Case 1: Bombay High Court rules out taxability of transit rent
Recently, in a writ petition filed by one Sarfaraz S Furniturewala, the Bombay High Court held that transit rent payable by the developer of land is not income and hence not taxable much less subject to TDS. It is a hardship allowance paid by developers to persons whose lands are dispossessed by the developer for building new buildings.
The builder is not the landlord nor is the one dispossessed his tenant. Their relationship, far from being one of landlord-tenant, is one of builder-buyer. Such transit rents are purely in the nature of hardship allowance. Since it is a capital receipt no tax is deductible at source. A welcome judgement indeed.
Case 2: SC interprets the onus of proving exclusion clause in standard-form contracts on the insured
In Texco Marketing vs Tata AIG case, the Supreme Court had the occasion to interpret standard-form contracts usually pressed into service by the insurers often to the detriment of the insured especially through the numerous exclusion clauses.
In this case, the turgid contract summarily excluded shops based in basements from fire insurance coverage yet the insurance contract was signed despite the shopkeeper disclosing the location and the insurer’s inspectors making a periodic visit of the insured property.
Having agreed to insure, the insurer cannot renege on his liability by citing the exclusion clause. He ought to have not insured the shop in the first place. The insurer cannot press in an exclusion clause when the subject matter of insurance itself is the one excluded. How can he insure with open eyes a property which is not supposed to be insured and then disown his commitment in a manner of double take
Case 3: Railways can't be held responsible for accident in an unmanned crossings
In Union of India & Another vs Rekha Bharali & 4 Others matter, the Gauhati High Court absolved the Indian Railways of any liability for the death caused by mowing down of a vendor and his vehicle by a speeding train.
The Indian Railways Act in fact warns people against unmanned crossings. Indeed, it is impossible for the Indian Railways to man every possible crossing just as it is impossible to seal the Indo-Pak or Indo-China border completely.
Borders are by definition porous. Likewise, all crossings cannot be manned. It is for the people crossing railway lines to exercise vigilance.
Case 4: Auctioned property can’t be denied registration
In T Bharath Gowda vs State of Karnataka case, the Karnataka High Court held that the winner of auction of a property under the Securitisation Act, 2002 cannot be denied registration on the ground that income tax dues have not been discharged by the borrower.
The tax authorities have recourse to the borrower and not to his mortgaged properties. The priority or preferential payments takes over only when the liquidator is distributing the proceeds in the pecking order.
Such a pecking order cannot be invoked when the auction is of a property of a going concern. Otherwise, the recovery rights of a lender would always remain subjugated to the rights of the tax authorities.
—The author, S Murlidharan, is a Chartered Accountant and legal expert, who comments and interprets important court rulings and judgements. The views expressed are his own and personal.
Read the previous Legal Digest columns here
Recently, in a writ petition filed by one Sarfaraz S Furniturewala, the Bombay High Court held that transit rent payable by the developer of land is not income and hence not taxable much less subject to TDS. It is a hardship allowance paid by developers to persons whose lands are dispossessed by the developer for building new buildings.
The builder is not the landlord nor is the one dispossessed his tenant. Their relationship, far from being one of landlord-tenant, is one of builder-buyer. Such transit rents are purely in the nature of hardship allowance. Since it is a capital receipt no tax is deductible at source. A welcome judgement indeed.
Case 2: SC interprets the onus of proving exclusion clause in standard-form contracts on the insured
In Texco Marketing vs Tata AIG case, the Supreme Court had the occasion to interpret standard-form contracts usually pressed into service by the insurers often to the detriment of the insured especially through the numerous exclusion clauses.
In this case, the turgid contract summarily excluded shops based in basements from fire insurance coverage yet the insurance contract was signed despite the shopkeeper disclosing the location and the insurer’s inspectors making a periodic visit of the insured property.
Having agreed to insure, the insurer cannot renege on his liability by citing the exclusion clause. He ought to have not insured the shop in the first place. The insurer cannot press in an exclusion clause when the subject matter of insurance itself is the one excluded. How can he insure with open eyes a property which is not supposed to be insured and then disown his commitment in a manner of double take
Case 3: Railways can't be held responsible for accident in an unmanned crossings
In Union of India & Another vs Rekha Bharali & 4 Others matter, the Gauhati High Court absolved the Indian Railways of any liability for the death caused by mowing down of a vendor and his vehicle by a speeding train.
The Indian Railways Act in fact warns people against unmanned crossings. Indeed, it is impossible for the Indian Railways to man every possible crossing just as it is impossible to seal the Indo-Pak or Indo-China border completely.
Borders are by definition porous. Likewise, all crossings cannot be manned. It is for the people crossing railway lines to exercise vigilance.
Case 4: Auctioned property can’t be denied registration
In T Bharath Gowda vs State of Karnataka case, the Karnataka High Court held that the winner of auction of a property under the Securitisation Act, 2002 cannot be denied registration on the ground that income tax dues have not been discharged by the borrower.
The tax authorities have recourse to the borrower and not to his mortgaged properties. The priority or preferential payments takes over only when the liquidator is distributing the proceeds in the pecking order.
Such a pecking order cannot be invoked when the auction is of a property of a going concern. Otherwise, the recovery rights of a lender would always remain subjugated to the rights of the tax authorities.
—The author, S Murlidharan, is a Chartered Accountant and legal expert, who comments and interprets important court rulings and judgements. The views expressed are his own and personal.
Read the previous Legal Digest columns here
First Published: Jun 12, 2024 11:34 AM IST
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