The Supreme Court has dismissed the appeal of the income tax department and ruled that the foreign exchange earned by transferring the right of exploitation of films outside India by way of lease is admissible for deduction under Section 80HHC of the Income Tax Act 1961. According to the department, movies/films are not goods. Hence Section 80HHC cannot be invoked which grants benefit only to sale.
The department further argued that the tape (cassette) was only a medium of transfer; that, there was no "sale" of the film in beta-cam format and that the film companies had only transferred the right to use for a period of five years and since the title remained with the exporters. The assessees (B Suresh and others) contended that the deduction/concession is given in cases where they derive profits from exports and earns foreign exchange. The court agreed with them and said that the rights held by them would certainly fall in the category of articles of trade and commerce, hence, merchandise.
Appeal against entry tax on tools dismissed
The Supreme Court has dismissed the appeal of Addison & Co challenging the imposition of entry tax by the Karnataka government on tools necessary to operate lathe or drilling machines.
The company argued that the tools are consumables and, therefore, they cannot be part of the machine nor can they be termed as "accessories". It was submitted that machines like lathe machines and drilling machines are not capable of performing any functions without the tools. The tools are rendered useless after sometime and disposed of.
The tax authorities maintained that the tools were part of the machinery and in any case accessories, attracting tax. The tribunal and the high court accepted the government's argument. The Supreme Court upheld this view.
Firms committing criminal offences can be prosecuted, but not sent to jail
Companies which commit criminal offence can be prosecuted and sentenced to fine, though they cannot be sent to jail as they are only juristic persons. This principle was reiterated by the Supreme Court in the case, Ballarpur Industries Ltd vs State of Tamil Nadu. Recalling its 2005 judgment in the case, Standard Chartered Bank vs Directorate of Enforcement, the court stated that "there is no immunity to the companies from prosecution merely because the prosecution is in respect of offences for which the punishment prescribed is mandatory imprisonment and fine. It has been held that though a company cannot be sentenced to imprisonment, it can nevertheless, be prosecuted and the court can impose punishment of fine instead."
Appeal against order of customs tribunal dismissed
The Supreme Court has dismissed the appeal of Alex Enterprises against the order of the customs tribunal which had rejected its plea to waive the pre-deposit of customs duty of Rs 42,90,226 and penalty of Rs 20,00,000. The Delhi high court had dismissed its appeal. The firm argued that it was entitled to the benefits of Rule 16(a) of the Customs and Central Excise Duties Drawback Rules and therefore, the direction given by the tribunal was wrong. The authorities submitted that the firm had been adopting various dilatory methods and have dragged on the whole matter for nearly eight years. Accepting the latter contention, the Supreme Court refused to interfere in the high court order, observing that it was nothing but abuse of process of law.