Jurisprudentiol – Wednesday's cases

By Vijay Kumar

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

Conflicting opinions by different benches of Tribunal are not conducive to business and trade and can cause adverse effect on economy of the country: HC

EVEN if the CESTAT, New Delhi did not agree with the reasoning given by the CESTAT, Bangalore, in similar proceedings on the same facts, it should have followed the practice of referring the matter to a Larger Bench. Apart from institutional integrity, the same Company, in respect of same period in the same activities, could not be subjected to different opinions expressed by the Tribunal, causing doubts and confusion over the liability. Such conflicting opinions by different benches of the Tribunal are not conducive to business and trade and can cause adverse effect on the economy of the country.

Income Tax

Whether imaginary loss arising out of valuation of interest rate swap is eligible for deduction in computation of income: ITAT

THE assessee is engaged in the business of dealing in government securities, bonds, debentures and providing services of arranging and underwriting the issue of debentures and bonds etc. During the course of the assessment proceedings, the AO noticed that the assessee has claimed a deduction of Rs 10,10,92,000 being loss on interest rate swap valuations. The assessee submitted that interest rate swap is a financial contract between two parties exchanging a stream of interest payments for a notional principal amount, on multiple occasions, during the contract period.

THE issue before the Bench are - Whether the imaginary loss arising out of valuation of interest rate swap is eligible for deduction in computation of income and whether, for the purpose of computing taxable income, deduction can only be allowed in respect of ascertained and enforceable liability which can be enforced on or before the end of the relevant previous year. And the verdict goes in favour of the assessee.

FTP

SFIS - Transmission of data through under-sea optical fibre cable constitutes supply of service from India: HC

THE transmission of data, voice or video through an optic fibre cable laid undersea from a point within India to an overseas destination constitutes a supply of service from India to any other country within the meaning of clause (i) of Para 9.53. The task of the PIC was to interpret Foreign Trade Policy. In the process of construing the policy, it would not be open to the Committee or, for that matter, to any administrative authority to modify the policy or amend the policy. The reasons, which weighed with the PIC in holding that the Petitioners do not fall within the description of a service provider in Paragraph 9.53 are fallacious.

Service Tax

Credit Cards - Tax payable even prior to Finance Act 2006 - Cum Tax value to be adopted: CESTAT

THE proposal by Finance Act, 2006 was to bring comprehensively all types of cards under one definition clause so that all services provided in relation to such credit cards shall be conveniently dealt by the tax administration following cannon of convenience which is one of the considerations of classification rule. Therefore at no point of time, credit card service cannot be presumed to be excluded from levy before enactment of Finance Act, 2006.

See our columns Tomorrow for the judgements