Jurisprudentiol - Friday's cases

By Vijay Kumar

Legal Corner Icon — the image was hosted by the publisher and was not captured.Central Excise

A miscellaneous application is not substitute for an appeal as provided for in law - Application dismissed: CESTAT by Majority

Member (Judicial) has taken the view that the miscellaneous application has to be treated as an appeal and the delay in filing the miscellaneous application has to be condoned in the facts and circumstances of the case and the application allowed with consequential relief. This Tribunal is creation of statute and is not a High Court/ Supreme Court whose powers are very wide. There is no provision or procedure under the Central Excise Act to consider a miscellaneous application as an appeal and condone the delay suomotu even without knowing the reasons for delay. In the earlier order of the Tribunal, there are no findings in relation to rebate even though in the facts position, certain arguments of the appellant are mentioned.

Income Tax

Whether provisions of Sec 56(2)(vii) apply to all capital assets, including bonus and rights shares offered on proportionate basis even if offer price is less than fair market value - NO: ITAT

THE assessee is an HUF, holding 15,000 shares in a company by the name Dorf Ketal Chemicals Pvt. Ltd. (DKCPL). The entire share capital was held by the family members of the assessee's karta's family, representing 4.98% of the share capital (3,01,316 shares), was offered 3,13,624 additional shares at the face value rate of Rs.100/- each, on a proportionate basis. It subscribed to and was accordingly allotted 1,94,000 of those shares, on 28.01.2010, i.e., along with the other shareholders, who were allotted - on the same terms, not only the shares similarly offered to them but also that not subscribed to by the other shareholders, as 1,19,624 (313624 194000) shares by the assessee. The shares were received by the assessee on 10.02.2010. As the book value of the shares of DKCPL as on 31.03.2009 was Rs.1,538/- per share, which was to be adopted as a measure of their FMV under the applicable rules, AO treating the difference of Rs.1,438/- per share as the extent of the inadequate consideration, in terms of section 56(2)(vii)(c) added toward the acquisition of additional shares. On appeal, CIT(A) confirmed AO's order.

The issues before the Bench are - Whether the provisions of section 56(2)(vii) apply to all capital assets, including bonus and rights shares offered on proportionate basis even if the offer price is less than the fair market value; Whether in case the value of the property in the additional shares is derived from that of the existing shareholding, it can be presumed that additional property have been received by the shareholder; Whether in case there is no disproportionate allotment, shares are allotted pro-rata to the shareholders, based on their existing holdings, there is any scope for any property being received by them on the said allotment of shares; Whether in case the value of additional shares is derived from that of the existing shares, the decline in the value thereof can be excluded from valuation; Whether purchase or transfer implies existence of a property, while the shares, where out of un-appropriated capital, come into existence only on their allotment and Whether the consequences can alter the meaning of a statutory provision, even where such meaning is plain and unambiguous. And the verdict partly goes in favour of the assessee.

Service Tax

Commercial or Industrial Construction Services - Lowering, laying, jointing and testing GRP pipes for Gujarat Industrial Development Corporation is taxable service as GIDC is corporation primarily undertaking development of infrastructure for industries Appeal dismissed: CESTAT

THE appellants are engaged in the activity of lowering, laying, jointing and testing GRP pipes (manufactured by the appellant) at the customers' site.

They undertook such activity for the benefit of customers namely M/s Videocon Narmada, Birla Copper, IVRCL Infrastructure, Gujarat Industrial Development Corporation (GIDC), Surat Municipal Corporation and Vizag Municipal Corporation.

In respect of the service rendered to the first three parties, the appellants paid service tax but not in the matter of services rendered to GIDC & the Surat & Vizag Municipal Corporations.

See our Columns Tomorrow for the judgements