SC dismisses Kanchanganga Sea Foods? plea

The Supreme Court has dismissed a batch of petitions filed by Kanchanganga Sea Foods Ltd challenging the income tax department?s demand notice asking it to pay tax for failing to deduct income tax at source (TDS) in its fish trade with the Hong Kong-based Eastwide Shipping Company. Kanchanganga entered into an agreement with the shipping company in March 1990 for chartering two fishing trawlers. According to the terms of the contract, the non-resident company was to provide vessels to the assessee for an all inclusive charter fee of $6,00,000 per vessel per annum and the latter was to receive Rs 75,000 or 15% of the gross value of the catch, whichever was more. Even the necessary permission to remit 85% of the gross earnings from sale of fish towards charter fee was granted by RBI. While actual fishing operations were done outside the territorial waters of India, but within the exclusive economic zone, the voyage commenced and concluded at Chennai port. The surveyor of the fishery department verified the log books and assessed the value on which local taxes were levied and paid by Kanchanganga, which then arranged customs clearance for the export of fish and the trawlers carried the fish to the destination chosen by the non-resident firm.

The department had issued the showcause notice to the Indian firm asking it why it should not be deemed to be an assessee in default, as it failed to deduct TDS from the foreign company and also did not produce any clearance certificate during the assessment years 1991-95.

The assessee objected to the notice contending that the non-resident company did not carry out activities in India, hence it was not obliged to make any deductions.

However, the department rejected the assessee?s contentions and held it liable to pay more than Rs 1.68 crore including interest. Both the tribunal and the high court dismissed the Indian company?s plea. Counsel A Subba Rao, appearing for the assessee, contended that there was no income chargeable as no payment of any sum to the non-resident company took place in India and therefore the liability to TDS under Section 195 of the Income Tax Act 1961 did not arise. There was no receipt of income at all in India as 85% of the fish catch given to the foreign company was sold outside India and the sale proceeds thereof were also realised outside India, thus the foreign company had no receipts in India. Senior counsel RP Bhatt opposed the firm?s submissions. However, the apex court held that the total income of non-resident firm shall include all income from whatever source derived, receive it or deemed to be received in India. It said that the chartered vessels with the entire catch were brought to the Indian port, the catch were certified for human consumption, valued and after customs and port clearance the non-resident company received 85% of the catch. So long as the catch was not apportioned, it was the property of the assessee and not of the non-resident company. It was only after the shipping company was given a share of the catch, this being the first receipt in the eyes of law in India, that it became chargeable to tax.

SC rejects MIAL?s plea

The apex court has rejected the Mumbai International Airport Pvt Ltd?s (MIAL) plea to be impleaded as a party in a dispute between the Airport Authority of India (AAI) and a hotel over a parcel of land adjoining the Mumbai airport. MIAL, which bagged the contract for modernisation and upgradation of the Chhatrapati Shivaji International Airport, was handed over the entire airport premises. However, the lease deed had a note stating that a parcel of land measuring 31,000 sq metres was not part of the lease deed, but may become so subject to the Bombay High Court verdict. But MIAL argued that the disputed land was part of the airport that was handed over to it, but couldn?t be included in view of the pending litigation filed by Regency Convention Centre & Hotels Pvt Ltd (RCCHL). It submitted that it was in dire need of land for the modernisation of the airport and it being a lessee had necessary powers of AAI for performance of the functions that had been assigned to it.

Its impleadment application to be an additional defendant was opposed both by RCCHL and AAI. The former opposed it on the grounds that MIAL was neither a necessary party nor a proper party to the suit and AAI itself being a substantial shareholder, having 26% share in MIAL, would protect the latter?s interest. Even AAI contended that any impleadment would delay the recording of the evidence and seriously affect the interests of the authority. Plus, the suit plot was not leased to MIAL. Both the high court and the Supreme Court ruled against MIAL.

SC remands war explosive import case to HC

The Supreme Court has remanded a case relating to clandestine transport of war material and explosives from abroad to Kandla port in the garb of ?heavy metal scrap? to the Gujarat High Court, which had earlier quashed the demand of container storage charges and ground rent. Shipping agent Goodrich Maritime (P) Ltd had in 2004 transported goods belonging to different consignees at Kandla Port Trust. While the description given in the bills of lading was ?heavy metal scrap and hollow section tubes,? the goods confiscated by the customs department were in fact war material and explosives . The company sought the release of its containers after destuffing the goods.

The port trust then demanded storage charge and ground rent from the shipping agent, which challenged the same before the high court. The quashing of the demand order was challenged by the port trust in the apex court, which remanded the matter to the high court. Senior counsel PH Parekh, appearing for the port trust, said that the consignors and consignees had tried to smuggle used and unused ammunition in the country, and there was no law under which it could destuff the seized goods. The shipping agent argued that it cannot be blamed for the import as its functionaries had no knowledge about the clandestine operation, if any, carried out by the consignors and consignees.