Jurisprudentiol - Friday's cases

By Vijay Kumar

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

Export of services - Service performed in India, service recipient abroad - it is export - CESTAT

THOUGH the services have been performed in India, these services being Business Auxiliary Services are in respect of the business of the appellant's principal located abroad. The services being provided by the appellant are obviously meant for and are used by M/s GAP, U.S.A. for their business. The services being provided by the appellant are covered by Clause (iii) of Rule 3 (1) of Export Service Tax Rules, 2005, as these services are in relation to business or commerce and in terms of this clause, read with sub-rule (2) of Rule 3, these services would be treated as exported out of India if the recipient is located outside India and the same have been delivered outside India and used outside India and payment for the same has been received by the service provided in convertible foreign exchange. There is no dispute that the payment for these services has been received in convertible foreign exchange and the payment has been made by M/s GAP, U.S.A. located abroad, not having any establishment or branch in India.

Income Tax

Whether any loss made on last date of accounting year on account of derivative contract outstanding is allowable as business loss as per provisions of Sec 37(1) - YES: ITAT

THE assessee company is a LTU, whose assessment for the AY was completed u/s 143(3) on 31.8.2010. The CIT issued show cause notice u/s 263 19.7.2011 stating as to why the assessment made u/s 143(3) should not be recalled and fresh assessment be made in view of the fact that the deduction claimed on forex derivative on account of losses arising out of the "Mark to Market"transactions of Rs.43.78crores, since these losses were notional losses, as no such sale or settlement had taken place and therefore, were contingent in nature.

The issues before the Bench are - Whether any loss made on the last date of the accounting year on account of derivative contract outstanding is allowable as per provisions of Sec 37(1); Whether assessee is entitled to adjust the actual cost of imported assets acquired in foreign currency on account of fluctuation in the rate of exchange at each of the relevant balance sheet dates, pending actual payment of the liability u/s 43A and Whether losses arising out of "Mark to Market"transaction can be considered as ascertained losses and allowable as a business expenditure. And the verdict goes in favour of the assessee.

Central Excise

It is well settled position that while considering various decisions on matter, latest decision should be preferred as that would have taken into account all previous decisions on subject: CESTAT

THE short question involved is whether the trade discount passed on by the appellant to Oil Marketing Company can be considered as trade discount or not and whether excise duty is leviable on this amount considering the same as part of the value of the goods sold.

The CCE, Mumbai-II confirmed the demand of Rs.1.68crores for the period April, 2011 to October, 2011 along with interest and, therefore, the appellant is before the CESTAT.

See our Columns Tomorrow for the judgements