Jurisprudentiol–Friday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Income Tax

If warranty is an integral part of the sale price of the goods and the warranty is attached to the sale price of the product, obligations arising from past events have to be recognized as provisions. These past events are known as obligating events – Supreme Court

WHAT is a provision? This is the question which needs to be answered. A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized. Liability is defined as a present obligation arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognized as provision.

Customs

Foreign Currency seized from two persons in the same case – for one person, confiscation quashed and for the other upheld – the Appellate Authority could not have adopted a schizophrenic approach

THE Appellate Authority could not have adopted a schizophrenic approach: the jurisdiction of the Customs authorities vis-à-vis the two sets of foreign exchange – one seized near the Airport and the other seized subsequently was on the basis that they formed part of the same transactions or arose out of the statement recorded in the first seizure. Such being the case and the notices having been issued as a part of the same investigation process, the Central Government could not have adopted a schizophrenic approach; on the one hand holding that the confiscation was unauthorized, and on other, upholding the confiscation in the absence of such order in the petitioner's case. The order nowhere discloses that insofar as the petitioner is concerned, there was any such determination by the authorities under FEMA or the RBI , as the case may be. Therefore, Central Government has, in the impugned order disclosed an inconsistent and wholly illogical approach in law which can hardly be commended by this Court.

See our columns tomorrow for the judgements