The Supreme Court last week dismissed the appeal of Bangalore Club seeking exemption from payment of income tax on the interest earned in the fixed deposits kept with certain banks, which were corporate members of the club, invoking the “doctrine of mutuality”. It paid tax on interest earned on fixed deposits kept with non-member banks. The assessing officer rejected the claim holding that there was lack of identity between the contributors and the participators to the fund. He treated the amount received by the club as interest as taxable business income. The appellate authority reversed the finding and stated the doctrine applied to the club. The tribunal upheld that view. But the Karnataka High Court found the view of the assessing officer correct. The club appealed to the Supreme Court which ruled that the doctrine did not apply to the club. “A façade of a club cannot be constructed over commercial transactions to avoid liability to tax,” the judgment said.
Disclosure of payment default
If an exporter, insured by the Export Credit Guarantee Corporation, does not disclose default in payment by foreign buyers, he cannot make claim under the policy, the Supreme Court ruled last week in the case of Export Credit Corpn vs Garg Sons International. The exporter in this case purchased a policy for insuring shipment to Natural Selection Ltd of UK, and the buyer committed default in making payments. The exporter sought enhancement of credit limit to the tune of Rs 50 lakh with respect to the defaulting foreign importer. Subsequently, he presented 17 claims. The insurer rejected all the claims on the ground that the insured did not ensure compliance with the clause which stipulated 30 days within which the insurer is to be informed about any default. The exporter moved the state consumer commission and later the National Consumer Commission. The latter ordered payment in some of the claims. Both parties moved the Supreme Court. It ruled that the exporter had failed to comply with the rule to inform the insurer and therefore allowed claim only in two claims where the information was given.
SBI manager’s dismissal upheld
In a departmental inquiry, the disciplinary authority is expected to prove the charges on “preponderance of probability” and not on proof beyond reasonable doubt as in a criminal case, the Supreme Court stated last week while upholding the dismissal of a manager of State Bank of India and setting aside the judgment of the Allahabad High Court. The high court had ruled that the dismissal was illegal as witnesses were not examined and documents were not given to the officer. He was accused of a dozen charges of serious nature. The disciplinary authority found that the charges were right. But he moved the high court without resorting to alternative remedies. The Supreme Court stated that when the inquiry officer has examined some 40 documents and was convinced of financial irregularities, there was no need for witnesses. The Supreme Court asserted in the case, SBI vs Narendra Kumar, that the high court should not act as an appellate authority and examine facts in detail when the inquiry is conducted without fault.
Brand name matters for excise
Cookies with a brand name sold loose from branded pouches cannot claim central excise exemption meant for small-scale units, the Supreme Court stated in the appeal case, Commissioner of Central Excise vs Australian Foods India, Chennai. The company, which is engaged in the manufacture and sale of cookies from branded retail outlets of Cookie Man, argued that sale of its cookies in loose form that do not physically bear a brand name from branded outlets would be exempt from the levy. The commissioner and the Customs, Excise & Service Appellate Tribunal ruled that unless the goods bear the brand name or logo, the exemption cannot be denied. On appeal, the Supreme Court reversed the finding and observed: “The store’s decision to sell some cookies without containers that are stamped with its brand or trade name does not change the brand of the cookies.”
Order to shift bio-medical waste
The Delhi High Court last week directed the state government and Synergy Waste Management Ltd to shift the biomedical waste disposal facility operating 30 metres from a residential colony of the capital to some other place. The site suitable for shifting of the facility would be identified by the Chief Secretary within three months.
Bio-medical waste is required to be disposed of in terms of the Bio-medical Waste (Management and Handling) Rules, 1998. On a complaint by residents, a committee was set up which recommended shifting of the facility. The company, which has a collaboration agreement with the government, moved the high court against it arguing that there was no hazard and the contract cannot be breached. It also submitted that many other hospitals in Delhi are committing the same violations. The high court rejected these contentions.
