Page 20 - Banking Finance October 017

LEGAL UPDATE

LEGAL

CASES
CASES
CASES
CASES
CASES

Assets to be auctioned Sec 35 benefit for Maruti R&D centre

despite appeals Section 35 (2AB) of the income tax Act provides for deduction of a sum equal to
two times the expenditure incurred for scientific research
Similar to the case of Citicorp Finance on in-house R&D facilities as approved by the prescribed
(India) authority, which in this case was the Department of Sci-
Ltd vs entific & Industrial Research.
Manoj
Ra y , The provision was introduced to encourage the establish-
there ment of R&D facilities in the country and also to encourage investment in inno-
vation. Maruti Suzuki India Ltd invested Rs. 395 crore in the Rohtak project but
were 4
other cases with the Calcutta High the department did not grant the necessary approval for claiming deduction,
Court, in which borrowers failed to and it led to a petition in the high court. Resultantly, the High Court ordered for
repay the amounts though the arbi- a fresh certification for R&D expenditures and consequential deductions under
Section 35 (2AB).
trators directed them to do so.
Hence, the companies were to ap- Insurance covers include transfer of vehicle
point receivers and sell assets though
Under the Motor Vehicles Act and the Workmen's Compensation Act, if a motor
appeals against the award were vehicle met an accident and has been transferred
pending and as the assets hypoth- to another person, the insurance company is liable
ecated to them will suffer deprecia-
to pay compensation to third parties. In the case of
tion in the interim period, it should
Firdaus vs Oriental Insurance Company, Parvez Khan
be auctioned to save loss, without
waiting for the appeal decision. - who was driving a vehicle -vehicle-driver was killed
as and when hit by a truck. The deceased person
The High Court allowed the plea and was employed by the owner and entitled to compensation.
receivers were appointed for sale of
assets and the sale proceeds will be The insurance company appealed to the Allahabad High Court, arguing that the
vehicle had been transferred to another person and therefore it was not liable
kept with the court and not given to
the finance companies. If the bor- to pay compensation, which was accepted by the High Court.
rowers succeed in the appeals On appeal by the widow, the Supreme Court emphasised that "even if it is as-
against the awards, they will be ad- sumed for the sake of argument that vehicle was transferred to another person
justed. The court asserted that it has there will be no consequence with regard to liability of Oriental Insurance to
the power under the Arbitration Act pay compensation". The court further explained that Section 157 of the Motor
to pass interim order for sale of the Vehicles Act was clear on the liability of the insurer and it did not matter who
assets till the appeals are decided. owned the vehicle at the time of the accident.

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