Page 24 - Banking Finance September 2018

LEGAL UPDATE

Supreme Court tax ex- CERC decision on tariff upheld
emption ruling may lead The Supreme Court dismissed a large number of appeals by electricity consum-
ing companies in the eastern part of the country,
to fresh litigation challenging the ruling of the Appellate Tribunal for

Supreme Court ruling in favour of tax Electricity on the question of fixing tariff.
depart- The main issue was the applicability of the provi-
ment in sions of the Electricity Act of 2003 in relation to
cases that those of the Damodar Valley Corporation Act of
involve am- 1948. In this batch of judgments, led by Bhaskar Shrachi Alloys Ltd vs DVC, the
biguity in court gave weight to the new law, as did the Appellate Electricity Tribunal which
tax exemp- had earlier dismissed the companies' challenge to the tariff.
tion clause may trigger a fresh slew
of litigation. Experts said the depart- They had raised issues regarding the depreciation rate, sinking fund, debt-eq-
ment was likely to re-open similar uity ratio, return of capital investment revenue relating to afforestation and
cases that were decided with a lib- period of transition. The judgment stated that under Section 79 of the Electric-
eral interpretation of tax laws, in ity Act, it was the Central Electricity Regulatory Commission (CERC) which would
favour of the assessee. be the "appropriate commission" to determine the tariff as DVC is a corpora-
tion under the central government. It upheld the decision of the CERC.
The five-judge bench in its order put
the onus on the assessee to demon- Directors cleared in cheque bounce
strate they meet all the conditions
The Delhi High Court recently reiterated that in order to prosecute directors of
for availing any exemption. This will
mean businesses will have to be ex- a company for issuing cheques without sufficient
fund in the bank, it must be shown that they were
tra careful in planning tax exemp-
tions and holidays, experts said. "The in charge and responsibile for the day-to-day af-
fairs of the company. Merely naming them is not
burden of proof will go up and plan-
enough under the provisions of the Negotiable in-
ning will need to be carefully done," struments Act. In this case, Jwala Devi Enterprises
noted Girish Vanvari, founder, Trans-
vs Fadi El Jaouni and others, it criminal complaints
action Square, a tax consultancy were field under the Act for prosecution of directors of a company.
firm.
The magistrate issued process but on appeal, the sessions judge quashed the
The Constitutional bench's order complaints. Thereafter, the payees moved the High Court it dismissed the ap-
overruled its 21-year-old verdict that
peals stating that the accused were not stated to be signatories to the cheques.
in case of any ambiguity in a tax ex- "They cannot be roped in merely because they have been directors of the ac-
emption provision or notification, it cused company. The general averments that they were responsible for all the
must be interpreted in favour of the business dealings and for the circumstances leading to the dishonour of the
assesse claiming the benefit. cheques or that they had given any assurance as to the cheques do not suffice,"
Amit Maheshwari, partner of Ashok the judgment explained.
Maheshwary & Associates, said the
ruling effectively meant that if any Dutch firm wins patent suit
area-based exemption was available The Delhi High Court has held that an Indian firm had violated the patent of a
under direct and indirect tax laws, Dutch corporation and ordered compensation. Koninklijke Philips Electronics N.V
and if any conditions attached for alleged that it was a global corporation with a large number of patents in the
availing the exemption were not field of electronics. It alleged that Mangalam Technology and associated com-
complied, the exemption could be panies infringed upon its patent In DVD and decoding technology and demanded
denied. "The burden of proof of eli- compensation. The lndian firms maintained that major components of the DVD
gibility of exemption shall be on the players were procured from authorised licensees like Sony, MediaTek, Sanyo and
taxpayer," he added. ST Micro from China after due payment of all the taxes and customs duties.

24 | 2018 | SEPTEMBER | BANKING FINANCE