Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

Tax collected from clients but not deposited with exchequer - finding by Commr(A) that there is no suppression involved as assessee has mentioned above factum in their books of accounts and balance sheet lacks merit - Revenue appeal allowed: CESTAT

DURING the period 2006-07 and 2008-09 the respondent was providing photography services. On enquiry it was found that the respondent collected the service tax from the customers but did not deposit the same with the Government treasury and it was also found that they have not filed the service tax returns regularly.

In his statement, the proprietor admitted that they were collecting service tax but not paying the same to the government exchequer due to financial crisis. Thereafter, they paid the service tax through their CENVAT credit account but did not pay the interest.

Income Tax

Whether expenditure incurred on premium paid for political risk insurance policy for safeguarding interest in its wholly owned subsidiary against unstable political environment in foreign country is allowable as business expenditure - YES: ITAT

ASSESSEE incurred expenses toward risk insurance premium for obtaining a political risk insurance policy for safeguarding its interest, in its wholly owned subsidiary against unstable political environment in Sudan. Assessee contended that premium is in the nature of revenue expenditure. The insurance policy was taken at the specific directions issued by the Ministry of Petroleum and Natural Gas, Govt. of India. Assessee contended that mere fact that the investment in Sudan has been made through a Subsidiary does not make the expenditure, as expenditure of the Subsidiary.

The issue before the Bench is - Whether expenditure incurred on premium paid for political risk insurance policy for safeguarding interest in its wholly owned subsidiary against unstable political environment in a foreign country is allowable as business expenditure. And the answer is YES.

Central Excise

Valuation - s.4(1)(b) of CEA, 1944 - Rule 6 of Valuation Rules, 2000 - appellant manufacturing and selling set-top boxes to M/s THIPL who in turn had an agreement to sell STBs to Tata Sky - value of remote control, smart card and software includible in value of STB - demand of Rs.10.78crores upheld but penalty reduced to Rs.50 lakhs: CESTAT

THE appellant manufactured and sold set-top boxes to M/s Thompson Holding India Pvt. Ltd. M/s THIPL had in turn an agreement to sell the STBs to Tata Sky. M/s Tata Sky supplied remote controls and viewing cards to the appellant through M/s Thompson. M/s NDS is a foreign collaborator of Tata Sky and NDS had given access to the appellant to download certain types of software from their server. M/s Tata Sky had agreement with NDS for the use of the software. The software was downloaded into a flash memory by the appellant which was then soldered to the populated printed circuit board of the set top boxes which were cleared to M/s Thompson. Tata Sky had paid royalty/licence fee to NDS for supply of the aforesaid software. The case of the department is that the value of remote control and viewing card supplied by Tata Sky should be included in the assessable value of STBs as they form an essential part of the STB. Further the amount of royalty/licence fee paid by Tata Sky to NDs for the download of the software by the appellant should also form part of the assessable value of the STBs.

See our Columns Tomorrow for the judgements