Jurisprudentiol - Monday's cases
Legal Corner Icon — the image was hosted by the publisher and was not captured.VAT vs Service Tax
Trade Mark - VAT Vs Service tax - Franchise services are liable to service tax and demand of VAT on same transaction by state government as “right to use Trade Mark” rejected : HC
THE High Court, in a landmark decision dealt with the issue of overlap of Service Tax and VAT and held that VAT cannot be demanded on consideration received under franchisee agreement. The High Court relied on the Apex Court decisions in the case of BSNL and another v. Union of India and others , Tata Consultancy Services v. State of A.P - and Imagic Creative Pvt. Ltd. v. Commissioner of Commercial Taxes () , to arrive at this conclusion.
The appellant is a private limited company engaged in marketing, trading, export and import of gold and diamond Jewellery. The appellant entered into franchise agreements, by which the appellant had permitted the Franchisees to use of the Trade Mark of the appellant. In return the appellant receives royalty and paid Service Tax of 10% / 12% on the royalty. However, the department of Commercial Taxes contended that royalty would attract VAT.
Income Tax
Whether benefit of exemption from capital gain tax u/s 47(xiv) is available, when assessee has corporatised his business of holding investments in proprietary concern by transferring same to an incorporated company in which he held virtually all shares - YES: ITAT
THE issues before the Bench are - Whether the benefit of exemption from capital gain tax u/s 47(xiv) is available, when the assessee has corporatized his business of holding investments (shares) in the proprietary concern by transferring the same to an incorporated company in which he held virtually all the shares; Whether under the scheme of succession of section 47(xiv), there is any requirement that the capital or other intangible asset transferred to the company should be used by the sole proprietor for the purpose of his business; Whether when the only asset held in the proprietary concern was equity shares which got transferred into the succeeding company, the exemption of benefit from capital gain u/s 47(xiv) is not available; Whether the definition of "business" in Income Tax Act is an inclusive definition and includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture and Whether there is any decisive test of the intention to carry on the business. And the verdict goes in favour of the assessee.
Service Tax
By placing shares in private domain, no advice or technical assistance relating to conceptualizing, devising, development, modification, rectification or up-gradation of any working system of any organization could be said to have been rendered by appellant - classification done by department under ‘Management Consultancy Service' has no basis - Order set aside and appeal allowed: CESTAT
THE appellant collected placement fee of Rs. 10 lakhs and Rs. 4,27,90,000/- for private placement of unlisted shares. Since the placement of listed shares was only taxable, the appellant did not discharge any service tax on the unlisted shares.
It is seen that no attempt has been made by the Revenue to classify the service first and then demand service tax thereon. Therefore, the principles of natural justice have been clearly violated as the primary requirement is to put the appellant to notice under what taxable service category, he is liable to service tax. The activity undertaken by the appellant is private placement of shares which have not been listed in any recognized stock exchange. By placing shares in the private domain, no advice or technical assistance, relating to conceptualizing, devising, development, modification, rectification or up-gradation of any working system of any organization could said to have been rendered by the appellant. The classification done by the department of the transaction of private placement of shares under management consultancy service has no basis and is not in accordance with the law.
Until Monday with more DDT
Have a nice weekend.
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