The Supreme Court has dismissed the appeal of the Commissioner of Income Tax against the judgment of the Uttarakhand High Court rejecting its claim against Enron Oil & Gas India Ltd. The Supreme Court also rejected the department’s contention. Analysing the contract, the court said that the foreign company which provided capital investment claimed the first oil extracted as ‘cost oil’. Often a company obtains profit not just from the ‘profit oil’ but also from cost oil. Such profits cannot be ascertained without taking into account translation losses. Therefore, the translation losses could not be considered as illusory.
Sugar mills’ incentive subsidy is capital receipts: SC
The Supreme Court ruled in a batch of cases involving sugar mills in Tamil Nadu that the incentive subsidy received by them was capital receipt not includible in the total income. Accepting the argument of the mills in the case, Commissioner of Income Tax v Ponni Sugars and Chemicals, the judgment said that “keeping in mind the object behind the payment of the incentive subsidy, we are satisfied that such payment received by the assessees under the scheme was not in the course of a trade but was of capital nature.” The second question raised in these cases was whether the assesses were entitled to exemption under Section 80 P(2)(a)(i) of the Income Tax Act in respect of interest received from the members of the society. The Supreme Court pointed out that none of the authorities below, including the Madras high court, had examined the Memorandums of Association filed by cooperative sugar mills of the state. Under Section 80 P(1) deduction incentive in respect of income of co-operative societies is provided for. Since this aspect was not at all considered, the court remitted the matter to the tribunal for reconsideration of this aspect.
SC upholds Gujarat HC judgment
The Supreme Court has upheld the ruling of the Gujarat High Court in the case, Asst Commissioner of Income Tax vs Saurashtra Kutch Stock Exchange, and stated that the tribunal has not committed any error of law in exercising power under Section 254(2) of the Income Tax Act and in rectifying “mistake apparent from the record”. Earlier, the exchange was not granted exemption as a charitable institution. But later, that order was recalled and the exchange was granted the request. This was challenged by the authorities. The high court rejected their arguments. The Supreme Court stated that the high court was right.
SC allows appeal of United India Insurance Company
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The Supreme Court last week allowed the appeal of United India Insurance Company against the judgment of the Madras High Court in which the high court had directed the insurance company to make payment of the compensation amounts in a motor accident death to the claimants and then to recover from the owner of the vehicle involved in the accident excess amounts paid over and above its liability under the insurance policy. The company’s liability was limited, the judgment said and added: “An unlimited or a higher liability than the statutory liability of the insurer would arise only in case there is a separate contract and payment of additional premium by the owner of the vehicle.”
RBI’s appeal against Consumer Commission dismissed
The Supreme Court has dismissed the appeals of the Reserve Bank of India and the Deposit Insurance & Credit Guarantee Corporation challenging the judgment of the National Consumer Commission criticising them for treating shabbily the small depositors. The commission had said that though the RBI has wide powers under Section 35A of the Banking Regulation Act to issue prohibitory orders and even stop payment of amounts to the depositors if the concerned bank was not functioning properly, it did not give a final decision for years. Therefore depositors do not get back the money for a long time. The invocation of the deposit insurance also did not benefit the depositors. They would be entitled to get the insurance cover of up to Rs 1 lakh only when there is a winding up order or liquidation order, which apparently never comes.