Jurisprudentiol – Friday's cases

By Vijay Kumar

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Appeal - Waiver of pre-deposit - When Stay granted by HC is vacated, Tribunal's order comes back to life - assessee directed to make pre-deposit: HC

WHEN the assessee challenged the order passed by the Tribunal originally directing deposit of the amount of Rs.5.00 lakhs, evidently, in the Writ Petition, it was subsequently vacated on the submissions made by the assessee that there was no need to make any payment, as the amount was not quantified. Thus, this Court held that there was no necessity to pass any interim order. Based on this order, the Tribunal stated that no pre-deposit was required. It is not clear under what circumstances the Tribunal by its order dated 23.1.2009 modified the order passed already on pre-deposit. Further, in the context of the fact that when the interim stay granted by this Court was vacated, the order of the Tribunal originally passed directing the assessee to make pre-deposit of Rs.5.00 lakhs stood thereon for compliance.

Income Tax

Whether development of Geographical Information software based on raw customer inputs and fact that it is not mere compilation of map simplicitor, satisfies test of manufacture as per Sec 80IB - YES: ITAT

THE issues before the Bench are - Whether the development of Geographical Information System Software based on raw customer inputs and the fact that it is not a mere compilation of map simplicitor, satisfies the test of manufacture as per Sec 80IB; Whether the fact that it is produced on a platform not owned by the assessee is relevant, when what is being transferred by the assessee is not the platform but the end product; Whether the mere fact that one of the input is owned by the client itself, does not mean that the property in the product never belonged to the assessee and Whether it was relevant for the AO to consider these foregoing issues, when there was a specific direction from a coordinate bench that all that is to be seen is the point of time when property in end product is transferred. And the verdict goes in favour of the assessee.

Service Tax

Appellant getting trade secret from an ex-employee of competitor firm - competitor firm filing suit in US Court - appellant pays for use of trade secret and reaches an out of court settlement as per which appellant has become a co-owner of intellectual property - since transfer is permanent transaction does not come under purview of Section 65 (55b) of FA, 1994 so as to be taxed under head of Intellectual Property Service - appeal allowed: CESTAT

THE appellant is a manufacturer of Ion exchange resins. In USA, one Shri Narendra Singh who was working with M/s Purolite International Ltd., a competitor of the applicant, left the job and provided trade secret for manufacturing of ion exchange to the applicant. M/s Purolite International Ltd. filed a suit in the USA court and the applicant was charged with using the trade secret of M/s Purolite International Ltd. Court proceedings were initiated against the applicant.

Not to escalate the matter further and be saddled with damages of astronomical proportions, the applicant entered into an agreement with M/s Purolite International Ltd., to settle the dispute out of court. As per the settlement, they paid consideration for the use of trade secret and became the co-owner of the Purolite's technology and information transferred by Shri Narender Singh to the applicant.

See our Columns Friday for the judgements