The Supreme Court has set aside the judgment of the Bombay High Court regarding the interpretation of Sections 80-AB and 80-HHC of the Income Tax Act in the case involving Shirke Construction Equipment Ltd. The high court had formulated two questions in the case and answered them both against the tax authorities.
It had held that unabsorbed business losses of the earlier years could not be set off against the profits from exports. It had also held that 80-HHC was independent of Section 80-AB and the latter did not control Section 80-HHC. These rulings were held wrong by the Supreme Court in the appeal of the Commissioner of Income Tax.
SC ruling on entertainment tax
The Supreme Court has held that different rates of entertainment tax on films cannot be imposed on the basis of difference in language alone. In this case, Aashirwad Films vs Union of India, a distributor of Hindi films in Hyderabad, moved the Supreme Court challenging the constitutionality of a notification issued by the Andhra Pradesh government levying different rates of entertainment tax.
He also challenged the validity of Andhra Pradesh Entertainment Tax Act 1939 under which the rate of entertainment tax on Telugu films was fixed at 10 per cent while on non-Telugu films it was 24 per cent. Rpresentations to withdraw the tax were rejected by the state government.
According to the distributor, discrimination on the basis of language violated the right to equality guaranteed under Article 14 of the Constitution.
The state government, however, opposed the petition on the ground that the state government enjoyed great latitude in the field of imposition of entertainment tax.
While imposing a cost of Rs 50,000 on the state of Andhra Pradesh, the court said: It has been brought to our notice that some states have been making hostile discriminations at the instance of the distributor of the films produced in local languages. Andhra Pradesh imposed the said tax on the said basis which is per se discriminatory in nature. We are therefore of the opinion that the impugned levy cannot be sustained being discriminatory in nature. It is struck down accordingly.
UP govts appeal dismissed
The Supreme Court has dismissed the appeal of the Uttar Pradesh government against the judgment of the Allahabad high court which went in favour of Deepak Fertilisers & Petrochemical Corporation Ltd. The government imposed trade tax on phosphatic fertilisers by changing the notification and applying it retrospectively. The high court struck it down. The government appealed against the verdict.
Upholding the high court decision, the Supreme Court stated that according to the Trade Tax Act, an exemption granted to the firm could not be withdrawn by a subsequent notification with retrospective effect.
No notification having the effect of increasing the tax liability shall be issued with retrospective effect. Moreover, withdrawing the benefit from potassium phosphatic fertilisers alone, leaving out other similar chemical compounds, would amount to discrimination, the Supreme Court said.