Losses can't be set off after merger

A weekly selection of key court orders

When loss-making cooperative societies are merged with a profit-making one, the accumulated losses of the former cannot be set off against the profits of the latter for income tax purposes. There is no provision in the Income Tax Act which approves of it, the Supreme Court stated in its judgment in Rajasthan Ginning Mills Federation vs Dy Commissioner of IT. In this case, the state government cancelled the registration of four loss-making societies and the assets and liabilities were taken over by the federation. When the federation wanted to carry forward the losses and set them off against its profits, tax officials did not permit it, leading to the litigation. Dismissing the arguments of the federation, the court stated that first, since the merged societies ceased to exist after the amalgamation, they cannot file returns and carry forward their losses. Second, the analogy of the companies, banks and other entities which are allowed to do so cannot be applied in the case of cooperative societies as the Act did not provide for it at the time of the assessment. Cooperative societies are in a different class. Tax laws must be interpreted strictly, the court added.

Computing loss in damages suit
While computing compensation for a motor vehicle accident, the victim's salary should be taken into account minus the income tax paid by him. Voluntary contributions which are in the nature of savings like contributions to general provident fund made for the welfare of the family, house rent, repayment of loan and insurance should not be deducted. The Supreme Court stated so in its judgment, Manasvi Jain vs Delhi Transport Corporation. The court directed National Insurance Company to pay the son of the deceased Rs 16.15 lakh with six per cent interest, up from Rs 10 lakh that the Uttarakhand High Court awarded. The high court and the tribunal had not followed this principle; therefore their judgments were set aside and the appeal was allowed.

Penalty for trademark violation

The Delhi High Court has imposed punitive compensation on a firm which failed to defend itself in a trademark case moved by Atlantic Industries, a subsidiary of Coca-Cola, and registered in Cayman Islands. The foreign firm alleged that Simron Food Processors Ltd had infringed its trade name, Schweppes, for a popular beverage. The local firm did not represent itself in the court. The judgment stated that a firm which chooses to stay away from court proceedings should not be permitted to enjoy the benefits of evasion of court proceedings. It could not escape liability due to its absence. "There is a larger public purpose involved to discourage such parties from indulging in such acts of deception," the judgment said. There is a growing menace of piracy in this country and courts have started granting punitive damages when the accused party failed to show its sale figures. The party which suffered losses on account of infringement of trade mark must get compensation. It will also deter wrongdoers and like-minded persons from indulging in such unlawful activities, the high court remarked.

A question of day and night
The Delhi High Court has settled an insurance claim in favour of Weston Tubes Ltd after 18 years and asked National Insurance Company to pay enhanced compensation for the loss in fire of imported machinery on the night between May 1 and May 2, 1996. One of the bitter points of contention was about the meaning of 'day' and 'night'. Weston approached the insurer on May 1 for enhancement of the cover and it was accepted. The fire occurred the same night. The insurance company contended the policy had not come into effect. The single judge accepted the argument, among other contentions. However, a division bench reversed it and stated that "in view of the fact that the fire took place post 12 mid-night and the document produced enhances the sum assured from May 02, without time being specified thereon, the inevitable conclusion has to be that the sum assured stood enhanced from the mid-night of the intervening night of May 01 and May 02 on account of the fact that May 02 commenced at the stroke of the first second past mid-night of the intervening night of May 01 and May 02, 1996."

Judgments must give reasons
The National Consumer Commission has stated that consumer forums must give reasons for passing orders; otherwise they will not be valid. In this appeal case, National Seeds Corporation vs Dadaso Bagal, the Maharashtra state consumer commission passed an order against the corporation, upholding the compensation ordered by the district forum. However, the state commission did not give the facts or reasons for the dismissal of the corporation's appeal. The state commission should have dealt with the pleas raised by the complaining person. In several cases, the Supreme Court had asked all legal forums to give reasons for their decision. Since this directive has been violated, the national commission remitted the matter to the state commission to write a reasoned judgment.

Pestered by marketing calls on mobile
A person pestered by unsolicited marketing calls and SMS in spite of registering his phone number in the National Do Not Call Registry can seek information on the action taken by the Telecom Authority of India (Trai) against service providers but a complaint of inaction against Trai or the service provider must be taken to the consumer forum. The Central Information Commission (CIC) stated so in its judgment, Akshay Kumar Malhotra vs TRAI. In this case, a person lodged approximately, 1970 complaints of receiving unsolicited SMS and voice calls through his Vodafone connection. Effective action was taken in hardly 100 complaints. While he maintained that Trai can seek information from private companies, Trai stated that it cannot do so solely for providing it under the RTI Act. CIC ruled he can pursue his remedy in the consumer forum and TRAI should provide information available to it. But it should be kept in mind that "providing bulky, voluminous or unnecessary and huge load of information will prove detrimental and hinder the normal course of activities of Trai...Discretion and judiciousness needs to be exercised in deciding the scope and ambit of the information to be furnished."