Case 1: SC orders sale of ancestral properties to pay divorced wife’s maintenance

Extraordinary situations call for extraordinary measures, goes the cliché. The Indian Constitution thus arms the Supreme Court vide article 142 to do complete justice by travelling beyond the statute book if the situation so warrants. In a way this extraordinary power allows the Apex Court to supplant the laws made by the Parliament and the state legislatures. The Supreme Court has never shied from using this extraordinary power when the situation demands, i.e., where there is a void in the armoury of the statute book.

The Supreme Court recently directed sale of ancestral property of a man to pay arrears of maintenance of ₹1.25 Crores to his wife using the powers conferred by article 142 in Manmohan Gopal V. State of Chhattisgarh matter. After divorce, the man was dilly-dallying and was in fact blissfully living in Australia, leaving his ex-wife languishing who willy-nilly had to be supported by her mother in the face of her ex-husband’s intransigence. Ends of justice were met by the Apex Court ordering sale of several ancestral properties belonging to the delinquent former husband.

This should set a healthy precedent for males cocking a snook at the orders made by the family court.

Case 2: No GST on stock transfer

In a matter —M/S Vacmet India Ltd. v. Additional Commissioner Grade -2 (Appeal) and another

The Court accordingly quashed the penalty order passed by the UP GST authorities who alleged tax evasion where there was none. Of course, GST will have to be paid when the branch or depot in turn made actual sales.

Case 3: Admission fee to club is not capital expenditure

In Swiss Re Services India Pvt. Ltd. Vs Deputy Commissioner of Income-Tax , the Bombay High Court recently dismissed the contention of the Income Tax department that since the admission fee to a club is a one-time payment giving rising to a lasting benefit, it couldn’t be written off against the current profits.

This is the typical contention of the department to disallow an avowedly business expenditure. The Court rightly observed that there was no accretion or increment to the profit-making apparatus of the company which would be the case when a machinery is installed.

Section 37(1) of the Income tax Act, 1961 which is the residuary or omnibus section dealing with business expenses frowns on capital expenditure which gives rise to a lot of litigation. Courts use their discretion in coming to a pragmatic conclusion as to the expenditure in question was indeed capital in nature.

Case 4: Telecom licence fee is not a revenue expenditure: SC

The Supreme Court on October 16 said that the licence fee paid by telecom companies to the Department of Telecom (DoT) after July 1999 would be treated as capital expenditure and not revenue expenditure. ₹Accepting the Income Tax Department’s contention in this regard, the court said that annual payment based on adjusted gross revenue (AGR) is towards licence fees. The fee cannot be construed as revenue expenditure just because it is paid based on the annual gross revenue.

The licence fee under the 2G policy (1999 ) was prefixed but allowed to be paid in 20 annual instalments. The Telcos have been rather ambitious and overconfident and claiming the licence fee as revenue expenditure that abates against the current year profits. But in the process, they defy section 35ABB which says licence fees can be written off equally over the period of a licence. So, the judgement is not all doom and gloom for telcos but only spells adherence to section 35ABB and biding of time.

—This column, Legal Digest, interprets various case verdicts or procedures and their implications in the current social and business scenario. The author, S Murlidharan, is a CA by qualification, and writes on economic issues, fiscal and commercial laws. The views expressed are personal.

(Edited by : C H Unnikrishnan)

First Published:Nov 5, 2023 1:07 PM IST