Jurisprudentiol – Monday's cases

By Vijay Kumar

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

Income tax - Whether when commission is paid to Directors of assessee company who hold all shares in company, disallowance is warranted by treating commission being paid in lieu of dividend which is liable to tax - YES, rules Special Bench

THE issues before the Special Bench are - Whether when commission is paid to the Directors of the assessee-company who hold all the shares of the company, disallowance is warranted on the ground that the commission was paid in lieu of dividend which is liable to tax; Whether section 36(1)(ii) is applicable only to employees who are not shareholders; Whether the expression “payable” used in section 36(1)(ii) means that the shareholder should have right to receive dividend and since the payment of dividend is discretionary to be decided by the management of the company and not compulsory, it cannot be said that the dividend is payable in case of the employee directors and whether payment of bonus or commission to an employee / director will also be covered by the provisions of section 36(1)(ii) and not under section 37(1). And the verdict goes against the assessee.

Service Tax

Taxable services received from offshore service providers - specific provision making service recipient in India liable to pay service tax was introduced only with effect from 18.4.2006 by inserting Section 66A in Finance Act, 1994 and during period prior 18.4.2006, Rule 2(1)(d) without backing of statutory provisions in Finance Act, 1994 was not valid: CESTAT

WITH effect from 16.8.02, proviso to sub-rule 1 of Rule 6 of the Service Tax Rules was deleted and at the same time definition of "person liable for paying service tax" as given in Rule 2 (1) (d) of Service Tax Rules, 1994 was amended so as to provided that in relation to any taxable service provided by a person, who has permanent address or usual place of residence or business establishment in a country than India and does not have any office or business establishment in India, the person in India who receives such service would be the person liable to pay service tax on the service so received by him.

Central Excise

PVC Fishing float is not a ‘Floating Structure' classifiable under heading 89.07 but is correctly classifiable under SH 39.26 of CETA, 1985 - Revenue appeal dismissed: CESTAT

THE respondent is engaged in the manufacture of excisable goods viz. P.V.C. Floats falling under Chapter heading no. 39.26 of Central Excise Tariff Act, 1985. A demand notice for Rs.13,93,207/- was issued alleging that the assessee had mis-classified the said product under SH 3926.90 instead of SH 8907.00 of CETA 1985 and consequently had not paid excise duty @16% amounting to Rs.13,93,207/-. The SCN was confirmed by the Additional Commissioner and an equal penalty was imposed.

See our columns Monday for the judgements