Jurisprudentiol – Wednesday's cases

By Vijay Kumar

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

Construction of residential complex by cooperative housing societies for its members not liable to service tax – Tax paid initially available as refund – Matter remanded to original authority to determine unjust enrichment and correctness of claims: CESTAT

THE two appellants, being cooperative housing societies, are engaged in construction of residential complex for their own / prospective members. The third appellant was a developer engaged by the societies to construct a super structure on the land owned by the societies which were to be transferred to the members of the society. The appellants paid service tax initially and later on filed refund claims on the ground that they are not liable to pay any service tax under the taxable service category of ‘construction of complex' service. The refund claims were rejected by the lower authorities resulting in this appeal before the CESTAT.

Income Tax

Hypo tax - AO does not find it allowable deduction u/s 16 - it is to be reduced from tax perquisite and not basic salary; Social security charges paid by employer in home country of assessee is also allowable deduction: ITAT

WHAT is hypo tax? Hypothetical tax has nowadays become a part and parcel of a salary package offered to an expat employee for working in a foreign country. It is done under tax equalisation policy in order to cap the tax liability of an employee in the hiring country to the tax liability which the employee would have borne in his home country. For example, if an expat employee is hired by a corporate in India, and in case the tax rate in his home country is 25% and the tax he suffers in India is 30%, the balance 5% is borne by the employer.

Central Excise

CENVAT Credit cannot be allowed on inputs used by job worker for processing of goods received under Rule 4(5)(a) of CENVAT Credit Rules, 2004 - CESTAT orders pre-deposit of full amount of duty demanded

THE basic issue involved is whether the CENVAT credit can be allowed on the inputs used by the job worker (the Applicants M/s TATA Motors Ltd.) in the processing of goods received under Rule 4(5)(a) of Cenvat Credit Rules, 2004. The goods cleared by M/s FIAPL (M/s Fiat India Automobiles Pvt. Ltd.) under rule 4(5)( a) were the car body shells and after job work by M/s Tata Motors, the job worked goods i.e painted car body shells were returned to the principal manufacturer i.e M/s FIAPL under the job work challans without payment of duty as per the provisions of Rule 4(5)(a) ibid. The paints used by M/s Tata Motors are from their on-stock, which have been received in their factory for the manufacture and clearance of their own finished goods. These paints have also been utilized for painting the goods received on job work basis.

See our columns Tomorrow for the judgements