[LEGAL DIGEST ]

APEX COURT TO RECONSIDER OWN

JUDGMENT IN ‘ZERO TAX’ CASES
A division bench of the Supreme Court (SC) last week
felt its earlier ruling in an income tax case was wrong
and referred the question, involving ‘zero tax’
companies which make profits, to a larger bench of
three or more judges. In this case, Dynamic
Orthopaedics Ltd vs Commissioner of Income Tax, the
private company returned income showing deprecia-
tion under Income Tax Rule 5. The assessing officer
recomputed the book profit after allowing depreciation
according to Schedule XIV of the Companies Act,
which was lower than under the Income Tax Rules. This
raised a dispute in which the Commissioner of Income
Tax (Appeals), the Appellate Tribunal and the Kerala
high court took different views. The high court allowed
the appeal filed by the department holding the
assessing officer was right in re-computing the book
profit for the purpose of Section 115J of the Income Tax
Act after allowing depreciation as per Schedule XIV to
the Companies Act and not as per the rates specified in
Rule 5 of the Income Tax Rules, as claimed by the
assessee. The SC stated its earlier ruling on this
question in the Malayala Manorama case (2008)
required reconsideration.

Former chief justice made arbitrator

The SC last week appointed former Chief Justice of
India S P Bharucha as arbitrator in the dispute between
Dolphin Drilling Ltd and Oil and Natural Gas
Corporation. His name was suggested by Dolphin,
but ONGC was against arbitration itself. However, the
court appointed former judge of the Supreme Court,
Sujata Manohar, as arbitrator on behalf of ONGC.
According to Dolphin, it conducted drilling
operations in the offshore waters of India allocated to it
by ONGC. It continued its operations even after the
contract period. Its complaint is that a number of
invoices were not paid and it had objected to referring
disputes to arbitration even while an arbitration
proceeding was pending. Rejecting the ONGC
contention, the court appointed the two judges as
arbitrators.

Carrier can be sued by insurance

firm for deficiency of service
A constitution bench of the SC ruled last week that an
insurance company
and the consignor
of goods can jointly
sue a carrier for
compensation
towards deficiency
in service. The
court stated that an
insurer cannot be
precluded from
recovering the
compensation from
the carrier as long as the complaint was jointly filed or
under the power of attorney granted by the consignor.
The bench was constituted to deliver a harmonised
interpretation of the provisions of the Consumer
Protection Act and the Carriers Act in a batch of
appeals led by the case, Economic Transport
Organization Charan Spinning Mills.

Damages only if death occurred in

course of employment
The SC has stated that an employer would be
liable to pay compensation for personal injury or death
of a worker only if it happened during an accident
arising out of and in the course of his employment. In
this case, Rashida Kupurade vs Oriental Insurance
Company, the worker died six months after an accident.
The commissioner under the Workmen’s
Compensation Act imposed the liability on the
insurance company. The insurer moved the Karnataka
high court, which exonerated it from the liability as
there was no link between the accident which occurred
earlier and the death of the worker following a heart
attack. However, the high court ordered the employer to
compensate the death. The employer therefore
appealed to the SC. It allowed the appeal and stated
that once it was held that there was no nexus between
the accident and the death, the insurer and the
employer were not liable to pay compensation
under the law.