Jurisprudentiol - Wednesday's cases

By Vijay Kumar

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

BAS - profit margin cannot be construed as commission - appellant cannot be said to provide any service of BAS to client for marketing of goods - contention of AR that private parties are paying ST is not acceptable as in case of private parties invoices on customers were raised by MGL directly and private parties are receiving commission and there is no transaction on principal to principal basis - Orders set aside and appeals allowed: CESTAT

THE appellants are Public Sector undertakings and engaged in marketing of petroleum products.

They purchase Compressed Natural Gas (CNG) from Mahanagar Gas Limited (MGL) and, thereafter, sell the same to their dealers. When the gas is supplied to the vehicles, the product has to be maintained at a particular pressure. Since the gas reaches these sale outlets through pipeline, it is not in the compressed form and, therefore, the gas has to be compressed before it is actually sold. In the various retail outlets of the appellants, space is provided by appellants to MGL to install their machinery, equipment etc. for compression and MGL sells the gas to the appellants on payment of excise duty.

The revenue is of the view that the services rendered by the appellants to M/s MGL are in relation to the marketing of the goods by M/s MGL and, therefore, it constitutes Business Auxiliary Services.

Income Tax

Whether premium paid on insurance policy designed under Unit Linked Investment Plan can be claimed as business expenditure u/s 37 - NO: ITAT

ASSESSEE Company had debited an amount of Rs. 3 lacs under the head ‘Insurance‘ pertaining to premium paid towards ‘Keyman Insurance Policy' of Joint MD. Assessee had contended that the amount paid was claimed as expense allowable u/s 37. The amount due on maturity of this policy had been received back in AY 2010-11 and had been offered for taxation in year of receipt. Payment of premium for keyman insurance cover was allowable as a business expense. The law permits deferment of payment of tax on this amount. This amount cannot be taxed twice. The claim of payment of premium was genuine. The nature of insurance plan cannot adversely effect that admissibility of claim.

During assessment, AO held that a unit linked plan can't be equated with Keyman Insurance Policy as per meaning of the term given in clause (c) of Section 10(10D) and elaborately differentiated between the quoting guidelines and circulars of IRDA, as detailed in the assessment order and held that the expense of Rs. 3 lacs was not to be treated as incurred for the purpose of business of assessee.

The issues before the bench are: Whether expenditure incurred on Term Insurance Plan under Keyman Insurance Cover is eligible for deduction u/s 37, even if the assessee firm proves that the said amount has been spent wholly and exclusively for the purposes of the business as per provisions of section 37; Whether in case the insurance companies otherwise invest the funds available with them in debt/stock etc, deduction of the amount invested can be claimed as revenue expenditure; Whether the nature of investment can be a deciding factor in determining the allowability of the premium paid; Whether when the policies are taken from Unit Linked Investment Plan it becomes investment plan, premium of which has been put into growth fund and it is not a Pure Life Insurance Policy on the life of another person and Whether in case only a fraction of the total premium is meant for risk premium, the balance is for the deployment of purchase of units, can be claimed as business expenditure. And the verdict goes against the assessee.

Central Excise

There is no merit in contention that merely because person liable to pay duty has discharged duty liability, proceedings against others on whom penalty has been imposed u/r 26 of CER, 2002 will get concluded - Pre deposit ordered of penalty: CESTAT

THE proceedings against the main appellant, M/s Giriraj Re-Rolls Pvt. Ltd., Jalna was concluded in as much as the said main-appellant had paid the duty demanded along with interest and also 25% of the penalty within the period stipulated.

However, a penalty of Rs.25,000/- was imposed on Shri Satish Nandlal Rathi, Proprietor of M/s Santosh Steel Traders for aiding and abetting the main appellant in evading duty and since the Commissioner(A) upheld the same, the appellant is before the CESTAT.

See our Columns Tomorrow for the judgements