Banks have to share details with the taxman

Written by Indu Bhan | Indu Bhan | Updated: Nov 13 2013, 08:41am hrs
Revival of foreign cos registered in India

The Supreme Court has left open the question whether foreign companies registered in India are eligible for revival package under the Sick Industrial Companies (Special Provisions) Act (SICA), 1985, saying that the decision may be taken for appropriate case as and when the occasion would arise.

The case of Yash Deep Trexim Ltd and Namokar Vinimay Ltd was brought before the SC after the Calcutta High Court held that the law doesnt apply to foreign companies. It allowed the implementation of a revival scheme framed by the Board for Industrial and Financial Reconstruction (BIFR) for Baranagore Jute Factory Plc. The HC said that the provisions of SICA would be applicable to the company as its only factory is located in India at Baranagore; 90% of its shareholders are Indians and 3,700 workers are working in the jute factory in West Bengal. This was contrary to the single judges January 2011 view that the SICA is not applicable to the company as it was incorporated outside India.

Finally, SC found that about 24 acre of the company land was acquired way back in 1988 for building a bridge across the river Hoogly. The company received around R170 crore as compensation from NHAI after going through many litigations. The acquisition compensation still left a surplus of R50 crore with the company after meeting all its losses and liabilities. The apex court, therefore, said that the Baranagore Jute Factory Plc was not a sick company under the Act and the question(s) arising in the appeals have surely become academic and redundant.

Banks must give information to Income Tax authorities

SC has ruled that no financial institution can refuse to disclose details of their customers on the ground of confidentiality to the income tax authorities.

It said that the Financial Act, 1995, has expanded the power of the revenue authorities to requisition information which will be useful for or relevant to any enquiry or proceedings under the Income Tax Act. Besides, the income tax officers can now gather general particulars of customers in the nature of a survey and store information in computers to check any tax evasion, the apex court said in a batch of petitions led by the one in the case of Kathiroor Service Cooperative Bank Ltd vs Commissioner of Income Tax.

In these cases, the Income Tax Officer (ITO) had issued notice seeking information from customers who have made either cash transactions (remittance, transfer, etc) or deposits of R1 lakh or above between April 2005 and March 2008. It had rejected the objection raised by the assessees that such notice seeking for information which is unrelated to any existing or pending proceeding against them could not be issued under the Act. Therefore, the banks challenged it under Section 133(6), calling it an unauthorised fishing inquiry. The Kerala HC upheld the assessing authoritys stand that the department is free to ask for information about any particular person or to call for general information in regard to any matter they consider necessary. SC also dismissed appeals filed by the banks.

Maharashtra to pay higher compensation

The Supreme Court, in the case of Daulat Sitaram vs the State of Maharashtra, has asked the latter to pay R3.70 lakh each to villagers who were affected due to its irrigation project without any discrimination. It said that the agreements entered into between one group of villagers and the Maharashtra government were unreasonable and unconstitutional apart from being violative of Section 23 of the Contract Act which lays down that any contract which is unconscionable and opposed to public policy is void.

In this case, lands of villagers in Bhandara district were submerged due to Gosikhurd irrigation project in 1997. They were declared as project affected persons under the Maharashtra Project Affected Persons Rehabilitation Act, 1999, and were allotted residential plots in village Pagora. However, due to lack of basic amenities in the area they could not construct the houses. They were instead given R50,000 in compensation against another set of project affected villagers who were given R3.70 lakh in 2006. Therefore, those who got R50,000 moved the Bombay HC alleging discrimination.

The HC rejected their pleas by upholding the corporations stand that the earlier group had a binding agreement with the state government and they cannot seek higher compensation.