Jurisprudentiol – Friday's cases

By Vijay Kumar

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

Xerox machine Maintenance is an Input service but Photography Services, Air Travel Agent & Tourist Taxi Services are not Input Services – Unconventional trade practices cannot bolster Cenvat credit claim - CESTAT

Minuscule amounts of Cenvat credits adding up to Rs.22,078/- were taken on the following services - Xerox machine repairs and maintenance, Air Travel Agents, Tourist taxi & Photography.

Revenue was of the view that there was no connection of these services with the manufacturing activities and hence denied the credit and imposed a penalty of Rs.5000/-. The lower appellate authority confirmed this.

Income Tax

Amortisation of licence fee expenditure on software over a period of 3 years – Where revenue expenditure results in continuing benefit to assessee's business over a period of time, allowing expenditure in year in which it is incurred will distort profits of that year - amortization of expenses permissible under concept of 'matching principle' – No reason to interfere with CIT order: ITAT

The 'matching principle' allowing amortization of expenses, in a situation where the Act is silent in this regard, is a 'judge-made' law. Its application has to be restricted to cases where a revenue expenditure results in a continuing benefit to the business of the assessee over a number of years, and allowing the entire expenditure in the year in which it is incurred is likely to distort the profit of that particular year. In our opinion this principle cannot be applied by the AO in each and every case where the benefit of a particular expenditure spills over to subsequent years. It should be applied with great caution.

Customs

Re-labelling of boxes of Vitrified and Glazed tiles with higher MRP consequent to import – Differential CVD duty demand – CESTAT orders pre-deposit of Rs.50 lakhs

The CESTAT has in the case of Media Industries Ltd. - (2006-TIOL-2007-CESTAT-DEL) held that subsequent change in MRP amounts to mis-declaration at the time of import and differential duty confirmed on the said basis is liable to be upheld along with confiscation of the goods and imposition of penalty.

In the present case, the appellant had imported Vitrified Tiles and Glazed Tiles during the period March 2001 to April, 2004 and cleared the same under Bills of Entry on payment of duty and on the MRP values declared on “per square meter” basis. After clearance of the goods on payment of duty as assessed, the appellant re-labelled the boxes with equivalent MRP printed thereon, but on “per box” basis .

See our columns Tomorrow for the judgements