Jurisprudentiol–Friday's cases

By Vijay Kumar

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

Parts of Boiler cleared together merits classification as complete boiler in unassembled state – CESTAT upholds dropping of Rs 39 crore demand of Central Excise duty against BHEL

AROUND 23 show cause notices were issued to M/s BHEL Trichy demanding Central Excise duty of nearly 39 crores. The issue is whether the parts of Boiler cleared by the unit are classifiable as complete Boiler as contended by the assessee or as separate parts of Boiler. After initial ritual of confirmation of the demand, the matter was remanded by the Tribunal as the assessments were provisional. In the remand order, the Commissioner was bold enough to drop the demand by classifying the goods as complete Boilers. However, as usual, the Revenue took the matter to the Tribunal again.

Income Tax

Indo-French DTAA - non-resident company gets contract - execution is over - another contract obtained after few years - earns interest income on I-T refund during lull period - assessee not entitled to claim deduction for expenses nor set off of business loss u/s 71 when there is no PE in India - PE cannot be equated to business connection: High Court

INDIA attracts hordes of non-resident companies to do business with domestic enterprises. There are cases where a non-resident company gets contracts for a few years and then there is a lull when no business is obtained from any company. After a gap of few years the non-resident company gets business again. Now the bone of contention is whether the non-resident company can claim set off for expenses against interest income accruing in the form of income tax refund when there is no PE in India? And the answer coming from the High Court is that when the assessee is not in any business in India nor has any PE in India, it cannot be allowed to claim deduction of expenses nor any set off of business loss under Sec 71 of the I-T Act.

FERA

Not taking adequate steps to recover the money from a foreign buyer – penalty rightly imposed – High Court

THE appellant failed to take reasonable steps to realize the outstanding export dues rather it settled the matter directly with the overseas buyer without permission of RBI which resulted in the loss of foreign exchange equivalent to Rs.67,200 /- to the country. Having considered the facts, evidence and circumstances of the case, appellant has rightly been held guilty by the Adjudicating Officer.

See our columns tomorrow for the judgements