The Supreme Court held last week that profit from Duty Entitlement Passbook Scheme (DEPB) and Duty Drawback Scheme could not be said to be profit derived from the business of an industrial undertaking eligible for deduction under Section 80-IB of the Income Tax Act. The court thus dismissed a large number of appeals in its common judgement, M/s Liberty India vs Commissioner of Income Tax. In the Liberty case, the company which manufactures fabrics and finished items, claimed deduction on the profits on account of DEPB and Duty Drawback Scheme. The authorities rejected the claim on the ground that the two benefits constituted export incentives and they did not represent profits derived from industrial undertaking. Upholding this view, the Supreme Court stated that these incentives could not be credited against the cost of manufacture of goods debited in the profit and loss account for purposes of Section 80-IA/80-IB as such remissions (credits) would constitute independent source of income.

Use of LPG for power by industry covered by ESI Act

The Supreme Court ruled last week that establishments using LPG gas for power in their manufacturing process were covered by the Employees State Insurance Act. According to the Act, establishments using power were included in the scope of the Act and must contribute to the ESI fund. Two restaurants of Bangalore, Bombay Anand Bhavan Restaurant and Cow & Cane, argued that power in the context of the Act meant electric power, and not LPG gas. The ESI authorities did not agree and issued demand notices to them. They challenged it in the Karnataka high court and failed. On appeal, the Supreme Court asserted that the law was a socially beneficial one and therefore its provisions should be liberally interpreted. In our view, the use of LPG gas satisfied the definition of power as it is mechanically transmitted and is not something generated by human or animal agency, the court said while dismissing the appeals.

Compensation in motor vehicle accident case

The Supreme Court last week referred to a larger bench the question whether an insurance company can be asked to pay the compensation awarded in a motor accident case even if it is not legally liable to pay it. In some cases, the court had been asking the insurer to pay the dependents of accident victims and recover the amount from the owner or driver of the vehicle. This was done mostly in cases where the dependents were too poor and incapable of suing the owner or driver. In such cases, the court used its extraordinary power under Article 142 of the Constitution to do complete justice in the facts and circumstances of those cases. This was done on humanitarian considerations. Now the court, in the case, National Insurance Co Ltd vs Parvtheneni, wants to review the use of this power and therefore the issue has been placed before the Chief Justice of India for reconsideration.

Staff can be transferred from one department to another

The Supreme Court has ruled that employees of a factory can be transferred from one department to another without any change in the s ervice conditions. The industrial court in Surat had held in the case, Ashok Jha vs Garden Silk Mills, that the transfer of a batch of workers from the crimping department of the mills to its twisting department violated Section 42(2) of the Bombay Industrial Relations Act. The Gujarat high court had quashed the finding. The workers appealed to the Supreme Court, but it dismissed the appeal.

Conditions for defending suit should not be burdensome

The Supreme Court has stated that the conditions imposed for permission to defend a suit filed under Order XXXVII of the Code of Civil Procedure should not be unduly onerous. If the terms are so burdensome, the defendant would not be able to defend himself for all intent and purpose. Each case, however, has to be considered on its own merits. The court stated so in the judgement, Fixity Packaging Industries Ltd vs Udyen Jain. In this case, the civil court asked the firm to deposit Rs 2 crore while the dispute was over Rs 2.60 crore. The Bombay high court upheld the order as it felt that the firm had no defence following the dishonour of its cheques. However, the apex court set aside the high court order as too harsh and reduced the deposit to Rs 1.10 crore.

Consumer courts cannot entertain telecom disputes

The Supreme Court has held that consumer courts cannot entertain disputes relating to telecom services under the Consumer Protection Act, 1986. The judgement has come as a much awaited relief to telecom operators which are being dragged to consumer courts for deficiency in services. A Bench headed by Justice Markandey Katju said, "in our opinion when there is a special remedy provided in Section 7-B of the Indian Telegraph Act regarding disputes in respect of telephone bills, than the remedy under the Consumer Protection Act is by implication barred." It said Section 7-B of the Telegraph Act provided for appointment of an arbitrator by the Centre for determination of the disputes and the award of the arbitrator should not be questioned in any court. According to the court, the provisions of the Telegraph Act, which is a special law, would prevail over a general law like Consumer Protection Act.

National Consumer Commissions jurisdiction

Citing an apex court judgement in the case of chairman, Thiruvalluvar Transport Corporation vs Consumer Protection Council, the Bench said the National Consumer Commission had no jurisdiction to adjudicate claims for compensation arising out of motor vehicles accidents. BSNL was dragged to a consumer court after it had disconnected a consumer's telephone connection for non-payment of telephone bill. The district consumer forum had allowed the consumer's plea in November 2001 and directed BSNL to re-connect the phone connection and pay compensation.