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Apex court to reconsider own judgement in 'zero tax' cases

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A division bench of the Supreme Court (SC) last week felt its earlier ruling in an income tax case was wrong and referred the question, involving ‘zero tax’ companies which make profits, to a larger bench of three or more judges. In this case, Dynamic Orthopaedics Ltd vs Commissioner of Income Tax, the private company returned income showing depreciation under Income Tax Rule 5.

The assessing officer recomputed the book profit after allowing depreciation according to Schedule XIV of the Companies Act, which was lower than under the Income Tax Rules. This raised a dispute in which the Commissioner of Income Tax (Appeals), the Appellate Tribunal and the Kerala high court took different views.

The high court allowed the appeal filed by the department holding the assessing officer was right in re-computing the book profit for the purpose of Section 115J of the Income Tax Act after allowing depreciation as per Schedule XIV to the Companies Act and not as per the rates specified in Rule 5 of the Income Tax Rules, as claimed by the assessee. The SC stated its earlier ruling on this question in the Malayala Manorama case (2008) required reconsideration. 

Former chief justice made arbitrator

The SC last week appointed former Chief Justice of India S P Bharucha as arbitrator in the dispute between Dolphin Drilling Ltd and Oil and Natural Gas Corporation. His name was suggested by Dolphin, but ONGC was against arbitration itself. However, the court appointed former judge of the Supreme Court, Sujata Manohar, as arbitrator on behalf of ONGC. According to Dolphin, it conducted drilling operations in the offshore waters of India allocated to it by ONGC. It continued its operations even after the contract period. Its complaint is that a number of invoices were not paid and it had objected to referring disputes to arbitration even while an arbitration proceeding was pending. Rejecting the ONGC contention, the court appointed the two judges as arbitrators. 

Carrier can sued by insurance firm too for deficiency of service

A constitution bench of the SC ruled last week that an insurance company and the consignor of goods can jointly sue a carrier for compensation towards deficiency in service. The court stated that an insurer cannot be precluded from recovering the compensation from the carrier as long as the complaint was jointly filed or under the power of attorney granted by the consignor. The bench was constituted to deliver a harmonised interpretation of the provisions of the Consumer Protection Act and the Carriers Act in a batch of appeals led by the case, Economic Transport Organization Charan Spinning Mills. 

Damages only if death occurred in course of employment

The SC has stated that an employer would be liable to pay compensation for personal injury or death of a worker only if it happened during an accident arising out of and in the course of his employment. In this case, Rashida Kupurade vs Oriental Insurance Company, the worker died six months after an accident. The commissioner under the Workmen’s Compensation Act imposed the liability on the insurance company.

The insurer moved the Karnataka high court, which exonerated it from the liability as there was no link between the accident which occurred earlier and the death of the worker following a heart attack. However, the high court ordered the employer to compensate the death. The employer therefore appealed to the SC. It allowed the appeal and stated that once it was held that there was no nexus between the accident and the death, the insurer and the employer were not liable to pay compensation under the law.

All directors of firm not liable in case of dishonoured cheque

The SC reiterated that every director connected with a company could not be held liable in a case of cheque which was dishonoured for want of sufficient funds in the bank. Only those who were in charge of and responsible for the conduct of the business of the company at the time of the offence under Section 138 of the Negotiable Instruments Act will be liable for criminal action, the court said in the case, National Small Industries Corporation vs Harmeet Singh. A mere bald statement that a particular director among many was responsible for the conduct of the business would not be sufficient to clamp vicarious liability on him.

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