 | Interest on borrowed fund allowed only on the portion used in the business |
Posted on 15 September 2012 by Apurba Ghosh  | |||||||||||||
CourtINCOME TAX APPELLATE TRIBUNAL BriefThe facts in brief. The assessee is a company engaged in the business of running of hospitals under the brand name "Metro" in various parts of the country. The company has high expertise in operating and managing Nursing Homes/Hospitals specially with respect to Cardio Vascular Care. It filed its return of income for the Assessment Year 2007-08 on 31.10.2007 declaring an income of Rs.7,13,10,790/-. The A.O. completed the assessment u/s 143(3) on 29.12.2009, assessing income at Rs.7,60,620/-, where interalia he has disallowed interest on borrowed capital as well as u/s 14A of the Income Tax Act, 1961. Aggrieved the assessee carried the matter in appeal before the CIT. The First Appellate Authority deleted the disallowance on proportionate interest made by the A.O. He also restricted the disallowance made u/s 14A. Aggrieved both the assessee and the Revenue are in appeal before us. CitationMetro Institute of Medical Sciences P.Ltd. X-1, Sector 12, Noida, UP Pin 201 301 (Appellant) vs. ACIT, Range 6 New Delhi(Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: "E" NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI C.M.GARG, JUDICIAL MEMBER ITA No: 3938/Del/2011 Assessment Year: - 2007-08 Metro Institute of Medical Sciences P.Ltd. X-1, Sector 12, Noida, UP Pin 201 301 (Appellant) vs. ACIT, Range 6 New Delhi (Respondent) ITA No: 3949/Del/2011 Assessment Year: - 2007-08 ACIT, Range 6 New Delhi (Appellant) Vs. Metro Institute of Medical Sciences P.Ltd. Noida, UP (Respondent) Appellant by: Shri Hiren Mehta, C.A. Respondent by: Shri R.S.Negi, Sr.D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER These are Cross Appeals and are directed against the order of the Ld.CIT(A)-IX, New Delhi dt. 25.5.2011 for the Assessment Year 2007-08. 2. The facts in brief. The assessee is a company engaged in the business of running of hospitals under the brand name "Metro" in various parts of the country. The company has high expertise in operating and managing Nursing Homes/Hospitals specially with respect to Cardio Vascular Care. It filed its return of income for the Assessment Year 2007-08 on 31.10.2007 declaring an income of Rs.7,13,10,790/-. The A.O. completed the assessment u/s 143(3) on 29.12.2009, assessing income at Rs.7,60,620/-, where interalia he has disallowed interest on borrowed capital as well as u/s 14A of the Income Tax Act, 1961. Aggrieved the assessee carried the matter in appeal before the CIT. The First Appellate Authority deleted the disallowance on proportionate interest made by the A.O. He also restricted the disallowance made u/s 14A. Aggrieved both the assessee and the Revenue are in appeal before us. 3. We have heard Mr. R.S.Negi, Sr.D.R. and Mr.Hiren Mehta, C.A. Ld.Counsel for the assessee. We first take up Revenue's appeal. The grounds raised by the Revenue are as follows. "1. The order of Ld. CIT(A) is erroneous and contrary to facts and law. 2. On the facts and in the circumstances of the case and in law, the ld.CIT(A) has erred in deleting the addition of Rs.26,30,636/- made by the Assessing Officer by disallowing the proportionate interest in respect of interest free advances given by the assessee ignoring that: 2.1 The assessee had borrowed huge funds on which it was paying interest and claiming same as expenditure in its P&L a/.c; 2.2. The assessee itself submitted that 35.71% of the total funds used for the purpose of making interest free advances were borrowed funds and remaining funds were assessee's own funds. 2.3. Similar disallowances made in the case of assessee itself for Assessment Year 2006-07 were upheld by the Hon'ble ITAT B bench of Chandigarh in ITA no.1432/Chandi/2010 vide order dt. 28.2.2011. 3. The appellant craves leave to add, alter, amend any grounds of appeal raised above at the time of hearing." 4. The main contention of the Ld.D.R. is that the facts and circumstances under which the Chandigarh Bench of the Tribunal in its order in ITA 1057/Ch./2008 dt. 24th September,2009, wherein it followed the judgement of the Jurisdictional High Court in the case of CIT vs. Abhishek Industries, (2006) 286 ITR p.1 and confirmed the disallowance remain the same. He further submitted that another the Chandigarh Bench of the Tribunal in ITA 1432/Ch./2010 order dt. 28th Feb.,2011 had followed its earlier order and confirmed the same disallowance. He argued that the precedence set by the Co-Ordinate Bench of the Tribunal in the assessee's own case has to be followed. He pointed out that the assessee in his explanation has also submitted that disallowance can be made on proportionate basis and had given reasons for the same. Thus he submits that it cannot argue otherwise. He further submitted that the Commissioner of Income Tax (Appeals) has accepted additional evidence from the assessee and without confronting the A.O. with this additional evidence, had adjudicated the matter. Hence he submitted that the order of the Ld.CIT(A) has to be reversed. 5. The Ld.Counsel for the assessee on the other hand submitted that the facts are different in this year and that case law relied upon by the Tribunal for the earlier A.Ys is no more good law in view of the subsequent judgement of the Hon'ble Supreme Court in the case of S.A.Builders, 288 ITR p.1. Thus he submitted that the judgement of the Hon'ble P&H High Court in the case of Abhishek Industries cannot be followed. He further submitted that the case now falls under the jurisdiction of the Delhi High Court and that the assessee satisfies the proposition laid down by the Jurisdictional High Court in the case of CIT vs. H.B.Stock Holding Ltd. 325 ITR 316 and submitted that the issue is covered in its favour. The Ld.Counsel's submissions are summarized as under. (a) the borrowings were for the purpose of business from PNB Centurian Bank and others and for specified business purpose and hence the interest paid on the loans cannot be disallowed; (b) that the assessee has sufficient interest free funds, which have to be presumed to have been advanced as interest free advances. Reliance is placed on the decision of the Bombay High Court in the case of CIT vs. Reliance Utilities 313 ITR 340 @ page 344. He further relied on the following decision:- i. CIT vs. DCM Ltd.325 ITR 310 Delhi; (c) that secured loans given by banks for specific purposes are not allowed to be diverted; (d) the advances were given keeping in view commercial expediency; (e) that the CIT called for the remand report from the Assessing Officer on the evidences admitted by him, and hence there can be no grievance of not having an opportunity. 6. In reply the Ld.D.R. tried to distinguish the decision of the Delhi High Court by submitting that it was a case where interest free advance was given prior to taking a loan. 7. On the assessee's appeal, the ld.counsel for the assessee thoughnot leaving this ground ultimately submitted that he is not pressing the same in view of the smallness of the amount. 8. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record and the orders of the authorities below we hold as follows:- 9. The loans in question, on which interest has been paid by the assessee and part of which is sought to be disallowed by the Assessing Officer is given below:-
10. It is common knowledge that loans granted by banks for specific purposes such as working capital or term loan are to be utilized for an agreed specified purpose and that the utilization is monitored by the Bank and that the quantum of working capital advance limit depends on the level of stocks and sundry debtors of the organization taking the loans and that term loans are disbursed only on acquiring of specified assets. The working capital limits vary in direct proportion to the net current assets. Similarly term loans granted are tied up for specific purposes and the Banker insists on bills etc. to monitor utilization. The presumption in such cases should be that the Banker have monitored the disbursements and that the loans granted by the banker have been utilized only for the purpose for which they have been granted. This presumption is a rebuttable presumption and the A.O. should have some evidence or material on record to hold otherwise. There is no such evidence in this case. 11. The earlier Benches of the Tribunal have followed the decision of the Hon'ble P&H High Court in the case of Abhishek Industries. The proposition laid down in this judgement are at variance with the judgement of the Hon'ble Supreme Court in the case of S.A.Builders Ltd. Vs CIT (S.C.)(2007) 288 ITR 1 has held as follows:- 22. In our opinion, the High Court in the impugned judgment, as well as the Tribunal and the income-tax authorities have approached the matter from an erroneous angle. In the present case, the assessee borrowed the fund from the bank and lent some of it to its sister concern (a subsidiary) as interest free loan. The test, in our opinion, in such a case is really whether this was done as a measure of commercial expediency. 23. In our opinion, the decisions relating to section 37 of the Act will also be applicable to section 36(1)(iii) because in section 37 also the expression used is "for the purpose of business". It has been consistently held in the decisions relating to section 37 that the expression "for the purpose of business" includes expenditure voluntarily incurred for commercial expediency, and it is immaterial if a third party also benefits thereby. 25. In our opinion, the High Court as well as the Tribunal and other income-tax authorities should have approached the question of allowability of interest on the borrowed funds from the above angle. In other words, the High Court and other authorities should have enquired as to whether the interest free loan was given to the sister company (which is a subsidiary of the assessee) as a measure of commercial expediency, and if it was, it should have been allowed. 26. The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. 31. The High Court and the other authorities should have examined the purpose for which the assessee advanced the money to its sister concern, and what the sister concern did with this money, in order to decide whether it was for commercial expediency, but that has not been done. 32. It is true that the borrowed amount in question was not utilized by the assessee in its own business, but had been advanced as interest free loan to its sister concern. However, in our opinion, that fact is not really relevant. What is relevant is whether the assessee advanced such amount to its sister concern as a measure of commercial expediency. 35. We agree with the view taken by the Delhi High Court in CIT v. Dalmia Cement (B.) Ltd. [2002] 254 ITR 377 that once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assessee itself), the Revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profit. The income-tax authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. The authorities must not look at the matter from their own view point but that of a prudent businessman. As already stated above, we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits." In the case of Munjal Sales Corporation Vs. CIT, 298 ITR 298, the Hon'ble Supreme Court has observed as follows. "17. One aspect needs to be mentioned during the Assessment Year 1995-96, apart from the loan to its sister concern amounting to Rs.5 lakhs. According to the Tribunal, there was nothing on record to show that the loans were given to the sister concern by the assessee firm out of its own funds, and, therefore, it was not entitled to claim deduction under Section 36(1)(iii). This finding is erroneous. The opening balance as on April 1, 1994, was Rs.1.91 crores whereas the loan given to the sister concern was a small amount of Rs.5 lakhs. I our view, the profits earned by the assessee during therelevant year were sufficient to cover the impugned loan of Rs.5 lakhs" 12. Thus applying the propositions laid down by the Hon'ble Supreme Court, we have to uphold the order of the First Appellate Authority. It is not the case of the Assessing Officer that the borrowings in question are not for business purposes. The A.O. has no material to disbelieve the claim of the assessee. Hence the assessee should succeed. 13. Even otherwise the interest free funds available with the assessee are Rs.44.28 crores. The assessee has earned profit of Rs.5.93 crores during the Assessment Year 2007-08. If depreciation of Rs.2.88 crores is added, the cash accruals during the year would be Rs.8.81 crores. The interest free advances are to the tune of Rs.14.89 crores. The Hon'ble Bombay High Court in the case of CIT vs. Reliance Utility and Power Ltd. 178 Taxman 135 Bombay held that in such situations the presumption would be that interest free funds were used for the purpose of giving interest free advances. The A.O. has not dislodged this presumption. Hence on this ground also, the issue is to be decided in favour of the assessee. 14. The Commissioner of Income Tax (Appeals) has also called for the remand report from the Assessing Officer on the details filed before him and hence the argument that the Assessing Officer has not been given an opportunity is against the facts of the case. Admission of additional evidence has not been challenged by Revenue. 15. For all these reasons, we uphold the order of the Commissioner of Income Tax (Appeals) and dismiss this appeal of the Revenue. 16. Coming to the assessee's appeal, the Ld.Counsel for the assessee did not press the same, in view of the smallness of the amount and on the condition that it would not set a legal precedent. Accepting this proposition we dismiss this appeal; by the assessee. 17. In the result both the Revenue's appeal and the assessee's appeal are dismissed. Order pronounced in the Open Court on 29th August, 2012. Sd/- Sd/- (C.M. GARG) (J.SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: the 29th August, 2012 *manga Copy of the Order forwarded to: 1. Appellant; 2.Respondent; 3.CIT; 4.CIT(A); 5.DR; 6.Guard File By Order Dy. Registrar 1. Date of Dictation: 17/7 2. Draft placed before the Author on:27/8 3. Draft proposed and placed before Second Member on:28/8 4. Draft discussed/approved by the Second Member on:28/8 5. Approved draft came to Sr.P.S. on:29/8 6. Date of Pronouncement: 29/8 7. File sent to Bench Clerk on :30/8 8. Date on which file given to Head Clerk on: 9. Date of dispatching the Order on: | |||||||||||||
| | Non compete fees cannot be taxed under the head income from salary |
| Posted on 15 September 2012 by Apurba Ghosh | |
CourtINCOME TAX APPELLATE TRIBUNAL BriefOn the facts and circumstances of the case, Ld. CIT(A)- XXVIII, New Delhi erred in deleting the addition of ` 1,54,90,828/- as a question of law in involved in this case i.e., whether non-compete fee/commission is to be assessed as business income or salary income in view of specific provisions of section 17 which states that any fee, wages, commission, bonus and perquisite in lieu of salary is included in the definition of salary CitationACIT Circle-37(1), Room No. 401, N. Block, Vikas Bhawan, I.P. Estate, New Delhi. (Appellant) Vs. Kanwaljit Singh,75, Friends Colony New Delhi-110 002. AAXPS6495A (Respondent) Judgement IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA No. 4348/Del/2011 Assessment Year: 2007- 2008 ACIT Circle-37(1), Room No. 401, N. Block, Vikas Bhawan, I.P. Estate, New Delhi. (Appellant) Vs. Kanwaljit Singh, 75, Friends Colony New Delhi-110 002. AAXPS6495A (Respondent) Appellant by: Shri R.S. Negi, Sr. DR Respondent by: Shri Vinod Kr. Bindal, Ms. Sweety Kothari, CAs ORDER PER I.C. SUDHIR, JUDICIAL MEMBER The revenue has impugned the first appellate order on the following ground:- "On the facts and circumstances of the case, Ld. CIT(A)- XXVIII, New Delhi erred in deleting the addition of ` 1,54,90,828/- as a question of law in involved in this case i.e., whether non-compete fee/commission is to be assessed as business income or salary income in view of specific provisions of section 17 which states that any fee, wages, commission, bonus and perquisite in lieu of salary is included in the definition of salary." 2. At the outset of hearing Ld. AR pointed out that an identical issue under similar facts has been decided by the Tribunal in favour of the assessee in the assessment years 2003-04 to 2005-06 in ITA No. 2311 to 2313/D/2007 vide order dated 16th January, 2009 and in asstt. Year 2006- 07 in ITA No. 2022/D/2009 vide order dated 8.1.2010. Thus the issue raised in the ground during the year is fully covered in favour of the assessee. 3. Ld. DR did not dispute the above facts. He however placed reliance on the assessment order. 4. Having gone through the above cited orders of the Tribunal we find that the issue raised in the ground under similar facts has been decided by the Tribunal in favour of the assessee in the assessment year 2003-04 to 2006-07. The relevant facts are that during the year the AO made an addition of ` 1,54,90,828/- being the non-compete fees receivable by the assessee from M/s. Uzind Corporation and offered for taxation as business income following cash system of accounting . The AO alleged the claimed business income as salary. The assessee contended that the said amount was not receivable because of employer-employee relationship but as non- compete fees in lieu of not taking away the business of the said firm in terms of the agreement dated 15.3.2002. It was contended that the non compete fee has to be taxed under the head "business income" and that the assessee was having an option to adopt cash or mercantile system of accounting for its business income. Without prejudice to these submissions it was also contended that even if amount receivable from Uzind Corporation is taxable as salary on due basis, then the amount of ` 2,12,42,850/- declared as business income by the assessee on receipt basis following cash method of accounting should be reduced from the total income as the said income pertained to the preceding assessment year because an amount cannot be taxed in the two different years under different heads of income following different methods of accounting. The Ld. CIT(A) referring order of the Tribunal in the case of assessee on an identical issue for the assessment years 2003-04 to 2005-06 has decided the issue in favour of the assessee with this finding that the non-compete fees receivable in pursuant to the agreement dated 15.3.2002 is assessable as "business income" and the assessee is free to adopt cash method of accounting for his business income and the addition made by the AO of the said amount as salary was deleted. The Ld. CIT(A) has also given reference of the order of the Tribunal on the issue in the case of assessee for the assessment year 2006-07. For a ready reference the relevant para No. 17 of the order dated 16.1.2009 of the Tribunal in the case of the assessee in the assessment years 2003-04 to 2005-06 is being reproduced hereunder :- 17. "Now coming to the issue in question about the head of taxability, the provisions of Section 28(va) have been narrated above. Except from raising general argument about colourable device, lower authorities have not disputed the arguments of the assessee about applicability of Section 28(va), CIT(A) has considered the argument of the assessee and at the end held that this is a colourble device and the income is assessable under the head as salary income without commenting on inherent merits and scope of Section 28(Va). In our view, provisions of Section 28(va) are applicable to assesee's case as a special provision derive light from the following observations of Hon'ble Supreme Court in the case of N.L. Mehta Cinema Enterprises, 208 ITR 975." 5. Under the above circumstances we do not find reason to interfere with the first appellate order on the issue as the same is fully covered by the decision of the Tribunal in the case of the assessee itself for the earlier assessment years. The First appellate order in this regard is thus upheld. 6. The ground is accordingly rejected. 7. Consequently the appeal is dismissed. The order is pronounced in the open court on 24th August, 2012. Sd/- Sd/- (G.D. AGRAWAL) (I.C. SUDHIR) VICE PRESIDENT JUDICIAL MEMBER Dated 24.8.2012 *Veena Copy of order forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By Order Deputy Registrar, ITAT |
| | Unless the ratio for appointment in grade I, II, III in district court adopted shown to be arbitrary it ought not to be interfered with |
| Posted on 15 September 2012 by Apurba Ghosh | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CourtHIGH COURT OF DELHI BriefThis writ petition has been filed on behalf of the Readers Grade- I/Senior Assistants, Readers Grade-II/Assistants, Readers Grade- III/U.D.Cs. and Ahlmads/Assistant Ahlmads/L.D.Cs. of the District Courts of Delhi. They have challenged the minutes of the meeting dated 19.04.2011 and 28.07.2011 of the Selection Committee of the Delhi High Court and the Full Court, respectively, with regard to the ratio for promotion to the post of Superintendent in the Subordinate Court. The Selection Committee meeting was held on 19.04.2011 and the relevant portion of the minutes of that meeting are as under:- "To consider the comments of District Judge-I and Sessions Judge, Delhi, received vide letter No.328/Admn.I/S&P/2011 dated 08.02.2011 regarding appointment to the post of Superintendent in the ratio of 3:1 in response to the representation dated 06.10.2010 of Ms Sunita Sharma, Private Secretary. CitationJ.P. GUPTA AND ORS ... Petitioners versus HIGH COURT OF DELHI AND ORS ... Respondents Judgement IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 09.08.2012 + W.P.(C) 8026/2011 J.P. GUPTA AND ORS ... Petitioners versus HIGH COURT OF DELHI AND ORS ... Respondents Advocates who appeared in this case: For the Petitioner: Mrs Jyoti Singh, Sr Advocate with Mr Padma Kumar, Mr. K.K. Mishra, Mr Tinu Bajwa and Ms Sahilla Lamba. For the Respondent: Mr Viraj R. Datar with Mr Mayank Mikhail Mukherjee for R-1. Ms Avnish Ahlawat with Ms Latika Chaudhary for R-2. Mr Paramjit S. Bindra with Mr Ketan Madan for R-4. Mr D.K. Thakur for R-5. CORAM:- HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE SIDDHARTH MRIDUL J U D G M E N T BADAR DURREZ AHMED, J (ORAL) 1. This writ petition has been filed on behalf of the Readers Grade- I/Senior Assistants, Readers Grade-II/Assistants, Readers Grade- III/U.D.Cs. and Ahlmads/Assistant Ahlmads/L.D.Cs. of the District Courts of Delhi. They have challenged the minutes of the meeting dated 19.04.2011 and 28.07.2011 of the Selection Committee of the Delhi High Court and the Full Court, respectively, with regard to the ratio for promotion to the post of Superintendent in the Subordinate Court. 2. The Selection Committee meeting was held on 19.04.2011 and the relevant portion of the minutes of that meeting are as under:- "To consider the comments of District Judge-I and Sessions Judge, Delhi, received vide letter No.328/Admn.I/S&P/2011 dated 08.02.2011 regarding appointment to the post of Superintendent in the ratio of 3:1 in response to the representation dated 06.10.2010 of Ms Sunita Sharma, Private Secretary. We have perused the office note and the comments of the District Judge-I and Sessions Judge. After careful consideration of the matter we feel that keeping in view the existing cadre strength of the feeder cadres, i.e. 257 of Sr Assistant/Readers line and 241 of the stenographer line, the existing ratio of 3:1 needs to be amended so as to be 1:1 it is accordingly recommended to the Full Court that the ratio for appointment to the post of Superintendent from the above feeder cadres in the District Courts, Delhi be made as 1:1. The issue as to whether the existing 17 vacancies of Superintendent in the District Courts be filled up as per the existing ratio of 3:1 or the proposed amended ratio of 1:1 in case the proposed ratio is approved by the Full Court, be also placed before the Full Court for decision. We are informed that the minimum qualification for promotion to the post of Superintendent has been prescribed as "Matriculate". We feel that the same is not in conformity with the stature of and the nature of the duties attached to the post. Accordingly, we recommend that henceforth the minimum qualification for promotion to the post of Superintendent may be prescribed as "Graduate". 3. This was followed by the Full Court meeting which was held on 28.07.2011. The relevant extract from the minutes of the meeting of the Full Court held on that date are as under:- "EXTRACT FROM THE MINUTES OF THE MEETING OF THE FULL COURT HELD ON 28.07.2011 AT 4.45 P.M. IN THE JUDGES LOUNGE"
4. The grievance of the petitioner is that earlier there was a ratio of 3:1 between the general line and the line of Stenographers insofar as promotion to the post of Superintendent was concerned. That ratio has been changed by virtue of the recommendations made by the Selection Committee and the decision arrived at by the Full Court whereby the ratio has now become 1:1. 5. The total strength of officials of the general line and officials of the Stenographers line at present, as given in the writ petition, are as under:- "Total strength of officials of General Line and official of Stenographer line AT PRESENT GENERAL LINE
STENOGRAPHER LINE
6. The feeder cadre for the post of Superintendent is Reader Grade- I/Senior Assistant from the general line and Stenographer Grade-I from the Stenographer line. The number of sanctioned posts in these feeder cadres is virtually the same. This is apparent from the fact that there are 257 posts of Reader Grade-I/Senior Assistant in the general line and there are 258 posts of Stenographer Grade-I in the Stenographer line. It is based on this equality of strength in the feeder cadres that the Selection Committee made the recommendation that the ratio should be 1:1 and not 3:1 as was hitherto prevailing. This rationale has been accepted by the Full Court in the meeting held on 28.07.2011. 7. The plea on behalf of the petitioners, who belong to the general line, is that since the entire cadre strength in the general line is three times the total strength of the Stenographers' line, the ratio of 3:1 ought to have been maintained and ought not to have been reduced to 1:1. One of the grounds for this submission was that the promotional avenues in the general line are very limited as compared to that in the Stenographers' line and, therefore, it was submitted that it is the entire cadre which ought to be taken into consideration and not just the feeder cadre. 8. The learned counsel for the petitioner also submitted out that the entire material and full facts were not placed before the Selection Committee and it is because of this deficiency that the Selection Committee came to the conclusion that the ratio should be 1:1 between the general line and the Stenographers' line insofar as promotions to the posts of Superintendents are concerned. 9. There is a great deal of controversy with regard to whether, earlier, the ratio of 3:1 was fixed on the basis of the entire cadre strength or it was fixed on the basis of only the feeder cadre strengths. Be that as it may, the position which emerges from the extracts of the minutes of meeting dated 19.04.2011 clearly indicates that the reason why the ratio of 1:1 has been recommended by the Selection Committee was that the strength in the feeder cadre of the general line and the Stenographers' line was virtually identical and, therefore, the ratio of 1:1 was recommended. It is this recommendation which has been accepted by the Full Court. 10. Therefore, what may have been the reason for adopting the ratio of 3:1 at earlier points of time, the logic behind adopting the ratio of 1:1 pursuant to the said recommendation of the Selection Committee is that of equality or near equality in the strengths of the feeder cadres of the general line and the Stenographers' line for the post of Superintendent. 11. The learned counsel for the petitioner referred to a decision of a Division Bench of the Orissa High Court in the case of Pramod Kumar Satpathy And 11 Ors v. State of Orissa And 16 Ors : 104 (2007) CLT 696, but we fail to see as to how this decision would come to the aid of the plea taken by the petitioner. Paragraph 17 and 18 of the said decision of the Orissa High Court would be relevant. They read as under:- "17. Again in the case of Kuldeep Kumar Gupta and Ors. v. Himachal Pradesh State Electricity Board and Ors. reported in AIR 2001 SC 308, Hon'ble Supreme Court held in paragraph 6 that it is usually for the Government to provide a quota of promotion whenever the feeder category itself consists of different categories of persons. Such quota is fixed in order to equi-balance each category so that they get equal opportunity of promotion. Hon'ble Supreme Court made it very clear that in the larger interest of administration the decision of the employer who is best suited to decide the percentage of posts in the promotional cadre should not be trifled with. 18. Similar observations have been made by the Hon'ble Supreme Court in the case of Dwarka Prasad and Ors. v. Union of India and Ors. Learned Judges have gone to the extent of saying that fixation of quotas in favour of various categories of posts in feeder cadres based upon the structure and pattern of the Department is a prerogative of the employer and the same pertains to policy making field. Learned Judges held that in fixation of such quotas, various factors are taken into account namely, cadre strength in the feeder quota, suitability of holders in the feeder post, nature of duties, experience and the channels of promotion and most important of them is the requirement of the promoting authority for manning the post on promotion with suitable candidates. The Hon'ble Supreme Court held that when quota is therefore fixed taking various factors into account, there can be no rule of absolute equality or arithmetical exactitude. Such quotas may vary from case to case depending upon the pattern, structure and hierarchies in the Departmental set up as well as the exigencies and balancing needs of Administration. It is obvious in such areas, the Court or Tribunal should be very slow in interfering unless there is palpable discrimination in the matters of fixation of quota." (underlining added) 12. If we see the above extract, we find that the Division Bench of the Orissa High Court has placed reliance on the decision of the Supreme Court in Kuldeep Kumar Gupta and Ors v. Himachal Pradesh State Electricity Board and Ors: AIR 2001 SC 308 wherein the Supreme Court made it clear that in larger interest of administration, it is the employer who is best suited to decide the percentage of posts in the promotional cadre and such a decision should not be trifled with. 13. Even in Dwarka Prasad and Ors v. Union of India and Ors : 2002 (6) SCC 535 we find that the observations of the Supreme Court do not come to the aid of the petitioner but on the other hand affirm the stand taken by the Full Court of the Delhi High Court. Paragraph 16 and 17 of the said decision are relevant and they read as under:- "16. Fixation of quotas or different avenues and ladders for promotion in favour of various categories of posts in feeder cadres based upon the structure and pattern of the Department is a prerogative of the employer, mainly pertaining to policymaking field. The relevant considerations in fixing a particular quota for a particular post are various such as the cadre strength in the feeder quota, suitability more or less of the holders in the feeder post, their nature of duties, experience and the channels of promotion available to the holders of posts in the feeder cadres. Most important of them all is the requirement of the promoting authority for manning the post on promotion with suitable candidates. Thus, fixation of quota for various categories of posts in the feeders cadres requires consideration of various relevant factors, a few amongst them have been mentioned for illustration. Mere cadre strength of a particular post in feeder cadre cannot be a sole criteria or basis to claim parity in the chances of promotion by various holders of posts in feeder categories. 17. Normally, where officers are to be drawn for promotion from different posts in the feeder cadre, quota for each post in the feeder cadre is maintained proportionately to the sanctioned strength in that post. This, however, cannot be an inviolable rule of strict application in every case, with an absolute equality of arithmetical exactitude but may vary case to case depending upon the pattern, structure and hierarchies in the Departmental set-up as well as exigencies and balancing needs of Administration. There are other relevant considerations, some of which have been mentioned above, which may require departure from the practice of fixation of quota for each post in the feeder cadre, solely proportionate to its strength." 14. The Supreme Court itself observed as would be apparent from the above extract that while fixing a particular quota for a particular post the cadre strength in the feeder cadre is one of the relevant circumstances. The Supreme Court also observed that normally where officers are to be drawn for promotion from the different posts in the feeder cadre, quota for each post in the feeder cadre is maintained proportionately to the sanctioned strength in that post. 15. Thus, reading the said decision of the Supreme Court as also of the Orissa High Court, it is apparent that adoption of a particular ratio on the basis of the relative strengths is the feeder cadres is not a criteria which is unknown. On the other hand, that is one of the relevant considerations which needs to be looked into for the purposes of fixing the ratio or quota. 16. The learned counsel for the petitioner placed strong reliance on paragraphs 19 and 20 of the Division Bench's decision of the Orissa High Court in the case of Pramod Kumar Satpathy (supra) which reads as under:- "19. In the instant case, considering the strength of the base services from which promotion to the feeder cadre is made, the ratio of 2:1, in the language of the Supreme Court, equibalances the chances of promotion of the employees coming from two different sources. 20. Learned counsel for the private Opposite Parties in W.P.(C) No.12484 of 2003 also relied on two Judgments of the Hon'ble Supreme Court on which reliance was placed by the Learned Counsel for the State. Reliance was also placed on Kuldeep Kumar Gupta where the Hon'ble Supreme Court held that fixation of quota should be equi-balanced. There can be no dispute to the said proposition. But here the fixation of quota is to be equi-balanced by taking the entire cadre strength of two services and including the feeder posts. If that is done the ratio of 2:1 is correctly framed in the Rules. In the case of equibalancing the chances of promotion between the two groups of employees the Court has to see the entire cadre strength. The Tribunal has taken only the upper strata of the feeder post which is immediately below the post of Assistant Commandant, namely, the Subedar, Subedar Major, and Reserve Inspector. The Tribunal has not taken into account the cadre strength of Jamadar from which the Subedars are promoted and the cadre strength of Sergeants from which Reserve Inspectors are promoted. Therefore, the Tribunal has taken, if I may say so, a very perfunctory view of the cadre strength of two services. So the ratio in the case of Kuldeep Kumar Gupta virtually goes against the contention of the Learned Counsel for the private Opposite Parties." 17. However, we do not see as to how this would, in any manner, enable the petitioner to challenge the quota of 1:1 which has been fixed by the Full Court. This is so because unless and until the petitioners are able to show and demonstrate that the ratio of 1:1 is completely arbitrary and perverse, the decision of the Full Court should not be trifled with. In fact this exactly what has been noted in the decision of the Supreme Court in the case of Kerala Magistrates (Judicial) Association and Others v. State of Kerala and Others: AIR 2001 SC 1075 which was also a decision cited by the learned counsel for the petitioner. In that case, the Supreme Court referred to its earlier decision in the case of Joginder Nath v. Union of India: (1975) 3 SCC 459 wherein it was observed that "The Court also observed that a better formula could be evolved, but the Court cannot substitute its wisdom for Government's save to see that unreasonable perversity, mala fide manipulation, indefensible arbitrariness and infirmities do not defile the equation for integration." It is in that context that the Supreme Court in the case of Kerala Magistrates (supra) observed that it would be necessary to examine whether, in that case, the provision of ratios of 3:1 and 5:2 in the integrated cadre, as provided in sub-rule (4) of Rule 3 of the Kerala Judicial Service Rules, could be held to be arbitrary, irrational or perverse. After considering all the circumstances, the Supreme Court came to the conclusion that the provision of ratios of 3:1 and 5:2 could not be held to be arbitrary, irrational and perverse and it did not find any legal infirmity requiring any interference. 18. In the present case, we find that the sole reason behind adopting the ratio of 1:1 was the near identity of strength of the feeder cadre of the general line and the Stenographers' line. Such a principle cannot be said to be arbitrary or perverse. Of course, there is no allegation of any mala fide manipulation. Thus, going by the Supreme Court observations in the case of Joginder Nath (supra) as applied in Kerala Magistrate (supra), unless and until the ratio adopted by the Full Court was shown to be arbitrary or perverse or irrational, it ought not to be interfered with. This Court, even if it is held that a ratio of 1:1 was not the best ratio, cannot substitute its view in place of that of the Full Court. 19. The writ petition has no merit and the same is hereby dismissed. There shall be no order as to costs. All interim orders stand vacated. BADAR DURREZ AHMED, J SIDDHARTH MRIDUL, J | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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