The Supreme Court has disapproved of the view of the Guwahati High Court and upheld the opinion of the Calcutta High Court on the question of applicability of Section 80HHC deduction under the Income Tax Act for companies which do both agriculture and trade.The tax authorities had appealed to the Supreme Court against the high court judgments in a large batch of companies engaged in growing, manufacturing and exporting tea.

This composite income is covered under Income Tax Rule 8(1). It provides that 40 per cent of the composite income arrived at on making of the apportionment shall be deemed to be income liable to tax.

In this batch of cases, the question was, at what stage, Section 80HHC deduction is to be allowed — before the 60: 40 apportionment under Rule 8(1) or from 40 per cent profits on sales taxable as business income? The assessees claimed that deduction against the entire composite income.

The authorities took the view that the deduction can be allowed after the 60:40 apportionment. The Supreme Court allowed the appeals of the Commissioner of Income Tax and upheld the latter view.

Owner has no control over government requisitioned vehicle

When a private motor vehicle requisitioned by the government meets with an accident, the insurance company would not be liable to pay compensation, the Supreme Court has held in the case, National Insurance Co vs Deepa Devi.

In this case, the magistrate of Rampur, Himachal Pradesh, requisitioned a vehicle for election purpose. It killed a boy. The heirs sued the insurer. The tribunal rejected the liability of the insurance company. The high court, however, held that it was liable.

The Supreme Court allowed the appeal of the company, holding that the owner had no control over the vehicle once it was requisitioned and therefore the terms of the insurance contract was not applicable to the owner.

Nirlex Spares (P) Ltd allowed excise duty exemption

The Supreme Court has set aside the judgment of the CEGAT and allowed exemption from central excise duty to Nirlex Spares (P) Ltd, a small scale manufacturer of riderless steel healds and flat steel healds. The company was entitled to exemption granted to SSIs under a 1986 notification.

However, the excise authorities found that it was using the brand name of a marketing company and they were related persons. Therefore, they held that the assessable value was the price at which the goods were sold by the marketing company and not the price at which the goods were sold to the marketing company by the manufacturer.

The Supreme Court found that they were not related persons and ruled that the company was entitled to the benefit.

Adhunik Synthetics’ directors held liable for debt incurred

The Supreme Court has dismissed the appeal of Sunil Poddar and other directors of Adhunik Synthetics who had been held liable to repay a loan taken from Union Bank of India while they were directors of Adhunik Detergents Ltd.

The directors concerned had left the latter firm and set up the new one. However, the debt recovery tribunal held them responsible as they had stood guarantors of the old firm. This view was upheld by the Allahabad High Court and the Supreme Court.

SC upholds tribunal’s view on Mathania Fabrics case

The Supreme Court has rejected the claim of Mathania Fabrics and another firm in Rajasthan that they were not using power and therefore were entitled to excise concessions. The Customs, Excise and Service Tax Tribunal had earlier dismissed their petitions.

The companies processed cotton fabrics and they asserted that they had not used power for bleaching, mercerising, dyeing, printing, washing, drying and finishing before the fabrics were cleared.

They used power only in certain ancillary and incidental areas such as mixing of chemicals. The authorities denied the benefit claimed as power was used. The Supreme Court upheld the tribunal’s view.

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