Jurisprudentiol – Wednesday's cases

By Vijay Kumar

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Summons issued by the Department in exercise of power vested in them cannot be quashed – High Court

A writ of prohibition will issue to prevent a tribunal or authority from proceeding further when the authority proceeds to act without or in excess of jurisdiction; proceeds to act in violation of the rules of natural justice; or proceeds to act under a law which is itself ultra vires or unconstitutional. The petitioner in essence seeks for a writ of prohibition against the department for having issued the summons by the exercise of the powers vested on them under section 37 read with section 131 of the Income Tax Act. The attack made against the summons issued by the Department cannot be countenanced by this Court.

Income Tax

Interest tax - Assessee is investment company - earns interest income on bonds and debentures - Revenue for levy of tax u/s 2(7) - A residuary non-banking company did not fall within Sec 2(5B)(vi) and its interest income is not chargeable to tax: Supreme Court

THIS case relates to Assessment Year 1992-93. The assessee is a registered company, set up as non-banking company with the objective to buy, sell, invest or deal in securities, bonds or fixed deposits. It earns interest income on bonds and debentures. Revenue treats the assessee as a 'credit institution' as defined in Sec 2(5A) of the Interest Tax Act and levies tax on interest income under Sec 2(7). The question before the Apex Court is - Whether "interest" which the assessee earned on bonds and debentures was chargeable to tax in view of the definition of the term "interest" in Section 2(7) of the Interest Tax Act, 1974. And the SC's decision has gone against the Revenue on the ground that the residuary non-banking company did not fall within sub-clause (vi) of Sec 2(5B) of the Interest Tax Act.

Service Tax

Security Service – BSNL directed to pay Service Tax amount with interest, to the service provider who has to pay it to the government – High Court

THE tragedy of a hapless service provider stuck with a Show Cause Notice from the Department and the service recipient refusing to reimburse the tax, is an everyday story in the life of any consultant.

In the present case, the High Court directed BSNL, to pay the service tax amount. Of course BSNL had never disowned its liability.

See our columns Tomorrow for the judgements