Friday, May 24, 2013

Important Questions with Short Answer Labour Legislation In India (Labour Law)

Labour Legislation In India (Labour Law): Short Answer Type Questions and their Answer

Answer the Following Quesions;
(i)                  Who is an employer? Discuss under Workmen’s Compensation Act, 1923.
(ii)                Explain the term ‘Seaman’.
(iii)               Define the term ‘Miscarriage’.
(iv)              What is meant by sickness benefits?
(v)                Explain the term ‘Appropriate Government’ as discussed in Gratuity Act.
(vi)              State the main object of Payment of Gratuity Act.
(vii)             Write short note on Pension Fund.
(viii)           Write short note on ‘State Board’ as understood in Employees Provident Fund, 1952.
(ix)              What do you mean by minimum bonus?
(x)                Define the term ‘Available Surplus’ as per Payment of Bonus Act, 1965.
Suggested Answer

i)            Question: Who is an employer? Discuss under Workmen’s Compensation Act, 1923.
            Ans :   “Employer” includes anybody of persons whether incorporated or not and any managing agent of an employer and the legal representative of a deceased employer, and, when the services of a workman are temporarily lent or let on hire to another person by the person with whom the workman has entered into a contract of service or apprenticeship, means such other person while the workman is working for him;

            ii) Question:  Explain the term ‘Seaman’.                 
                   Ans:  "Seaman" means any person forming part of the crew of any ship, but does not include the master of the ship;

            iii)  Question:    Define the term ‘Miscarriage’.              
                      Ans: "Miscarriage" means the expulsion of the contents of a pregnant uterus at any period prior to or during the twenty-sixth week of pregnancy but does not include any miscarriage, the cause of which is punishable under the Indian Penal Code. 

            iv) Question: What is meant by sickness benefits?
                     Ans: Sickness Benefit(SB) : Sickness Benefit in the form of cash compensation at the rate of 70 per cent of wages is payable to insured workers during the periods of certified sickness for a maximum of 91 days in a year.  In order to qualify for sickness benefit the insured worker is required to contribute for 78 days in a contribution period of 6 months

v)               Question: Explain the term ‘Appropriate Government’ as discussed in Gratuity Act.
                 Ans: Appropriate Government under this Act means
             (i) In relations to an establishment :
(a) belonging to, or under the control of the Central Governments,
(b) having branches in more then one State,
(c) of a factory belonging to, or under the control of the Central Government,
(d) of a major port, mine, oilfield or railway company, the Central Government
(ii) any others case, the State Government [Section 2(a)]

vi)          Ques:  State the main object of Payment of Gratuity Act.   
                        The objects of the Payment of Gratuity Act, 1972 are mentioned below-
i) To provide for a Scheme for the payment of Gratuity to employees.
ii) To provide for matters connected with or incidental to the Scheme for payment of Gratuity.
iii) To provide retiring benefits to employees who have rendered continuous services to his employer and thereby contributed to his prosperity.
iv) To define the principles of payment of gratuity according to the prescribed formula.
v) To provide machinery for the employment of liability for payment of gratuity.

vii)          Question:Write short note on Pension Fund.
                           Ans: Pension Fund is a fund from which pensions are paid, accumulated from contributions from employers, employees, or both.
In the event of  the premature death of the employees the accumulation in the Provident Fund were too meager to the family of the deceased .Thus another social security benefit of providing Family Pension through the Employees' Family Pension Fund  Scheme , 1971 was introduced by amending the Act . At this stage , the Act was renamed as "The Employees' Provident Fund & Family Pension Act , 1952" and the Employees' Family Pension Scheme came into force on 1-3-1971.

viii)       Question: Write short note on ‘State Board’ as understood in Employees Provident Fund, 1952.
             Ans: State Board: According to Section 5-B of the Act The Central Government may, by a notification in the Official Gazette, constituent a State Board of Trustees for any state after consultation with the Government of that state in such manner as may be provided in the scheme. It shall exercise powers and perform such duties as the Central Government may assign to it from time to time.

ix)               Question: What do you mean by minimum bonus?
             Ans: Minimum bonus - Every employer shall be bound to pay to every employee in respect of any accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year. Where an employee has not completed fifteen years of age at the beginning of the accounting year, the minimum bonus payable is 8.33% or Rs 60 whichever is higher. [Section 10].

x)               Question: Define the term ‘Available Surplus’ as per Payment of Bonus Act, 1965.
                 Ans: “Available surplus”.
The available surplus in respect of any accounting year shall be the gross profits for that year after deducting there from the sums referred to in section 6:

 Bonus payable under the Act is linked with profits. The employer has to calculate “gross profits” of his establishment in the manner specified in section 4. Then, from “gross profits” so calculated he has to deduct the sums referred to in section 6 as prior charges. The balance is called “available surplus”.

Sunday, May 19, 2013

Companies law : DOCTRINE OF LIFTING OF CORPORATE VEIL


Note: Piercing the corporate veil and  lifting the corporate veil are same Concept


DOCTRINE OF LIFTING OF CORPORATE VEIL
PERSPECTIVE IN TAXATION CASES
By Nikhil Singal and Aditya Bhattacharya
“The company is at law a different person altogether from the subscribers to the Memorandum and, although it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or the trustee for them. Nor are subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act.”
                                                                       -Lord McNaughtenSoloman v. Soloman and Co.,(1897)

The law laid down in Soloman v. Soloman and Co.(supra) is often considered the source on the basis of which the jurisprudence of corporate personality has been written world over. However, the history of corporate-commercial litigation has witnessed situations wherein the Courts have gone beyond the corporate cloak and analyzed the working and the motives of the members or directors of the company: In doing the same, the Courts have evolved the concept of lifting or piercing the corporate veil. This article aims to bring to light the interpretational issues concerning taxation cases vis-à-vis the aforesaid doctrine and to focus on interpretation of the Indian Courts over time. 
In recent times the plague of tax evasion has been so severe that the Courts have actively used the doctrine of piercing of corporate veil to probe into transactions and decide the actual entities responsible behind the facade of the company. Lately, the Hon’ble Karnataka High Court in the case of Richter Holding v. The Assistant Director of Income Tax used this doctrine to take the view that it may be necessary for the fact finding authority to lift the corporate veil to look into the real nature of the transaction and ascertain the virtual facts. The Hon’ble High Court further held that the Assessee, as a majority share holder, enjoys the power by way of interest and capital gains in the assets of the company and it is necessary to identify whether the transfer of shares includes indirect transfer of assets and interest in the company.In view of the aforementioned rulings, it is eminently clear that the Indian Courts are actively pursuing this doctrine to ascertain the actual offenders and the nature of transactions behind the veil of the company. In Juggilal Kamlapat v. Commissioner of Income Tax, Uttar Pradesh (SC Full Bench), the Hon’ble Supreme Court had taken the view that the doctrine of lifting the corporate veil ought to be applied only in exceptional circumstances and not as a routine matter. However, if the intention of the Assessee is to avoid tax through a collusive device, and the real purpose was something else than what appeared on the face, then the Court may lift the veil of corporate entity to pay due regard to the economic realities behind the legal facade. 
The above analysis shows that in the initial years the Courts have taken a balanced approach while using the doctrine and have time and again stated that the doctrine must be used in exceptional cases and must not be used as a tool to fasten liability on the entities behind the corporate curtain. With every passing year we see that this doctrine is being used more extensively than the previous years. This comes especially in the light of the fact that India is witnessing a corporate transition and issues pertaining to tax evasion, liquidation and subsidiary conglomerates are surfacing at an ever increasing rate. The key question that needs to be understood is to what extent should this doctrine be used; should it be used only in exceptional circumstances as it has put forth by the founding legal luminaries or should it be given a dynamic and versatile approach and be used as extensively as possible. (LIFTING OF CORPORATE VEIL )
Reinforcing the Identity of the Company, as Distinguishable From the Director
The doctrine seems to be in vogue! As ‘Scams’ is the new word on the block, whether it be Satyam’s Ramalinga Raju or the band wagon locked in Tihar Jail for the 2G Scam, it is the application of the niceties of the doctrine that has revealed the true culprit behind the actions of the company. The aim of the doctrine is to ensure that the players behind the corporate veil maintain the sanctity of the company’s affairs and do not malign the same by injecting personal motive. Nevertheless, a situation may warrant that the legal identity of the company as a juristic person be seen in distinguishment with the identity of the person causing the tax evasion, fraud, etc.
Take the example of loss caused to a company by embezzlement, something engineered and tailored on the lines of the Satyam case, where a Managing Director (or an agent/employee) of a company, along with his confidants occupying top positions, are involved in defrauding a company of its funds and business opportunities. The Courts in this regard have opined that the loss be allowed as a deduction under the provisions of the Income Tax Act, 1961. The relevance of the example in terms of the present article is to give the doctrine of corporate veil a new facet.
In the case of Badridas Daga v. CIT, the Hon’ble Supreme Court held that a loss caused by embezzlement is allowable as a deduction where it is shown that the loss has occurred in the course of the business and is incidental to it. Another pre-condition to be established is that the ‘company’ has to be unaware of the embezzlement. Further, through a plethora of decisions delivered after Badridas Daga (supra), additions conditions like a reasonable chance of restitution, year of allowance, etc. have been laid down.
The above view contemplates the distinguishment of the identity of the company from the person who has caused the fraud. Thus, even though the doctrine of corporate veil is applied, the separate identity of the company from its directors is not totally discarded. On the contrary, this identity is reinforced. In such cases, the knowledge of the director causing the fraud is deemed to be distinct from the knowledge of the company. The Courts will prosecute the director of the company along with his confidants and not penalize the company as a whole. The onus in such cases therefore lies on the company to prove the absence of knowledge of the embezzlement. Though the determination of knowledge will depend on a case to case analysis, but where the company fails to do so, like in the case of Curtis v. J. & G. Oldfield Limited and Plas-Flab Pvt. Ltd. v. Commissioner of Income Tax, the loss is not allowed as a deduction. Nevertheless, the legal principle with regard to the application of the doctrine is reinforced by declaring the company as a separate juristic person and the director as another. 
The facets of the doctrine of corporate veil stated herein above are only an illustrative list of the non-exhaustive interpretation accorded by judicial precedents. As stated, the principle is ever expansive and is applied as per the facts and circumstances of each case. However, in sum and substance, the application of the doctrine will revolve around, the facts of each case, the identity of the company and the identity of the person(s) actually involved in the misdoings. Even in taxation cases, there may be cases where the identity of a company may be disregarded to identify the real culprit, whereas on the other hand, there may be cases where the identity of the company will be reinforced to allow the separation of the knowledge of the person causing the fraud with the knowledge of the company. 

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Tags: CORPORATE reorganizations; CORPORATION law; TAXATION, Company Law, Interview, University Question
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