Jurisprudentiol– Tuesday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Income Tax

Income tax - PE set up to execute project - payments made to non-residents - Disallowance u/s 40(a)(i) not sustainable as non-residents have no PE in India; Salary paid to technical personnel deployed in India not covered under 'Head Office expenses' as defined in Sec 44C

THERE is no dispute between the parties that payment received by the non-resident would be treated as business profit as per Article 7 of DTAA between India and U.K. and such profit would be taxable in India only if it is established that the assessee has a PE in India. According to the Assessing Officer the case of the assessee falls under clause (k) of Article 5(2) while as per the assessee, its case falls under clause (j) of Article 5(2). However, since the non-resident did not have a PE in India, it cannot be taxed.

Excise

Furnace Oil is a consumable and entitled to benefit of exemption under notification 1/95-CE much before its amendment on 15.09.1998

IT is undisputed that respondents is an EOU and has procured furnace oil for use in boilers and it is on record that on 24th April 1995 respondent had declared their intention of use of furnace oil for boiler. Revenue is not disputing this fact but it is the submission that a specific entry for use of furnace oil as fuel in boiler was made in notification no. 1/95-CE on 15.9.98 hence the eligibility will be effective from 15.5.1998 and not prior.

Customs

Customs - Jurisdiction of officers for Issuance of Show Cause Notices & Adjudications – Show Cause Notices issued by ADG, DGCEI under Customs Act, 1962 – ADG, DGCEI has no jurisdiction to issue show cause notice in absence of any territorial jurisdiction for ADGCEI to exercise the powers of Commissioner of Customs specified by the Central Government/CBEC - It was for the CBEC under sub-section (1) of Section 5 of the Act to specify the area of jurisdiction – The show cause notice is not valid, ab initio bad in law and liable to be quashed

THE Additional Director General, DGCEI, Chennai issued a Show Cause Notice alleging illicit import of photocopier sub-assemblies which was adjudicated by the Commissioner of Customs (Imports), Chennai. The importers contended that the DGCEI had no jurisdiction in the case. The Tribunal relying on the earlier case held that the ADG, DGCEI has no jurisdiction to issue the notice and allowed the appeal.

See our columns tomorrow for the judgements