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7 Mar

“The Charger Which Is Sold Along With The Mobile Phone In One Set And Accordingly Taxable At 5%”: Karnataka High Court

The Karnataka High Court has passed a judgment on 10^th February, 2023 held that the mobile phone finds its place in Schedule III and is taxable at 5%, and therefore, the charger, which is also sold along with the mobile phone in ‘one set,” is also chargeable at 5%.This was in the case of The State of Karnataka Versus The Index Technologies India Ltd.( STRP No. 8 Of 2022) and this is presided over by a division bench of Justice P.S. Dinesh Kumar and Justice T.G. Shivashankare Gowda.

FACTS OF THE CASE:

M/s. Intex Technologies India Ltd. are, it is a registered dealer under the Karnataka Value Added Tax Act, 20032 . It is engaged in trading mobile phones, parts and accessories. It sells mobile phones in a composite package which also contains accessories such as headsets, cables, ejection pin, adapter, charger, manual etc. The AO3 passed an order under Section 39(1) of the KVAT Act subjecting to tax, the sales turnover of mobile charger at the rate of 13.5% to 14.5% for A.Y.4 2010-11 to 2013-14. The assessee filed an application for rectification and the AO passed orders under Section 69 of the KVAT Act, rectifying the order by dropping estimated turnover as per the return and books of accounts. The JCCT(A)5 dismissed assessee’s appeal. On further appeal, KAT, by the impugned order, has allowed assessee’s appeal. The department contended that “mobile charger is not an integral part of the mobile phone to treat among ‘composite goods’ because merely making a composite package of cell phone, charger shall not make it eligible as one of the composite goods for the purpose of interpretation of the provisions”.

JUDGEMENT:

The court contended that “A bare perusal of the Section 4 (charging section) of KVAT Act and Rule 3 (computation provision) of KVAT Rules would clearly indicate that there is no prescribed mechanism provided for determining the value of individual goods in a composite transaction. Thus, in the absence of a valuation mechanism, tax cannot be levied differently on each of the component by separating a single composite package. 28. In view of the above discussion, we are of the considered view that the definition contained in the Notification issued under the KVAT Act includes the charger which is sold along with the mobile phone in one set and accordingly taxable at 5%”.

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JUDGEMENT REVIEWED BY PRATIKSHYA P. BEURA

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7 Mar

Capital or Revenue, Business Income, Construction Company, Netting of Receipts and Payments, Amounts Received by the Assessee Would Go to Reduction of Cost of Construction: The Supreme Court

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The Supreme Court in the case of CIT v. Bokaro Steel Ltd. (1999) 236 ITR 315/102 Taxman 94/151 CTR 276 (SC) held that as per S. 4 of Income Tax Act : Charge of income tax – Capital or revenue- Business income – Receipts from Construction company – Netting of receipts and payments- Receipts from the Construction Company being intrinsically connected with construction of assessee’s plant, would be considered as a capital receipt and not income of assessee from any independent source-Amounts received by the assessee would go to reduction of cost of construction.

Facts

The Government of India is the only shareholder in the assessee, which is a company. It was evaluated concerning its standing as a firm. Bokaro Steel Ltd., the firm being evaluated, was established as a legal entity in January 1964. Its purpose was to build and eventually own a fully integrated iron and steel industry.

During the evaluation years that were being taken into account, the work of constructing the company’s factory and installing the machinery was getting close to being finished. During the year, the assessee was given certain sums of money by the contractors as payment for providing housing accommodations for construction workers, hire charges of plant and machinery, interest on advance payments, and royalties for the excavation and use of stone that was found on the assessee’s land. According to the decision of the Tribunal, all of the money that the assessee brings in will be used for the reduction of the building costs.

Issue

Would the revenue receive from the Construction Company, which is inextricably linked to the building of the assessee’s plant, be included as a capital reception, rather than the income that the assessee earns from any other source?

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This is the rent that the assessee charges to its contractors for housing employees and staff that the contractor employs for the building work of the assessee. This rent may include specific facilities that are supplied to the workforce by the assessee. Secondly, hiring costs for equipment and machinery that were supplied to the contractors by the assessee to utilize the assessee’s construction work, and thirdly, interest on advances granted to the contractors by the assessee to make the construction work easier to complete.

The actions of the assessee in connection with all three of these revenues are either directly related to or are ancillary to the activity that the assessee is doing in connection with the building of its plant. In a general sense, they are related to the agreements that the assessee made with its contractors on the work that was being done on the building project. The contractor was granted permission by the assessee to utilize the premises of the assessee to house its employees and workers who were involved in the building activity of the assessee’s plant. This was done to make the job of the contractor easier. It was obvious that this was done to make the process of a building easier. If this facility had not been supplied by the assessee, the contractors would have been responsible for making their arrangements, and the cost of these preparations would have been included in the prices that the contractors charged for the building work.

Instead, the assessee has been responsible for the provision of these amenities. The same is true for the hiring rates for equipment and machinery that the assessee gave to the contractors for the building work that the assessee had done. The assessee is additionally compensated for the wear and tear that the equipment has sustained thanks to the receipts related to this matter. The purpose of the advances that the assessee provided to the contractors to facilitate the construction activity of putting together a very large project was just as much to help the contractors as it was to ensure that the work that the contractors did proceed without any financial difficulties.

Held

When it comes to these three receipts, the agreements that were established between the assessee business and the contractors are arrangements that are inextricably linked to the development of the steel factory that the assessee company is responsible for. The payments received have been subtracted from the amounts owed to the contractors, which has resulted in a decrease in the overall cost of the building. As a result, they have been properly classified as capital receipts, and the assessee has not been required to account for them as income from any independent source.

Order Reviewed by Jay Kumar Gupta

7 Mar

Departmental action cannot be initiated post retirement of the employee: Punjab High Court.

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The Punjab High Court, on 7th December, 2022, in Raj Pal v/s State of Haryana and others (CWP-5842-2022), held that departmental enquiry cannot be initiated against an employee for event that occurred four years prior to issuance of charge sheet. The judgement was presided by Honourable Mr. Justice Deepak Sibal.

FACTS OF THE CASE:

Departmental proceedings were initiated by the High Court against a retired police inspector for an alleged misconduct during the years 1986-1988. The petitioner retired in the year 19 and served an extension period till the year 2020. Departmental proceeding were initiated and a charge sheet was filed against the petitioner under rule 12.2 (b) of the Haryana Civil Services (Pension) Rules, 2016. The departmental proceeding was filed on the basis of the petitioner having completed his LLB degree, from Rajasthan, while he was posted as an inspector at Karnal. The department argued that the petitioner must have manipulated the records in this regard. The petitioner contended that departmental proceeding cannot be initiated against him for an event that took place four years before the initiation of such proceedings.

JUDGEMENT:

The Court held that departmental proceedings cannot be initiated for an event which took place four years prior to the initiation of departmental proceedings. The court held that the a retired employee should be left to live in peace during his twilight zone. The rationale that the court held here is ‘let bygones be bygones’. The Court referred to the Punjab State Corporation Ltd. Patiala and others v/s Atma Singh Grewal (2014) 13 SCC 666. The court further contended that the petitioner retired in 2019 and departmental proceedings were initiated in 2021 for an alleged misconduct that took place in the years 1986-1988. The alleged misconduct by the petitioner was prior to four years from the date of issuance of the charge sheet. By Rules 12.2 (b) read with Rule 12 (5) (a), the petitioner had retired and such actions of State was barred by the mentioned rules. Thereby, the court quashed the proceedings against the petitioner.

JUDGEMENT REVIEWED BY ARYA THAKUR.

7 Mar

Failure of compliance to remove hoarding and billboards met with contempt petition: Punjab High Court.

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A petition was filed at the Punjab High Court on 13th February, 2023, in Council of Engineers and anr v/s V.K. Janjua and anr. (COCP-2736-2022), regarding the failure of an 18 year order by the court to remove the hoarding and billboards. The judgement was presided by Honourable Mr. Justice B.S. Walia.

FACTS OF THE CASE:

The petitioners moved a contempt plea in the High Court under section 12 of the Contempt of Courts Act, 1971. The contempt was issues on account of inaction of State authorities to remove the billboards and hoardings. These billboards and hoarding faced highways, main roads and side lanes. In a Namit Kaur v/s Union Territory of Chandigarh (CWP-7639-1995), the removal of boards from the roads was issued by the High Court. Similarly, demolition of iron or concrete pillars supporting such hoardings was issues to be removed within a period of one month.

JUDGEMENT:

After a lapse of over 8 years, there had been no sign of removal of the billboards or the hoardings. The petitioner fit here claimed that the non removal of the boards is in violation of the judgement by the High Court. The issue of road safety concerns were contended by the Court as the hoardings distracted the drivers of motor vehicles. Citing the reasons of distractions and the danger posed thereby, the petition was contended in the court.

JUDGEMENT REVIEWED BY ARYA THAKUR.

7 Mar

This instance of discrimination against women is illustrated in the case of Vishaka v. State of Rajasthan. The Supreme Court decided the Vishaka guidelines in this case for the protection of women from sexual harassment at work since specific law was required in this area.

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Facts of the Case: To provide a better comprehension, it is essential to present the case’s facts in depth at the start. Initially, the alleged horrific gang rape of a woman in a hamlet in the Indian state of Rajasthan served as the immediate impetus for this campaign for gender justice. A social worker named Bhanwari Devi was gang-raped in exchange for her selfless efforts to stop child marriage. Regrettably, this criminal case was dropped [1] due to inadequate evidence supporting the offense. Yet, this event attracted support from a number of NGOs and social activists, reinforcing the need for particular laws for workplace sexual harassment of women in light of gender equality.

Judgment: The Court established the rules and standards to be followed at all workplaces until legislation is passed under Article 32 of the Constitution to implement the Fundamental Rights, taking into account the lack of domestic law governing gender equality and protection against sexual harassment at work. Additionally, according to the court, this falls under the purview of Article 141 of the Constitution.

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