Tax on company guest houses

LEGAL DIGEST

The Supreme Court last week dismissed the appeal of Britannia Industries Ltd against the Commissioner of Income Tax, Kolkata, claiming allowance for the maintenance of its guest house.

The company argued that the guest house was used in connection with the business of the company and therefore it was entitled to concessions under Section 37 of the Income Tax Act.

The Supreme Court noted that different high courts have expressed divergent views on the question of tax liability for company guest houses. The provisions relating to this subject in the Act have been amended several times, adding to the confusion.

The Supreme Court said, "In our view, the intention of the legislature appears to be clear and unambiguous and was intended to exclude the expenses towards rents, repairs and also maintenance of the premises used for the purposes of a guest house of the nature indicated in Section 37(4)." The decision was with reference to the law obtaining in that particular assessment year.

SC upholds excise exemption

The Supreme Court last week referred to a Constitution Bench certain questions about the eligibility for exemption under Chapter X of the Central Excise Rules. This is because of conflicting views in two sets of judgments in the recent past.

In Thermax Ltd vs Collector of Customs (1992) and Collector vs JK Synthetics (2000) cases, goods produced in one unit and transferred to another unit for manufacture were given the benefit of exemption under a 1994 notification.

A diametrically opposite view was taken in the Kirloskar Brothers vs Collector (1997) in which it was held that no exemption can be granted on a strict reading of the procedure in Chapter X. Therefore, the present bench wanted a larger bench to take a final view in the new case, Commissioner vs M/s Hari Chand.

In this case, the assessee firms manufactured chewing tobacco (final product) from kimam mixture. Kimam is manufactured in Delhi and sent to its units in UP and Himachal. The excise tribunal followed the Thermax decision and granted relief to the company, leading to the appeal.

Pensioners' plea upheld

The Supreme Court has dismissed the appeals of Air India, the Cabin Crew Association and other employees' associations of the carrier challenging the Bombay High Court decision in favour of retired employees.

According to the pensioners, the amended pension scheme of the government carrier will result in their paying additional contributions and they would get reduced pension. After retirement, the scheme cannot be changed against their interests. The high court upheld this view.

The Supreme Court, while upholding the high court ruling, underlined that the Life Insurance Corporation having accepted the annuity and having paid monthly pension, can neither reduce the annuity nor refund it to the trust to the detriment of the retired employees since the annuity has already been crystallised and no change can be made by amending the scheme.