The Supreme Court held last week that the loss claimed by a company on account of fluctuation in the rate of foreign exchange as on the date of the balance sheet is allowable as expenditure under Section 37 of the Income Tax Act. The court stated so in the appeal case, ONGC vs Commissioner, where the argument of ONGC was accepted and the view of the authorities was rejected. The judgement also held that ONGC was entitled to adjust the actual cost of imported capital assets, acquired in foreign currency, on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates pending actual payment of the varied liability. On both counts, the court allowed the appeal of ONGC.
Damages based on bill of lading
Compensation for the value of goods lost or damaged in transit can be claimed only if the nature or the value of the goods has been declared by the shipper before shipment and inserted in the bill of lading. The valuation should be according to the bill of lading, the Supreme Court stated last week in the judgment, Contship Container Lines Ltd vs D K Lall. In this case, the Indian exporter packed iron furniture and miniature paintings in different cartons and put them in one container and sent them to two different Spanish customers through a vessel belonging to Contship.
One out of 121 cartons containing paintings was not delivered, leading to claims against the insurance company and the carrier. The National Consumer Commission granted compensation against the carrier, but not against the insurance company. It went by the packages mentioned in the packing list. Contship appealed to the Supreme Court. It ruled that according to Rule 5 of Article IV of the Carriage of Goods by Sea Act, the bill of lading was the only document on the basis of which compensation could be determined. The Supreme Court therefore reduced the compensation granted by the commission.
Appeal on lockout dismissed
The Supreme Court last week dismissed the appeal of Empire Industries Ltd which had declared a lock-out in its factory, Garlick Engineering at Thane, in 1992 against the order of the Maharashtra Government. The Bombay high court had dismissed its appeal earlier and it lost in the Supreme Court also. It ruled that the state government was competent to prohibit the closure of the factory as the issues raised by the workers and the management had already been referred to the industrial tribunal under the Industrial Disputes Act.
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HC should not set aside arbitrator’s award
The Supreme Court reiterated the principle that a high court should not set aside an arbitrator’s award by examining the facts once again. In this judgement, O P Pathrose vs State of Kerala, the high court quashed the findings of the arbitrator. The contractor, who built a canal, appealed to the Supreme Court. It overruled the high court, observing that “the unreasonableness of an award is not a matter for the court to consider unless the award is preposterous and absurd.”
State cannot impose tax on vehicles used during production
A division bench of the Bombay high court has ruled in the case of Tata Motors Ltd that the Maharastra government could not impose tax on its motor vehicles used by the vehicle manufacturer exclusively within its premises for purposes related to production. The regional transport officer at Pimpri Chinchwad had issued 173 demand notices to the Tatas demanding tax on more than 150 vehicles with interest retrospectively. The authorities contended that the vehicles were being used in ‘public places’. The company paid Rs 24 lakh under protest, but argued that its factory was not accessible to the public and the vehicles in question were being used for transportation of materials and equipment related to manufacturing purposes. The high court accepted the view of the company, quashed the demand notices and asked the government to refund the amount paid under protest with interest upon it.
Patent authority told to accept application
The Delhi high court has asked the patent authorities to consider the application of Swedish company Telefonaktiebolaget LM Ericsson for patent titled “A Method and Apparatus For Supporting Content Purchases Over a Public Communication Network.” The company’s application was rejected without reasons twice and when it moved the high court, the central government merely stated that the company had “abandoned” its claim. Government counsel were absent most of the time to explain the issues raised by the firm. Therefore, the high court asked the authorities to consider the application and hear the company before taking any decision.
Pay interest on refund in cases of pre-paid taxes, I-T dept told
The Delhi high court last week ruled in the case, Commissioner of Income Tax vs Sutlej Industries, that the authorities have a duty to pay interest on refund in cases of pre-paid taxes, including that paid on self-asssessment. It reversed the view of the Commissioner of Income Tax (Appeals) who maintained that interest was not payable. The high court stated that interest was payable in the case of self-assessment tax from the date of payment of self-assessment tax till the date of grant of refund.
This was evident on an analysis of Section 244A of the IT Act as it is seen that where “refund of any amount” becomes due to the assessee, the assessee is entitled to simple interest thereon. Moreover, the high court stated there was also a statutory liability on the revenue authorities to pay the interest on such refund on general principles to pay the interest on sums wrongfully retained.