Bigger the unit, lesser incentive benefit

The Supreme Court last week set aside the judgment of the Rajasthan which had granted 75 per cent rebate on central and state sales tax to Binani Cements Ltd based on an incentive scheme under the state industrial policy. The scheme exempted certain industrial units from payment of tax on the sale of goods manufactured by them within the state. It specified and categorized the districts, types of units, the extent of exemption from tax, the maximum exemption available in terms of percentage of fixed capital investment. The units were classified as new, large-scale, prestigious and very prestigious. The dispute was over the classification and consequent rate of benefit. The company had applied to the state-level screening committee claiming benefit of exemption at 75 per cent under the scheme. The committee rejected the claim, observing that since the assessee company is a large-scale unit, it was entitled only to 25 per cent exemption. On appeal, the High Court held that the company was entitled to 75 per cent. The Commercial Tax Officer appealed to the Supreme Court.

Loan interest not capital investment

The Supreme Court has held that pre-operative expenses in setting up or modernisation of a new unit by payment of interest on loans could not be included in the "fixed capital investment" under the Uttar Pradesh Trade Tax. Therefore that amount would not be eligible for tax benefit. The court stated so while partly allowing the appeal of the Commissioner of Trade Tax against the judgment of the Allahabad High Court in its dispute with Bhushan Steel Ltd. However, the apex court rejected the revenue department's argument that transformer and other equipment installed for regulating voltage for running machinery would be covered by the term fixed capital investment. So it would be eligible for tax benefit.

Delay in filing complaint on cheques

When the six-month period of limitation to file a complaint of bounced cheque is calculated the day on which the cheque is drawn should be excluded, the Supreme Court ruled in the case, Rameshchandra vs State of Gujarat. In this case, the bouncer cheque was drawn on December 31 and it was presented on June 30, just when the period was expiring. When the payee filed a complaint under Section 138 of the Negotiable Instruments Act for issuing the cheque without sufficient balance, the drawer defended by arguing that the six-month limit was exceeded and therefore the complaint should be dismissed. However, the High Court and the Supreme Court did not agree. The Supreme Court stated that the period begins one day after the date on the cheque. "The six months would expire one day prior to the date in the corresponding month and in case no such day falls, the last day of the immediate previous month," the judgment clarified.

Damages for 'functional disability'

A person who suffers 'functional disability' in a road accident should be compensated according to the percentage of the handicap, the Supreme Court stated last week while dealing with the Motor Vehicles Act. In this case, G Dhanasekar vs Metropolitan Transport, the professional driver of a tourist taxi met with an accident and was handicapped by 35 per cent. He could not pursue his profession. Taking into account the functional disability, the Supreme Court raised the compensation from Rs 3.20 lakh decided by the High Court to Rs 6.13 lakh. It relied upon an earlier case in which a 24-year-old cine artist suffered disfigurement of her face. The court had held that the functional disability in her case was 100 per cent as she was knocked out of her glamourous career.

Regularisation of casual labourers

The Supreme Court last week stated that while regularising casual employees, there should not be any pick and choose policy. Gobind Kumar, who was engaged as a casual typist in 1986 and continued to work till 1990 for the Food Corporation of India in Darbhanga, was not regularised while more than 70 others on par with him were taken in. He raised a dispute under the Industrial Disputes Act which was referred to the central government cum Industrial Tribunal. It declared that the termination was illegal and he was directed to be regularised with 50 per cent back wages. The corporation challenged the decision before the High Court. The single judge dismissed the appeal, but the division bench set aside the tribunal's order. On appeal by the employee, the Supreme Court restored the award of the tribunal.

SC orders resumption of arbitration

In a 10-year-old arbitration dispute between Voltas Ltd and Rolta India Ltd, the Supreme Court last week set aside the view of the arbitrator that the counter-claim of Rolta was barred by the rule of limitation. It asked the arbitrator to proceed with the counter-claim. The dispute arose over the termination of a contract in 2004 by Rolta to construct certain buildings by Voltas in Mumbai. The Bombay High Court appointed an arbitrator in 2006 and since then the dispute was tied up on the question of limitation. The arbitrator rejected the counter-claim on the ground of limitation. On appeal, the High Court decided in favour of Rolta. Voltas moved the Supreme Court which modified the High Court order and allowed the arbitrator to go ahead and hear the counter-claim.

Surgical cotton is not cotton

Surgical cotton, also known by its medical term absorbent cotton wool, and cotton are commercially different commodities as they have distinctive names, character and use, the Supreme Court declared last week in a dispute over sales tax benefit on the two commodities. However, the Rajasthan government has issued notifications putting them together for tax purposes. Therefore, surgical cotton would get tax rebate in the state, the court ruled in the appeal of a manufacturer of surgical cotton, M/s Mamta Surgical Cotton Industries.