Jurisprudentiol – Wednesday's cases

By Vijay Kumar

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

Works Contract or Construction - Activities which are concerned with welfare of citizens of this country has been excluded from liability of service tax - CESTAT

THE assessee had executed Projects relating to construction of reservoirs, canals, distributory system to feed various ayacut, land etc. for Government of Andhra Pradesh. The Revenue proceeded against the appellant on the ground that such an activity would fall under the category of works contract and liable for service tax as “turnkey projects including engineering, procurement and construction or commissioning (EPC) projects” under ‘Works Contract Services' which was introduced from 01.06.2007.

Income Tax

Assessee markets cinematographic films on DVD for non-resident - makes royalty payment but deducts no tax at source- AO invokes rigours of Sec 40(a) - although royalty has been paid but it falls outside definition of royalty given in I-T Act - no TDS: ITAT

WITH the Indian economy opening up to the global economy in a big way, a large number of business entities nowadays undertake cross-border transactions, and send payments by wire transfer for either the goods or the services. Among all the payments remitted to non-residents, royalty has its own pride of place. Royalty has been defined in Section 9(1)(vi) of the I-T Act. If royalty payment is made without TDS, such a payment is disallowed under Section 40(a). But here is a case where the assessee-company declares in its return that royalty payment has been made but the same does not fit into the definition of royalty given in the I-T Act. Since it falls outside the definition given in Explanation 2 to Sec 9(1)(vi), no disallowance can be made in respect of such payment.

Customs

‘Reverse Osmosis Membrane Filtration System' squarely falls within meaning of ‘plant' used in definition of ‘Water Supply Project' – Importer eligible for benefit of exemption notification 14/2004-Cus – Revenue appeal rejected by CESTAT.

Notification 14/2004-Cus dated 8.1.2004 exempts Water Supply Projects, falling under heading 9801 of the First Schedule to the Customs Tariff Act, 1975, from whole of the duty of customs leviable thereon under the said First Schedule, and from whole of the additional duty leviable thereon under section 3 of the said Customs Tariff Act. The explanation to the notification effective 9 th January, 2004 reads - Water Supply Project includes a plant for desalination, demineralization or purification of water or for carrying out any similar process or processes intended to make the water fit for agricultural or industrial use.

Revenue in its appeal before CESTAT seeks to challenge the order of the Commissioner(Appeals) allowing the benefit of this notification to the imports made by the respondent.

See our columns Tomorrow for the judgements