Jurisprudentiol – Thursday's cases

By Vijay Kumar

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

Amount collected from customers not paid to Government but kept in escrow account - whether provisions of Section 73A are attracted - NO: CESTAT

SINCE the appellant had no clarity on liability of service tax while settling the accounts finally with the buyers of the apartments, they collected certain amount which was in the interest of protecting both the buyers and the appellant from any future exposure to service tax liability if their service falls under the category of ‘works contract'; and the amounts collected were kept in a separate escrow account. The only issue to be considered in this case is whether service tax collected from the customers and kept in the escrow account and not paid to the Government would attract provisions of Section 73A of the Finance Act, 1994 or not.

Income Tax

Whether when close relative of assessee has been working with him for several years, huge payment of commission in particular year can be construed as subterfuge to reduce tax liability - YES: HC

THE assessee an individual is engaged in supply and maintenance of sophisticated electronics equipment. He had filed his return of income tax for AY 1989-90 declaring his income as Rs.24,34,593/- which as per revised return was changed to Rs.20,62,310/-. Pursuant to notice issued u/s 148, assessee had filed his revised return on 1.7.1991 finally declaring his income as Rs.26,66,840/-. Thereafter, notices u/s 143(2) and 141(1) were served. The AO after finalizing the assessment vide assessment order, made an addition of Rs.1,74,484/-, interalia, on account of commission paid to one Anil Kumar Gupta. On appeal, CIT(A) affirmed the said addition made on account of commission paid though gave relief with regard to some other additions which had been made by the AO. Agreeing with the order of the CIT(A), Tribunal vide a joint order upholding the re-opening of assessment by the CIT(A), gave no relief to the assessee with respect to the addition made by the AO.

The issues before the Bench are - Whether when a close relative of the assessee has been working with him for several years, the huge payment of commission in a particular year can be construed as a subterfuge to reduce tax liability of the assessee and Whether "nephew" can be considered as a relative as per the provisions of section 2(41). And the verdict goes against the assessee.

Service Tax

Vocational Training - training in areas such as export import management, retail management and merchandising - Exempted for period 01.07.2003 to September, 2008 : HC

IT is evident that the term "vocational training institute" included the commercial training or coaching centers which provide vocational coaching or training meant to "impart skills to enable the trainees to seek employment or to have self employment directly after such training or coaching". The notion of such training institute having been recognized or accredited to nowhere emerges from such a broad definition. The further Notification of 2010 substitutes the existing explanation to the term "vocational training institute" and narrowing it to those institutes affiliated to National Council for Vocational Training offering courses in designated trade in fact supports the assessee. Had the intention been to exempt only such class or category of institutions, the appropriate authority would have designed such a condition in the original Notification of 2003 and Notification No.10 of 2004 which had been relied upon in this case.

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