Jurisprudentiol - Monday's cases

By Vijay Kumar

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

Whether an assessee is free to exercise his commercial wisdom to sell loss-making shares at any given point of time, even though this may amount to reduction of his tax liability - YES: HC

THE issues before the Bench are - Whether shares pledged with a bank, can be validly transferred within the meaning of section 2(47) of the Income Tax Act, even though the mandatory requirements of registering such transfer u/s 108 of the Companies Act, may not be fulfilled; Whether capital loss arising on sale of such shares can be claimed, when such transfer of shares may be challenged by the bank, on the grounds of breach of contract; Whether in such a case, the transfer could be considered as a paper arrangement, merely because loss making shares were sold to a group company; Whether there are any restrictions in the Income Tax Act on sale of loss making shares and Whether an assessee is free to exercise his commercial wisdom to sell loss making shares at any given point of time, even though this may amount to reduction of his tax liability. And the verdict goes against the Revenue.

Service Tax

All claims for refund have to be preferred and adjudicated under provisions of respective enactment - claim clearly time barred in terms of s.11B of CEA, 1944 - Revenue appeal allowed: CESTAT

THE assessee manufactures and exports telecommunication products. They entered into an agency commission agreement with their foreign principal. In terms of this agreement, they carried out marketing efforts to find Indian customers for the products manufactured by the principal. In return, they were paid agency commission at specified percentage for the said services in the convertible foreign exchange, which they realized through normal banking channel. Since assessee was under bona fide belief that the said marketing services amounted to Business Auxiliary Services in terms of Section 65 (19) of the Finance Act, 1994 read with 65(105) (zzb) of the Finance Act, they paid Service Tax at appropriate rates and in case of delayed payment of said tax they also paid penal interest.

Central Excise

Supply of paint and thinner to Indian Navy by claiming exemption notification 64/95-CE on basis of certificate issued by Commandant, Warship Production for construction of naval vessels and not for consumption as stores - benefit not available: CESTAT

AS the revenue was aware that goods in question have been cleared to M/s Mazgaon Dock Ltd. by claiming the benefit of notification. Hence, the allegation of suppression with intent to evade payment of duty is not sustainable in the present case.

Oxygen plant set up in factory by M/s Inox Air Products and leased out to assessee - CENVAT credit availed on capital goods used in fabrication of ‘plant' - Pre-deposit of Rs.4.85 Crores waived and stay granted: CESTAT

REVENUE relies on the findings of the lower authority and submitted that as no duty has been paid on the Plant as the Plant is not excisable and credit in respect of the inputs used in the fabrication of the Plant is not admissible.

See our columns Monday for the judgements