Jurisprudentiol–Tomorrow's cases

By Vijay Kumar

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

Finalization of provisional assessment and differential duty paid before finalization – Interest cannot be charged prior to 01.07.2001 as there was no provision for the same – Tribunal

BOTH Rule 7(4) of the CER , 2001 (w.e.f 01.07.2001) and CER, 2002 (w.e.f 01.03.2002) mandates that an assessee pays interest on the amount payable consequent to finalization of provisional assessment; however no such provisions existed in earlier rule 9B of CER, 1944.

Also see our 'Guest Column'

Income Tax

Investment of interest-bearing fund - no immediate return - Revenue cannot disallow interest expenditure as investment in subsidiaries where assessee has stakes, is business decision to get business from them: ITAT

UTILISATION of interest-bearing funds is a major bone of contention in the tax domain. Since interest expenditure is an allowable deduction, Revenue generally tends to look at the corresponding entry of income arising from investment of such funds. However, for a business entity, it is an investment which may bear fruit or may go fruitless. Should Revenue disallow the interest expenditure if an investment goes awry? Anyway, here is a case where the assessee has share application money as well as interest-bearing funds. AO simply disallows on the ground that the business in which investments were made did not commence in the relevant year. But the CIT(A) disallows only the proportionate interest, after considering the availability of the share application money with the assessee.

And the final verdict of the Tribunal against these facts is that the CIT(A) order is not sustainable even though he has only partly disallowed the interest expenditure. And rationale for the same decision is that whether it is own fund or interest-bearing fund, as long as the same is invested in the subsidiaries of the assessee-company and the subsidiaries utilise the same for furtherance of their business which in turn sub-serves the interest of the assessee-company which has a reasonably good stake in the subsidiaries, the disallowance cannot be made. Thus, the Revenue's appeal is dismissed.

Customs

Conflicting judgements from two division benches as to whether appeal lies before a Tribunal on rejection of application for renewal of CHA license – Matter goes to larger bench – CESTAT

THE appellant aggrieved by the rejection of his application for renewal of CHA license approached the Tribunal for redressal. However, at the outset the Departmental Representative raised a preliminary objection on the maintainability of the appeal before the Tribunal. He relied on the decision of Delhi Bench in the case of G.P. Jaiswal vs. Commissioner of Customs, Lucknow. The counsel for the appellant countered this by relying on the Chennai bench in the case of Sri Shipping Services vs. Commissioner of Customs, Coimbatore.

See our columns tomorrow for the judgements