Jurisprudentiol - Tuesday's cases

By Vijay Kumar

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

Appellant providing Compliance Services - Compliance with laws is part of responsibilities of management and such responsibility per se cannot bring it into ambit of words "in connection with management of any organisation" to tax such services: CESTAT

REVENUE was of the view that "Compliance Services" would fall within the definition of Management Consultancy Service and the appellants are liable to pay Service Tax. Accordingly, a Show Cause Notice was issued on 20.10.2006 demanding service tax of Rs. 3,53,05,405/-. This widely reported case was adjudicated by the Commissioner of Service Tax, Delhi, but naturally by confirming the demand and imposing penalties galore.

“...The adjudicating authority has chosen to ignore the Circular of CBEC. But we would not like to ignore the decisions of Tribunal quoted before us....”- CESTAT

Income Tax

Whether when assessee settles inter-corporate loan through journal entries and pays us balance sum by account payee cheque, such netting of accounts violates provisions of Sec 269T and thus attracts penalty u/s 271E - NO: High Court

ASSESSEE is a member of the National Stock Exchange and a Merchant Banker, registered with SEBI. Prior to 1st April 2002, the assessee had accepted a sum of Rs. 4,29,04,722/- as and by way of loan/inter-corporate deposit from ‘ITI' which was repayable during AY 2003-2004. Assessee transferred 1,99,300 shares of ‘R' held by it to ‘ITI' for an aggregate consideration of Rs. 4,28,99,325/. Instead of repaying the loan / inter-corporate deposit to ‘ITI' and receiving the sale price of the shares from ‘ITI', both the parties agreed that the amount payable / receivable be setoff in the respective books of account by making journal entries and pay the balance by account payee cheque. Accordingly, after setting off of the mutual claim through journal entries, the balance amount was paid by the assessee.

In view of the objections raised in the Audit Report regarding repayment of loan / inter-corporate deposit otherwise than by an account payee cheque or draft, AO issued show cause notice as to why action should not be taken for violating provisions of section 269T. AO imposed penalty under section 271E on the ground that the assessee had repaid the loan / inter-corporate deposit to the extent of Rs. 4,28,99,325/-in contravention of the provisions of Section 269T.

Service Tax

The express mention of one thing excludes all others - explicit mention in notification is "services provided for consumption within such Special Economic Zone" - as such, services consumed outside such zone will not be entitled for benefit of exemption notification No.4/2004-ST - Pre-deposit ordered of Rs. One Crore: CESTAT

THE appellant is engaged in rendering of services of Custom House Agent, Clearing and Forwarding Agent, Storage and Warehousing, Business Auxillary Service, Transport of goods by road and Business Support Service, etc. During the course of audit, it was noticed that the assessee was wrongly availing exemption of service tax under Notfn. No. 4/2004-ST dated 31/03/2004 for the CHA services rendered outside the unit situated at Special Economic Zone, Chennai. The demand notice was confirmed by the CCE, Thane-I along with penalty and interest and hence the appellant is before the CESTAT.

See our columns Tomorrow for the judgements