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What would be the realisable value of this asset ? It would indeed be difficult to speculate as to what 425 the leasehold interest in the land would fetch in the open marker when it is affected by the burden or restriction contained in clause (13) of the lease deed. Ratio |
If the lease hold interest were free from this burden or restriction, it ' would be comparatively easy to determine its market value, for there are recognised methods of valuation of leasehold interest, but where the leasehold interest is cut down by this burden or restriction and some right of interest is abstracted f... |
The only way it can be done in a case of this kind is by taking the market value of the leasehold interest as if it were unencumbered or unaffected by the burden or restriction of clause (13) and deducting from it, 50 per cent of the unearned increase in the value of the land on the basis of the hypothetical sale, as r... |
There is also one other consideration which reinforces the adoption of this method of valuation. Ratio |
When, for the purpose of valuation of the leasehold interest, it is as sumed that the leasehold interest is sold in the open market, the price received does not in its entirety belong to the assessee. Ratio |
Fifty per cent of the unearned increase in the value of the land is diverted to the lessor by virtue of the paramount title contained in clause (13) and when re ceived by the assessee, it belongs to the lessor. Ratio |
It is in truth and substance collected by the assessee on behalf of the lessor. Ratio |
What is received by the assessee on his own account is only the price less 50 per cent of the unearned increase in the value of the land and that represents the net realisable worth of the asset in the hands of the asses see. Ratio |
The Revenue contended that payment of 50 per cent of the unearned increase in the value of the land to the lessor is really an instance of application of the price received by the assessee and not diversion of a part of the price by paramount title and hence the whole of the price must be taken as the measure of the we... |
But this contention is, in our opinion, not well founded and cannot be sustained. Ratio |
The true test for determining whether a payment made by an assessee out of an amount received by him is an application of part of the amount which belongs to him or it is payment of an amount which is diverted before it reaches the assessee so that at the time of receipt, it belongs to the payee and not to the assessee... |
Obligations, no doubt, there are in every case but it is the nature of the. obli gation which is the decisive fact. PRE |
There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. PRE |
Where by the obligation income is diverted before it reaches the assessee, it is deductible; but where the income is re quired to be applied to discharge an obliga tion after such income reaches the 426 assessee, the same consequence, in law, does not follow. PRE |
It is the first kind of payment which can truly be excused and not the second. PRE |
The second payment is merely an.obligation to pay another a portion of one 's own income, which has been received and is since applied. PRE |
The first is a case in which the income never reaches the assessee, who, even if he were to collect it, does so, not as part of his in come, but for and on ,behalf of the person to whom it is payable. PRE |
In our opinion, the present case is one in which the wife and children of the assessee who continued to be members of the family received a portion of the income of the assessee, after the assessee had received the income as his own. PRE |
The case is one of application of a portion of the income to discharge an obligation and not a case in which by an overriding charge the assessee became only a collector ' of another 's income." PRE |
It is clear on the application of this test that in the present case, 50 per cent of the unearned increase iii the value of the land would be diverted to the lessor before it reaches the hands of the assessee as part of the price. Ratio |
The assessee holds the leasehold interest on condition that if he assigns it, 50 per cent of the unearned increase in the value of the land will be payable to the lessor. Ratio |
That is the condition on which he has acquired the leasehold inter est arid hence 50 per cent of the unearned increase in the value of the land must be held to belong to the lessor at the time when it is received by the assessee and it would not be part of the net realisable worth of the leasehold interest in the hands... |
If a question is asked as to what is the real wealth of the assessee in terms of money so far as the leasehold interest is concerned, the answer would inevitably be that it is the price less 50 per cent of the unearned increase in the value of the land. Ratio |
It is difficult to see how 50 per cent of the unearned increase in the value of the land which belongs to the lessor can be regarded as part of the wealth of the asses.see. Ratio |
The posi tion would undoubtedly be different where a payment is made by an assessee which is an application of a part of the price received by him. Ratio |
Where such is the case, the whole of the price would represent the net realisable worth of the asset in the hands of the assessee and what is paid out by the assessee would be merely a disbursement made after the price reaches the assessee as his own property. Ratio |
That was the position in Pardit Lakshi Kant Jha vs Commissioner of Wealth Tax, Bihar(1) where the question arose whether the expenditure in connection with brokerage, commission or other expenses which would be liable to be incurred by the assessee in effectuating a sale would be deductible from the market value of the... |
This Court held that in computing the value of the shares, the assessee is not entitled to deduction of brokerage and commission from the valuation of the shares as given in,the Stock Exchange quotations or quotations furnished by well known brokers. Ratio |
It was pointed out by this Court that: (1) 427 "It is not the amount which the vendor would receive after deduction of this expense, but the price which the asset would fetch when sold in the open market which would constitute the value of the asset for the purpose of section 7(1) of the Act". PRE |
Obviously, this view 'was taken because the entire price, when received, would belong to the asses see and payment of brokerage and commission would be merely application of part of the price in meeting expenditure necessary for effectuating the sale and hence it would not be deductible in ascertaining the net realisab... |
We are, therefore, of the view that the question re ferred by the Tribunal must be answered in the negative and it must be held that in determining the value of the lease hold interest of the assessee in the land for the purpose of assessment to wealth tax, the price which the leasehold interest would fetch in the open... |
The appeal accordingly Fails and must be dismissed with costs. RPC |
section R. Appeal dismissed. RPC |
Appeal No. 680 of 1976. FAC |
From the Judgment and Order dated the 17th March, 1976 of the Monopolies and Restrictive Trade Practices Commis sion, New Delhi in R.T.P. Enquiry No. 11 of 1974. FAC |
L.M. Singhvi, Ravinder Narain, Talat Ansari and Shri Narain for the Appellant. FAC |
L.N. Sinha, Sol.General, B. Datta and Girish Chandra for Respondents Nos. 1 and 2. FAC |
G.A. Shah and N. Nettar for Respondent No. 13 The Judgment of the Court was delivered by C.J. FAC |
This is an appeal under section 55 of the Monop olies & Restrictive Trade Practices Act, 1969 (hereinafter referred to as 'the Act ') against the order and judgment of the Monopolies & Restrictive Trade Practices Commission, New Delhi (hereinafter referred to as the 'Commission '), in proceedings started under section ... |
The informant was a redistribution stockist of the appellant company carrying on business regulated by the terms of an agreement, known as the redistribution stockists agreement of the company, found in a standard printed form, entered into with each stockist. FAC |
The agreement has 23 terms or clauses in it. FAC |
The clauses complained of are 5 and 9, which may be reproduced here: "5.The Redistribution Stockist shall use his best endeavours to maintain and in crease the trade of the Products in the said town and for this purpose he shall at all times keep and 'maintain adequate stocks of the Products in all its packings and he ... |
out all instructions and directions including those as to the maximum resale price which may from time to time be given by the Company or by the Company 's accredited repre sentatives in respect of the sale or resale or disposal by the Redistribution Stockist of stocks of the Products supplied to him in pursuance of th... |
The Redistribution Stockist is prohibited from charging in excess of the maximum resale prices stipulated by the Company, but he may, at his discretion, charge prices lower than the said maximum resale prices. FAC |
The Redistribution 459 Stockist shall purchase and accept from the Company such stock as the Company shall at its discretion send to the Redistribution Stockist for fulfilling its obligations under this Agreement. FAC |
In order to ensure equitable and reasonable distribution of stocks at fair prices, the Redistribution Stockist shall not rebook or in any way convey, transport or despatch parts of stocks of the products received by him outside the aforesaid town except when he is so expressly directed in writing by the Company. FAC |
He shall also whenev er so required by the Company make available from the stocks of Company 's merchandise purchased by him such part as the Company directs him. FAC |
to do for purposes of resale on his behalf by the Company 's employee." FAC |
It is alleged that the two clauses, set out above found in identical agreements entered into by the Company with its stockists, whose number is quite large, constitute or autho rise restrictions which are unreasonable and illegal. ARG |
Hence, it was submitted by the respondents that it must be struck down or modified so as to make the business and trade of the appellant company and its stockists conform to the requirements of law. ARG |
The Commission had accepted the case brought to its notice by the informant and made the following order : "(1). FAC |
Clause 5 of the Agreement (Exhib it F) shall stand modified so that the follow ing shall be substituted in place thereof: "5. FAC |
The Redistribution Stockists shall use his best endeavours to maintain and in crease the trade of the products in the said town and for this purpose he shah at all times keep and maintain adequate stocks of the products in all its packings and he shall carry out the instructions and directions including those as to max... |
The Redistribu tion Stockist is prohibited from charging in excess of the maximum resale prices stipulated by the Company but he may at his discretion charge prices lower than the said maximum resale prices". "(2). FAC |
The practices of resale price maintenance and full line forcing to which original clause 5 of the agreement related, shall be discontinued and shall not be repeat ed. FAC |
(3) Clause 9 of the Agreement (Exhibit F) shall be void. FAC |
(4) The practice of area allocation to which clause 9 of the Agreement (Exhibit F) related, shall be discontinued and shall not be repeated. FAC |
460 (5) In all future price circulars or lists to be issued by the Respondents, it shall be clearly stated that the prices there in mentioned are maximum prices and that prices lower than these prices may be charged. FAC |
(6) This order shall come into force with effect from 1st July, 1976. FAC |
On or before the said date, the Respondents shall intimate all Redistribution Stockists of the modifica tions in Clauses 5 of the Agreement (Exhibit F) and the voidity of clause 9 of the Agree ment (Exhibit F)". FAC |
There was some argument before us on the question whether proceedings before the Commission were maintainable at the instance of a "complainant" who had reasons to nurse a grievance against the Company and whose motives could be questioned. Ratio |
It was pointed out that the agreement of the company with the informant had been terminated. Ratio |
The version of the informant was that this had been done because his firm had sold Vanaspati at the rate of Rs. 127/ per tin which was below the price of Rs. 129.05 per tin fixed by the Company. Ratio |
The informant stockist said that the price had to be reduced by him to remove public discontent. Ratio |
We think that the motives of the informant are quite irrelevant in such a case. Ratio |
All that the Commission, and, on appeal, this Court has to examine is whether what would undoubtedly be a "practice" by the appellant company, of introducing the two clauses complained of, in its agreements with its stockists, amounted to a restrictive trade practice. Ratio |
The distinction sought to be made .,on behalf of the appellant, between a practice and clauses in a contract which give a company the power to regulate trade in a manner which may constitute a restriction, appears to be inconse quential here. Ratio |
We do not think that we can isolate the terms of a contract from the actual practice of the company. Ratio |
It is not the case of the company anywhere that the clauses in its agreement with its stockists are to be treated as deadletter. Ratio |
Its case is that they do not operate as restrictions. Ratio |
The introduction of such clauses in so many agreements meant to regulate relations, either between a principal and an agent or the seller and the stockist who acquires complete proprietary rights in the stock of goods purchased, is itself a trade practice. Ratio |
The simple question before us is: Can powers conferred upon the company under such clauses be exercised in such a way as to constitute restrictive trade practices? Ratio |
It is true that the practice of imposing restrictions under such clauses is one thing and the practice of intro ducing such clauses is quite another thing. Ratio |
Both may con stitute separate practices. Ratio |
Nevertheless, the introduction of such clauses into an agreement between the manufacturer and the seller who purchases and stocks his goods is in itself something practised. Ratio |
It is immaterial that the use of powers under such clauses may constitute another set of practices which depend upon the existence of 'such clauses as sources or springs. Ratio |
Inasmuch as the introduction of clauses in such an agreement is a practice, taken by itself, the question whether such a practice amounts to a restric tive trade practice or not could only be decided by consid ering 461 whether the clauses could be so used as to unjustifiably restrict trade? It would be specious reason... |
This argument seems to us to overlook the definition of "restrictive trade practice" contained in section 2(0) of the Act which lays down: "(0) "restrictive trade practice" means a trade practice which has, or may have, the effect of preventing distorting or restricting competition in any manner and in particular (i) w... |
In other words, if the introduction of the clause in itself is a trade practice and could be used to prevent, distort or restrict competition "in any manner" it may be struck down. Ratio |
A trade practice is defined by section 2(u) of the Act as follows : "(u) "trade practice" means any practice relating to the carrying on of any trade, and includes (i) anything done by any person which controls or affects the price charged by, or the method of trading of, any trader or any class of traders. STA |
(ii) a single or isolated action of any person in relation to any trade". STA |
This definition is wide enough to include any "trade practice" if it is in relation to the carrying on of a trade. Ratio |
It cannot be argued that the introduction of the clauses complained of does not amount to an action which relates to the carrying on of a trade. Ratio |
If the result of that action or what could reasonably flow from it is to restrict trade in the manner indicated, it will, undoubted ly, be struck by the provisions of the Act. Ratio |
Reliance was sought to be placed by learned counsel for the appellant company on a recent decision of this Court in Tata Engineering & Locomotive Co. Ltd. vs The Registrar of the Restrictive 3 502 SCI/77 462 Trade Agreements, New Delhi(1) (hereinafter referred to as the "Telco" case) where it was held: "The definition ... |
The decision whether trade practice is restrictive or not has to be arrived at by applying the rule of reason and not on the doctrine that any restriction as to area or price will per se be a restrictive trade practice. Ratio |
Every trade agreement restrains or binds persons or places or prices. Ratio |
The ques tion is whether the restraint is such as regulates and thereby promotes competition or whether it is such as may suppress or even destroy competition. Ratio |
To determine this ques tion three matters are to be considered. Ratio |
First, what facts are peculiar to the business to which the restraint is applied. Ratio |
Second, what was the condition before and after the restraint was imposed. Ratio |
Third, what is the nature of the restraint and what is its actual or probable effect". Ratio |
It was also held there: "The question of competition cannot be considered in vacuo or in a doctrinaire spirit. Ratio |
The concept of competition is to be understood in a commer cial sense. Ratio |
Territorial restriction will promote competi tion whereas the removal of territorial restriction would reduce competition. Ratio |
As a result of territorial restriction there is in each part of India open competition among the four manufacturers. Ratio |
If the territorial restriction is removed there will be pockets without any competition in certain parts of India. Ratio |
If the dealer in Kashmir is allowed to sell anywhere in India wealthy cities like Delhi, Bombay, Calcutta will buy up trucks allocated for Kashmir and the buyer in Kashmir will not be able to get the trucks. Ratio |
The other three manufacturers whose trucks are not in equal demand will have Kashmir as an open field to them without competition by Telco. Ratio |
Therefore, competition will be re duced in Kashmir by the successful competition being put out of the field". Ratio |
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