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By Vijay Kumar

Income Tax

Income Tax - damages paid for non-fulfilment of contractual obligations - allowable expenditure - But, any sum paid for infraction of law, not allowable under Sec 37(1 ) : High Court Larger Bench

ANY business is a tricky ' business ' for its doers ! It is tricky because of the presence of many parameters beyond the control of the doers. Under such circumstances, what is to be treated as normal expenditure of business is the sum of compensation which a business-doer has to incur as expenditure for paying damages in case of non-fulfilment of certain obligations under a contract. Now, the major question is whether such an expenditure can be treated as wholly and exclusively for the purposes of business as mandated by the provision of the Sec 37(1) of the Income Tax Act? Since there were two conflicting views on this issue, the matter was handled by the Larger Bench which has now lucidly and explicitly held that the word ' wholly ' in the Section 37 refers to the quantum of expenditure whereas the word 'exclusively' refers to the motive and objective of the expenditure. The expression 'wholly and exclusively' does not connote 'necessarily'. For instance, if a sum is spent to promote the business for earning profits, deduction is allowable even though it was not compelling or necessary for the assessee to incur such an expenditure. Therefore, what is important for the test of allowability of an expenditure as a deduction is whether an expenditure has been incurred with the sole motive of furthering the business interest unalloyed with any other consideration and such an expenditure was legitimised by commercial expediency.

Central Excise

Bail is the rule; Jail is the exception.- Investigation to be complete within sixty days; If not completed, the accused has a statutory right to be released on bail: Even within the period, it is not necessary that he must perforce languish in jail: Personal liberty of a citizen is a Fundamental Right - High Court

The High Court has reiterated some noble concepts on a citizen's liberty.

In the criminal jurisprudence prevailing in all common law countries, every person is presumed to be innocent until proved to the contrary. The consequence that logically follows is that an accused ought not to be detained or imprisoned, that the personal liberty even of an accused should not be interfered with, until he is convicted by due process of law. Several offences are notified as being bailable and even in the remainder, that is non- bailable offences, the accused can be enlarged on bail by orders of the Court. Bail is the rule; Jail is the exception. This is what Sections 437/439 of the Cr. PC in terms postulate, viz. that when any person accused of or suspected of the commission of any non- bailable offence is arrested or detained he may be released on bail. However, an exception has simultaneously been prescribed, namely, that such a person shall not be so released unless it appears to the Court, on reasonable grounds, that he has been guilty of an offence punishable with death or imprisonment for life.

Quantity discount if not passed to dealers includible in Assessable value - DGCEI wins VIP case before Tribunal

THE appellant is engaged in the manufacture of plastic moulded furniture products, soft/hard luggage etc. & were selling their goods from their factory gate directly to dealers as well as through their regional depots. Investigations were carried out by the DGCEI , which revealed that the appellants have claimed uniform discount of 12% while clearing the goods from the factory.

A show cause notice was issued stating that as per the Charted Accountant certificate submitted by the appellant an amount of Rs.4,10,78,053.00 which was claimed as discount for the period 1.5.1996 to 30.6.2000 as quantity discount was not passed on to the dealers and accordingly duty amounting to Rs.74,82,028 /- was demanded. In adjudication, on the basis of revised CA certificate, the actual amount of quantity discount was arrived at and accordingly the duty of Rs.55 ,08,651 /- was held payable.

See our columns Monday for the judgements