8/14/2019 [Legal Digest ]

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[LEGAL DIGEST ]

UTTAR PRADESH TOLD TO

REOPEN CASES OF UNITSUSING HIGH SPEED DIESELThe Supreme Court has asked the Uttar Pradeshtrade tax authorities to reopen the cases of more

than 130 industrial units in the state which had beenissued show cause notices asking them to explainwhy concessional rates for high speed diesel (HSD)given to them should not be withdrawn. The Allahabadhigh court had quashed the show cause notices to

Vam Organic Chemicals Ltd and a large number

of other units which have been getting concessionalrates from oil companies. The beneficial rates weregiven to them under the central sales tax law andthe UP trade tax law. However, the state governmenttook a decision later that those who have beenusing HSD for generating electricity should not begiven the beneficial rates. When the high court setaside the show cause notices, the governmentappealed to the Supreme Court. It stated that the highcourt had not gone into certain aspects of thedispute, like the discretion granted on the assessing

authority for bestowing concessions. Stressing thediscretion of the assessing authority, it remitted thecases for fresh decision.

Bylaws of co-ops crucial in

income tax liabilityThe answer to the question whether a member of aprimary cooperative society will automatically becomea member of the apex society will determine the incometax liability of the apex body, the Supreme Court stated

in the case, Commissioner of Income Tax vs RajasthanRajya Bunker Samiti. In this case, Samiti, the apex body

was the assessee. It provided raw materials like yarn toprimary societies of weavers who manufactured cloth.The apex society claimed tax concessions underSection 80P(2) of the Income Tax Act on the groundthat it was a cottage industry. It denied that it wasengaged in the collective disposal of labour of itsmembers under the provision. The revenue departmentcontended that the weavers are not the members of theapex society. They are members of the primary

societies. The Supreme Court stated that an answer tothe problem lies in the bye-laws of the societies. Thesewere not examined by the authorities. While rejectingthe claim of the authorities for tax claims in the relevant

years, the court asked them to examine, in future, theactual position according to the bye-laws of the

cooperative societies.

Case of rolloverpremium chargeThe Supreme Court set aside the judgement ofthe Gujarat high court in the case, Asst CIT vsElecon Engineering Co Ltd, involving the natureof roll-over premium charge incurred by the companyas also the scope and applicability of Section 43A ofthe Income Tax Act. The company procured foreigncurrency loan for expansion of its business. Repayment

was in instalments. It took forward contract witha bank for the delivery of foreign currency onstipulated dates. The balance value of the contract,after deducting the amount withdrawn towards

repayment, was rolled over for a further periodup to the date of the next instalment. The autho-rities disallowed the roll over premium chargespaid by the assessee in respect of foreign exchangeforward contracts to the bank on the ground that thesaid charges were incurred in connection with the

purchase of a capital asset, hence it was not admissiblefor deduction under Section 36(1)(iii). The highcourt took the view that the roll over premium charges

were in the nature of interest or committal charges,hence, they were allowable. The Supreme Courtrejected this view.

Central WarehousingCorporation pulled upThe Delhi high court and the Bombay high court haveseverely criticised the Central WarehousingCorporation (CWC) for the manner in dealing with aconsignment of plant and machinery imported by

Appollo Paper Mills Ltd for setting up an industry inGujarat or Himachal Pradesh. The goods could not be

released due to a strike by stevedores in Navi Mumbai.The mills protested against the exorbitant chargesdemanded by CWC as demurrage. Moreover, when themills moved the Bombay high court, it did not file areply for seven years. It provoked the high court toremark that the total negligence of CWC officials and

their conduct in taking the matter so casually is highlydeplorable. Further, CWC did not follow the methodprescribed by the high court for calculating thedemurrage. This led to an appeal to the SupremeCourt and then to a writ petition in the Delhi highcourt. The latter indicted CWC for not following the

Bombay high court orders and causing delays. Allowingthe appeal of the mill, it remarked: CWCs inactionhas resulted in severely prejudicing not only the millbut CWC itself. The adverse remarks of the Bombayhigh court obviously did not spur them to act anyquicker.

Where to file cheque bouncing caseThe Delhi high court last week ruled in a chequebouncing case that a complaint under the Negotiable

Instruments Act should be filed in the court wherethe drawee bank is situated. In this case, SwastikSales Corporation vs Advanced Medical Optics, thecheques were issued by Swastik in Mumbai on a bankthere and was dishonoured there. The notice of demand

was issued in Delhi. Following that the complaint was

filed in Delhi. Swastik moved the high court forquashing the complaint arguing that the Delhi courthad no jurisdiction to prosecute the case. The highcourt, relying on Supreme Court decisions, agreed

with Swastik.

Pickets to check spurious liquorTo check manufacture of spurious liquor in parts of thecity, the Delhi High Court has directed the police to setup special pickets to keep a watch on people indulging

in its sale and distribution.