Sales Tax Review

January  2008

Roving Eye

1. Cm promises to end tax on film rights transfer

The Maharashtra Government will soon scrap the value added tax applicable when Bollywood producers temporarily transfer copyrights of their films.

2. Chief Minister Vilasrao Deshmukh assured film producers to relieve them of the additional tax burden when a delegation of Indian Motion Picture Producers Association (IMPPA) met him last Friday in Mumbai. Maharashtra is the only State in India which imposes VAT on this.

3. With the advent of electronic technologies, producers now possess about a hundred different copyrights on their films. This has provided them new earning avenues. They are no longer solely dependent on theatre releases to earn from their productions.

4. The most lucrative of these rights are television, satellite and DVD. Except for music rights, which they sell outright to the music companies, producers part with other copyrights only for a limited period. After expiry of the period, the rights revert back to them.

5. The State’s sales tax department held that when producers parted with the copyrights on their films, they effectively “sold” the rights, thus attracting VAT. Producers, on the other hand, contended that unlike music rights, they did not sell outright the other rights of their films and so imposing VAT on such transfer agreements was unjustified. [Source: By India PRwire, December 19, 2007].

2. "Pil is not a pill for every ill", said celebrated lawyer Soli J. Sorabjee

Judicial activism was actually a boon for India except when some Judges passed “fanciful” orders, former Attorney General Soli J. Sorabjee, said on 11-1-2008 while delivering the ‘Nani Palkhivala Memorial Lecture’ in Mumbai, soon after the award ceremony. Earlier, Shri Shailesh Gandhi, an ex-IITian, better known as an RTI activist, was awarded ‘Nani Palkhivala Civil Liberties Award’ for preservation and protection of civil liberties in the country.

2. Shri Shailesh Gandhi, who almost single-handedly brought RTI into the collective consciousness and within reach of thousands of citizens, humbly said that the award was a recognition for RTI which had become “a true citizen’s movement” that could lead people to the “yet – elusive Swaraj”. “The award is meant for the activism Gandhi has shown,” former SC Judge Smt. Sujata Manohar, one of the panelists, said.

3. Continuing on the said occasion, his lecture Sorabjee sought to dispel “the alarm bells which have been ringing in some quarters and the impression created that judicial activism is an infectious disease which has recently afflicted our judiciary. This hullabaloo is totally misplaced.”

4. In the course of his lecture, he also brought out the question of whether the Court could undertake legislative activity and said, “A certain degree of legislative activity is inherent in the process of interpretation.” He continued – “in our country it is vain to invoke the Parliament or the Legislatures. This is evident from the fact that measures have hardly been taken for years to remedy several social evils. A striking instance is that a law against sexual harassment is still awaited despite a ten year old landmark Apex Court Judgment.”

5. He further continued – “It must be remembered that PIL is not a pill for every ill. Justice is not dispensed through slot machines but by human beings. Judges are not infallible.” And, to ripples of laughter, he said : “Vanity is not exclusive monopoly of Hollywood and Bollywood. Lawyers and Judges are not immune from this human weakness. Both like their names in bold print.”

6. The lecture of Soli J. Sorabjee was indeed a splendid treat for a thirty mind. I hope you will also enjoy this piece of writing.

3. SC : pay fee to settle cheque bouncing case

As per recent Supreme Court Judgment reported in TOI dated 10-12-2007, the Court ruled that an accused in a cheque bouncing case can escape conviction by settling the dispute and paying the compounding fee. Interpreting section 147 of the Negotiable Instruments Act, the Court said that every offence committed under the Act was compoundable.

2. The Apex Court noted that there have been conflicting judgments from various High Courts as to whether an offence relating to bouncing of cheque was compoundable. While some High Courts held the offence was not compoundable, others said it was, provided the parties reached an amicable settlement. However, the Court pointed out that section 147 of the Act gave the accused liberty to escape conviction by paying the compounding fee.

3. The SC passed the said Judgment while allowing the appeal filed by Karnataka’s Viney Devanna Nayak, charged with issuing a cheque for Rs. 24,000/- that had bounced.

4. Parents before you make a gift to your children think 3 times

The Supreme Court Bench of Justices S.B. Sinha and H.S. Bedi, who recently ruled that gifts from parents to children could not rescinded later had said two months ago that parents could disentitle their son from inheritance if he neglected them.

2. Briefly stated the facts of the case were: - Ashokan from Kerala was gifted land by his mother through a registered gift deed out of “love and affection” on January 4, 1984. His father followed suit saying it would help him lead a good family life. Buy after one-and-a-half years, the parents cancelled the deeds saying Ashokan had failed to render financial assistance to the family though he worked in Oman. They were also upset he did not fulfil his promise to contribute Rs. 1 Lakh for his sister’s marriage.

3. Ashokan approached the trial Court seeking quashing of the two documents executed by his parents through which the gift was cancelled. Despite the breach of promise cited by the parents, the Court ruled that once the gift deed had been executed, it could not be revoked “by the mere fact that the Donor’s feeling towards the recipient underwent a change.”

4. The parent has protested that if the deeds were kept alive, it would be fair to fear that the son would evict them from their own land. The District Court ruled in favour of the parents saying the son had not taken possession of the land, nor paid tax, nor mutated it in his name. Subsequently, the Kerala High Court upheld the decision of the Dist. Court.

5. Being aggrieved, Ashokan approached the Apex Court challenging the said High Court decision. The SC said the gift deeds were executed out of love and on the ground that the recipient was the son of the Donor and to enable him to live a good life. “Could the parents now turn around and say he was to fulfil a promise ? The answer must be in the negative. It is one thing to say the execution of the deed is based on an aspiration or belief, but another to say the same constituted an onerous gift,” said the Bench. The SC, accordingly, revived the gift deeds originally made by the parents and further said, “Once a gift is complete, it cannot be rescinded.”

6. Apparently, it appears that the above decision is not in conformity with the decision of the same Court which said few months ago that it is the duty of the son to take care of his parents. Anyway, a common man is advised to think 3 times before he gifts his property to children, unless he has sufficiently provided for his future life. Otherwise, he will have to face very bad days in old life.