Jurisprudentiol–Tomorrow's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Central Excise

Duty free raw materials procured by an EOU in terms of notifications 1/95-CE and 53/97- Cus destroyed in a fire accident in the factory – Prima facie, the Customs and Excise duties are payable on these raw materials for non-fulfilment of conditions – Tribunal directs pre-deposit.

THIS is really bad news for this 100% EOU.

The appellants, a 100% EOU procured, duty free, raw materials by way of indigenous purchase as also by way of import in terms of the relevant notifications 1/95-CE and 53/97- Cus respectively. In the year 2002, there occurred a fire accident in their factory, in which raw materials as such and the raw materials contained in the finished goods were destroyed.

The appellants submitted a claim before the insurance company, which did not include the amount of duty of Customs/Central Excise which were payable in the event of non- fulfillment of the conditions of the aforesaid notifications.

Income Tax

Non-resident Company claims deduction for reimbursement of expenses incurred by third party - held, such expenses are caught within mischief of Sec 44C where key word is 'expenses of Head Office nature' - but they are allowable u/s 42 as Production Sharing Contract is a different tax regime in itself: Tribunal

FOR the non-resident companies operating in India, reimbursement of expenses incurred by their Head Office or parent company is common feature of expenses. And such expenses are governed by the Sec 44C of the Income Tax Act which disallows them. And, mind it, it is not an artificial disallowance of expenditure incurred by HO for the Indian branch. There is a logic behind it - since the AO cannot verify such expenses and will have no jurisdiction over it, it is perhaps one of the rationale ways to handle such difficulties. And in the latest decision the Tribunal has held that even third party expenses attributed by the assessee in place of the HO are also caught within the mischief of this provision as the language used is an expenditure in the nature of head office and not HO expenditure. Thus the Tribunal took the view that the creation of a third party expenditure was merely a devise to escape the effect of Sec 44C.

Service Tax

Advice, consultancy or technical assistance in working system of client - covered under category of 'Management Consultant' – when there is scope for difference in interpretation, extended period of limitation would not be applicable: CESTAT

IN earlier days, the term "Management" was understood by the Board of Directors or by Apex Body or the Executive Body of the Organization, who regulates, supervises, directs and controls the affairs of the organisation. Now, the term “Management" has to be looked, in the context of rapidly growing profession of management consultancy. The management consultancy is available in various areas, such as, planning, technical advice, co-ordination, staffing, controlling labourers, etc. It is seen from the definition of the "Management Consultancy" in the Finance Act, 1994, it has widen the scope by the words "management of any organisation in any manner". It includes any advice, consultancy or technical assistance.

See our columns Tomorrow for the judgements