Settling differences among various high courts on the question of penalty in income- tax cases, the Supreme Court held last week that in the absence of any positive income and no tax being levied, penalty for concealment of income cannot be levied in assessments before 2002. 
 
The court clarified that the position has altered after the amendment in Section 271(1)(c) and Explanation 4(a) by the Finance Act, 2003. The court was deciding appeals from several high courts in the batch of cases, Virtual Soft Systems Ltd versus Commissioner of Income Tax. In a typical case, a company filed nil return due to depreciation and carried forward the unabsorbed depreciation to the following year. 
 
However, the authorities levied a penalty on the company for evasion of tax. The tribunal reversed that order. The authorities appealed to the high court, which accepted their argument. The company appealed to the Supreme Court, which granted a decision in its favour. It rejected the argument of the authorities that the reduction of losses had resulted in concealment of income. 
 
Duty relief 
 
The Supreme Court last week dismissed the appeal of the commissioner of Customs, Kolkata, challenging a ruling of the Customs, Excise and Service Tax Appellate Tribunal which had granted duty relief to JK Corporation Ltd. Orissa Synthetics Ltd, a division of JK Corporation, was to manufacture polyester-oriented yarn and flat yarn. 
 
It entered into a collaboration agreement with Samsung Company Ltd and Chiel Synthetics Inc, both of Korea. Cheil Synthetics Inc is said to be an associate company of the Samsung group under the laws of the Republic of Korea. The agreement was in two parts.The first provided for licence knowhow and technology while the second provided for supply of equipment as part of the necessary plant and machinery and equipment for manufacture of the yarn. The first part stipulated lump sum payment of $ 14,00,000 by JK Corporation for transfer of technology and equipment. 
 
The second part set the price of foreign equipment at $ 34,86,000 plus large amounts in DM and J Yen. After the import, the evaluation branch of the Customs decided to add the two amounts, stating that both parts of the agreement formed an integrated contract. This became a point of dispute and the tribunal delivered its ruling in favour of the JK Corporation. This was upheld by the Supreme Court. 
 
Trademark case 
 
The Supreme Court has directed a Karnataka court dealing with an intellectual property dispute between Gomzi Active and Reebok India Co to decide the case within four months. 
 
Gozmi sought permanent injunction against its rival restraining it from using the logo and the slogan I am what I am and for payment of damages and for rendition of accounts. A temporary injunction was granted. The trial court held that the disputed trade mark was not used by Gomzi. It had also not applied for registration of the trade mark till 2005. On appeal, the Supreme Court observed that the grant of interim injunction was not proper. Stating this, the court asked the trial court to decide the matter early. 
 
Proving trademark 
 
The Delhi High Court has asked an Indore-based beer-maker to prove its claim over the numerals 5000, on a petition from liquor firm Shaw Wallace, which said it held the trade mark to use the numerals. 
 
The petition challenged the right of MP Beer Products Pvt Ltd (MPBPPL), which manufactures beer under the brand, President 5000, to use the numerals. The court passed the direction after MPBPPL failed to bring any substantial evidence before the court to show that it was using the numerals since 1980, prior to Shaw Wallace, which has also been using the numerals on its various brands, including Haywards 5000 beer. 
 
Shaw Wallace, which has exclusive rights over trademark Haywards 5000 since 1983 and registered under the Copyright Act 1957, has filed a suit seeking direction from the court to the beer manufacturer to restrain it from manufacturing, selling, marketing the beer under the trademark 5000 or President 5000. 
 
Penalty limit 
 
The Supreme Court has held in R K Sharma versus Union of India that fixation of compounding amount for an offence under Section 135(1)(a) of the Customs Act need not be limited to 20 per cent of the market value of the goods. 
 
In this case, the value of the goods was Rs 8.5 lakh. The authorities imposed a compounding amount of Rs 10 lakh. The importer contested this, arguing that the maximum limit should be 20 per cent of the value. The Delhi High Court rejected this contention. 
 
On appeal, the Supreme Court observed that this was a stand taken by several importers. It held that on a fair reading of the Customs Rule 5, the crucial words were whichever is higher. The interpretation suggested by the importers was unacceptable, the Supreme Court said, pointing out that such an interpretation would render the expression whichever is higher redundant. 
 
Unitechs appeal 
 
The Supreme Court has admitted an appeal by real estate major Unitech seeking quashing of a Bombay High Court order that held it liable for undervaluing a property in Maharashtra to evade tax. 
 
The court admitted Unitech's plea seeking a stay on a direction by the government authorities to initiate prosecution proceedings against the developers on the ground that the amount paid for the property was low and understated by more than 15 per cent. 
 
Dues with UTI 
 
The Panjab University has moved the Supreme Court seeking recovery of Rs 22.53 crore from Unit Trust of India (UTI) in lieu of its investments made in 1998. While hearing the special leave petition challenging the National Consumer Disputes Redressal Commission's order that had dismissed its complaint, the court admitted the appeal. 
 
The university said it invested Rs 9.6 crore from the provident fund contributions of its employees under the open-ended UTI scheme - Institutional Investors Special fund Unit Scheme-93 (IISFUS-93) - with the option of reinvestment of dividends in 1993. However, IISFUS-93 was unilaterally terminated by the UTI, which allotted 1,90,00,000 units of Rs 10 each (totalling Rs 19 crore) to the university in lieu of the conversion of Rs 19 crore from IISFUS-93 to IIFUS-98 in 1998. While claiming that it was entitled to Rs 48.76 crore against the total number of 4,87,68,893.512 units, the university said UTI paid only Rs 30.45 crore and the balance was still due. 
 
Even under the assured 13.5 per cent per annum return for all the five years, the amount that is payable to the appellant is several crores more than Rs 30.45 crore paid to the appellant, the petition stated, adding the return was far less than the promised amount. As per the terms of the offer, UTI had guaranteed that the purchase price would not be less than Rs 10 per unit except in case of premature repurchase, which had not happened, the institution said, adding, Not a single unit was repurchased by it.