Page 20 - Banking Finance August 2019

LEGAL UPDATE

IT notice to Infosys Award in long-standing disputes upheld
quashed With a 320-page judgment, the Bombay High Court drew curtains on a batch of
disputes, more than a decade old, between In-
The Karnataka High Court has
dian shareholders and a German company in the
quashed the no-
appeal, Wind World India vs. Enercon GmhH.
tices issued to
The court upheld the award of the arbitration
Infosys by the
tribunal. Wind World was incorporated under the
Commissioner
of Income Tax Companies Act as a joint venture between
for reopening the assessment of Enercon GmbH and members of the Mehra fam-
three years from 2004. ily. Enercon is the registered holder of 56 per cent of the issued share capital,
and the Mahras are the registered holders of the residual 44%. The German
The judgment asserted that “there company is in the business of engineering, manufacturing and marketing wind
is no iota of material available in the turbine generators.
reasons recorded by the assessing
officer to believe escapement of tax Disputes ranged over shareholding, royalty and intellectual property rights and
on any agreement where the com- travelled to different parts in England and courts and tribunals in this country,
pany received revenue from foreign including the Supreme Court. Ultimately, a three-member tribunal by a major-
companies for deputing the techni- ity gave an award in favour of Enercon. Wind World challenged the award in
cal members independent of soft- the commercial court of arbitration in the high court and failed. The appeal
ware development work." also was dismissed.
The notice for reopening of the as-
sessment was based on the assess- Stay on arbitration centre vacated
ment relating to the assessment The proposed New Delhi International Arbitration Centre has been caught in
year 2007-2008. In that assessment, litigation for some months and the Delhi High Court has vacated a stay on the
certain claims for deductions under government’s ordinance establishing it.
Section 10-A of the Income Tax Act The International Centre for Alternative Dispute Resolution (ICADR) had chal-
were disallowed. That finding was lenged the New Delhi International Arbitration Centre Ordinance issued in
applied to the earlier assessments March. The centre was established for creating an autonomous regime for
alleging that some incomes had es-
institutionalised arbitration and for the acquisition of the undertakings of ICADR
caped then.
which stood vested in the New Delhi Arbitration Centre.
The company argued that the ear- ICADR alleged that the ordinance was issued though there was no urgency. The
lier assessment could not be re-
opened after six years. It also as- government countered and asserted that a Bill for setting up the centre was
serted that there was no escapement passed by the Lok Sabha but the Rajya Sabha could not take it up as it was
adjourned sine die in February this year. The government has international ob-
of income and all facts were dis-
ligations to set up a proper centre for alternative dispute resolution.
closed in the original assessments.
The B N Srikrishna Commission and the 84th parliamentary committee had rec-
The high court observed that "it is pre-
ommended the establishment of such a centre. Since ICADR was set up in 1995,
sumed that the assessing authority had
examined the entitlement of deduc- its performance was unsatisfactory and it was not able to attract arbitration
tion under Section 10-A by the asses- cases to it. Therefore, the ordinance was issued, the government argued.
see from all angles. Withdrawal of the It also noted that an appeal against the high court stay could not be heard by
deduction allowed based on the assess- the Supreme Court because judges in three Benches rescued themselves each
ment order relating to the assessment time it was listed. The high court vacated the stay on the ordinance and clari-
year 2007-08 is without application of fied that its order was only interim in nature and the main writ petition will be
mind and nothing but a change of opin- heard in July.
ion, which tantamount to review and
the same is not permissible." "All pending arbitration cases with ICADR shall be permitted to be carried out
in the same manner as they were

20 | 2019 | AUGUST | BANKING FINANCE