Page 14 - Banking Finance June 2017

LEGAL UPDATE

LEGAL

CASES
CASES
CASES
CASES
CASES

Tax liability after amal- Business Correspondence is not binding
The Supreme Court sets aside the judgment of the Madras High Court and two
gamation lower courts in a dispute between Vedanta Ltd and Emir-
McDowell Co vs. CIT: The sick com- ates Trading Agency, ruling that there was no concluded
pany, Hindustan Polymers Ltd (HPL), contract between the parties.
was amalgamated with McDowell.
Emirates wanted phosphoric acid from Vedanta and com-
HPL owed a munications followed over the quantity and duration of sup-
lot of money
ply. It also bid in response to the international tender pub-
to banks and lished by Bangladesh Chemical Industries Corporation as-
financial in- suming that the supplies will be available from Vedanta. As
stitutions in- Vedanta denied of supplies, Emirates' performance guarantee was forfeited and
cluding it suffered other losses.
waiver of interest. Invoking Section
72A of the Income Tax Act, the in- The breach of contracts was accepted in lower courts Vedanta had told the dis-
terest was shown as expenditure by trict judge and appellate courts that there were only communications regarding
HPL. According to that provision, the proposals and counter-proposals but they were not accepted and hence no con-
company which takes over the sick tract was signed, stamped and confirmed. But those courts did not agree.
company is allowed to set off losses Vedanta appealed to the Supreme Court reiterating its stand which was ac-
of the amalgamated company as its cepted.
own losses, subject to certain condi-
tions. Over 300 cases under Benami Act
The assessing officer treated the in- After demonetization, the Prime Minister in a recent meeting had directed the
come at the hands of the company tax department to take stringent action against
and adjusted it from the accumu- benami owners who were identified during Op-
eration Clean Money.
lated losses. McDowell challenged it
before the tribunal which ruled in its Operation Clean Money is the government's on-
favor, stating income was that of going exercise, aimed to detect black money gen-
HPL, which was a different entity. eration in the system, after demonetization. Act-
But the Karnataka High Court held ing on the directive, the Central Board of Direct Taxes has constituted 30 special
that the tribunal was wrong in treat- units in 16 jurisdictions. The special unit will comprise four I-T officials headed by
ing the waiver of interest as not in- additional commissioner of the respective zone.
come of McDowell. The company's
According to sources, the tax department has identified over 300 cases which
appeal was dismissed.
could face action under the Benami Transactions (Prohibition) Act.

14 | 2017 | JUNE | BANKING FINANCE

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