transactions between Indian head office and overseas branches considered international transactions under Income Tax Act – Procedural and legal compliance affirmed – No costs awarded [Paras 51–53].
 

Civil Law - Lease Renewal – Enforcement of Renewal Clause – Specific Performance Denied – The appellant sought specific performance of a lease renewal clause under a registered lease deed dated 01.04.1964, claiming entitlement to renewal for another 30 years commencing from 01.04.1994 – The appellant failed to issue legal notice to all defendants before instituting the suit and remained silent for four years before filing the claim – Held: Mere expression of desire for renewal without bona fide steps does not confer an automatic right to renewal – The appellant, having defaulted in rent payments for 20 years, acted in bad faith, and specific performance was rightly denied [Paras 16-24].

Burmah Shell Act – Automatic Lease Renewal – Not Absolute – The appellant argued that the lease renewal was statutorily protected under Section 5(2) and Section 7(3) of the Burmah Shell Act, 1976 – The Court held that statutory renewal under the Act does not confer an unfettered right and must be exercised in good faith – Since the appellant neither expressed a bona fide need for renewal nor complied with lease terms, the claim for automatic renewal was unsustainable [Paras 20-22].

Tenant’s Conduct – Failure to Pay Rent – Discretionary Relief under Specific Relief Act – The appellant defaulted on rent payments from 01.04.1994, and only after two decades began depositing rent in court – Under Section 16(c) of the Specific Relief Act, specific performance is a discretionary relief, and the appellant’s failure to fulfill contractual obligations disentitled it from such relief – Held: The appellant’s conduct in squatting on the property without payment demonstrated a lack of bona fide intention, justifying the refusal of specific performance [Paras 22-24].

Concurrent Findings of Lower Courts – Limited Scope of Second Appeal under Section 100 CPC – The High Court reiterated that under Section 100 CPC, it cannot interfere with concurrent factual findings unless they are perverse or based on an erroneous interpretation of law – Held: Both the trial and first appellate courts correctly assessed the factual matrix, and no substantial question of law warranted interference – Second appeal dismissed [Paras 14-25].

Decision: Second appeal dismissed. The judgments of the trial court and first appellate court were upheld. No costs imposed.
 

Land Acquisition – Delay and Laches – Writ Petition Dismissed – The petitioner challenged the acquisition of land in Village Akurdi, Pune, which was acquired under the MID Act in 1971, with possession taken in 1972 – Petition filed in 2010, nearly 38 years after the acquisition – Held: Delay of over three decades is unexplained and renders the petition non-maintainable – Principles of delay and laches bar the challenge, as acquisition proceedings had attained finality [Paras 1-4, 10-12].

Property Law – Land Acquisition and Possession – Once Vested, Cannot Be Reversed – The petitioner’s father had agreed to the acquisition in consent terms recorded before the High Court in 1968 – Held: Once land vests in the government upon acquisition, it cannot be challenged after decades on the ground that the petitioner was unaware of the process – Petitioner’s plea that possession was not taken is contradicted by official records – Land deemed lawfully acquired [Paras 8-10, 15-17].

Judicial Review – High Court Cannot Interfere After Conclusion of Acquisition Process – Petitioner argued that no compensation was paid, and therefore, the acquisition lapsed – Held: The remedy for non-payment of compensation lies in seeking proper legal recourse, not in challenging acquisition decades later – Supreme Court rulings reaffirm that land acquisition cannot be nullified solely on non-payment of compensation [Paras 20-25].

Final Decision – Writ Petition Dismissed – No Relief Granted – High Court dismissed the writ petition, upholding the validity of the acquisition – Held: No case for interference as the petitioner’s challenge was barred by delay, acquiescence, and past judicial orders – Costs imposed on the petitioner for abuse of legal process [Paras 30-32].
 

Waqf Law – Jurisdiction Over Waqf Property – Commission of Inquiry Lacks Authority – Writ Petitions Allowed – Petitioners challenged the Kerala Government’s order appointing a Commission of Inquiry under the Commissions of Inquiry Act, 1952, to investigate ownership claims over a property declared as waqf – Held: Waqf Board has exclusive jurisdiction to determine whether a property is waqf – Section 40(2) of the Waqf Act makes the Waqf Board’s decision final, subject only to Tribunal review – Government’s appointment of the Commission contravenes Section 85 of the Waqf Act, which bars jurisdiction of any other authority over waqf matters – Commission’s appointment quashed [Paras 30-35].

Administrative Law – Competence of State Government – Commission of Inquiry Not Justified – The Kerala Government claimed authority under the Commissions of Inquiry Act to resolve a matter of “public importance” – Held: The dispute relates to property rights, which fall under the exclusive purview of the Waqf Tribunal – The Government failed to consider relevant legal provisions and the ongoing appeal before the Tribunal – Mere public protests or agitations cannot justify the appointment of an inquiry commission – Government’s action held arbitrary and legally unsustainable [Paras 24-26, 39-42].

Judicial Review – Government’s Decision to Appoint Inquiry Commission Lacks Legal Basis – Petitioners argued that the Government acted without jurisdiction and in violation of existing legal orders – Held: Government ignored previous High Court orders and the statutory framework of the Waqf Act – Section 85 of the Act prohibits interference in waqf matters by civil or revenue courts, reinforcing the exclusive jurisdiction of the Waqf Board and Tribunal – The decision to appoint the Commission was made without application of mind and is liable to be struck down [Paras 40-43].

Final Decision – Writ Petitions Allowed – Government Order Quashed – Kerala High Court quashed the Government’s order appointing the Commission of Inquiry – Held: The Waqf Board’s authority stands, and any challenge to its decision must be adjudicated before the Waqf Tribunal – Government directed not to interfere in waqf-related disputes contrary to the Waqf Act [Paras 43-44].
 

Service Law – Resignation Under Duress – No Break in Service – Writ Petition Allowed – The petitioner, an Assistant Engineer in the Howrah Municipal Corporation, was required to resign before being released for deputation as an Executive Engineer under the Ministry of Surface Transport – Upon termination of deputation, he was reappointed as an Assistant Engineer but was denied continuity of service due to an alleged break – Held: The resignation was not voluntary but imposed as a condition for deputation – Resignation letter was conditional and does not constitute a valid resignation – The break in service must be condoned [Paras 19-26].

Employment Law – Conditional Resignation – Not a Voluntary Relinquishment of Office – A valid resignation requires an unconditional intention to relinquish office – Held: Since the resignation was a forced precondition for deputation and not voluntary, it cannot be treated as a resignation in law – Relying on Dr. Prabha Atri v. State of U.P., (2003) 1 SCC 701 and Moti Ram v. Param Dev, (1993) 2 SCC 725, the court held that an employee cannot be deemed to have resigned if the act was compelled by the employer [Paras 20-22].

Continuity of Service – Break in Service Unjustified – Petitioner Entitled to Benefits – The Howrah Municipal Corporation imposed the resignation condition, which led to the break in service – Held: Since the break was due to the Corporation’s actions, the petitioner must be treated as being in continuous service from his original appointment date – Following Sushil Kumar Yadunath Jha v. Union of India, (1986) 3 SCC 325, the court directed reinstatement with full financial and retirement benefits [Paras 30-40].

Final Decision – Writ Petition Allowed – Break in Service Condoned – Financial Benefits Granted – High Court quashed the Corporation’s decision treating the period as a break in service – Directed the Corporation to restore continuity of service and pay arrears and retirement benefits within six weeks [Paras 41-42].