Jurisprudentiol - Thursday's cases

By Vijay Kumar

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

Anti Dumping Duty - Release of seized goods, which are prohibited, on payment of redemption fine is discretion in terms of Section 125 of Customs Act, 1962 - Allowed goods on RF and enhanced RF amount: HC

ABSOLUTE confiscation and redemption of seized goods - Prohibited Goods - The expression 'prohibited goods' is much broader and wider and is not confined merely to goods import and export of which is prohibited absolutely or subject to conditions by a notification issued under Section 11(1). In fact, the said aspect is no longer res integra , in view of the decisions of the Supreme Court in Om Prakash Bhatia vs. Commissioner of Customs, Delhi = (2003-TIOL-06-SC-CUS)

Income Tax

Whether when holding company creates a wholly-owned subsidiary and transfers hotel development rights for NIL consideration but when same is transferred back to holding company on rejection of name substitution application for a consideration, capital gains arising out of such transaction is exempt u/s 47(v) - NO: Delhi HC

‘S' was granted the rights to develop a hotel by the NDMC. ‘S' incorporated another company i.e. the assessee company and asked the NDMC to substitute its name with that of the assessee's name. During the pendency of such application, ‘S' transferred its right to the assessee for nil consideration. NDMC rejected the application of ‘S' and the assessee transferred the hotel development rights back to ‘S' for a consideration of Rs 21 crores. The assessee claimed capital gain on transfer of hotel development rights to ‘S' as exempt u/s 47(v) which applied when a wholly owned subsidiary transferred its capital assets for consideration to the holding company. AO rejected the plea of the assessee stating that as per the material unearthed during the search operation and post search investigation, the assessee was not a wholly owned subsidiary of ‘S' as claimed and observed that the share certificates were allotted in the name of the individual shareholders and did not show that the shareholders were nominees of ‘S'.

Service Tax

Onus on department to prove that amount received and shown in Balance Sheet is as "Consulting Engineering Firm" - since department has failed to prove same, Service Tax demand set aside: CESTAT

THE appellant is the manufacturer of PVC lamination film, rigid and flexible films during the year 1999-2001. The appellant has shown an amount of Rs.14,02,300/- and Rs.18,91,500/- in their balance sheet as received by them against the financial year 1999-2000 and 2000-2001 respectively on account of "Technical Consultancy". This entry was enough for the departmental officers to issue a show-cause notice to the appellant demanding service tax on the amount received under the category of ‘Consulting Engineer'. The appellant contested the demand notice by submitting that they are a manufacturing firm and not a Consulting Engineer but both the lower authorities turned down this plea and confirmed the demand along with penalties.

See our columns Tomorrow for the judgements