Some recent reports have pointed out that the Authority for Authority for Advance Rulings has once again sanctified the “Mauritius route”. While the law since Azadi Bachao Andolan’s case has upheld the sanctity of a tax residency certificate (TRC), the Revenue has not given up its efforts to find the “hidden reality” or “true facts”. The Revenue has also met with some success in its...
Ostensible Authority and Estoppel
The Privy Council in Kelly v. Fraser, [2012] UKPC 25, recently revisited the issue of whether an agent can be said to have ostensible authority on the basis of his own representations. Mr. Fraser, the Respondent, became the CEO of Island Life Insurance Company on 1st February, 2000, and shortly after that became a member of the Salaried Staff Pension Plan (“SSP”) of the company. The SSP was...
The GAAR Guidelines
One of the major changes implemented by the Finance Act has been the introduction of the General Anti-Avoidance Rules (GAAR). The Government has recently issued draft GAAR Guidelines in this connection, which can be downloaded from here. It is proposed to introduce a monetary threshold for invocation of the GAAR provisions, and time limits (such as time limits for making references to the...
Depreciation and Sale-and-Lease-back Transactions
One of the most important deductions permissible under income tax law in relation to capital assets is depreciation. Under the general scheme of the Income tax Act, particularly section 32, depreciation is allowed to an assessee who is the owner of a capital asset used for the purposes of business. The criterion of “ownership” is given a slightly more liberal scope under tax law. Assessees can...
Parent’s Duty to Employees of its Subsidiary: Chandler v. Cape affirmed
In an earlier post, we had discussed the judgment of the England & Wales High Court in Chandler v. Cape plc, [2011] EWHC 951. In that case, the Court had held that in certain circumstances, a parent company would owe a duty of care to the employees of the subsidiary even in situations where the tests for lifting the corporate veil are not satisfied. This judgment has been affirmed today by...
2011: Year in Review (Income Tax)
The year 2011 was in the news (insofar has tax issues are consult) mainly due to a few high-profile matters in the Supreme Court. The public interest litigation relating to black money (Ram Jethmalani v. Union of India) and the hearing in the Vodafone case are few examples of this. In terms of legal issues however, 2011 saw a number of far-reaching decisions of the courts which may not have been...
Court of Appeal: Clarification of ‘Meridian’ attribution
The theory of attribution in common law turns significantly on the application of the two main cases: Tesco Supermarkets v. Nattrass [1972] AC 153 (which provides for a strict reading of who the ‘directing mind and will’ of a company is), and Meridian Global Funds v. Securities Commission [1995] 2 AC 500 (which, in certain instances, allows for a more flexible understanding). In the...
Lifting the Veil: Is ‘Fraud’ Necessary?
The sanctity of the corporate veil is among the most important pillars of certainty in commercial law today. English Courts, we have seen earlier, have given great respect to independent personality, refusing to lift the veil on grounds of economic ‘reality’ such as “single economic entity”, or subjective notions such as “public interest”. This tendency has been in existence since Adams v. Cape;...
Fiduciary Duties and the Nature of an LLP
While the position of law in relation to the inter-se relationship between partners of a firm is fairly well-settled, there is no great clarity on similar issues arising in the context of LLPs. It is clear that the “double agency” rule of partnerships does not apply to LLPs: but, if LLPs are seen as a hybrid form of a partnership and a company, does the law impose any fiduciary duties on members...
Retailers Assoc. v. Union: Bombay High Court on Service Tax
In a previous post, I had briefly mentioned the judgment of a Division Bench (D.Y. Chandrachud and A.V.Mohta, JJ.) the Bombay High Court, where the constitutional validity of service tax on renting of immovable property was upheld. The judgment (Retailers Association v. Union of India) is available on the Bombay High Court website (linked here). A perusal of the judgment shows that three...
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