Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Activities of "Scientific Research" and “Consulting Engineering Services” are different - Scientific Research not taxable prior to 16.07.2001 under Consulting Engineer Service: HC

THE respondent M/s. National Ship Design and Research Centre, Visakhapatnam is an autonomous body under the administrative control of Ministry of Surface Transport, Government of India, and is engaged in providing services in the fields of integrated ship design, consultancy, maritime economics, research and development. The services being provided by the respondent include design (tender design to production drawings) of all kinds of floating structures and also providing consultancy in the fields of techno economic evaluation of vessels, model testing etc.

On a suspicion that the respondent was evading payment of Service Tax under the provisions of the Finance Act, 1994 on “Consulting Engineering Services” provided by it to clients, the Head Quarters Preventive Unit of the Central Excise Commissionerate, Visakhapatnam conducted investigations.

Income Tax:

Whether gains on foreign currency received from service providers for plying of ships is income incidental to tonnage income - YES: ITAT

THE assessee company is engaged in business of cargo transport and trading. The assessee had u/s 115VA of the Act, opted to pay taxes under Tonnage tax scheme and thus the income from the operation of qualifying ships was computed in accordance with the provisions of Chapter XIIB of the Act. The assessee having opted to be taxed under the aforesaid provision for its shipping division. In the A.Y. under consideration, the AO had completed assessment u/s 143(3) of the Act, based on return of income filed by the assessee by making disallowances on account of unpaid leave encashment liability and depreciation disallowed on revenue expenditure which was treated as capital expenditure. THE issues before the Bench are - Whether gain on currency received from service providers for plying of ships is income incidental to tonnage income; Whether the payment to gratuity fund as per the actuarial valuation are allowable as deduction u/s 43B and Whether expenses on issue of Bonds optionally convertible into equity shares are revenue expenses. And the verdict partly goes in favour of the assessee.

Central Excise

SSI Exemption - clearance of goods in the brand name of another person - for part of demand period, there is no assignment deed and even for later period, assignment will take place only when Trade Marks are registered - since Trade Marks are yet to be registered question of appellant owning the brand name by virtue of assignment deed does not arise - Benefit not available - Appeal dismissed: CESTAT

THE appellant claimed the benefit of SSI exemption during the period 1.4.1999 to 6.12.2001 in respect of medicaments bearing the brand name of M/s Milichem Laboratories.

The department was of the view that since the goods bore the brand name of another person the appellant is not eligible for the SSI exemption in terms of para 4 of the notification. Accordingly, the lower authority confirmed a demand of Rs.45,851/- along with interest and penalty. Since this order was upheld by the Commissioner (A), the appellant is before the CESTAT.

THE proprietor of the appellant firm appeared before the Bench and submitted that they had a Deed of Assignment dated 10.08.2000 executed by M/s Milichem Laboratories in their favour where under the brand names have been sold to them for a consideration of Rs.2000/- and, therefore, they are rightly entitled for the SSI exemption in respect of goods cleared with the said brand name. It is further submitted that one more Assignment Deed has been executed by M/s Milichem Laboratories in their favour in May, 2003, once again assigning the brand names in their favour, and which they have registered with the Trade Marks Registry on 20.05.2003.

See our Columns Tomorrow for the judgements