Jurisprudentiol - Monday's cases

By Vijay Kumar

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

Construction of water supply pipelines and pumping stations for Government - Clause 'e' confusion - total waiver of pre-deposit granted: CESTAT

HERE is some good news for contractors executing water supply projects for Government, especially after the weird interpretation by a section of the department that the non-commercial constructions which are excluded under sub-clause (b) of the explanation under the definition of Works Contract service are taxable under sub-clause (e) as EPC / Turnkey contracts. At least there should be some relief at pre-deposit stage in view of this recent order by the Circuit Bench of the Tribunal at Hyderabad.

The Petitioner is engaged in providing services to several departments of the Government of Andhra Pradesh i.e. in the Command Area Development; Irrigation; and Public Health Departments on turn-key or non turn-key basis involving works relating to laying of pipelines including associated earth work, excavation, supply, laying, joining, testing and commissioning of water pipelines of various diameters; civil works involving construction of pumping stations; treatment plants and canals; and electro-mechanical works involving erection, commissioning and installation of various pumps, motors and equipments for treatment required to set up water treatment or water supply plants and the like.

Income Tax

Whether for purpose of deemed transfer u/s 2(47)(v), all Development Agreements, in all situations, can be said to have satisfied conditions u/s 53A of Transfer of Property Act - NO: ITAT

DURING the previous year 2006-07 relevant to A.Y. 2007-08, the assessee company had entered into a Development Agreement cum-GPA with M/s. MAK Projects Pvt. Ltd for development of its agricultural property, into a Housing Project as company under incorporation. After examination of all the documents and details filed, the AO, completed the assessment by rejecting claim of the assessee company that the land is not a capital asset, being agricultural land, and therefore no capital gain is assessable. Having held that there is a charge within the meaning of section 45, the land being a capital asset, the AO proceeded to determine the full value of consideration ignoring the plea of the assessee company that the same is not ascertainable in the year under consideration. In other words, it was the prayer of the assessee company that the full value of consideration is only ascertainable in the year of receipt of constructed area for the purpose of computation of capital gain as the same can be worked out with certainty with reference to the cost of construction in the hands of the builder. The AO referred to the penal clause of the development agreement and adopted the same as yardstick to estimate the full value of consideration for the purpose of computation of capital gain. On appeal, the CIT(A) confirmed the additions made in the assessment order.

THE issue before the Bench is - Whether for the purpose of deemed transfer u/s 2(47)(v), all Development Agreements, in all situations, can be said to have satisfied the conditions of Section 53A of the Transfer of Property Act. And its answer is NO.

Central Excise

CENVAT Credit of Sugar Cess - Appellant entitled to credit of CVD paid on imported sugar equivalent to Cess levied and paid under Sugar Cess Act: HC

SUGAR CESS - Tax or Fee: the provisions of the Central Excise Act and the Rules made thereunder including those relating to refunds and exemptions from duty shall, so far as may be, apply in relation to the levy and collection of the said duty of excise as they apply in relation to the levy and collection of the duty of excise on sugar under that Act. In other words, the provisions of the Central Excise Act and the Rules made there under are read into the Act. Levy and collection of cess under the Act is treated as levy and collection of a duty of excise on sugar under the Central Excise Act. The cess imposed under the Act is a duty of excise or a tax. The contention that it is a fee and the assessee is not entitled to CENVAT credit has no substance. Therefore, the sugar cess paid under the Act is tax, and to be precise it is DUTY OF EXCISE and not FEE.

The assessee is entitled to claim CENVAT credit in respect of the cess paid as additional duty (CVD) on raw sugar imported under the Sugar Cess Act of 1982 read with Section 3 of the Customs Tariff Act, 1975.

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