Jurisprudentiol–Wednesday's cases

By Vijay Kumar

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

Exploration work carried out by PSU for the Ministry of Mines, Government of India for which only Grant-in-Aid is received – whether chargeable to Service Tax – Appellant, a Public Sector Undertaking and totally owned by the Government of India, Ministry of Mines has a good prima facie case in their favour and also balance of convenience was lying in their favour – Waiver of pre-deposit of tax, penalties and interest granted and stay ordered by CESTAT

THE Govt. of India, Ministry of Mines provides grant-in-aid for exploration work of various minerals to the applicant. The exploration work carried out by the applicant is termed as promotional work. The applicant is also registered with Service Tax department under the category of “Scientific and Technical Consultancy Services”. The applicant is also doing exploration work, as promotional work for the Ministry of Mines, Government of India, in the field of Mineral exploration. The funding for promotional work to the applicant is done by way of promotional grant provided by Government of India i.e. Department of Mines every year in their Budget.

Customs

Imported goods lying in bonded warehouse damaged and unable to use to be regarded as goods destroyed, remission of duty under Section 23 of Customs Act available – Wider interpretation to be given to the words ‘lost’ or ‘destroyed’ – In terms of Section 68, when there is relinquishment of title to the goods imported before their clearance, no duty can be demanded – Impugned order not sustainable – CESTAT

IT was observed that no one in his senses would voluntarily or willingly damage his own goods after spending considerable foreign exchange for import of such goods. Further, the goods were also certified as unusable as networking equipment by the experts. It was held that a wide interpretation has to be given to the words ‘lost’ or ‘destroyed’ employed in the statute and goods which are damaged beyond any capability of being put to use have to be regarded as goods ‘lost’ or ‘destroyed’ only. It was further observed that in terms of s. 68 of the Act, when title to the goods has been relinquished before their clearance, duty cannot be demanded.

Income Tax

Transfer Pricing - ALP is price which is charged by unrelated parties for similar transaction in similar circumstances as are prevailing between related parties carrying international transaction; Depreciation - It is nowhere provided that deduction of depreciation is a must – ITAT

THE taxpayer showed before the revenue authorities that profit shown by the taxpayer satisfies arm's length requirement on ratio of cash profit to sales if uniformly applied. As the deduction of depreciation is leading to wide differences, the same should be excluded. The only reason given for rejecting taxpayer's analysis and for making adjustment is that use of ratio of cash profit without depreciation is not permitted under the law.

See our columns Tomorrow for the judgements