Contract must be adhered to: SC

LEGAL DIGEST

The Supreme Court last week ruled that the dispute between a Cyprus company, Aurohill Global Commodities Ltd, and the Indian company MSTC Ltd, over the price of steel products meant for import should be arbitrated in London, according to the contract between the parties.

The procedural law will be the British Rules of Arbitration. The Indian company argued that there was no concluded contract, much less an arbitration clause.

The Supreme Court rejected this contention and said that it was for the arbitrator to decide this question. On other questions also, the arbitrator' s decision should be followed, as the parties had agreed upon international arbitration.

Blenders of tea to pay tax: SC

The Supreme Court has ruled that blending or processing of tea are different from production or manufacture and therefore a tea firm merely blending different qualities of tea would not be eligible for weighted deduction under Section 35B(1A) of the Income Tax Act.

In this case, Commissioner of IT vs Tara Agencies, the firm was an exporter of tea after blending only. It claimed weighted deduction, but the authorities denied it insisting that only those firms which produced or manufactured tea were entitled to the benefit of the provision.

The appellate tribunal as well as the Kerala High Court rejected the contention of the revenue authorities. But the Supreme Court allowed their appeal, setting aside the High Court decision.

SC dismisses HMT Ltd's appeal

The Supreme Court has dismissed the appeal of HMT Ltd against the order of the Customs, Excise & Service Tax Appellate Tribunal and ruled that the allegation that the company had misclassified its machinery and parts was correct.

The machinery included chilling plants, milk pasteurisers, pumps, separators and packing machines. The excise authorities reclassified the items, charged them new levy and imposed penalty. The tribunal had upheld the action.

Oriental insurance Ltd exonerated

If a tractor is used for non-agricultural purpose and kills a labourer in the process, the insurance company would not be liable to pay compensation awarded by the motor accident claims tribunal.

The Supreme Court thus exonerated the insurer in the judgment, Oriental Insurance Co Ltd vs Brij Mohan. In this case, the labourer was travelling on a trolley attached to a tractor, which was used for digging earth. Owing to rash driving, he was thrown out of the vehicle, grievously injuring his gall bladder and left thigh.

The tribunal awarded Rs 1.96 lakh to him as compensation. The insurance company argued in the Supreme Court that the trolley was not insured and the labourer was a gratuitous passenger who did not have the benefit of insurance.

Moreover, the tractor was not being used for agricultural purpose, which was in violation of the insurance contract, assessment. The Supreme Court accepted these arguments.

IT dept's appeal dismissed

The Supreme Court last week dismissed the appeal of the Commissioner of Income Tax, Chennai, against the ruling of the Madras High Court in the assessment of Alagendran Finance Ltd.

According to the Supreme Court, for computing the period of limitation envisaged under Section 263 (2) of the Income Tax Act, the time would run from the date of the order of assessment and not from the order of reassessment.

In this case, the commissioner invoked the revisional jurisdiction beyond the period of limitation, and therefore the entire proceeding was invalid.