Jurisprudentiol - Friday's cases

By Vijay Kumar

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

classification of service - if a person is simply selling a product manufactured by another or licensing software developed by another, he cannot prima facie be considered as a franchisee: CESTAT

THE appellants are engaged in marketing and licensing of the popular software known as "my SAP" along with other related software products of software firm based in Germany. They do software licensing, maintenance, consulting and training services. There is an agreement between the appellant and their principals in Germany. Subject to the terms of the agreement, the principals granted to the appellant a non-exclusive license to use, market, sub-license the software, documentation, 3rd party data base and 3rd party software to end users in the territory as assigned to the appellants which area is predominantly in India. In consideration of the above licenses and permissions, the appellant was required to make certain payments to the principals in Germany which was mostly from consideration received from the clients to whom the software was marketed. In this proceeding, Revenue is seeking to tax such payments made under provisions of Section 66A of Finance Act, 1994 on the basis that the appellant was receiving franchisee service from their principals in Germany.

Income Tax

Whether intangible assets,acquired, as commercial rights under a slump sale are entitled for depreciation - YES: ITAT

ASSESSEE, formerly known as Areva T & D Systems India Ltd merged with Areva T & D India Limited, had filed its ROI disclosing loss of Rs.97,06,238/-. Later on, it had revised its ROI and declared loss as Rs.1,05,41,362/-. As per assessee, the revision of ‘return' was attributed to merger of the earlier company with the present assessee with effect from 01.01.2006 as approved by the Delhi HC order. The FY in question was also restricted to April, 2005 to December, 2005. On 31.03.2008, assessee's return was processed u/s 143(1), during which AO noticed that the assessee had raised a claim of depreciation of Rs.3,11,01,728/- @ 25% on ‘goodwill'. As per assessee, the said payment had been made as excess of net value of the seller entity and accounted it as ‘goodwill'. The issue before the Bench is - Whether intangible assets acquired under slump sale are entitled for depreciation. And the verdict goes in favour of the assessee.

Central Excise

Rule 6 of CCR, 2004 - Whether supplier of materials u/r 4(5)(a) of CCR, 2004 has paid duty on final products - enquiry to be made with principal supplier before allowing CENVAT to manufacturer job worker - Matter remanded: CESTAT

ALTHOUGH the Larger Bench of the Tribunal in the case of Sterlite Industries (2005-TIOL-305-CESTAT-MUM-LB) has held that MODVAT credit of duty paid on the inputs used by the job worker in the manufacture of final product cleared without payment of duty in terms of notification 214/86-CE for further utilisation by the supplier in the manufacture of final product, which are cleared on payment of duty by the principal manufacturer, would not be hit by provision of Rule 57C of CER, the Revenue formations choose to look the other way.

See our Columns Tomorrow for the judgements