1. The Supreme Court of India has upheld the constitutionality of the levy of service tax on leasing and hire purchase transactions. The constitutional validity of Section 65(12) and Section 65(105)(zm) of the Finance Act, 1994 were challenged on grounds of lack of legislative competence. The basic argument on behalf of the appellants challenging the constitutionality was that Article 366(29A) deems six specified types of transactions as deemed sales, enabling the levy of sales tax on those six transactions. Under Article 366(29A), hire purchase and leasing were included in the category of deemed sales. Consequently, these transactions would come within the ambit of the entry on sales tax under the State List, and the Union would not have the power to levy service tax on these transactions under Entry 97 of List I or under any other entry. This submission was rejected by the Supreme Court. The Court distinguished between financial leases and operating leases and held that the taxable event under the relevant provisions of the Finance Act 1994 was not the sale of goods but was the provision of services. It was held, "The taxable event is the service which is rendered by the finance company to its customer(s). The value of taxable service under Section 67 is income by way of interest/finance charges (measure of tax) which is not determinative of the character of the levy. Thus, Section 67 of the Finance Act, 1994 seeks to tax financial services rendered by the appellant(s) with reference to the income which the appellant(s) earns by way of interest/ finance charges. In the circumstances and for the reasons given hereinabove, the question of splitting up of transactions, as contended on behalf of the appellant(s), does not arise. As held hereinabove, equipment leasing and hire-purchase finance constitute long term financing activity." The impugned sections were held to be within the residuary entry; and hence it was held that Parliament had the legislative competence to enact the impugned provisions. The decision, along with a detailed summary, can be accessed here.
2. A recent decision of the UK Supreme Court discusses several important concepts in the law of arbitration. I have discussed the decision in two posts on the Indian Corporate Law blog, which can be accessed here and here. The decision itself can be accessed here.