Jurisprudentiol–Tomorrow's cases

By Vijay Kumar

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

Preamble to O-in-A cites wrong appellate authority – Drawback claims rejected by Commissioner(A) - Appeal lies before Joint Secretary (Revision Application) and not before Tribunal

PREAMBLE to an Order in original or an Order in appeal is the ‘welcoming' cover page of an O-in-O or O-in-A that is the most neglected portion of the order and always carries with it the risk of being responsible for appeals being filed with authorities who are not empowered to decide such cases under the relevant Act.

The other day we happened to come across an O-in-O issued by a Customs Commissioner which was mentioning some thing about appeal that could be preferred before the Special Bench of the Tribunal or that preamble which referred to the Central Excise Act although it was an o-in-o deciding a Service Tax case. Just goes to prove that the old preamble is still in circulation.

Income Tax

Indo-Italy DTAA - non-resident claims deduction of direct expenses under DTAA - pays 10% tax u/s 44BB on net receipts after deducting 90% receipt as general expenses - assessee cannot take part benefit under DTAA and part under I-T Act - if DTAA is applied, it is to be applied in full - Invocation of Sec 263 upheld: Tribunal

NON-APPLICATION of mind is a terminology which is often used for the AO by CITs before invoking powers under Sec 263. But it is indeed rare occasion when the CIT's Sec 263 order is upheld by higher judicial fora . And the simple reason in most cases is that the CITs generally fail to fulfill the twin conditions of proving the AO's order as erroneous and prejudicial to the interest of revenue. However, in the instant case, involving a non-resident which took the benefits of DTAA as well as Sec 44BB , the case of the Revenue has been upheld. The Tribunal has held that in the name of rule of consistency if an improper method is followed in the past for claiming deduction of direct expenses under the Indo-Italy DTAA and then paying tax @ 10% of net contractual receipts after deducting 90% of receipt as general and administrative expenses, it cannot be termed as one of the valid possible views taken by the AO. If the benefits are allowed to the assessee under DTAA, then the DTAA provisions are to be applied in full. And if domestic law is to be applied, then the 10% rate is to be applied to gross receipts under Sec 44BB.

Service Tax

Commercial Coaching and Training Service - Since partners of assessee fail to substantiate private tuitions provided, fees collected for same to be included in gross amount chargeable to tax; Since assessee also fails to prove sale of prospectus and forms, this income is also includible in gross sum liable to service tax: CESTAT

IN an interesting case involving the Commercial Coaching and Training Service, the Tribunal has held that since the assessees, partners in a leading coaching institute, failed to provide evidence related to the private tuition provided by them to students, the value of service needs to be added to the gross amount chargeable to service tax, collected by the professional coaching institutes. Similarly, the sum attributed to the sale of forms and prospectus is also includible to the taxable value of services provided by the Institute as the assessee failed to corroborate it to actual sale of prospectus.

As regards the discount offered on services, since the assessee was found maintaining parallel records, the same was disallowed. However, in certain cases where the Income Tax authorities had verified the same from certain students, the Revenue directed to verify and extend the same benefit to the assessee. But, for the cases in which no such verification was done, similar benefit cannot be extended as this appears to be unrealistic and improper.

See our columns tomorrow for the judgements