Developers of housing projects with commercial complexes imbedded in them can claim deduction of 100 per cent of profits subject to certain conditions. The income tax authorities have been denying this benefit so far though several high courts had granted it to the builders. The tax authorities appealed against each of the high court judgment to the Supreme Court. In one sweep, the court has dismissed all the appeals and upheld the high court decisions in the judgment, CIT vs Sarkar Builders.
The tax authorities denied the benefit arguing that they were not "housing projects" inasmuch as some commercial activity was also undertaken there, like shops, clinics, offices of lawyers and chartered accountants. The benefit of the judgment will go to builders who finished their projects on or after April 1, 2005, though the local authorities might have sanctioned them much earlier, and the construction started before that date.
The relevant provision, section 80IB (10)(d) of the Income Tax Act, was amended prospectively on that date. The dispute was over a condition inserted in 2005 stipulating that the built-up area of commercial establishments in the housing projects would not exceed three per cent of the aggregate built-up area of the housing project or 5,000 sq feet, whichever was higher. The court ruled that the housing projects with commercial elements could claim the deductions prospectively.
The contract between an authority and its contractor cannot be linked "back-to-back" with the sub-contractors of the contractor, Supreme Court has stated in its arbitration judgment, Ircon International Ltd vs Vinay Heavy Equipment. In this case, Ircon was a successful tenderer for building roads in an industrial complex in Tamil Nadu. It sub-contracted two packages of work to Vinay firm.
The latter did not complete its part, leading to two arbitration cases, Ircon wanted the authority to make the payment to it while the sub-contractor wanted its payment from Ircon. The latter said it would pay the dues when it received payment from Ircon, arguing that it was a back-to-back contract. The arbitrator did not agree with it and gave the award in favour of the sub-contractor. He ruled that Ercon, was primarily liable to its sub-contractor, rejecting the argument of back-to-back liability.
Ercon appealed to the Madras High Court, but both the single judge and the division bench dismissed its petition. Supreme Court affirmed the high court view starting that "in the absence of a covenant in the main contract to the contrary, the relationship between the employer and the main contractor on the one hand and between the sub-contractor and the main contractor on the other will be quite distinct and separate."
Road victim can choose who will pay
When a person suffers injuries in a road accident due to the combined negligence or wrong-doing of others, the victim can sue any one of the guilty persons and that person is bound to pay the full compensation. The victim can choose the person against whom he wants to make the claim, weighing that person's capacity to pay. This rule of torts was reiterated by Supreme Court last month in its judgment, Khenyei vs New India Assurance.
This was a group of appeals by victims. In one typical case, the victim was injured in a collision between a bus, insured by New India, and a trailer truck. The liability for compensation was disputed by all the parties including the insurer. The judgment summed up the law on the subject thus: i) the owner, driver and insurer of one of the vehicles can be sued and it is not necessary to sue the owner, driver and insurer of both the vehicles.
The claimant may implead the owner, driver and insurer of both the vehicles or anyone of them. (ii) There cannot be apportionment of liability of the guilty persons. In case all of them are sued, the claims tribunal shall decide the issue. After satisfying the demand of the victim, the guilty persons can sue each other and recover their entitlements.
Taxmen lose case against Lufthansa
The Delhi High Court last week dismissed the appeal of the Director of Income Tax against Lufthansa Cargo India Ltd which had paid for technical services from a German firm. The firm wet-leased four jets and it was granted the licence by the DGCA to operate them on international routes only. The aircraft were not used by any other airline in India. Consequently, there were no facilities in India for their overhaul and repairs.
However, according to DGCA directives various components and the aircraft themselves had to undergo periodic overhaul in workshops authorised for the purpose by the manufacturer as well as duly approved by the DGCA. The overhaul was done by another firm in Germany. The revenue authorities noticed that no tax was deducted at source on payments to the German unit though the payments were in the nature of "fees for technical services" defined in section 9(1)(vii)(b) of the Income Tax Act.
They rejected the firm's plea that the payments for repairs were incurred for earning income from sources outside India and therefore exempted. The tax tribunal and the high court ruled that the firm was right stating that "the operations were abroad, and the expenses towards maintenance and repairs payments were for the purpose of earning abroad."
Insurer to pay for wrong weather data
The National Consumer Commission, last week, directed ICICI Lombard General Insurance Co to settle the claims of 73 farmers of Durg district of Chhattisgarh who had suffered wheat crop damage due to reliance on wrong weather data. They were covered by the Pilot Weather Based Crop Insurance Scheme.
The insurance premium is paid in equal proportion by the central and state governments. The scheme was devised to protect farmers from the vagaries of the weather, especially the availability of the requisite moisture and ambient temperature, all through the agricultural operations from sowing to harvest.
Under the scheme, ICICI is responsible for establishing and operating weather centres for monitoring of the temperature and rain parameters for the purposes of determination of loss. The farmers complained that the insurer gave them a "manipulated chart" relating to temperature and they suffered losses.
The response of the company was scant, "except bland denials". It did not even explain the basis of calculations adopted by it for rejection of the claims of these farmers. So the commission directed the authorities to settle the claims within three months on the basis of the Indian Meteorological Department data of the relevant period.
The tax authorities denied the benefit arguing that they were not "housing projects" inasmuch as some commercial activity was also undertaken there, like shops, clinics, offices of lawyers and chartered accountants. The benefit of the judgment will go to builders who finished their projects on or after April 1, 2005, though the local authorities might have sanctioned them much earlier, and the construction started before that date.
The relevant provision, section 80IB (10)(d) of the Income Tax Act, was amended prospectively on that date. The dispute was over a condition inserted in 2005 stipulating that the built-up area of commercial establishments in the housing projects would not exceed three per cent of the aggregate built-up area of the housing project or 5,000 sq feet, whichever was higher. The court ruled that the housing projects with commercial elements could claim the deductions prospectively.
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Claim of back-to-back contract rejected
The contract between an authority and its contractor cannot be linked "back-to-back" with the sub-contractors of the contractor, Supreme Court has stated in its arbitration judgment, Ircon International Ltd vs Vinay Heavy Equipment. In this case, Ircon was a successful tenderer for building roads in an industrial complex in Tamil Nadu. It sub-contracted two packages of work to Vinay firm.
The latter did not complete its part, leading to two arbitration cases, Ircon wanted the authority to make the payment to it while the sub-contractor wanted its payment from Ircon. The latter said it would pay the dues when it received payment from Ircon, arguing that it was a back-to-back contract. The arbitrator did not agree with it and gave the award in favour of the sub-contractor. He ruled that Ercon, was primarily liable to its sub-contractor, rejecting the argument of back-to-back liability.
Ercon appealed to the Madras High Court, but both the single judge and the division bench dismissed its petition. Supreme Court affirmed the high court view starting that "in the absence of a covenant in the main contract to the contrary, the relationship between the employer and the main contractor on the one hand and between the sub-contractor and the main contractor on the other will be quite distinct and separate."
Road victim can choose who will pay
When a person suffers injuries in a road accident due to the combined negligence or wrong-doing of others, the victim can sue any one of the guilty persons and that person is bound to pay the full compensation. The victim can choose the person against whom he wants to make the claim, weighing that person's capacity to pay. This rule of torts was reiterated by Supreme Court last month in its judgment, Khenyei vs New India Assurance.
This was a group of appeals by victims. In one typical case, the victim was injured in a collision between a bus, insured by New India, and a trailer truck. The liability for compensation was disputed by all the parties including the insurer. The judgment summed up the law on the subject thus: i) the owner, driver and insurer of one of the vehicles can be sued and it is not necessary to sue the owner, driver and insurer of both the vehicles.
The claimant may implead the owner, driver and insurer of both the vehicles or anyone of them. (ii) There cannot be apportionment of liability of the guilty persons. In case all of them are sued, the claims tribunal shall decide the issue. After satisfying the demand of the victim, the guilty persons can sue each other and recover their entitlements.
Taxmen lose case against Lufthansa
The Delhi High Court last week dismissed the appeal of the Director of Income Tax against Lufthansa Cargo India Ltd which had paid for technical services from a German firm. The firm wet-leased four jets and it was granted the licence by the DGCA to operate them on international routes only. The aircraft were not used by any other airline in India. Consequently, there were no facilities in India for their overhaul and repairs.
However, according to DGCA directives various components and the aircraft themselves had to undergo periodic overhaul in workshops authorised for the purpose by the manufacturer as well as duly approved by the DGCA. The overhaul was done by another firm in Germany. The revenue authorities noticed that no tax was deducted at source on payments to the German unit though the payments were in the nature of "fees for technical services" defined in section 9(1)(vii)(b) of the Income Tax Act.
They rejected the firm's plea that the payments for repairs were incurred for earning income from sources outside India and therefore exempted. The tax tribunal and the high court ruled that the firm was right stating that "the operations were abroad, and the expenses towards maintenance and repairs payments were for the purpose of earning abroad."
Insurer to pay for wrong weather data
The National Consumer Commission, last week, directed ICICI Lombard General Insurance Co to settle the claims of 73 farmers of Durg district of Chhattisgarh who had suffered wheat crop damage due to reliance on wrong weather data. They were covered by the Pilot Weather Based Crop Insurance Scheme.
The insurance premium is paid in equal proportion by the central and state governments. The scheme was devised to protect farmers from the vagaries of the weather, especially the availability of the requisite moisture and ambient temperature, all through the agricultural operations from sowing to harvest.
Under the scheme, ICICI is responsible for establishing and operating weather centres for monitoring of the temperature and rain parameters for the purposes of determination of loss. The farmers complained that the insurer gave them a "manipulated chart" relating to temperature and they suffered losses.
The response of the company was scant, "except bland denials". It did not even explain the basis of calculations adopted by it for rejection of the claims of these farmers. So the commission directed the authorities to settle the claims within three months on the basis of the Indian Meteorological Department data of the relevant period.